Thank you for standing by, and welcome to Domino's Pizza's Fourth Quarter 2023 Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speakers’ presentation, there will be a question-and-answer session. [Operator Instructions] As a reminder, today's program is being recorded. And now, I’d like to introduce your host for today’s program, Greg Lemenchick, Vice President, Investor Relations. Please go ahead, sir.

Good morning, everyone. Thank you for joining us today for our fourth quarter conference call. Today's call will begin with our Chief Executive Officer, Russell Weiner; followed by our Chief Financial Officer, Sandeep Reddy. The call will conclude with a Q&A session. The forward-looking statements in this morning's earnings release and 10-K both of which are available on our IR website, also apply to our comments on the call today. Actual results or trends could differ materially from our forecast. For more information, please refer to the risk factors discussed in our filings with the SEC. In addition, please refer to the 8-K earnings release to find disclosures and reconciliations of non-GAAP financial measures that may be referenced on today's call. This morning's conference call is being webcast and is also being recorded for replay via our website. We want to do our best this morning to accommodate as many of your questions as time permits. As such, we encourage you to ask one question only. With that, I'd like to turn the call over to Russell.

Thanks, Greg. I thought you were going to sing the opening as we discussed, but I guess we'll let that path today. Welcome to your first call here on Domino's, and good morning to everyone joining us. Our strong Q4 demonstrated that our Hungry for MORE strategy is already delivering results. Our positive U.S. same-store sales and transaction growth in both delivery and carryout underscore the strength and momentum that we're building in our business. These results and the initiatives that I'll cover today give me confidence in Domino's ability to continue to drive meaningful value for shareholders. We're excited to share an update on the business through the lens of our Hungry for MORE strategy. Now as a reminder, Hungry for MORE is our new strategy around what we're going to do to deliver over the course of the next five years, more sales, more stores and more profits. We're going to accomplish this through our four more pillars, MORE, that I'll share a brief update on. Let's start with M. M is for the most delicious food. And we know we have the most delicious food in the industry, but you know what, it's time to talk about it more. It's time to show it more, and we're already doing that. We're currently on air with Pan Pizza advertising for the first time since 2014. We call Pan Pizza, our best kept secret. It's time to change that. Pan Pizza is a delicious product made with fresh never frozen dough. It also showcases the variety of crust we have to offer. You're probably also noticing a shift in our advertising as we're beginning to romance the product more to showcase the deliciousness of our food. You can expect this to continue throughout the year. The O in Hungry for MORE stands for operational excellence, and this is how we're going to deliver on our promise to have the most delicious food. By consistently driving a great experience with our products. As we've noted before, we made meaningful strides operationally in 2023 with our Summer of Service program, which has resulted in service times being back to pre-COVID levels. But we're never satisfied, and we want to continue to get better, our operators and our franchisees, we are Hungry for MORE. In 2024, we're rolling out a new service program. We're calling that MORE Delicious Operations. This program will be a series of three product training sprints focused on our dough, how we build and make our products and how we cook them. All of this is being done with a keen focus on driving more consistency in our food by providing the proper teaching, tools and processes for our team members to succeed. Our third pillar is R for Renowned Value. We've always been known as a premier value player, and we believe this can continue to be a differentiator for us in '24 through our improved loyalty program, our national promotions, and our rollout on Uber. Domino's rewards is off to a great start and was a key driver of our strong comp performance in the fourth quarter, when we saw positive sales and transactions in both our U.S. delivery and carryout businesses. We've also seen the following: an uptick in active members. We are up 3 million active members in 2023, with 2 million plus since our relaunch in September. Domino's Rewards ended the year with approximately 33 million active members, a big driver of the increase in active members as well as the early success of the program was our Emergency Pizza promotion, which was an innovative marketing initiative that drove increased order counts and acquisition of customers into Domino's rewards. We're seeing more redemptions than ever before, and we're seeing them at those lower tiers that we implemented. And we know that this program has driven incremental profit dollars for our franchisees. So customers are getting more, and franchisees have earned more profits truly a win-win. Finally, we're seeing more carryout users and light users in the program than we were prior to the relaunch. So Domino's Rewards is working as we intended. National promotions will be another way will drive renowned value in '24. And right now, we're on air with our perfect combo promotion. We believe this is the best deal in the QSR industry to feed the family, and it highlights the depth we have in our menu. We also brought back our carryout special boost week in January for the first-time since January 2020. And this performance exceeded my expectations. Clearly, customers want value, and we are driving it profitably for our franchisees. While providing value through our own channels is one part of our barbell strategy, tapping into the aggregator marketplace is the other. We're very excited about this new sales layer, which we believe is a different and largely incremental customer that we had not been able to reach in the past. Our entrance into this marketplace with Uber is on track as we are now fully rolled out across our U.S. system. We've gone live with the marketing and formally kicked off our one-year exclusivity period in Q1. Sales are building in line with increased marketing, which has been great to see and we expect those orders to continue to grow throughout the year. Sandeep will share more about our sales expectations in 2024 for Uber in his comments. Now everything we do at Domino's is enhanced by our best-in-class franchisees, the E in our Hungry for MORE strategy. In 2023, we continue to enhance our U.S. franchisee base by adding more than 60 new franchisees to the system, the most in 15 years. Every one of these new franchisees started with Domino's either as a delivery driver or from within our system. This remains the secret sauce to our success. We ended 2023 slightly ahead of our expectations on U.S. store growth and profits, adding 168 net new stores and finishing the year with estimated average franchisee profitability per store of $162,000. This highlights the momentum we expect to continue into 2024. I couldn't be more excited about 2024 and beyond for Domino's Pizza. Our foundation has never been stronger and our vision has never been greater. We made a ton of progress in 2023 and our strong start to '24 gives me confidence in our ability to win with customers and drive return for Domino's franchisees and shareholders. Now with that, I'll turn things over to Sandeep.

