domino’s investor day 2015
TRANSCRIPT
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Domino’s Investor Day 2015
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Patrick Doyle President and CEO
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Legal Stuff
3
This presentation and our accompanying comments include “forward-looking statements.”
These statements may relate to future events or our future financial performance and are subject to known and unknown risks,
uncertainties and other factors that may cause our actual results, levels of activity, performance or achievements to differ
materially from those expressed or implied by these forward-looking statements. This presentation and our accompanying
comments do not purport to identify the risks inherent in an investment in Domino’s Pizza and factors that could cause actual
results to differ materially from those expressed or implied in the forward-looking statements. These risks include but are not
limited to those risk factors identified in Domino’s Pizza, Inc.’s Annual Report on Form 10-K for the fiscal year ended December
29, 2013, as well as other SEC reports filed by Domino’s Pizza, Inc. from time to time. Although we believe that the expectations
reflected in the forward-looking statements are based upon reasonable estimates and assumptions, we cannot guarantee future
results, levels of activity, performance or achievements. We caution you not to place undue reliance on forward-looking
statements, which reflect our estimates and assumptions and speak only as of the date of this presentation and you should not
rely on such statements as representing the views of the Company as of any subsequent date. We undertake no obligation to
update the forward-looking statements to reflect subsequent events or circumstances. In light of the above, you are urged to
review the disclosures contained in the Domino’s Pizza, Inc. SEC reports, including the risk factors contained therein.
This presentation contains trade names, trademarks and service marks of other companies. We do not intend our use or display of
other parties’ trade names, trademarks and service marks to imply a relationship with, or endorsement or sponsorship of, these
other parties.
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Today’s Line Up
4
• Patrick Doyle, CEO
• Richard Allison, President, Domino’s International
• Russell Weiner, President, Domino’s U.S.A.
• Michael Lawton, Chief Financial Officer
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The Top Three Questions Asked
5
• What has driven Domino’s success to date?
• Can the success continue?
• Can that success drive shareholder value?
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How Have We Been So Successful?
6
• Leader in delivery
• Franchise model focus
• International master franchise model
• Effective supply chain
• Great team
• Efficient use of cash / balance sheet
• Got our food right
• Breakthrough advertising / communication
• Industry-leading consumer technology
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Can the Success Continue?
7
• Just getting started on technology
• Store reimages / relocations will reflect overall brand strength
• Unit economics focus will drive store growth
• Hospitality / in-store experience remains a big opportunity
• Room for market share growth around the world
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Can We Keep Driving Shareholder Value?
8
• Fundamental brand strength drives returns
• Constant focus on shareholder-friendly use of cash /
balance sheet
• Not reliant on “catalysts”
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Strong Track Record for Our Shareholders
9 Source: Bloomberg
Total Shareholder Return = (Priceend – Pricebegin + Dividends) / Pricebegin
0.00
20.00
40.00
60.00
80.00
100.00
120.00
2010 2011 2012 2013 2014
Total Shareholder Return
Domino's Pizza
S&P
S&P 500 Restaurant
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Ritch Allison President, Domino’s International
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FUNDAMENTALLY
STRONG
BUSINESS
KEY INITIATIVES
FOR 2015
SIGNIFICANT
GROWTH
OPPORTUNITY
- Robust Growth
- Balanced Portfolio
- Long Runway in Existing
Markets
- Push into Sub-Saharan
Africa
- Technology Deployment
- Pizza Theater
Transformation
Executive Summary
11
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12
Fundamentally Strong Business
Cendere, Turkey
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2014 Was a Year of Important Milestones
13
Q1
Q2
Q3
Q4
- Domino’s opens 11,000th store
- Domino’s opens 6,000th international store
- Norway opens
- South Korea opens 400th store
- Brazil opens 100th store
- India and the United Kingdom both open 800th store
- Turkey opens 400th store
- South Africa and Kenya markets open
- Paraguay opens
- India opens 700th store
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Nine-Year Sales CAGR of 12.6%
14
$1,459 $1,679
$1,870
$2,222 $2,452
$2,531
$2,952
$3,519
$3,861
$4,252
$1,000
$1,500
$2,000
$2,500
$3,000
