Krispy Kreme Reports Third Quarter 2023 Results

Rhea-AI Summary

Krispy Kreme, Inc. (NASDAQ: DNUT) reported Q3 2023 results, with Net Revenue up 7.9% to $407.4 million and Organic Revenue up 9.6% to $400.3 million. Adjusted EBITDA grew 13.5% to $43.7 million. The company reaffirmed mid-to-high end of Revenue and Adjusted EBITDA guidance. CEO Mike Tattersfield highlighted the global expansion and strong performance of specialty doughnut offerings, projecting continued momentum into the fourth quarter.

Positive

• Net Revenue and Organic Revenue grew by 7.9% and 9.6% respectively, showing strong performance in Q3 2023.
• Adjusted EBITDA increased by 13.5% to $43.7 million, with improved margins of 10.7%.
• Global Points of Access growth accelerated by 14.4% to 13,394, indicating strong expansion.
• CEO Mike Tattersfield's positive outlook and expectations for continued momentum in the fourth quarter.

Negative

• None.

Net Revenue grew 7.9% and Organic Revenue grew 9.6% with strong momentum to start Q4

Reaffirms mid-to-high end of Revenue and Adjusted EBITDA guidance

CHARLOTTE, N.C.--(BUSINESS WIRE)-- Krispy Kreme, Inc. (NASDAQ: DNUT) (“Krispy Kreme” or the “Company”) today reported financial results for the third quarter ended October 1, 2023.

Third Quarter Highlights (vs Q3 2022)

• Net Revenue grew 7.9% to $407.4 million
• Organic Revenue grew 9.6% to $400.3 million
• GAAP Net Loss of $40.3 million primarily driven by non-cash, income tax expense accrual
• Adjusted EBITDA grew 13.5% to $43.7 million
• Adjusted EBITDA margins improved 50 basis points to 10.7%
• Global Points of Access growth accelerated, increasing 1,691, or 14.4%, to 13,394

“Our third quarter results showed the strength of our team, business model, and the power of our brand. We delivered revenue and Adjusted EBITDA growth, while delivering Adjusted EBITDA margin expansion through our hub and spoke model. Our global expansion continued, and our doughnuts became available in two new markets, Switzerland and Kazakhstan, and Insomnia Cookies expanded internationally into Canada and the United Kingdom. Overall, Global Points of Access growth accelerated, increasing by 1,691 or 14.4% year-over-year to 13,394,” stated CEO Mike Tattersfield. “We delivered the joy that is Krispy Kreme through powerful specialty doughnut offerings including the popular M&Ms collection, which was available in 17 countries, our extremely successful limited time offering with Pumpkin Spice, and an innovative new partnership with Hailey Bieber to promote her Krispy Kreme inspired strawberry glazed peptide lip treatment.”

Mike continued, “The path forward for Krispy Kreme remains incredibly exciting. Momentum continues into the seasonally strong fourth quarter enhanced by continued growth in global Points of Access, and a robust Halloween Scooby-Doo offering. We expect to open in Ecuador and France in the fourth quarter taking our new market openings to seven in 2023. We are also excited about our continued partnership with McDonald’s, which we believe has validated the attractiveness of the quick-service restaurant channel. While nothing has been finalized, we are in advanced discussions about expanding the partnership and are making investments in the U.S. that reflect our confidence in further scaling our Delivered Fresh Daily network. I could not be more excited to watch Krispy Kreme become the most loved sweet treat brand in the world and follow the Company’s continued success as Josh Charlesworth takes on the CEO position in 2024.”

Financial Highlights

$ in millions, except per share data	Q3 2023	vs Q3 2022	Q1-Q3 2023	vs. Q1-Q3 2022
Net Revenue	$407.4	+7.9%	$1,235.2	+9.8%
Organic Revenue (1)	$400.3	+9.6%	$1,229.6	+11.8%
GAAP Net Loss	$(40.3)	(240.0)%	$(38.5)	(394.6)%
Adjusted Net Income, Diluted (1)	$4.4	(3.6)%	$31.1	0.5%
GAAP Operating (Loss)/Income	$(2.1)	(105.7)%	$18.5	(22.3)%
GAAP Operating (Loss)/Income Margin	(0.5)%	-20 bps	1.5%	-60 bps
Adjusted EBITDA (1)	$43.7	+13.5%	$147.5	+9.4%
Adjusted EBITDA Margin (1)	10.7%	+50 bps	11.9%	-10 bps
GAAP Diluted EPS	$(0.24)	$(0.16)	$(0.24)	$(0.16)
Adjusted Diluted EPS (1)	$0.03	$0.00	$0.18	$0.00
Notes:
(1) Non-GAAP figures – please refer to Reconciliation of Non-GAAP Financial Measures.

