Q2 2024 Krispy Kreme Inc Earnings Call

Operator: Thanks for standing by. My name is Eric, and I will be your conference operator today. At this time, I'd like to welcome everyone to the Krispy Kreme Second Quarter 2024 Earnings call. I would now like to turn the call over to Dre Eldredge, Krispy Kreme Investor Relations. Please go ahead.

Eric: My name is Eric, and I will be your conference operator today.

Thanks for standing by. My name is Eric and I will be your conference operator today. At this time, I'd like to welcome everyone to the Krispy Kreme Second Quarter 2024 earnings call.

Operator: At this time, I'd like to welcome everyone to the Krispy Kreme second quarter 2024 earnings.

Operator: At this time, I'd like to welcome everyone to the Krispy Kreme second quarter 2024 earnings call.

Dre Eldredge: I would now like to turn the call over to Dre Eldredge, Krispy Kreme Investor Relations.

I would now like to turn the call over to Dre Eldredge, Krispy Kreme Investor Relations. Please go ahead.

Unknown Executive: Thank you.

Operator: Thank you. Good morning, everyone. Welcome to Krispy Kreme's second quarter 2024 earnings call. Thank you for joining us today.

Dre Eldredge: Thank you. Good morning, everyone. Welcome to Krispy Kreme's second quarter 2024 earnings call. Thank you for joining us today.

Dre Eldredge: Good morning, everyone. Welcome to Krispy Kreme's second quarter 2024 earnings call. Thank you for joining us today. We will be referencing our earnings release and presentation during the call. These are available on our Investor Relations website at investors. Krispy Kreme.com.

Dre Eldredge: Thank you. Good morning, everyone. Welcome to Krispy Kreme's second quarter 2024 earnings call. Thank you for joining us today.

Operator: We will be referencing our earnings release and presentation during the call. These are available on our investor relations website at investors.krispykreme.com. Joining me on the call this morning are President and Chief Executive Officer Josh Charlesworth and Chief Financial Officer Jeremiah Ashukian. After prepared remarks, there will be a question and answer session.

Dre Eldredge: We will be referencing our earnings release and presentation during the call. These are available on our investor relations website at investors.krispykreme.com. Joining me on the call this morning are President and Chief Executive Officer Josh Charlesworth and Chief Financial Officer Jeremiah Ashukian.

Dre Eldredge: We will be referencing our earnings release and presentation during the call. These are available on our investor relations website at investors.krispykreme.com

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

Operator: 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 December 31, 2023 and in other filings we make from time to time with the SEC. Additionally, today's call will include certain non-GAAP financial measures. A reconciliation between non-GAAP financial measures and our closest comparable GAAP measures can be found in our second quarter 2024 earnings press release and Form 8K, filed today with the SEC, and is also available at our investors.krispykreme.com website. Jeremiah will take us through our financial performance in a moment, but first, here's Jon.

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

Dre Eldredge: Before we begin, I would like to remind you that this call contains forward-looking statements made pursuant to the safe harbor provisions of the Private Securities and Litigation Reform Act of 1995, including statements of expectations, future events, or future financial performance. Forward-looking statements involve a number of inherent risks and uncertainties. And we caution investors that these risks could cause actual results to differ materially from those contained in any forward-looking statements. These factors and other risks and uncertainties are described in detail in the company's form. In September of 2021, 2020, and in other filings we make from time to time with the SEC.

Dre Eldredge: After prepared remarks, there will be a question and answer session. Before we begin, I would like to remind you that this call contains forward-looking statements made pursuant to the safe harbor provisions of the Private Securities and Litigation Reform Act of 1995, including statements of expectations, future events, or future financial performance. Forward-looking statements involve a number of inherent risks and uncertainties, and we caution investors that these risks could cause actual results to differ materially from those contained in any forward-looking statement.

Speaker Change: before we begin i would like to remind you that this call contentss forward-looking statements made pursuant to the safe harbor provisions of the private securities and litigation reform act one thousandnine and nety five including statements of expectations future events or future financial performance

Speaker Change: 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.

Speaker Change: these factors and other risks and uncertainties are described in detail in the company's form ten -k filed with the sec for the year ended december thirty one two thousand and twenty three and other filings we make from time to time with the sec

Dre Eldredge: 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 December 31, 2023 and in 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.

Dre Eldredge: 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.

Speaker Change: 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.

Dre Eldredge: Additionally, today's call will include certain non-GAAP financial measures. A reconciliation between non-GAAP financial measures and our closest comparable GAAP measures can be found in our second quarter 2024 earnings press release and Form 8-K, filed today with the SEC, and is also available at our investors. Krispy Kreme.com website.

Speaker Change: additionally today's call will include certain non-gaap financial measures a reconciliation between non-gaap financial measures and our closest comparable gaap measures

Speaker Change: can be found in our second quarter two thousand and twenty four earnings press release and form eight k filed today with the sec and is also available at our investors do crispy cream dot com website

Dre Eldredge: A reconciliation between non-GAAP financial measures and our closest comparable GAAP measures can be found in our second quarter 2024 earnings press release and Form 8K, filed today with the SEC, and is also available at our investors.krispykreme.com website. Jeremiah will take us through our financial performance in a moment. But first, here's Jon.

Jeremiah Ashukian: Jeremiah will take us through our financial performance in a moment, but first, here's Josh.

Speaker Change: Jeremiah will take us through our financial performance in a moment, but first, here's Josh.

Jon (Joshua Charlesworth): Thanks, Trey. Good morning, everyone, and thank you for joining us. Our strategy of making fresh Krispy Kreme doughnuts more available around the world is working, and the excitement the brand creates has never been higher. This photo is from the recent opening of a hotline theater in Ankara, Turkey, showing consumers lining up for our amazing original glazed donuts hot off the production line. I want to thank our teams around the world for the great job they are doing making our fresh doughnuts available in more places and for reminding people of the joy that is Krispy Kreme, not just to eat but to share and give to others.

Joshua Charlesworth: Thanks, Jay.

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

Joshua Charlesworth: Good morning, everyone, and thank you for joining us. Our strategy of making fresh Krispy Kreme donuts more available around the world is working. And the excitement that brand creates has never been higher. This photo is from the recent opening of a hotline theater in Ankara, Turkey, showing consumers lining up for our amazing original glazed donuts, spots off the production line. I want to thank our teams around the world for the great job they are doing making our fresh donuts available at more places and for reminding people of the joy that is Krispy Kreme, not just to eat, but to share and give to others.

Jon: Our strategy of making fresh Krispy Kreme doughnuts more available around the world is working, and the excitement the brand creates has never been higher. This photo is from the recent opening of a hotline theater in Ankara, Turkey. The continuing strength of the brand and our strategy is reflected in our strong second quarter results. In the U.S., our profitable expansion is accelerating, which led to a U.S. margin increase of 80 basis points in the quarter. The recent sale of Insomnia Cookies allows us to focus on our core strategy of producing, selling, and distributing fresh doughnuts daily, whilst also further improving our financial profile.

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

Josh Charlesworth: Donuts. Our strategy of making fresh Krispy Kreme donuts more available around the world is working.

Josh Charlesworth: And the excitement the brand creates has never been higher. This photo is from the recent opening of a hotline theatre in Ankara, Turkey, showing consumers lining up for our amazing original glazed doughnuts hot off the production line.

Speaker Change: I want to thank our teams around the world for the great job they are doing making our fresh doughnuts available in more places, and for reminding people of the joy that is Krispy Kreme, not just to eat, but to share and give to others.

Joshua Charlesworth: And as of tomorrow, Krispy Kreme will be available in 40 countries with the opening of our first hotline theater in Morocco. The continuing strength of the brand and our strategy is reflected in our strong second quarter results. Organic revenue grew 7.8% driven by our innovative specially done at collections, which continue to resonate with our consumers. Our global points of access continue to grow, increasing by 23% year over year. Our recently announced expansion into Spain means that fresh Krispy Kreme donuts will be available in four of Europe's largest markets next year. We are well on our way to our goal of 33,000 points of access by the end of 2026.

Jon (Joshua Charlesworth): And as of tomorrow, Krispy Kreme will be available in 40 countries with the opening of our first hotline theatre in Morocco. The continuing strength of the brand and our strategy is reflected in our strong second quarter results. Organic revenue grew 7.8% driven by our innovative, specially done at collections which continue to resonate with our consumers. Our global points of access continue to grow, increasing by 23% year over year.

Speaker Change: and as of tomorrow christi cream will be available in forty countries with the opening of our first hotline theatre in moroca

Speaker Change: The continuing strength of the brand and our strategy is reflected in our strong second quarter results. Organic revenue grew 7.8% driven by our innovative specially done collections which continue to resonate with our consumers.

Speaker Change: our global points of access continue to grow increasing by twenty-three percent year-over-year

Joshua Charlesworth: Our recently announced expansion into Spain means that fresh Krispy Kreme Donuts will be available in four of Europe's largest markets next year. We are well on our way to our goal of 33,000 points of access by the end of 2026. In the U.S., our profitable expansion is accelerating, which led to a U.S. margin increase of 80 basis points in the quarter. And we expect that as we build and optimize our hub-and-spoke network, the efficiency benefits will continue to drive profitability.

Speaker Change: Our recently announced expansion into Spain means that fresh Krispy Kreme doughnuts will be available in four of Europe's largest markets next year. We are well on our way to our goal of 33,000 points of access by the end of 2026.

Joshua Charlesworth: In the US, our possible expansion is accelerating, which led to a US margin increase of 80 basis points in the quarter. And we expect that as we build and optimize our hub and spoke network, the efficiency benefits will continue to drive profitability. The recent sale of Insomnia Cookies allows us to focus on our core strategy of producing, selling and distributing fresh donuts daily whilst also further improving our financial profile. I am thankful for the partnership with Insomnia Cookies over the past five years and look forward to continue success going forward as a minority shall hold it.

Speaker Change: In the U.S., our profitable expansion is accelerating, which led to a U.S. margin increase of 80 basis points in the quarter, and we expect that as we build and optimize our hub-and-spoke network, the efficiency benefits will continue to drive profitability.

Joshua Charlesworth: The recent sale of Insomnia Cookies allows us to focus on our core strategy of producing, selling, and distributing fresh donuts daily, whilst also further improving our financial profile. I'm thankful for the partnership with Insomnia Cookies over the past five years and look forward to continued success going forward as a minority shareholder.

Speaker Change: The recent sale of Insomnia Cookies allows us to focus on our core strategy of producing, selling and distributing fresh doughnuts daily, whilst also further improving our financial profile.

Speaker Change: and thankful for the partnership within somnia cookies over the past five years and look forward to continue success going forward as a minority shareholder

Joshua Charlesworth: Focused on fresh donuts, now excluding Insomnia Cookies, we expect full-year organic revenue growth of five to seven percent.

Joshua Charlesworth: Focused on fresh doughnuts, now excluding insomnia cookies, we expect full year organic revenue growth of 5 to 7%. In a moment, Jeremiah will provide more details on the impact of the transaction and full year guidance as we continue on our journey of building a bigger and better Krispy Kreme in 2024 and beyond. Let's expand on each of these key messages starting with the continuing sales growth in Q2.

Speaker Change: Focused on fresh doughnuts, now excluding insomnia cookies, we expect full year organic revenue growth of 5-7%.

Joshua Charlesworth: In a moment, Jeremiah will provide more details on the impact of the transaction and full-year guidance as we continue on our journey of building a bigger and better Krispy Kreme in 2024 and beyond.

