Financial Performance and Key Metrics - In Q1, net revenue was $375.2 million, reflecting continued growth through the omnichannel model, offset by the sale of Insomnia Cookies [22] - Organic revenue declined by 1%, largely due to expected consumer softness in a challenging macro environment [22] - Adjusted EBITDA was $24 million with a margin of 6.4%, impacted by the sale of Insomnia Cookies and costs associated with U.S. nationwide expansion [22][24] - Adjusted earnings per share were negative $0.05 in Q1, a decline from the prior year driven by expected lower revenue and EBITDA [27] Business Line Performance - U.S. segment organic revenue declined by 2.6%, with adjusted EBITDA declining to $15.9 million due to softness in the retail segment and operational inefficiencies related to a cybersecurity incident [23][24] - International markets saw organic revenue growth of 1.5%, led by strong results in Canada [24] - In the Market Development segment, organic revenue grew by 2.7% due to franchise business expansion [25] Market Data and Key Metrics - Average revenue per door per week (APD) was $587, down from the same period last year, reflecting a shift in customer mix [24] - Points of Access grew by 6.3%, indicating expansion in Australia with Kohl's and BP [24] Company Strategy and Industry Competition - The company is focused on profitable U.S. expansion and capital-light international franchise growth, aiming for 100,000 points of access [6] - The strategy includes paying down debt, generating positive cash flow, and pursuing only profitable growth based on sustainable revenue streams [6][29] - The company is reassessing its partnership with McDonald's to ensure a profitable business model before further expansion [14][60] Management Commentary on Operating Environment and Future Outlook - Management acknowledged the challenging macro environment and the need to prioritize financial flexibility and deleveraging the balance sheet [21][29] - The company expects to deliver positive operating cash flow in 2025 as it continues to reduce capital intensity and improve working capital [28] - The prior full-year outlook has been withdrawn due to macroeconomic softness and uncertainty around McDonald's [31] Other Important Information - The company has decided to discontinue the quarterly dividend to allocate capital towards debt repayment [29] - A new Minneapolis hub is under construction, retrofitting an existing building to save 20% in capital and real estate costs [17] Q&A Session Summary Question: How is the company thinking about CapEx given the current changes? - The company is focused on strengthening the balance sheet and becoming more disciplined in capital allocation, investing only in high-return projects [35][36] Question: Was the decision to pause McDonald's expansion made by the company or McDonald's? - The decision was made collaboratively with McDonald's, ensuring that profitable growth is prioritized before further expansion [60] Question: How aggressive will the company be in pruning underperforming locations in the U.S.? - The company could exit as much as 5% to 10% of doors in the U.S. network to drive profitable growth [40][41] Question: Can you explain the refranchising process for international markets? - The company is looking for the right partners to grow the business in a capital-efficient way, with proceeds used to pay down debt [42][43] Question: What was the impact of the cybersecurity incident on operations? - The $5 million inefficiency related to the cybersecurity incident was expected and is now behind the company, allowing for improved operational efficiency [53] Question: Why was there a pause in the McDonald's rollout? - Sales initially started strong but dropped below expectations after local marketing efforts, prompting the need to ensure profitable growth before further expansion [60]