Thank you, Russell, and good morning, everyone. As a reminder, in the third quarter, we closed the remaining 143 stores in the Russia market. The 2023 global retail sales growth measures exclude the Russia market and are calculated as a growth in retail sales, excluding the retail sales from the Russian market from both 2023 retail sales and the 2022 retail sales pace. Now for our fourth quarter financial results. Excluding the impact of foreign currency, global retail sales grew 4.9% due to positive U.S. comps and global net store growth. U.S. retail sales increased 4.5% and international retail sales, excluding the impact of foreign currency, grew 5.2%. During Q4, same-store sales for the U.S. business saw an increase of 2.8%. As Russell noted earlier, our strong comps in the quarter were driven by both delivery and carryout as they were up 2% and 3.9%, respectively. For the year, delivery represented 48% of our transactions and 58% of our sales, while carryout represented 52% of our transactions and 42% of our sales. The weight of sales and transactions shifted slightly more to carry out in 2023. The increase in U.S. Q4 same-store sales was driven by transaction growth from our new loyalty program inclusive of a benefit from Emergency Pizza, pricing of approximately 1%, and a 0.4% sales mix from Uber. It will take us some time to determine just how much of that Uber mix is incremental. So more to come on that as we move through 2024 and into 2025. These tailwinds were partially offset by a slightly lower average ticket that was the result of higher carryout mix. Shifting to unit count. We added 92 net new stores in the U.S., bringing our U.S. system store count to 6,854 stores at the end of the year. For the year, we added 168 net new stores, which was a strong increase over the 126 net stores we opened in 2022. U.S. company-owned store gross margin decreased 1.6 percentage points in the fourth quarter of 2023. Excluding the impact from higher insurance costs and an increase in our loyalty liability, due to the change in point structure following the relaunch of the Domino's Rewards program, margins would have expanded slightly. Domino's unit economics remained strong with continued EBITDA growth for our U.S. franchisees. We are expecting that our average franchisee profitability per store will come in at $162,000 in 2023, up $23,000 from the prior year. Shifting to International. Same-store sales, excluding foreign currency impact, increased 0.1%. The deceleration from the third quarter is being driven primarily by pressures in Europe and geopolitical tensions in the Middle East. Please note that the Middle East represents a relatively small portion of our profits at less than 3% of our operating income. Our international store count increased by 302 net stores in the fourth quarter. For the year, our net store growth in international was 702 units, excluding the Russia closures. In total for the year, we grew 870 net stores across the globe. Income from operations increased $8.4 million or 3.4% in the fourth quarter. Excluding the impact of the $21.2 million prior re-franchising gain that we are lapping income from operations would have been approximately -- would have been up approximately 13% in the fourth quarter and up approximately 10% for the full year. Now turning to our 2024 outlook, which remains in line with what we shared at Investor Day in December. Our guidance calls for the following in 2024. 7% or more of global retail sales growth excluding the impact of foreign currency. We are expecting our 2024 U.S. comp to be above the 3% long-term guide as a result of our expected outsized catalysts in Uber and loyalty. As we have communicated previously, we expect our sales with Uber to increase throughout the year as marketing and awareness increases, and we are expecting to exit the year with an overall sales mix of 3% or more. We expect sales with Uber to start ramping up after Q1, which will have only a partial tailwind from marketing. In the U.S., we are planning for a modest price increase in the low-single digits. This is inclusive of California, where we're expecting to take pricing above that to offset the wage impacts from AB 1228. We expect our international comps to remain soft in the first half of the year due to a continuation of the trends we saw in the fourth quarter, but expect them to accelerate to our 3% or more long-term guidance in the back half of the year. Now shifting to net stores, where we are expecting 1,100 or more, which will be driven by 175 in the U.S. and 925 in international. There was a meaningful uptick in our U.S. net store growth in the fourth quarter, which was slightly ahead of our expectations, and the pipeline continues to build. We are expecting net unit growth in the U.S. to be relatively flat to 2023 in the first half of the year and to accelerate slightly in the back half based on current visibility. Internationally, we are expecting to increase net store growth each quarter over the prior year as we lap the one-time closures we had in 2023 and to step up significantly in the back half of the year. As previously communicated, we are expecting slightly less than half of our growth to come from China and India. On profits, we are expecting an 8% or more year-over-year increase in operating income excluding the impact of foreign currency. We do not expect the impact of foreign currency to have a material impact in 2024 based on current FX rates. A few additional points of color on some of the profit components. We are expecting our food basket to be up 1% to 3%. This has been driven by continued moderation on cheese prices. From meeting's perspective, we expect the Q1 food basket to be deflationary as we lap the only quarter from 2023 when the basket increased followed by moderate increases for the remainder of 2024. We are expecting our supply chain margins to be roughly flat for the year, barring any unforeseen shifts in the food baskets. We are expecting an increase in year-over-year supply chain margins in Q1 due to the expected negative food basket, followed by a slight moderation for the balance of the year. We expect supply chain margin dollars to grow in line with transaction growth throughout the year. We are estimating that rate (ph) inflation across the system, inclusive of California will be in the mid-single digits, and this has been primarily driven by minimum wage increases. We are expecting our G&A as a percentage of retail sales to be approximately 2.4%, which is in line with 2023. We also wanted to provide an update on our technology fee for 2024. In Q2 2023, we increased this fee to $39.5 and temporarily lowered our advertising fund contribution percentage by 0.25% to 5.75% for a 12 month period. Starting at the beginning of Q2 2024, we are lowering the technology fee to $35.5 and increasing the ad fund back to 6%. As previously communicated, we are expecting operating income margins to be relatively flat compared to 2023. We do not expect to see cost leverage in 2024 due to investments we are making in consumer technology, store technology and supply chain capacity to support future sales growth in the U.S. We are expecting Q1 margin expansion due to lower inflationary pressures, as previously noted on our food basket and we are expecting the Q2 margin rate to be down because of the timing of G&A spend which will be partially driven by our worldwide rally (ph), a gathering of our U.S. and international franchisees that takes place every two years. We expect margins in the back half of the year to be flat. As I conclude, I wanted to note that we announced a 25% increase in our dividend and increased our share repurchase authorization by $1 billion. All of this is being done in line with our capital deployment priorities. Thank you. We will now open the line for questions.

