Recent Quotes View Full List My Watchlist Create Watchlist Indicators DJI Nasdaq Composite SPX Gold Crude Oil EL&P Market Index Markets Stocks ETFs Tools Overview News Currencies International Treasuries Krispy Kreme Reports Third Quarter 2022 Results By: Krispy Kreme, Inc. via Business Wire November 15, 2022 at 07:00 AM EST Third quarter net revenue grew 10.1% compared to Q3 2021 Organic revenue growth accelerated to 12.0% Added 294 Points of Access in Q3 and 1,276 year to date, exceeding our full year target Reiterating 2022 Guidance with strong momentum to start Q4 Krispy Kreme, Inc. (NASDAQ: DNUT) (“Krispy Kreme” or the “Company”) today reported financial results for the third quarter ended October 2, 2022 with net revenue growing 10.1% year-over-year to $377.5 million, or 13.4% in constant currency, while organic revenue grew 12.0%. Foreign currency translation resulted in a negative 3.3% impact on net revenue growth during the third quarter due to the strength of the U.S. dollar. Sales per Hub in the U.S. and Canada increased by 18.4% year-over-year to $4.5 million while International Sales per Hub grew 16.3% to $10.0 million. Organic growth was driven by the solid performance and expansion of Krispy Kreme’s omni-channel model, with a 17% increase in Global Points of Access and strong organic revenue growth in all three business segments in our seasonally low quarter. Global Points of Access, which reflect all locations where fresh doughnuts and cookies can be purchased, increased by 294 during the quarter, providing consumers access to Krispy Kreme in more than 11,700 locations around the world. GAAP Net Loss for the quarter was $11.8 million with Adjusted Net Income of $5.9 million. GAAP Loss per Share for the quarter was ($0.08) while Adjusted Diluted EPS was $0.03 for the quarter. Adjusted EBITDA in the third quarter was $38.5 million, which included approximately $3.1 million negative impact from the strong U.S. dollar. Commenting on the Company’s performance, President and CEO Mike Tattersfield stated, “We were pleased with our strong organic revenue growth in the third quarter, led by an acceleration in growth in the U.S. and Canada and Market Development. Margins improved significantly in the final period of the quarter as we successfully implemented price increases in the U.S. coupled with decreased promotional activity after Labor Day. Strong momentum continues into the fourth quarter enhanced by further recent pricing actions in the U.S. and U.K. and a robust global Halloween performance.” Mike continued, “Our international expansion strategy is progressing at a healthy pace. Just recently we opened in Jordan and announced a joint venture to enter into France in 2023. We are excited to also announce a new development agreement to open in Jamaica next year, bringing our total development deals signed in 2022 to 7 international countries, representing over 5,000 new potential points of access.” Financial Highlights $ in millions, except per share data Q3 2022 vs Q3 2021 Q1-Q3 2022 vs Q1-Q3 2021 Net Revenue $377.5 +10.1% $1,125.3 +11.0% Organic Revenue(1) $384.1 +12.0% $1,134.3 +11.9% GAAP Net (Loss)/Income ($11.8) ($8.1) ($7.8) $11.3 Adjusted Net Income(1) $5.9 ($6.8) $36.6 ($14.1) Operating (Loss)/Income ($1.0) ($2.9) $23.8 ($0.9) Operating (Loss)/Income Margin (0.3%) -80 bps 2.1% -30 bps Adjusted EBITDA(1) $38.5 ($2.9) $134.8 ($5.4) Adjusted EBITDA Margin(1) 10.2% -190 bps 12.0% -180 bps GAAP Diluted Income/(Loss) Per Share ($0.08) ($0.04) ($0.08) +$0.12 Adjusted Diluted EPS(1) $0.03 ($0.03) $0.18 ($0.11) Net Debt $753.3 +10.7% Notes: (1) Non-GAAP figures – please refer to Reconciliation of Non-GAAP Financial Measures. Key Operating Metrics $ in millions, except access points Q3 2022 vs Q3 2021 vs Q2 2022 Global Points of Access 11,703 +16.6% +2.6% Sales per Hub (U.S. and Canada) TTM $4.5 +18.4% +2.3% Sales per Hub (International) TTM $10.0 +16.3% +2.0% Ecommerce as a Percent of Retail Sales 18.5% +170 bps +100 bps Third quarter 2022 Consolidated Results Net revenue grew 10.1% in the third quarter to $377.5 million, or 13.4% in constant currency, and organic revenue grew 12.0% in the quarter. Organic revenue growth was driven by strong performances in our Hubs with Spokes, both domestically and internationally, leveraging a 16.6% increase in points of access from a year ago, and robust Ecommerce revenue growth. GAAP Net Loss for the quarter was $11.8 million, compared to a GAAP Net Loss of $3.8 million in the third quarter of 2021. Adjusted EBITDA in the quarter declined 6.9% to $38.5 million, due to an approximately $3.1 million negative impact from the strength of the U.S. dollar, higher promotional activity from the Beat the Pump promotion in the US through Labor Day and increased labor and commodity costs. Operating margins declined 80 basis points to -0.3%, while Adjusted EBITDA margin declined 190 basis points to 10.2% from the same quarter in 2021 driven by margin declines in our International segment and FX headwinds. However, Adjusted EBITDA margins improved significantly as the quarter progressed and were higher in the final period of the third quarter compared to a year ago. Adjusted Net Income for the quarter declined 53.5% to $5.9 million compared to the same quarter in 2021. GAAP Diluted Net Loss per share in the quarter was ($0.08) compared to a net loss of ($0.04) in the same quarter last year with Adjusted Diluted EPS decreasing to $0.03 from $0.06 in the third quarter of 2021. Diluted weighted average shares outstanding for the third quarter of 2022 were 169.3 million, compared to 168.1 million in the third quarter of 2021. Third Quarter Market Segment Results U.S. and Canada: In the U.S. and Canada segment net revenue in the third quarter of 2022 grew 11.9% to $252.6 million, driven by the continued execution of our omni-channel strategy, including our Pumpkin Spice limited time offering across all channels including Branded Sweet Treats, Hubs with Spokes strength and Insomnia Cookies. Organic revenue increased 8.9% driven by increased points of access and successful price increases in retail locations in July and Delivered Fresh Daily (“DFD”) doors in September. Points of Access increased by 206 in quarter to 6,259 and represents a 9.4% increase in Points of Access from a year ago. U.S. and Canada Adjusted EBITDA increased 10.0% to $21.9 million in the third quarter of 2022 compared to the third quarter of 2021 with a slight Adjusted EBITDA margin decline of 10 basis points to 8.7%. Hub and Spoke efficiency and a strong performance from Insomnia offset inflationary pressures, higher promotional activity in the first two periods of the third quarter and margin erosion at Hubs without Spokes. Adjusted EBITDA margins improved significantly as the quarter progressed, including strong margin expansion in September over the prior year, as promotional activity returned to normal levels and sales remained robust. This momentum has continued in the fourth quarter. Also during the third quarter, we closed 8 underperforming Hubs without Spokes that were previously announced. International: In the International segment, net revenue grew 5.4% to $91.9 million, with organic growth of 15.5%. Organic growth in the quarter was driven by strong growth in Mexico, Australia and New Zealand. Points of Access increased by 14 to 3,439, or 548 year to date. Foreign currency translation had a negative 10.1% impact on our International net revenue growth during the quarter. International Adjusted EBITDA declined 15.7% to $18.3 million in the third quarter over the same period of the prior year, due to a $2.4 million impact from the higher U.S. dollar as well as a continued challenging environment in the U.K. Adjusted EBITDA for Mexico and Australia & New Zealand markets grew 18.1% in the third quarter compared to the same period in the prior year. International Adjusted EBITDA margin was 19.9% in the third quarter, down 490 basis points compared the same period last year due to reduced margins in the U.K. from lower organic revenue growth and elevated inflation. Market Development: In the Market Development segment, net revenue increased 10.9% to $33.0 million driven by a 32.7% increase in Points of Access compared to the prior year to 2,005, partially offset by franchise acquisitions and an 8.6% adverse impact from foreign currency exchange. Organic revenue growth accelerated to 26.0% compared to the same period in 2021 driven by a strong performance in our franchise markets, including South Korea and India, and our equity-owned Japan market where the Company is implementing its omni-channel model with the expansion of Ecommerce and the launch of DFD. Points of Access in the quarter increased by 74 and 192 year to date. Market Development Adjusted EBITDA grew 14.6% to $10.4 million in the third quarter of 2022, with strong organic revenue growth partially offset by domestic franchise acquisitions and a foreign currency impact of negative $0.7 million. Adjusted EBITDA margins increased 100 basis points to 31.4% in the quarter. The Company has signed development agreements in 2022 with franchise partners to open in Switzerland, Costa Rica, Jordan, Jamaica and Chile as well as a joint venture in France and a new partner in Turkey. Balance Sheet & Capital Expenditures During the third quarter of 2022, the company invested $23.5 million in capital expenditures, or 6.2% of revenue. For the first three quarters of 2022, the Company invested $75.0 million in capital expenditures, or 6.7% of revenue. As of July 3, 2022, the Company had $28.1 million of cash and cash equivalents, $750.5 million of bank debt and $30.9 million of other debt-like items, for a total net debt of $753.3 million. 2022 Financial Outlook Krispy Kreme re-iterates its guidance for the full year 2022 as follows: Net Revenue of $1.49 billion to $1.52 billion Organic Revenue growth of 10% to 12% Adjusted EBITDA of $189 million to $195 million Adjusted Net Income to Krispy Kreme shareholders, diluted, of $49 million to $54 million Adjusted Diluted EPS of $0.29 to $0.32 Approximately 170 million weighted average Diluted shares outstanding Adjusted Income Tax rate between 23% and 25% Capital Expenditures between $105 million to $110 million (approximately 7% of revenue) Net Leverage of approximately 3.6x, including the short-term impact from the U.S. Midwest franchise acquisition and FX headwinds, with a goal of 3.0x by the end of 2023 The Company’s guidance includes an Adjusted EBITDA impact of approximately negative $10 to $12 million from foreign currency translation and input costs as a result of the strengthening of the U.S. dollar or approximately negative $0.05 per Diluted share. At current exchange rates, we expect to come in near the high end of the estimated impact range for 2022. December Investor Day Krispy Kreme previously announced it will host an Investor Day on December 15, 2022 at its headquarters in Charlotte, NC and virtually via webcast. The Company will provide further detail on our strategic vision and long-term growth goals and introduce our initial 2023-2026 outlook. To register for the event, please refer to the Events section of the Krispy Kreme’s Investor Relations website. Conference Call Krispy Kreme will host a public conference call at 8:30 AM Eastern Time today to discuss its results for the third quarter of 2022. The conference call can be accessed by dialing 1 (800) 599-5188 and entering the conference ID 5487868. International participants can access the call via the corresponding number listed here and entering the conference ID 5487868. To listen to the live audio webcast and Q&A, visit the Krispy Kreme investor relations website at investors.krispykreme.com. A replay and transcript of the webcast will be available on the website within 24 hours after the call. Krispy Kreme’s earnings press release and related materials will also be available on the investor relations section of the Company’s website. Definitions The following definitions apply to terms used throughout this press release: Global Points of Access: Reflects all locations at which fresh doughnuts or cookies can be purchased. We define Global Points of Access to include all Hot Light Theater Shops, Fresh Shops, Carts, Food Trucks and Other, DFD Doors and Cookie Shops, at both Company-owned and franchise locations as of the end of the respective reporting period. We monitor Global Points of Access as a metric that informs the growth of our omni-channel presence over time and believe this metric is useful to investors to understand our footprint in each of our segments. Hubs: Reflects locations where fresh doughnuts are produced and processed for sale at any point of access. We define Hubs to include self-sustaining Hot Light Theater Shops and Doughnut Factories, at both Company-owned and franchise locations as of the end of the respective reporting period. Sales Per Hub: Sales per Hub equals Fresh Revenues from Hubs with Spokes, divided by the average number of Hubs with Spokes at the end of the five most recent quarters. Fresh Revenues from Hubs with Spokes: Fresh Revenues include product sales generated from our Doughnut Shop business (including Ecommerce and delivery), as well as DFD sales, but excluding sales from our legacy wholesale business and our Branded Sweet Treat Line. It also excludes all Insomnia Cookies revenues as the measure is focused on the Krispy Kreme business. Fresh Revenues from Hubs with Spokes equals the Fresh Revenues derived from those Hubs currently producing product for other shops, Carts, Food Trucks and Other, and/or DFD Doors, but excluding Fresh Revenues derived from those Hubs not currently producing product for other shops, Carts, Food Trucks and Other, and/or DFD Doors. Total Net Leverage Ratio: Calculated using Net Debt (including both bank debt and financing leases as part of debt) divided by Adjusted EBITDA. Free Cash Flow: Defined as cash provided by operating activities less purchases of property and equipment. About Krispy Kreme