Q4 2023 Krispy Kreme Inc Earnings Call
Operator: Thanks for standing by. My name is Mandeep, and I will be your conference operator. At this time, I'd like to welcome everyone to the Krispy Kreme fourth quarter 2023 earnings call. All lines are being placed on me to prevent any background noise.
Thank you for standing by my name is Martin deep and I will be your conference operator today at this time I'd like to welcome everyone to the Krispy Kreme fourth quarter 2023 earnings call.
All lines have been placed on mute to prevent any background noise.
Operator: After the speaker remarks, there will be a question and answer session. At that time, you may simply ask a question by pressing star one on your telephone keypad. I would now like to turn the call over to Ms. Stephanie Daukus, Vice President of Investor Relations. Ms. Daukus, please go ahead.
After the Speakers' remarks, there will be a question answer session.
At that time, you may simply asked the question by pressing star one on your telephone keypad.
I would now like to turn the call over to MS. Stephanie Daucus, Vice President of Investor Relations.
Mr. <unk>. Please go ahead.
Thank you good morning, everyone and welcome to Krispy, Kreme fourth quarter and full year 2023 earnings call.
Stephanie Daukus: Thank you. Good morning, everyone, and welcome to Krispy Kreme's fourth quarter and full year 2023 earnings call. Thank you for joining us today. Our earnings release and associated earnings presentation, which we will be referencing during the call, are available on our investor relations website at investors.krispykreme.com. Joining me on the call this morning are Josh Charlesworth, Chief Executive Officer, and Jeremiah Ashukian, Chief Financial Officer. After prepared remarks, there will be a question and answer session.
Thank you for joining us today, our earnings release and associated earnings presentation, which we will be referencing during the call are available on our Investor Relations website at investors <unk> Krispy Kreme dotcom.
Joining me on the call. This morning are Jos Charles Worth Chief Executive Officer, and Jeremy you can Chief Financial Officer. After prepared remarks, there will be a question and answer session.
Stephanie Daukus: Before we begin, I would like to remind you that this call contains forward-looking statements made pursuant to the safe harbor provisions of the Private Securities and Litigation Reform Act of 1995, including statements of expectations, future events, or future financial performance. Forward-looking statements involve a number of inherent risks and uncertainties, and we caution investors that these risks could cause actual results to differ materially from those contained in any forward-looking statement. These factors and other risks and uncertainties are described in detail in the company's Form 10-K filed with the SEC for the year ended January 1, 2023, and in the other filings we make from time to time with the SEC. Forward-looking statements made today are 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 include certain non-GAAP financial measures. A reconciliation between non-GAAP financial measures and our closest comparable GAAP measure can be found in our fourth quarter 2023 earnings press release in Form 8K filed today with the SEC and is also available at our investors.krispykreme.com website. With that, I'll turn the call over to Josh.
Before we begin I would like to remind you that this call contains forward looking statements made pursuant to the safe Harbor provisions of the private Securities Litigation Reform Act of 1995, including statements of expectations future events or future financial performance.
Forward looking statements involve a number of inherent risks and uncertainties and we caution investors that these risks could cause actual results to differ materially from those contained in any forward looking statements.
These factors and other risks and uncertainties are described in detail in the company's Form 10-K filed with the SEC for the year ended January one 2023 and in the other filings we make from time to time with the SEC.
Forward looking statements made today are only as of today. The company assumes no obligation to publicly update or revise any forward looking statements, except as maybe required by law.
Additionally, today's call will include certain non-GAAP financial measures a reconciliation between non-GAAP financial measures and our closest comparable GAAP measure can be found in our fourth quarter 2023 earnings press release and form 8-K filed today with the SEC and is also available at our investors that Krispy kreme.
Dot com website.
That I'll turn the call over to Josh.
Joshua Charlesworth: Good morning, everyone, and thank you for joining us today. I'm so excited for what is ahead of us at Krispy Kreme. Our strategy is clear to make our fresh donuts available in more places and keep reminding people of the joy that is Krispy Kreme. Not just to eat, but to share and give to others.
Good morning, everyone and thank you for joining us today.
I'm. So excited for what is ahead of us a crispy Craig.
Strategy is clear to make all fresh donuts available in more places and keep reminding people of the joy that as crispy cream, well just to be sure and give to others.
Joshua Charlesworth: We made great progress on this in 2023, with strong consumer demand and increased access to our fresh doughnuts in both existing and new markets around the world. We also improved profitability as we grew, demonstrating the productivity benefits of our unique hub-and-spoke operating model. As we move forward in 2024, we will continue to offer new and exciting specialty premium doughnuts, upgrade our digital commerce capabilities, and expand the availability of our donuts around the world, including in our newer sales channels like club stores and quick service restaurants. We will also increase our efforts to modernize the making and moving of doughnuts to ensure we deliver high-quality, profitable growth. Let me summarise the key messages from today.
We made great progress on this in 2023 with strong consumer demand and increased access to our fresh donuts in both existing and new markets around the world.
We also improved profitability as we group demonstrating the productivity benefits of our unique hub and spoke operating model.
As we move forward in 2024, we will continue to offer new and exciting specialty premium Donuts app.
Grade, our digital commerce capabilities and expand the availability of our donuts around the world, including in our newest sales channels like club stores and quick service restaurants.
We will also increase our efforts to modernize the making of moving of donuts to ensure we deliver high quality profitable Greg.
Let me summarize today's key messages.
Joshua Charlesworth: We continued to deliver double-digit organic revenue growth with all markets and channels growing sales. We expanded profit margins by leveraging existing production hubs to support our growth, especially in the U.S., where operating leverage was strongest. Our ongoing strategy is to scale the business efficiently by adding more fresh points of access. There are now more than 14,100 places where you can buy our melt-in-your-mouth fresh doughnuts in 39 countries.
We continued to deliver double digit organic revenue growth with all markets and channels growing sales.
We expanded profit margins by leveraging existing production hubs to support our growth, especially in the U S where operating leverage was strongest.
Our ongoing strategy is to scale the business efficiently, but adding more fresh points of access there are now more than 14100 places when you combine our melts in your mouth fresh donuts in 39 countries.
Our focus on operating excellence means that we are building both the bigger embedded krispy kreme business.
Joshua Charlesworth: And finally, we are introducing our 2024 outlook, with organic growth expected to translate into adjusted EBITDA expansion, reflecting our intent to drive increasingly profitable growth. We delivered 13.2% organic revenue growth in the fourth quarter, ahead of our guide, and 12.2% organic revenue growth for the full year. This performance reflected strong consumer demand, with people choosing to celebrate Halloween, Thanksgiving, and the holiday season with premium-priced specialty donuts from Krispy Kreme, including a Scooby-Doo dozen and our first ever elf donut collection celebrating the 20th anniversary of the family favorite holiday movie.
And finally, we are introducing our 2020 outlook with organic growth expected to translate into adjusted EBITDA expansion, reflecting our intent to drive increasingly profitable growth.
We delivered 13, 2% organic revenue growth in the fourth quarter ahead of our guide and 12, 2% organic revenue growth for the full year.
This performance reflected strong consumer demand with people choosing to celebrate Halloween Thanksgiving and the holiday season with premiums priced specialty donuts from Krispy Kreme.
