DNUT Krispy Kreme Inc

Second quarter Net Revenue grows 7.3%, Organic Revenue increases 7.8%

Updated 2024 guidance reflects sale of majority stake in Insomnia Cookies

Krispy Kreme, Inc. (NASDAQ: DNUT) (“Krispy Kreme”, “KKI”, or the “Company”) today reported financial results for the quarter ended June 30, 2024.

Second Quarter Highlights (vs Q2 2023)

• Net revenue grew 7.3% to $438.8 million
• Organic revenue grew 7.8% to $440.2 million
• GAAP net loss of $4.9 million ($5.5 million net loss attributable to KKI)
• Adjusted EBITDA grew 12.1% to $54.7 million, Adjusted EBITDA margin up 60 basis points year-over-year
• GAAP operating cash flow of $33.2 million
• Global Points of Access (“POA”) increased 2,981, or 23.2%, to 15,853

“Krispy Kreme had another strong quarter as our fresh doughnuts are becoming even easier to purchase and more available globally,” said Josh Charlesworth, CEO. “Our innovative specialty doughnut collections continue to resonate with consumers and drove increased Delivered Fresh Daily (“DFD”) and digital sales in the quarter.”

“Our points of access also grew, and we’re excited about upcoming launches in Germany, Brazil, and our recent announcements of entries into Spain and Morocco,” continued Charlesworth. “In the U.S., our profitable nationwide expansion is accelerating as we grow with existing customers and add new national partners. This includes the nationwide rollout to McDonald’s, starting this fall in the Midwest with Chicago.”

“The recent sale of a majority stake in Insomnia Cookies allows us to focus on our core strategy of producing, selling, and distributing fresh doughnuts daily whilst also further improving our financial profile,” he said.

Financial Highlights

 

Quarter Ended

$ in millions, except per share data

 

June 30, 2024

 

July 2, 2023

 

Change

GAAP:

 

 

 

 

 

 

Net revenue

 

$

438.8

 

 

$

408.9

 

 

 

7.3

%

Operating income

 

$

6.9

 

 

$

5.6

 

 

 

21.5

%

Operating income margin

 

 

1.6

%

 

 

1.4

%

 

20 bps

Net (loss)/income

 

$

(4.9

)

 

$

0.1

 

 

nm

Net (loss)/income attributable to KKI

 

$

(5.5

)

 

$

0.2

 

 

nm

Diluted (loss)/income per share

 

$

(0.03

)

 

$

0.00

 

 

$

(0.03

)

 

 

 

 

 

 

 

Non-GAAP(1):

 

 

 

 

 

 

Organic revenue

 

$

440.2

 

 

$

408.2

 

 

 

7.8

%

Adjusted net income, diluted

 

$

9.1

 

 

$

11.4

 

 

 

(20.1

)%

Adjusted EBITDA

 

$

54.7

 

 

$

48.8

 

 

 

12.1

%

Adjusted EBITDA margin

 

 

12.5

%

 

 

11.9

%

 

60 bps

Adjusted diluted EPS

 

$

0.05

 

 

$

0.07

 

 

$

(0.02

)

 

Notes:

 

(1)

Non-GAAP figures – please refer to Reconciliation of Non-GAAP Financial Measures.

Key Operating Metrics

 

Quarter Ended

$ in millions

 

June 30, 2024

 

July 2, 2023

 

Change

Global Points of Access

 

 

15,853

 

 

 

12,872

 

 

23.2

%

Sales per Hub (U.S.) TTM

 

$

5.0

 

 

$

4.7

 

 

6.4

%

Sales per Hub (International) TTM

 

$

10.1

 

 

$

9.9

 

 

2.0

%

Digital Sales as a Percent of Retail Sales

 

 

22.2

%

 

 

18.8

%

 

340 bps

Second Quarter 2024 Consolidated Results (vs Q2 2023)

Krispy Kreme’s second quarter results represent continued execution of its omni-channel strategy, with net revenue growth of 7.3% to $438.8 million, compared to $408.9 million last year. GAAP net loss was $4.9 million compared to prior year net income of $0.1 million. GAAP diluted loss per share was $(0.03), a decline of $(0.03) from the same quarter last year.

Total company organic revenue grew 7.8%, fueled by a 23.2% increase in POA, a digital sales increase of 22%, and an increase in DFD sales of 18%, driven by the success of global brand activations including the Dolly Parton Southern Sweets collection, and Kit Kat, among others.

Adjusted EBITDA in the quarter grew 12.1% to $54.7 million, with Adjusted EBITDA margins improving 60 bps to 12.5%, benefiting from the optimization of the Company’s Hub and Spoke strategy and SG&A leverage driven by cost controls and lower compensation costs. Adjusted Net Income, diluted declined 20.1% to $9.1 million in the quarter. Adjusted Diluted EPS declined to $0.05 from $0.07 in the same quarter last year, primarily driven by increased depreciation and amortization linked to the strategy of making fresh doughnuts more available and Insomnia Cookies’ continued expansion.

Second Quarter 2024 Segment Results (vs Q2 2023)

U.S.: In the U.S. segment, net revenue grew $21.9 million, or 8.2%, with organic revenue growth of 8.4%. Revenue growth was driven by innovative specialty doughnut collections which continued to resonate with consumers, resulting in a 24% increase in Delivered Fresh Daily sales and a 26% increase in digital sales. Sales per hub in the U.S. increased 6.4% to $5.0 million, with DFD average sales per door per week increasing 4% to $657.

U.S. Adjusted EBITDA increased 16.3% to $32.7 million with Adjusted EBITDA margin expansion of 80 basis points to 11.3%, driven by the impact of labor and waste optimization and productivity benefits from the Company’s Hub and Spoke model, partially offset by increased promotional activity and McDonald’s start up costs.

