Krispy Kreme, Inc.

ask a question by pressing star one on your telephone keypad. I would now like to turn the call over to Ms. Stephanie Dawkus, Vice President of Investor Relations. Ms. Dawkus, please go ahead.

Thank you.

Good morning, everyone, and welcome to Krispy Kreme's fourth quarter and full year 2023 earnings call. Thank you for joining us today. Our earnings release and associated earnings presentation, which we will be referencing during the call, are available on our investor relations website at investors.crispycream.com. Joining me on the call this morning are Josh Charlesworth, Chief Executive Officer, and Jeremiah Ashoukian, Chief Financial Officer. 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 statements. These factors and other risks and uncertainties are described in detail in the company's Form 10-K filed with the SEC for the year ended January 1, 2023, and in the other filings we make from time to time with the SEC. Forward-looking statements made today are only as of today. The company assumes no obligation to publicly update or revise any forward-looking statements except as may be required by law. Additionally, Today's call will include certain non-GAAP financial measures. A reconciliation between non-GAAP financial measures and our closest comparable GAAP measure can be found in our fourth quarter 2023 earnings press release in Form 8K filed today with SEC and is also available at our investors.crispycream.com website. With that, I'll turn the call over to Josh.

Good morning, everyone, and thank you for joining us today. I'm so excited for what is ahead of us at Krispy Kreme. Our strategy is clear to make our fresh donuts available in more places and keep reminding people of the joy that is Krispy Kreme, not just to eat, but to share and give to others. We make great progress on this in 2023 with strong consumer demand and increased access to our fresh donuts in both existing and new markets around the world. We also improved profitability as we grew. demonstrating the productivity benefits of our unique hub-and-spoke operating model. As we move forward in 2024, we will continue to offer new and exciting specialty premium doughnuts, upgrade our digital commerce capabilities, and expand the availability of our doughnuts around the world, including in our newer sales channels like club stores and quick service restaurants. We will also increase our efforts to modernize the making and moving of doughnuts to ensure we deliver high quality, profitable growth. Let me summarize today's key messages. We continued to deliver double digit organic revenue growth with all markets and channels growing sales. We expanded profit margins by leveraging existing production hubs to support our growth, especially in the US where operating leverage was strongest. Our ongoing strategy is to scale the business efficiently by adding more fresh points of access. There are now more than 14,100 places where you can buy our melt-in-your-mouth fresh donuts in 39 countries. Our focus on operating excellence means that we're building both a bigger and better Krispy Kreme business. And finally, we are introducing our 2024 outlook. with organic growth expected to translate into adjusted EBITDA expansion, reflecting our intent to drive increasingly profitable growth. We delivered 13.2% organic revenue growth in the fourth quarter ahead of our guide and 12.2% organic revenue growth for the full year. This performance reflected strong consumer demand, with people choosing to celebrate Halloween, Thanksgiving, and the holiday season with premium-priced specialty doughnuts from Krispy Kreme, including a Scooby-Doo Dozen and our first-ever Elf Doughnut Collection celebrating the 20th anniversary of the family favorite holiday movie. Tie-ins like this helped create tremendous excitement for the brand in 2023, and we finished the year with over 40 billion media impressions, reflecting how well Krispy Kreme's fresh and innovative donuts resonated with the consumer. E-commerce also continues to play a bigger role within our business, growing over 25% in the fourth quarter, driven by new loyalty members, which now total over 15 million, as well as