Domino's Pizza, Inc. (DPZ) Q4 2015 Earnings Report, Transcript and Summary

Good morning. My name is Dennis. And I will be your conference operator today. At this time, I would like to welcome everyone to the Domino's Pizza Q4 and Year End 2015 Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks there will be a question-and-answer session. I will now turn the call over to Ms. Lynn Liddle. Please go ahead. Lynn M. Liddle - Executive Vice President-Communications, Legislative Affairs & Investor Relations: Thanks, Dennis, and good morning, everyone. We're coming to you from beautiful, snowy Ann Arbor, Michigan. We made it through a snowstorm to be here with you today to announce our year end 2015 results. And we're very happy to be here. I'll remind investors or all of the folks on the call that this is for investors primarily. So I'll kindly ask the members of the press to be in a listen-only mode. And also turn your attention to our Safe Harbor statement that is in the press release and the 10-K. In the event we say something that we shouldn't say that's forward-looking. We're going to follow our usual procedure of prepared comments from our CFO and CEO. And then we'll open it up for your questions. So as we begin, I would like to introduce Jeff Lawrence, our Chief Financial Officer. Jeffrey D. Lawrence - Chief Financial Officer & Executive Vice President: Thank you, Lynn, and good morning, everyone. We are thrilled to report our results this morning for the fourth quarter and full year 2015. During the quarter, we continued to build on the positive results we posted during the first three quarters of the year. And we delivered fantastic results for our shareholders. Our international and domestic divisions posted strong same-store sales growth. We opened a significant number of new stores, both domestically and internationally. And adjusted EPS grew 26.4% over the prior year quarter. Before we jump into the numbers, I would like to first remind everyone once again that our fourth quarter included an extra week this year. Typically our year consists of three 12-week quarters and a 16-week fourth quarter. But in 2015 our fourth quarter consisted of 17 weeks. Additionally, we also completed our recapitalization during the fourth quarter, which also impacted our as reported amounts. In the earnings release we filed this morning, the impact of both of these items has been adjusted out of our 2015 results, as items affecting comparability. With that in mind, let's jump into results. Global retail sales, which are the total retail sales at franchise and company-owned stores worldwide, grew 17.6% in the quarter. Again, these numbers were benefited by the extra week. When we exclude the adverse impact of foreign currency, which was a headwind for us all year, global retail sales grew by 25.2%. The drivers of this retail sales growth included strong domestic same-store sales, which rose by 10.7% in the quarter. Broken down, our U.S. franchise business was up 10.7%, while our corporate stores were up 10%. Both of these comp increases, which are not affected by the extra week, were driven primarily by traffic or order count growth. We also saw some ticket growth during the quarter. What's even more impressive is that this 10.7% increase was lapping an 11.1% increase in the prior year quarter, a double-digit on a double-digit. We're also very pleased to report that we opened 88 net domestic stores in the fourth quarter, consisting of 92 store openings and four closures. For the full year, we opened 133 net domestic stores. This net domestic store growth is the highest number of openings we've had in 15 years. Our international division had another strong quarter, as same-store sales there grew 8.6%, lapping a prior year quarter increase of 6.1%. This marked the 88th consecutive quarter, or 22nd year of positive same-store sales growth for our international business. Our international division added 323 stores during Q4, comprised of 348 store openings and 25 closures. For the full year 2015, we had record international growth of 768 net new stores. When adding in the domestic store growth, we opened 901 net new stores globally, which is the most store growth we've had since the brand was rapidly expanding back in the 1980s. Turning to revenues, total revenues were up $98.2 million, or 15.3% from the prior year. This increase was primarily a result of four factors. First, the extra week increased revenues by an estimated $49.7 million. Second, higher supply chain center revenues, which were driven by higher food volumes related to strong U.S. comps, as well as increased sales of equipment to stores in connection with our global store re-imaging program. These supply chain increases were partially offset by lower commodity prices. Third, higher domestic same-store sales and store count growth resulted in increased royalties from our franchise stores and higher revenues at our company-owned stores. And last but not least, higher international royalties, again from increased same-store sales and store count growth, which were partially offset by the negative impact of foreign currency exchange rates. Currency exchange rates negatively impacted us this quarter by $6.4 million versus the prior year quarter, due to the dollar strengthening against most of our currencies. For the full fiscal year of 2015, foreign currency negatively impacted revenues by $19.9 million. Now moving onto operating margin, as a percentage of revenues, consolidated operating margin for the quarter increased to 31.2% from 29.5% in the prior year quarter. Operating margins benefited overall from lower commodity costs in the quarter and higher sales in all of our business segments. Looking specifically at company-owned stores, operating margin there increased to 26.5% from 23.2%, driven primarily by lower food costs and to a lesser extent, the leveraging impact gained from higher store sales. The supply chain operating margin also increased, this time to 10.8% from 10.1%, due primarily to lower commodity costs, offset in part by higher labor costs. As a reminder, commodities are generally priced on a constant dollar markup to our franchisees. Therefore, lower commodity prices do not impact our supply chain dollar profit. They do, however, positively impact our supply chain margin as a percent of revenues. The average cheese block price in the fourth quarter was $1.63 per pound versus $2.11 in the same period last year. This helped drive down our overall market basket by 7.1% as compared to the prior year quarter. Let's now shift to general and administrative expense. G&A increased by $6.3 million in the fourth quarter versus the prior year quarter due to several factors. First, we estimate that $4.7 million of these G&A expenses were incurred as a result of the extra week in the quarter. Next, our planned investments in our team, primarily in e-commerce, international and technology, also contributed to this increase. Third, our robust sales and earnings led to increases in volume-driven expenses such as variable performance based compensation and franchisee incentives. And finally, these increases were offset in part by the non-recurrence of a $5.8 million asset impairment charge we took back in 2014. Moving down the income statement, net interest expense increased by $13.6 million in the fourth quarter, and by $12.5 million for the full year, primarily as a result of increased net debt from our 2015 recapitalization. Switching to income taxes, our reported effective tax rate was 36% for the quarter and 37% for the full year. We expect that 37% to 38% will be our effective tax rate for the foreseeable future. Our fourth quarter net income was up $14.7 million, or 30.7%. When you exclude the estimated impact of the extra week, the 2015 recapitalization expenses, and the 2014 asset impairment charges, all of which are identified as items affecting comparability in our earnings release, the net increase in net income was primarily driven by higher domestic and international comps, global store growth and strong supply chain volumes. Our improved operating results were partially offset by the FX headwinds I mentioned just a moment ago. Our fourth quarter diluted EPS as reported was $1.18 versus $0.85 last year, which was a 39% increase. Our fourth quarter diluted EPS as adjusted for the items affecting comparability that I just mentioned was $1.15 versus $0.91 in the fourth quarter of 2014, which was a 26.4% increase. Here is how that increase in diluted EPS, as adjusted, breaks down. Foreign currency exchange rates negatively impacted us by $0.045. Our higher interest expense, primarily as a result of our higher debt balance, negatively impacted us by $0.05. Our lower effective tax rate benefited us by $0.015 and lower diluted share counts benefited us by $0.07. But most importantly, our improved operating results benefited us by $0.25. For those of you looking for a 17-week EPS number without the recapitalization, you would take our as adjusted diluted EPS amount of $1.15 for the quarter and add back an estimated $0.12 for the impact of the extra week. Now turning to our use of cash, over the course of the year we had total share repurchases of $738.6 million. Of this amount we repurchased and retired approximately 1.3 million shares for $138.6 million, or an average price of $107.08 per share through our open market share repurchase program in the first three quarters of the year. Separately, in the fourth quarter we received and retired approximately 4.9 million shares in connection with our previously announced $600 million accelerated share repurchase program. At final settlement of the ASR program, which will be completed and recorded by the end of the first quarter of 2016, the company will likely receive and retire additional shares. We also used cash to repay $564 million of our debt during the year, primarily related to the $551 million partial repayment of our 2012 notes in connection with our recapitalization. Separately, we returned over $80 million to our shareholders in quarterly dividends. When you add the share repurchases and the quarterly dividends together, the end result