News Release

Krispy Kreme Reports Second Quarter 2022 Results

Aug 17, 2022

Second quarter net revenue grew 7.5% with organic revenue growth of 8.9% compared to Q2 2021
Added 982 Points of Access year to date, totaling 11,409
Sales per Hub growth over 20% domestically and internationally
Third quarter to date net revenue growth of 8% with organic revenue growth of 10%

CHARLOTTE, N.C.--(BUSINESS WIRE)--Aug. 17, 2022-- Krispy Kreme, Inc. (NASDAQ: DNUT) (“Krispy Kreme” or the “Company”) today reported financial results for the second quarter ended July 3, 2022 with net revenue growing 7.5% year-over-year to $375.2 million, or 50.0% on a two-year stack basis, while organic revenue grew 8.9%, or 31.4% on a two-year stack basis. Sales per Hub in the U.S. and Canada increased by 22.2% year-over-year to $4.4 million while International Sales per Hub grew 22.5% to $9.8 million, driven by a 19% increase in Global Points of Access and a 9% increase in U.S. and Canada weekly sales per Delivered Fresh Daily (“DFD”) Door. Foreign currency translation resulted in a negative 2.6% impact on net revenue growth during the second quarter due to the strength of the U.S. dollar.

GAAP Net Loss for the quarter was $2.4 million, a significant improvement compared to a loss of $15.0 million a year ago while GAAP diluted Loss Per Share for the quarter was $0.02 compared to a loss of $0.13 last year. Adjusted Diluted EPS was $0.08 for the quarter, compared to $0.13 last year due in part to share dilution from an increased share count following the IPO. Adjusted EBITDA in the second quarter was $47.4 million, which included an approximately $2.7 million negative impact from the strong U.S. dollar.

Organic growth was driven by the performance and expansion of Krispy Kreme’s omni-channel model, and strong performances in Australia, Mexico, the Market Development segment, hubs with spokes in the U.S. and Insomnia Cookies. Global Points of Access, which reflect all locations where fresh doughnuts and cookies can be purchased, increased by 382 during the quarter, providing consumers access to Krispy Kreme in more than 11,400 locations around the world.

Commenting on the Company’s performance, President and CEO Mike Tattersfield stated, “Our results in the second quarter continue to demonstrate the benefits of our omni-channel model and global expansion strategy with strong organic growth. In the second quarter consumers faced unique economic pressures, which is why we invested in our customers through Acts of Joy such as Beat the Pump dozen pricing that matched a gallon of gas and other promotions to drive brand love. After the end of the second quarter, we took successful pricing actions in the U.S. and U.K. markets and we have seen a significant deceleration in key commodity costs for 2023 in recent weeks.”

Mike continued, “We are very well-positioned for growth over the next few years driven by the expansion of our omni-channel model as we significantly expand our points of access primarily through low capital DFD Doors and continue our transformation to the more profitable and capital efficient Hub and Spoke model in the U.S. Additionally, we have strong interest from global partners to bring Krispy Kreme to new geographies.”

Financial Highlights

$ in millions, except per share data

Q2
2022

vs Q2
2021

1H 2022

vs 1H 2021

Net Revenue

$375.2

+7.5%

$747.8

11.4%

Organic Revenue(1)

$380.1

+8.9%

$750.2

11.8%

GAAP Net Income/(Loss)

($2.4)

+83.9%

$4.1

126.3%

Adjusted Net Income(1)

$14.6

-28.4%

$30.7

-19.3%

Operating Income

$7.5

-17.7%

$24.8

8.7%

Operating Income Margin

2.0%

-60 bps

3.3%

-10 bps

Adjusted EBITDA(1)

$47.4

-9.6%

$96.3

-2.6%

Adjusted EBITDA Margin(1)

12.6%

-240 bps

12.9%

-180 bps

GAAP Diluted Income/(Loss) Per Share

($0.02)

+$0.11

$0.00

+$0.16

Adjusted Diluted EPS(1,2)

$0.08

($0.05)

$0.16

($0.09)

Net Debt

$703.1

-37.9%

 

 

Notes:

(1)

Non-GAAP figures – please refer to Reconciliation of Non-GAAP Financial Measures.

(2)

Second quarter 2022 Adjusted Diluted EPS was impacted by $(0.02) from share count dilution from the IPO

$ in millions, except access points

Q2
2022

vs Q2
2021

vs Q1
2022

Global Points of Access

11,409

 

+18.6%

 

+3.5%

Sales per Hub (U.S. and Canada) TTM

$4.4

 

+22.2%

 

+2.3%

Sales per Hub (International) TTM

$9.8

 

+22.5%

 

+1.0%

Ecommerce as a Percent of Retail Sales

17.5%

 

-110 bps

 

+10 bps

December Analyst Day
Krispy Kreme will host an Investor Day on December 15, 2022 in Charlotte, NC and virtually. The event will unveil the Company’s plans and expectations for 2023-2025 including the next evolution of the Hub and Spoke model in the U.S., Branded Sweet Treats, Insomnia Cookie’s international and domestic expansion plans and other exciting updates. More information to follow in the coming months.

