Krispy Kreme Reports Robust Third Quarter 2021 Results, with Strong Momentum into Q4

Rhea-AI Summary

Krispy Kreme (NASDAQ: DNUT) reported strong Q3 2021 results, with net revenue increasing 18% year-over-year to $342.8 million. Organic revenue growth, excluding the legacy wholesale business, was 14%, with global points of access expanding 46% to over 10,000 locations. Adjusted EBITDA rose 10% to $41.4 million, driven by operational efficiencies. The company announced a 40% reduction in net debt to $681 million and reaffirmed its full-year 2021 guidance, expecting revenue between $1.34 billion and $1.38 billion. CEO Mike Tattersfield highlighted momentum heading into the holiday season.

Positive

• Net revenue increased by 18% YoY to $342.8 million.
• Organic growth of 14% YoY, excluding legacy wholesale business.
• Global points of access grew by 46% YoY, exceeding 10,000 locations.
• Adjusted EBITDA increased to $41.4 million, up 10%.
• Net debt reduced by 40% to $681 million.
• Full-year 2021 guidance reaffirmed with expected revenue growth of 19.4% to 23.0%.

Negative

• GAAP net loss of $3.8 million, affected by IPO and acquisition expenses.
• Adjusted diluted EPS decreased from $0.08 to $0.06 YoY.

Company Reaffirms Full Year 2021 Guidance and Long-Term Outlook

2022 Expected to Exceed Long-Term Outlook

CHARLOTTE, N.C.--(BUSINESS WIRE)-- Krispy Kreme, Inc. (NASDAQ: DNUT) (“Krispy Kreme” or the “Company”) today reported strong financial results for the third quarter ended October 3, 2021 with net revenue growing 18% year-over-year. Organic growth, excluding the now fully exited legacy wholesale business, was 14% year-over-year and 22% on a two-year basis. Including the exited business, organic growth was 6% year-over-year, in line with company expectations after lapping a strong third quarter in 2020.

Growth was driven by the performance and expansion of Krispy Kreme’s signature capital-efficient hub and spoke operating model. Global Points of Access, which reflect all locations where fresh doughnuts and cookies can be purchased, have grown 46% year-over-year, providing customers access to Krispy Kreme in more than 10,000 locations around the world. International Sales per Hub have grown 31% in the quarter year-over-year while U.S. and Canada Sales per Hub have grown 15%. In addition, ecommerce represented 17% of global retail sales in the third quarter.

Adjusted diluted Earnings Per Share was $0.06 in line with our expectations while GAAP diluted Loss Per Share which included IPO and acquisition related expenses was ($0.04). Adjusted EBITDA grew 10% in the quarter, driven by the strength and efficiency of the Company’s fresh doughnut hub and spoke operating model. The economies of scale from adding over 3,000 Global Points of Access in the last 12 months, as well as a successful price increase in September, are already helping to offset wage and commodity inflation, with more of an impact of the price increase to come in the fourth quarter.

Net debt decreased 40% to $681 million from the end of the second quarter as a result of proceeds from the IPO and positive free cash flow generated during the third quarter. Current net leverage is now 3.7x. Including the impact of acquiring the Krispy Kreme Canada franchise operations in the fourth quarter, the company expects net leverage to be under 3.0x in the next 12 months.

Commenting on the performance, CEO Mike Tattersfield stated, “Our third quarter results demonstrate the benefits of our omni-channel and global expansion strategy, which allow us to meet consumer demand with premium, fresh doughnuts, in a capital-efficient manner. We are seeing positive momentum continue into the seasonally strong fourth quarter, as consumers sought out our sweet treats throughout October for Halloween and are expected to do so through the holidays. In addition, our pricing power means that we are able to quickly adapt to this inflationary environment with the full impact of the pricing action we have already taken still to come in the fourth quarter.”

Third Quarter Consolidated Results

Krispy Kreme’s third quarter results showcased strong growth compared to 2019 and 2020. Total company organic revenue grew 6.2% in the quarter, and 14.3% on a two-year stack basis against 2019. Organic revenue growth was driven by our International segment, which delivered results that were stronger than prior to the pandemic, as well as the expansion of our Delivered Fresh Daily (“DFD”) network in the U.S. and Canada business, which is highlighted by weekly average sales per door growing more than 50% higher compared to the prior year. Total Company organic revenue growth, excluding the exit of our legacy wholesale business, grew 14.1% and was up 22.2% on a two-year stack basis with high growth from both the U.S. and Canada and International segments.