Jon: In a moment, Jeremiah will provide more details on the impact of the transaction and full year guidance as we continue on our journey of building a bigger and better Krispy Kreme in 2024 and beyond, as we capitalize on buzzworthy events like the solar eclipse, as well as successful specialty doughnuts, including our Dolly Parton and Kit Kat collections, and the pace of our expansion is accelerating. To reach our goal of 33,000 by 2026, we're expanding with existing customers, new customers, and indeed a new market.

Speaker Change: In a moment, Jeremiah will provide more details on the impact of the transaction and full year guidance as we continue on our journey of building a bigger and better Krispy Kreme in 2024 and beyond.

Joshua Charlesworth: Let's expand on each of these key messages, starting with the continuing sales growth in Q2. We saw a fantastic engagement with our brand again this quarter with more than 27 billion media impressions as we capitalized on buzzwear, the events like the solar eclipse, as well as successful, specially donuts, including our Dolly Parton and Kit Kat collections. Delivered fresh daily sales were up 18 percent globally and 22 percent in the US, where we have been driving donut category growth for our grocery and convenience store customers for more than a year now. Digital sales grew 22 percent with the April relaunch of our US loyalty program, making the experience easier and more rewarding for our consumers.

Jeremiah Ashukian: let's expand each of these key messages starting with the continuing sales growth in q two

Joshua Charlesworth: We saw fantastic engagement with our brand again this quarter, with more than 27 billion media impressions, as we capitalized on buzzworthy events like the Solar Eclipse, as well as successful specialty doughnuts, including our Dolly Parton and Kit Kat collection. Deliver Fresh daily sales were up 18% globally and 22% in the US, where we have been driving donut category growth for our grocery and convenience store customers for more than a year now.

Jeremiah Ashukian: We saw fantastic engagement with our brand again this quarter with more than 27 billion media impressions as we capitalized on buzzworthy events like the solar eclipse as well as successful specialty doughnuts including our Dolly Parton and Kit Kat collections.

Speaker Change: Deliver Fresh daily sales were up 18% globally and 22% in the US, where we have been driving donut category growth for our grocery and convenience store customers for more than a year now.

Joshua Charlesworth: Digital sales grew 22% with the April relaunch of our US loyalty program, making the experience easier and more rewarding for our consumers. We can now deploy personalized consumer engagement across 15 million loyalty members, 27% more than a year ago.

Speaker Change: Digital sales grew 22% with the April relaunch of our U.S. loyalty program making the experience easier and more rewarding for our consumers.

Joshua Charlesworth: We can now deploy personalized consumer engagement across 15 million loyalty members. That's 27 percent more than a year ago.

Speaker Change: We can now deploy personalized consumer engagement across 15 million loyalty members.

Speaker Change: that's twenty seven percent more than a year ago

Joshua Charlesworth: Our biggest opportunity is to make it easier for people to buy our fresh donuts. We are doing this by increasing availability through our donut shops online and by delivering fresh daily to growth sellers, convenience stores, and quick service restaurants. And the pace of our expansion is accelerated. To reach our goal of 33,000 by 2026, we're expanding with existing customers, new customers, and indeed in new markets. With existing customers such as Walmart, which still only lists us in about 25 percent of their stores, we are exploring the opportunity to go nationwide. We have agreed to expand with Target a new customer later this year and we are engaged in joint business planning with them to bring fresh donuts daily to their store's nationwide.

Joshua Charlesworth: Our biggest opportunity is to make it easier for people to buy our fresh doughnuts. We are doing this by increasing availability through our donut shops, online, and by delivering them fresh daily to grocers, convenience stores, and quick service restaurants. And the pace of our expansion is accelerating. To reach our goal of 33,000 by 2026, we're expanding with existing customers, new customers, and indeed a new market. With existing customers such as Walmart, which still only lists us in about 25% of their stores, we are exploring the opportunity to go nationwide.

Speaker Change: the biggest opportunity is to make it easier for people to buy our fresh donuts

Speaker Change: We are doing this by increasing availability through our doughnut shops, online and by delivering fresh daily to grocers, convenience stores and quick service restaurants.

Speaker Change: and the pace of our expansion is accelerating. To reach our goal of 33,000 by 2026, we're expanding with existing customers, new customers and indeed in new markets.

Speaker Change: with existing customers such as walma which still onlyning ists us in about twenty-five percent of their stores we are exploring the opportunity to go nationwide

Joshua Charlesworth: We have agreed to expand with Target, a new customer, later this year, and we are engaged in joint business planning with them to bring fresh doughnuts daily to their stores nationwide. In new markets, our expansion in France and, since, Spain, Germany, and Brazil provides the opportunity for thousands more points of access. In Paris, we've quickly grown to five shops already, all supported by a single production hub, and we have plans to enter DfD next year.

Speaker Change: we have agreed to expand with target a new customer later this year and we'are engaged in joint business planning with them and to bring fresh on its daily to their stores nationwide

Joshua Charlesworth: In new markets, our expansion in France and Spain, Germany, and Brazil provides the opportunity for thousands more points of access. In Paris, we've quickly grown to five shops already, all supported by a single producing hub, and we have plans to enter DFT next year. In the US, our accelerated national expansion provides an opportunity to profitably denser fire network. We currently have more than 8,000 points of access in the US. We remain on track to add more than 12,000 McDonald's and about 3,000 with partners like Walmart and Target. Bringing the goal to nearly 23,000 US points of access by the end of 2026.

Speaker Change: In new markets, our expansion in France and soon Spain, Germany and Brazil provides the opportunity for thousands more points of access.

Speaker Change: in paris we've quickly grown to five shots already all supported by a single producing hub and we have plans to enter dfd next year

Joshua Charlesworth: In the U.S., Our accelerated national expansion provides an opportunity to profitably densify our network. We currently have more than 8,000 points of access in the U.S. We remain on track to add more than 12,000 McDonald's and about 3,000 with partners like Walmart and Target, bringing the goal to nearly 23,000 US points of access by the end of 2026. We are very pleased with our partnership with McDonald's. The national rollout begins this fall in the Midwest, starting in Chicago.

Speaker Change: In the U.S., our accelerated national expansion provides an opportunity to profitably densify our network.

Speaker Change: We currently have more than 8,000 points of access in the US.

Speaker Change: We remain on track to add more than 12,000 McDonald's and about 3,000 with partners like Walmart and Target, bringing the goal to nearly 23,000 US points of access by the end of 2026.

Joshua Charlesworth: We are very pleased with our partnership with McDonald's. The national rollout begins this fall, with the Midwest starting in Chicago. We expect to serve fresh donuts in more than 1,000 McDonald's restaurants by the end of the year, add 5,000 in 2025, and 6,000 in 2026, bringing us to more than 85% of the US footprint. Our team is hard at work, modernising the making and moving of donuts. We have a dedicated team partnering with our customers, including McDonald's, to ensure a smooth rollout. We are hiring and training experts in manufacturing operations, upgrading our donut production lines, continuously improving the manufacturing process, and optimising our delivery logistics network with improved routing and upgrades to our fleet.

Jon: We are very pleased with our partnership with McDonald's. This expansion effort will increase utilization of our production hubs and distribution density. Today, our 151 U.S. hubs with spokes each serve, on average, 50 points of access. In addition to leveraging existing capacity, we'll be making selective investments in geographies that have limited access to Krispy Kreme today.

Speaker Change: We are very pleased with our partnership with McDonald's.

Speaker Change: the national rollout begins this fall with the midwest starting in chicago

Joshua Charlesworth: We expect to serve fresh donuts in more than 1,000 McDonald's restaurants by the end of the year, add 5,000 in 2025 and 6,000 in 2026, bringing us to more than 85% of their US footprint. Our team is hard at work modernizing the making and moving of doughnuts. We have a dedicated team partnering with our customers, including McDonald's, to ensure a smooth rollout.

Speaker Change: We expect to serve fresh donuts in more than 1,000 McDonald's restaurants by the end of the year, add 5,000 in 2025, and 6,000 in 2026, bringing us to more than 85% of their U.S. footprint.

Speaker Change: Our team is hard at work modernizing the making and moving of doughnuts.

Speaker Change: we have a dedicated team partnering with our customers including m donald's to ensure a smooth rollout

Jeremiah Ashukian: We are hiring and training experts in manufacturing operations, upgrading our doughnut production lines, continuously improving the manufacturing process, and optimizing our delivery logistics network with improved routing and upgrades to our fleet. This expansion effort will increase utilization of our production hubs and distribution density. Today, our 151 US hubs with spokes each serve on average 50 points of access. We expect this to increase to over 100 by 2026, improving efficiency and profitability.

Speaker Change: we are hiring and training experts in manufacturing operations upgrading our donup production lines continuously improving the manufacturing process and optimizing our delivery logistics network with improved routing and upgrades to our fleet

Joshua Charlesworth: This expansion effort will increase utilization of our production hubs and distribution density. Today, our 151 US hubs with spokes each serve, on average, 50 points of access. We expect this to increase to over 100 by 2026, improving efficiency and profitability. Take, for example, Chicago will expect to support 450 new delivered fresh daily doors with the same number of hubs as we have today. In addition to leveraging existing capacity, we will be making selective investments in geographies which have limited access to Crispy Cream today. Last quarter, I discussed adding 30 new hubs over the next three years to support the expansion.

Speaker Change: This expansion effort will increase utilization of our production hubs and distribution density. Today, our 151 U.S. hubs with spokes each serve, on average, 50 points of access.

Speaker Change: We expect this to increase to over 100 by 2026, improving efficiency and profitability.

Jeremiah Ashukian: Take, for example, Chicago, where we expect to support 450 new daily delivery doors with the same number of hubs as we have today. In addition to leveraging existing capacity, we'll be making selective investments in geographies that have limited access to Krispy Kreme today. Last quarter, I discussed adding 30 new hubs over the next three years to support the expansion. We're on track to achieve this goal and have 17 of the 30 hubs already underway, including Seattle, Minneapolis, and Philadelphia.

Speaker Change: Take for example Chicago where we expect to support 450 new delivered fresh daily doors with the same number of hubs as we have today.

Speaker Change: in addition to leveraging existing capacity will'll be making selective investments in geographies which are limited access to crispy creen today

Speaker Change: Last quarter, I discussed adding 30 new hubs over the next three years to support the expansion. We're on track to achieve this goal and have 17 of the 30 hubs already underway, including Seattle, Minneapolis, and Philadelphia.

Joshua Charlesworth: We are on track to achieve this goal and have 17 of the 30 hubs already underway, including Seattle, Minneapolis, and Philadelphia. With this, we are well positioned to deploy delivered fresh daily in all major metropolitan markets in the US.

Jeremiah Ashukian: With this, we are well positioned to deploy DeliverFresh daily in all major metropolitan markets in the U.S. Now, I'll hand it over to Jeremiah to discuss our overall financial performance and the impact of the recent Insomnia Cookies transaction.

Speaker Change: With this, we are well positioned to deploy DeliverFresh daily in all major metropolitan markets in the U.S.

Jeremiah Ashukian: And now, I'll hand it over to Jeremiah to discuss our overall financial performance and the impact of the recent Insomnia Cookies transaction. Thanks, Josh. I'll begin with our strong second quarter results. Organic growth was 7.8%. Adjusted EBITDA increased 12.1%, resulting in positive operating leverage with adjusted EBITDA margin expansion of 60 basis points to 12.5%. Turning to our US segment results, the consumer engagement we saw in the quarter resulted in an organic revenue growth of 8.4%. Points of access growth was 17.8% year over year as we added new doors with several key customers and new stores, including Stop and Shop and Targets.

