Thank you for standing by. My name is Maria, and I will be your conference operator today. At this time, I would like to welcome everyone to the Krispy Kreme Second Quarter 2023 Earnings Call. All lines have been placed on mute to prevent any background noise. After the speaker remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star followed by the number one on your telephone keypad. If you would like to withdraw your question, press star one again. Thank you. I would like to turn the call over to Ms. Eloise Hale, Vice President of Global Corporate Communications. Ms. Hale, please go ahead. Good morning, everyone, welcome to Krispy Kreme's second quarter 2023 earnings call. Thank you all for joining us today. Our earnings release and accompanying earnings presentation deck are available on the investor relations portion of our website at investors.krispykreme.com. Joining me on the call this morning are Mike Tattersfield, President and Chief Executive Officer, Josh Charlesworth, Global President and Chief Operating Officer, and Jeremiah Ashukian, Chief Financial Officer. After prepared remarks, there will be a question and answer session. Before we begin, I would like to remind you that this call contains forward-looking statements made pursuant to the Safe Harbor Provisions of the Private Securities Litigation Reform Act of 1995, including statements of expectations, future events, and future financial performance. Forward-looking statements involve a number of inherent risks and uncertainties. We caution investors that these risks could cause actual results to differ materially than those contained in any forward-looking statements. These factors and other risks and uncertainties are described in detail in the company's Form 10-K, filed with the SEC on March 2, 2023, and in other filings that we make from time to time with the SEC. Forward-looking statements made today speak only as of today. The company assumes no obligation to publicly update or revise any forward-looking statements, except as may be required by law. Additionally, today's call will include certain non-GAAP financial measures. A reconciliation between non-GAAP financial measures and their closest comparable GAAP measures can be found in the company's second quarter 2023 earnings press release and Form 8-K filed today. Both are available at investors.krispykreme.com. With that, I'll turn the call over to Mike. Good morning, thank you everyone for joining us today. I'm pleased to report our 4th consecutive quarter of double-digit organic revenue growth, evidencing the strength of our omni-channel strategy. Our second quarter performance was bolstered by our continued focus on expanding our hub-and-spoke model as we leaned heavily into our omni-channel and delivered fresh daily or DFD capabilities, as well as our international expansion strategy. Our focus strategy delivered 9% net revenue and 3% EBITDA growth, in line with our expectations. We also remain concentrated on strategic execution of premium product sales and thoughtful timing of selective pricing while driving high levels of consumer demand. I want to extend thanks to our Krispy Kremers, our team members, for another fantastic quarter. Every day, we aim to touch and enhance lives through the joy that is Krispy Kreme. Without your continued efforts and dedication to our brand and purpose, this would not be possible. Our doughnuts continue to be loved across all the countries we operate in every day, and we understand that access to our brand is our biggest opportunity. Ultimately, our aim is to continue expanding points of access and driving further availability of our doughnuts. We have learned that different channels play different roles in satisfying our customers globally through our omni-channel system. These supplemental channels will help us reach our long-term goal of 75,000 points of access. This quarter, our points of access grew nearly 13% globally year-over-year, and we were particularly pleased with the momentum we saw in the U.S. Our global points of access now stand at 12,872, we continue to be confident in our ability to achieve our annual goal of 10%-15% growth. Our U.S. fresh doughnut business led the way as our focus on increasing access helped drive another quarter of continued improvement in our largest market via maximizing our existing hub-and-spoke infrastructure. Our continued momentum, driven by the expansion of our DFD strategy, gives us confidence in our plan to expand into new channels like QSR, drug, and club, while building out our existing customer base. For example, our current test with McDonald's, which Josh will talk about further, has been a fantastic learning experience thus far and has enhanced our belief that the QSR channel is a significant growth opportunity, not just in the U.S. market, but globally. In our market development and international segments, we continue to see tremendous performance in Japan and Canada. We are also starting to see some stability in our core equity international markets as pricing and inflation become more balanced. The growth potential in our international markets remains significant, as our omni-channel and DFD model further unlocks new points of access, channels, and customers. I'm excited about the progress we've made on our global expansion strategy, with new openings in Chile, Costa Rica, and Jamaica, all performing well. We remain on track to meet our goal of opening in seven new countries this year, with three to five countries to follow in 2024. Our signed pipeline of new hubs and fresh shops through our existing franchise partners is already well over 1,000 shops. At Insomnia Cookies, we are ramping up our development efforts to get to 30-40 new bakeries this year, including international expansion in the back half of 2023, starting in Canada and the UK. In addition, we are focused on meaningful innovation, including opening our innovation center in Philadelphia in Q3. Insomnia Cookies continues to evolve into a more mature growth business, underpinned by exciting plans to gain additional share within a global addressable market of over 4,000 bakeries. As we continue to grow globally, we continue finding moments of joy to share with our colleagues and our guests. In Q2, we celebrated National Doughnut Day, which has truly become Global Doughnut Day for us. It was the strongest and largest doughnut day in Krispy Kreme's history, further cementing the importance of access to our guests. It wasn't only about actual doughnut sales that day, but also about gifting every customer one of our signature Original Glazed Doughnuts just because they took the time to visit us. This single event generated over 3 billion social media impressions, and we're just getting started as we will move from 12 countries participating to every country in which we have a presence by 2026. As we start the third quarter, we have seen continued organic revenue momentum from our second quarter. Our strategic priorities remain unchanged as