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Krispy Kreme Reports Robust Third Quarter 2021 Results, with Strong Momentum into Q4

Company Reaffirms Full Year 2021 Guidance and Long-Term Outlook

2022 Expected to Exceed Long-Term Outlook

Krispy Kreme, Inc. (NASDAQ: DNUT) (“Krispy Kreme” or the “Company”) today reported strong financial results for the third quarter ended October 3, 2021 with net revenue growing 18% year-over-year. Organic growth, excluding the now fully exited legacy wholesale business, was 14% year-over-year and 22% on a two-year basis. Including the exited business, organic growth was 6% year-over-year, in line with company expectations after lapping a strong third quarter in 2020.

Growth was driven by the performance and expansion of Krispy Kreme’s signature capital-efficient hub and spoke operating model. Global Points of Access, which reflect all locations where fresh doughnuts and cookies can be purchased, have grown 46% year-over-year, providing customers access to Krispy Kreme in more than 10,000 locations around the world. International Sales per Hub have grown 31% in the quarter year-over-year while U.S. and Canada Sales per Hub have grown 15%. In addition, ecommerce represented 17% of global retail sales in the third quarter.

Adjusted diluted Earnings Per Share was $0.06 in line with our expectations while GAAP diluted Loss Per Share which included IPO and acquisition related expenses was ($0.04). Adjusted EBITDA grew 10% in the quarter, driven by the strength and efficiency of the Company’s fresh doughnut hub and spoke operating model. The economies of scale from adding over 3,000 Global Points of Access in the last 12 months, as well as a successful price increase in September, are already helping to offset wage and commodity inflation, with more of an impact of the price increase to come in the fourth quarter.

Net debt decreased 40% to $681 million from the end of the second quarter as a result of proceeds from the IPO and positive free cash flow generated during the third quarter. Current net leverage is now 3.7x. Including the impact of acquiring the Krispy Kreme Canada franchise operations in the fourth quarter, the company expects net leverage to be under 3.0x in the next 12 months.

Commenting on the performance, CEO Mike Tattersfield stated, “Our third quarter results demonstrate the benefits of our omni-channel and global expansion strategy, which allow us to meet consumer demand with premium, fresh doughnuts, in a capital-efficient manner. We are seeing positive momentum continue into the seasonally strong fourth quarter, as consumers sought out our sweet treats throughout October for Halloween and are expected to do so through the holidays. In addition, our pricing power means that we are able to quickly adapt to this inflationary environment with the full impact of the pricing action we have already taken still to come in the fourth quarter.”

Third Quarter Consolidated Results

Krispy Kreme’s third quarter results showcased strong growth compared to 2019 and 2020. Total company organic revenue grew 6.2% in the quarter, and 14.3% on a two-year stack basis against 2019. Organic revenue growth was driven by our International segment, which delivered results that were stronger than prior to the pandemic, as well as the expansion of our Delivered Fresh Daily (“DFD”) network in the U.S. and Canada business, which is highlighted by weekly average sales per door growing more than 50% higher compared to the prior year. Total Company organic revenue growth, excluding the exit of our legacy wholesale business, grew 14.1% and was up 22.2% on a two-year stack basis with high growth from both the U.S. and Canada and International segments.

Adjusted EBITDA grew 9.6% to $41.4 million, with a 12.1% Adjusted EBITDA margin, as a result of strength in our International segment and economies of scale gained as we continue to grow our DFD doors globally. Adjusted Net Income grew 7.1% to $12.6 million in the quarter. We saw a GAAP net loss of $3.8 million, but net income would have been positive excluding IPO and acquisition related expenses in the quarter. GAAP diluted loss per share was ($0.04) for the third quarter of 2021, with Adjusted Diluted EPS decreasing to $0.06 from $0.08 in the third quarter of 2020 as a result of increased share count following the IPO. Weighted average shares outstanding for the third quarter of 2021 increased to 166 million, compared to 125 million in the third quarter of 2020 as a result of the IPO, with an additional 2 million of dilutive shares included when calculating Adjusted Diluted EPS, for a total of 168 million shares.

Net debt decreased from $1,133 million in the second quarter to $681 million in the third quarter due to IPO proceeds and $11 million of positive free cash flow generated in the quarter.