Including a Scooby Doo doesn't in our first ever Donut collection celebrating the 20th anniversary of the family favorite holiday movie.
Joshua Charlesworth: Tie-ins like this helped create tremendous excitement for the brand in 2023, and we finished the year with over 40 billion media impressions. Reflecting how well Krispy Kreme's fresh and innovative donuts resonated with the consumer, eCommerce also continues to play a bigger role within our business, growing over 25% in the fourth quarter, driven by new loyalty members, which now total over 15 million, as well as operational improvements to our website, app, and in-shop availability. Organic growth was also driven by adding new points of access, which increased by 743, a much stronger fourth quarter expansion than in prior years, reflecting the growing demand from existing and new partners who want to make everybody's favorite fresh doughnuts available to their customers. The same goes for new countries, with Krispy Kreme opening in Ecuador and France in the fourth quarter to add to Jamaica, Kazakhstan, Switzerland, Chile, and Costa Rica, which were all added earlier in the year.
Tie ins like this helped create tremendous excitement for the brand in 2023, and we finished the year with over 40 billion media impressions.
How well crispy creams, fresh and innovative donuts resonated with the consumer.
E. Commerce also continues to play a bigger role within our business growing over 25% in the fourth quarter, driven by new loyalty members, which now total over $15 million as well as operational improvements to our website App and.
And in shelf availability.
Organic growth was also driven by adding new points of access which increased by 743.
Much stronger fourth quarter expansion than in prior years, reflecting the growing demand from existing and new partners, who want to make everybody's favorite fresh donuts available to their customers.
The same goes for new countries with Krispy Kreme opening in Ecuador in France in the fourth quarter, So I have to Jamaica, Kazakhstan, Switzerland, Chile, and Costa Rica, which were all added earlier in the year.
The continued expansion of our hub and spoke model delivered productivity growth and increased profitability in the fourth quarter with adjusted EBITA margin, improving 40 basis points to 14, 2%.
Joshua Charlesworth: The continued expansion of our hub-and-spoke model delivered productivity growth and increased profitability in the fourth quarter, with adjusted EBITDA margin improving 40 basis points to 14.2%. The hub-and-spoke model is becoming more productive as we add more points of access without adding significantly more production hubs. We ended 2023 with 2,300 more points of access than in 2022, mostly through DeliverFresh daily displays in grocery and convenience stores. And we did this while adding net one production hub.
The hub and spoke model is becoming more productive as we add more points of access without adding significantly more production hubs.
We ended 2023 with 2300 more points of access than in 2022, mostly to deliver fresh daily displays in grocery and convenience stores.
And we did this was adding <unk>.
One production hub.
Joshua Charlesworth: The resulting increased utilisation of our production hubs, most of which can still make twice as many doughnuts as they do today, made them more efficient and profitable. We also completed the optimisation of our production hubs without spokes in 2023, closing legacy doughnut shops which were not well suited to the strategy. Our fourth quarter and four-year results exemplify the success and power of our hub-and-spoke model, and in 2024, I look forward to us becoming a bigger and better Krispy Kreme by continuously improving our business operations as we grow. And the number one reason why someone may not buy a Krispy Kreme doughnut continues to be access and convenience.
The resulting increased utilization of our production hubs most of which can still make twice as many donuts as they do today made them more efficient and profitable. We also completed the optimization of our production hubs without folks in 2023.
Zing legacy donut shops, which were not well suited to the strategy.
Okay.
Our fourth quarter and full year results exemplify the success and power of a hub and spoke model and in 2024 and look forward to us, becoming a bigger and better krispy kreme by continuously improving our business operations as we grow.
And the number one reason why someone may not buy Krispy Kreme doughnuts continues to be access and convenience with more than 2 million locations, where we could in theory, So krispy kreme.
Joshua Charlesworth: With more than 2 million locations where we could, in theory, sell Krispy Kreme, at least in the markets we've targeted, the opportunity to expand availability is big. We have previously shared our long-term goal of opening at least 75,000 points of access around the world, yet this still represents less than 3% of the total addressable market. And we are adding new customers all the time, such as Costco in international markets and McDonald's in the US, where we have been conducting an extended test in Kentucky for much of 2023. Our relationship with McDonald's remains strong, with discussions ongoing about further expansion, and we look forward to providing updates on our quick service restaurant plans through 2024. We also expect to launch Krispy Kreme in three to five new countries in 2024, with several priority markets identified in Europe, as well as Brazil, where we just announced an exciting new partnership with the convenience store chain, A.M.P.A. We have perfected the art of making our original glazed doughnut over the last 87 years and are bringing joy to our consumers across the world.
At least in the markets, we've targeted the opportunity to expand availability is big.
We have previously shared our long term goal of opening at least 75000 points of access around the world. It still represents less than 3% of the total addressable market.
We are adding new customers all the time, such as Costco in international markets and Mcdonalds in the U S, where we have been conducting an extended test in Kentucky for much of 2023.
Our relationship with Mcdonald's remains strong with discussions ongoing about further expansion and we look forward to providing updates on our quick service restaurant plans through 2024.
We also expect to launch Krispy Kreme and three to five new countries in 2024 with several priority markets identified in Europe, as well as Brazil, where we just announced an exciting new partnership with the convenience store chain <unk>.
We have perfected the art of making our original glazed donut over the last 87 years, and bringing joy to our consumers across the world yet there remains the opportunity to modernize the way, we make a move out donuts, bringing efficiency to the process, whilst maintaining consistent high quality and service levels.
Joshua Charlesworth: Yet, there remains the opportunity to modernize the way we make and move our doughnuts, bringing efficiency to the process whilst maintaining consistent high quality and service levels. We have started 2024 by making changes to our global leadership team to reflect these opportunities, and Angelo Yochim, we are adding a new Chief Information Officer with deep digital technology experience across multiple industries. Our global supply chain leader, Sharif Riad, formerly of Mondelez, has stepped into the team, as has our US business leader, Javier Rancano, who has extensive QSR operations experience.
We have started 2024 by making changes to our global leadership team to reflect these opportunities and.
And Angela Yakin, we're adding a new chief information officer with deep digital technology experience across multiple industries.
Our global supply chain leader Sharif Riyadh, formerly a model has stepped into the team as our U S business leader Javier <unk>, who has extensive <unk> operations experience.
Joshua Charlesworth: As a leadership team, we are focused on quality fresh doughnuts in every channel, every day, expanding the use of automated doughnut making and processing and continuously improving our doughnut delivery capabilities as we support more and more points of access. An example of this is a pilot we are just starting on select routes in LA and DC to deliver our fresh donuts through a third-party logistics provider, still using dedicated Krispy Kreme trucks and drivers.
As a leadership team we are focused on quality fresh donuts in every channel every day.
Ending the use of automated donut, making and processing and continuously improving alternate delivery capabilities as we support more points of access.
An example of this is a pilot we are just starting on select routes and L. A and D. C to deliver a fresh donuts through a third party logistics provider still using dedicated krispy kreme trucks and drivers.
