Good day, ladies and gentlemen. Welcome to Papa John's Second Quarter 2016 Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session with instructions following at that time. As a reminder, this conference is being recorded. Now, I'll turn the conference over to your host, Lance Tucker, CFO. Please begin. Lance F. Tucker - Senior Vice President, Chief Financial Officer, Treasurer & Chief Administrative Officer: Thank you, Tyrone. Good morning, everyone. Joining me on the call today are our Founder, Chairman and CEO, John Schnatter; and our President and COO, Steve Ritchie, as well as other members of our senior management team. After the financial update, John and Steve will have comments about our business, and the management team will then be available for Q&A. Our discussion today will contain forward-looking statements that may involve risks related to future events. Actual events may differ materially from the projections discussed today. All forward-looking statements should be considered in conjunction with the cautionary statements in our earnings press release, and the risk factors included in our SEC filings, and all statements made on this call are as of today. Please refer to our earnings press release in the Investor Relations section of our website for a reconciliation and other disclosures related to our discussion of non-GAAP financial measures on this call. Unless otherwise noted, all comparisons are versus the comparable periods from a year ago. This call is being taped, and a replay will be available for a limited time on our website and in downloadable podcast format. Now for a discussion of our second quarter operating results, EPS in the second quarter was $0.61, up 30% over 2015. All areas of the business performed well, driven primarily by strong global comp sales,…

Thank you. First question is from David Carlson of KeyBanc. Your line is open.

Okay. Thank you very much. Hope all is well with you guys. Lance, a question for you. Just trying to understand the guidance for the full year. You guys – your earnings per share 27% in the first half, but when we – based on the midpoint of the revised range here, it looks like you're only anticipating about 3% of growth in the second half, and this seems an acceleration in the comp in the second half relative to the first half. Understandably, cheese prices have increased, but what are some of the costs you anticipate in the second half that would cause EPS growth to slow so dramatically? Lance F. Tucker - Senior Vice President, Chief Financial Officer, Treasurer & Chief Administrative Officer: Sure, David. I'll take that one. First of all, we're on track for mid to possibly high-teens growth for the year, so we're obviously real pleased with our full year guidance. And as you know, our business is subject to pretty sizable volatility on a quarter-to-quarter basis and we're seeing some of that this year. So to kind of hit the two halves of the year a little bit, as you requested. In the first half, we did have several tailwinds and that helped us to grow at an outsized 27%. There was a lot of G&A tailwinds, largely driven by high legal expenses in the first half of 2015 that we did not have in the first half of 2016. We also had a high marketing spend in the first half of 2015 that's not coming until the second half of 2016 and that's in our international business over in the U.K., had a little bit lower incentive compensation costs in the second half. So on the G&A side alone, we were down 70…

Fair enough. And then, John, Lance, Steve, either one of you. The midpoint of the revised comp guidance would suggest that you expect further acceleration in the comp. What gives you confidence the comp will improve from the second quarter result? And has the third quarter started out strong? John H. Schnatter - Founder, Chairman & Chief Executive Officer: Hey, Steve, why don't you take that one? Steve M. Ritchie - President & Chief Operating Officer: Sure, John. And thank you, David, for the question. And, I indicated on the last call, I spoke to a little bit of a rough start to the first couple of months of the first quarter, a lot of momentum coming towards the tail end of the first quarter. That momentum really picked up throughout the second quarter and we're seeing momentum indicating from the second quarter that we feel very confident the full year can be within that range of 3% to 5%. I think you know our two-year stacks, we produced a double-digit comp of just over 10% for the second quarter and we're rolling a 3% in the third quarter and roughly a 2% for the fourth quarter. So some of that's just the cyclical nature of the quarter stacks. But it's more related to the momentum that we have in the promotional cadence. So we feel really good about the Major League Baseball partnership that we started in the second quarter. If you look at the promotions that I had spoken to in my prepared remarks with the mediums, that promotion has performed quite well for us. And the LTOs that we've done from time to time throughout the year continue to perform very well for us. So we look at our promotional calendar for the duration of 2016, that's really what's driving a lot of the momentum. I guess the last thing that I would state is you hear me talk a lot about customer experience and that's something that we're very passionate about. And the execution at the restaurant level is what's driving that. And we just keep getting better and better quarter after quarter with execution, which is why we continue to have momentum about the upside on top-line sales. John H. Schnatter - Founder, Chairman & Chief Executive Officer: Yeah, Dave. This is John. We didn't have a good quarter this quarter because of what we did this quarter. We had a great quarter because of what we did in the last two years, three years, four years. And so two years or three years from now, we're going to have another great quarter and it's because of what we're doing this quarter. So, Sean Muldoon, why don't you talk a little bit about the ingredients and what we're doing with our ingredients to even further differentiate ourselves from our competition and how that reflects into the Millennials. This is our Chief Ingredient Officer, Sean Muldoon.