$3,500
$4,000
$4,500
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
Retail Sales (millions) Q3 2014 TTM Retail Sales
$4.7B
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Accelerated Pace of Store Count Growth Since 2009
15
CAGR 2009 –
Q3 2014
9.6%
4,072 4,422
4,835
5,327
5,900 6,265
0
1,000
2,000
3,000
4,000
5,000
6,000
7,000
2009 2010 2011 2012 2013 Q3 2014
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Net Store Growth: Better Than Top Two Competitors
16
90 74
113 137
183 179
103
186
271
454
522
580
346 350
413
492
573
638
0
100
200
300
400
500
600
700
2009 2010 2011 2012 2013 Q3 2014 TTM
Papa John's
Pizza Hut
DPI
Pizza Hut counts exclude licensees
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17
Growing Store Base in Both Developed and Emerging Markets
37%
+417 Stores 63%
+704 Stores
Developed
Emerging
Two-Year Net Store Growth
Q3 2012 vs. Q3 2014
Developed and emerging as defined by the World Bank
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Johannesburg, South Africa 18
Significant Growth Opportunity
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International Pizza Market $90B+ and Growing
19
• International Market for Total Pizza Expected to Continue
Growing at Historic 3% CAGR
– Expected to be ~$117 billion by 2020
• International DelCo Market is Forecasted to Grow ~33% by
2020
– DelCo expected to be ~$40 billion by 2020
Sources: third-party research, NPD Crest, DPI consultants and franchisee input
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Our Share Is Growing and Still Has Significant Upside
20
2010 vs. 2013 Estimated Domino’s Pizza
Share of International Pizza Market
Market share estimates sources: DPI actuals, third-party research, DPI consultants and franchisees
3.5% 4.5%
10.7%
14.2%
0.0%
2.0%
4.0%
6.0%
8.0%
10.0%
12.0%
14.0%
16.0%
'10 Total Pizza '13 Total Pizza '10 DelCo '13 DelCo
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Our 15 Largest Markets* Have Potential for ~4,000 Additional Stores
21
Top
Markets
Q3 2014
Store Count*
Potential
Store
Count
United Kingdom 791 1,200
Australia / New
Zealand 599 900
South Korea 400 500
Canada 383 650
Japan 334 700
France 235 850
Netherlands 151 300
Taiwan 131 150
Spain 128 300
TOTAL 3,152
5,550
Developed Markets
Top
Markets
Q3 2014
Store
Count*
Potential
Store
Count
India 781 1,300
Mexico 596 700
Turkey 398 700
Malaysia 120 300
Saudi Arabia 112 250
Brazil 100 500
TOTAL 2,107
3,750
Emerging Markets
Delivery market position and potential store count based on Domino’s Pizza International and master franchisee estimates
*Based on DPZ’s Q3 2014 reported store count
#1 or #2 pizza delivery market position in top 15 markets
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Some Early Stage Markets Could Have High Growth Potential
22
1,357
250 144
81
0
400
800
1,200
1,600
China Indonesia Russia Germany
Population (millions)
*Based on 2013 World Bank population and DPZ’s Q3 2014 reported store count
• The population of these four countries = 1.83 billion people
• Domino’s Pizza International currently only has 151 total stores in these markets
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Sub-Saharan Africa
23
• Domino’s Currently Present in South Africa,
Nigeria and Kenya
• Initial Response in These Markets Has Been Strong
• South Africa Partner is Taste Holdings
– Publicly traded
– Approximately 150 units under two brands
– Vast majority expected to convert within two years
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Key Initiatives for 2015
24
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Continue International Domino’s Pulse Deployment
25
2011
59%
11%
30%
Q3 2014
36%
21%
43%
Domino's PulseInstalled
AgreementsSigned
Other
% of international stores
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Technology Expanding Globally
26
• 3,700+ International Stores on Domino’s Pulse as of Q3 2014
– At least six additional markets and 700 stores to be deployed
in 2015
• Back-end Franchisee Data System Linked to Domino’s Pulse
is Now in 2,600+ International Stores and Growing
– Allows for robust business analytics, planning and
benchmarking
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Technology Expanding Globally
27
• 41% Average for Online Ordering Sales Among All International
Markets
• Four Markets Have Digital Sales Over 50%
• Opportunities
– Many large markets working to increase their online ordering
percentages
– Some markets still do not have online ordering
– Others that have online still do not have mobile capability
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Pizza Theater Transformation
28
• Year End 2014
- 2,200 international stores in new
image
• Plans for 2015
- Reimage ~1,000 more existing
stores in new image
• Substantially Complete by 2017
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29 Ushiku, Japan
Pizza Theater Transformation
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30 Mexico City, Mexico
Pizza Theater Transformation
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31 London, U.K.
