Krispy Kreme Inc. Q1 2023 Earnings Call

May 11, 2023

Speaker 1: The.

Operator: Hello, my name is Jean Louis. Welcome to the Krispy Kreme Q1 2023 earnings call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question and answer session. If you would like to ask a question during this time, press Star 1 on your telephone keypad. If you would like to withdraw your question, again, press the Star 1. I will now turn the conference over to Rob Ballou, Vice President of Investor Relations.

Speaker 2: to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, press star 1 on your telephone keypad. If you would like to withdraw your question again, press the star 1. I will now turn the conference over to

Rob Ballou: Good morning everyone, and welcome to Krispy Kreme's first quarter 2023 earnings call. Thank you for joining us today. Our earnings release and an accompanying earnings presentation deck are available on the Investor Relations portion of our website at investors.krispykreme.com. Joining me on the call this morning is Mike Tattersfield, President and Chief Executive Officer, Josh Charlesworth, Global President and Chief Operating Officer, and Jeremiah Ashukian, Chief Financial Officer. After prepared remarks, there will be a question and answer session. Before we begin, I'd like to remind you this call contains forward-looking statements made pursuant to the safe harbor provision of the Private Securities and Litigation Reform Act of 1995, including statements of expectations, future events, or future financial performance.

Rob Ballew: Good morning everyone, and welcome to Krispy Kreme's first quarter 2023 earnings call. Thank you for joining us today. Our earnings release and an accompanying earnings presentation deck are available on the Investor Relations portion of our website at investors.krispykreme.com. Joining me on the call this morning is Mike Tattersfield, President and Chief Executive Officer, Josh Charlesworth, Global President and Chief Operating Officer, and Jeremiah Ashukian, Chief Financial Officer. After prepared remarks, there will be a question and answer session. Before we begin, I'd like to remind you this call contains forward-looking statements made pursuant to the safe harbor provision of the Private Securities and Litigation Reform Act of 1995, including statements of expectations, future events, or future financial performance.

Speaker 3: Good morning, everyone, and welcome to Krispy Kreme's first quarter 2023 earnings call. Thank you for joining us today. Our earnings release and accompanying earnings presentation deck are available on the investor relations portion of our website at investors.krispykreme.com. Joining me on the call this morning is Mike Tattersfield, President and Chief Executive Officer, Josh Charlesworth, Global President and Chief Operating Officer, and Jeremiah Shouhian, Chief Financial Officer. To prepare remarks, there will be a question and answer session.

Speaker 3: Before we begin, I'd like to remind you that this call contains four looking statements made pursuant to the Safe Harbor Provision of the Private Securities and Litigation Reform Act of 1995, including statements of expectations, future events, or future financial performance. Four looking statements involve a number of inherent risks and uncertainties, and we caution investors that these risks could cause actual results to differ materially.

Rob Ballou: 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. These factors and other risks and uncertainties are described in detail in the company's Form 10K filed with the SEC on 2 March 2023. Forward looking statements made today speak only as of today. The company assumes no obligation to publicly update or revise any forward looking statements except as may be required by law. Additionally, today's call will contain certain non-GAAP financial measures. A reconciliation between non-GAAP financial measures and their closest comparable GAAP measures can be found in the company's first quarter earnings release this morning and is available at investors.krispykreme.com. With that, I'll now turn.

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. These factors and other risks and uncertainties are described in detail in the company's Form 10K filed with the SEC on 2 March 2023. Forward looking statements made today speak only as of today. The company assumes no obligation to publicly update or revise any forward looking statements except as may be required by law. Additionally, today's call will contain certain non-GAAP financial measures. A reconciliation between non-GAAP financial measures and their closest comparable GAAP measures can be found in the company's first quarter earnings release this morning and is available at investors.krispykreme.com. With that, I'll now turn. The call over to Mike.

Speaker 3: and let's contain any or looking statements.

Speaker 3: These factors and other risk uncertainties described in detail in the company's Form10K followed the SEC on March 2nd, 2023.

Speaker 3: For looking statements made today, speak only as of today. The company is in no obligation to public he update or revise any for looking statements except it may be required by law.

Speaker 3: Additionally, today's call will contain certain non-GAAP financial measures.

Speaker 3: A reconciliation between non-GAAP financial measures and their closest comparable GAAP measures can be found in the company's first quarter earnings released this morning and is available at investors.krispykreme.com. With that, I'll turn the call over to Mike.

Mike Tattersfield: The call over to Mike. Good morning, and thank you everyone for joining us today. We are pleased to share our first quarter results, marking another period of accelerated organic growth driven by our continued successful execution of our Omnichannel strategy, and a robust performance of our premium offerings for celebration, events, and holidays. I want to start today's call by thanking our Krispy Kremers, our team members, for another quarter where we once again achieved positive organic growth in every country we and our partners operate. Thank you. Without your efforts and dedication, this would not be possible. Since 1937, we've been serving our iconic Original Glazed donut, and it has always been about sharing joyful moments as an affordable indulgence. We love that more than 80% of our donuts are bought to be shared with others.

Mike Tattersfield: Good morning, and thank you everyone for joining us today. We are pleased to share our first quarter results, marking another period of accelerated organic growth driven by our continued successful execution of our Omnichannel strategy, and a robust performance of our premium offerings for celebration, events, and holidays. I want to start today's call by thanking our Krispy Kremers, our team members, for another quarter where we once again achieved positive organic growth in every country we and our partners operate. Thank you. Without your efforts and dedication, this would not be possible. Since 1937, we've been serving our iconic Original Glazed donut, and it has always been about sharing joyful moments as an affordable indulgence. We love that more than 80% of our donuts are bought to be shared with others.

Speaker 3: Good morning and thank you everyone for joining us today. We have pleased to share our first quarter results, marking another period of accelerated organic growth driven by our continued successful execution of our Omni Channel strategy and a robust performance of our premium offerings for celebration events and holidays.

Speaker 3: and dedication, this would not be possible.

Speaker 4: Since 1937, we've been serving our iconic original glazed illness and it has always been about sharing joyful moments.

Speaker 4: As an affordable indulgent, we love that more than 80% of our donuts are bought to be shared with others.

Mike Tattersfield: Nearly 40% of our customers buy our donuts for a party or a special event in their life, up from just 10% a few years ago. Our customers trust us to be part of their special moments. We do not take that lightly. We are proud to carry on the best of what our founder Vernon Rudolph knew. Consumers love fresh doughnuts. We appreciate our history, yet we know we are a donut company that is constantly evolving, and that freshness is important, as it is the most important attribute our customers want in a sweet treat. We see this in the continued impressive growth of our Delivered Fresh Daily, or DFD, business.

Nearly 40% of our customers buy our donuts for a party or a special event in their life, up from just 10% a few years ago. Our customers trust us to be part of their special moments. We do not take that lightly. We are proud to carry on the best of what our founder Vernon Rudolph knew. Consumers love fresh doughnuts. We appreciate our history, yet we know we are a donut company that is constantly evolving, and that freshness is important, as it is the most important attribute our customers want in a sweet treat. We see this in the continued impressive growth of our Delivered Fresh Daily, or DFD, business.

Speaker 4: Nearly 40% of our customers buy our donuts for a party or a special event in their life, up from just 10% a few years ago.

Speaker 4: Our customers trust us to be part of their special moment.

Speaker 4: to be part of their special moments. We don't take that lightly.

Speaker 4: consumers love fresh donuts. We appreciate our history yet we know we are a donut company that is constantly evolving. And that freshness is important as it is the most important attribute our customers want in a sweet treat. We see this in the continued impressive growth of our delivered fresh daily or de-ept business. Our ever increasing confidence and our ability to continue to grow fresh points of access by 10 to 15% a year.

Mike Tattersfield: Our ever-increasing confidence in our ability to continue to grow fresh points of access by 10% to 15% a year allowed us to make the decision to exit our startup CPG business, Branded Sweet Treats, and focus our efforts and capital where our customers want us to, bringing a fresh and delicious Krispy Kreme doughnut.

Our ever-increasing confidence in our ability to continue to grow fresh points of access by 10% to 15% a year allowed us to make the decision to exit our startup CPG business, Branded Sweet Treats, and focus our efforts and capital where our customers want us to, bringing a fresh and delicious Krispy Kreme doughnut.To a convenient location.

Speaker 4: Allow us to make the decision to exit our start-up CPG business, brand-new sweet treats.

Jeremiah Ashukian: To a convenient location.

Speaker 4: and focus our efforts in capital where our customers want us to.

Mike Tattersfield: Our omnichannel strategy, where we provide convenient access to consumers through many channels, is unique in the industry and is fueled by our passion for innovation and our understanding that access to our brand is our biggest opportunity. Through the efficiency of only 400 donut-producing hubs worldwide, we know how to think differently and creatively, delivering fresh donuts when and where consumers want them. Thinking differently has meant that we not only think like an experiential donut company, but also a donut logistics company, which makes our model very unique. That change in our model and culture enabled us to open and service more than 12,000 points of access daily, with a long-term goal of at least 75,000 by growing global points of access by 10% to 15% per year.

Our omnichannel strategy, where we provide convenient access to consumers through many channels, is unique in the industry and is fueled by our passion for innovation and our understanding that access to our brand is our biggest opportunity. Through the efficiency of only 400 donut-producing hubs worldwide, we know how to think differently and creatively, delivering fresh donuts when and where consumers want them. Thinking differently has meant that we not only think like an experiential donut company, but also a donut logistics company, which makes our model very unique. That change in our model and culture enabled us to open and service more than 12,000 points of access daily, with a long-term goal of at least 75,000 by growing global points of access by 10% to 15% per year.

Speaker 4: bringing a fresh and delicious Krispy Kreme donut to a convenient location. Our omni-channel strategy, where we provide convenient access to consumers through many channels, is unique in the industry.

Speaker 4: And it's fueled by our passion for innovation and our understanding that access to our brand is our biggest opportunity. Through the efficiency of only 400 donut-producing hubs worldwide, we know how to think differently and creatively.

Speaker 4: delivering fresh donuts when and where consumers want them. Thinking differently is meant that we not only think like an experiential donut company.

Speaker 4: donuts when and where consumers want them. Thinking differently is meant that we not only think like an experiential donut company, but also a donut logistics company.

Speaker 4: which makes our model very unique.

Speaker 4: that change in our mob and culture enabled us to open in service more than 12,000 points of access daily, with a long-term goal of at least 75,000 by growing global points of access by 10 to 15 percent per year.

Mike Tattersfield: While those points of access started as grocery and convenience stores, today they include mass merchandisers, restaurants, and drugstores. The uniqueness of our current model allows us to maximize an idea that was once only available at the 400 producing donut hubs, taking it to every potential point of access in our system. Thinking like a donut logistics company with our DFD network truly unlocks the power of our brand and reach, and thinking differently leads directly to the purpose of our company, to touch and enhance the lives of others through the joy that is Krispy Kreme. We are committed to positively impacting the world by loving our people, our communities, and our planet. In the first quarter, we donated much of our remaining Branded Sweet Treats donut inventory to food banks across the US.

While those points of access started as grocery and convenience stores, today they include mass merchandisers, restaurants, and drugstores. The uniqueness of our current model allows us to maximize an idea that was once only available at the 400 producing donut hubs, taking it to every potential point of access in our system. Thinking like a donut logistics company with our DFD network truly unlocks the power of our brand and reach, and thinking differently leads directly to the purpose of our company, to touch and enhance the lives of others through the joy that is Krispy Kreme. We are committed to positively impacting the world by loving our people, our communities, and our planet. In the first quarter, we donated much of our remaining Branded Sweet Treats donut inventory to food banks across the US.

Speaker 4: While those points of access started as growth in convenience stores, today include mass merchandisers, restaurants, and drug stores.

Speaker 4: The uniqueness of our current model allows it to maximize an idea.

Speaker 4: That was once only available at the 400 producing donut huts.

Speaker 4: taking it to every potential point of access in our system. Thinking like a donut logistics company with our DFT network truly unlocks the power of our brand and reach. And thinking differently leads directly to the purpose of our company to touch and enhance the lives of others through the joy that is crispy cream. We are committed to positively impacting the world by loving our people, our communities, and our planet. And we are committed to the purpose of our company to touch and enhance the lives of others through the joy that is crispy cream.

Speaker 4: In the first quarter, we donated much of our remaining brand new Sweet Treat donut inventory to food banks across the U.S. We also saw another strong quarter of community fundraising and local giving across the globe as we donated both to school children, supported the elderly, and held more than 100 acts of joy worldwide. We worked hard to share joy in a way that really connected people to Krispy Kreme. Turning to our results. The first quarter marked a great start to the year for our brand with organic revenue

Mike Tattersfield: We also saw another strong quarter of community fundraising and local giving across the globe as we donated both to school children, supported the elderly, and held more than 100 acts of joy worldwide. We worked hard to share joy in a way that really connected people to Krispy Kreme. Turning to our results, the first quarter marked a great start to the year for our brand with organic revenue growth accelerating to 14.4% as we had highly successful seasonal global campaigns, including the critically important Valentine's Day, with great partnerships with Hershey's as well as the strong St. Patrick's Day.

We also saw another strong quarter of community fundraising and local giving across the globe as we donated both to school children, supported the elderly, and held more than 100 acts of joy worldwide. We worked hard to share joy in a way that really connected people to Krispy Kreme. Turning to our results, the first quarter marked a great start to the year for our brand with organic revenue growth accelerating to 14.4% as we had highly successful seasonal global campaigns, including the critically important Valentine's Day, with great partnerships with Hershey's as well as the strong St. Patrick's Day.

Speaker 4: growth accelerating to 14.4% as we had highly successful seasonal global campaigns, including the critically important Valentine's Day with great partnership with Hershey's, as well as the strong St. Cotter Day.