Second Quarter and First Half 2022 Consolidated Results
Net revenue grew 7.5% in the second quarter to $375.2 million, or 10.0% excluding foreign currency translation, and organic revenue grew 8.9% in the quarter. Organic revenue growth was driven by strong performances in our Hubs with Spokes, both domestically and internationally, leveraging an 18.6% increase in points of access from a year ago. For the first half of 2022, net revenue grew 11.4% to $747.8 million, or 13.4% excluding foreign currency impacts, and organic revenue grew 11.8%.

GAAP Net Loss for the quarter was $2.4 million, compared to a GAAP Net Loss of $15.0 million in the second quarter of 2021. Adjusted EBITDA in the quarter declined 9.6% to $47.4 million, due to increased labor and commodity cost as well as including an approximately $2.7 million negative impact from the strength of the U.S. dollar. Still, compared to the same quarter in 2020, Adjusted EBITDA increased by 60.7%. Operating margins declined 60 basis points to 2.0%, while Adjusted EBITDA margin declined 240 basis points to 12.6% from the same quarter in 2021 driven by margin declines in our International and US & Canada segments. Adjusted Net Income for the quarter declined 28.4% to $14.6 million compared to the same quarter in 2021. GAAP Diluted Net Loss per share in the quarter was $0.02 compared to a net loss of $0.13 in the same quarter last year with Adjusted Diluted EPS decreasing to $0.08 from $0.13 in the second quarter of 2021.

GAAP Net Income for the first half of 2022 was $4.1 million, compared to a GAAP Net Loss of $15.4 million in the same period of 2021. Adjusted EBITDA in the first half of 2022 declined 2.6% to $96.3 million, including an approximately $3.7 million negative impact from the strength of the U.S. dollar with cost increases largely offsetting net revenue growth. Operating margins in the first half of 2022 declined 10 basis points to 3.3% while Adjusted EBITDA margin declined 180 basis points to 12.9% from the same period in 2021. Adjusted Net Income declined 19.3% to $30.7 million in the first half of 2022. GAAP Diluted EPS in the first half of 2022 was $0.00 compared to a net loss of $0.16 with Adjusted Diluted EPS decreasing to $0.16 from $0.25 in the same period of 2021.

Diluted weighted average shares outstanding for the second quarter of 2022 were 169.3 million, compared to 135.9 million in the second quarter of 2021 primarily as a result of the IPO.

Second Quarter and First Half 2022 Market Segment Results
U.S. and Canada: In the U.S. and Canada segment net revenue in the second quarter of 2022 grew 8.5% to $250.5 million, driven by the continued execution of our omni-channel strategy and strength in Hubs with Spokes and Insomnia Cookies. Organic revenue increased 6.0% driven by increased points of access and strong performance in DFD, with average weekly sales per DFD Door growing by 9.0% compared to the prior year. Hubs with Spokes had revenue growth 5% faster than those without Spokes. Points of access increased 112 in quarter to 6,053 which represents an 8.9% increase in points of access from a year ago.

U.S. and Canada Adjusted EBITDA decreased 8.0% to $26.0 million in the second quarter of 2022 compared to the second quarter of 2021 with margin declines of 180 basis points to 10.4%. This was driven by cost increases in labor and commodities and weakness in Hubs without Spokes, partially offset by improved margin performance from Branded Sweet Treats. Pricing actions were successfully taken at the beginning of the third quarter of 2022.

In the U.S. and Canada segment net revenue in the first half of 2022 grew 11.1% to $503.6 million. Organic revenue increased 7.8% driven by increased points of access and strong performance in DFD. Points of access increased 330 in the first half of 2022. U.S. and Canada Adjusted EBITDA grew 6.8% to $59.6 million in the first half of 2022 compared to the same period in 2021 with margin declines of 50 basis points to 11.8%.

International: In the International segment, net revenue grew 5.2% to $93.9 million, with organic growth of 13.0%. Organic growth in the quarter was driven by the expansion of DFD and successful seasonal offerings. Growth was particularly strong in Mexico, Australia and New Zealand. Points of access increased by 222 to 3,425. Foreign currency translation had a negative 7.9% impact on our International net revenue growth during the quarter.

International Adjusted EBITDA declined 17.5% in the second quarter over the same period of the prior year to $19.5 million, due to a decline in our UK & Ireland market which was cycling unusually high margins in the quarter a year ago as the UK COVID-19 restrictions were lifted. Additionally, the UK and Ireland market was impacted by a challenged consumer environment with reduced general retail and grocery traffic and cost increases. Adjusted EBITDA for Mexico and Australia & New Zealand markets grew 12.0% in the second quarter compared to the same period in the prior year. The strengthening of the U.S. Dollar had an approximate negative $2.0 million impact on International Adjusted EBITDA in the second quarter of 2022 compared to the same period of the prior year. International Adjusted EBITDA margin was 20.8% in the second quarter, up 100 basis points from the first quarter of 2022 but down 570 basis points compared the same period last year. Pricing actions were successfully taken in the U.K. at the start of the third quarter of 2022.

International net revenue in the first half of 2022 grew 16.3% to $181.1 million. Organic revenue increased 22.6% driven by increased points of access and product innovation, especially in Mexico and Australia & New Zealand. Points of access increased 534 in the first half of 2022. International Adjusted EBITDA declined 5.7% to $36.8 million in the first half of 2022 compared to the same period in 2021 with margin declines of 480 basis points to 20.3%.