Pizza Theater Transformation
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FUNDAMENTALLY
STRONG
BUSINESS
KEY INITIATIVES
FOR 2015
SIGNIFICANT
GROWTH
OPPORTUNITY
- Robust Growth
- Balanced Portfolio
- Long Runway in Existing
Markets
- Push into Sub-Saharan
Africa
- Technology Deployment
- Pizza Theater
Transformation
Conclusion
32
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Russell Weiner President, Domino’s U.S.A.
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INDUSTRY
LEADER
KEY INITIATIVES
FOR 2015 PERFORMANCE
AND INNOVATION
- Exceptional Sales
Growth
- Clear Leader in Delivery
and Technology
- Repeatable Formula for
Success
- Balanced Innovation
- Continued Innovation
- Retail Transformation
through Reimaging
- Store Growth
Executive Summary
34
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Industry Leader
35
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Over the Last Six Years Domino’s Has Been a Clear Leader in Sales Growth
36 Source: The NPD Group/CREST®, Years Ending Sept. 2008 and 2014
Independents = QSR Pizza Independents, 1-2 units
25%
14%
-7% -4%
Pizza
Independents Small Pizza
Chains
QSR Pizza – 2014 vs. 2008 (Dollars % Change)
Three Major
Competitive Pizza
Chains
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Fragmented Category Offers Room to Grow
37 Source: The NPD Group/CREST®, Year Ending September 2014
96%
83%
72%
41%
QSR Hamburger QSR Mexican QSR Sandwich QSR Pizza
Major Chains’ Share of Dollars
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One Out of Four Delivered Pizzas is from Domino’s
38 Source: The NPD Group/CREST®, Years Ending September 2008 and 2014. Share of Delivery Consumer Spending
19%
31% 19%
31%
2008
Domino's
Major Competitive Pizza Chains
Small Pizza Chains
Pizza Independents
25%
31% 17%
27%
2014
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Almost a Third of Pizzas Ordered Online are from
Domino’s
39
31%
50%
11%
8%
Share of Online Dollars - QSR Pizza
Domino's
Major Competitive Pizza Chains
Small Pizza Chains
Pizza Independents
Source: The NPD Group/CREST®, Year Ending September 2014
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Digital Sales Have Room to Grow in QSR Pizza
40
20%
37%
41%
2%
Share of Dollars by Order Type – QSR Pizza
Internet and Mobile
Telephone
Walk-In
Other
Source: The NPD Group/CREST®, Year Ending September 2014
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Online Ordering Hit 50% Milestone in 2014
41
By the end of 2014, digital sales
were at 50% in the U.S.
Global run rate for digital
sales now estimated at
$4.0 billion
International digital sales and information based on reported sales information and other data from franchisees
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Performance and Innovation
42
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Only 18 QSR Chains Have Posted 5+ Years
of Consecutive Growth
43
164
114
73
47
18
1 Year 2 Years 3 Years 4 Years 5 Years
Count
of
Majo
r Q
SR
Chain
s
Consecutive Years of Average Unit Volume (AUV) Growth
Source: company 10-K filings and Technomic's QSR AUV
data, 2008-2013. Total count of eligible chains ranging from
248 (2008) to 254 (2013)
18 QSR chains with consecutive years of growth from 2009-2013 included: Domino's Pizza, Chick-fil-A, Popeyes Louisiana Kitchen, Papa
Murphy's, Tim Hortons, Whataburger, Wingstop, Steak 'n Shake, Caribou Coffee, Taco John's, Krispy Kreme, Dutch Bros. Coffee, Sizzler,
Pizza Ranch, Tully's Coffee, Freddy's Frozen Custard & Steakburgers, Paradise Bakery & Café, Pal's Sudden Service
(2013) (2012-2013) (2011-2013) (2010-2013) (2009-2013)
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1 Year: Dairy Queen, Little Caesars; 2 Year: Taco Bell, Papa John’s, Baskin Robbins;
3 Year: Wendy’s, SONIC, Jack in the Box; 4 Years: Subway, Starbucks, Dunkin’ Donuts
Only One 2,000+ Store QSR Chain Has Posted
Five Years of Consecutive Growth
44 Source: company 10-K filings and Technomic's Top 17 QSR Chains (by units)
AUV data, 2008-2013. Major QSR chains defined as the 17 chains with 2,000
or more domestic units
12
10
9
4
1
1 Year 2 Years 3 Years 4 Years 5 Years
Count
of
Majo
r Q
SR
Chain
s Consecutive Years of AUV Growth
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Strong Growth through a Balance of Product
and Technology Innovation
45
9.9%
3.5% 3.1%
5.4%
2010 2011 2012 2013
Handmade Pan Pizza,
Parmesan Bread Bites,