Adjusted EBITDA grew 9.6% to $41.4 million, with a 12.1% Adjusted EBITDA margin, as a result of strength in our International segment and economies of scale gained as we continue to grow our DFD doors globally. Adjusted Net Income grew 7.1% to $12.6 million in the quarter. We saw a GAAP net loss of $3.8 million, but net income would have been positive excluding IPO and acquisition related expenses in the quarter. GAAP diluted loss per share was ($0.04) for the third quarter of 2021, with Adjusted Diluted EPS decreasing to $0.06 from $0.08 in the third quarter of 2020 as a result of increased share count following the IPO. Weighted average shares outstanding for the third quarter of 2021 increased to 166 million, compared to 125 million in the third quarter of 2020 as a result of the IPO, with an additional 2 million of dilutive shares included when calculating Adjusted Diluted EPS, for a total of 168 million shares.

Net debt decreased from $1,133 million in the second quarter to $681 million in the third quarter due to IPO proceeds and $11 million of positive free cash flow generated in the quarter.

Third Quarter Market Segment Results

U.S. and Canada: In the U.S. and Canada segment, GAAP net revenue grew 11.5% to $225.8 million from $202.6 million the previous year, driven by the continued execution of our omni-channel strategy. Organic revenue declined 2.3% as we lapped the pipeline fill of the Branded Sweet Treat launch in the third quarter of 2020 and the now fully discontinued legacy wholesale business. Excluding the impact of exiting the legacy wholesale business, U.S. and Canada organic growth was 8.9%, with a two-year stack of 27.7% when compared to 2019. Growth was driven by the expansion of both DFD points of access and higher DFD sales per door as well as ecommerce sales which accounted for 16.8% of retail sales in the quarter. Over 150 DFD doors were added in the third quarter despite nationwide driver shortages with additional listings at leading national retailers in several key markets around the country including Chicago, Dallas and Los Angeles. A record 2,100 Krispy Kremers were hired in the quarter, despite the tight labor market. According to Nielsen, consumer demand for Krispy Kreme Branded Sweet Treats also remained very strong with a 33% increase in scan sales in the third quarter compared to the second quarter of 2021. However, production shortages resulted in fulfillment shortfalls in the quarter impacting net revenue. Branded Sweet Treats production capacity has now increased with the commission of three new production lines.

U.S. and Canada Adjusted EBITDA of $19.9 million remained relatively consistent with the prior year with the efficiency benefits of DFD to the hub and spoke model being offset by short term supply challenges on Branded Sweet Treats as well as commodity cost pressures following the expiration of some forward contracts. Price increases were implemented on fresh doughnuts during September to manage these cost pressures, as well as the growing impact of wage inflation in the marketplace.

International: In the International segment, GAAP net revenue grew 37.4% to $87.3 million from $63.5 million the previous year, with organic growth of 29.1%. Organic growth in the quarter was driven by successful limited time offerings, substantial expansion of DFD, and lapping a previous period which was negatively impacted by COVID-19. Our businesses in the United Kingdom, Ireland and Mexico in particular saw strong organic growth during the third quarter, with a greater number of points of access and higher ecommerce sales than prior to the pandemic. Our businesses in Australia and New Zealand also contributed to organic growth even with significantly heavier impacts from COVID-19 restrictions there, including temporary shop closures.

International Adjusted EBITDA grew 43.4% to $21.7 million from $15.1 million the previous year, driven primarily by revenue growth from expansion of points of access and some recovery from COVID-19 restrictions, which led to $8.6 million sales per hub over the trailing twelve months driving efficiencies from our hub and spoke model.

Market Development: In the Market Development segment, GAAP net revenue grew 23.1% to $29.7 million from $24.2 million the previous year, with organic growth of 18.1%. GAAP net revenue growth was driven mainly by the acquisition of Krispy Kreme Japan in the fourth quarter of 2020, while organic growth was primarily driven by continued improvement in market conditions for international franchise locations as COVID-19 restrictions in certain key markets continued to ease.

