Group 1 - The article discusses the growth potential of Krispy Kreme (NASDAQ: DNUT) and questions whether the current market conditions represent a good entry point for investors [1] - The author has a strong background in restaurant stocks, with expertise in various segments including QSR, fast casual, casual dining, fine dining, and family dining [1] - The analysis employs advanced models and valuation techniques to provide insights and strategies for investors in the U.S. restaurant market [1] Group 2 - The author is involved in academic and journalistic initiatives, contributing to institutions that promote economic freedom [1] - Previous experience includes writing for Investing, focusing on topics like monetary policy and financial education [1]

Core Insights - Krispy Kreme's international operations are crucial for understanding its financial strength and growth potential [1][2] - The company's reliance on international markets presents both opportunities and risks, making it essential to monitor international revenue trends [9] Financial Performance - In the recent quarter, Krispy Kreme reported total revenue of $404.02 million, a decline of 10.4% year-over-year [4] - International revenue contributed $138.39 million, accounting for 34.25% of total revenue, which was a surprise of +3.38% compared to estimates [6] - Market Development generated $20.52 million, representing 5.08% of total revenue, which was an 18.8% decline from the expected $25.27 million [5] Revenue Breakdown - For the previous quarter, International revenue was $130.7 million (34.41%), and in the same quarter last year, it was $107.05 million (23.74%) [6] - Analysts predict total revenue of $392.32 million for the current fiscal quarter, with Market Development and International expected to contribute 5.8% ($22.88 million) and 33% ($129.36 million) respectively [7] - For the full year, total revenue is expected to be $1.62 billion, reflecting a 3% decline from the previous year, with Market Development and International projected to contribute $93.8 million and $540.46 million respectively [8] Market Context - The interconnected global economy influences Krispy Kreme's financial health and growth trajectory, highlighting the importance of international market penetration [2][3] - Analysts are closely monitoring international revenue trends to refine earnings estimates, considering the impact of geopolitical risks and currency fluctuations [10]

Core Viewpoint - Krispy Kreme's shares fell 32.2% following disappointing fourth-quarter earnings, a cyberattack, and cautious guidance for 2025 [1] Financial Performance - In Q4, Krispy Kreme reported revenue of $404 million, a decrease of 10.4% year-over-year, and adjusted non-GAAP EPS of $0.01, down 89%, both missing analyst expectations [2] - The company anticipates 2025 revenue between $1.55 billion and $1.65 billion, with adjusted EPS of $0.04 to $0.08, reflecting a decline from fiscal 2024's revenue of $1.67 billion and EPS of $0.11 [3] Guidance and Strategic Moves - The guidance accounts for the sale of the Insomnia Cookies brand, which will not contribute to 2025 revenue, and the company plans to refranchise more stores, expecting organic revenue growth of 5% to 7% [4] - Management highlighted a cautious consumer environment and external factors like California wildfires impacting the early 2025 outlook [5] Costs and Investments - Elevated costs are expected as Krispy Kreme addresses cybersecurity vulnerabilities and invests in a partnership with McDonald's, aiming for 6,000 locations by the end of 2025 and 12,000 by the end of 2026 [6] Market Position and Valuation - Following a significant decline since its IPO in mid-2021, Krispy Kreme shares are now valued at approximately 10 times enterprise value-to-EBITDA, based on projected adjusted EBITDA of $180 million to $200 million for 2025 [7] - Despite the low valuation for a growing franchise business, investors are advised to monitor management's handling of the cyber incident and the McDonald's partnership before making investment decisions [8]