Certainly. [Operator Instructions] And our first question comes from the line of Brian Bittner from Oppenheimer. Your question, please.

Thank you. Good morning. Clearly, your underlying core business is showing very nice signs of improvement, positive traffic in both the carryout business and delivery business prior to any Uber benefits. And I understand improvements in the core business can continue moving forward, maybe even perhaps accelerate and they remain important, but now you are fully rolled out with Uber. And our conversations with the investment community suggests the expectations for Uber mix currently is still relatively low, maybe that 1% to 1.5% range. And you talked about getting to 3% by the end of the year. So can you talk about how this improvement should unfold as the year unfolds and maybe unpack the marketing that's getting turned on. How is that bolstering your expectations for where the Uber mix will go? Thank you.

Good morning, Brian. How are you doing? Let me talk a little bit about what we're seeing as far as the cadence of the flow of orders from Uber. Sandeep talked about the 0.4 in Q4, and we're seeing a meaningful uptick in Q1, we just turned the marketing on and so essentially, and same with Uber. So essentially, what we expect to see as awareness grows, is that percent of sales grow, and we feel like we're still in line for the 3% exit rate that we spoke about.

Thank you. One moment for next question. And our next question comes from the line of Lauren Silberman from Deutsche Bank. Your question, please.

Thank you very much. Congrats on the quarter. I wanted to ask about value in January, you ran the week-long carryout promo, which I haven't seen before. Can you talk about the rationale behind that? Any commentary on how you saw that perform and to the extent that you're willing to talk about January, just given a little bit of noise across the industry? And then more broadly, how you're thinking about value and any incremental value offers through '24. Thank you very much.

Yeah. Lauren, when you think about our Hungry for MORE strategy, renowned value is a big piece of it. And the carryout special isn't something new. It's something we brought back. I think the last time, we ran it was 2020. And frankly, that's going to be part of our portfolio moving forward as well as 50% off as well as our mix and match deal. Value is a key component not only price but value from a loyalty standpoint and value in the aggregator space. So yeah, the weak loan carryout wasn’t anything new, but what I will tell you, it performed extraordinarily well. I’m really happy with the way it went.

Thank you. One moment for our next question. Our next question comes from of Gregory Francfort from Guggenheim (ph). Your question, please.

Hey. Thanks for the question. Just looking at the unit growth this quarter, the domestic side, really strong pickup in terms of openings, international, maybe a little bit on the softer side. As you guys look out to next year, can you maybe talk about your confidence in that accelerating on a global basis next year and then maybe what that looks like from a domestic and international standpoint? Thanks.

Yeah. We still feel really strongly about the guidance we gave, the 1,100 plus stores and 5,500 over the next five years. I mean you saw some really nice momentum at the end of the year in the U.S. in 2023. We expect to see more at the end of the year in 2024. Internationally, I think we've got a lot of closures behind us, that was probably one of the things that was driving down the number this year. But those closures really focused on three areas. Domino's Pizza Enterprises, and they talked about their number, Russia and Brazil. Those three were over 80% of our closures and no other market closed more than five stores. And so as we look forward, we feel really confident about openings. And I'm sure someone will ask a little bit later, but when you look at the profitability of our U.S. franchisees, you look at the fact that for the -- we had more new franchisees in 2023 than we have in the last 15 years, they're bullish about Domino's Pizza, and they're spending their money that way.

