Good day and thank you for standing by. Welcome to the Papa John's Fourth Quarter 2022 Conference Call and Webcast. At this time all participants are in listen-only mode. After the speakers' presentation there will be a question-and-answer session. [Operator Instructions] Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Stacy Frole.

Good morning. And welcome to our fourth quarter and full year 2022 earnings conference call. This morning, we issued our fourth quarter and full year 2022 earnings release. A copy of the release can be obtained on our Investor Relations website at ir.papajohns.com under the News Releases tab or by contacting our Investor Relations department at investor_relations@papajohns.com. On the call this morning are Rob Lynch, our President and CEO and Ann Gugino, our CFO. Before we begin, I need to remind you that comments made during this call will include forward-looking statement within the meaning of the federal securities laws. These statements may involve risks and uncertainties that could cause actual results to differ materially from these statements. Forward-looking statement should be considered in conjunction with the cautionary statements in our earnings release, and the risk factors included in our SEC filings. In addition, please refer to our earnings release for the required reconciliation of non-GAAP financial measures discussed on today's call. Lastly, let me thank you in advance for asking only one question and getting back in the queue for more follow up. Rob?

Thank you, Stacy. Good morning, everyone. And thanks for joining us today. I'm pleased to report this morning that we had a strong finish to 2022. For the full year, we reported global system wide sales of $4.8 billion, up 3% in constant currency over last year's record sales. We also delivered a third straight year of positive North America comparable sales. We opened 378 new restaurants, growing our system wide footprint by 4.5%. And in 2022, we delivered our second highest adjusted operating income and Papa John's history, second only to last year's record and more than four times higher than 2019. Last year presented our teams and franchisees with one of the most challenging and dynamic environments we have ever experienced. I want to give a heartfelt thanks to our restaurant supply chain, corporate and franchise teams around the world for their outstanding resilience against the headwinds facing our industry. Thanks to your efforts, Papa John's mitigated and successfully navigated the challenges of Omicron, an increasingly volatile geopolitical environment, unprecedented commodities and wage inflation, and to top it all off, at the end of the year winter storm that impacted more than 60% of the U.S. population. Today, I will discuss Papa John's business performance, focusing on three key priorities to strengthen our competitive advantage and better position us for future growth. First, I will discuss our winning product innovation. Second, I'll provide an overview of our unit level productivity. And third, I will lay out details around our domestic and international expansion. I will then pass it on to Anne, who will walk through our fourth quarter and full year results before opening the lines to answer any questions you may have. Starting with our product innovation. At the heart of Papa John's success is our innovation mindset, particularly in the areas of menu and digital innovation. Over the past three years, we have made purposeful additions to our menu, ensuring there are incremental sales layers to drive strong sales growth, and capitalize on our premium brand positioning. This enables us to forego the blanket short term discounts we've seen elsewhere in the category, contributing to more sustainable and profitable ticket growth, and most importantly, higher customer satisfaction. We are introducing menu innovations that offer value and variety to our customers. But they also limit added complexity to our restaurant operations and our supply chain. Our menu innovation calendar is expansive, flexible and differentiated and allows us to adjust our offerings to customer preferences nimbly, whether that is extending a limited time offer or building upon existing platforms. 2022 was a robust year of successful innovations. We continue to drive demand and growth on existing platforms like Epic Pepperoni-Stuffed Crust, and Pepperoni-Crusted Papadias. In addition, new items like New York Style Pizza and Papa Bowls are great examples of how we continue to build new platforms around our premium ingredients. At the end of December, we launched Papa Bites, and the reception from our customers has been extremely positive. This new menu platform was inspired by our Jalapeno Popper Rolls, which we launched back in 2020. We've now elevated and expanded this concept to include two additional flavors, chicken parmesan, and Oreo cookie, and we see opportunities to introduce more flavors in the future. In fact, we just tasted some new flavors last week that I'm pretty excited about. Our promotional calendar is flexible, but our commitment to better is not. As I've discussed in previous calls, we view value differently than discounting. Our value proposition comes from offering a variety of great products and accessible price points for all of our customers, whether that's from our extra large, extra cheesy extra pepperoni Shaq-a-Roni or our Papa pairings, which offers multiple items on our menu for just $699 each. Our barbell strategy balances our menu to offer our premium products along with value options to ensure all of our customers are getting the products they want at great prices. This strategy contributed nicely to our solid performance in the fourth quarter, and we expect this momentum will carry into 2023. We're also excited by our latest patent pending innovation Crispy Parm Pizza. That's first and that pizza industry product features are thin crust, but with a blend of parmesan and Romano cheeses on the bottom. Yes, you get crispy cheese on the bottom of the crust and your favorite premium ingredients on top. While they're still early in its rollout, the customer response we've received so far has been fantastic. And we expect this innovation to deliver a lift in both ticket and transactions. We've also applied our innovation mindset to our digital channels, and continue to invest in our digital capabilities to deliver a best-in-class customer experience. Our website digital app, third-party aggregator partnerships, and Papa Call call centers are significant differentiators that promote stronger retention and grow our customer base. Back in 2001, we were the first in the category to offer online ordering. And we're also the first to launch a nationwide digital rewards program. We will stay ahead of the curve by continuing to invest in technology enhancing our digital capabilities, given that today, more than 85% of our domestic transactions come through these digital channels. Our Papa Rewards Loyalty Program members are our most valuable customers representing nearly 50% of sales. But they also provide a robust source of data that helps shape our business to better serve all of