Cybersecurity and Operational Risks - The company experienced operational disruptions due to unauthorized activity on its information technology systems, which materially affected business operations, including online ordering in parts of the U.S.[79] - The 2024 Cybersecurity Incident resulted in lost sales and increased expenses related to remediation, highlighting vulnerabilities in the company's cybersecurity measures[84]. - The company identified a material weakness in its internal control over financial reporting, which could impair the ability to produce timely and accurate financial statements[91]. - The company’s business interruption insurance may not fully cover losses from service disruptions caused by system failures, potentially leading to significant financial impacts[82]. - The company acknowledges the potential for future public health risks to impact operations, which may lead to workforce disruptions and affect guest traffic[170]. Financial Performance and Revenue - Total net revenues for the fiscal year ended December 29, 2024, were $1,665,397, a decrease of 1.2% compared to $1,686,104 in the previous year[322]. - Product sales amounted to $1,627,778, down from $1,651,166, reflecting a decline of 1.4% year-over-year[322]. - The company reported a net income of $3,815, a significant recovery from a net loss of $36,647 in the prior year[322]. - Operating loss for the year was $8,735, compared to an operating income of $13,145 in the previous year[322]. - The company reported a gain of $124.126 million from the divestiture of Insomnia Cookies, contributing positively to cash flows[334]. Customer and Market Dynamics - The company relies on a diverse customer base, with no single customer contributing more than 10% of total revenue in the fiscal years ending December 29, 2024, December 31, 2023, or January 1, 2023[98]. - The company competes in a highly competitive food service landscape, facing challenges from both local operators and well-capitalized national and international players[102]. - The company’s ability to maintain its competitive position depends on effectively responding to consumer preferences and managing operational complexities[103]. Supply Chain and Cost Management - The company relies on a single vendor for glaze flavoring, exposing it to risks of supply interruptions and price fluctuations[127]. - The company’s profitability is sensitive to changes in raw material costs, particularly flour, shortening, and sugar, which have been volatile in recent years[133]. - The company employs forward purchase contracts to mitigate commodity price risks, but these may not fully protect against fluctuations over extended timeframes[134]. - The company has implemented measures to manage inflationary cost increases, including rapid inventory turnover and adjusting product pricing[293]. Debt and Financial Obligations - The company has incurred significant indebtedness, which may constrain operational flexibility and increase interest expenses, potentially limiting funds for working capital and acquisitions[108]. - The company has entered into interest rate swaps on $500 million of its $824.5 million outstanding debt to mitigate the impact of changes in interest rates[295]. - A 100 basis point increase or decrease in the one-month SOFR would result in a $3.2 million increase or decrease in interest expense for a 12-month period based on unhedged debt[295]. - The company may face challenges in paying dividends due to financial performance, capital needs, and existing debt agreements, which could impact liquidity[185]. Regulatory and Compliance Issues - The company operates under various data privacy and security laws, including the GDPR, which impose strict requirements on data handling and could result in significant penalties for non-compliance[89]. - The company is subject to franchise laws that may affect its ability to develop new franchised shops and enforce contractual rights, potentially leading to a decline in franchise revenues[151]. - Changes in regulations regarding health and food quality could negatively impact public perception and consumer preferences towards the company's products[147]. Human Resources and Labor Costs - The company faces challenges in recruiting and retaining personnel, which could adversely affect operations and overall performance[140]. - Rising labor costs, including wages and employee benefits, may impact the company's financial condition and results of operations[141]. - Increased minimum wage regulations and healthcare legislation could lead to higher operational costs for the company[153]. Shareholder and Governance Matters - As of December 29, 2024, JAB Holdings B.V. held approximately 44% of the company's common stock, granting it substantial influence over corporate decisions[180]. - The concentration of voting power held by JAB may limit other shareholders' ability to influence significant corporate decisions, potentially affecting the market price of the common stock[182]. Asset Management and Financial Position - Total assets decreased to $3,072,030 from $3,240,592, representing a decline of 5.2%[327]. - Current liabilities decreased to $486,172 from $525,593, a reduction of 7.5%[327]. - Long-term debt, less current portion, increased slightly to $844,547 from $836,615, indicating a marginal rise of 0.2%[327]. - The company’s cash and cash equivalents decreased to $28,962 from $38,185, a decline of 24.0%[327]. Marketing and Brand Management - The company’s reputation and brand image are essential for success, and negative feedback on social media could severely harm its brand reputation[100]. - Marketing expenses for the fiscal year ended December 29, 2024, were approximately $47.7 million, an increase from $45.9 million in the previous year[358].

