Q2 2024 Krispy Kreme Inc Earnings Call

August 8, 2024

Eric: 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.

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: I'd like to welcome everyone to the Krispy Kreme Second Quarter 2024 Earnings.

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

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: Thank you. 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.krispykreme.com.

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.

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.

Operator: 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.

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.

Speaker Change: 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.

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: 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.

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.

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 and ended december thirty one two thousand and twenty three and other filings we make from time to time with the sec

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

Operator: 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 Josh.

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

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 John.

Speaker Change: a reconciliation between non-gaap financial measures in our closest comparable gaap measures can be found in our second quarter two thousand and twenty four earnings press release and form eight k filile today with the sec and is also available at our investors do crispy cream dot com website

John: 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 doughnuts just 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. And as of tomorrow, Krispy Kreme will be available in 40 countries with the opening of our first hotline theatre in Morocco.

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

Joshua Charlesworth: Thanks, Trey. Good morning, everyone.

Josh Charlesworth: thanks tray good morning everyone and thank you for joining us our strategy of making fresh crispy cream donuts more available around the world is working

Joshua Charlesworth: And thank you for joining us; 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. The continuing strength of the brand and our strategy is reflected in our strong second quarter results. Our recently announced expansion into Spain means that fresh Krispy Kreme doughnuts will be available in four of Europe's largest markets next year.

Josh Charlesworth: and the excitement that brand creates has never been higher this phoo is from the recent opening of a hotlight theatre in anchora turkey showing consumers lining up for our amazing original gr donuts shots offof 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.

Speaker Change: And as of tomorrow, Krispy Kreme will be available in 40 countries with the opening of our first hotline theatre in Morocco.

John: 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 in Spain means that fresh Krispy Kreme donuts will be available in four of Europe's largest markets next year.

Speaker Change: the continuing stgth of the brand and our strategy is reflected in our strong second quarter results organic revenue grew seven point eight percent driven by our innovative specially donnet collections which continue to resonate with our consumers

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

Speaker Change: Donuts. 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: We are well on our way to our goal of 33,000 points of access by the end of 2026. 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: 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: 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: I'm thankful for the partnership with Insomniac Cookies over the past five years and look forward to continued success going forward as a minority shareholder.

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

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.

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 in median pressure, as we capitalized on buzzworthy events like the solar eclipse, as well as successful specialty donuts, including our Dolly Parton and Kit Kat collections. Digital sales grew 22% with the April relaunch of our U.S. loyalty program, making the experience easier and more rewarding for our consumers. That's 27% more than a year ago.

John: We saw fantastic engagement with our brand again this quarter, with more than $27 billion in median revenue, as we capitalized on buzzworthy events like the solar eclipse, as well as successful specialty donuts, 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.

Jeremiah Ashukian: 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.

John: Digital sales grew 22% with the April relaunch of our U.S. 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.

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

Jeremiah Ashukian: We can now deploy personalized consumer engagement across 15 million loyalty members. That's 27% more than a year ago.

John: 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 in new markets. 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.

Joshua Charlesworth: We are doing this by increasing availability through our donut shops and online, and by delivering fresh daily to grocers, convenience stores, and quick service restaurants, and the pace of our expansion is accelerating. 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. 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., bringing the goal to nearly 23,000 US points of access by the end of 2026.

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

Jeremiah Ashukian: 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.

Jeremiah Ashukian: 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.

John: 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, soon, 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 in the U.S. Our Accelerated National Expansion provides an opportunity to profitably densify our network.

Jeremiah Ashukian: 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 on its daily to their stores nationwide

Jeremiah Ashukian: in new markets our expansion in france and since spain germany in brazil provides the opportunity for thousands more points of access

Jeremiah Ashukian: In Paris, we've quickly grown to five shops already, all supported by a single producing hub, and we have plans to enter DfD next year.

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

John: We currently have more than 8,000 points of access in the U.S. and remain on track to add more than 12,000 tunnels and about 3,000 with partners like Walmart and Tarks, 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 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.