our customers. Our work to attract more loyalty program members through early access to new menu items, and exclusive perks and discounts, has delivered outstanding results, enabling us to not only sustain our sales coming out of a pandemic, but to grow on top of those record sales. Today, we have more than 28 million loyalty member accounts, more than double the number of registered members just three years ago. We will continue to explore the additional untapped potential from investing in this channel, including opportunities to increase customer frequency and personalization, in addition to continuing to attract new members. Another solid contributor to our growth has been our aggregator partnerships. These relationships enable us to reach new incremental customers and help us service existing customers during periods of peak demand. In fact, when staffing shortages were exacerbated by Omicron in 2022, we're able to lean into these relationships to increase our delivery-as-a-service option. Papa John's leads the pizza industry when it comes to building these third-party relationships. And we will continue to further leverage this channel to introduce our brand and products to even more customers in the future. As we look to 2023, we will continue to improve our capabilities to deliver our customers a best-in-class experience, regardless of channel or method of delivery. This brings me to our next key growth driver, unit level productivity. I won't spend much time discussing the economic challenges that will continue to place downward pressure on the industry, increased key input costs and consumer price sensitivity, as the challenges of the global economy are already well documented and broadly discussed. Instead, I will focus my remarks on the proactive steps that we are taking to ensure operational excellence and continued profitability within this operating environment. We're focused on what we can control, becoming better operators to deliver better pizza with better service. I'm pleased to announce that in the fourth quarter, we launched our back to better operations initiatives, further sharpening our execution and driving better customer experience. While we cannot control inflation or a customer's budget, we can control how effectively we execute superior operations. As such, we're leaning into our corporate-owned restaurants, focusing on faster service, while optimizing labor allocation, enhancing operational efficiencies and effectively managing margins. We're realizing early wins with improved product quality, faster out the door times and better customer satisfaction while also optimizing unit margins. For example, are out the door time for orders taken in our corporate restaurants is now approximately 20 minutes, that's nearly 10 minutes faster from where we were a year ago. This work is being led by our Chief Restaurant Officer, Joe Sieve, and his company operations team. For nearly a year, Joe and his team have been closely evaluating our restaurant operations and introducing a best-in-class infrastructure to build a model for unit level productivity and operational excellence across all of our restaurants. These efforts helped to offset some of the macro and operational headwinds that we faced in 2022 and produce positive comps for our corporate locations in the fourth quarter. We expect these efforts will continue to deliver margin improvement and higher sales over the next several years. Our focus in 2023 is to leverage these insights to drive similar improvements with our franchisees. Finally, expanding our domestic and international footprint is a key aspect to our growth strategy. We believe there's a significant amount of white space to offer our differentiated premium positioning to more customers globally and within the U.S. This past year, we made good headway expanding our system wide footprint by 4.5%, with the opening of 378 new restaurants. This includes the opening of six restaurants in Honduras in the fourth quarter, which was a new market for us. At the end of 2022, we were in 48 countries and territories, leaving us with significant whitespace for further expansion moving forward. In North America, we achieved record system AUVs of approximately $1.2 million in 2022, versus approximately $900,000 in 2019. And as we mentioned, on our last call, we see opportunities for us to implement our winning strategies from our North American playbook and apply them across our global footprint. Our teams are focused on delivering premium menu innovations, enhancing revenue management capabilities, and ensuring that we have a strong online ordering presence through our app, website and aggregators in all of our markets, It will take some time to implement these best practices across all markets. But so far, we're pleased with the early customer response to our North American menu innovations when introduced internationally. The underlying long term fundamentals of our franchisee model are strong. And our franchisee, payback and unit economics remain attractive, despite near term macroeconomic challenges affecting our industry. This is most evident in the pipeline we have for new unit openings, as we remain a sought after brand for new franchisees on a global basis. Even as we head into another challenging economic year, I'm confident that we will open between 270 to 310 net new units and 2023. At the midpoint of the range, this growth would represent a 5% increase in total system wide units and nearly 20% increase over last year's 244 net new units. We're particularly bullish on the long-term opportunity internationally. Last year, we were pleased with the progress we made in penetrating the Middle East and East Asian markets and we have a robust pipeline for further expansion in Asia in general. In fact, last week, we opened our 49th market with four new restaurants and Jordan. Our development team also remains an active negotiations to expand our footprint into more new markets in the near future. Taking all of this into consideration, we remain on track to achieve our projected long-term development target of 1,400 to 1,800 net new units by the end of 2025. As a reminder, these numbers are inclusive of the 244 net new units we built in 2022. Achieving this net new unit goal would result in annualized net new unit growth between 6% and 8% between 2023 and 2025. I'd like to close my comments by recognizing our teams for the winning culture that we are building at Papa John's. For the second year in a row, Papa John's was named to both Forbes list of world's Best Employers and Best Employers for Diversity. We also earned another 100% score on the Human Rights Campaign Foundation's 2022 Corporate Equality Index. We're proud of our team and their commitment to our brand promise of delivering better, which has contributed to the resiliency and achievements of our business as we navigated the challenges of 2022. Coming out of this year, we are better operators and a stronger company. And we're set up to further build on our success in 2023. Now I'd like to turn the call over to Ann to provide more color on our fourth quarter and full year financial results. Ann?

