Hello everyone and thank you for standing by. My name is Ellie and I will be your conference operator today. At this time, I would like to welcome everyone to the Krispy Kreme fourth quarter and full year 2025 earnings call. All lines have been placed on mute to prevent any background noise. After the prepared remarks, there will be a question and answer session. If you'd like to ask a question during that time, please press star followed by one on your telephone keypad. Thank you. I would now like to turn the call over to Christine McDevitt, Krispy Kreme Associate General Counsel. Please go ahead.

Hello, everyone, and welcome to Krispy Kreme's fourth quarter and full year 2025 earnings call. Thank you for joining us today. This morning, Krispy Kreme issued its earnings press release. The press release and an accompanying presentation are available on our Investor Relations website at investors.crispycream.com. Joining me on the call are President and Chief Executive Officer Josh Charlesworth and Chief Financial Officer Rafael Duvivier. After their prepared remarks, we will host a question-and-answer session. But before we begin, please note that during this call we will be making forward-looking statements pursuant to the safe harbor provisions of the private securities litigation reform act of 1995 including statements of expectations future events or future financial performance forward-looking statements involve a number of risks assumptions and uncertainties and we caution investors that many factors could cause actual results to differ materially from those contained in any forward-looking statements. These factors and other risks and uncertainties are described in detail in the cautionary statements in our earnings press release, our annual report on Form 10-K filed with the SEC, and in other SEC filings we make from time to time. Forward-looking statements represent our expectations only as of today, and we assume no obligation to publicly update or revise any forward-looking statements except as may be required by law. Additionally, during this call we will reference certain non-GAAP financial measures. Please refer to our earnings press release on our website for additional information regarding these non-GAAP measures, including a reconciliation to the closest comparable GAAP measures. Raphael will take us through our financial performance in a moment, but first here's Josh.