Market Development Adjusted EBITDA declined 3.6% to $9.0 million from $9.4 million the previous year, driven by the impact of U.S. and Canada franchise acquisitions over the last year, but partially offset by strengthening of the international franchise business as evidenced by the organic growth.

Balance Sheet

As of October 3, 2021, we had $44.9 million of cash and cash equivalents, $700.0 million of bank debt and $25.5 million of other debt-like items, for a total net debt of $680.6 million. This compared to $1,132.7 million at the end of the second quarter 2021. Using a trailing four quarters Adjusted EBITDA of $181.9 million, current net leverage is 3.7x, which is substantially below pre-IPO levels. Excluding IPO related expenses net leverage would have been 3.6x. Free cash flow in the third quarter was positive with the EBITDA generated from operating activities in excess of capital expenditures reflecting the capital efficient hub and spoke growth model. Operating cash flow was $41.9 million of which the Company invested $30.6 million primarily in growth-oriented capital, including in the U.S. to make the transition from our now exited legacy wholesale model to our Hub and Spoke strategy, which is now largely complete.

With the acquisition of the Krispy Kreme Canadian franchisee in the fourth quarter of 2021, we now expect total net leverage to be under 3.0x in the next 12 months. Our long-term net leverage policy is 2.0x.

Financial Highlights
$ in millions, except per share data	Q3 2021	vs 3Q 2020	vs 3Q 2019	2021 YTD	vs 2020
Net Revenue	$342.8	18.1%	46.2%	$1,013.8	27.3%
Organic Revenue(1) (2) (3)	$308.4	6.2%	14.3%	$891.4	11.9%
GAAP Net Loss	$(3.8)	72.2%	11.6%	$(19.1)	47.0%
Adjusted Net Income(2)	$12.6	7.1%	20.5%	$50.7	76.9%
Adjusted EBITDA(2)	$41.4	9.6%	26.2%	$140.2	35.2%
Adjusted EBITDA Margin(2)	12.1%	-90 bps	-190 bps	13.8%	+80 bps
GAAP Diluted Loss Per Share	$(0.04)	70.0%	-	$(0.20)	35.5%
Adjusted Diluted EPS(2)	$0.06	-25.0%	-	$0.29	45.0%
Net Debt	$680.6	-38.1%	-27.8%	-	-

Notes:
(1)		Organic revenue growth negatively impacted by $22.8 million in Q3 2021 and $80.7 million in first three quarters of 2021 due to exit of the legacy wholesale business.
(2)		Non-GAAP figures – please refer to Reconciliation of Non-GAAP Financial Measures.
(3)		Organic Revenue Growth “% vs 2019” figures are calculated as a two-year stack.

Key Operating Metrics
$ in millions, except access points	Q3 2021	vs 3Q 2020	vs 3Q 2019	2021 YTD	Vs 2020
Global Points of Access	10,041	46.3%	67.4%	10,041	20.7%
Sales per Hub (U.S. and Canada) TTM	$3.8	14.5%	20.3%	$3.8	9.4%
Sales per Hub (International) TTM	$8.6	31.0%	9.0%	$8.6	35.2%
Ecommerce as a Percent of Retail Sales	17%	+10 bps	-	18%	+250 bps

Financial Outlook

Krispy Kreme reaffirmed the following guidance for the full year 2021:

• Net Revenue of $1.34 billion to $1.38 billion (growth of 19.4% to 23.0%)
• Organic Revenue growth of 10% to 12%
• Adjusted EBITDA of $178 million to $185 million (growth of 22.4% to 27.2%)
• Adjusted Net Income of $62 million to $68 million (growth of 46.4% to 60.6%)

Krispy Kreme also reiterated the following long-term outlook:

• Organic Revenue growth of 9% to 11%
• Adjusted EBITDA growth of 12% to 14%
• Adjusted Net Income growth of 18% to 22%

We anticipate exceeding these long-term targets in the full year 2022 as we will no longer be lapping the exit of our legacy wholesale business in the U.S.

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 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 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.
• 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.