Thanks, Rob. And good morning, everyone. From a financial perspective, we are pleased with our 2022 performance, given the many macroeconomic challenges our teams had to navigate throughout the year. As Rob mentioned, for the full year 2022, we reported increasing system wide sales, our third straight year of positive North America comps and solid net unit growth. We also increased our annualized dividend rates by 20% in August, and bought back nearly 4% of our outstanding shares. We're entering 2023 with a solid financial foundation enabling us to continue investing in long-term growth and returning value to our shareholders through dividends and share repurchases. Beginning with our P&L, for the fourth quarter global system wide sales were $1.2 billion, up 3% in constant currency and excluding the previously announced franchisee suspended restaurants compared with the same period last year. Net unit growth particularly in international markets, along with positive North America comp contributed to the higher system wide sales. This growth is a great example of the strength of our brand and franchisees excitement to invest in Papa John's. We finished the year with North America comp sales of 1.1% in the fourth quarter, a result of franchised restaurant comp sales being up 1.1% and company-owned restaurant comp sales up 0.8%. The key factors that drove the comp sales growth in the fourth quarter were new menu innovations, strategic pricing actions, and our enhanced value platform popup pairings. Our corporate locations also benefited from our back to better operations initiative that was launched in the fourth quarter. For the fourth quarter menu, prices were approximately seven to 9% higher compared with a year ago, primarily due to strategic pricing actions taken during the first half of 2022. As anticipated with strategic pricing actions, transactions were lower year-over-year for the fourth quarter, but in line with our expectations. Looking to 2023, we expect our sales growth to come from a combination of ticket and transaction growth, as our strategic pricing actions begin to lap. International costs were down 3.4% in the fourth quarter, but still delivering a 3-year stack of 20%. Similar to the prior quarter, the challenges we saw in the UK market had a significant impact on our international segment results, largely offsetting the UK performance were solid comps from other international markets, specifically the Middle East. Total revenues for the fourth quarter were $526 million of 3% versus the prior year when excluding the impact of our strategic refranchising of a 90-restaurant joint venture in the first quarter. Turning to margins, adjusted operating income, which we believe is a meaningful measure of our operating performance and a metric I will reference throughout my comments today was $38 million in the fourth quarter compared with $42 million, the same period last year. Adjusted operating margins were 7.3%, down slightly from 7.9% last year, but up sequentially from 6.6% in the third quarter. The year-over-year decline was in line with our expectations and primarily reflects higher feed inflation and labor costs in our corporate restaurants, which more than offset our strategic pricing actions taken earlier in 2022. Taking a deeper dive into our operating segments. For our domestic company-owned restaurants segment, food basket costs were up 13% in the quarter versus the prior year, driven largely by higher year-over-year cheese costs and to a lesser extent, by increases in dough costs. Labor costs also remained elevated in the quarter. Together these two factors represented approximately 550 basis points of headwind for the domestic company-owned restaurant segment margins year-over-year. Our strategic pricing actions somewhat offset this record inflation, resulting in an approximate 250 basis point decline in restaurant level margins compared with a year ago. We anticipate our domestic company-owned restaurant margins will improve throughout 2023 as food inflation accelerates and our teams execute on the operational excellence initiatives Rob discussed earlier. Most importantly, we remain confident in our ability to offer good value to customers without sacrificing margins. For our North America commissary segment, revenues grew by 12% in the fourth quarter year-over-year, driven by the continued acceleration of costs somewhat offset by lower volumes. As a reminder or commentary arrangement with North American franchisees enabled us to pass through food, labor and fuel costs on a cost plus fixed margin basis. As a result, rising costs are slightly accretive to commissary operating income, but diluted to operating margins. In addition, variances can exist between quarters because of a lag in timing from when costs are incurred to when they are passed through to franchisees, which is why it's helpful to look at commissary margins on a full year basis. For fiscal 2022 commissary margins were 6.7%, excluding G&A, D&A and intersegment revenues. Taking these items into consideration, commissary margins were 3.9% comparable with the prior year and consistent with our expectations. For our international operating segment operating income was down in the fourth quarter compared with the prior year. As we previously mentioned, the UK is our largest market, and the only international market where we own the commissary. Since this market is more than just a royalty stream, the near term challenges we are facing have had a more pronounced impact on international profits. Sequentially, we saw improved performance within our international operating segments, including the UK. Additionally, changes in foreign currency exchange rates negatively impacted adjusted operating income in the fourth quarter by approximately 250 basis points. The cost headwinds we experienced in our domestic company on restaurants and our international segments were somewhat offset by a decline in general and administrative expenses. Altogether, these factors were an approximate 70 basis point drag on fourth quarter adjusted operating margins versus a year ago, and an approximate 70 basis point improvement from what we experienced in Q3. I'd like to pause and say how proud I am of our team in a year of significant commodity and