we continue to drive capital-light expansion of our omni-channel model and grow points of access and lean into new and existing channels. With this momentum, we remain confident in our 2023 outlook and ability to achieve our long-term 2020 targets that we highlighted at our Investor Day last year, including growing revenue to $2.15 billion and adjusted EBITDA to $315 million. My excitement and enthusiasm for all this brand has to offer continues to grow. We have the team, the culture, the brand, and the strategy to execute on many opportunities for growth on our journey to becoming the most loved sweet treat brand in the world. With that, I'll hand the call over to Josh. Josh? Thanks, Mike. Our omni-channel system continues to deliver robust growth around the world, with our fresh U.S. doughnut business delivering double-digit organic sales growth in the quarter once again. We saw strong performances in the U.S. across all of our sales channels, thanks in large part to our specialty doughnuts, including Cookie Blast, Fan Favs, and Mini Summer, which all proved popular in the quarter. Selling the same fresh doughnuts that we make in our production hubs through more points of access is at the heart of our unique hub-and-spoke operating model, making Krispy Kreme more accessible and convenient to more consumers. During the second quarter, we added 462 new points of access globally, including 6 new Hot Light Theater shops, 45 fresh shops, and 406 DFD doors. This means that we remain on track to grow points of access by 10%-15% this year. In the U.S., we added another 239 DFD doors in the quarter, led by expansion with Kroger, which now carries Krispy Kreme in more than 1,000 locations across the country. All in, we now have over 6,300 DFD doors in the U.S., with average weekly sales up 16% year-over-year in the second quarter. We also continued to add secondary display cabinets to high-traffic grocery doors, which add up to 70% incremental sales to a DFD door. 87 of these premium cabinets have now been added in U.S. grocery stores year to date, with a similar number expected for the balance of the year. A new initiative, which we just announced with Amazon, is a small format Krispy Kreme fresh shop located within Amazon Fresh grocery stores. This capital light pilot exemplifies our strategy to make access to our fresh doughnuts more convenient for the consumer and is already underway with the opening of our first two locations in Chicago earlier this month. To support all of this growth, we took the number of production hubs with spokes in the U.S. from 137 to 143 during the quarter. These were all conversions of existing hubs without spokes, requiring minimal incremental investment. Our trailing twelve-month sales per hub KPI was up 9% year-over-year to $4.7 million, driving Krispy Kreme's U.S. fresh margins up over 150 basis points compared to the same quarter a year ago. With pricing now setting inflation, this improvement is driven by both the productivity benefits of adding sales to the hubs with spokes and the results of our previously announced U.S. shop network optimization program, which focused on the poorer performing hubs without spokes, cities like D.C., Miami, and Charlotte, which have all seen significant door growth this year, are seeing some of our highest margin increases and are now demonstrating that we can deliver +20% margins in U.S. cities, just like we have seen internationally for several years in places like Sydney, Toronto, and London. As we've previously shared, we are also running a DFD test in the QSR channel in Kentucky with McDonald's, which is now in its sixth month. As a reminder, we are servicing over 160 McDonald's restaurants with fresh doughnuts delivered daily, which they sell on to their customers, branded as Krispy Kreme. While the test is still ongoing, the results have shown us that the consumers value a Krispy Kreme experience in the QSR channel, that these sales are incremental to our existing doughnut shop and DFD sales in the region, and that we can successfully serve these points of access from an existing hub network in Kentucky. Given all of the expansion opportunities we are seeing across multiple channels and customers, we have taken the opportunity to do a deep dive assessment of our doughnut capacity and capabilities to accelerate expansion of DFD in the U.S. Overall, we are confident that should we need to, we can quickly leverage existing hubs and selectively add new production hubs to support a network even bigger than the 15,000 points of access we set as our long-term goal in the U.S. Before I turn the call over to Jeremiah, I want to highlight the progress we're seeing in our U.K. business, which has seen slower growth since the changes in the macro environment there last spring. Specialty doughnuts targeted at local celebrations, including a Royal Dozen range to celebrate the King's coronation, contributed to double-digit retail sales growth in the quarter. Pricing and cost control initiatives also brought EBITDA margin back above 20%. We've also taken actions on DFD in the UK, including optimization of our price pack architecture, expansion into the club channel, and the inclusion of Krispy Kreme in customer loyalty card programs, which are starting to improve our performance. I'll now turn the call over to Jeremiah. Thanks, Josh. Good morning, everyone. As Josh mentioned, demand remains healthy. While costs remain elevated versus historical levels, we expect to start seeing inflation ease in the back half of this year as some of our unfavorable hedging impacts soften. As Mike said, we saw growth across all of our reporting segments in the second quarter, with net revenue up 9% year-over-year to $409 million. Organic revenue, which excludes the impact of acquisitions and changes in foreign currency, grew 11.4%, an acceleration from last year, driven by pricing, premium specialty donuts, and the growth of DFD and e-commerce. We continue to see low levels of elasticity due to pricing, which we took again during this quarter. As a result, product and distribution costs as a percent of revenue declined 30 basis points year-over-year. This contributed to adjusted EBITDA growth of 3.1% in the second quarter to $49 million, or an increase of 4.1% in constant currency. Adjusted EBITDA margin levels were 11.9%, compared to 12.6% one year ago, as benefits from pricing and efficiencies that are network-driven by our hub-and-spoke evolution in the U.S. was offset by inflation and year-over-year phasing of performance-based bonus accruals. GAAP net income of $0.1 million in the second quarter was driven by a $4.4 million, largely non-cash expense related to the exit of Branded Sweet Treats. Adjusted net income for the quarter decreased to 13.1% to $11.4 million, and adjusted diluted EPS in the second quarter was $0.07. Turning to our segment results. The U.S. business segment total revenue increased 9.3% in the 2Q to $267 million, and organic revenue growth was 12.7%. This was