operational improvements to our website, app, and in-shop availability. Organic growth was also driven by adding new points of access, which increased by 743, a much stronger fourth quarter expansion than in prior years, reflecting the growing demand from existing and new partners who want to make everybody's favorite fresh donuts available to their customers. The same goes for new countries, with Krispy Kreme opening in Ecuador and France in the fourth quarter to add to Jamaica, Kazakhstan, Switzerland, Chile, and Costa Rica, which were all added earlier in the year. The continued expansion of our hub and spoke model delivered productivity growth and increased profitability in the fourth quarter, with adjusted EBITDA margin improving 40 basis points to 14.2%. The hub and spoke model is becoming more productive as we add more points of access without adding significantly more production hubs. We ended 2023 with 2,300 more points of access than in 2022, mostly through deliver fresh daily displays in grocery and convenience stores. And we did this whilst adding net one production hub. The resulting increased utilization of our production hubs, most of which can still make twice as many donuts as they do today, made them more efficient and profitable. We also completed the optimization of our production hubs without spokes in 2023, closing legacy doughnut shops, which were not well suited to the strategy. Our fourth quarter and full year results exemplify the success and power of our hub and spoke model. And in 2024, I look forward to us becoming a bigger and better Krispy Kreme by continuously improving our business operations as we grow. And the number one reason why someone may not buy a Krispy Kreme doughnut continues to be access and convenience. With more than 2 million locations where we could in theory sell Krispy Kreme, at least in the markets we've targeted, the opportunity to expand availability is big. We have previously shared our long-term goal of opening at least 75,000 points of access around the world, yet this still represents less than 3% of the total addressable market. And we are adding new customers all the time. such as Costco in international markets and McDonald's in the US, where we have been conducting an extended test in Kentucky for much of 2023. Our relationship with McDonald's remains strong, with discussions ongoing about further expansion, and we look forward to providing updates on our quick service restaurant plans through 2024. We also expect to launch Krispy Kreme in three to five new countries in 2024, with several priority markets identified in Europe as well as Brazil, where we just announced an exciting new partnership with the convenience store chain AMPM. We have perfected the art of making our original glazed doughnut over the last 87 years and bringing joy to our consumers across the world. Yet, there remains the opportunity to modernize the way we make and move our doughnuts, bringing efficiency to the process whilst maintaining consistent high quality and service levels. We have started 2024 by making changes to our global leadership team to reflect these opportunities. In Angelo Jochen, we are adding a new chief information officer with deep digital technology experience across multiple industries. Our global supply chain leader, Sharif Riyad, formerly of Mondelez, has stepped into the team, as has our US business leader, Javier Rancano, who has extensive QSR operations experience. As a leadership team, we are focused on quality fresh donuts in every channel every day, expanding the use of automated donut making and processing, and continuously improving our donut delivery capabilities as we support more and more points of access. An example of this is a pilot we are just starting on select routes in LA and DC to deliver our fresh donuts through a third party logistics provider, still using dedicated Krispy Kreme trucks and drivers. As we focus on our core strategy of producing, selling, and distributing fresh donuts daily, we continue our strategic review of Insomnia Cookies. With that, I will turn it over to Jeremiah to give further insight on our financial performance and provide an outlook for 2024.