wage inflation for the full year, we still produced $157 million in adjusted operating income. To put this in context. In 2020, our adjusted operating income was $96 million, and in 2019, it was $34 million. Needless to say, we've come a long way in a relatively short amount of time while successfully navigating extremely challenging circumstances. Continuing to earnings, on a GAAP basis, diluted earnings per share was $0.66 for the fourth quarter versus $0.67 last year. Q4, 2022 results included $0.05 per diluted share related to the termination of UK franchisees, and in Q4 2021, included $0.08 per diluted share related to our strategic corporate reorganization. The termination costs in the UK are a continuation of our commitment to reposition our UK portfolio in a way that ensures our franchisees and this market are aligned to drive above average industry growth over the long term. Excluding these items, Q4, 2022 adjusted diluted earnings per share were $0.71, down slightly from $0.75 a year ago. Moving on to cash on the balance sheet. For fiscal year 2022, net cash provided by operating activities was $180 million. After deducting $78 million in capital expenditures for the development of new domestic restaurants and investments in technology innovation, we generated free cash flow of $39 million. This was down from $110 million for fiscal year 2021, reflecting the impact of our overall business performance, working capital changes and a $10 million increase in capital expenditures. We ended the year with ample liquidity approximately $440 million in cash in borrowings available under our revolving credit facility and have a conservative gross leverage ratio of 2.6 times. We also continue to return significant cash to our shareholders. During the quarter we repurchase $30 million in shares. In total, we purchased more than 1.3 million shares in 2022 and has $300 million remaining available for repurchase under our current authorization at the end of the year. We also paid out approximately $55 million in cash dividends in 2022. Based on our strong balance sheet, our board has declared the first quarter dividend of $0.42 per common share, or $1.68 annualized. Through prudent management of our cash flows, we are able to maximize our financial flexibility and our ability to create value for our shareholders in both the short and long-term through a combination of organic growth opportunities, share repurchases, and cash dividends. Before discussing our outlook, I want to provide an update on our UK market and the support we are providing our franchisees as this market continues to face significant inflation and high energy prices, among other challenges. As we mentioned on our last call, we are committed to supporting our UK franchisees with a needed operational adjustments and investments to manage through the current environment and reposition our UK portfolio to drive above average industry growth over the long-term. The next step and our commitment includes a variety of support to help our franchisees to this difficult time, included targeting marketing initiatives are about $2 million to $3 million. We are confident the investments we are making today are setting us up for long term success supported by a strong franchisee base. Now to our outlook. We remain confident and our positive North America comp sales, which we expect to grow between two and 4% annually going forward work as we look to 2023 specifically, we anticipate being at the lower end of this range following three straight years of record sales. And while we're confident in our positive momentum around comp sales for fiscal 2023 in Q1, we're lapping our largest January ever when we launch New York style crust and benefited from consumers staying closer to home due to the impact of Omicron. As such, we anticipate North America comp sales in the first quarter to be comparable with the first quarter record sales in 2022. Internationally, we're making progress across our markets. Although the macroeconomic environment will be a factor in how quickly we're able to grow in certain areas, including the UK. Since the UK market represents approximately 20% of our international sales, we anticipate our international comp sales will remain under pressure throughout 2023. For adjusted operating margins, we anticipate the first quarter of 2023 to be comparable to slightly down sequentially as commodity and wage costs remain elevated. For the full year, we anticipate margins to be comparable to up slightly as we benefit from several tailwinds, including our operational excellence initiatives, a positive comp performance and the benefit of 53rd week in 2023. As a reminder, flowthrough margin is higher in the 53rd week, as we love our fixed costs primarily in G&A, and D&A, which we estimate will have a roughly 50 basis points benefit to our fourth quarter adjusted operating income margins in 2023. Offsetting these tailwinds are the investments we are making in the UK and higher G&A expenses as performance-based compensation ramps back up along with the return of our franchisee conference in the second quarter after a three year pandemic hiatus. Additionally, while we expect food and wage inflation to ease over the longer term, it's difficult to predict when and to what extent it will occur in 2023. We expect CapEx to be between $80 million and $90 million, as we invest in technology innovation and the development of new company stores. Full year net interest expense is expected to be between $33 million and $38 million, and we expect our tax rate to be between 21% and 24%, reflecting an impact from the UK and a lower tax benefit related to equity vesting. Looking at the longer term, we'll continue to drive value through innovation, unit growth, operational productivity and strategic capital investments. As Rob discussed today, our marketing teams are aggressively pursuing top-line growth through menu and digital innovations, while our restaurant operations have a renewed focus on productivity coming out of the pandemic. Process enhancements are resulting in faster service and improved customer satisfaction, giving us great confidence in our ability to drive future margin expansion. And with that, I'll turn the call over to Rob for some final comments. Rob?

