Good day, ladies and gentlemen, and welcome to Papa John's Third Quarter 2018 Conference Call and Webcast. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session and instructions will follow at that time. As a reminder, this conference call is being recorded. I would now like to introduce your host for today's conference, Mr. Steve Coke, Vice President of Investor Relations and Strategic Planning. Sir, you may begin.

Thank you, Chanel. Good afternoon. Joining me on the call today are President and CEO, Steve Ritchie; and our CFO, Joe Smith; and Mike Nettles, our Chief Operating and Growth Officer. Steve and Joe will have comments about our business and provide a financial update. After the prepared remarks, Steve, Joe, and Mike will be available for Q&A. Our discussion today will contain forward-looking statements involving risk that could cause actual results to differ materially from these statements. Forward-looking statements should be considered in conjunction with the cautionary statements in our earnings release and the risk factors included in our SEC filings. Please refer to our earnings release in the Investor Relations section of our website for a reconciliation of non-GAAP financial measures discussed on this call. Finally, we ask any members of the media to be in a listen-only mode. Now, I'd like to turn the call over to Steve Ritchie for his comments. Steve?

Thank you, Steve, and good afternoon, everyone. Our third quarter results continue to reflect the brand challenges we have faced this year and were exacerbated by the negative impact of the media coverage that began on July 11. However, these events are not going to define the future of Papa John's. During the quarter, we took important actions to help repair our brand reputation and we believe good progress has been made. Our performance shows the positive impact from these efforts with improved consumer sentiment, third quarter comp sales coming in better than our expectations, cash flows remaining strong, and an improvement in North America comp sales outlook for the remainder of the year. As we continue working to rebuild trust, sustained consistent improvements and sales performance will take time. Overall, North America comps for the third quarter were down 9.8%. As you may recall, when we reported second quarter results, comps were down approximately 10.5% in July due to the consumer and brand sentiment challenges. We said that performance had stabilized, so the third quarter comps at 9.8% were better than our expectations at that time. That said, the consolidated numbers does not tell the full story. So let me provide some additional detail. In September, we launched our new Voices of Papa John's marketing campaign supported by significant PR and social media effort to drive additional awareness. This work showcase the fact that Papa John's is made up of a team of 120,000 corporate and franchise team members. I am very proud of this team. The support they have shown and their collective commitment to the actions we are taking to move the company forward. We had a strong positive response from internal and external stakeholders to the Voices campaign. Employees and franchisees express their appreciation for sharing…

Thank you, Steve. We reported a diluted loss of $0.41 per share in the third quarter on a GAAP basis. Adjusted diluted earnings per share were $0.20 on a non-GAAP basis compared to $0.60 in the third quarter of 2017. The decline in our EPS was primarily attributable to our special charges, the impact of lower North America comparable sales, higher restaurant operating cost, as well as increased interest expense. During the third quarter, we incurred special charges of $24.8 million, which is $19.3 million on an after-tax basis including $3.6 million of cost to replace or write-off branded assets and reduce royalties to domestic franchisees amounting to $9.9 million. The remainder of the special charges were primarily cost associated with activities of the special committee of the board including the third-party audit of the culture of Papa John's and additional legal and advisory cost. Our third quarter net loss on a GAAP basis was $13 million. Excluding the special charges, our third quarter after-tax income was $6.2 million compared to $21.8 million for the corresponding quarter in 2017. Consolidated third quarter revenues decreased $67.7 million or 15.7% primarily driven by lower comparable sales for North America which resulted in lower company-owned restaurant revenues lower royalties and decreased North America commissary sales. In addition, the refranchising of 62 company-owned restaurants in North America earlier in the year reduced total revenues on a quarter and year-to-date basis by approximately $15 million and $27.2 million as compared to prior year periods. International revenues also decreased due to the refranchising of 34 China company-owned restaurants. Domestic company-owned restaurants operating margin decreased $12 million or 3.3% as a percentage of related revenues primarily due to the impact of lower comparable sales and higher non-owned automobile cost. Additionally, the adoption of the new revenue recognition…

Thank you, Joe. As we entered the fourth quarter, we're optimistic about the opportunities ahead for Papa John's. While the challenges that have been created for our company are still there, you're seeing early indications that our improvement actions are working. The improved consumer sentiment in North America, our stabilizing comps, the outspoken support both internally and externally, our significant international white space, and our continued strong cash flows all support our confidence for the future. We are absolutely committed to building on this momentum in moving the company forward to greater success. We appreciate your continued support and I'll now turn the call over to the operator for Q&A. Chanel?