Core Viewpoint - Krispy Kreme's stock has experienced significant declines following disappointing Q4 earnings, leading analysts to lower their price targets substantially [1][2][3] Financial Performance - Krispy Kreme missed both revenue and earnings expectations in Q4, which has raised concerns among analysts [3] - The company's revenue guidance for 2025 is lower than its 2024 performance, contradicting previous expectations of strong demand and growth [3] Analyst Reactions - Piper Sandler analyst Brian Mullan reduced his price target for Krispy Kreme by 33% to $12 per share [2] - Morgan Stanley's analysts were more drastic, cutting their price target by 50% to $6 per share [2] Growth Concerns - The company is facing challenges due to a heavy debt load and thin profit margins, making growth essential for its investment appeal [4] - Despite potential growth opportunities, such as partnerships with McDonald's, the lack of significant sales growth is a concern for investors [4]

Financial Data and Key Metrics Changes - The company reported net revenue of $404 million for Q4 2024, marking a 21% revenue growth year-over-year, despite a $11 million revenue impact from a Cyber Security Incident [26][8][25] - Organic revenue grew by 1.8%, with an estimated 280 basis point headwind from the Cyber Security incident [27] - Adjusted EBITDA declined to $45.9 million, with an adjusted EBITDA margin of 11.4%, impacted by the Cyber Incident and the sale of a majority stake in Insomnia Cookies [27][28] Business Line Data and Key Metrics Changes - U.S. segment organic revenue declined by 1.2%, primarily due to a 460 basis point impact from the Cyber Security Incident [28] - The Delivered Fresh Daily (DFD) expansion strategy saw points of access growth accelerate to 34% year-over-year [29] - International markets reported organic revenue growth of 7.8%, led by Canada and Japan, with adjusted EBITDA of $25.7 million and an adjusted EBITDA margin of 18.6% [30][31] Market Data and Key Metrics Changes - Global points of access grew by 24%, with over 2,800 new doors added in the U.S. through national partners [15][8] - The company anticipates reaching more than 23,000 points of access by year-end 2025 [21] - The capital-light international franchise business grew points of access by 8% in 2024, with plans to open in two to four new countries in 2025 [20][21] Company Strategy and Development Direction - The company is focusing on profitable U.S. DFD expansion and wider adoption of its capital-light international franchise model [39] - Plans include evaluating refranchising certain international markets and strengthening a performance-based culture [11][22] - The marketing strategy will spotlight the Original Glazed doughnut, targeting value-conscious consumers [13][110] Management's Comments on Operating Environment and Future Outlook - Management acknowledged consumer softness and adverse weather impacts in Q1 2025, but remains optimistic about long-term growth [37][50] - The company expects revenue growth in 2025, with organic revenue growth projected at 5% to 7% [35] - Management emphasized the importance of operational efficiency and leveraging existing capacity to drive profitability [57][39] Other Important Information - The Cyber Security Incident is expected to have a limited long-term impact on the business trajectory [25] - The company plans to outsource more than half of its U.S. logistics deliveries by year-end 2025 [19] - Capital expenditures are expected to track between 6% and 7% of net revenue, with interest expenses projected between $65 million and $75 million [36] Q&A Session Summary Question: What are the expectations for OpEx expenses in 2025? - Management indicated that OpEx will be pressured in the first half of the year due to investments in operations leadership and logistics outsourcing, with expectations for leverage in the second half [44] Question: How will the company handle underperforming DFD locations? - The company will optimize low-performing doors as part of its strategy to ensure sustainable growth [47] Question: Why is the organic growth guidance lower than market expectations? - Management cited a choppy start to the year due to weather and consumer pressures, impacting traditional retail locations [50] Question: What is the impact of the Cyber Security Incident on 2025 guidance? - While not quantified, management acknowledged ongoing operational challenges from the incident affecting labor and materials management [72] Question: What are the plans for international refranchising? - The company is evaluating refranchising opportunities in several international markets to focus on expanding its U.S. footprint [90] Question: What is the expected impact of outsourcing logistics on EBITDA? - Management aims for EBIT neutrality during the transition to outsourced logistics, with potential cash benefits from negotiated payment terms [123]