Thanks, Ann. As you can tell from our prepared comments today, we expect 2023 to be another great year for Papa John's, as we execute on our strategic priorities. We're leaning into and leveraging our barbell strategy of offering both great products and value for our customers. Our back to better operations initiative is focused on delivering more profitable growth. And our development teams are accelerating growth in our established markets, identifying attractive new markets to enter and attracting new well capitalized franchisees to partner with. With a continuing combination of insight, innovation and discipline, we're confident will drive steady earnings expansion and system wide sales growth for many years to come. With that, I'll turn the call over to the operator for Q&A.

Thank you. [Operator Instructions] Our first question goes from Brian Bittner with Oppenheimer. You may proceed.

Thanks. Good morning, Rob and Ann. I appreciate all the guidance details that you've given us on this call. It sounds like you anticipate comps in 2023 to be at the lower end of this new 2% to 4% long-term range, which is solid, but you also, I think you said you anticipate traffic to be positive in 2023. Can you just clarify that? Is that what you anticipate for the full year, or are you anticipate the opportunity to turn traffic positive throughout the year? And what are you seeing in your business that makes you think that positive traffic can be achieved in light of kind of all the macro pressures we're hearing out there impacting the delivery segment in general?

Hi, Brian. Great question. What I would tell you is in Q1, we're seeing strong transactions, particularly at our company restaurants, where we've kind of significantly improved our operations, which is creating an improvement in our throughput. And we anticipate being able to bring those insights and that discipline to bear across our franchisee network. We've already met with many of our largest franchisees and are starting to implement those procedures and those processes to make us all run more productively. And so the other thing I would tell you is, and we said this in the past, I mean, we have pizza done really well, through tough economic times. It has a built-in value component, we're still very competitive in the marketplace with lower priced offerings that are going to be in more demand as the economy and consumer sentiment continues to evolve. So we have a lot of confidence. Q1 is our biggest lap ever. Q1 was an amazing quarter for us last year. And, we're really confident in our ability to continue the momentum that we're building in Q1 throughout the balance of the year. And that will help us to continue to drive some strong transactions.

Thank you.

Thank you. Our next question comes from Sarah Senatore with Bank of America. You may proceed.

Great, thank you very much. I just wanted to sort of understand a little bit more about this comp trend. And it sort of sounds like we're still perhaps in the process of normalization of demand, post kind of the big pull forward during the pandemic. I guess I asked, because the rest of the industry seems to be seeing strong sales. So I was wondering if you could give any color, is the right way to think about this sort of, like, normalized volumes, and then we grow from here? And are you seeing any difference in your, like the demand coming through the third-party, the aggregators versus what you might be seeing in your own ordering platforms? And just trying to figure out where, like the shifts are coming from? If it's delivery, overall, or delivery in your platforms? And whether or not we can think about this year, sort of with volumes normalize and grow from here? Thank you.

