Third quarter net revenue grew 10.1% compared to Q3 2021 Organic revenue growth accelerated to 12.0% Added 294 Points of Access in Q3 and 1,276 year to date, exceeding our full year target Reiterating 2022 Guidance with strong momentum to start Q4

Krispy Kreme, Inc. (NASDAQ: DNUT) (“Krispy Kreme” or the “Company”) today reported financial results for the third quarter ended October 2, 2022 with net revenue growing 10.1% year-over-year to $377.5 million, or 13.4% in constant currency, while organic revenue grew 12.0%. Foreign currency translation resulted in a negative 3.3% impact on net revenue growth during the third quarter due to the strength of the U.S. dollar. Sales per Hub in the U.S. and Canada increased by 18.4% year-over-year to $4.5 million while International Sales per Hub grew 16.3% to $10.0 million.

Organic growth was driven by the solid performance and expansion of Krispy Kreme’s omni-channel model, with a 17% increase in Global Points of Access and strong organic revenue growth in all three business segments in our seasonally low quarter. Global Points of Access, which reflect all locations where fresh doughnuts and cookies can be purchased, increased by 294 during the quarter, providing consumers access to Krispy Kreme in more than 11,700 locations around the world.

GAAP Net Loss for the quarter was $11.8 million with Adjusted Net Income of $5.9 million. GAAP Loss per Share for the quarter was ($0.08) while Adjusted Diluted EPS was $0.03 for the quarter. Adjusted EBITDA in the third quarter was $38.5 million, which included approximately $3.1 million negative impact from the strong U.S. dollar.

Commenting on the Company’s performance, President and CEO Mike Tattersfield stated, “We were pleased with our strong organic revenue growth in the third quarter, led by an acceleration in growth in the U.S. and Canada and Market Development. Margins improved significantly in the final period of the quarter as we successfully implemented price increases in the U.S. coupled with decreased promotional activity after Labor Day. Strong momentum continues into the fourth quarter enhanced by further recent pricing actions in the U.S. and U.K. and a robust global Halloween performance.”

Mike continued, “Our international expansion strategy is progressing at a healthy pace. Just recently we opened in Jordan and announced a joint venture to enter into France in 2023. We are excited to also announce a new development agreement to open in Jamaica next year, bringing our total development deals signed in 2022 to 7 international countries, representing over 5,000 new potential points of access.”

Financial Highlights

$ in millions, except per share data

 

Q3 2022

 

vs Q3 2021

 

Q1-Q3 2022

 

vs Q1-Q3 2021

Net Revenue

 

$377.5

 

+10.1%

 

$1,125.3

 

+11.0%

Organic Revenue(1)

 

$384.1

 

+12.0%

 

$1,134.3

 

+11.9%

GAAP Net (Loss)/Income

 

($11.8)

 

($8.1)

 

($7.8)

 

$11.3

Adjusted Net Income(1)

 

$5.9

 

($6.8)

 

$36.6

 

($14.1)

Operating (Loss)/Income

 

($1.0)

 

($2.9)

 

$23.8

 

($0.9)

Operating (Loss)/Income Margin

 

(0.3%)

 

-80 bps

 

2.1%

 

-30 bps

Adjusted EBITDA(1)

 

$38.5

 

($2.9)

 

$134.8

 

($5.4)

Adjusted EBITDA Margin(1)

 

10.2%

 

-190 bps

 

12.0%

 

-180 bps

GAAP Diluted Income/(Loss) Per Share

 

($0.08)

 

($0.04)

 

($0.08)

 

+$0.12

Adjusted Diluted EPS(1)

 

$0.03

 

($0.03)

 

$0.18

 

($0.11)

Net Debt

 

$753.3

 

+10.7%

 

 

 

 

Notes:

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

Key Operating Metrics

$ in millions, except access points

 

Q3 2022

 

vs Q3 2021

 

vs Q2 2022

Global Points of Access

 

11,703

 

+16.6%

 

+2.6%

Sales per Hub (U.S. and Canada) TTM

 

$4.5

 

+18.4%

 

+2.3%

Sales per Hub (International) TTM

 

$10.0

 

+16.3%

 

+2.0%

Ecommerce as a Percent of Retail Sales

 

18.5%

 

+170 bps

 

+100 bps

Third quarter 2022 Consolidated Results

Net revenue grew 10.1% in the third quarter to $377.5 million, or 13.4% in constant currency, and organic revenue grew 12.0% in the quarter. Organic revenue growth was driven by strong performances in our Hubs with Spokes, both domestically and internationally, leveraging a 16.6% increase in points of access from a year ago, and robust Ecommerce revenue growth.

GAAP Net Loss for the quarter was $11.8 million, compared to a GAAP Net Loss of $3.8 million in the third quarter of 2021. Adjusted EBITDA in the quarter declined 6.9% to $38.5 million, due to an approximately $3.1 million negative impact from the strength of the U.S. dollar, higher promotional activity from the Beat the Pump promotion in the US through Labor Day and increased labor and commodity costs. Operating margins declined 80 basis points to -0.3%, while Adjusted EBITDA margin declined 190 basis points to 10.2% from the same quarter in 2021 driven by margin declines in our International segment and FX headwinds. However, Adjusted EBITDA margins improved significantly as the quarter progressed and were higher in the final period of the third quarter compared to a year ago.

