DNUT Krispy Kreme Inc

Third quarter Net Revenue of $379.9 million, Organic Revenue increases 3.5%

Krispy Kreme, Inc. (NASDAQ: DNUT) (“Krispy Kreme”, “KKI”, or the “Company”) today reported financial results for the quarter ended September 29, 2024.

Third Quarter Highlights (vs Q3 2023)

• Net revenue of $379.9 million
• Organic revenue grew 3.5% to $376.4 million
• GAAP net income of $37.6 million, linked to the sale of a majority ownership stake of Insomnia Cookies ($39.6 million net income attributable to KKI)
• Adjusted EBITDA of $34.7 million
• GAAP operating cash flow of $3.3 million
• Global Points of Access (“POA”) increased 2,417, or 18.0%, to 15,811

“Krispy Kreme delivered a seventeenth consecutive quarter of year-over-year organic sales growth driven by increased Delivered Fresh Daily and digital sales,” said Josh Charlesworth, CEO.

“Consumers ask us every day, ‘When can you bring Krispy Kreme to my town?’ hence our strategy of making our fresh doughnuts more available around the world. The successful start of our nationwide U.S. rollout at McDonald’s, which began in Chicago in October and continues next week across Ohio and Indiana, is a major milestone on this journey, and we now expect to be delighting Krispy Kreme’s fans with our melt-in-your-mouth doughnuts fresh daily in nearly 2,000 McDonald’s restaurants by the end of 2024.”

“Now well into my first year as CEO, we have streamlined and focused our business with the sale of our majority stake in Insomnia Cookies complete and the acceleration of our US DFD expansion underway. To better align our talent and our capital to our business priorities, we are now restructuring our management teams to concentrate on maximizing our profitable expansion of the U.S. while focusing international efforts on the wider adoption of our capital-light franchise model. With our resources prioritized to the things that matter most, I believe that these changes will result in a bigger and better Krispy Kreme,” Charlesworth continued.

Financial Highlights

 

Quarter Ended

$ in millions, except per share data

 

September 29, 2024

 

October 1, 2023

 

Change

GAAP:

 

 

 

 

 

 

Net revenue

 

$

379.9

 

 

$

407.4

 

 

 

(6.8

)%

Operating loss

 

$

(16.0

)

 

$

(2.1

)

 

nm

Operating loss margin

 

 

(4.2

)%

 

 

(0.5

)%

 

(370) bps

Net income/(loss)

 

$

37.6

 

 

$

(40.3

)

 

nm

Net income/(loss) attributable to KKI

 

$

39.6

 

 

$

(40.5

)

 

nm

Diluted income/(loss) per share

 

$

0.23

 

 

$

(0.24

)

 

$

0.47

 

 

 

 

 

 

 

 

Non-GAAP (1):

 

 

 

 

 

 

Organic revenue

 

$

376.4

 

 

$

363.8

 

 

 

3.5

%

Adjusted net (loss)/income, diluted

 

$

(2.5

)

 

$

4.4

 

 

nm

Adjusted EBITDA

 

$

34.7

 

 

$

43.7

 

 

 

(20.7

)%

Adjusted EBITDA margin

 

 

9.1

%

 

 

10.7

%

 

(160) bps

Adjusted diluted (loss)/income per share

 

$

(0.01

)

 

$

0.03

 

 

$

(0.04

)

Notes:

(1)

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

Key Operating Metrics

 

Quarter Ended

$ in millions

 

September 29, 2024

 

October 1, 2023

 

Change

Global Points of Access

 

 

15,811

 

 

 

13,394

 

 

18.0

%

Sales per Hub (U.S.) TTM

 

$

4.9

 

 

$

4.8

 

 

2.1

%

Sales per Hub (International) TTM

 

$

10.1

 

 

$

9.9

 

 

2.0

%

Digital Sales as a Percent of Doughnut Shop Sales

 

 

15.5

%

 

 

12.6

%

 

290 bps

Third Quarter 2024 Consolidated Results (vs Q3 2023)

Krispy Kreme’s third-quarter results reflect the sale of a majority ownership stake of Insomnia Cookies. The business is now fully focused on its core strategy of producing, selling and distributing fresh doughnuts daily and executing on its profitable U.S. growth strategy and capital light international model. Net revenue was $379.9 million in Q3 2024, a decline of 6.8%, compared to $407.4 million in the same quarter last year. GAAP Net Income was $37.6 million, including the gain on divestiture of a controlling interest in Insomnia Cookies, compared to prior year net loss of $40.3 million. GAAP diluted earnings per share was $0.23, compared to a loss of $0.24 in the same quarter last year.

Total company organic revenue grew 3.5% compared to the same quarter in the prior year. Delivered Fresh Daily (“DFD”) sales and digital sales both grew 15%, more than offsetting expected consumer softness in U.S. Retail and the U.K.