Headquartered in Charlotte, N.C., Krispy Kreme is one of the most beloved and well-known sweet treat brands in the world. Our iconic Original Glazed® doughnut is universally recognized for its hot-off-the-line, melt-in-your-mouth experience. Krispy Kreme operates in over 30 countries through its unique network of fresh doughnut shops, partnerships with leading retailers, and a rapidly growing Ecommerce and delivery business with more than 11,000 fresh points of access. Our purpose of touching and enhancing lives through the joy that is Krispy Kreme guides how we operate every day and is reflected in the love we have for our people, our communities and the planet. Connect with Krispy Kreme Doughnuts at www.KrispyKreme.com, or on one of its many social media channels, including www.Facebook.com/KrispyKreme, and www.Twitter.com/KrispyKreme. Cautionary Note Regarding Forward-Looking Statements This press release contains forward-looking statements that involve risks and uncertainties. The words “believe,” “may,” “could,” “will,” “should,” “anticipate,” “estimate,” “expect,” “outlook,” “guidance,” “working towards” or similar words, or the negative of these words, identify forward-looking statements. Such forward-looking statements are based on certain assumptions and estimates that we consider reasonable but are subject to various risks and uncertainties and assumptions relating to our operations, financial results, financial conditions, business, prospects, growth strategy and liquidity. Accordingly, there are, or will be, important factors that could cause our actual results to differ materially from those indicated in these statements. The inclusion of this forward-looking information should not be regarded as a representation by us that the future plans, estimates or expectations contemplated by us will be achieved. Our actual results could differ materially from the forward-looking statements included herein. Factors that could cause actual results to differ from those expressed in forward-looking statements include, without limitation, the risks and uncertainties described under the headings “Cautionary Note Regarding Forward-Looking Statements” and “Risk Factors” in our Annual Report on Form 10-K for the year ended January 2, 2022, filed by us with the Securities and Exchange Commission (“SEC”) and described in the other filings we make from time to time with the SEC. We believe that these factors include, but are not limited to, the impact of pandemics, changes in consumer preferences, the impact of inflation, and our ability to execute on our omni-channel business strategy. These forward-looking statements are made only as of the date of this document, and we do not undertake any obligation, other than as may be required by applicable law, to update or revise any forward-looking or cautionary statement to reflect changes in assumptions, the occurrence of events, unanticipated or otherwise, or changes in future operating results over time or otherwise. Non-GAAP Measures This press release includes certain non-GAAP financial measures including organic revenue growth, Adjusted EBITDA, Adjusted Net Income, Adjusted Diluted EPS, Fresh Revenue from Hubs with Spokes and Sales per Hub, which differ from results using U.S. Generally Accepted Accounting Principles (“GAAP”). These non-GAAP financial measures are not universally consistent calculations, limiting their usefulness as comparative measures. Other companies may calculate similarly titled financial measures differently than we do or may not calculate them at all. Additionally, these non-GAAP financial measures are not measurements of financial performance under GAAP. In order to facilitate a clear understanding of our consolidated historical operating results, you should examine our non-GAAP financial measures in conjunction with our historical consolidated financial statements and notes thereto filed with the SEC. The Company does not provide reconciliations of such forward-looking non-GAAP measures to GAAP due to the inability to predict the amount and timing of impacts outside of the Company’s control on certain items, such as net income and other charges reflected in our reconciliation of historic numbers, the amount of which, based on historical experience, could be significant. Krispy Kreme, Inc. Condensed Consolidated Statements of Operations (Unaudited) (in thousands, except per share amounts) Quarter Ended Three Quarters Ended October 2, 2022 (13 weeks) October 3, 2021 (13 weeks) October 2, 2022 (39 weeks) October 3, 2021 (39 weeks) Net revenues Product sales $ 370,216 $ 334,324 $ 1,102,045 $ 989,132 Royalties and other revenues 7,306 8,475 23,254 24,662 Total net revenues 377,522 342,799 1,125,299 1,013,794 Product and distribution costs 102,870 92,152 299,539 257,166 Operating expenses 177,592 157,315 520,260 462,733 Selling, general and administrative expense 54,801 52,950 160,266 163,417 Marketing expenses 10,995 12,062 32,369 31,621 Pre-opening costs 1,200 1,192 3,514 4,335 Other expenses/(income), net 2,964 (359 ) 1,800 (4,365 ) Depreciation and amortization expense 28,127 25,663 83,782 74,258 Operating (loss)/income (1,027 ) 1,824 23,769 24,629 Interest expense, net 8,871 7,186 23,808 25,228 Interest expense — related party — — — 10,387 Other non-operating expense/(income), net 1,648 732 2,083 (126 ) Loss before income taxes (11,546 ) (6,094 ) (2,122 ) (10,860 ) Income tax expense/(benefit) 294 (2,342 ) 5,668 8,266 Net loss (11,840 ) (3,752 ) (7,790 ) (19,126 ) Net income attributable to noncontrolling interest 1,216 1,907 5,113 6,736 Net loss attributable to Krispy Kreme, Inc. $ (13,056 ) $ (5,659 ) $ (12,903 ) $ (25,862 ) Net loss per share: Common stock — Basic $ (0.08 ) $ (0.04 ) $ (0.08 ) $ (0.20 ) Common stock — Diluted $ (0.08 ) $ (0.04 ) $ (0.08 ) $ (0.20 ) Weighted average shares outstanding: Basic 167,431 166,034 167,353 141,124 Diluted 167,431 166,034 167,353 141,124 Krispy Kreme, Inc. Condensed Consolidated Balance Sheets (in thousands, except per share amounts) As of (Unaudited) October 2, 2022 January 2, 2022 ASSETS Current assets: Cash and cash equivalents $ 28,096 $ 38,562 Restricted cash 403 630 Accounts receivable, net 46,941 47,491 Inventories 49,406 34,851 Taxes receivable 16,537 14,662 Prepaid expense and other current assets 33,126 20,701 Total current assets 174,509 156,897 Property and equipment, net 450,954 438,918 Goodwill 1,074,241 1,105,322 Other intangible assets, net 966,358 992,520 Operating lease right of use asset, net 410,001 435,168 Other assets 25,788 16,429 Total assets $ 3,101,851 $ 3,145,254 LIABILITIES AND SHAREHOLDERS’ EQUITY Current liabilities: Current portion of long-term debt $ 40,243 $ 36,583 Current operating lease liabilities 45,551 50,359 Accounts payable 188,059 182,104 Accrued liabilities 111,818 140,750 Structured payables 123,331 116,361 Total current liabilities 509,002 526,157 Long-term debt, less current portion 738,504 680,307 Noncurrent operating lease liabilities 400,594 415,208 Deferred income taxes, net 140,244 145,418 Other long-term obligations and deferred credits 39,784 42,509 Total liabilities 1,828,128 1,809,599 Commitments and contingencies Shareholders’ equity: Common stock, $0.01 par value; 300,000 shares authorized as of both October 2, 2022 and January 2, 2022; 167,437 and 167,251 shares issued and outstanding as of October 2, 2022 and January 2, 2022, respectively 1,674 1,673 Additional paid-in capital 1,422,850 1,415,185 Shareholder note receivable (4,812 ) (4,382 ) Accumulated other comprehensive loss, net of income tax (37,380 ) (2,478 ) Retained deficit (208,886 ) (178,409 ) Total shareholders’ equity attributable to Krispy Kreme, Inc. 1,173,446 1,231,589 Noncontrolling interest 100,277 104,066 Total shareholders’ equity 1,273,723 1,335,655 Total liabilities and shareholders’ equity $ 3,101,851 $ 3,145,254 Krispy Kreme, Inc. Condensed Consolidated Statements of Cash Flows (Unaudited) (in thousands) Three Quarters Ended October 2, 2022 (39 weeks) October 3, 2021 (39 weeks) CASH FLOWS FROM OPERATING ACTIVITIES: Net loss $ (7,790 ) $ (19,126 ) Adjustments to reconcile net loss to net cash provided by operating activities: Depreciation and amortization expense 83,782 74,258 Deferred income taxes (10,259 ) 9,168 Loss on extinguishment of debt — 1,700 Impairment and lease termination charges 7,255 854 (Gain)/loss on disposal of property and equipment (244 ) 157 Gain on sale-leaseback (4,311 ) — Share-based compensation 13,318 16,973 Change in accounts and notes receivable allowances 378 133 Inventory write-off 388 2,983 Other 804 (315 ) Change in operating assets and liabilities, excluding business acquisitions and foreign currency translation adjustments (12,591 ) 12,003 Net cash provided by operating activities 70,730 98,788 CASH FLOWS USED FOR INVESTING ACTIVITIES: Purchase of property and equipment (75,002 ) (83,485 ) Proceeds from disposals of assets 856 202 Proceeds from sale-leaseback 5,700 — Acquisition of shops and franchise rights from franchisees, net of cash acquired (17,335 ) (33,888 ) Purchase of equity method investment (989 ) — Other investing activities (931 ) 455 Net cash used for investing activities (87,701 ) (116,716 ) CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from the issuance of debt 121,500 670,000 Repayment of long-term debt and lease obligations (70,180 ) (1,115,910 ) Payment of financing costs — (1,700 ) Proceeds from structured payables 219,459 194,927 Payments on structured payables (211,778 ) (223,063 ) Payment of contingent consideration related to a business combination (900 ) — Capital contribution by shareholders, net of loans issued (288 ) 120,532 Proceeds from IPO, net of underwriting discounts (excluding unpaid issuance costs) — 527,329 Payments of issuance costs in connection with IPO (12,458 ) — Proceeds from sale of noncontrolling interest in subsidiary 410 53,337 Distribution to shareholders (17,570 ) (42,334 ) Payments for repurchase and retirement of common stock (2,425 ) (138,501 ) Distribution to noncontrolling interest (11,525 ) (17,257 ) Net cash provided by financing activities 14,245 27,360 Effect of exchange rate changes on cash, cash equivalents and restricted cash (7,967 ) (1,827 ) Net (decrease)/increase in cash, cash equivalents and restricted cash (10,693 ) 7,605 Cash, cash equivalents and restricted cash at beginning of period 39,192 37,483 Cash, cash equivalents and restricted cash at end of period $ 28,499 $ 45,088 Krispy Kreme, Inc. Reconciliation of Non-GAAP Financial Measures (Unaudited) (in thousands, except per share amounts) Quarter Ended Three Quarters Ended October 2, 2022 October 3, 2021 October 2, 2022 October 3, 2021 Net loss $ (11,840 ) $ (3,752 ) $ (7,790 ) $ (19,126 ) Interest expense, net 8,871 7,186 23,808 25,228 Interest expense — related party(1) — — — 10,387 Income tax expense/(benefit) 294 (2,342 ) 5,668 8,266 Depreciation and amortization expense 28,127 25,663 83,782 74,258 Share-based compensation 2,825 6,315 13,318 16,973 Employer payroll taxes related to share-based compensation 2 1,171 92 2,012 Other non-operating expense/(income), net(2) 1,648 732 2,083 (126 ) Acquisition and integration expenses(3) 790 1,288 1,389 3,663 Shop closure expenses(4) 5,735 — 7,859 — Restructuring and severance expenses(5) 2,328 57 2,804 1,393 IPO-related expenses(6) — 4,018 — 14,221 Gain on sale-leaseback (1,937 ) — (4,311 ) — Other(7) 1,699 1,081 6,108 3,064 Adjusted EBITDA $ 38,542 $ 41,417 $ 134,810 $ 140,213 Quarter Ended Three Quarters Ended October 2, 2022 October 3, 2021 October 2, 2022 October 3, 2021 Segment Adjusted EBITDA: U.S. and Canada $ 21,896 $ 19,912 $ 81,521 $ 75,760 International 18,254 21,655 55,033 60,676 Market Development 10,353 9,033 32,135 29,782 Corporate (11,961 ) (9,183 ) (33,879 ) (26,005 ) Total Adjusted EBITDA $ 38,542 $ 41,417 $ 134,810 $ 140,213 Quarter Ended Three Quarters Ended (in thousands, except per share amounts) October 2, 2022 October 3, 2021 October 2, 2022 October 3, 2021 Net loss $ (11,840 ) $ (3,752 ) $ (7,790 ) $ (19,126 ) Interest expense — related party(1) — — — 10,387 Share-based compensation 2,825 6,315 13,318 16,973 Employer payroll taxes related to share-based compensation 2 1,171 92 2,012 Other non-operating expense/(income), net(2) 1,648 732 2,083 (126 ) Acquisition and integration expenses(3) 790 1,288 1,389 3,663 Shop closure expenses(4) 5,735 — 8,109 — Restructuring and severance expenses(5) 2,328 57 2,804 1,393 IPO-related expenses(6) — 4,018 — 14,221 Gain on sale-leaseback (1,937 ) — (4,311 ) — Other(7) 1,699 1,081 6,108 3,064 Amortization of acquisition related intangibles(8) 7,083 7,497 21,307 22,573 KKI Term Loan Facility interest and debt issuance costs(9) — 107 — 2,448 Tax impact of adjustments(10) (2,470 ) (5,784 ) (5,889 ) (10,604 ) Tax specific adjustments(11) — (114 ) (628 ) 3,833 Adjusted net income $ 5,863 $ 12,616 $ 36,592 $ 50,711 Net income attributable to noncontrolling interest (1,216 ) (1,907 ) (5,113 ) (6,736 ) Adjusted net income attributable to Krispy Kreme, Inc. $ 4,647 $ 10,709 $ 31,479 $ 43,975 Adjustment to adjusted net income attributable to common shareholders — (522 ) (374 ) (1,815 ) Adjusted net income attributable to common shareholders - Basic $ 4,647 $ 10,187 $ 31,105 $ 42,160 Additional income attributed to noncontrolling interest due to subsidiary potential common shares (76 ) (88 ) (174 ) (237 ) Adjusted net income attributable to common shareholders - Diluted $ 4,571 $ 10,099 $ 30,931 $ 41,923 Basic weighted average common shares outstanding 167,431 166,034 167,353 141,124 Dilutive effect of outstanding common stock options and RSUs 1,822 2,041 2,006 2,937 Diluted weighted average common shares outstanding 169,253 168,075 169,359 144,061 Adjusted net income per share attributable to common shareholders: Basic $ 0.03 $ 0.06 $ 0.19 $ 0.30 Diluted $ 0.03 $ 0.06 $ 0.18 $ 0.29 (1) Consists of interest expense related to the Related Party Notes which were paid off in full during the quarter ended July 4, 2021. (2) Primarily foreign translation gains