Key Operating Metrics

$ in millions, except access points	Q3 2023	vs Q3 2022	vs Q2 2023
Global Points of Access	13,394	+14.4%	+4.1%
Sales per Hub (U.S.) TTM	$4.8	+9.1%	+2.1%
Sales per Hub (International) TTM	$9.9	0.0%	(4.8)%
Ecommerce as a Percent of Retail Sales	18.6%	+10 bps	-20 bps

Third Quarter 2023 Consolidated Results

Krispy Kreme’s third quarter 2023 results reflect continued year-over-year growth as compared to the third quarter of 2022. Net Revenue grew 7.9% to $407.4 million. Total Company Organic Revenue grew 9.6% in the quarter, led by the U.S., which delivered 10.2% organic growth in the quarter driven by growth across all sales channels, including Delivered Fresh Daily (“DFD”) doors, Doughnut Shops and Cookie Bakeries, and Ecommerce.

GAAP net loss for the quarter was $40.3 million, compared to a GAAP net loss of $11.8 million in 2022, due to the forecasted effective tax rate and attributable non-cash income tax expense. Adjusted Net Income, Diluted, decreased 3.6% to $4.4 million in the quarter. Adjusted EBITDA in the quarter grew in excess of revenue at 13.5% to $43.7 million, driven by improved profitability across each of our reportable segments. Adjusted EBITDA margins improved 50 basis points to 10.7% driven by efficiencies in and expansion of our hub and spoke model, as well as pricing actions taken throughout the quarter and from earlier in 2023. GAAP diluted EPS in the quarter was a $0.24 loss per share compared to a loss per share of $0.08 in the same quarter last year, while adjusted diluted EPS was flat compared to last year at $0.03 despite elevated interest rates.

Third Quarter 2023 Market Segment Results (vs Q3 2022)

U.S.: In the U.S. segment, net revenue grew $13.3 million, or approximately 5.4%, and organic revenue increased $23.9 million, or approximately 10.2%. Organic growth was driven by successful marketing activations, pricing actions, and the expansion of our DFD strategy. Sales per hub in the U.S. increased 9.1% to $4.8 million and DFD average sales per door increased 11.6% to $613 per week, with an additional 786 doors. Additionally, Ecommerce as a percent of retail sales grew 150 basis points, or $4.8 million.

U.S. Adjusted EBITDA increased 8.8% to $22.3 million with Adjusted EBITDA margin expansion of 30 basis points to 8.6%. This was primarily driven by the productivity benefits of the expansion of our hub and spoke model.

International: In the International segment, net revenue grew $14.2 million, or approximately 15.4%, aided by foreign currency translation impacts of $6.7 million from a weakening U.S. dollar. International organic revenue grew $7.5 million, or approximately 8.2%, with organic growth across all of our markets, driven by pricing and strong Points of Access growth of 416, or 12%.

International Adjusted EBITDA grew 17.3% to $21.4 million with Adjusted EBITDA margin expansion of 30 basis points to 20.2%, primarily driven by the U.K. and Australia where pricing and cost control initiatives continue to prove effective.

Market Development: In the Market Development segment, net revenue increased $2.3 million, or approximately 5.9%, despite lapping one-time franchise equipment sales and the impact 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 $3.5 million, or approximately 9.1%, driven by strong organic growth in Japan and Canada, and new markets openings including Kazakhstan and Switzerland.

Market Development Adjusted EBITDA grew 13.3% to $13.4 million with Adjusted EBITDA margin expansion of 220 basis points to 32.6% driven mainly by hub and spoke efficiencies in our company-owned Japan and Canada businesses.