Third Quarter Market Segment Results

U.S. and Canada: In the U.S. and Canada segment, GAAP net revenue grew 11.5% to $225.8 million from $202.6 million the previous year, driven by the continued execution of our omni-channel strategy. Organic revenue declined 2.3% as we lapped the pipeline fill of the Branded Sweet Treat launch in the third quarter of 2020 and the now fully discontinued legacy wholesale business. Excluding the impact of exiting the legacy wholesale business, U.S. and Canada organic growth was 8.9%, with a two-year stack of 27.7% when compared to 2019. Growth was driven by the expansion of both DFD points of access and higher DFD sales per door as well as ecommerce sales which accounted for 16.8% of retail sales in the quarter. Over 150 DFD doors were added in the third quarter despite nationwide driver shortages with additional listings at leading national retailers in several key markets around the country including Chicago, Dallas and Los Angeles. A record 2,100 Krispy Kremers were hired in the quarter, despite the tight labor market. According to Nielsen, consumer demand for Krispy Kreme Branded Sweet Treats also remained very strong with a 33% increase in scan sales in the third quarter compared to the second quarter of 2021. However, production shortages resulted in fulfillment shortfalls in the quarter impacting net revenue. Branded Sweet Treats production capacity has now increased with the commission of three new production lines.

U.S. and Canada Adjusted EBITDA of $19.9 million remained relatively consistent with the prior year with the efficiency benefits of DFD to the hub and spoke model being offset by short term supply challenges on Branded Sweet Treats as well as commodity cost pressures following the expiration of some forward contracts. Price increases were implemented on fresh doughnuts during September to manage these cost pressures, as well as the growing impact of wage inflation in the marketplace.

International: In the International segment, GAAP net revenue grew 37.4% to $87.3 million from $63.5 million the previous year, with organic growth of 29.1%. Organic growth in the quarter was driven by successful limited time offerings, substantial expansion of DFD, and lapping a previous period which was negatively impacted by COVID-19. Our businesses in the United Kingdom, Ireland and Mexico in particular saw strong organic growth during the third quarter, with a greater number of points of access and higher ecommerce sales than prior to the pandemic. Our businesses in Australia and New Zealand also contributed to organic growth even with significantly heavier impacts from COVID-19 restrictions there, including temporary shop closures.

International Adjusted EBITDA grew 43.4% to $21.7 million from $15.1 million the previous year, driven primarily by revenue growth from expansion of points of access and some recovery from COVID-19 restrictions, which led to $8.6 million sales per hub over the trailing twelve months driving efficiencies from our hub and spoke model.

Market Development: In the Market Development segment, GAAP net revenue grew 23.1% to $29.7 million from $24.2 million the previous year, with organic growth of 18.1%. GAAP net revenue growth was driven mainly by the acquisition of Krispy Kreme Japan in the fourth quarter of 2020, while organic growth was primarily driven by continued improvement in market conditions for international franchise locations as COVID-19 restrictions in certain key markets continued to ease.

Market Development Adjusted EBITDA declined 3.6% to $9.0 million from $9.4 million the previous year, driven by the impact of U.S. and Canada franchise acquisitions over the last year, but partially offset by strengthening of the international franchise business as evidenced by the organic growth.

Balance Sheet

As of October 3, 2021, we had $44.9 million of cash and cash equivalents, $700.0 million of bank debt and $25.5 million of other debt-like items, for a total net debt of $680.6 million. This compared to $1,132.7 million at the end of the second quarter 2021. Using a trailing four quarters Adjusted EBITDA of $181.9 million, current net leverage is 3.7x, which is substantially below pre-IPO levels. Excluding IPO related expenses net leverage would have been 3.6x. Free cash flow in the third quarter was positive with the EBITDA generated from operating activities in excess of capital expenditures reflecting the capital efficient hub and spoke growth model. Operating cash flow was $41.9 million of which the Company invested $30.6 million primarily in growth-oriented capital, including in the U.S. to make the transition from our now exited legacy wholesale model to our Hub and Spoke strategy, which is now largely complete.

With the acquisition of the Krispy Kreme Canadian franchisee in the fourth quarter of 2021, we now expect total net leverage to be under 3.0x in the next 12 months. Our long-term net leverage policy is 2.0x.