Thank you. Our first question comes from the line of Will Slabaugh of Stephens. Your line is now open.

Yeah. Thanks, guys. Wanted to ask a follow-up on the $50 million to $60 million number that you increased this quarter. Can you talk a little bit more about where that's going exactly? I know you mentioned the $10 million going to the ad fund, I believe that stayed constant or maybe that was an increase going into the fourth quarter, just curious on some of the color around that?

No. Well, the $10 million was actually new from our previous guidance that we gave in the third quarter. That was something that we approved late, basically in early October. So that's kind of a new contribution that was not considered when we gave the previous guidance. Then again, the rest of it will be against some more assistance to the franchisees and then again some work from special committee – advisors working with the special committee of the board.

Got it. I'm wondering if you can talk a little bit more about the trends that you saw during the quarter, you mentioned it got a little bit better and then I know you said in September particular they did improve. Can you give us any more color around numbers how they may have looked and then any color into October after you've had a little time under your belt with the new launch of the Voices campaign would be helpful as well?

Sure, Will. It's Steve. So I'm not going to probably get into specifics around the fourth quarter, I'll probably start getting back to just kind of full year guidance numbers. I'll give you a little bit of color there on the third quarter. So as we did give visibility of the cadence of the comps in third quarter in July being down 10.5%, that trend kind of continued through August and then we saw a significant improvement in September, some of that is attributed to a couple of factors around the new campaign work that had launched, one being the new Voices brand campaign, but the other being the App Download campaign that we called out and it was very concentrated effort from a promotional standpoint just on the weekends for four weekends within the quarter. So I think just indicating as we get the right promotional balance, the right media buying with the right brand messaging, we know that we can get significant improvement from a comp standpoint. And, obviously, we got expectations that the fourth quarter will improve versus the third quarter. Some of that is just the nature of the rollovers from prior year from the November 1 event, but we do expect based on the leading indicators of the consumer sentiment improvement from the voices campaign, we think that is definitely a leading indicator to continued sales improvement as we progress through the rest of this year.

Got it. Thank you.

Thank you, Will.

Thank you. Our next question comes from the line of Alex Slagle of Jefferies. Your line is now open.

Thanks. Just wondering if you guys could remind us what the cadence of your same-store sales domestically look like last year through the fourth quarter to the degree, I guess, the trends accelerate starting in November but any color you could provide on that.

Sure. Alex, so the third quarter we were basically, we were up 1%, we were up – fourth quarter we were down 3.9%. So just think about kind of trends in the third quarter continuing through October and then a big precipitous drop-off in November and December. So clearly we're, in real-time, hurdling some of those numbers from prior year, but the business had decelerated a bit in 2017, but was above the flat line. So the predominant amount of the issues from a comp standpoint certainly related to consumer sentiment issues related to the two trigger events, one from of course November from last year and then of course earlier this year in July.

Okay. And could you talk about the health of your franchisees, just recent conversations you've had with them and any updated thoughts on the potential for increased number of closures in the coming quarters and whatever you're doing, ongoing efforts to ensure the stores are all in the right hands?

Sure, sure. Happy to. It's Steve again, Alex. So, I mean, I think, first off, unit economics and the health of our franchisees is always a top priority. As you guys know, I'm also a franchisee, have been one since 2005. So I understand the importance of unit economics on the backs, the strength of the franchisees is how we grow the business. The good thing is we've had a very nice run, dating all the way back to 2011. It's been the best five, six year run in the history of the company. So 2015 and 2016, were back – record back-to-back years in terms of sales and profitability for the vast majority of our franchisees. So I note that because that's clearly important as we see a slowdown in 2017 and this precipitous drop-off from a comp standpoint from the fourth quarter last year and went all the way through the third quarter. So I think we've taken the appropriate action, working collaboratively with our franchisees, those two big bodies, our Franchise Advisory Council and the Papa John's Franchise Association, that does make up nearly 50% of the units on the franchise base. So what we put in place was bridge solutions to make up for the cash flow declines that they've experienced because of the sales comp issues here. So I think we made the right decisions with the commitments that we put forth through the end of 2018 in terms of royalty relief, some relief in terms of food cost through the PJ Food Service. We also did delay the increase on our national marketing fund that was scheduled to go increased 0.25 point in the fourth quarter and we've also continued to not increase the online fee even though we're making significant investments this year on the technology side of the business. So I think we're working very collaboratively with our partners being the franchisees, recognizing the top priority needs to be to continue to quickly accelerate the improvement in top-line sales and that will improve the unit economics for our franchisees. As far as a continuation into 2019, clearly we're in the evaluation stages of that now to understand what the outlook looks like for 2019 from a sales standpoint and what level of support and how we may support our franchisees and we'll clearly give you guys a very detailed outlook of that in February when we report our fourth quarter numbers.