International: In the International segment, net revenue grew $4.7 million, or 3.9%. International organic revenue grew 5.0%, driven by record POA growth of 1,515, or 39%, and successful marketing activations.

International Adjusted EBITDA decreased 12.3% to $21.7 million with adjusted EBITDA margin declining approximately 320 basis points to 17.3%, primarily linked to softer transaction volumes in the U.K.

Market Development: In the Market Development segment net revenue and organic revenue increased $3.4 million, or 16.1%, driven by greater equipment sales than in the prior year.

Market Development Adjusted EBITDA grew 22.7% to $12.9 million. Adjusted EBITDA margins expanded 280 basis points to 53.1%, driven by greater flow through from product sales.

Balance Sheet and Capital Expenditures

During the second quarter of 2024, strong Adjusted EBITDA translated to GAAP Operating Cash Flow of $33.3 million. The Company invested $31.7 million in capital expenditures, driven primarily by the investments in the Hub and Spoke model for the U.S. expansion of the DFD network. This drove positive Free Cash Flow of $1.6 million in the quarter.

Subsequent to the quarter, the Company received $127.4 million following the sale of a majority stake in Insomnia Cookies and have received an additional $45 million following the refinancing of intercompany debt.

2024 Financial Guidance

Krispy Kreme provides the following guidance update for the full year 2024 (vs FY2023) solely to reflect the recent sale of a majority ownership stake in Insomnia Cookies, which closed on July 17, 2024.

• Net Revenue of $1,650 to $1,685 million
• Organic Revenue growth of +5% to +7%
• Adjusted EBITDA of $215 to $220 million
• Adjusted Diluted EPS of $0.24 to $0.28
• Income Tax rate between 28% and 30%
• Capital Expenditures of 7% to 8% of net revenue
• Interest Expense, net of $55 million to $60 million

The Company expects net leverage to trend towards 3.5x by year end, as we make progress towards our 2026 goal of approximately 2.0x to 2.5x net leverage.

Definitions

The following definitions apply to terms used throughout this press release:

• Global Points of Access: Reflects all locations at which fresh doughnuts or cookies can be purchased. We define global points of access to include all Hot Light Theater Shops, Fresh Shops, Carts and Food Trucks, DFD Doors and Cookie Shops, at both Company-owned and franchise locations as of the end of the respective reporting period. We monitor global points of access as a metric that informs the growth of our omni-channel presence over time and believe this metric is useful to investors to understand our footprint in each of our segments.
• Hubs: Reflects locations where fresh doughnuts are produced and processed for sale at any point of access. We define Hubs to include self-sustaining Hot Light Theater Shops and Doughnut Factories, at both Company-owned and franchise locations as of the end of the respective reporting period.
• Sales Per Hub: Sales per Hub equals Fresh Revenues from Hubs with Spokes, divided by the average number of Hubs with Spokes at the end of the five most recent quarters.
• Fresh Revenues from Hubs with Spokes: Fresh Revenues include product sales generated from our Doughnut Shop business (including digital), as well as DFD sales, but excluding sales from Branded Sweet Treats. It also excludes all Insomnia Cookies revenues as the measure is focused on the Krispy Kreme business. Fresh Revenues from Hubs with Spokes equals the Fresh Revenues derived from those Hubs currently producing product for other shops, Carts and Food Trucks, and/or DFD doors, but excluding Fresh Revenues derived from those Hubs not currently producing product for other shops, Carts and Food Trucks, and/or DFD doors.
• Free Cash Flow: Defined as cash provided by operating activities less purchases of property and equipment.

Conference Call

Krispy Kreme will host a public conference call at 8:30 AM Eastern Time today to discuss its results for the second quarter of 2024. The conference call can be accessed by dialing 1 (800) 715-9871 and entering the conference ID 5985470. International participants can access the call via the corresponding number listed HERE and entering the conference ID 5985470. To listen to the live audio webcast and Q&A, visit the Krispy Kreme investor relations website at investors.krispykreme.com. A replay and transcript of the webcast will be available on the website within 24 hours after the call. Krispy Kreme’s earnings press release and related materials will also be available on the investor relations section of the Company’s website.

About Krispy Kreme

Headquartered in Charlotte, N.C., Krispy Kreme is one of the most beloved and well-known sweet treat brands in the world. Our iconic Original Glazed® doughnut is universally recognized for its hot-off-the-line, melt-in-your-mouth experience. Krispy Kreme operates in 40 countries through its unique network of fresh doughnut shops, partnerships with leading retailers, and a rapidly growing digital business with more than 15,500 fresh points of access. Our purpose of touching and enhancing lives through the joy that is Krispy Kreme guides how we operate every day and is reflected in the love we have for our people, our communities and the planet. Connect with Krispy Kreme Doughnuts at www.KrispyKreme.com, or on one of its many social media channels, including www.Facebook.com/KrispyKreme and www.Twitter.com/KrispyKreme.

Cautionary Note Regarding Forward-Looking Statements

This press release contains forward-looking statements that involve risks and uncertainties. The words “continue,” “towards,” “expect,” “outlook,” “guidance,” “explore,” or similar words, or the negative of these words, identify forward-looking statements. Such forward-looking statements are based on certain assumptions and estimates that we consider reasonable but are subject to various risks and uncertainties and assumptions relating to our operations, financial results, financial conditions, business, prospects, growth strategy and liquidity. Accordingly, there are, or will be, important factors that could cause our actual results to differ materially from those indicated in these statements. The inclusion of this forward-looking information should not be regarded as a representation by us that the future plans, estimates or expectations contemplated by us will be achieved. Our actual results could differ materially from the forward-looking statements included herein. Factors that could cause actual results to differ from those expressed in forward-looking statements include, without limitation, the risks and uncertainties described under the headings “Cautionary Note Regarding Forward-Looking Statements” and “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2023, filed by us with the Securities and Exchange Commission (“SEC”) and described in the other filings we make from time to time with the SEC. We believe that these factors include, but are not limited to, the impact of pandemics, changes in consumer preferences, the impact of inflation, and our ability to execute on our omni-channel business strategy. These forward-looking statements are made only as of the date of this document, and we do not undertake any obligation, other than as may be required by applicable law, to update or revise any forward-looking or cautionary statement to reflect changes in assumptions, the occurrence of events, unanticipated or otherwise, or changes in future operating results over time or otherwise.