Financial Highlights

 

 

$ in millions, except per share data

Q3

2021

vs 3Q

2020

vs 3Q

2019

2021 YTD

vs 2020

Net Revenue

$342.8

18.1%

46.2%

$1,013.8

27.3%

Organic Revenue(1) (2) (3)

$308.4

6.2%

14.3%

$891.4

11.9%

GAAP Net Loss

$(3.8)

72.2%

11.6%

$(19.1)

47.0%

Adjusted Net Income(2)

$12.6

7.1%

20.5%

$50.7

76.9%

Adjusted EBITDA(2)

$41.4

9.6%

26.2%

$140.2

35.2%

Adjusted EBITDA Margin(2)

12.1%

-90 bps

-190 bps

13.8%

+80 bps

GAAP Diluted Loss Per Share

$(0.04)

70.0%

-

$(0.20)

35.5%

Adjusted Diluted EPS(2)

$0.06

-25.0%

-

$0.29

45.0%

Net Debt

$680.6

-38.1%

-27.8%

-

-

Notes:
(1)   

Organic revenue growth negatively impacted by $22.8 million in Q3 2021 and $80.7 million in first three quarters of 2021 due to exit of the legacy wholesale business.

 
(2)   

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

(3)   

Organic Revenue Growth “% vs 2019” figures are calculated as a two-year stack.

Key Operating Metrics

 

$ in millions, except access points

Q3

2021

vs 3Q

2020

vs 3Q

2019

2021 YTD

Vs 2020

Global Points of Access

10,041

46.3%

67.4%

10,041

20.7%

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

$3.8

14.5%

20.3%

$3.8

9.4%

Sales per Hub (International) TTM

$8.6

31.0%

9.0%

$8.6

35.2%

Ecommerce as a Percent of Retail Sales

17%

+10 bps

-

18%

+250 bps

Financial Outlook

Krispy Kreme reaffirmed the following guidance for the full year 2021:

  • Net Revenue of $1.34 billion to $1.38 billion (growth of 19.4% to 23.0%)
  • Organic Revenue growth of 10% to 12%
  • Adjusted EBITDA of $178 million to $185 million (growth of 22.4% to 27.2%)
  • Adjusted Net Income of $62 million to $68 million (growth of 46.4% to 60.6%)

Krispy Kreme also reiterated the following 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%

We anticipate exceeding these long-term targets in the full year 2022 as we will no longer be lapping the exit of our legacy wholesale business in the U.S.

Definitions

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

  • Global Points of Access: Reflects all locations at which fresh doughnuts or cookies can be purchased. We define global points of access to include all Hot Light Theater Shops, Fresh Shops, Carts and Food Trucks, DFD doors and Cookie Shops, at both Company-owned and franchise locations as of the end of the respective reporting period. We monitor global points of access as a metric that informs the growth of our omni-channel presence over time and believe this metric is useful to investors to understand our footprint in each of our segments.
  • Hubs: Reflects locations where fresh doughnuts are produced and processed for sale at any point of access. We define Hubs to include self-sustaining Hot Light Theater Shops and Doughnut Factories, at both Company-owned and franchise locations as of the end of the respective reporting period.
  • Sales Per Hub: Sales per Hub equals Fresh Revenues from Hubs with Spokes, divided by the average number of Hubs with Spokes at the end of the five most recent quarters.
  • Fresh Revenues from Hubs with Spokes: Fresh Revenues include product sales generated from our Doughnut Shop business (including ecommerce and delivery), as well as DFD sales, but excluding sales from our legacy wholesale business and our Branded Sweet Treat Line. It also excludes all Insomnia Cookies revenues as the measure is focused on the Krispy Kreme business. Fresh Revenues from Hubs with Spokes equals the Fresh Revenues derived from those Hubs currently producing product for other shops, Carts and Food Trucks, and/or DFD doors, but excluding Fresh Revenues derived from those Hubs not currently producing product for other shops, Carts and Food Trucks, and/or DFD doors.
  • Total Net Leverage Ratio: Calculated using Net Debt (including both bank debt and financing leases as part of debt) divided by Adjusted EBITDA.
  • Free Cash Flow: Defined as cash provided by operating activities less purchases of property and equipment.

Conference Call

Krispy Kreme will host a public conference call at 5:00 PM Eastern Time today to discuss its results for the third quarter of 2021. The conference call can be accessed by dialing (877) 312-1907, or (470) 495-9529 for international participants, and entering the conference ID 6086266. To listen to the live audio webcast and Q&A, visit the Krispy Kreme investor relations website at investors.krispykreme.com. A replay and transcript of the webcast will be available on the website within 24 hours after the call. Krispy Kreme’s earnings press release and related materials will also be available on the investor relations section of the Company’s website.