Speaker Change: and now hand it over to jeremiah to discuss our overall financial performance and the impact of the recent omia cookies transaction

Jeremiah Ashukian: Thanks, Josh. I'll begin with our strong second quarter results. Organic growth was 7.8 percent, and Adjusted EBITDA increased 12.1 percent, resulting in positive operating leverage with an Adjusted EBITDA margin expansion of 60 basis points to 12.5 percent. Turning to our US segment results, the consumer engagement we saw in the quarter resulted in organic revenue growth of 8.4%. Points of access growth was 17.8% year over year as we added new doors with several key customers and new stores, including Stop and Shop and Target.

Jeremiah Ashukian: Organic growth was 7.8%, and adjusted EBITDA increased 12.1%, resulting in positive operating leverage with an adjusted EBITDA margin expansion of 60 basis points to 12.5%. Average revenue per door increased to $657, driven by price and specialty donut collections. Within our equity-owned international markets, organic revenue grew 5% with all markets growing in the quarter, led by Canada and Japan. We've completed the consolidation of three sites, which should yield benefits in the back half of the year, and are taking further actions to ensure we restore margin levels in this market. Adjusted EBITDA in the segment grew 22.7%, with margin expansion driven by greater flow-through from product sales.

Jeremiah Ashukian: Thanks, Josh. I'll begin with our strong second quarter results. Organic growth was 7.8%. Adjusted EBITDA increased 12.1%, resulting in positive operating leverage with adjusted EBITDA margin expansion of 60 basis points to 12.5%.

Speaker Change: turning to our us segment results as the consumer engagement we saw in the quarter resulted inan organic revenue growth of eight point four percent

Speaker Change: Points of access growth was 17.8% year-over-year as we added new doors with several key customers and new stores, including Stop and Shop and Target.

Jeremiah Ashukian: Average revenue per door increased to $657, driven by price and specialty donut collection.

Jeremiah Ashukian: Average revenue per door increased to $657, driven by price and specialty donut collections. This quarter, we saw a 6.4% increase in sales per hub to $5 million, which is a key measure of hub productivity. This helped deliver adjusted EBITDA growth of 16.4% to $32.7 million. Margins improved 80 basis points year-over-year to 11.3 percent, driven by increased utilization and tight control of SG&A. This was partially offset by increased promotional activity and startup costs for the McDonald's launch in the fall.

Speaker Change: Average revenue per door increased to $657 driven by price and specialty donut collections.

Jeremiah Ashukian: DeGenerations. This quarter, we saw a 6.4% increase in sales per hub to $5 million, which is a key measure of hub productivity. This helped deliver adjusted the EBITDA growth of 16.4% to $32.7 million. Within our equity owned international markets, organic revenue grew 5% with all markets growing in the quarter, led by Canada and Japan. We continue to add points of access across the network, including Coles, Australia, and Oxo in Mexico. Adjusted EBITDA declined 12.3% primarily driven by the UK market, which resulted in an adjusted EBITDA margin of 17.3%. We're focused on improving results in the UK, where performance is not enough to our expectations.

Speaker Change: This quarter, we saw a 6.4% increase in sales per hub to $5 million, which is a key measure of hub productivity. This helped deliver adjusted EBITDA growth of 16.4% to $32.7 million.

Speaker Change: Margins improved 80 basis points year-over-year to 11.3% driven by increased utilization and tight control of SG&A. This was partially offset by increased promotional activity and startup costs for the McDonald's launch in the fall.

Jeremiah Ashukian: Within our equity-owned international markets, organic revenue grew 5% with all markets growing in the quarter, led by Canada and Japan. We continue to add points of access across the network, including Kohl's in Australia and OXO in Mexico.

Speaker Change: Within our equity-owned international markets, organic revenue grew 5% with all markets growing in the quarter, led by Canada and Japan.

Speaker Change: We continue to add points of access across the network, including Kohl's in Australia and OXO in Mexico.

Jeremiah Ashukian: Adjusted EBITDA declined 12.3%, primarily driven by the UK market, which resulted in an adjusted EBITDA margin of 17.3%. We're focused on improving results in the UK, where performance is not enough to our expectations. We've completed the consolidation of three sites, which should yield benefits in the back half of the year, and are taking further actions to ensure we restore margin levels in this market. In our market development segment, organic revenue grew 16.1% as equipment sales increased year over year. System-wide sales grew in most markets, most notably in South Korea, where digital sales and donut innovation have driven successful results.

Speaker Change: adjusted ebitidadeclinent twelve point three percent primarily driven by the uk market which resulted in an adjusted ebit a margin of seventeen point three percent

Speaker Change: We're focused on improving results in the UK, where performance has not been up to our expectations.

Jeremiah Ashukian: We've completed the consolidation of three sites, which should yield benefits in the back half of the year, and are taking further actions to ensure we restore margin levels in this market. In our market development segment, organic revenue grew 16.1% as equipment sales increased year over year. System-wide sales grew in most markets, most notably in South Korea, where digital sales and donor innovation have driven successful results. Adjusted EBITDA in the segment grew 22.7% with margin expansion driven by greater flow-through from product sales. For the second quarter, we delivered 5 cents in adjusted earnings per share. The higher depreciation and amortization in the quarter reflects the investments associated with expansion of our open-spoken network and Insomnia Cookies rapid growth.

Speaker Change: We've completed the consolidation of three sites, which should yield benefits in the back half of the year, and are taking further actions to ensure we restore margin levels in this market.

Speaker Change: In our market development segment, organic revenue grew 16.1% as equipment sales increased year-over-year.

Speaker Change: system widesales grew in most markets most notably in south koreawhere dig sales and dona innovation have driven successful results

Jeremiah Ashukian: Adjusted EBITDA in the segment grew 22.7%, with margin expansion driven by greater flow through from product sales. For the second quarter, we delivered five cents in adjusted earnings per share. The higher depreciation and amortization in the quarter reflects the investments associated with the expansion of our Huff & Spoke network and Insomnia Cookies' Rapid Growth. [inaudible] Consistent with our plan, we delivered cash flow from operations in the second quarter of $33 million, taking us to $15.5 million a year to date.

Speaker Change: Adjusted EBITDA in the segment grew 22.7% with margin expansion driven by greater flow-through from product sales.

Speaker Change: For the second quarter, we delivered five cents in adjusted earnings per share.

Speaker Change: the higher depreciation amortization in the quarter reflects theinvestments associated with the expansionfrom our upandspoke network and in insomiiaa cookies's rapid growth

Jeremiah Ashukian: Consistent with our plan, we delivered cash flow from operations in the second quarter of $33 million, taking us to $15.5 million a year to date. Since closing the quarter, we have strengthened our balance sheet following the sale of a majority ownership stake in Insomnia Cookies. We received $127.4 million in cash proceeds upon closing on July 17th, and have since collected an additional $45 million following an Insomnia Cookies refinancing of intercompany debt. As a result, we expect our next leverage ratio to trend towards 3.5 times by year end, and remain on track to a long-term goal of 2.0 times to 2.5 times by the end of 2026.

Speaker Change: Consistent with our plan, we delivered cash flow from operations in the second quarter of $33 million, taking us to $15.5 million year-to-date.

Jeremiah Ashukian: Since closing the quarter, we have strengthened our balance sheet following the sale of a majority ownership stake in Insomnia Cookies. We received $127.4 million in cash upon closing on July 17th, and have since collected an additional $45 million following an Insomnia Cookies refinancing of intercompany debt. As a result, we expect our next leverage ratio to trend toward 3.5 times by year-end and remain on track to our long-term goal of 2.0 times to 2.5 times by the end of 2026.

Speaker Change: Since closing the quarter, we have strengthened our balance sheet following the sale of a majority ownership stake in Insomnia Cookies.

Speaker Change: We received $127.4 million in cash proceeds upon closing on July 17, and have since collected an additional $45 million following an insomnia cookies refinancing of intercompany debt.

Speaker Change: As a result, we expect our next leverage ratio to trend toward 3.5 times by year-end and remain on track to our long-term goal of 2.0 times to 2.5 times by the end of 2026.

Jeremiah Ashukian: Let me turn to our full-year guidance, which now reflects the sale of a majority ownership stake in Insomnia Cookies, improving the long-term financial profile of the business. On the left, you can see our previous guidance with a full-year contribution from Insomnia. The middle column represents the back half impact of the transaction, and on the right-hand side is Krispy Kreme's updated full-year guidance, which reflects the removal of Insomnia from the second half of the year. By removing the previously forecasted $129 million of insomnia revenue from the guidance, we now expect net revenue of $1.65 to $1.65 billion.

Jeremiah Ashukian: Let me turn to our full-year guidance, which now reflects the sale of a majority ownership stake in insomnia cookies, improving the long-term financial profile of the business. On the left, you can see our previous guidance with a full year contribution from Insomnia. The middle column represents the back half impact of the transaction.

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

Jeremiah Ashukian: On the left, you can see our previous guidance with a full year contribution from Insomnia. By removing the previously forecasted $120 million of Insomnia revenue from the guidance, we now expect net revenue of $1.65 to $1.685 billion. As with all of these updates, the change to adjusted EPS solely reflects the recent sale of Insomnia. We are also providing the following modeling assumptions. As a reminder, Q3 will reflect the elimination of insomnia, and as a result, we expect third quarter net revenue of $370 to $383 million, with adjusted EBITDA of $38 to $41 million.

Speaker Change: On the left, you can see our previous guidance with a full year contribution from Insomnia.

Speaker Change: the middle column represents the backhalf impact of the transaction

Jeremiah Ashukian: And on the right-hand side is Krispy Kreme's updated full-year guidance, which reflects the removal of insomnia revenue from the second half of the year. By removing the previously forecasted $120 million of insomnia revenue from the guidance, we now expect net revenue of $1.65 to $1.685 billion. Consistent with our prior assumption that insomnia would have a 100 basis point impact on our overall growth, we expect organic growth of 5% to 7% for the full year.

Speaker Change: and on the right hand side is the crispy creams updated full year guidance which reflects the removal of insomia from the second half of the year

Speaker Change: by removing the previously forecasted one hundred twenty mill dollars of when somia revenue from the guidance we now expect that revenue of one point six five to one point six eight five billion dollars

Jeremiah Ashukian: Consistent with our prior assumption that insomnia would have a 100 basis point impact to our overall growth, we expect for organic growth of 5% to 7% for the full year. Re-moving insomnia's second half adjusted EBDA, resulting Krispy Kreme adjusted EBDA of $215 to $229 for 2024. As with all of these updates, the change to adjusted EPS solely reflects the recent sales insomnia. We now expect between $24 and $0.28 for the year. We are also providing the following modeling assumptions: an income tax rate of between 28 and 30 percent, capital expenditures of 7 to 8 percent of net revenue, and interest expense of $55 to $60 million, down from our prior guidance of $55 to $65 million, reflecting our lower net debt levels.

Speaker Change: consistent with our prior assumption that inssomi would have one hundred basis point impact to our overall growth we expect for organic growth and five percent to seven percent for the full year

Jeremiah Ashukian: Removing Insami's second half adjusted EBDA, the resulting Krispy Kreme adjusted EBDA is of $215 to $229 for 2024. As with all of these updates, the change to adjusted EPS solely reflects the recent sale of insomnia. We now expect between $0.24 and $0.28 for the year. We are also providing the following modeling assumptions, an income tax rate of between 28 and 30%, capital expenditures of seven to 8% of net revenue, and interest expense of $55 to $60 million, down from our prior guidance of $55 to $65 million, reflecting our lower net debt levels.

Speaker Change: Removing Insomnia's second half-adjusted EBITDA results in Krispy Kreme-adjusted EBITDA of $215 to $220 million for 2024.

