Q4 2024 Domino's Pizza Inc Earnings Call
Okay.
Speaker Change: Thank you for standing by and welcome to the Domino's Pizza.
Speaker Change: 2024 earnings conference call at this time, all participants are in a listen only mode. After the speaker's presentation. There will be a question and answer session to ask a question. During this session you will need to press star one on your telephone.
Greg: Reminder, today's program is being recorded and now I'd like to introduce your host for today's program, Greg Let me check Vice President Investor Relations. Please go ahead Sir.
Speaker Change: Good morning, everyone. Thank you for joining us today for our fourth quarter and full year results conference call.
Speaker Change: Today's call will begin with our Chief Executive Officer, Russell Leaner, followed by our Chief Financial Officer Sandy.
Speaker Change: The call will conclude with a Q&A session.
Speaker Change: Forward looking statements in this morning's earnings release and 10-K, both of which are available on our IR website also apply to our comments on the call today.
Speaker Change: Actual results or trends could differ materially from our forecast for more information. Please refer to the risk factors discussed in our filings with the SEC.
Speaker Change: In addition, please refer to the 8-K earnings release to find disclosures and reconciliations of non-GAAP financial measures that may be referenced throughout todays call.
Speaker Change: This mornings conference call is being webcast and is also being recorded for replay via our website.
Speaker Change: We want to do our best this morning to accommodate as many of your questions as time permits as such we encourage you to ask one question only.
Russell Leaner: With that I'd like to turn the call over to Russell.
Russell Leaner: Well, thank you, Greg and good morning, everybody I'd like to start with a look back at 2020 for the first full year executing against our hungry for more strategy when.
Russell Leaner: When we introduce hungry for more at our December 23, Investor Day, we know consumer spending would be pressured in 2024, we believe the <unk> brands that offer the strongest value would win.
Russell Leaner: And we made the right call to focus on this as we've seen more market headwinds than anticipated at the time.
Russell Leaner: At Domino's leaning into our strategic pillar of renowned value was key to our success last year.
It helped drive market share gains in <unk>, our pizza of about 1% in the U S. Consistent with our average annual share growth in 2015 and proves that are hungry for more plan is working.
Russell Leaner: As we look ahead to 2025, we believe the combination of pressured consumer spending and a value driven <unk> marketplace will continue.
Russell Leaner: In these challenging times, the best measure of our company's success will be the market share gains and achieved.
Russell Leaner: Domino's is well positioned to do just that because we have the right strategy in place.
Russell Leaner: We grew retail sales in the U S by five 3% in 2024.
Russell Leaner: Importantly, and something that continues to be unique in the industry, we drove meaningful positive order count growth.
Russell Leaner: The account growth has been the key to delivering best in class economics for our U S franchisees.
Russell Leaner: These strong economics continued to drive store growth, which was a tailwind to market share in 2024.
Russell Leaner: Orders grew on the strength of our revamped Domino's rewards program and our entrance into the aggregator channel with Uber.
Russell Leaner: In addition, we continue to see significant same store sales growth and our carryout business up over 6% for the year.
Russell Leaner: I want to illustrate how we drove these results through the lens of our hungry for more strategy.
Russell Leaner: The EM and hungry for more stands for most delicious food.
Russell Leaner: Domino's has the most delicious food in the industry and in 2024, we demonstrated this through our two successful new product launches newer style pizza and Mac and cheese pasta.
Russell Leaner: These launches reflect the commitment we have to our innovation with intent approach. There is a clear purpose behind any product we bring to market.
Russell Leaner: Got news to an existing non pizza platform with Mac and cheese, and we added a new pizza crust type for customers, who prefer an offering we didn't have in our portfolio with New York style.
Russell Leaner: In 2025, we plan to continue to build on this momentum by launching at least two new products, which is our annual goal.
Russell Leaner: An important component of our strategy is how we showcase our food we've enhanced this through the food photography, and our creative and upgrades to our existing E Commerce platform, where our team made meaningful changes in 2024.
Russell Leaner: We've also completed the development of our new E Commerce platform in the U S, which we intend to rollout during 2025.
Russell Leaner: The new site and App, providing an improved user experience for our customers, while highlighting the deliciousness of our food.
Russell Leaner: The OLED hungry for more stands for operational excellence. This is how we deliver on our promise to have the most delicious food by consistently driving a great experience with our product and service to.
Russell Leaner: <unk> 2024, we rolled out our new service program called more delicious operations.
This program was a series of three product training sprint's, focusing on Dow management, how we build and make our products and how we baked them.
Russell Leaner: These products work together with our <unk> technology to drive improvements in our delivery times in fact, our average delivery times decreased by two minutes over the last two years.
Russell Leaner: Operational excellence also brings focus and innovation around making our stores easier to operate.
Russell Leaner: This is an area, where we've made significant strides.
Russell Leaner: We've enhanced our <unk> operating system and have found ways to roll technology out across our system much more quickly than we have in the past.
Russell Leaner: We've now rolled out 1600, DJ dose stretching machines across the U S more than a 50% increase from where we were at the end of Q3.
Russell Leaner: Demand continues to be high for this equipment because of the impact it's having on our product consistency and the speed to competency for new team members.
Russell Leaner: I want to thank our franchisees and our operations team for their continued effort to achieve operational excellence. This is a point of pride and differentiation predominance.
Speaker Change: The our Stanford renown value from.
Speaker Change: From tipping our delivery customers to launching more inflation in bringing back emergency pizza, we launched several brand building value initiatives that broke through the industry clear in 2024.
Speaker Change: We will continue to driver now value in 2025 through national promotions, Domino's rewards and by continuing to grow an aggregator platforms.
Speaker Change: In 2025, Domino's will give customers what they are demanding from their <unk> brands more value.
Speaker Change: We have a strong slate of initiatives prior.
Speaker Change: Primed and ready to go you can expect a similar cadence of boost weeks and value driving promotions as we believe it is going to be another challenging year ahead in the industry.
Speaker Change: Dominoes rewards program had a great first year and continues to bring members back for repeat purchases.
Speaker Change: We grew our overall active members significantly in 2024, finishing the year at $35 7 million users up approximately $2 5 million versus 2023.
Speaker Change: Part of this growth was delivering more light user and carryout customers, who are the primary target of the redesign.
Speaker Change: This strong base of users will allow us to engage more customers and drive frequency with targeted and personalized marketing efforts.