Hi, David. This is Sean. Good to talk to you this morning. So as John mentioned earlier, we're really proud of the position that we've got right now from a quality perspective. Within our category, we think we've got the cleanest label in the industry. And as John mentioned, we were the first in the industry to remove several key ingredients including, as John mentioned, MSG, trans-fats, partially hydrogenated oils and artificial flavors, colors, on and on. Earlier this year, we were very proud to announce, as John mentioned, that we removed high fructose corn syrup. The first, again, in the pizza industry to do that. And as John mentioned, earlier this month, the RWA chicken, raised without antibiotic chicken, the first in the pizza industry to do that. So it's part of a long journey that we've been on. We keep hitting these milestones and we've got a lot in the pipeline in terms of future milestones that we're going to hit. As alluded to earlier, later this year we're going to remove cage-free eggs from our menu. Again, going to be the first in the pizza industry to do that. As well as we're going to deliver on our promise from last year in terms of removing 14 unwanted ingredients. We made that announcement at the end of last year. So we think all of this is very important to some of our core demographics, particularly moms with kids, and Millennials, as John mentioned. Those are hugely important demographics for us. And it's very important for these demographics for us to be transparent, for them to know what's in their ingredients, where they come from. And we think that shows in terms of our consumer satisfaction, and particularly in terms of the ACSI. We think that plays into winning that 15 out of the last 17 years.

Okay. Thanks for the explanation. I just had one other short one. In the 10-Q, you guys indicated that comps were negative in China. How much of a drag has China been on the international segment profitability year-to-date and any update on the divestiture process there? John H. Schnatter - Founder, Chairman & Chief Executive Officer: Yeah, David. This is John. The Asian Pacific region is very difficult at this time. Steve or Lance, do you want to enhance that? Lance F. Tucker - Senior Vice President, Chief Financial Officer, Treasurer & Chief Administrative Officer: This is Lance, David. I'll take that. So first of all, as far as the divestiture process goes, we're in the middle of that and we still expect to get a transaction completed this year. But I really don't want to go into much more detail than that. As far as the number goes, it is in the neighborhood of a couple of pennies. We won't put the exact number out there, but it's right in that neighborhood.

Thank you, guys.

Our next question is from Alton Stump of Longbow Research. Your line is open.

Good morning and great job on the quarter, guys. Steve M. Ritchie - President & Chief Operating Officer: Thanks, Alton.

Two questions. A, of course you talked on the first quarter call, an awful lot about, like, shifting your promotional strategies towards the end of the first quarter, obviously, which played out very well for you in 2Q. And so, as we move into the back half of the year, even into 2017, is the plan to focus a bit more on promotional price points or is it just kind of a read as you're watching the competitive environment and responding to that? John H. Schnatter - Founder, Chairman & Chief Executive Officer: Go ahead, Steve. Steve M. Ritchie - President & Chief Operating Officer: Yeah. Sure, Alton, it's Steve. Thanks, John. I think what you've seen in the second quarter and obviously you can watch TV now and see what we've done in July and then kicking off in August back with the medium. So fairly consistent strategy plan for the duration of 2016. The competitive environment doesn't necessarily play a big role in what we do from a promotional standpoint. We are always thinking the long-term at Papa John's. Obviously, we do command a premium price within the category and we've been able to do that now for 13 consecutive years of flat to positive sales growth here. So, I'd say, continuation is what you have seen, it's what's planned for 2016. I don't want to get too far out into 2017. The competitive environment just related to price, obviously, has been impacted by lower cheese pricing within the commodity market, I think, has made it slightly more aggressive, at least in the first half of this year. As you can see, cheese pricing has edged back up on the block market and is indicating that it will continue to go up in the back half of the year. So I do anticipate a little softness in the competitive pricing throughout the broader category. But we're going to remain consistent with what we do and we'll build off the momentum that we had in the second quarter.

