Krispy Kreme, Inc. Q3 FY2024 earnings call

• Drive Consumer Relevance: Continue to offer iconic original glazed and specialty doughnut collections, enhance digital experience including the relaunched U.S. loyalty program.
• Expand Availability: Nationwide U.S. rollout with McDonald's, international growth in Europe and Latin America, DFD expansion with Target, Walmart, Costco.
• Increase Hub-and-Spoke Efficiency: Modernize doughnut production, improve distribution density; pursue third-party managed delivery in U.S.
• Improve Capital Efficiency: Leverage existing capacity, open new high-volume facilities in underserved markets, improve production hub utilization.
• Inspire Engagement: Train and develop teams to deliver exceptional experiences, leveraging team passion for success.

U.S. segment: Organic revenue growth was 2.5% with adjusted EBITDA of $13.9 million. Points of access growth was 13.7% year-over-year. Equity-owned international markets: Organic revenue grew 4.2%, led by Canada, Japan and Australia, with points of access growing nearly 32% year-over-year. Adjusted EBITDA margin was 17.4%, but underperformance in the UK was offset by Mexico's sequential margin improvement. Market Development segment: Organic revenue grew 8.6% due to capital-light franchise partners, with adjusted EBITDA margin at 54.2%.

• Full year revenue expected between $1.65 billion and $1.685 billion with organic revenue growth of 5% to 7%.
• Adjusted EBITDA updated to between $205 million and $210 million.
• Adjusted earnings per share expected between $0.18 and $0.22 for the full year.
• Annualized net SG&A cost savings of $8 million to $12 million starting in 2025.

• Adverse insurance claims in the U.S. led to incremental expense in the third quarter.
• UK market underperformance due to consumer trends, regulatory changes, and need to adjust menu and pricing.
• Logistics costs and vehicle accident claims impacting margins.

Q: With McDonald's, is revenue per door consistent?

A: Good response in line with assumptions, no obvious impact on existing doughnut shops, accelerated expansion planned.

Q: Confidence in UK market?

A: New management team addressing challenges, adjusting menu and pricing for Original Glazed and brand recovery.

Q: DFD partnerships and sunsetting locations?

A: Prioritize growth with high-traffic customers, 3 production hubs under construction, 10 signed contracts.

Q: McDonald's attach rates and digital support?

A: Good consumer response, available on McDonald's app, social media marketing support.

Q: Guidance and EBITDA changes?

A: Pull forward of start-up costs, logistics costs included in 2024 guide, expect margin improvement in Q4.

Q: Third-party delivery and McDonald's?

A: Evaluating third-party partners, will leverage for McDonald's rollout, pilots in U.S. successful.

Q: McDonald's national advertising?

A: Expect national support as rollout scales, currently local marketing with TV, social media, billboards.

Q: Early learnings from McDonald's rollout?

A: Operational adjustments needed, strong consumer response, focus on scaling correctly.

Q: U.S. margin improvement in 2025?

A: Daily learnings, start-up costs, expect back half improvement in U.S. margins