Krispy Kreme, Inc.

Thank you for standing by. My name is Greg, and I will be your conference operator today. At this time, I would like to welcome everyone to the Krispy Kreme third quarter 2024 earnings call. I would now like to turn the call over to Dre Eldridge, Krispy Kreme Investor Relations. Dre, please go ahead.

Thank you. Good morning, everyone. Welcome to Krispy Kreme third 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.chrisbycranes.com. Joining me on the call this morning are President and Chief Executive Officer Josh Charlesworth and Chief Financial Officer Jeremiah Oshukian. 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 expectation, future events, or future financial performance. Forward-looking statements involve a number of inherent risks and uncertainties, and we caution investors that these risks could cause actual results to differ materially from those contained in any forward-looking statement. These factors and other risks and uncertainties are described in detail in the company's Form 10-K filed with the SEC for the year ended December 31, 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. Acceptance 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 measures can be found in our third quarter 2024 earnings press release and form 8K filed today with the SEC and is also available at our investors.crispycream.com website. Jeremiah will take us through our financial performance in a moment, but first, here's Josh.

Thanks, Dre. Good morning, everyone, and thank you for joining us. Consumers ask us every day, When can you bring Krispy Kreme to my town? And so our strategy of making our fresh donuts more available around the world. The successful start of our nationwide U.S. rollout at McDonald's, which began in Chicago in October and continues next week in Ohio and Indiana, is a major milestone on this journey. We now expect to be delighting Krispy Kreme fans with our melt-in-your-mouth donuts fresh daily in nearly 2,000 McDonald's restaurants by the end of 2024. We're building a bigger Krispy Kreme by focusing on our fresh doughnuts available through retail shops, online, and delivered daily to grocers, convenience stores, and quick service restaurants around the world. While we are already in nearly 16,000 points of access across 40 countries, there is much more growth ahead of us. We expect our beloved doughnuts to be available fresh daily in nearly 35,000 points of access in about 50 countries within three years. Not only are we making the Krispy Kreme business bigger, we must also make it a better business, one that maximizes the benefits of the opportunity in front of us and delivers sustainable, profitable returns. Now, well into my first year as CEO, we have streamlined and focused our business with the sale of our majority stake in Insomnia Cookies Complete, and the acceleration of our USDFD expansion underway. To better align our talent and capital to our business priorities, we are now restructuring our management teams to concentrate on maximizing our profitable expansion in the US while focusing international efforts on the wider adoption of our capital-like franchise model. With our resources prioritized to the teams that matter most, I believe that these changes will result in a bigger and better Krispy Kreme. As we move forward, our team's business priorities are clear. Number one, drive consumer relevance. We'll continue to give our fans more reasons to enjoy and share our fresh donuts with both our iconic original glaze and our buzzworthy specialty donut collections. Number two, expand availability. With household penetration in the US at only 13%, we'll grow nationwide by reaching more points of access. We're also excited about our international growth prospects, particularly in new markets like Europe and Latin America. Number three, increase hub and spoke efficiency. We are modernizing donut production and increasing distribution density to improve profitability. Number four, improve capital efficiency. We are leveraging our existing capacity to increase production hub utilization and making selective high-return investments in regions with limited access to Krispy Kreme today. Number five, inspire engagement. The passion and hard work of our Krispy Kremers is key to our success, and we're committed to creating an environment that fosters their growth, celebrates their contributions, and empowers them to take pride in their roles. At Krispy Kreme, the spotlight is always on our iconic original glaze, our most distinctive most purchased and most shared donut accounting for more than half of our sales. There's just nothing like our irresistible fan favorite where we make sure that it's always so fresh and enjoyed throughout the day in all sales channels representing excellent value for the consumer. Our buzz-worthy innovative specialty donuts bring additional fun and relevance to the brand. In Q3, our Barbie 65th anniversary and Dr. Pepper football collections were our strongest performing activations, helping generate 28 billion media impressions. We're also continuously striving to enhance our consumers' digital experience, including the US loyalty program that we relaunched earlier this year. For example, this quarter, we saw 15% growth in digital sales. The nationwide rollout to McDonald's has started well, with fresh donuts delivered daily to more than 400 McDonald's in Chicago since mid-October from our three production hubs in the city. I want to thank our dedicated Krispy Kremers and McDonald's teams who have partnered closely to ensure a smooth rollout so far. The consumer response has been positive, and the pace of growth accelerates from here. with more than 1,000 additional restaurants launching this month alone in Ohio, Indiana, Pennsylvania, and West Virginia. We're off to a strong start on our journey to meet our goal of making fresh, crispy, clean donuts available in more than 12,000 McDonald's by the end of 2026. McDonald's is supporting the launch with a comprehensive local marketing plan, including TV, social media, and out-of-home billboards. We expect this increased visibility to benefit Krispy Kreme brand awareness as we expand to more cities across the country. Availability is also growing through our other BFD customers, with the addition of deliveries to more than 150 new Target stores in the third quarter, as well as more Walmarts and Krogers. After success in several international countries, we've also started a promising US test of daily deliveries the small number of Costco warehouses in Southern California. We are well on our way to adding 15,000 points of access in the U.S. by the end of 2026, and we continue to believe in the long-term financial benefit of our profitable U.S. expansion. As we shared earlier this year, we estimate $340 to $430 million in annualized incremental revenue and $70 to $100 million in additional adjusted EBITDA, creating significant operating leverage on the business. Increasing donut volumes at existing production hubs improves productivity and profitability, as does the modernization of our donut manufacturing facilities and processes. For example, our refurbished and improved production facility in Elk Grove, Chicago, has increased daily production threefold in a matter of days and is already demonstrating significantly improved productivity levels. On average, our U.S. production network operates at about 25% utilization today compared to an optimum above 60%. Nationwide DFD expansion gives us the opportunity to improve the capital efficiency of the existing production hubs, and we also plan to open new high-volume facilities with quicker paybacks in underserved markets like Minneapolis and Massachusetts. As our company grows, so does the scale and complexity of logistics and delivery. Having run successful pilots in the U.S., we are pursuing third-party managed delivery to DFD customers, a proven approach we use in several international markets. While we could continue to successfully build out our logistics and delivery network in-house, we believe this approach is aligned with our evolved strategy and the desire to focus on what we do best, making fresh, melt-in-your-mouth donuts every day, and spreading the joy of Krispy Kreme. Krispy Kreme engagement is essential to driving customer satisfaction and deepening the connection to our brand. We are training and developing our teams so they feel empowered, inspired, and well-prepared to deliver exceptional experiences. I want to thank our Krispy Kremers for their daily commitment to bringing joy to our consumers through Krispy Kreme. Now I'll turn it over to Jeremiah to talk about our financial performance.