Speaker Change: As with all of these updates, the change to adjusted EPS solely reflects the recent sale of insomnia. We now expect between $0.24 and $0.28 for the year.

Speaker Change: We are also providing the following modeling assumptions.

Speaker Change: An income tax rate of between 28 and 30 percent.

Speaker Change: capital expenditures of seven to eight percent of net revenue

Speaker Change: and interest expense of fifty five to sixty million dollars down from our prior guidance of fifty five to sixty five million dollars reflecting our lower net debt levels

Jeremiah Ashukian: With regards to the third quarter, we recognize the changing consumer dynamics and continue to respond to it. As a reminder, Q3 will reflect the removal of insomnia, and as a result, we expect third quarter net revenue of $370 to $383 million with adjusted EBDA of $38 to $41 million. We remain confident in our ability to execute throughout the remainder of 2024.

Jeremiah Ashukian: With regard to the third quarter, we recognize the changing consumer dynamic and continue to respond to it. As a reminder, Q3 will reflect the elimination of insomnia, and as a result, we expect third quarter net revenue of $370 to $383 million, with adjusted EBITDA of $38 to $41 million.

Speaker Change: With regards to the third quarter, we recognize the changing consumer dynamic and continue to respond to it.

Speaker Change: As a reminder, Q3 will reflect the removal of insomnia, and as a result, we expect third-quarter net revenue of $370 to $383 million, with adjusted EBITDA of $38 to $41 million.

Joshua Charlesworth: We remain confident in our ability to execute throughout the remainder of 2024. With that, I'll turn it over to Josh for his closing remarks. Thanks, John.

Speaker Change: we remain confident in our ability to execute threat the remainder of two thousand and twenty four with that i'll turn it over to josh for his closing remarks

Joshua Charlesworth: With that, I'll turn it over to Josh for his closing remarks.

Joshua Charlesworth: Thanks, Jeremiah. I'm excited for what we have ahead in the balance of the year, particularly in our high season, which begins in September and runs through the year and holidays. In summary, we are focused on expanding fresh donor availability by adding high quality, productive points of access, driving operating leverage to the efficiency of our operating model, and maximizing capital return, both by leveraging existing capacity and making selective investments and geographies which have limited access to Krispy Kreme today.

Joshua Charlesworth: I'm excited for what we have ahead in the balance of the year, particularly in our high season, which begins in September and runs through the year-end holiday. In summary, we're focused on expanding fresh doughnut availability by adding high-quality, productive points of access. Driving operating leverage to 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.

Josh Charlesworth: Thanks, Jeremiah.

Josh Charlesworth: I'm excited for what we have ahead in the balance of the year, particularly in our high season which begins in September and runs through the year-end holidays.

Speaker Change: In summary, we are focused on expanding fresh doughnut availability by adding high quality, productive points of access.

Josh Charlesworth: Driving operating leverage to 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.

Joshua Charlesworth: All in, I look forward to us building a bigger and better Krispy Kreme in the years ahead.

Speaker Change: 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.

Operator: Operator, let's now open it up to Q and A, please.

Operator: We will now begin the question and answer session.

Operator: We will now begin the question and answer session. In order to ask a question, please press star followed by the number one on your telephone keypad. Your first question comes from the line of Sara Senatore with Bank of America.

Operator: In order to ask a question, please best start, followed by the number one on your telephone keypad.

Speaker Change: We will now begin the question and answer session. In order to ask a question, please press star followed by the number one on your telephone keypad.

Sarah Senatore: Your first question comes from the line of Sarah Senatory with Bank of America. Please go ahead. Great, thank you very much. I wanted to ask about, you mentioned the McDonald's rollout, and just basically thinking about, are you still a stupor? Are you still on track? I think the idea had been to increase rateably the number of stores over time. Does that still sound like the right kind of rollout plan? The second point is, I think you had seen some pretty significant investment ahead of that, whether it was an OptX or G&A. Are the biggest, chunkiest increases behind us, and so going forward, the growth rate in operating expense should lag, or at least more closely match revenues.

sarah satory: your first question comes from the line of sarah satory with bank of america

Sara Senatore: Great, thank you very much. I wanted to ask you about the McDonald's rollout and just basically think about, are you still in a stupor? Are you still on track? I think the idea was to kind of gradually increase the number of stores over time. Does that still sound like the right kind of rollout plan? And as a second point, you know, I think you had seen some pretty significant investment ahead of that, but it was an op-ex or GNA? We have the biggest, kind of, chunkiest increases behind us, and so going forward, you know, the growth rate and operating expense should lag or at least more closely match revenues. Thank you.

Speaker Change: Please go ahead.

sarah satory: Great, thank you very much. I wanted to ask about, you mentioned the McDonald's rollout, and just basically thinking about, are you still, I guess twofold, are you still on track, I think the idea had been to kind of increase rateably the number of stores over time, is that still

Speaker Change: sound like the right kind of rollout plan and as a second point is you know I think you had we've seen some pretty significant investment ahead of that whether it was an OpEx or GNA

Speaker Change: are the biggest, kind of chunkiest increases behind us. And so going forward, you know, the growth rate and operating expense should, you know, lag or at least more closely match revenues. Thanks.

Joshua Charlesworth: Thanks.

Joshua Charlesworth: So you're good morning. Yeah, the McDonald's partnership is going very well in general, and the rollout is on track. We announced today that we will be first listing, and we've met Donalds beyond the Kentucky pilot in the fall in Chicago and then expanding through the Midwest in the back end of this year and obviously into next year. We expect to be in more than 1,000 McDonald's restaurants by the end of 2024, and then we have a rollout plan that we have partnered with McDonald's on through 2025 and indeed through 2026. With about 5,000, we're expecting to add generally evenly through the year of 2025.

Joshua Charlesworth: Good morning. Yeah, the McDonald's partnership is going very well in general. And the rollout is on track. We announced today that we will be the first to list with McDonald's beyond the Kentucky pilot in the fall in Chicago and then expanding through the Midwest in the back end of this year and then, obviously, into next year. We expect to be in more than a thousand McDonald's restaurants by the end of 2024. And then we have a rollout plan that we have partnered with McDonald's on through 2025 and indeed through 2026, with about 5000 we're expecting to add generally evenly through the year of 2025.

Speaker Change: Good morning. Yeah, the McDonald's partnership is going very well in general and the rollout is on track. We announced today that we will be first listing

Speaker Change: with McDonald's beyond the Kentucky.

Speaker Change: Pilot in the fall in Chicago and then expanding.

Operator: Thanks for standing by.

Eric: My name is Eric and I will be your conference operator today. At this time, I'd like to welcome everyone to the Krispy Kreme second quarter, 2024 earnings call.

Speaker Change: through the Midwest in the back end of this year and then obviously into next year. We expect to be in more than a thousand McDonald's restaurants by the end of 2024 and then we have a rollout plan that we have.

Dre Eldredge: I would now like to turn the call over to Dre Eldredge, Krispy Kreme investor relations. Please go ahead. Thank you.

Speaker Change: partnerof w m donalds on through two thousand and twenty five and deed through two and twenty six with about five thousand we're expecting to add

Dre Eldredge: Good morning, everyone. Welcome to Krispy Kreme's second quarter, 2024 earnings call. Thank you for joining us today. We will be referencing our earnings release and presentation during the call. These are available on our investor relations website at investors. Krispy Kreme.com.

Jeremiah Ashukian: We have a dedicated cross-functional team there to make sure the facilities and our people are ready. In fact, we're also making improvements to the production lines and even doing our best to improve productivity and up our game as we go. We're very focused on delivering a really high quality service to the McDonald's restaurants so that people get all some fresh donuts every day at the same quality level.

Speaker Change: generally evenly through the year of of two thousand and twenty five

Joshua Charlesworth: We have a dedicated cross-functional team there to make sure the facilities and our people are ready. In fact, we're also making improvements to the production lines and even doing our best to improve productivity and up our game as we go. We're very focused on delivering a really high-quality service to McDonald's restaurants so that people get awesome fresh donuts every day at the same quality level they expect from Krispy Kreme and other channels. Perhaps, Jeremiah, do you want to talk about some of the impacts of that? Yeah, and Josh, you did a nice job. Good morning, Sarah.

Speaker Change: We have a dedicated cross-functional team there to make sure the facilities and our people are ready. In fact, we're also making improvements to the production lines.

Dre Eldredge: Joining me on the call this morning are President and Chief Executive Officer Josh Charlesworth and Chief Financial Officer Jeremiah Ashukian. After prepared remarks, there will be a question and answer session. Before we begin, I would like to remind you that this call contains forward looking statements made pursuant to the safe harbor provisions of the private securities and litigation reform act of 1995, including statements of expectations, future events or future financial performance.

Speaker Change: and leeven doing our best to improve productivity and up our game as we go we're very focused on delivering a really high quality service to the macdonald's restaurants so that people get aw some fresh donors every day at the same quality level they re expecting chrisp between other channels

Dre Eldredge: 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. In September of 2021, 2020 and in other filings we make from time to time with the SEC. Forward looking statements made today are only as of today.

Jeremiah Ashukian: They're expecting Crispy Cream and other channels.

Jeremiah Ashukian: How's Jeremiah Johnson talking about some of the impacts of that? Yeah, and Joshy did a nice job.

Jeremiah Ashukian: And thanks for the question. To ensure a smooth rollout, we are investing in the opportunity with dedicated rollout teams to support our shops and training and development costs. We're also improving capabilities across our manufacturing and operations teams and upgrading our donut production lines, as you can imagine, the volume that will move through. All of this has been included in our guide. Ongoing, we expect to manage costs prudently and deliver margin expansion as we ramp up the McDonald's network, serving nearly 85 percent of the brand's U.S. footprint by 2026, as Josh mentioned.

Jeremiah Ashukian: Good morning, Sarah. And thanks for the question. It's to ensure a smooth rollout. We are investing out of the opportunity with dedicated rollout teams to sport our shops and training and development costs. We're also improving capabilities across our manufacturing and operations teams and upgrading your donut production lines. As you can imagine, the line that will move through. All of this has been included in our guide ongoing. We expect to manage costs prudently and deliver margin expansion as we ramp the McDonald's network serving nearly 85% of the brand's US footprint by 2026, as Josh mentioned.

Jeremiah Ashukian: Perhaps Jeremiah, do you want to talk about some of the impacts of that? Yeah, and Josh, you did a nice job. Good morning, Sarah, and thanks for the question. To ensure a smooth rollout, we are investing ahead of the opportunity with dedicated rollout teams to support our shops and training and development costs.

Jeremiah Ashukian: We're also improving capabilities across our manufacturing and operations teams and upgrading our donut production lines, as you can imagine, the volume that we'll move through. All of this has been included in our guide.

Jeremiah Ashukian: Ongoing, we expect to manage costs prudently and deliver margin expansion as we ramp the McDonald's network, serving nearly 85% of the brand's U.S. footprint by 2026, as Josh mentioned.

Operator: William Chappell, Andrew Wolf, William Chappell, David Palmer, Thanks for holding. We have the name of your conference. Yes, it's the Krispy Kreme. One moment.

Dre Eldredge: 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 includes certain non-gap financial measures, a reconciliation between non-gap financial measures and our closest comparable gap measures can be found in our second quarter 2024 earnings press release and form 8K, filed today with the SEC and is also available at our investors.

Raoul Crowe: In next question comes from the line of Raoul Crowe with JP Morgan. Please go ahead. Good morning, guys. Thanks for the great update today.

Speaker Change: Thank you.

Operator: Your next question comes from the line of Raul Crow with JP Morgan.

Operator: Your next question comes from the line of Raul Crow with JP Morgan. Please go ahead.