Thanks, Josh, and good morning, everyone. As Josh mentioned, we reported strong double-digit fourth quarter organic growth and improved profitability for the year, demonstrating the productivity benefits of our hub and spoke model. In the fourth quarter, We grew double-digit on both the top and bottom line on a percentage basis, resulting in adjusted EBITDA margin expansion of 40 basis points year-over-year to 14.2%. We saw growth in all our markets, driven by high-impact global brand activations and seasonal offerings, increased points of access, and premiumization efforts. Adjusted EBITDA grew 14.7%, outpacing our revenue growth for the second consecutive quarter as we continue to realize cost efficiencies across the global business through both productivity efforts, increased utilization of our hubs. For the full year, the business performed largely in line with expectations as we delivered 12.2% organic growth, increased adjusted EBITDA by 11%, and expanded margins. Organic growth accelerated to 13.2% in the fourth quarter. Notably, we saw growth across all our segments in 2023 on top of strong performance in 2022. In the U.S. segment, organic revenue grew 13.7% in the fourth quarter, driven by record holiday season, especially donut offerings drove incremental sales through all channels, especially DFT, and had positive impact on our sales. We also observed increased transaction values due to growth of our e-commerce channel. All of this was underpinned by our strategy of growing points of access, which grew 17.7% year over year, with more than 300 DFT doors added in Q4 versus Q3 and over 1,000 doors added versus 2022. At Insomnia Cookies, we observed strong organic growth of 16.3% as well as sequential margin improvement from Q3. That said, margins in the business remain pressured given the elevated cost of COCO. The hub and spoke model first established in the UK and Australia is now well underway in the US with several cities seeing marked improvements in profitability during the year as we added more points of access to the existing hubs. This, as well as our ability to leverage pricing to offset inflation, explains the increase in sales per hub of 8.9% year-over-year and the subsequent 120 basis point adjusted EBITDA margin improvement for the year. In the international segment, organic revenue grew 9% year-over-year as we expanded points of access and leveraged global campaigns over the holiday season to drive volume of our specialty donuts. Most notably, we executed our ELF specialty donuts in nine markets worldwide, leveraging a single set of marketing materials, seeing great results in Mexico and the UK. Mexico was a substantial contributor to growth this quarter. We have nearly doubled points of access in Mexico through existing partners such as OXO, with meaningful room to continue expanding in the country. We also saw successful growth in new partners such as Costco in Australia, which continues to prove to be an efficient customer. Adjusted EBITDA improved sequentially in the quarter to 20.6% with margin expansion in both Australia and Mexico. Profitability continues to be pressured in the UK, and we're taking actions to improve productivity. In the market development segment, organic revenue grew 19.2% in the fourth quarter as we continue our international expansion by opening 126 more points of access through a combination of theaters, fresh shops, and DFD doors. We opened in two new markets, Ecuador and France, and expect that these two countries alone can support more than 2,000 further points of access. Most notably, Paris represented a record-breaking launch in the fourth quarter. This shop was our best-performing shop worldwide on a sales basis in December. Market development adjusted EBITDA grew 21.1% in the fourth quarter, with margins expanding by 120 basis points to 35.4%. Margin improvements were primarily driven by continued hub-and-spoke efficiencies in our equity-owned Japanese and Canadian markets. As we continue to expand globally, we expect to see high returns in international franchises. The JV structure of the French market is a prime example of our Capital Light model approach, which enables earnings flow throughout significant margins while providing the option to take equity ownership of the market in the future. As you heard from Josh earlier, we announced our future entry into Brazil using a similar approach. For the year ending 2023, we delivered 27 cents in adjusted earnings per share driven by improvements in adjusted EBITDA that were offset by higher than expected depreciation amortization as we continue to accelerate expansion both domestically and globally at Insomnia Cookies and made choiceful investments in anticipation of accelerated growth in the U.S. DFT business. We also saw increased annual interest expense as a result of the higher interest rate environment. As a result, we saw adjusted diluted earnings per share finish lower than our original expectations. Our business fundamentals remain strong, and we are confident in our ability to grow EPS despite remaining in a somewhat higher interest rate environment in 2024. As mentioned on previous calls, in 2023, we deployed some of our operating cash flow to strategically reduce our use of vendor financing, which had an impact on net cash from operations. Over the year, we reduced vendor financing by roughly $82 million which will provide a long-term tailwind of $3 to $5 million on an annualized basis to adjusted EBITDA beginning in mid-2024. Despite these efforts, we were able to hold leverage flat through 2023, finishing the year at 4.1 times. We have a healthy balance sheet, having extended our maturities to 2028 in the first quarter of 2023. We closed the year with just under $40 million in cash and have access to ample liquidity through a revolver with an undrawn capacity of $159 million. We remain focused on the long-term health of the business and setting up our capital structure to support growth through a strong balance sheet. We expect to de-lever in 2024, primarily through the growth of adjusted EBITDA and running the business with an eye towards efficiency and capital expenditures, as well as managing working capital. Over the long term, we remain on track to be between 2.0 times and 2.5 times net leverage in 2026. As we look forward to 2024, we're providing our outlook for the full year, which assumes a nominal impact from foreign exchange and contemplates all operations, including insomnia cookies. For the full year 2024, we expect to deliver net revenue growth of 5% to 7%, organic revenue growth of 6% to 8%, adjusted EBITDA growth of 8% to 11%, and adjusted diluted earnings per share between $0.27 and $0.31. After reporting strong double-digit fourth quarter and full-year organic growth in excess of our full-year guide, we remain confident in our 2024 guidance and our ability to drive operating leverage as we become more coordinated as a global company. We believe we are well-positioned for sustainable, high-quality growth in the years to come, leveraging the tools which helped us deliver a great finish to the year in 2023. As it relates to the first quarter, despite the harsh weather in broad parts of the US in January, and lapping record-breaking sales in the first quarter of 2023, we expect net revenue growth of 2% to 4%. We also expect adjusted EBITDA to grow in line with the revenue growth. We will closely monitor and adapt to changes in the market and consumer environment, and I remain confident about the profitable growth potential of our business in 2024, and we're excited for a great year to come. With that, I'll turn it over to Josh for his closing remarks. Thanks, Jeremiah.