Conference Call

Krispy Kreme will host a public conference call at 5:00 PM Eastern Time today to discuss its results for the third quarter of 2021. The conference call can be accessed by dialing (877) 312-1907, or (470) 495-9529 for international participants, and entering the conference ID 6086266. 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 over 30 countries through its unique network of doughnut shops, partnerships with leading retailers, and a rapidly growing ecommerce and delivery business. 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,” “would,” “anticipate,” “estimate,” “expect,” “intend,” “objective,” “seek,” “strive” 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. 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, 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 and number of shares)
	Quarter Ended										Three Quarters Ended
	October 3, 2021 (13 weeks)					September 27, 2020 (13 weeks)					October 3, 2021 (39 weeks)					September 27, 2020 (39 weeks)
Net revenues
Product sales	$	334,324				$	281,317				$	989,132				$	769,461
Royalties and other revenues	8,475					8,916					24,662					26,960
Total net revenues	342,799					290,233					1,013,794					796,421
Product and distribution costs	92,152					85,303					257,166					222,409
Operating expenses	157,315					121,792					462,733					341,792
Selling, general and administrative expense	52,950					46,521					163,417					129,090
Marketing expenses	12,062					8,015					31,621					24,704
Pre-opening costs	1,192					3,368					4,335					9,668
Other (income)/expenses, net	(359		)			4,667					(4,365		)			7,177
Depreciation and amortization expense	25,663					20,435					74,258					57,619
Operating income	1,824					132					24,629					3,962
Interest expense, net	7,186					7,908					25,228					26,263
Interest expense — related party	—					5,566					10,387					16,698
Other non-operating expense/(income), net	732					(357		)			(126		)			(469		)
Loss before income taxes	(6,094		)			(12,985		)			(10,860		)			(38,530		)
Income tax (benefit)/expense	(2,342		)			499					8,266					(2,413		)
Net loss	(3,752		)			(13,484		)			(19,126		)			(36,117		)
Net income attributable to noncontrolling interest	1,907					1,368					6,736					2,880
Net loss attributable to Krispy Kreme, Inc.	$	(5,659	)			$	(14,852	)			$	(25,862	)			$	(38,997	)
Net loss per share:
Common stock — Basic	$	(0.04	)			$	(0.12	)			$	(0.20	)			$	(0.31	)
Common stock — Diluted	$	(0.04	)			$	(0.12	)			$	(0.20	)			$	(0.31	)
Weighted average shares outstanding:
Basic	166,033,539					124,987,370					141,123,999					124,987,370
Diluted	166,033,539					124,987,370					141,123,999					124,987,370

Krispy Kreme, Inc. Reconciliation of Non-GAAP Financial Measures (in thousands)
	Quarter Ended														Three Quarters Ended
(in thousands)	October 3, 2021					September 27, 2020					September 29, 2019				October 3, 2021				September 27, 2020
Net loss	$	(3,752	)			$	(13,484	)			$	(4,286	)		$	(19,126	)		$	(36,117	)
Interest expense, net	7,186					7,908					8,426				25,228				26,263
Interest expense — related party(1)	—					5,566					5,630				10,387				16,698
Income tax (benefit)/expense	(2,342		)			499					(205		)		8,266				(2,413		)
Depreciation and amortization expense	25,663					20,435					14,860				74,258				57,619
Share-based compensation	6,315					3,095					2,556				16,973				9,236
Employer payroll taxes related to share-based compensation	1,171					—					—				2,012				—
Other non-operating expense/(income), net(2)	732					(357		)			(64		)		(126		)		(469		)
New York City flagship Hot Light Theater Shop opening(3)	—					2,190					1,576				—				6,429
Strategic initiatives(4)	—					4,649					—				—				13,923
Acquisition and integration expenses(5)	1,288					4,274					3,296				3,663				8,697
Shop closure expenses(6)	—					2,058					—				—				4,844
Restructuring and severance expenses(7)	57					—					—				1,393				—
IPO-related expenses(8)	4,018					206					—				14,221				206
Other(9)	1,081					746					1,018				3,064				(1,218		)
Adjusted EBITDA	$	41,417				$	37,785				$	32,807			$	140,213			$	103,698