Adjusted EBITDA was $34.7 million, a decline of 20.7% largely driven by the sale of a majority ownership stake in Insomnia Cookies. Adjusted EBITDA margin declined 160 bps to 9.1%, due to underperformance in the U.K. and incremental vehicle accident claims costs in the U.S. Adjusted Net Loss, diluted was $2.5 million in the quarter. Adjusted Diluted EPS declined to $(0.01) from $0.03 in the same quarter last year.

Third Quarter 2024 Segment Results (vs Q3 2023)

U.S.: In the U.S. segment, net revenue declined $31.8 million, or 12.2%, driven by the $43.5 million impact associated with the sale of a majority ownership stake of Insomnia Cookies in July 2024. Organic revenue growth of $5.5 million, or 2.5%, was driven by a 14% increase in Points of Access and a 21% increase in digital channel revenues.

U.S. Adjusted EBITDA decreased $8.3 million, or 37.5%, with margin declining 250 basis points to 6.1%, due to incremental vehicle accident claims costs and McDonald’s start-up costs, partially offset by pricing and productivity benefits from the Company’s Hub and Spoke model. Following successful pilots with a third-party logistics partner in Los Angeles and Washington, DC, the Company launched an RFP on October 9th with several national and regional carriers for daily delivery of fresh doughnuts to grocers, convenience stores, quick service restaurants, and others.

International: In the International segment, net revenue grew $4.6 million, or 3.7%, with organic revenue growth of $5.3 million or 4.2%, driven by Canada, Japan, and Australia, which more than offset underperformance in the U.K.

International segment Adjusted EBITDA margin improved sequentially despite the seasonally weaker quarter as actions taken to reduce costs delivered improved results. Year over year, Adjusted EBITDA decreased $2.2 million, or 8.7%, with a margin decline of 240 basis points to 17.4%, primarily due to pressure in the U.K. where we have welcomed a new management team focused on improving the business.

Market Development: In the Market Development segment, net revenue declined $0.3 million, or approximately 1.5%, due to the $2.1 million impact of franchise acquisitions in the third quarter of fiscal 2024. Market Development organic revenue grew $1.8 million, or approximately 8.6%, with a new market opening in Morocco alongside continued growth in France, Turkey, and Ecuador.

Market Development Adjusted EBITDA grew $1.5 million, or 14.8%, with margin expansion of 770 basis points delivering Adjusted EBITDA margins of 54.2%, driven by royalty flow through and savings in SG&A.

Balance Sheet and Capital Expenditures

During the third quarter of 2024, Operating Cash Flow was $3.3 million. The Company invested $26.1 million, or 6.9% of net revenue, in capital expenditures, driven primarily by the investments in the Hub and Spoke model for the U.S. expansion of the DFD network. During the quarter, the Company received $117.6 million in net proceeds from the divestiture of Insomnia Cookies and $45.0 million from the repayment of an intercompany loan due from Insomnia Cookies, which was used to reduce long term debt.

2024 Financial Guidance

We are adjusting our full year guide to reflect the third quarter results, the acceleration of our expansion with McDonald’s, and the completion of the Insomnia Cookies transaction in July 2024:

• Net Revenue of $1,650 to $1,685 million
• Organic Revenue growth of +5% to +7%
• Adjusted EBITDA of $205 to $210 million
• Adjusted Diluted EPS of $0.18 to $0.22
• 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

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 applicable 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 applicable 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 each 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 third quarter of 2024. The conference call can be accessed by dialing 1 (800) 715-9871 and entering the conference ID 1277949. International participants can access the call via the corresponding number listed HERE and entering the conference ID 1277949. 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.X.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 relating to our operations, financial results, financial conditions, business, prospects, growth strategy and liquidity. Accordingly, there are, and may 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. See “Reconciliation of Non-GAAP Financial Measures” below for reconciliations of our non-GAAP financial measures to the comparable GAAP measures.

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

 

Three Quarters Ended

 

September 29, 2024 (13 weeks)

 

October 1, 2023 (13 weeks)

 

September 29, 2024 (39 weeks)

 

October 1, 2023 (39 weeks)

Net revenues

 

 

 

 

 

 

 

Product sales

$

370,662

 

 

$

398,745

 

 

$

1,233,585

 

 

$

1,209,767

 

Royalties and other revenues

 

9,205

 

 

 

8,622

 

 

 

27,789

 

 

 

25,432

 

Total net revenues

 

379,867

 

 

 

407,367

 

 

 

1,261,374

 

 

 

1,235,199

 

Product and distribution costs

 

95,840

 

 

 

101,353

 

 

 

310,701

 

 

 

330,292

 

Operating expenses

 

192,027

 

 

 

195,380

 

 

 

609,726

 

 

 

575,953

 

Selling, general and administrative expense

 

71,110

 

 

 

68,305

 

 

 

207,150

 

 

 

192,355

 

Marketing expenses

 

10,680

 

 

 

12,478

 

 

 

35,211

 

 

 

32,101

 

Pre-opening costs

 

619

 

 

 

1,059

 

 

 

2,691

 

 

 

2,927

 

Other income, net

 

(5,781

)

 

 

(1,102

)

 

 

(6,430

)