and losses in each period. (3) Consists of acquisition and integration-related costs in connection with the Company’s business and franchise acquisitions, including legal, due diligence, consulting and advisory fees incurred in connection with acquisition and integration-related activities for the applicable period. (4) Includes lease termination costs, impairment charges, and loss on disposal of property, plant and equipment. Shop closure expenses included in Adjusted Net Income for the three quarters ended October 2, 2022 are inclusive of accelerated depreciation related to replacing a point of sale system. (5) The quarter and three quarters ended October 2, 2022 consist of costs associated with restructuring of the global executive team. The quarter and three quarters ended October 3, 2021 consist of severance and related benefits costs associated with the Company’s realignment of the Company shop organizational structure to better support the DFD and Branded Sweet Treat Line businesses. (6) Includes consulting and advisory fees incurred in connection with preparation for and execution of the Company’s IPO. (7) The quarter and three quarters ended October 2, 2022 and October 3, 2021 consist primarily of legal expenses incurred outside the ordinary course of business, including the net settlement of approximately $3.3 million negotiated with TSW Foods, LLC. (8) Consists of amortization related to acquired intangible assets as reflected within depreciation and amortization in the Condensed Consolidated Statements of Operations. (9) Includes interest expense and debt issuance costs incurred and recognized as expenses in connection with the extinguishment of the KKI Term Loan Facility within four business days of receipt of the net proceeds from the IPO. (10) Tax impact of adjustments calculated applying the applicable statutory rates. The quarter and three quarters ended October 2, 2022 also include the impact of disallowed executive compensation expense and a discrete tax benefit related to a legal accrual. (11) The three quarters ended October 2, 2022 consist of the recognition of a previously unrecognized tax benefit unrelated to ongoing operations. The three quarters ended October 3, 2021 consist primarily of the effect of tax law changes on existing temporary differences. Krispy Kreme, Inc. Segment Reporting (Unaudited) (in thousands except percentages) Quarter Ended Three Quarters Ended October 2, 2022 October 3, 2021 October 2, 2022 October 3, 2021 Net revenues: U.S. and Canada $ 252,609 $ 225,807 $ 756,196 $ 679,195 International 91,934 87,262 272,988 243,005 Market Development 32,979 29,730 96,115 91,594 Total net revenues $ 377,522 $ 342,799 $ 1,125,299 $ 1,013,794 Q3 2022 Organic Revenue (1) - QTD U.S. and Canada International Market Development Total Company Total net revenues in third quarter of fiscal 2022 $ 252,609 $ 91,934 $ 32,979 $ 377,522 Total net revenues in third quarter of fiscal 2021 225,807 87,262 29,730 342,799 Total Net Revenues Growth 26,802 4,672 3,249 34,723 Total Net Revenues Growth % 11.9 % 5.4 % 10.9 % 10.1 % Impact of acquisitions (6,809 ) — 1,917 (4,892 ) Impact of foreign currency translation — 8,890 2,564 11,454 Organic Revenue Growth $ 19,993 $ 13,562 $ 7,730 $ 41,285 Organic Revenue Growth % 8.9 % 15.5 % 26.0 % 12.0 % (1) Organic revenue is total net revenue adjusted for the impact of acquisitions and foreign currency translation. Q3 2022 Organic Revenue - YTD U.S. and Canada International Market Development Total Company Total net revenues in first three quarters of fiscal 2022 $ 756,196 $ 272,988 $ 96,115 $ 1,125,299 Total net revenues in first three quarters of fiscal 2021 679,195 243,005 91,594 1,013,794 Total Net Revenues Growth 77,001 29,983 4,521 111,505 Total Net Revenues Growth % 11.3 % 12.3 % 4.9 % 11.0 % Impact of acquisitions (21,738 ) — 6,130 (15,608 ) Impact of foreign currency translation — 18,843 5,769 24,612 Organic Revenue Growth $ 55,263 $ 48,826 $ 16,420 $ 120,509 Organic Revenue Growth % 8.1 % 20.1 % 17.9 % 11.9 % Q3 2021 Organic Revenue - QTD U.S. and Canada International Market Development Total Company Total net revenues in third quarter of fiscal 2021 $ 225,807 $ 87,262 $ 29,730 $ 342,799 Total net revenues in third quarter of fiscal 2020 202,575 63,504 24,154 290,233 Total Net Revenues Growth 23,232 23,758 5,576 52,566 Total Net Revenues Growth % 11.5 % 37.4 % 23.1 % 18.1 % Impact of acquisitions (27,928 ) — (1,195 ) (29,123 ) Impact of foreign currency translation — (5,305 ) — (5,305 ) Organic Revenue Growth $ (4,696 ) $ 18,453 $ 4,381 $ 18,138 Organic Revenue Growth % -2.3 % 29.1 % 18.1 % 6.2 % Q3 2021 Organic Revenue - YTD U.S. and Canada International Market Development Total Company Total net revenues in first three quarters of fiscal 2021 $ 679,195 $ 243,005 $ 91,594 $ 1,013,794 Total net revenues in first three quarters of fiscal 2020 557,280 158,575 80,566 796,421 Total Net Revenues Growth 121,915 84,430 11,028 217,373 Total Net Revenues Growth % 21.9 % 53.2 % 13.7 % 27.3 % Impact of acquisitions (99,062 ) — (1,584 ) (100,646 ) Impact of foreign currency translation — (21,767 ) — (21,767 ) Organic Revenue Growth $ 22,853 $ 62,663 $ 9,444 $ 94,960 Organic Revenue Growth % 4.1 % 39.5 % 11.7 % 11.9 % Sales per Hub Trailing Four Quarters Ended Fiscal Year Ended October 2, 2022 January 2, 2022 January 3, 2021 U.S. and Canada: Revenues $ 1,005,414 $ 928,413 $ 782,717 Non-Fresh Revenues (1) (39,148 ) (37,311 ) (128,619 ) Fresh Revenues from Insomnia Cookies and Hubs without Spokes (2) (402,544 ) (415,768 ) (323,079 ) Sales from Hubs with Spokes 563,722 475,334 331,019 Sales per Hub (millions) 4.5 4.0 3.5 International: Sales from Hubs with Spokes (3) $ 362,978 $ 332,995 $ 230,185 Sales per Hub (millions) 10.0 9.1 6.4 (1) Includes legacy wholesale business revenues and Branded Sweet Treat Line revenues. (2) Includes Insomnia Cookies revenues and Fresh Revenues generated by Hubs without Spokes. (3) Total International net revenues is equal to Fresh Revenues from Hubs with Spokes for that business segment. Krispy Kreme, Inc. Global Points of Access (Unaudited) Global Points of Access (1) Quarter Ended Fiscal Year Ended October 2, 2022 October 3, 2021 January 2, 2022 U.S. and Canada: (2) Hot Light Theater Shops 244 238 241 Fresh Shops 67 57 66 Cookie Shops 227 206 210 Carts, Food Trucks, and Other (3) 1 — 2 DFD Doors 5,720 5,220 5,204 Total 6,259 5,721 5,723 International: Hot Light Theater Shops 35 30 32 Fresh Shops 384 363 370 Carts, Food Trucks, and Other (3) 12 1 1 DFD Doors 3,008 2,415 2,488 Total 3,439 2,809 2,891 Market Development: (4) Hot Light Theater Shops 107 113 109 Fresh Shops 803 761 782 Carts, Food Trucks, and Other (3) 29 30 31 DFD Doors 1,066 607 891 Total 2,005 1,511 1,813 Total Global Points of Access (as defined) 11,703 10,041 10,427 Total Hot Light Theater Shops 386 381 382 Total Fresh Shops 1,254 1,181 1,218 Total Cookie Shops 227 206 210 Total Shops 1,867 1,768 1,810 Total Carts, Food Trucks, and Other 42 31 34 Total DFD Doors 9,794 8,242 8,583 Total Global Points of Access (as defined) 11,703 10,041 10,427 (1) Excludes Branded Sweet Treat Line distribution points. (2) Includes Points of Access that were acquired from a franchisee in Canada during the fourth quarter of fiscal 2021. These Points of Access were previously included in the Market Development segment. (3) Carts and Food Trucks are non-producing, mobile (typically on wheels) facilities without walls or a door where product is received from a Hot Light Theater Shop or Doughnut Factory. Other includes a vending machine as of October 2, 2022. Points of Access in this category are primarily found in international locations, in airports, train stations, etc. Comparative data has been included in all periods presented above. (4) Includes locations in Japan which are Company-owned. All remaining Points of Access in the Market Development segment relate to our franchise business. Krispy Kreme, Inc. Global Hubs (Unaudited) Hubs Quarter Ended Fiscal Year Ended October 2, 2022 October 3, 2021 January 2, 2022 U.S. and Canada: Hot Light Theater Shops (1) 241 234 238 Doughnut Factories 4 4 4 Total 245 238 242 Hubs with Spokes 129 121 126 International: Hot Light Theater Shops (1) 26 25 25 Doughnut Factories 11 10 11 Total 37 35 36 Hubs with Spokes 37 35 36 Market Development: Hot Light Theater Shops (1) 103 111 106 Doughnut Factories 26 26 27 Total 129 137 133 Total Hubs 411 410 411 (1) Includes only Hot Light Theater Shops and excludes Mini Theaters. A Mini Theater is a Spoke location that produces some doughnuts for itself and also receives doughnuts from another producing location. Krispy Kreme, Inc. Net Debt and Leverage (Unaudited) (in thousands) October 2, 2022 January 2, 2022 Current portion of long-term debt $ 40,243 $ 36,583 Long-term debt, less current portion 738,504 680,307 Total long-term debt, including debt issuance costs 778,747 716,890 Add back: Debt issuance costs 2,644 3,833 Total long-term debt, excluding debt issuance costs 781,391 720,723 Less: Cash and cash equivalents (28,096 ) (38,562 ) Net debt $ 753,295 $ 682,161 Adjusted EBITDA - trailing four quarters 182,542 187,945 Net leverage ratio 4.1 x 3.6 x View source version on businesswire.com: https://www.businesswire.com/news/home/20221114006016/en/Contacts Investor Relations Rob Ballew, VP of Investor Relations rballew@krispykreme.com Financial Media Edelman Smithfield for Krispy Kreme, Inc. Allie McLarty & Ashley Firlan, KrispyKremeIR@edelman.com Data & News supplied by www.cloudquote.io Stock quotes supplied by Barchart Quotes delayed at least 20 minutes. 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Krispy Kreme Reports Third Quarter 2022 Results By: Krispy Kreme, Inc. via Business Wire November 15, 2022 at 07:00 AM EST Third quarter net revenue grew 10.1% compared to Q3 2021 Organic revenue growth accelerated to 12.0% Added 294 Points of Access in Q3 and 1,276 year to date, exceeding our full year target Reiterating 2022 Guidance with strong momentum to start Q4 Krispy Kreme, Inc. (NASDAQ: DNUT) (“Krispy Kreme” or the “Company”) today reported financial results for the third quarter ended October 2, 2022 with net revenue growing 10.1% year-over-year to $377.5 million, or 13.4% in constant currency, while organic revenue grew 12.0%. Foreign currency translation resulted in a negative 3.3% impact on net revenue growth during the third quarter due to the strength of the U.S. dollar. Sales per Hub in the U.S. and Canada increased by 18.4% year-over-year to $4.5 million while International Sales per Hub grew 16.3% to $10.0 million. Organic growth was driven by the solid performance and expansion of Krispy Kreme’s omni-channel model, with a 17% increase in Global Points of Access and strong organic revenue growth in all three business segments in our seasonally low quarter. Global Points of Access, which reflect all locations where fresh doughnuts and cookies can be purchased, increased by 294 during the quarter, providing consumers access to Krispy Kreme in more than 11,700 locations around the world. GAAP Net Loss for the quarter was $11.8 million with Adjusted Net Income of $5.9 million. GAAP Loss per Share for the quarter was ($0.08) while Adjusted Diluted EPS was $0.03 for the quarter. Adjusted EBITDA in the third quarter was $38.5 million, which included approximately $3.1 million negative impact from the strong U.S. dollar. Commenting on the Company’s performance, President and CEO Mike Tattersfield stated, “We were pleased with our strong organic revenue growth in the third quarter, led by an acceleration in growth in the U.S. and Canada and Market Development. Margins improved significantly in the final period of the quarter as we successfully implemented price increases in the U.S. coupled with decreased promotional activity after Labor Day. Strong momentum continues into the fourth quarter enhanced by further recent pricing actions in the U.S. and U.K. and a robust global Halloween performance.” Mike continued, “Our international expansion strategy is progressing at a healthy pace. Just recently we opened in Jordan and announced a joint venture to enter into France in 2023. We are excited to also announce a new development agreement to open in Jamaica next year, bringing our total development deals signed in 2022 to 7 international countries, representing over 5,000 new potential points of access.” Financial Highlights $ in millions, except per share data Q3 2022 vs Q3 2021 Q1-Q3 2022 vs Q1-Q3 2021 Net Revenue $377.5 +10.1% $1,125.3 +11.0% Organic Revenue(1) $384.1 +12.0% $1,134.3 +11.9% GAAP Net (Loss)/Income ($11.8) ($8.1) ($7.8) $11.3 Adjusted Net Income(1) $5.9 ($6.8) $36.6 ($14.1) Operating (Loss)/Income ($1.0) ($2.9) $23.8 ($0.9) Operating (Loss)/Income Margin (0.3%) -80 bps 2.1% -30 bps Adjusted EBITDA(1) $38.5 ($2.9) $134.8 ($5.4) Adjusted EBITDA Margin(1) 10.2% -190 bps 12.0% -180 bps GAAP Diluted Income/(Loss) Per Share ($0.08) ($0.04) ($0.08) +$0.12 Adjusted Diluted EPS(1) $0.03 ($0.03) $0.18 ($0.11) Net Debt $753.3 +10.7% Notes: (1) Non-GAAP figures – please refer to Reconciliation of Non-GAAP Financial Measures. Key Operating Metrics $ in millions, except access points Q3 2022 vs Q3 2021 vs Q2 2022 Global Points of Access 11,703 +16.6% +2.6% Sales per Hub (U.S. and Canada) TTM $4.5 +18.4% +2.3% Sales per Hub (International) TTM $10.0 +16.3% +2.0% Ecommerce as a Percent of Retail Sales 18.5% +170 bps +100 bps Third quarter 2022 Consolidated Results Net revenue grew 10.1% in the third quarter to $377.5 million, or 13.4% in constant currency, and organic revenue grew 12.0% in the quarter. Organic revenue growth was driven by strong performances in our Hubs with Spokes, both domestically and internationally, leveraging a 16.6% increase in points of access from a year ago, and robust Ecommerce revenue growth. GAAP Net Loss for the quarter was $11.8 million, compared to a GAAP Net Loss of $3.8 million in the third quarter of 2021. Adjusted EBITDA in the quarter declined 6.9% to $38.5 million, due to an approximately $3.1 million negative impact from the strength of the U.S. dollar, higher promotional activity from the Beat the Pump promotion in the US through Labor Day and increased labor and commodity costs. Operating margins declined 80 basis points to -0.3%, while Adjusted EBITDA margin declined 190 basis points to 10.2% from the same quarter in 2021 driven by margin declines in our International segment and FX headwinds. However, Adjusted EBITDA margins improved significantly as the quarter progressed and were higher in the final period of the third quarter compared to a year ago. Adjusted Net Income for the quarter declined 53.5% to $5.9 million compared to the same quarter in 2021. GAAP Diluted Net Loss per share in the quarter was ($0.08) compared to a net loss of ($0.04) in the same quarter last year with Adjusted Diluted EPS decreasing to $0.03 from $0.06 in the third quarter of 2021. Diluted weighted average shares outstanding for the third quarter of 2022 were 169.3 million, compared to 168.1 million in the third quarter of 2021. Third Quarter Market Segment Results U.S. and Canada: In the U.S. and Canada segment net revenue in the third quarter of 2022 grew 11.9% to $252.6 million, driven by the continued execution of our omni-channel strategy, including our Pumpkin Spice limited time offering across all channels including Branded Sweet Treats, Hubs with Spokes strength and Insomnia Cookies. Organic revenue increased 8.9% driven by increased points of access and successful price increases in retail locations in July and Delivered Fresh Daily (“DFD”) doors in September. Points of Access increased by 206 in quarter to 6,259 and represents a 9.4% increase in Points of Access from a year ago. U.S. and Canada Adjusted EBITDA increased 10.0% to $21.9 million in the third quarter of 2022 compared to the third quarter of 2021 with a slight Adjusted EBITDA margin decline of 10 basis points to 8.7%. Hub and Spoke efficiency and a strong performance from Insomnia offset inflationary pressures, higher promotional activity in the first two periods of the third quarter and margin erosion at Hubs without Spokes. Adjusted EBITDA margins improved significantly as the quarter progressed, including strong margin expansion in September over the prior year, as promotional activity returned to normal levels and sales remained robust. This momentum has continued in the fourth quarter. Also during the third quarter, we closed 8 underperforming Hubs without Spokes that were previously announced. International: In the International segment, net revenue grew 5.4% to $91.9 million, with organic growth of 15.5%. Organic growth in the quarter was driven by strong growth in Mexico, Australia and New Zealand. Points of Access increased by 14 to 3,439, or 548 year to date. Foreign currency translation had a negative 10.1% impact on our International net revenue growth during the quarter. International Adjusted EBITDA declined 15.7% to $18.3 million in the third quarter over the same period of the prior year, due to a $2.4 million impact from the higher U.S. dollar as well as a continued challenging environment in the U.K. Adjusted EBITDA for Mexico and Australia & New Zealand markets grew 18.1% in the third quarter compared to the same period in the prior year. International Adjusted EBITDA margin was 19.9% in the third quarter, down 490 basis points compared the same period last year due to reduced margins in the U.K. from lower organic revenue growth and elevated inflation. Market Development: In the Market Development segment, net revenue increased 10.9% to $33.0 million driven by a 32.7% increase in Points of Access compared to the prior year to 2,005, partially offset by franchise acquisitions and an 8.6% adverse impact from foreign currency exchange. Organic revenue growth accelerated to 26.0% compared to the same period in 2021 driven by a strong performance in our franchise markets, including South Korea and India, and our equity-owned Japan market where the Company is implementing its omni-channel model with the expansion of Ecommerce and the launch of DFD. Points of Access in the quarter increased by 74 and 192 year to date. Market Development Adjusted EBITDA grew 14.6% to $10.4 million in the third quarter of 2022, with strong organic revenue growth partially offset by domestic franchise acquisitions and a foreign currency impact of negative $0.7 million. Adjusted EBITDA margins increased 100 basis points to 31.4% in the quarter. The Company has signed development agreements in 2022 with franchise partners to open in Switzerland, Costa Rica, Jordan, Jamaica and Chile as well as a joint venture in France and a new partner in Turkey. Balance Sheet & Capital Expenditures During the third quarter of 2022, the company invested $23.5 million in capital expenditures, or 6.2% of revenue. For the first three quarters of 2022, the Company invested $75.0 million in capital expenditures, or 6.7% of revenue. As of July 3, 2022, the Company had $28.1 million of cash and cash equivalents, $750.5 million of bank debt and $30.9 million of other debt-like items, for a total net debt of $753.3 million. 2022 Financial Outlook Krispy Kreme re-iterates its guidance for the full year 2022 as follows: Net Revenue of $1.49 billion to $1.52 billion Organic Revenue growth of 10% to 12% Adjusted EBITDA of $189 million to $195 million Adjusted Net Income to Krispy Kreme shareholders, diluted, of $49 million to $54 million Adjusted Diluted EPS of $0.29 to $0.32 Approximately 170 million weighted average Diluted shares outstanding Adjusted Income Tax rate between 23% and 25% Capital Expenditures between $105 million to $110 million (approximately 7% of revenue) Net Leverage of approximately 3.6x, including the short-term impact from the U.S. Midwest franchise acquisition and FX headwinds, with a goal of 3.0x by the end of 2023 The Company’s guidance includes an Adjusted EBITDA impact of approximately negative $10 to $12 million from foreign currency translation and input costs as a result of the strengthening of the U.S. dollar or approximately negative $0.05 per Diluted share. At current exchange rates, we expect to come in near the high end of the estimated impact range for 2022. December Investor Day Krispy Kreme previously announced it will host an Investor Day on December 15, 2022 at its headquarters in Charlotte, NC and virtually via webcast. The Company will provide further detail on our strategic vision and long-term growth goals and introduce our initial 2023-2026 outlook. To register for the event, please refer to the Events section of the Krispy Kreme’s Investor Relations website. Conference Call Krispy Kreme will host a public conference call at 8:30 AM Eastern Time today to discuss its results for the third quarter of 2022. The conference call can be accessed by dialing 1 (800) 599-5188 and entering the conference ID 5487868. International participants can access the call via the corresponding number listed here and entering the conference ID 5487868. To listen to the live audio webcast and Q&A, visit the Krispy Kreme investor relations website at investors.krispykreme.com. A replay and transcript of the webcast will be available on the website within 24 hours after the call. Krispy Kreme’s earnings press release and related materials will also be available on the investor relations section of the Company’s website. Definitions The following definitions apply to terms used throughout this press release: Global Points of Access: Reflects all locations at which fresh doughnuts or cookies can be purchased. We define Global Points of Access to include all Hot Light Theater Shops, Fresh Shops, Carts, Food Trucks and Other, DFD Doors and Cookie Shops, at both Company-owned and franchise locations as of the end of the respective reporting period. We monitor Global Points of Access as a metric that informs the growth of our omni-channel presence over time and believe this metric is useful to investors to understand our footprint in each of our segments. Hubs: Reflects locations where fresh doughnuts are produced and processed for sale at any point of access. We define Hubs to include self-sustaining Hot Light Theater Shops and Doughnut Factories, at both Company-owned and franchise locations as of the end of the respective reporting period. Sales Per Hub: Sales per Hub equals Fresh Revenues from Hubs with Spokes, divided by the average number of Hubs with Spokes at the end of the five most recent quarters. Fresh Revenues from Hubs with Spokes: Fresh Revenues include product sales generated from our Doughnut Shop business (including Ecommerce and delivery), as well as DFD sales, but excluding sales from our legacy wholesale business and our Branded Sweet Treat Line. It also excludes all Insomnia Cookies revenues as the measure is focused on the Krispy Kreme business. Fresh Revenues from Hubs with Spokes equals the Fresh Revenues derived from those Hubs currently producing product for other shops, Carts, Food Trucks and Other, and/or DFD Doors, but excluding Fresh Revenues derived from those Hubs not currently producing product for other shops, Carts, Food Trucks and Other, and/or DFD Doors. Total Net Leverage Ratio: Calculated using Net Debt (including both bank debt and financing leases as part of debt) divided by Adjusted EBITDA. Free Cash Flow: Defined as cash provided by operating activities less purchases of property and equipment. About Krispy Kreme Headquartered in Charlotte, N.C., Krispy Kreme is one of the most beloved and well-known sweet treat brands in the world. Our iconic Original Glazed® doughnut is universally recognized for its hot-off-the-line, melt-in-your-mouth experience. Krispy Kreme operates in over 30 countries through its unique network of fresh doughnut shops, partnerships with leading retailers, and a rapidly growing Ecommerce and delivery business with more than 11,000 fresh points of access. Our purpose of touching and enhancing lives through the joy that is Krispy Kreme guides how we operate every day and is reflected in the love we have for our people, our communities and the planet. Connect with Krispy Kreme Doughnuts at www.KrispyKreme.com, or on one of its many social media channels, including www.Facebook.com/KrispyKreme, and www.Twitter.com/KrispyKreme. Cautionary Note Regarding Forward-Looking Statements This press release contains forward-looking statements that involve risks and uncertainties. The words “believe,” “may,” “could,” “will,” “should,” “anticipate,” “estimate,” “expect,” “outlook,” “guidance,” “working towards” or similar words, or the negative of these words, identify forward-looking statements. Such forward-looking statements are based on certain assumptions and estimates that we consider reasonable but are subject to various risks and uncertainties and assumptions relating to our operations, financial results, financial conditions, business, prospects, growth strategy and liquidity. Accordingly, there are, or will be, important factors that could cause our actual results to differ materially from those indicated in these statements. The inclusion of this forward-looking information should not be regarded as a representation by us that the future plans, estimates or expectations contemplated by us will be achieved. Our actual results could differ materially from the forward-looking statements included herein. Factors that could cause actual results to differ from those expressed in forward-looking statements include, without limitation, the risks and uncertainties described under the headings “Cautionary Note Regarding Forward-Looking Statements” and “Risk Factors” in our Annual Report on Form 10-K for the year ended January 2, 2022, filed by us with the Securities and Exchange Commission (“SEC”) and described in the other filings we make from time to time with the SEC. We believe that these factors include, but are not limited to, the impact of pandemics, changes in consumer preferences, the impact of inflation, and our ability to execute on our omni-channel business strategy. These forward-looking statements are made only as of the date of this document, and we do not undertake any obligation, other than as may be required by applicable law, to update or revise any forward-looking or cautionary statement to reflect changes in assumptions, the occurrence of events, unanticipated or otherwise, or changes in future operating results over time or otherwise. Non-GAAP Measures This press release includes certain non-GAAP financial measures including organic revenue growth, Adjusted EBITDA, Adjusted Net Income, Adjusted Diluted EPS, Fresh Revenue from Hubs with Spokes and Sales per Hub, which differ from results using U.S. Generally Accepted Accounting Principles (“GAAP”). These non-GAAP financial measures are not universally consistent calculations, limiting their usefulness as comparative measures. Other companies may calculate similarly titled financial measures differently than we do or may not calculate them at all. Additionally, these non-GAAP financial measures are not measurements of financial performance under GAAP. In order to facilitate a clear understanding of our consolidated historical operating results, you should examine our non-GAAP financial measures in conjunction with our historical consolidated financial statements and notes thereto filed with the SEC. The Company does not provide reconciliations of such forward-looking non-GAAP measures to GAAP due to the inability to predict the amount and timing of impacts outside of the Company’s control on certain items, such as net income and other charges reflected in our reconciliation of historic numbers, the amount of which, based on historical experience, could be significant. Krispy Kreme, Inc. Condensed Consolidated Statements of Operations (Unaudited) (in thousands, except per share amounts) Quarter Ended Three Quarters Ended October 2, 2022 (13 weeks) October 3, 2021 (13 weeks) October 2, 2022 (39 weeks) October 3, 2021 (39 weeks) Net revenues Product sales $ 370,216 $ 334,324 $ 1,102,045 $ 989,132 Royalties and other revenues 7,306 8,475 23,254 24,662 Total net revenues 377,522 342,799 1,125,299 1,013,794 Product and distribution costs 102,870 92,152 299,539 257,166 Operating expenses 177,592 157,315 520,260 462,733 Selling, general and administrative expense 54,801 52,950 160,266 163,417 Marketing expenses 10,995 12,062 32,369 31,621 Pre-opening costs 1,200 1,192 3,514 4,335 Other expenses/(income), net 2,964 (359 ) 1,800 (4,365 ) Depreciation and amortization expense 28,127 25,663 83,782 74,258 Operating (loss)/income (1,027 ) 1,824 23,769 24,629 Interest expense, net 8,871 7,186 23,808 25,228 Interest expense — related party — — — 10,387 Other non-operating expense/(income), net 1,648 732 2,083 (126 ) Loss before income taxes (11,546 ) (6,094 ) (2,122 ) (10,860 ) Income tax expense/(benefit) 294 (2,342 ) 5,668 8,266 Net loss (11,840 ) (3,752 ) (7,790 ) (19,126 ) Net income attributable to noncontrolling interest 1,216 1,907 5,113 6,736 Net loss attributable to Krispy Kreme, Inc. $ (13,056 ) $ (5,659 ) $ (12,903 ) $ (25,862 ) Net loss per share: Common stock — Basic $ (0.08 ) $ (0.04 ) $ (0.08 ) $ (0.20 ) Common stock — Diluted $ (0.08 ) $ (0.04 ) $ (0.08 ) $ (0.20 ) Weighted average shares outstanding: Basic 167,431 166,034 167,353 141,124 Diluted 167,431 166,034 167,353 141,124 Krispy Kreme, Inc. Condensed Consolidated Balance Sheets (in thousands, except per share amounts) As of (Unaudited) October 2, 2022 January 2, 2022 ASSETS Current assets: Cash and cash equivalents $ 28,096 $ 38,562 Restricted cash 403 630 Accounts receivable, net 46,941 47,491 Inventories 49,406 34,851 Taxes receivable 16,537 14,662 Prepaid expense and other current assets 33,126 20,701 Total current assets 174,509 156,897 Property and equipment, net 450,954 438,918 Goodwill 1,074,241 1,105,322 Other intangible assets, net 966,358 992,520 Operating lease right of use asset, net 410,001 435,168 Other assets 25,788 16,429 Total assets $ 3,101,851 $ 3,145,254 LIABILITIES AND SHAREHOLDERS’ EQUITY Current liabilities: Current portion of long-term debt $ 40,243 $ 36,583 Current operating lease liabilities 45,551 50,359 Accounts payable 188,059 182,104 Accrued liabilities 111,818 140,750 Structured payables 123,331 116,361 Total current liabilities 509,002 526,157 Long-term debt, less current portion 738,504 680,307 Noncurrent operating lease liabilities 400,594 415,208 Deferred income taxes, net 140,244 145,418 Other long-term obligations and deferred credits 39,784 42,509 Total liabilities 1,828,128 1,809,599 Commitments and contingencies Shareholders’ equity: Common stock, $0.01 par value; 300,000 shares authorized as of both October 2, 2022 and January 2, 2022; 167,437 and 167,251 shares issued and outstanding as of October 2, 2022 and January 2, 2022, respectively 1,674 1,673 Additional paid-in capital 1,422,850 1,415,185 Shareholder note receivable (4,812 ) (4,382 ) Accumulated other comprehensive loss, net of income tax (37,380 ) (2,478 ) Retained deficit (208,886 ) (178,409 ) Total shareholders’ equity attributable to Krispy Kreme, Inc. 1,173,446 1,231,589 Noncontrolling interest 100,277 104,066 Total shareholders’ equity 1,273,723 1,335,655 Total liabilities and shareholders’ equity $ 3,101,851 $ 3,145,254 Krispy Kreme, Inc. Condensed Consolidated Statements of Cash Flows (Unaudited) (in thousands) Three Quarters Ended October 2, 2022 (39 weeks) October 3, 2021 (39 weeks) CASH FLOWS FROM OPERATING ACTIVITIES: Net loss $ (7,790 ) $ (19,126 ) Adjustments to reconcile net loss to net cash provided by operating activities: Depreciation and amortization expense 83,782 74,258 Deferred income taxes (10,259 ) 9,168 Loss on extinguishment of debt — 1,700 Impairment and lease termination charges 7,255 854 (Gain)/loss on disposal of property and equipment (244 ) 157 Gain on sale-leaseback (4,311 ) — Share-based compensation 13,318 16,973 Change in accounts and notes receivable allowances 378 133 Inventory write-off 388 2,983 Other 804 (315 ) Change in operating assets and liabilities, excluding business acquisitions and foreign currency translation adjustments (12,591 ) 12,003 Net cash provided by operating activities 70,730 98,788 CASH FLOWS USED FOR INVESTING ACTIVITIES: Purchase of property and equipment (75,002 ) (83,485 ) Proceeds from disposals of assets 856 202 Proceeds from sale-leaseback 5,700 — Acquisition of shops and franchise rights from franchisees, net of cash acquired (17,335 ) (33,888 ) Purchase of equity method investment (989 ) — Other investing activities (931 ) 455 Net cash used for investing activities (87,701 ) (116,716 ) CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from the issuance of debt 121,500 670,000 Repayment of long-term debt and lease obligations (70,180 ) (1,115,910 ) Payment of financing costs — (1,700 ) Proceeds from structured payables 219,459 194,927 Payments on structured payables (211,778 ) (223,063 ) Payment of contingent consideration related to a business combination (900 ) — Capital contribution by shareholders, net of loans issued (288 ) 120,532 Proceeds from IPO, net of underwriting discounts (excluding unpaid issuance costs) — 527,329 Payments of issuance costs in connection with IPO (12,458 ) — Proceeds from sale of noncontrolling interest in subsidiary 410 53,337 Distribution to shareholders (17,570 ) (42,334 ) Payments for repurchase and retirement of common stock (2,425 ) (138,501 ) Distribution to noncontrolling interest (11,525 ) (17,257 ) Net cash provided by financing activities 14,245 27,360 Effect of exchange rate changes on cash, cash equivalents and restricted cash (7,967 ) (1,827 ) Net (decrease)/increase in cash, cash equivalents and restricted cash (10,693 ) 7,605 Cash, cash equivalents and restricted cash at beginning of period 39,192 37,483 Cash, cash equivalents and restricted cash at end of period $ 28,499 $ 45,088 Krispy Kreme, Inc. Reconciliation of Non-GAAP Financial Measures (Unaudited) (in thousands, except per share amounts) Quarter Ended Three Quarters Ended October 2, 2022 October 3, 2021 October 2, 2022 October 3, 2021 Net loss $ (11,840 ) $ (3,752 ) $ (7,790 ) $ (19,126 ) Interest expense, net 8,871 7,186 23,808 25,228 Interest expense — related party(1) — — — 10,387 Income tax expense/(benefit) 294 (2,342 ) 5,668 8,266 Depreciation and amortization expense 28,127 25,663 83,782 74,258 Share-based compensation 2,825 6,315 13,318 16,973 Employer payroll taxes related to share-based compensation 2 1,171 92 2,012 Other non-operating expense/(income), net(2) 1,648 732 2,083 (126 ) Acquisition and integration expenses(3) 790 1,288 1,389 3,663 Shop closure expenses(4) 5,735 — 7,859 — Restructuring and severance expenses(5) 2,328 57 2,804 1,393 IPO-related expenses(6) — 4,018 — 14,221 Gain on sale-leaseback (1,937 ) — (4,311 ) — Other(7) 1,699 1,081 6,108 3,064 Adjusted EBITDA $ 38,542 $ 41,417 $ 134,810 $ 140,213 Quarter Ended Three Quarters Ended October 2, 2022 October 3, 2021 October 2, 2022 October 3, 2021 Segment Adjusted EBITDA: U.S. and Canada $ 21,896 $ 19,912 $ 81,521 $ 75,760 International 18,254 21,655 55,033 60,676 Market Development 10,353 9,033 32,135 29,782 Corporate (11,961 ) (9,183 ) (33,879 ) (26,005 ) Total Adjusted EBITDA $ 38,542 $ 41,417 $ 134,810 $ 140,213 Quarter Ended Three Quarters Ended (in thousands, except per share amounts) October 2, 2022 October 3, 2021 October 2, 2022 October 3, 2021 Net loss $ (11,840 ) $ (3,752 ) $ (7,790 ) $ (19,126 ) Interest expense — related party(1) — — — 10,387 Share-based compensation 2,825 6,315 13,318 16,973 Employer payroll taxes related to share-based compensation 2 1,171 92 2,012 Other non-operating expense/(income), net(2) 1,648 732 2,083 (126 ) Acquisition and integration expenses(3) 790 1,288 1,389 3,663 Shop closure expenses(4) 5,735 — 8,109 — Restructuring and severance expenses(5) 2,328 57 2,804 1,393 IPO-related expenses(6) — 4,018 — 14,221 Gain on sale-leaseback (1,937 ) — (4,311 ) — Other(7) 1,699 1,081 6,108 3,064 Amortization of acquisition related intangibles(8) 7,083 7,497 21,307 22,573 KKI Term Loan Facility interest and debt issuance costs(9) — 107 — 2,448 Tax impact of adjustments(10) (2,470 ) (5,784 ) (5,889 ) (10,604 ) Tax specific adjustments(11) — (114 ) (628 ) 3,833 Adjusted net income $ 5,863 $ 12,616 $ 36,592 $ 50,711 Net income attributable to noncontrolling interest (1,216 ) (1,907 ) (5,113 ) (6,736 ) Adjusted net income attributable to Krispy Kreme, Inc. $ 4,647 $ 10,709 $ 31,479 $ 43,975 Adjustment to adjusted net income attributable to common shareholders — (522 ) (374 ) (1,815 ) Adjusted net income attributable to common shareholders - Basic $ 4,647 $ 10,187 $ 31,105 $ 42,160 Additional income attributed to noncontrolling interest due to subsidiary potential common shares (76 ) (88 ) (174 ) (237 ) Adjusted net income attributable to common shareholders - Diluted $ 4,571 $ 10,099 $ 30,931 $ 41,923 Basic weighted average common shares outstanding 167,431 166,034 167,353 141,124 Dilutive effect of outstanding common stock options and RSUs 1,822 2,041 2,006 2,937 Diluted weighted average common shares outstanding 169,253 168,075 169,359 144,061 Adjusted net income per share attributable to common shareholders: Basic $ 0.03 $ 0.06 $ 0.19 $ 0.30 Diluted $ 0.03 $ 0.06 $ 0.18 $ 0.29 (1) Consists of interest expense related to the Related Party Notes which were paid off in full during the quarter ended July 4, 2021. (2) Primarily foreign translation gains and losses in each period. (3) Consists of acquisition and integration-related costs in connection with the Company’s business and franchise acquisitions, including legal, due diligence, consulting and advisory fees incurred in connection with acquisition and integration-related activities for the applicable period. (4) Includes lease termination costs, impairment charges, and loss on disposal of property, plant and equipment. Shop closure expenses included in Adjusted Net Income for the three quarters ended October 2, 2022 are inclusive of accelerated depreciation related to replacing a point of sale system. (5) The quarter and three quarters ended October 2, 2022 consist of costs associated with restructuring of the global executive team. The quarter and three quarters ended October 3, 2021 consist of severance and related benefits costs associated with the Company’s realignment of the Company shop organizational structure to better support the DFD and Branded Sweet Treat Line businesses. (6) Includes consulting and advisory fees incurred in connection with preparation for and execution of the Company’s IPO. (7) The quarter and three quarters ended October 2, 2022 and October 3, 2021 consist primarily of legal expenses incurred outside the ordinary course of business, including the net settlement of approximately $3.3 million negotiated with TSW Foods, LLC. (8) Consists of amortization related to acquired intangible assets as reflected within depreciation and amortization in the Condensed Consolidated Statements of Operations. (9) Includes interest expense and debt issuance costs incurred and recognized as expenses in connection with the extinguishment of the KKI Term Loan Facility within four business days of receipt of the net proceeds from the IPO. (10) Tax impact of adjustments calculated applying the applicable statutory rates. The quarter and three quarters ended October 2, 2022 also include the impact of disallowed executive compensation expense and a discrete tax benefit related to a legal accrual. (11) The three quarters ended October 2, 2022 consist of the recognition of a previously unrecognized tax benefit unrelated to ongoing operations. The three quarters ended October 3, 2021 consist primarily of the effect of tax law changes on existing temporary differences. Krispy Kreme, Inc. Segment Reporting (Unaudited) (in thousands except percentages) Quarter Ended Three Quarters Ended October 2, 2022 October 3, 2021 October 2, 2022 October 3, 2021 Net revenues: U.S. and Canada $ 252,609 $ 225,807 $ 756,196 $ 679,195 International 91,934 87,262 272,988 243,005 Market Development 32,979 29,730 96,115 91,594 Total net revenues $ 377,522 $ 342,799 $ 1,125,299 $ 1,013,794 Q3 2022 Organic Revenue (1) - QTD U.S. and Canada International Market Development Total Company Total net revenues in third quarter of fiscal 2022 $ 252,609 $ 91,934 $ 32,979 $ 377,522 Total net revenues in third quarter of fiscal 2021 225,807 87,262 29,730 342,799 Total Net Revenues Growth 26,802 4,672 3,249 34,723 Total Net Revenues Growth % 11.9 % 5.4 % 10.9 % 10.1 % Impact of acquisitions (6,809 ) — 1,917 (4,892 ) Impact of foreign currency translation — 8,890 2,564 11,454 Organic Revenue Growth $ 19,993 $ 13,562 $ 7,730 $ 41,285 Organic Revenue Growth % 8.9 % 15.5 % 26.0 % 12.0 % (1) Organic revenue is total net revenue adjusted for the impact of acquisitions and foreign currency translation. Q3 2022 Organic Revenue - YTD U.S. and Canada International Market Development Total Company Total net revenues in first three quarters of fiscal 2022 $ 756,196 $ 272,988 $ 96,115 $ 1,125,299 Total net revenues in first three quarters of fiscal 2021 679,195 243,005 91,594 1,013,794 Total Net Revenues Growth 77,001 29,983 4,521 111,505 Total Net Revenues Growth % 11.3 % 12.3 % 4.9 % 11.0 % Impact of acquisitions (21,738 ) — 6,130 (15,608 ) Impact of foreign currency translation — 18,843 5,769 24,612 Organic Revenue Growth $ 55,263 $ 48,826 $ 16,420 $ 120,509 Organic Revenue Growth % 8.1 % 20.1 % 17.9 % 11.9 % Q3 2021 Organic Revenue - QTD U.S. and Canada International Market Development Total Company Total net revenues in third quarter of fiscal 2021 $ 225,807 $ 87,262 $ 29,730 $ 342,799 Total net revenues in third quarter of fiscal 2020 202,575 63,504 24,154 290,233 Total Net Revenues Growth 23,232 23,758 5,576 52,566 Total Net Revenues Growth % 11.5 % 37.4 % 23.1 % 18.1 % Impact of acquisitions (27,928 ) — (1,195 ) (29,123 ) Impact of foreign currency translation — (5,305 ) — (5,305 ) Organic Revenue Growth $ (4,696 ) $ 18,453 $ 4,381 $ 18,138 Organic Revenue Growth % -2.3 % 29.1 % 18.1 % 6.2 % Q3 2021 Organic Revenue - YTD U.S. and Canada International Market Development Total Company Total net revenues in first three quarters of fiscal 2021 $ 679,195 $ 243,005 $ 91,594 $ 1,013,794 Total net revenues in first three quarters of fiscal 2020 557,280 158,575 80,566 796,421 Total Net Revenues Growth 121,915 84,430 11,028 217,373 Total Net Revenues Growth % 21.9 % 53.2 % 13.7 % 27.3 % Impact of acquisitions (99,062 ) — (1,584 ) (100,646 ) Impact of foreign currency translation — (21,767 ) — (21,767 ) Organic Revenue Growth $ 22,853 $ 62,663 $ 9,444 $ 94,960 Organic Revenue Growth % 4.1 % 39.5 % 11.7 % 11.9 % Sales per Hub Trailing Four Quarters Ended Fiscal Year Ended October 2, 2022 January 2, 2022 January 3, 2021 U.S. and Canada: Revenues $ 1,005,414 $ 928,413 $ 782,717 Non-Fresh Revenues (1) (39,148 ) (37,311 ) (128,619 ) Fresh Revenues from Insomnia Cookies and Hubs without Spokes (2) (402,544 ) (415,768 ) (323,079 ) Sales from Hubs with Spokes 563,722 475,334 331,019 Sales per Hub (millions) 4.5 4.0 3.5 International: Sales from Hubs with Spokes (3) $ 362,978 $ 332,995 $ 230,185 Sales per Hub (millions) 10.0 9.1 6.4 (1) Includes legacy wholesale business revenues and Branded Sweet Treat Line revenues. (2) Includes Insomnia Cookies revenues and Fresh Revenues generated by Hubs without Spokes. (3) Total International net revenues is equal to Fresh Revenues from Hubs with Spokes for that business segment. Krispy Kreme, Inc. Global Points of Access (Unaudited) Global Points of Access (1) Quarter Ended Fiscal Year Ended October 2, 2022 October 3, 2021 January 2, 2022 U.S. and Canada: (2) Hot Light Theater Shops 244 238 241 Fresh Shops 67 57 66 Cookie Shops 227 206 210 Carts, Food Trucks, and Other (3) 1 — 2 DFD Doors 5,720 5,220 5,204 Total 6,259 5,721 5,723 International: Hot Light Theater Shops 35 30 32 Fresh Shops 384 363 370 Carts, Food Trucks, and Other (3) 12 1 1 DFD Doors 3,008 2,415 2,488 Total 3,439 2,809 2,891 Market Development: (4) Hot Light Theater Shops 107 113 109 Fresh Shops 803 761 782 Carts, Food Trucks, and Other (3) 29 30 31 DFD Doors 1,066 607 891 Total 2,005 1,511 1,813 Total Global Points of Access (as defined) 11,703 10,041 10,427 Total Hot Light Theater Shops 386 381 382 Total Fresh Shops 1,254 1,181 1,218 Total Cookie Shops 227 206 210 Total Shops 1,867 1,768 1,810 Total Carts, Food Trucks, and Other 42 31 34 Total DFD Doors 9,794 8,242 8,583 Total Global Points of Access (as defined) 11,703 10,041 10,427 (1) Excludes Branded Sweet Treat Line distribution points. (2) Includes Points of Access that were acquired from a franchisee in Canada during the fourth quarter of fiscal 2021. These Points of Access were previously included in the Market Development segment. (3) Carts and Food Trucks are non-producing, mobile (typically on wheels) facilities without walls or a door where product is received from a Hot Light Theater Shop or Doughnut Factory. Other includes a vending machine as of October 2, 2022. Points of Access in this category are primarily found in international locations, in airports, train stations, etc. Comparative data has been included in all periods presented above. (4) Includes locations in Japan which are Company-owned. All remaining Points of Access in the Market Development segment relate to our franchise business. Krispy Kreme, Inc. Global Hubs (Unaudited) Hubs Quarter Ended Fiscal Year Ended October 2, 2022 October 3, 2021 January 2, 2022 U.S. and Canada: Hot Light Theater Shops (1) 241 234 238 Doughnut Factories 4 4 4 Total 245 238 242 Hubs with Spokes 129 121 126 International: Hot Light Theater Shops (1) 26 25 25 Doughnut Factories 11 10 11 Total 37 35 36 Hubs with Spokes 37 35 36 Market Development: Hot Light Theater Shops (1) 103 111 106 Doughnut Factories 26 26 27 Total 129 137 133 Total Hubs 411 410 411 (1) Includes only Hot Light Theater Shops and excludes Mini Theaters. A Mini Theater is a Spoke location that produces some doughnuts for itself and also receives doughnuts from another producing location. Krispy Kreme, Inc. Net Debt and Leverage (Unaudited) (in thousands) October 2, 2022 January 2, 2022 Current portion of long-term debt $ 40,243 $ 36,583 Long-term debt, less current portion 738,504 680,307 Total long-term debt, including debt issuance costs 778,747 716,890 Add back: Debt issuance costs 2,644 3,833 Total long-term debt, excluding debt issuance costs 781,391 720,723 Less: Cash and cash equivalents (28,096 ) (38,562 ) Net debt $ 753,295 $ 682,161 Adjusted EBITDA - trailing four quarters 182,542 187,945 Net leverage ratio 4.1 x 3.6 x View source version on businesswire.com: https://www.businesswire.com/news/home/20221114006016/en/Contacts Investor Relations Rob Ballew, VP of Investor Relations rballew@krispykreme.com Financial Media Edelman Smithfield for Krispy Kreme, Inc. Allie McLarty & Ashley Firlan, KrispyKremeIR@edelman.com
Third quarter net revenue grew 10.1% compared to Q3 2021 Organic revenue growth accelerated to 12.0% Added 294 Points of Access in Q3 and 1,276 year to date, exceeding our full year target Reiterating 2022 Guidance with strong momentum to start Q4
Krispy Kreme, Inc. (NASDAQ: DNUT) (“Krispy Kreme” or the “Company”) today reported financial results for the third quarter ended October 2, 2022 with net revenue growing 10.1% year-over-year to $377.5 million, or 13.4% in constant currency, while organic revenue grew 12.0%. Foreign currency translation resulted in a negative 3.3% impact on net revenue growth during the third quarter due to the strength of the U.S. dollar. Sales per Hub in the U.S. and Canada increased by 18.4% year-over-year to $4.5 million while International Sales per Hub grew 16.3% to $10.0 million. Organic growth was driven by the solid performance and expansion of Krispy Kreme’s omni-channel model, with a 17% increase in Global Points of Access and strong organic revenue growth in all three business segments in our seasonally low quarter. Global Points of Access, which reflect all locations where fresh doughnuts and cookies can be purchased, increased by 294 during the quarter, providing consumers access to Krispy Kreme in more than 11,700 locations around the world. GAAP Net Loss for the quarter was $11.8 million with Adjusted Net Income of $5.9 million. GAAP Loss per Share for the quarter was ($0.08) while Adjusted Diluted EPS was $0.03 for the quarter. Adjusted EBITDA in the third quarter was $38.5 million, which included approximately $3.1 million negative impact from the strong U.S. dollar. Commenting on the Company’s performance, President and CEO Mike Tattersfield stated, “We were pleased with our strong organic revenue growth in the third quarter, led by an acceleration in growth in the U.S. and Canada and Market Development. Margins improved significantly in the final period of the quarter as we successfully implemented price increases in the U.S. coupled with decreased promotional activity after Labor Day. Strong momentum continues into the fourth quarter enhanced by further recent pricing actions in the U.S. and U.K. and a robust global Halloween performance.” Mike continued, “Our international expansion strategy is progressing at a healthy pace. Just recently we opened in Jordan and announced a joint venture to enter into France in 2023. We are excited to also announce a new development agreement to open in Jamaica next year, bringing our total development deals signed in 2022 to 7 international countries, representing over 5,000 new potential points of access.” Financial Highlights $ in millions, except per share data Q3 2022 vs Q3 2021 Q1-Q3 2022 vs Q1-Q3 2021 Net Revenue $377.5 +10.1% $1,125.3 +11.0% Organic Revenue(1) $384.1 +12.0% $1,134.3 +11.9% GAAP Net (Loss)/Income ($11.8) ($8.1) ($7.8) $11.3 Adjusted Net Income(1) $5.9 ($6.8) $36.6 ($14.1) Operating (Loss)/Income ($1.0) ($2.9) $23.8 ($0.9) Operating (Loss)/Income Margin (0.3%) -80 bps 2.1% -30 bps Adjusted EBITDA(1) $38.5 ($2.9) $134.8 ($5.4) Adjusted EBITDA Margin(1) 10.2% -190 bps 12.0% -180 bps GAAP Diluted Income/(Loss) Per Share ($0.08) ($0.04) ($0.08) +$0.12 Adjusted Diluted EPS(1) $0.03 ($0.03) $0.18 ($0.11) Net Debt $753.3 +10.7% Notes: (1) Non-GAAP figures – please refer to Reconciliation of Non-GAAP Financial Measures. Key Operating Metrics $ in millions, except access points Q3 2022 vs Q3 2021 vs Q2 2022 Global Points of Access 11,703 +16.6% +2.6% Sales per Hub (U.S. and Canada) TTM $4.5 +18.4% +2.3% Sales per Hub (International) TTM $10.0 +16.3% +2.0% Ecommerce as a Percent of Retail Sales 18.5% +170 bps +100 bps Third quarter 2022 Consolidated Results Net revenue grew 10.1% in the third quarter to $377.5 million, or 13.4% in constant currency, and organic revenue grew 12.0% in the quarter. Organic revenue growth was driven by strong performances in our Hubs with Spokes, both domestically and internationally, leveraging a 16.6% increase in points of access from a year ago, and robust Ecommerce revenue growth. GAAP Net Loss for the quarter was $11.8 million, compared to a GAAP Net Loss of $3.8 million in the third quarter of 2021. Adjusted EBITDA in the quarter declined 6.9% to $38.5 million, due to an approximately $3.1 million negative impact from the strength of the U.S. dollar, higher promotional activity from the Beat the Pump promotion in the US through Labor Day and increased labor and commodity costs. Operating margins declined 80 basis points to -0.3%, while Adjusted EBITDA margin declined 190 basis points to 10.2% from the same quarter in 2021 driven by margin declines in our International segment and FX headwinds. However, Adjusted EBITDA margins improved significantly as the quarter progressed and were higher in the final period of the third quarter compared to a year ago. Adjusted Net Income for the quarter declined 53.5% to $5.9 million compared to the same quarter in 2021. GAAP Diluted Net Loss per share in the quarter was ($0.08) compared to a net loss of ($0.04) in the same quarter last year with Adjusted Diluted EPS decreasing to $0.03 from $0.06 in the third quarter of 2021. Diluted weighted average shares outstanding for the third quarter of 2022 were 169.3 million, compared to 168.1 million in the third quarter of 2021. Third Quarter Market Segment Results U.S. and Canada: In the U.S. and Canada segment net revenue in the third quarter of 2022 grew 11.9% to $252.6 million, driven by the continued execution of our omni-channel strategy, including our Pumpkin Spice limited time offering across all channels including Branded Sweet Treats, Hubs with Spokes strength and Insomnia Cookies. Organic revenue increased 8.9% driven by increased points of access and successful price increases in retail locations in July and Delivered Fresh Daily (“DFD”) doors in September. Points of Access increased by 206 in quarter to 6,259 and represents a 9.4% increase in Points of Access from a year ago. U.S. and Canada Adjusted EBITDA increased 10.0% to $21.9 million in the third quarter of 2022 compared to the third quarter of 2021 with a slight Adjusted EBITDA margin decline of 10 basis points to 8.7%. Hub and Spoke efficiency and a strong performance from Insomnia offset inflationary pressures, higher promotional activity in the first two periods of the third quarter and margin erosion at Hubs without Spokes. Adjusted EBITDA margins improved significantly as the quarter progressed, including strong margin expansion in September over the prior year, as promotional activity returned to normal levels and sales remained robust. This momentum has continued in the fourth quarter. Also during the third quarter, we closed 8 underperforming Hubs without Spokes that were previously announced. International: In the International segment, net revenue grew 5.4% to $91.9 million, with organic growth of 15.5%. Organic growth in the quarter was driven by strong growth in Mexico, Australia and New Zealand. Points of Access increased by 14 to 3,439, or 548 year to date. Foreign currency translation had a negative 10.1% impact on our International net revenue growth during the quarter. International Adjusted EBITDA declined 15.7% to $18.3 million in the third quarter over the same period of the prior year, due to a $2.4 million impact from the higher U.S. dollar as well as a continued challenging environment in the U.K. Adjusted EBITDA for Mexico and Australia & New Zealand markets grew 18.1% in the third quarter compared to the same period in the prior year. International Adjusted EBITDA margin was 19.9% in the third quarter, down 490 basis points compared the same period last year due to reduced margins in the U.K. from lower organic revenue growth and elevated inflation. Market Development: In the Market Development segment, net revenue increased 10.9% to $33.0 million driven by a 32.7% increase in Points of Access compared to the prior year to 2,005, partially offset by franchise acquisitions and an 8.6% adverse impact from foreign currency exchange. Organic revenue growth accelerated to 26.0% compared to the same period in 2021 driven by a strong performance in our franchise markets, including South Korea and India, and our equity-owned Japan market where the Company is implementing its omni-channel model with the expansion of Ecommerce and the launch of DFD. Points of Access in the quarter increased by 74 and 192 year to date. Market Development Adjusted EBITDA grew 14.6% to $10.4 million in the third quarter of 2022, with strong organic revenue growth partially offset by domestic franchise acquisitions and a foreign currency impact of negative $0.7 million. Adjusted EBITDA margins increased 100 basis points to 31.4% in the quarter. The Company has signed development agreements in 2022 with franchise partners to open in Switzerland, Costa Rica, Jordan, Jamaica and Chile as well as a joint venture in France and a new partner in Turkey. Balance Sheet & Capital Expenditures During the third quarter of 2022, the company invested $23.5 million in capital expenditures, or 6.2% of revenue. For the first three quarters of 2022, the Company invested $75.0 million in capital expenditures, or 6.7% of revenue. As of July 3, 2022, the Company had $28.1 million of cash and cash equivalents, $750.5 million of bank debt and $30.9 million of other debt-like items, for a total net debt of $753.3 million. 