	Quarter Ended															Three Quarters Ended
(in thousands)	October 3, 2021					September 27, 2020					September 29, 2019					October 3, 2021						September 27, 2020
Net loss	$	(3,752	)			$	(13,484	)			$	(4,286	)			$	(19,126		)			$	(36,117		)
Interest expense — related party(1)	—					5,566					5,630					10,387						16,698
Share-based compensation	6,315					3,095					2,556					16,973						9,236
Employer payroll taxes related to share-based compensation	1,171					—					—					2,012						—
Other non-operating expense/(income), net(2)	732					(357		)			(64		)			(126			)			(469			)
New York City flagship Hot Light Theater Shop opening(3)	—					2,190					1,576					—						6,429
Strategic initiatives(4)	—					4,649					—					—						13,923
Acquisition and integration expenses(5)	1,288					4,274					3,296					3,663						8,697
Shop closure expenses(6)	—					2,058					—					—						4,844
Restructuring and severance expenses(7)	57					—					—					1,393						—
IPO-related expenses(8)	4,018					206					—					14,221						206
Other(9)	1,081					746					1,018					3,064						(1,218			)
Amortization of acquisition related intangibles(10)	7,497					6,566					5,129					22,573						19,138
KKI Term Loan Facility interest and debt issuance costs(11)	107					—					—					2,448						—
Tax impact of adjustments(12)	(5,784		)			(5,702		)			(4,388		)			(10,604			)			(14,669			)
Tax specific adjustments(13)	(114		)			1,975					—					3,833						1,975
Adjusted net income	$	12,616				$	11,782				$	10,467				$	50,711					$	28,673
Net income attributable to noncontrolling interest	(1,907		)			(1,368		)			N/A					(6,736			)			(2,880			)
Adjusted net income attributable to Krispy Kreme, Inc.	10,709					10,414					N/A					43,975						25,793
Adjustment to adjusted net income attributable to common shareholders	(522		)			34					N/A					(1,815			)			(121			)
Adjusted net income attributable to common shareholders - Basic	10,187					10,448					N/A					42,160						25,672
Additional income attributed to noncontrolling interest due to subsidiary potential common shares	(88		)			(22		)			N/A					(237			)			(48			)
Adjusted net income attributable to common shareholders - Diluted	10,099					10,426					N/A					41,923						25,624
Basic weighted average common shares outstanding	166,033,539					124,987,370					N/A					141,123,999						124,987,370
Dilutive effect of outstanding common stock options and RSUs	2,041,098					3,065,198					N/A					2,936,731						2,936,264
Diluted weighted average common shares outstanding	168,074,637					128,052,568					N/A					144,060,730						127,923,634
Adjusted net income per share attributable to common shareholders:
Basic	$	0.06				$	0.08				N/A					$	0.30					$	0.21
Diluted	$	0.06				$	0.08				N/A					$	0.29					$	0.20

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 pre-opening costs related to our New York City flagship Hot Light Theater Shop opening, including shop design, rent, and additional consulting and training costs incurred and reflected in selling, general and administrative expenses.
4. The quarter and three quarters ended September 27, 2020 consists mainly of consulting and advisory fees, personnel transition costs, and network conversion and set-up costs related to the transformation of the Company’s legacy wholesale business in the United States.
5. 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-related activities for the applicable period.
6. Includes lease termination costs, impairment charges, and loss on disposal of property, plant and equipment.
7. Consists 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.
8. Includes consulting and advisory fees incurred in connection with preparation for and execution of the Company’s IPO. Due to the timing of the IPO, certain costs were incurred in the quarter ended October 3, 2021 that are not expected to recur in future quarters.
9. The quarter and three quarters ended October 3, 2021 consist primarily of legal expenses incurred. The quarter and three quarters ended September 27, 2020 consists primarily of fixed asset and impairment expenses, net of a gain on the sale of land.
10. Consists of amortization related to acquired intangible assets as reflected within depreciation and amortization in the consolidated statements of operations.
11. 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.
12. Tax impact of adjustments calculated applying the applicable statutory rates. The three quarters ended October 3, 2021 also includes the impact of disallowed executive compensation expense incurred in connection with the IPO.
13. The three quarters ended October 3, 2021 consists primarily of the effect of the U.K. 2023 statutory tax rate change from 19.0% to 25.0% on existing temporary differences.