Market Development: In the Market Development segment, net revenue increased 6.5% to $30.9 million driven by a 37.9% increase in points of access to 1,931 compared to the prior year, partially offset by franchise acquisitions and a 7.0% adverse impact from foreign currency exchange. Organic revenue growth was 19.2% compared to the same period in 2021 driven by a strong performance in our franchise markets and in our equity-owned Japan market where the Company is implementing its omni-channel model with the expansion of Ecommerce and the launch of DFD.

Market Development Adjusted EBITDA grew 6.5% to $10.5 million in the second quarter of 2022, with strong organic revenue growth partially offset by domestic franchise acquisitions and foreign currency translation impacts. Adjusted EBITDA margins were approximately flat at 33.9%.

Market Development net revenue in the first half of 2022 grew 2.1% to $63.1 million while organic revenue increased 14.0%. Points of access increased by 118 in the first half of 2022. Excluding the impact of closing 30 franchise shops in Russia, Points of Access increased by 148 in the first half of 2022. Market Development Adjusted EBITDA increased 5.0% to $21.8 million in the first half of 2022 compared to the same period in 2021 with margin increase of 100 basis points to 34.5%.

As previously announced, the Company has signed development agreements in 2022 with franchise partners to open in Switzerland, Costa Rica, Jordan and Chile. Additionally, the Company has signed with a new partner in Turkey and have an agreement to build out a substantial omni-channel network across the market.

Franchisee Acquisition
Later this month, the Company will spend approximately $18.5 million to acquire seven shops (including one of which is under construction) in the U.S. Midwest from a franchise partner at an attractive multiple. These shops will be accretive to margins immediately and the Company estimates the potential for more than 100 low-capital DFD Doors in this market.

Balance Sheet & Capital Expenditures

During the second quarter of 2022, the company invested $22.0 million in capital expenditures, or 5.9% of revenue. For the first half of 2022, the Company invested $51.5 million in capital expenditures, or 6.9% of revenue. The Company had Free Cash Flow of $3.5 million in the second quarter.

As of July 3, 2022, the Company had $25.8 million of cash and cash equivalents, $700.7 million of bank debt and $28.1 million of other debt-like items, for a total net debt of $703.1 million, with more than $225 million of available liquidity.

2022 Financial Outlook

Krispy Kreme updates 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), a reduction of $10 million from our prior expectations due to a shift to lower capital points of access spend and a benefit from foreign currency translation
  • 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 updated guidance includes an Adjusted EBITDA impact of approximately negative $10 to $12 million from foreign currency translation and input costs from the strengthening of the U.S. dollar or approximately negative $0.05 per Diluted share. It also reflects the current soft consumer environment and heat waves this summer in the U.K.

Krispy Kreme continues to expect the following annual long-term outlook:

  • Organic Revenue growth of 9% to 11%
  • Adjusted EBITDA growth of 12% to 14%
  • Adjusted Net Income growth of 18% to 22%
  • Net leverage of approximately 2.0x

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.

Conference Call

Krispy Kreme will host a public conference call at 8:30 AM Eastern Time today to discuss its results for the second quarter of 2022. Please be advised that the process for listening to and participating in Krispy Kreme’s quarterly conference calls has changed. To listen to the live audio webcast and Q&A, visit the Krispy Kreme investor relations website at investors.krispykreme.com. Participants who wish to join by phone must visit the following link and pre-register:

https://register.vevent.com/register/BI0d6261025fb54849a63e56ef18587ff5

An email will be sent to the user’s registered email address, which will provide the dial-in details. To avoid delays, we encourage participants to dial into the conference call fifteen minutes ahead of the scheduled start time.

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. 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

 

Two Quarters Ended

 

July 3, 2022
(13 weeks)

 

July 4, 2021
(13 weeks)

 

July 3, 2022
(26 weeks)

 

July 4, 2021
(26 weeks)

Net revenues

 

 

 

 

 

 

 

Product sales

$

367,777

 

 

$

341,223

 

 

$

731,829

 

 

$

654,808

 

Royalties and other revenues

 

7,468

 

 

 

7,963

 

 

 

15,948

 

 

 

16,187

 

Total net revenues

 

375,245

 

 

 

349,186

 

 

 

747,777

 

 

 

670,995

 

Product and distribution costs

 

100,558

 

 

 

85,017

 

 

 

196,669

 

 

 

165,014

 

Operating expenses

 

173,942

 

 

 

157,877

 

 

 

342,668

 

 

 

305,418

 

Selling, general and administrative expense

 

51,754

 

 

 

60,930

 

 

 

105,465

 

 

 

110,467

 

Marketing expenses

 

11,215

 

 

 

10,052

 

 

 

21,374

 

 

 

19,559

 

Pre-opening costs

 

985

 

 

 

1,752

 

 

 

2,314

 

 

 

3,143

 

Other expenses/(income), net

 

1,469

 

 

 

(761

)

 

 

(1,164

)

 

 

(4,006

)

Depreciation and amortization expense

 

27,814

 

 

 

25,194

 

 

 

55,655

 

 

 

48,595

 

Operating income

 

7,508

 

 

 

