Good morning. My name is Kelly, and I will be your conference operator today. At this time, I would like to welcome everyone to the First Quarter 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. [Operator Instructions] Thank you. [Indiscernible], you may begin your conference.

Thanks, Kelly and good morning everybody. With the year we’re going to start with some prepared remarks this morning and then open to Q&A. But we do said this up for investors primarily so I would kindly ask the members of the press to listen only mode the Q&A session. And also to turn your attention to our Safe Harbor statement in the events of any forward-looking statement were made. And with that I would like to introduce our participants today. The first will be Mike Lawton, our Chief Financial Officer and then we’ll follow up with Patrick Doyle, who is our CEO and he’ll make some prepared remarks. Then we’ll open for Q&A. So with that Mike you’re ready to go?

Thank you [indiscernible] good morning, everyone. This quarter our positive momentum continued as we posted fantastic same store sales in both our domestic and international businesses. We opened significant number of new stores and our adjusted EPS grew 19.1% over the prior year quarter. We’re pleased with this earnings growth, particularly in the phase of some strong foreign exchange headwinds. Global retail sales which are the total retail sales at franchise and company owned stores worldwide grew 10.4%. When we exclude the adverse impact of foreign currency global retail sales grew by 16.4%. The drivers of this growth included domestic same stores sales which rose by 14.5% in the quarter. The increase this quarter was comprised of franchise same store sales which were up 14.4% and company owned stores which were up about 15.9% and this was due primarily to strong order growth. We also saw some ticket growth during the quarter. We are pleased to report that we opened 17 net domestic stores in the first quarter consisting of 22 store opening and five closures, for the trailing 12 months we opened 93 net domestic stores. Our international division had another strong quarter as same store sales grew 7.8% lapping our prior year quarter increase of 7.4%. Our international division also grew by 93 stores which made up of 140 store opening and 47 closures. We had more closures than usual this quarter as we recorded 36 closures in Peru. We are working to reopen the market. Over the past four quarters, our international division is growing by 658 stores. Turning to revenues. Total revenues were up 48.2 million or 10.6% from the prior year. This increase was primarily a result of three factors; first, higher supply chain center volumes as well as increased sales of equipment to stores…

Thanks, Mike. It was an outstanding start to 2016. Many who follow the Domino's continues to ask the same question. What catalyst can we point to in helping explain our momentum and continued positive performance? While I may run the risk of sounding repetitive the truth is the truth. The fundamental strength of the business and the equity in our brand name have proven again and again to deliver a strong financial outcome overtime and in multiple macro-environments. Global net store openings were the highest in the decade for the first quarter and our trailing 12 months net store opening number is now at 751 a net growth of over two stores per day. This momentum along with our same stores sales helped us deliver 19% adjusted EPS growth despite the effect of foreign exchange headwinds from the strong dollar. Domestically we'd now had 16 consecutive quarters of positive same stores sales. Our last negative quarter was rolling over 14.3% from the quarter when we launched our new and inspired pizza. And our extraordinary streak of positive consecutive quarters in international has now reached a whopping 85. All in all we are very pleased with the start to 2015 and the fact that our story has strong fundamentals and sustained performance continues. Looking specifically at our first quarter domestic business I'm incredibly proud of our 14.5 same store sales comp. We are accomplishing this by building brand equity over-time through our compelling advertising, innovative technology, strategic menu management, strong operations and more recently store reimages, it proven to be a winning combination. One of the things that excited me the most when it comes to our domestic franchisees is the progress we’ve made on store level profitability. The results are now in on 2014 franchise profitability and it was a…

[Operator Instructions] Your first question will come from the line of Karen Holthouse with Goldman Sachs.

Congratulations on a great quarter. Looking out as you go from here in the year, what are your thoughts of your hoping you looking at your company stores and then franchisees on the wage environment and you would then with increases in some stage are other signs that wages are coming up, plans to help manage through that or help your franchisees manage through that. What are the opportunities to offset it?

It's very manageable, when you're generating this level of top line growth we are very comfortable with the environment. We certain it's something that we can manage through minimum wage is a starting wage. And frankly that’s majority of the team members in our corporate stores and in our franchise stores are delivery drivers. And delivery drivers with tips are making substantially more than the minimum wage. So we're very comfortable that we would able to manage in this environment.