Speaker Change: Your next question comes from the line of Raul Crow with JP Morgan. Please go ahead.

Raul Crow: Good morning guys, thanks for the great update today. I'd like to focus on the nationwide rollout of Walmart and Target, and this is, I feel, is a very big step for you guys. I think today, as I understand it, there are around 4,000 to 5,000 doors and taps just between these two brands versus the 3000 odd non-McDonald's doors you guys discussed for guidance over the next three years. So as you expand the hub and spoke infrastructure, is it fair to expect there will be almost no additions are very low or a lower mix of convenience stores or low volume doors additions as we go along expanding this side of the business, and also will be profitable to follow this?

Raoul Crowe: I'd like to focus on the nationwide rollout of Walmart and Target, and this, I feel, is a very big step for you guys. I think today as I understand there are around 4,000 to 5,000 doors and tap just between these two brands versus the 3,000 odd non McDonald's doors. You guys discussed for the guidance for the next three years.

Raul Crow: good morning guys thanks for the great update today i'd like to focus on the nationwidedraw out of walmart and target and this is i feel is a very big step for you guys

Dre Eldredge: Krispy Kreme.com website.

Josh Charlesworth: Jeremiah will take us through our financial performance in a moment, but first here's Josh. Thanks, Jay. Good morning, everyone, and thank you for joining us.

Speaker Change: I think today, as I understand, there are around 4,000 to 5,000 doors untapped just between these two brands versus the 3,000-odd non-McDonald's doors you guys discussed for the guidance over the next three years. So...

Josh Charlesworth: Our strategy of making fresh Krispy Kreme donuts more available around the world is working. And the excitement that brand creates has never been higher. This photo is from the recent opening of a hotline theater in Ankara, Turkey, showing consumers lining up for our amazing original glazed donuts, spots off the production line. I want to thank our teams around the world for the great job they are doing making our fresh donuts available at more places and for reminding people of the joy that is Krispy Kreme, not just to eat, but to share and give to others. And as of tomorrow, Krispy Kreme will be available in 40 countries with the opening of our first hotline theater in Morocco.

Joshua Charlesworth: So, as you expand the hub-and-spoke infrastructure, is it fair to expect there will be almost no additions or very low or a lower mix of convenience stores or low-volume doors additions as we go along expanding this side of the business, and also will profitability follow this. I'm glad you're good morning, Raoul. It's important to understand that the McDonald's nationwide expansion is a bit of a catalyst for us. It enables us to really expand our DFT business faster than we would have been able to otherwise. And so we're focused on, naturally, the high quality national players.

Speaker Change: As you expand the hub-and-spoke infrastructure,

Speaker Change: is it fair to expect there will be almost no additions are very low or a lower mix of

Speaker Change: convenience stores or low-volume door additions as we go along expanding this side of the business and also will profitability follow this.

Joshua Charlesworth: I'm glad. Good morning, Raoul.

Speaker Change: I'm glad. Good morning, Raoul. It's important to understand that the McDonald's nationwide expansion

Joshua Charlesworth: It's important to understand that the McDonald's nationwide expansion is a bit of a catalyst for us. It enables us to really expand our DFD business faster than we would have been able to otherwise. And so we're focused on, naturally, high-quality national players.

Speaker Change: It's a bit of a catalyst for us.

Speaker Change: It enables us to really expand our DfD business faster than we would have been able to otherwise. And so we're focused on, naturally, the high-quality national players. You mentioned Walmart, Target, Kroger, and others all fit the bill, all ways of getting

Josh Charlesworth: The continuing strength of the brand and our strategy is reflected in our strong second quarter results. Organic revenue grew 7.8% driven by our innovative specially done at collections, which continue to resonate with our consumers. Our global points of access continue to grow, increasing by 23% year over year. Our recently announced expansion into Spain means that fresh Krispy Kreme donuts will be available in four of Europe's largest markets next year. We are well on our way to our goal of 33,000 points of access by the end of 2026.

Joshua Charlesworth: You mentioned Walmart, Target, Kroger, and others all fit the bill. All ways of getting our consumers, those fresh donuts, and making it easier for them to purchase them than it is today. So we're in discussions with Walmart about how, as our hubs are available to reduce donuts in more and more markets, we can get it to those additional Walmart stores. We began discussions with Target as well, and they've evolved quickly. We've recently expanded with Target, Phoenix, and Lanter, and we've got plans to come to LA, Detroit, and several cities as we build out the network with the rollout of McDonald's.

Speaker Change: consumers those fresh donuts and making it easier for them to purchase them than it is today. So, you know, we're in discussions with Walmart about how, as our hubs are available to produce donuts in more and more markets, we can get it to those additional Walmart stores. We began discussions with Target as well, and they've evolved quickly, and we've recently expanded with Target.

Joshua Charlesworth: You mentioned Walmart, Target, Kroger, and others all fit the bill, all ways of getting our consumers those fresh donuts and making it easier for them to purchase them than it is today. So, you know, we're in discussions with Walmart about how, as our hubs are available to produce donuts in more and more markets, we can get them to those additional Walmart stores. We began discussions with Target as well, and they've evolved quickly.

Josh Charlesworth: In the US, our possible expansion is accelerating, which led to a US margin increase of 80 basis points in the quarter. And we expect that as we build and optimize our hub and spoke network, the efficiency benefits will continue to drive profitability. The recent sale of insomnia cookies allows us to focus on our core strategy of producing, selling and distributing fresh donuts daily whilst also further improving our financial profile. I am thankful for the partnership with insomnia cookies over the past five years and look forward to continue success going forward as a minority shall hold it. Focused on fresh donuts, now excluding insomnia cookies, we expect full-year organic revenue growth of five to seven percent.

Joshua Charlesworth: And we've recently expanded with Target, Phoenix, and Atlanta, and we've got plans to go to LA, Detroit, and several cities as we build out the network with the rollout of McDonald's. So it really is a great combination. C-Stores and other smaller locations, lower traffic locations, are actually still very helpful to us, though, because we think all the places you go on the way to McDonald's, Target, Walmart, Kroger, you're going to be going past convenience stores, gas stations, making the logistics route efficient. And so we still see a role for those to play. But naturally, we're focused on those big national partners that the McDonald's program unlocks for us.

Speaker Change: phoenix and we got plans to come to detroit and several citiesas we build the net work with the rollout of cdonald so it's it really is a great combination c stores and other small locations lower traffic locations are actually still very helpful to us though because we think all the places you go on the way to donald target walmk roger you're going to be going past convenience stores gas stations making the logistics throughout fion and so we still see role for those to play but naturally focused on those big national partnerers

Joshua Charlesworth: So it really is a great combination. Sea stores and other smaller locations, smaller low traffic locations are actually still very helpful to us though because if you think all the places you go on the way to a McDonald's, Target, Walmart, Kroger, you're going to be going past convenience stores, gas stations, making the logistics route efficient. And so we still see a role for those to play. But naturally we're focused on those big national partners to the McDonald's program on locks for us.

Josh Charlesworth: In a moment, Jeremiah will provide more details on the impact of the transaction and full-year guidance as we continue on our journey of building a bigger and better Krispy Kreme in 2024 and beyond.

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

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

Raoul Crowe: Thanks for that.

Speaker Change: The MacDonalds program unlocks for us.

Josh Charlesworth: Let's expand on each of these key messages, starting with the continuing sales growth in Q2. We saw a fantastic engagement with our brand again this quarter with more than 27 billion media impressions as we capitalized on buzzwear, the events like the solar eclipse, as well as successful, specially donuts, including our Dolly Parton and Kit Kat collections. Delivered fresh daily sales were up 18 percent globally and 22 percent in the US where we have been driving donut category growth for our grocery and convenience store customers for more than a year now.

Raoul Crowe: And I have a follow-up on the international side. Can you discuss the details on what's happening in the UK market today? There has been concerns around broader softening demand in the QSR space. I'm just curious to understand how a Christmas business in that core market is holding up. How is it tracking relatively to our expectations? Anything here would be helpful. Well, it's true that the UK has been the challenge that we're focused on, but it is important to understand that the majority of our near 40 international markets continue to perform very well. We have company on Japan, Canada, Australia, most of our franchisee partners, newly opened France, all performing very well.

Speaker Change: Thanks for that. And I have a follow-up on the international side. Can you discuss the details on what's happening in the UK market today? There has been concerns around broader softening demand in the QSR space. I'm just curious to understand how Krispy Kreme's business in that core market is holding up. How is it tracking related to your expectations?

Joshua Charlesworth: Well, it's true that the UK has been a challenge that we're focused on, but it is important to understand that the majority of our near 40 international markets continue to perform very well. I mean, we have a company out in Japan, Canada, Australia, most of our franchisee partners, and newly opened France are all performing very well, and indeed, the UK is still growing. It's just at a slower rate than the others, and profitability has been disappointing as a result. But the team created some local buzz recently in July with specialty donuts following the strategy that's worked out elsewhere. They celebrated the TV show Friends.

Speaker Change: Anything here would be helpful.

Speaker Change: Well, it's true that the UK has been a challenge that we're focused on, but it is important to understand that the majority of our near 40 international markets

Josh Charlesworth: Digital sales grew 22 percent with the April relaunch of our US loyalty program, making the experience easier and more rewarding for our consumers. We can now deploy personalized consumer engagement across 15 million loyalty members. That's 27 percent more than a year ago. Our biggest opportunity is to make it easier for people to buy our fresh donuts. We are doing this by increasing availability through our donut shops online and by delivering fresh daily to growth sellers, convenience stores and quick service restaurants.

Speaker Change: continue to perform very well and we have company and japan canada australiania year most of our franchisee partners newly open france or performing very well in indeedb u k is still growing

Joshua Charlesworth: And indeed the UK is still growing. It's just at a slower rate than the others. And profitability has been disappointing as a result. But the team have created some local buzz recently in July with specialty donuts, following the strategy that's worked out elsewhere. They celebrated the TV show Friends just yesterday. We announced upgrades to the core donut range coming in Q3. So there's a lot of adaptation to those conditions you described that the team are doing well, not just on the top line. Oh, actually, you know, also worth mentioning about 200 secondary displays in grocery stores that are working well in larger supermarkets, expansion into convenience stores.

Speaker Change: It's just at a slower rate than the others.

Speaker Change: And profitability has been disappointing as a result. But the team have created some local buzz recently in July with specialty donuts, following the strategy that's worked elsewhere. They celebrated the TV show Friends.

Joshua Charlesworth: Just yesterday, we announced upgrades to the core donut range coming in Q3. So there's a lot of adaptation to those conditions you described that the team is doing well, not just on the top line. Actually, it's worth mentioning about 200 secondary displays in grocery stores that are working well in larger supermarkets and expansion to convenience stores. So a lot of focused effort to get the UK back up to the levels we're seeing in other international markets, all whilst managing the cost side as well that Jeremiah covered earlier. So you know, I understand why you ask about the UK; we're closely monitoring and supporting the team there to make sure we get performance back up to the levels we're seeing elsewhere. I really appreciate that.

Speaker Change: Just yesterday, we announced upgrades to the core doughnut range coming in Q3, so there's a lot of adaptation to those conditions you described that the team are doing well. Not just on the top line, actually, also worth mentioning, about 200 secondary displays in grocery stores that are working well in larger supermarkets.

Josh Charlesworth: And the pace of our expansion is accelerated. To reach our goal of 33,000 by 2026, we're expanding with existing customers, new customers and indeed in new markets. With existing customers such as Walmart, which still only lists us in about 25 percent of their stores, we are exploring the opportunity to go nationwide. We have agreed to expand with target a new customer later this year and we are engaged in joint business planning with them to bring fresh donuts daily to their store's nationwide.