9,125

 

 

 

24,796

 

 

 

22,805

 

Interest expense, net

 

7,586

 

 

 

9,793

 

 

 

14,937

 

 

 

18,042

 

Interest expense — related party

 

 

 

 

4,821

 

 

 

 

 

 

10,387

 

Other non-operating expense/(income), net

 

756

 

 

 

(416

)

 

 

435

 

 

 

(858

)

(Loss)/income before income taxes

 

(834

)

 

 

(5,073

)

 

 

9,424

 

 

 

(4,766

)

Income tax expense

 

1,574

 

 

 

9,923

 

 

 

5,374

 

 

 

10,608

 

Net (loss)/income

 

(2,408

)

 

 

(14,996

)

 

 

4,050

 

 

 

(15,374

)

Net income attributable to noncontrolling interest

 

1,441

 

 

 

2,146

 

 

 

3,897

 

 

 

4,829

 

Net (loss)/income attributable to Krispy Kreme, Inc.

$

(3,849

)

 

$

(17,142

)

 

$

153

 

 

$

(20,203

)

Net loss per share:

 

 

 

 

 

 

 

Common stock — Basic

$

(0.02

)

 

$

(0.13

)

 

$

 

 

$

(0.16

)

Common stock — Diluted

$

(0.02

)

 

$

(0.13

)

 

$

 

 

$

(0.16

)

Weighted average shares outstanding:

 

 

 

 

 

 

 

Basic

 

167,367

 

 

 

132,351

 

 

 

167,314

 

 

 

128,669

 

Diluted

 

167,367

 

 

 

132,351

 

 

 

167,314

 

 

 

128,669

 

Krispy Kreme, Inc.

Condensed Consolidated Balance Sheets

(in thousands, except per share amounts)

 

 

As of

 

(Unaudited)
July 3, 2022

 

January 2, 2022

ASSETS

 

 

 

Current assets:

 

 

 

Cash and cash equivalents

$

25,796

 

 

$

38,562

 

Restricted cash

 

411

 

 

 

630

 

Accounts receivable, net

 

45,027

 

 

 

47,491

 

Inventories

 

47,420

 

 

 

34,851

 

Taxes receivable

 

14,614

 

 

 

14,662

 

Prepaid expense and other current assets

 

29,264

 

 

 

20,701

 

Total current assets

 

162,532

 

 

 

156,897

 

Property and equipment, net

 

443,898

 

 

 

438,918

 

Goodwill

 

1,083,199

 

 

 

1,105,322

 

Other intangible assets, net

 

969,319

 

 

 

992,520

 

Operating lease right of use asset, net

 

419,211

 

 

 

435,168

 

Other assets

 

21,761

 

 

 

16,429

 

Total assets

$

3,099,920

 

 

$

3,145,254

 

LIABILITIES AND SHAREHOLDERS’ EQUITY

 

 

 

Current liabilities:

 

 

 

Current portion of long-term debt

$

39,844

 

 

$

36,583

 

Current operating lease liabilities

 

45,936

 

 

 

50,359

 

Accounts payable

 

187,516

 

 

 

182,104

 

Accrued liabilities

 

108,497

 

 

 

140,750

 

Structured payables

 

135,542

 

 

 

116,361

 

Total current liabilities

 

517,335

 

 

 

526,157

 

Long-term debt, less current portion

 

686,013

 

 

 

680,307

 

Noncurrent operating lease liabilities

 

407,141

 

 

 

415,208

 

Deferred income taxes, net

 

142,361

 

 

 

145,418

 

Other long-term obligations and deferred credits

 

38,088

 

 

 

42,509

 

Total liabilities

 

1,790,938

 

 

 

1,809,599

 

Commitments and contingencies

 

 

 

Shareholders’ equity:

 

 

 

Common stock, $0.01 par value; 300,000 shares authorized as of both July 3, 2022 and January 2, 2022; 167,428 and 167,251 shares issued and outstanding as of July 3, 2022 and January 2, 2022, respectively

 

1,674

 

 

 

1,673

 

Additional paid-in capital

 

1,420,410

 

 

 

1,415,185

 

Shareholder note receivable

 

(4,573

)

 

 

(4,382

)

Accumulated other comprehensive loss, net of income tax

 

(20,647

)

 

 

(2,478

)

Retained deficit

 

(189,970

)

 

 

(178,409

)

Total shareholders’ equity attributable to Krispy Kreme, Inc.

 

1,206,894

 

 

 

1,231,589

 

Noncontrolling interest

 

102,088

 

 

 

104,066

 

Total shareholders’ equity

 

1,308,982

 

 

 

1,335,655

 

Total liabilities and shareholders’ equity

$

3,099,920

 

 

$

3,145,254

 

Krispy Kreme, Inc.