Mike Tattersfield: These global campaigns serve as the playbook moving forward for significant events and holidays, as we'll be able to leverage marketing costs, media coverage, and brand partners across many or all of the countries Krispy Kreme and our franchise partners operate, driving increased efficiencies on both the top and bottom line. Also strengthening our omnichannel capabilities in the first quarter was our e-commerce efforts in the US that included expanding availability of specialty donuts and more targeted marketing efforts. Additionally, Insomnia continues to benefit from the expanded radius of warm cookie delivery of up to 10mi. These efforts led to a 23% increase in e-commerce revenue in the first quarter compared to a year ago and led to a 220 basis point increase in sales mix of e-commerce to 19.6% of retail sales for the company during the quarter.

These global campaigns serve as the playbook moving forward for significant events and holidays, as we'll be able to leverage marketing costs, media coverage, and brand partners across many or all of the countries Krispy Kreme and our franchise partners operate, driving increased efficiencies on both the top and bottom line. Also strengthening our omnichannel capabilities in the first quarter was our e-commerce efforts in the US that included expanding availability of specialty donuts and more targeted marketing efforts. Additionally, Insomnia continues to benefit from the expanded radius of warm cookie delivery of up to 10mi. These efforts led to a 23% increase in e-commerce revenue in the first quarter compared to a year ago and led to a 220 basis point increase in sales mix of e-commerce to 19.6% of retail sales for the company during the quarter.

Speaker 4: These global campaigns serve as the playbook moving forward for significant events and holidays. As we'll be able to leverage marketing costs.

Speaker 4: media coverage, and brand partners across many, or all of the countries Chris B. Creening and our brand-chart partners operate, driving increased efficiencies on both the top and bottom line. Also, straightening our Omni channel capabilities in the first quarter with our e-commerce efforts.

Speaker 4: In the U.S., that included expanding availability of specialty donuts and more targeted marketing efforts. Additionally, Insomnia continues to benefit from the expanded radius of warm cookie delivery of up to 10 miles. Check out our latest video multicompetech.com.

Speaker 4: These efforts led to a 23% increase in e-commerce revenue in the first quarter compared to a year ago, and led to a 220 point basis increase in sales mix of e-commerce to 19.6% of retail sales for the company during the quarter.

Mike Tattersfield: This was our strongest quarter ever in E-commerce, both in revenue and percent of retail sales, even when you compare that to the height of the pandemic, and we continue to see significant opportunity to grow in this channel. We also continue to execute on our global expansion strategy, with a strong increase in points of access in our market development and international segment, which led to strong organic growth around the world, particularly in our equity-owned Japan and Canada markets, and international franchise markets. Since the end of the quarter, a new franchise partner opened for the first time in Chile, which saw one of the highest openings in the company's history. We expect to open in three additional countries during the second quarter, including Switzerland, Costa Rica, and Jamaica.

This was our strongest quarter ever in E-commerce, both in revenue and percent of retail sales, even when you compare that to the height of the pandemic, and we continue to see significant opportunity to grow in this channel. We also continue to execute on our global expansion strategy, with a strong increase in points of access in our market development and international segment, which led to strong organic growth around the world, particularly in our equity-owned Japan and Canada markets, and international franchise markets. Since the end of the quarter, a new franchise partner opened for the first time in Chile, which saw one of the highest openings in the company's history. We expect to open in three additional countries during the second quarter, including Switzerland, Costa Rica, and Jamaica.

Speaker 4: This was our strongest quarter ever in the E-commerce, both in revenue and percent of retail sales.

Speaker 4: even when you compare that to the height of a pandemic, and we continue to see significant opportunity to grow in this channel.

Speaker 4: We also continue to execute on our global expansion strategy with a strong increase in points of access in our market development and international segments, which led to stronger organic growth around the world, particularly in our equity-owned Japan and Canada markets and international parte Eco- routes and national brainstorming markets.

Speaker 4: Since the end of the quarter, a new franchise, partner opened for the first time in Chile, which Chile saw one of the highest openings in the company's history.

Speaker 4: We expect to open in three additional countries during the second quarter, including Switzerland, Puerto Liza and Jamaica. We continue to be on track to open in up to seven new countries this year.

Mike Tattersfield: We continue to be on track to open in up to seven new countries this year and expect to sign three to five new development agreements for additional countries to open in 2024, including further locations in Western Europe and South America. Our pipeline of new hubs and fresh shops from our franchise partners is now well over 1,000 shops over the next five years, which will be used to further unlock additional points of access in those markets. We've seen that Insomnia is really working across the entire country, United States of America, and recent new store openings are performing better than expected. To accelerate their growth, we are investing in capabilities and processes to rapidly expand the number of new Insomnia store openings both in 2023 and longer term, and to launch internationally as they remain on track to open in the UK and Canada later this year.

We continue to be on track to open in up to seven new countries this year and expect to sign three to five new development agreements for additional countries to open in 2024, including further locations in Western Europe and South America. Our pipeline of new hubs and fresh shops from our franchise partners is now well over 1,000 shops over the next five years, which will be used to further unlock additional points of access in those markets. We've seen that Insomnia is really working across the entire country, United States of America, and recent new store openings are performing better than expected. To accelerate their growth, we are investing in capabilities and processes to rapidly expand the number of new Insomnia store openings both in 2023 and longer term, and to launch internationally as they remain on track to open in the UK and Canada later this year.

Speaker 4: and expect to sign three to five new development agreements for additional countries to open in 2024, including further locations in Western Europe and South America.

Speaker 4: Our pipeline of new hubs and fresh shops from our franchise partners is now well over 1000 shops over the next five years, which will be used to further unlock additional points of access in those markets.

Speaker 4: We've seen that insomnia is really working across the entire country, United States of America, and recent news store openings are performing better than expected.

Speaker 4: To accelerate their growth, we are investing in capabilities and processes to rapidly expand the number of new insomnia store openings both in 2023 and longer term, and to launch internationally. We are investing in capabilities and processes to rapidly expand the number of new insomnia

Mike Tattersfield: We expect to open nearly double the number of cookie shops this year compared to last year, with further growth to come in 2024 and 2025. As we look ahead, our focus remains relentless on driving the capital-light expansion of our Omnichannel model. We continue to see momentum in our Hub and Spoke model, as well as existing DFD channels, and are now excited to grow our fresh business to new channels such as QSR, Club, and Drugstore. That's why we have such confidence in our ability to grow to more than 75,000 points of access globally from 12,400 today. In addition to expanding DFD, we will also continue our work to align our specialty donuts across all channels, and expand our e-commerce capabilities.

We expect to open nearly double the number of cookie shops this year compared to last year, with further growth to come in 2024 and 2025. As we look ahead, our focus remains relentless on driving the capital-light expansion of our Omnichannel model. We continue to see momentum in our Hub and Spoke model, as well as existing DFD channels, and are now excited to grow our fresh business to new channels such as QSR, Club, and Drugstore. That's why we have such confidence in our ability to grow to more than 75,000 points of access globally from 12,400 today. In addition to expanding DFD, we will also continue our work to align our specialty donuts across all channels, and expand our e-commerce capabilities.

Speaker 4: as they remain on track to open in the UK and Canada later this year.

Speaker 4: We expect to open the other double the number of cookie shops this year compared to last year with further growth to come in 2024 and 2025.

Speaker 4: As we look ahead, our focus remains relentless on dragging the capital-wide expansion of our Omni Channel model.

Speaker 4: We continue to see momentum in our hub and spoke model as well as existing DFC channels and are now excited to grow our fresh business to new channels such as QSR, from the drugstore.

Speaker 4: That's why we have such confidence in our ability to grow to more than 75,000 points of access globally from 12,400 today.

Speaker 4: In addition to expanding DFT, we will also continue our work to align our specialty donuts across all channels and expand our e-commerce capabilities.

Mike Tattersfield: Krispy Kreme has great momentum right now, and we remain confident and excited about the long-term 2026 expectations we highlighted at our Investor Day last year, including growing revenue to $2.15 billion and adjusted EBITDA to $315 million. My excitement about the growth of this incredible brand is stronger than ever. My belief is that brands with a purpose and clear direction will thrive in even challenging economic times. We've seen this in the resilience of the Krispy Kreme brand and culture. We have worked diligently over the past six years to transform our business model and operations to give more customers exactly what they want, where they want it, an awesome fresh Krispy Kreme doughnut. We have incredible momentum as we continue our journey to become the most loved Sweet Treat brand in the world.

Krispy Kreme has great momentum right now, and we remain confident and excited about the long-term 2026 expectations we highlighted at our Investor Day last year, including growing revenue to $2.15 billion and adjusted EBITDA to $315 million. My excitement about the growth of this incredible brand is stronger than ever. My belief is that brands with a purpose and clear direction will thrive in even challenging economic times. We've seen this in the resilience of the Krispy Kreme brand and culture. We have worked diligently over the past six years to transform our business model and operations to give more customers exactly what they want, where they want it, an awesome fresh Krispy Kreme doughnut. We have incredible momentum as we continue our journey to become the most loved Sweet Treat brand in the world.

Speaker 4: Chris Becreme, that's great momentum right now. And we've remained confident, excited about the long-term 2026 expectations. We highlighted our investor day last year.

Speaker 4: including growing revenue, the 2.15 billion, and adjusted EBITDA to turn in 15 million. My excitement about the growth of this incredible brand is stronger than ever. My belief is that brands with a purpose and clear direction will thrive in even challenging economic times.

Speaker 4: We've seen this in the resilience of the Krispy Kreme brand and culture. We have worked diligently over the past six years to transform a business model and an operation to give more customers exactly what they want, what they want it.

Speaker 4: an awesome fresh crispy green doughnut. We have incredible momentum as we continue our journey to become the most love sweet treat brand in the world. With that, I hand the call over to Josh to give an update on the business and our PSC efforts. Josh.

Speaker 4: awesome, fresh, crispy green doughnut. We have incredible momentum as we continue our journey to become the most love sweet treat brand in the world. With that, I hand the call over to Josh to give an update on the business and our PSU ethics. Josh, thanks Mike.

Mike Tattersfield: With that, I hand the call over to Josh to give an update on the business and our DSE efforts. Josh, thanks Mike. In the last few months, we've made great progress around the world with the fresh daily hub and spoke operating model that we discussed back at our Investor Day last December. This is especially the case in the US, where strong growth across all our sales channels helped us to deliver 16% organic growth and EBITDA margins above 15% when excluding the now discontinued Branded Sweet Treats line. The operating leverage of the model is particularly effective when we generate revenue off premises via E Commerce or the local point of access, such as grocery stores, all from our existing fresh donut production hubs in the US.

With that, I hand the call over to Josh to give an update on the business and our DSE efforts. Josh.

Josh Charlesworth: Thanks Mike. In the last few months, we've made great progress around the world with the fresh daily hub and spoke operating model that we discussed back at our Investor Day last December. This is especially the case in the US, where strong growth across all our sales channels helped us to deliver 16% organic growth and EBITDA margins above 15% when excluding the now discontinued Branded Sweet Treats line. The operating leverage of the model is particularly effective when we generate revenue off premises via E Commerce or the local point of access, such as grocery stores, all from our existing fresh donut production hubs in the US.

Speaker 4: In the last few months we've made quite pro-Grotoram a world with the fresh daily hub and spoke operating model that we discussed back at our investor day last December .

Speaker 5: This is especially the case in the US where strong growth across all our sales channels help us to deliver 16% organic growth and EBITDA margin above 15% when excluding the marginileyigo into the? us so treaty line.

Speaker 5: The operating leverage of the model is particularly effective when we generate revenue off-premises by e-commerce or the local point of access such as grocery stores.

Mike Tattersfield: Upgrades to our web and app, as well as continued expansion of our delivery zones, helped us to generate over 22% of retail sales via e-commerce in the first quarter. In Delivered Fresh Daily, we added over 350 doors both at well-established customers like Walmart and Publix, but also with emerging newer customers like Target and Albertsons. We now have over 6,000 DFD doors across the US, with average weekly sales up 35% from two years ago to nearly $650. We're also adding larger DFD display cabinets, which add up to 70% sales to a door. Sixty-three of these premium cabinets went into grocery stores in the first quarter, including Kroger's Ralph's division, and a test with Target is more expected in the coming months. This off-premises sales growth is benefiting our 137 production hubs in several key US cities, including New York, Dallas, Houston, and D.C.

Upgrades to our web and app, as well as continued expansion of our delivery zones, helped us to generate over 22% of retail sales via e-commerce in the first quarter. In Delivered Fresh Daily, we added over 350 doors both at well-established customers like Walmart and Publix, but also with emerging newer customers like Target and Albertsons. We now have over 6,000 DFD doors across the US, with average weekly sales up 35% from two years ago to nearly $650. We're also adding larger DFD display cabinets, which add up to 70% sales to a door. Sixty-three of these premium cabinets went into grocery stores in the first quarter, including Kroger's Ralph's division, and a test with Target is more expected in the coming months. This off-premises sales growth is benefiting our 137 production hubs in several key US cities, including New York, Dallas, Houston, and D.C.

Speaker 5: All from our existing fresh-dome production hubs. In the US, upgrades to our web and app, as well as continued expansion of our delivery zones, helped us to generate over 22% of retail sales via e-commerce in the first quarter. And in delivered fresh daily, we added over 350 doors.

Speaker 5: Both the well-established customers like Walmart and Publix, but also with emerging newer customers like Target and Albertans.

Speaker 5: We now have over 6,000 DFD doors across the US with average weekly sales of up 35% from two years ago to nearly 650 dollars.

Speaker 5: We're also adding a large ADFD display cabinet which add up to 70% sales to a bill.

Speaker 5: 63 of these premium cabinets, when you dig right through stores in the first quarter, including crocuses, bounce division, and a test with target is more expected in the coming months.

Speaker 5: Its off-premises sales growth is benefiting our 137 production hubs and several key U.S. cities, including York, Dallas, Houston, DC, Metro and LA, which all saw year-over-year margin growth in the first quarter.