Joshua Charlesworth: So a lot of focused effort to get the UK back up to the levels we're seeing in other international markets, all whilst managing the cost side as well that Jeremiah covered earlier. So, you know, I understand why you ask about the UK. We're closely monitoring and supporting the team there to make sure we get performance back up to the levels we're seeing elsewhere.

Jeremy: expansion into convenience store so a lot of focused effort to get the uk back up to the levels we're seeing other international markets all whiles managing the cost side as well that jeremy

Speaker Change: covered earlier. So, you know, I understand why you ask about the UK. We're closely monitoring and supporting the team there to make sure we get performance back up to the levels we're seeing elsewhere.

Josh Charlesworth: In new markets, our expansion in France and Spain, Germany and Brazil provides the opportunity for thousands more points of access. In Paris, we've quickly grown to five shops already all supported by a single producing hub and we have plans to enter DFT next year. In the US, our accelerated national expansion provides an opportunity to profitably denser fire network. We currently have more than 8,000 points of access in the US. We remain on track to add more than 12,000 McDonald's and about 3,000 with partners like Walmart and Target.

Raul Crow: I really appreciate the color; just good luck for the rest of the year. Thank you.

Raoul Crowe: Really appreciate the color, just a good luck for the rest of the year. Thank you.

Speaker Change: Really appreciate the color, just good luck for the rest of the year.

Bill Chappell: Next question comes from the line of Bill Chappell, with twist. Please go ahead. Thanks.

Operator: The next question comes from the line of Bill Chappell with Truist.

Speaker Change: Thank you.

Speaker Change: The next question comes from the line of Bill Chappell with Truist. Please go ahead.

Bill Chappell: Good morning. Hey, just a quick follow up on the UK. I was, I mean, I thought the impression that more of the issue was a regulatory one and that you were start to be like kind of lapping that. So maybe any update there in terms of just yeah, are you lapping it should think you better on their own. Is it getting any worse? Were you hearing more noise on that front? You know, just from that standpoint, it would be great.

Bill Chappell: Hey, Josh, just a quick follow up on the UK. I was, I mean, I thought the impression that more of the issue was a regulatory one and that you were starting to be kind of lapping that. So maybe any update there in terms of just, yeah, are you lapping it? Should things get better on their own? Is it getting any worse? Or are you hearing more noise on that front? You know, just from that standpoint, it would be great. Hi Bill. Yeah, I mean, the regulatory changes you're talking about.

Bill Chappell: Thanks, good morning.

Speaker Change: he just just just a quick follow up on the u k

Bill Chappell: I thought the impression that more of the issue was a regulatory one, and that you would start to be kind of lapping that. So maybe any update there in terms of just...

Speaker Change: Are you lapping it? Should things get better on their own? Is it getting any worse? Or are you hearing more noise on that front? Just from that standpoint, it would be great.

Josh Charlesworth: Bringing the goal to nearly 23,000 US points of access by the end of 2026. We are very pleased with our partnership with McDonald's. The national rollout begins this fall with the Midwest starting in Chicago. We expect to serve fresh donuts in more than 1,000 McDonald's restaurants by the end of the year, add 5,000 in 2025 and 6,000 in 2026, bringing us to more than 85% of the US footprint. Our team is hard at work, modernising the making and moving of donuts.

Joshua Charlesworth: Hi, Bill. Yeah, I mean, the regulatory changes you're referencing. So she largely impact in terms of where displays can be placed in a grocery store associated with regulations around the merchandising of sweet treats there. That definitely has been a challenge for the team, and hence the secondary displays I mentioned, the additional expansion to convenience stores. These are, there's a great tactics for teams of employees. We are lapping the initial impact of those regulations to your question, but it obviously has brought a structural effect onto the market. But then you know, when you step back and look at the brand, the donuts, the, how it, the consumers resonating with our product, there's definitely an opportunity in the UK.

Joshua Charlesworth: Hi Bill. Yeah, I mean, the regulatory changes you're referencing impact largely in terms of where displays can be placed in a grocery store, associated with regulations around the merchandising of sweet treats there. That definitely has been a challenge for the team, hence the secondary displays I mentioned, and the additional expansion to convenience stores. These are great tactics the teams have employed. We are lapping the initial impact of those regulations on your question, but they have obviously brought a structural effect on the market.

Speaker Change: i believe yeah i mean the regulatory changes your' referencing

Speaker Change: associated largely impact in terms of whereare displays

Speaker Change: can be placed in a grocery store, associated with regulations around the merchandising of sweet treats there. That definitely has been a challenge.

Speaker Change: for the team, and hence the secondary displays I mentioned, the additional expansion to convenience stores. These are great tactics the teams have employed. We are lapping the initial...

Josh Charlesworth: We have a dedicated team partnering with our customers, including McDonald's, to ensure a smooth rollout. We are hiring and training experts in manufacturing operations, upgrading our donut production lines, continuously improving the manufacturing process and optimising our delivery logistics network with improved routing and upgrades to our fleet. This expansion effort will increase utilization of our production hubs and distribution density. Today, our 151 US hubs with spokes each serve on average 50 points of access.

Speaker Change: impact of those regulations to your question, but it obviously has brought a structural effect onto the market. But then, you know, when you step back and look at the brand, the doughnuts, how the consumer is resonating with our product, there's definitely an opportunity in the UK, hence.

Joshua Charlesworth: But then, you know, when you step back and look at the brand, the doughnuts, how the consumer is responding to our product, there's definitely an opportunity in the UK to focus on upgrading the core doughnuts, bringing out specialty doughnuts as we see in other markets. And the team is really leaning into that. So obviously, the macroeconomic environment has been relatively challenged in the UK, but our teams generally focus on these amazing moments of joy, celebratory occasions. And so looking forward, I know they're really getting behind all the big special occasions we have in the high season months ahead of us.

Joshua Charlesworth: Hence, focus on upgrading the cordone arts, bringing out specialty arts as we see in other markets. And the team are really leaning into that. So obviously the macroeconomic environment has been relatively challenged in the UK. But our teams generally focus on these amazing moments of joy, celebratory occasions. And so looking forward, I know they're really getting behind all the big special occasions we have in the high season months ahead of us.

Speaker Change: focus on upgrading the core down bring out specialty as we see in other markets and the team really leaning into that so obviously that the macrooic environment has been roseallyly challenged in the u k but our teams generally focus on these amazing momentents of joy celebratory occasions and so looking forward i know they're ready getting behind all the big special occasions we have in the high season months ahead of us

Josh Charlesworth: We expect this to increase to over 100 by 2026, improving efficiency and profitability. Take, for example, Chicago will expect to support 450 new delivered fresh daily doors with the same number of hubs as we have today. In addition to leveraging existing capacity, we will be making selective investments in geographies which have limited access to crispy cream today.

Operator: As a reminder, if you'd like to ask a question, please press star followed by the number one on your telephone keypad.

Operator: As a reminder, if you'd like to ask a question, please press star followed by the number one on your telephone keypad. Your next question comes from the line of Dan Guglielmo with Capital One Securities. Please go ahead.

Speaker Change: As a reminder, if you would like to ask a question, please press star followed by the number 1 on your telephone keypad.

Daniel Guglielmo: Your next question comes from the line of Dan Guglielmo with Capital One Securities. Please so around like the big US relationship expansion, so McDonald's Target and then possibly Walmart, well you all need to hire in the US in the second half of this year, or can the existing employee base kind of handle most of that? Well, obviously we're gearing up for expansion already in many ways that is making sure that we've got extra drivers in place to get the donuts out there. That's the main hiring initiative we'd expect. In the early months, nearly all of the expansion is serviced by existing production hubs, so it's quite small the amount of extra labor we need to support the production there.

Dan Guglielmo: Hello, everyone. Thank you for taking my question.

Josh Charlesworth: Last quarter, I discussed adding 30 new hubs over the next three years to support the expansion. We are on track to achieve this goal and have 17 of the 30 hubs already underway, including Seattle, Minneapolis and Philadelphia. With this, we are well positioned to deploy delivered fresh daily in all major metropolitan markets in the US.

Speaker Change: Your next question comes from the line of Dan Guglielmo with Capital One Securities.

Operator: Please go ahead.

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

Raul Crow: Hello, everyone. Thank you for taking my question.

Speaker Change: Please go ahead.

Dan Guglielmo: helloeveryone thank you for taking my questions

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

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

Jeremiah Ashukian: And now, I'll hand it over to Jeremiah to discuss our overall financial performance and the impact of the recent insomnia cookies transaction. Thanks, Josh. I'll begin with our strong second quarter results. Organic growth was 7.8%. Adjusted EBITDA increased 12.1%, resulting in positive operating leverage with adjusted EBITDA margin expansion of 60 basis points to 12.5%. Turning to our US segment results, the consumer engagement we saw in the quarter resulted in an organic revenue growth of 8.4%.

Joshua Charlesworth: Well, obviously, we're gearing up for expansion already. In many ways, that means making sure that we've got extra drivers in place to get the doughnuts out there. That's the main hiring initiative we'd expect. In the early months, nearly all of the expansion will be serviced by existing production hubs. So it's quite small the amount of extra labor we need to support the production there. We do have teams focused on partnering with customers, as you can imagine, in customer service and in marketing.

Speaker Change: Well, obviously, we're gearing up for expansion already. In many ways, that is making sure that we've got extra drivers in place to get the donuts out there. That's the main hiring initiative we'd expect.

Speaker Change: In the early months, nearly all of the expansion is serviced by existing production hubs.

Jeremiah Ashukian: Points of access growth was 17.8%, year over year as we added new doors with several key customers and new stores, including stop and shop and targets. Average revenue per door increased to $657, driven by price and specialty donut collection. DeGenerations. This quarter, we saw a 6.4% increase in sales per hub to $5 million, which is a key measure of hub productivity. This helped deliver adjusted the EBITDA growth of 16.4% to $32.7 million.

Speaker Change: It's quite small the amount of extra labor we need to support the production there. We do have teams focused on partnering with the customers. You can imagine in customer service and in marketing, for example, our respective marketing teams are working closely together with the McDonald's team so that people know Krispy Kreme is coming to McDonald's. There is investment there.

Joshua Charlesworth: We do have teams focused on partnering with the customers; you can imagine in customer service and in marketing. For example, our respective marketing teams are working closely together with the McDonald's team so that people know Krispy Kreme is coming to McDonald's. So you know there is investment there, but the overall message is that the expansion of deliver fresh daily in the US is leveraging an underutilized system. The additional densification of all that distribution means you get flow through to the bottom line, as we saw in this quarter in the second quarter, which we're pleased to see.

Joshua Charlesworth: And for example, our respective marketing teams are working closely together with the McDonald's team so that people know Krispy Kreme is coming to McDonald's. So there is investment there. But the overall message is that the expansion of Deliver Fresh Daily in the US is leveraging an underutilized system. The additional densification of all that distribution means you get flow through to the bottom line, as we saw in this quarter and in the second quarter, which we're pleased to see.

Speaker Change: But the overall message is that the expansion of Deliver Fresh Daily in the U.S. is leveraging an underutilized system. The additional densification of all that distribution means you get flow through to the bottom line, as we saw in this quarter, in the second quarter, which we're pleased to see, you know, overall organic growth and basis point improvement, it reflects the model we have here. And so, you know, recruitment of the right people to support that is important, but it isn't a big concern. In fact, it's really exciting to see how we're growing.

Joshua Charlesworth: Overall organic growth and its point improvement reflects the model we have here, and serving a recruitment of the right people to support that is important. But it isn't a big concern; in fact, it's really exciting to see how we're growing.