Condensed Consolidated Statements of Cash Flows (Unaudited)

(in thousands)

 

 

Two Quarters Ended

 

July 3, 2022
(26 weeks)

 

July 4, 2021
(26 weeks)

CASH FLOWS FROM OPERATING ACTIVITIES:

 

 

 

Net income/(loss)

$

4,050

 

 

$

(15,374

)

Adjustments to reconcile net income/(loss) to net cash provided by operating activities:

 

 

 

Depreciation and amortization expense

 

55,655

 

 

 

48,595

 

Deferred income taxes

 

(6,866

)

 

 

7,995

 

Loss on extinguishment of debt

 

 

 

 

1,700

 

Impairment and lease termination charges

 

1,991

 

 

 

1,126

 

(Gain)/loss on disposal of property and equipment

 

(499

)

 

 

148

 

Gain on sale-leaseback

 

(2,374

)

 

 

 

Share-based compensation

 

10,493

 

 

 

10,658

 

Change in accounts and notes receivable allowances

 

193

 

 

 

110

 

Inventory write-off

 

251

 

 

 

776

 

Other

 

(733

)

 

 

(425

)

Change in operating assets and liabilities, excluding business acquisitions and foreign currency translation adjustments

 

(8,238

)

 

 

1,536

 

Net cash provided by operating activities

 

53,923

 

 

 

56,845

 

CASH FLOWS USED FOR INVESTING ACTIVITIES:

 

 

 

Purchase of property and equipment

 

(51,460

)

 

 

(52,842

)

Proceeds from disposals of assets

 

872

 

 

 

147

 

Proceeds from sale-leaseback

 

3,000

 

 

 

 

Acquisition of shops and franchise rights from franchisees, net of cash acquired

 

 

 

 

(33,888

)

Principal payments received from loans to franchisees

 

29

 

 

 

45

 

Disbursement for loan receivable

 

(720

)

 

 

 

Maturities of held-to-maturity debt securities

 

 

 

 

277

 

Net cash used for investing activities

 

(48,279

)

 

 

(86,261

)

CASH FLOWS (USED FOR)/FROM FINANCING ACTIVITIES:

 

 

 

Proceeds from the issuance of debt

 

53,000

 

 

 

540,000

 

Repayment of long-term debt and lease obligations

 

(50,179

)

 

 

(541,353

)

Payment of financing costs

 

 

 

 

(1,700

)

Proceeds from structured payables

 

153,097

 

 

 

140,598

 

Payments on structured payables

 

(133,530

)

 

 

(138,100

)

Payment of contingent consideration related to a business combination

 

(900

)

 

 

 

Capital contribution by shareholders, net of loans issued

 

(27

)

 

 

120,932

 

Payments of issuance costs in connection with IPO

 

(12,458

)

 

 

 

Proceeds from sale of noncontrolling interest in subsidiary

 

410

 

 

 

53,256

 

Distribution to shareholders

 

(11,710

)

 

 

(34,364

)

Payments for repurchase and retirement of common stock

 

(2,363

)

 

 

(102,698

)

Distribution to noncontrolling interest

 

(9,496

)

 

 

(6,018

)

Net cash (used for)/provided by financing activities

 

(14,156

)

 

 

30,553

 

Effect of exchange rate changes on cash, cash equivalents and restricted cash

 

(4,473

)

 

 

(1,161

)

Net decrease in cash, cash equivalents and restricted cash

 

(12,985

)

 

 

(24

)

Cash, cash equivalents and restricted cash at beginning of period

 

39,192

 

 

 

37,483

 

Cash, cash equivalents and restricted cash at end of period

$

26,207

 

 

$

37,459

 

Krispy Kreme, Inc.

Reconciliation of Non-GAAP Financial Measures (Unaudited)

(in thousands, except per share amounts)

 

 

Quarter Ended

Two Quarters Ended

 

July 3, 2022

July 4, 2021

July 3, 2022

July 4, 2021

Net (loss)/income

$

(2,408

)

$

(14,996

)

$

4,050

 

$

(15,374

)

Interest expense, net

 

7,586

 

 

9,793

 

 

14,937

 

 

18,042

 

Interest expense — related party(1)

 

 

 

4,821

 

 

 

 

10,387

 

Income tax expense

 

1,574

 

 

9,923

 

 

5,374

 

 

10,608

 

Depreciation and amortization expense

 

27,814

 

 

25,194

 

 

55,655

 

 

48,595

 

Share-based compensation

 

5,452

 

 

8,290

 

 

10,493

 

 

10,658

 

Employer payroll taxes related to share-based compensation

 

35

 

 

841

 

 

90

 

 

841

 

Other non-operating expense/(income), net(2)

 

756

 

 

(416

)

 

435

 

 

(858

)

Acquisition and integration expenses(3)

 

82

 

 

223

 

 

599

 

 

2,375

 

Shop closure expenses(4)

 

1,894

 

 

 

 

2,124

 

 

 

Restructuring and severance expenses(5)

 

476

 

 

1,336

 

 

476

 

 

1,336

 

IPO-related expenses(6)

 

 

 

6,727

 

 

 

 

10,203

 

Gain on sale-leaseback

 

 

 

 

 

(2,374

)

 

 

Other(7)

 

4,100

 

 

657

 

 

4,409

 

 

1,983

 

Adjusted EBITDA

$

47,361

 

$

52,393

 

$

96,268

 

$

98,796

 

 
 

 

Quarter Ended

Two Quarters Ended

 

July 3, 2022

July 4, 2021

July 3, 2022

July 4, 2021

Segment Adjusted EBITDA:

 

 

 

U.S. and Canada

$

26,017

 

$

28,285

 

$

59,625

 

