Krispy Kreme (DNUT) 8 Aug 242024 Q2 Earnings call transcript

At investors.krispykreme.com.

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

Before we begin, I would like to remind you that this call contains forward-looking statements made pursuant to the safe harbor provisions of the Private Securities and Litigation Reform Act of 1995, including statements of expectations, future events or future financial performance.

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

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

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

thank Trey. for you joining everyone, us. morning, Thanks, Good and

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is buy to opportunity for Our people biggest easier fresh to doughnuts. make our it

to in through goal doing pace of quick of stores restaurants. and donut and is To are availability reach shops, increasing expansion by daily existing customers, expanding our we we're XX,XXX Walmart, as lists stores, XX% by delivering indeed their our only are service our And exploring nationwide. of still this With online grocers, by existing to the opportunity new We and fresh convenience accelerating. about markets. us customers with new go the XXXX, which customers such in

expansion with of an currently the accelerated we U.S., DFD X,XXX to U.S. add points end have access have our We more densify XXXX. to fresh the customer to to and network. them and agreed in producing X business markets, grown track plans more in donuts goal the like nationwide. In we've Target, by Germany Brazil new on We their points have opportunity all to than hub, thousands to with engaged to by and We than the we XX,XXX of and joint profitably supported McDonald's In points in XX,XXX for year, nearly more national and bringing already, this Paris, access. of later our provides provides and expand France enter bring remain partners planning Walmart the opportunity Spain, access our with shops a Target, quickly year. In daily U.S. about of next X,XXX new in a stores to are single expansion

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footprint. than X,XXX bringing of to U.S. end X,XXX add XXXX their than McDonald's expect year, in more XX% fresh of We us X,XXX and by in restaurants serve more the donuts in the XXXX, to

of the is at work team donuts. moving hard Our making and modernizing

McDonald's our We have rollout. partnering customers, including a smooth ensure a dedicated team, to with

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the to delivered expect improving new to XXX efficiency today. We by daily Chicago profitability. of same have example, this for support doors XXXX, number increase to over where hubs expect Take as XXX we we fresh with and

including new next which support X and leveraging today. adding achieve Kreme goal U.S. I'll this it and We're to to the to Insomnia to are on access years over the Philadelphia. capacity, underway, already in now In overall deploy XX we'll making track the have existing over performance daily in transaction. fresh markets Minneapolis Last to With we Jeremiah discuss hubs expansion. hubs selective the well hand XX Cookies limited metropolitan of to this, delivered the the all in and I recent Krispy discussed Seattle, geographies financial XX positioned investments addition be have our of to major impact quarter,

margin EBITDA positive quarter strong operating begin was leverage adjusted expansion basis Thanks, EBITDA results. of Adjusted XX.X%. X.X%. our growth with to XX.X%, in XX points increased Organic second resulting Josh. with I'll

as X.X%. customers per in price The doors consumer was Target. new in key segment Points specialty & XX.X% to doughnut access year-over-year added Stop increased to resulted stores, our with quarter and we growth saw Average engagement collections. growth U.S. $XXX of organic several including Shop we by Turning revenue new results. of and in the door revenue driven

productivity. revenue to This increase by markets equity-owned activity of X.X% sales a of grew led the in in improved hub and year-over-year SG&A. control by basis costs $X was saw XX we tight Canada to a EBITDA driven fall. Within million. start-up Japan. quarter, offset of is the XX.X% This adjusted markets, promotional hub the per increased helped growth McDonald's points X%, million, $XX.X and with all This deliver international and which quarter, our launch XX.X%, key partially measure Margins to growing by utilization for in increased organic

in Australia an sales product Oxxo of network, on by of driven innovation in benefits donut our the Mexico. Adjusted equipment We in X the greater XX.X% with notably U.K. EBITDA expectations. by results sales results. the and Korea, from grew sales Development add restore consolidation increased completed year XX.X%. our EBITDA yield resulted and should as system-wide across we the half back margin revenue to been are Kohl's which driven adjusted We're ensure the XX.X%, has the levels in Adjusted taking market. In South EBITDA actions sites, declined where successful year-over-year, further in most most sales. the XX.X% market, up which and in continue segment, margin expansion points performance in grew We've primarily where margin driven markets, to to digital in focused including segment not U.K., grew access of improving organic this in flow-through Market have of