As we focus on our core strategy of producing selling and distributing fresh Donuts daily. We continue our strategic review of insomnia cookies with that I will turn it over to Jeremy to give further insight on our financial performance and provide an outlook for 2024.
Jeremiah Ashukian: As we focus on our core strategy of producing, selling, and distributing fresh doughnuts daily, we continue our strategic review of insomnia cooking. With that, I will turn it over to Jeremiah to give further insight on our financial performance and provide an outlook for 2024. Thanks, Josh.
Thanks, Josh and good morning, everyone as.
As Josh mentioned, we reported strong double digit fourth quarter organic growth and improved profitability for the year, demonstrating the productivity benefits of our hub and spoke model.
Jeremiah Ashukian: And good morning, everyone. (Inaudible) In the fourth quarter, we grew double-digits on both the top and bottom lines on a percentage basis, resulting in an adjusted EBITDA margin expansion of 40 basis points year-over-year to 14.2%. We saw growth in all our markets, driven by high-impact global brand activations and seasonal offerings, increased points of access, and premiumization efforts. Adjusted EBITDA grew 14.7%, outpacing revenue growth for the second consecutive quarter as we continue to realize cost efficiencies across the global business through both productivity efforts and increased utilization of our hubs. For the full year, the business performed largely in line with expectations as we delivered 12.2% organic growth, increased adjusted EBITDA by 11%, and expanded margins. Organic growth accelerated to 13.2% in the fourth quarter.
In the fourth quarter, we grew double digit on both the top and bottom line on a percentage basis, resulting in adjusted EBITDA margin expansion of 40 basis points year over year to 14, 2%.
We saw growth in all our markets driven by high impact global brand Activations and seasonal offerings increased points of access and premium amortization efforts.
Adjusted EBITDA grew 14, 7% outpacing our revenue growth for the second consecutive quarter as we continue to realize cost efficiencies across the global business through both productivity efforts increase the utilization of our hubs.
For the full year the business performed largely in line with expectations as we delivered 12, 2% organic growth increased adjusted EBITDA by 11% and expanded margins.
Organic growth accelerated to 13, 2% in the fourth quarter.
Jeremiah Ashukian: Notably, we saw growth across all our segments in 2023, on top of strong performance in 2022. In the US segment, organic revenue grew 13.7% in the fourth quarter, driven by a record holiday season. Donut offerings drove incremental sales through all channels, especially DFD, and had a positive impact on our sales. We also observed increased transaction values due to the growth of our e-commerce channel.
Notably we saw growth across all our segments in 2023 on top of strong performance in 2022.
In the U S segment organic revenue grew 13, 7% in the fourth quarter driven by a record holiday season, especially Donna offerings drove incremental sales through all channels, especially DFT.
And have positive impact on ourselves. We also observed increased transaction values due to growth of our E Commerce channel.
Jeremiah Ashukian: All of this was underpinned by our strategy of growing points of access, which grew 17.7% year-over-year, with more than 300 DFD doors added in Q4 versus Q3, and over 1,000 doors added versus 2022. At Insomnia Cookies, we observed strong organic growth of 16.3%, as well as sequential margin improvement from Q3. That said, margins in the business remain pressured given the elevated cost of cocoa.
All of this was underpinned by our strategy of growing points of access, which grew 17, 7% year over year with more than 300, DFT doors added in Q4 versus Q3 and over 1000 doors added versus 2022.
And Samir cookies, we observed strong organic growth of 16, 3% as well as sequential margin improvement from Q3.
That said margins in the business remain pressured given the elevated cost of cocoa.
Jeremiah Ashukian: The hub-and-spoke model first established in the UK and Australia is now well underway in the U.S., with several cities seeing marked improvements in profitability during the year as we add more points of access to the existing hub. This, as well as our ability to leverage pricing to offset inflation, explains the increase in sales per hub of 8.9% year over year and the subsequent 120 basis point adjusted EBITDA margin improvement for the year. In the international segment, organic revenue grew 9% year over year as we expanded points of access and leveraged global campaigns over the holiday season to drive volume of our specialty doughnuts. Most notably, we executed our ALF specialty donuts in nine markets worldwide, leveraging a single set of marketing materials, and saw great results in Mexico and the UK. Mexico was a substantial contributor to growth this quarter.
The hub and spoke model first established in the UK and Australia is now well underway in the U S with several cities, saying marked improvements in profitability during the year as we added more points of access to the existing hubs.
This as well as our ability to leverage pricing to offset inflation explains the increase in sales per hub eight 9% year over year in the subsequent 120 basis point adjusted EBITDA margin improvement for the year.
In the international segment organic revenue grew 9% year over year, as we expanded points of access and leverage global campaigns over the holiday season to drive volume of our specialty Donuts, most notably we executed our <unk> specialty donuts in nine markets worldwide, leveraging a single set of marketing materials seeing great results in Mexico and.
The U K.
Mexico was a substantial contributor to growth this quarter, we have nearly doubled points of access in Mexico through existing partners, such as OXXO with meaningful room to continue expanding in the country.
Jeremiah Ashukian: We have nearly doubled points of access in Mexico through existing partners such as OXO, with meaningful room to continue expanding in the country. We also saw successful growth in new partners such as Costco in Australia, which continues to prove to be an efficient customer, with meaningful room to continue expanding in the country. Adjusted EBITDA improved sequentially in a quarter to 20.6% with margin expansion in both Australia and Mexico.
We also saw successful growth and new partners, such as Costco in Australia, which continues to prove to be an efficient customer.
Adjusted EBITDA improved sequentially in the quarter to 26% with margin expansion in both Australia and Mexico.
Profitability continues to be pressured in the U K and we're taking actions to improve productivity.
And the market development segment organic revenue grew 19, 2% in the fourth quarter as we continue our international expansion by opening a 126 more points of access through a combination of theaters fresh.
Jeremiah Ashukian: Profitability continues to be pressured in the UK, and we're taking actions to improve productivity. In the market development segment, organic revenue grew 19.2% in the fourth quarter as we continue our international expansion by opening 126 more points of access through a combination of theatres. Fresh Ops, and DFD Doors. We opened two new markets, Ecuador and France, and expect that these two countries alone can support more than 2,000 further points of access. Most notably, Paris represented a record-breaking launch in the fourth quarter.
Fresh ups and DFT doors.
We opened two new markets, Ecuador in France, and expect that these two countries alone can support one in 2000 and further points of access.
Notably Paris represented a record breaking launch in the fourth quarter. The shop was our best performing shop worldwide on a sales basis in December.
Market development adjusted EBITDA grew 21, 1% in the fourth quarter with margins expanding by 120 basis points to 35, 4%.
Margin improvements were primarily driven by continued hub and spoke efficiencies in our equity owned Japanese and Canadian markets.
As we continue to expand globally, we expect to see high returns and international franchises. The JV structure of the French market is a Prime example of our capital light model approach, which enables earnings flow throughout significant margins.
Jeremiah Ashukian: This shop was our best-performing shop worldwide on a sales basis in December; market development adjusted EBITDA grew 21.1% in the fourth quarter, with margins expanding by 120 basis points to 35.4%. Margin improvements were primarily driven by continued hub-and-spoke efficiencies in our equity-owned Japanese and Canadian markets. As we continue to expand globally, we expect to see high returns on international franchises. The JV structure of the French market is a prime example of our capital light model approach, which enables earnings to flow through at significant margins while providing the option to take equity ownership of the market in the future.