$

55,848

 

International

 

19,535

 

 

23,673

 

 

36,779

 

 

39,021

 

Market Development

 

10,495

 

 

9,858

 

 

21,782

 

 

20,749

 

Corporate

 

(8,686

)

 

(9,423

)

 

(21,918

)

 

(16,822

)

Total Adjusted EBITDA

$

47,361

 

$

52,393

 

$

96,268

 

$

98,796

 

Quarter Ended

 

Two Quarters Ended

(in thousands, except per share amounts)

July 3, 2022

 

July 4, 2021

 

July 3, 2022

 

July 4, 2021

Net (loss)/income

$

(2,408

)

 

$

(14,996

)

 

$

4,050

 

 

$

(15,374

)

Interest expense — related party(1)

 

 

 

 

4,821

 

 

 

 

 

 

10,387

 

Share-based compensation

 

5,452

 

 

 

8,290

 

 

 

10,493

 

 

 

10,658

 

Employer payroll taxes related to share-based compensation

 

35

 

 

 

841

 

 

 

90

 

 

 

841

 

Other non-operating expense/(income), net(2)

 

756

 

 

 

(416

)

 

 

435

 

 

 

(858

)

Acquisition and integration expenses(3)

 

82

 

 

 

223

 

 

 

599

 

 

 

2,375

 

Shop closure expenses(4)

 

2,144

 

 

 

 

 

 

2,374

 

 

 

 

Restructuring and severance expenses(5)

 

476

 

 

 

1,336

 

 

 

476

 

 

 

1,336

 

IPO-related expenses(6)

 

 

 

 

6,727

 

 

 

 

 

 

10,203

 

Gain on sale-leaseback

 

 

 

 

 

 

 

(2,374

)

 

 

 

Other(7)

 

4,100

 

 

 

657

 

 

 

4,409

 

 

 

1,983

 

Amortization of acquisition related intangibles(8)

 

6,978

 

 

 

7,627

 

 

 

14,224

 

 

 

15,076

 

KKI Term Loan Facility interest and debt issuance costs(9)

 

 

 

 

2,341

 

 

 

 

 

 

2,341

 

Tax impact of adjustments(10)

 

(2,341

)

 

 

(798

)

 

 

(3,419

)

 

 

(4,820

)

Tax specific adjustments(11)

 

(628

)

 

 

3,816

 

 

 

(628

)

 

 

3,947

 

Adjusted net income

$

14,646

 

 

$

20,469

 

 

$

30,729

 

 

$

38,095

 

Net income attributable to noncontrolling interest

 

(1,441

)

 

 

(2,146

)

 

 

(3,897

)

 

 

(4,829

)

Adjusted net income attributable to Krispy Kreme, Inc.

$

13,205

 

 

$

18,323

 

 

$

26,832

 

 

$

33,266

 

Adjustment to adjusted net income attributable to common shareholders

 

 

 

 

(424

)

 

 

(374

)

 

 

(417

)

Adjusted net income attributable to common shareholders - Basic

$

13,205

 

 

$

17,899

 

 

$

26,458

 

 

$

32,849

 

Additional income attributed to noncontrolling interest due to subsidiary potential common shares

 

(83

)

 

 

(120

)

 

 

(122

)

 

 

(145

)

Adjusted net income attributable to common shareholders - Diluted

$

13,122

 

 

$

17,779

 

 

$

26,336

 

 

$

32,704

 

Basic weighted average common shares outstanding

 

167,367

 

 

 

132,351

 

 

 

167,314

 

 

 

128,669

 

Dilutive effect of outstanding common stock options and RSUs

 

1,973

 

 

 

3,507

 

 

 

2,099

 

 

 

3,385

 

Diluted weighted average common shares outstanding

 

169,341

 

 

 

135,858

 

 

 

169,413

 

 

 

132,054

 

Adjusted net income per share attributable to common shareholders:

 

 

 

 

 

 

 

Basic

$

0.08

 

 

$

0.14

 

 

$

0.16

 

 

$

0.26

 

Diluted

$

0.08

 

 

$

0.13

 

 

$

0.16

 

 

$

0.25

 

(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 are inclusive of accelerated depreciation related to replacing a point of sale system.

(5)

The quarter and two quarters ended July 3, 2022 consist of costs associated with restructuring of the global executive team. The quarter and two quarters ended July 4, 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 two quarters ended July 3, 2022 and July 4, 2021 consist primarily of legal expenses incurred outside the ordinary course of business.

(8)

Consists of amortization related to acquired intangible assets as reflected within depreciation and amortization in the Condensed Consolidated Statements of Operations.

(9)

Includes interest expense of $0.6 million and debt issuance costs of $1.7 million incurred and recognized as expenses in the quarter ended July 4, 2021 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 two quarters ended July 3, 2022 also include the impact of disallowed executive compensation expense and a discrete tax benefit related to a legal accrual.