Thank you Christine and good morning everyone. Our fourth quarter results show that we are making meaningful progress on our turnaround plan to de-leverage the balance sheet and deliver sustainable profitable growth. Krispy Kreme continues to be a compelling growth story anchored by our globally recognized brand and strong consumer demand for our iconic fresh donuts. Our turnaround plan is centered on unlocking that demand through our two biggest opportunities, profitable U.S. expansion and capital-like international franchise growth. In 2025, we generated $2 billion in system-wide sales, and we expect to grow this by 2% to 4% in 2026 through higher sales volumes, points of access expansion, and franchise development. Last year, approximately 75% of our system-wide sales came from company-operated locations. As a result of our refranchising efforts, we expect nearly 50% of system-wide sales to come from franchisees as we begin 2027. We believe this shift will improve capital efficiency while supporting sustainable long-term growth. Although our decision to exit underperforming U.S. doors earlier in 2025 resulted in a modest decline in net revenue in the fourth quarter, we significantly increased adjusted EBITDA, expanded adjusted EBITDA margin, reduced our financial leverage, and delivered positive free cash flow. These results demonstrate the meaningful progress we are making on our turnaround plan focused on one, refranchising, two, improving returns on capital, three, expanding margins, and four driving sustainable, profitable U.S. growth. Our first pillar, refranchising, enables us to more profitably drive system-wide sales growth and accelerate unit development through our capital-like franchise model. In December, we announced a strategic refranchising agreement with Unison Capital for our operations in Japan, which we expect to close in March. Unison is a proven operator with extensive expertise in the retail restaurant sector and we believe they are an ideal partner to continue to grow our iconic brand in Japan. Cash proceeds from the transaction are expected to be approximately 65 million dollars. Beyond Japan, our intent is to re-franchise certain other international markets, prioritizing the right partners to maximize value and position the company for long-term growth. We are targeting two to three international refranchising deals in 2026. Additionally, we plan to reduce our ownership to a minority stake in our existing joint venture in the Western U.S. with the WKS Restaurant Group, which today represents about 15% of our U.S. revenues. As a franchisee, WKS Krispy Kreme will continue operating its existing shops, and our plan is to add company-operated shops on the West Coast to the joint venture. We also expect WKS to develop new shops and meaningfully expand our fresh delivery footprint over the next several years. The second pillar is improving returns on capital. Across the business, we are reducing capital intensity and improving utilization of existing assets, while our franchisees continue to invest to support brand growth. This is reflected in our full-year 2025 CapEx, which decreased 19% from 2024, and our expectation that 2026 CapEx will be nearly half of last year. This substantial reduction in CAPEX should position us to generate stronger free cash flow in 2026. Our international development pipeline remains a key driver of capital-like growth. We now operate more than 1,700 international shops, both company-owned and franchised, across more than 40 countries. in 2026 we expect more than 100 shops opening globally while continuing to expand fresh delivery doors across grocery convenience club wholesalers and quick service restaurants i recently visited our first hotline theater shop in madrid spain an important and emerging european market for us where i saw firsthand the enthusiasm for further expansion with our strong local franchise partner in november we opened a hotline theater shop and production hub in the under penetrated minneapolis market this strategic opening generated immediate results and we expect sales in the first 12 months to be approximately 10 million dollars this includes fresh delivery which has already grown to 70 doors minneapolis exemplifies our disciplined thoughtful approach to capital deployment. We strategically transformed a former drugstore into a donut shop and production hub designed to efficiently support off-premises distribution. While Minneapolis demonstrates the strong returns we can generate from strategic new locations, our broader US strategy is to moderate company hub development and prioritize leveraging existing capacity to drive growth more efficiently. More broadly, we delivered to over 7,000 fresh delivery doors in the u.s with our network utilization at only approximately 25 percent we have the ability to reach thousands more locations without incremental capacity investment many of our strategic partners such as walmart and target remain under penetrated the third pillar is expanding margins we are simplifying the business and reducing costs across the pnl In the U.S., we are making doughnuts more efficiently through improved production planning, labor optimization, and streamlined hub operations. Doughnuts are being delivered more efficiently by improving route management and demand planning and by optimizing production and delivery schedules to support cost-effective expansion. By the end of 2025, 57% of our U.S. fresh delivery network was outsourced to third-party logistics partners, and we expect to complete the transition in 2026. Outsourcing logistics gives us more predictable costs, reduces risk, and allows our teams to focus on what they do best. As a result of the cost reduction initiatives implemented last year, total shop and delivery labor and SG&A expenses declined more than 10% in the second half of the year versus the first half. The fourth pillar is sustainable, profitable growth in the U.S., which we can achieve by offering our consumers the right product in the right quantities, in the right place, and at the right time. By the end of the third quarter of 2025, we fully exited McDonald's and completed the rationalization of another approximately 1,400 underperforming fresh delivery doors. By the end of the fourth quarter of 2025, we'd also added more than 1,100 new higher volume, higher margin doors with strategic partners. We also saw growth return with a 200-door increase in the fourth quarter. The results of upgrading the quality of our fresh delivery doors are encouraging. Average weekly sales per door have increased meaningfully, and these newer doors are performing well above the system average. We've also started 2026 by adding new distribution with grocery customers, Publix, and Dual Osco. Another key driver of sustainable profitable growth in the U.S. is our marketing strategy, Focused on, one, driving everyday sales through our refreshed retail donut menu, two, creating excitement with buzz-worthy limited-time offerings, and three, accelerating growth in digital. In the fourth quarter, our Trick or Treat Halloween collection delivered our most successful Halloween campaign to date, while our Krispy Kreme and Peanuts offering generated strong consumer demand over the holiday season. That momentum carried into 2026, with our Valentine's Day collection delivering record results, reinforcing Krispy Kreme as a top choice for gifting, sharing, and celebrating special occasions with others. To give our consumers even more ways to enjoy and share Krispy Kreme, we continue to innovate and evolve our successful minis category, which today includes our donut minis and donut dots. Later this year, we'll expand our lineup of smaller, shareable treats with mini-crawlers, a mini-cake donut available through strategic fresh delivery partners. Limited-time offerings perform particularly well in our digital channel during 2025, with U.S. digital sales growing 15% year-over-year. Digital represented 22.5% of U.S. retail sales in the fourth quarter, reflecting strength across the Krispy Kreme app and website, as well as through third-party delivery partnerships. Our loyalty platform, now surpassing 17 million members in the U.S. alone, helps us to stay connected with consumers by reminding them of the joy of Krispy Kreme and rewarding them with offers that increase purchase frequency. Our digital presence continues to prove effective at building engagement across all age groups and driving incremental transactions. Heading into 2026, we believe we are well positioned amid a dynamic consumer environment. Our affordable offerings are designed to be gifted and shared, bringing people together for celebrations and meaningful occasions. With a full calendar of innovative collections for seasonal and cultural moments ahead, such as our upcoming St. Patrick's Day offering, we expect to sustain engagement and drive demand throughout the year. We're building a stronger, more resilient Krispy Kreme and positioning ourselves for long-term profitable growth. With that, Rafael will now review our fourth quarter financials and discuss our outlook for 2026.