Speaker Change: While providing value through our own channels as one part of our rent now value barbell strategy tapping into the aggregated marketplace is the other in.
Speaker Change: In 2024, we successfully entered the aggregator space with our partnership with Uber, achieving our goal of exiting the year at 3% of sales coming through this channel.
Speaker Change: And importantly, incrementally has continue to track as expected and we remain focused on tailoring our offers and programming to optimize it further.
Speaker Change: In 2025, we know that Aggregators are meaningful sales driving opportunity for us and we have yet to join the largest aggregator platform in the U S.
Speaker Change: We've extended our exclusivity arrangement with Uber until May one and.
Speaker Change: In the meantime, we've begun negotiations with additional aggregator partners and have the ability to begin piloting with other partners in a small number of stores.
Speaker Change: It is our intention to further penetrate this channel in 2025 with a meaningful impact expected in the back half of the year.
Speaker Change: We believe that this channel represents an incremental sales opportunity of $1 billion over time.
Speaker Change: The aggregated marketplace is the fastest growing segment within <unk> Pizza and we are just getting started.
Speaker Change: Now everything we do at Domino's Pizza is enhanced by our best in class franchisee and.
Speaker Change: In 2024, we added almost 60, new franchisees to the system and have a pipeline of 120 future franchisees waiting for their opportunity.
Speaker Change: Every one of these new franchisees started as a domino's team member and they remain the secret sauce to our success.
Speaker Change: In summary, we're laser focused on delivering against our hungry for more goals in the U S. With a plan. We have developed I believe we will deliver U S same store sales growth of 3% or more annually.
Speaker Change: Along with 175 net new stores.
This will enable dominoes to continue to capture additional market share gains in 2025 and beyond.
Speaker Change: Now shifting to our international business.
Speaker Change: Domino's International showed strong improvement in the fourth quarter and has now delivered a remarkable 31 straight years of same store sales growth.
Speaker Change: We're pleased with how most of our franchisees internationally are navigating the continued macroeconomic pressures and geopolitical issues across the globe.
Speaker Change: Our team continues to work with our international Master franchisees to create momentum in their markets even in the face of these headwinds.
Speaker Change: We know what works in today's challenging environment and its renowned value.
Speaker Change: As we noted on our last call we are engaging with our master franchisees with a focus on three key areas.
Speaker Change: These areas are around consistent value messaging maximizing orders from Aggregators and driving additional growth in Carryout and Diana.
Speaker Change: The good news is that we've begun to see some results due to this focus.
Speaker Change: Canada ran an emergency pizza promotion in Q4, and Thats been a strong traffic driver for them.
Speaker Change: And India Jubilant has driven sales through increased delivery orders after eliminating their delivery fee.
Speaker Change: UK and Canada have launched with Uber and this has provided a tailwind to their sales.
Speaker Change: Lastly, Mexico saw a nice increase in their carryout business in 2024, as they provided a premium product and pan pizza at a compelling price point driving consistent value for customers.
Speaker Change: Our international business has so much potential and by focusing on are hungry for more strategies, we expect to create sales momentum that will produce the same kind of market share gains and net store growth we've achieved in the past.
Speaker Change: In closing I want to reinforce the same message I repeatedly share with our team.
Speaker Change: We have always been in the business of creating our own tailwind and driving share growth.
Speaker Change: That has been and will continue to be how we drive best in class results and long term value creation for our franchisees and shareholders.
Speaker Change: I'll now hand, the call over to Sandeep.
Sandeep: Thank you and good morning, everyone.
Speaker Change: While our full year 2024 financial results were impacted by a more challenging backdrop.
Sandeep: We had initially anticipated.
Sandeep: Still delivered profitable growth of 8%.
Sandeep: Income from operations increased six 5% in Q4, excluding the impact of foreign currency, which was in line with our expectations. Despite lower U S same store sales than we expected.
This increase in profits was primarily due to gross margin dollar growth within supply chain driven by procurement productivity.
Sandeep: Well as lower general and administrative expenses, which was driven by the timing of investments.
Sandeep: Excluding the impact of foreign currency.
Sandeep: Retail sales grew four 4% in the fourth quarter from positive U S and international comps global net store growth.
Sandeep: For the year.
Sandeep: While retail sales grew approximately 6% which was in line with our updated guidance.
Sandeep: In Q4 total retail sales grew two 3% in the U S driven by a net store growth and same store sales of 0.4%.
Sandeep: These comps were driven by county at up three 2% and delivery down one 4%.
Sandeep: The delivery comp was impacted by continued macro and competitive pressures that put pressure on our low income customers.
Sandeep: We benefited from two 3% of pricing, which was inclusive of high single digits in California, and our sales mix from Uber was two 7% for the quarter.
Sandeep: <unk> were partially offset by a higher carryover mix.
Sandeep: It carries a lower ticket and delivery.
Sandeep: Traffic was flat for the quarter.
Sandeep: This was partially driven by a slight headwind as a result of the timing.
Sandeep: For the year delivery represented 46% of our transactions and 57% of our sales one coyote represented 54% of our transactions and 43% of our sales.
The rate of sales and transactions shifted slightly more to carry out in 2024.
Sandeep: Those are the strong carryout comp, we had a six 2%.
Sandeep: The full year delivery comp was up one 1%.
Sandeep: Our estimated average U S franchisee store profitability in 2024 came in at approximately $162000.
Sandeep: Which we continue to believe is best in class.
Sandeep: After a strong start in the first half of the year, the combination of macro and competitive pressures that impacted our sales in the back half weighed on this result.
Shifting to U S unit count.
Sandeep: We added 84 net new stores in Q4, and opened 7000 store, bringing our U S systems store count to 7014.
Sandeep: Our Q4 openings were negatively impacted by some of the hurricane activity that took place late last year.
Sandeep: Moving to international where total retail sales grew six 4%, excluding the impact of foreign currency in the fourth quarter.
Sandeep: This was driven by net store growth and same store sales that came in slightly ahead of our expectations at two 7%.
Sandeep: In the quarter, we saw improvements in Asia that were driven by strong comps in India and broadly across Europe.
Sandeep: Despite the challenging macro backdrop that impacted our international business. Our franchisees grew the average per store profitability in 2024 and slightly reduced the average new store paybacks as a result.
Sandeep: We also continue to see strong paybacks in our two largest growth markets, which are China and India.
