Krispy Kreme Reports Second Quarter 2023 Results, Reiterates Full Year Guidance

Rhea-AI Summary

Krispy Kreme reports 9.0% net revenue growth in Q2 2023, with organic revenue growth of 11.4%. GAAP net income of $0.1 million and Adjusted EBITDA of $48.8 million. Global Points of Access increased by 12.8% to 12,872.

Positive

• Net revenue grew 9.0% year-over-year to $408.9 million
• Organic revenue grew 11.4%, led by the U.S.
• Adjusted EBITDA increased 3.1% to $48.8 million
• Global Points of Access grew by 12.8% to 12,872

Negative

• Adjusted diluted EPS decreased $0.01 to $0.07 for the quarter

Second quarter net revenue grew 9.0% with organic revenue growth of 11.4%

Global Points of Access grew by 12.8% to 12,872

GAAP net income of $0.1 million and Adjusted EBITDA of $48.8 million

CHARLOTTE, N.C.--(BUSINESS WIRE)-- Krispy Kreme, Inc. (NASDAQ: DNUT) (“Krispy Kreme” or the “Company”) today reported financial results for the second quarter ended July 2, 2023. Net revenue grew 9.0% year-over-year to $408.9 million and organic revenue grew 11.4%, led by the U.S., where all sales channels including doughnut and cookie shops, Delivered Fresh Daily (“DFD”) doors, and ecommerce contributed to 12.7% organic growth in the quarter.

GAAP net income for the quarter was $0.1 million compared to net loss of $2.4 million a year ago while GAAP diluted EPS for the quarter was $0.00 compared to diluted loss per share of $0.02 last year. Adjusted diluted EPS decreased $0.01 to $0.07 for the quarter, compared to $0.08 last year in the same period, driven by higher net interest expense. Adjusted EBITDA increased 3.1% in the quarter to $48.8 million led by the U.S. and Market Development segments.

Global Points of Access, which reflect all locations where fresh doughnuts and cookies can be purchased, increased by 462 during the quarter and 1,035 year-to-date, providing consumers with access to Krispy Kreme and Insomnia Cookies through 12,872 locations around the world.

Commenting on the Company’s performance, CEO Mike Tattersfield stated, “I am proud of the results we delivered in the second quarter, which were bolstered by our continued focus on expanding our hub and spoke model as we leaned heavily into our omni-channel and DFD capabilities as well as our international expansion strategy. We executed the strongest and largest National Doughnut Day in our history, which we now celebrate in a dozen countries. We are also pleased with our continued global expansion, as we opened three new markets during the quarter in Chile, Jamaica, and Costa Rica, all exceeding our revenue growth targets.”

Mike continued, “We look forward to capitalizing on a strong start to the year in the back half of 2023 and delivering profitable growth as we focus on our capital efficient hub and spoke model and omni-channel strategy. We continue to expect to open in three to five additional markets in 2023, and recently opened in Switzerland which marked our first opening in Continental Europe to be followed by France before year-end. Overall, we remain on our path to grow Global Points of Access and become the most loved sweet treat brand in the world.”

Financial Highlights

$ in millions, except per share data	Q2 2023	vs Q2 2022	1H 2023	vs. 1H 2022
Net Revenue	$408.9	+9.0%	$827.8	+10.7%
Organic Revenue (1)	$406.8	+11.4%	$829.3	+12.9%
GAAP Net Income	$0.1	+103.5%	$1.7	(57.3)%
Adjusted Net Income, Diluted (1)	$11.4	(13.1)%	$26.7	+1.3%
GAAP Operating Income	$5.6	(24.8)%	$20.6	(17.0)%
GAAP Operating Income Margin	1.4%	-60 bps	2.5%	-80 bps
Adjusted EBITDA (1)	$48.8	+3.1%	$103.7	+7.8%
Adjusted EBITDA Margin (1)	11.9%	-70 bps	12.5%	-40 bps
GAAP Diluted EPS	$0.00	+$0.02	$0.00	$0.00
Adjusted Diluted EPS (1)	$0.07	($0.01)	$0.16	$0.00
Notes:
(1) Non-GAAP figures – please refer to Reconciliation of Non-GAAP Financial Measures.

