Krispy Kreme(US:DNUT)2022-08-17 16:52Financial Data and Key Metrics Changes - Net revenue grew 7.5% year-over-year to $375 million, despite a near 3% negative impact from the stronger US dollar [35] - Organic revenue growth was 9% or 31% on a two-year stack basis [36] - Adjusted EBITDA was $47.4 million, down 10% from a year ago, impacted by inflationary pressures and foreign exchange headwinds [38][39] - GAAP net loss was $2.4 million, compared to a loss of $15 million in the same period a year ago [39] - Free cash flow was positive at $3.5 million [40] Business Line Data and Key Metrics Changes - In the US and Canada segment, total revenue increased 8.5% to $251 million, with organic growth of 6% [40] - Adjusted EBITDA for the US and Canada decreased 8% to $26 million, with margins declining 180 basis points to 10.4% [43] - The International segment saw net revenue grow 5.2% to $94 million, with organic revenue increasing 13% [47] - Market Development segment revenues increased 6.5% to $30.9 million, with organic growth of 19.2% [51][52] Market Data and Key Metrics Changes - Global organic revenue growth was approximately 9%, with strong performance in Mexico, Australia, and New Zealand [11][21] - International points of access expanded by more than 200 in the second quarter, totaling over 3,400 [21][48] - E-commerce represented 17.5% of retail sales, up from less than 10% pre-pandemic [26] Company Strategy and Development Direction - The company aims to expand its omnichannel model and has added 382 fresh points of access globally [10][36] - The focus remains on the hub-and-spoke model to drive efficiency and revenue growth [32][90] - The company plans to open at least three new countries per year and has signed agreements in Switzerland, Jordan, Costa Rica, and Chile [24][25] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about long-term growth despite short-term macro challenges, with a robust pipeline of low capital points of access [31][60] - The company anticipates inflation to moderate significantly looking ahead into 2023 [19][59] - Management remains confident in achieving a long-term growth algorithm of 9% to 11% annual organic revenue growth [61] Other Important Information - The company is reviewing underperforming Hubs without Spokes and expects to close approximately 10 shops [57] - The company announced an acquisition of a Midwest US franchise for $18.5 million, adding seven profitable shops [56] Q&A Session Summary Question: What defines the US Hubs without Spokes that will be closed? - Management indicated that the decision is based on the ability to convert these shops to the hub-and-spoke model, with some being underperforming and not sustainable in the long run [62][64] Question: What are the drivers of the improvement in organic growth in July? - Management noted that promotional activity, merchandising mix, and strategic pricing contributed to the improvement, alongside the growth in points of access [65][66] Question: How is the profitability of DFD Doors being managed? - Management emphasized the importance of route profitability and continuous refinement of capabilities to ensure optimal performance across DFD Doors [70][78] Question: What is the biggest resistance to pricing in the US? - Management stated that strategic pricing is essential, and they continuously seek to innovate and provide value to customers while managing inflation [83][84] Question: Has the long-term growth outlook changed? - Management confirmed that the long-term growth algorithm remains intact, with strong top-line momentum and reduced commodity inflation expected for 2023 [95][96]