Sure, our 3-year stacks right now, for Q4 last year were 26%. And we delivered 1.1%. So I would absolutely concur with you that the volume is normalized. And we, for a long time, during the pandemic, we continue to be asked if this was a pandemic a pandemic, impact on our business, all the sales that we had garnered and whether that was all going to go away when we came out of the pandemic. Well, I'm happy to say that we delivered positive comps last year. And last year was kind of the year that we came out of the pandemic. It was a record year for us in terms of sales, our third straight year of positive comps in North America. And so as we look at 2023, we were guiding to be positive again this year, which would deliver another record year. And so we are building on the foundation that we developed during the pandemic, as everyone on the call recognizes, three and a half years ago, this company was in a very different spot. And there were a lot of initiatives put in place, and we laid out our strategic priorities. And we mentioned that during the pandemic, we didn't change any of that. We just accelerated everything. And I feel like the pandemic did help this company get a strong footing. And we delivered, two amazing record years. Last year was a very tough year. 2022 the cost structure created a really tough P&L year. But we persevered through it and delivered our second highest operating income in the company's history. So this year, we're building on all of that. It is much more kind of stabilized normalized growth. And we feel like that's going to be the foundation for us to continue to grow moving forward.

And then just on the ordering channels?

I'm sorry, I apologize. So we are seeing -- we're still seeing growth and strength in the aggregator marketplace models. Their growth rates have changed, the trend lines have changed, but they're still growing. They're a solid part of our business, both on the marketplace side, where we continue to attract new incremental, profitable customers and transactions, but also on the delivery-as-a-service side where we leverage their partnership to really help us manage through some of our peak times and make sure we don't have to turn off our ordering system. So I know there's a lot in the media a lot that has been written about the aggregators, and where they're headed. For us, it's still a very strong partnership and a strong part of our business.

Thank you.

Thank you. Our next question comes from Chris O'Cull with Stifel. You may proceed. Chris O'Cull: Yeah, thanks. Good morning, guys. Rob, the unit growth guidance for '23 implies a pretty large step up in '24 and '25 in order to achieve that 6% to 8% '23 and '25 growth rate guidance you've given. It looks like maybe 100 units step up or more in those years. So I'm just wondering which markets do you expect to be primarily responsible for that accelerated unit growth in those out years. And then if you guys could just provide an update on maybe domestic franchisee store profitability for '22? And how maybe it changed year-over-year, that'd be helpful.

So great question, Chris. Yeah, it is a step up. Last year obviously was impacted by some of the geopolitical situations across the globe. And we had some big markets that we couldn't count on development from. This year, Ann mentioned, some of the investments we're making in the UK with the UK will be a little softer than we've been the last few years because of the situation that they're going through. But we're making that up with strength to China, strength in the Middle East, strength in Central America, and what we believe will be in a stronger domestic development this year, and in the next year. We also, as Ann mentioned on her comments, we are in active discussions with partners in large, undeveloped countries right now. And we look forward to hopefully being able to announce some of those agreements later this year, which will then have relatively significant impacts on 2024 and 2025. So it really is a combination of some of the current markets really performing well, as Ann mentioned. If you take the UK out of our international business, it was positive last year. And we have some really bright spots across the globe with our current franchisees that we are counting on and are seeing strong commitment to ongoing development. And then, with the addition of the new market, that those two things give us a lot of confidence in our ability to hit that that range. And then on the domestic restaurant margin, Ann if you want to kind of comment on that?

Yeah. I mean, I think certainly, the domestic restaurant margin was under pressure for the current year. But we're still holding on to the AUVs, as Rob talked about, and actually grew the AUVs slightly. So when you look at the dollar profit that's been thrown off by these units, it's still very healthy profit, particularly when you look at historically still at record highs, which gives us great confidence, kind of moving forward. And if you look at our outlook for 2023, we would expect to improve the unit economics from there in 2023. Chris O'Cull: Perfect, thanks, guys.

Thanks, Chris.

Thank you. Our next question comes from Eric Gonzalez with KeyBanc Capital Markets. You may proceed.

Hey, thanks. Good morning. Ann, maybe a quick clarification and then my real question. You said North America comps in the first quarter, you expect them to be comparable with the first quarter record sales in '22 Is that you mean flat comps? Or were you talking about the growth rate versus last year? And then my real question is really about the labor market. And if you could give us an update on the status of the labor market as it pertains to Pizza category. Are you still losing sales due to delivery driver shortages, and whether the stores are fully staffed right now?

So Eric, thanks for the clarifying question. I was meaning that we expect comps to be roughly flat in Q1 and then grow from there.

Great, thanks.

Yeah. So on the delivery driver staffing. We really haven't talked a lot about our sales being negatively impacted by delivery driver staffing. I think that's been a lot of the commentary throughout the industry or with our competitors. But we've been able to mitigate some of those staffing challenges with our partnerships on the delivery-as-a-service. So we are seeing staffing stabilized, we are seeing improvement in our staffing models. And a lot of the operational improvements that we talked about that we started to see, really in the back half of last year and significantly here in Q1 are helping us leverage our labor to a greater degree and make sure that we're able to service our customers. I mean, I mentioned in the comments that are out the door times have gone down from 29 to 20 minutes versus a year ago. You don't do that if you have a staffing, delivery staffing problem. So we feel confident that we have what we need to continue to drive operational improvements. And that's why Ann talks about her comments that we expect some operating margin improvement in our restaurants through the balance of the year.