Balance Sheet & Capital Expenditures

During the third quarter of 2023, the Company invested $34.3 million in capital expenditures, or 8.4% of revenue, primarily to support new store development, international expansion and the growth of our omni-channel strategy preparing for expansion in the QSR channel.

As of October 1, 2023 the Company had total available liquidity of $196.2 million, including $25.7 million of cash and cash equivalents plus undrawn capacity of $170.5 million under available credit facilities, and net debt of $849.8 million.

2023 Financial Outlook

With the exception of capital expenditures and interest expense, the Company is reiterating its outlook 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)
• Adjusted Income Tax rate between 24.5% to 26.0%
• Capital Expenditures of approximately 7% to 8% of revenue; updated from 6.6% driven by investments to support the growth of the business and foreign exchange rates
• Interest Expense, net between $47 million to $51 million; updated from $39 to $43 million driven by the reduction of vendor financing and higher prevailing interest rates
• The Company continues to expect to reduce its net leverage in 2023, as we make progress towards our 2026 goal of approximately 2.0x to 2.5x net leverage

As noted above, the Company continues to trend toward the middle to the higher end of the revenue and adjusted EBITDA ranges. Additionally, on October 3, 2023, the Company announced it is exploring strategic alternatives for Insomnia Cookies, which includes consideration of an all-cash sale. Guidance for the full year 2023 includes operations from Insomnia Cookies and, if a divestiture occurs, final results may reflect separation of Insomnia Cookies' operations.

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 Bakeries, 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 third 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 more than 35 countries through its unique network of fresh doughnut shops, partnerships with leading retailers, and a rapidly growing Ecommerce and delivery business with more than 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 “continue,” “towards,” “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								Three Quarters Ended
	October 1, 2023 (13 weeks)				October 2, 2022 (13 weeks)				October 1, 2023 (39 weeks)				October 2, 2022 (39 weeks)
Net revenues
Product sales	$	398,745			$	370,216			$	1,209,767			$	1,102,045
Royalties and other revenues		8,622				7,306				25,432				23,254
Total net revenues		407,367				377,522				1,235,199				1,125,299
Product and distribution costs		101,353				102,870				330,292				299,539
Operating expenses		195,380				177,592				575,953				520,260
Selling, general and administrative expense		68,305				54,801				192,355				160,266
Marketing expenses		12,478				10,995				32,101				32,369
Pre-opening costs		1,059				1,200				2,927				3,514
Other (income)/expenses, net		(1,102	)			2,964				(6,051	)			1,800
Depreciation and amortization expense		32,007				28,127				89,142				83,782
Operating (loss)/income		(2,113	)			(1,027	)			18,480				23,769
Interest expense, net		12,807				8,871				36,858				23,808
Other non-operating expense, net		971				1,648				3,031				2,083
Loss before income taxes		(15,891	)			(11,546	)			(21,409	)			(2,122	)
Income tax expense		24,367				294				17,121				5,668
Net loss		(40,258	)			(11,840	)			(38,530	)			(7,790	)
Net income attributable to noncontrolling interest		199				1,216				2,005				5,113
Net loss attributable to Krispy Kreme, Inc.	$	(40,457	)		$	(13,056	)		$	(40,535	)		$	(12,903	)
Net loss per share:
Common stock — Basic	$	(0.24	)		$	(0.08	)		$	(0.24	)		$	(0.08	)
Common stock — Diluted	$	(0.24	)		$	(0.08	)		$	(0.24	)		$	(0.08	)
Weighted average shares outstanding:
Basic		168,224				167,431				168,183				167,353
Diluted		168,224				167,431				168,183				167,353