is that we returned more than $800 million to shareholders during 2015. Moving to capital expenditures, we invested approximately $63 million in CapEx in 2015, primarily in our stores, our supply chain centers and our most important technology initiatives. As we look forward to 2016, I'd like to remind you of some information we shared at our Investor Day in January. We currently project that commodities we use in our U.S. system will be flat to up 2% as compared to 2015 levels. We estimate that foreign currency could have an $8 million to $12 million negative year-over-year impact on pre-tax earnings in 2016. For G&A we expect to have increases for e-commerce and technological initiatives, which remember are partially offset by transaction fees we receive. We also plan to have increases for other strategic initiatives. We expect total G&A expense to be in the range of $290 million to $295 million for full year 2016. Keep in mind too that G&A expense can vary up or down by, among other things, our performance versus our plan, as that affects variable performance based compensation expense and other costs. In 2016 we expect gross capital spending to be approximately $60 million, as we will continue to invest in improving our image, our technology and our supply chain capabilities. Overall, we are pleased with the results we achieved in 2015 and remain very excited about our continued growth prospects. We do not take these results for granted, and are committed to continuing to drive the brand forward with a focus on relentlessly increasing sales and unit economics for our franchisees, and driving continued growth and shareholder value. Thank you for your time today, and with that, I'd like to turn it back over to Patrick. J. Patrick Doyle - President, Chief Executive Officer & Director: Thanks, Jeff. So that was an outstanding year. If there is one question I continue to get from the many who have become interested in us in recent years, it's about the cause of our success and what catalyst or event we can point to, to explain it. We welcome the question because, truthfully, it allows us the opportunity to take people through this multi-layered story. Our success didn't happen overnight and was certainly not due to the push of one button or the pursuit of a single element. It's been the result of a steady build over time and we're extremely pleased with the results those efforts are producing. From our landmark U.S. pizza turnaround six years ago, to our accountable, honest and transparent marketing and communication with consumers, to our unmatched innovation as a clear technology leader, and more recently the overhaul and redesign of our store image worldwide, we've truly taken a brand that once stood for delivery convenience, and frankly little else, to one that now stands for so much more. There are two critical elements to our steady strategy: continuous focus on improvements and big, bold ideas. In any competitive landscape, the team with momentum and operational excellence can be very difficult to stop. And as we sit today, it's nearly impossible to argue against Domino's proven strength in both of these areas. This approach helped produce an incredible 2015. And beyond just numbers and results, I'm encouraged by the winning attitude and culture throughout our team and franchisee base globally, along with our relentless focus on avoiding complacency. You won't find us spending any time marveling at our past success. Instead we look ahead and focus on whatever it takes to always get better. Nothing has brought this idea to life quite like our domestic business, where our performance in 2015 was just tremendous. From an execution and energy standpoint, our U.S. franchisees had what I would consider their best year in our company's 55-year history. We delivered 12% same-store sales growth domestically for the year and have now racked up seven straight years of positive sales growth in the U.S. We achieved another record year of franchise profitability at an average of more than $120,000 per store. This level of health in our franchisees' unit economics is very much a result of their hard work, passion and energy. Our domestic franchisees are making more money than at any time in our history, and that is helping to open even more stores. It's a positive cycle, and the momentum certainly continued in 2015. We're also proud of our accomplishment at re-imaging half of our U.S. stores by the end of 2015. Store re-image is all about providing a welcoming atmosphere and customer experience upgrade. And I am very pleased with the dedication, focus and progress our franchisees have demonstrated towards this goal, while continuing to execute at extremely high levels and not lose focus on the business at hand. Our loyalty program, which was launched during the fourth quarter, has produced encouraging early results, feedback and engagement from our digital customers. This introduction had a positive impact on the fourth quarter, and we look forward to continuing to introduce it to our growing digital audience and learning more along the way. It was a great year on the supply chain side as our team did a great job of reacting to the significant volume growth in 2015. As we look forward the next few years, it's clear we will need to invest to expand our supply chain capacity to continue to support growth throughout our system. I also want to note that because of the generosity of our customers, as well as hard work from dedicated franchisees and store members, we were able to set yet another record in raising $5.4 million for St. Jude Children's Research Hospital. One of my favorite moments of 2015 was having the privilege of cutting the ribbon on the Domino's Event Center, a beautiful addition to the St. Jude campus in Memphis. We continue to be extremely proud of this partnership and the over $30 million we have helped raise since the partnership began in 2004. It's impossible to highlight our thriving business without discussing technology. We ended 2015 with over 50% digital sales in the U.S. And for the first time in our history more than half of our national television campaign topics were directly related to digital initiatives. Technology is now simply part of our brand fabric and identity. We promoted voice ordering, loyalty and most notably our 15 ordering platforms that now include text and Twitter via emoji, Samsung TV, Ford SYNC and smartwatches. Just last week we announced that customers can now order on their Apple Watch. Time will tell what is next. We also continue to grow our digital presence within international markets, helped by the increasing adoption of our PULSE point-of-sale system and the growing opportunity of global online ordering, which is currently active in 12 markets. I'm encouraged that this will help our franchisees abroad compete better and grow faster. Nearly 45% of our international sales now come from digital channels, with some areas of the world exceeding the 70% mark. And we're pleased to see more markets developing this capability. But innovation requires investment and I want to take the opportunity today to make an important point in this regard. Digital is having a tremendous impact on our performance. We aren't willing to give up our lead or the unparalleled digital experience we offer customers, one that only seems to be getting better. Therefore, we will continue to invest as long as we keep seeing these strong returns. Keep in mind as well that we receive a transaction fee for every digital order in the U.S. and those international markets using our platform. And it's a win-win for our system. Franchises get the best digital experience in QSR quite affordably, and we benefit from some offset to our investment. The paradigm has changed dramatically and it's our job to be mindful as always of investing wisely, while refusing to let go of our lead. And speaking of staying on top, the best international model in QSR continued its phenomenal run in 2015. We've now reached a rather unbelievable streak: 22 consecutive years of positive same-store sales. With strong sales and another terrific year of rapid store growth, the business continued to grow and our master franchisees performed at the highest of levels. We opened six new markets in 2015: Azerbaijan, Cambodia, Georgia, Portugal, Belarus and the birthplace of pizza, Italy. And we once again saw outstanding sales performances from countries such as Australia, the UK, Mexico and Canada. We added 901 net new stores globally last year, reaching 12,530 stores worldwide. India was our biggest store growth champion for 2015, adding 159 net new stores and recently hitting the 1,000 store milestone, the first market outside of the U.S. to do so. As of the fourth quarter, we had 3,800 international stores re-imaged. Around the globe, store returns are driving an accelerated pace of store growth and reinvestments, and attracting competitive pizza brands to convert to Domino's. In addition to brand conversions in South Africa and France, we recently announced a conversion in Germany and are looking forward to the energy and potential that our master franchisees, Domino's Pizza Enterprises, and Domino's Pizza Group will together bring to that important market. And lastly, we recognize the milestone anniversaries as both Japan and the UK celebrated their 30th years in business. I couldn't be more pleased with the strength and steadiness of our international business despite a tough economic landscape in many international markets. It's truly a tribute to a great team and fantastic group of master franchisees. In summary, I can't say enough about how pleased I am with our 2015 performance. The momentum behind this brand is tremendous. We know our identity, we pursue innovation relentlessly, we genuinely, even in the face of great success, look for ways to be better. We are big and bold with our ideas. We would rather risk and fail than not risk at all. We're honest and accountable. This identity exists because we have a franchise base that is second to none, both in the U.S. and abroad, getting it done each and every day. Thanks and I will now open it up for questions.