And then just quick modelings follow up. The change in G&A guidance how much is that relates to technology spending versus the entire bonus accruals versus something else.

It's a little bit of both and it's not a significant change from what was out there before it is a little bit higher. But it's certainly as you can see the variable component which also includes things like advertising contributions in corporate store is significant.

Your next question will come from the line of Chris O'Cull with KeyBanc.

Patrick has you recent advertising campaigns resulted in an increase mix for non-pizza items. Or is there anything you can tell us about may how guess how you expect to see as you differently would this campaign any different occasions.

It absolutely does we've done this mix and match promotion that we've out there. Probably once a year on average something like that to remind people of the other product offerings that we have and when we do that it's certainly drive mix of other products and we saw that again in the first quarter. What I would say is we are and we'll continue to be overwhelmingly a Pizza company it is the majority of what we sell and it's going to continue to be the majority of what we sell. But we've got great sandwiches and pasta and chicken and the other items on the menu and we make sure we remind people of that on an occasional basis and it works.

And then I had a question regarding franchise contribution rate that help recover some of the investment in the digital platform. Has that changed at all or is there any plan for that to change?

The numbers reflected in the first quarter don’t reflect the change there is certainly can be changes going forward.

Your next question will come from the line of John Glass with Morgan Stanley.

I'm wondering, given the strength in comps, if throughput is now an issue. In other words, you've got such huge demand and that has been very clear. Is there a bottleneck in the stores? Do you have to do things to relieve that bottleneck, or capacity constraints given this level of sales gains?

In the first quarter of the year with a lot of weather knocking around I would say the weather was even though regionally it was pretty tough it was not in abnormal first quarter for weather. Certainly you are going to feel some of that and we did a little bit our highest volume stores are getting a little capacity constrained. And you're seeing some stores that need to add some new equipment to add some new ovens but I will tell you that’s the highest quality problem you will ever face and certainly something we know how to deal with. But yes there are certainly some small percentage of our stores that are seeing volumes now that frankly they weren’t built for when they were built 10 or 15 years ago.

That make sense. And you talked a lot about, over the last several years, of technology and leader in ordering. But I'm wondering if there's a way to use technology for the deliveries side as well. Some restaurants have begun to experiment with Uber or other kind of new technologies on the deliveries side. Is that an opportunity for you in some respects, or is the delivery driver in that piece of the business sacrosanct and that's not what you look for to gain further efficiency?

We've got the best kind of real time delivery system around. And I guess what I'd say is when you think about an Uber or some of the other folks that are coming in the technology that they are using is terrific. But at the end of the day they are service companies and it's about can you find great people who are motivated can you back them up with great systems that are going to help them be efficient we've been doing that and doing that very well for a long time. So are there things that we can do that potentially are going to make us more efficient sure and it's part of the investment that we make in technology to help our folks be more efficient overtime, but are we going to wind up ahead of using somebody else to do it, something like that, no. We’re planning to be plenty efficient with our people and they want to see a Domino’s delivery driver showing up, looking great in uniform and that’s certainly the way that it’s going to continue.

Your next question will come from the line of Alton Stump with Longbow Research.

Of course, great job on the quarter. Obviously a huge comp, in particular. Can you talk about the specialty chicken launch, which if I recall was April of last year? If you are still seeing it benefit to comps year-over-year in the first quarter. And then as you look out in coming quarters if you can talk about any sort of new product plans? Obviously, you probably don't want to get specific but just any color on what you plan to do on the new product front in coming quarters.

So, specialty chicken did very well for us. Our chicken mix continues to be higher than it was before we launched specialty chicken. So at some level is it part of what’s contributing to our comp, yes probably is, though I'd say at this point that's kind of more at the margins than a big part of it. And in terms of new products we absolutely have lots of things in the pipelines that we can turn to but I think the overall message as we talked about before and certainly as we talked about at our Investor Day in January we think our discipline around our menu and launching fewer things in a bigger way and doing that very thoughtfully and purposefully so that we’re able to execute well at our stores is continuing to be a fundamental strength for us. And with what we think was at least from those who have released so far the best comp in the restaurant industry in the first quarter we think our approach on this is working awfully well.