2022 Financial Outlook Krispy Kreme re-iterates its guidance for the full year 2022 as follows: Net Revenue of $1.49 billion to $1.52 billion Organic Revenue growth of 10% to 12% Adjusted EBITDA of $189 million to $195 million Adjusted Net Income to Krispy Kreme shareholders, diluted, of $49 million to $54 million Adjusted Diluted EPS of $0.29 to $0.32 Approximately 170 million weighted average Diluted shares outstanding Adjusted Income Tax rate between 23% and 25% Capital Expenditures between $105 million to $110 million (approximately 7% of revenue) Net Leverage of approximately 3.6x, including the short-term impact from the U.S. Midwest franchise acquisition and FX headwinds, with a goal of 3.0x by the end of 2023 The Company’s guidance includes an Adjusted EBITDA impact of approximately negative $10 to $12 million from foreign currency translation and input costs as a result of the strengthening of the U.S. dollar or approximately negative $0.05 per Diluted share. At current exchange rates, we expect to come in near the high end of the estimated impact range for 2022. December Investor Day Krispy Kreme previously announced it will host an Investor Day on December 15, 2022 at its headquarters in Charlotte, NC and virtually via webcast. The Company will provide further detail on our strategic vision and long-term growth goals and introduce our initial 2023-2026 outlook. To register for the event, please refer to the Events section of the Krispy Kreme’s Investor Relations website. Conference Call Krispy Kreme will host a public conference call at 8:30 AM Eastern Time today to discuss its results for the third quarter of 2022. The conference call can be accessed by dialing 1 (800) 599-5188 and entering the conference ID 5487868. International participants can access the call via the corresponding number listed here and entering the conference ID 5487868. To listen to the live audio webcast and Q&A, visit the Krispy Kreme investor relations website at investors.krispykreme.com. A replay and transcript of the webcast will be available on the website within 24 hours after the call. Krispy Kreme’s earnings press release and related materials will also be available on the investor relations section of the Company’s website. Definitions The following definitions apply to terms used throughout this press release: Global Points of Access: Reflects all locations at which fresh doughnuts or cookies can be purchased. We define Global Points of Access to include all Hot Light Theater Shops, Fresh Shops, Carts, Food Trucks and Other, DFD Doors and Cookie Shops, at both Company-owned and franchise locations as of the end of the respective reporting period. We monitor Global Points of Access as a metric that informs the growth of our omni-channel presence over time and believe this metric is useful to investors to understand our footprint in each of our segments. Hubs: Reflects locations where fresh doughnuts are produced and processed for sale at any point of access. We define Hubs to include self-sustaining Hot Light Theater Shops and Doughnut Factories, at both Company-owned and franchise locations as of the end of the respective reporting period. Sales Per Hub: Sales per Hub equals Fresh Revenues from Hubs with Spokes, divided by the average number of Hubs with Spokes at the end of the five most recent quarters. Fresh Revenues from Hubs with Spokes: Fresh Revenues include product sales generated from our Doughnut Shop business (including Ecommerce and delivery), as well as DFD sales, but excluding sales from our legacy wholesale business and our Branded Sweet Treat Line. It also excludes all Insomnia Cookies revenues as the measure is focused on the Krispy Kreme business. Fresh Revenues from Hubs with Spokes equals the Fresh Revenues derived from those Hubs currently producing product for other shops, Carts, Food Trucks and Other, and/or DFD Doors, but excluding Fresh Revenues derived from those Hubs not currently producing product for other shops, Carts, Food Trucks and Other, and/or DFD Doors. Total Net Leverage Ratio: Calculated using Net Debt (including both bank debt and financing leases as part of debt) divided by Adjusted EBITDA. Free Cash Flow: Defined as cash provided by operating activities less purchases of property and equipment. About Krispy Kreme Headquartered in Charlotte, N.C., Krispy Kreme is one of the most beloved and well-known sweet treat brands in the world. Our iconic Original Glazed® doughnut is universally recognized for its hot-off-the-line, melt-in-your-mouth experience. Krispy Kreme operates in over 30 countries through its unique network of fresh doughnut shops, partnerships with leading retailers, and a rapidly growing Ecommerce and delivery business with more than 11,000 fresh points of access. Our purpose of touching and enhancing lives through the joy that is Krispy Kreme guides how we operate every day and is reflected in the love we have for our people, our communities and the planet. Connect with Krispy Kreme Doughnuts at www.KrispyKreme.com, or on one of its many social media channels, including www.Facebook.com/KrispyKreme, and www.Twitter.com/KrispyKreme. Cautionary Note Regarding Forward-Looking Statements This press release contains forward-looking statements that involve risks and uncertainties. The words “believe,” “may,” “could,” “will,” “should,” “anticipate,” “estimate,” “expect,” “outlook,” “guidance,” “working towards” or similar words, or the negative of these words, identify forward-looking statements. Such forward-looking statements are based on certain assumptions and estimates that we consider reasonable but are subject to various risks and uncertainties and assumptions relating to our operations, financial results, financial conditions, business, prospects, growth strategy and liquidity. Accordingly, there are, or will be, important factors that could cause our actual results to differ materially from those indicated in these statements. The inclusion of this forward-looking information should not be regarded as a representation by us that the future plans, estimates or expectations contemplated by us will be achieved. Our actual results could differ materially from the forward-looking statements included herein. Factors that could cause actual results to differ from those expressed in forward-looking statements include, without limitation, the risks and uncertainties described under the headings “Cautionary Note Regarding Forward-Looking Statements” and “Risk Factors” in our Annual Report on Form 10-K for the year ended January 2, 2022, filed by us with the Securities and Exchange Commission (“SEC”) and described in the other filings we make from time to time with the SEC. We believe that these factors include, but are not limited to, the impact of pandemics, changes in consumer preferences, the impact of inflation, and our ability to execute on our omni-channel business strategy. These forward-looking statements are made only as of the date of this document, and we do not undertake any obligation, other than as may be required by applicable law, to update or revise any forward-looking or cautionary statement to reflect changes in assumptions, the occurrence of events, unanticipated or otherwise, or changes in future operating results over time or otherwise. Non-GAAP Measures This press release includes certain non-GAAP financial measures including organic revenue growth, Adjusted EBITDA, Adjusted Net Income, Adjusted Diluted EPS, Fresh Revenue from Hubs with Spokes and Sales per Hub, which differ from results using U.S. Generally Accepted Accounting Principles (“GAAP”). These non-GAAP financial measures are not universally consistent calculations, limiting their usefulness as comparative measures. Other companies may calculate similarly titled financial measures differently than we do or may not calculate them at all. Additionally, these non-GAAP financial measures are not measurements of financial performance under GAAP. In order to facilitate a clear understanding of our consolidated historical operating results, you should examine our non-GAAP financial measures in conjunction with our historical consolidated financial statements and notes thereto filed with the SEC. The Company does not provide reconciliations of such forward-looking non-GAAP measures to GAAP due to the inability to predict the amount and timing of impacts outside of the Company’s control on certain items, such as net income and other charges reflected in our reconciliation of historic numbers, the amount of which, based on historical experience, could be significant. Krispy Kreme, Inc. Condensed Consolidated Statements of Operations (Unaudited) (in thousands, except per share amounts) Quarter Ended Three Quarters Ended October 2, 2022 (13 weeks) October 3, 2021 (13 weeks) October 2, 2022 (39 weeks) October 3, 2021 (39 weeks) Net revenues Product sales $ 370,216 $ 334,324 $ 1,102,045 $ 989,132 Royalties and other revenues 7,306 8,475 23,254 24,662 Total net revenues 377,522 342,799 1,125,299 1,013,794 Product and distribution costs 102,870 92,152 299,539 257,166 Operating expenses 177,592 157,315 520,260 462,733 Selling, general and administrative expense 54,801 52,950 160,266 163,417 Marketing expenses 10,995 12,062 32,369 31,621 Pre-opening costs 1,200 1,192 3,514 4,335 Other expenses/(income), net 2,964 (359 ) 1,800 (4,365 ) Depreciation and amortization expense 28,127 25,663 83,782 74,258 Operating (loss)/income (1,027 ) 1,824 23,769 24,629 Interest expense, net 8,871 7,186 23,808 25,228 Interest expense — related party — — — 10,387 Other non-operating expense/(income), net 1,648 732 2,083 (126 ) Loss before income taxes (11,546 ) (6,094 ) (2,122 ) (10,860 ) Income tax expense/(benefit) 294 (2,342 ) 5,668 8,266 Net loss (11,840 ) (3,752 ) (7,790 ) (19,126 ) Net income attributable to noncontrolling interest 1,216 1,907 5,113 6,736 Net loss attributable to Krispy Kreme, Inc. $ (13,056 ) $ (5,659 ) $ (12,903 ) $ (25,862 ) Net loss per share: Common stock — Basic $ (0.08 ) $ (0.04 ) $ (0.08 ) $ (0.20 ) Common stock — Diluted $ (0.08 ) $ (0.04 ) $ (0.08 ) $ (0.20 ) Weighted average shares outstanding: Basic 167,431 166,034 167,353 141,124 Diluted 167,431 166,034 167,353 141,124 Krispy Kreme, Inc. Condensed Consolidated Balance Sheets (in thousands, except per share amounts) As of (Unaudited) October 2, 2022 January 2, 2022 ASSETS Current assets: Cash and cash equivalents $ 28,096 $ 38,562 Restricted cash 403 630 Accounts receivable, net 46,941 47,491 Inventories 49,406 34,851 Taxes receivable 16,537 14,662 Prepaid expense and other current assets 33,126 20,701 Total current assets 174,509 156,897 Property and equipment, net 450,954 438,918 Goodwill 1,074,241 1,105,322 Other intangible assets, net 966,358 992,520 Operating lease right of use asset, net 410,001 435,168 Other assets 25,788 16,429 Total assets $ 3,101,851 $ 3,145,254 LIABILITIES AND SHAREHOLDERS’ EQUITY Current liabilities: Current portion of long-term debt $ 40,243 $ 36,583 Current operating lease liabilities 45,551 50,359 Accounts payable 188,059 182,104 Accrued liabilities 111,818 140,750 Structured payables 123,331 116,361 Total current liabilities 509,002 526,157 Long-term debt, less current portion 738,504 680,307 Noncurrent operating lease liabilities 400,594 415,208 Deferred income taxes, net 140,244 145,418 Other long-term obligations and deferred credits 39,784 42,509 Total liabilities 1,828,128 1,809,599 Commitments and contingencies Shareholders’ equity: Common stock, $0.01 par value; 300,000 shares authorized as of both October 2, 2022 and January 2, 2022; 167,437 and 167,251 shares issued and outstanding as of October 2, 2022 and January 2, 2022, respectively 1,674 1,673 Additional paid-in capital 1,422,850 1,415,185 Shareholder note receivable (4,812 ) (4,382 ) Accumulated other comprehensive loss, net of income tax (37,380 ) (2,478 ) Retained deficit (208,886 ) (178,409 ) Total shareholders’ equity attributable to Krispy Kreme, Inc. 1,173,446 1,231,589 Noncontrolling interest 100,277 104,066 Total shareholders’ equity 1,273,723 1,335,655 Total liabilities and shareholders’ equity $ 3,101,851 $ 3,145,254 Krispy Kreme, Inc. Condensed Consolidated Statements of Cash Flows (Unaudited) (in thousands) Three Quarters Ended October 2, 2022 (39 weeks) October 3, 2021 (39 weeks) CASH FLOWS FROM OPERATING ACTIVITIES: Net loss $ (7,790 ) $ (19,126 ) Adjustments to reconcile net loss to net cash provided by operating activities: Depreciation and amortization expense 83,782 74,258 Deferred income taxes (10,259 ) 9,168 Loss on extinguishment of debt — 1,700 Impairment and lease termination charges 7,255 854 (Gain)/loss on disposal of property and equipment (244 ) 157 Gain on sale-leaseback (4,311 ) — Share-based compensation 13,318 16,973 Change in accounts and notes receivable allowances 378 133 Inventory write-off 388 2,983 Other 804 (315 ) Change in operating assets and liabilities, excluding business acquisitions and foreign currency translation adjustments (12,591 ) 12,003 Net cash provided by operating activities 70,730 98,788 CASH FLOWS USED FOR INVESTING ACTIVITIES: Purchase of property and equipment (75,002 ) (83,485 ) Proceeds from disposals of assets 856 202 Proceeds from sale-leaseback 5,700 — Acquisition of shops and franchise rights from franchisees, net of cash acquired (17,335 ) (33,888 ) Purchase of equity method investment (989 ) — Other investing activities (931 ) 455 Net cash used for investing activities (87,701 ) (116,716 ) CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from the issuance of debt 121,500 670,000 Repayment of long-term debt and lease obligations (70,180 ) (1,115,910 ) Payment of financing costs — (1,700 ) Proceeds from structured payables 219,459 194,927 Payments on structured