Mike Tattersfield: Metro and LA, which all saw year-over-year margin growth in the first quarter. Our previously announced US shop network optimization program, which focuses on poorer performing hubs without spokes, which do not benefit from the DFD expansion, is also well underway. Twenty-nine shops have now already closed or been converted into different shop formats, and as a result, hubs without spokes have seen a 180 basis point margin improvement year over year. We expect another five to 10 more shops to go through this process through the end of 2023. We're also making improvements to the donut shop experience itself, including the addition of new equipment in our drive-throughs, which represent around 60% of retail sales in the US, as well as the introduction of digital kiosks in our lobbies at select locations across the US.

Metro and LA, which all saw year-over-year margin growth in the first quarter. Our previously announced US shop network optimization program, which focuses on poorer performing hubs without spokes, which do not benefit from the DFD expansion, is also well underway. Twenty-nine shops have now already closed or been converted into different shop formats, and as a result, hubs without spokes have seen a 180 basis point margin improvement year over year. We expect another five to 10 more shops to go through this process through the end of 2023. We're also making improvements to the donut shop experience itself, including the addition of new equipment in our drive-throughs, which represent around 60% of retail sales in the US, as well as the introduction of digital kiosks in our lobbies at select locations across the US.

Speaker 5: Our previously announced US shop network optimization program, which focuses on poorer performing Cubs without folks, which do not benefit from the of these same expansion is also well underway.

Speaker 5: 29 shops have now already closed, all being converted into different shop formats. And as a result, PODS without spokes have seen a 180-based point margin improvement year over year.

Speaker 5: We expect another 5 to 10 more shops to go through this process through the end of 2023.

Speaker 5: We're also making improvements to the donut shop experience itself, including the addition of new equipment in our drive-throughs, which represent around 60% of retail sales in the US. That's why I let the introduction of digital kiosks in our lobbies and select locations across the US. These kiosks have already proven popular with our customers, especially at the flagship shop in Times Square in New York.

Mike Tattersfield: These kiosks have already proven popular with our customers, especially at the flagship shop in Times Square, New York. The fresh daily hub and spoke operating model is also showing early success in some newer international markets, including company-owned Canada and Japan, which both saw organic growth above 35% in the first quarter, as well as in international franchise markets, which grew even faster. In Japan, specifically an acquisition we completed at the end of 2020, we have brought back the hotline experience to our donut shops, strengthened e-commerce, and added over 160 DFD doors. This omnichannel-led growth is expected to deliver $60 million in revenue for Japan in 2023 at a more than 15% adjusted EBITDA margin. This compares to a loss at the time of the original acquisition.

These kiosks have already proven popular with our customers, especially at the flagship shop in Times Square, New York. The fresh daily hub and spoke operating model is also showing early success in some newer international markets, including company-owned Canada and Japan, which both saw organic growth above 35% in the first quarter, as well as in international franchise markets, which grew even faster. In Japan, specifically an acquisition we completed at the end of 2020, we have brought back the hotline experience to our donut shops, strengthened e-commerce, and added over 160 DFD doors. This omnichannel-led growth is expected to deliver $60 million in revenue for Japan in 2023 at a more than 15% adjusted EBITDA margin. This compares to a loss at the time of the original acquisition.

Speaker 5: The French Daily Hub and spoke operating model is also showing early success to newer international markets, including company owned Canada and Japan, which both saw organic growth above 35% in the first quarter.

Speaker 5: as well as an international franchise market which is great even faster.

Speaker 5: In Japan specifically, and that position we completed at the end of 2020, we have brought back the hotline experience to our donut shops.

Speaker 5: strengthily commerce and added over 160 DFT doors. This Omni Channel-led grog is expected to deliver $16 million in revenue for Japan in 2023 at a more than 15th Senate-JFD bidar margin, this compares to a loss at the time of the original acquisition.

Mike Tattersfield: As Mike explained, our long-term global Points of Access goal of 75,000 includes the opportunity to take DFD to new partners in new sales channels. We now have DFD listings in drug through Walgreens in the US, in club through Costco in the UK, Canada, and Australia, and in QSR through an expanded test at over 160 McDonald's restaurants in Kentucky, which kicked off at the end of March. We're closely monitoring all of these new channels for quality, product freshness, service, and, of course, performance regarding McDonald's. We are happy with our team's ability to service these additional restaurant locations from three of our existing local production hubs, and we have not seen any adverse impact on existing sales at our doughnut shops or other DFD builders in Kentucky.

As Mike explained, our long-term global Points of Access goal of 75,000 includes the opportunity to take DFD to new partners in new sales channels. We now have DFD listings in drug through Walgreens in the US, in club through Costco in the UK, Canada, and Australia, and in QSR through an expanded test at over 160 McDonald's restaurants in Kentucky, which kicked off at the end of March. We're closely monitoring all of these new channels for quality, product freshness, service, and, of course, performance regarding McDonald's. We are happy with our team's ability to service these additional restaurant locations from three of our existing local production hubs, and we have not seen any adverse impact on existing sales at our doughnut shops or other DFD builders in Kentucky.

Speaker 5: As might explain, a long-term global point of access goal of 75,000 includes the opportunity to take DFT to new partners in new sales channels.

We now have DFD listings in drug through Walbrings in the US, in club to Costco and UK, Canada and Australia, and in QSR through an expanded test at over 160 McDonald's restaurants in Kentucky, which kicked off at the end of March.

We're closely monitoring all of these new channels for quality, product freshness, service and of course performance.

Regalodding McDonald's, I am happy with our team's ability to service these additional restaurant locations.

from three of our existing local production hubs, and we have not seen any adverse impact on existing sales at our donut shops or other DFD doors in Kentucky.

Mike Tattersfield: I'll now happily turn the call over to Jeremiah to give us more detail on our financials, including an update on our balance sheet, and our 2023 financial outlook.

I'll now happily turn the call over to Jeremiah to give us more detail on our financials, including an update on our balance sheet, and our 2023 financial outlook.

I'll now happily turn the call over to Jeremiah to give us more detail on our financials, including an update on our balance sheet and our 2023 financial outlook.

Jeremiah Ashukian: Thanks, Josh, and good morning, everyone. We had a great first quarter. The fresh omnichannel model is working, and we are building confidence in our ability to drive both top and bottom line results. Sales for hub in the US increased 9% to $4.6 million, led by both strong points of access growth and record average weekly sales per DFD door. New door productivity is strong, and e-commerce revenue saw its highest quarter ever, even higher than the height of the pandemic. In addition to the benefits of the actions Josh outlined a few moments ago, we have also successfully taken pricing to offset significant inflation. Plus, we believe the exit of Branded Sweet Treats will allow us to focus even more on our US fresh business.

Thanks Josh and good morning everyone. We had a great first quarter. The fresh on the channel model is working and we are building confidence in our ability to drive both top and bottom line results.

Sales for HUP in the US increased 9 percent to $4.6 million, led by both strong points of access growth and record average weekly sales per DSD door.

Ludor productivity is strong. Any commerce revenue is highest, quarter ever even higher than the height of the pandemic.

In addition to the benefits of the actions Josh outlined a few moments ago, we have also successfully taken pricing to offset significant inflation.

Jeremiah Ashukian: Outside of the US, we're seeing similarly strong performances in Japan, Canada, and our international franchise segment, and continue to make great progress on our global expansion plans. Turning to the financials, as Mike said, we saw strong growth across all our reporting segments in the first quarter, net revenue up 12.5% year over year to $419 million. Organic revenue, which excludes the impact of acquisitions and changes in foreign currency, grew 14.4% in acceleration from last year, driven by pricing, our premium seasonal innovation, the growth of our delivered fresh daily donuts sold in grocery and convenience stores, and in e-commerce.

Outside of the US, we're seeing similarly strong performances in Japan, Canada, and our international franchise segment, and continue to make great progress on our global expansion plans. Turning to the financials, as Mike said, we saw strong growth across all our reporting segments in the first quarter, net revenue up 12.5% year over year to $419 million. Organic revenue, which excludes the impact of acquisitions and changes in foreign currency, grew 14.4% in acceleration from last year, driven by pricing, our premium seasonal innovation, the growth of our delivered fresh daily donuts sold in grocery and convenience stores, and in e-commerce.

Plus, we believe the exit of Rhinocweet trees will allow us to focus even more on our US suppress exhibits.

Outside of the U.S., we're seeing similarly strong performances in Japan, Canada, and our international franchise segment and continue to make great progress on our global expansion plan. Turning to the financials, as Mike said, we saw strong growth across all our reporting segments in the first quarter, net revenue up 12.5 percent.

year-over-year to $419 million. Organic revenue, which excludes the impact of acquisitions and changes in foreign currency, grew 14.4% and acceleration from last year, driven by pricing. Our premium is low innovation.

Jeremiah Ashukian: We took further pricing in the first quarter in several key markets, including the US and the UK, bringing our effective global pricing to a low double-digit increase, and we continue to see lower levels of elasticity thanks to the infrequency of purchases, strong specialty campaigns, and the fact that it remains an affordable indulgence for all income. Adjusted EBITDA grew 12.3% in the first quarter to $55 million, or an increase of 16% in constant currency once the $2 million impact of the stronger dollar is considered. Pricing, Hub and Spoke efficiencies, the improvements in our US network, and labor optimization offset elevated commodity and labor cost inflation and a negative mix change shift to maintain adjusted EBITDA margin levels at 13.1% in the first quarter compared to a year ago.

We took further pricing in the first quarter in several key markets, including the US and the UK, bringing our effective global pricing to a low double-digit increase, and we continue to see lower levels of elasticity thanks to the infrequency of purchases, strong specialty campaigns, and the fact that it remains an affordable indulgence for all income. Adjusted EBITDA grew 12.3% in the first quarter to $55 million, or an increase of 16% in constant currency once the $2 million impact of the stronger dollar is considered. Pricing, Hub and Spoke efficiencies, the improvements in our US network, and labor optimization offset elevated commodity and labor cost inflation and a negative mix change shift to maintain adjusted EBITDA margin levels at 13.1% in the first quarter compared to a year ago.

The growth of our delivered fresh daily donuts, holding grocery and convenience stores and any commerce.

which occurs at pricing in the first quarter in several P markets including the U.S. and the UK bring your effective global pricing to a low double-piget increase.

And we continue to see lower levels of elasticity thanks to the frequency of purchases, strong specialty campaigns, and the fact that it remains an affordable indulgence for all income.

Adjust the EBITDA accrues 12.3 percent in the first quarter to $55 million or an increase of 16 percent in constant currency once the $2 million impact of the stronger dollar is considered.

Bright thing, hub and silk efficiency, the improvements in our U.S. network and labor optimization offset elevated commodity and labor cost inflation, and a negative shift to maintain adjusted the ubiquitous margin level of that 13.1 percent in the first quarter compared to a year ago.

Jeremiah Ashukian: GAAP net income of $1.6 million in the first quarter was negatively impacted by a $13.4 million largely non-cash expense related to the exit of Branded Sweet Treats, partially offset by a $9.7 million gain on the sale leaseback. Adjusted net income for the quarter increased 15.5% at $15.3 million, and adjusted diluted EPS in the first quarter was $0.09, an increase of 13%, or 25% in constant currency. The US business segment's total revenue increased 14% in the first quarter to $281 million, and organic revenue growth was also up 14% despite decreased revenue from Branded Sweet Treats. Growth was driven by sales per hub increases to $4.6 million from $4.3 million a year ago, and double-digit same store sales growth by Insomnia Cookies. E-commerce and DFD revenue were strong in the first quarter, with record revenue for both channels in the US.

GAAP net income of $1.6 million in the first quarter was negatively impacted by a $13.4 million largely non-cash expense related to the exit of Branded Sweet Treats, partially offset by a $9.7 million gain on the sale leaseback. Adjusted net income for the quarter increased 15.5% at $15.3 million, and adjusted diluted EPS in the first quarter was $0.09, an increase of 13%, or 25% in constant currency. The US business segment's total revenue increased 14% in the first quarter to $281 million, and organic revenue growth was also up 14% despite decreased revenue from Branded Sweet Treats. Growth was driven by sales per hub increases to $4.6 million from $4.3 million a year ago, and double-digit same store sales growth by Insomnia Cookies. E-commerce and DFD revenue were strong in the first quarter, with record revenue for both channels in the US.

Gaffnet income of $1.6 million in the first quarter was negatively impacted by a $13.4 million of largely non-cash expense related to the exit of branded sweet treat, partially offset by a $9.7 million gain on the sale lease back. Adjusted net income for the quarter increased 15.5% to a $15.3 million.

And adjusted diluted EPS in the first quarter of its 9 cents in increase of 13% or 25% in constant currency.

The U.S. business segment's total revenue increased 14 percent in the first quarter to $281 million, and organic revenue growth is also up 14 percent despite decreased revenue from Brandon's retreat.

Growth was driven by sales for half increases to $4.6 million from $4.3 million a year ago, and double digits samsar sales growth by Insomniac cookies. E-commerce and DFT revenue were strong in the first quarter with record revenue for both channels in the US. Adjust the DPS EBITDA for the US segment in the first quarter increased 19% to 30%.

Jeremiah Ashukian: Adjusted EBITDA for the US segment in the first quarter increased 19% to $39 million, with margins increasing 60 basis points year over year to 13.7%, driven by strong performance in our US fresh doughnut business, which saw EBITDA margins expand 120 basis points. This reflects the successful pricing actions taken in the last nine months, the absorption benefits in our hub and spokes from the growth in DFD off-premise sales, and improved performance in hub and spoke spokes. These factors more than offset double-digit ingredient cost inflation and elevated labor cost growth. International organic revenue growth was 7.3%, with total revenues of $90.3 million, while adjusted EBITDA for the quarter declined to $13.6 million. Organic growth was offset by continued softness in DFD in the UK, as well as increased cost of goods sold and logistics costs in Australia and the UK.