Krispy Kreme, Inc. Segment Reporting (Unaudited) (in thousands)
	Quarter Ended								Three Quarters Ended
	October 3, 2021				September 27, 2020				October 3, 2021				September 27, 2020
Net revenues:
U.S. and Canada	$	225,807			$	202,575			$	679,195			$	557,280
International	87,262				63,504				243,005				158,575
Market Development	29,730				24,154				91,594				80,566
Total net revenues	$	342,799			$	290,233			$	1,013,794			$	796,421

(in thousands except percentages)	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			%

(in thousands except percentages)	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			%

(in thousands except percentages)	U.S. and Canada					International					Market Development					Total Company
Total net revenues in fiscal 2020	$	782,717				$	230,185				$	109,134				$	1,122,036
Total net revenues in fiscal 2019	587,522					223,115					148,771					959,408
Total Net Revenues Growth	195,195					7,070					(39,637		)			162,628
Total Net Revenues Growth %	33.2			%		3.2			%		-26.6			%		17.0			%
Impact of acquisitions	(121,671		)			(42,811		)			35,053					(129,429		)
Impact of foreign currency translation	—					(906		)			—					(906		)
Impact of 53rd week	(15,615		)			(3,287		)			(1,603		)			(20,505		)
Organic Revenue Growth	$	57,909				$	(39,934	)			$	(6,187	)			$	11,788
Organic Revenue Growth %	9.9			%		-17.9			%		-4.2			%		1.2			%

	Quarter Ended															Three Quarters Ended
(in thousands except percentages)	October 3, 2021					September 27, 2020					September 29, 2019					October 3, 2021					September 27, 2020
Total net revenues - current year	$	342,799				$	290,233				$	234,484				$	1,013,794				$	796,421
Total net revenues - prior year	290,233					234,484					197,115					796,421					694,136
Total Net Revenues Growth	52,566					55,749					37,369					217,373					102,285
Total Net Revenues Growth %	18.1			%		23.8			%		19.0			%		27.3			%		14.7			%
Impact of acquisitions	(29,123		)			(34,577		)			(29,087		)			(100,646		)			(96,714		)
Impact of foreign currency translation	(5,305		)			(2,117		)			3,371					(21,767		)			822
Organic Revenue Growth	$	18,138				$	19,055				$	11,653				$	94,960				$	6,393
Organic Revenue Growth %	6.2			%		8.1			%		5.9			%		11.9			%		0.9			%

	Trailing Four Quarters Ended				Fiscal Year Ended
(in thousands, unless otherwise stated)	October 3, 2021				January 3, 2021				December 29, 2019
U.S. and Canada:
Revenues	$	904,633			$	782,717			$	587,522
Non-Fresh Revenues (1)	(53,719)				(128,619)				(112,051)
Fresh Revenues from Insomnia Cookies and Hubs without Spokes (2)	(414,186)				(323,079)				(271,067)
Sales from Hubs with Spokes	436,728				331,019				204,404
Sales per Hub (millions)	3.8				3.5				3.2
International:
Sales from Hubs with Spokes (3)	$	314,615			$	230,185			$	223,115
Sales per Hub (millions)	8.6				6.4				8.3

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 sales from Hubs with Spokes for that business segment.

	Quarter Ended										Three Quarters Ended
	October 3, 2021					September 27, 2020					October 3, 2021					September 27, 2020
Segment Adjusted EBITDA:
U.S. and Canada	$	19,912				$	20,028				$	75,760				$	69,216
International	21,655					15,098					60,676					27,909
Market Development	9,033					9,374					29,782					27,959
Corporate	(9,183		)			(6,715		)			(26,005		)			(21,386		)
Total Adjusted EBITDA	$	41,417				$	37,785				$	140,213				$	103,698