In summary, we are expanding availability by adding high quality productive points of access, driving operating leverage through the efficiency of our operating model, and maximizing capital return both by leveraging existing capacity and making selective investments in geographies which have limited access to Krispy Kreme today. All in, I look forward to us building a bigger and better Krispy Kreme in the years ahead. Operator, let's now open it up to Q&A, please.

The floor is now open for your questions. To ask a question at this time, simply press the star followed by the number one on your telephone keypad. We'll now take a moment to compile our roster. Our first question comes from the line of Sarah Senator with Bank of America. Please go ahead.

Hi, good morning. This is Jessica Owusu-Afari on for Sarah Senator. Thank you. So for last quarter, you said you were in advanced discussions about expanding the McDonald's partnership and we're making investments in the US, but it looks like the 160 or so restaurants testing the donuts have been unchanged since 3Q. And I know that the press release alluded to more growth in the quick service restaurant channel, but I wanted to see if there's any more color you could provide on that agreement. And I do have a couple more questions, I think I can ask them one at a time.

Sure, good morning, Jessica. Yeah, obviously word is out on the success of our Deliver Fresh Daily Donut program, several customer opportunities in existing and new channels around the world. Regarding quick service restaurants in the U.S., our focus does continue to be on McDonald's. Discussions are ongoing and productive about an expanded partnership, and we'll provide an update on that one when we have it. What was your second question?

So in the U.S. and international markets, revenue growth was slightly less than points of access growth. I know you think in terms of growth in sales per hub, but as we try to forecast sales going forward, how should we think about new points of access? Is it fair to assume that they'll have lower volumes than the existing base of points of access? And if so, is that driven by the type of door? And will that change if you accelerate expansion into the quick service industry?

Well, it's interesting. Obviously, the three international markets there of UK, Australia, and Mexico are all in different situations. The UK, Australia, much more developed in the grocery store customer mix. Mexico really starting out with a big opportunity in convenience stores so you get a constant mix effect there underlying performance is good but you're going to get these mixed effects for the forecasting especially in Mexico with with the big opportunity with the oxo convenience store chain okay thank you and could you remind us how much of your commodity basket you have locked in

Yeah, I can take that, Jessica. And we started to put on cover on commodities earlier in 2023. We do expect to see mid to high single-digit inflation overall for 2024. Most of our commodities are now covered, so about 75% of them are covered, of the commodities that we actually can cover, as it made sense for us from a pricing perspective or just a security of supply perspective. It's a bit of a mixed bag within that kind of high single-digit, mid-to-high single-digit inflation number amongst our cost structures. We're forecasting inflation in excess of 20% on things like sugar, where the market remains around 10-year highs, and low double-digit inflation on things like cartons, which is a commodity we can't hedge. But we do expect to see some deflation on key commodities like wheat and edible oils. I think it's important to note out just outside of commodities, from a labor perspective, we do believe that we'll be subject to the wage increases in California. And as a result, we continue to expect to see high single digit to low double digit inflation on labor in 2024. All right.