That's helpful. And actually a question which I think you already answered, which is effectively we are seeing cheese block prices come back up. Obviously a lot of your smaller independents are probably buying on a much higher percentage of spot versus contract. And so are you starting to see them get a bit more rational or, I should say, a bit less irrational because of the fact that we are seeing cheese move back up here recently? John H. Schnatter - Founder, Chairman & Chief Executive Officer: Lance, why don't you talk a little bit about our hedging? And then we'll talk a little bit more about what we think the competition is doing with regarding the price of cheese. Steve M. Ritchie - President & Chief Operating Officer: Want to talk about the hedging program, Lance? Lance F. Tucker - Senior Vice President, Chief Financial Officer, Treasurer & Chief Administrative Officer: Oh, I'm sorry. I didn't understand that. Alton, it's Lance. So real quick on cheese hedging just so you're aware and then I'll turn it over to Steve. We have hedged a little bit more aggressively this year, as you know we only do that on the corporate side and typically we are keeping it under 50%. With the low cheese we saw earlier this year, we did hedge a little bit above that. I won't go into the specific numbers. But that takes the volatility out for us, gives us some predictability and protects the downside. Relative to what that's doing to the competitive marketplace, I'll pitch that over to Steve. Steve M. Ritchie - President & Chief Operating Officer: Sure. And Alton, it's Steve. So I tell you that I've been in the pizza business, been at Papa John's for 20 years and the pizza business a little bit longer than that, actually, It's always been extremely competitive in terms of price. In fact, 20 years ago, the price on a promotion is pretty consistent with what it is today. With that being said, in recent years, let's talk about the last five years, we have seen the overall category shift, consolidation and movement to more share moving to some of the national players, ourself included in that. I think there's a number of factors that have played into that from a standpoint of the digital growth obviously being a leader – Papa John's being the leader in the overall online sales mix at 55% and quickly approaching 60% in the coming years. I'd say that's an emergence that's been a share steal with the independents. The commodity volatility for 2016 I haven't seen any significant shift from some of the promotional cadence throughout the independents. I would just say that you're going to continue to see a consolidation and a slight shrinking of independents within the category.

Okay. Great. Thanks, guys. Steve M. Ritchie - President & Chief Operating Officer: Thanks, Alton.

Next question is from Peter Saleh of BTIG. Your line is open.

Great. Thanks. I just wanted to come back to the NFL partnership. Glad to hear that that's been renewed but back half of the year, you won't have Peyton Manning this year. Is there a plan to replace those spots? Or is it all J.J. Watt, or do you guys have somebody else that will be in the commercials? John H. Schnatter - Founder, Chairman & Chief Executive Officer: Steve, is this Peter? Steve M. Ritchie - President & Chief Operating Officer: It is Peter. John H. Schnatter - Founder, Chairman & Chief Executive Officer: Okay. Peter, this is John. All the film is shot all the way through the end of this year, so all the film is in the can. We'll never replace Peyton Manning because Peyton Manning is not replaceable. Peyton Manning's in the spots. So we have no idea or desire to ever replace Peyton Manning. Peyton Manning is the Michael Jordan of football. Period. End of conversation. Steve M. Ritchie - President & Chief Operating Officer: And, Peter. It's Steve. I would just add that to John's point on Peyton. So as you may recall, Peyton is a partner of ours. He's a joint venture partner in Denver. And the market has done very well for him and us in that partnership. And we look forward to that to being a long-term partnership with Peyton. Obviously, Peyton's not a player anymore, so he'll play a different role in the creative. And I think you'll see some very fun and interactive ways that the marketing team, led by Robert Thompson, has utilized Peyton in the spots, John and Peyton and J.J. as a partner. We have some unique things to show you guys for this NFL season.

Excellent. And just on the international side, are you guys seeing any weakness in the U.K. post the Brexit vote? John H. Schnatter - Founder, Chairman & Chief Executive Officer: The U.K. has just really been a diamond in the rough. Steve, why don't you highlight some of the things we're doing in the United Kingdom? Because that is just a fantastic success story. Steve M. Ritchie - President & Chief Operating Officer: Sure, Peter. And thanks for the question. And we've highlighted this, I guess the last several quarters, the success that we've had in the U.K. As you may be aware, we own the Quality Control Center in the U.K., that distribution piece there. So that's been a hub and spoke of the growth development story that we've had there over the last 10 years. We're now well over 300 stores in the U.K. That being driven by the same store sales growth that's producing outstanding profitability for our franchisees. When the franchisees are making more money, they're inspired to grow. And it has been the biggest growth driver in our international story. The Brexit vote, to your question, has not had any negative impact on our sales performance in the U.K. Obviously there has been some foreign currency exchange implications that are immaterial to our overall numbers and we've got that built into our guidance. In the next couple of years, we'll see how this unfolds with Brexit. Obviously, there's some caution to that point just in terms of trade and supply chain, but we're well equipped to have multiple paths to mitigate those kinds of challenges. But all is good in the U.K. and the business continues to grow.