Non-GAAP Measures

This press release includes certain non-GAAP financial measures including organic revenue growth, Adjusted EBITDA, Adjusted Net Income, Diluted, Adjusted Diluted EPS, Net Debt, Fresh Revenue from Hubs with Spokes and Sales per Hub, which differ from results using U.S. Generally Accepted Accounting Principles (“GAAP”). These non-GAAP financial measures are not universally consistent calculations, limiting their usefulness as comparative measures. Other companies may calculate similarly titled financial measures differently than we do or may not calculate them at all. Additionally, these non-GAAP financial measures are not measurements of financial performance under GAAP. In order to facilitate a clear understanding of our consolidated historical operating results, you should examine our non-GAAP financial measures in conjunction with our historical consolidated financial statements and notes thereto filed with the SEC.

To the extent that the Company provides guidance, it does so only on a non-GAAP basis. The Company does not provide reconciliations of such forward-looking non-GAAP measures to GAAP due to the inability to predict the amount and timing of impacts outside of the Company’s control on certain items, such as net income and other charges reflected in our reconciliation of historic numbers, the amount of which, based on historical experience, could be significant.

Krispy Kreme, Inc.

Condensed Consolidated Statements of Operations (Unaudited)

(in thousands, except per share amounts)

 

 

Quarter Ended

 

Two Quarters Ended

 

June 30, 2024 (13 weeks)

 

July 2, 2023 (13 weeks)

 

June 30, 2024 (26 weeks)

 

July 2, 2023 (26 weeks)

Net revenues

 

 

 

 

 

 

 

Product sales

$

429,411

 

 

$

400,348

 

 

$

862,923

 

 

$

811,022

 

Royalties and other revenues

 

9,398

 

 

 

8,534

 

 

 

18,584

 

 

 

16,810

 

Total net revenues

 

438,809

 

 

 

408,882

 

 

 

881,507

 

 

 

827,832

 

Product and distribution costs

 

107,846

 

 

 

111,106

 

 

 

214,861

 

 

 

228,939

 

Operating expenses

 

212,504

 

 

 

189,165

 

 

 

417,699

 

 

 

380,573

 

Selling, general and administrative expense

 

64,466

 

 

 

62,582

 

 

 

136,040

 

 

 

124,050

 

Marketing expenses

 

12,416

 

 

 

9,770

 

 

 

24,531

 

 

 

19,623

 

Pre-opening costs

 

967

 

 

 

1,104

 

 

 

2,072

 

 

 

1,868

 

Other (income)/expenses, net

 

(849

)

 

 

314

 

 

 

(649

)

 

 

(4,949

)

Depreciation and amortization expense

 

34,600

 

 

 

29,196

 

 

 

68,186

 

 

 

57,135

 

Operating income

 

6,859

 

 

 

5,645

 

 

 

18,767

 

 

 

20,593

 

Interest expense, net

 

14,452

 

 

 

12,063

 

 

 

28,188

 

 

 

24,051

 

Other non-operating expense, net

 

949

 

 

 

1,061

 

 

 

1,522

 

 

 

2,060

 

Loss before income taxes

 

(8,542

)

 

 

(7,479

)

 

 

(10,943

)

 

 

(5,518

)

Income tax (benefit)/expense

 

(3,611

)

 

 

(7,563

)

 

 

651

 

 

 

(7,246

)

Net (loss)/income

 

(4,931

)

 

 

84

 

 

 

(11,594

)

 

 

1,728

 

Net income/(loss) attributable to noncontrolling interest

 

560

 

 

 

(139

)

 

 

2,431

 

 

 

1,806

 

Net (loss)/income attributable to Krispy Kreme, Inc.

$

(5,491

)

 

$

223

 

 

$

(14,025

)

 

$

(78

)

Net (loss)/income per share:

 

 

 

 

 

 

 

Common stock — Basic

$

(0.03

)

 

$

0.00

 

 

$

(0.08

)

 

$

0.00

 

Common stock — Diluted

$

(0.03

)

 

$

0.00

 

 

$

(0.08

)

 

$

0.00

 

Weighted average shares outstanding:

 

 

 

 

 

 

 

Basic

 

169,095

 

 

 

168,184

 

 

 

168,890

 

 

 

168,162

 

Diluted

 

169,095

 

 

 

170,659

 

 

 

168,890

 

 

 

168,162

 

 

Krispy Kreme, Inc.

Condensed Consolidated Balance Sheets

(in thousands, except per share data)

 

 

As of

 

(Unaudited) June 30, 2024

 

December 31, 2023

ASSETS

 

 

 

Current assets:

 

 

 

Cash and cash equivalents

$

28,625

 

 

$

38,185

 

Restricted cash

 

483

 

 

 

429

 

Accounts receivable, net

 

57,348

 

 

 

59,362

 

Inventories

 

39,461

 

 

 

34,716

 

Taxes receivable

 

18,143

 

 

 

15,526

 

Prepaid expense and other current assets

 

24,110

 

 

 

25,363

 

Total current assets

 

168,170

 

 

 

173,581

 

Property and equipment, net

 

551,406

 

 

 

538,220

 

Goodwill

 

1,096,249

 

 

 

1,101,939

 

Other intangible assets, net

 

927,714

 

 

 

946,349

 

