8-K
Krispy Kreme, Inc. (DNUT)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_________________________
FORM 8-K
_________________________
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
November 15, 2022
Date of Report (Date of earliest event reported)
_________________________
Krispy Kreme, Inc.
(Exact name of registrant as specified in its charter)
_________________________
| Delaware | 001-40573 | 37-1701311 |
|---|---|---|
| (State or other jurisdiction of incorporation) | (Commission File Number) | (IRS Employer Identification No.) |
2116 Hawkins Street, Charlotte, North Carolina 28203
(Address of principal executive offices)
(800) 457-4779
(Registrant’s telephone number, including area code)
N/A
(Former name or former address, if changed since last report)
_________________________
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):
☐ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
☐ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
☐ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
☐ Pre-commencement communications pursuant to Rule 13e-14(c) under the Exchange Act (17 CFR 240.13e-14(c))
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol | Name of each exchange on which registered |
|---|---|---|
| Common stock, $0.01 par value per share | DNUT | NASDAQ Global Select Market |
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Item 2.02. Results of Operations and Financial Condition.
The information contained in this Item 2.02, including Exhibit 99.1, shall not be deemed "filed" for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), or incorporated by reference in any filing under the Securities Act of 1933, as amended (the "Securities Act"), or the Exchange Act, except as expressly set forth by specific reference in such a filing.
On November 15, 2022, Krispy Kreme, Inc. (the "Company") issued a press release announcing the Company's financial results for the third quarter ended October 2, 2022. A copy of such press release is attached as Exhibit 99.1 and is also available on the Company’s website at investors.krispykreme.com.
Item 9.01. Financial Statements and Exhibits.
| Exhibit No. | Description |
|---|---|
| 99.1 | Press Release issued by Krispy Kreme, Inc. dated November 15, 2022 |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, hereunto duly authorized.
KRISPY KREME, INC.
Dated: November 15, 2022
By: /s/ Josh Charlesworth
| Name: | Josh Charlesworth |
|---|---|
| Title: | Global President, Chief Operating Officer & Chief Financial Officer |
Document
EXHIBIT 99.1
Krispy Kreme Reports Third Quarter 2022 Results
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
CHARLOTTE, NC (November 15, 2022) – 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.
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 |