Key Operating Metrics

$ in millions, except access points	Q2 2023	vs Q2 2022	vs Q1 2023
Global Points of Access	12,872	+12.8%	+3.7%
Sales per Hub (U.S.) TTM	$4.7	+9.3%	+2.2%
Sales per Hub (International) TTM	$9.7	+3.2%	(1.0)%
Ecommerce as a Percent of Retail Sales	18.8%	+130 bps	-80 bps

Second Quarter 2023 Consolidated Results

Krispy Kreme’s second quarter 2023 results reflect strong growth compared to the prior year. Net revenue grew 9.0% to $408.9 million and total company organic revenue grew 11.4% in the quarter. Organic revenue growth was driven by a strong performance in all three business segments. Ecommerce revenue growth in the quarter was 18.0% and represented 18.8% of retail sales in the quarter.

GAAP net income for the quarter was $0.1 million, compared to a GAAP net loss of $2.4 million in 2022. GAAP net income included a $4.4 million charge related to the previously disclosed exit of the Company’s Branded Sweet Treats business that was largely non-cash. Inventory write-offs and employee severance associated with the exit of the Branded Sweet Treats business had a 70 basis point impact on product and distribution costs as a percent of revenue in the second quarter of 2023.

Adjusted EBITDA in the quarter grew 3.1% to $48.8 million despite an approximate $0.5 million negative impact from the stronger U.S. dollar. Operating margins declined 60 basis points to 1.4%, while Adjusted EBITDA margins declined 70 basis points to 11.9% as pricing initiatives and hub and spoke efficiencies were offset by inflationary pressure and the timing of certain performance-based incentives. Adjusted Net Income, Diluted, decreased 13.1% to $11.4 million in the quarter. GAAP diluted EPS in the quarter was $0.00 compared to a loss per share of $0.02 in the same quarter last year, while adjusted diluted EPS decreased 12.5% to $0.07 from $0.08 in the second quarter of 2022, due primarily to higher net interest expense.

Second Quarter 2023 Market Segment Results

U.S.: In the U.S. segment, net revenue grew $22.8 million, or approximately 9.3%, and organic revenue increased $29.8 million, or approximately 12.7%, compared to a year ago. Organic growth was driven by successful pricing actions, marketing activations and expansion of our DFD strategy. Sales per hub in the U.S. increased 9% to $4.7 million and DFD average sales per door increased 16% year over year to $632 per week, with an additional 815 Points of Access compared to the second quarter of fiscal 2022. Additionally, ecommerce as a percent of retail sales grew 260 basis points. This level of performance was achieved despite short-term disruption from a third-party POS provider during the first part of the quarter, which has since been resolved. We also saw strong performance at Insomnia Cookies which opened 23 new Cookie Shops compared to the second quarter of fiscal 2022.

U.S. Adjusted EBITDA increased 16.3% to $28.1 million with Adjusted EBITDA margin expansion of 60 basis points to 10.5%. This was primarily driven by efficiencies from network optimizations and price increases augmenting Sales per Hub, partially offset by inflation and labor inefficiencies due to the temporary outages associated with a third-party POS provider. Profitability at Insomnia Cookies was pressured because of the impact of higher product and distribution costs, partially offset by pricing, as well as timing of investments to support strategic growth initiatives.

International: In the International segment, net revenue grew $4.5 million, or approximately 4.8%, from the second quarter of fiscal 2022 to the second quarter of fiscal 2023, aided by foreign currency translation impacts of $1.2 million from a weakening U.S. dollar. International organic revenue grew $3.3 million, or approximately 3.5%, from the second quarter of fiscal 2022 to the second quarter of fiscal 2023, driven by increased pricing and Points of Access growth of 245 locations, or 7%, compared to the second quarter of fiscal 2022.

International Adjusted EBITDA declined 0.4% compared to the prior year at $19.5 million, driven by cost inflation. Adjusted EBITDA margins declined 100 basis points to 19.8%. We have already begun to see results from the actions taken in the International segment, focused on expansion with key partners including adding Krispy Kreme to consumer loyalty card programs, deploying pricing and cost control initiatives, and optimizing price pack architecture in the UK DFD market.

Market Development: In the Market Development segment, net revenue increased $6.4 million, or approximately 17.4%, from the second quarter of fiscal 2022 to the second quarter of fiscal 2023, despite the impacts of certain foreign currencies devaluing against the U.S. dollar. When adjusted for the impacts of acquisitions and foreign currency, Market Development organic revenue grew $8.5 million, or approximately 23.2%, from the second quarter of fiscal 2022 to the second quarter of fiscal 2023, driven by strong performance in the Company’s international franchise markets, Canada, and Japan, aided by Hub and Spoke model expansion.