Krispy Kreme, Inc. Condensed Consolidated Balance Sheets (in thousands, except per share amounts)
	As of
	(Unaudited) October 1, 2023				January 1, 2023
ASSETS
Current assets:
Cash and cash equivalents	$	25,711			$	35,371
Restricted cash		430				359
Accounts receivable, net		49,854				51,089
Inventories		35,063				46,239
Taxes receivable		17,886				18,263
Prepaid expense and other current assets		31,118				26,953
Total current assets		160,062				178,274
Property and equipment, net		517,528				472,358
Goodwill		1,092,000				1,087,908
Other intangible assets, net		949,463				966,088
Operating lease right of use asset, net		448,569				417,381
Other assets		19,581				26,528
Total assets	$	3,187,203			$	3,148,537
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Current portion of long-term debt	$	43,492			$	40,034
Current operating lease liabilities		49,408				43,160
Accounts payable		178,725				225,276
Accrued liabilities		164,577				104,424
Structured payables		88,838				103,575
Total current liabilities		525,040				516,469
Long-term debt, less current portion		827,429				739,052
Noncurrent operating lease liabilities		441,732				412,759
Deferred income taxes, net		109,925				143,124
Other long-term obligations and deferred credits		34,067				38,258
Total liabilities		1,938,193				1,849,662
Commitments and contingencies
Shareholders’ equity:
Common stock, $0.01 par value; 300,000 shares authorized as of both October 1, 2023 and January 1, 2023; 168,594 and 168,137 shares issued and outstanding as of October 1, 2023 and January 1, 2023, respectively		1,686				1,681
Additional paid-in capital		1,437,488				1,426,105
Shareholder note receivable		(3,820	)			(4,813	)
Accumulated other comprehensive loss, net of income tax		(7,516	)			(9,151	)
Retained deficit		(275,698	)			(217,490	)
Total shareholders’ equity attributable to Krispy Kreme, Inc.		1,152,140				1,196,332
Noncontrolling interest		96,870				102,543
Total shareholders’ equity		1,249,010				1,298,875
Total liabilities and shareholders’ equity	$	3,187,203			$	3,148,537

Krispy Kreme, Inc. Condensed Consolidated Statements of Cash Flows (Unaudited) (in thousands)
	Three Quarters Ended
	October 1, 2023 (39 weeks)				October 2, 2022 (39 weeks)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss	$	(38,530	)		$	(7,790	)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation and amortization expense		89,142				83,782
Deferred income taxes		12,634				(10,259	)
Loss on extinguishment of debt		472				—
Impairment and lease termination charges		7,711				7,255
Gain on disposal of property and equipment		(168	)			(244	)
Gain on sale-leaseback		(9,646	)			(4,311	)
Share-based compensation		17,821				13,318
Change in accounts and notes receivable allowances		504				378
Inventory write-off		10,522				388
Settlement of interest rate swap derivatives		7,657				—
Amortization related to settlement of interest rate swap derivatives		(7,334	)			—
Other		566				804
Change in operating assets and liabilities, excluding business acquisitions and foreign currency translation adjustments		(47,319	)			(12,591	)
Net cash provided by operating activities		44,032				70,730
CASH FLOWS USED FOR INVESTING ACTIVITIES:
Purchase of property and equipment		(88,605	)			(75,002	)
Proceeds from disposals of assets		202				856
Proceeds from sale-leaseback		10,025				5,700
Acquisition of shops and franchise rights from franchisees, net of cash acquired		—				(17,335	)
Purchase of equity method investment		—				(989	)
Other investing activities		20				(931	)
Net cash used for investing activities		(78,358	)			(87,701	)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from the issuance of debt		1,044,698				121,500
Repayment of long-term debt and lease obligations		(965,250	)			(70,180	)
Payment of financing costs		(5,000	)			—
Proceeds from structured payables		145,099				219,459
Payments on structured payables		(159,571	)			(211,778	)
Payment of contingent consideration related to a business combination		(925	)			(900	)
Capital contribution by shareholders, net of loans issued		631				(288	)
Payments of issuance costs in connection with IPO		—				(12,458	)
Proceeds from sale of noncontrolling interest in subsidiary		—				410
Distribution to shareholders		(17,657	)			(17,570	)
Payments for repurchase and retirement of common stock		(1,609	)			(2,425	)
Distribution to noncontrolling interest		(12,883	)			(11,525	)
Net cash provided by financing activities		27,533				14,245
Effect of exchange rate changes on cash, cash equivalents and restricted cash		(2,796	)			(7,967	)
Net decrease in cash, cash equivalents and restricted cash		(9,589	)			(10,693	)
Cash, cash equivalents and restricted cash at beginning of period		35,730				39,192
Cash, cash equivalents and restricted cash at end of period	$	26,141			$	28,499
Net cash provided by operating activities	$	44,032			$	70,730
Less: Purchase of property and equipment		(88,605	)			(75,002	)
Free cash flow	$	(44,573	)		$	(4,272	)