Krispy Kreme, Inc. Condensed Consolidated Balance Sheets (in thousands, except per share data)
	As of
	(Unaudited) October 3, 2021					January 3, 2021
ASSETS
Current assets:
Cash and cash equivalents	$	44,895				$	37,460
Marketable securities	614					1,048
Restricted cash	193					23
Accounts receivable, net	60,069					74,351
Inventories	36,141					38,519
Prepaid expense and other current assets	22,068					12,692
Total current assets	163,980					164,093
Property and equipment, net	423,547					395,255
Goodwill	1,089,914					1,086,546
Other intangible assets, net	993,440					998,014
Operating lease right of use asset, net	414,612					399,688
Other assets	17,165					17,399
Total assets	$	3,102,658				$	3,060,995
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Current portion of long-term debt	$	38,608				$	41,245
Current operating lease liabilities	42,637					45,675
Accounts payable	170,780					148,645
Accrued liabilities	132,638					124,951
Structured payables	108,969					137,319
Total current liabilities	493,632					497,835
Long-term debt, less current portion	682,676					785,810
Related party notes payable	—					344,581
Noncurrent operating lease liabilities	397,640					376,099
Deferred income taxes, net	155,982					144,866
Other long-term obligations and deferred credits	53,008					63,445
Total liabilities	1,782,938					2,212,636
Commitments and contingencies
Shareholders’ equity:
Common stock, $0.01 par value; 300,000,000 and 174,500,000 shares authorized as of October 3, 2021 and January 3, 2021, respectively; 167,112,953 and 124,987,370 shares issued and outstanding as of October 3, 2021 and January 3, 2021, respectively	1,671					1,250
Additional paid-in capital	1,410,724					845,499
Shareholder note receivable	(4,216		)			(18,660		)
Accumulated other comprehensive loss, net of income tax	(6,707		)			(1,208		)
Retained deficit	(173,911		)			(142,197		)
Total shareholders’ equity attributable to Krispy Kreme, Inc.	1,227,561					684,684
Noncontrolling interest	92,159					163,675
Total shareholders’ equity	1,319,720					848,359
Total liabilities and shareholders’ equity	$	3,102,658				$	3,060,995

Krispy Kreme, Inc. Condensed Consolidated Statements of Cash Flows (Unaudited) (in thousands)
	Three Quarters Ended
	October 3, 2021 (39 weeks)					September 27, 2020 (39 weeks)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss	$	(19,126	)			$	(36,117	)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation and amortization expense	74,258					57,619
Deferred income taxes	9,168					(4,623		)
Loss on extinguishment of debt	1,700					—
Impairment and lease termination charges	854					3,287
Loss on disposal of property and equipment	157					773
Share-based compensation	16,973					9,236
Change in accounts and notes receivable allowances	133					700
Inventory write-off	2,983					34
Other	(315		)			276
Change in operating assets and liabilities, excluding business acquisitions and foreign currency translation adjustments	12,003					(433		)
Net cash provided by operating activities	98,788					30,752
CASH FLOWS USED FOR INVESTING ACTIVITIES:
Purchase of property and equipment	(83,485		)			(69,437		)
Proceeds from disposals of assets	202					2,793
Acquisition of shops and franchise rights from franchisees, net of cash acquired	(33,888		)			(59,658		)
Principal payments received from loans to franchisees	67					519
Purchases of held-to-maturity debt securities	—					(56		)
Maturities of held-to-maturity debt securities	388					517
Net cash used for investing activities	(116,716		)			(125,322		)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from the issuance of debt	670,000					263,097
Repayment of long-term debt and lease obligations	(1,115,910		)			(206,966		)
Payment of financing costs	(1,700		)			—
Proceeds from structured payables	194,927					211,892
Payments on structured payables	(223,063		)			(155,951		)
Payment of contingent consideration related to a business combination	—					(506		)
Capital contribution by shareholders	120,532					—
Proceeds from IPO, net of underwriting discounts (excluding unpaid issuance costs)	527,329					—
Proceeds from sale of noncontrolling interest in subsidiary	53,337					17,592
Distribution to shareholders	(42,334		)			(19		)
Payments for repurchase and retirement of common stock	(138,501		)			—
Distribution to noncontrolling interest	(17,257		)			(6,553		)
Net cash provided by financing activities	27,360					122,586
Effect of exchange rate changes on cash, cash equivalents and restricted cash	(1,827		)			759
Net increase in cash, cash equivalents and restricted cash	7,605					28,775
Cash, cash equivalents and restricted cash at beginning of period	37,483					35,450
Cash, cash equivalents and restricted cash at end of period	$	45,088				$	64,225
Supplemental schedule of non-cash investing and financing activities:
Accrual for property and equipment	$	3,137				$	11,280
Stock issuance under shareholder notes	446					—
Accrual for distribution to noncontrolling interest	(5,056		)			—
Accrual for distribution to shareholders	(5,853		)			—
Accrual for repurchase and retirement of common stock	(188		)			—
Reconciliation of cash, cash equivalents and restricted cash at end of period:
Cash and cash equivalents	$	44,895				$	64,154
Restricted cash	193					71
Total cash, cash equivalents and restricted cash	$	45,088				$	64,225