driven by pricing, DFD expansion, and e-commerce, despite a disruption from third-party POS provider during the first part of the quarter that impacted our ability to execute promotional activity. In addition, we saw strong revenue growth in Insomnia Cookies, which opened 23 new bakeries over the trailing four quarters. Adjusted EBITDA for the U.S. segment was up 16% to $28.1 million, with margin expansion of 60 basis points year-over-year to 10.5%, driven by strong performance in our U.S. fresh doughnut business. This reflects the successful pricing actions taken over the last 9 months, the efficiency benefits realized from our hubs with spokes, and the benefits from our U.S. shop network optimization program. This margin expansion was delivered despite the same disruption caused by the third-party POS provider that impacted revenue, as it also impacted our ability to manage labor efficiently. Impacts from the outage have since been resolved. Insomnia Cookies margins softened in the quarter as elevated input costs outweighed the benefits from pricing actions taken in early Q2. International total revenue increased 4.8% in the second quarter to $98.3 million, organic revenue growth was 3.5%, driven by pricing and points of access growth of 7%, taking our points of access to 3,670. Adjusted EBITDA for the quarter was flat at $19.5 million, with adjusted EBITDA margins of 19.8%, which was up significantly from the prior quarter as pricing in all markets, as well as rationalizing unprofitable DFD doors and adding new, more productive doors, are having a positive effect on margins. We expect the actions Josh detailed as he spoke about our UK business to positively contribute to margins over the remainder of the year. Market development, which is made up of our franchisee businesses around the world and equity-owned Japanese and Canadian markets, saw organic growth accelerate to 23%. Total revenues in the second quarter increased 17.4% to $43 million, driven by the strength in Japan, strong performance in our Costco partnership in Canada, and new market openings, offset partially by a 5.8% impact from foreign exchange headwinds and franchisee acquisitions. Market development adjusted EBITDA increased 27.3% to $15.7 million, despite a roughly $800,000 negative impact from foreign exchange headwinds. Adjusted EBITDA margins increased 290 basis points to 36.5% in the second quarter compared to the prior year. We continue to be very pleased with our performance in Japan and the Canadian markets, which has led to outsized performance in this segment. Turning to the balance sheet. Recall that last quarter, we successfully refinanced our debt, extending maturities to 2028, enabling our future growth, and we also began efforts to reduce our reliance on vendor financing to normalize terms and reduce what has become a more expensive way to provide financing. As a reminder, expense from vendor financing hits adjusted EBITDA, not net interest expense. We continue to make progress on that reduction in the second quarter and have reduced our reliance on these programs by over $80 million year to date, which will have a longer-term tailwind to adjusted EBITDA and net income due to lower rates. While we saw our leverage increase to 4.2 x in the quarter, we expect to close the year under 4 times. Our leverage, excluding this shift in vendor financing, would have been much closer to 3.8x. We continue to execute on plans to drive leverage closer to 2x-2.5x net leverage by 2026. Free cash flow, excluding these efforts, was also strong at $14.6 million, reflecting the strength of the underlying business fundamentals. In addition, we remain laser-focused on deploying our capital to target the highest return opportunities. As we mentioned at our 2022 Investor Day, we expect CapEx as a percentage of revenue to reduce to 6% by the end of 2026 and expect to fall around 6.6% of revenue, or between $105 million and $115 million in 2023. This includes the opening of at least 30-40 new Insomnia Cookie bakeries and roughly 10 company-built hubs in 2023. We are also reaffirming our 2023 guidance and continuing to trend toward the middle to higher end of our revenue and adjusted EBITDA ranges. This includes growth of 9%-11% in organic revenue and 8%-10% in net revenue. $205 million-$215 million of adjusted EBITDA, and between $0.31 and $0.34 of adjusted EPS. Our 2023 guidance includes modest tailwinds from foreign exchange rates for the year based on current exchange rates. Each 1% move in the U.S. Dollar Index is a little over a $1 million impact on adjusted EBITDA on an annualized basis, as roughly half of our pre-corporate expense adjusted EBITDA is outside the U.S. We are pleased with our second quarter results that prove the underlying strength of our business, giving us further confidence in our momentum as we enter the second half of 2023. Operator, we can open up the call to Q&A now, please. Thank you. At this time, I would like to remind everyone, in order to ask a question, press star, then the number one on your telephone keypad. We ask that you please limit yourself to one question and one follow-up, then reenter the queue for any additional questions that you may have. We will pause for just a moment to compile the Q&A roster. Your first question comes from the line of Sara Senatore, Bank of America, please go ahead. Great. Can you hear me? We can. We can. Okay, good. Thank you. I was a little choppy for a minute. I, I guess a, a question, a, a clarification, and then a question. In terms of the POS disruption, do you have any sort of estimate of what that might have been in terms of an impact on, you know, revenue or EBITDA? Just trying to understand what the disruption might have meant, if you can quantify it. The question I had was about loyalty programs, and you mentioned in the U.K., you know, you're, you've seen some success in adding Krispy Kreme to loyalty card programs. I know you've talked about relaunching in the U.S. next year. Are there any kind of lessons that you can take away from the U.K. or maybe that inform how you're thinking about loyalty programs, just given, you know, the relatively low frequency nature of the, of the Krispy Kreme occasion? Thanks. Thanks, Sarah. It's a great question. It's Jeremiah here. I'll start off by saying that despite the interruption, we still delivered improved margins, saw strong e-commerce revenue at 18.8%, which is actually up 130 basis points, and actually did not see a perceivable decline in customer satisfaction scores. That said, the disruptions caused across the business really manifested itself in 2, 2 key areas. One was delays in our ability to run and execute promotional activity and LTOs, which had an impact on revenue. Then two, the lack of visibility to real-time information, which impacted our ability to manage labor. I think what I would say is, you know, we're in the midst of insurance recovery right now, so I don't want to kind of quantify and put numbers out there, just given, given