Krispy Kreme (DNUT) 9 May 242024 Q1 Earnings call transcript

My name is Audra, and I will be your conference operator today. At this time, I'd like to welcome everyone to the Krispy Kreme First Quarter 2020 Earnings Call. I would now like to turn the call over to Alexandre Eldredge, Krispy Kreme Investor Relations. Please go ahead.

Thank you. everyone. morning, Good Kreme's Krispy XXXX Call. Earnings Welcome First to Quarter today. Thank you us joining for

website our We available These Relations call. will on investors.krispykreme.com. earnings Investor and be referencing release presentation during the our at are

call Joining Charlesworth; remarks, Joshua Financial there this me be Chief on morning President question-and-answer Executive and After and Ashukian. Jeremiah a are Officer, will Officer, Chief prepared the session.

made Securities provisions would that of statements this Litigation forward-looking financial statements Before of Act you call harbor performance. safe Private remind we pursuant like begin, XXXX, the to of and events I Reform expectations, the to or contains including future future

to the in Forward-looking caution other forward-looking and factors described risks uncertainties number investors with and of actual SEC statements. for a are statements and risks other XX, these risks we year contained detail filings could in cause make involve materially with and any we the in that differ XXXX, results Form These uncertainties, filed and December time to the ended inherent SEC. those from time the the XX-K company's in from

statements publicly Forward-looking any or only today law. statements, The of required forward-looking be as by update except may revise obligation no made company assumes today. are to as

earnings but take and financial the website. investors.krispykreme.com us release call GAAP with and XXXX in available between our our and will today's measures in today measures. closest Form also financial filed Josh. here's SEC can include Additionally, press through a certain performance non-GAAP at will quarter Jeremiah moment, non-GAAP first comparable reconciliation X-K A financial measures is first, be our our found

quarter. strong us. Good morning, Andre. everyone. Thanks, joining you for We a had first Thank

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messages. Let me key summarize today's

operating drive the make to the consumer QX, Germany. organic results. revenue and X.X% reflects X% new XX,XXX translate guidance the expectations quarter access strong McDonald's, grew than for to growth channels world. XX,XXX about increasingly U.S., by into of X% of convenience increased Spoke expected rollout points to We're we we're more with with excited Krispy and add growth alone. fueling We're doughnuts our XXXX. reaffirming the for year-over-year We by stores. We're access First full adjusted access pace in increasing around doughnuts EBITDA And growth at our expansion of demand Brazil of points launched as through is model. digital to and into Kreme In XX%. exceeded more sales XX.X% points add year accelerating France, end we our groceries available our our the which the of fresh to of X% expansion from organic intent with year-over-year. our into In revenue with and fresh expect national more we our announced Hub expansion expected This to we've profitable recently

Patrick's planned same with topics. XX.X In the on Day celebratory the Krispy especially our fresh a We X nimbly with quarter our cellphone all-time billion media nearly to outage spontaneous we to offered St. and customers, responded quarter, resonate record first Kreme's into the launched those the hit engagement to as occasions. doughnuts impressions, collection double-click of doughnut had triple such specialty like Let's AT&T brand when highs. initiatives last impacted. these of innovative and year. each events doughnuts We continue

loyalty our specialty example, pickup in delivery XX collection received. which channels, doughnut available the our has our launched to excited For in well the program Valentine's recently by biggest about digital including we're ever. Sales U.S., for and XX% and countries sales day new quarter, very Day been and led through improved in increased

week. the so much on So one Store the last download #X App point, at became our app

announcement McDonald's long-term our the recent access the U.S., include to to to goal quick service XXX,XXX of at we Following opportunity. doughnuts provide XX,XXX restaurants global points raised in restaurant daily fresh our have from

of Our also accelerating. pace is expansion

past average of XXXX. end the per global X by points For over of access years, XX,XXX XX% grew our just to year by the an

the expect we XXXX. ahead, access end Looking by to available fresh in doughnuts of Krispy already be XX,XXX of points Kreme

combination driven growth both customers a as We market as of new to by and expect this well be expansion. new existing