And Greg, I'm just going to add something in terms of the international store openings in particular. I think the -- we provided some milestones to say that every quarter we're expecting to actually grow against last year, as we lap the closures and then significantly accelerate more in the back half of the year. So very confident in where we are with store openings international. And we’ve been talking to our master franchisees and have good visibility to our expectations there.

Thank you. One moment for our next question. And our next question comes from the line of Andrew Charles from TD Cowen. Your question, please.

Great. Thank you. Russell, within guidance for outsized ‘24 or U.S same-store sales, can you talk about your expectations for core traffic growth or what 2024 same-store sales will look like when you exclude the 3% mix for Uber and the low-single digit pricing? What I'm trying to get at is that do you believe similar to 4Q that you can drive positive carryout and delivery transactions, excluding the impact of Uber? Thanks.

Yeah. Andrew, absolutely. When I think about 2023, it was kind of a tale of two stories for us. The first part of the year was all about addressing the base and fixing things like delivery times and getting delivery times back to where they needed to be and getting franchisee profitability back where it needed to be, so that in Q4, we were able to really lean into the Hungry for MORE strategy and you saw it all in action. You saw most delicious food with innovation. You saw a renowned value from a promotional standpoint with loyalty. And so all of those things are going to be able to continue throughout 2024 with this improved base that we've got. So yeah, I expect both carryout and delivery orders to be positive.

Thank you. One moment for our next question. And our next question comes from the line of Dennis Geiger from UBS. Your question, please.

Great. Thanks. Good morning, guys and thanks for all of the color on the loyalty program. Wondering if you could just talk a little more about loyalty in the U.S. and sort of expectations for the program looking ahead. I think recently, you've kind of talked about that as being the biggest contributor to U.S. same-store sales growth this year. Curious if that expectation still holds. Thank you.

Yeah, Dennis. The loyalty program was just off to -- it's off to a great start. I'll just repeat numbers that we had in the opening remarks because I just like them so much. We added 3 million folks last year, 2 million of them came with a new program. And so it's important to know because I'll talk about Emergency Pizza in a second and the effect on loyalty there. But the loyalty program out of the gate before even Emergency Pizza was doing exactly what we needed it to do, which was engage lower-frequency users, engage carryout users, then we brought in this powerhouse of Emergency Pizza that continue to inflect those numbers. And we have ideas like that in the future that we'll be able to drive, there will be advantages and there are advantages to be in a Domino's Rewards customer. I'll give you a little bit more color about the users. It's doing exactly what we thought it would which is driving frequency, especially among the lower frequency customers, as I said before, also the carryout customers. And even though we have these lower tier levels, we're down to two purchases now can get you a free item. Because of the food cost at these various tiers, it’s actually positive for the franchisees. So really, as I said, a win-win, a better program that’s more engaging to customers and more profitable for our franchisees.

Thank you. One moment for our next question. And our next question comes from the line of David Palmer from Evercore ISI. Your question, please.

Thanks. Good morning. Great update. I'm getting some feedback as I'm asking, so I'll try to get through this. Wanted to ask you about a couple of profit drivers for this upcoming year, that being company-owned stores and supply chain. In the company store line is probably the only area of the P&L that was slightly disappointing on the quarter. But for the year, it looked like the company stores profitability was down maybe 10%. And your franchisees did a lot better than that, they were up double digits this last year. So any sort of callouts you would make in the quarter and for the year, and more importantly, how are you thinking about margins for company stores long term? They had been as high as 23.5% or so, consensus for '24 is more like 18%. So I'm just wondering, how you're thinking about company operated and then supply chain. Any comments there? Obviously, very strong on the supply chain in the fourth quarter, how you're thinking for '24. Thanks.

Thanks for the question, David. So I think on the company stores in the prepared remarks, I actually called out a couple of impacts in the fourth quarter that actually impacted our margins. One of them really was insurance costs. And the other one was the accrual because of the points that actually got generated with the new loyalty program. And I think when you take out those two impacts, our margins actually expanded. So the good thing about this is, I think the loyalty program has worked extremely well from a transaction perspective for company stores. And we expect this to be significantly driving profit dollars, and we expect to revert to margin expansion in 2024. And frankly, I think we expect to continue to build on our margins as we move forward even beyond 2024. And then I would go to the supply chain profit. We're really happy about our supply chain profitability that we generated in the fourth quarter. A big driver of supply chain profitability all year was the productivity improvements that we saw specifically driven by procurement and in food cost, and I think that was a big element of what we saw. As we pivot to 2024, the expectation on supply chain is, it's going to be supply chain profit dollars because it's going to be driven by our transaction growth. And as Russell talked about earlier, we're expecting to see transaction growth before and after the impact of Uber. And all of that is going to fly through the supply chain P&L and expect that to actually drive significant profit dollar growth for the Supply Chain business.

Yeah. I'd just add those same transactions also add up to a low fees, online ordering fees as well. Yeah.

Thank you. One moment for our next question. And our next question comes from the line of David Tarantino from Baird. Your question, please.

Hi. Good morning. Very nice to see the order counts in both delivery and carryout, but I wanted to ask specifically about the Emergency Pizza promotion and whether you could try to frame up how much of a lift that might have cause for the transaction growth. And I know there's a component about customer acquisition in there. So just wanting to sort of get a sense of how you're thinking about the trend coming out of that promotion, which ended, I think, recently? Thanks.