Jeremiah Ashukian: we currently have more than eight thousand points of access in the u s

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.

Speaker Change: we are very pleased with our partnership withve wereadts 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. Our team is hard at work modernizing the making and distribution 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 the U.S. footprint.

Speaker Change: our team is hard at work modernizing the making a moving of donut

Speaker Change: We have a dedicated team partnering with our customers, including McDonald's, to ensure a smooth roll-out. We are hiring and training experts in manufacturing operations, upgrading our doughnut production lines.

John: 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 U.S. 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.

Joshua Charlesworth: 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 U.S. 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: continuously improving the manufacturing process and optimizing our delivery logistics network with improved routing and upgrades to our fleet

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

Joshua Charlesworth: Take, for example, Chicago, where we expect to support 450 new daily delivery doors with the same number of hubs as we have 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. With this, we are well positioned to deploy DeliverFresh daily in all major metropolitan markets in the US. And now I'll hand it over to Jeremiah to discuss our overall financial performance and the impact of the recent Insomnia Cookies transaction.

John: 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'll be making selective investments in geographies which 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, we'll be making selective investments in geographies which have limited access to Krispy Kreme today.

Speaker Change: last quarter i discussed adding thirty new hubs over the next three years to support the expansion we'will on track to achieve this goal and have've seventeen of the thirty hubs already underway including seattle minneapolis and philadelphia

John: With this, we are well positioned to deploy DeliverFresh daily in all major metropolitan markets in the U.S., and now I'll hand it over to Jeremiah to discuss our overall financial performance and the impact of the recent insomnia cookies transacted.

Speaker Change: with this we are well positioned to deploy deliver fresh daily in all major metroboallsand markets in the us

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.

Jeremiah Ashukian: Thanks, Josh. I'll begin with our strong second quarter results. 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%. Turning to our U.S. 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%. Turning to our U.S. segment results, the consumer engagement we saw in the quarter resulted in organic revenue growth of 8.4%. Additionally, 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.

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

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

Speaker Change: points of access growth about seventeen point eight percent yearover-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 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%, 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. Within our equity-owned international markets, organic revenue groups, 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: average revenue per door increased to six hundred and fifty-seven dollars driven by price and specialty donut collections

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.

Jeremiah Ashukian: Margins improved 80 basis points year-over-year to 11.3%, driven by increased utilization and tight control of SG&A. We continue to add points of access across the network, including Kohl's in Australia and OXO in Mexico. However, 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 has not been up to our expectations.

Speaker Change: margins improved deighty bas' points year over-year to eleven point three percent driven by increased utilization and tight control of best gna this was partially offset by increased promotionalactivity and start up cost for the mdonald'slaunch the fall

Speaker Change: Within our equity-owned international markets, organic revenue grew 5% of 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. Adjusted EBITDA declined 12.3%, primarily driven by the UK market, which resulted in an adjusted EBITDA margin of 17.3%.

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 has not been up 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: We're focused on improving results in the UK, where performance has not been up 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.

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 donut 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 five cents in adjusted earnings per share and Insomnia Cookies' rapid growth. 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: In our market development segment, organic revenue grew 16.1% as equipment sales increased year-over-year.

Speaker Change: system widesales were in most markets most notably in south korea where digital sales and dona innovation have driven successful results

Jeremiah Ashukian: Adjusted eBuy 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. 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 EBDA 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: a higher depreciation amortization in the quarter reflects the investments associated with the expansion of hopens spoke network and in somiaa cookieies' 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 year-to-date. Since closing the quarter, we have strengthened our balance sheet following the sale of a majority ownership stake in Insomnia Cookies.

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 17, 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.