<unk> the option to take equity ownership of the market in the future.
As you heard from Josh earlier, we announced our future entry into Brazil, using a similar approach.
For the year ending 2023, we delivered <unk> 27, and adjusted earnings per share driven by improvements in adjusted EBITDA that were offset by higher than expected depreciation and amortization as we continue to accelerate expansion, both domestically and globally at the summary of cookies.
The choice of all investments in anticipation of accelerated growth in the U S DSD business we.
We also saw increased annual interest expense as a result of the higher interest rate environment.
As a result, we saw adjusted diluted earnings per share finished lower than our original expectations. Our business fundamentals remain strong and we are confident in our ability to grow EPS. Despite remaining in the somewhat higher interest rate environment in 2024.
Jeremiah Ashukian: As you heard from Josh earlier, we announced our future entry into Brazil using a similar approach. For the year ending 2023, we deliver $0.27 in adjusted earnings per share, driven by improvements in adjusted EBITDA that were offset by higher than expected depreciation amortization as we continue to accelerate expansion both domestically and globally at Insomnia Cookies and made choiceful investments in anticipation of accelerated growth in the U.S. DFD business. We also saw increased annual interest expenses as a result of the higher interest rate environment. As a result, we saw adjusted diluted earnings per share finish lower than our original expectations.
As mentioned on previous calls in 2023, we deployed some of our operating cash flow to strategically reduce our use of vendor financing, which had an impact on net cash from operations.
For the year, we reduced vendor financing by roughly $82 million, which provide a long term tailwind of $3 million to $5 million on an annualized basis to adjusted EBITDA beginning in mid 2024.
Despite these efforts we were able to hold leverage flat through 2023, finishing the year at four one times.
We have a healthy balance sheet, having extended our maturities to 2028 in the first quarter of 2023, we closed the year with just under $40 million in cash and have access to ample liquidity through our revolver with an undrawn capacity of $159 million.
Jeremiah Ashukian: Our business fundamentals remain strong, and we are confident in our ability to grow EPS despite remaining in a somewhat higher interest rate environment in 2024. As mentioned on previous calls, in 2023, we deployed some of our operating cash flow to strategically reduce our use of vendor financing, which had an impact on net cash from operations. Over the year, we reduced vendor financing by roughly $82 million, which will provide a long-term tailwind of $3 to $5 million on an annualized basis to adjusted EBITDA beginning in mid-2024. Despite these efforts, we were able to hold leverage flat through 2023, finishing the year at 4.1 times. We have a healthy balance sheet, having extended our maturities to 2028 and the first quarter of 2023. We closed the year with just under $40 million in cash and have access to ample liquidity through a revolver with an undrawn capacity of $159 million.
We remain focused on the long term health of the business and setting up our capital structure to support growth through a strong balance sheet.
We expect to Delever in 2024 are primarily to the growth of adjusted EBITDA and running the business with an eye towards efficiency and capital expenditures as well as managing working capital over.
Over the long term, we remain on track to be between 2.0 times and two five times net leverage in 2026.
As we look forward to 2024, we're providing our outlook for the full year, which assumes a nominal impact from foreign exchange and contemplates all operations, including insomnia cookies.
For the full year 2024, we expect to deliver net revenue growth of 5% to 7% organic.
Organic revenue growth of 6% to 8% adjusted.
Adjusted EBITDA growth of 8% to 11% and adjusted diluted earnings per share of between 27% and 31.
After reporting strong double digit fourth quarter and full year organic growth in excess of our full year guidance. We remain confident in our 2020 for guidance and our ability to drive operating leverage as we become more coordinated as a global company.
Jeremiah Ashukian: We remain focused on the long-term health of the business and setting up our capital structure to support growth through a strong balance sheet. We expect to delever in 2024, primarily through the growth of adjusted EBITDA and running the business with an eye toward efficiency and capital expenditures, as well as managing working capital. Over the long term, we remain on track to be between 2.0 times and 2.5 times net leverage in 2026. As we look forward to 2024, we're providing our outlook for the full year, which assumes a nominal impact from foreign exchange and contemplates all operations, including insomnia cookies. For the full year 2024, we expect to deliver net revenue growth of 5 to 7% and organic revenue growth of 6 to 8 percent. Adjusted EBITDA growth of 8 to 11 percent and adjusted diluted earnings per share between $0.27 and $0.31.
We believe we are well positioned for sustainable high quality growth in the years to come leveraging the tools, which helped us deliver a great finish to the year in 2023.
As it relates to the first quarter, despite the harsh weather and broad parts of the U S. In January and lapping record breaking sales in the first quarter of 2023, we expect net revenue growth of 2% to 4%.
We also expect adjusted EBITDA to grow in line with the revenue growth.
We will closely monitor and adapt to changes in the market and consumer environment and I remain confident about the profitable growth potential of our business in 2024, and we're excited for a great year to come with that I'll turn it over to Josh for his closing remarks.
Thanks, Jeremy.
In summary, we are expanding availability by adding high quality productive points of access drew.
Driving operating leverage through the efficiency of our operating model.
<unk> capital return, both by leveraging existing capacity I'm, making selective investments in geographies, which have limited access to Krispy kreme today.
Jeremiah Ashukian: After reporting strong, double-digit, fourth-quarter and full-year organic growth in excess of our full-year guidance, we remain confident in our 2024 guidance and our ability to drive operating leverage as we become more coordinated as a global company. We believe we are well-positioned for sustainable, high-quality growth in the years to come, leveraging the tools which helped us deliver a great finish to the year in 2023. As it relates to the first quarter, despite the harsh weather in broad parts of the U.S. in January and lapping record-breaking sales in the first quarter of 2023, we expect net revenue growth of 2% to 4%. We also expect Adjusted EBITDA to grow in line with revenue growth.
I look forward to is building a bigger and better crispy cream in the years ahead, operator, let's now open it up to Q&A. Please.
The floor is now open for your questions to ask a question at this time simply press the star followed by the number one on your telephone keypad.
We'll now take a moment to compile our roster.
Yes.
Okay.
Our first question comes from the line of Sara Senatore with Bank of America. Please go ahead.
Hi, Good morning. This is <unk> on for Derik inventory.
Thank you Joe for last quarter. You said you were in advanced discussions about expanding that Mcdonald's partnership and we're making investments in the U S. But it looks like the 160 or so restaurants testing. The donuts has been unchanged since Q, So and I note that the press release alluded to more growth in the quick service restaurant channel, but I wanted to see if there's any more.
Joshua Charlesworth: We will closely monitor and adapt to changes in the market and consumer environment, and I remain confident about the profitable growth potential of our business in 2024. And we're excited for a great year to come. With that, I'll turn it over to Josh for his closing remarks. Thank you, Jeremiah.
Arc color you could provide on that agreement I do have a couple more questions, but I'll.
I figure I can ask them one at a time.
Sure Good morning, Jessica.
Yeah, obviously word is out in the success of all deliver fresh daily Donut program.