Adjusted Net Income for the quarter declined 53.5% to $5.9 million compared to the same quarter in 2021. GAAP Diluted Net Loss per share in the quarter was ($0.08) compared to a net loss of ($0.04) in the same quarter last year with Adjusted Diluted EPS decreasing to $0.03 from $0.06 in the third quarter of 2021.

Diluted weighted average shares outstanding for the third quarter of 2022 were 169.3 million, compared to 168.1 million in the third quarter of 2021.

Third Quarter Market Segment Results

U.S. and Canada: In the U.S. and Canada segment net revenue in the third quarter of 2022 grew 11.9% to $252.6 million, driven by the continued execution of our omni-channel strategy, including our Pumpkin Spice limited time offering across all channels including Branded Sweet Treats, Hubs with Spokes strength and Insomnia Cookies. Organic revenue increased 8.9% driven by increased points of access and successful price increases in retail locations in July and Delivered Fresh Daily (“DFD”) doors in September. Points of Access increased by 206 in quarter to 6,259 and represents a 9.4% increase in Points of Access from a year ago.

U.S. and Canada Adjusted EBITDA increased 10.0% to $21.9 million in the third quarter of 2022 compared to the third quarter of 2021 with a slight Adjusted EBITDA margin decline of 10 basis points to 8.7%. Hub and Spoke efficiency and a strong performance from Insomnia offset inflationary pressures, higher promotional activity in the first two periods of the third quarter and margin erosion at Hubs without Spokes. Adjusted EBITDA margins improved significantly as the quarter progressed, including strong margin expansion in September over the prior year, as promotional activity returned to normal levels and sales remained robust. This momentum has continued in the fourth quarter. Also during the third quarter, we closed 8 underperforming Hubs without Spokes that were previously announced.

International: In the International segment, net revenue grew 5.4% to $91.9 million, with organic growth of 15.5%. Organic growth in the quarter was driven by strong growth in Mexico, Australia and New Zealand. Points of Access increased by 14 to 3,439, or 548 year to date. Foreign currency translation had a negative 10.1% impact on our International net revenue growth during the quarter.

International Adjusted EBITDA declined 15.7% to $18.3 million in the third quarter over the same period of the prior year, due to a $2.4 million impact from the higher U.S. dollar as well as a continued challenging environment in the U.K. Adjusted EBITDA for Mexico and Australia & New Zealand markets grew 18.1% in the third quarter compared to the same period in the prior year. International Adjusted EBITDA margin was 19.9% in the third quarter, down 490 basis points compared the same period last year due to reduced margins in the U.K. from lower organic revenue growth and elevated inflation.

Market Development: In the Market Development segment, net revenue increased 10.9% to $33.0 million driven by a 32.7% increase in Points of Access compared to the prior year to 2,005, partially offset by franchise acquisitions and an 8.6% adverse impact from foreign currency exchange. Organic revenue growth accelerated to 26.0% compared to the same period in 2021 driven by a strong performance in our franchise markets, including South Korea and India, and our equity-owned Japan market where the Company is implementing its omni-channel model with the expansion of Ecommerce and the launch of DFD. Points of Access in the quarter increased by 74 and 192 year to date.

Market Development Adjusted EBITDA grew 14.6% to $10.4 million in the third quarter of 2022, with strong organic revenue growth partially offset by domestic franchise acquisitions and a foreign currency impact of negative $0.7 million. Adjusted EBITDA margins increased 100 basis points to 31.4% in the quarter.

The Company has signed development agreements in 2022 with franchise partners to open in Switzerland, Costa Rica, Jordan, Jamaica and Chile as well as a joint venture in France and a new partner in Turkey.

Balance Sheet & Capital Expenditures

During the third quarter of 2022, the company invested $23.5 million in capital expenditures, or 6.2% of revenue. For the first three quarters of 2022, the Company invested $75.0 million in capital expenditures, or 6.7% of revenue.

As of July 3, 2022, the Company had $28.1 million of cash and cash equivalents, $750.5 million of bank debt and $30.9 million of other debt-like items, for a total net debt of $753.3 million.

2022 Financial Outlook

Krispy Kreme re-iterates its guidance for the full year 2022 as follows:

  • Net Revenue of $1.49 billion to $1.52 billion
  • Organic Revenue growth of 10% to 12%
  • Adjusted EBITDA of $189 million to $195 million
  • Adjusted Net Income to Krispy Kreme shareholders, diluted, of $49 million to $54 million
  • Adjusted Diluted EPS of $0.29 to $0.32
  • Approximately 170 million weighted average Diluted shares outstanding
  • Adjusted Income Tax rate between 23% and 25%
  • Capital Expenditures between $105 million to $110 million (approximately 7% of revenue)
  • Net Leverage of approximately 3.6x, including the short-term impact from the U.S. Midwest franchise acquisition and FX headwinds, with a goal of 3.0x by the end of 2023

The Company’s guidance includes an Adjusted EBITDA impact of approximately negative $10 to $12 million from foreign currency translation and input costs as a result of the strengthening of the U.S. dollar or approximately negative $0.05 per Diluted share. At current exchange rates, we expect to come in near the high end of the estimated impact range for 2022.