of X to expect which new thousands France the be The our us our announced other will nationwide only X example, add presence. into expand gives do still we in the expected cream we markets, in U.S. popular original McDonald's McDonald's end For most of the This their than major Louisville, lists XXXX. and a where test their Kentucky They rollout Kreme already by every the to have in biggest of the them of restaurants agreed to in XX% and than fresh Brazil of points to our available the with our opening with our about expectations. will customers we per grades, XX,XXX and sprinkles markets access, McDonald's Krispy Germany, chocolate day, provide We'll expansion. ice upcoming more and follows and X provide app. at opportunity bring the more demand their distribution ice agreement U.S. such restaurants and year. filled. recently exceeded for driver In of boxes U.S. to and successful doughnuts, chocolate stores consumer by Lexington whom of be new is in to to iconic us expect Target with profitable mobile and continue areas as individually opportunities drive-thru more available Still, X. making that excitement of expansion is Walmart XXX McDonald's restaurant on

Much end end We our access nearly on with point begin the over anticipate a the this McDonald's U.S. to to We next rollout are partnering phased tripling through of we before XXXX, year. expect the which of of end capacity, rollout production business from X,XXX years will more invest XXXX. X of of can in we our increase national than with XX,XXX spokes. also by using the existing hubs to the today but to happen

which our access to access density we by will currently the in of the with end of optimized spokes from hubs delivery to of a average, spokes over our XXXX. this do point our to to expect for distribution Currently, get each points new with production of U.S. serve means fresh to In XX spokes routes. increased XX existing our hub more expect will This hubs make expect and couple DFD We delivered approximately fully with This on hubs increased XXX needs that daily XXX add the same have of XX we hub. We'll just them support utilization hubs our expansion points We'll our be able of of in network. also about production ways. on the access allow all, convert hubs, expansion.

bring Philadelphia, the optimized productivity this we a expect XXXX. currently accretive in margin XXX fully start. the couple The examples. from model of We to over don't where best benefits to explained we to In have more chance to hub-and-spoke a with sell increase by doughnuts, mature And impact the Minneapolis, expected growth. is be are of

a have to excited on teams of I'm growth ahead our tremendous opportunity We this with potential. partner to and capitalize us,

more Jeremiah about overall turn and it expansion U.S. performance. I the opportunity to financial Now our over business will talk to

Thanks, key Josh, U.S. of a basis. on impact in roughly increases access million to would existing an chart XX,XXX of our business start everyone. wanted U.S. metrics to the adding this anticipated annualized on leverage you up of million annualized $XXX see on in $XX million XX,XXX we of range morning, perspective, to What illustrating business. and financial points points by addition on financial of significant is adjusted good the here the EBITDA, a the in and business. of to access that additional $XXX to million From expect revenue growth result operating $XXX incremental XX,XXX to I creating

Adjusted we X.X%. EBITDA first results. organic grew our operating and maintained the at leverage X.X%, outperformed holding adjusted discuss in EBITDA revenue I'll Now XX.X%. margin increased expectations We steady quarter, as quarter positive

business increased Turning to X.X% despite weather U.S. January. Organic results. disruptions in revenue segment to the our

strong points see Additionally, of increased as access XX.X%. in growth we availability to continue

takes grocery cabinets points of by cabinets quality XX total us to the We grocery XXX another high-traffic have also This display U.S. to the improved access adding of secondary doors. across

XX% all the nearly the add quarter, performance XX mix of move Development of revenue of basis adjusted up per points by being quarter we EBITDA to by underlying as remains businesses a Market points slight XX% U.K. network, markets to margin Canadian the million, with this XX.X%. into EBITDA drove in The adjusted of an was utilization driven door to as This year. from record reflects decline of these expansion turn, the in Save growth The market. of markets was $X.X revenue the which resulting segment markets and decline the growth by Overall, the drove perspective, From grew international a per marketing $X.X points in expand International a Organic healthy, XX.X%. of key increase X.X%, in X.X% EBITDA outside segment margin average driven the a seen adjusted company-owned improvement XX now while all million base helped successful margins prior customers of up equity-owned the such increased also increased all Mart from incremental customer to and alongside DFT year-over-year smaller to factor Japanese have activations. segment. the hub X.X%, impact We sales delivering sales launch saw grocery Minis. we in access across In with basis added in the in international door. door