Thank you so much for your time. Thank you.

Our next question comes from a line of John Ivanco with JP Morgan. Please go ahead.

Hey team, this is Luke Joban for John Ivanco. Just wondering if you could give some language around specific changes to kind of the current process or model that we're focused on with specification to modernization of the donut making process and kind of especially delivery within that. Thanks.

Sure, thanks Luke. I'll take that. Yeah, you picked up on our efforts to modernize the way we make and move our doughnuts that goes all the way from the sort of digitization of the process through to the automation of the doughnut making itself and then all the way on to upskilling our doughnut transportation you know all in we're you know we're working to ensure the freshest doughnuts every time delivered as efficiently as possible we've shared before the automation and efforts. We have a line running in New York, which is now automatically filling, topping, and even packing the donuts. We're looking to perfect that and then roll it out as time goes on. And then regarding the logistics in particular, the rapid expansion of DFD means that logistics are becoming more and more important. So we announced on today's call that we have a pilot covering select routes in DC and LA. And that's expected to take about four to six months. And the purpose of that is to work with a third party provider to see if we can maintain quality and service whilst being able to access new capabilities that they can bring and over time improve our operations and indeed bring more efficiency. It's an effort end-to-end to continuously improve doughnut making and moving, and we'll provide updates as we learn more.

Great, thanks. You bet.

Our next question comes from the line of Bill Chappell with Truist. Please go ahead.

Hi, good morning. This is Davis Holcomb on for Bill Chappell. Thanks for taking our question. I just wanted to know, we saw that your guidance this year for fiscal year 24 includes operations from Insomnia Cookies, but we were wanting to know if you could provide a little bit of color on what the sales guide would be without the inclusion of Insomnia Cookies.

Yeah, I mean, number one, we're pleased with the performance of Insomnia as the business continues to grow profitably and improve sequentially in terms of EBITDA, adjusted EBITDA improvements. We opened a record number of cookie bakeries in 2023. We also talked about the growth rate at Insomnia at 16.3% on the earnings call as well. There continues to be lots of opportunity on this business to expand both the U.S. and internationally. We do expect it to continue to grow double digit in 2024. But just given the fact that we're in the process, As we said in Q3, we're conducting a strategic review and we look forward to sharing more news about it that we can. I think in the last earnings call, I did let everybody know that we operate or the impact on insomnia would have a roughly 100 to 200 basis point impact on the top line, though.

Excellent. Thanks for the call. I'll pass it on.

Our next question comes from the line of Ashley Grueninger. with Piper Sandler. Please go ahead.

Hey, good morning. So CapEx came in as a percent of revenue for 2023 at 7.2%. And the new 2024 outlook, you're targeting seven to eight. We're just wondering how concrete of a number that is. Does that include any incremental investments you would need to make if, let's say, a QSR partnership was to come to fruition in 2024?

Good morning, Aisling. Our confidence in the DFD opportunity around the world and especially in the US, including QSR, is such that we have thoughtfully started making additional investments in manufacturing capacity to support it. For example, we've secured new sites in Miami, Twin Cities and LA, all conversions of existing buildings looking to accelerate time to opening to keep up with with demand. To clarify, though, the investments we're making, they're in broad support of the expansion of DFD overall, so they're not dependent specifically, for example, on McDonald's, but they're investments that we very much believe make a lot of sense for our business going forward in terms of bringing Krispy Kreme to more people in those new channels.