 

 

(6,051

)

Depreciation and amortization expense

 

31,376

 

 

 

32,007

 

 

 

99,562

 

 

 

89,142

 

Operating (loss)/income

 

(16,004

)

 

 

(2,113

)

 

 

2,763

 

 

 

18,480

 

Interest expense, net

 

16,280

 

 

 

12,807

 

 

 

44,468

 

 

 

36,858

 

Gain on divestiture of Insomnia Cookies

 

(87,128

)

 

 

—

 

 

 

(87,128

)

 

 

—

 

Other non-operating (income)/expense, net

 

(407

)

 

 

971

 

 

 

1,115

 

 

 

3,031

 

Income/(loss) before income taxes

 

55,251

 

 

 

(15,891

)

 

 

44,308

 

 

 

(21,409

)

Income tax expense

 

17,679

 

 

 

24,367

 

 

 

18,330

 

 

 

17,121

 

Net income/(loss)

 

37,572

 

 

 

(40,258

)

 

 

25,978

 

 

 

(38,530

)

Net (loss)/income attributable to noncontrolling interest

 

(1,991

)

 

 

199

 

 

 

440

 

 

 

2,005

 

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

$

39,563

 

 

$

(40,457

)

 

$

25,538

 

 

$

(40,535

)

Net income/(loss) per share:

 

 

 

 

 

 

 

Common stock — Basic

$

0.23

 

 

$

(0.24

)

 

$

0.15

 

 

$

(0.24

)

Common stock — Diluted

$

0.23

 

 

$

(0.24

)

 

$

0.15

 

 

$

(0.24

)

Weighted average shares outstanding:

 

 

 

 

 

 

 

Basic

 

169,596

 

 

 

168,224

 

 

 

169,125

 

 

 

168,183

 

Diluted

 

171,486

 

 

 

168,224

 

 

 

171,384

 

 

 

168,183

 

 

Krispy Kreme, Inc.

Condensed Consolidated Balance Sheets

(in thousands, except per share data)

 

 

As of

 

(Unaudited) September 29, 2024

 

December 31, 2023

ASSETS

 

 

 

Current assets:

 

 

 

Cash and cash equivalents

$

25,410

 

 

$

38,185

 

Restricted cash

 

474

 

 

 

429

 

Accounts receivable, net

 

62,019

 

 

 

59,362

 

Inventories

 

31,486

 

 

 

34,716

 

Taxes receivable

 

19,406

 

 

 

15,526

 

Prepaid expense and other current assets

 

25,531

 

 

 

25,363

 

Total current assets

 

164,326

 

 

 

173,581

 

Property and equipment, net

 

489,782

 

 

 

538,220

 

Goodwill

 

1,060,393

 

 

 

1,101,939

 

Other intangible assets, net

 

831,735

 

 

 

946,349

 

Operating lease right of use asset, net

 

409,425

 

 

 

456,964

 

Investments in unconsolidated entities

 

91,033

 

 

 

2,806

 

Other assets

 

18,430

 

 

 

20,733

 

Total assets

$

3,065,124

 

 

$

3,240,592

 

LIABILITIES AND SHAREHOLDERS’ EQUITY

 

 

 

Current liabilities:

 

 

 

Current portion of long-term debt

$

47,577

 

 

$

54,631

 

Current operating lease liabilities

 

45,767

 

 

 

50,365

 

Accounts payable

 

123,125

 

 

 

156,488

 

Accrued liabilities

 

119,832

 

 

 

134,005

 

Structured payables

 

139,170

 

 

 

130,104

 

Total current liabilities

 

475,471

 

 

 

525,593

 

Long-term debt, less current portion

 

804,638

 

 

 

836,615

 

Noncurrent operating lease liabilities

 

406,726

 

 

 

454,583

 

Deferred income taxes, net

 

119,291

 

 

 

123,925

 

Other long-term obligations and deferred credits

 

49,858

 

 

 

36,093

 

Total liabilities

 

1,855,984

 

 

 

1,976,809

 

Commitments and contingencies

 

 

 

Shareholders’ equity:

 

 

 

Common stock, $0.01 par value; 300,000 shares authorized as of both September 29, 2024 and December 31, 2023; 169,799 and 168,628 shares issued and outstanding as of September 29, 2024 and December 31, 2023, respectively

 

1,698

 

 

 

1,686

 

Additional paid-in capital

 

1,460,416

 

 

 

1,443,591

 

Shareholder note receivable

 

(1,924

)

 

 

(3,850

)

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

 

(9,276

)

 

 

7,246

 

Retained deficit

 

(271,238

)

 

 

(278,990

)

Total shareholders’ equity attributable to Krispy Kreme, Inc.

 

1,179,676

 

 

 

1,169,683

 

Noncontrolling interest

 

29,464

 

 

 

94,100

 

Total shareholders’ equity

 

1,209,140

 

 

 

1,263,783

 

Total liabilities and shareholders’ equity

$

3,065,124

 

 

$

3,240,592

 

 

Krispy Kreme, Inc.