Market Development Adjusted EBITDA grew 27.3% to $15.7 million, with strong margin improvement in the Company’s equity-owned Japan and Canada markets from hub and spoke efficiencies and strength in international franchise revenue more than offsetting inflation and the strong U.S. dollar. Adjusted EBITDA margins for the segment increased 290 basis points to 36.5% despite a negative impact from mix shift.

Balance Sheet & Capital Expenditures

During the second quarter of 2023, the company invested $27.7 million in capital expenditures, or 6.8% of revenue, primarily to support growth of our hot light theaters, cookie shops, and DFD Doors.

As of July 2, 2023 the company had total available liquidity of $201.6 million, including $26.6 million of cash and cash equivalents plus undrawn capacity of $175 million under available credit facilities, and net debt of $833.5 million. In line with the strategic decision to reduce reliance on vendor financing programs, the Company paid down a further $33.7 million in structured payables and supply chain financing vehicles in the second quarter which will provide a long-term tailwind to Adjusted EBITDA.

2023 Financial Outlook

Krispy Kreme re-affirms its previous guidance for the full year 2023 as follows:

• Net Revenue of $1.65 billion to $1.68 billion, +8% to +10% vs 2022 (+9% to +11% in constant currency)
• Organic Revenue growth of 9% to 11%
• Adjusted EBITDA of $205 million to $215 million, +8% to +13% vs 2022 (+10% to +14% in constant currency)
• Adjusted Net Income, Diluted, of $52 million to $58 million, +5% to +17% vs 2022 (+9% to +21% in constant currency)
• Adjusted Diluted EPS of $0.31 to $0.34, +7% to +17% vs 2022 (+10% to +21% in constant currency)
• Income Tax rate between 24.5% to 26.0%
• Capital Expenditures between $105 million to $115 million, or approximately 6.6% of revenue
• Interest Expense, net between $39 million to $43 million

The above guidance continues to assume a negative 1% impact to 2023 revenue and a negative $3 million impact to 2023 Adjusted EBITDA from FX headwinds, with the impact entirely in the first half of the year. The Company expects to reduce its net leverage in 2023, as we make progress towards our 2026 goal of approximately 2.0x to 2.5x net leverage.

Definitions

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

• Global Points of Access: Reflects all locations at which fresh doughnuts or cookies can be purchased. We define global points of access to include all Hot Light Theater Shops, Fresh Shops, Carts and Food Trucks, DFD Doors and Cookie Shops, at both Company-owned and franchise locations as of the end of the respective reporting period. We monitor global points of access as a metric that informs the growth of our omni-channel presence over time and believe this metric is useful to investors to understand our footprint in each of our segments.
• Hubs: Reflects locations where fresh doughnuts are produced and processed for sale at any point of access. We define Hubs to include self-sustaining Hot Light Theater Shops and Doughnut Factories, at both Company-owned and franchise locations as of the end of the respective reporting period.
• Sales Per Hub: Sales per Hub equals Fresh Revenues from Hubs with Spokes, divided by the average number of Hubs with Spokes at the end of the five most recent quarters.
• Fresh Revenues from Hubs with Spokes: Fresh Revenues include product sales generated from our Doughnut Shop business (including 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 8:30 AM Eastern Time today to discuss its results for the second quarter of 2023. 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.

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 35 countries through its unique network of fresh doughnut shops, partnerships with leading retailers, and a rapidly growing Ecommerce and delivery business with nearly 13,000 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,” 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 1, 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, Fresh Revenue from Hubs with Spokes and Sales per Hub, which differ from results using U.S. Generally Accepted Accounting Principles (“GAAP”). These non-GAAP financial measures are not universally consistent calculations, limiting their usefulness as comparative measures. Other companies may calculate similarly titled financial measures differently than we do or may not calculate them at all. Additionally, these non-GAAP financial measures are not measurements of financial performance under GAAP. In order to facilitate a clear understanding of our consolidated historical operating results, you should examine our non-GAAP financial measures in conjunction with our historical consolidated financial statements and notes thereto filed with the SEC.

