McDonald : Transcript (opens in new window)

Corrected Transcript

29-Apr-2021

McDonald's Corp. (MCD)

Q1 2021 Earnings Call

	Total Pages: 21
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McDonald's Corp. (MCD)	Corrected Transcript
Q1 2021 Earnings Call	29-Apr-2021

CORPORATE PARTICIPANTS

Mike Cieplak	Joseph M. Erlinger
Vice President & Investor Relations Officer, McDonald's Corp.	President, McDonald's USA, McDonald's Corp.
Chris Kempczinski	Kevin M. Ozan
President, Chief Executive Officer & Director, McDonald's Corp.	Chief Financial Officer & Executive Vice President, McDonald's Corp.

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OTHER PARTICIPANTS

John Glass	Sara H. Senatore
Analyst, Morgan Stanley & Co. LLC	Analyst, Sanford C. Bernstein & Co. LLC
David E. Tarantino	Nicole Miller Regan
Analyst, Robert W. Baird & Co., Inc.	Analyst, Piper Sandler & Co.
Dennis Geiger	Brian Bittner
Analyst, UBS Securities LLC	Analyst, Oppenheimer & Co., Inc.
Eric Gonzalez	Christopher Carril
Analyst, KeyBanc Capital Markets, Inc.	Analyst, RBC Capital Markets LLC
Andrew Charles	John Ivankoe
Analyst, Cowen and Company	Analyst, JPMorgan Securities LLC
David Palmer	Lauren Silberman
Analyst, Evercore ISI	Analyst, Credit Suisse Securities (USA) LLC

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McDonald's Corp. (MCD)	Corrected Transcript
Q1 2021 Earnings Call	29-Apr-2021

MANAGEMENT DISCUSSION SECTION

Operator: Hello and welcome to McDonald's First Quarter 2021 Investor Conference Call. At the request of McDonald's Corporation, this conference is being recorded. Following today's presentation, there will be a question-and-answer session for investors. [Operator Instructions]

I would now like to turn the conference over to Mr. Mike Cieplak, Investor Relations Officer for McDonald's Corporation. Mr. Cieplak, you may begin.

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Mike Cieplak

Vice President & Investor Relations Officer, McDonald's Corp.

Good morning, everyone, and thank you for joining us. With me on the call this morning are: President and Chief Executive Officer, Chris Kempczinski; Chief Financial Officer, Kevin Ozan; and President of McDonald's USA, Joe Erlinger.

I want to remind everyone that the forward-looking statements in our earnings release and 8-K filing also apply to our comments on the call today. Both of those documents are available on our website, as are reconciliations of any non-GAAP financial measures mentioned on today's call with their corresponding GAAP measures.

Following prepared remarks this morning, we will open queue for your questions. I ask that you please limit yourself to one question. And if you have more than one, please ask your most pressing question first and then re-enter the queue. Today's conference call is being webcast and is also being recorded for replay via our website.

And now, I'll turn it over to Chris.

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Chris Kempczinski

President, Chief Executive Officer & Director, McDonald's Corp.

Thanks, Mike, and good morning, everyone. It was a year ago this week that we had our first earnings call of the COVID-19 pandemic. We had just begun to experience the closings, openings and constantly changing regulations that would come to define the past year.

I said then that in the face of such enormous challenges, I was immensely proud of the entire McDonald's system. Franchisees, crew members, suppliers and company employees banded together and continued to feed and foster communities amidst unprecedented change and disruption.

My pride has only grown since then. Through the pandemic, we've seen the power of the McDonald's system and our franchise model at work. We are one of the world's most global corporation, but also one of the most local, serving tens of millions of customers each day across almost 40,000 local restaurants. That's our secret sauce.

And it's hard to imagine how we would have adapted to the constantly changing circumstances of the past year, if we were not a locally owned, locally managed system, rooted in the communities where we operate. That ability to adapt enabled us to build a system playbook that tapped into our operating prowess and synthesize learnings from individual markets.

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McDonald's Corp. (MCD)	Corrected Transcript
Q1 2021 Earnings Call	29-Apr-2021

We put our customers and people first, and found ways to ensure their safety and security amidst a global health crisis. We leaned into our historical strengths, like our core menu and drive-thru, to continue serving our communities, creating feel-good moments that were more welcome and needed than ever.

At the same time, we kept innovating, in areas like digital and delivery, to offer customers new ways to safely connect with our brand and deepen our ability to meet their personalized needs. And we used our marketing muscle to keep the golden arches shining brightly, reminding people of their enduring trust in our brand and our purpose to feed and foster communities.

Importantly, we did it all with a commitment to transparency. Every step of the way, we gave our stakeholders a clear sense of what we were doing and why we were doing it. That communication was made easier by our refreshed values that captured the essence of the McDonald's system and how we operate. No matter where you are in the world, our McDonald's values serve as the glue that unites us and guides our every decision.