Adjusted EBITDA for the US segment in the first quarter increased 19% to $39 million, with margins increasing 60 basis points year over year to 13.7%, driven by strong performance in our US fresh doughnut business, which saw EBITDA margins expand 120 basis points. This reflects the successful pricing actions taken in the last nine months, the absorption benefits in our hub and spokes from the growth in DFD off-premise sales, and improved performance in hub and spoke spokes. These factors more than offset double-digit ingredient cost inflation and elevated labor cost growth. International organic revenue growth was 7.3%, with total revenues of $90.3 million, while adjusted EBITDA for the quarter declined to $13.6 million. Organic growth was offset by continued softness in DFD in the UK, as well as increased cost of goods sold and logistics costs in Australia and the UK.

helps to us poke from the growth in TFD off-premise sales and improve performance in helps to get out of spokes. These factors more than offset double digit ingredient cost manipulation and elevated labor cost growth.

International Organic Revenue Growers was 7.3% of total revenues of $90.3 million. Well, it's just a deeper effort to climb to $13.6 million. Organic Growers was offset by continued softness and DFC in the UK, as well as increased cost of goods build and logistics cost in Australian and UK. He's their halved community.

Jeremiah Ashukian: However, we are seeing continued strengthening in the retail environment in the UK, and we are making efforts to streamline costs, reduce waste, and we'll continue to review pricing on a regular basis in all three markets in the UK. We're also working to expand visibility in the grocery channel, including secondary placement, evolving our product range, pack sizes, and grocery, as well as looking at new partners and channels. Market development, which is made up of franchise businesses around the world and equity-owned Japanese and Canadian markets, saw organic growth accelerate to 36%. Total revenues in the first quarter increased 27% to $47.3 million, even with a 9% impact from foreign exchange headwinds and franchise acquisitions. Market development adjusted EBITDA increased 36% to $17 million, despite a $1.3 million negative impact from foreign exchange headwinds.

However, we are seeing continued strengthening in the retail environment in the UK, and we are making efforts to streamline costs, reduce waste, and we'll continue to review pricing on a regular basis in all three markets in the UK. We're also working to expand visibility in the grocery channel, including secondary placement, evolving our product range, pack sizes, and grocery, as well as looking at new partners and channels. Market development, which is made up of franchise businesses around the world and equity-owned Japanese and Canadian markets, saw organic growth accelerate to 36%. Total revenues in the first quarter increased 27% to $47.3 million, even with a 9% impact from foreign exchange headwinds and franchise acquisitions. Market development adjusted EBITDA increased 36% to $17 million, despite a $1.3 million negative impact from foreign exchange headwinds.

However, we are seeing continued strengthening in the retail environment in the UK and we are making efforts to streamline costs, reduce waste, and we'll continue to review pricing on a regular basis in all three markets.

In the UK, we're also working to expand his ability in the grocery channel, including secondary placement, the volume aeropronics, range, pack sizes, and grocery, as well as looking at new partners in the channel.

Market development, which is made up of our franchise businesses around the world and equity owned Japanese and Canadian markets, to organic growth, accelerate the 36%. Total revenues, the first quarter, increased 27% to $47.3 million, even with a 9% impact from foreign exchange hedge funds and franchise acquisitions.

Market development adjusted EBITDA increased 36 percent to $17 million despite a $1.3 million negative impact from foreign exchange headwinds. Adjusted EBITDA margins increased 250 basis points to 35.9 percent in the first quarter compared to the prior year. seen prior.

Jeremiah Ashukian: Adjusted EBITDA margins increased 250 basis points to 35.9% in the first quarter compared to the prior year and would have been higher if not for a mix shift due to the very strong organic revenue growth in equity-owned Japan and Canada. The growth in Japan led to adjusted EBITDA margins of over 20%, up nearly 800 basis points from a year ago. During the first quarter, we completed a well oversubscribed refinancing of our term loan A and revolver facilities, extending our maturities at the same terms through March 2028. Last quarter, I mentioned we would begin efforts to reduce our reliance on vendor financing programs to reduce what has become a more expensive financing vehicle and an increased impact to adjusted EBITDA, as these costs do not hit net interest expense.

Adjusted EBITDA margins increased 250 basis points to 35.9% in the first quarter compared to the prior year and would have been higher if not for a mix shift due to the very strong organic revenue growth in equity-owned Japan and Canada. The growth in Japan led to adjusted EBITDA margins of over 20%, up nearly 800 basis points from a year ago. During the first quarter, we completed a well oversubscribed refinancing of our term loan A and revolver facilities, extending our maturities at the same terms through March 2028. Last quarter, I mentioned we would begin efforts to reduce our reliance on vendor financing programs to reduce what has become a more expensive financing vehicle and an increased impact to adjusted EBITDA, as these costs do not hit net interest expense.

And what have been higher, if not for a mixed shift, do this very strong organic revenue growth in equity on Japan and Canada.

The growth in Japan lets you adjust the even margins of over 20% up nearly 800 basis point term a year ago.

During the first quarter, we completed a well-over-subscribed Black refinancing of our TermLoneA and Revolver Facilities, extending our maturies at the same terms through March 20, 20-8.

Last quarter, I mentioned we would begin efforts to reduce our reliance on vendor financing programs to reduce what has become a more expensive financing vehicle and an increased impact to adjusted EBITDA as these costs do not hit net interest expense. We made progress on that reduction in the first quarter, reducing those levels by over $45 million. For more information, visit www.fema.gov

Jeremiah Ashukian: We made progress on that reduction in the first quarter, reducing those levels by over $45 million. We expect this to be a long-term tailwind to our adjusted EBITDA and net income, and we remain on track to be between 2x and 2.5x net average in 2026. We are also reaffirming our 2023 guidance. This includes growth of 9% to 11% in organic revenue and 8% to 10% in net revenue, $205 to $215 million in adjusted EBITDA, and between $0.31 to $0.34 adjusted EPS. We continue to expect capital expenditures of $105 to $115 million, or roughly 6.6% of revenue, including opening at least 30 to 40 new Insomnia Cookies shops and roughly 10 company-built hubs in 2025.

We made progress on that reduction in the first quarter, reducing those levels by over $45 million. We expect this to be a long-term tailwind to our adjusted EBITDA and net income, and we remain on track to be between 2x and 2.5x net average in 2026. We are also reaffirming our 2023 guidance. This includes growth of 9% to 11% in organic revenue and 8% to 10% in net revenue, $205 to $215 million in adjusted EBITDA, and between $0.31 to $0.34 adjusted EPS. We continue to expect capital expenditures of $105 to $115 million, or roughly 6.6% of revenue, including opening at least 30 to 40 new Insomnia Cookies shops and roughly 10 company-built hubs in 2025. 3.

We expect this to be a long-term tailwind to our adjusted EBITDA and net income and we remain on track between two times and two point five times net purchase in 2026.

We are also reaffirming our 2023 guidance. This includes growth of 9 to 11 percent in organic revenue, an 8 to 10 percent in net revenue, $205 to $215 million in adjusted EBITDA, and between 31 cents to 34 cents adjusted EPS. We continue to expect capital expenditures of $105 to $105 million in adjusted EBITDA.

[Analyst]: 3.

Jeremiah Ashukian: Our 2023 guidance continues to include modest headwinds from foreign exchange rates for the year, which has roughly negative 1% impact on revenue growth and approximately $3 million hit to adjusted EBITDA. While the impact for the full year is negative, in the second half of 2023 we'll start to see the benefits year over year from foreign exchange at current US dollar rates, particularly in the fourth quarter as the dollar peaked in early December 2022. Despite seeing roughly $25 to 30 million in lower revenue from exiting Branded Sweet Treats for the balance of the year, we remain confident in our guidance range for 2023 and are currently trending to be towards the middle or higher end of our revenue and adjusted EBITDA ranges.

Our 2023 guidance continues to include modest headwinds from foreign exchange rates for the year, which has roughly negative 1% impact on revenue growth and approximately $3 million hit to adjusted EBITDA. While the impact for the full year is negative, in the second half of 2023 we'll start to see the benefits year over year from foreign exchange at current US dollar rates, particularly in the fourth quarter as the dollar peaked in early December 2022. Despite seeing roughly $25 to 30 million in lower revenue from exiting Branded Sweet Treats for the balance of the year, we remain confident in our guidance range for 2023 and are currently trending to be towards the middle or higher end of our revenue and adjusted EBITDA ranges.

a monthly negative 1% impact on revenue growth and approximately $3 million hit to adjust the diva. While the impact for the full year is negative, in the second half of 2023, we'll start to see the benefits year over year from foreign exchange at current US dollar rates, particularly in the fourth quarter, as the dollar peaked in their early December 2022. Despite saying roughly 25 to $30 million, lower revenue from exiting brands, which raised for the balance of the year, we remain confident in our guidance.

Jeremiah Ashukian: We have good momentum in the business, and I continue to have a high degree of confidence that we can meet or even exceed our long-term outlook in 2026, which we provided at our Investor Day operator. We can open up the call to Q&A now, please.

We have good momentum in the business, and I continue to have a high degree of confidence that we can meet or even exceed our long-term outlook in 2026, which we provided at our Investor Day operator. We can open up the call to Q&A now, please.

Operator: We will now begin the question and answer session. If you have a question, please press Star one on your telephone keypad. One moment for your first question. Your first question comes from the line of John Ivanko of JPMorgan. Please go ahead.

We will now begin the question and answer session. If you have a question, please press star one on your telephone keypad. One moment for your first question.

Your first question comes from the line of John Ivanko of JP Morgan.

[Analyst]: Hi. Thank you, Mike. I like the quote, thinking like a doughnut logistics company, and obviously there's a lot of implications in that. I guess a couple things. Talk about your intelligence or skill, your capabilities. Probably best word of really evaluating profitability per DFD account. I mean, is that something particularly in the US that you're specifically honing in on, and maybe a related kind of comment to that. McDonald's is on a demand planning model, which means they order and actually own the product once it goes in the back door. I don't think that's the case in other US accounts. Is that kind of a possibility for you going forward as you maybe reduce some of the risk of your business and have a more predictable profitability of each drop each day to each account?

John Ivanko: Hi. Thank you, Mike. I like the quote, thinking like a doughnut logistics company, and obviously there's a lot of implications in that. I guess a couple things. Talk about your intelligence or skill, your capabilities. Probably best word of really evaluating profitability per DFD account. I mean, is that something particularly in the US that you're specifically honing in on, and maybe a related kind of comment to that. McDonald's is on a demand planning model, which means they order and actually own the product once it goes in the back door. I don't think that's the case in other US accounts. Is that kind of a possibility for you going forward as you maybe reduce some of the risk of your business and have a more predictable profitability of each drop each day to each account?

Please go ahead. Hi, thank you. Mike, I'd like to quote thinking like a donut logistics company. And obviously there's a lot of implications in that. So I guess a couple things. Talk about your intelligence or skill, your capabilities, probably best word. A really evaluating profitability per DFD account. I mean, is that something particularly in the US? You know that?

business and have a more predictable profitability of each drop each day to each account. Hey John , how you doing? I'm good morning. I'll start with the McDonald's piece today. I think as you think about the demand planning piece I'm out of that they do.

Mike Tattersfield: Hey John, how you doing?

Mike Tattersfield: Good morning. I'll start with the McDonald's piece today. I think as you think about the demand planning piece that they do, it's pretty interesting. It's actually something we do in other markets. Right. It's not the first time we've done this, but it's sometimes consumer centric that really works for them and the uniqueness, it could even be the drop that we're doing today where we still do our own route system and actually drop to each McDonald's individually. You can do a center drop where another logistic team can then do the drop as well. That opportunity from where they own the demand planning is something that we look for in customers, and we continue to see that as viable options anytime we look at different channels to see if that opportunity exists. Josh, I'll pass it on.

Good morning. I'll start with the McDonald's piece today. I think as you think about the demand planning piece that they do, it's pretty interesting. It's actually something we do in other markets. Right. It's not the first time we've done this, but it's sometimes consumer centric that really works for them and the uniqueness, it could even be the drop that we're doing today where we still do our own route system and actually drop to each McDonald's individually. You can do a center drop where another logistic team can then do the drop as well. That opportunity from where they own the demand planning is something that we look for in customers, and we continue to see that as viable options anytime we look at different channels to see if that opportunity exists. Josh, I'll pass it on.

It's pretty interesting. It's actually something we do in other markets, right? So it's not the first time we've done this, but it's sometimes consumer centric that really works for them. And the unique this could even be the drop that we're doing today where we still do our own route system and actually drop.

to each McDonald individually or you can do a center drop where another logistic team can then do the drop as well. So that opportunity from where they own the demand planning is something that we look for in customers.

And we continue to see that as viable options any time. We look at different channels to see of that opportunity exists. Josh, I'll pass it on in terms of a, you were trying to get into the sophistication of how we're thinking about a logistics company.

Mike Tattersfield: In terms of you were trying to get into the sophistication of how we're thinking about a logistics company, anything you'd like to add on that?

In terms of you were trying to get into the sophistication of how we're thinking about a logistics company, anything you'd like to add on that?

to see that as viable options anytime we look at different channels to see if that opportunity exists. Josh, I'll pass it on in terms of you were trying to get into the sophistication of how we're thinking about a logistics company. Anything you'd like to add on that? Yeah.

Operator: Sure.

Josh Charlesworth: Sure. Hi John, I think that you mentioned the profitability per DFD account, and profitability in DFD has obviously significantly improved over the last couple of years as we've gone to selling the same doughnuts as in our donut shop at the same source but very close price point. That applies across all these channels, including the McDonald's opportunity. From there, the profitability is impacted by how quickly you can make the delivery, get in and out of the store, whether it's prepack doughnuts or a high proportion of loose, which are. We're selling both in the McDonald's example. Then, yeah, the sophistication of adding more trucks and routes is why Mike, I think, referenced the logistics company in the earlier remarks.