David, I'll start, maybe Sandeep, you can give some color to this one, too. Emergency pizza was a resounding success. It really was. And when I look back and just, again, giving complements to our marketing team, this is your traditional buy one get one free, that has been marketed in such a way that it really breaks through. We've done buy one get one free before. They've done nothing like this. And when I think about Emergency Pizza, what I like is not only what it did to order count, it also drove people into the loyalty program because you need to be a loyalty member in order to get your Emergency Pizza. I think last, we have a new thing in our arsenal now. Boost weeks have worked really well for us. We've got this Emergency Pizza piece now, and I expect this is ownable from our perspective. And so this is something we'll be able to use in the future as well. Sandeep, if you want to add some color?

Yeah. I think Russell is exactly right. And I think the thing about what's happening with Emergency Pizza, it's a brilliant marketing innovation from our marketing team. But I think the broader construct of it is thinking about Domino's rewards the loyalty program. And that essentially creates a key platform to our third pillar renowned value. So at the beginning of the quarter in the fourth quarter, we had pepperoni stuffed cheesy bread, which was a special offer that was actually being connected to the loyalty program. Then after that, we've got Emergency Pizza and there's a number of different promotions that we can continue to bring along on to Domino's rewards. So the driver rather than looking at Emergency Pizza by itself, is really Domino's rewards and how much which can drive and transaction growth for us. This is a significant pillar of how we're going to drive transaction growth in 2024, both in delivery as well as carry.

Yeah. That was a big learning from us for the first loyalty program we had. With Piece of the Pie rewards, we advertised on TV, hey, we have a rewards program. And what we learned over time is actually the best way to tell people that you have a rewards program is have a really compelling promotion, whether it's a new product or something like Emergency Pizza that the only way you can get it is, if you sign up for the program. And once you sign up for the program, you're in this flywheel of frequency driving point levels that we've never had before. And so I think Emergency Pizza was a highlight. But as Sandeep talked about, that type of mechanism driving people into the loyalty flywheel is something we’re going to continue to – a play will continue to run.

Thank you. One moment for our next question. And our next question comes from the line of John Ivankoe from JPMorgan. Your question, please. John, you might have your phone on mute.

Apologize. Can you hear me now?

Yes.

Okay. Perfect. All right. You're on speaker, but all right, this will work. First, in terms of the -- some of the slowdown that we saw, the brands saw in Continental Europe, were there any learning lessons that you could apply there, perhaps as Europe potentially being as a leading indicator to the U.S. of how you could get in front of some economic changes that would actually allow the perform -- the brand to perform better in the U.S. than perhaps it has in Europe, at least in the last quarter is the first good question. And then secondly, obviously, there's no direct P&L impact in advertising allocation, but there is a direct P&L impact in terms of the online ordering fee. In terms of reducing that online ordering fee or cutting it at least marginally relative to what it was in '23. I mean what was the reasoning behind that? Was that really franchise driven? Obviously, the economics at the franchise level would suggest that they could bear that higher fee, but I just wanted to have a sense of why you felt that, that reduction was necessary to make? Thank you so much.

Good morning, John. I'll take the first question, maybe Sandeep will take the second one. Our European business is really strong, and we believe some of the pressures we're seeing there are generally transitory in nature. If you listen to the call from DPE, Domino's Pizza Enterprises, our master franchisee over several markets, but especially France, there have been some challenges there, and that's one of our larger markets in Europe. We're partnering closely with them right now on those challenges. What I'd point to for DPE in general, there are green shoots in a lot of the markets where they're really leaning in on. And so, for example, Australia, New Zealand, the numbers there have been fantastic. And one of the reasons why is, they're leaning into the M, the most delicious food part of Hungry for MORE. I mean, I don't think anyone is doing it better than they are right now. They give a little insight into Japan into the first kind of six, seven weeks of the second half and how that seems to have turned a corner. Germany is positive. So we're working on France together, and that's certainly a business that needs to turn.

Yeah. And I'll just finish off on what Russell just said. And if you remember what I talked about in the prepared remarks, we expect to see pressure in the first half of the year on the international business. But exactly why we expect to see an improvement in the back half is because of all the more initiatives. Australia is one example. But taking those learnings and applying them across the international markets should enable us to offset any other headwinds that we have as we go into the back to our long-term guidance. And then specifically to your question on the advertising fund and the online fee. Now let's go back to about a year ago. And I think about a year ago, where we were was franchisee profitability was not in the best place. We had come off a big decline in franchisee profits in '22. And we saw an opportunity because of the buildup in the reserves of the ad fund to essentially take a 25 basis point 12-month hiatus from the advertising fund contributions, but we did want to continue investing in our technology solutions. And so we did take up the technology fee by $0.08. View that as a temporary increase and kind of an offset between the ad fund contribution and the technology fee. Now that we've actually come to the point where we think it needs -- it's time to restore the ad fund the 6%, we have actually adjusted the technology fee to $35.5. Another way to look at it is we actually went up from $31.5 to $35.5. And if you look back at our history, we've consistently increased our technology fee because we're making investments on technology for our franchisees, which drives the flywheel of their growth and eventually drives global retail sales and our royalty dollars as well. And so that is the rationale. I think where we are. All of this is included in the $170,000 or more in franchisee EBITDA that we’re expecting for 2024, and we feel very good about it.