December Investor Day

Krispy Kreme previously announced it will host an Investor Day on December 15, 2022 at its headquarters in Charlotte, NC and virtually via webcast. The Company will provide further detail on our strategic vision and long-term growth goals and introduce our initial 2023-2026 outlook. To register for the event, please refer to the Events section of the Krispy Kreme’s Investor Relations website.

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 2022. The conference call can be accessed by dialing 1 (800) 599-5188 and entering the conference ID 5487868. International participants can access the call via the corresponding number listed here and entering the conference ID 5487868. 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.

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, Food Trucks and Other, 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 Ecommerce and delivery), as well as DFD sales, but excluding sales from our legacy wholesale business and our Branded Sweet Treat Line. 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, Food Trucks and Other, and/or DFD Doors, but excluding Fresh Revenues derived from those Hubs not currently producing product for other shops, Carts, Food Trucks and Other, and/or DFD Doors.
  • Total Net Leverage Ratio: Calculated using Net Debt (including both bank debt and financing leases as part of debt) divided by Adjusted EBITDA.
  • Free Cash Flow: Defined as cash provided by operating activities less purchases of property and equipment.

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 over 30 countries through its unique network of fresh doughnut shops, partnerships with leading retailers, and a rapidly growing Ecommerce and delivery business with more than 11,000 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 “believe,” “may,” “could,” “will,” “should,” “anticipate,” “estimate,” “expect,” “outlook,” “guidance,” “working towards” 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 January 2, 2022, 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, Adjusted Diluted EPS, 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.

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

 

 

October 2, 2022 (13 weeks)

 

October 3, 2021 (13 weeks)

 

October 2, 2022 (39 weeks)

 

October 3, 2021 (39 weeks)

Net revenues

 

 

 

 

 

 

 

 

Product sales

 

$

370,216

 

 

$

334,324

 

 

$

1,102,045

 

 

$

989,132

 

Royalties and other revenues

 

 

7,306

 

 

 

8,475

 

 

 

23,254

 

 

 

24,662

 

Total net revenues

 

 

377,522

 

 

 

342,799

 

 

 

1,125,299

 

 

 

1,013,794

 

Product and distribution costs

 

 

102,870

 

 

 

92,152

 

 

 

299,539

 

 

 

257,166

 

Operating expenses

 

 

177,592

 

 

 

157,315

 

 

 

520,260

 

 

 

462,733

 

Selling, general and administrative expense

 

 

54,801

 

 

 

52,950

 

 

 

160,266

 

 

 

163,417

 

Marketing expenses

 

 

10,995

 

 

 

12,062

 

 

 

32,369

 

 

 

31,621

 

Pre-opening costs

 

 

1,200

 

 

 

1,192

 

 

 

3,514

 

 

 

4,335

 

Other expenses/(income), net

 

 

2,964

 

 

 

(359

)

 

 

1,800

 

 

 

(4,365

)

Depreciation and amortization expense

 

 

28,127

 

 

 

25,663

 

 

 

83,782

 

 

 

74,258

 

Operating (loss)/income

 

 

(1,027

)

 

 

1,824

 

 

 

23,769

 

 

 

24,629

 

Interest expense, net

 

 

8,871

 

 

 

7,186

 

 

 

23,808

 

 

 

25,228

 

Interest expense — related party

 

 

 

 

 

 

 

 

 

 

 

10,387

 

Other non-operating expense/(income), net

 

 

1,648

 

 

 

732

 

 

 

2,083

 

 

 

(126

)

Loss before income taxes

 

 

(11,546

)

 

 

(6,094

)

 

 

(2,122

)

 

 

(10,860

)

Income tax expense/(benefit)

 

 

294

 

 

 

(2,342

)

 

 

5,668

 

 

 

8,266

 

Net loss

 

 

(11,840

)

 

 

(3,752

)

 

 

(7,790

)

 

 

(19,126

)

Net income attributable to noncontrolling interest

 

 

1,216

 

 

 

1,907

 

 

 

5,113

 

 

 

6,736

 

Net loss attributable to Krispy Kreme, Inc.

 

$

(13,056

)

 

$

(5,659

)

 

$

(12,903

)

 

$

(25,862

)

Net loss per share:

 

 

 

 

 

 

 

 

Common stock — Basic

 

$

(0.08

)

 

$

(0.04

)

 

$

(0.08

)

 

$

(0.20

)

Common stock — Diluted

 

$

(0.08

)

 

$

(0.04

)

 

$

(0.08

)

 

$

(0.20

)

Weighted average shares outstanding:

 

 

 

 

 

 

 

 

Basic

 

 

167,431

 

 

 

166,034

 

 

 

167,353

 

 

 

141,124

 

Diluted

 

 

167,431

 

 

 

166,034

 

 

 

167,353

 

 

 

141,124

 

Krispy Kreme, Inc.