Operating lease right of use asset, net

 

456,124

 

 

 

456,964

 

Other assets

 

23,823

 

 

 

23,539

 

Total assets

$

3,223,486

 

 

$

3,240,592

 

LIABILITIES AND SHAREHOLDERS’ EQUITY

 

 

 

Current liabilities:

 

 

 

Current portion of long-term debt

$

59,827

 

 

$

54,631

 

Current operating lease liabilities

 

54,937

 

 

 

50,365

 

Accounts payable

 

135,197

 

 

 

156,488

 

Accrued liabilities

 

114,269

 

 

 

134,005

 

Structured payables

 

129,344

 

 

 

130,104

 

Total current liabilities

 

493,574

 

 

 

525,593

 

Long-term debt, less current portion

 

894,979

 

 

 

836,615

 

Noncurrent operating lease liabilities

 

453,338

 

 

 

454,583

 

Deferred income taxes, net

 

115,800

 

 

 

123,925

 

Other long-term obligations and deferred credits

 

36,538

 

 

 

36,093

 

Total liabilities

 

1,994,229

 

 

 

1,976,809

 

Commitments and contingencies

 

 

 

Shareholders’ equity:

 

 

 

Common stock, $0.01 par value; 300,000 shares authorized as of both June 30, 2024 and December 31, 2023; 169,357 and 168,628 shares issued and outstanding as of June 30, 2024 and December 31, 2023, respectively

 

1,694

 

 

 

1,686

 

Additional paid-in capital

 

1,453,944

 

 

 

1,443,591

 

Shareholder note receivable

 

(2,865

)

 

 

(3,850

)

Accumulated other comprehensive (loss)/income, net of income tax

 

(12,594

)

 

 

7,246

 

Retained deficit

 

(304,840

)

 

 

(278,990

)

Total shareholders’ equity attributable to Krispy Kreme, Inc.

 

1,135,339

 

 

 

1,169,683

 

Noncontrolling interest

 

93,918

 

 

 

94,100

 

Total shareholders’ equity

 

1,229,257

 

 

 

1,263,783

 

Total liabilities and shareholders’ equity

$

3,223,486

 

 

$

3,240,592

 

 

Krispy Kreme, Inc.

Condensed Consolidated Statements of Cash Flows (Unaudited)

(in thousands)

 

 

Two Quarters Ended

 

June 30, 2024 (26 weeks)

 

July 2, 2023 (26 weeks)

CASH FLOWS FROM OPERATING ACTIVITIES:

 

 

 

Net (loss)/income

$

(11,594

)

 

$

1,728

 

Adjustments to reconcile net (loss)/income to net cash provided by operating activities:

 

 

 

Depreciation and amortization expense

 

68,186

 

 

 

57,135

 

Deferred and other income taxes

 

(5,338

)

 

 

(11,743

)

Loss on extinguishment of debt

 

—

 

 

 

472

 

Impairment and lease termination charges

 

448

 

 

 

7,808

 

Gain on disposal of property and equipment

 

(3

)

 

 

(151

)

Gain on sale-leaseback

 

—

 

 

 

(9,646

)

Share-based compensation

 

14,634

 

 

 

10,369

 

Change in accounts and notes receivable allowances

 

327

 

 

 

372

 

Inventory write-off

 

1,038

 

 

 

10,244

 

Settlement of interest rate swap derivatives

 

—

 

 

 

7,657

 

Amortization related to settlement of interest rate swap derivatives

 

(5,910

)

 

 

(4,379

)

Other

 

858

 

 

 

996

 

Change in operating assets and liabilities, excluding foreign currency translation adjustments

 

(47,121

)

 

 

(24,609

)

Net cash provided by operating activities

 

15,525

 

 

 

46,253

 

CASH FLOWS USED FOR INVESTING ACTIVITIES:

 

 

 

Purchase of property and equipment

 

(60,735

)

 

 

(54,290

)

Proceeds from sale-leaseback

 

—

 

 

 

10,025

 

Purchase of equity method investment

 

(3,506

)

 

 

—

 

Disbursement for loan receivable

 

(1,086

)

 

 

—

 

Other investing activities

 

166

 

 

 

163

 

Net cash used for investing activities

 

(65,161

)

 

 

(44,102

)

CASH FLOWS FROM/(USED FOR) FINANCING ACTIVITIES:

 

 

 

Proceeds from the issuance of debt

 

365,000

 

 

 

989,198

 

Repayment of long-term debt and lease obligations

 

(306,797

)

 

 

(916,580

)

Payment of financing costs

 

—

 

 

 

(5,000

)

Proceeds from structured payables

 

190,162

 

 

 

73,939

 

Payments on structured payables

 

(190,811

)

 

 

(126,920

)

Capital contribution by shareholders, net of loans issued

 

919

 

 

 

631

 

Distribution to shareholders

 

(11,807

)

 

 

(11,771

)

Payments for repurchase and retirement of common stock

 

(4,275

)

 

 

(147

)

Distribution to noncontrolling interest

 

(2,146

)

 

 

(11,246

)

Net cash provided by/(used for) financing activities

 

40,245

 

 

 

(7,896

)

Effect of exchange rate changes on cash, cash equivalents and restricted cash

 

(115

)

 

 

(3,011

)

Net decrease in cash, cash equivalents and restricted cash

 

(9,506

)

 

 

(8,756

)

Cash, cash equivalents and restricted cash at beginning of period

 

38,614

 

 

 

35,730

 

Cash, cash equivalents and restricted cash at end of period

$

29,108

 

 

$

26,974

 

 

 

 

 

Net cash provided by operating activities

$

15,525

 

 

$

46,253

 

Less: Purchase of property and equipment

 

(60,735

)

 

 

(54,290

)

Free cash flow

$

(45,210

)

 

$

(8,037

)

 

Krispy Kreme, Inc. Reconciliation of Non-GAAP Financial Measures (Unaudited) (in thousands, except per share amounts)

We define “Adjusted EBITDA” as earnings before interest expense, net, income tax expense, and depreciation and amortization, with further adjustments for share-based compensation, certain strategic initiatives, acquisition and integration expenses, and other certain non-recurring, infrequent or non-core income and expense items. Adjusted EBITDA is a principal metric that management uses to monitor and evaluate operating performance and provides a consistent benchmark for comparison across reporting periods.