Several customer opportunities in existing and new channels around the world regarding quick service restaurants in the U S. Our focus does continue to be on mcdonalds.
Operator: In summary, we are expanding availability by adding high-quality, productive points of access, driving operating leverage through the efficiency of our operating model, and maximizing capital return, both by leveraging existing capacity and making selective investments in geographies which have limited access to Krispy Kreme today. All in, I look forward to us building a bigger and better Krispy Kreme in the years ahead. Operator, let's now open it up to Q&A, please. The floor is now open to your questions. To ask a question at this time, simply press the star followed by the number one on your telephone keypad.
Discussions are ongoing.
Unproductive about an expanded partnership.
We'll provide an update on that one when we have it.
Okay, Alright second question.
So in the U S and international markets revenue growth with slightly less on points of access growth.
Do you think in terms of growth in sales very hot but as we try to forecast going forward. How should we think about new points of access is it fair to assume that they will have lower volumes than the 16 basis points of access and if so is that driven by the type of door and will that change if you're accelerating expansion and to the quick service industry.
What is interesting obviously, the the three international markets the UK.
Australia and Mexico in different situations.
Operator: We'll now take a moment to compile our roster. Our first question comes from the line of Sara Senatore with Bank of America. Please go ahead. Hi, good morning. This is Jessica Afari on behalf of Sara Senatore.
K, Australia much more developed in the grocery store.
Customer mix.
Mexico really really starting out with a big opportunity in convenience stores. So you get a constant mix effect the underlying.
Jessica Owusu Afari: Thank you. So last quarter, you said you were in advanced discussions about expanding the McDonald's partnership and we're making investments in the US, but it looks like the 160 or so restaurants testing the donuts have been unchanged since 3Q. So, and I know that the press release alluded to more growth in the quick service restaurant channel, but I wanted to see if there's any more color you could provide on that agreement. And I do have a couple more questions, but I figure I can ask them one at a time. Sure, good morning Jessica.
Our performance is good.
But youre going to get these mix effects for the full costing especially in Mexico with the big opportunity with the OXXO convenience store chain.
Okay. Thank you.
And.
Could you remind us how much of your commodity basket you have locked in.
Okay.
Yes, I can I can take that Jessica and we started to put on cover on commodities early or in 2023.
We do expect to see mid to high single digit inflation overall for 2024.
Most of our commodities are now covers about 75% of them are covered the of the commodities that we actually can cover.
Joshua Charlesworth: Yeah, obviously, word is out on the success of our Deliver Fresh Daily Donut program and several customer opportunities in existing and new channels around the world. Regarding quick service restaurants in the US, our focus does continue to be on McDonald's. Discussions are ongoing and productive about an expanded partnership, and we'll provide an update on that one when we have it. What was your second question?
As it made sense for us from a pricing perspective, or just a security of supply perspective.
It's a bit of a mixed bag within that kind of high single digit.
Mid to high single digit inflation number.
Amongst our cost structure as we're forecasting inflation in excess of 20% on things like sugar, where the market remains around 10 year highs.
And low double digit inflation on things like cartons, which is a commodity we can hedge but we do expect to see some deflation in key commodities like wheat and edible oils I think it's important to note out just outside of commodities from a labor perspective, we do believe that will be subject to the wage increases in California and as a result, we continue to expect to see high single digit to low <unk>.
Jessica Owusu Afari: So, in the U.S. and international markets, revenue growth was slightly less than points-of-access growth. I know you think in terms of growth in sales per hub, but as we try to forecast sales going forward, how should we think about new points-of-access? Is it fair to assume that they'll have lower volumes than the existing base of points-of-access? And if so, is that driven by the type of store, and will that change if you accelerate expansion into the quick service industry? Well, obviously, the three international markets there are the UK, Australia, and Mexico are all in different situations, the UK and Australia much more developed in the grocery store customer mix, Mexico really starting out with a big opportunity in convenience stores, so you get a constant mix effect there; underlying performance is good, but you're going to get these mix effects for the forecasting, especially in Mexico with the big opportunity with the OXO convenience store chain. Okay, thank And could you remind us how much of your commodity basket you have locked in? Yeah, I can. I can take that, Jessica.
Double digit inflation on labor in 2024.
Okay alright. Thank you so much for your time.
Thank you.
Yes.
Our next question comes from the line of John <unk> with J P. Morgan. Please go ahead.
Hey, this is Luke job on for Jon I Havent go.
Just wondering if you could give some language around specific changes to.
Kind of the current process for model that we're that we're focused on with specific Asian to.
Modernization of the doughnut, making process and kind of especially delivery within the within that.
Sure. Thanks, Luke I'll take that yeah you.
Picks up on our efforts to modernize the way, we make and move our donuts.
Those are all the way from the sort of digitization of the process through to the automation of the doughnut, making itself and then all the way on to Upskilling, our doughnut transportation.
All in where we.
Working to ensure the freshest Donuts every time delivered as efficiently as possible. We've shared before the automation efforts, we have aligned running in New York, which is now automatically.
Jeremiah Ashukian: And we started to put on cover on commodities earlier in 2023. We do expect to see mid to high single-digit inflation overall for 2024. Most of our commodities are now covered, so about 75% of them are covered, of the commodities that we actually can cover, as it made sense for us from a pricing perspective or just a security of supply perspective.
Feeling.
Top paying and even packing the donuts, we're looking to.
Perfect that.
And then roll it out.
And as time goes on.
Then.
Regarding the logistics in particular the.
Jeremiah Ashukian: It's a bit of a mixed bag within that kind of high single-digit, mid-to-high single-digit inflation number amongst our cost structure, as we're forecasting inflation in excess of 20% on things like sugar, where the market remains around 10-year highs, and low double-digit inflation on things like cartons, which is a commodity we can't hedge, but we do expect to see some deflation on key commodities like I think it's important to note that, just outside of commodities, from a labor perspective, we do believe that we'll be subject to wage increases in California, and as a result, we continue to expect high single-digit to low double-digit inflation on labor in 2024. All right. Thank you so much for your time.
The rapid expansion of DFT means that we're becoming more logistics and becoming more and more important.
So we announced in today's call that we have a pilot covering select routes in D C and L a and that let's say.
I expect it to take about four to six months and the purpose of that.
With the third party providers to see if we can maintain quality and service, whilst being able to access new capabilities that they can bring in over time improve our operations and indeed bring more efficiency. So it's an effort and to and to continuously improve donut, making them moving.
We will provide updates as we learn more.
Great. Thanks.
Yes.
Jessica Owusu Afari: Thank you. Our next question comes from a line from Jon Ivankoe with JP Morgan. Please go ahead. Hey team, this is Luke Jobe on behalf of Jon Ivankoe.
You bet.
Our next question comes from the line of Bill <unk>.
<unk> Powell with tourists. Please go ahead.
Hi, Good morning. This is David <unk> on for Bill Chappell. Thanks for taking my question.
Lucas Elias Jobe: I'm just wondering if you could give some language around specific changes to kind of the current process or model that we're focused on with specification for the modernization of the donut making process and, especially, delivery within that. Thanks. Sure, thanks, Luke. I'll take that.
Yeah.
I just wanted to know we saw that.
