Krispy Kreme, Inc.

Hello, everyone, and thank you for standing by. My name is Ellie, and I will be your conference operator today. At this time, I would like to welcome everyone to the Krispy Kreme third quarter 2025 earnings call. All lines have been placed on mute to prevent any background noise. I would now like to turn the call over to Christine McDevitt, Krispy Kreme Associate, General Counsel. Please go ahead.

Hello, everyone, and welcome to Krispy Kreme's third quarter 2025 earnings call. Thank you for joining us today. This morning, Krispy Kreme issued its earnings press release for the third quarter of fiscal 2025. The press release and an accompanying presentation are available on our investor relations website at investors.krispykreme.com. Joining me on the call are President and Chief Executive Officer Josh Charlesworth, and Chief Financial Officer Raphael Duvivier. After their prepared remarks, we will host a question and answer session. But before we begin, please note that during this call, we will be making forward-looking statements pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995, including statements of expectations, future events, or future financial performance. Forward-looking statements involve a number of risks, assumptions, and uncertainties, and we caution investors that many factors 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 cautionary statements in our earnings press release, our annual report on Form 10-K filed with the SEC, and in other SEC filings we make from time to time. Forward-looking statements represent our expectations only as of today. We assume no obligation to publicly update or revise any forward-looking statements except as may be required by law. Additionally, during this call, we will reference certain non-GAAP financial measures. Please refer to our earnings press release on our website for additional information regarding those non-GAAP measures including a reconciliation to the closest comparable gap measures. Rafael will take us through our quarterly financial performance in a moment, but first, here's Josh.

Thank you, Christine, and good morning, everyone. I'm pleased with the early progress we are making on our turnaround plan to deleverage the balance sheet and deliver sustainable, profitable growth, as reflected in our third quarter performance. As a reminder, we are focused on one, re-franchising, two, improving returns on capital, three, expanding margins, and four, driving sustainable, profitable US growth. First, re-franchising enables us to more profitably drive system-wide sales growth and accelerate unit development through our capital-like franchise model. We are already working toward re-franchising certain international markets as we look for experienced long-term potential partners to operate and expand our iconic brand around the world. We also plan to restructure our joint venture in the Western U.S. with the WKS Restaurant Group, which today represents approximately 15% of our U.S. revenues. Restructuring is expected to reduce our ownership to a minority stake. We are happy with the strength of our operations in the WKS joint venture and look forward to future capitalized expansion across 10 Western US states. Proceeds from international re-franchising and the WKS restructuring are expected to be used to reduce net debt. Second, our focus on improving returns on capital involves reducing capital intensity by leveraging existing assets and focusing on franchise development. As part of this approach, we have lowered our capex spending for the back half of 2025 compared to the first half of the year. And in aggregate, annual capex will be significantly below 2024 levels. In the U.S. next week, we will open our Hot Light Theater Shop and Production Hub in Minneapolis, bringing Krispy Kreme to an area where fans have been eagerly anticipating our arrival. Overall, though, we have reduced investment in building new hubs, preferring to leverage existing excess capacity for growth where available. Looking ahead to 2026, we plan to reduce capex investment compared to 2025. We also expect our international franchise pipeline to continue to be a source of capital-like growth in the years ahead. For example, through our franchisees and minority joint ventures, we recently opened our first hot light theater shop in Madrid, Spain. will soon enter Uzbekistan and have announced further expansion in Brazil. Future international growth is expected to come not just from new shop openings with franchisees, but also through fresh delivery door expansion in grocery, convenience, club wholesalers, and quick service restaurants. For example, our collaboration with KFC in the UAE has now expanded to more than 200 KFC restaurants offering Krispy Kreme donuts. This reflects the success of the model and the potential for future growth. Third, to expand margins through greater operational efficiency, the business model is being simplified. U.S. operations have been strengthened under the leadership of Chief Operating Officer Nicholas Steele, and costs across the P&L are being reduced. First, donuts are being made more efficiently by optimizing production, streamlining hub activities, and improving labor productivity. These initiatives are expected to maximize capacity, enhance operations and guest experience, and increase profitability through better labor management. Second, donuts are being delivered more efficiently by improving route management and demand planning, and by testing adjusted production and delivery schedules to support cost-effective expansion. These efforts are further strengthened by the capabilities of our third-party logistics partners whose expertise in fleet management, delivery technology, and safety now supports approximately 54% of our US network. Outsourcing has already resulted in more predictable logistics costs, and we expect to fully outsource US delivery in 2026. And third, the benefits of reduced headcount and costs that we previously announced are decreasing both operating expenses and SG&A. Finally, To drive sustainable, profitable growth in the U.S., we are focused on strategic customers with high volume and high margin doors, ensuring that we have the right product variety in the right amounts, in the right place, and at the right time. We continue to grow with strong existing customers. During the third quarter, more than 200 profitable doors were added with strategic partners, including Target, Costco, Sam's Club, Kroger, and Publix. In total, approximately 1,000 profitable doors have been added year-to-date, and these doors are delivering weekly sales well above the system average. At Walmart, we are seeing the benefit of additional shelf space combined with our current merchandising towers and cabinets, as well as placement on Walmart's website. Early results demonstrate higher sales at current stores while supporting incremental distribution at new stores. So far, we only serve about 30% of Walmart's total domestic footprint, so there is a considerable opportunity ahead of us. Our marketing continues to emphasize the original glazed donut, our most iconic, most affordable, and most profitable product, while leveraging digital channels to engage consumers and further amplify sales. The excitement around our signature core product is coupled with innovative limited time offerings that are culturally relevant and tied to buzzworthy events. Third quarter examples include our Harry Potter and Passport to Italy collections, as well as our collaboration with Crocs. In the fourth quarter, we are also pleased with our successful Halloween campaign. These limited time offerings perform particularly well in our digital channel. In the third quarter, US digital sales increased 17% year over year, and represented more than 20% of US retail sales. Our heightened traction in this channel reinforces digital as a key driver of profitable growth and a highly valued means for connecting with US consumers. In addition, we recently announced a refresh of our everyday doughnut menu, featuring trending flavors, fan favorites requested on social media, and returning popular doughnuts. Our updated offerings provide more variety for consumers while reinforcing the strength of our core menu. Our turnaround plan to drive sustainable, profitable growth and reduce debt leverage is showing progress, and I'm confident that we can deliver on our objectives and achieve compelling results. Our long-term success will be built upon the strength of our leadership and field teams, whose talent and commitment to operational excellence continue to inspire confidence. I'm especially encouraged by how our new CFO has seamlessly taken on his role, providing strategic financial leadership that complements the operational expertise of our teams. With that, Rafael will now review our third quarter financials.