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

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

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

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

	Quarter Ended								Three Quarters Ended
(in thousands)	October 1, 2023				October 2, 2022				October 1, 2023				October 2, 2022
Net loss	$	(40,258	)		$	(11,840	)		$	(38,530	)		$	(7,790	)
Interest expense, net		12,807				8,871				36,858				23,808
Income tax expense		24,367				294				17,121				5,668
Depreciation and amortization expense		32,007				28,127				89,142				83,782
Share-based compensation		7,452				2,825				17,821				13,318
Employer payroll taxes related to share-based compensation		96				2				310				92
Other non-operating expense, net (1)		971				1,648				3,031				2,083
Strategic initiatives (2)		5,895				86				23,841				206
Acquisition and integration expenses (3)		49				790				479				1,389
New market penetration expenses (4)		678				313				1,013				683
Shop closure (income)/expenses, net (5)		(449	)			5,735				356				7,859
Restructuring and severance expenses (6)		552				2,328				2,799				2,804
Gain on sale-leaseback		—				(1,937	)			(9,646	)			(4,311	)
Other (7)		(426	)			1,300				2,888				5,219
Adjusted EBITDA	$	43,741			$	38,542			$	147,483			$	134,810

	Quarter Ended								Three Quarters Ended
(in thousands)	October 1, 2023				October 2, 2022				October 1, 2023				October 2, 2022
Segment Adjusted EBITDA:
U.S.	$	22,258			$	20,452			$	88,878			$	77,014
International		21,406				18,254				54,436				55,033
Market Development		13,371				11,797				46,071				36,642
Corporate		(13,294	)			(11,961	)			(41,902	)			(33,879	)
Adjusted EBITDA	$	43,741			$	38,542			$	147,483			$	134,810

	Quarter Ended								Three Quarters Ended
(in thousands, except per share amounts)	October 1, 2023				October 2, 2022				October 1, 2023				October 2, 2022
Net loss	$	(40,258	)		$	(11,840	)		$	(38,530	)		$	(7,790	)
Share-based compensation		7,452				2,825				17,821				13,318
Employer payroll taxes related to share-based compensation		96				2				310				92
Other non-operating expense, net (1)		971				1,648				3,031				2,083
Strategic initiatives (2)		5,895				86				23,841				206
Acquisition and integration expenses (3)		49				790				479				1,389
New market penetration expenses (4)		678				313				1,013				683
Shop closure (income)/expenses, net (5)		(449	)			5,735				356				8,109
Restructuring and severance expenses (6)		552				2,328				2,799				2,804
Gain on sale-leaseback		—				(1,937	)			(9,646	)			(4,311	)
Other (7)		(426	)			1,300				2,888				5,219
Amortization of acquisition related intangibles (8)		7,386				7,083				22,027				21,307
Loss on extinguishment of 2019 Facility (9)		—				—				472				—
Tax impact of adjustments (10)		22,694				(2,470	)			8,574				(5,889	)
Tax specific adjustments (11)		(28	)			—				(2,343	)			(628	)
Net income attributable to noncontrolling interest		(199	)			(1,216	)			(2,005	)			(5,113	)
Adjustment to adjusted net income attributable to common shareholders		—				—				—				(374	)
Adjusted net income attributable to common shareholders - Basic	$	4,413			$	4,647			$	31,087			$	31,105
Additional income attributed to noncontrolling interest due to subsidiary potential common shares		(7	)			(76	)			(14	)			(174	)
Adjusted net income attributable to common shareholders - Diluted	$	4,406			$	4,571			$	31,073			$	30,931
Basic weighted average common shares outstanding		168,224				167,431				168,183				167,353
Dilutive effect of outstanding common stock options, RSUs, and PSUs		2,421				1,822				2,249				2,006
Diluted weighted average common shares outstanding		170,645				169,253				170,432				169,359
Adjusted net income per share attributable to common shareholders:
Basic	$	0.03			$	0.03			$	0.18			$	0.19
Diluted	$	0.03			$	0.03			$	0.18			$	0.18