the was the driven parts OXO and Tesco a naturally of our Market of revenue utilization. per door. manufacturing We in plan by U.S. our U.K., have expand internationally. of a average for rationalized both Express continue customers convenience in including and segment, solely comprised door U.S. to now is place network has as per channel, have development revenue the to domestically mix Similar we Mexico and businesses, which a the the into in U.K. lower holistic to improve intervention franchise

to points by revenue driven linked EBITDA basis Adjusted equipment Within XX.X%, equipment lower-margin the XX.X%, was which versus to largely timing sales are declined which again, expanded the sales, segment, lower segment year. prior of the organic revenues. in XXX

For delivered the first the the from to our amortization of per we first This share. quarter depreciation our operations the cash with the quarter, of financing. adjusted reduce reflected associated earnings now reflects in largely The expansion $X.XX flow is quarter the network. investments vendor complete. negative The strategy release in hub-and-spoke and higher in

We are still in aiming to cash flow positive XXXX. be

have healthy continue our full to outlook. Today, fuel to also reaffirming We year our are sheet growth liquidity balance we to a agenda. with access

current We into discretionary the are in some the spend. impacting quarter, momentum which but heading is market, consumer have good mindful second softness of

earlier to trending anticipate in the towards this to referenced expansion, for as in investments deliver capital to high open positive McDonald's and hubs the anticipate U.S. national our in leverage. We Similarly, we expenditures X% XXXX investing and XXXX. on before expect continue of rollout, towards thereafter. to Josh start-up range XXXX new end the costs operating we expect incremental the While trend including

to relates to adjusted second X% we to it of X% deliver revenue net growth of the XX%. of As quarter to expect EBITDA growth XXXX, and X%

market turn the for the consistently will Josh closing continue remain uncertainty environment it consumer the throughout and in and remarks. to XXXX. and to operating confident that, closely in adapt drive I over to We monitor ability changes will leverage his our With in

access, of maximizing summary, capital In by by availability in, let's ahead. the All Q&A, the model and points and selective leveraging high-quality, Jeremiah. open bigger return, geographies are to please. in today. building through Thanks, operating us investments Kreme Operator, to making operating better adding look Krispy efficiency a limited leverage which Kreme driving both in of forward existing our have capacity expanding access we Krispy productive it now years to up and I

you. Thank

We We'll will Senator question-and-answer first the session. go America. begin Bank to at Sara now [Operator of Instructions]

I in guess little bit. a have wanted I guess So wanted mentioned I few McDonald's. questions. to-- you I to I there a dive

you? clarify out. just about on I either you've that from the think long-- Or how G&A, about ahead of could partnership see how rolling going impact, is, to we growth perhaps any, think to upfront line? or think of I G&A one partnership So sort that of sort behind growth you big quarters Or cost expect what of growth. that forward if if invested should ahead you're as including many how revenue top outsized

for partnership So just a view broader on your sort implications the of McDonald's P&L?

Yes, question. for And thanks the I'll Sarah. take that,

collaborating McDonald's are with build launch in rollout anticipate We plan detailed to the XXXX. tail start a the of to end and

are that, on in So our from in assuming pleased you minimal and and do but our business this not SG&A to We're and I in expect that incurring are QX. say costs much What are a reaffirm can mentioned, cost, we beginning fairly we investment are, costs as disclosing would start-up those exactly respect spending revenue that be impact, year. guidance, how we we now we're OpEx. with to phase the

Understood.

and you don't in you on respect the you anything an regarding I when anything, saw Okay. past, said the existing I the of McDonald's. with you of can some be some distribution to And And happened launched those and your frame I talk sort But then seem to just have maybe PLAs if cannibalization? questions sort issue of you of follow-up existing in that during you're about some underpenetrated. the test is because concerns know points with that really do of your McDonald's think with saw of your Kentucky that to question what know what, overlap access. around or

this a we incrementality strong little incrementality mean see to existing of of markets. kind mix around bit I higher a Yes. presented of brand-new chart will markets, the we've of in expect the work which done bit that. believe It's incrementality And reflects lower what a obviously of we around see we XX%. incrementality in this. morning be you but in