Sandeep: As we look ahead to 2025, we continue to believe that global retail sales growth should be generally in line with 2024.
Sandeep: Now to give some color.
Sandeep: We are expecting our U S comp to be in line with our 3% long term guide as a result of unexpected traffic driving catalysts and aggregators and loyalty.
Sandeep: In the event that macro pressures persist throughout the year it could put pressure on achieving this number.
Sandeep: We also expect that based on the timing of certain initiatives that our comp will be lower in the first half compared to the back half in the U S.
Sandeep: We continue to believe planning for approximately 1% to 2% International same store sales growth in 2025.
Sandeep: The right expectation before we return the business to a more normalized level in 2026.
Sandeep: Shifting to net stores, we continue to expect 175, plus net stores in the U S and we have a strong pipeline heading into the year to achieve this.
Sandeep: Internationally, we're expecting a net store growth to be in line with what we have in 2024.
Sandeep: This is primarily due to impacts from Domino's Pizza enterprises.
Sandeep: Which is a master franchisee based out of Australia.
Sandeep: <unk> continues to make meaningful progress into what they need to do to their business as they work through their strategic plan under the new CEO.
Sandeep: We've recently announced that they are expecting to close an additional 200, plus underperforming stores primarily in Japan.
Sandeep: We're also planning to be more disciplined in their new store openings.
Sandeep: <unk> locations, where they can drive sustainable profitable growth for the long term.
We believe that the meaningful impacts from Bp's closures will be behind us as we head into 2026.
Sandeep: On profits, we continue to expect operating profit growth of approximately 8%, excluding the impact of currency.
Sandeep: A few additional points of color on the P&L.
Sandeep: Any metrics, we are providing today excludes any impacts from the proposed tax.
Sandeep: In our U S supply chain business, we source most of our food products from within the country. So we are not expecting this to have a meaningful meaningful impact if tariffs put in place.
Sandeep: We are expecting our food basket to be up low single digits.
Sandeep: Expect increases to be higher in the first half the second half.
Sandeep: Similarly, driven by cheese prices.
Sandeep: We are expecting a supply chain margins to expand slightly year over year due to continued procurement productivity through the team continues to do an incredible job executing on.
Sandeep: We are expecting our G&A as a percentage of retail sales to be approximately two 4%.
Sandeep: Starting at the beginning of Q1 2025, we have increased the technology fee by two to 37 five cents per digital transaction to fund our future tech initiatives to drive growth.
Sandeep: We are expecting operating income margins to expand slightly in 2025, primarily driven by supply chain margins.
Sandeep: We expect margin growth to be lower in the first half of the year than in the second half.
Sandeep: At current exchange rates, we are expecting foreign currency to be a headwind of approximately 1% to 2% operating income growth.
Sandeep: We continue to plan for our debt maturity in October of this year and if current interest rates. It would result in some pressure on interest expense.
Sandeep: Okay.
Sandeep: We expect our tax rate to be the range of 21% to 23%, which is generally in line with where it has been historically.
Sandeep: Our belief in the long term algorithm of border.
Speaker Change: Domino's business can and should achieve has not changed.
Speaker Change: We continue to expect that our algorithm of 7% or more annual global retail sales growth and operating profit growth of 8% or more is the right one.
Speaker Change: However, we anticipated impact from Dp's additional net closures in 2025 will put pressure on our 2026 global retail sales and profit expectations, which we now expect to be in line with 2025.
To close I wanted to note that this morning, we announced a 15% increase in our dividend, which was done in line with our capital allocation priorities.
Speaker Change: We also repurchased approximately 259000 shares at an average price of $433 for a total of $112 million in the fourth quarter.
Speaker Change: As of the end of 2024, we had approximately $814 million remaining on our share repurchase authorization.
Speaker Change: Thank you we will now open the line for questions.
Speaker Change: Certainly and our first question for today.
Speaker Change: Comes from the line of Dennis Geiger from UBS. Your question. Please.
Speaker Change: Great. Good morning, Thanks, guys I wanted to ask a bit more on the 2025 guidance for the U S. Same store sales I guess specific to the comments around lower first half versus back half and I think commentary around the aggregators and loyalty being the biggest drivers could you just kind of unpack some of the sales initiatives those two in particular.
Speaker Change: <unk> and maybe how youre thinking about new product innovation in 25 at a high level of excitement versus prior years, but those two items that you called out thanks guys.
Speaker Change: Hey, good morning, how are you doing.
Speaker Change: So I think lumpy on the question on the guidance in the back half versus the first half cadence.
Speaker Change: Thank you.
Speaker Change: And Russell his prepared remarks, we talked about the aggregated platform specifically.
Speaker Change: Started negotiating with.
Speaker Change: Essentially other partners in the meaningful impact would come more in the back half from Aggregators. So things. So thats one piece of it in terms of the weight.
Speaker Change: And I think the.
Speaker Change: The other piece of it is really.
Speaker Change: We have a bunch of initiatives that we have in our in our marketing calendar and as Youll see one shy about drilling on a whole bunch of them and 24 similar plans in 2005.
Speaker Change: <unk> has just been launched earlier this quarter so.
Speaker Change: They are all much more of it relating to surprise our competition.
Speaker Change: So im not going to give you more details on that but but that's kind of how the back half versus front half commentary was but yes.
Speaker Change: Yes, I think just in general.
Dennis Geiger: When we were asked by the way good morning, Dennis sorry.
Dennis Geiger: When folks talk to us about what drivers are in the business.
Dennis Geiger: We're not going to give.
Dennis Geiger: Specific information, but if you want to know what our recipe is hungry for more and so for example, if someone were to ask me.
Dennis Geiger: Last quarter, what are you going to do in Q1, what's going to be different.
Dennis Geiger: I wouldn't tell them we're doing.
Dennis Geiger: A.
Dennis Geiger: 199, any best deal ever promotion, but that idea really came out of this strategy of hungry for more so the specifics are going to change we need to keep you guys on your toes.
Dennis Geiger: But but the drivers behind them are going to be borne out of the highway from our strategy.
Dennis Geiger: Thank you and our next.
Speaker Change: Next question comes from the line of Brian Bittner from Oppenheimer and company. Your question. Please.
Brian Bittner: Thank you good morning.
Brian Bittner: As it relates to the 2025 guidance.
Brian Bittner: It does still assumes softer international expectations with you established on last quarter's call.