. And your first question is from the line of Brian Bittner with Oppenheimer. Please go ahead. Michael Tamas - Oppenheimer & Co., Inc. (Broker): Great. Thanks. This is Mike Tamas on for Brian. So obviously congratulations, great comps and great end to the year. Just wondering how do you think about the business as you look towards 2016 and the comps? Should we be thinking about this on like a two-year and a three-year comp basis? What's the best way to think about that? And then sort of tying in, you mentioned the loyalty program helped the fourth quarter a little bit? So anything else you can talk on there? Is there some sort of big bump early on that sort of gets a little bit more normalized as we move out several months into the year, out from the launch? So, anything you could provide there would be helpful. Thank you. J. Patrick Doyle - President, Chief Executive Officer & Director: Yeah. Thanks, Mike. So first I'll take the answer on loyalty. We feel good about the start on loyalty. It's still going to be some time, I think, before we really see the full impact of that and understand how it's affecting customer behavior. You need to see a number of cycles of customer repurchase, I think, before you fully understand it. But clearly we're happy with the start. Our long-term guidance is 2% to 5% domestically. And clearly we've been performing above that level, but as we look at our business, we think that over the medium to long term that's the right answer for you as you think about the business. Certainly looking at two- or three-year comps makes sense. And so I think most of you are doing that in your analysis on the business. There's always going to be some movement quarter-to-quarter. But clearly we're pretty pleased with our results both on a one-year and a multiple-year basis. Michael Tamas - Oppenheimer & Co., Inc. (Broker): Great. Thank you.