go JPMorgan. to John Ivankoe We'll next at

questions, few may. A if I

national on and do to the you First, have beginning and to format smaller relatively have penetration, to with with are kind it of retailers. words, basis? of other national types as number begin national other larger begin you simultaneous as expect you of a to overall In various for national both McDonald's, different have capacity agreements go into other major you have a conversation grocery type plans taking to accounts

are to Krispy out the they to in by distributing build Walmart customers, exciting Minneapolis, us because since positive country, therefore, had I bring distribution almost the nationally. new to to that a both have that Krispy able see that we've or our Home and existing be the can Kreme model Kreme the them and for going ones. operating Target indeed really to indeed Yes, McDonald's mean, serve profitably been we're national bring this example, does think to it's with opportunity give scale conversations on in to John. Arkansas. every in add And we the to largely major with underpenetrated them announcement other customers I

up are we're really So things done to excited that. these we to now haven't do and

shared data as so XX,XXX getting expansion today points in by U.S. goal a of the to the And yes, access that and McDonald's we XXXX, our obviously beyond result. includes of

X does actually have remind me-- it And more questions. I

it do or market is? I interesting tweet about employer of price Krispy kind the current market share you you Kreme you be As at employers. I high bigger how Kreme materially of sales? to you sales, very mean this point? the have the U.S. both previous mean, think years, doughnut at Krispy a obviously you lot of big and treat you size in think out you doughnut really could also can But of TAM guys very, at of that price percentage are your overall overall kind as market, a than a the is gets insights, argue doughnut but the defining if of look obviously-- the How something

following we points we goal. XX,XXX expect reflecting national incremental to insight the access of that to insight this the $XXX Well, $XXX to appreciate really today, access to opportunity XXXX, us revenue, the of QSR We've brought million on good overall. accounts beginning these gave McDonald's actually the opportunity announcement you Jeremiah We I revenue referenced discussion. million think shared on continued of at the out

So can access we say we run. we believe XX,XXX of get the points long about in

in Regarding player with the grocery share teens in of you, have market the and small today. stores we're low actually a still relatively what share

so And of the we're It's best for bringing fresh, the to really innovating, unique constantly daily. brand. plenty positioning. market. the It's an there's a for in us doughnuts fresh excitement experience because upside awesome constantly are And we

absolutely, who consumer. aren't able to such take we and exciting the to yes, share want So brand to product bring from an those

was apologize kind current missed of you last would experience decision. keep if and point, delayed it's I Did this I distribution, of Ryder little in positives getting And the that. Understood. I your D.C. slightly you a to system-wide I It with test at think and perhaps negatives, on. that L.A. what overall mile handling and an address making and guess, kind

could in how rider great so and support economics And into Krispy terms like look the primary we the question. just Really, way Ryder the analysis rollout. to was was therefore, sure need Krispy the that we it with been a of show being right this what the the No, make which route. understanding quality see is with that service And the the could now, it's team and the move more Kreme's far. of myself up in I in riding would test of doughnuts Kreme those could good is the and focus Actually, has expect. up D.C. of maintained, our do not what now and in level partnership I the and

providers. it presenting way, We and really extend in were the rollout was city Krispy and support delivery opportunity and are XX,XXX we're provide the test. really doughnuts really XXXX. uniforms goal also looking talking dedicated this Krispy add important the to more And know trucks. the as drivers about other Kreme the as in towards up we The indeed, to that it that But by we another to looks Kreme, themselves to positive a promising. nationally as we'll It's they're updates show

Piper Grueninger We'll move to at next Aisling Sandler.

You've mentioned production. doughnut automating you're the focused in around the past

around the international have I of some automation. Just any facilities segment, updates know wondering in if production this. use you your

for Just presents wondering how opportunity with the market rollout just about this could the the this U.S. and of help McDonald's?