Thank you. One moment for our next question. And our next question comes from the line of Chris O'Cull from Stifel. Your question, please. Chris O'Cull: Thanks. Sandy, could you break down how much of the $23 million of the year-over-year supply chain profit dollar growth came from the productivity improvement versus the volume growth? And do you expect any productivity improvements to continue in that segment into '24?

Thanks, Chris. Thanks for the question. A significant portion of the profit dollar growth that we saw in '23 came from the productivity improvement that we saw. It was pretty outsized. And I think it was, it is probably a function of where the markets were, especially after the outsized inflationary period in 2022 that we were able to get such significant improvements in '23. And as we move forward in '24, this is definitely going to be a focus, but it's not going to be as outside as it was in '23. We do expect to get some benefits but I think we also have to make investments in capacity, like I talked about, both at Investor Day and earlier on the call today. So that's why I think as we look at '24, really expect profit dollar growth to be driven by transaction growth and productivity improvements that we can see, if anything should be an offset as some of the investments that we're making in the business.

But the nice thing about what our supply chain team has done, the productivity we gained in 2023, it's not going back and so, I would think about that as kind of accruing forward. So well done by Sandeep and the team (ph).

Thank One moment for our next question. And our next question comes from the line of Peter Saleh from BTIG. Your question, please.

Great. Thanks for taking the question. I want to come back to the loyalty conversation. Russell, I think you mentioned 2 million plus new loyalty members since launch. And I think at the Investor Day, in early December, you had mentioned there was about $1 million incremental. So just curious if you could comment, was there a meaningful acceleration in new loyalty members in December? Do you expect that trend to continue in '24? And then is there any way to parse out how many of those are coming or more carryout customers versus traditional delivery?

Yeah, Peter. There are -- I'd say a couple of meaningful moves in the loyalty program. First was just the launch of the loyalty program, right? We saw a meaningful increase, and that's what we talked about with you in December. And then building on top of that, we had some more momentum driven by Emergency Pizza. So I'd say loyalty program on its own did well is doing very well. We have added a little bit more gas on the fire with Emergency Pizza. And as we continue into Q1, now with Emergency Pizza behind us, we’re still very happy with the way that’s growing, and we’ve got programs like Sandeep talked about earlier that we’ll continue to drive that business. The other thing, and you talked about this that I’m really happy with is the big objective here was to engage carryout customers and to engage light users. And we are absolutely doing that with the program. And we can see that even out of the gate so far.

Thank you. One moment for our next question. And our next question comes from the line of Sara Senatore from Bank of America. Your question, please.

Thank you. I have a clarification and then a question. Just a clarification is Sandeep, you said company margins would have been up slightly excluding insurance and loyalty liability. I guess given transaction growth and lower commodity costs and the shift to carryout, which I think is typically higher margin rate, I would have thought up more than slightly. So I guess as we think about that business, we should be focused now, I guess, increasingly on profit dollar growth as opposed to margin rate expansion sort of similar to how you think about supply chain or maybe my interpretation of up slightly is not quite right. And then the question is about the industry and the pizza segment. And so you often have better insights into the competitive dynamic than I do. Was any of this category improvement? Finally, I think that may be normalization in terms of sales mix, but anything you can say about what -- to what extent are share gains by Domino's versus finally seeing perhaps green shoots in the category? Thank you.

Thanks, Sarah. So I'll take the first one and Russell will take the shared question. So kook, in terms of company margins, we specifically called out the impacts of those two and the margins expanding slightly outside of that. And I think it's been consistent. If you look at the first three quarters, our margins expanded. And I think in the fourth quarter, excluding the impact of those two items that we call out insurance and the loyalty liability, margins are expanded. So the great thing about the loyalty liability adjustment is it's because we expect to have incremental transactions or redemptions on the loyalty program. So you're right, look for profit dollar growth on the supply chain -- sorry, on the company stores. But I think we also do believe that there is an opportunity to expand margins in addition to driving profit dollar growth as we leverage the fixed cost structure of the company stores. So look for both on company stores is my answer.

And on the state of the industry, I think and this is really even looking forward to 2024. A lot of what we expect is QSR there to be real pressure on orders and transactions. We don’t expect that to be the case with Domino’s, and I think will be unique in that area in 2024.

Thank you. One moment for our next question. And our next question comes from the line of Brian Harbour from Morgan Stanley. Your question, please.

Yeah. Thanks. Good morning. I wanted to ask about just your international sales outlook as well. How much of this do you think is kind of market specific execution issues? And I'm referring to just some of the countries that have been a little bit slower versus kind of macro pressures. And as you have that outlook for kind of improvement through the year, does that depend on some of those macro pressures easing, like, for example, if you think about India or can you maybe comment on some of the other markets that you didn't address before.