Your next question is from the line of John Glass with Morgan Stanley. Please go ahead. John Glass - Morgan Stanley & Co. LLC: Just first on the loyalty program, and I don't think you'll probably give us a sense of how much it contributed to the comp, but I thought I'd ask. And then maybe just membership, what's the rate of signup versus your expectations? Or can you give us sort of a sense of how well embraced it's been so far and what you need to do? If it needs to go further, how you'll incent people to sign up? J. Patrick Doyle - President, Chief Executive Officer & Director: Yes. So we're off to a strong start with it, John. And you guessed correctly. We're not going to give kind of specifics around it. And honestly it's going to take some time for us to really understand that. As I said, until you've seen multiple repurchase cycles you're not able to really be able to project how it's affecting frequency. But we're very happy with how it's rolled out. We're getting very good feedback from the customers. If you look at kind of the reviews that it's getting, it's been very well accepted by consumers. We're not going to disclose kind of the enrollment numbers, but clearly we feel good about how it has launched and about the feedback that we're getting from customers on it. John Glass - Morgan Stanley & Co. LLC: That's helpful. And then on the unit growth, I think in the last couple or three years you've gone from essentially 0% in the U.S. on a net basis to like 3%. If that's correct, is that the right way to think about 2016 and 2017? Have you talked to your franchisees and is there an aggregate number that maybe is higher than that and maybe what is that? And related to that, delivery businesses are unique in that you can't just open a store unless you – you have to consider impacts. Has there been any discussion in the franchisee base about getting impacted on delivery areas? Or have you been able to negotiate that pretty well? J. Patrick Doyle - President, Chief Executive Officer & Director: Yes. So we've got the right with our franchisees to look at delivery areas. There is an area that is assigned to them, but there is a smaller area that is protected for them under their 10-year contract. As we look at the business and the growth we've had in the business and the returns that are getting generated at the store level, it has clearly helped accelerate the store growth. And we still see 1,000-plus stores that can be built in the U.S. The ramp up in growth is a reflection of the growth in the business and the great returns that our franchisees are getting by investing in building new stores. We're getting strong returns from those new stores as they're opening. So I think you're seeing growing excitement from the system about expanding the system in the U.S. So we feel good about where we are. And you've probably heard me say many times that while there are many in the industry that put out a lot of press releases around contracts that are being signed, about how many stores are going to be built, particularly as they're going into new markets, we largely just don't do that, because our view is that the franchisees are smart. And when they're seeing strong returns, they're going to build more stores. Stores get built because capital moves toward where there's a strong return, and there is a very strong return on building Domino's Pizza stores right now in the U.S. and in the vast majority of our international markets. That's ultimately what's accelerated the unit growth. Over time our view is kind of 5% to 7% growth overall on our global store counts. And we think that's a very realistic view of what you should expect from us. John Glass - Morgan Stanley & Co. LLC: But that target does not necessarily pertain to the U.S. What is that target in the U.S. then? J. Patrick Doyle - President, Chief Executive Officer & Director: Well, that's a combined growth for both. John Glass - Morgan Stanley & Co. LLC: Okay. J. Patrick Doyle - President, Chief Executive Officer & Director: So that's a full-up domestic and international store level growth is 5% to 7% range. It has clearly been predominantly international over the last few years. But it has been our expectation that as we improved the returns that you're going to see more of that shifting into the U.S. And so I feel good about the momentum we've got in the U.S. I feel great about the store level returns. And so that 1,000 more stores that I'm talking about in the U.S. I think is very realistic. John Glass - Morgan Stanley & Co. LLC: Thank you. J. Patrick Doyle - President, Chief Executive Officer & Director: Thanks, John.