Your guidance this year for fiscal year 'twenty four includes operations for insomnia cookies, but we're getting to know if you could provide a little bit of color on what the sales guide would be without the inclusion of insomnia cookies.
Yeah, I mean number one we are pleased with the performance of insomnia as the business continues to grow profitably and improve.
Joshua Charlesworth: Yeah, you picked up on our efforts to modernize the way we make and move our doughnuts. That goes all the way from the sort of digitization of the process through to the automation of the doughnut making itself, and then all the way on to upskilling our doughnut transportation. You know, all in all, we're working to ensure the freshest doughnuts every time, delivered as efficiently as possible. We've shared before about our automation efforts. We have a line running in New York, which is now automatically filling, topping, and even packing the donuts. We're looking to perfect that and then roll it out as time goes on. And then, regarding logistics, in particular, the rapid expansion of DFD means that we're becoming more, you know, logistics are becoming more and more important. So we announced on today's call that we have a pilot covering select routes in DC and LA, and that's expected to take about four to six months.
Sequentially in terms of EBITDA adjusted EBITDA improvement.
We opened a record number of cookie bakeries in 2023, we also talked about the growth rate at Insomniac 16, 3% on the earnings call as well.
There continues to be lots of.
The opportunity on this business to expand both the U S and internationally would you expect it to continue to grow.
Double digit in 2024.
But just given the fact that we're in the process as we said in Q3.
We're conducting a strategic review and we look forward to sharing more news about it.
We can I think in the last earnings call I did we'll let everybody know that we operate are or the impact on insomnia would have a roughly 100 to 200 basis point impact on the top line, though.
Excellent thanks for the color I'll pass it on.
Our next question comes from the line of Ashley Green anger with Piper Sandler. Please go ahead.
Joshua Charlesworth: And the purpose of that is to work with a third-party provider to see if we can maintain quality and service whilst being able to access new capabilities that they can bring and, over time, improve our operations and indeed bring more efficiency. So it's an effort end-to-end to continuously improve doughnut making and moving, and we'll provide updates as we learn more. Great, thanks. You bet!
Hey, good morning.
So capex came in as a percent of revenue for at <unk> for 2023 at seven 2% and the new 2024 outlook Youre targeting 7% to eight we're.
Davis Holcomb: Our next question comes from the line of Bill... Chappell with Truris. Please go ahead. Hi, good morning. This is Davis Holcomb on behalf of Bill Chappell.
We're just wondering how concrete or a number that is does that include any incremental investments you would need to make if let's say a <unk> partnership was to come to fruition in 2024.
Davis Holcomb: Thanks for taking our question. I just wanted to know that your guidance this year, for fiscal year 24, includes operations from Intamnia Cookies, but we were wanting to know if you could provide a little bit of color on what the sales guide would be without the inclusion of Intamnia Cookies. Yeah, I mean, number one, we're pleased with the performance of Insomnia as the business continues to grow profitably and improve sequentially in terms of EBITDA, adjusted EBITDA improvement. We opened a record number of cookie bakeries in 2023.
Yes, good morning <unk> so.
Since in the DSD opportunity around the world and especially in the U S, including Q ISR.
Such that we have thoughtfully.
Started making additional investments in manufacturing capacity to support it.
For example, we've secured new sites in Miami twin cities in L. A.
All conversions of existing buildings looking to accelerate time to opening to keep up with with demand.
Clarify though.
Investments, we're making there and broad support of the expansion DFT overall, so theyre not dependent specifically for example on our Mcdonald's, but the investments that we very much believe.
Jeremiah Ashukian: We also talked about the growth rate at Insomnia at 16.3% on the earnings call as well. There continues to be lots of opportunity for this business to expand both in the U.S. and internationally. We do expect it to continue to grow double digits in 2024.
A lot of sense for our business going forward.
In terms of bringing Krispy kreme to more people in those in those new channels.
Great Thanks for that.
My second question is on I think we touched on this before but it is slide 18 of your presentation. It's about average revenue per door per week for international just what's the dynamics behind its been the decrease year over year is it just opening these DFT doors and less prime locations in the earlier locations or just.
Jeremiah Ashukian: But just given the fact that we're in the process, as we said in Q3, we're conducting a strategic review and look forward to sharing more news about it when we can. I think in the last earnings call, I did let everybody know that we operate or the impact on Insomnia would have a roughly 100 to 200 basis points impact on the top line. Excellent. Thanks for the color.
Color would help thanks.
Davis Holcomb: I'll pass it. Our next question comes from the line of Aisling Grueninger with Piper Sandler. Please go ahead. Hey, good morning. So CapEx came in as a percent of revenue for 2023 at 7.2%. And with the new 2024 outlook, you're targeting seven to eight. We're just wondering how concrete of a number that is. Does that include any incremental investments you would need to make if, let's say, a QSR partnership was to come to fruition in 2024? Good morning, Aisling.
It's a great question Apd's internationally were impacted in 2002.
By the UK regulations.
That were put in place, it's called HFF, SaaS, which required us to move where the locations were in the stores, which had an immediate step down in terms of productivity.
Moving forward.
The Apd per door has been impacted by adding more convenience type locations with Josh mentioned.
Around around places like OXXO in Mexico, which on average has a smaller footprint, which would be a lower kind of dollar per door. So overall kind of the mix effect. There we'll have a prolonged we believed the apd will remain fairly flattish internationally kind of moving forward.
Aisling Ronan Grueninger: Our confidence in the DFD opportunity around the world, and especially in the US, including QSR, is such that we have thoughtfully started making additional investments in manufacturing capacity to support it. For example, we've secured new sites in Miami, Twin Cities, and LA, all conversions of existing buildings, looking to accelerate times of opening to keep up with demand. To clarify, though, the investments we're making are in broad support of the expansion of DFD overall. So they're not dependent specifically, for example, on McDonald's, but they're investments that we very much believe make a lot of sense for our business going forward, in terms of bringing Krispy Kreme to more people in those new channels. Great. Thanks for that.
Great.
Clarifying on the U S.
Interesting with IPD is growing strongly.
We're seeing that we're actually bringing on even.
Even more productive new customers and locations showing that.
No.
There is a lot of white space opportunity.
In the U S and it's interesting International Mexico. An example, where we are leaning in on convenience store in the U S is a little bit grocery stores mass.
Club stores for example, big opportunities there so the apd will evolve over time with different types of customers.
Aisling Ronan Grueninger: My second question is on I think we touched on this before, but it's in slide 18 of your presentation. It's about average revenue per door per week for international. Just what's the dynamics behind the decrease year over year? Is it just opening these DFD doors in less prime locations than the earlier locations? Or does any color help?
But all in we are seeing.
Continuously productive doors are ones that support our margin expansion plans.
Great. Thank you so much for that and I'll pass it back.
Keith.
Yes.
Again the floor is now open for your questions to ask a question simply press star followed by the number one on your telephone keypad.
Jeremiah Ashukian: Thanks. Yeah, it's a great question. APDs internationally were impacted in 2002 by the UK regulations that were put in place.
Our next question comes from the line of Daniel Glug, Glenn, though with capital One Securities. Please go ahead.
Hey, everyone. Thanks for taking my questions.