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

Krispy Kreme, Inc. Condensed Consolidated Statements of Operations (Unaudited) (in thousands, except per share amounts)
	Quarter Ended								Two Quarters Ended
	July 2, 2023 (13 weeks)				July 3, 2022 (13 weeks)				July 2, 2023 (26 weeks)				July 3, 2022 (26 weeks)
Net revenues
Product sales	$	400,348			$	367,777			$	811,022			$	731,829
Royalties and other revenues		8,534				7,468				16,810				15,948
Total net revenues		408,882				375,245				827,832				747,777
Product and distribution costs		111,106				100,558				228,939				196,669
Operating expenses		189,165				173,942				380,573				342,668
Selling, general and administrative expense		62,582				51,754				124,050				105,465
Marketing expenses		9,770				11,215				19,623				21,374
Pre-opening costs		1,104				985				1,868				2,314
Other expenses/(income), net		314				1,469				(4,949	)			(1,164	)
Depreciation and amortization expense		29,196				27,814				57,135				55,655
Operating income		5,645				7,508				20,593				24,796
Interest expense, net		12,063				7,586				24,051				14,937
Other non-operating expense, net		1,061				756				2,060				435
(Loss)/income before income taxes		(7,479	)			(834	)			(5,518	)			9,424
Income tax (benefit)/expense		(7,563	)			1,574				(7,246	)			5,374
Net income/(loss)		84				(2,408	)			1,728				4,050
Net (loss)/income attributable to noncontrolling interest		(139	)			1,441				1,806				3,897
Net income/(loss) attributable to Krispy Kreme, Inc..	$	223			$	(3,849	)		$	(78	)		$	153
Net income/(loss) per share:
Common stock — Basic	$	—			$	(0.02	)		$	—			$	—
Common stock — Diluted	$	—			$	(0.02	)		$	—			$	—
Weighted average shares outstanding:
Basic		168,184				167,367				168,162				167,314
Diluted		170,659				167,367				168,162				167,314

Krispy Kreme, Inc. Condensed Consolidated Balance Sheets (in thousands, except per share amounts)
	As of
	(Unaudited) July 2, 2023				January 1, 2023
ASSETS
Current assets:
Cash and cash equivalents	$	26,635			$	35,371
Restricted cash		339				359
Accounts receivable, net		49,381				51,089
Inventories		33,977				46,239
Taxes receivable		17,354				18,263
Prepaid expense and other current assets		31,635				26,953
Total current assets		159,321				178,274
Property and equipment, net		492,233				472,358
Goodwill		1,099,393				1,087,908
Other intangible assets, net		960,094				966,088
Operating lease right of use asset, net		443,277				417,381
Other assets		19,826				26,528
Total assets	$	3,174,144			$	3,148,537
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Current portion of long-term debt	$	40,722			$	40,034
Current operating lease liabilities		42,932				43,160
Accounts payable		216,407				225,276
Accrued liabilities		96,199				104,424
Structured payables		50,447				103,575
Total current liabilities		446,707				516,469
Long-term debt, less current portion		814,476				739,052
Noncurrent operating lease liabilities		439,103				412,759
Deferred income taxes, net		134,130				143,124
Other long-term obligations and deferred credits		33,453				38,258
Total liabilities		1,867,869				1,849,662
Commitments and contingencies
Shareholders’ equity:
Common stock, $0.01 par value; 300,000 shares authorized as of both July 2, 2023 and January 1, 2023; 168,184 and 168,137 shares issued and outstanding as of July 2, 2023 and January 1, 2023, respectively		1,682				1,681
Additional paid-in capital		1,432,150				1,426,105
Shareholder note receivable		(3,809	)			(4,813	)
Accumulated other comprehensive income/(loss), net of income tax		7,784				(9,151	)
Retained deficit		(229,340	)			(217,490	)
Total shareholders’ equity attributable to Krispy Kreme, Inc.		1,208,467				1,196,332
Noncontrolling interest		97,808				102,543
Total shareholders’ equity		1,306,275				1,298,875
Total liabilities and shareholders’ equity	$	3,174,144			$	3,148,537