Condensed Consolidated Statements of Cash Flows (Unaudited)

(in thousands)

 

 

Three Quarters Ended

 

September 29, 2024 (39 weeks)

 

October 1, 2023 (39 weeks)

CASH FLOWS PROVIDED BY OPERATING ACTIVITIES:

 

 

 

Net income/(loss)

$

25,978

 

 

$

(38,530

)

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

 

 

 

Depreciation and amortization expense

 

99,562

 

 

 

89,142

 

Deferred and other income taxes

 

(22

)

 

 

12,634

 

Loss on extinguishment of debt

 

—

 

 

 

472

 

Impairment and lease termination charges

 

368

 

 

 

7,711

 

Loss/(gain) on disposal of property and equipment

 

470

 

 

 

(168

)

Gain on divestiture of Insomnia Cookies

 

(87,128

)

 

 

—

 

Gain on remeasurement of equity method investment

 

(5,579

)

 

 

—

 

Gain on sale-leaseback

 

—

 

 

 

(9,646

)

Share-based compensation

 

24,603

 

 

 

17,821

 

Change in accounts and notes receivable allowances

 

433

 

 

 

504

 

Inventory write-off

 

1,731

 

 

 

10,522

 

Settlement of interest rate swap derivatives

 

—

 

 

 

7,657

 

Amortization related to settlement of interest rate swap derivatives

 

(5,910

)

 

 

(7,334

)

Other

 

263

 

 

 

566

 

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

 

(35,982

)

 

 

(47,319

)

Net cash provided by operating activities

 

18,787

 

 

 

44,032

 

CASH FLOWS PROVIDED BY/(USED FOR) INVESTING ACTIVITIES:

 

 

 

Purchase of property and equipment

 

(86,877

)

 

 

(88,605

)

Proceeds from sale-leaseback

 

—

 

 

 

10,025

 

Acquisition of shops and franchise rights from franchisees, net of cash acquired

 

(26,612

)

 

 

—

 

Purchase of equity method investment

 

(3,506

)

 

 

—

 

Net proceeds from divestiture of Insomnia Cookies

 

117,646

 

 

 

—

 

Principal payment received from loan to Insomnia Cookies

 

45,000

 

 

 

—

 

Disbursement for loan receivable

 

(1,086

)

 

 

—

 

Other investing activities

 

180

 

 

 

222

 

Net cash provided by/(used for) investing activities

 

44,745

 

 

 

(78,358

)

CASH FLOWS (USED FOR)/PROVIDED BY FINANCING ACTIVITIES:

 

 

 

Proceeds from the issuance of debt

 

490,000

 

 

 

1,044,698

 

Repayment of long-term debt and lease obligations

 

(545,692

)

 

 

(965,250

)

Payment of financing costs

 

—

 

 

 

(5,000

)

Proceeds from structured payables

 

298,551

 

 

 

145,099

 

Payments on structured payables

 

(264,346

)

 

 

(159,571

)

Payment of contingent consideration related to a business combination

 

—

 

 

 

(925

)

Capital contribution by shareholders, net of loans issued

 

919

 

 

 

631

 

Proceeds from sale of noncontrolling interest in subsidiary

 

364

 

 

 

—

 

Distribution to shareholders

 

(17,743

)

 

 

(17,657

)

Payments for repurchase and retirement of common stock

 

(4,366

)

 

 

(1,609

)

Distribution to noncontrolling interest

 

(35,035

)

 

 

(12,883

)

Net cash (used for)/provided by financing activities

 

(77,348

)

 

 

27,533

 

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

 

1,086

 

 

 

(2,796

)

Net decrease in cash, cash equivalents and restricted cash

 

(12,730

)

 

 

(9,589

)

Cash, cash equivalents and restricted cash at beginning of period

 

38,614

 

 

 

35,730

 

Cash, cash equivalents and restricted cash at end of period

$

25,884

 

 

$

26,141

 

 

 

 

 

Net cash provided by operating activities

$

18,787

 

 

$

44,032

 

Less: Purchase of property and equipment

 

(86,877

)

 

 

(88,605

)

Free cash flow

$

(68,090

)

 

$

(44,573

)

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

 

Three Quarters Ended

(in thousands)

September 29, 2024

 

October 1, 2023

 

September 29, 2024

 

October 1, 2023

Net income/(loss)

$

37,572

 

 

$

(40,258

)

 

$

25,978

 

 

$

(38,530

)

Interest expense, net

 

16,280

 

 

 

12,807

 

 

 

44,468

 

 

 

36,858

 

Income tax expense

 

17,679

 

 

 

24,367

 

 

 

18,330

 

 

 

17,121

 

Depreciation and amortization expense

 

31,376

 

 

 

32,007

 

 

 

99,562

 

 

 

89,142

 

Share-based compensation

 

9,969

 

 

 

7,452

 

 

 

24,603

 

 

 

17,821

 

Employer payroll taxes related to share-based compensation

 

49

 

 

 

96

 

 

 

299

 

 

 

310

 