Real quick, if I could follow up -- and if I missed this, I apologize. But I think you guys have talked about 2% to 4% comp growth in the US heading into the year. Is there any update on that range after, obviously, the huge first quarter?

That’s our long term guidance for you 14.5 is a little higher 2% to 4% so year we were off the high end of that for the quarter. But obviously we’re incredibly pleased with the comp in the first quarter. And I guess what it say is 2% to 4% is the long term guidance that we’ve given but we’re awfully pleased to have beaten it by I guess 10% plus we’re pretty happy with that.

Your next question will come from the line of Jeffrey Bernstein with Barclays.

Two questions, and first one Patrick thank you for that help on the 14 bigger than 2% to 4%. That was a very strong result, so congratulations. No, I appreciate all the help I can get. The first question was on the comp. We've heard from a lot of people in the industry that the quarter started off heroic and then slowed. I know you don't give monthly sales but I'm wondering whether you can opine upon what you saw something similar and maybe whether you can make any comment on the broader industry, because I know you talked about the industry maybe growing at 1%. I'm wondering whether this is a Domino's phenomenon or is all of a sudden just a resurgence across broader pizza segment. And I have one follow-up.

I think the pizza category is doing a little better than the restaurant category overall. I think it’s up maybe more 2% to 3%. But there is no question that we’re taking share right now with the numbers that we’re putting up. And in terms of within the quarter I am not going to comment on that. What I would say is what we are seeing is that the employment market looks awfully healthy out there. And we’ve said it many times and it continues to be true employed people buy more pizza than unemployed people. And so when we look at the overall market, the overall restaurant category we’re continuing to see the employment picture looking good, people are continuing months to months we’re continuing to add jobs, certainly we’d like to see that a little stronger than we saw at the last month or two. But the trend is clearly up, the recovery is continuing and we’ve said often that that correlates to higher pizza category consumption and we’re certainly seeing that playing out again.

Got it. And then just on a balance sheet perspective, Mike, there was no mention of leverage positioning, and, obviously, Domino's being a heavily franchised business that's always a key part to the story. I just wondering where there any comment in terms of closely monitoring the markets or if you are content with leverage flowing to that four times or below range or how we should think about that over the next 12 months.

As we've said we are comfortable in this three to six range. We're still solidly into that range. But yes, we'll continue to monitor we'll continue to evaluate what we think is the best approach for us.

Your next question comes will come from the line of Brian Bittner with Oppenheimer & Company.

A follow-up on John's earlier question. You talked about some stores that are becoming a little bit capacity constraint. What type of values are those stores doing so we can at least imagine what the upside in the current asset base looks like in the U.S. potentially?

We've always said we think there is at least the 1000 stores yet to be built in the U.S. and is unit economics are continuing to improve. We like the building momentum on that I release the kind of final estimate on franchise profitability last year at 89,000 with moderating food cost. As you saw in our corporate numbers and with the comp that we put up clearly first quarter this year was better than first quarter last year as well. So the cash flow per store continues to go up and so we're feeling pretty good about how that plays through overtime. And from a capacity standpoint it certainly means that as sales go higher there's even more opportunity to continue to build. So we're feeling good on that front.

I appreciate that. I should have framed the question differently. What I'm asking is the actual stores that are seeing some capacity constraints on volumes. What type of AUV levels are they doing so we can think about what type of AUVs those stores are doing versus the overall portfolio?

I don't know if I am going to get into give any kind of a specific number on that it depends on the store and we've got stores that are 1,200 square feet. And they are pretty capacity constraints if they're doing 30,000 or 40,000 a week, it's tough to do that out of a small store. But we’ve got stores, I can think of stores on military bases essentially have two lines they are effectively doubled the capacity in a single store. And they can do substantially more than an average store. So there is not a single answer that I can give on that but what I can tell you is with the increases in volume we're seeing there are certainly more stores that are followed into the category of being a little capacity constrained. And they are really two ways to solve that either putting more equipments into existing stores or building more stores and both of those are relatively straight forward to do and are pretty good for our shareholders.