Condensed Consolidated Balance Sheets

(in thousands, except per share amounts)

   

 

 

As of

 

 

(Unaudited) October 2, 2022

 

January 2, 2022

ASSETS

 

 

 

 

Current assets:

 

 

 

 

Cash and cash equivalents

 

$

28,096

 

 

$

38,562

 

Restricted cash

 

 

403

 

 

 

630

 

Accounts receivable, net

 

 

46,941

 

 

 

47,491

 

Inventories

 

 

49,406

 

 

 

34,851

 

Taxes receivable

 

 

16,537

 

 

 

14,662

 

Prepaid expense and other current assets

 

 

33,126

 

 

 

20,701

 

Total current assets

 

 

174,509

 

 

 

156,897

 

Property and equipment, net

 

 

450,954

 

 

 

438,918

 

Goodwill

 

 

1,074,241

 

 

 

1,105,322

 

Other intangible assets, net

 

 

966,358

 

 

 

992,520

 

Operating lease right of use asset, net

 

 

410,001

 

 

 

435,168

 

Other assets

 

 

25,788

 

 

 

16,429

 

Total assets

 

$

3,101,851

 

 

$

3,145,254

 

LIABILITIES AND SHAREHOLDERS’ EQUITY

 

 

 

 

Current liabilities:

 

 

 

 

Current portion of long-term debt

 

$

40,243

 

 

$

36,583

 

Current operating lease liabilities

 

 

45,551

 

 

 

50,359

 

Accounts payable

 

 

188,059

 

 

 

182,104

 

Accrued liabilities

 

 

111,818

 

 

 

140,750

 

Structured payables

 

 

123,331

 

 

 

116,361

 

Total current liabilities

 

 

509,002

 

 

 

526,157

 

Long-term debt, less current portion

 

 

738,504

 

 

 

680,307

 

Noncurrent operating lease liabilities

 

 

400,594

 

 

 

415,208

 

Deferred income taxes, net

 

 

140,244

 

 

 

145,418

 

Other long-term obligations and deferred credits

 

 

39,784

 

 

 

42,509

 

Total liabilities

 

 

1,828,128

 

 

 

1,809,599

 

Commitments and contingencies

 

 

 

 

Shareholders’ equity:

 

 

 

 

Common stock, $0.01 par value; 300,000 shares authorized as of both October 2, 2022 and January 2, 2022; 167,437 and 167,251 shares issued and outstanding as of October 2, 2022 and January 2, 2022, respectively

 

 

1,674

 

 

 

1,673

 

Additional paid-in capital

 

 

1,422,850

 

 

 

1,415,185

 

Shareholder note receivable

 

 

(4,812

)

 

 

(4,382

)

Accumulated other comprehensive loss, net of income tax

 

 

(37,380

)

 

 

(2,478

)

Retained deficit

 

 

(208,886

)

 

 

(178,409

)

Total shareholders’ equity attributable to Krispy Kreme, Inc.

 

 

1,173,446

 

 

 

1,231,589

 

Noncontrolling interest

 

 

100,277

 

 

 

104,066

 

Total shareholders’ equity

 

 

1,273,723

 

 

 

1,335,655

 

Total liabilities and shareholders’ equity

 

$

3,101,851

 

 

$

3,145,254

 

Krispy Kreme, Inc.

Condensed Consolidated Statements of Cash Flows (Unaudited)

(in thousands)

 

 

 

Three Quarters Ended

 

 

October 2, 2022 (39 weeks)

 

October 3, 2021 (39 weeks)

CASH FLOWS FROM OPERATING ACTIVITIES:

 

 

 

 

Net loss

 

$

(7,790

)

 

$

(19,126

)

Adjustments to reconcile net loss to net cash provided by operating activities:

 

 

 

 

Depreciation and amortization expense

 

 

83,782

 

 

 

74,258

 

Deferred income taxes

 

 

(10,259

)

 

 

9,168

 

Loss on extinguishment of debt

 

 

 

 

 

1,700

 

Impairment and lease termination charges

 

 

7,255

 

 

 

854

 

(Gain)/loss on disposal of property and equipment

 

 

(244

)

 

 

157

 

Gain on sale-leaseback

 

 

(4,311

)

 

 

 

Share-based compensation

 

 

13,318

 

 

 

16,973

 

Change in accounts and notes receivable allowances

 

 

378

 

 

 

133

 

Inventory write-off

 

 

388

 

 

 

2,983

 

Other

 

 

804

 

 

 

(315

)

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

 

 

(12,591

)

 

 

12,003

 

Net cash provided by operating activities

 

 

70,730

 

 

 

98,788

 

CASH FLOWS USED FOR INVESTING ACTIVITIES:

 

 

 

 

Purchase of property and equipment

 

 

(75,002

)

 

 

(83,485

)

Proceeds from disposals of assets

 

 

856

 

 

 

202

 

Proceeds from sale-leaseback

 

 

5,700

 

 

 

 

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

 

 

(17,335

)

 

 

(33,888

)

Purchase of equity method investment

 

 

(989

)

 

 

 

Other investing activities

 

 

(931

)

 

 

455

 

Net cash used for investing activities

 

 

(87,701

)

 

 

(116,716

)

CASH FLOWS FROM FINANCING ACTIVITIES:

 

 

 

 

Proceeds from the issuance of debt

 

 

121,500

 

 

 

670,000

 

Repayment of long-term debt and lease obligations

 

 

(70,180

)

 

 

(1,115,910

)

Payment of financing costs

 

 

 

 

 

(1,700

)

Proceeds from structured payables

 

 

219,459

 

 

 

194,927

 