We put our people and customers first. We open our doors to everyone. We do the right thing. We're good neighbors. And we get better together. Five simple statements that capture the essence of the company Ray Kroc founded over 65 years ago. Our renewed focus on these values has kicked off a virtuous cycle, energizing our workforce and attracting new leaders who embody these qualities and are inspired by our purpose. That includes Desiree Ralls-Morrison, who joined the team earlier this week as our new General Counsel.

Turning to our business performance. Despite resurgences in continued operating restrictions in many parts of the world, I'm pleased to share that in the first quarter, global comp sales and revenues have already surpassed Q1 2019 levels. Not surprisingly, we expect McDonald's to deliver strong global comp sales and revenue growth against 2019 levels for the full year, reflecting the strength of our business and the pent-up customer demand we're seeing as markets reopen.

Specifically in Q1, global comp sales for the quarter were up 7.5%, with each of our segments achieved positive comp sales. As we will hear in a moment from our US segment President, Joe Erlinger, that improvement was largely driven by the US with comp sales of 13.6% for the quarter.

In Europe, we continue to face a tough operating environment, which is impacting recovery across some of our top markets in the IOM segment. Kevin will talk about our international performance in a minute.

We remain laser-focused on achieving the sustainable growth plan laid out in Accelerating the Arches. Likewise, our three growth pillars, M, C and D, continue to serve as both a guide and an engine for our path forward. We are maximizing our marketing to stay relevant and find those connection points with customers that will pay off in a big way.

We're also committing to our core menu, making the chicken, burgers and coffee our customers love even more delicious. In a moment, Joe will talk about the successful launch of the new Crispy Chicken Sandwich.

Finally, we're doubling-down on digital, delivery and drive-thru. We're creating a faster, easier, better customer experience however our customers want to interact with us, whether at the counter, through drive-thru window or on the app, dining in the restaurant or having that meal delivered to them. We will offer experiences they love and that we believe will keep them coming back.

Over the past four years, we went from just over 3,000 restaurants offering delivery to now more than 30,000 restaurants for 75% of our global footprint. We're excited about our success with multiple [ph] 3PO (6:35)

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McDonald's Corp. (MCD)	Corrected Transcript
Q1 2021 Earnings Call	29-Apr-2021

partners, and we continue to innovate. That includes testing self-delivery models in select markets and identifying ways to improve restaurant operations for delivery so that customer experience will get better and better.

Drive-thru made McDonald's what it is today. The drive-thrus in 25,000 of our restaurants worldwide are a huge part of who we are and why we've been able to continue safely serving millions of customers each day this past year. And since the pandemic began, we've leaned into this competitive advantage by continuing to improve drive-thru service times by putting more emphasis on operations and reducing menu complexity.

We also see digital as an important channel to improve speed and convenience, provide customers with more personalization and offer even better value. We have 40 million active app users in just our top six markets and millions more around the world. Our goal is to make sure that no matter how customers interact with us, they have a seamless and consistently enjoyable experience.

One key lever in reaching our digital ambition is loyalty. In addition to France and a few other markets, which already have loyalty, we are currently piloting our new loyalty program, MyMcDonald's Rewards, in the US and Germany, with plan to deploy later this year. What inspires me the most about our digital transformation is that we constantly have the opportunity and ability to become even relevant in our customers' everyday routines.

The power of our growth pillars come to life, not in isolation but in combination. The success of our Famous Orders program is a great example of how the three pillars, our M, C and D, are deeply interconnected, reinforcing and bolstering one another. And last week's announcement that we're partnering with Supergroup BTS from South Korea, to offer fans in nearly 50 countries their favorite McDonald's order shines a powerful light on a simple truth: in every country where we operate, from every walk of life and at almost every stage of life, you have your go-to McDonald's order.

This is much more than your traditional promotional partnership. For one, it will harness the scale of McDonald's and the relevance of authentic fans like BTS. I think it's fair to say that few other brands have the cultural relevance and global appeal to pull off this kind of partnership. That's the power of brand McDonald's.

Famous Orders takes that universal insight of everyone's unique go-to McDonald's order, celebrates our fans' love of the core menu and brings it to life through digital activations. The BTS ARMY will soon experience the M, the C and the D of our plan in a way that authentically taps into their love of these two global icons.

And it doesn't stop there. Whether it's through successful traffic-generating promotions like digital calendars in Australia or Germany, building on the strength of core equities with line extensions like Katsu Curry Chicken McNuggets and Grand Big Mac in the UK, or piloting the MyMcDonald's Reward loyalty program, we continue to deepen our connection with customers and create a consistent and enjoyable experience.

Let's turn it over to Joe to tell us what that experience is looking like in the US. Joe?

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Joseph M. Erlinger

President, McDonald's USA, McDonald's Corp.

Thanks, Chris. Our US business ended 2020 in a position of strength and that carried into the first quarter, delivering a 13.6% comp sales increase, with double-digit positive comps across all dayparts. We exited Q1 with historically high average daily sales volumes and the record high operating cash flow our franchisees experienced in 2020 continued in Q1. While we have seen some benefit from consumers receiving government stimulus checks during the first quarter, our results are truly a testament to the hard work happening each day in our restaurants.

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