We define “Adjusted Net Income, Diluted” as net loss attributable to common shareholders, adjusted for interest expense, share-based compensation, certain strategic initiatives, acquisition and integration expenses, amortization of acquisition-related intangibles, the tax impact of adjustments, and other certain non-recurring, infrequent or non-core income and expense items. “Adjusted EPS” is Adjusted Net Income, Diluted converted to a per share amount.

Adjusted EBITDA, Adjusted Net Income, Diluted, and Adjusted EPS have certain limitations, including adjustments for income and expense items that are required by GAAP. In evaluating these non-GAAP measures, you should be aware that in the future we will incur expenses that are the same as or similar to some of the adjustments in this presentation, such as share-based compensation. Our presentation of Adjusted EBITDA, Adjusted Net Income, Diluted, and Adjusted EPS should not be construed to imply that our future results will be unaffected by any such adjustments. Management compensates for these limitations by relying on our GAAP results in addition to using Adjusted EBITDA, Adjusted Net Income, Diluted, and Adjusted EPS supplementally.

 

Quarter Ended

 

Two Quarters Ended

(in thousands)

June 30, 2024

 

July 2, 2023

 

June 30, 2024

 

July 2, 2023

Net (loss)/income

$

(4,931

)

 

$

84

 

 

$

(11,594

)

 

$

1,728

 

Interest expense, net

 

14,452

 

 

 

12,063

 

 

 

28,188

 

 

 

24,051

 

Income tax (benefit)/expense

 

(3,611

)

 

 

(7,563

)

 

 

651

 

 

 

(7,246

)

Depreciation and amortization expense

 

34,600

 

 

 

29,196

 

 

 

68,186

 

 

 

57,135

 

Share-based compensation

 

7,648

 

 

 

4,824

 

 

 

14,634

 

 

 

10,369

 

Employer payroll taxes related to share-based compensation

 

207

 

 

 

189

 

 

 

250

 

 

 

214

 

Other non-operating expense, net (1)

 

949

 

 

 

1,061

 

 

 

1,522

 

 

 

2,060

 

Strategic initiatives (2)

 

4,187

 

 

 

4,477

 

 

 

9,008

 

 

 

17,946

 

Acquisition and integration expenses (3)

 

851

 

 

 

339

 

 

 

1,099

 

 

 

430

 

New market penetration expenses (4)

 

572

 

 

 

241

 

 

 

1,038

 

 

 

335

 

Shop closure expenses, net (5)

 

628

 

 

 

1,484

 

 

 

767

 

 

 

805

 

Restructuring and severance expenses (6)

 

132

 

 

 

1,667

 

 

 

138

 

 

 

2,247

 

Gain on sale-leaseback

 

—

 

 

 

15

 

 

 

—

 

 

 

(9,646

)

Other (7)

 

(958

)

 

 

737

 

 

 

(973

)

 

 

3,314

 

Adjusted EBITDA

$

54,726

 

 

$

48,814

 

 

$

112,914

 

 

$

103,742

 

 

Quarter Ended

 

Two Quarters Ended

(in thousands)

June 30, 2024

 

July 2, 2023

 

June 30, 2024

 

July 2, 2023

Segment Adjusted EBITDA:

 

 

 

 

 

 

 

U.S.

$

32,668

 

 

$

28,085

 

 

$

75,284

 

 

$

66,620

 

International

 

21,655

 

 

 

24,702

 

 

 

42,191

 

 

 

43,684

 

Market Development

 

12,875

 

 

 

10,495

 

 

 

24,775

 

 

 

22,046

 

Corporate

 

(12,472

)

 

 

(14,468

)

 

 

(29,336

)

 

 

(28,608

)

Total Adjusted EBITDA

$

54,726

 

 

$

48,814

 

 

$

112,914

 

 

$

103,742

 

 

Quarter Ended

 

Two Quarters Ended

(in thousands, except per share amounts)

June 30, 2024

 

July 2, 2023

 

June 30, 2024

 

July 2, 2023

Net (loss)/income

$

(4,931

)

 

$

84

 

 

$

(11,594

)

 

$

1,728

 

Share-based compensation

 

7,648

 

 

 

4,824

 

 

 

14,634

 

 

 

10,369

 

Employer payroll taxes related to share-based compensation

 

207

 

 

 

189

 

 

 

250

 

 

 

214

 

Other non-operating expense, net (1)

 

949

 

 

 

1,061

 

 

 

1,522

 

 

 

2,060

 

Strategic initiatives (2)

 

4,187

 

 

 

4,477

 

 

 

9,008

 

 

 

17,946

 

Acquisition and integration expenses (3)

 

851

 

 

 

339

 

 

 

1,099

 

 

 

430

 

New market penetration expenses (4)

 

572

 

 

 

241

 

 

 

1,038

 

 

 

335

 

Shop closure expenses (5)

 

628

 

 

 

1,484

 

 

 

767

 

 

 

805

 

Restructuring and severance expenses (6)

 

132

 

 

 

1,667

 

 

 

138

 

 

 

2,247

 

Gain on sale-leaseback

 

—

 

 

 

15

 

 

 

—

 

 

 

(9,646

)

Other (7)

 

(958

)

 

 

737

 

 

 

(973

)

 

 

3,314

 

Amortization of acquisition related intangibles (8)