Your next question comes from the line of Karen Holthouse with Goldman Sachs. Please go ahead. Karen Holthouse - Goldman Sachs & Co.: Hi. Thank you for taking the question and congratulations on a fantastic quarter to say the least. Looking at the fourth quarter, we've I think historically thought of the category, or the pizza category, as something that actually benefits from inclement weather. But is there any sense that a relatively mild start to winter may have been a tailwind? J. Patrick Doyle - President, Chief Executive Officer & Director: May have been a tailwind? It would actually be the other way around. Karen Holthouse - Goldman Sachs & Co.: I'm sorry, been a headwind, sorry. Yes, been a headwind. J. Patrick Doyle - President, Chief Executive Officer & Director: Yes. I think our answer on this is, as we've looked at it over time, bad weather, as long as it's not too bad, is a net positive for the business in the near-term. But the real answer is that with the variety of weather and the different geographies that we're operating in, when you're looking at a full quarter of results, we just don't think it is really that material of an effect. So could it have been a little bit of a headwind for us? Maybe, but not enough that it really materially affects the results. Karen Holthouse - Goldman Sachs & Co.: And then one other quick one. It's obviously pretty hard to find a hole to pick in a 10.7% comp, but within that, were there any just regions in the U.S. that were particularly strong or were underperformers? J. Patrick Doyle - President, Chief Executive Officer & Director: No. There really weren't. It was very broad-based. Karen Holthouse - Goldman Sachs & Co.: Great. Thank you. J. Patrick Doyle - President, Chief Executive Officer & Director: Thank you, Karen.

Your next question is from the line of Alton Stump with Longbow Research. Please go ahead.

Good morning and offer my congrats as well on a great quarter. I guess looking back at the U.S. store growth, I was surprised at how much growth you ended up having for the full year. Is there any certain regions, Patrick, that you're seeing the strongest growth here in the U.S.? J. Patrick Doyle - President, Chief Executive Officer & Director: Yes. I think it's pretty broad-based. There are still areas of the country where we are somewhat less penetrated than others. Interestingly enough, probably the area where we have the most opportunity still to grow over time is actually the Midwest where we're based. But really when we look around the country, there's an awful lot of kind of fill-in growth that you're going to be seeing. So there aren't many markets where we don't have a good base to grow from. So as we kind of prioritize markets around the country for growth, an awful lot of it is a dozen stores here, a dozen stores there, if there's any concentration left today that I think geographically looks like there will be a little bit more than other areas, it's probably in the Midwest.