a It's question. great

non-consumer-facing moving We are the relatively earlier continue are that doughnut and the transformational to It's opportunity automation. to still making the to applying making work modernize question. proportionately this percentage of a small the we indeed of factories. on can with largely and doughnut make are the There we're to improvements business

stage, fully that's ongoing. doughnut We improving in to topping by way by a in have running automatically. this ways line, production modernize off the example, lines those the variables and automated finding facility, the Bronx New a that well. also in line actually yield and York, that's and even for our still monitoring as But lines filling picking line we're work We're digitizing at reducing where waste

capacity the is of more efficient think need U.S. scale be access of definitely an to us the with growth, opportunity. and points particularly expansion, across can help we We that us acceleration is this an area but So that support help it also

expand. we're we being we thoughtful also in new So technology how bring as

Our Securities. Bill at next question comes Truth Chappell from

the and recent pulling kind about comments, of consumers category your you of back. some kind In around softness talked

that? over color you there of but just slowing are I more and few little not of food that other you talk things seen unique, volumes that all And anything past a we've on it's I the think about maybe months. can packaged throughout impacting that. Just were more any if mean kind think

this special Krispy Actually, see an with Bill, brand people consumer with environment, mentioned month the We our those although day we being healthy in celebratory we biggest total as history Solar sales saw we're looking Kreme I doughnut. even the mindful treat affordable mean to of in being the tremendous April, sweet the Eclipse engagement earlier earlier company, for occasions. really Valentine's of actually

international And and so brand consumer of occasional of unique really for the healthy. think environment, special is on the engagement. treat because as particularly occasions Krispy sweet although the we're role consumer I that the an Kreme mindful And it's celebrations. side, of plays Plenty

may So-- not sorry, any you're seeing missed I have sorry. softness. that I'm comment,

been the in No, I have of in that to talked consumer. not January kind necessarily the have think just due States, we would softness but about United weather broader would

full then behind road, and can obviously commitment franchises McDonald's, going X One, trying this lot a out that the that it XX,XXX fully just mean you're through hear to certain think, McDonald's the doesn't and you're there-- the the to spending money doors. XXXX. on to I X that? questions to, this, I guess, is ahead, mean, say this year, X.X of it. I And Is down you work kind I is most of McDonald's for there XX,XXX franchisees often. to Okay. or of of level isn't XX,XXX and any Or understand is say going changes or committed everybody working that way years into I

agreement the course, a last We've rollout renewed can collaboration. great in been partner after really after last The far. enjoyed the that. year be has and X of McDonald's so XXXX

theirs provide faster. consumer Kentucky far test the so can both thorough outstripped is naturally where obviously of that XX,XXX tail very announced great from partnership demonstrated is and with already than end don't at we've through partnership the working look, the McDonald's. going Krispy We'll about availability and rollout that But intent to is that and with start the great rolling really what restaurants, share after really We places And the the it's to year, was but test that end until thoughtful. obviously is our more we, McDonald's. we're out phased expect So it plan demand XXXX, prioritize Kreme our it of and a on expectations.

one does of a incrementality, this follow-up a in overall and but the Got next one understand kind on on, to it understand-- when kind it to it. your I your more of what squeeze doughnut earlier with how test interacts from in convenience from And I'm showed trying how maybe buy an or is understand I'll the and I'm just stores, doughnuts stuff there's market Dunkin' how store expands of it that that? standpoint. sales just like way trying or the store same the then

take we of the Atlanta They're already availability, country may where your the good there buzzing but have have Well, the obviously, prolonged again, we other a time we shop more generally we doughnut know even town, doughnut they're sandwich that we reference, to Kentucky new not and focused, really Carolinas, also it that of a places to seen when of be when taken create that see where We've beverage with the focused. mind, again demand to market. come the incrementality. of markets, comes many test impact to the had bear in existing parts areas of period in But shops.

ones offer the Minis a the are Mom for experience, doughnut this to headlines unique category. constantly excitement week, We who and bringing awesome fresh

doesn't analysis that Jeremiah yes, surprise in based very that the the that today was done off But thoughtful shared us. So the analysis. incrementality and are we've a numbers

next at from We'll CL Andrew question take our King. Wolf

a couple of I follow-ups. just had

the build even sort or build, just it's would rollout just front-end be in of loaded you a more Do an McDonald's. the exponential of exponential. But linear? expect timing rolled between overtime, kind of stores into think where is Or on terms XXXX? and now I there First

as a And course, balanced country development us where little how bring launch. where it has balanced. have fantastic parts where run conversation on availability want them development around And of today they means share our describe to as going taken McDonald's there our around to with the to are they've we I'd we with pipeline can quickly. through new we then, it. been and It's capacity of take it's while plans, balanced