 

7,397

 

 

 

7,368

 

 

 

14,817

 

 

 

14,641

 

Loss on extinguishment of 2019 Facility (9)

 

—

 

 

 

—

 

 

 

—

 

 

 

472

 

Tax impact of adjustments (10)

 

(6,777

)

 

 

(9,464

)

 

 

(7,001

)

 

 

(14,120

)

Tax specific adjustments (11)

 

(226

)

 

 

(1,758

)

 

 

(815

)

 

 

(2,315

)

Net (income)/loss attributable to noncontrolling interest

 

(560

)

 

 

139

 

 

 

(2,431

)

 

 

(1,806

)

Adjusted net income attributable to common shareholders - Basic

$

9,119

 

 

$

11,403

 

 

$

20,459

 

 

$

26,674

 

Additional income attributed to noncontrolling interest due to subsidiary potential common shares

 

(11

)

 

 

(4

)

 

 

(30

)

 

 

(7

)

Adjusted net income attributable to common shareholders - Diluted

$

9,108

 

 

$

11,399

 

 

$

20,429

 

 

$

26,667

 

Basic weighted average common shares outstanding

 

169,095

 

 

 

168,184

 

 

 

168,890

 

 

 

168,162

 

Dilutive effect of outstanding common stock options, RSUs, and PSUs

 

2,397

 

 

 

2,475

 

 

 

2,442

 

 

 

2,163

 

Diluted weighted average common shares outstanding

 

171,492

 

 

 

170,659

 

 

 

171,332

 

 

 

170,325

 

Adjusted net income per share attributable to common shareholders:

 

 

 

 

 

 

 

Basic

$

0.05

 

 

$

0.07

 

 

$

0.12

 

 

$

0.16

 

Diluted

$

0.05

 

 

$

0.07

 

 

$

0.12

 

 

$

0.16

 

(1)

Primarily foreign translation gains and losses in each period.

(2)

The quarter and two quarters ended June 30, 2024 consist primarily of costs associated with global transformation, exploring strategic alternatives for the Insomnia Cookies business, and preparing for the McDonald’s U.S. expansion (with these three specific initiatives aggregating to approximately $3.9 million and $8.5 million for the quarter and two quarters ended June 30, 2024, respectively). The quarter and two quarters ended July 2, 2023 consists primarily of costs associated with the decision to exit the Branded Sweet Treats business, including property, plant and equipment impairments, inventory write-offs, employee severance, and other related costs.

(3)

Consists of acquisition and integration-related costs in connection with the Company’s business and franchise acquisitions, including legal, due diligence, and advisory fees incurred in connection with acquisition and integration-related activities for the applicable period.

(4)

Consists of start-up costs associated with entry into new countries for which the Company’s brands have not previously operated, including Brazil, Spain, and the Insomnia Cookies brand entering Canada and the U.K.

(5)

Includes lease termination costs, impairment charges, and loss on disposal of property, plant and equipment.

(6)

The quarter and two quarters ended June 30, 2024 and July 2, 2023 consist primarily of costs associated with restructuring of the global executive team.

(7)

The quarter and two quarters ended June 30, 2024 consist primarily of a gain from insurance proceeds received related to a shop in the U.S. that was destroyed and subsequently rebuilt. The quarter and two quarters ended July 2, 2023 consist primarily of legal and other regulatory expenses incurred outside the ordinary course of business.

(8)

Consists of amortization related to acquired intangible assets as reflected within depreciation and amortization in the Condensed Consolidated Statements of Operations.

(9)

Includes interest expenses related to unamortized debt issuance costs from the 2019 Facility associated with extinguished lenders as a result of the March 2023 debt refinancing.

(10)

Tax impact of adjustments calculated applying the applicable statutory rates. The quarter and two quarters ended June 30, 2024 and July 2, 2023 also include the impact of disallowed executive compensation expense.

(11)

The quarter and two quarters ended June 30, 2024 consist of the recognition of previously unrecognized tax benefits unrelated to ongoing operations, a discrete tax benefit unrelated to ongoing operations, and the effect of various tax law changes on existing temporary differences. The quarter and two quarters ended July 2, 2023 consist of the recognition of a previously unrecognized tax benefit unrelated to ongoing operations, the effect of tax law changes on existing temporary differences, and a discrete tax benefit unrelated to ongoing operations.

Krispy Kreme, Inc.

Segment Reporting (Unaudited)

(in thousands, except percentages or otherwise stated)

 

 

Quarter Ended

 

Two Quarters Ended

 

June 30, 2024

 

July 2, 2023

 

June 30, 2024

 

July 2, 2023

Net revenues:

 

 

 

 

 

 

 

U.S.

$

289,304

 

$

267,417

 

$

585,239

 

$

548,761

International

 

125,269

 

 

120,588

 

 

250,019

 

 

232,576

Market Development

 

24,236

 

 

20,877

 

 

46,249

 

 

46,495

Total net revenues

$

438,809

 

$

408,882

 

$

881,507

 

$

827,832

Q2 2024 Organic Revenue - QTD

(in thousands, except percentages)

U.S.