Core Viewpoint - Krispy Kreme's shares declined by approximately 24% following disappointing fourth-quarter earnings and fiscal 2025 guidance [1] Financial Performance - Adjusted earnings were reported at $0.01, missing Wall Street estimates of $0.10, while revenue was $404 million, below the consensus estimate of $414 million [2] - For fiscal year 2025, the company guided revenue between $1.55 billion and $1.65 billion and adjusted earnings per share between $0.04 and $0.08, again falling short of consensus expectations [2] Revenue Growth and Challenges - The company reported organic revenue growth of about 2% year over year during the quarter [3] - A cybersecurity incident impacted online ordering, resulting in a revenue hit of $11 million and $3 million in remediation expenses [3] - The decision to sell a majority stake in Insomnia Cookies had a $101 million impact on revenue [3] Market Sentiment and Future Outlook - Despite the challenges, Krispy Kreme achieved 5% organic revenue growth in fiscal 2024 and established a new partnership with McDonald's for donut delivery, which shows potential [4] - Analysts remain optimistic about price targets for the stock, but the recent earnings report may lead to lower targets and decreased investor confidence [4] - Given concerns about consumer strength, it may be prudent to monitor the stock rather than make immediate purchases [4]

Core Insights - Krispy Kreme reported a revenue of $404.02 million for the quarter ended December 2024, reflecting a decline of 10.4% year-over-year and a surprise of -2.39% compared to the Zacks Consensus Estimate of $413.92 million [1] - The company's EPS was $0.01, down from $0.09 in the same quarter last year, resulting in an EPS surprise of -90.00% against the consensus estimate of $0.10 [1] Financial Performance - The stock has returned -2.7% over the past month, underperforming the Zacks S&P 500 composite, which saw a change of -1.8% [3] - Krispy Kreme holds a Zacks Rank 5 (Strong Sell), indicating potential underperformance in the near term [3] Global Points of Access - Total Global Points of Access reached 17,557, slightly below the two-analyst average estimate of 17,934 [4] - U.S. Fresh Shops totaled 70, compared to the average estimate of 73 [4] - International Fresh Shops reported 519, exceeding the average estimate of 512 [4] Geographic Revenue Breakdown - Market Development revenue was $20.52 million, significantly lower than the estimated $25.27 million, representing a year-over-year decline of -57.1% [4] - International revenue was $138.39 million, surpassing the average estimate of $133.86 million, with a year-over-year increase of +29.3% [4] - U.S. revenue was $245.12 million, below the average estimate of $256.39 million, reflecting a year-over-year decrease of -17.2% [4]

Core Insights - Krispy Kreme's shares fell over 20% to an all-time low following disappointing earnings and guidance, exacerbated by a cyberattack and ongoing restructuring efforts [1][5] - The company reported fourth-quarter adjusted EPS of $0.01 on revenue of $404 million, a 10% decline year-over-year, missing analyst expectations of $0.09 EPS and $411.1 million in revenue [1][2] Revenue Impact - The revenue decline was primarily due to the sale of its majority stake in Insomnia Cookies and an $11 million negative impact from a December cyberattack, which disrupted operations including online ordering [2][5] - The company stated that online ordering and core business functions are now fully operational [2] Management and Strategic Changes - CEO Josh Charlesworth indicated that excluding the cybersecurity issue, performance was largely in line with expectations [3] - The company has restructured management teams to focus on profitable U.S. expansion and capital-light international growth, and plans to outsource U.S. logistics [3][5] - Krispy Kreme is also evaluating refranchising certain international markets [3] Future Outlook - The company projects full-year revenue between $1.55 billion and $1.65 billion, with adjusted EBITDA of $180 million to $200 million, both below analyst estimates of $1.76 billion and $235 million respectively [3]

Krispy Kreme, Inc. FOURTH QUARTER 2024 EARNINGS PRESENTATION FEBRUARY 25, 2025 Krispy Kreme | 4Q24 Earnings 1 Cautionary Note Regarding Forward-Looking Statements Certain statements made in this presentation and the conference call that this presentation accompanies are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements can be identified by the use of forward-looking terminology, including terms such as "plan," "believe," "may," ...