Great. And last one from me, if you could provide any commentary around recent 8-K filing on the executive retention program and any other actions related to that that you can comment on?

Sure. Alex, it's Steve. I'd be happy to. So, I mean, I think as you know it's a war on talent out there and priority number one for me is to make certain that I'm retaining the top talent of this organization. And I think the compensation committee working with an independent compensation consultant has taken some very appropriate actions, benchmarking our business across our peer group and also looking at what best practices are done broadly throughout the industry. And they took some actions there to ensure that we're putting forth the right efforts to retain that talent. So there was some amendments to some of the severance (29:57) components of those plans and we feel confident those actions put us at parity against the industry which we certainly don't want to be disadvantaged especially during a time where we've got a – clearly, we're in a transformational stage for the brand.

Great. Thanks for that.

Thank you. Our next question comes from the line of Chris O'Cull of Stifel. Your line is now open Chris O'Cull - Stifel, Nicolaus & Co., Inc.: Thanks. Good afternoon, guys. Steve, just as a follow-up to that last question, when do you expect to make a decision regarding the level of franchise support for 2019?

We're in our budgeting phase now, Chris, so we're close. So we actually have our Franchise Advisory Council in this week so this is one of the points of discussion just to understand the outlook for the franchisee perspective and, clearly, understanding the cadence of the improvement in comp is directly tied to the levels of support. So we'll make some decisions here in the near future. But in terms of externally making those announcements, it likely won't be externally until we announce fourth quarter earnings but we're certainly working through that right now. Chris O'Cull - Stifel, Nicolaus & Co., Inc.: Okay. And then, Joe, commissary sales were down about 11% which makes sense given the transaction declines but profits were down only 2%. Does this mean that the company has not provided any commissary markup or pricing release to franchisees?

No. We actually did take our profits down a little bit and have committed that for the rest of the year that our margin will be lower. I do think you have a little bit and we can – if we take that offline – we have a little bit of shift on some of the income with our – now that we have less company-owned stores so that does make that margin change a little bit, that's more of an accounting issue than anything else. Chris O'Cull - Stifel, Nicolaus & Co., Inc.: Okay. And can you give some color or explain why the International commissary sales were down so much?

That would be with the China sale. We had a commissary there. Well, there's two things. Obviously, we have the sale of the China operation. The other part is just the U.K. operation being having some lower sales and that reflects some of their lower volumes. Chris O'Cull - Stifel, Nicolaus & Co., Inc.: Okay. Okay. And then, Steve, I apologize if I missed this in the presentation, but has the cultural audit been completed?

It's still ongoing, Chris. So – and they have not announced any timeline of completion, but it is still ongoing. And clearly, we take those things very seriously. So not waiting on an output of the audit, however, we are excited to get some of the output of that so we can make sure that we make the adjustments to enhance the culture, but we are continuing as I stated in some of the early presentation of making people a priority. So there's number of initiatives that are in motion here to continue to enhance the culture, specifically as it relates to D&I, so we did earlier this year announced that we have a new Chief of Diversity, Equity, and Inclusion. So there's a number of efforts around that and a lot of external things that we're working to also improve the perception of the company. Chris O'Cull - Stifel, Nicolaus & Co., Inc.: Okay. And then I believe the board may have mentioned at one point that they were looking to expand the number of members, is that still the plan?

I think they're keeping an open mind. Certainly, they look at the size of our board. It's a relatively small board of six directors, of course, one non-independent and another five independent directors. So that is something certainly the board has been very thoughtful of having evaluating the options that they may have. And, obviously, as we make decisions on that, those things will be communicated. Chris O'Cull - Stifel, Nicolaus & Co., Inc.: Okay. Great. Thanks, guys.

Thank you, Chris.

Thank you. And I'm showing no further questions at this time. I would now like to turn the call over to Mr. Steve Ritchie for closing remarks.

All right. Well, I just want to thank you everybody for joining us today on the call. And clearly, we're very excited about the future of this brand. Here, we got a lot of work to do, but hopefully you're seeing that we are demonstrating, making the right steps to take the brand in the right direction. So we look forward to talking to you again after our fourth quarter results in February. Thank you.

Ladies and gentlemen, thank you for participating in today's conference. This concludes today's program. You may all disconnect. Everyone have a great day.