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

Krispy Kreme, Inc. Segment Reporting (Unaudited) (in thousands, except percentages or otherwise stated)
	Quarter Ended						Three Quarters Ended
	October 1, 2023			October 2, 2022			October 1, 2023			October 2, 2022
Net revenues:
U.S.	$	260,177		$	246,830		$	808,938		$	739,414
International		106,130			91,934			294,750			272,988
Market Development		41,060			38,758			131,511			112,897
Total net revenues	$	407,367		$	377,522		$	1,235,199		$	1,125,299

Q3 2023 Organic Revenue - QTD (in thousands, except percentages)	U.S.				International				Market Development				Total Company
Total net revenues in third quarter of fiscal 2023	$	260,177			$	106,130			$	41,060			$	407,367
Total net revenues in third quarter of fiscal 2022		246,830				91,934				38,758				377,522
Total Net Revenues Growth		13,347				14,196				2,302				29,845
Total Net Revenues Growth %		5.4	%			15.4	%			5.9	%			7.9	%
Less: Impact of shop optimization closures		(3,096	)			—				—				(3,096	)
Less: Impact of Branded Sweet Treats exit		(9,035	)			—				—				(9,035	)
Adjusted net revenues in third quarter of fiscal 2022		234,699				91,934				38,758				365,391
Adjusted net revenue growth		25,478				14,196				2,302				41,976
Impact of acquisitions		(1,575	)			—				457				(1,118	)
Impact of foreign currency translation		—				(6,677	)			765				(5,912	)
Organic Revenue Growth	$	23,903			$	7,519			$	3,524			$	34,946
Organic Revenue Growth %		10.2	%			8.2	%			9.1	%			9.6	%

Q3 2023 Organic Revenue - YTD (in thousands, except percentages)	U.S.				International				Market Development				Total Company
Total net revenues in first three quarters of fiscal 2023	$	808,938			$	294,750			$	131,511			$	1,235,199
Total net revenues in first three quarters of fiscal 2022		739,414				272,988				112,897				1,125,299
Total Net Revenues Growth		69,524				21,762				18,614				109,900
Total Net Revenues Growth %		9.4	%			8.0	%			16.5	%			9.8	%
Less: Impact of shop optimization closures		(9,613	)			—				—				(9,613	)
Less: Impact of Branded Sweet Treats exit		(15,736	)			—				—				(15,736	)
Adjusted net revenues in first three quarters of fiscal 2022		714,065				272,988				112,897				1,099,950
Adjusted net revenue growth		94,873				21,762				18,614				135,249
Impact of acquisitions		(7,678	)			—				2,227				(5,451	)
Impact of foreign currency translation		—				(4,593	)			4,475				(118	)
Organic Revenue Growth	$	87,195			$	17,169			$	25,316			$	129,680
Organic Revenue Growth %		12.2	%			6.3	%			22.4	%			11.8	%

Q3 2022 Organic Revenue - QTD (in thousands, except percentages)	U.S.				International				Market Development				Total Company
Total net revenues in third quarter of fiscal 2022	$	246,830			$	91,934			$	38,758			$	377,522
Total net revenues in third quarter of fiscal 2021		225,807				87,262				29,730				342,799
Total Net Revenues Growth		21,023				4,672				9,028				34,723
Total Net Revenues Growth %		9.3	%			5.4	%			30.4	%			10.1	%
Impact of acquisitions		(1,030	)			—				(3,862	)			(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	%

Q3 2022 Organic Revenue - YTD (in thousands, except percentages)	U.S.				International				Market Development				Total Company
Total net revenues in first three quarters of fiscal 2022	$	739,414			$	272,988			$	112,897			$	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		60,219				29,983				21,303				111,505
Total Net Revenues Growth %		8.9	%			12.3	%			23.3	%			11.0	%
Impact of acquisitions		(4,955	)			—				(10,653	)			(15,608	)
Impact of foreign currency translation		—				18,843				5,769				24,612
Organic Revenue Growth	$	55,264			$	48,826			$	16,419			$	120,509
Organic Revenue Growth %		8.1	%			20.1	%			17.9	%			11.9	%