Brian Bittner: International same store sales in that 1% to 2% range instead of the 3% plus long term range and you did reiterate this view in your prepared remarks. This morning, but I'm curious if your international thoughts for 2025 have changed at all over the last several months I mean, your <unk> comps.
Brian Bittner: Were stronger than expected. We're also seeing better international trends that are out of a lot of your peers. So I'm. Just curious if this is starting to tilt conservatively, possibly or anything else you can add.
Brian Bittner: I was wondering Brian here ill start off and Sandeep feel free to feel free to add.
Brian Bittner: Like you said to Q4.
Speaker Change: For the competition as well.
Brian Bittner: The headwinds seem to be dying down a little bit.
Brian Bittner: We're not going to make a flip after one quarter, we were pleased with our quarter as well.
Brian Bittner: I look at are the things that we can control and there I am pretty happy.
Brian Bittner: We gave a bunch of I'm not going to go through them again, but in my in my opening remarks, I gave a bunch of examples of how around the world. We're taking the renown value part of hungry for more and we're translating into some of these international markets and we're seeing results we've talked about having to do three things to drive international same store sales and I think we are.
Brian Bittner: Really beginning to do that.
Brian Bittner: First is making sure that our price points are at or below CPI second is making sure we're leveraging aggregators and the third just like we've diversified beyond delivery, while still driving delivery in the U S. We need to do that in international markets. So happy with.
Brian Bittner: With Q4, and as we get more information.
Brian Bittner: We will update that number we'll let you know.
Brian Bittner: What I will add Brian is.
Speaker Change: In terms of the guidance on same store sales in particular I wouldn't say this feels conservatively.
Speaker Change: It is a very tough macroeconomic environment out there is a lot of volatility that's out there and thats all been taken into consideration both in terms of what we said at Q3 on the.
Speaker Change: Q3 earnings call as well as what we're seeing right now so we will continue to drive them to do a known vendor initiatives that we've talked about but I think the expectations really have not shifted materially since the last call.
Speaker Change: Okay. Thank you.
Speaker Change: Thank you and our next question comes from the line of David Tarantino from Baird. Your question. Please.
Speaker Change: Hi, good.
David Tarantino: Good morning. My question is on the U S unit growth.
Speaker Change: Number.
Speaker Change: You guys missed your target for 2024.
And I was just wanting to ask you.
Speaker Change: Three of confidence in getting to the target for 2025 I guess.
Speaker Change: Any way you can frame up the pipeline or your degree of.
Speaker Change: Yes.
Speaker Change: Assessment of an enthusiasm in terms of building new units would be great. Thanks.
Speaker Change: Thanks, David Yeah, I think I saw deepen his remarks talked about some of the hurricanes at the back part of the year impacted our net openings otherwise we would've been.
Speaker Change: Essentially there.
Speaker Change: What I'm really happy about is.
Speaker Change: And also just how we've done relative to that.
Speaker Change: Kind of competitive Pizza places even in a year, maybe we didnt hit and so if you look at our.
Speaker Change: Competition as far as public companies you add up the number of stores net stores that they opened and we were a multiple several multiples higher higher than that so we've got more to do the hurricanes hurt us a little bit, but net net we're still gaining more share in the U S and that's what this game is all about.
Speaker Change: Yes.
David Tarantino: Add to that David our economics are still very much best employers. The paybacks are extremely compelling the demand for new units continues to be very strong and with the share that we continue to build we are in a stronger and stronger position.
David Tarantino: Position not just against the national competitors, whose data you actually hear about but against the regional competitors in the local players as well. So we're super confident that the pipeline is.
David Tarantino: <unk> is very realistic.
Speaker Change: Thank you and our next question comes from line of John <unk> from Jpmorgan. Your question. Please.
David Tarantino: Hi, Thank you.
Speaker Change: <unk>, obviously been a lot of attention around price points under $10 699 specials, and obviously whats currently pretty incredible.
Speaker Change: Large unlimited topping for 999. So the question was really kind of around that $10 price point is the brand in a position.
Speaker Change: Where you can drive significantly interest in promoting a pizza that.
Speaker Change: But whatever the number might be 12, 13, $14 or for whatever reason might.
Mike: Mike The brand has some kind of a natural path around the $10 number where we can.
Mike: Consumer really getting a lot of interest around a higher nominal price point not value, but higher nominal price point that might otherwise be constrained.
Hey, John Yes, one of the things that you'll see in this promotional environment and we knew this when we set out hungry for more and we said we were going to dive into right now and values is that price is important.
Mike: And frankly, there are a lot of folks doing similar promotions that we do have we had $6 99 and other folks have done.
Mike: <unk> 99, we had emergency pizza that there'd been bogo.
Speaker Change: You talked about price points for me the thing and Sandeep talked about this before is for US it's sustainable when you look at the economics for our franchisees.
Speaker Change: They are able to sustain these types of price points and we saw same store sales for other pizza players which were not.
Speaker Change: In line with Dominos are so if you got similar promotions and you've got lower same store sales. The economics are not going to be good and so we've got when you look at the scale of Domino's, our ability to drive volume through our high share of voice and drive costs down through our supply chain, that's what enabled us to do that $10.
Speaker Change: 99 is a good price point right now where you.
Speaker Change: To continue to pivot to keep consumers interested in domino's, but the big thing that's different about US is that this is sustainable as part of our strategy.
Speaker Change: Thank you and our next question comes from the line of David Palmer from Evercore ISI. Your question. Please.
Speaker Change: Thanks.
Speaker Change: If I if I had to summarize perhaps where investors are excited about and concerned about I'd say they're.
Speaker Change: Excited about the potential on this on the door dash expansion marketing, they're excited about stuff across the potential too.
Speaker Change: Roll that out but they are concerned about the long term same store sales growth beyond these types of initiatives given what they would back out from Uber eats from the fourth quarter and they think gosh. The underlying trends are our troubled for pizza delivery, particularly one piece so I'm wondering.
Speaker Change: When you think beyond 2006.
Speaker Change: Through 2006 and beyond about your 3% domestic comp growth target or thereabouts. What are some things that you think might ramp up in terms of its growth contribution that would give people comfort at this point that you could do that without some of these other things perhaps.
Speaker Change: <unk> in that given year.
Speaker Change: Thanks, David.
Speaker Change: Yes, we can.
Speaker Change: Get that question, a lot, which is hey, whats coming up in future years that makes you think that you could sustain what <unk>.