in we second expansion an Cookies the stake we July the $XX.X from and hub-and-spoke following closing growth. Consistent cash Cookies. intercompany and debt. on $XX additional taking quarter the plan, per of We million delivered flow our in and $X.XX our of in million since ownership XX quarter refinancing to associated higher operations collected with second closing have in upon year-to-date. in Insomnia we Insomnia a of $XX our rapid quarter, an strengthened of million majority the For $XXX.X depreciation share. amortization earnings the Since million, sheet The Cookies have the adjusted reflects quarter, sale delivered balance investments network Insomnia proceeds following the received with us cash

leverage by we the XXXX. goal to of of to to on net end by X.Xx long-term ratio result, expect and a X.Xx trend track our remain As X.Xx our towards year-end

now our reflects of Insomnia stake financial guidance, sale Let full long-term Cookies, a year me ownership the improving turn in the business. majority which profile of to the

Removing revenue right-hand $XXX EBITDA reflects of billion our On Insomnia guidance, prior half to would Insomnia. year. now point second EBITDA with represents the overall $XXX transaction and guidance, year By our Kreme the full you XXX-basis XXXX. Kreme's $X.XXX $XXX billion. Consistent the column of see the Insomnia back from for of impact million adjusted of to Krispy growth, see contribution X% removal previously the the to year the $X.XX expect previous million revenue the impact net adjusted our of growth from we middle of updated organic Insomnia's the results in on for guidance have forecasted side removing the to The you'll which second that half we full full X% year. the million left, can assumption from expect Krispy of Insomnia with half

reflects $X.XX and between adjusted expect the We all these the with now recent sale updates, change $X.XX of As to EPS the of for Insomnia. solely year.

capital XX%; of down expenditures assumptions, to providing from to levels. expense X% to modeling are and We changing $XX the debt rate lower to regards million of revenue, of million, it. an between we to X% quarter, reflecting our of $XX third the prior and million, recognized million $XX respond interest the of to dynamic guidance consumer continue also tax following $XX income XX% and net our net With

the With with million adjusted EBITDA a reminder, QX that, a And of closing remainder to As We turn the our in net quarter we to million. throughout over third revenue it of reflect of removal Josh result, execute his XXXX. $XX as $XX of million, remarks. $XXX expect to for million remain insomnia. I'll confident ability will to $XXX

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

question question-and-answer America. of Bank session. line the Senatore comes with Your begin [Operator We of Sara Instructions] will now from first the

us. are I -- like just Does you you sound kind thinking of basically plan? I some increase was rollout idea about twofold, right pretty of still behind are that, or had think wanted is, chunkiest track? And -- time. to the still over to guess the of had rollout whether in ratably point ask second number mentioned seen the on are it that OpEx of ahead investment the I about stores you think you McDonald's been the biggest kind still and I you of -- increases had kind G&A, significant the

forward, lag expense closely the in revenues? rate going should growth match at or operating more so least And

is on be partnership end pilot into the and that in McDonald's today we the fall general. And Yes, Kentucky then Chicago year Midwest We year. well will the is back expanding McDonald's rollout through announced going track. then the beyond in next in this listing the and of very with first obviously in the and

in than of to the we indeed rollout more to evenly XXXX. X,XXX XXXX end be generally expecting of about McDonald's year And partnered with add expect a XXXX. the McDonald's through by we We restaurants have we're plan with and X,XXX that have on through XXXX then through

people team ready. cross-functional make dedicated are a have We to and facilities the our there sure

that McDonald's channels. Perhaps, we the best expecting to at to fresh donuts a you as productivity go. very level we're people really high also get to fact, service that. up delivering to on making about impacts do game other the same and the Kreme talk of quality awesome and We're our they're the restaurants In of production day focused doing every our want improve quality Jeremiah, and lines so even improvements Krispy some

out nice our and you rollout Josh, the To we development manufacturing dedicated to also and and rollout, for smooth investing a We're our upgrading ensure lines. with and support Yes. a costs. production question. the shops training job. teams across the improving Thanks teams opportunity the operations capabilities donut are did of