Great. Thanks for that. My second question is on, I think we touched on this before, but it's in slide 18 of your presentation. It's about average revenue per door per week for international. Just what's the dynamics behind it's been the decrease year over year? Is it just opening these DFD doors in less prime locations than the earlier locations, or just any color would help, thanks.

Yeah, it's a great question. APDs internationally were impacted in 2002. by the UK regulations that were put in place. It's called HFSS, which required us to move where the locations were in the stores, which had an immediate step down in terms of productivity. Moving forward, the APD per door has been impacted by adding more convenience type locations, which Josh mentioned, around places like OXO in Mexico, which On average, it's a smaller footprint, which would be a lower kind of dollar per door. So overall, kind of the mix effect there will have a pull on. We believe the APD will remain fairly flattish internationally kind of moving forward.

You know, it's worth clarifying on the U.S. because actually interesting, you know, with APDs growing strongly, we're seeing that we're actually bringing on even more productive new customers and locations showing that, you know, that there's a lot of white space opportunity in the US. And it's interesting international. Mexico, an example where we are leaning in on convenience store. In the US, there's a lot of grocery stores, mass club stores, for example, big opportunities there. So the APD will evolve over time with different types of customers. But all in, we're seeing continuously productive doors, ones that support our margin expansion plans.

Great. Thank you so much for that. I'll pass it back. Thank you.

Again, the floor is now open for your questions. To ask a question, simply press star followed by the number one on your telephone keypad. Our next question comes from a line of Daniel Glaglano with Capital One Securities. Please go ahead.

Hey, everyone. Thank you for taking my questions. Just going back to the U.S. expansion of hubs, you mentioned Minnesota, California, Florida, and I think New England and upstate New York are also opportunities. So just thinking through kind of those, are there certain areas you see as priorities right now? And are there certain markets that you need to get open before doing like a national QSR rollout?

Well, you know, roll out with a customer like, for example, McDonald's, 13,000, 14,000 restaurants in the U.S., we could cover about 6,000 restaurants just with our existing network. So your question goes to the 7,000 or 8,000, assuming you're taking McDonald's as the benchmark, that we would need to cover in areas where mostly it's those areas you described in the country where Krispy Kreme isn't today. Our plans are anyway over time to open up in those places and reference to either Miami, Twin Cities, L.A., New England, all the ones you referenced, upstate New York. They're all in our plans. Naturally, those that we have already maxed out capacity or we've identified sites are the ones we're prioritizing in the short term. But they all make sense for us. And so we're actually looking across the country in all those locations as we build out our plans for DFD and QSR in the future.

Great. Thank you. And then just as a follow-up to that, it's kind of like a modeling question just around the CapEx spend. So the 7% to 8% of revenue guidance for 2024, just thinking about the expansion, and I think you had said 3 to 6 million for some of those hubs. Is there a cadence we should be thinking about quarter to quarter for the year? Is it going to be pretty evenly spread throughout, or should it be back-weighted? I'm just trying to get some help there. Thank you.

On the CapExes, I mean, the hubs themselves are coming online, probably a little more back-weighted. The CapEx itself, though, phases differently, doesn't it, Jeremiah?

Yeah, I mean, there's a cash flow from CapEx that will happen here, because we've spent, or at least Decided to deploy capital last year in an effort to get up and running earlier in the year. From a modeling perspective, I mean, for the most part, we will follow a fairly uniform spend of CapEx throughout the year as we have in previous years. So it's a fairly consistent number when you think about a percent of revenue that will balance between 7% and 8% per the quarters. It'll just balance up and down between those numbers more or less.

Okay. Thank you.

Our next question comes from the line of Andrew Wolf with CL King. Please go ahead.

Thanks. Good morning. First, I wanted to ask about, you know, the first quarter sales being low, you know, low trend and tie that to the year, you know, because obviously you're looking for a big rebound to more like six to 8%. to get to the 5% to 7% for the year for the Q2 through Q4, a little more in line with what I think Sri was expecting. So could you just kind of flesh out a little bit what you're seeing in the quarter, how much you think is pure weather? Is there anything else going on? Do you have sort of non-weather impact in markets, either in the U.S. or Canada or even the other segments that sort of point to sort of some more normalized growth? supporting the rebound for the rest of the year?