Payments on structured payables

 

 

(211,778

)

 

 

(223,063

)

Payment of contingent consideration related to a business combination

 

 

(900

)

 

 

 

Capital contribution by shareholders, net of loans issued

 

 

(288

)

 

 

120,532

 

Proceeds from IPO, net of underwriting discounts (excluding unpaid issuance costs)

 

 

 

 

 

527,329

 

Payments of issuance costs in connection with IPO

 

 

(12,458

)

 

 

 

Proceeds from sale of noncontrolling interest in subsidiary

 

 

410

 

 

 

53,337

 

Distribution to shareholders

 

 

(17,570

)

 

 

(42,334

)

Payments for repurchase and retirement of common stock

 

 

(2,425

)

 

 

(138,501

)

Distribution to noncontrolling interest

 

 

(11,525

)

 

 

(17,257

)

Net cash provided by financing activities

 

 

14,245

 

 

 

27,360

 

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

 

 

(7,967

)

 

 

(1,827

)

Net (decrease)/increase in cash, cash equivalents and restricted cash

 

 

(10,693

)

 

 

7,605

 

Cash, cash equivalents and restricted cash at beginning of period

 

 

39,192

 

 

 

37,483

 

Cash, cash equivalents and restricted cash at end of period

 

$

28,499

 

 

$

45,088

 

Krispy Kreme, Inc.

Reconciliation of Non-GAAP Financial Measures (Unaudited)

(in thousands, except per share amounts)

   

 

 

Quarter Ended

 

Three Quarters Ended

 

 

October 2, 2022

 

October 3, 2021

 

October 2, 2022

 

October 3, 2021

Net loss

 

$

(11,840

)

 

$

(3,752

)

 

$

(7,790

)

 

$

(19,126

)

Interest expense, net

 

 

8,871

 

 

 

7,186

 

 

 

23,808

 

 

 

25,228

 

Interest expense — related party(1)

 

 

 

 

 

 

 

 

 

 

 

10,387

 

Income tax expense/(benefit)

 

 

294

 

 

 

(2,342

)

 

 

5,668

 

 

 

8,266

 

Depreciation and amortization expense

 

 

28,127

 

 

 

25,663

 

 

 

83,782

 

 

 

74,258

 

Share-based compensation

 

 

2,825

 

 

 

6,315

 

 

 

13,318

 

 

 

16,973

 

Employer payroll taxes related to share-based compensation

 

 

2

 

 

 

1,171

 

 

 

92

 

 

 

2,012

 

Other non-operating expense/(income), net(2)

 

 

1,648

 

 

 

732

 

 

 

2,083

 

 

 

(126

)

Acquisition and integration expenses(3)

 

 

790

 

 

 

1,288

 

 

 

1,389

 

 

 

3,663

 

Shop closure expenses(4)

 

 

5,735

 

 

 

 

 

 

7,859

 

 

 

 

Restructuring and severance expenses(5)

 

 

2,328

 

 

 

57

 

 

 

2,804

 

 

 

1,393

 

IPO-related expenses(6)

 

 

 

 

 

4,018

 

 

 

 

 

 

14,221

 

Gain on sale-leaseback

 

 

(1,937

)

 

 

 

 

 

(4,311

)

 

 

 

Other(7)

 

 

1,699

 

 

 

1,081

 

 

 

6,108

 

 

 

3,064

 

Adjusted EBITDA

 

$

38,542

 

 

$

41,417

 

 

$

134,810

 

 

$

140,213

 

 

 

Quarter Ended

 

Three Quarters Ended

 

 

October 2, 2022

 

October 3, 2021

 

October 2, 2022

 

October 3, 2021

Segment Adjusted EBITDA:

 

 

 

 

 

 

 

 

U.S. and Canada

 

$

21,896

 

 

$

19,912

 

 

$

81,521

 

 

$

75,760

 

International

 

 

18,254

 

 

 

21,655

 

 

 

55,033

 

 

 

60,676

 

Market Development

 

 

10,353

 

 

 

9,033

 

 

 

32,135

 

 

 

29,782

 

Corporate

 

 

(11,961

)

 

 

(9,183

)

 

 

(33,879

)

 

 

(26,005

)

Total Adjusted EBITDA

 

$

38,542

 

 

$

41,417

 

 

$

134,810

 

 

$

140,213

 

 

 

Quarter Ended

 

Three Quarters Ended

(in thousands, except per share amounts)

 

October 2, 2022

 

October 3, 2021

 

October 2, 2022

 

October 3, 2021

Net loss

 

$

(11,840

)

 

$

(3,752

)

 

$

(7,790

)

 

$

(19,126

)

Interest expense — related party(1)

 

 

 

 

 

 

 

 

 

 

 

10,387

 

Share-based compensation

 

 

2,825

 

 

 

6,315

 

 

 

13,318

 

 

 

16,973

 

Employer payroll taxes related to share-based compensation

 

 

2

 

 

 

1,171

 

 

 

92

 

 

 

2,012

 

Other non-operating expense/(income), net(2)

 

 

1,648

 

 

 

732

 

 

 

2,083

 

 

 

(126

)

Acquisition and integration expenses(3)

 

 

790

 

 

 

1,288

 

 

 

1,389

 

 

 

3,663

 