move volume through. the imagine, can you we As that

guide, All of ongoing. included been in our this has

footprint deliver mentioned. we the as ramp and margin U.S. XXXX, of nearly serving We expansion manage prudently XX% network brands McDonald's costs by expect as the to Josh

comes with from Rahul next question Crow JPMorgan. [ Your the of line ]

on Walmart guys. for big and Thanks is the very -- for the great rollout this update nationwide today. And of is I step focus Target. I'd to a like feel you

the these I brands X over as to the understand, around versus doors X non-McDonald's guys for untapped guidance I X,XXX between doors the today, you next are X,XXX-odd think X,XXX there just discussed years.

the also, you or -- this expect low side infrastructure, the will we as additions expand as very a mix of along So, fair lower stores business? to low-volume additions it this? be profitability no will almost is And go convenience or hub-and-spoke there of door expanding or follow

than to would important our McDonald's catalyst that nationwide is of a enables It's really expand us. been to otherwise. DFD Rahul, have for to business bit the expansion It a faster understand us we able

players. And so we're focused on naturally the high-quality national

mentioned Kroger of others You it getting today. fit and than always all our them it Walmart, the purchase donuts those bill, fresh easier consumers, Target, making and for them is to

with donuts discussions with discussions as and get And hubs more we've plans markets. network quickly. Detroit at in can We evolved well, they've we're the we've of come the to So, rollout got to additional and recently with Atlanta, several expanded L.A., and cities to available and Target build produce Phoenix Target Walmart how We about as with McDonald's. out we those to as are and it began stores. more our Walmart in

traffic us, places really are very combination. C-stores the on McDonald's, to smaller think helpful past and you convenience gas though, Walmart, going you still is going Target, great to lower efficient. actually it route locations, stores, smaller be all other to logistics go stations, locations, Kroger, the a making the a because So, you're way

McDonald's the so partners But for those still on play. role those And to program naturally, that focused we're big us. for we national a see unlocks

I'm Kreme's market a relative what's would you QSR have the be is happening expectations? discuss in international that is the broader here I understand market today? the There demand follow-up Can to tracking to helpful. in been how How U.K. And in softening core business Anything up? around holding the concerns on just on your it has curious Krispy side. space. details

than our the we're important performing most near And Well, it's have But the result. following continue is growing. that a specialty celebrated our is well. indeed, and Australia, And local a strategy has with very Canada, recently friends. markets perform company disappointing team challenge that partners, to just of as franchisee in Japan, the the a have international France, elsewhere. They out donuts at profitability still has true buzz been very a the understand all worked the been well. that slower TV July It's some opened newly on. U.K. U.K. the created focused of we show on XX others, that's But it majority rate to

Just yesterday, core the in we QX. announced to range upgrades donut coming

convenience are line on So, actually doing there's well, the that displays supermarkets, a the those into lot expansion team XXX that in just grocery are to of conditions top larger you or working worth also secondary in mentioning stores. stores about well described not adaptation

So, get we're to markets, back cost the a all lot international in covered up well U.K. as earlier. side that levels the other effort seeing managing to of Jeremiah focused the whilst

I U.K. supporting back why the levels about up monitoring closely So, seeing there sure asked team you the we and We're understand we're performance make to elsewhere. to the get

Really the the Josh. year. color, the of Good rest for luck appreciate

with line next Bill Truist. question the comes Your Chappell from of

just quick -- the I that kind a start be of I Josh, of to one thought mean, was more lapping on issue follow-up regulatory impression that and a you the was U.K. that. the I would

that lapping own? hearing getting of any Is So, Or in any get are that are worse? just standpoint would on their things great. it maybe there -- front? you it, terms be better Just more should noise update from on you

the tactics teams team been definitely additional That there. are stores. and challenge changes -- around for store you're can yes, I displays of hence, secondary associated I have to be largely the mean regulations in sweet expansion with mentioned, Bill, displays associated the great placed terms a a where the in has These grocery impact regulatory referencing, the treats convenience of employed. merchandising the

our it consumer U.K., other really the the question. in brought the those then look has team the are onto a the -- the We And definitely market. But when impact donuts, you to resonating structural regulations product, out hence, the opportunity and But specialty markets. initial to we that. donuts effect back step focus an lapping your the donuts, obviously into bringing brand, on at are in with there's see leaning is the core upgrading how