Yeah, thanks, Andrew. I can take that. I think I'll probably start off by just saying we're actually pleased with the fact that we'll continue to post growth in Q1 after a record Q1 in 2023 and 14 consecutive quarters of organic growth. I think the last time we didn't grow in a quarter was during COVID and as a result of some of the UK shutdown or slowdown. Organic growth in the quarter is actually close to 3% to 6%. given we'll be lapping the discontinuation of BST. As you mentioned, like many others, we saw harsh weather in broad parts of the U.S. in January, leading to lower revenues and a softer start to the year, which also comes up against the comp of 14.4% last year, but also a couple of one-offs, to your point. One at Insomnia Cookies, we have a lap against extended delivery zones that will be in our base, which provided some tailwind last year. And then two, in market development, we had a one-off shift in the timing of some equipment sales in our market development franchise business, which resulted in higher sales being recognized in 1Q last year. That said, we're excited for Valentine's Day tomorrow, which is one of our biggest sales days of the year, not to mention other key specialty donut offerings over the course of the year. We're definitely committed to disciplined growth in pursuit of the full year guide that are laid out. And we will, when you think about it from a cadence point of view, lapse some other things as we get into Q2 that may go the other way, most notably the NCR outage that we had in the U.S. in Q2 2023, which will help us kind of recover back in Q2.

You know, I'll add is, you know, we're looking forward to quality sustained growth through 2024. And, you know, Q4 showed once again that the consumer just loves our donuts, especially for sharing and gifting at special occasions and celebrations like Valentine's. that Jeremiah mentioned, even when priced at a premium. And we see that in all sales channels with really quite phenomenal growth recently in e-commerce in particular. So our consumer is engaging with the brand more than ever, and that's the key backdrop to understanding Krispy Kreme.

Okay, and if I could just add another follow-up just related also to sales. um now i assume for the year you only have the 160 or so mcdonald's stores in there um but i guess for the us specifically you know is there any less um um of a um a push on sales um in any way whether it's um you know not putting up stores you might have put a hubs that you might have put up uh because you're deferring and is there any impact on your what's in the guidance because you're kind of throttling any part of the U.S. operations back in anticipation of either McDonald's or another QSR.

There's no throttling back. It's absolutely the case that DFD continues to be a core driver of our growth. Indeed, as I mentioned a moment ago, the Q4 addition of doors around the world, including the U.S., at a time which has traditionally been problematic for our customers. They want to put in other seasonal items. This year, they want to put in our items and prioritized listing new doors for Krispy Kreme. So definitely no throttling back. At the same time, we are very focused on improving the quality of our operations, ensuring high-quality sustainable growth, working, as I mentioned, on making moving donuts in continuously better ways. So that naturally means we're very thoughtful as we grow to make sure we have the best points of access, strong hubs, making sure they're set up for future growth. It's also mentioned, you know, with many of the donut shops still heavily underutilized, they're able to make more than twice the amount of donuts that they do today, most of those lines. Getting ready for growth with QSR and other new channels Is is an effort is a lift and so we're making sure that everywhere we grow It's in a in a way that ensures high quality Donuts presented freshly consumer in every channel whilst maintaining productivity and efficiency So yeah, we're certainly working hard on the system, but we're not as such throttling back Thank you, that's a really helpful color I'll pass it on thank you You bet. Thanks, Andrew.

I would now like to turn the call over to Josh Charlesworth for closing remarks.

Well, thank you, everybody. Thank you for your interest in Krispy Kreme today. And, of course, thank you to all our Krispy Kremers for their hard work in 2023 and your ongoing commitment to bring joy to our customers through Krispy Kreme. Thank you.

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