Speaker Change: Youre doing and obviously, we're not going to go into.
Speaker Change: Particular programs, but.
But this brand has a track record this team has a track record in.
Speaker Change: One one share point plus a year is has been what we've delivered without sometimes getting into the specifics of what we're doing for competitive reasons I don't think you'd want us to.
Speaker Change: I said this earlier I'll bring it up again, if someone were to ask me Hey last year, what do you got coming in Q1, I wouldn't be telling them, we've got best deal ever, but I'd be telling them. They answer would come out of our strategy of are now in value and so I've been with this company 16 years.
Speaker Change: And essentially the.
Speaker Change: The track record has been pretty solid without us giving forward looking information. So if you want to know what we're doing obviously you talked about some of the big ones Hill.
Speaker Change: Expanding on the aggregator platforms is a big one if you think about what our Q4 number would've been had we been on all the aggregators.
Speaker Change: Lately right there.
Speaker Change: Loyalty is a multi year gain for us like we show with the first loyalty program, but youre going to see a company that continues to bring.
Speaker Change: Best in class ideas that are differentiated based on our strategy and we've got a track record of doing that so I'm not going to get into specific numbers other than to say our specific names of programs.
Speaker Change: To say, we've done it and we're going to continue to do that.
Speaker Change: Going forward.
Speaker Change: And Dave I'll, just add when we talk about the aggregate is in aggregate is specifically when you think about 2026 Russell talked about the long term and other things that we can do if we are talking about really looking at something post may one and we have a meaningful impact in the back half. Obviously, there is an <unk> impact that comes from the aggregate of platts.
Speaker Change: Yeah.
Speaker Change: Due to that.
Speaker Change: And then I think there is theres more tailwind the fastest growing segment of the pizza curious are.
Speaker Change: Space is the aggregate.
Russell Leaner: Russells point.
Russell Leaner: We werent on their fully in Q4 of 24 in and Theres a lot more growth to come from there and I think given the loyalty Russell talked about the multiyear compounding impact, but really cool thing about loyalty the $2 $5 million incremental two five incremental loyalty members that we've gained these are light users and carry out to users and that becomes.
Russell Leaner: A huge flywheel because now we've captured them into a database and we can start marketing events to drive incremental compounding impacts. So this is going to be a big flywheel and we're really thrilled about the carryout mix of the business as well, it's very compelling. It's very strong you combine that with the number of loyalty members that we've gained more growth to come in so.
Russell Leaner: The catalyst that we talked about are very consistent and they are multiyear drivers and I think too just to add is when you if you've listened to some of the commentary we've got over why we're able to sustain what we've been able to sustain.
Russell Leaner: Over the last decade plus.
Russell Leaner: We've talked about building scale and the scale we've got.
Speaker Change: And share of voice in scale, we havent supply chain that gets grown through same store sales.
Speaker Change: Alright, so it another year, where we're winning on same store sales another year, where we're winning on stores stores that should drive more markets. There stores lets you keep competitive stores from opening all of that actually kind of snowballs and drives more momentum for the future. So all the stuff that we said has worked for us by continued.
Speaker Change: This flywheel essentially becomes more offense for us in the future.
Speaker Change: Thank you and our next question comes from the line of Daniel <unk> from Bernstein. Your question. Please.
Speaker Change: Thank you.
Speaker Change: I think you are you're showing some.
Speaker Change: If you think somebody thought it cost discipline also.
Speaker Change: In 2024.
Speaker Change: On the supply chain as well as on the G&A side.
Speaker Change: Talking about some shift in timing on some of these investments. So can you help us understand which investments have been put out and then to the extent that the retail stores with becoming a little bit softer in 2025 softer than your expectations do you still have room for optimizing G&A or do you think that the.
Speaker Change: The guidance that you gave today. It will include all the opportunity that you have over there. Thank you.
Speaker Change: Yes. Thank you for the question I think it's a really good one in terms of how we're thinking about the business and how we've pivoted. If you go back to the prepared remarks, we said that 2024, it was a year where <unk>.
Speaker Change: Sales didn't really try to what we initially expected at the beginning of the year. Despite that we found agility in the P&L to actually drive the 8% operating income growth that we have that we were targeting a couple of things that actually helped us in 2024.
Speaker Change: Procurement productivity fantastic from our supply chain organization, they've done a really terrific job and Thats a flywheel that continues to run we expect more of that in 2025 as we look forward to that and then I think in terms of timing of investments I've talked about this even earlier during the third quarter call I think where we have three different buckets of investments in specific.
Speaker Change: G&A, we had consumer technology store technology and capacity investments I think on the capacity investments piece I think based on the way the volumes, we're going we're able to re time that a little bit and actually that's part of what's in the numbers.
Speaker Change: When we look at how 25 was built up we actually do have that framework as we're looking at it but we want to make sure that we are pacing our investments appropriately with where sales are going we've demonstrated through 2024 that were able to pivot. If there is a shift a little bit in terms of what the sales momentum is and we have a lot of confidence in doing that and.
Speaker Change: <unk> 25 as well.
Speaker Change: Thank you and our next question comes from the line of Peter <unk> from <unk>. Your question. Please.
Speaker Change: Great. Thanks for taking the question.
Speaker Change: I wanted to ask about the third party I mean, you exited 2024 near the 3% target.
Speaker Change: On an Uber eats.
Speaker Change: Are you still on track for the $1 billion of incremental revenue by the end of 2026.
Speaker Change: And what if anything have you learned from the Uber eats partnership over the past call. It year five six quarters now maybe informs how youll do things differently. When you expand to another third party partnership in 2025.
Speaker Change: Yes, Thanks, Peter Yeah, we're we're still bullish on that as being a $1 billion opportunity for us the timing may have.
Speaker Change: Is going to be pushed out a little bit and thats really because we have purposely manage this for.
Speaker Change: As high of incremental volume as we can and so once we get on some of the other.
Speaker Change: Platforms, obviously, we'll continue to grow there I think what we've learned with <unk> with Uber.
Speaker Change: Couple of things one is how to optimize the marketing. So one of the reasons I talked about kind of the 1 billion, maybe taking a little bit longer to get to is we've learned how to optimize incrementals and so we're not going after all the volume right away. We want this to grow over time and be incremental.
Speaker Change: And accretive to the profitability of our franchisees.