Sales per Hub	Trailing Four Quarters Ended				Fiscal Year Ended
(in thousands, unless otherwise stated)	October 1, 2023				January 1, 2023				January 2, 2022
U.S.:
Revenues	$	1,079,774			$	1,010,250			$	923,129
Non-Fresh Revenues (1)		(18,488	)			(38,380	)			(37,311	)
Fresh Revenues from Insomnia Cookies and Hubs without Spokes (2)		(400,567	)			(404,430	)			(414,899	)
Sales from Hubs with Spokes		660,719				567,440				470,919
Sales per Hub (millions)		4.8				4.5				4.0
International:
Sales from Hubs with Spokes (3)	$	387,678			$	365,916			$	332,995
Sales per Hub (millions) (4)		9.9				9.9				8.6

(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
	October 1, 2023		October 2, 2022		January 1, 2023
U.S.: (2)
Hot Light Theater Shops	229		240		234
Fresh Shops	65		61		62
Cookie Bakeries	247		227		231
Carts, Food Trucks, and Other (3)	—		1		—
DFD Doors (5)	6,506		5,720		5,729
Total	7,047		6,249		6,256
International:
Hot Light Theater Shops	36		35		37
Fresh Shops	410		384		388
Carts, Food Trucks, and Other (3)	16		12		14
DFD Doors	3,393		3,008		3,032
Total	3,855		3,439		3,471
Market Development: (4)
Hot Light Theater Shops	122		111		115
Fresh Shops	989		809		873
Cookie Bakeries	2		—		—
Carts, Food Trucks, and Other (3)	29		29		27
DFD Doors	1,350		1,066		1,095
Total	2,492		2,015		2,110
Total Global Points of Access (as defined)	13,394		11,703		11,837
Total Hot Light Theater Shops	387		386		386
Total Fresh Shops	1,464		1,254		1,323
Total Cookie Bakeries	249		227		231
Total Shops	2,100		1,867		1,940
Total Carts, Food Trucks, and Other	45		42		41
Total DFD Doors	11,249		9,794		9,856
Total Global Points of Access (as defined)	13,394		11,703		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 October 1, 2023.

Krispy Kreme, Inc. Global Hubs (Unaudited)
	Hubs
	Quarter Ended				Fiscal Year Ended
	October 1, 2023		October 2, 2022		January 1, 2023
U.S.:
Hot Light Theater Shops (1)	222		237		228
Doughnut Factories	4		4		4
Total	226		241		232
Hubs with Spokes	148		126		133
Hubs without Spokes	78		115		99
International:
Hot Light Theater Shops (1)	30		26		28
Doughnut Factories	11		11		11
Total	41		37		39
Hubs with Spokes	41		37		39
Market Development:
Hot Light Theater Shops (1)	115		107		110
Doughnut Factories	26		26		27
Total	141		133		137
Total Hubs	408		411		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)	October 1, 2023				January 1, 2023
Current portion of long-term debt	$	43,492			$	40,034
Long-term debt, less current portion		827,429				739,052
Total long-term debt, including debt issuance costs		870,921				779,086
Add back: Debt issuance costs		4,634				2,247
Total long-term debt, excluding debt issuance costs		875,555				781,333
Less: Cash and cash equivalents		(25,711	)			(35,371	)
Net debt	$	849,844			$	745,962
Adjusted EBITDA - trailing four quarters		203,402				190,729
Net leverage ratio	4.2 x				3.9 x

 

View source version on businesswire.com: https://www.businesswire.com/news/home/20231108513454/en/

Investor Relations

Stephanie Daukus

ir@krispykreme.com

Financial Media

Edelman Smithfield for Krispy Kreme, Inc.

Ashley Firlan & Ashna Vasa, KrispyKremeIR@edelman.com

Source: Krispy Kreme, Inc.

FAQ

What are Krispy Kreme's Q3 2023 financial results?

Krispy Kreme reported Q3 2023 Net Revenue growth of 7.9% to $407.4 million and Organic Revenue growth of 9.6% to $400.3 million. Adjusted EBITDA increased by 13.5% to $43.7 million.

What is the projected outlook for Krispy Kreme?

CEO Mike Tattersfield expects continued momentum into the fourth quarter, with global expansion and strong performance of specialty doughnut offerings.

How many new markets is Krispy Kreme opening in 2023?

Krispy Kreme plans to open in seven new markets in 2023, including Ecuador and France in the fourth quarter.