Okay, thanks on that. And last question -- you guys obviously have a lot more insight into the business and the trends than we do. The acceleration in the business to mid-teen comps is obviously incredible. And I think what I'm really trying to understand better is when you look at your business and you see that inflection, how much of it is due to you truly being at the epicenter of a tightening labor market? And how much of this is doing what you are doing with the technology things and new products, just thinking about macro versus micro here?

If you look at what I said on category growth that winning category growth is more in the 2% to 3% range. That includes store growth in that number that’s not just same stores sales we're clearly outperforming the category by a lot right now. So it is more about things but we're doing in the business and I guess I've got a fall back on what I said before it's about just a lot of different things coming together getting the food right, having the best franchisees in the business. And I mean now we've got terrific franchisees who are leaning in to the business right now, they're excited about what's happening, there is staffing up as volumes are growing. So they can continue to give great service it's about the advertising that’s been very effective, it's about we think some of the best if not the best use of technology in the category giving customers a better experience. It's about getting stores reimaged, though I would remind you that’s still only kind of 20% to 25% complete in the U.S. So it's just a lot of different things that have been coming together that we've been talking about but are really all happening right now and that’s strengthening the brands in the minds of consumers which is building pretty phenomenal momentum in the business.

Your next question will come from the line of Peter Saleh with Telsey Advisory Group.

I wanted to ask about -- you mentioned the remodels but can you give us an update on the returns that you are seeing on the remodels and then also on the relocations? How many relocations do you guys expect to do at this point? And is there any impact when you relocate from maybe a less desirable location to a better location on the carryout business?

I think the last one first, yes. The relocations that are getting done you see a bigger bump on sales and more of that is within carryout. What you’re going to see is it’s still going to be a minority of the stores that are going to relocate over the course of the next couple of years this is primarily going to be about reimages. And my answer on reimages and the results that we’re seeing continue to reflect exactly what we said in the past that an individual store getting reimaged you will see a very low single digit a point, two point, maybe three points in lift versus the stores around it when the reimage is done. What we always have believed and I think what you’re seeing play out is that it’s really more about the overall brand momentum as you’re getting lots of these done and people start rethinking Domino’s pizza, it’s really more about overall brand momentum than it is about kind of the specific store that’s getting done. And we’re still roughly a two thirds delivery, one third carryout business. And so it makes sense. Only a third of our customers are walking into the store, maybe if you look take it a little bit lower so maybe 35% or 40% of orders you’re going to have less of an immediate impact on comp sales from a reimage of a specific store. But given what we’re doing with the overall business and the brand and technology and the food quality and service, everything that we’re doing we can’t have stores that don’t reflect our overall brand image. And we think it adds to the momentum of the brand. So, that’s what we’re seeing. The individual store reimages don’t produce that big of a bump in the near term but we do think it’s part of what’s feeding into the overall brand momentum.

And then on pricing or menu pricing, I know lots of the other restaurants have talked about higher pricing than historical, at least for this year. How are you and the franchisees thinking about pricing in the environment where you've got commodities actually coming down but you're probably seeing some labor pressure as well?

So I think the answer is really in the profits that you’re seeing in the stores. I mean they had record profitability last year they did that in an environment where commodities were up pretty dramatically now the commodities are easing. You’re seeing that play through in even better profitability. And our system, our franchisees were exceptionally disciplined last year when commodities were up a lot they decided that the long term benefit of the customers feeling good about the value they’re getting was more important than simply covering and a little bit of short-term pressure from a cost standpoint. And this year that’s going back the other way. So any pressure that you saw on wages which again for us is reasonably minimal because most of our people are tipped and are making far more than the starting wage you’re seeing a lot of discipline in our system but they’re benefiting now as commodities gone a little bit lower and it playing back ultimately to discipline around doing what the consumer needs, what our customers need to continue to give us more of their business.

Your next question will come from the line of Joseph Buckley with Bank of America.

Patrick, you mentioned the tip aspect of the drivers a few times. The drivers -- are they paid a tip credit wage or are they paid at least a minimum wage and then tips on top of that?