Joshua Charlesworth: Hi John, I think that you mentioned the profitability per DFD account, and profitability in DFD has obviously significantly improved over the last couple of years as we've gone to selling the same doughnuts as in our donut shop at the same source but very close price point. That applies across all these channels, including the McDonald's opportunity. From there, the profitability is impacted by how quickly you can make the delivery, get in and out of the store, whether it's prepack doughnuts or a high proportion of loose, which are. We're selling both in the McDonald's example. Then, yeah, the sophistication of adding more trucks and routes is why Mike, I think, referenced the logistics company in the earlier remarks.

Sure, hi John . I think that you mentioned the profitability for DFD account and profitability in DFD have obviously significantly improved over the last couple of years as we've gone, but you're selling the same doughnuts as in our doughnut shop at the same source, but very close price point.

And that applies across all these channels, including the McDonald's opportunity, from their the profitability's impact by how quickly you can make the delivery get in and out of the store, whether it's pre-packed donuts or a high proportion of loose, which we're selling both in McDonald's example. And then yeah, the sophistication.

Joshua Charlesworth: Just take for example with the McDonald's in Kentucky test, adding trucks, adding significant production, doubling production in those existing hubs completely sort of changes the context of us becoming much more of an operator behind the scenes as well as obviously up front at the donut counter. That we're seeing with a lot of our DFD partners. Walmart continues to grow, adding new points of access, with Target adding both prepacked donuts and these cabinets, these bigger, more premium merchandising units. That all introduces complexity for us to manage. We're certainly stepping up to the game right now and seeing the profitability pretty consistent across all those different DFD customers.

Just take for example with the McDonald's in Kentucky test, adding trucks, adding significant production, doubling production in those existing hubs completely sort of changes the context of us becoming much more of an operator behind the scenes as well as obviously up front at the donut counter. That we're seeing with a lot of our DFD partners. Walmart continues to grow, adding new points of access, with Target adding both prepacked donuts and these cabinets, these bigger, more premium merchandising units. That all introduces complexity for us to manage. We're certainly stepping up to the game right now and seeing the profitability pretty consistent across all those different DFD customers.

doubling production in those existing hubs completely sort of changes the context of us becoming much more of an operator behind the scenes as well as obviously up front at the donut counter. And that we're seeing with a lot of our DSD partners. Shop continues to grow adding new points of access with Target.

adding both pre-packed O&R sand and these cabinets, these higher, bigger, more premium merchandise in units, that all introduces complexity for us to manage. But we're certainly stepping up to the game right now and seeing the profitability pretty consistent across all those different throughout the game, so we continue to get up from 40 of these relatively happy Verdemort ?rees from which installation becomes relatively steep, as this game, is?ancing.

[Analyst]: There's not another example of a quick service chain that I can think of in the US. Maybe I could think hard that gets seven day a week delivery of a perishable product, which yours functionally is because it has to be sold the day that they get it. How is McDonald's of the 170 stores kind of doing with that? I mean, do all 170 stores continue to want to have donuts seven days a week? Might it be a Friday to Sunday kind of business? Or they want to have products available to customers whenever they order. Just give us a little bit, to whatever extent you're comfortable on this call, give us a little bit more insight. 170 stores is something bigger than just a test. It's like basically a market rollout of how that market experience is going, if we can.

John Ivanko: There's not another example of a quick service chain that I can think of in the US. Maybe I could think hard that gets seven day a week delivery of a perishable product, which yours functionally is because it has to be sold the day that they get it. How is McDonald's of the 170 stores kind of doing with that? I mean, do all 170 stores continue to want to have donuts seven days a week? Might it be a Friday to Sunday kind of business? Or they want to have products available to customers whenever they order. Just give us a little bit, to whatever extent you're comfortable on this call, give us a little bit more insight. 170 stores is something bigger than just a test. It's like basically a market rollout of how that market experience is going, if we can.

There's not another example of a quick service chain that I can think of in the U.S.

i don't know if i'm a big think hard you know that gets seven day a week delivery of a perishable product which yours functionally is because you have to be sold the day that they get it uh... how is mcdonald you know the hundred and seventy stores kind of doing with that i mean this do also hundred and seventy stores continue to want to have don't have seven days a week of you might it be uh... you know friday the sunday kind of business or you know it's like you were what they want to have products available to cut

Mike Tattersfield: Sure.

Josh Charlesworth: Sure. Well, I mean as I mentioned earlier, we're really pleased from an operating point of view how it's going. As I mentioned, getting those production hubs to pretty much double their production overnight, our Krispy Kreme has really sort of stepped up to the game. We're only six weeks in though, so it's too early to share too many specific results around it. Very specifically about our experience with the McDonald's restaurants, I mean, we're finding that the hours that we're able to operate, often during operating hours, opening hours during the day, actually even complementary to what we do with, for example, our other grocery customers, which often need very early morning drops, the McDonald's restaurants are able to do other times of the day. That’s working well.

Joshua Charlesworth: Well, I mean as I mentioned earlier, we're really pleased from an operating point of view how it's going. As I mentioned, getting those production hubs to pretty much double their production overnight, our Krispy Kreme has really sort of stepped up to the game. We're only six weeks in though, so it's too early to share too many specific results around it. Very specifically about our experience with the McDonald's restaurants, I mean, we're finding that the hours that we're able to operate, often during operating hours, opening hours during the day, actually even complementary to what we do with, for example, our other grocery customers, which often need very early morning drops, the McDonald's restaurants are able to do other times of the day. That’s working well.

you know, set getting those production hubs to double their production overnight. Our Krispy Kreme has really sort of stepped up to the game. Roney six weeks in though. So it's too early to sort of share too many specific results around it. Very specifically about our experience with a Dmitron's restaurant. I mean, we're finding that.

the hours that we're able to operate, often during operating hours, or opening hours during the day, actually even complimentary to what we do with, for example, or other grocery customers, which often need very early morning drops. The McDonald's restaurant's not available to do it other times of the day, so that's working well. We're doing it daily as you say.

Joshua Charlesworth: We're doing it daily, as you say, and we've been very clear, and actually McDonald's has been a fantastic partner so far in understanding this is a fresh daily proposition. That's how we see our Delivered Fresh Daily business and channel expanding, whether it's in QSR or some of these other newer channels that I mentioned earlier. I think that we certainly see it as a fresh daily business. That's how we've built it, providing those amazing donuts to folks off premise in all these more convenient locations. Because, as you may have heard us say before, the number one reason why somebody might not buy Krispy Kreme is just they didn't come across it. It's not convenient to them. An opportunity like this obviously makes it a lot more convenient for them when they see it.

We're doing it daily, as you say, and we've been very clear, and actually McDonald's has been a fantastic partner so far in understanding this is a fresh daily proposition. That's how we see our Delivered Fresh Daily business and channel expanding, whether it's in QSR or some of these other newer channels that I mentioned earlier. I think that we certainly see it as a fresh daily business. That's how we've built it, providing those amazing donuts to folks off premise in all these more convenient locations. Because, as you may have heard us say before, the number one reason why somebody might not buy Krispy Kreme is just they didn't come across it. It's not convenient to them. An opportunity like this obviously makes it a lot more convenient for them when they see it.

We certainly see it as a fresh daily business, that's how we've built it, providing those amazing donuts to folks off-premise in all these more convenient locations, because as you may have heard us say before, the number one reason why somebody might not buy Krispy Kreme is just they didn't come across it, it's not convenient for them, and an opportunity like this obviously makes it a lot more convenient for them.

Mike Tattersfield: Yeah, only add one thing, John, to keep in mind as well. It's a different need states when you're looking at the QSR.

Joshua Charlesworth: Right.

Right. What are they using it for, what type of pack, and all those things. We will always do what we do in our routing system. Right. Deliver fresh daily, and then you adjust to what needs states like McDonald's or any other QSR would look at. This is what I need for my customer base.

Mike Tattersfield: What are they using it for, what type of pack, and all those things.

Mike Tattersfield: We will always do what we.

Mike Tattersfield: Do in our routing system. Right. Deliver fresh daily, and then you adjust to what needs states like McDonald's or any other QSR would look at. This is what I need for my customer base.

to what needs state click McDonald's or any other QSR would look at. This is what I need for my customer base. Thank you. Your next question comes from the line of Bill Chappell of Trist Securities. Please go ahead. Thanks. Good morning.

Operator: Thank you. Your next question comes from the line of Bill Chappell of William Blair. Please go ahead.

[Analyst]: Thanks. Good morning.

Bill Chappell: Thanks. Good morning.

Mike Tattersfield: Good morning.

[Analyst]: A couple, I guess, quick ones. One just on the Sweet Treats discontinuation line. There are many things you could have done with that. I mean, you could have licensed it and just kept the product in the store. You could have sold the business outright. Stuff like that. Was the thought that it's really just a focus on fresh and you don't want the name to be attributed with kind of multi day old type products, or, you know, was it too much competition? Just trying to understand as you go forward, you know, what other opportunities you would look at to extend the brand versus keeping it just all fresh.

Bill Chappell: A couple, I guess, quick ones. One just on the Sweet Treats discontinuation line. There are many things you could have done with that. I mean, you could have licensed it and just kept the product in the store. You could have sold the business outright. Stuff like that. Was the thought that it's really just a focus on fresh and you don't want the name to be attributed with kind of multi day old type products, or, you know, was it too much competition? Just trying to understand as you go forward, you know, what other opportunities you would look at to extend the brand versus keeping it just all fresh.

I mean you could have licensed it and just kept the product in the store. You could have sold the business outright, stuff like that. It was the thought that it's really just a focus on fresh and you don't want the name to be attributed with multi-day old type products.

or you know, was it too much competition to try and understand as you go forward, you know, what other opportunities you would look at to extend the brand versus keeping it just all fresh.

Mike Tattersfield: You know, Bill, it's Mike again. With the amount of growth that we have, not just in the US but in the international markets and even our market development, including Insomnia. For Krispy Kreme in particular, the fresh business is just absolutely growing significantly. How to make sure that we can look at where do we want to allocate resources, where do we want to allocate capital, how do we want to make sure that we can continue to improve the DFD experience, logistics. It was a pretty simple call for us in terms of this is where we should be. What we did learn again is that the brand does translate in that category, but at this point in time, we're focusing our energy on fresh.

So, you know, Bill, it's Mike again. With the amount of growth that we have, not just in the US, but in the international markets and even our market development, including insomnia, but for Krispy Kreme in particular, the fresh business is just absolutely growing significantly and how to make sure that we can look at.

Where do we want to allocate resources? Where do we want to allocate capital? How do we want to make sure that we can continue to improve the DFT experience logistic? It was a pretty simple call for us in terms of this is where we should be. What we did learn again is that the brand does translate in that category, but at this point in time, we're focusing our energy on fresh.

[Analyst]: Got it. I think you talked about a lot of different opportunities of kind of new door expansion, but one I think you said was a test at Target. Can you maybe just give us a little more? I understand the test process because obviously a lot of Targets don't offer donuts of any sort or have a bakery in store. It's a different kind of customer mix, different kind of look and feel from kind of a grocery or even a club. Just trying to understand, you know, how that works and what's kind of the opportunity behind that.

Bill Chappell: Got it. I think you talked about a lot of different opportunities of kind of new door expansion, but one I think you said was a test at Target. Can you maybe just give us a little more? I understand the test process because obviously a lot of Targets don't offer donuts of any sort or have a bakery in store. It's a different kind of customer mix, different kind of look and feel from kind of a grocery or even a club. Just trying to understand, you know, how that works and what's kind of the opportunity behind that. Thanks.

Got it. And then the second, I think you talked about a lot of different opportunities of kind of new door expansion, but one I think you said was a test at Target. Can you maybe just give us a little more? I understand the test. I can see that.

I'll find the thought process because I'd say a lot of targets don't offer donuts of any slower to have a bakery in store. It's a different kind of customer mix, different kind of looking field from kind of a grocery or even a club. And so just try to understand how that works and what's kind of the opportunity behind that. Thanks. Here's your end in Dallas. We've been able.

Operator: Thanks.

Joshua Charlesworth: Yeah, sure. In Dallas, we've been able a few months ago to list in a few Targets, around 20, with originally our prepackaged range that we typically have seen in other big grocery players. What's really interesting is Target has been great to talk to, and they've been asking us about how we can present the brand in different ways. We talk to them a lot about our cabinet merchandising units, these premium units that offer both loose and prepackaged doughnuts alongside each other. The test that we've got running in Dallas is now also we've got five locations doing that with those. Of course, they are much higher sales per door for us, and they're really interested in that. We've also talked to them about expanding the prepackaged doughnuts to the Chicago market as well. It's early days.

Josh Charlesworth: Yeah, sure. In Dallas, we've been able a few months ago to list in a few Targets, around 20, with originally our prepackaged range that we typically have seen in other big grocery players. What's really interesting is Target has been great to talk to, and they've been asking us about how we can present the brand in different ways. We talk to them a lot about our cabinet merchandising units, these premium units that offer both loose and prepackaged doughnuts alongside each other. The test that we've got running in Dallas is now also we've got five locations doing that with those. Of course, they are much higher sales per door for us, and they're really interested in that. We've also talked to them about expanding the prepackaged doughnuts to the Chicago market as well. It's early days.

talked to and they've been asking us about how we can present the brand in different ways. And we talked to them a lot about our cabinet merchandising units, these premium units that offer both loose and prepackaged doughnuts alongside each other.

And the test that we've got running in Dallas is now also, we've got five locations doing that with those. And of course they are much higher sales per door for us and they're really interested in that. We've also talked to them about expanding the pre-packed donuts to Chicago market as well. So it's.

Joshua Charlesworth: What's really promising is that with us they're looking for ways to show why Krispy Kreme is a premium, differentiated offering, and it's obviously something that has real promise.

What's really promising is that with us they're looking for ways to show why Krispy Kreme is a premium, differentiated offering, and it's obviously something that has real promise.

Operator: Thank you. Your next question comes from the line of Andrew Wolf of C.L. King. Please go ahead.

Thank you. Your next question comes from the line of Andrew Wolf of CL King. Please go ahead. Hi, good morning.