payables (211,778 ) (223,063 ) Payment of contingent consideration related to a business combination (900 ) — Capital contribution by shareholders, net of loans issued (288 ) 120,532 Proceeds from IPO, net of underwriting discounts (excluding unpaid issuance costs) — 527,329 Payments of issuance costs in connection with IPO (12,458 ) — Proceeds from sale of noncontrolling interest in subsidiary 410 53,337 Distribution to shareholders (17,570 ) (42,334 ) Payments for repurchase and retirement of common stock (2,425 ) (138,501 ) Distribution to noncontrolling interest (11,525 ) (17,257 ) Net cash provided by financing activities 14,245 27,360 Effect of exchange rate changes on cash, cash equivalents and restricted cash (7,967 ) (1,827 ) Net (decrease)/increase in cash, cash equivalents and restricted cash (10,693 ) 7,605 Cash, cash equivalents and restricted cash at beginning of period 39,192 37,483 Cash, cash equivalents and restricted cash at end of period $ 28,499 $ 45,088 Krispy Kreme, Inc. Reconciliation of Non-GAAP Financial Measures (Unaudited) (in thousands, except per share amounts) Quarter Ended Three Quarters Ended October 2, 2022 October 3, 2021 October 2, 2022 October 3, 2021 Net loss $ (11,840 ) $ (3,752 ) $ (7,790 ) $ (19,126 ) Interest expense, net 8,871 7,186 23,808 25,228 Interest expense — related party(1) — — — 10,387 Income tax expense/(benefit) 294 (2,342 ) 5,668 8,266 Depreciation and amortization expense 28,127 25,663 83,782 74,258 Share-based compensation 2,825 6,315 13,318 16,973 Employer payroll taxes related to share-based compensation 2 1,171 92 2,012 Other non-operating expense/(income), net(2) 1,648 732 2,083 (126 ) Acquisition and integration expenses(3) 790 1,288 1,389 3,663 Shop closure expenses(4) 5,735 — 7,859 — Restructuring and severance expenses(5) 2,328 57 2,804 1,393 IPO-related expenses(6) — 4,018 — 14,221 Gain on sale-leaseback (1,937 ) — (4,311 ) — Other(7) 1,699 1,081 6,108 3,064 Adjusted EBITDA $ 38,542 $ 41,417 $ 134,810 $ 140,213 Quarter Ended Three Quarters Ended October 2, 2022 October 3, 2021 October 2, 2022 October 3, 2021 Segment Adjusted EBITDA: U.S. and Canada $ 21,896 $ 19,912 $ 81,521 $ 75,760 International 18,254 21,655 55,033 60,676 Market Development 10,353 9,033 32,135 29,782 Corporate (11,961 ) (9,183 ) (33,879 ) (26,005 ) Total Adjusted EBITDA $ 38,542 $ 41,417 $ 134,810 $ 140,213 Quarter Ended Three Quarters Ended (in thousands, except per share amounts) October 2, 2022 October 3, 2021 October 2, 2022 October 3, 2021 Net loss $ (11,840 ) $ (3,752 ) $ (7,790 ) $ (19,126 ) Interest expense — related party(1) — — — 10,387 Share-based compensation 2,825 6,315 13,318 16,973 Employer payroll taxes related to share-based compensation 2 1,171 92 2,012 Other non-operating expense/(income), net(2) 1,648 732 2,083 (126 ) Acquisition and integration expenses(3) 790 1,288 1,389 3,663 Shop closure expenses(4) 5,735 — 8,109 — Restructuring and severance expenses(5) 2,328 57 2,804 1,393 IPO-related expenses(6) — 4,018 — 14,221 Gain on sale-leaseback (1,937 ) — (4,311 ) — Other(7) 1,699 1,081 6,108 3,064 Amortization of acquisition related intangibles(8) 7,083 7,497 21,307 22,573 KKI Term Loan Facility interest and debt issuance costs(9) — 107 — 2,448 Tax impact of adjustments(10) (2,470 ) (5,784 ) (5,889 ) (10,604 ) Tax specific adjustments(11) — (114 ) (628 ) 3,833 Adjusted net income $ 5,863 $ 12,616 $ 36,592 $ 50,711 Net income attributable to noncontrolling interest (1,216 ) (1,907 ) (5,113 ) (6,736 ) Adjusted net income attributable to Krispy Kreme, Inc. $ 4,647 $ 10,709 $ 31,479 $ 43,975 Adjustment to adjusted net income attributable to common shareholders — (522 ) (374 ) (1,815 ) Adjusted net income attributable to common shareholders - Basic $ 4,647 $ 10,187 $ 31,105 $ 42,160 Additional income attributed to noncontrolling interest due to subsidiary potential common shares (76 ) (88 ) (174 ) (237 ) Adjusted net income attributable to common shareholders - Diluted $ 4,571 $ 10,099 $ 30,931 $ 41,923 Basic weighted average common shares outstanding 167,431 166,034 167,353 141,124 Dilutive effect of outstanding common stock options and RSUs 1,822 2,041 2,006 2,937 Diluted weighted average common shares outstanding 169,253 168,075 169,359 144,061 Adjusted net income per share attributable to common shareholders: Basic $ 0.03 $ 0.06 $ 0.19 $ 0.30 Diluted $ 0.03 $ 0.06 $ 0.18 $ 0.29 (1) Consists of interest expense related to the Related Party Notes which were paid off in full during the quarter ended July 4, 2021. (2) Primarily foreign translation gains and losses in each period. (3) Consists of acquisition and integration-related costs in connection with the Company’s business and franchise acquisitions, including legal, due diligence, consulting and advisory fees incurred in connection with acquisition and integration-related activities for the applicable period. (4) Includes lease termination costs, impairment charges, and loss on disposal of property, plant and equipment. Shop closure expenses included in Adjusted Net Income for the three quarters ended October 2, 2022 are inclusive of accelerated depreciation related to replacing a point of sale system. (5) The quarter and three quarters ended October 2, 2022 consist of costs associated with restructuring of the global executive team. The quarter and three quarters ended October 3, 2021 consist of severance and related benefits costs associated with the Company’s realignment of the Company shop organizational structure to better support the DFD and Branded Sweet Treat Line businesses. (6) Includes consulting and advisory fees incurred in connection with preparation for and execution of the Company’s IPO. (7) The quarter and three quarters ended October 2, 2022 and October 3, 2021 consist primarily of legal expenses incurred outside the ordinary course of business, including the net settlement of approximately $3.3 million negotiated with TSW Foods, LLC. (8) Consists of amortization related to acquired intangible assets as reflected within depreciation and amortization in the Condensed Consolidated Statements of Operations. (9) Includes interest expense and debt issuance costs incurred and recognized as expenses in connection with the extinguishment of the KKI Term Loan Facility within four business days of receipt of the net proceeds from the IPO. (10) Tax impact of adjustments calculated applying the applicable statutory rates. The quarter and three quarters ended October 2, 2022 also include the impact of disallowed executive compensation expense and a discrete tax benefit related to a legal accrual. (11) The three quarters ended October 2, 2022 consist of the recognition of a previously unrecognized tax benefit unrelated to ongoing operations. The three quarters ended October 3, 2021 consist primarily of the effect of tax law changes on existing temporary differences. Krispy Kreme, Inc. Segment Reporting (Unaudited) (in thousands except percentages) Quarter Ended Three Quarters Ended October 2, 2022 October 3, 2021 October 2, 2022 October 3, 2021 Net revenues: U.S. and Canada $ 252,609 $ 225,807 $ 756,196 $ 679,195 International 91,934 87,262 272,988 243,005 Market Development 32,979 29,730 96,115 91,594 Total net revenues $ 377,522 $ 342,799 $ 1,125,299 $ 1,013,794 Q3 2022 Organic Revenue (1) - QTD U.S. and Canada International Market Development Total Company Total net revenues in third quarter of fiscal 2022 $ 252,609 $ 91,934 $ 32,979 $ 377,522 Total net revenues in third quarter of fiscal 2021 225,807 87,262 29,730 342,799 Total Net Revenues Growth 26,802 4,672 3,249 34,723 Total Net Revenues Growth % 11.9 % 5.4 % 10.9 % 10.1 % Impact of acquisitions (6,809 ) — 1,917 (4,892 ) Impact of foreign currency translation — 8,890 2,564 11,454 Organic Revenue Growth $ 19,993 $ 13,562 $ 7,730 $ 41,285 Organic Revenue Growth % 8.9 % 15.5 % 26.0 % 12.0 % (1) Organic revenue is total net revenue adjusted for the impact of acquisitions and foreign currency translation. Q3 2022 Organic Revenue - YTD U.S. and Canada International Market Development Total Company Total net revenues in first three quarters of fiscal 2022 $ 756,196 $ 272,988 $ 96,115 $ 1,125,299 Total net revenues in first three quarters of fiscal 2021 679,195 243,005 91,594 1,013,794 Total Net Revenues Growth 77,001 29,983 4,521 111,505 Total Net Revenues Growth % 11.3 % 12.3 % 4.9 % 11.0 % Impact of acquisitions (21,738 ) — 6,130 (15,608 ) Impact of foreign currency translation — 18,843 5,769 24,612 Organic Revenue Growth $ 55,263 $ 48,826 $ 16,420 $ 120,509 Organic Revenue Growth % 8.1 % 20.1 % 17.9 % 11.9 % Q3 2021 Organic Revenue - QTD U.S. and Canada International Market Development Total Company Total net revenues in third quarter of fiscal 2021 $ 225,807 $ 87,262 $ 29,730 $ 342,799 Total net revenues in third quarter of fiscal 2020 202,575 63,504 24,154 290,233 Total Net Revenues Growth 23,232 23,758 5,576 52,566 Total Net Revenues Growth % 11.5 % 37.4 % 23.1 % 18.1 % Impact of acquisitions (27,928 ) — (1,195 ) (29,123 ) Impact of foreign currency translation — (5,305 ) — (5,305 ) Organic Revenue Growth $ (4,696 ) $ 18,453 $ 4,381 $ 18,138 Organic Revenue Growth % -2.3 % 29.1 % 18.1 % 6.2 % Q3 2021 Organic Revenue - YTD U.S. and Canada International Market Development Total Company Total net revenues in first three quarters of fiscal 2021 $ 679,195 $ 243,005 $ 91,594 $ 1,013,794 Total net revenues in first three quarters of fiscal 2020 557,280 158,575 80,566 796,421 Total Net Revenues Growth 121,915 84,430 11,028 217,373 Total Net Revenues Growth % 21.9 % 53.2 % 13.7 % 27.3 % Impact of acquisitions (99,062 ) — (1,584 ) (100,646 ) Impact of foreign currency translation — (21,767 ) — (21,767 ) Organic Revenue Growth $ 22,853 $ 62,663 $ 9,444 $ 94,960 Organic Revenue Growth % 4.1 % 39.5 % 11.7 % 11.9 % Sales per Hub Trailing Four Quarters Ended Fiscal Year Ended October 2, 2022 January 2, 2022 January 3, 2021 U.S. and Canada: Revenues $ 1,005,414 $ 928,413 $ 782,717 Non-Fresh Revenues (1) (39,148 ) (37,311 ) (128,619 ) Fresh Revenues from Insomnia Cookies and Hubs without Spokes (2) (402,544 ) (415,768 ) (323,079 ) Sales from Hubs with Spokes 563,722 475,334 331,019 Sales per Hub (millions) 4.5 4.0 3.5 International: Sales from Hubs with Spokes (3) $ 362,978 $ 332,995 $ 230,185 Sales per Hub (millions) 10.0 9.1 6.4 (1) Includes legacy wholesale business revenues and Branded Sweet Treat Line revenues. (2) Includes Insomnia Cookies revenues and Fresh Revenues generated by Hubs without Spokes. (3) Total International net revenues is equal to Fresh Revenues from Hubs with Spokes for that business segment. Krispy Kreme, Inc. Global Points of Access (Unaudited) Global Points of Access (1) Quarter Ended Fiscal Year Ended October 2, 2022 October 3, 2021 January 2, 2022 U.S. and Canada: (2) Hot Light Theater Shops 244 238 241 Fresh Shops 67 57 66 Cookie Shops 227 206 210 Carts, Food Trucks, and Other (3) 1 — 2 DFD Doors 5,720 5,220 5,204 Total 6,259 5,721 5,723 International: Hot Light Theater Shops 35 30 32 Fresh Shops 384 363 370 Carts, Food Trucks, and Other (3) 12 1 1 DFD Doors 3,008 2,415 2,488 Total 3,439 2,809 2,891 Market Development: (4) Hot Light Theater Shops 107 113 109 Fresh Shops 803 761 782 Carts, Food Trucks, and Other (3) 29 30 31 DFD Doors 1,066 607 891 Total 2,005 1,511 1,813 Total Global Points of Access (as defined) 11,703 10,041 10,427 Total Hot Light Theater Shops 386 381 382 Total Fresh Shops 1,254 1,181 1,218 Total Cookie Shops 227 206 210 Total Shops 1,867 1,768 1,810 Total Carts, Food Trucks, and Other 42 31 34 Total DFD Doors 9,794 8,242 8,583 Total Global Points of Access (as defined) 11,703 10,041 10,427 (1) Excludes Branded Sweet Treat Line distribution points. (2) Includes Points of Access that were acquired from a franchisee in Canada during the fourth quarter of fiscal 2021. These Points of Access were previously included in the Market Development segment. (3) Carts and Food Trucks are non-producing, mobile (typically on wheels) facilities without walls or a door where product is received from a Hot Light Theater Shop or Doughnut Factory. Other includes a vending machine as of October 2, 2022. Points of Access in this category are primarily found in international locations, in airports, train stations, etc. Comparative data has been included in all periods presented above. (4) Includes locations in Japan which are Company-owned. All remaining Points of Access in the Market Development segment relate to our franchise business. Krispy Kreme, Inc. Global Hubs (Unaudited) Hubs Quarter Ended Fiscal Year Ended October 2, 2022 October 3, 2021 January 2, 2022 U.S. and Canada: Hot Light Theater Shops (1) 241 234 238 Doughnut Factories 4 4 4 Total 245 238 242 Hubs with Spokes 129 121 126 International: Hot Light Theater Shops (1) 26 25 25 Doughnut Factories 11 10 11 Total 37 35 36 Hubs with Spokes 37 35 36 Market Development: Hot Light Theater Shops (1) 103 111 106 Doughnut Factories 26 26 27 Total 129 137 133 Total Hubs 411 410 411 (1) Includes only Hot Light Theater Shops and excludes Mini Theaters. A Mini Theater is a Spoke location that produces some doughnuts for itself and also receives doughnuts from another producing location. Krispy Kreme, Inc. Net Debt and Leverage (Unaudited) (in thousands) October 2, 2022 January 2, 2022 Current portion of long-term debt $ 40,243 $ 36,583 Long-term debt, less current portion 738,504 680,307 Total long-term debt, including debt issuance costs 778,747 716,890 Add back: Debt issuance costs 2,644 3,833 Total long-term debt, excluding debt issuance costs 781,391 720,723 Less: Cash and cash equivalents (28,096 ) (38,562 ) Net debt $ 753,295 $ 682,161 Adjusted EBITDA - trailing four quarters 182,542 187,945 Net leverage ratio 4.1 x 3.6 x View source version on businesswire.com: https://www.businesswire.com/news/home/20221114006016/en/
Investor Relations Rob Ballew, VP of Investor Relations rballew@krispykreme.com Financial Media Edelman Smithfield for Krispy Kreme, Inc. Allie McLarty & Ashley Firlan, KrispyKremeIR@edelman.com