Joshua Charlesworth: Overall organic growth and basis point improvement reflect the model we have here, and so recruitment of the right people to support that is important, but it isn't a big concern. In fact, it's really exciting to see how we're growing.

Jeremiah Ashukian: Within our equity owned international markets, organic revenue grew 5% with all markets growing in the quarter, led by Canada and Japan. We continue to add points of access across the network, including Coles, Australia, and Oxo in Mexico. Adjusted EBITDA declined 12.3% primarily driven by the UK market, which resulted in an adjusted EBITDA margin of 17.3%. We're focused on improving results in the UK, where performance is not enough to our expectations. We've completed the consolidation of three sites, which should yield benefits in the back half of the year, and are taking further actions to ensure we restore margin levels in this market.

Joshua Charlesworth: Great, yeah that's very helpful and just kind of as a follow up to that just kind of US macro a little bit the new employees kind of that you're bringing, bringing on like how has the labor environment looked? Is it competitive? Just kind of curious from your guys's view. Yeah, it's it's Krispy Kreme has been well positioned to feel. People love working at a Krispy Kreme; it's a great environment to work in. So generally, across the board, we've been able to recruit great talent and great people across the system. And there were stages where hiring drivers was a little more difficult.

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

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

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

Joshua Charlesworth: Krispy Kreme has been well positioned. I feel that people love working at a Krispy Kreme. It's a great environment to work in, and, generally, we've been able to recruit great talent and great people across the system. There were stages where hiring drivers was a little more difficult, but we're not seeing the same challenge. I think the labor environment has eased up on that side. And so, yeah, the main thing we're focused on is making sure that all those folks are trained and supported, that the equipment is in tip-top condition, that we have optimized our delivery routes, all so that we can service our customers' needs.

Speaker Change: Yeah, Krispy Kreme has been well-positioned, I feel. People love working at a Krispy Kreme. It's a great environment to work in. And so, generally, across the board, we've been able to recruit great talent and great people across the system. There were stages where hiring drivers was a little more difficult. We're not seeing the same challenge. I think the labour environment...

Jeremiah Ashukian: In our market development segment, organic revenue grew 16.1% as equipment sales increased year over year. System-wide sales grew in most markets, most notably in South Korea, where digital sales and donor innovation have driven successful results. Adjusted EBITDA in the segment grew 22.7% with margin expansion driven by greater flow-through from product sales. For the second quarter, we delivered 5 cents in adjusted earnings per share. The higher depreciation and amortization in the quarter reflects the investments associated with expansion of our open-spoken network and insomnia cookies rapid growth.

Joshua Charlesworth: We're not seeing the same challenge. I think the labor environment has eased up on that side, and so, yeah, the main thing we're focused on is making sure that all those folks are trained and supported, that the equipment is in tip-top condition, and that we have optimized our delivery routes, or also that we can service our customers' needs.

Speaker Change: has eased up on that side, and so, yeah, the main...

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

Daniel Guglielmo: James. Great, thank you.

Jeremiah Ashukian: Consistent with our plan, we delivered cash flow from operations in the second quarter of $33 million, taking us to $15.5 million a year to date. Since closing the quarter, we have strengthened our balance sheet following the sale of a majority ownership stake in insomnia cookies. We received $127.4 million in cash proceeds upon closing on July 17th, and have since collected an additional $45 million following an insomnia cookies refinancing of intercompany debt. As a result, we expect our next leverage ratio to trend towards 3.5 times by year end, and remain on track to a long-term goal of 2.0 times to 2.5 times by the end of 2026.

Speaker Change: Great, thank you.

Bill Chappell: The next question comes from the line of Bill Chappell with Truist. Please go ahead. Thanks, sorry, me again. I get cut off. Just a question on Chicago. You know, why that's the next city. It's obviously different from Kentucky cities. It's in the backyard and front yard of McDonald's Headquarters. And, but, and I don't know what kind of your existing presence is compared to other cities.

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

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

Bill Chappell: Thanks. Sorry, me again. I got cut off. Hello again.

Speaker Change: Please go ahead.

Bill Chappell: Thanks. Sorry, me again. I got cut off.

Speaker Change: justice

Ian: i hello ian just a question on chicago

Bill Chappell: Just a question on Chicago, you know, why that's the next city. It's obviously different from the Kentucky cities. It's in the backyard and front yard of McDonald's headquarters. And I don't know what kind of your existing presence is compared to other cities. So maybe you could just kind of explain the thought process behind that and kind of how that may be different or not from what you've seen in Lexington and Louisville.

Speaker Change: You know, why that's the next city, it's obviously different from Kentucky cities, it's in the backyard and front yard of McDonald's headquarters, and I don't know what kind of your existing presence is compared to other cities.

Joshua Charlesworth: So maybe you can just kind of explain the thought process behind that and kind of how that may be different or not from what you see in Lexington, Louisville. Well, yeah, we it is certainly different, but we're excited to be there at the home of Donald's, with guided by their teams where they prefer to roll out first, only constrained by our existing capacity. As I mentioned earlier in the call, you know, we're investing selectively in key markets around the country, you know, identifying and even getting commitments on sites in places like Minneapolis and Boston, that we don't have production, and we'll come to those later.

Jeremiah Ashukian: Let me turn to our full-year guidance, which now reflects the sale of a majority ownership stake in insomnia cookies, improving the long-term financial profile of the business. On the left, you can see our previous guidance with a full-year contribution from insomnia. The middle column represents the back half impact of the transaction, and on the right-hand side is the Krispy Kreme's updated full-year guidance, which reflects the removal of insomnia from the second half of the year.

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

Jon: Well, yeah, it is certainly different, but we're excited to be there at the home of McDonald's. We're guided by their teams, where they prefer to roll out first, only constrained by our existing capacity. As I mentioned earlier in the call, we're investing selectively in key markets around the country, you know, identifying and even getting commitments on sites in places like Minneapolis and Boston that we don't have production on, and we'll come to those later. But in Chicago, we have three hubs with spokes already. They have excess capacity.

Joshua Charlesworth: Well, yeah, us it is certainly different, but we're excited to be there at the home of McDonald's. We're guided by their teams, where they prefer to roll out first, only constrained by our existing capacity. As I mentioned earlier in the call, we're investing selectively in key markets around the country, you know, identifying and even getting commitments on sites in places like Minneapolis and Boston that we don't have production on, and we'll come to those later. But in Chicago, we have three hubs with spokes already. They have excess capacity.

Speaker Change: Well, yeah, it is certainly different, but we're excited to be there at the home of McDonald's. We're guided by their teams, where they prefer to roll out first, only constrained by our existing capacity. As I mentioned,

Jeremiah Ashukian: By removing the previously forecasted $129 million of insomnia revenue from the guidance, we now expect net revenue of $1.65 to $1.65 billion. Consistent with our prior assumption that insomnia would have a 100 basis point impact to our overall growth, we expect for organic growth of 5% to 7% for the full year. Re-moving insomnia's second half adjusted EBDA, resulting Krispy Kreme adjusted EBDA of $215 to $229 for 2024. As with all of these updates, the change to adjusted EPS solely reflects the recent sales insomnia.

Speaker Change: Earlier in the call, we're investing selectively in key markets around the country, identifying and even getting commitments on sites in places like Minneapolis and Boston that we don't have production. And we'll come to those later. But in Chicago, we have three hubs with spokes already. They have excess capacity. In fact, in one of the sites we have.

Joshua Charlesworth: In fact, at one of the sites, we have a hub with more than one production line. And so it made complete sense to start in a place where we had that. You know, as we think about our hubs going forward, we're really working on creating streamlined, sort of high-efficiency sites that seamlessly integrate DFD and retail operations. And, and we actually already have somewhere that we've been able to, with a modest investment, set up in that way.

Joshua Charlesworth: But in Chicago, we have three hubs with spokes already. They have excess capacity. In fact, in one of the sites, we have a hub with more than one production line. And so it's made complete sense to start in a place where we had that, you know, as we think about our hubs going forward, we're really working on creating streamlined sort of high-efficiency sites that seamlessly integrate DFT and retail operations. And we actually already have somewhere that we've been able to, with modest investment, set up in that way. So I feel really confident about starting out in Chicago.

Jon: In fact, at one of the sites, we have a hub with more than one production line. And so it made complete sense to start in a place where we had that. You know, as we think about our hubs going forward, we're really working on creating streamlined, sort of high efficiency sites that seamlessly integrate DFD and retail operations. And we actually already have somewhere that we've been able to, with modest investment, set up in that way.

Speaker Change: a hub with more than one production line. And so it's made complete sense to start in a place where we had that. As we think about our hubs going forward, we're really working on creating streamlined, sort of high-efficiency sites that seamlessly integrate DFD and retail operations, and we actually already have somewhere that we've been able to, with modest investment, set up in that way. So I feel really confident about starting out in Chicago. We have a nice presence across the Midwest in general. So to get going with a really positive, strong momentum from the start made sense for both

Joshua Charlesworth: So I feel really confident about starting out in Chicago; we have a nice presence across the Midwest, in general. So to, you know, get going with a really positive, strong momentum from the start made sense for both of us. So we're excited for the teams there. Thanks.

Jeremiah Ashukian: We now expect between $24 and $0.28 for the year. We are also providing the following modeling assumptions, an income tax rate of between 28 and 30 percent, capital expenditures of 7 to 8 percent of net revenue, and interest expense of $55 to $60 million down from our prior guidance of $55 to $65 million reflecting our lower net debt levels.

Jon: So I feel really confident about starting out in Chicago. We have a nice presence across the Midwest, in general. So to get going with really positive, strong momentum from the start made sense for both of us. So we're excited for the teams there.

Joshua Charlesworth: We have a nice presence across the Midwest in general. So to, you know, get going with a really positive, strong momentum from the start, made sense for both of us. So excited for the teams there.

Jeremiah Ashukian: With regards to the third quarter, we recognize the changing consumer dynamics and continue to respond to it. As a reminder, Q3 will reflect the removal of insomnia, and as a result we expect third quarter net revenue of $370 to $383 million with adjusted EBDA of $38 to $41 million. We remain confident in our ability to execute throughout the remainder of 2024.

Bill Chappell: Great. Thanks a lot.

Bill Chappell: Great, thanks so much.

Speaker Change: So we're excited for the teams there.

Speaker Change: Great. Thanks so much.

Joshua Charlesworth: I'll now turn the call back over to Josh Charlesworth for closing remarks. Please go ahead. Yeah, well, thanks everyone for the questions. Really appreciate it. Thank you for your interest in Crispy Cream today. Obviously, strong results and strategies are working. So really pleased to share with you that today. And of course, thank you to all our Crispy Creamers for your ongoing commitment to bring joy to our customers through Crispy Cream around the world. Thank you very much.

Joshua Charlesworth: I'll now turn the call back over to Josh Charlesworth for his closing remarks. Please go ahead.

Speaker Change: I'll now turn the call back over to Josh Charlesworth for closing remarks. Please go ahead.

Joshua Charlesworth: Yeah, well, thanks everyone for the questions. I really appreciate it. Thank you for your interest in Krispy Kreme today. Obviously, we have had strong results and the strategies are working, so I'm really pleased to share with you that today. And, of course, thank you to all Krispy Kremeers for your ongoing commitment to bring joy to our customers through Krispy Kreme stores around the world. Thank you very much. Thank you very much for your interest. Thank you. Ladies and gentlemen, that concludes today's call. Thank you all for joining, and you may now disconnect. [music]

Josh Charlesworth: you thanks for wrong for the questions really appreciate it thank you for your interest in crispy creen today obviously strong results and the strategy working so really pleased to share with you that today andof course thank you to our crp crereeers for your ongoing commitment to bring enjoy to our customers so crispy cream around the world thank you very much

Josh Charlesworth: With that, I'll turn it over to Josh for his closing remarks. Thanks, Jeremiah. I'm excited for what we have ahead in the balance of the year, particularly in our high season, which begins in September and runs through the year and holidays.