Gain on divestiture of Insomnia Cookies

 

(87,128

)

 

 

—

 

 

 

(87,128

)

 

 

—

 

Other non-operating (income)/expense, net (1)

 

(407

)

 

 

971

 

 

 

1,115

 

 

 

3,031

 

Strategic initiatives (2)

 

11,426

 

 

 

5,895

 

 

 

20,434

 

 

 

23,841

 

Acquisition and integration expenses (3)

 

1,938

 

 

 

49

 

 

 

3,037

 

 

 

479

 

New market penetration expenses (4)

 

156

 

 

 

678

 

 

 

1,194

 

 

 

1,013

 

Shop closure expenses/(income), net (5)

 

21

 

 

 

(449

)

 

 

788

 

 

 

356

 

Restructuring and severance expenses (6)

 

631

 

 

 

552

 

 

 

769

 

 

 

2,799

 

Gain on remeasurement of equity method investment (7)

 

(5,579

)

 

 

—

 

 

 

(5,579

)

 

 

—

 

Gain on sale-leaseback

 

—

 

 

 

—

 

 

 

—

 

 

 

(9,646

)

Other (8)

 

716

 

 

 

(426

)

 

 

(257

)

 

 

2,888

 

Adjusted EBITDA

$

34,699

 

 

$

43,741

 

 

$

147,613

 

 

$

147,483

 

 

Quarter Ended

 

Three Quarters Ended

(in thousands)

September 29, 2024

 

October 1, 2023

 

September 29, 2024

 

October 1, 2023

Segment Adjusted EBITDA:

 

 

 

 

 

 

 

U.S.

$

13,922

 

 

$

22,258

 

 

$

89,206

 

 

$

88,878

 

International

 

22,779

 

 

 

24,961

 

 

 

64,970

 

 

 

68,645

 

Market Development

 

11,271

 

 

 

9,816

 

 

 

36,046

 

 

 

31,862

 

Corporate

 

(13,273

)

 

 

(13,294

)

 

 

(42,609

)

 

 

(41,902

)

Total Adjusted EBITDA

$

34,699

 

 

$

43,741

 

 

$

147,613

 

 

$

147,483

 

 

Quarter Ended

 

Three Quarters Ended

(in thousands, except per share amounts)

September 29, 2024

 

October 1, 2023

 

September 29, 2024

 

October 1, 2023

Net income/(loss)

$

37,572

 

 

$

(40,258

)

 

$

25,978

 

 

$

(38,530

)

Share-based compensation

 

9,969

 

 

 

7,452

 

 

 

24,603

 

 

 

17,821

 

Employer payroll taxes related to share-based compensation

 

49

 

 

 

96

 

 

 

299

 

 

 

310

 

Gain on divestiture of Insomnia Cookies

 

(87,128

)

 

 

—

 

 

 

(87,128

)

 

 

—

 

Other non-operating (income)/expense, net (1)

 

(407

)

 

 

971

 

 

 

1,115

 

 

 

3,031

 

Strategic initiatives (2)

 

11,426

 

 

 

5,895

 

 

 

20,434

 

 

 

23,841

 

Acquisition and integration expenses (3)

 

1,938

 

 

 

49

 

 

 

3,037

 

 

 

479

 

New market penetration expenses (4)

 

156

 

 

 

678

 

 

 

1,194

 

 

 

1,013

 

Shop closure expenses/(income) (5)

 

21

 

 

 

(449

)

 

 

788

 

 

 

356

 

Restructuring and severance expenses (6)

 

631

 

 

 

552

 

 

 

769

 

 

 

2,799

 

Gain on remeasurement of equity method investment (7)

 

(5,579

)

 

 

—

 

 

 

(5,579

)

 

 

—

 

Gain on sale-leaseback

 

—

 

 

 

—

 

 

 

—

 

 

 

(9,646

)

Other (8)

 

716

 

 

 

(426

)

 

 

(257

)

 

 

2,888

 

Amortization of acquisition related intangibles (9)

 

7,780

 

 

 

7,386

 

 

 

22,597

 

 

 

22,027

 

Loss on extinguishment of 2019 Facility (10)

 

—

 

 

 

—

 

 

 

—

 

 

 

472

 

Tax impact of adjustments (11)

 

20,766

 

 

 

22,694

 

 

 

13,765

 

 

 

8,574

 

Tax specific adjustments (12)

 

(2,395

)

 

 

(28

)

 

 

(3,210

)

 

 

(2,343

)

Net loss/(income) attributable to noncontrolling interest

 

1,991

 

 

 

(199

)

 

 

(440

)

 

 

(2,005

)

Adjusted net (loss)/income attributable to common shareholders - Basic

$

(2,494

)

 

$

4,413

 

 

$

17,965

 

 

$

31,087

 

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

 

(4

)

 

 

(7

)

 

 

(28

)

 

 

(14

)

Adjusted net (loss)/income attributable to common shareholders - Diluted

$

(2,498

)

 

$

4,406

 

 

$

17,937

 

 

$

31,073

 

Basic weighted average common shares outstanding

 

169,596

 

 

 

168,224

 

 

 

169,125

 

 

 

168,183

 

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

 

—

 

 

 

2,421

 

 

 

2,259

 

 

 

2,249

 

Diluted weighted average common shares outstanding

 

169,596

 

 

 

170,645

 

 

 

171,384

 

 

 

170,432

 

Adjusted net (loss)/income per share attributable to common shareholders:

 

 

 

 

 

 

 

Basic

$

(0.01

)

 

$

0.03

 

 

$

0.11

 

 

$

0.18

 

Diluted

$

(0.01

)

 

$

0.03

 

 

$

0.10

 

 

$

0.18

 

(1)

Primarily foreign translation gains and losses in each period.