Shop closure expenses(4)

 

 

5,735

 

 

 

 

 

 

8,109

 

 

 

 

Restructuring and severance expenses(5)

 

 

2,328

 

 

 

57

 

 

 

2,804

 

 

 

1,393

 

IPO-related expenses(6)

 

 

 

 

 

4,018

 

 

 

 

 

 

14,221

 

Gain on sale-leaseback

 

 

(1,937

)

 

 

 

 

 

(4,311

)

 

 

 

Other(7)

 

 

1,699

 

 

 

1,081

 

 

 

6,108

 

 

 

3,064

 

Amortization of acquisition related intangibles(8)

 

 

7,083

 

 

 

7,497

 

 

 

21,307

 

 

 

22,573

 

KKI Term Loan Facility interest and debt issuance costs(9)

 

 

 

 

 

107

 

 

 

 

 

 

2,448

 

Tax impact of adjustments(10)

 

 

(2,470

)

 

 

(5,784

)

 

 

(5,889

)

 

 

(10,604

)

Tax specific adjustments(11)

 

 

 

 

 

(114

)

 

 

(628

)

 

 

3,833

 

Adjusted net income

 

$

5,863

 

 

$

12,616

 

 

$

36,592

 

 

$

50,711

 

Net income attributable to noncontrolling interest

 

 

(1,216

)

 

 

(1,907

)

 

 

(5,113

)

 

 

(6,736

)

Adjusted net income attributable to Krispy Kreme, Inc.

 

$

4,647

 

 

$

10,709

 

 

$

31,479

 

 

$

43,975

 

Adjustment to adjusted net income attributable to common shareholders

 

 

 

 

 

(522

)

 

 

(374

)

 

 

(1,815

)

Adjusted net income attributable to common shareholders - Basic

 

$

4,647

 

 

$

10,187

 

 

$

31,105

 

 

$

42,160

 

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

 

 

(76

)

 

 

(88

)

 

 

(174

)

 

 

(237

)

Adjusted net income attributable to common shareholders - Diluted

 

$

4,571

 

 

$

10,099

 

 

$

30,931

 

 

$

41,923

 

Basic weighted average common shares outstanding

 

 

167,431

 

 

 

166,034

 

 

 

167,353

 

 

 

141,124

 

Dilutive effect of outstanding common stock options and RSUs

 

 

1,822

 

 

 

2,041

 

 

 

2,006

 

 

 

2,937

 

Diluted weighted average common shares outstanding

 

 

169,253

 

 

 

168,075

 

 

 

169,359

 

 

 

144,061

 

Adjusted net income per share attributable to common shareholders:

 

 

 

 

 

 

 

 

Basic

 

$

0.03

 

 

$

0.06

 

 

$

0.19

 

 

$

0.30

 

Diluted

 

$

0.03

 

 

$

0.06

 

 

$

0.18

 

 

$

0.29

 

(1)

 

Consists of interest expense related to the Related Party Notes which were paid off in full during the quarter ended July 4, 2021.

(2)

 

Primarily foreign translation gains and losses in each period.

(3)

 

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

(4)

 

Includes lease termination costs, impairment charges, and loss on disposal of property, plant and equipment. Shop closure expenses included in Adjusted Net Income for the three quarters ended October 2, 2022 are inclusive of accelerated depreciation related to replacing a point of sale system.

(5)

 

The quarter and three quarters ended October 2, 2022 consist of costs associated with restructuring of the global executive team. The quarter and three quarters ended October 3, 2021 consist of severance and related benefits costs associated with the Company’s realignment of the Company shop organizational structure to better support the DFD and Branded Sweet Treat Line businesses.

(6)

 

Includes consulting and advisory fees incurred in connection with preparation for and execution of the Company’s IPO.

(7)

 

The quarter and three quarters ended October 2, 2022 and October 3, 2021 consist primarily of legal expenses incurred outside the ordinary course of business, including the net settlement of approximately $3.3 million negotiated with TSW Foods, LLC.

(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 expense and debt issuance costs incurred and recognized as expenses in connection with the extinguishment of the KKI Term Loan Facility within four business days of receipt of the net proceeds from the IPO.

(10)

 

Tax impact of adjustments calculated applying the applicable statutory rates. The quarter and three quarters ended October 2, 2022 also include the impact of disallowed executive compensation expense and a discrete tax benefit related to a legal accrual.

(11)

 

The three quarters ended October 2, 2022 consist of the recognition of a previously unrecognized tax benefit unrelated to ongoing operations. The three quarters ended October 3, 2021 consist primarily of the effect of tax law changes on existing temporary differences.

Krispy Kreme, Inc.