Great, thanks.

Thank you. Our next question comes from Lauren Silberman with Credit Suisse. You may proceed.

Hey, thanks so much. I wanted to ask about the operating margins and the guide for I guess, flat slightly up for the year. Can you just talk about where the contribution is from the domestic corporate portfolio, you expect for margins there, understanding some offsets with the G&A. And then if you can just help us understand what the implied guide is for EPS, I think that'd be really helpful. Thank you.

Sure. So looking forward, as I said in my remarks, we expect margins operating margins for the total company to be relatively flat year-over-year. So as Rob talked about, and I mentioned kind of already, we do expect expansion in the corporate restaurants. But that will be offset, excuse me by investments that we're making, both in international and in G&A. So as we look specifically at the corporate restaurant margins, we expect those to improve, reflecting some deflation and commodities cost, labor efficiencies from our back to better initiative that Rob talked about, as well as the benefit of fixed cost coverage on comp sales increases. G&A will be a headwind year-over-year as we ramp up -- ramp back our performance-based compensation and bring back our franchisee conference. To give you some additional color there, there was a lot of noise in 2022. So I'd go back to 2021. Use that as your base, add in some inflation, and then a couple million dollars for the franchisee conference and that will get you close. International, we talked about will be pressured, reflecting a combination of the investments we're making, which I guess quantify of between $2 million to $3 million and then a bit of near term sales pressure coming from the UK. So I think those pieces kind of can get you to where you can back into what you think the corporate restaurant margins would be. As far as EPS, we're not providing specific guidance, Lauren, but we did in my remarks, provide some specifics around interest expense, and the tax rate. And so I think there's enough there for you to kind of get to the EPS system on your own.

Right, thank you, guys.

Thank you. Our next question comes from Joshua Long with Stephens. You may proceed.

Great, thank you for taking my question. I imagine there's more to come. And given how new the back to basics operations, operational plan is, there's probably more to come here. And just curious if at a high level, if you could share some of the early learnings and maybe tease out some of the focus points of how that might flow through? I realize much to be shared and probably learned at the store level as you work through it. But just curious on early learnings that have gotten you enthusiastic about rolling out this program a bit more?

Yeah, great question. A couple of things. I'll tell you. One, for two years during the pandemic, it was really about staffing the restaurants, not just driver staffing, but staffing in general. We were doing everything we could and our operators are doing everything they could to keep the restaurant safe, keep the restaurants open. And I think during that time, we lost a little discipline, a little focus on some of the KPIs that you track and monitor to make sure you're running great operations. Well, we brought in some new leadership, they have kind of restored that that focus and that measurement and that discipline. And, frankly, the follow up on whether or not we're hitting the KPIs that they are watching the right performance indicators and hitting the objectives that we all that we have in place. And we changed some of the GM comp model to include operations metrics, not just the financial metrics. So there's things that we've done, really kind of blocking and tackling to make sure that we are tracking the right things. And following up on those things. Some other more kind of functional things, we've improved our make line efficiency through some optimizations. And then we've also worked really hard to make sure that we have a great operating model when it comes to our driver dispatch, utilizing both our company, employees and drivers and our deliveries of service partners, making sure that we are optimizing that model there. I think for a while there was some kind of get to some of our operators and some of our restaurants weren't as efficient as they needed to be, and how they utilize their driver labor pool, and we've cleaned up a lot of that. So it's not really any rocket science that we've incorporated. It's not like we wrote some new piece of software that's changing everything, it really is about leadership. It really is about measuring results. And I think it's just getting back to being great operators, which is effectively what made this company great in the first place. So that's really the focus areas right now.

Thank you.

Thank you. Our next question comes from Peter Saleh with BTIG. You may proceed.

Great. Thanks. Rob, seems like the challenge right now is really getting traffic back into the stores. Can you just talk about what do you think is the top one or two levers that you have at your disposal to drive shopping? Is it really leaning harder on menu innovation? Is it more on operations? It doesn't sound like labor based on your prior comments. So just trying to understand what you think the major levers are to drive traffic in 2023?