Speaker Change: So we've learned how to do marketing better I think on this platform and then just technology integration I would expect that if we were to go on another platform that the tech integration would be quicker than it was when we were doing it from scratch.
Speaker Change: Thank you and our next question comes from the line of Andrew Charles from TD and <unk>.
Speaker Change: Question. Please.
Great. Thank you I wanted to ask about the $162000 of U S store level cash flow in 2024 trailed the initial $170000 target issued in December 2023, Investor meeting. So I'm curious if the shortfall was versus versus the original expectation was that strictly sales. There was some other driver there and then Russell.
Russell Leaner: Can you also address two just franchisees conviction and prioritizing we're now value property profitably grow sales just given the shortfall in 24 of franchisee store level cash flow.
Russell Leaner: So I'll start on the first part on the actual cash flow.
Russell Leaner: So look I agree I mean, I think we started the year we're in.
Russell Leaner: <unk> 2024, we're expecting around $70000 of bonds to our cash flow and we finished up with 162 and candidly on the first half of the year. We were tracking we were tracking where we were expecting but but as we kind of moved into the second half you saw.
Russell Leaner: Softness that came in in the.
Russell Leaner: Third quarter, we talked about at the macro environment, plus the competitive pressures release hundred weighing on sales and profits as well.
With the promotional intensity that was building and then when we got into Q4.
Russell Leaner: Just accelerated and if you look at the comp trends wind.
Russell Leaner: We intend to be continue to be heavy.
Russell Leaner: On top of that we had a four 4% food basket in the fourth quarter, so that actually it didn't help from a cash flow perspective, either so.
Russell Leaner: OLED is to explain what happened in terms of the cadence of the cash flows. However.
Russell Leaner: This was really critical we grew about a point of market share.
Russell Leaner: And that is critical because you take that market share growth you take the loyalty membership, which grew by $2 5 million members and then you look forward into 'twenty to 'twenty five with our scale advantage that we have whether its in marketing whether it's digital whether it's in the supply chain side, we have a lot of.
A lot of catalysts to drive continued growth not only cash flows, but I think overall in terms of share growth as we move into 2005.
Speaker Change: Andrew I guess I would add to that.
Our franchisees are pretty special.
Speaker Change: They are fully invested in domino's, they don't run any other restaurant chains.
Speaker Change: This is their business and they are competitive folks.
Speaker Change: And actually they are in it for the long term because of that as being their primary business and so what they saw this year was.
Speaker Change: Sorry, this year, meaning 2024, I apologize in 2024 was similar promotions right with some of the competition, but sales higher for us towards higher for us share higher for us.
Speaker Change: And so they know what the P&L it looks like on lower volumes and if they are in it for the long term.
Speaker Change: You're holding your own on profit and you know you are negatively impacting the competition.
Speaker Change: That's a good thing and this is not me just talking about sentiment I would say that franchisees are are talking with their action because one of the things that they.
Speaker Change: Approved.
Speaker Change: We're well into the quarter. So they knew where things were going was 999 any promotion is best deal ever and so theyre going to if they had any qualms about continuing to lean in and you Wouldnt see literally what is our best deal ever.
Speaker Change: And market and similarly with store growth store growth signs are there. So it was.
Speaker Change: It certainly wasn't a year, where we delivered what we said we would but I think they are in it for the long term we're in it for the long term it was still a win in 2024 for Domino's Pizza.
Speaker Change: Thank you. Our next question comes from the line of Jon Tower from Citi. Your question. Please.
Jon Tower: Hey, great. Thanks for taking the questions good morning.
Jon Tower: I was just curious if you could dig a little bit into the international unit growth and I understand.
Jon Tower: The headwinds that the business will be facing in 25 from the Australia.
Jon Tower: Master franchisee closure, but what could you just speak to maybe the confidence you have in this re accelerating in 2006 and specifically do you have any other global master franchisees, where you see potential for a potential market consolidation.
Jon Tower: Store closures over the next 12 months or so.
Jon Tower: Yes, let me let me go.
Jon Tower: I started and you continue.
Speaker Change: Look I think.
Speaker Change: 200 closures by DTE.
Speaker Change: By the end of the year I think both of those closures will be behind us what what I want to make sure that I focus everyone as our two largest growth markets.
Speaker Change: Ana and India remain on track, China opened up 240 stores last year Theyre talking now 300 to 350 and so the growth.
Speaker Change: In the rest of the system is really strong and the GPU closures by the end of the year I think we will.
Speaker Change: Will be behind us anything to add yes, I think what I would say you probably heard in the prepared remarks, I talked about the international store profitability improving slightly.
Speaker Change: Slightly despite the pressures that we're talking about on DB and paybacks improving.
Speaker Change: Paybacks are obviously very very compelling in China, and India that Russell just talked about but they are very good outside of China, and India as well.
Speaker Change: Look at the portfolio outside of PPE and <unk> I think we're looking at all the actions that have been talked about by the GPO organization to prune the portfolio to our plus stores that they're going to close this year. The commentary from the CEO has to be very focused on profitable sustainable growth from their portfolio. So all of this augurs very.
Well for 2026 and beyond because I think we're looking at very healthy growth and.
Speaker Change: Invariably store economics are going to be the leading indicator of what is going to happen with unit growth and we are definitely on the right path.
Speaker Change: Thank you and our next question comes from the line of Christine Cho from Goldman Sachs. Your question. Please.
Christine Cho: Great. Thank you.
Speaker Change: Yes, good question.
Speaker Change: So I think you mentioned 1600 dose just curious.
Speaker Change: Fourth quarter, which is up meaningfully.
Speaker Change: Roughly a quarter I guess, Jordan when you ask so.
Speaker Change: I can understand what I think the key inhibitors on a more accelerated rollout.
Any metrics you can share impact shady Oaks.
Speaker Change: Stuart.
Speaker Change: Thank you.
Speaker Change: Yes sure.
Speaker Change: Right now really just the.
Speaker Change: The impact on why we don't have more is we're just we're just trying to ramp up supply demand is higher than supply and that means the thing is working.
Speaker Change: Metrics.
Speaker Change: One that I would like to point on us.
Speaker Change: Usually if we bring somebody new onboard it takes them about 25 shifts in a store.
Speaker Change: Yet too.
Speaker Change: Kind of call it comp speed of competency to stress do with DJ its two shifts and I don't even think it that long, but that's all that sandy flooding me say.
Speaker Change: As to shift so.
Speaker Change: But what I wanted to do is take a step back and make sure you.