Krispy Kreme, Inc. Condensed Consolidated Statements of Cash Flows (Unaudited) (in thousands)
	Two Quarters Ended
	July 2, 2023 (26 weeks)				July 3, 2022 (26 weeks)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	$	1,728			$	4,050
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization expense		57,135				55,655
Deferred income taxes		(11,743	)			(6,866	)
Loss on extinguishment of debt		472				—
Impairment and lease termination charges		7,808				1,991
Gain on disposal of property and equipment		(151	)			(499	)
Gain on sale-leaseback		(9,646	)			(2,374	)
Share-based compensation		10,369				10,493
Change in accounts and notes receivable allowances		372				193
Inventory write-off		10,244				251
Settlement of interest rate swap derivatives		7,657				—
Amortization related to settlement of interest rate swap derivatives		(4,379	)			—
Other		996				(733	)
Change in operating assets and liabilities, excluding foreign currency translation adjustments		(24,609	)			(8,238	)
Net cash provided by operating activities		46,253				53,923
CASH FLOWS USED FOR INVESTING ACTIVITIES:
Purchase of property and equipment		(54,290	)			(51,460	)
Proceeds from sale-leaseback		10,025				3,000
Disbursement for loan receivable		—				(720	)
Other investing activities		163				901
Net cash used for investing activities		(44,102	)			(48,279	)
CASH FLOWS USED FOR FINANCING ACTIVITIES:
Proceeds from the issuance of debt		989,198				53,000
Repayment of long-term debt and lease obligations		(916,580	)			(50,179	)
Payment of financing costs		(5,000	)			—
Proceeds from structured payables		73,939				153,097
Payments on structured payables		(126,920	)			(133,530	)
Payment of contingent consideration related to a business combination		—				(900	)
Capital contribution by shareholders, net of loans issued		631				(27	)
Payments of issuance costs in connection with IPO		—				(12,458	)
Proceeds from sale of noncontrolling interest in subsidiary		—				410
Distribution to shareholders		(11,771	)			(11,710	)
Payments for repurchase and retirement of common stock		(147	)			(2,363	)
Distribution to noncontrolling interest		(11,246	)			(9,496	)
Net cash used for financing activities		(7,896	)			(14,156	)
Effect of exchange rate changes on cash, cash equivalents and restricted cash		(3,011	)			(4,473	)
Net decrease in cash, cash equivalents and restricted cash		(8,756	)			(12,985	)
Cash, cash equivalents and restricted cash at beginning of period		35,730				39,192
Cash, cash equivalents and restricted cash at end of period	$	26,974			$	26,207

Krispy Kreme, Inc.

Reconciliation of Non-GAAP Financial Measures (Unaudited)

(in thousands, except per share amounts)

	Quarter Ended								Two Quarters Ended
(in thousands)	July 2, 2023				July 3, 2022				July 2, 2023				July 3, 2022
Net income/(loss)	$	84			$	(2,408	)		$	1,728			$	4,050
Interest expense, net		12,063				7,586				24,051				14,937
Income tax (benefit)/expense		(7,563	)			1,574				(7,246	)			5,374
Depreciation and amortization expense		29,196				27,814				57,135				55,655
Share-based compensation		4,824				5,452				10,369				10,493
Employer payroll taxes related to share-based compensation		189				35				214				90
Other non-operating expense, net (1)		1,061				756				2,060				435
Strategic initiatives (2)		4,477				120				17,946				120
Acquisition and integration expenses (3)		339				82				430				599
New market penetration expenses (4)		241				260				335				370
Shop closure expenses, net (5)		1,484				1,894				805				2,124
Restructuring and severance expenses (6)		1,667				476				2,247				476
Gain on sale-leaseback		15				—				(9,646	)			(2,374	)
Other (7)		737				3,720				3,314				3,919
Adjusted EBITDA	$	48,814			$	47,361			$	103,742			$	96,268

	Quarter Ended								Two Quarters Ended
(in thousands)	July 2, 2023				July 3, 2022				July 2, 2023				July 3, 2022
Segment Adjusted EBITDA:
U.S.	$	28,085			$	24,155			$	66,620			$	56,562
International		19,463				19,535				33,030				36,779
Market Development		15,734				12,357				32,700				24,845
Corporate		(14,468	)			(8,686	)			(28,608	)			(21,918	)
Adjusted EBITDA	$	48,814			$	47,361			$	103,742			$	96,268