But macroeconomic amazing is relatively on joy, has generally of been moments occasions. celebratory the our U.K. in challenged obviously, these focused the So, environment team

months so know have behind high really season they're we special in the And us. getting I big forward, the looking of all ahead occasions

comes question with next Your Instructions] Dan [Operator the One Guglielmo Securities. of Capital from line

expansion, like all of McDonald's, will hire and kind that? Target to Walmart, the this big relationship U.S. then of most can handle U.S. the Just half so, Or the possibly in employee of around year? base the existing you need second in

obviously, expansion expansion in existing the many get making there. place nearly of hiring got donuts months, Well, up the already. the drivers extra we've gearing That's In is main all that In serviced we'd that out early initiative is we're for ways, sure to production hubs. the expect. by

there. partnering extra amount we the have small, So, customers. with it's quite teams do the support to focused labor need of We on the production

customer the example, with working are in and team, McDonald's marketing closely imagine coming together can our and to people teams marketing, McDonald's. You respective service Kreme know Krispy in for so that is

model as U.S. it it to all investment quarter, system, that the we reflects that see. you means that but the So, which an to underutilized important, have the the the in the in growth big pleased flow bottom delivered recruitment get concern. we here of daily in the of we expansion organic there. But second basis a of people is and so, right is is point isn't is there Overall, fresh and support densification to quarter, were line improvement, this saw through additional the distribution message leveraging overall

see In how fact, it's to really growing. we're exciting

view. a U.S. like how The competitive? to And Great. Yes. of as of new kind the of environment it kind of bit. bringing kind little very follow-up helpful. macro you're that, a employees kind that from curious That's labor just just has your looked? guys' Is Just on,

a positioned, love People Krispy feel. great Yes. to in. a It's environment been has Kreme It's I Krispy well Kreme. working -- work at

hiring people difficult. great generally drivers great were we've so, board, the We're the talent a not and to the same more seeing able system. recruit across little across There And was challenge. stages been where

think up on I eased environment the labor side. has that

that And so folks focused that service we optimized trained needs. those and tip-top on are making have equipment customers' that we and routes, our yes, we're the our the in delivery sure can also main is condition, all thing that supported

line next with Chappell the of Truist. comes question from Bill Your

Thank sorry, cut again. off. me I get

question on the why city? but yard the a front Chicago, Just the presence is kind And existing backyard -- headquarters. -- don't obviously in other know of different your Kentucky I and cities. and from of what McDonald's It's that's to It's compared next cities.

not So, how Lexington explain the maybe you and that could behind you've that seen just of be different kind or kind process in of may what and thought from Louisville?

out certainly -- we there McDonald's. different, constrained home where at their capacity. by is but to existing by it we're only Well, teams We're guided excited prefer be the first, they yes, to roll and our

in As in call, markets commitments capacity. and already. places sites -- in mentioned we'll Boston we're later. But even X They country those Chicago, have Minneapolis with we in I don't hubs selectively, in production, on we and identifying like around excess investing that have to and have spokes come key earlier the getting the

the more a fact, one have line. of than in one production hub In with we sites

start in had to that. sense we complete made it's a where place so And

investment, think creating up integrate that that we and DFD high-efficiency already sort we're set retail And about our been that in streamlined As able working to, on we hubs of way. with sites going operations. somewhere modest have really actually we've seamlessly forward,

So, I about in confident really feel Chicago. out starting

nice We have the across general. in presence a Midwest

to going for start from really positive strong a sense us. made of both get momentum with So, the

we're for the there. So, excited teams

I'll back closing Josh the now to turn call Charlesworth, for remarks. over

you it. appreciate is Obviously, and strategy thanks, the in the Well, interest for the Krispy Thank everyone, today. Really results for strong Kreme your Yes. questions. working.

you to that with commitment you Krispy Kreme's today. And ongoing the all thank of world. Kreme very for to around our pleased your share really to I'm So, much. course, our bring to customers, Thank you to Krispy joy

you Thank now today's for and call. may concludes you that all disconnect. gentlemen, and Ladies joining,