year will the tail over XXXX. of this end period so And be the end balanced of and the to from it up thoughtful

relationship, you're And kind them your Krispy to it? what what sure how getting Kreme us kind them Or with about help with McDonald's make with is And more going the be and is to going it franchisee of-- the role? franchisees. to I you're mean, interaction it I'm is successful? Is is training? of But franchisees McDonald's excited the to interact collaborating

awesome time as the is doughnuts every delivered focus right agreed service the perfect day, customer, level. every time, with Our at

it's the it's a simple which provide to them. is the But own our relationships. talked remember, to taken we're any them, really a from a think all partners a where that's focused we very trust folks now, really, need a And customers We Kreme we're and or guide activity, operations improving obviously, on even X-count I franchisee, to box focus, that, Kroger our their got tray, right about They already over our make them. customer. I move We've to modernizing doughnuts. great with So that do are primary relationship with and up their strengthening bag and handed we'll just operations lot made. indeed Krispy expect put themselves excel. international McDonald's manage McDonald's Walmart, bringing a mean, be whether how a our doughnuts take our it's to in insights

So it for should be Crew activity the a the relatively easy McDonald's and franchisees.

the So just doughnuts. real great is focus

a U.S. sustainability enough. I of was could penetration that? sales Fair the I the in and call and for about so away have minute, but distracted could might from in ask you the increase you this, just on one the big the if digital talked And elaborate follow-up.

customers convenient not purchase Kreme, It's somebody Krispy why gives a looking, may for #X before, we've Well, us the them. Kreme. still us reason to provide more that as to access name Krispy said convenient to way just they not

and great, in members mean growth our the there, terms actually engagement both And own I big through forward, there, seeing and a tremendous so third of loyalty parties partnering and it's a both been response relaunched becoming indeed. significant existing to we digital And channel and with ones. channel. new program, going app grow it's energizing driver tremendous we're loyalty just our

sales future drive with growth to expect actually loyalty we So program. that

world is we're digital stay sure. Krispy really in And modern here Kreme, the leveraging that. to So for

from our Daniel Securities. take Capital question Guglielmo We'll One at next

logistics segment there. dig the shops Japan I well the own a International more to there are U.S. like The want into perform and has continued lot to point just and to there Canada access now fresh mix. relative in It seems you U.S.? of fresh And to into the It delivered would a shops the of would think fresh seems that will to be McDonald's volume adding segment. ever get would about you more similar be at what doughnuts like and shop?

international of of size rate number conditions, cost, the big including local higher local metro of shops a labor reflects fresh The cities. the

great about the Krispy of shops with have But adapt different U.S. number with opportunity Kreme the vast model they of can these One great to daily of of a big as fresh sense. fresh you deliver cities the the Yes, the national we on U.S. the some in the environment. remember, in these set cabinets. the a make things capital-efficient production model and of cross to premium one very which partners, capacity between what the leveraging if DFD $X,XXX it's typically maybe more we're focusing up doors, our and is through excess the $X,XXX attention of hubs off-premise in

fresh our We've the return. So U.S. the good it's focus excess the a shops. than capital That's capacity that-- in got such rather

or putting of Great. I like are playbook on all And you the then past? if more all that it's just curious a playbook off history detail. you the just McDonald's. are like do together? I'm kind they partnership a have of In in of going there's one the appreciate new if a McDonald's, this

doing to something is about And a thing. do learned Treats. Kreme approach Krispy different Sweet the with about us breakfast with a I've think something different, I thing There's with every new partner opportunity so One much day McDonald's something doing here. different came is thinking

it's view, So from our I point of a think but feels pioneering, question. it certainly, great

And remarks. time, And further Instructions] over [Operator are to for that at now the conference Q&A there back this will no turn I questions. Charlesworth Josh concludes session. our closing

interest all your Have day. thank everybody. through joy to good Kreme. today. Krispy in Well, our customers for Krispy a bring thank Krispy you, to Kreme Take care. And Thanks you ongoing our commitment for of course, Kremers your to

your call. conference for And participation. Thank you this concludes today's

You may now disconnect.