that. It's important to note that these issues have been resolved and are now behind us. Thanks. Yeah. Hi, Sara, this is Josh. On the, on the loyalty, yeah, I mean, loyalty is important to us at Krispy Kreme, with particularly given the importance of e-commerce, and the level of interaction we have with the brand. We have 15.5 million loyalty members around the world. That's an increase of 18% year-over-year, including 11.5 million in the U.S. You're right, we're looking to improve the loyalty program even further later this year, looking to make it more intuitive and easier to track for customers. And we'll be testing that later this year in the U.S. In the U.K., we have a loyalty program. What I was actually referencing in the call was being a part of customer loyalty programs, grocery stores, which have their own loyalty programs, and starting to become a part of that. That's something, to your question, that we do want to do more in the U.S. We haven't done too much of that in the U.S. We are speaking to our, our key account customers about how we can do that. One of the challenges is availability. We are not available in every grocery store in the U.S. with our fresh donuts and have much more broad availability in the U.K., but it's something that we think down the line with DFD will certainly play a role. Great. Yes, understood it's a different format. I guess I was just wondering if, you know, maybe the higher frequency occasion that comes with your people going to those partners, if it changes how you think about loyalty broadly. But it sounds like you think they're complementary, your own loyalty, and then these partners. Yeah, definitely. I mean, most of our loyalty programs that we manage directly, through the retail donut shop, sales channel, this starts to add that capability through DFD, and it gives a lot of visibility as well. The UK supermarkets use it as a way of communicating with their customers extensively, and certainly by getting more involved with that, we know the brand Krispy Kreme becomes more top of mind. Got it. Thank you so much. Operator, I think we're good for the next question, please. Yeah. Mr. John Ivankoe, JP Morgan, please go ahead. Hi, thank you. How are you? Hi, Joe. Very well. Hi. Hi. In your prepared remarks, I mean, it was, you know, looking at the overall footprint, your hub model, you know, and just, you know, really trying to evaluate how many DFD accounts you could do through existing hubs and, you know, and I guess there was some thought of, you know, maybe putting in some more assets in terms of even expanding DFD accounts beyond 15,000. Also in that, in those remarks, I mean, it almost, you know, kind of dovetailed exactly in, you know, into McDonald's and the, you know, the 160 stores or so that, you know, that you have in Kentucky. I guess, was there an intention to kind of tie those two comments together? I mean, in other words, are you looking at your, you know, your footprint and your capacity now to potentially prepare for a regional or even national expansion into McDonald's? Yeah. So again, what, what we've learned, John, is my... We love that the test has allowed us to really get deep knowledge about how the QSR, QSR channel is going to actually work. You know, what that does is just unlock just the opportunity from that need state that the consumer is looking, it's either a single or they're using gifting, that they can compound with it, but it really unlocks the convenience, right? With the drive-throughs that you see in the QSR chain, we can do that. What we've really started to look at as a channel is, what's the opportunity in that channel within our existing footprint, and how could that work? Then really push on from that. Yeah, you know, regarding McDonald's itself, John, I mean, it's a great business, and we're really enjoying working with them. One of the things, to, to remember, though, is it just behaves like a DFD door for us. You know, similar sales and profit margins. I mean, in fact, we're selling a limited selection, of, of donuts, but they're the same fresh daily donuts we sell anywhere else. There's no sort of, as I mentioned, no sort of cannibalization effect. For us, we're, we're thinking about, the learning from that. I mean, we've learned, for example, how to deliver over longer distances from our hubs than we've had to do before, whilst maintaining quality and service standards. It's, it's, you know, it's really proving a, a valuable test. They've been super collaborative. As I said a moment ago, you know, we're confident we could serve more McDonald's stores, to your point. You know, it's obviously up to them. We look forward to hearing from them how they think the test is going. Regarding the more broader point that you're making around hubs and spokes, look, with this level of DFD expansion, it behooves us to start looking ahead to how do we service more and more DFD doors. It's clear with the growth rate we have, whether it's in QSR or other channels, in grocery, convenience, and indeed more recently, club and other opportunities, you know, we need to start planning ahead for greater expansion. We've taken a lot of the learning from McDonald's and sort of realized that by making changes to operating hours, doughnut processing and packing layouts, delivery windows, and the like, we can get even more from our existing hubs than we even thought was possible before. We serve about 6,000 DFD doors today. We think we could get to near 12,000 DFD doors just with the existing hubs. Remember, we have about 225 production hubs in the U.S. that we directly own, but we also have 45 franchise-owned hubs that could be a part of that as well. You know, all in, that represents a great opportunity for us, and we're really working on how to, you know, how to calculate all that and start to plan for that. Then, you know, I mentioned, you know, even selectively investing in new hubs. I mean, if we wanted to add on top of that 12,000, let's say another 8,000-10,000 over the years to come as we meet the DFD demand, we think that's learning, requires a 10%-15% increase in production hubs itself. Because we're learning how to make production hubs purpose-built with automation, with more production lines to meet this kind of demand. It's an exciting time to be thinking ahead and thinking about a, a hub and network of the future, rather than worrying about optimizing the hub-and-spoke network of the past. Yeah, very interesting. And the comment about doubling the nearly doubling the number of doors served on existing hubs is obviously a very interesting one from just a return on assets perspective. You know, it actually, the statement reminded me, and maybe, you know, this, maybe this vernacular is just going to fade into the past at some point, but hubs with spokes, hubs without spokes, you actually, I think I'm looking at 82 hubs without spokes. Is there? What, what is? And that number's obviously been going down, both year-over-year, and I think over a period