[Analyst]: Hi, good morning. I just kind of want to contrast or ask you to contrast the, you know, the sales and profit performance in the US versus the major international markets. I'm trying to, you know, frame it in different ways, but it seems like, you know, the velocities are much different at same doors, and obviously you referenced that the price, the cost increases are now accelerating in some of these international markets. Could you just unpack some of that either by contrasting it or just talking about the international markets directly in terms of same store, you know, like the UK being down obviously, at least in units, and so sort of, you know, why it is in the quarter and why the outlook, you know, what's the outlook in the UK and maybe Australia as well.

Andrew Wolf: Hi, good morning. I just kind of want to contrast or ask you to contrast the, you know, the sales and profit performance in the US versus the major international markets. I'm trying to, you know, frame it in different ways, but it seems like, you know, the velocities are much different at same doors, and obviously you referenced that the price, the cost increases are now accelerating in some of these international markets. Could you just unpack some of that either by contrasting it or just talking about the international markets directly in terms of same store, you know, like the UK being down obviously, at least in units, and so sort of, you know, why it is in the quarter and why the outlook, you know, what's the outlook in the UK and maybe Australia as well.

I kind of want to contrast or ask you to contrast the sales and profit performance in the US versus the US.

the major international markets. I'm trying to frame it in different ways, but it seems like the velocities are much different at same doors. And obviously you referenced that the price, the cost increases are now accelerating in some of these international markets. Could you just unpack some of that? Either by contrasting it or just talking about the international markets directly in terms of the international markets.

same store, like the UK being down, obviously, at least in units. And so, sort of, you know, why it is in the quarter and why the outlook, you know, what's the outlook, you know, in the UK and maybe Australia as well.

Joshua Charlesworth: I'll kick off, Andrew, by talking a little bit about the international sales, and I'm going to hand over to Jeremiah to talk about profit. I think, I mean, all the markets, all the international markets delivered growth, with Japan and Canada, as I mentioned, being the highest, over 35%. Australia, you asked about, low double-digit performance from them. UK, more mid-single digits. I mean, we're seeing as we look across the international markets, DFD points of access are a very big driver. Pricing, obviously, a driver of growth that we've got. Markets also adding around the world new DFD doors, like we described and discussed in the US, including with new channels. I mean, Costco in Canada is one of the big drivers of that growth up there. Also listed at Costco in the UK during the quarter.

Mike Tattersfield: I'll kick off, Andrew, by talking a little bit about the international sales, and I'm going to hand over to Jeremiah to talk about profit. I think, I mean, all the markets, all the international markets delivered growth, with Japan and Canada, as I mentioned, being the highest, over 35%. Australia, you asked about, low double-digit performance from them. UK, more mid-single digits. I mean, we're seeing as we look across the international markets, DFD points of access are a very big driver. Pricing, obviously, a driver of growth that we've got. Markets also adding around the world new DFD doors, like we described and discussed in the US, including with new channels. I mean, Costco in Canada is one of the big drivers of that growth up there. Also listed at Costco in the UK during the quarter.

I'll kick off, Andrew, by talking a little bit about the international sales and then I'll have Jeremiah talk about profit, I think. All the markets, all the international markets deliver growth. With Japan and Canada, as mentioned being the highest, over 35%. Australia you asked about.

low double digit performance from them, UK more mid single digits. I mean we're seeing as we look across the international markets, DFD points of access, very big driver of pricing, obviously a driver of growth. We've got markets also adding around the world, new DFD doors, like we described and discussed in the US including with new channels.

Joshua Charlesworth: I mean, overall on the UK, which we have talked a lot about with the backdrop of some of the economic challenges there, we are seeing retail business in double-digit growth. We can see it's people are still excited to come out to a doughnut shop for Valentine's event or other sort of celebrations. In DFD, the supermarket shoppers seem to be a little more careful in the UK with their basket size. It's not growing as much in DFD. There are a few ups and downs, but generally I would say it's good growth, strong performance. In terms of DFD door performance specifically, we are now seeing that we've still got a way to go, but the US is closing the ground with its growth in DFD door weekly sales to get up to some of those international levels, which is also exciting.

I mean, overall on the UK, which we have talked a lot about with the backdrop of some of the economic challenges there, we are seeing retail business in double-digit growth. We can see it's people are still excited to come out to a doughnut shop for Valentine's event or other sort of celebrations. In DFD, the supermarket shoppers seem to be a little more careful in the UK with their basket size. It's not growing as much in DFD. There are a few ups and downs, but generally I would say it's good growth, strong performance. In terms of DFD door performance specifically, we are now seeing that we've still got a way to go, but the US is closing the ground with its growth in DFD door weekly sales to get up to some of those international levels, which is also exciting.

Costco in Canada is one of the big drivers of that growth up there. Also listed at Costco in the UK during the quarter. I mean overall on the UK which we have talked a lot about with the backdrop of some of the economic challenges there. We are seeing retail business in double-digit growth. We can see it's doing it. People are still excited to come out to a donut shop for Valentine's event or other.

We're now seeing that there's still got a way to go, but the US is closing the ground with its growth in DSD door weekly sales to get up to some of those international levels, which is also exciting. Joe, mind you want to talk about the profit a little more? Yeah, thanks for the question, Andrew. And I think where I'll start is you look at a macro level, the international margins are slightly accretive to the US, but despite some of the challenges we're seeing today, they are still quite proffs.

Joshua Charlesworth: Jeremiah, do you want to talk about profit a little more?

Jeremiah, do you want to talk about profit a little more?

Jeremiah Ashukian: Yeah, yeah, thanks for the question, Andrew. I think where I'll start is you look at a macro level, the international margins are slightly accretive to the US, but despite some of the challenges we're seeing today, they are still quite profitable, and over the medium to longer term, we do expect to generate 20% plus margins in our international equity markets. What I would say is they're going through a bit of challenge at the moment since we're kind of more challenged the most from a margin perspective. The international teams are very focused around driving efficiencies and continue to be very agile on the pricing front. The UK and Mexico have already taken mid to high single digit pricing in the first quarter, with Australia planned to take price in the high single digit in Q2.

Jeremiah Ashukian: The only thing I'll add is in Australia, in addition to inflation, we're experiencing some kind of cost growing pains. It launches into DFD and Woolworths, and we're still kind of fine tuning the demand and supply planning models there, and seeing a higher level of waste that the team is working on fixing. Again, overall in the longer term, we continue to expect decent, accretive margins in our international kind of markets.

The only thing I'll add is in Australia, in addition to inflation, we're experiencing some kind of cost growing pains. It launches into DFD and Woolworths, and we're still kind of fine tuning the demand and supply planning models there, and seeing a higher level of waste that the team is working on fixing. Again, overall in the longer term, we continue to expect decent, accretive margins in our international kind of markets.

in mid to high single digit pricing in the first quarter with Australia plan to take price in the high single digit in Q2. The only thing I'll add is, you know, in Australia, in addition to inflation, we're experiencing some kind of cost growing pains as it launches into DSD and Woolworths. And we're still kind of fine tuning the demand and supply planning models there and seeing a higher level of waste that the team is working on fixing. But.

Mike Tattersfield: Okay, sort of a follow up that's kind of my summary takeaway is that it's more, it sounds like the profitability being down in these markets as a total is more regarding, you know, rapid cost inflation versus, you know, price realization or catching up in price, more so than DFD store productivity. Is that the profit? Is that the right takeaway? How we think about profitability? As you're adding, you know, increasing pricing, you know, the profitability will increase since the velocity seem to be not really an issue.

Andrew Wolf: Okay, sort of a follow up that's kind of my summary takeaway is that it's more, it sounds like the profitability being down in these markets as a total is more regarding, you know, rapid cost inflation versus, you know, price realization or catching up in price, more so than DFD store productivity. Is that the profit? Is that the right takeaway? How we think about profitability? As you're adding, you know, increasing pricing, you know, the profitability will increase since the velocity seem to be not really an issue.

Again, overall in the longer term we continue to expect decent accretive margins in our international kind of markets. Okay, so sort of a follow up that's kind of my summary takeaway is that it's more, it sounds like the profitability being down in these markets as a total is more...

regarding rapid cost inflation versus price realization or catching up to the price more so than DFD store productivity. for of that

Is that the right takeaway, how we think about profitability? And as you're adding, you know, increasing pricing, you know, the profitability will increase, since the velocity seems to be not really an issue.

Jeremiah Ashukian: I think that's fairly accurate, Andrew.

Jeremiah Ashukian: I would say, you know, the nuance on pricing is we were probably a bit behind in international markets, and now we're catching up for that. We do expect improvements in the back half.

I would say, you know, the nuance on pricing is we were probably a bit behind in international markets, and now we're catching up for that. We do expect improvements in the back half. So.

I think that's fairly accurate, Andrew, and I would say the nuance on pricing is we were probably a bit behind in international markets, and now we're catching up for that, so we do expect improvements in the back half.

Joshua Charlesworth: So.

Operator: Thank you again. If you'd like to ask a question, press Star, then the number one on your telephone keypad. Your next question comes from the line of Sarah Santoro of Bank of America. Please go ahead.

Thank you. Again, if you would like to ask a question, press star, then the number one on your telephone keypad. Your next question comes from the line of Sarah Sanatori of Bank of America. Please go ahead. Thank you, Sarah.

Sarah Santoro: Thank you. Question on the DFD doors in the US. You mentioned growth in sales per door. I guess couple clarifications. One is, are you seeing any difference as you add new kinds of doors? Is that a reflection on your mix of doors, or is that strictly just existing doors or the same door sales, if you will. On that point, do you have any kind of insights you can give as you're testing with grocery stores, Target? I know you mentioned that you're not seeing any cannibalization from the McDonald's test. That's obviously a question that comes up a lot.

Sarah Sartori: Thank you. Question on the DFD doors in the US. You mentioned growth in sales per door. I guess couple clarifications. One is, are you seeing any difference as you add new kinds of doors? Is that a reflection on your mix of doors, or is that strictly just existing doors or the same door sales, if you will. On that point, do you have any kind of insights you can give as you're testing with grocery stores, Target? I know you mentioned that you're not seeing any cannibalization from the McDonald's test. That's obviously a question that comes up a lot.

Thank you. Question on the DFT doors in the U.S. I mentioned growth in sales per door. I guess a couple of clarifications.

Are you seeing any difference as you add any kinds of doors? Is that a reflection on your mix of doors or that strictly just existing doors, you know, or the same sort of same door sales, if you will? And on that point, do you have any kind of insights you can give as you're testing, you know, with grocery stores?

Sarah Santoro: Anything you can share about differences in terms of the types of the end customer use cases and just how you think about density, the number of doors per capita, or anything that can help people get comfort with the absence, I guess, of cannibalization as you continue to densify DFD doors? Thanks.

Anything you can share about differences in terms of the types of the end customer use cases and just how you think about density, the number of doors per capita, or anything that can help people get comfort with the absence, I guess, of cannibalization as you continue to densify DFD doors? Thanks.

about your density, sort of the number of doors per capita or anything that can help people get comfort with you know the the absence I guess of analyzations as you continue to densify DFD doors. Thanks.

Joshua Charlesworth: Hi Sarah, a few questions around DFD there. I think I'll start with the trends on weekly sales for DFD. Very positive, including on the existing doors. Some of that is just momentum, some of it's pricing. A big part is the specialty donuts. More premium priced specialty donuts are doing really well and helping us deliver record performance weeks. When we have a Biscoff or a Valentine's or St. Patrick's Day, a Spring Minis for Easter in the range. What's really good is even on a day like a St. Patrick's Day or a Valentine's Day, we're putting them on for a couple of weeks in the lead up, and we're seeing good sales performance throughout that two weeks. That is helping us a lot with that performance on the existing doors. Interestingly, the new doors, we're finding they are at least as good.

Josh Charlesworth: Hi Sarah, a few questions around DFD there. I think I'll start with the trends on weekly sales for DFD. Very positive, including on the existing doors. Some of that is just momentum, some of it's pricing. A big part is the specialty donuts. More premium priced specialty donuts are doing really well and helping us deliver record performance weeks. When we have a Biscoff or a Valentine's or St. Patrick's Day, a Spring Minis for Easter in the range. What's really good is even on a day like a St. Patrick's Day or a Valentine's Day, we're putting them on for a couple of weeks in the lead up, and we're seeing good sales performance throughout that two weeks. That is helping us a lot with that performance on the existing doors. Interestingly, the new doors, we're finding they are at least as good.

Hi Sarah, a few questions around DFD there. I think I'll start with the trends on weekly sales for DFD, very positive, including on the existing doors. Some of that is just momentum, some of it's pricing. But also a big part is...

the specialty donuts, more premium-price specialty donuts, doing really well and helping us deliver record performance weeks when we have a bisgoth or a Valentine's or a St. Patrick's Day, a spring mini-sferista in the range. And what's really good is even on a day like some Patrick's Day or a Valentine's Day weeks.

We're putting them on for a couple of weeks in the lead up and we're seeing good sales performance throughout that two weeks. So that is helping us a lot with that performance on the existing doors. Interestingly, the new doors we're finding they are at least as good in front many of the new doors are better.

Joshua Charlesworth: In fact, many of the new doors are better than sales performance right now. Partly we think that's because we're expanding with new customers, new channels. Certainly as we see it right now in the US, not only do we not see cannibalization, but the incrementality is very, very clear. I called it out for McDonald's just because that was such a growth in just a couple of cities and we were curious ourselves, yet we haven't seen it impact there. I don't think we know the full answer about where it is. I mean, do remember that 6,000 doors in the US is still a fraction of all the grocery convenience.

In fact, many of the new doors are better than sales performance right now. Partly we think that's because we're expanding with new customers, new channels. Certainly as we see it right now in the US, not only do we not see cannibalization, but the incrementality is very, very clear. I called it out for McDonald's just because that was such a growth in just a couple of cities and we were curious ourselves, yet we haven't seen it impact there. I don't think we know the full answer about where it is. I mean, do remember that 6,000 doors in the US is still a fraction of all the grocery convenience.

sales performance right now. Partly we think that's because we're expanding with new customers, new channels, and so certainly as we see it right now in the US, not only do we not see cannibalization, but the incrementalities.

is very, very clear. I called it out to McDonald's just because that was such a growth in just a couple of cities and we were curious ourselves. And yet we haven't seen an impact there. So I don't think we know the full answer about where it is. But I mean, do remember that 6,000 dollars in the US is still a fraction of all the grocery convenience and actually other places where people are looking for food.