Krispy Kreme, Inc. Global Points of Access
	Global Points of Access (1)
	Quarter Ended						Fiscal Year Ended
	October 3, 2021			September 27, 2020			January 3, 2021
U.S. and Canada: (2)
Hot Light Theater Shops	238			206			229
Fresh Shops	57			48			47
Cookie Shops	206			178			184
DFD Doors (3)	5,220			2,846			4,137
Total	5,721			3,278			4,597
International:
Hot Light Theater Shops	30			28			28
Fresh Shops	352			353			348
Carts, Food Trucks, and Other (4)	12			10			11
DFD Doors (3)	2,415			1,833			1,986
Total	2,809			2,224			2,373
Market Development: (5)
Hot Light Theater Shops	113			144			119
Fresh Shops	761			716			732
Carts, Food Trucks, and Other (4)	30			30			30
DFD Doors (3)	607			470			465
Total	1,511			1,360			1,346
Total global points of access (as defined)	10,041			6,862			8,316
Total Hot Light Theater Shops	381			378			376
Total Fresh Shops	1,170			1,117			1,127
Total Cookie Shops	206			178			184
Total Shops	1,757			1,673			1,687
Total Carts, Food Trucks, and Other	42			40			41
Total DFD Doors	8,242			5,149			6,588
Total global points of access (as defined)	10,041			6,862			8,316

1. Excludes Branded Sweet Treat Line distribution points and legacy wholesale business doors.
2. Includes points of access that were acquired from franchisees in the United States during the first quarter of fiscal 2021 and the second half of fiscal 2020. These points of access were previously included in the Market Development segment.
3. DFD Doors for both the U.S. and Canada and Market Development segments exclude legacy wholesale doors, which have been declining consistent with our strategy to evolve our legacy wholesale business to focus on the new DFD model and our new Branded Sweet Treat Line. As of July 4, 2021 legacy wholesale doors for the U.S. and Canada and the Market Development segments were substantially eliminated.
4. Beginning in the quarter ended October 3, 2021, the Company includes Carts and Food Trucks in its calculation of global points of access. 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. They are primarily found in international locations, in airports, train stations, etc. Comparative data has been included in all periods presented above.
5. Includes locations in Japan, which were acquired in December 2020 and are now Company-owned. All remaining points of access in the Market Development segment relate to our franchise business.

Krispy Kreme, Inc. Global Hubs
	Hubs
	Quarter Ended						Fiscal Year Ended
	October 3, 2021			September 27, 2020			January 3, 2021
U.S. and Canada:
Hot Light Theater Shops (1)	234			203			226
Doughnut Factories	4			7			5
Total	238			210			231
Hubs with Spokes	121			112			113
International:
Hot Light Theater Shops (1)	25			27			27
Doughnut Factories	10			9			9
Total	35			36			36
Hubs with Spokes	35			36			36
Market Development:
Hot Light Theater Shops (1)	111			141			116
Doughnut Factories	26			26			26
Total	137			167			142
Total Hubs	410			413			409

1. Includes only Hot Light Theater Shops and excludes Mini Theaters. A Mini Theater is a spoke location that produces hot doughnuts.

 

View source version on businesswire.com: https://www.businesswire.com/news/home/20211109006498/en/

Investor Relations

Rob Ballew, Head of Investor Relations

rballew@krispykreme.com

Financial Media

Edelman for Krispy Kreme, Inc.

Allie McLarty & Ashley Firlan, KrispyKremeIR@edelman.com

Source: Krispy Kreme, Inc.

FAQ

What were Krispy Kreme's Q3 2021 financial results?

Krispy Kreme reported a net revenue of $342.8 million, an 18% increase year-over-year.

How did Krispy Kreme's organic revenue perform in Q3 2021?

Organic revenue growth was 14% year-over-year, excluding the legacy wholesale business.

What is Krispy Kreme's expected revenue for full-year 2021?

Krispy Kreme expects total revenue between $1.34 billion and $1.38 billion for 2021.

How much did Krispy Kreme reduce its net debt in Q3 2021?

Krispy Kreme reduced its net debt by 40% to $681 million in Q3 2021.

What is the adjusted diluted EPS for Krispy Kreme in Q3 2021?

The adjusted diluted EPS for Q3 2021 was $0.06, down from $0.08 in the same quarter last year.