Yeah. I mean, so we've already seen some improvements in our transaction trends versus year ago here in Q1. So we're already seeing traffic improvements. And a lot of that has to do with some of the throughput in the company restaurants, where we've seen the most impact. But a lot of it also has to do with some of the innovation we've already launched. Papadias, and Crispy Parm Pizza have done extremely well. They're bringing in new customers, they're driving trial of the brand. And they're also adding check while driving those transactions. Because that Crispy Parm is a premium pizza, Papa Bites are being added to existing pizza order. So innovation is going to play a big part. We've got a full pipeline of new products lined up to go this year, we're really excited. If we're lucky enough that all of them do as well as Crispy Parm is doing, then I think we'll be in really great shape. So product innovation. And then, frankly just the throughput that's being, when you reduce your outdoor parts, you're able to take a lot more orders. And order loss at the restaurant level is always a challenge at peak times, and we're seeing a lot more orders just being lost, or a lot less orders just being lost through our improvement and operations. So that's going to drive transaction growth itself. The last thing I'll say, we've got almost 20 million loyalty members at this point. We started talking about the loyalty program three years ago, we're at 12 million or 13 million loyalty members. So that's just a lot more people that we continue to add to our loyalty program that gives us the ability to send personalized incentives and one-to-one marketing opportunities to kind of to increase frequency. Throughout the pandemic, we've said this before, throughout the pandemic, we brought in a lot of new customers, we really didn't move the needle on frequency, when there's a lot of discussion around pizza fatigue, we weren't seeing that. We weren't seeing people come back a lot more often, we were just getting a lot more people. So I do think that there is a lot of upside opportunity for us to increase the frequency with our best customers and our loyalty platform is the best way to do that.

Great. And then just lastly, your menu pricing, I believe in the fourth quarter was in the high-single digit range. How do we think about carryover pricing in '23? What the impact on the copy? And do you plan on taking the additional price or do you feel like more discounting is in the cards? Just any thoughts on that would be helpful?

Yeah, I mean, we started taking that pricing last year about this time. So we're kind of just starting to lap the impact of that pricing. We don't have much pricing planned for 2023. As Ann mentioned, we are -- we do believe that there is going to be some relief in the commodities cost that impacted us to such a huge extent in 2022. So that should help with some of the restaurant operating margins, as Ann mentioned. And therefore, we're not planning on taking nearly as much pricing as we did last year, because we don't believe we'll need to.

Right, thank you very much.

Yeah. Thanks, Pete.

Thank you. Our next question comes from Alexander Slagle with Jefferies. You may proceed.

Thanks. Good morning. Congrats. Question on UK and just additional thoughts on what you think you need to do ultimately to resolve the challenges in this market? And if it's just as simple as driving more awareness and brand voice? Or do you see this more as a first step while you evaluate additional portfolio repositioning work or other support? Just kind of thoughts there?

Yeah, it's a great question. And I will tell you, it's not as simple as that. I mean, there's a lot of work that needs to be done in the UK. I mean, fundamentally, we believe that the UK is going to be a great market for Papa John's. We've got our second largest market outside the U.S. We have brand awareness there, we have scale, we have great operate -- a great supply chain, we have the infrastructure. We need to get better at operations, we need to make sure that the challenges that have that market is facing don't lead to a significant decline in our ability to take care of our customers. We've got a new team in the UK, a leadership team that is focused on operations focused on a lot of the things that we've talked about here, improving our corporate restaurants. It really is a back to basics fact a better model over there, where we're making sure that we've got great operators that can take care of our customers. And then once you've got that in place, then you do try to create more awareness, more opportunities to bring new customers in, where we're right now building out new digital capabilities. Our website, our application over there isn't as robust as we have in the U.S. Our conversion rates of customers coming into those digital platforms, is significantly lower than it is in the U.S. So we're making investments there to optimize those platforms and get more customers through the funnel. We're also leveraging the innovation that we're developing here in the U.S. to be able to bring excitement and new items to that market. It's not as -- it's not just hey, whatever we do in the U.S. was put in the UK. We're still making sure that there's consumer demand and excitement around those items, but we're doing a lot more cross pollinating than we ever have. So we have a lot of confidence. Obviously, we've called out here that it's not something that we're going to fix overnight or not maybe not something that we're going to fix even in the next quarter or two. But it's definitely a market that we are committed to and that we believe can be a strong growth market for us in the future.

Great, thank you.

Thank you.

Thank you. This concludes the Q&A session. I now like to turn the call back over to Rob Lynch for any closing remarks.

So I'd like to thank everyone on the call for your time this morning and for your continued support of Papa John's. To summarize we are confident about the long-term opportunities for Papa John's and our progress thus far. It's often said that it's easy to look good during good times, but it's the challenging times that reveal the true potential of a company. I couldn't be more proud of how our team has navigated the most challenging year that we've experienced together. And entering my fourth year with the company, I continue to be excited about the potential for this differentiated brand. We have a solid foundation, great momentum, and are focused on executing our strategic priorities to continue to build sustainable long-term value for all of our stakeholders. So thank you very much for calling in. I look forward to speaking with many of you later today.

Thank you. This concludes today's conference call. Thank you for participating. You may now disconnect.