(11)

The quarter and two quarters ended July 3, 2022 consist of the recognition of a previously unrecognized tax benefit unrelated to ongoing operations. The quarter and two quarters ended July 4, 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

 

Two Quarters Ended

 

July 3, 2022

 

July 4, 2021

 

July 3, 2022

 

July 4, 2021

Net revenues:

 

 

 

 

 

 

 

U.S. and Canada

$

250,460

 

$

230,918

 

$

503,587

 

$

453,388

International

 

93,853

 

 

89,237

 

 

181,054

 

 

155,743

Market Development

 

30,932

 

 

29,031

 

 

63,136

 

 

61,864

Total net revenues

$

375,245

 

$

349,186

 

$

747,777

 

$

670,995

Q2 2022 Organic Revenue (1) - QTD

U.S. and Canada

 

International

 

Market
Development

 

Total Company

Total net revenues in second quarter of fiscal 2022

$

250,460

 

 

$

93,853

 

 

$

30,932

 

 

$

375,245

 

Total net revenues in second quarter of fiscal 2021

 

230,918

 

 

 

89,237

 

 

 

29,031

 

 

 

349,186

 

Total Net Revenues Growth

 

19,542

 

 

 

4,616

 

 

 

1,901

 

 

 

26,059

 

Total Net Revenues Growth %

 

8.5

%

 

 

5.2

%

 

 

6.5

%

 

 

7.5

%

Impact of acquisitions

 

(5,795

)

 

 

 

 

 

1,623

 

 

 

(4,172

)

Impact of foreign currency translation

 

 

 

 

7,018

 

 

 

2,044

 

 

 

9,062

 

Organic Revenue Growth

$

13,747

 

 

$

11,634

 

 

$

5,568

 

 

$

30,949

 

Organic Revenue Growth %

 

6.0

%

 

 

13.0

%

 

 

19.2

%

 

 

8.9

%

(1) Organic revenue is current year net revenue adjusted for the impact of acquisitions and foreign currency translation.

Q2 2022 Organic Revenue - YTD

U.S. and Canada

 

International

 

Market
Development

 

Total Company

Total net revenues in first two quarters of fiscal 2022

$

503,587

 

 

$

181,054

 

 

$

63,136

 

 

$

747,777

 

Total net revenues in first two quarters of fiscal 2021

 

453,388

 

 

 

155,743

 

 

 

61,864

 

 

 

670,995

 

Total Net Revenues Growth

 

50,199

 

 

 

25,311

 

 

 

1,272

 

 

 

76,782

 

Total Net Revenues Growth %

 

11.1

%

 

 

16.3

%

 

 

2.1

%

 

 

11.4

%

Impact of acquisitions

 

(14,929

)

 

 

 

 

 

4,213

 

 

 

(10,716

)

Impact of foreign currency translation

 

 

 

 

9,953

 

 

 

3,205

 

 

 

13,158

 

Organic Revenue Growth

$

35,270

 

 

$

35,264

 

 

$

8,690

 

 

$

79,224

 

Organic Revenue Growth %

 

7.8

%

 

 

22.6

%

 

 

14.0

%

 

 

11.8

%

Q2 2021 Organic Revenue - QTD

U.S. and Canada

 

International

 

Market
Development

 

Total Company

Total net revenues in second quarter of fiscal 2021

$

230,918

 

 

$

89,237

 

 

$

29,031

 

 

$

349,186

 

Total net revenues in second quarter of fiscal 2020

 

184,255

 

 

 

34,412

 

 

 

26,305

 

 

 

244,972

 

Total Net Revenues Growth

 

46,663

 

 

 

54,825

 

 

 

2,726

 

 

 

104,214

 

Total Net Revenues Growth %

 

25.3

%

 

 

159.3

%

 

 

10.4

%

 

 

42.5

%

Impact of acquisitions

 

(39,429

)

 

 

 

 

 

1,750

 

 

 

(37,679

)

Impact of foreign currency translation

 

 

 

 

(11,499

)

 

 

 

 

 

(11,499

)

Organic Revenue Growth

$

7,234

 

 

$

43,326

 

 

$

4,476

 

 

$

55,036

 

Organic Revenue Growth %

 

3.9

%

 

 

125.9

%

 

 

17.0

%

 

 

22.5

%

Q2 2021 Organic Revenue - YTD

U.S. and Canada

 

International

 

Market
Development

 

Total Company

Total net revenues in first two quarters of fiscal 2021

$

453,388

 

 

$

155,743

 

 

$

61,864

 

 

$

670,995

 

Total net revenues in first two quarters of fiscal 2020

 

354,705

 

 

 

95,071

 

 

 

56,412

 

 

 

506,188

 

Total Net Revenues Growth

 

98,683

 

 

 

60,672

 

 

 

5,452

 

 

 

164,807

 

Total Net Revenues Growth %

 

27.8

%

 

 

63.8

%

 

 

9.7

%

 

 

32.6

%

Impact of acquisitions

 

(71,134

)

 

 

 

 

 

(390

)

 

 

(71,524

)

Impact of foreign currency translation

 

 

 

 

(16,462

)

 

 

 

 

 

(16,462

)

Organic Revenue Growth

$

27,549

 

 

$

44,210

 

 

$

5,062

 

 

$

76,821

 

Organic Revenue Growth %

 

7.8

%

 

 

46.5

%

 

 

9.0

%

 

 

15.2

%

The following reconciliation shows net revenue and organic revenue growth for the five-week period from July 4, 2022 through August 7, 2022 (“period seven”):

Period Seven 2022 Organic Revenue - PTD

 