Thank you, Josh. Our financial results reflect meaningful progress on our turnaround, positioning us to deliver sustainable, profitable growth while continuing to leverage the balance sheet. In the second half of 2025, adjusted EBITDA reached $96.2 million, more than double the $44.1 million generated in the first half, even as net revenue grew less than 2%. Moving to our fourth quarter results, adjusted EBITDA of $55.6 million dollars rose 21 percent year over year and 37 percent quarter over quarter profitability was positively impacted by productivity initiatives across our network at the end at the corporate level net revenue of 392.4 million dollars represented a decrease of 2.9 percent while organic revenue decreased 3.9%. These declines were driven by the strategic closure of underperforming fresh delivery doors, primarily in the U.S., as we focus on quality growth. Excluding disclosures, we benefit from growth with strategic partners, higher digital sales, and international expansion. As of the end of the fourth quarter, our net leverage ratio, which reflects our net debt divided by trading four quarters adjusted EBITDA improve 0.6 times quarter over quarter to 6.7 times. Falling below seven times is an encouraging milestone driven by strong adjusted EBITDA and lower debt. And we expect to be at or below six times by the end of the first quarter. Our cash flow was strengthened by higher adjusted EBITDA, significantly reduced CAPEX, and working capital management that include better handling of receivables and lower inventories. For the fourth quarter, we generated $45 million in operating cash flow and $27.9 million in free cash flow. Free cash flow improved substantially compared to the third quarter and rose $34.8 million from the same quarter a year ago. At year-end, we had excess liquidity of $207 million, which we believe enabled us to meet our short-term obligations and fund long-term investments while continuing to advance our turnaround. We are also in full compliance with our bank covenants. In the U.S., organic revenue growth declined 5.8% year-over-year, in part due to exiting approximately 1,400 underperforming doors in 2025, which were replaced with more than 1,100 new high-volume, higher-margin doors with strategic partners, delivering substantially higher average weekly sales. Door optimization contributed to a year-over-year increase in average weekly sales to $660, a 7% increase quarter-over-quarter. This demonstrates our attraction when Krispy Kreme is displayed in the right place with the right partner at the right time. U.S. adjusted EBITDA increased 39.1% to $32.8 million, up from $23.6 million in the fourth quarter of 2024. We benefit from cost controls and other initiatives related to efficiencies through our operating network, SG&A savings, and the elimination of costs related to the now-ended McDonald's USA partnership, in addition to cybersecurity insurance recoveries of $4.8 million. Excluding cyber-related insurance recoveries, U.S. suggested EBITDA increased 33% quarter per quarter to $28 million, demonstrating solid improvement resulting from our turnaround plan initiatives. In our company-owned international segment, we saw negative organic growth of 0.3% as lower sales in Australia were partially offset by growth in Canada and Japan. International segment adjusted EBITDA rose 4.1% to $26.8 million, up from $25.7 million in the year-ago quarter, and up 15.7% from $23.2 million in the third quarter of 2025, driven in both cases by Mexico and Japan. For the second consecutive quarter, we generated adjusted EBITDA growth in segment year over year. Adjusted EBITDA margin increased 20 basis points year over year and 230 basis points quarter over quarter to 18.8%. In our market development segment, organic revenue declined 4.9% as growth in royalty revenues from international markets was more than upset by lower equipment sales. We're encouraged by the strong sales performance in Brazil, the Middle East, India, and South Korea, and we look forward to further expanding point of access across Europe, highlighted by a recent entry into Spain. Market development segment adjusted EBITDA rose 2.1% to $12.1 million. Adjusted EBITDA margin increased 370 basis points to 61.5% year-over-year due to a higher mix of priority revenue. Our highly attractive franchise margin levels support our intention to advance our capital light strategy to re-franchising. In addition, this year we intend to open three to four new international franchise markets as we continue to spread the joy of Krispy Kreme around the world. Ending 2025 with meaningful progress provides solid momentum as we move into 2026, even amid the dynamic consumer environment. While we cannot control microeconomic factors, we are focused on delivering quality sales growth and managing cost effectively across the entire P&L. We are providing the following annual financial guidance and intend to provide further details as our re-franchising efforts progress. We are including system-wide sales growth as a measure of brand health, which will become more important as we advance our re-franchising strategy. We currently expect the following for the full year. System-wide sales up 2 to 4 percent in constant currency from $1.96 billion in 2025, open at least 100 shops globally, having ended 2025 with 2,125 shops, capex of 50 to 60 million dollars, positive free cash flow, and net leverage ratio at or below 5.5 times. Our success will be driven by our ability to continue the leverage the balance sheet while further expanding our capital-wide business model to drive sustainable profitable growth. I'm confident in our ability to execute against these priorities and deliver clear proof points along the way. Thank you for the interest in Krispy Kreme. We'll now turn the call back over to Josh.