	Quarter Ended								Two Quarters Ended
(in thousands, except per share amounts)	July 2, 2023				July 3, 2022				July 2, 2023				July 3, 2022
Net income/(loss)	$	84			$	(2,408	)		$	1,728			$	4,050
Share-based compensation		4,824				5,452				10,369				10,493
Employer payroll taxes related to share-based compensation		189				35				214				90
Other non-operating expense, net (1)		1,061				756				2,060				435
Strategic initiatives (2)		4,477				120				17,946				120
Acquisition and integration expenses (3)		339				82				430				599
New market penetration expenses (4)		241				260				335				370
Shop closure expenses, net (5)		1,484				2,144				805				2,374
Restructuring and severance expenses (6)		1,667				476				2,247				476
Gain on sale-leaseback		15				—				(9,646	)			(2,374	)
Other (7)		737				3,720				3,314				3,919
Amortization of acquisition related intangibles (8)		7,368				6,978				14,641				14,224
Loss on extinguishment of 2019 Facility (9)		—				—				472				—
Tax impact of adjustments (10)		(9,464	)			(2,341	)			(14,120	)			(3,419	)
Tax specific adjustments (11)		(1,758	)			(628	)			(2,315	)			(628	)
Net loss/(income) attributable to noncontrolling interest		139				(1,441	)			(1,806	)			(3,897	)
Adjustment to adjusted net income attributable to common shareholders		—				—				—				(374	)
Adjusted net income attributable to common shareholders - Basic	$	11,403			$	13,205			$	26,674			$	26,458
Additional income attributed to noncontrolling interest due to subsidiary potential common shares		(4	)			(83	)			(7	)			(122	)
Adjusted net income attributable to common shareholders - Diluted	$	11,399			$	13,122			$	26,667			$	26,336
Basic weighted average common shares outstanding		168,184				167,367				168,162				167,314
Dilutive effect of outstanding common stock options and RSUs		2,475				1,973				2,163				2,099
Diluted weighted average common shares outstanding		170,659				169,340				170,325				169,413
Adjusted net income per share attributable to common shareholders:
Basic	$	0.07			$	0.08			$	0.16			$	0.16
Diluted	$	0.07			$	0.08			$	0.16			$	0.16

(1)		Primarily foreign translation gains and losses in each period.
(2)		The quarter and two quarters ended July 2, 2023 consist primarily of costs associated with the decision to exit the Branded Sweet Treats business, including property, plant and equipment impairments, inventory write-offs, employee severance, and other related costs.
(3)		Consists of acquisition and integration-related costs in connection with the Company’s business and franchise acquisitions, including legal, due diligence, and advisory fees incurred in connection with acquisition and integration-related activities for the applicable period.
(4)		Consists of start-up costs associated with entry into new countries for which the Company’s brands have not previously operated, including the Insomnia Cookies brand entering Canada and the U.K.
(5)		Includes lease termination costs, impairment charges, and loss on disposal of property, plant and equipment.
(6)		The quarter and two quarters ended July 2, 2023 consist primarily of costs associated with restructuring of the global executive teams.
(7)		The quarters and two quarters ended July 2, 2023 and July 3, 2022 consist primarily of legal and other regulatory expenses incurred outside the ordinary course of business. The regulatory expenses incurred in the quarter ended April 2, 2023 relate to business acquisitions.
(8)		Consists of amortization related to acquired intangible assets as reflected within depreciation and amortization in the Condensed Consolidated Statements of Operations.
(9)		Includes interest expenses related to unamortized debt issuance costs from the 2019 Facility associated with extinguished lenders as a result of the March 2023 debt refinancing.
(10)		Tax impact of adjustments calculated applying the applicable statutory rates. The quarter and two quarters ended July 2, 2023 and July 3, 2022 also include the impact of disallowed executive compensation expense.
(11)		The quarter and two quarters ended July 2, 2023 consist of the recognition of a previously unrecognized tax benefit unrelated to ongoing operations, the effect of tax law changes on existing temporary differences, and a discrete tax benefit unrelated to ongoing operations.

Krispy Kreme, Inc. Segment Reporting (Unaudited) (in thousands, except percentages or otherwise stated)
	Quarter Ended						Two Quarters Ended
	July 2, 2023			July 3, 2022			July 2, 2023			July 3, 2022
Net revenues:
U.S.	$	267,417		$	244,665		$	548,761		$	492,584
International		98,332			93,853			188,620			181,054
Market Development		43,133			36,727			90,451			74,139
Total net revenues	$	408,882		$	375,245		$	827,832		$	747,777

Q2 2023 Organic Revenue - QTD (in thousands, except percentages)	U.S.				International				Market Development				Total Company
Total net revenues in second quarter of fiscal 2023	$	267,417			$	98,332			$	43,133			$	408,882
Total net revenues in second quarter of fiscal 2022		244,665				93,853				36,727				375,245
Total Net Revenues Growth		22,752				4,479				6,406				33,637
Total Net Revenues Growth %		9.3	%			4.8	%			17.4	%			9.0	%
Less: Impact of shop optimization closures		(3,330	)			—				—				(3,330	)
Less: Impact of Branded Sweet Treats exit		(6,701	)			—				—				(6,701	)
Adjusted net revenues in second quarter of fiscal 2022		234,634		—		93,853				36,727				365,214
Adjusted Net Revenue Growth		32,783				4,479				6,406				43,668
Impact of acquisitions		(3,023	)			—				877				(2,146	)
Impact of foreign currency translation		—				(1,224	)			1,239				15
Organic Revenue Growth	$	29,760			$	3,255			$	8,522			$	41,537
Organic Revenue Growth %		12.7	%			3.5	%			23.2	%			11.4	%