Josh Charlesworth: In summary, we are focused on expanding fresh donor availability by adding high quality, productive points of access, driving operating leverage to the efficiency of our operating model, and maximizing capital return, both by leveraging existing capacity, and making selective investments and 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: Ladies and gentlemen, that concludes today's call. Thank you all for joining. Anyway, now disconnect.

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

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

Operator: Operator, let's now open it up to Q and A, please. We will now begin the question and answer session. In order to ask a question, please best start, followed by the number one on your telephone keypad.

Sarah Senatore: Your first question comes from the line of Sarah Senatory with Bank of America. Please go ahead. Great, thank you very much.

Josh Charlesworth: I wanted to ask about, you mentioned the McDonald's rollout, and just basically thinking about, are you still a stupor? Are you still on track? I think the idea had been to increase rateably the number of stores over time. Does that still sound like the right kind of rollout plan?

Jeremiah Ashukian: The second point is, I think you had seen some pretty significant investment ahead of that, whether it was an OptX or G&A. Are the biggest chunkiest increases behind us, and so going forward, the growth rate in operating expense should lag, or at least more closely match revenues. Thanks.

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Josh Charlesworth: So you're good morning. Yeah, the McDonald's partnership is going very well in general, and the rollout is on track. We announced today that we will be first listing, and we've met Donalds beyond the Kentucky pilot in the fall in Chicago and then expanding through the Midwest in the back end of this year and obviously into next year. We expect to be in more than 1,000 McDonald's restaurants by the end of 2024, and then we have a rollout plan that we have partnered with McDonald's on through 2025 and indeed through 2026.

Josh Charlesworth: With about 5,000, we're expecting to add generally evenly through the year of 2025. We have a dedicated cross-functional team there to make sure the facilities and our people are ready. In fact, we're also making improvements to the production lines and even doing our best to improve productivity and up our game as we go. We're very focused on delivering a really high quality service to the McDonald's restaurants so that people get all some fresh donuts every day at the same quality level. They're expecting crispy cream and other channels.

Jeremiah Ashukian: How's Jeremiah Johnson talking about some of the impacts of that? Yeah, and Joshy did a nice job.

Jeremiah Ashukian: Good morning, Sarah. And thanks for the question. It's too ensure a smooth rollout. We are investing out of the opportunity with dedicated rollout teams to sport our shops and training and development costs. We're also improving capabilities across our manufacturing and operations teams and upgrading your donut production lines, as you can imagine, the line that will move through. All of this has been included in our guide ongoing. We expect to manage costs prudently and deliver margin expansion as we ramp the McDonald's network serving nearly 85% of the brand's US footprint by 2026 as Josh mentioned.

Raoul Crowe: In next question comes from the line of Raoul Crowe with JP Morgan. Please go ahead. Good morning, guys. Thanks for the great update today.

Josh Charlesworth: I'd like to focus on the nationwide rollout of Walmart and Target, and this is, I feel, is a very big step for you guys. I think today as I understand there are around 4,000 to 5,000 doors and tap just between these two brands versus the 3,000 odd non McDonald's doors. You guys discussed for the guidance for the next three years.

Josh Charlesworth: So as you expand the hubbent spoke infrastructure, is it fair to expect there will be almost no additions are very low or a lower mix of convenience stores or low-volume doors additions as we go along expanding this side of the business and also will profitability follow this. I'm glad you're good morning, Raoul. It's important to understand that the McDonald's nationwide expansion is a bit of a catalyst for us. It enables us to really expand our DFT business faster than we would have been able to otherwise.

Josh Charlesworth: And so we're focused on naturally the high quality national players. You mentioned Walmart, Target, Kroger and others all fit the bill. All ways of getting our consumers, those fresh donuts and making it easier for them to purchase them than it is today. So we're in discussions with Walmart about how as our hubs are available to reduce donuts in more and more markets, we can get it to those additional Walmart stores. We began discussions with Target as well and they've evolved quickly and we've recently expanded with Target, Phoenix and Lanter and we've got plans to come to LA Detroit and several cities as we build out the network with the rollout of McDonald's.

Josh Charlesworth: So it really is a great combination. Sea stores and other smaller locations, smaller low traffic locations are actually still very helpful to us though because if you think all the places you go on the way to a McDonald's, Target, Walmart, Kroger, you're going to be going past convenience stores, gas stations, making the logistics route efficient. And so we still see a role for those to play. But naturally we're focused on those big national partners to the McDonald's program on locks for us. Thanks for that.

Raoul Crowe: And I have a follow-up on the international side.

Josh Charlesworth: Can you discuss the details on what's happening in the UK market today? There has been concerns around broader softening demand in the QSR space. I'm just curious to understand how a Christmas business in that core market is holding up. How is it tracking relatively our expectations? Anything here would be helpful. Well, it's true that the UK has been the challenge that we're focused on, but it is important to understand that the majority of our near 40 international markets continue to perform very well.

Josh Charlesworth: We have company on Japan, Canada, Australia, most of our franchisee partners, newly opened France, all performing very well. And indeed the UK is still growing. It's just at a slower rate than the others. And profitability has been disappointing as a result. But the team have created some local buzz recently in July with specialty donuts following the strategy that's worked out elsewhere. They celebrated the TV show Friends just yesterday. We announced upgrades to the core donut range coming in Q3.

Josh Charlesworth: So there's a lot of adaptation to those conditions you described that the team are doing well, not just on the top line. Oh, actually, you know, also worth mentioning about 200 secondary displays in grocery stores that are working well in larger supermarkets, expansion into convenience stores. So a lot of focused effort to get the UK back up to the levels we're seeing in other international markets, all whilst managing the cost side as well that Jeremiah covered earlier. So, you know, I understand why you ask about the UK. We're closely monitoring and supporting the team there to make sure we get performance back up to the levels we're seeing elsewhere.

Raoul Crowe: Really appreciate the color just a good luck for the rest of the year. Thank you.

Bill Chappell: Next question comes from the line of Bill Chappell with twist. Please go ahead. Thanks.

Bill Chappell: Good morning. Hey, just just a quick follow up on the UK. I was, I mean, I thought the impression that more of the issue was a regulatory one and that you were start to be like kind of lapping that. So maybe any update there in terms of just yeah, are you lapping it should think you better on their own. Is it getting any worse? Were you hearing more noise on that front? You know, just from that standpoint, it would be great.

Josh Charlesworth: Hi, Bill. Yeah, I mean, the regulatory changes your referencing. So she largely impact in terms of where displays can be placed in a in a grocery store associated with regulations around the merchandising of sweet treats there. That definitely has been a challenge for the team and hence the secondary displays I mentioned the additional expansion to convenience stores. These are, there's a great tactics for teams of employees. We are lapping the initial impact of those regulations to your question, but it obviously has brought a structural effect onto the market.

Josh Charlesworth: But then you know, when you step back and look at the brand, the donuts, the, how it, the consumers resonating with our product, there's definitely an opportunity in the UK. Hence, focus on upgrading the cordone arts, bringing out specialty arts as we see in other markets. And the team are really leaning into that. So obviously the macroeconomic environment has been relatively challenged in the UK. But our teams generally focus on these amazing moments of joy, celebratory occasions. And so looking forward, I know they're really getting behind all the big special occasions we have in the high season months ahead of us.

Operator: As a reminder, if you'd like to ask a question, please press star followed by the number one on your telephone keypad.

Dan Guglielmo: Your next question comes from the line of Dan Guglielmo with Capital One Securities.

Josh Charlesworth: Please So around like the big US relationship expansion, so McDonald's Target and then possibly Walmart, well you all need to hire in the US in the second half of this year, or can the existing employee base kind of handle most of that? Well obviously we're gearing up for expansion already in many ways that is making sure that we've got extra drivers in place to get the donuts out there. That's the main hiring initiative we'd expect.

Josh Charlesworth: In the early months, nearly all of the expansion is serviced by existing production hubs, so it's quite small the amount of extra labor we need to support the production there. We do have teams focused on partnering with the customers, you can imagine in customer service and in marketing and for example our respective marketing teams are working closely together with the McDonald's team so that people know Krispy Kreme is coming to McDonald's.

Josh Charlesworth: So you know there is investment there, but the overall message is that the expansion of deliver fresh daily in the US is leveraging an underutilized system, the additional densification of all that distribution means you get flow through to the bottom line as we saw in this quarter in the second quarter, which we're pleased to see. Overall organic growth and its point improvement reflects the model we have here and serving a recruitment of the right people to support that is important, but it isn't a big concern in fact, it's really exciting to see how we're growing.

Josh Charlesworth: Great, yeah that's that's very helpful and just kind of as a follow up to that just kind of US macro a little bit the new employees kind of that you're bringing, bringing on like how has the labor environment looked is it competitive just kind of curious from from your guys's view. Yeah it's it's Krispy Kreme has been well positioned to feel people love working at a Krispy Kreme it's a great environment to work in and so generally across the board we've we've been able to to recruit great talent and great people across the system and there were stages where hiring drivers is a little more difficult.

Josh Charlesworth: We're not seeing the same challenge I think the labor environment has eased up on that on that side and so yeah the main thing we're focused on and making sure that all those folks are trained and supported that the equipment is in tip top condition that we have optimized our delivery routes or also that we can service our customers needs.

Dan Guglielmo: James. Great, thank you.

Bill Chappell: The next question comes from the line of Bill Chappell with Truist. Please go ahead. Thanks, sorry, me again. I get cut off. Just a question on Chicago. You know, why that's the next city. It's obviously different from Kentucky cities. It's in the backyard and front yard of McDonald's headquarters. And, but, and I don't know what kind of your existing presence is compared to other cities. So maybe you can just kind of explain the thought process behind that and kind of how that may be different or not from what you see in Lexington Louisville.

Josh Charlesworth: Well, yeah, we it is certainly different, but we're excited to be there at the home of Donald's with guided by their teams where they prefer to roll out first, only constrained by our existing capacity. As I mentioned earlier in the call, you know, we're investing in selectively in key markets around the country, you know, identifying and even getting commitments on sites in places like Minneapolis and Boston, that we don't have production and we'll come to those later.

Josh Charlesworth: But in Chicago, we have three hubs with spokes already. They have excess capacity. In fact, in one of the sites, we have a hub with more than one production line. And so it's made complete sense to start in a place where we had that, you know, as we think about our hubs going forward, we're really working on creating streamlined sort of high efficiency sites that seamlessly integrate DFT and retail operations. And we actually already have somewhere that we've been able to, with modest investment, set up in that way.

Josh Charlesworth: So I feel really confident about starting out in Chicago. We have a nice presence across the Midwest in general. So to, you know, get going with a really positive, strong momentum from the start, made sense for both of us so excited for the teams there.

Bill Chappell: Great. Thanks a lot.

Josh Charlesworth: I'll now turn the call back over to Josh Charlesworth for closing remarks. Please go ahead. Yeah, well, thanks everyone for the questions. Really appreciate it. Thank you for your interest in Crispy Cream today. Obviously, strong results and strategies working. So really pleased to share with you that today. And of course, thank you to all our Crispy Creamers for your ongoing commitment to bring joy to our customers through Crispy Cream around the world. Thank you very much.

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