(2)

The quarter and three quarters ended September 29, 2024 consist primarily of costs associated with the divestiture of the Insomnia Cookies business, preparing for the McDonald’s U.S. expansion, and global transformation (with these three specific initiatives aggregating to approximately $11.3 million and $20.0 million for the quarter and three quarters ended September 29, 2024, respectively). The quarter and three quarters ended October 1, 2023 consist primarily of costs associated with global transformation and U.S. initiatives such as 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 and Spain.

(5)

Includes lease termination costs, impairment charges, and loss on disposal of property, plant and equipment. The quarter and three quarters ended October 1, 2023 include gains related to the termination of leases at certain Krispy Kreme shops in the U.S. where the Company had already recognized impairment of the corresponding right of use assets in a prior period.

(6)

The quarter and three quarters ended September 29, 2024 consists primarily of costs associated with the restructuring of the KK U.K. executive team. The quarter and three quarters ended October 1, 2023 consists primarily of costs associated with restructuring of the global executive team.

(7)

Consists of a gain related to the remeasurement of the equity method investments in KremeWorks USA, LLC and KremeWorks Canada, L.P. to fair value immediately prior to the acquisition of the shops.

(8)

The quarter and three quarters ended September 29, 2024 and October 1, 2023 consist primarily of legal and other regulatory expenses incurred outside the ordinary course of business. The three quarters ended September 29, 2024 also include a gain from insurance proceeds received related to a shop in the U.S. that was destroyed and subsequently rebuilt.

(9)

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

(10)

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.

(11)

Tax impact of adjustments calculated applying the applicable statutory rates. The quarter and three quarters ended September 29, 2024 and October 1, 2023 also include the impact of disallowed executive compensation expense.

(12)

The quarter and three quarters ended September 29, 2024 consist of the recognition of previously unrecognized tax benefits unrelated to ongoing operations, a discrete tax benefit unrelated to ongoing operations, the release of valuation allowances on state net operating losses associated with the divestiture of Insomnia Cookies, and the effect of various tax law changes on existing temporary differences. The quarter and three quarters ended October 1, 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

 

Three Quarters Ended

 

September 29, 2024

 

October 1, 2023

 

September 29, 2024

 

October 1, 2023

Net revenues:

 

 

 

 

 

 

 

U.S.

$

228,376

 

$

260,177

 

$

813,615

 

$

808,938

International

 

130,697

 

 

126,077

 

 

380,716

 

 

358,653

Market Development

 

20,794

 

 

21,113

 

 

67,043

 

 

67,608

Total net revenues

$

379,867

 

$

407,367

 

$

1,261,374

 

$

1,235,199

Q3 2024 Organic Revenue - QTD

(in thousands, except percentages)

U.S.

 

International

 

Market Development

 

Total Company

Total net revenues in third quarter of fiscal 2024

$

228,376

 

 

$

130,697

 

 

$

20,794

 

 

$

379,867

 

Total net revenues in third quarter of fiscal 2023

 

260,177

 

 

 

126,077

 

 

 

21,113

 

 

 

407,367

 

Total Net Revenues Growth

 

(31,801

)

 

 

4,620

 

 

 

(319

)

 

 

(27,500

)

Total Net Revenues Growth %

 

-12.2

%

 

 

3.7

%

 

 

-1.5

%

 

 

-6.8

%

Less: Impact of Insomnia Cookies divestiture

 

(43,531

)

 

 

—

 

 

 

—

 

 

 

(43,531

)

Adjusted net revenues in third quarter of fiscal 2023

 

216,646

 

 

 

126,077

 

 

 

21,113

 

 

 

363,836

 

Adjusted net revenue growth

 

11,730

 

 

 

4,620

 

 

 

(319

)

 

 

16,031

 

Impact of acquisitions

 

(6,228

)

 

 

(1,108

)

 

 

2,127

 

 

 

(5,209

)

Impact of foreign currency translation

 

—

 

 

 

1,770

 

 

 

—

 

 

 

1,770

 

Organic Revenue Growth

$

5,502

 

 

$

5,282

 

 

$

1,808

 

 

$

12,592

 

Organic Revenue Growth %

 

2.5

%

 

 

4.2

%

 

 

8.6

%

 

 

3.5

%

Q3 2024 Organic Revenue - YTD

(in thousands, except percentages)

U.S.