Jeremiah Ashukian: It's called HFSS, which required us to move where the locations were in the stores, which had an immediate step down in terms of productivity. Moving forward, the APD per door has been impacted by adding more convenience-type locations, which Josh mentioned, around places like OXO in Mexico, which on average is a smaller footprint and which would be a lower kind of dollar per door. So overall, kind of the mixed effect there will have a pull on. We believe the APD will remain fairly flattish internationally, kind of moving forward. You know, it's worth clarifying on the U.S. because, you know, with APDs growing strongly, we're seeing that we're actually bringing on even more productive new customers and locations, showing that, you know, that there's a lot of white space opportunity in the U.S., and interestingly, international, Mexico, an example where we are leaning in on convenience stores, and the U.S. is Great. Thank you so much for that. I'll pass it back to you.
Just going back to the U S expansion of hubs.
Mentioned, Minnesota, California, Florida, and I think new England in upstate New York, where also opportunities. So just thinking through kind of those are there certain areas you see as priorities right now and are there certain markets that you need to get open before doing like a national <unk> rollout.
Well.
Q2 is a rollout with a customer like for example, Mcdonald's.
13, 14000 restaurants in the U S. We could cover about 6000 restaurants, just with our existing networks. So your question goes to the seven or 8000, assuming youre, taking Mcdonald's as the benchmark that we would need to cover.
In areas, where mostly it's those areas you described in the country, where krispy kreme isn't today.
Plans or any way over time to open up your nose and those places in reference to the.
Miami These L a.
New England, although LNG referenced upstate New York They are all in our plans.
Naturally those that we.
Have already maxed out capacity or we've identified sites are the ones with priority prioritizing in the short term, but they all make sense for us and so we're actually looking across the country and all of those locations.
Aisling Ronan Grueninger: Thank you. Again, the floor is now open to your questions. To ask a question, simply press the star followed by the number one on your telephone keypad.
We as we build out our plans for <unk> and <unk> in the future.
Great. Thank you and then just as a follow up to that is kind of like a modeling question just around the capex spend so the 7% to 8% of revenue guidance for 2024.
Daniel Edward Guglielmo: Our next question comes from the line of Daniel Guglielmo with Capital One Security. Please go ahead. Hey, everyone. Thank you for taking my questions. Just going back to the US expansion of hubs. You mentioned Minnesota, California, Florida, and I think New England and upstate New York are also opportunities.
Just thinking about the expansion and I think you had said $3 million to $6 million for some of those hubs is there a cadence we should be thinking about quarter to quarter for the year as it can be pretty evenly spread throughout or should it be back weighted just trying to get some help there. Thank you.
Daniel Edward Guglielmo: So just thinking through kind of those, are there certain areas you see as priorities right now? And are there certain markets that you need to get open before doing like a national QSR rollout? Well, you know, if you did a sort of rollout with a customer like, for example, McDonald's, 13, 14,000 restaurants in the U.S., we could cover about 6,000 restaurants just with our existing network. So your question goes to the 7 or 8,000, assuming you're taking McDonald's as the benchmark, that we would need to cover in areas where, mostly, it's those areas you described in the country where Kris Our plans are anyway, over time, to open up in those places and reference either Miami, Twin Cities, L.A., New England, all the ones you referenced, upstate New York, they're all in our plans. Naturally, those that we have already maxed out capacity or we've identified sites are the ones we're prioritizing in the short term. But they all make sense for us, so we're actually looking across the country in all those locations as we build out our plans for DFD and QSR in the future. Great, thank you.
On the Capex I mean, the hubs themselves are coming online probably a little more back weighted.
The capex itself flow phases differently it doesn't in turmoil.
Yes, I mean, there is a cash flow from capex that wall will happen here, because we spent or at least.
Decided to deploy capital last year in an effort to get mobile top.
Up and running earlier in the year.
From a modeling perspective, I mean for the most part.
We will follow a fairly.
Uniform.
The spend of Capex throughout the year.
As we have in previous years. So it's a fairly consistent number when you think about a percent of revenue that will balance between 7% and 8% for the quarters that will just bounce up and down between those numbers more or less.
Okay. Thank you.
Our next question comes from the line of Andrew Wolf with CL King. Please go ahead.
Thanks, Good morning, first I wanted to ask about the first quarter sales being low low trend.
And tie that to the year because obviously.
Daniel Edward Guglielmo: And then just as a follow-up to that, it's kind of like a modeling question just around the CapEx spend. So the 7 to 8% of revenue guidance for 2024. Just thinking about the expansion, and I think you had said 3 to 6 million for some of those hubs.
Youre looking for a big rebound to more like 6% to 8%.
Get to the 5% to 7% for the year for the for the Q2 through Q4.
A little more in line with what.
I think the street was expecting so could you just kind of flesh out a little bit what youre seeing in the quarter. How much do you think is pure weather is there anything else going on do you have sort of non weather impacted markets either in the U S or Canada or.
Daniel Edward Guglielmo: Is there a cadence we should be thinking about quarter to quarter for the year? Is it going to be pretty evenly spread throughout? Or should it be back-weighted? help.
Jeremiah Ashukian: I mean, the hubs themselves are coming online, probably a little more back-weighted. But the CapEx itself, though, phases differently, doesn't it, Jeremiah? Yeah, I mean, there's a cash flow from CapEx that will happen here because we've spent, or at least..., decided to deploy capital last year in an effort to get up and running earlier in the year. From a modeling perspective, I mean, for the most part, we will follow a fairly simple...
Even the other segments, it's sort of point to sort of some more normalized growth supporting the rebound for the rest of the year.
Yes, Thanks, Andrew I can I can take that I think I'll, probably start off by just saying, we're actually pleased with the fact that we'll continue to post growth in Q1. After a record Q1 in 2023 and four.
<unk> 14 consecutive quarters of organic growth I think the last time, we didn't grow on a quarter was during COVID-19 and as a result of some of the U K shutdown or slowdown.
Jeremiah Ashukian: Uniform spend of CapEx throughout the year, as we have in previous years. So it's a fairly consistent number when you think about a percent of revenue that will balance between 7 and 8 percent per quarter. It'll just balance up and down between those numbers more or less. Our next question comes from the line of Andrew Wolf with C.L. King.
Organic growth in the quarter, it was actually closer to 3% to 6% given we will be lapping the discontinuation of BST.
As he mentioned like many others, we saw harsh weather and broad parts of the U S. In January leading to lower revenues and a softer start to the year.
Andrew Paul Wolf: Please go ahead. Thanks, Good morning. First, I wanted to ask about, you know, the first quarter, sales being low, you know, the low trend, low trend, low trend, low trend, low trend, low trend, low trend, low trend, tie that to the year, you know, because obviously. You're looking for a big rebound to more like 6% to 8% to get to the 5% to 7% for the year for Q2 through Q4. A little more in line with what I think the street was expecting. So could you just kind of flesh out a little bit what you're seeing in the quarter? How much do you think is pure weather?
Which also comes up against the comp of 14, 4% last year, but also a couple of one offs to your 0.1 of insomnia cookies, we have a lap against extended delivery zones that will be in our base, which provided some tailwind last year and then two in market development. We had a one one off shift in the timing of some equipment sales and our market development France.