Segment Reporting (Unaudited)

(in thousands except percentages)

 

 

 

Quarter Ended

 

Three Quarters Ended

 

 

October 2, 2022

 

October 3, 2021

 

October 2, 2022

 

October 3, 2021

Net revenues:

 

 

 

 

 

 

 

 

U.S. and Canada

 

$

252,609

 

$

225,807

 

$

756,196

 

$

679,195

International

 

 

91,934

 

 

87,262

 

 

272,988

 

 

243,005

Market Development

 

 

32,979

 

 

29,730

 

 

96,115

 

 

91,594

Total net revenues

 

$

377,522

 

$

342,799

 

$

1,125,299

 

$

1,013,794

Q3 2022 Organic Revenue (1) - QTD

 

U.S. and Canada

 

International

 

Market Development

 

Total Company

Total net revenues in third quarter of fiscal 2022

 

$

252,609

 

 

$

91,934

 

 

$

32,979

 

 

$

377,522

 

Total net revenues in third quarter of fiscal 2021

 

 

225,807

 

 

 

87,262

 

 

 

29,730

 

 

 

342,799

 

Total Net Revenues Growth

 

 

26,802

 

 

 

4,672

 

 

 

3,249

 

 

 

34,723

 

Total Net Revenues Growth %

 

 

11.9

%

 

 

5.4

%

 

 

10.9

%

 

 

10.1

%

Impact of acquisitions

 

 

(6,809

)

 

 

 

 

 

1,917

 

 

 

(4,892

)

Impact of foreign currency translation

 

 

 

 

 

8,890

 

 

 

2,564

 

 

 

11,454

 

Organic Revenue Growth

 

$

19,993

 

 

$

13,562

 

 

$

7,730

 

 

$

41,285

 

Organic Revenue Growth %

 

 

8.9

%

 

 

15.5

%

 

 

26.0

%

 

 

12.0

%

 

(1) Organic revenue is total net revenue adjusted for the impact of acquisitions and foreign currency translation.

Q3 2022 Organic Revenue - YTD  

U.S. and Canada

 

International

 

Market Development

 

Total Company

Total net revenues in first three quarters of fiscal 2022

 

$

756,196

 

 

$

272,988

 

 

$

96,115

 

 

$

1,125,299

 

Total net revenues in first three quarters of fiscal 2021

 

 

679,195

 

 

 

243,005

 

 

 

91,594

 

 

 

1,013,794

 

Total Net Revenues Growth

 

 

77,001

 

 

 

29,983

 

 

 

4,521

 

 

 

111,505

 

Total Net Revenues Growth %

 

 

11.3

%

 

 

12.3

%

 

 

4.9

%

 

 

11.0

%

Impact of acquisitions

 

 

(21,738

)

 

 

 

 

 

6,130

 

 

 

(15,608

)

Impact of foreign currency translation

 

 

 

 

 

18,843

 

 

 

5,769

 

 

 

24,612

 

Organic Revenue Growth

 

$

55,263

 

 

$

48,826

 

 

$

16,420

 

 

$

120,509

 

Organic Revenue Growth %

 

 

8.1

%

 

 

20.1

%

 

 

17.9

%

 

 

11.9

%

Q3 2021 Organic Revenue - QTD

 

U.S. and Canada

 

International

 

Market Development

 

Total Company

Total net revenues in third quarter of fiscal 2021

 

$

225,807

 

 

$

87,262

 

 

$

29,730

 

 

$

342,799

 

Total net revenues in third quarter of fiscal 2020

 

 

202,575

 

 

 

63,504

 

 

 

24,154

 

 

 

290,233

 

Total Net Revenues Growth

 

 

23,232

 

 

 

23,758

 

 

 

5,576

 

 

 

52,566

 

Total Net Revenues Growth %

 

 

11.5

%

 

 

37.4

%

 

 

23.1

%

 

 

18.1

%

Impact of acquisitions

 

 

(27,928

)

 

 

 

 

 

(1,195

)

 

 

(29,123

)

Impact of foreign currency translation

 

 

 

 

 

(5,305

)

 

 

 

 

 

(5,305

)

Organic Revenue Growth

 

$

(4,696

)

 

$

18,453

 

 

$

4,381

 

 

$

18,138

 

Organic Revenue Growth %

 

 

-2.3

%

 

 

29.1

%

 

 

18.1

%

 

 

6.2

%

Q3 2021 Organic Revenue - YTD

 

U.S. and Canada

 

International

 

Market Development

 

Total Company

Total net revenues in first three quarters of fiscal 2021

 

$

679,195

 

 

$

243,005

 

 

$

91,594

 

 

$

1,013,794

 

Total net revenues in first three quarters of fiscal 2020

 

 

557,280

 

 

 

158,575

 

 

 

80,566

 

 

 

796,421

 

Total Net Revenues Growth

 

 

121,915

 

 

 

84,430

 

 

 

11,028

 

 

 

217,373

 

Total Net Revenues Growth %

 

 

21.9

%

 

 

53.2

%

 

 

13.7

%

 

 

27.3

%

Impact of acquisitions

 

 

(99,062

)

 

 

 

 

 

(1,584

)

 

 

(100,646

)

Impact of foreign currency translation

 

 

 

 

 

(21,767

)

 

 

 

 

 

(21,767

)

Organic Revenue Growth

 

$

22,853

 

 

$

62,663

 

 

$

9,444

 

 

$

94,960

 

Organic Revenue Growth %

 

 

4.1

%

 

 

39.5

%

 

 

11.7

%

 

 

11.9

%

Sales per Hub

 

Trailing Four Quarters Ended

 

Fiscal Year Ended

 

October 2, 2022

 

January 2, 2022

 

January 3, 2021

U.S. and Canada:

 

 

 

 

 

 

Revenues

 

$

1,005,414

 

 

$

928,413

 

 