Jeremiah Ashukian: we received one hundred and twenty seven point four million dollars in cash proceeds upon closing on july seventeen and have since collectedin additional forty five illiondollars fing in somnia cookieiessrefinancing 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. We are also providing the following modeling assumptions, an income tax rate of between 28 and 30 percent, and interest expense of $55 to $60 million, down from our prior guidance of $55 to $65 million, reflecting our lower net debt levels. With regard to the third quarter, we recognize the changing consumer dynamic and continue to respond to it, with adjusted EBITDA of $38 to $41 million.

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.

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

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.

Jeremiah Ashukian: The middle column represents the back half impact of the transaction. And on the right hand side, you see Krispy Kreme's updated full year guidance, which reflects the removal of insomnia from the second half of the year.

Speaker Change: by removing the previously forecasted one hundred twenty nineill dollars of somia revenue from the guidance we now expect net 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 organic growth of 5% to 7% for the full year.

Jeremiah Ashukian: Removing Insomnia's second half adjusted EBITDA results in Krispy Kreme adjusted EBITDA of $215 to $220 million 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 percent. Capital expenditures of 7-8% of net revenue, Thank you, and interest expense of $55 to $60 million, down from our prior guidance of $55 to $65 million, reflecting our lower net debt levels.

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

Jeremiah Ashukian: as with all of these updates the change to adjusted eps s solely reflects the recent sales ininsomia we now expect between twenty four and twenty eight cents for the year

Jeremiah Ashukian: 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,

Jeremiah Ashukian: and interest expense of $55 to $60 million down from our prior guidance of $55 to $65 million reflecting our lower net debt levels.

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.

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

Jeremiah Ashukian: a reminder q three will reflect the removal of insomia and as a result we expect third quarter net revenue of three hundred and seventy to three hundred andniny three million dollars with adjusted ebitda of thirty eight to forty one million dollars

Jeremiah Ashukian: 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, Jim.

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

Jeremiah Ashukian: 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 are 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 all, 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: 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 are 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-all, 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.

Speaker Change: Thanks, Jeremiah.

Jeremiah Ashukian: 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.

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

Jeremiah Ashukian: 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.

Jeremiah Ashukian: 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: 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. The first question comes from the line of Sara Senatore with Bank of America.

Speaker Change: we will now begin the question and answer session in order to ask a question please breast star followed by the number one on your telephone key pub

Operator: Your first question comes from the line of Sara Senatore with Bank of America.

Speaker Change: Your first question comes from the line of Sarah Senatore 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, I guess twofold, are you still on track? I think the idea had been to kind of gradually increase the number of stores over time. Does that still sound like the right kind of rollout plan? And the second point is, you know, we've seen some pretty significant investment ahead of that, whether it was in OpEx or G&A, the biggest kind of chunkiest increases behind us. And so going forward, you know, the growth rate in operating expense should lag or at least more closely match revenues.

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, whether it was an op-x or GNA? Are the biggest, kind of, chunkiest increases behind us? And so, going forward, you know, the growth rate in operating expense should lag, or at least be more closely matched by revenues.

Speaker Change: Please go ahead.

Sara Senatore: Great, thank you very much. I wanted to ask about, you know, you mentioned the McDonald's rollout, and just...

Speaker Change: basically thinking about are you still and suupple are you still on track i think the idea had been to kind of

Speaker Change: increase rateably the number of stores over time, does that still...

Sara Senatore: sound like the right kind of rollout plan and the 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 lag or at least more closely match revenues. Thanks.

Josh 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 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.

Speaker Change: so you good morning again a mcdonald's partnership is is going very well in general

Speaker Change: And the rollout is on track. We announced today that we will be first listing.

Speaker Change: and with McDonald's beyond the Kentucky.

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

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 1,000 McDonald's restaurants by the end of 2024. And then we have a rollout plan that we have.

Speaker Change: partnered with McDonald's on through 2025 and indeed through 2026 with about 5,000 we're expecting to add.

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

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

Speaker Change: 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 awesome fresh donuts every day at the same quality level they'd expect in Krispy Kreme and other channels.

Josh 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, and thanks for the question.

Jeremiah Ashukian: 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. 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% of the brand's U.S. footprint by 2026, as Josh mentioned.