Yeah. Well, actually, maybe I'll start out talking about India because I was speaking over the weekend to Hari Bhartia, who's the Chairman of Jubilant. I mean that's a great example of both dynamics you talk about. And so obviously, they're pushing the business there. It's some headwinds. But what Hari talked about is what's going on in the rest of the industry and why he's bullish and while he's looking for the future. And while they're talking about 200 stores to grow in 2024 is because he's growing share. And so what I love about our franchisees is that they're future focused. And I think you see a lot of folks doing what they're doing in India. That's why we think the second half is going to return to that 3% that we talked about. Anything to add?

No. I think Russell is exactly right. We think it's all tied back to the Hungry for MORE strategy is being applied across the entire system with the international markets. Learnings from markets like Australia being applied across DPE and essentially all of the other markets as well have embraced Hungry for MORE, and that’s really what we’re looking to drive.

Thank you. One moment for our next question. And our next question comes from the line of Danilo Gargiulo from Bernstein. Your question, please.

Thank you. I have a quick clarification and then a question. So the clarification is, Russell, you mentioned that you're expecting some real pressures in the industry, but not for Domino's. Can you clarify whether the increase in transactions that you've seen in the fourth quarter is across all the income cohorts? And then the question is, can you talk about the speed of delivery in the overage channel versus your own channel, understanding that you're using your own drivers anyway? And maybe how does the delivery timing compared versus your peers today?

On the transactions piece, we believe that our transactions being positive is something that, like I said, is that is unique in the industry. We'll get more share information as that comes out, and we'll certainly share that with you. On speed of delivery, the biggest comparison -- the biggest comparison we have is versus ourselves. And every day, we expect to get better than the day before. So we're happy that we're back to 2019 levels. We're now moving more volume into that delivery network. And we're doing everything we can, not only to make sure that the delivery times or where they need to be. But more importantly, we haven't talked a lot about this is that the quality is there. And so when you think about our Hungry For MORE pillars, the first M is about most delicious food and so just delivering a pizza on time is one thing. It's got to be great. And one of the things that I talk about, hopefully, there are no Boston Red Socks fans on the call today of a Yankee fan. And there's a famous player, Joe DiMaggio who there's a quote Somebody asked him one, why you play so hard every game. And what he said was there's going to be someone who sees me for the first time in that game and so I'm playing for them. And that is how we need to approach making our pizza. Every pizza you're making is for your mom, right? And that's what some of these sprints are all about with more delicious operations. We're making promises in our advertising we need to deliver it, and it's more than just time. It's quality, it's consistency in all of those. And we like to say, down, we don't sell 1 million pizzas a day. Our goal is to sell one pizza a day 1 million times. And that's kind of the new thinking behind Delicious operations.

Thank you. One moment for our next question. Our next question comes from the line of Jeff Bernstein from Barclays. Your question, please.

Great. Thank you very much. Just following up from the Investor Day, you guys talked about your, I guess, Pulse 2.0 technology. And I think you mentioned there will be a complete overhaul throughout 2024 in conjunction with your Microsoft partnership talking about AI tools and whatnot, which are clearly very topical. So I'm wondering if you could talk a little bit about the greatest changes or the most likely incremental benefits to the front or the back of the house and maybe the time frame to see those benefits. Obviously, it's been, like you said, a long time coming with this major overhaul. So just trying to get a sense of what we're going to see as we look through '24. Thank you.

Yeah. Thanks for the question. It's a good time for me to clarify that. I think the future of the benefits of Pulse is actually now, right? We talked about [indiscernible] and accelerating the areas within the circle of operations that make the biggest difference in our business. And so yes, next-generation pulses in stores now, some stores in the U.S. will be rolling out to a bigger degree later on in 2024. But the most important element, the ones that are going to drive the operational efficiencies, the more delicious food, the improved atmosphere -- working atmosphere for our team members. Those are out in the [indiscernible] with current pulse and the next-generation pulse. Hopefully, that clarifies it. The Microsoft – the answer to your Microsoft question is we’re working really in two areas with Microsoft and generative AI. One is on the consumer ordering side. We are not waiting for the new website to come in to see something on that. So you’ll see something that in 2024. And then also on the store side and what can we do with Generative AI to make the experience better on our team members in store. And so we’ll have more to talk about both of those in 2024.

Thank you. One moment for our next question. And our next question comes from the line of Andrew Strelzik from BMO Capital Markets. Your question, please.

Hi. This is Joe Zinski (ph) on for Andrew Strelzik. Thanks for taking the question. So I'm curious how you would characterize the current competitive environment and what you're seeing from a promotional standpoint. And I was wondering if you could provide any incremental details regarding product innovation and the two new products that you are planning to launch this year? Thank you.

Yeah. Sure. I don't really like to talk a lot about competitors. I mean, a competitor we have is ourselves, and we try to get better than ourselves every day, and I think you see that in our Q4 results. I talked in general about it probably being a year that's less about order count. And we'll see how folks adjust to that and when they do, be happy to comment on that through the year. I didn't quite hear your second question. Can you repeat the second -- even though we're only supposed to ask one I'm joking. Yeah, products. Thank you very much. Yeah, on the product side, couple of things. One is we're really happy that we've got our pan pizza out there now. But that's not a new product, and you should know that is not counted among the kind of two plus new products we're going to have this year. But what you do see with that is, we haven't talked about pan pizza since 2014. So while I'm not counting it on my list of new products, it's something that's new to a lot of people and something that is really shot. If you look at the way we shot that commercial in the new way of kind of romancing the deliciousness of our pizza. So we're out with product news. News on a product for the first time in a long time, but that's not part of our two new product scheme for this year.