of years. What's, what's the current thinking around those? I mean, do, do you want to, you know, should those hubs actually start to redevelop spokes as you kind of look at markets again, and maybe there are some smaller format or convenience or QSR chains, you know, that can, you know, turn on, you know, the delivery light, if you will? That's good. That was an accidental pun. you know, turn on the delivery, you know, of, you know, of those hubs without spokes might be a nice way to add a sales layer that currently doesn't exist. I mean, you know, our, our hub network was not originally designed for this kind of opportunity. But what we do know how to do is make a lot of doughnuts. So we've been learning how to adapt it for the future, future model. These legacy hubs, these hubs without spokes, we continuously go back to them, as you say, and say, "Okay, what's the opportunity here?" Of course, we want to invest in new hubs, before you start doing that, what can we do with our existing? As you know, for the program we described in our Investor Day in December 2022, since then, we've closed 14 of the hubs without spokes, and we've converted, actually, just in the way you described, 17 hubs without spokes to become hubs with spokes. Bear in mind, these are ones we didn't necessarily think were going to work. We didn't think we could make the layouts work, the operating procedures work, the economics work, but we're learning more and more that with the level of sales per door and off-premise sales we can get from DFD, we can make the economics work. Now, there comes a point where some of these stores are just not in great locations to support a DFD rollout, but still play a role in the local communities. The Hot Light and the retail business, the experience for our families and our customers going to that local doughnut shop still warrants it, particularly in the Southeast. That, that legacy of hubs without spokes will likely be with us for, for a long time to come because they, they are profitable. Now, we've addressed a lot of the nonprofit ones. All the while, you can see that we're adapting our learning and, and, and thinking about what's the right kind of hub for this new model. Larger areas at the back of house, even more than one line at the back of house, more logistics areas, maybe even the location of the hub. You don't want it on Main and Main if you're driving trucks out the back all night. We're, we're learning and adapting, and of course, the, the opportunity for automation and technology to be a part of that as well. All of those mean that, yeah, absolutely, the hub is evolving. It's there to support omni-channel, and we're excited about the changes we've made to the legacy and now what we can do to support this growth going forward. I'd only add one thing, John. Go ahead, Mike. I'd just say, if, if you think about it, the opportunity, you were saying, "Hey, could they build more customers and do that?" Our priority is also, we've got great customers. We need to continue to figure out how to build out those existing customers. That's also in balance. How do we do that? Yeah. Right? 'Cause we want to be, you know, outstanding to all the customers we serve, and that's going to always be one of our priorities as well. Yeah, you've got McDonald's, you've got the Krogers and Walmarts and some fantastic customers already. Yes, understood. A separate, you know, topic, if I can. Obviously, UPS driver strike truly in the news. You know, can you, in that context or outside of that context, you know, talk about your staffing, execution, you know, what, what you guys are doing to kind of attract and retain on the delivery side, specifically for you, how, how we should be thinking about that going forward? It, it, again, the difference in our model, right, when we're staffing drivers in our shops, right? It's about four to five drivers to manage the routes. It's not been a challenge for us to be able to attract. I'm ging to make sure that we have the right incentive systems, we can compete in that. The uniqueness of the model is that you're coming in through the front door. It's easy for our drivers to interact, you know, with the customer, and then you know, they're done by a certain part of the day, right? It's a unique approach as to how it works, and they can have that. We haven't seen the challenge on that. We'll continue to be attractive to the space, but that's where we continue to see and look at other alternatives as we continue to expand. Yeah, I mean, it's, you know, it's not things like that are not impacting us significantly today, but, you know, again, with this level of growth, we're, we're planning and thinking ahead. Most importantly, you know, fresh quality, local delivered doughnuts, you know, that's the heart of our DFD model. As we expand, we are going to need to evaluate alternative models as long as they deliver on these parameters. You know, we will remain flexible, but for now, they're Krispy Kreme's, they're part of our core, and they're doing a great job to get those doughnuts out to all these new locations as well as our existing partners. Thanks, John. Operator, could we have the next question, please? Our next question comes from Jon Tower from Citi. Please go ahead. Great, thanks for taking the question. I just quick, quickly wanted to get your thoughts on, on pricing in the back half of the year. I know you had discussed earlier, Jeremiah, that there's a little elasticity that you're seeing as you're taking some of the pricing, but we're certainly hearing from other quick service operators that, you know, plans for the back half of the year are, you know, to, to take less pricing, if not zero pricing. Curious to get your thoughts on later 2023 and into 2024, how you're thinking about pricing across the different markets and different channels for the brand. Yeah, I'll start, and then Jeremiah will just get into probably a little bit more in the detail. You know, we always look at pricing as a strategic piece because we want to be an affordable indulgent treat in all the markets that we serve. We've seen a lot of really, not just pricing, but the premiumization of the brand is really sticking as we do fresh, either in the DFD business and see our customers continue to migrate towards a better product, as well as premiumization from partnerships, whether they be the M&M's doughnuts or the SpongeBob in Mexico What really happens in the pricing strategy is, as people migrate because they want to try that new merchant mix, the new products that we have, it allows us to also, because we're a dozens business, have a secondary dozen at a value price. It really works with us. It's a way of giving back as well. That's been fairly consistent as we've really honed in on our dozens model because it capitalizes on gifting and frequency as well. Yeah, John, I mean, it's a great question. Thank you for the question. You know, for, for me, price will always play a role in the growth of our portfolio. The