Good to hear. Just a couple more. Can you guys remind us what is the threshold internationally for certain markets to do more TV or more national advertising? Is it 200 units? Is it 300 units? And what's the next market that we should start to see some more significant advertising push in internationally? John H. Schnatter - Founder, Chairman & Chief Executive Officer: Hey, Steve, you or Robert field that question, please? Steve M. Ritchie - President & Chief Operating Officer: Sure, Peter. It's Steve, I'll start with that. Robert can jump in if he'd like to. So in the U.K., we did come on TV just shortly after about 250 stores. What I'll tell you and you might not like this answer, Peter, it's going to vary very wildly. Depending on the size of the market and the cost for media in each of those countries, it does vary significantly. So we've got markets that are as small as 20 stores that have TV. And obviously in the U.K. it took us a significantly higher amount of stores to be able to get cost effective in media. We do have TV in several markets on national exposure, but still the vast majority of our markets are using digital and social and more traditional forms of local store marketing via print is their primary forms of marketing. So as I had spoken to also in my prepared remarks that we really are starting to emerge in the digital side of the business just in terms of online ordering capability. And really that's where consumers are going. TV will play a part in our future marketing strategy from international, but we'll be more focused on moving the digital opportunity. In fact, the U.K. is actually our highest online mixing (32:41) market in the world. It outpaces the U.S. So just shows the opportunity that we have broadly in international.

Excellent. All right, just last question for me. Lance, I think you mentioned lower development incentives. Are you guys pulling back on development incentives? Or is there something else that we're unaware of here? Lance F. Tucker - Senior Vice President, Chief Financial Officer, Treasurer & Chief Administrative Officer: Peter, we really haven't pulled back. We have redirected some of those funds, so the numbers are showing up in a different line. We've done some print drops and some things as opposed to some of the straight incentives we would go into franchisees. So, overall, not a big difference in what we've done in the past from a financial standpoint, it's just showing up in different lines on the P&L, and we'll continue to do what we need to do to make sure we're getting that development and driving those franchisees to take the right actions.

Great. Thank you very much, and congrats on the quarter. Lance F. Tucker - Senior Vice President, Chief Financial Officer, Treasurer & Chief Administrative Officer: Thank you. Steve M. Ritchie - President & Chief Operating Officer: Thank you, Peter.

Thank you. Next question is from Mark Smith with Feltl and Company. Your line is open.

Morning, guys. Just real quick, can you just give any update or thoughts on your use of cash, kind of the balance between dividend, buybacks, investments, back in the business, and maybe potential to buy franchisees? Lance F. Tucker - Senior Vice President, Chief Financial Officer, Treasurer & Chief Administrative Officer: Yeah, Mark. This is Lance. I'll take that one, as you might expect. We think what we've been doing here over the last few years works very well. Obviously we do a fairly significant amount of buybacks. This year's guidance is $100 million to $150 million a year and we're going to do that at the right valuation, so we won't be buying evenly all the time, but we feel like that's the biggest component to returning cash. Of course, we also have the dividend. We just announced earlier this week – or actually at the end of last week, pardon me – that the dividend was going from $0.70 to $0.80 on an annualized basis, so we're going to continue to return cash to shareholders in the form of a dividend as well. And then beyond that, be it CapEx or restaurant purchases, we'll be opportunistic. We'll certainly make the investments we need to make, particularly to drive the technology area. On CapEx, that's where you'll see most of the spend coming and making sure that our stores are kept looking good. And then beyond that, I think it's going to be more of the same and more of what you've seen.

Okay. And the CapEx, raising the CapEx guidance this year at the high-end. Was that pure IT spending? Or was there anything else? Lance F. Tucker - Senior Vice President, Chief Financial Officer, Treasurer & Chief Administrative Officer: We've got a couple of big things going on, including a new commissary down in the Southeastern U.S., as we've mentioned before. The raise really was just because of a couple of technology things that we are doing; take us a little bit higher than we thought we might be when we put that initial guidance out there. But no individual project or anything that's noteworthy to call out.

Okay. That's helpful. Thank you.

Thank you. There are no further questions at this time. I'd like to turn the conference over to Lance Tucker for any closing remarks. Lance F. Tucker - Senior Vice President, Chief Financial Officer, Treasurer & Chief Administrative Officer: All right, thank you, Tyrone, and thank you, everyone, for being on the call. Have a good day.

Ladies and gentlemen, thank you for your participation in today's conference. This concludes the program. You may now disconnect. Have a wonderful day.