$

782,717

 

Non-Fresh Revenues (1)

 

 

(39,148

)

 

 

(37,311

)

 

 

(128,619

)

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

 

 

(402,544

)

 

 

(415,768

)

 

 

(323,079

)

Sales from Hubs with Spokes

 

 

563,722

 

 

 

475,334

 

 

 

331,019

 

Sales per Hub (millions)

 

 

4.5

 

 

 

4.0

 

 

 

3.5

 

 

 

 

 

 

 

 

International:

 

 

 

 

 

 

Sales from Hubs with Spokes (3)

 

$

362,978

 

 

$

332,995

 

 

$

230,185

 

Sales per Hub (millions)

 

 

10.0

 

 

 

9.1

 

 

 

6.4

 

(1)

 

Includes legacy wholesale business revenues and Branded Sweet Treat Line 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.

Krispy Kreme, Inc.

Global Points of Access

(Unaudited)

   

 

 

Global Points of Access (1)

 

 

Quarter Ended

 

Fiscal Year Ended

 

 

October 2, 2022

 

October 3, 2021

 

January 2, 2022

U.S. and Canada: (2)

 

 

 

 

 

 

Hot Light Theater Shops

 

244

 

238

 

241

Fresh Shops

 

67

 

57

 

66

Cookie Shops

 

227

 

206

 

210

Carts, Food Trucks, and Other (3)

 

1

 

 

2

DFD Doors

 

5,720

 

5,220

 

5,204

Total

 

6,259

 

5,721

 

5,723

International:

 

 

 

 

 

 

Hot Light Theater Shops

 

35

 

30

 

32

Fresh Shops

 

384

 

363

 

370

Carts, Food Trucks, and Other (3)

 

12

 

1

 

1

DFD Doors

 

3,008

 

2,415

 

2,488

Total

 

3,439

 

2,809

 

2,891

Market Development: (4)

 

 

 

 

 

 

Hot Light Theater Shops

 

107

 

113

 

109

Fresh Shops

 

803

 

761

 

782

Carts, Food Trucks, and Other (3)

 

29

 

30

 

31

DFD Doors

 

1,066

 

607

 

891

Total

 

2,005

 

1,511

 

1,813

Total Global Points of Access (as defined)

 

11,703

 

10,041

 

10,427

Total Hot Light Theater Shops

 

386

 

381

 

382

Total Fresh Shops

 

1,254

 

1,181

 

1,218

Total Cookie Shops

 

227

 

206

 

210

Total Shops

 

1,867

 

1,768

 

1,810

Total Carts, Food Trucks, and Other

 

42

 

31

 

34

Total DFD Doors

 

9,794

 

8,242

 

8,583

Total Global Points of Access (as defined)

 

11,703

 

10,041

 

10,427

(1)

 

Excludes Branded Sweet Treat Line distribution points.

(2)

 

Includes Points of Access that were acquired from a franchisee in Canada during the fourth quarter of fiscal 2021. These Points of Access were previously included in the Market Development segment.

(3)

 

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 as of October 2, 2022. Points of Access in this category are primarily found in international locations, in airports, train stations, etc. Comparative data has been included in all periods presented above.

(4)

 

Includes locations in Japan which are Company-owned. All remaining Points of Access in the Market Development segment relate to our franchise business.

Krispy Kreme, Inc.

Global Hubs

(Unaudited)

   

 

 

Hubs

 

 

Quarter Ended

 

Fiscal Year Ended

 

 

October 2, 2022

 

October 3, 2021

 

January 2, 2022

U.S. and Canada:

 

 

 

 

 

 

Hot Light Theater Shops (1)

 

241

 

234

 

238

Doughnut Factories

 

4

 

4

 

4

Total

 

245

 

238

 

242

Hubs with Spokes

 

129

 

121

 

126

International:

 

 

 

 

 

 

Hot Light Theater Shops (1)

 

26

 

25

 

25

Doughnut Factories

 

11

 

10

 

11

Total

 

37

 

35

 

36

Hubs with Spokes

 

37

 

35

 

36

Market Development:

 

 

 

 

 

 

Hot Light Theater Shops (1)

 

103

 

111

 

106

Doughnut Factories

 

26

 

26

 

27

Total

 

129

 

137

 

133

Total Hubs

 

411

 

410

 

411

(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)

 

October 2, 2022

 

January 2, 2022

Current portion of long-term debt

 

$

40,243

 

 

$

36,583

 

Long-term debt, less current portion

 

 

738,504

 

 

 

680,307

 

Total long-term debt, including debt issuance costs

 

 

778,747

 

 

 

716,890

 

Add back: Debt issuance costs

 

 

2,644

 

 

 

3,833

 

Total long-term debt, excluding debt issuance costs

 

 

781,391

 

 

 

720,723

 

Less: Cash and cash equivalents

 

 

(28,096

)

 

 

(38,562

)

Net debt

 

$

753,295

 

 

$

682,161

 

Adjusted EBITDA - trailing four quarters

 

 

182,542

 

 

 

187,945

 

Net leverage ratio

 

4.1 x

 

3.6 x

 

Investor Relations Rob Ballew, VP of Investor Relations rballew@krispykreme.com

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

Krispy Kreme (NASDAQ:DNUT)
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