Speaker Change: You guys understand that dose stretcher is just one piece of it what we did and this is really coming out of Covid. We said, we got to get better at what we're doing have to reinvent our circle of operations. Both the physical plant, but also technology and so you look at what we've done which has improved our Mos <unk>.
Speaker Change: Reinvent our circle of operations two straight years of programs concentrating on training our franchisees we have some of our service two years ago, and then last year we had.
Speaker Change: Most siliceous operations that training net net a couple of things one is our delivery times have improved by a couple of minutes.
Speaker Change: And secondly in our team USA stores.
Speaker Change: Turnover turnover is lower so if you've got a new circle of operations that makes it better for your team members and Youre delivering better to your customers I think that's a win win so I know the question was about DJ but I just wanted to take a step back and say DJ as part of an overall approach we've had over the last three years to improve operations.
Speaker Change: Thank you and our next question comes from the line of Christopher <unk> from Stifel. Your question. Please.
Speaker Change: Yes, Thanks for taking the question Russell you mentioned the rollout of our new ecommerce platform this year, including new App and site can you just provide some more information on what those changes will entail both from a consumer facing side and then also kind of the back end for the business side and then are you.
Speaker Change: Are you expecting a meaningful improvement with seen conversion rates. Following these changes.
Russell Leaner: Yes, Chris So let me let me talk to you about how we're doing the rollout first as the sites built we finished building it last year and you talked about conversion that's kind of what we're doing now and so we're slowly.
Speaker Change: Showing more and more people the site letting them order on the site.
Speaker Change: And then what we do is when when there are pieces of conversion that are flat to positive overall that if things we need to change we'll go back and fix that this is obviously, it's a huge website and so.
Speaker Change: Tenths of a percent of conversion loss is an issue and so what we see in 2025 is this is going to be year, where we're rolling this out at a fast pace as we can to make sure we're continuing to support the business.
Speaker Change: And the right way.
Speaker Change: Probably the apps will be a little bit later than the website, but also be out this year.
I were to highlight a couple of things on the.
Speaker Change: What consumers will see.
Speaker Change: It is it takes most delicious food up.
Speaker Change: Our level of Big time, I mean, we've already fast forwarded some of the.
Speaker Change: New food photography onto the old website, but just to lay out and all of that are.
Speaker Change: People buy with her eyes first and so I'm excited about that a lot of the user flows are just we've taken steps out of the user flow and things are much more intuitive.
Speaker Change: It was.
Speaker Change: We brought up a long time ago, a lot of things have changed a lot of things that were frankly comment among other apps we didn't have.
Speaker Change: Also our Carryout business is much bigger than it was when we developed the.
Speaker Change: The original website, and so that which was kind of an afterthought.
Speaker Change: After thought.
Speaker Change: And our first website won't be there and this will be a great carryout experience and then on the back end when you talk about integration into our systems. When you talk about personalization Duane talked about speed all of that is.
Is the reason we're confident about.
Speaker Change: Your web site.
Brian <unk>: Thank you and our next question comes from line of Brian <unk> from Morgan Stanley. Your question. Please.
Speaker Change: Yes, thanks, good morning, guys.
Speaker Change: Sometimes you've talked about kind of carryout versus delivery fair was the the point gain consistent across both of those in.
Speaker Change: In 2024, and I guess just.
Speaker Change: Yes, it was sort of implied earlier right, excluding kind of the Uber contribution.
Speaker Change: <unk> deliveries, obviously still kind of the softer spot is your expectation that that.
Speaker Change: Doesn't change too much into into this year or is there. Some some pick up there and where do you think kind of that business is going to.
Brian Bittner: Yes, so Brian first.
Brian: Our market share gains for both in Carryout and delivery.
Brian: And we continue to think we're going to have balanced growth moving forward.
Brian: Youre right about <unk> being a little bit where the softness was.
Brian: There is.
Brian: People switching to eating at home.
Brian: And so <unk> for US is new once we once we get into that obviously all of those consumers into those marketplaces are new but delivery is a tougher value right now and this value conscious world and so.
Brian: The choice, though isn't going to another restaurant in most of the time it.
Brian: It's eating at home.
Speaker Change: And Brian I think you didn't specifically ask this but I think you brought up something which I think is super important as we think about 25, we expect balanced growth between delivery and Carryout, we expect balanced growth between ticket and transaction as well and I think thats Super important to actually think about it is we are putting together your models and we will continue to stay.
Brian: Disciplined on pricing.
Brian: So in spite of actually taking their high single digit pricing in California, We really were in the low single digits in 'twenty four and pricing.
Brian: Much the same in terms of pricing disciplines and 25. So we continue to build on our advantage under non value and drive more market share, yes, Brian one of the things I.
Brian: I should have said as well is.
Brian: Looking forward, especially when we're on all the delivery platforms. Our delivery business is going to be that's how we're going to report on the delivery business. Our delivery business is going to be <unk> and <unk> and if you remember the way, we priced and the way we're managing.
Brian: Franchisee profitability on some of these new channels.
Brian: We want to meet consumers, where they are and if this is where they want to be.
Brian: It's going to be a profitable transaction for customers. So I understand the questions on lumpy I really would though especially as in the back half of the year start thinking about our delivery business as one business, that's how we're approaching it.
Speaker Change: Thank you and our next question comes from the line Lauren Silberman from Deutsche Bank. Your question. Please.
Lauren Silberman: Thanks for the question. So it's been reported that you plan to launch that Christian I think most investors expect it in the next month or so I guess, how are you thinking about balancing the timing of the high volume <unk> with potential additional delivery partners and on.
Speaker Change: That point it sounds like you may not willing to be.
Speaker Change: Confirming a specific LDL, but can you help us understand whether this is already contemplated in the 3% guide and what Youre expecting in the first half being a little softer. Thank you.
Speaker Change: Yes sure.
Speaker Change: A few questions there I think in general you FERC question.
Speaker Change: Yes.
<unk> you talked about the LTE OS I'm, not saying, we will never do <unk>, but we do a lot of work I talked about innovation with intent in my opening remarks, our desire when we launch something.
Speaker Change: Is is to get the long term ROI you need to keep the thing long term and so if you look at what we did last year with New York style Pizza on the Pizza and we brought in a cross talk that we didn't have and then with Mac and cheese. We brought news deposit that we launched in 2009 and by the way that news helped us keep positive volume, while we took a.