<unk>.
Business, which resulted in a higher higher sales being recognized in <unk> last year that said, we're excited for Valentine's Day Tomorrow, which is one of our biggest sales days of the year not to mention other key specialty donut offerings over the course of the year.
Jeremiah Ashukian: Is there anything else going on? Do you have sort of non-weather-impacted markets either in the U.S. or Canada or even other segments that sort of point to sort of some more normalized growth supporting the rebound for the rest of the year? Yeah, thanks, Andrew. I can take that.
We're definitely committed to disciplined growth in pursuit of the full year guide that are laid out.
And we will when you think about from a cadence point of view lap. Some other things as we get into Q2 that may go the other way most notably the NCR outage that we had in the U S. In Q2, 2023, which will help us kind of recover back in Q2.
Jeremiah Ashukian: I think I'll probably start off by just saying we're actually pleased with the fact that we'll continue to post growth in Q1 after a record Q1 in 2023. 14 consecutive quarters of organic growth. I think the last time we didn't grow in a quarter was during COVID and as a result of some of the UK shutdown or slowdown. Organic growth in the quarter is actually close to three to six percent, given we'll be lapping the discontinuation of BST. As you mentioned, like many others, we saw harsh weather in broad parts of the US in January, leading to lower revenues and a softer start to the year, which also comes up against the comp of 14.4 percent last year, but also a couple of one-offs, to your point. One at Insomnia Cookies.
Yeah, I'll add as you know we're looking we're looking forward to.
<unk> sustained growth through through 2020 for Q4 showed once again, the consumer just loves our donuts.
Especially for sharing and gifting and special occasions and celebrations like Valentine's.
That Jeremy mentioned, even even when priced at a premium.
We see that in all all sales channels.
With really quite phenomenal growth recently and in E. Commerce in particular, so I'll consumers engaging with the brand more than ever.
And that's that's the ascend.
The key backdrop to understanding crispy cream.
Yeah.
Okay, and if I can just add another follow up just related also to sales.
<unk>.
No I assume for the year, you only have the 160 or so mcdonalds stores in there.
Jeremiah Ashukian: We have a lap against extended delivery zones that will be in our base, which provided some tailwind last year. And then two, in market development, we had a one-off shift in the timing of some equipment sales in our market development franchise business, which resulted in higher sales being recognized in 1Q last year. That said, we're excited for Valentine's Day tomorrow, which is one of our biggest sales days of the year, not to mention other key specialty donut offerings over the course of the year. We're definitely committed to disciplined growth in pursuit of the full-year growth plan that I laid out. And we will, when you think about it from a cadence point of view, lap some other things as we get into Q2 that may go the other way, most notably the NCR outage that we had in the US in Q2 2023, which will help us recover back in Q2. I'll add that we're looking forward to quality sustained growth through 2024. Q4 showed once again that the consumer just loves our doughnuts, especially for sharing and gifting at special occasions and celebrations like Valentine's Day, as Jeremiah mentioned, even when priced at a premium.
But I guess for the U S.
Specifically.
Is there any less.
Okay, a push on sales.
In any way whether it's.
I'm not putting up stores you might have put out a hubs that you might have put up.
Youre deferring and is there any impact on your whats in the guidance because you're kind of throttling any part of the U S operations back.
In anticipation of either Mcdonald's or another <unk>.
Yeah.
There's no there's no throttling back.
The case that the DFT continues to be.
On a core driver of our growth.
Indeed, as I mentioned, a moment ago the queue for additional doors around the world included the U S. At a time, which has traditionally been.
Problematic for our customers they want to put it in other seasonal items. This year. They wanted to put in all of our items and prioritized.
Lifting new doors for Krispy kreme, so so definitely no no throttling back at the same time.
We are very focused on improving the quality of our operations, ensuring high quality sustainable growth working as I mentioned on making moving donuts and continuously better ways.
Joshua Charlesworth: We see that in all sales channels, with really quite phenomenal growth recently in e-commerce, in particular. Our consumer is engaging with the brand more than ever, and that's the key backdrop to understanding Krispy Kreme. Okay, and if I could just add another follow-up just related to sales. [inaudible] And I assume for the year, you only have 160 or so McDonald's stores in there. But I guess for the U.S. specifically... You know, is there any less of a push on sales in any way, whether it's not putting up stores that you might have put up, a hub that you might have put up because you're deferring? Is there any impact on what's in the guidance because you're kind of throttling any part of the U.S. operations back in anticipation of, you know, There's no throttling back.
Does that naturally means a very thoughtful as we grow to make sure we have the best points of access.
Strong hubs, making sure they're set up for future growth as also mentioned with many of the donut shops still heavily underutilized are able to make more than twice the amount of donuts. They do today most of those lines getting ready for growth with <unk> and other new channels.
Is it is a lift and so we're making sure that every way we grow.
In a way that ensures high quality donuts presented freshness consumer in every channel, whilst maintain tightening productivity and efficiencies. So yeah, we certainly working hard on the system, but we're not as such throttling back.
Okay.
Thank you that's really helpful color I'll pass it on thank you.
Joshua Charlesworth: It's absolutely the case that the DFD continues to be a core driver of our growth. Indeed, as I mentioned a moment ago, the Q4 addition of doors around the world, including the US, at a time which has traditionally been problematic for our customers because they want to put in other seasonal items. This year, they wanted to put in our items and prioritised listing new doors for Krispy Kreme. So definitely, no throttling back
You bet. Thanks, Andrew.
I would now like to turn the call over to Josh Charles were for closing remarks.
Well. Thank you everybody. Thank you for your interest in Krispy Kreme today and of course, Thank you to all our crispy creams for their hard work in 2023.
In your ongoing commitment to bring joy to our customers through Krispy kreme. Thank you.
This concludes today's call you may now disconnect.
Joshua Charlesworth: At the same time, we are very focused on improving the quality of our operations, ensuring high quality, sustainable growth, working, as I mentioned, on making moving donuts in continuously better ways. So that naturally means we're very thoughtful as we grow to make sure we have the best points of access, strong hubs, making sure they're set up for future growth. As I also mentioned, with many of the donut shops still heavily underutilized, they're able to make more than twice the amount of donuts that they do today, on most of those lines.
Okay.
[music].
Yeah.
Okay.
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Yeah.
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Okay.
Okay.
Yes.
Okay.
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Joshua Charlesworth: Getting ready for growth with QSR and other new channels is a challenge, and so we're making sure that everywhere we grow, it's in a way that ensures high-quality donuts presented fresh to consumers in every channel, whilst maintaining productivity and efficiency. So yeah, we're certainly working hard on the system, but we're not as such throttling back.
Okay.
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Andrew Paul Wolf: [inaudible] You bet. Thanks, Andrew. I would now like to turn the call over to Josh Charlesworth for closing remarks. Well, thank you, everybody. Thank you for your interest in Krispy Kreme today. And, of course, thank you to all our Krispy Kremers for their hard work in 2023 and your ongoing commitment to bring joy to our customers through Krispy Kreme. Thank you. This concludes today's call. You may now disconnect.
Yes.
Thank you.
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Yes.