 

International

 

Market Development

 

Total Company

Total net revenues in first three quarters of fiscal 2024

$

813,615

 

 

$

380,716

 

 

$

67,043

 

 

$

1,261,374

 

Total net revenues in first three quarters of fiscal 2023

 

808,938

 

 

 

358,653

 

 

 

67,608

 

 

 

1,235,199

 

Total Net Revenues Growth

 

4,677

 

 

 

22,063

 

 

 

(565

)

 

 

26,175

 

Total Net Revenues Growth %

 

0.6

%

 

 

6.2

%

 

 

-0.8

%

 

 

2.1

%

Less: Impact of shop optimization program closures

 

(463

)

 

 

—

 

 

 

—

 

 

 

(463

)

Less: Impact of Branded Sweet Treats exit

 

(5,853

)

 

 

—

 

 

 

—

 

 

 

(5,853

)

Less: Impact of Insomnia Cookies divestiture

 

(43,531

)

 

 

—

 

 

 

—

 

 

 

(43,531

)

Adjusted net revenues in first three quarters of fiscal 2023

 

759,091

 

 

 

358,653

 

 

 

67,608

 

 

 

1,185,352

 

Adjusted net revenue growth

 

54,524

 

 

 

22,063

 

 

 

(565

)

 

 

76,022

 

Impact of acquisitions

 

(6,228

)

 

 

(1,108

)

 

 

2,127

 

 

 

(5,209

)

Impact of foreign currency translation

 

—

 

 

 

1,338

 

 

 

—

 

 

 

1,338

 

Organic Revenue Growth

$

48,296

 

 

$

22,293

 

 

$

1,562

 

 

$

72,151

 

Organic Revenue Growth %

 

6.4

%

 

 

6.2

%

 

 

2.3

%

 

 

6.1

%

Q3 2023 Organic Revenue - QTD

(in thousands, except percentages)

U.S.

 

International

 

Market Development

 

Total Company

Total net revenues in third quarter of fiscal 2023

$

260,177

 

 

$

126,077

 

 

$

21,113

 

 

$

407,367

 

Total net revenues in third quarter of fiscal 2022

 

246,830

 

 

 

107,585

 

 

 

23,107

 

 

 

377,522

 

Total Net Revenues Growth

 

13,347

 

 

 

18,492

 

 

 

(1,994

)

 

 

29,845

 

Total Net Revenues Growth %

 

5.4

%

 

 

17.2

%

 

 

-8.6

%

 

 

7.9

%

Less: Impact of shop optimization program closures

 

(3,096

)

 

 

—

 

 

 

—

 

 

 

(3,096

)

Less: Impact of Branded Sweet Treats exit

 

(9,035

)

 

 

—

 

 

 

—

 

 

 

(9,035

)

Adjusted net revenues in third quarter of fiscal 2022

 

234,699

 

 

 

107,585

 

 

 

23,107

 

 

 

365,391

 

Adjusted net revenue growth

 

25,478

 

 

 

18,492

 

 

 

(1,994

)

 

 

41,976

 

Impact of acquisitions

 

(1,575

)

 

 

—

 

 

 

457

 

 

 

(1,118

)

Impact of foreign currency translation

 

—

 

 

 

(5,912

)

 

 

—

 

 

 

(5,912

)

Organic Revenue Growth

$

23,903

 

 

$

12,580

 

 

$

(1,537

)

 

$

34,946

 

Organic Revenue Growth %

 

10.2

%

 

 

11.7

%

 

 

-6.7

%

 

 

9.6

%

Q3 2023 Organic Revenue - YTD

(in thousands, except percentages)

U.S.

 

International

 

Market Development

 

Total Company

Total net revenues in first three quarters of fiscal 2023

$

808,938

 

 

$

358,653

 

 

$

67,608

 

 

$

1,235,199

 

Total net revenues in first three quarters of fiscal 2022

 

739,414

 

 

 

322,636

 

 

 

63,249

 

 

 

1,125,299

 

Total Net Revenues Growth

 

69,524

 

 

 

36,017

 

 

 

4,359

 

 

 

109,900

 

Total Net Revenues Growth %

 

9.4

%

 

 

11.2

%

 

 

6.9

%

 

 

9.8

%

Less: Impact of shop optimization program closures

 

(9,613

)

 

 

—

 

 

 

—

 

 

 

(9,613

)

Less: Impact of Branded Sweet Treats exit

 

(15,736

)

 

 

—

 

 

 

—

 

 

 

(15,736

)

Adjusted net revenues in first three quarters of fiscal 2022

 

714,065

 

 

 

322,636

 

 

 

63,249

 

 

 

1,099,950

 

Adjusted net revenue growth

 

94,873

 

 

 

36,017

 

 

 

4,359

 

 

 

135,249

 

Impact of acquisitions

 

(7,678

)

 

 

—

 

 

 

2,227

 

 

 

(5,451

)

Impact of foreign currency translation

 

—

 

 

 

(118

)

 