Thank you, Rafael. We are pleased with the meaningful progress achieved during the fourth quarter. We look forward to building on this momentum and growing our brand around the world in 2026. As we continue to expand, leveraging the balance sheet and delivering sustainable, profitable growth remain our two primary objectives. We plan to accomplish both through re-franchising, improving returns on capital, expanding margins, and continuing to drive sustainable, profitable U.S. growth. I am grateful to work alongside a highly capable team that shares my passion and belief in our opportunity as we continue to spread the joy that is Krispy Cream to more people in more places around the world. Operator, let's now open it up for Q&A, please.

Thank you. We are now opening the floor for question and answer session. If you'd like to ask a question, please press star followed by one on your telephone keypad.

That's star followed by one on your telephone keypad your first question comes from the line of daniel guglielmo of capital one securities your line is now open thank you um hi everyone thank you for taking my questions we're making great progress on the turnaround i can drive the best thought of mine you mentioned the moderated hub growth Are you starting to think about potential U.S. hub growth that you know can provide a good return, or is it still too early?

Yes, good morning, Dan. I think that the line was a bit interrupted there, but I think you were asking around the potential expansion and supporting it with whether or not we need new hub growth. What's great about our opportunity in the U.S. is we have plenty of underpenetrated customers, places like Walmart and Target, where we're only about 30% of those. Costco, Sam's only about 20%. So we have plenty of opportunity to grow. As we saw in the fourth quarter, we expanded access with new distribution by more than 200 doors in the U.S. So we intend to continue to drive that expansion opportunity as we grow the brand in the U.S. in 2026. We also have a great opportunity in that our capacity utilization is only around about 25%. So we're able to manufacture the donuts without significant investment in new production. And that is why our CapEx in the fourth quarter is actually nearly half what it had been year over year. And we expect CapEx overall to be about half the level in 2026 as it was in 2025 as we're able to pursue that growth opportunity, which is very compelling. We know our consumer continues to look for convenient access for our doughnuts, but without significant investment in infrastructure, enabling us to drive not just profitable growth, but to strengthen the balance sheet as we go.

Great. I appreciate that caller and hope that the line's clear now.

As a thought, for this quarter, for 20 years to go on those closures, is it going to be significant or will it come down from from here yeah I'm sorry the line broke up a little too much you were asking around perhaps the door closures that we completed in the third quarter last year a program that is over we're now focused on expanding access to the brand and distribution was that what you were asking about sorry about that I took my headset off and hopefully it's it is it

clear now?

Yeah, that's much better. If you can repeat that, that'd be great.

Okay, perfect. Yeah, so there was a pretty significant shop closure expense for this quarter. For 2026, how much more do you guys have left to go on those closures? Is it going to be significant in the first half of 2026, or will it come down from here?

Yeah, what we saw regarding shops is that what we've been doing is with our production hubs and our retail shops we've been really optimizing where we produce how we then deliver the donuts how many locations individual sites are supporting and that has enabled us to improve productivity drive efficiency throughout the system both from production and delivery point of view so um so so we we're not um uh making closures right now instead what we're what we're doing is focusing uh production to be as efficient as possible this is all in support of course of the journey that we saw in the fourth quarter where we saw meaningful EBITDA growth. And then we expect that to translate into 2026. We expect, for example, in the first quarter, EBITDA to be growing again versus the same quarter a year ago. So this is all part of our efforts around the turnaround to drive margins in the U.S. and become more profitable.

Great. I appreciate that. And congrats on that strong quarter. Thanks, Ty.

You bet. Thank you.

There are no further questions. I'd now like to hand the call back to Josh for final remarks.

Okay. Thank you very much. Appreciate everybody's interest in Krispy Kreme. We're making very good progress, as you heard, on our turnaround, strengthening the balance sheet and positioning Krispy Kreme for sustainable long-term growth. And we look forward to continuing this momentum into 2026, Thank you, everybody.

Thank you for attending today's call. You may now disconnect.