way we're evolving our thinking around pricing is it's much broader growth lever than just list price increases. You know, the way we think about it, as Mike kind of just referenced, the premiumization of the portfolio through donut offerings, price pack architecture is a lever for us. Also the way we, we think about and drive efficiency in our promotional and discounting strategies. You know, we tend to think about it more holistically. You know, to your point, we're in the back half of the year, as we might come under a bit of pressure around list price increases, there's other levers in our portfolio to kind of drive from a pricing realization standpoint. That said, you know, we'll continue to evaluate price every quarter globally, while ensuring we're providing an attractive offering to our consumers, and our strategy is to really take price in line with inflation, you know, going forward. You'll continue to see that play out. Got it. Just thinking about the inflation, obviously, we've got another reading this morning, seems like it's softening quite a bit. Is the interpretation there that you guys are looking at core CPI and saying, "All right, that's easing, therefore, pricing, later this year into 2024, certainly lower than what we've been seeing last 12, 24 months? Yeah, I think, for us, we, we've locked in a lot of the key commodities for the rest of the year with low double-digit inflation on average for the year. Labor's kind of locked in more or less at mid to high single digit inflation. As we look forward to 2024, we are seeing some deflation, and we're looking opportunistically to lock in prices at attractive price points. But what I would say is we're still seeing elevated prices in things like sugar, which remain around 5-year highs. We do expect rough, rough inflation on cartons, in the high double digits next year, which is a commodity we actually can't hedge. We'll continue to need to be flexible with the way we think about pricing, even into 2024. Got it. Thanks for taking the questions. Our next question comes from the line of Mr. Brian Mullan from Piper Sandler. Please go ahead. Hey, thank you. Just a question on the Insomnia business in the U.S. Can you just update us on how the business is doing right now, perhaps give some early thoughts on the pace of growth for next year? Then just related to that, you know, as the brand continues to open at a faster clip, you know, how would you describe the competitive environment in this, in this category? Are you seeing it change in any way? Any thoughts would be great. You know, the, the brand is now, you know, starting to become a, a more of a mature brand in our business. They're ramping up, as we talked about. You know, it's about 23 shops in the last 12 months. Our target is to get to 30 or 40 cookie shops and unlocking that on a yearly basis and growing from that. We've seen that opportunity and, and see line of sight of that. We continue to invest in our innovation center, which we will be opening up in Philadelphia. That'll really help drive the whether it's the limited time offerings or anything from a cookie perspective, about what should be or what the consumer is looking for in the dozens business as well, right? From that aspect, we have a unique brand in terms of how we compete in the marketplace, right. It's a late night business started in the college, and we really try to capitalize that, and we continue to grow from that business. The competitive set, you know, we think of ourselves, again, as a gifting and a snacking opportunity. What we see in the business is it's not just in the college town anymore. We're able to start to break into the cities and the suburbs, and that starts to really target where we think the business can be from a TAM, as we've identified even in our Investor Day, to get to 4,000 bakeries. Okay, thank you. Then just a question on the DFD business. You know, Mike, in the prepared marks, you spoke to the idea that the QSR channel might also work outside the U.S. as well. Are there any markets that you might already have in mind? You know, I would think it would be logical, maybe places where you already have hubs, but... Any way you could elaborate on that comment, or just even how much time you might be spending on this opportunity? Just where it lies in the priority list, any thoughts would be great. Right. As a, again, we're in more than 30 markets around the world. Our priority right now is really getting and honing in on the QSR channel, using the U.S. as a big test case. Because the DFD system that we have works around the world, those will be natural ones once we prove it and run it in the United States. We'll be very disciplined about how to do that, and then the same logic would work. You know, in a DFD system, where you have a route where you're managing multiple customers along the route that could be from different channels. If it continues, it's going to work in the markets that we're in. Our focus will be on the U.S. All right. Thanks, Brian. Our next question will come from the line of Mr. David Palmer from Evercore ISI. Please go ahead. Thanks. Good morning. What was the year-over-year sales growth per U.S. hub in the quarter? The, the sales per hub, the hubs with spokes, was $4.7 million, which was up 9% year-over-year. Yeah, great. I thought I saw that on an LTM basis. That's for the quarter. That's what it was. I'm trying to. Yeah, it's, it's a 12-month figure, if you recall. It's an annualized figure, so we then compare it to the same quarter a year ago, which is again, an annualized figure. It's not a sort of quarter by quarter, but, 4.7 would be the annual sales over the last 12 months, and it's 9% versus the same time a year ago. Okay. I'm trying to reconcile things. Is 16% growth in sales and weekly sales per DFD door in the U.S.? Yeah. It looks like there was a 14% expansion in the number of DFD doors in the U.S. Would that mean that there's about a 30% sales growth in DFD doors, per hub? Yeah. In terms of if you wanted to calculate what's the growth of DFD itself, sales overall, it's about 25% in the quarter. Your math isn't too far off, if that's what you were looking for. Yeah. In the U.S. Then, you had about a 7% reduction in the number of hubs? In terms of the, - Number of hubs in the U.S. quarter, year-over-year in the quarter. Because of the hubs without spokes, you're thinking, so, yeah, 225, I think it was, and a year ago we had 240. Yeah. Yeah. You had maybe over 30% growth in DFD sales per hub in the U.S., if you take the 25 and add the 7, right? Because... I'm just wondering, you know, they call it over 30% growth in DFD sales per hub. How much do you think that added to your in, to your sales per U.S. hub? Is that essentially... Do you think that equals the 9? You know, or is that, you know, or is that more? Is there-- You know, how, how do we kinda think about that as just a pure sales per hub contributor, that over 30% growth in DFD sales per hub? Yeah, I know this omni-channel