Q2 2023 Organic Revenue - YTD (in thousands, except percentages)	U.S.				International				Market Development				Total Company
Total net revenues in first two quarters of fiscal 2023	$	548,761			$	188,620			$	90,451			$	827,832
Total net revenues in first two quarters of fiscal 2022		492,584				181,054				74,139				747,777
Total Net Revenues Growth		56,177				7,566				16,312				80,055
Total Net Revenues Growth %		11.4	%			4.2	%			22.0	%			10.7	%
Less: Impact of shop optimization closures		(6,517	)			—				—				(6,517	)
Less: Impact of Branded Sweet Treats exit		(6,701	)			—				—				(6,701	)
Adjusted net revenues in first two quarters of fiscal 2022		479,366				181,054				74,139				734,559
Adjusted Net Revenue Growth		69,395				7,566				16,312				93,273
Impact of acquisitions		(6,103	)			—				1,770				(4,333	)
Impact of foreign currency translation		—				2,084				3,710				5,794
Organic Revenue Growth	$	63,292			$	9,650			$	21,792			$	94,734
Organic Revenue Growth %		13.2	%			5.3	%			29.4	%			12.9	%

Q2 2022 Organic Revenue - QTD (in thousands, except percentages)	U.S.				International				Market Development				Total Company
Total net revenues in second quarter of fiscal 2022	$	244,665			$	93,853			$	36,727			$	375,245
Total net revenues in second quarter of fiscal 2021		230,918				89,237				29,031				349,186
Total Net Revenues Growth		13,747				4,616				7,696				26,059
Total Net Revenues Growth %		6.0	%			5.2	%			26.5	%			7.5	%
Impact of acquisitions		—				—				(4,172	)			(4,172	)
Impact of foreign currency translation		—				7,018				2,044				9,062
Organic Revenue Growth	$	13,747			$	11,634			$	5,568			$	30,949
Organic Revenue Growth %		6.0	%			13.0	%			19.2	%			8.9	%

Q2 2022 Organic Revenue - YTD (in thousands, except percentages)	U.S.				International				Market Development				Total Company
Total net revenues in first two quarters of fiscal 2022	$	492,584			$	181,054			$	74,139			$	747,777
Total net revenues in first two quarters of fiscal 2021		453,388				155,743				61,864				670,995
Total Net Revenues Growth		39,196				25,311				12,275				76,782
Total Net Revenues Growth %		8.6	%			16.3	%			19.8	%			11.4	%
Impact of acquisitions		(3,926	)			—				(6,790	)			(10,716	)
Impact of foreign currency translation		—				9,953				3,205				13,158
Organic Revenue Growth	$	35,270			$	35,264			$	8,690			$	79,224
Organic Revenue Growth %		7.8	%			22.6	%			14.0	%			11.8	%

Sales per Hub	Trailing Four Quarters Ended				Fiscal Year Ended
(in thousands, unless otherwise stated)	July 2, 2023				January 1, 2023				January 2, 2022
U.S.:
Revenues	$	1,066,427			$	1,010,250			$	923,129
Non-Fresh Revenues (1)		(27,381	)			(38,380	)			(37,311	)
Fresh Revenues from Insomnia Cookies and Hubs without Spokes (2)		(412,241	)			(404,430	)			(414,899	)
Sales from Hubs with Spokes		626,805				567,440				470,919
Sales per Hub (millions)		4.7				4.5				4.0
International:
Sales from Hubs with Spokes (3)	$	373,482			$	365,916			$	332,995
Sales per Hub (millions) (4)		9.7				9.8				8.5

(1)		Includes the exited Branded Sweet Treats business revenues.
(2)		Includes Insomnia Cookies revenues and Fresh Revenues generated by Hubs without Spokes.
(3)		Total International net revenues is equal to Fresh Revenues from Hubs with Spokes for that business segment.
(4)		International Sales per Hub comparative data has been restated in constant currency based on current exchange rates.