It depends on the franchisee so remember over 90% of our stores in the U.S. are owned by franchisees, they control that. What I can tell you is it is all over the board and it’s really market dependent so there are places where people could pay tip credit and they’re not, there are places where they are paying above the starting wage, they're places where people are paying out of the tip credit. You pay what you need to pay to have good people in stores and be staffed but what remains true is that with tips our drivers are certainly making on average $10 plus and probably substantially more than that as you look across the country. So they're doing well and so it's really more about kind of market demand for labor than it is about the starting wage.

And in the Company stores is it a tip credit wage?

That varies also by market and there are some markets where we're doing, there are some markets where we aren't, there are also some markets where we can't where tip credit wage is not available and you pay at the same minimum as non-tipped employees.

And then just another question on consumer activity. Obviously, your comp is not reflecting the macro. But the macro may be a small part of it. But are you seeing customers willing to spend more? Is the mix going up, or are add-on items going up? Are you seeing the consumer willing to spend a little bit more aggressively?

Not particularly and you've been ask the question before gas prices going down and we just don’t think that’s a particularly big factor in consumer spending right now and you've certainly seeing the same data that we have that savings rate may have even gone up a little bit in the last three or six months. So I don’t think that’s really playing in and we're not seeing that. Mike mentioned in his prepared remarks that this was overwhelmingly about order growth for us but our ticket was up a little bit. So I would remind you that ticket is both a function of price and what they're buying kind of the basket of products that are in the order. But I wouldn’t say that we're seeing a particular change in customers' willingness and ability to pay more and people are remaining disciplined coming out of the crisis now five, six years ago, customers are smarter they are remaining disciplined, they continue to want value which is a function of both the quality of the food and the quality of the service as well as the price and I'm not seeing a dramatic change there.

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

Congratulations, obviously -- very exceptional. I did want to talk about the restaurant modernization and I guess maybe more specifically the Pizza Theater in terms of what some initial experience has been in terms of sales lift, how far along you are with that in terms of the overall program, if the costs are where you want. And I think a theme that has been discussed a lot on this call is whether that can actually start to push business two things like lunch and earlier in the week and what have you, where I think most Domino's stores would in fact have capacity if they don't have capacity on a Friday or Saturday night, for example.

I think the broad answer is that we've always been very, very good at delivery. We haven’t been particularly differentiated on carry out. And the experienced with the customer has in our store and so getting that right starts with having a good environment for the customers. And I would add importantly for the team member. Our team members prefer to work in these new stores and so that helps get better people it helps us be staffed in the stores and it's relatively early in this process. We still are only 20% or 25% kind of reimage in the U.S we're moving very quickly on that those numbers are going to continue to go up very quickly over the course of this year and next year really till the end of 2017. It's probably too early to say that there are dramatic shifts in day parks and mix and that sort of things. But what I would say is having a great environment for customers in our stores certainly gives us far more opportunity looking forward to do something that’s differentiated for our carry out customers as well. And it's certainly something that we're looking at, we're excited about the prospects of getting better there. But this is foundational, they've got to look good first.

If I may, obviously there's a lot of attention, probably even more so in the investment community then maybe even the consumer, but certainly a lot of attention in both places around this personally made, what I'm going to call it Neapolitan style pizza. Do you want to have the Pizza Theater in place before you start looking into a segment like that? Or does a segment like that make sense for Domino's? Or could you even basically serve that customer or serve that demand within your existing format?

So if you look at some of -- what people are calling the fast casual players it’s about food quality, it’s about the environment and it’s about open kitchen, it’s still about giving speed of service. And we think we’re doing all of those things and doing it better than most. As you get into kind of the specifics of your question which is really around the product itself and maybe wood fired oven, a thinner [indiscernible] that sort of thing I don’t think you are going to see us doing that but certainly having all of the rest of the things in place we’re going to watch, you’re not going to see us bringing lumber into the stores soon, to start cooking the pizzas, I mean [multiple speakers]

I think we know you wouldn’t Patrick.

But it does give us an opportunity to look at things. So I don’t think you’re going to see us go all the way over there but it does give us an opportunity as we’re showcasing the food to look at how we drive that even more strongly.

There are no further questions in queue at this time. Presenters, are there any closing remarks?

No. I just want to thank everybody for getting on the call. I know it is a very busy earning season right now. And I look forward to talking to you again as we discuss our second quarter earnings on July 16.