model can definitely be complicated, and forgive us for that. I think that one of the challenges is there's retail sales in there, and also the hub reductions are hubs without spokes. The, the math doesn't quite, quite play out like that. What we can say is that the expansion of points of access and pricing were the two biggest drivers of that growth, the sales per hub growth that you describe, or indeed, the overall organic growth of the business. So, you know, I think that DFD is indeed a big driver of that 9%, and indeed, the most likely the biggest driver going forward of the sales per hub growth that we'll see. I mean, because it's an average measure, you know, as we add spokes to the hubs, particularly some of the hubs without spokes, that historically, we didn't necessarily first go for, we now have learned that we can make them work as well. Some of them only have one or two routes as well, which actually depresses the sales per hub. You know, it's all about evolving this, this, this, this system to deliver high growth and flow through to the bottom line. This KPI, that you're picking up on that, is just one of the ones that we use to say, "Are we doing what we said we're going to a do? Add points of access to our hub network." Happy to take it, take it offline and go through all the detail on that math. That's the main headline I'd love you to walk away with. Our next question comes from the line of Mr. Brian Harbour, Morgan Stanley. Please go ahead. Yeah, thank you. Good morning. Could you talk more about the international segment? Just 'cause, you know, I think that's been the one that's been a little bit slower growing recently. You know, I think just from other companies, we've seen probably resilient results in some of those markets, although it certainly varies. You know, what, what do you think is, is really still needed there to, to drive faster growth? The success of the brand in our omni-channel business, you know, it continues to play out around the world, as Mike said earlier. I mean, these, these specialty doughnut campaigns, we're seeing successful across the planet. The points of access, expansion of the DFD model is applicable everywhere, and e-commerce is strong everywhere. We're seeing, for example, Mike mentioned, or Jeremiah mentioned that Canada and Japan are +30% growth. Actually, our international franchise markets on average grew more than 20% last quarter. Company-owned Australia and Mexico grew high single digit in the quarter, and the UK was flat. I think your question is largely a UK question. We did actually see, very interestingly, strong double-digit retail sales growth in the UK last quarter, but it was offset by a decline in DFD specifically. That's consistent with what we see as sort of an industry-wide trend for reduced supermarket visits. Team's doing a great job, though. They're adapting to those conditions. As I mentioned a moment ago, you know, already taken actions to do things like in addition to the loyalty card that came up with Sara's question earlier, we're introducing nine packs and minis to bring more choice to the consumer and indeed broaden the value proposition with that changing macro environment. I mean, the headline to the question is, we do see strong, resilient performance across the world, but like with any portfolio of business, you do have ups and downs from time to time that you need to manage. In our case, it's specific to, to the U.K., and we're confident around the applicability of the, of the model going forward around the world. Okay, thanks. Could you comment on, like, roughly how much total price you had in the second quarter and how much you think you're going to have in the second half? Yeah, Brian, I, I can take that, thanks for the question. You know, we as I mentioned, we took pricing across all our markets. In the U.S. specifically, we took another low single digit price increase in the quarter. That leads us to the mid-teens on an annualized basis. As I mentioned, you know, before with John's question, you know, we'll, we'll continue to look at inflation and, and reflect pricing, you know, if we need to. Thank you. As a reminder, in order to ask a question, press star, then the number 1 on your telephone keypad. Our next question comes from Mr. Bill Chappell, Truist Securities. Please go ahead. Thanks. Good morning. Good morning. Yeah, I was wondering, is there a way to quantify the impact of the vendor disruption in the quarter, and I assume it's just on U.S. sales? Yeah, I can take that, and then, and I think Sarah asked a similar question, so apologies if I'm, I'm a bit repeating. Just given we're in the midst of an insurance claim against this, I really don't want to kind of quantify. The way I would think about it from a modeling perspective, it did have an impact in revenue as a result of our inability to run promotional activities and get LTOs out timely, and it did have an impact on the EBITDA in the U.S. specifically, as we weren't able to see real-time information and manage labor efficiently. What I would say is, you know, that outage was roughly four to six weeks of pain in the U.S., to give you an idea of what that impact would look like over the quarter. Yeah, we still delivered. But- organic growth and, and on the fresh business saw more than 150 basis points of margin increase. You know, it gives you an idea of, of what could have been, but yeah, we're not able to quantify it right now. Yeah, I guess, the thought process being that you're now talking about full year guidance at the high end of your range despite that. I assume that's just us carrying through the next two quarters as if the issue doesn't happen and what your run rate could have been last quarter. Is that, is that a fair way to look at it? That, that, that's exactly how we're thinking about it as well. You know, should current trends persist, we do anticipate we'll land at the mid to high end, high end of our range, from a guidance point of view. So that's spot on, Bill. Yeah, I mean, I mean, it's, the consumer we're seeing, is, is strong, particularly in the U.S., where this impact happened. I mean, as we talked a lot about the, the convenience of DFD, e-commerce, and the love of these specialty doughnuts, you know, we've seen that trend continue into July. If you saw our M&M's doughnut range, which even included a special premium price doughnut filled with mini M&M's, really popular. Again, we're seeing that. Growth is driven by, quite interestingly, the 18- to 24-year-old demographic, a very healthy part of the consumer base, now represents 28% of our sales. You know, these sweet treat-loving, heavy QSR-spending digital natives, you know, they've got a lot of confidence in the brand. That's why I think we talk about momentum on the brand, even now. Got it. Then just also a follow-up on, on the pricing. You talked about, you know, mid-single-digit pricing going forward. Is that kind of a net number? Because you also especially talked about Europe and more