Got you. That's helpful. And then one quick follow up and I'll hop back in the queue. There's been a lot of hype, somewhat media driven, recently about a I suppose a price war in the U.S. pizza category. It would seem that you guys are not responding to that or maybe not even seeing it. Any color on sort of what you're seeing not just from of course major player that has been out there (34:58) pretty aggressive value deals? But even smaller players are they using the lower cheese cost to discount more heavily. Just kind of overall competitive environment you're seeing? J. Patrick Doyle - President, Chief Executive Officer & Director: Honestly we're really not seeing it. Clearly our results were strong, and so if we saw it, we didn't feel it. But if you look at the category over the last few years, first of all, Domino's has had the same national price point now for six or seven years. You've seen ticket in the category probably growing a couple of points a year pretty consistently over the last five or six years, so 1% to 2% in that range. And so I've seen the same discussion about it. But honestly, overall we just aren't seeing it. And it clearly has not been affecting our business.

Got it. Thank you.

Your next question is from the line of Steve Anderson with Maxim. Please go ahead.

Yes. Good morning. And I wanted to ask about something that's popped up in the last couple of conference calls and it's regarding your insurance costs. And I know you've had to increase your costs with regard to a couple of incidents that occurred during the year. And so I just want to see if those trends had normalized during the quarter. Jeffrey D. Lawrence - Chief Financial Officer & Executive Vice President: Yes. This is Jeff. On our casualty insurance, as you know, we took kind of that unexpected charge in quarter three. At the time we said we were going to make sure we were doubling down on our safety efforts and making sure that we manage it the best way we can. It's only one more quarter on the books, but we didn't have an unexpected headwind or a tailwind on insurance from a casualty perspective during the quarter. And as we get into 2016 the expectation, at least for management is, hopefully we can make an impact by managing it better and kind of getting back that normal run rate. So the Q3 charge we did think was certainly out of the ordinary for us, at least given our history. But for us it's all about just making sure we're managing it the best way we can. And that'll be our focus going forward.

Okay. Thank you. Jeffrey D. Lawrence - Chief Financial Officer & Executive Vice President: My pleasure.

Your next question's from the line of Peter Saleh with BTIG. Please go ahead.

Great. Thanks. And congrats on the quarter. I wanted to ask about the mix and match menu. Just curious, I know you guys said that you didn't see any real impact from the discounting going on. But did you see at all the incidences of the mix and match? Have customers gravitated a little bit more towards that in the recent past? J. Patrick Doyle - President, Chief Executive Officer & Director: I think the way to think about it is, first, the overwhelming majority of our sales are pizza and are always going to be pizza. We've got great other products on our menu and we want people to be aware of those. And particularly we want people to be aware of those when they're ordering in larger groups. And so there is always in a group of four or six or eight people, there is going to be somebody who may not be as interested in ordering pizza. And if they don't know about the options that Domino's has, we may lose that whole order. So when we advertise mix and match, we will get a little bit of a bump in those other products in the near term. But as much as anything, it's about driving awareness of those products over the long term so that people know there are some other choices. And as much as anything that's about making sure that we're an option for larger groups that know that there are things that they can order beyond just the pizza.

Got it. And then on the loyalty program, just circling back, Pizza Profile, did that help with the enrollment in the quarter for the loyalty program? J. Patrick Doyle - President, Chief Executive Officer & Director: Absolutely it did, yes. And the profiles that we've got now and the information that we have with our customer base is a very strong benefit for us. And it's what allows us to be rolling out the platforms that we are as quickly as we are for digital ordering. It gives us a real leg-up when we roll out something like the loyalty program that we already have a strong profile on the customer and their information. And really signing up for loyalty if you had a profile was about checking a box. And that accomplished it and you were now in the program. As an ecommerce company, we are always looking at conversion rates. We want to understand people who are starting the process to order, what percentage of them actually complete the order. And if you give them something that is too complicated along the way, like a long enrollment for the loyalty program, you may actually hurt your sales in the near-term. So the fact that we already have a lot of information made that sign up easier and it absolutely helps.

Got it. And then last question, can you guys just give us an update on the franchisee EBITDA at the end of 2015? I don't know if you guys called that out on the call, I may have missed it. What was the final number? J. Patrick Doyle - President, Chief Executive Officer & Director: We don't have the final, final, but it is north of $120,000.