Speaker Change: ger moduul will talk about some of impact of the y josh did a nice job warningsah and thanks for the question to insure smoothto roll out we are investing out of the opportunity with dedicated role teenss to suort our shops and training and development costs

Speaker Change: we're also improving capabilities across our manufacturing and operations teams and ograting or donor production lines as you can imagine the volume that will move through all of this has been included in our guide

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

Speaker Change: Thank you.

Speaker Change: thenext question comes from the line of rawel c with j p morortgan please go add

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 4000 to 5000 doors untapped just between these two brands versus the 3000 odd non-McDonald's doors you guys discussed for guidance for the next three years. So, as you expand the hub-and-spoke infrastructure, is it fair to expect there will be almost no additions or a lower mix of convenience stores or low-volume door additions as we go along expanding this side of the business, and will profitability follow this?

Speaker Change: 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

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 for the next three years. So...

Speaker Change: as you expand the huband spoke infrastructure

Speaker Change: Is it fair to expect there will be almost no additions or 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.

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

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

Josh 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: He'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 on.

Josh Charlesworth: You mentioned Walmart, Target, Kroger, and others all fit the bill, all ways of getting our consumers those fresh doughnuts 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 doughnuts 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.

Speaker Change: consumers those fresh uts and makingit 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 expandedit would target

Josh Charlesworth: And we've recently expanded with Target in 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, Atlanta, and we've got plans to come to L.A., Detroit, and several cities as...

Speaker Change: We build out the network with the rollout of McDonald's. So it really is a great...

Speaker Change: combination c sto andother small locations small 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 walmk roger you're going to be going past convenience stores gas stations making the logistics throughout efficient and so we still see a role for those to play but naturally we're focused on those big national partners that mdonald's

Josh 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 it tracking relative to your expectations? Anything here would be helpful.

Sara Senatore: 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.

Speaker Change: program on locks for us

Sara Senatore: 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?

Josh 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. We have companies in Japan, Canada, Australia, most of our franchisee partners, and 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 created some local buzz recently in July with specialty donuts following the strategy that's worked elsewhere. They've celebrated the TV show Friends.

Sara Senatore: 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

Speaker Change: continue to perform very well. We have a company out in Japan, Canada, Australia, most of our franchisee partners, newly opened France, all performing very well. And indeed, the UK is still growing.

Speaker Change: it's just at a slow 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.

Speaker Change: just yesterday we areannounced upgrades to the core donut range coming in q three so there's a lot of adaptation to those conditions you describe that the team doing well not just on the top line actually you know also worth mentioning about two hundred secondary displays in grocery stores that are working well in larger supermarkets expansion into convenience sto so a lot of focused effort to get the u k back up to the levels we' seeing other international markets all managing the cost side as well that jre

Speaker Change: covered earlier so i understand why ask about the uk we're closely monitoring and supporting the team there to make sure we get performance back up to vels we're seeing elsewhere

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

Sara Senatore: Really appreciate the color, good luck for the rest of the year.

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

Speaker Change: Thank you.

Sara Senatore: Your next question comes from the line of Bill Chappell with Truist. Please go ahead.

Bill Chappell: Hey Josh, just a quick follow up on the UK. 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, 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? It would be great from that standpoint. Hi Bill. Yeah, I mean the regulatory changes you're proposing.

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 would start to be kind of lapping that. So maybe any update there in terms of just, 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.

Speaker Change: Thanks, good morning.

Bill Chappell: Hey, Josh, just a quick follow-up on the UK.

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 think the better on their own is it getting any worse where you're hearing more noise on that front just from that standample would be great

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.

Josh 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, and 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.

Joshua Charlesworth: i believe yeah i mean the regulatory changes your're referencing

Joshua Charlesworth: associated largely impact in terms of wear displays.

Joshua Charlesworth: can be placed in a in a grocery store associated with regulations around the merchandising of sweet treats there there definitely has been a challenge

Joshua Charlesworth: 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...