Krispy Kreme, Inc. Global Points of Access (Unaudited)
	Global Points of Access (1)
	Quarter Ended				Fiscal Year Ended
	July 2, 2023		July 3, 2022		January 1, 2023
U.S.: (2)
Hot Light Theater Shops	228		241		234
Fresh Shops	66		60		62
Cookie Shops	244		221		231
Carts, Food Trucks, and Other (3)	—		1		—
DFD Doors (5)	6,320		5,520		5,729
Total	6,858		6,043		6,256
International:
Hot Light Theater Shops	35		34		37
Fresh Shops	400		386		388
Carts, Food Trucks, and Other (3)	16		2		14
DFD Doors	3,219		3,003		3,032
Total	3,670		3,425		3,471
Market Development: (4)
Hot Light Theater Shops	120		111		115
Fresh Shops	939		784		873
Carts, Food Trucks, and Other (3)	28		29		27
DFD Doors	1,257		1,017		1,095
Total	2,344		1,941		2,110
Total Global Points of Access (as defined)	12,872		11,409		11,837
Total Hot Light Theater Shops	383		386		386
Total Fresh Shops	1,405		1,230		1,323
Total Cookie Shops	244		221		231
Total Shops	2,032		1,837		1,940
Total Carts, Food Trucks, and Other	44		32		41
Total DFD Doors	10,796		9,540		9,856
Total Global Points of Access (as defined)	12,872		11,409		11,837

(1)		Excludes the recently exited Branded Sweet Treats distribution points.
(2)		Includes Points of Access that were acquired from a franchisee in the U.S. in the third quarter of fiscal 2022. These Points of Access were previously included in the Market Development segment prior to the acquisition date.
(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. Points of Access in this category are primarily found in international locations in airports, train stations, etc.
(4)		Includes locations in Japan and Canada, which are Company-owned. All remaining Points of Access in the Market Development segment relate to our franchise business.
(5)		Includes over 160 McDonald’s test shops located in Louisville and Lexington, Kentucky and the surrounding area as of July 2, 2023.

Krispy Kreme, Inc. Global Hubs (Unaudited)
	Hubs
	Quarter Ended				Fiscal Year Ended
	July 2, 2023		July 3, 2022		January 1, 2023
U.S.:
Hot Light Theater Shops (1)	221		238		228
Doughnut Factories	4		4		4
Total	225		242		232
Hubs with Spokes	143		124		133
Hubs without Spokes	82		118		99
International:
Hot Light Theater Shops (1)	29		26		28
Doughnut Factories	11		11		11
Total	40		37		39
Hubs with Spokes	40		37		39
Market Development:
Hot Light Theater Shops (1)	114		108		110
Doughnut Factories	26		26		27
Total	140		134		137
Total Hubs	405		413		408

(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)
(in thousands, except leverage ratio)	July 2, 2023				January 1, 2023
Current portion of long-term debt	$	40,722			$	40,034
Long-term debt, less current portion		814,476				739,052
Total long-term debt, including debt issuance costs		855,198				779,086
Add back: Debt issuance costs		4,896				2,247
Total long-term debt, excluding debt issuance costs		860,094				781,333
Less: Cash and cash equivalents		(26,635	)			(35,371	)
Net debt	$	833,459			$	745,962
Adjusted EBITDA - trailing four quarters		198,203				190,729
Net leverage ratio	4.2 x				3.9 x

 

View source version on businesswire.com: https://www.businesswire.com/news/home/20230809107165/en/

Investor Relations

ir@krispykreme.com



Financial Media

Edelman Smithfield for Krispy Kreme, Inc.

Ashley Firlan & Ashna Vasa, KrispyKremeIR@edelman.com

Source: Krispy Kreme, Inc.

FAQ

What was Krispy Kreme's net revenue growth in Q2 2023?

Krispy Kreme's net revenue grew 9.0% year-over-year to $408.9 million in Q2 2023.

What was the growth rate of Global Points of Access?

Global Points of Access grew by 12.8% to 12,872 in Q2 2023.

What was Krispy Kreme's Adjusted EBITDA in Q2 2023?

Krispy Kreme's Adjusted EBITDA was $48.8 million in Q2 2023.

What was the organic revenue growth in Q2 2023?

Krispy Kreme's organic revenue grew 11.4% in Q2 2023.

What was the adjusted diluted EPS in Q2 2023?

Krispy Kreme's adjusted diluted EPS decreased $0.01 to $0.07 in Q2 2023.