Krispy Kreme(US:DNUT)2023-02-15 18:27Financial Data and Key Metrics Changes - The company reported a net revenue growth of 9% year-over-year, with organic revenue growth of 12.5% in the fourth quarter, driven by pricing and premium seasonal offerings [50][61] - Adjusted EBITDA grew 17% in the fourth quarter to $56 million, or 25% in constant currency, with a full-year adjusted EBITDA increase of 7% in constant currency [51][61] - Adjusted net income for the quarter increased 27% to $20.4 million, with adjusted diluted EPS rising 38% to $0.11 [52][61] Business Line Data and Key Metrics Changes - In the U.S. and Canada segment, total revenue increased 11% in the fourth quarter to $277 million, with organic revenue growth of 12% [52][61] - Insomnia Cookies experienced a 24% revenue growth driven by strong same-shop sales and high productivity from new shops, with an average order value (AOV) of $850,000, up 8% [46][61] - The Delivered Fresh Daily (DFD) channel accounted for 21% of sales, up from 17% in 2021, reflecting a 10% increase in doors served and average weekly sales per door [53][61] Market Data and Key Metrics Changes - International segment net revenue grew 3.3% in the fourth quarter, with organic revenue increasing 11%, led by strong performances in Mexico and Australia [87][89] - The company added nearly 600 points of access internationally in 2022, leading to 18% organic revenue growth [34][61] - Sales per hub in the international segment increased 8% to nearly $10 million despite foreign exchange headwinds [34][87] Company Strategy and Development Direction - The company aims to grow to more than 75,000 points of access globally, an increase from the previous target of 50,000, while expanding DFD and aligning specialty doughnuts across all channels [35][61] - The focus remains on capital-light expansion of the omnichannel model, with plans to open 30 to 40 new Insomnia Cookie shops and approximately 10 company-built hubs in 2023 [62][61] - The company is committed to enhancing its e-commerce capabilities and leveraging marketing efficiencies across global campaigns [31][61] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in meeting or exceeding long-term growth expectations set for 2026, citing strong momentum in the business [65][61] - The company anticipates modest headwinds from foreign exchange and inflation, but expects pricing strategies to offset these challenges [63][64] - Management highlighted the importance of maintaining product quality and freshness while exploring partnerships for distribution [104][61] Other Important Information - The company generated $32 million of free cash flow in Q4, leading to a 15% cash conversion in 2022 [59][61] - The appointment of a new Global CFO is expected to enhance financial leadership and drive shareholder value [49][61] - The company closed 14 lower-performing shops in 2022 and plans to close seven more in 2023, focusing on optimizing its shop network [86][61] Q&A Session Summary Question: Can you provide more color on pricing plans given inflation? - Management indicated that they entered the year with low double-digit effective pricing and will adapt their pricing strategy to inflation trends [13][61] Question: How much of the growth in Q4 was driven by seasonal demand? - Management noted that while seasonal promotions contributed, they expect continued momentum into the following months [20][61] Question: Can you discuss the performance of legacy DFD accounts? - Management confirmed that existing customers continue to grow in volume and profitability, with expectations for double-digit growth in 2023 [109][61] Question: What is the pace of growth in the international segment? - Management expects consistent growth throughout the year, with new market openings paced evenly [115][61] Question: What are the expectations for the McDonald's partnership? - Management stated that they are still evaluating the partnership and will provide updates when ready [68][61]