Excellent. Thank you very much and congrats on the quarter. J. Patrick Doyle - President, Chief Executive Officer & Director: Thanks, Peter.

Your next question is from the line of John Ivankoe with JPMorgan.

Great. My congratulations as well. Obviously, tremendous. On the supply chain piece, that segment, at least from our perspective, has become increasingly difficult to model and you had a completely blow-out fourth quarter. I mean, could you just help us separate how much of that is – and I think we understand store growth and comp, but how much of that was due to equipment sales related to the remodels, and whether there's any lumpiness in the fourth quarter that may not recur, or maybe will occur, into 2016 and beyond? Jeffrey D. Lawrence - Chief Financial Officer & Executive Vice President: Yeah. So, when you think about supply chain, the first thing you have to remember is that as cheese and other commodity prices go up and down, it's really going to mess with your percentage margin comparison. So that's first and foremost. But when you think about dollars, margin in 2014, about $131 million, $149 million in 2015, which you can find in the 10-K, more than anything this is about selling more food in the stores, which is requiring more food from the supply chain centers. There is definitely some leverage that you get from leveraging the existing supply chain systems. But going against that is also as we have gotten a lot busier, we are working a lot harder to keep up with the growth. So, when we think about profitability there, it's mostly about food volume, that's following the comps in the U.S. Separate from that, and you mentioned it is equipment and supply chain sales to our stores that are re-imaging, and building stores both in the U.S. and including some international franchisees who buy their store packages from us as well. Again, you think about that, we've been accelerating store count growth, obviously the re-images are now about half done but not done yet, another couple of years to go, so as you think about it going forward, it should be more of the same on balance.

Okay. And if I may, just to follow up on that, Patrick, in your comments, you mentioned needing to invest in the supply chain based on how much your volumes have increased. Could you shed some more light on that? I mean, does that mean additional distribution centers? And could you talk about what potential profit impact could be from that? J. Patrick Doyle - President, Chief Executive Officer & Director: Yeah. I think the answer, John, is over time that we will need to. And if you look at the growth in our business over the course of the last five years or six years, the volumes in total from our system are up in the range of 35%, 40%. And so at some point, you're going to need to build some more capacity into the system. Obviously, it's a great problem. The way I would kind of think about that is first we gave kind of the guidance for this year to you at Investor Day. The second thing is that our CapEx into reimaging and relocating our Team USA stores, our corporate stores, is actually going to be going down as that reimage program kind of wraps up. So I don't know that you're going to see a dramatic change in the level of CapEx going forward. But we certainly are going to have to look at ways to increase the capacity in the system to make sure that we're giving great service to our franchisees in their stores.

Thank you. J. Patrick Doyle - President, Chief Executive Officer & Director: Thanks, John.

Thank you. Your next question's from the line of Jeffrey Bernstein with Barclays. Please go ahead.

Great. Thank you very much. Two things: just one asking about the – there's been a lot of questions on the pizza category and the competition and discounting, if you broaden that out a little bit and look maybe at, for example quick service and then the burger discounting going on. I'm wondering whether theoretically do you think about perhaps playing in the same sandbox with the QSR players? Or do you view pizza as a distinct occasion? There's no sign of it in the fourth quarter results. I'm just wondering how you kind of think about it theoretically and perhaps historically as more of a tie-in to casual dining discounting than quick service, but just wondering how you think about the discounting on either end of the pizza category. J. Patrick Doyle - President, Chief Executive Officer & Director: Yeah, Jeff. It's a good question because we certainly do look at it. You're going to have more direct impact from the pizza competitors than we do from burgers or chicken or sandwiches or anywhere else. And we've told you in the past that what's interesting about the pizza category is because it is so unconsolidated, we think we actually feel the effect of competitive activity less than most categories in the restaurant industry. So, do we look at it? Absolutely. And at some point, is there an overall share of stomach question? I think there is. But because of the overall size of the restaurant industry and the relative fragmentation of market share within the pizza industry, we just don't feel the effect of any single competitor's movement in price or promotional strategy in a material way on our business in the short term. We might feel it a little bit, but it just doesn't have a big material effect on the business. So, we watch it. We're certainly aware of what's going on there. But in terms of short-term impact, it just isn't that big.

