Krispy Kreme(US:DNUT)2023-05-11 18:57Financial Data and Key Metrics Changes - The company reported a net revenue increase of 12.5% year-over-year to $419 million, with organic revenue growth accelerating to 14.4% driven by pricing and growth in delivered fresh daily (DFD) donuts [89][90] - Adjusted EBITDA grew 12.3% to $55 million, with an adjusted EBITDA margin of 13.1% compared to the previous year [90][92] - GAAP net income was $1.6 million, impacted by a $13.4 million non-cash expense related to the exit of the branded sweet treat line [62][90] Business Line Data and Key Metrics Changes - The U.S. business segment's total revenue increased 14% to $281 million, with organic revenue growth also up 14% despite decreased revenue from branded sweet treats [91] - E-commerce revenue saw a 23% increase, contributing to 22% of retail sales in the U.S. during the first quarter [49][54] - The DFD business expanded to over 6,000 doors in the U.S., with average weekly sales up 35% from two years ago [83][90] Market Data and Key Metrics Changes - International organic revenue growth was 7.3%, with total revenues of $90.3 million, while adjusted EBITDA for the quarter declined to $13.6 million [92] - The growth in Japan led to adjusted EBITDA margins of over 20%, up nearly 800 basis points from a year ago [92] - The company expects to open in three additional countries during the second quarter, including Switzerland, Costa Rica, and Jamaica [50] Company Strategy and Development Direction - The company is focusing on expanding its DFD network, aiming for a long-term goal of 75,000 points of access globally, up from 12,400 today [75][80] - The strategy includes enhancing e-commerce capabilities and aligning specialty donuts across all channels [51][52] - The company is investing in capabilities to rapidly expand Insomnia store openings and plans to open nearly double the number of cookie shops compared to last year [51][52] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the ability to meet or exceed long-term revenue and adjusted EBITDA targets set for 2026, including growing revenue to $2.15 billion and adjusted EBITDA to $215 million [52][66] - The company noted that it has seen resilience in its brand and culture, which is crucial during challenging economic times [52] - Management highlighted the importance of fresh donuts and the unique logistics model that allows for efficient delivery to various points of access [41][75] Other Important Information - The company has exited the branded sweet treat business to focus on its fresh donut offerings, which are experiencing significant growth [74][106] - The company has seen strong performance in its seasonal campaigns, particularly around Valentine's Day and St. Patrick's Day, which serve as a model for future marketing efforts [76][90] - The company is also working to reduce reliance on vendor financing programs, which is expected to positively impact adjusted EBITDA [65] Q&A Session Summary Question: Insights on the McDonald's partnership and profitability per DFD account - Management indicated that profitability per DFD account has significantly improved, and they are focusing on ensuring that donuts are delivered fresh daily to McDonald's [98][126] Question: Discontinuation of the Sweet Treats line - Management clarified that the decision to exit the Sweet Treats line was to concentrate resources on the fresh donut business, which is growing significantly [106] Question: Expansion opportunities with Target - Management discussed testing pre-packaged donuts in Target stores and the potential for premium merchandising units to enhance brand visibility [108]