 

International

 

Market

Development

 

Total Company

Total net revenues in second quarter of fiscal 2024

$

289,304

 

 

$

125,269

 

 

$

24,236

 

 

$

438,809

 

Total net revenues in second quarter of fiscal 2023

 

267,417

 

 

 

120,588

 

 

 

20,877

 

 

 

408,882

 

Total Net Revenues Growth

 

21,887

 

 

 

4,681

 

 

 

3,359

 

 

 

29,927

 

Total Net Revenues Growth %

 

8.2

%

 

 

3.9

%

 

 

16.1

%

 

 

7.3

%

Less: Impact of shop optimization program closures

 

(147

)

 

 

—

 

 

 

—

 

 

 

(147

)

Less: Impact of Branded Sweet Treats exit

 

(486

)

 

 

—

 

 

 

—

 

 

 

(486

)

Adjusted net revenues in second quarter of fiscal 2023

 

266,784

 

 

 

120,588

 

 

 

20,877

 

 

 

408,249

 

Adjusted net revenue growth

 

22,520

 

 

 

4,681

 

 

 

3,359

 

 

 

30,560

 

Impact of foreign currency translation

 

—

 

 

 

1,404

 

 

 

—

 

 

 

1,404

 

Organic Revenue Growth

$

22,520

 

 

$

6,085

 

 

$

3,359

 

 

$

31,964

 

Organic Revenue Growth %

 

8.4

%

 

 

5.0

%

 

 

16.1

%

 

 

7.8

%

Q2 2024 Organic Revenue - YTD

(in thousands, except percentages)

U.S.

 

International

 

Market

Development

 

Total Company

Total net revenues in first two quarters of fiscal 2024

$

585,239

 

 

$

250,019

 

 

$

46,249

 

 

$

881,507

 

Total net revenues in first two quarters of fiscal 2023

 

548,761

 

 

 

232,576

 

 

 

46,495

 

 

 

827,832

 

Total Net Revenues Growth

 

36,478

 

 

 

17,443

 

 

 

(246

)

 

 

53,675

 

Total Net Revenues Growth %

 

6.6

%

 

 

7.5

%

 

 

-0.5

%

 

 

6.5

%

Less: Impact of shop optimization program closures

 

(463

)

 

 

—

 

 

 

—

 

 

 

(463

)

Less: Impact of Branded Sweet Treats exit

 

(5,853

)

 

 

—

 

 

 

—

 

 

 

(5,853

)

Adjusted net revenues in first two quarters of fiscal 2023

 

542,445

 

 

 

232,576

 

 

 

46,495

 

 

 

821,516

 

Adjusted net revenue growth

 

42,794

 

 

 

17,443

 

 

 

(246

)

 

 

59,991

 

Impact of foreign currency translation

 

—

 

 

 

(432

)

 

 

—

 

 

 

(432

)

Organic Revenue Growth

$

42,794

 

 

$

17,011

 

 

$

(246

)

 

$

59,559

 

Organic Revenue Growth %

 

7.9

%

 

 

7.3

%

 

 

-0.5

%

 

 

7.2

%

Q2 2023 Organic Revenue - QTD

(in thousands, except percentages)

U.S.

 

International

 

Market

Development

 

Total Company

Total net revenues in second quarter of fiscal 2023

$

267,417

 

 

$

120,588

 

 

$

20,877

 

 

$

408,882

 

Total net revenues in second quarter of fiscal 2022

 

244,665

 

 

 

110,558

 

 

 

20,022

 

 

 

375,245

 

Total Net Revenues Growth

 

22,752

 

 

 

10,030

 

 

 

855

 

 

 

33,637

 

Total Net Revenues Growth %

 

9.3

%

 

 

9.1

%

 

 

4.3

%

 

 

9.0

%

Less: Impact of shop optimization program closures

 

(3,330

)

 

 

—

 

 

 

—

 

 

 

(3,330

)

Less: Impact of Branded Sweet Treats exit

 

(6,701

)

 

 

—

 

 

 

—

 

 

 

(6,701

)

Adjusted net revenues in second quarter of fiscal 2022

 

234,634

 

 

 

110,558

 

 

 

20,022

 

 

 

365,214

 

Adjusted net revenue growth

 

32,783

 

 

 

10,030

 

 

 

855

 

 

 

43,668

 

Impact of acquisitions

 

(3,023

)

 

 

—

 

 

 

877

 

 

 

(2,146

)

Impact of foreign currency translation

 

—

 

 

 

15

 

 

 

—

 

 

 

15

 

Organic Revenue Growth

$

29,760

 

 

$

10,045

 

 

$

1,732

 

 

$

41,537

 

Organic Revenue Growth %

 

12.7

%

 

 

9.1

%

 

 

8.7

%

 

 

11.4

%

Q2 2023 Organic Revenue - YTD

(in thousands, except percentages)

U.S.

 

International

 

Market

Development

 

Total Company

Total net revenues in first two quarters of fiscal 2023

$

548,761

 

 

$

232,576

 

 

$

46,495

 

 

$

827,832

 

Total net revenues in first two quarters of fiscal 2022

 

492,584

 

 

 

215,051

 

 

 

40,142

 

 

 

747,777

 

Total Net Revenues Growth

 

56,177

 

 

 

17,525

 

 

 

6,353

 

 

 

80,055

 

Total Net Revenues Growth %

 

11.4

%

 

 

8.1

%

 

 

15.8

%

 

 

10.7

%

Less: Impact of shop optimization program closures

 

(6,517

)

 

 

—

 

 

 

—

 

 

 

(6,517

)

Less: Impact of Branded Sweet Treats exit

 

(6,701

)

 

 

—

 

 

 

—

 

 

 

(6,701

)

Adjusted net revenues in first two quarters of fiscal 2022

 

479,366

 

 

 

215,051

 

 

 

40,142

 

 

 

734,559

 

Adjusted net revenue growth

 

69,395

 

 

 

17,525

 

 

 

6,353

 

 

 

93,273

 

Impact of acquisitions

 

(6,103

)

 

 

—

 

 

 

1,770

 

 

 

(4,333

)

Impact of foreign currency translation

 

—

 

 

 

5,794

 

 

 

—

 

 

 

5,794

 

Organic Revenue Growth

$

63,292

 

 

$

23,319

 

 

$

8,123

 

 

$

94,734

 

Organic Revenue Growth %

 

13.2

%

 

 

10.8

%

 

 

20.2

%

 

 

12.9

%

 

Trailing Four

Quarters Ended

 