Total Company

Total net revenues in period seven of fiscal 2022

 

$

138,982

 

Total net revenues in period seven of fiscal 2021

 

 

129,218

 

Total Net Revenues Growth

 

 

9,764

 

Total Net Revenues Growth %

 

 

7.6

%

Impact of acquisitions

 

 

(1,519

)

Impact of foreign currency translation

 

 

4,163

 

Organic Revenue Growth

 

$

12,408

 

Organic Revenue Growth %

 

 

9.6

%

Sales per Hub

Trailing Four
Quarters Ended

 

Fiscal Year Ended

July 3, 2022

 

January 2, 2022

 

January 3, 2021

U.S. and Canada:

 

 

 

 

 

Revenues

$

978,612

 

 

$

928,413

 

 

$

782,717

 

Non-Fresh Revenues (1)

 

(39,677

)

 

 

(37,311

)

 

 

(128,619

)

Fresh Revenues from Insomnia Cookies and Hubs without Spokes (2)

 

(399,959

)

 

 

(415,768

)

 

 

(323,079

)

Sales from Hubs with Spokes

 

538,976

 

 

 

475,334

 

 

 

331,019

 

Sales per Hub (millions)

 

4.4

 

 

 

4.0

 

 

 

3.5

 

 

 

 

 

 

 

International:

 

 

 

 

 

Sales from Hubs with Spokes (3)

$

358,306

 

 

$

332,995

 

 

$

230,185

 

Sales per Hub (millions)

 

9.8

 

 

 

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 sales 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

 

July 3, 2022

 

July 4, 2021

 

January 2, 2022

U.S. and Canada: (2)

 

 

 

 

 

Hot Light Theater Shops

245

 

237

 

241

Fresh Shops

66

 

56

 

66

Cookie Shops

221

 

199

 

210

Carts, Food Trucks, and Other (3)

1

 

 

2

DFD Doors

5,520

 

5,067

 

5,204

Total

6,053

 

5,559

 

5,723

International:

 

 

 

 

 

Hot Light Theater Shops

34

 

28

 

32

Fresh Shops

386

 

365

 

370

Carts, Food Trucks, and Other (3)

2

 

 

1

DFD Doors

3,003

 

2,264

 

2,488

Total

3,425

 

2,657

 

2,891

Market Development: (4)

 

 

 

 

 

Hot Light Theater Shops

107

 

113

 

109

Fresh Shops

778

 

739

 

782

Carts, Food Trucks, and Other (3)

29

 

30

 

31

DFD Doors

1,017

 

518

 

891

Total

1,931

 

1,400

 

1,813

Total Global Points of Access (as defined)

11,409

 

9,616

 

10,427

Total Hot Light Theater Shops

386

 

378

 

382

Total Fresh Shops

1,230

 

1,160

 

1,218

Total Cookie Shops

221

 

199

 

210

Total Shops

1,837

 

1,737

 

1,810

Total Carts, Food Trucks, and Other

32

 

30

 

34

Total DFD Doors

9,540

 

7,849

 

8,583

Total Global Points of Access (as defined)

11,409

 

9,616

 

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 July 3, 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 were acquired in the fourth quarter of fiscal 2020 and are now Company-owned. All remaining Points of Access in the Market Development segment relate to our franchise business.

Krispy Kreme, Inc.

Global Hubs

(Unaudited)

 

 

Hubs

 

Quarter Ended

 

Fiscal Year
Ended

 

July 3, 2022

 

July 4, 2021

 

January 2, 2022

U.S. and Canada:

 

 

 

 

 

Hot Light Theater Shops (1)

242

 

233

 

238

Doughnut Factories

4

 

5

 

4

Total

246

 

238

 

242

Hubs with Spokes

127

 

114

 

126

International:

 

 

 

 

 

Hot Light Theater Shops (1)

26

 

25

 

25

Doughnut Factories

11

 

12

 

11

Total

37

 

37

 

36

Hubs with Spokes

37

 

37

 

36

Market Development:

 

 

 

 

 

Hot Light Theater Shops (1)

104

 

112

 

106

Doughnut Factories

26

 

26

 

27

Total

130

 

138

 

133

Total Hubs

413

 

413

 

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)

July 3, 2022

 

January 2, 2022

Current portion of long-term debt

$

39,844

 

 

$

36,583

 

Long-term debt, less current portion

 

686,013

 

 

 

680,307

 

Total long-term debt, including debt issuance costs

 

725,857

 

 

 

716,890

 

Add back: Debt issuance costs

 

3,040

 

 

 

3,833

 

Total long-term debt, excluding debt issuance costs

 

728,897

 

 

 

720,723

 

Less: Cash and cash equivalents

 

(25,796

)

 

 

(38,562

)

Net debt

$

703,101

 

 

$

682,161

 

Adjusted EBITDA - trailing four quarters

 

185,417

 

 

 

187,945

 

Net leverage ratio

3.8 x

 

3.6 x

 

Investor Relations
Rob Ballew, VP of Investor Relations
rballew@krispykreme.com

Financial Media
Edelman for Krispy Kreme, Inc.
Allie McLarty & Ashley Firlan, KrispyKremeIR@edelman.com

Source: Krispy Kreme, Inc.