Thank you. One moment for our next question. And our next question comes from the line of Chris Carril from RBC Capital Markets. Your question, please.

Hi. Thanks. Good morning. So Russell, you mentioned the U.S. system added more than 60 new franchisees. I think that was the most in 15 years, you said. On the back of this, how are you thinking about the evolution of the domestic franchisee base and just the balance of openings coming from new franchisees versus longer tenured franchisees going forward? Thanks.

Yeah. Thanks a lot for the question. When we have calls like this and what I -- what I tell people is you're ever wondering how the Domino's Pizza brand is going to do in the future, you look at what your franchisees are doing. And franchisees right now from a profit standpoint, obviously really positive versus where they were the year before. We opened up more stores really heavy towards the end of the year when things became clear there, yet we're still very positive that we're going to beat that number in 2024 and hit our 175 plus algorithm. The 60 to me means that we've got young of encumbers within our system that for the first time in 15 years, it's bigger than -- or bigger than we have had in 15 years, which means they see a really positive future. And the cool thing is as you look into '24, what I can tell you is two things. One is we already have 170 new potential franchisees that are either in or have graduated our franchise management school, which is the last step you do before you either build a store or buy a store. And we have 50 already waiting on opens or transfers within the system. We're in February. And so I think some of the momentum you saw is going to continue. And that just shows what they are feeling about the brand where they want to invest.

Thank you. One moment for our next question. And our next question comes from the line of Meredith Jensen from HSBC. Your question, please.

Yes. Hi. I know we've spoken about it a number of times in terms of the loyalty program. But given the mention of the liability, the loyalty liability from the relaunch, is there a way or how would you suggest we sort of track that and look at the breakage levels and sort of see where that may be going in the future and how we should sort of map that out. Obviously, as you mentioned, it's a positive thing, so. Thank you.

Yeah, Meredith. Thank you for the question. And look, I mean, I think the way to look at this is it’s the appropriate accounting treatment if we’re going to expect to see more redemptions, and that’s the adjustment to the breakage accrual. But I think the whole point with this is our Domino’s Rewards program is working as we intended. More transactions expected to come in, more redemptions are expected to come in. And I think Sarah asked the question earlier, look for profit dollar growth in addition to margin expansion as we move forward, especially on the company stores in 2024. And we’ll continue to provide disclosure as we move forward, but that’s how I would actually measure performance on this.

Thank you. One moment for our next question. And our next question comes from the line of Brian Mullan from Piper Sandler. Your question, please.

Hey. Thank you. Just a follow-up on the topic of Domino's advertising on Uber. Understanding it's just getting started, it will ramp throughout the year. Can you just discuss any learnings you've had here? Is it going how you would have thought? Has anything with the effectiveness surprised you either positively or negatively. And I ask in the context of just -- it's a new activity for Domino's, but I know you've been preparing to get ready for it. So just any thoughts on that strategy?

Yeah. Thanks, Brian. There’s two advertising now for Domino’s on Uber. One is Domino’s and the other is Uber. And I think what we’re seeing on that platform is very promotionally driven. And the nice place. The nice thing is when you think of marketplaces and excelling on marketplaces, that’s what we do, whether it’s a Google marketplace or in this case, Uber. And so responding how you would think it’s very much promotionally driven, but we know how to excel in those areas, which is why we are confident that a percent of sales remover is going to increase to that 3% exit rate we talk about.

Thank you. One moment for our next question. And our final question for today comes from the line of Jon Tower from Citi. Your question, please.

Great. Thanks. I appreciate it. Quick clarification on a question. Clarification, the loyalty liability. I'm assuming that was just a onetime true-up, if you can clarify, that would be great. And then the question is on frequency shifts you're seeing in the loyalty program. Any way you can give us some sort of benchmarks as to where some of the more loyal customers were spending either frequency last year and what it's looking like so far since you made the shifts in late '23.

So I'll take the first part of the question, John. And it is a onetime thing because I think the significance of the change of the new program was what was the trigger. But that doesn't mean it's never going to happen also because I think you always have to continue to monitor your breakage and if you do need to make a true-up, you will make a true up. But given the new program launching, I think this was much more of a onetime event because of the new program launching. And I think on the frequency ships, Russell will take the question.

Yeah. What I can tell you, macro, we're still just a couple of months into this thing is what we thought we would see with regards to car customers and lighter user engagement, we are seeing. What we will do, John, is make sure throughout the year when we got more information under our belt, and we're able to give perspective because remember, loyalty programs are not just about the first use or the second it's about lifetime value and use over time. And so as we get more color on that, we’ll share.

Thanks, John. That was our last question of the call. I want to thank you all for joining our call today, and we look forward to speaking with you all soon. You may now disconnect. Have a great day.

Thank you, ladies and gentlemen, for your participation in today's conference. This does conclude the program. You may now disconnect. Good day.