Gluten Free Crust
Android™ and Kindle
Fire™ app
Windows Phone 8® app, Profiles / Easy Order
Same Store Sales Growth
Innovation
New & Inspired Pizza
Mobile Web,
Audible OLO Tracker
Stuffed Cheesy Bread,
Artisan, New Chicken
iPhone® app, Pizza Hero
Products
Technology
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Innovation
Products
Technology
4.9% 5.4%
7.7%
Q1 2014 Q2 2014 Q3 2014
Ford SYNC®
announcement
Specialty Chicken
iPad® app, Google Wallet™,
Group Ordering
Strong Growth through a Balance of Product
and Technology Innovation
46
Same Store Sales Growth
Voice Ordering,
Pebble Watch Tracker
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Key Initiatives for 2015
47
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Proven Innovation Strategy Will Continue
48
• Technology News that Drives the Business
– Positive brand halo
– Closer customer relationships
– Higher satisfaction and profitability
– Long runway
• Selective New Product Platforms that Are Sustainable
– No “product of the month”
– Simplifies operations, more efficient supply chain
– Keeps bar high for new products
– Pipeline full
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Store Reimaging Will Continue to Transform
Our Brand at Retail
49
• Year-End 2014
- 1,000+ domestic stores reimaged
• Plans for 2015
- Nearly all remaining corporate
stores to be reimaged or relocated
- 1,000 more domestic stores will be
reimaged
• Substantially complete by 2017
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Domestic Store Count Accelerates
50 5,016 total domestic stores as of Q3 2014
Domino’s Domestic Store Growth (net)
2
-22
21
58
77
-40
-20
0
20
40
60
80
100
2010 2011 2012 2013 Q3 2014 TTM
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INDUSTRY
LEADER
KEY INITIATIVES
FOR 2015 PERFORMANCE
AND INNOVATION
- Exceptional Sales
Growth
- Clear Leader in Delivery
and Technology
- Repeatable Formula for
Success
- Balanced Innovation
- Continued Innovation
- Retail Transformation
through Reimaging
- Store Growth
Conclusion
51
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New Advertising Breaks February 2
52
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Michael Lawton Chief Financial Officer
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SUCCESSFUL
FRANCHISEES
LONG RANGE
OUTLOOK LOOKING AHEAD
AT 2015
- Franchise
Profitability
- Updates on
Commodities, G&A
and Impact of
Currency
- 2015 Updates
54
Global Strength
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Successful Franchisees
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Franchise Profitability Continues to Grow
Expecting over $85K in 2014
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Note: 2015 is a 53-week year
Looking Ahead at 2015
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Commodities
• Food basket outlook is favorable
• Project -2% to -4%
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G&A
• Range of $265 - $270 million - Technology innovation and upgrades
- International growth
- Depreciation
- 53rd week
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Impact of Currency
• Market currently projecting ~$8 - $12M negative
impact
• Diversified portfolio of more than 75 markets
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Impact of Currency – Modeling
•A 1% strengthening of the dollar against our basket of
currencies has roughly a 1.8 cent impact on EPS
• A 10% move in the price of cheese has roughly a 1.5 cent
impact on EPS
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Long Range Outlook
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Cap Ex Increase
• Updated Long Range Outlook of $50 - $60 Million* - Technology
- Company store reimaging - leading the way
- Supply chain centers
64 *Update to previous outlook
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Global Net Units Increase*
– Updated long range outlook to +5% - +7%
– Store growth opening trends accelerated over last few years
65 *Update to previous outlook
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Outlook does not constitute specific earnings guidance. Domino’s does not provide quarterly or annual earnings estimates.
Global
Net Units
Domestic
Same Store
Sales
International
Same Store Sales
Global
Retail Sales
+5% to +7%
+2% to +4%
+3% to +6%
+7% to +11%
Cap Ex: $50 - $60 million Tax Rate: 37% - 38%
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Q&A