multi-packs and promotions and stuff like that to address the consumer there. Is that a net or, you know, we give some of that back with, with kind of stepped up promotions, particularly in Europe? Yeah, no, I mean, the, the single digit pricing in the quarter was relative to the U.S., specifically. You know, we're not expecting to give much of that pricing back. As we think about get more from a price realization perspective. You know, it's more of a kind of profit impact than, than you'll see in kind of list price changes, you know, with things like price pack architecture, just changing the discounting kind of strategies that we have. Got it. Thank you. Our next question comes from the line of Mr. Andrew Wolf from C.L. King. Please go ahead. Thank you. I have a follow-up on pricing as well, just over the geographic segments. Just putting sort of what you've given us about the U.S. pricing and price realization and comparing it to, you know, the sales for growth versus the EBITDA growth for international and market development and the commentary on the release. You know, it, it seems pretty evident there's just more pricing power right now in the U.S. You know, certainly that's the way your, your strategy seems to be rolling out. Could you just give us a flavor for the price increases in international and in the market development segments, and why they're, you know, they're different, it seems substantially versus the U.S. in terms of, you know, the amount of pricing power? We've actually. You know, it's a great question. Maybe I can tackle the pricing and then Josh can tackle kind of consumer across the different kind of markets that we see. We have seen aggressive pricing across all of our markets in the second quarter, in kind of the high single digit, low double digit range. We actually feel very good about our ability to navigate price increases, while still offering, you know, value to our consumers, and that's kind of the feedback we've been getting so far in the markets that we have taken price in markets like the UK. Josh, I don't know if you have any comments? Well, the one thing I'll say, the macro environment is, is interesting around the world, but only moderately so. By that I mean, you know, I talked a bit about M&M's and the success there, but also that, that we've been deploying that specialty donut strategy around the world. In fact, you know, the U.K. saw double-digit organic growth in the retail business after a variety of, of engaging specialty donut programs like the, the Royal Dozen one I mentioned on the call earlier. It really reflects that when we get our execution right, when we excite the customer, you know, in this low frequency business, it's still an affordable treat, even in the context of, of, of, of, of price increases. I mean, an OG donut still costs $1.79 in the U.S. You're talking about what's most important is to make sure that people have access and convenience to the brand and are excited about the innovative products we're selling. And we've seen that that work across the world, and sometimes to extraordinary levels, like we just mentioned on Japan and Canada. And we don't see whether or not pricing was taken in one market versus another, as the driver of that success. It's more implementation of the strategy. We've got great hotlight execution that's really brought alive the business in Japan. We're doing really well with Costco and Club in Canada. Slightly different reasons, but we don't see pricing power variation as a driver of performance. Overall, your overall general point, that, in the U.S., when it's worth it, when the programs are exciting, when we bring meaningful innovation and notoriety to the brand, we are able to pass on the pricing we must, given the inflationary environment in our commodity group. We appreciate that our customers see the value in what we're selling. Yeah, the only other thing I'd add is the gifting and the sharing is a global piece. When people are using that for our brand, it's just a different occasion, right? Whether it's Mother's Day, whether it's Father's Day, and whatever what's happening around the world, that's a great gift that's shared by families, right? The mindset in our markets is the same. How do we do the dozens? How do we build that? How do you premiumize? How do you make it affordable to the sweet treat, but how do you then complement it? It really is about that discipline of how do you make sure the frequency is driven by gifting, et cetera, and then match it up with just great partners. Okay. Just the last bit of a follow-up, which is sort of also an open question, is given your answer, you know, clearly, us trying to, you know, use one or two statistics to say, "Hey, this is your competitive set," go into the CPI and look at, like, you know, baked goods and donuts or something like that. Or, you know, QSR away from home, you know, seems to be pretty far off. I mean, it sounds like, you know, you're competing against, you know, the Godivas of the world and various things. Could you just kind of... I mean, you've mentioned this from time to time, but just how do you look at, you know, the competitive set for the, you know, as you said, for, you know, the, the sort of infrequent occasion of the kind of indulgence that you guys are bringing to market? Again, we, we do look at the competitive set as a broad sweet treat. You know, our direction is to be the most loved sweet treat brand in the world, right? The opportunity, you know, if you look specifically at the doughnut category, right? We don't really focus our energy on a single serve. We actually focus our energy on the dozens business. We do that, and we bring either premiumization with partners, with recent with M&M's, for example. The mindset is, you can capitalize on occasions, which is, you know, when gifting really happens or unique events like Halloween and holidays, or you can just really unlock because your partners have, they're creating that desire. When you have an M&M's doughnut that might be broken in half, and these little mini M&M's come out, people want to try that, right? You end up trying to say: How do I maximize that opportunity? It is about, people will still have a sweet treat. We just want to be in our affordable, indulgent space, sweet treat space. We want to be there when they're making that decision. Thank you. All right. Thank you. I will now turn the call over to Mr. Mike Tattersfield for closing remarks. Please go ahead. Sure, yeah. Appreciate everybody being on the call. I always want to talk and thank our Krispy Kremers for doing an incredible job. You know, I also want to be a little bit of reflection and make sure that folks keep their thoughts and minds on the folks in Maui and any of our Krispy Kreme family that might have been impacted there, and see what type of support Krispy Kreme might be able to do. Thank you. Ladies and gentlemen, this concludes today's call. Thank you all for joining. 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