Fiscal Year Ended

(in thousands, unless otherwise stated)

June 30, 2024

 

December 31,

2023

 

January 1, 2023

U.S.:

 

 

 

 

 

Revenues

$

1,141,422

 

 

$

1,104,944

 

 

$

1,010,250

 

Non-Fresh Revenues (1)

 

(3,760

)

 

 

(9,416

)

 

 

(38,380

)

Fresh Revenues from Insomnia Cookies and Hubs without Spokes (2)

 

(400,618

)

 

 

(399,061

)

 

 

(404,430

)

Sales from Hubs with Spokes

 

737,044

 

 

 

696,467

 

 

 

567,440

 

Sales per Hub (millions)

 

5.0

 

 

 

4.9

 

 

 

4.5

 

 

 

 

 

 

 

International:

 

 

 

 

 

Sales from Hubs with Spokes (3)

$

507,074

 

 

$

489,631

 

 

$

435,651

 

Sales per Hub (millions) (4)

 

10.1

 

 

 

10.0

 

 

 

9.7

 

(1)

Includes the exited Branded Sweet Treats business revenues.

(2)

Includes Insomnia Cookies revenues and Fresh Revenues generated by Hubs without Spokes.

(3)

Total International net revenues is equal to Fresh Revenues from Hubs with Spokes for that business segment.

(4)

International sales per Hub comparative data has been restated in constant currency based on current exchange rates.

Krispy Kreme, Inc.

Global Points of Access (Unaudited)

 

 

Global Points of Access

 

Quarter Ended

 

Fiscal Year

Ended

 

June 30, 2024

 

July 2, 2023

 

December 31,

2023

U.S.:

 

 

 

 

 

Hot Light Theater Shops

229

 

228

 

229

Fresh Shops

70

 

66

 

70

Cookie Bakeries

286

 

244

 

267

DFD Doors (2)

7,497

 

6,320

 

6,808

Total

8,082

 

6,858

 

7,374

International:

 

 

 

 

 

Hot Light Theater Shops

46

 

44

 

44

Fresh Shops

502

 

466

 

483

Carts, Food Trucks, and Other (1)

18

 

16

 

16

DFD Doors

4,871

 

3,396

 

3,977

Total

5,437

 

3,922

 

4,520

Market Development:

 

 

 

 

 

Hot Light Theater Shops

117

 

111

 

116

Fresh Shops

1,033

 

873

 

968

Carts, Food Trucks, and Other (1)

30

 

28

 

30

DFD Doors

1,154

 

1,080

 

1,139

Total

2,334

 

2,092

 

2,253

Total Global Points of Access (as defined)

15,853

 

12,872

 

14,147

Total Hot Light Theater Shops

392

 

383

 

389

Total Fresh Shops

1,605

 

1,405

 

1,521

Total Cookie Bakeries

286

 

244

 

267

Total Shops

2,283

 

2,032

 

2,177

Total Carts, Food Trucks, and Other

48

 

44

 

46

Total DFD Doors

13,522

 

10,796

 

11,924

Total Global Points of Access (as defined)

15,853

 

12,872

 

14,147

(1)

Carts and Food Trucks are non-producing, mobile (typically on wheels) facilities without walls or a door where product is received from a Hot Light Theater Shop or Doughnut Factory. Other includes a vending machine. Points of Access in this category are primarily found in international locations in airports, train stations, etc.

(2)

Includes over 160 McDonald’s shops located in Louisville and Lexington, Kentucky and the surrounding area as of June 30, 2024.

Krispy Kreme, Inc.

Global Hubs (Unaudited)

 

 

Hubs

 

Quarter Ended

 

Fiscal Year

Ended

 

June 30, 2024

 

July 2, 2023

 

December 31,

2023

U.S.:

 

 

 

 

 

Hot Light Theater Shops (1)

222

 

221

 

220

Doughnut Factories

5

 

4

 

4

Total

227

 

225

 

224

Hubs with Spokes

151

 

143

 

149

Hubs without Spokes

76

 

82

 

75

International:

 

 

 

 

 

Hot Light Theater Shops (1)

37

 

35

 

36

Doughnut Factories

14

 

14

 

14

Total

51

 

49

 

50

Hubs with Spokes

51

 

49

 

50

Market Development:

 

 

 

 

 

Hot Light Theater Shops (1)

115

 

108

 

112

Doughnut Factories

26

 

23

 

23

Total

141

 

131

 

135

Total Hubs

419

 

405

 

409

(1)

Includes only Hot Light Theater Shops and excludes Mini Theaters. A Mini Theater is a Spoke location that produces some doughnuts for itself and also receives doughnuts from another producing location.

Krispy Kreme, Inc.

Net Debt and Leverage (Unaudited)

(in thousands, except leverage ratio)

 

 

June 30, 2024

 

December 31,

2023

Current portion of long-term debt

$

59,827

 

 

$

54,631

 

Long-term debt, less current portion

 

894,979

 

 

 

836,615

 

Total long-term debt, including debt issuance costs

 

954,806

 

 

 

891,246

 

Add back: Debt issuance costs

 

3,847

 

 

 

4,371

 

Total long-term debt, excluding debt issuance costs

 

958,653

 

 

 

895,617

 

Less: Cash and cash equivalents

 

(28,625

)

 

 

(38,185

)

Net debt

$

930,028

 

 

$

857,432

 

Adjusted EBITDA - trailing four quarters

 

220,796

 

 

 

211,624

 

Net leverage ratio

4.2 x

 

4.1 x

 

View source version on businesswire.com: https://www.businesswire.com/news/home/20240807359325/en/

Investor Relations ir@krispykreme.com

Financial Media Edelman Smithfield for Krispy Kreme, Inc. Ashley Firlan & Ashna Vasa KrispyKremeIR@edelman.com