Krispy Kreme(US:DNUT)2021-08-18 03:51Financial Data and Key Metrics Changes - Net revenue increased by 43% year-over-year to $349 million, with organic revenue growth of 23% [11][29] - Adjusted EBITDA grew by 78% to $52.4 million, and adjusted net income increased by 254% to $20.5 million [13][29] - On a two-year stack basis, organic revenues have grown 16% since 2019, indicating strong performance compared to pre-COVID-19 results [12] Business Line Data and Key Metrics Changes - The International segment saw net revenue growth of 159% to $89 million, with organic revenue growth of 126% year-over-year [48] - The U.S. and Canada segment's net revenue grew by 25% to $231 million, with organic growth of 3.9% [40] - Market Development segment net revenue increased to $29 million from $26 million year-over-year, with 17% organic growth [51] Market Data and Key Metrics Changes - Points of access to fresh doughnuts increased by over 40% in the U.K. and Ireland, driven by additional delivered fresh daily doors at major supermarkets [33] - E-commerce represented 15% of Q2 retail sales in the International segment, showing strong growth in online sales [49] - The U.S. and Canada segment has over 5,000 delivered fresh daily doors, significantly up from 2,000 in Q2 2020 [41] Company Strategy and Development Direction - The company is focused on an omni-channel strategy and expanding its hub and spoke model to drive growth and profitability [8][25] - Plans to add approximately 800 to 1,000 points of access per year globally, with a focus on new markets and enhancing consumer access [22][56] - The company aims to leverage its branded sweet treat line to expand distribution through grocery and convenience stores [23][46] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the long-term growth potential, expecting to achieve net revenue of $1.34 billion to $1.38 billion for the full year 2021 [60] - Anticipated challenges include wage and commodity inflation, but management remains optimistic about maintaining guidance due to pricing strategies [61] - Long-term organic revenue growth is projected at 9% to 11%, with adjusted EBITDA growth of 12% to 14% per year [61] Other Important Information - The company has a net debt of $646 million and total net leverage of 3.6 times using Q2 trailing adjusted EBITDA [39] - The company plans to pay an initial cash dividend of $0.035 per share for the quarter ending October 3, 2021 [62] Q&A Session Summary Question: U.S. margins relative to international - Management acknowledged that U.S. margins are currently lower but expect improvements with the hub and spoke model and price increases in Q4 [68][71] Question: International business performance - Management noted strong recovery in international markets, with pent-up demand driving growth, and plans to open new hubs, including in Egypt [75] Question: September price hike details - The price increase will vary by region and is intended to cover commodity and wage inflation, with a focus on maintaining pricing power through product innovation [80] Question: Increased costs compared to June - The largest cost increases are in operating expenses, particularly labor and product costs, driven by expansion and market conditions [83] Question: Path to improving U.S. margins - Management outlined a multi-year transition to improve U.S. margins, leveraging the hub and spoke model and increasing points of access [88][90]