 

—

 

 

 

(118

)

Organic Revenue Growth

$

87,195

 

 

$

35,899

 

 

$

6,586

 

 

$

129,680

 

Organic Revenue Growth %

 

12.2

%

 

 

11.1

%

 

 

10.4

%

 

 

11.8

%

 

Trailing Four Quarters Ended

 

Fiscal Year Ended

(in thousands, unless otherwise stated)

September 29, 2024

 

December 31, 2023

 

January 1, 2023

U.S.:

 

 

 

 

 

Revenues

$

1,109,621

 

 

$

1,104,944

 

 

$

1,010,250

 

Non-Fresh Revenues (1)

 

(3,857

)

 

 

(9,416

)

 

 

(38,380

)

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

 

(360,354

)

 

 

(399,061

)

 

 

(404,430

)

Sales from Hubs with Spokes

 

745,410

 

 

 

696,467

 

 

 

567,440

 

Sales per Hub (millions)

 

4.9

 

 

 

4.9

 

 

 

4.5

 

 

 

 

 

 

 

International:

 

 

 

 

 

Sales from Hubs with Spokes (3)

$

511,694

 

 

$

489,631

 

 

$

435,651

 

Sales per Hub (millions) (4)

 

10.1

 

 

 

10.0

 

 

 

9.7

 

(1)

Includes the exited Branded Sweet Treats business revenues as well as licensing royalties from customers for use of the Krispy Kreme brand.

(2)

Includes Insomnia Cookies revenues (through the date of the divestiture) 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

 

September 29, 2024

 

October 1, 2023

 

December 31, 2023

U.S.:

 

 

 

 

 

Hot Light Theater Shops

236

 

229

 

229

Fresh Shops

71

 

65

 

70

Cookie Bakeries (3)

—

 

249

 

267

DFD Doors (2)

7,711

 

6,506

 

6,808

Total

8,018

 

7,049

 

7,374

International:

 

 

 

 

 

Hot Light Theater Shops

48

 

45

 

44

Fresh Shops

508

 

479

 

483

Carts, Food Trucks, and Other (1)

17

 

16

 

16

DFD Doors

4,867

 

3,588

 

3,977

Total

5,440

 

4,128

 

4,520

Market Development:

 

 

 

 

 

Hot Light Theater Shops

110

 

113

 

116

Fresh Shops

1,059

 

920

 

968

Carts, Food Trucks, and Other (1)

30

 

29

 

30

DFD Doors

1,154

 

1,155

 

1,139

Total

2,353

 

2,217

 

2,253

Total Global Points of Access (as defined)

15,811

 

13,394

 

14,147

Total Hot Light Theater Shops

394

 

387

 

389

Total Fresh Shops

1,638

 

1,464

 

1,521

Total Cookie Bakeries (3)

—

 

249

 

267

Total Shops

2,032

 

2,100

 

2,177

Total Carts, Food Trucks, and Other

47

 

45

 

46

Total DFD Doors

13,732

 

11,249

 

11,924

Total Global Points of Access (as defined)

15,811

 

13,394

 

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.

(3)

Reflects the divestiture of Insomnia Cookies during the quarter ended September 29, 2024.

Krispy Kreme, Inc.

Global Hubs (Unaudited)

 

 

Hubs

 

Quarter Ended

 

Fiscal Year Ended

 

September 29, 2024

 

October 1, 2023

 

December 31, 2023

U.S.:

 

 

 

 

 

Hot Light Theater Shops (1)

230

 

222

 

220

Doughnut Factories

6

 

4

 

4

Total

236

 

226

 

224

Hubs with Spokes

152

 

148

 

149

Hubs without Spokes

84

 

78

 

75

International:

 

 

 

 

 

Hot Light Theater Shops (1)

39

 

36

 

36

Doughnut Factories

14

 

14

 

14

Total

53

 

50

 

50

Hubs with Spokes

53

 

50

 

50

Market Development:

 

 

 

 

 

Hot Light Theater Shops (1)

108

 

109

 

112

Doughnut Factories

26

 

23

 

23

Total

134

 

132

 

135

Total Hubs

423

 

408

 

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)

 

 

September 29, 2024

 

December 31, 2023

Current portion of long-term debt

$

47,577

 

 

$

54,631

 

Long-term debt, less current portion

 

804,638

 

 

 

836,615

 

Total long-term debt, including debt issuance costs

 

852,215

 

 

 

891,246

 

Add back: Debt issuance costs

 

3,584

 

 

 

4,371

 

Total long-term debt, excluding debt issuance costs

 

855,799

 

 

 

895,617

 

Less: Cash and cash equivalents

 

(25,410

)

 

 

(38,185

)

Net debt

$

830,389

 

 

$

857,432

 

Adjusted EBITDA - trailing four quarters

 

211,754

 

 

 

211,624

 

Net leverage ratio

3.9

x

 

4.1

x

 

View source version on businesswire.com: https://www.businesswire.com/news/home/20241106595255/en/

Investor Relations ir@krispykreme.com

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