Joshua Charlesworth: 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.

Josh 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: But then, you know, when you step back and look at the brand, the donuts, how the consumer is responding to our product, there's definitely an opportunity in the UK to focus on upgrading the core donuts, bringing out specialty donuts, 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: focus on upgrading the core doughnuts, bringing out specialty doughnuts 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. 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.

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

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

Dan Guglielmo: 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?

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

Speaker Change: Please go ahead.

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

Daniel 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?

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.

Josh 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.

Joshua Charlesworth: 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.

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

Speaker Change: 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 in marketing and for example our respective marketing teams are working closely together with the mcdonald's team you know so that people know crispy cream is coming to mcdonald so you know there is investmentthere

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.

Josh 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, you know, overall organic growth, basis point improvement, which reflects the model we have here. And so, you know, recruiting 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: 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, at this 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.

Joshua Charlesworth: Great, 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 about 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.

Josh Charlesworth: Great, great. Yeah, that's very helpful. And just kind of as a follow-up to that, kind of on 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' point of view.

Joshua 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

Josh Charlesworth: Yeah, Krispy Kreme has been well positioned, I feel. People love working at a Krispy Kreme; it's a great environment to work in.

Joshua Charlesworth: 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, 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.

Joshua Charlesworth: it's chrispic cream has being well positioned to feel people love working and a crispy cream it's a great environment to work in and so generally across the board we've been able to to recruit great talent and great people across the system and there were stages where irring drivers is a little more difficult we' not seeing the same challenge i think the labor environment

Josh Charlesworth: And so, generally, across the board, we've been able to recruit great talent and great people across the system. But there were stages where hiring drivers was a little more difficult. 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.

Joshua Charlesworth: has eased up on that side. And so, yeah, the main...

Joshua Charlesworth: 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.

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

Bill Chappell: Great, thank you.

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

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

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

Speaker Change: Please go ahead.

Speaker Change: thank sry meagan i get cut off justice

Joshua Charlesworth: 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.

Joshua Charlesworth: Hello again. Just a question on Chicago.

Josh Charlesworth: 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 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.

Joshua Charlesworth: 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 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.

Joshua Charlesworth: 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. And we'll come to those later.

Josh 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.

Joshua Charlesworth: 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, 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.

Josh 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.

Bill Chappell: But in Chicago, we have three hubs with spokes already. They have excess capacity. 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 a modest investment, set up in that way.

Bill Chappell: in fact in one of the sites we have

Bill Chappell: 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

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 we're excited for the teams there. Thanks.

Bill Chappell: 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.

Bill Chappell: Great, thanks so much.

Bill Chappell: Thank you all for joining us, we're excited for the teams there.

Bill Chappell: Great. Thanks so much.

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

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

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

Speaker Change: i'll now turn the call back over to josh charlesworth for clo remarks please glad

Josh 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 strategy is working.

Joshua Charlesworth: Yeah, well, thanks everyone for the questions. Really appreciate it. Thank you for your interest in Krispy Kreme today. Obviously, strong results and the strategy is working, so really pleased to share with you that today. And of course, thank you to all our Krispy Kremers for your ongoing commitment to bring joy to our customers through Krispy Kreme around the world. Thank you very much.

Operator: So, really pleased to share that with you today. And, of course, thank you to all our Krispy Kremers for your ongoing commitment to bring joy to our customers through Krispy Kreme around the world. Thank you very much. Ladies and gentlemen, that concludes today's call. Thank you all for joining. Thanks for watching!

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

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

unknown: Why has God so many jobs? God's work is honestly an abundance of joy. Ignorance is the mother of all joys. Yes, truly, ignorance can go both ways. Be aware, and know that your gospel matters. God loves you.

John: 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. 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. 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 chef.

Josh 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 also worth mentioning about 200 secondary displays in grocery stores that are working well in larger supermarkets, and 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 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.

Q2 2024 Krispy Kreme Inc Earnings Call

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