Got it. And the one other thing was just on the return of cash. So obviously in 2015, it was heavily skewed by the recap and the $600 million ASR. I'm just wondering as you think now about 2016, leverage is already on the books, just wondering how you or the board think about the balance of, I guess, share repo versus dividend. Looks like from the dividend perspective, you made a nice boost, but the yield is somewhat of a modest low 1% range relative to the outsized repos. So, how do you think about that going forward? Any reason why the dividend, kind of the regular dividend wouldn't go up just to be commensurate with the stability of the business model? Jeffrey D. Lawrence - Chief Financial Officer & Executive Vice President: Yeah. So, I mean on the dividend, as we put out this morning, another really big increase year-over-year; a 20%-plus increase. Last year it was more than 20% increase on the quarterly dividend. So the board has decided again, and it's up to them in the future to decide going forward, that the quarterly dividend was going to continue to be an important part of how we return free cash to our shareholders. On the buybacks specifically, and as you mentioned, the ASR is winding up. It'll be done by the end of Q1 here. We do have $100 million kind of left over from the recapitalization that we weren't able to efficiently deploy in the ASR or otherwise in Q4. So we're starting kind of from a cash flush position as we start the year. And you can actually see that on the balance sheet as of the end of Q4. So how we spend that and how we view that, again, will be determined by the board. But I think what you've seen from us is if it makes sense, we'll pursue buybacks. If it doesn't make sense, we'll go heavier on the dividend. So it really just depends on what the board's thinking at that point in time.

Understood. Thank you.

Your next question is from the line of Joe Buckley with Bank of America Merrill Lynch. Please go ahead.

Hi. Thank you. Just had a couple of questions. The step-up unit growth in the U.S., is that primarily existing franchisees? Or is it a combination of existing and new franchisees? J. Patrick Doyle - President, Chief Executive Officer & Director: It's all existing franchisees. So we are essentially 100% internally grown franchisees. So our franchisees are successful managers or supervisors within our system. And then they apply to become a franchisee. And even those new franchisees coming into the system, I think we had just under 20 last year who franchise and so those were already people working within Domino's. Essentially all of them become franchisees the first time by buying a store, not building a store. So, really all of the building of stores is coming from existing franchisees.

Thank you. And then just a quick question on the economics of the loyalty program, with food costs down so much, I'm sure, not an issue at all. But as you work through the first full quarter of it, any thoughts on how the economics of it work for the franchisee relative to the discount that the free pizza represents? J. Patrick Doyle - President, Chief Executive Officer & Director: I think that franchisees are excited about the overall momentum in the business. They just finished a record year for profits. And I think there's a lot of energy around the loyalty program. And I think, as you know, when you launch loyalty programs, the goal is to make them simple upfront so people can understand the program. And then over time you see people maybe tweaking them a little bit as they can see exactly how customers are using the program. But overall, I think our franchisees are excited about the program and hopefully how it's going to affect the business long term.

Okay. Thank you. J. Patrick Doyle - President, Chief Executive Officer & Director: Thanks, Joe.

Your next question is a follow-up from the line of Steve Anderson with Maxim. Please go ahead.

Following up on the question of variability within different markets. If I to turn to international, have you seen any discrepancies between, certainly within the economy there was very strong, but have you seen any differences between different geographies like Europe versus Asia, or India? Some of the other geographies where – India had shown some weakness in the economy overall, but you've been able to grow that market as well. So, I just wanted to get some little more color on each of the individual countries? J. Patrick Doyle - President, Chief Executive Officer & Director: Yeah. Overall it really has been quite strong and pretty consistent. You're right on your comment on India. Certainly the economy there has gone through a little bit of a downturn. But I think the economy is continuing to improve. We had terrific store growth there last year. Maybe not quite as robust same-store sales growth as they had had three years or four years ago. But overall amongst major markets in our International portfolio, it's been pretty consistently strong.

Okay. Thank you.

Your next question is from the line of Greg Badishkanian with Citi. Please go ahead.

Hey, guys. This is actually Fred Wightman on for Greg. Just a quick question on the loyalty program: One of the other larger QSR loyalty programs recently switched from a frequency to more of a dollar-based approach. Just wondering if you could provide your thoughts on the benefits of the two different styles? J. Patrick Doyle - President, Chief Executive Officer & Director: Yes. We're trying to drive volume in our business. It's about driving frequency and retention of those customers. I think it's a fundamental choice that brands need to make on whether or not it's going to be about driving ticket and overall sales versus frequency of the customers, and we clearly chose that we want to drive order counts within our system. So it's a clear choice that you make. I'm aware of the example that you're talking about and the change that they made. And you obviously have to talk to them about why the shift in focus on that. But for us, as low as our market share is overall within the pizza category, we think it makes sense to be focusing primarily on order counts.

And at this time there are no further questions. Please continue with any closing remarks. J. Patrick Doyle - President, Chief Executive Officer & Director: All right. Thank you, everyone. I look forward to discussing our 2016 first quarter earnings with you on April 28.