Joshua Charlesworth: Actually, other places where people are looking to purchase, arguably if you add in QSRs, club, drug, you know, you're getting upwards of half a million locations where people we now realize could well be looking through the convenience, through the opportunity of having a special doughnut occasion that they will pick up our doughnuts. Cannibalization is just not really on our mind. A more mature market like the UK, where you have a lot more points of access, we also have seen the data there is even if the doughnuts in a Tesco right next to a subway station, they don't see cannibalization. It continues to be the case that shoppers go to these locations for different reasons. They're not going to the Target, the Walmart, McDonald's necessarily for a doughnut, they're going for something else.

Actually, other places where people are looking to purchase, arguably if you add in QSRs, club, drug, you know, you're getting upwards of half a million locations where people we now realize could well be looking through the convenience, through the opportunity of having a special doughnut occasion that they will pick up our doughnuts. Cannibalization is just not really on our mind. A more mature market like the UK, where you have a lot more points of access, we also have seen the data there is even if the doughnuts in a Tesco right next to a subway station, they don't see cannibalization. It continues to be the case that shoppers go to these locations for different reasons. They're not going to the Target, the Walmart, McDonald's necessarily for a doughnut, they're going for something else.

it's just not really on our mind. A more mature market like the UK where you have a lot more points of access we also have seen the data there is even if the doughnuts are in a Tesco right next to a subway station they don't see cannibalization so it continues to be the case that shoppers go to these locations for different reasons.

Joshua Charlesworth: Whilst they're there, they go, wow, it's available here, I'll pick it up. We're still relatively infrequent, three times a year, even in DFD. I think that the way we're thinking about it is let's just make it more convenient. Let's get those awesome fresh doughnuts to people where they want to pick them up. We're just learning as we go that the demand is there in multiple locations.

Whilst they're there, they go, wow, it's available here, I'll pick it up. We're still relatively infrequent, three times a year, even in DFD. I think that the way we're thinking about it is let's just make it more convenient. Let's get those awesome fresh doughnuts to people where they want to pick them up. We're just learning as we go that the demand is there in multiple locations.

They're not going to the target, the Walmart, the models necessarily for a donut, they're going for something else and whilst they're there, they go out, it's available here, I'll pick it up. And we're still resident-freecredits, three times a year, even in DFT. So I think that the way we're thinking about it is let's just make it more convenient and let's get those awesome fresh donuts.

the people where they want to pick them up. And we're just learning as we go that the demand is there in multiple locations.

Mike Tattersfield: The only other thing I'd add, Sarah, is your first question started out with a difference, and we see one thing. When we get the full assortment cabinet in place, the customer really reacts. Sometimes we see up to 2x of the sales of what's there in front of it. They get a broader range, they can see the donuts, they can choose to make their own. You get a broader representation of Krispy Kreme. That's a big deal.

The only other thing I'd add to the Tizzers first question start out with a difference. We see one thing when we get the full assortment cabinet in place. The customer really reacts. Sometimes we see up to two X of the sales of what's there in front of it. So then they get a broader range. They can see the donuts. They can choose, make your own.

Sarah Santoro: Great. Thank you very much.

Sarah Sartori: Great. Thank you very much.

You get a broader representation of Krispy Kreme. That's a big deal.

for all the representation of Krispy Kreme. That's a big deal. Great. Thank you very much.

Operator: Thank you. Your next question comes from the line of Brian Harbour of Morgan Stanley. Please go ahead.

Thank you. Your next question comes from the line of Brian Harper of Morgan Stanley . Please go ahead. Yeah, thank you. Good morning. Good morning guys. Maybe just first, could you dig into your comments on e e commerce a little bit? Certainly I'm I'm sure insomnia has has kind of helped there as that's grown quickly. But how about just for the crispy.

[Analyst]: Yeah, thank you. Good morning, guys. Maybe just first, could you dig into your comments on E-commerce a little bit? Certainly. I'm sure Insomnia has kind of helped there as that's grown quickly. How about just for the Krispy Kreme brand specifically, has that been driven more by delivery recently, or have you done more to kind of promote online ordering, for example?

Brian Harbour: Yeah, thank you. Good morning, guys. Maybe just first, could you dig into your comments on E-commerce a little bit? Certainly. I'm sure Insomnia has kind of helped there as that's grown quickly. How about just for the Krispy Kreme brand specifically, has that been driven more by delivery recently, or have you done more to kind of promote online ordering, for example?

Joshua Charlesworth: Well, yeah, I mean, definitely. E-commerce has been really, really strong for us in recent times on the Krispy Kreme side and the Insomnia Cookies side. To your question, on the Krispy Kreme side, we've been making improvements to the web and the app experience to literally just make it easier to use and increase the conversion rate from when a customer first goes on the site or the app to making a purchase. We have indeed continuously been looking to add to the delivery areas. We do have some dark shops that we've been adding to the system that's helped us with that. We've also worked a lot on very much more basic things around ensuring that when people pre-order, the donuts are always there. It sounds obvious, but on these big event days, people want a Valentine's Day donut, St. Patrick's Day donut.

Josh Charlesworth: Well, yeah, I mean, definitely. E-commerce has been really, really strong for us in recent times on the Krispy Kreme side and the Insomnia Cookies side. To your question, on the Krispy Kreme side, we've been making improvements to the web and the app experience to literally just make it easier to use and increase the conversion rate from when a customer first goes on the site or the app to making a purchase. We have indeed continuously been looking to add to the delivery areas. We do have some dark shops that we've been adding to the system that's helped us with that. We've also worked a lot on very much more basic things around ensuring that when people pre-order, the donuts are always there. It sounds obvious, but on these big event days, people want a Valentine's Day donut, St. Patrick's Day donut.

question on the on the Christie Cream site we've been making improvements to the web and the app experience to literally just make it easier to use and increase the conversion rate from when a customer first goes on the site or the app to making a purchase. We have indeed continuously been looking to add

to the delivery areas. We do have some dark shops that we've been adding to the system that's helped us with that. We've also worked a lot on very much more basic things around ensuring that when people pre-order, the donuts are always there. It sounds obvious but on these big event days, people want a Valentine's donut, a Central Patrick's Day donut.

Joshua Charlesworth: We've really focused on E-commerce because a lot of people are ordering well in advance. They want to be part of that celebratory occasion and guarantee their doughnuts. We're finding that sometimes it's those most simple operating focus delivers the growth as much as improving the brand and what have you. We do, as we look ahead, see an opportunity on loyalty to relaunch loyalty, and we'll be looking to do that in the US early next year, really to make it more intuitive. The loyalty program we have now in the US, over 11 million loyalty members. We really see the opportunity to drive more E-commerce growth with them by relaunching the loyalty program.

We've really focused on E-commerce because a lot of people are ordering well in advance. They want to be part of that celebratory occasion and guarantee their doughnuts. We're finding that sometimes it's those most simple operating focus delivers the growth as much as improving the brand and what have you. We do, as we look ahead, see an opportunity on loyalty to relaunch loyalty, and we'll be looking to do that in the US early next year, really to make it more intuitive. The loyalty program we have now in the US, over 11 million loyalty members. We really see the opportunity to drive more E-commerce growth with them by relaunching the loyalty program.

We've really focused on e-commerce because a lot of people are ordering well in advance. They want to be part of that celebratory occasion and guarantee their doughnuts. And we're finding that sometimes it's those most simple operating focus delivers the growth as much as improving the brand and what have you.

We do, as we look ahead, see an opportunity on loyalty to relaunch loyalty and we'll be looking to do that in the US early next year, really to make it more intuitive, the loyalty program. We have now in the US over 11 million loyalty members.

but we really see the opportunity to drive more e-commerce growth with them by relaunching the loyalty program. So yeah, it's been really great to see more than 20% growth in e-commerce in the US in the last quarter and we'll continue to focus on that along with the DFD.

Joshua Charlesworth: Yeah, it's been really, really great to see more than 20% growth in e-commerce in the US in the last quarter, and we'll continue to focus on that along with the DFD.

Yeah, it's been really, really great to see more than 20% growth in e-commerce in the US in the last quarter, and we'll continue to focus on that along with the DFD.

[Analyst]: Okay, thanks. You know, in the past you provided comments just on labor cost inflation and also kind of input cost inflation and how much of that is contracted. Could you just update us on that, if it's changed at all versus your prior comments, and if you have any more plans for pricing in the US in the near term.

Brian Harbour: Okay, thanks. You know, in the past you provided comments just on labor cost inflation and also kind of input cost inflation and how much of that is contracted. Could you just update us on that, if it's changed at all versus your prior comments, and if you have any more plans for pricing in the US in the near term.

Okay, so thanks and then, you know, in the past, you'd provided comments just on labor cost inflation and also kind of input cost inflation and. And how much of that is contracted? Could you just update us on that? If it's changed at all versus.

Jeremiah Ashukian: Yes, Brian, I can take that, and thanks for the question. For key commodities like sugar, wheat, edible oils, we're essentially locked in with low double-digit inflation on average for the year. Higher increases obviously in the front half of the year, as I think I probably would have talked about in the last call, with a little softening inflation in the second half. We're also starting to look out into 2024 as well as we start to think about the commodity outlook and pictures. With respect to the question around pricing, we have taken additional pricing in several markets year to date already, including Mexico. As I mentioned, the UK, the US also took low double-digit price, and we'll continue to be agile as the market unfolds and have planned pricing, as I mentioned, for Australia in Q2, but also Insomnia.

kind of your prior comments and then if you have any more plans for pricing in the US in the near term. Yeah, Brian , I can take that and thanks for the question. For key commodities like sugar, wheat, edible oils, we're essentially locked in with low double-digit inflation on average for the year.

High increases obviously in the front half of the year is I think I probably would have talked about in the last call with a little softening inflation in the second half. We're also starting to look out in the 2024 as well as we start to think about the commodity outlook and pitchers. With respect to the question around pricing, we have taken additional pricing in several markets year to date already.

Jeremiah Ashukian: What I would say as well, the only other thing that will help with kind of price realization for our business is just this focus on premium specialty campaigns, as we obviously have a nice pricing tier when we do those activities.

What I would say as well, the only other thing that will help with kind of price realization for our business is just this focus on premium specialty campaigns, as we obviously have a nice pricing tier when we do those activities.

for our business as just as focused on premium specialty campaigns. We obviously have a nice pricing here when we do those activities. So just to clarify one thing on the pricing, we've been taking pricing a little more on DFD. So the low double-digit, the GERM line reference was on DFD. We're taking low single-digit pricing on retail. We just did so again, but we're doing it more frequently.

Joshua Charlesworth: Just to clarify one thing on the pricing, we've been taking pricing a little more on DFD. The low double digit Jeremiah referenced was on DFD. We're taking low single digit pricing on retail. We just did so again, but we're doing it more frequently as we look to make sure that when the customer sees our donuts, it's at a similar price point across all the channels. One of our strategic goals.

Josh Charlesworth: Just to clarify one thing on the pricing, we've been taking pricing a little more on DFD. The low double digit Jeremiah referenced was on DFD. We're taking low single digit pricing on retail. We just did so again, but we're doing it more frequently as we look to make sure that when the customer sees our donuts, it's at a similar price point across all the channels. One of our strategic goals.

as we look to make sure that when the customer sees our down-ups at a similar price point across all the channels, one of our strategic goals.

Operator: Thank you. Your next question comes from the line of David Palmer of Evercore. Please go ahead.

Thank you. Your next question comes from the line of David Palmer of Evercore. Please go ahead.

[Analyst]: Thanks. Just a couple questions or follow ups on the McDonald's stuff. Given the numbers you gave, the doubling the sales of those hubs in that market, it would imply something like $200 per day per McDonald's in Krispy Kreme sales, which might be about 2% of the sales of the McDonald's. Is that way off? If not, I wonder how McDonald's would view that given what they will be putting into this and the incrementality, of course, of those sales. Any thoughts on all of that?

David Palmer: Thanks. Just a couple questions or follow ups on the McDonald's stuff. Given the numbers you gave, the doubling the sales of those hubs in that market, it would imply something like $200 per day per McDonald's in Krispy Kreme sales, which might be about 2% of the sales of the McDonald's. Is that way off? If not, I wonder how McDonald's would view that given what they will be putting into this and the incrementality, of course, of those sales. Any thoughts on all of that?

Thanks, just a couple questions or follow-ups on the McDonald's stuff. In the numbers you gave with the doubling the sales of those hubs in that market.

It would imply something like $200 per day per McDonald's in Krispy Kreme sales, which might be about 2% of the sales of a McDonald's. Is that way off? And if not, I wonder how McDonald's would view that given what they will be putting into this and the incrementality, of course, of those sales. Any thoughts on all of that?

Joshua Charlesworth: Yeah, it's definitely too early for us to get into the performance measures. Just six weeks in, my comments focused on the three production hubs that cover a big area across the whole of that Kentucky co-op. Obviously, those hubs, how we saw an opportunity within them. We actually have a hub without spokes also in Kentucky. We saw the opportunity there to really ramp up production and support them in the way that's needed. We'll continue to partner with them on what's the right way of doing this, what are the right targets, what are the right measures. They're the experts on the impact on McDonald's. I think we really focus on the things that really we can control, which is make sure the doughnuts are there at the right time, the doughnuts at the right level that are ordered by them.