Speaker Change: Couple of Skus out of that clean up that business a little bit.
Speaker Change: You're not the first person believer nachos asset have stuffed crust.
And I'm not surprised we're the number one pizza company in the World and it's one of the biggest crust types out there and we don't have it we don't have it in the states we do have it in other markets.
Speaker Change: So we're not going to comment on future products, but I think maybe the way to answer is it's your last question, which is to say hey look as you're trying to build volume here, whether it's with new products or going on more aggregators.
Speaker Change: What's your capacity to deal with that and I guess I'd say a couple of things one is.
If you think about the number of orders we were putting through during COVID-19.
Speaker Change: We're still not at that level.
Speaker Change: Number two is if you think about our operations. Since then is at a much better level that level I won't go through it again, but we've.
Speaker Change: Changed our circle of operations Domino less all of that stuff. So there is still volume upside in a more efficient domino's than we've ever had since I've been here.
Speaker Change: Lauren I'll just add to what Russell said, because you are specifically what's in the same store sales guidance. So a couple of things I think on an aggregator as it was pretty clear in the prepared remarks that we're expecting a more meaningful impact in the back half. So yes that is included in the 3% same store sales guide and I think apart from that we have.
Speaker Change: Slate of initiatives that we're not going to talk about for competitive reasons, but they're all in the same store sales guide because we know what those are and thats part of our experts, including two new products. Obviously, we said we're going to do two new products every year and so there will be two new products. This year.
Speaker Change: Yeah.
Speaker Change: Thank you and our next question comes from the line of Jeffrey Bernstein from Barclays. Your question. Please.
Speaker Change: Great. Thank you very much I wanted to talk about Domino's positioning.
Speaker Change: Within that renewed renowned value in the U S that you speak about.
Speaker Change: Clearly it looks like Youre, assuming comps reaccelerate to reach the 3% and 25 versus the <unk>.
Speaker Change: 40 basis points in the most recent quarter.
Speaker Change: Lots of focus on value in the pizza and broader <unk> segment. So I'm just wondering when you think about two things one the delivery side of your business I would think is less of that value with the surcharges and tips.
Speaker Change: And at the same time, you're <unk> competition as aggressively pushing five dollar meals.
Speaker Change: Both of those things maybe eat into your value leadership. So just hoping you could talk about the delivery segments resilience in a challenging macro and your thoughts on the broader non pizza <unk> pushing a whole lot more value than they were doing 12 to 24 months ago. Thank you.
Speaker Change: Yes.
Speaker Change: The way I would think about value its relative value and so relative to ourselves and carryout delivery is certainly more expensive you got the fees.
Speaker Change: Hopefully tips.
Speaker Change: Our drivers.
Speaker Change: But still when you look at <unk>.
Speaker Change: Delivery to delivery.
Speaker Change: <unk>.
Speaker Change: Sure.
Speaker Change: We're very competitive down to that.
Speaker Change: A delivery fee and the price not only to other pizza.
Speaker Change: But really other items you get delivered if you think about getting a pizza delivered to your house to Pizza is delivered to your house.
Speaker Change: For $6 99, each that 16 slices youre feeling a lot of people.
Speaker Change: And so when we talk about value and delivery.
Speaker Change: Being a little pressured, especially with the lower income customer, it's more about it's more value compared to our carryout than it is to other delivery choices.
Speaker Change: Thank you and our final question for today comes from the line of Jeffrey Farm from Gordon Haskett. Your question. Please.
Speaker Change: Thank you you just touched on a little bit of it but with some of the restaurant in earnings calls over the last two weeks.
Speaker Change: Your peers have clearly suggested that the demand headwinds that had largely been isolated to the lower income cohort for most of 2024.
Speaker Change: Are beginning to sort of expand beyond just lower income so.
Speaker Change: How do you see that as you move through 2025 in terms of demand headwinds that might be expanding beyond the lower income cohorts.
Speaker Change: Yes, I think for US a couple of things I'll talk about Domino's, but then I'll talk about larger restaurant.
Speaker Change: We're seeing the crossed income cohort be really more of a pressure on <unk> within within pizza delivery.
Speaker Change: I think if I was just talking about overall <unk> business and what seems to be happening. If there is a new dynamic you've always heard me talk about kind of down switching so when a tougher climate economically youre going to see customers.
Speaker Change: Maybe go down from.
Speaker Change: More expensive dining options into <unk> or pizza, that's continuing to happen and you've always heard me talking about <unk> right, which is at some point, especially with delivery when when.
Speaker Change: Consumers pressures are as such debt.
Speaker Change: Maybe they want more affordable options that'll eat at home.
Speaker Change: What we're starting to see now and maybe a little bit less so in pizza than in other.
Speaker Change: Other parts of <unk>, it's what I'll call up switching where the price gap between let's say, a burger at <unk> versus casual dining or fast casual the price gap.
Speaker Change: Those other areas may be more expensive than <unk>, but the gap maybe isn't as big as it used to be and so a customer may be saying, Hey, you know what I'm willing to pay a little bit more because the occasions can be different or maybe the food is going to be able to different and so there are lots of dynamics that were following it out with customers the down switching the outsourcing of the up switching.
Speaker Change: Clearly, though theyre looking for a value, but maybe maybe this is a good way to end the call I think one of the things that.
Speaker Change: I keep reiterating with the team as this thought that.
Speaker Change: Value is not value.
Speaker Change: If a customer doesn't value it.
Speaker Change: What do I mean by that.
As folks are.
Speaker Change: Driving more value into the marketplace.
Speaker Change: Just because there is price off a certain item.
Speaker Change: If customers don't want that item, then it's really not value.
Speaker Change: And one of the strengths I think we have a domino's pizza is that when you think about our pizza and every single platform we have.
Speaker Change: All of those you can get as part of our mix and match and I think that's something that's unique to us. It's something we've had for 14 15 years and in the long term, we have our customers having to buy something they don't want to buy.
Speaker Change: For the right price, it's going to start to affect their frequency.
Speaker Change: At a restaurant. So that's why I think long term I really liked what are our strategies brought forth.
Speaker Change: Thank you Jeff that was our last question of the call.
Speaker Change: Thank you all for joining our call today, and we look forward to speaking with you. All again soon you may now disconnect.
Speaker Change: Thank you, ladies and gentlemen for your participation in today's conference. This does conclude the program you may now disconnect good day.
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