Josh Charlesworth: Yeah, it's definitely too early for us to get into the performance measures. Just six weeks in, my comments focused on the three production hubs that cover a big area across the whole of that Kentucky co-op. Obviously, those hubs, how we saw an opportunity within them. We actually have a hub without spokes also in Kentucky. We saw the opportunity there to really ramp up production and support them in the way that's needed. We'll continue to partner with them on what's the right way of doing this, what are the right targets, what are the right measures. They're the experts on the impact on McDonald's. I think we really focus on the things that really we can control, which is make sure the doughnuts are there at the right time, the doughnuts at the right level that are ordered by them.

Yeah, it's definitely too early for us to get into the performance measures, just six weeks. In my comments focused on the three production hubs that cover a big area across the whole of that Kentucky co-op and obviously those hubs, how we saw an opportunity within them, we actually have a hub without spokes also in the...

in Kentucky, so we saw the opportunity there to really ramp up production and support them in the way that's needed. And we'll continue to partner with them on what's the right way of doing this, what are the right targets, what are the right measures. They're the experts on the impact on McDonald's. I think we really focus on the things that really we can control, which is make sure the donuts are there and make sure the drive isime is successful,

Joshua Charlesworth: As was discussed earlier, they're advising us on how many doughnuts they want rather than us guessing it. It's a great partnership. We love the way we're working with them, obviously they're being thoughtful about things that are important to them, and we're focusing on the things that we can control.

As was discussed earlier, they're advising us on how many doughnuts they want rather than us guessing it. It's a great partnership. We love the way we're working with them, obviously they're being thoughtful about things that are important to them, and we're focusing on the things that we can control.

[Analyst]: Any sense of the next steps, if this is successful, if they think that this is a good partnership, what would happen next? I guess maybe related to that, about your fulfillment of this if it went national, how many McDonald's within reach of Krispy Kreme hubs today as it stands. Thanks.

David Palmer: Any sense of the next steps, if this is successful, if they think that this is a good partnership, what would happen next? I guess maybe related to that, about your fulfillment of this if it went national, how many McDonald's within reach of Krispy Kreme hubs today as it stands. Thanks.

to the things that we can control. If any sense of the next steps, you know, if this is successful, if they think that this is a good partnership, you know, what would happen next? And I guess maybe related to that about your fulfillment of this, if it went national.

Joshua Charlesworth: Yeah, I mean we've no plans yet to expand beyond Kentucky or anything like that. We expect to be doing this test with them for months, and I'm sure that they will be evaluating all sorts of parameters important to them. Regarding your more general question about capacity, if you step back and just, we have been, not just because of McDonald's, but because of this DFD growth of all these customer types, we have been thinking about the future and what happens. If you recall Investor Day, we said that we thought there was about 15,000 points of access opportunity in the US. That's part of that 75,000 number that Mike referenced. We have been looking at our ability to fulfill that.

Josh Charlesworth: Yeah, I mean we've no plans yet to expand beyond Kentucky or anything like that. We expect to be doing this test with them for months, and I'm sure that they will be evaluating all sorts of parameters important to them. Regarding your more general question about capacity, if you step back and just, we have been, not just because of McDonald's, but because of this DFD growth of all these customer types, we have been thinking about the future and what happens. If you recall Investor Day, we said that we thought there was about 15,000 points of access opportunity in the US. That's part of that 75,000 number that Mike referenced. We have been looking at our ability to fulfill that.

How many McDonald's within reach of crispy cream hubs today as it stands? Yeah, I mean, with no plans yet to expand beyond Kentucky or any of that, it's a big big speck to be doing this test with them for months and I'm sure that they will be evaluating all sorts of parameters.

important for them. Regarding your question, more general question about capacity, if you step back and just and we have been McDonald's but because of this DFD growth all these customer types We have been thinking about the future and what happens if you recall investor day we said

that we thought there was about 15,000 points of access opportunity in the US, that's part of that 75,000 number that Mike referenced. And so we've been looking at about our ability to fulfill that. We have 6,000 points of access today, give or take that we service. We think we can add about 50% to that with our adding to production around the system.

Joshua Charlesworth: We have 6,000 points of access today, give or take, that we service. We think we can add about 50% to that without adding to production around the system. Once you start getting beyond that, you start to look indeed at our proximity to all our different DFD customers and their locations, both in existing channels and new channels. To go beyond that would require us to unlock new capacity in some target locations. We're starting to look into how we can do that, whether it's at our existing sites, because some of them can be adapted, or new ones. I mean, for that 15,000 points of access, though, do bear in mind that our production hubs can support a lot of DFD doors, especially when they're designed with that in mind: smaller lobbies, bigger loadout areas, places to put trucks.

We have 6,000 points of access today, give or take, that we service. We think we can add about 50% to that without adding to production around the system. Once you start getting beyond that, you start to look indeed at our proximity to all our different DFD customers and their locations, both in existing channels and new channels. To go beyond that would require us to unlock new capacity in some target locations. We're starting to look into how we can do that, whether it's at our existing sites, because some of them can be adapted, or new ones. I mean, for that 15,000 points of access, though, do bear in mind that our production hubs can support a lot of DFD doors, especially when they're designed with that in mind: smaller lobbies, bigger loadout areas, places to put trucks.

Once you start getting beyond that, you start to look indeed at our proximity to all our different DFD customers and their locations both in existing channels and new channels. And so to go beyond that would require us to unlock new capacity and some target locations. And we're starting to look into how we can do that. Whether it's at our existing sites.

because some of them can be adapted or new ones. I mean for that 15,000 points of access though, do bear in mind that our production hubs can support a lot of DFD doors, especially when they're designed with that in mind. Smaller lobbies, bigger loadout areas, places to put trucks.

Joshua Charlesworth: A lot of our US shops are not set up for that. Future production hubs that we could invest in will be able to support a lot of doors. When you start to do the math to get to that sort of 15,000 DFD opportunity that we mentioned at the investor day for all those DFD customers, still about 30 to 40 additional hubs we're talking about to get all the way there. We're focused with McDonald's just on the test, delivering great doughnuts fresh every day. That's what we know how to be an expert on. We're thinking more broadly around growth and fulfilling the 75,000 opportunity around the world with 15,000 in the US, and we'll go from there. Most important is those awesome doughnuts.

A lot of our US shops are not set up for that. Future production hubs that we could invest in will be able to support a lot of doors. When you start to do the math to get to that sort of 15,000 DFD opportunity that we mentioned at the investor day for all those DFD customers, still about 30 to 40 additional hubs we're talking about to get all the way there. We're focused with McDonald's just on the test, delivering great doughnuts fresh every day. That's what we know how to be an expert on. We're thinking more broadly around growth and fulfilling the 75,000 opportunity around the world with 15,000 in the US, and we'll go from there. Most important is those awesome doughnuts.

there's certainly still about 30 to 40 additional hubs we're talking about to get all the way there. So we're focused on, with McDonald's just on the test, delivering great donuts, fresh every day. That's what we know how to be an expert on. We're thinking more broadly around growth and fulfilling the 75,000 opportunity around the world.

Operator: Thank you. Your next question comes online of John Tower of Citigroup. Please go ahead.

[Analyst]: Great, thanks. Maybe just following up to that question. I don't believe the test with McDonald's is exclusive. Can you talk about your thinking around the US QSR market? Would you wait until the end of the test or trial period with McDonald's before potentially looking at other QSR operators, and then kind of thinking more broadly beyond the US, how should we think about the opportunity outside in some of these international markets where there are plenty of QSR brands that probably would be looking to add some sweet treats to their lineup?

Jon Tower: Great, thanks. Maybe just following up to that question. I don't believe the test with McDonald's is exclusive. Can you talk about your thinking around the US QSR market? Would you wait until the end of the test or trial period with McDonald's before potentially looking at other QSR operators, and then kind of thinking more broadly beyond the US, how should we think about the opportunity outside in some of these international markets where there are plenty of QSR brands that probably would be looking to add some sweet treats to their lineup?

Great, thanks. Maybe just following up to that question. I don't believe the test with McDonald's is exclusive. So can you talk about your thinking around the US QSR market? Would you wait until the end of the test or trial period with McDonald's before potentially looking at other QSR operators and then...

Kind of thinking more broadly beyond the US, how should we think about the opportunity outside in some of these international markets where there are plenty of QSR brands that probably would be looking to add some sweet treats to their lineup? Yes, so it's Mike again.

Mike Tattersfield: Yeah, it's Mike again. When we thought about partnering with McDonald's, you can attest there's a lot of learnings that are going to happen with McDonald's as we start to expect. What does that mean in the QSR space? We're learning. What we're learning is we can deliver to the QSR space. When you look at, hey, are you ready to go beyond other partners, we really like the partnership with McDonald's as it stands today. We're going to continue to learn both from each other and see where it grows. If you look outside the world, there's plenty of other spaces and partners out there, but we're going to focus on McDonald's as a partner.

So when we thought about partnering with McDonald's and you're going to a test, there's a lot of learnings that are going to happen with McDonald's as we start to explore what does that mean in the QSR space. We're learning. What we're learning is we can deliver to the QSR space and then when you look at, hey, are you ready to go beyond.

Other partners, we really like the partnership with McDonald's as it stands today. We're going to continue to learn both from each other and see where it grows if you look outside the world. There's plenty of other spaces and partners out there, but we're going to focus on McDonald's as a partner right now. Got it. Switching gears a little bit. In terms of the business, I think Mike, you mentioned in the remarks earlier that about 40% of the business today comes from special events. I understand that many different agencies try to match that effort even if the process is agencies themselves. But heck no, they don't accept it at a dev Ackles. What we're going to do is at aSee, what we're going to do is utilize as an executive order in terms of how but then the GEmilyAlexander lodge.

Mike Tattersfield: Right.

[Analyst]: Got it. Switching gears a little bit in terms of the business, I think, Mike, you mentioned in the remarks earlier that about 40% of the business today comes from special events. I'm curious, outside of these special events, key holiday windows, Valentine's Day, St. Patrick's Day, how are you getting consumers to or what are you doing to try and drive that non special event window going forward? Is it just expanding points of access, or even just at the existing hubs today? What are you doing to try and lift existing sales per box?

Jon Tower: Got it. Switching gears a little bit in terms of the business, I think, Mike, you mentioned in the remarks earlier that about 40% of the business today comes from special events. I'm curious, outside of these special events, key holiday windows, Valentine's Day, St. Patrick's Day, how are you getting consumers to or what are you doing to try and drive that non special event window going forward? Is it just expanding points of access, or even just at the existing hubs today? What are you doing to try and lift existing sales per box?

So, I'm curious, you know, that outside of these special events, key holiday windows, you know, Valentine's Day, St. Patrick's Day, how are you getting consumers to, or what are you doing to try and drive kind of that non-special event window going forward? Is it just expanding points of access or even just at the existing hubs today? You know, what are you doing to try and lift existing sales per box? Our focus is looking atucking customers, moving them to better uses, toBOs, where we do whatever it takes to take home Meyer & and

Mike Tattersfield: Right.

Mike Tattersfield: Right. When we reference the 40%, we reference it because the product, the dozens that are actually bought, 40% are gifted a lot of times. That's the real big number from, and that gets into people's special occasions, right, not just the Valentine's Day, not just the St. Patrick's Day. Those are great, they create a lot of energy, just the ideation of premiumization of donuts where you've seen an English brand that they brought around the world, a few places such as Biscoff, right. You can see how that can, as you premiumize the brand and people engage in it. The biggest opportunity is still about access, right, so getting the DFD and growing our business through the DFD and getting the customers is how they continue to be engaged with Krispy Kreme.

Mike Tattersfield: When we reference the 40%, we reference it because the product, the dozens that are actually bought, 40% are gifted a lot of times. That's the real big number from, and that gets into people's special occasions, right, not just the Valentine's Day, not just the St. Patrick's Day. Those are great, they create a lot of energy, just the ideation of premiumization of donuts where you've seen an English brand that they brought around the world, a few places such as Biscoff, right. You can see how that can, as you premiumize the brand and people engage in it. The biggest opportunity is still about access, right, so getting the DFD and growing our business through the DFD and getting the customers is how they continue to be engaged with Krispy Kreme.

Right, so when we reference the 40%, right, we reference it because the product that dozens that are actually bought, 40% are gifted a lot of times. So that's the real big number from a...and that gets into people's special occasions, not just the Valentine's Day, not just the St. Patrick's Day. Those are great. They create a lot of energy. But just the ideation of premiumization of donuts, where you've seen...

an English brand that they brought around the world to be places such as Biscoth. So you can see how that can, as you preemmise the brand and people engage in it.

The biggest opportunity still is about access, right? So getting the DFT and growing our business is through the DFT and getting the customers is how they continue to be engaged with Krispy Kreme. When we can bring that total donut experience that you can see in the shop and bring it to actually a DFT door.

Mike Tattersfield: When we can bring that total donut experience that you can see in the shop and bring it to actually a DFD door, that's when people really start also to connect with the brand because it's clearly an opportunity. On top of that, you can see the growth that's happening in E-commerce. Right, where consumers choosing where they want to be and when they want to get the donuts, that really matters.

When we can bring that total donut experience that you can see in the shop and bring it to actually a DFD door, that's when people really start also to connect with the brand because it's clearly an opportunity. On top of that, you can see the growth that's happening in E-commerce. Right, where consumers choosing where they want to be and when they want to get the donuts, that really matters.

Operator: Thank you. There are no further questions at this time. We'll turn the call over to Mike Tattersfield, President and Chief Executive Officer, for closing remarks. Please go ahead.

Thank you. There are no further questions at this time. We'll turn the call over to Mike Tattersfield, President and Chief Executive Officer for closing remarks. Please go ahead.

Mike Tattersfield: Appreciate everybody listening to our story this quarter, and thank you for that. I really appreciate all the Krispy Kremers around the world that make this happen every single day. Thank you. See you next quarter. Ciao.

So, appreciate everybody listening to our story this quarter and thank you for that and I really appreciate all the Krispy Kremers around the world that make this happen every single day. Thank you, see you next quarter. Ciao.

Operator: This concludes today's conference call. You may now disconnect.

This concludes today's conference call. You may now disconnect.

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