About Krispy Kreme

Headquartered in Charlotte, N.C., Krispy Kreme is one of the most beloved and well-known sweet treat brands in the world. Our iconic Original Glazed® doughnut is universally recognized for its hot-off-the-line, melt-in-your-mouth experience. Krispy Kreme operates in over 30 countries through its unique network of 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,” “would,” “anticipate,” “estimate,” “expect,” “intend,” “objective,” “seek,” “strive” 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. 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, Fresh Revenue from Hubs with Spokes and Sales per Hub, which differ from results using U.S. Generally Accepted Accounting Principles (“GAAP”). These non-GAAP financial measures are not universally consistent calculations, limiting their usefulness as comparative measures. Other companies may calculate similarly titled financial measures differently than we do or may not calculate them at all. Additionally, these non-GAAP financial measures are not measurements of financial performance under GAAP. In order to facilitate a clear understanding of our consolidated historical operating results, you should examine our non-GAAP financial measures in conjunction with our historical consolidated financial statements and notes thereto filed with the SEC.

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

Krispy Kreme, Inc.

Condensed Consolidated Statements of Operations (Unaudited)

(in thousands, except per share amounts and number of shares)

 

 

Quarter Ended

 

Three Quarters Ended

 

October 3,

2021 (13 weeks)

 

September 27,

2020 (13 weeks)

 

October 3,

2021 (39 weeks)

 

September 27,

2020 (39 weeks)

Net revenues

 

 

 

 

 

 

 

Product sales

$

334,324

 

 

 

$

281,317

 

 

 

$

989,132

 

 

 

$

769,461

 

 

Royalties and other revenues

8,475

 

 

 

8,916

 

 

 

24,662

 

 

 

26,960

 

 

Total net revenues

342,799

 

 

 

290,233

 

 

 

1,013,794

 

 

 

796,421

 

 

Product and distribution costs

92,152

 

 

 

85,303

 

 

 

257,166

 

 

 

222,409

 

 

Operating expenses

157,315

 

 

 

121,792

 

 

 

462,733

 

 

 

341,792

 

 

Selling, general and administrative expense

52,950

 

 

 

46,521

 

 

 

163,417

 

 

 

129,090

 

 

Marketing expenses

12,062

 

 

 

8,015

 

 

 

31,621

 

 

 

24,704

 

 

Pre-opening costs

1,192

 

 

 

3,368

 

 

 

4,335

 

 

 

9,668

 

 

Other (income)/expenses, net

(359

)

 

 

4,667

 

 

 

(4,365

)

 

 

7,177

 

 

Depreciation and amortization expense

25,663

 

 

 

20,435

 

 

 

74,258

 

 

 

57,619

 

 

Operating income

1,824

 

 

 

132

 

 

 

24,629

 

 

 

3,962

 

 

Interest expense, net

7,186

 

 

 

7,908

 

 

 

25,228

 

 

 

26,263

 

 

Interest expense — related party

 

 

 

5,566

 

 

 

10,387

 

 

 

16,698

 

 

Other non-operating expense/(income), net

732

 

 

 

(357

)

 

 

(126

)

 

 

(469

)

 

Loss before income taxes

(6,094

)

 

 

(12,985

)

 

 

(10,860

)

 

 

(38,530

)

 

Income tax (benefit)/expense

(2,342

)

 

 

499

 

 

 

8,266

 

 

 

(2,413

)

 

Net loss

(3,752

)

 

 

(13,484

)

 

 

(19,126

)

 

 

(36,117

)

 

Net income attributable to noncontrolling interest

1,907

 

 

 

1,368

 

 

 

6,736

 

 

 

2,880

 

 

Net loss attributable to Krispy Kreme, Inc.

$

(5,659

)

 

 

$

(14,852

)

 

 

$

(25,862

)

 

 

$

(38,997

)

 

Net loss per share:

 

 

 

 

 

 

 

Common stock — Basic

$

(0.04

)

 

 

$

(0.12

)

 

 

$

(0.20

)

 

 

$

(0.31

)

 

Common stock — Diluted

$

(0.04

)

 

 

$

(0.12

)

 

 

$

(0.20

)

 

 

$

(0.31

)

 

Weighted average shares outstanding:

 

 

 

 

 

 

 

Basic

166,033,539

 

 

 

124,987,370

 

 

 

141,123,999

 

 

 

124,987,370

 

 

Diluted

166,033,539

 

 

 

124,987,370

 

 

 

141,123,999

 

 

 

124,987,370

 

 

Krispy Kreme, Inc.

Reconciliation of Non-GAAP Financial Measures

(in thousands)

 

 

Quarter Ended

 

Three Quarters Ended

(in thousands)

October 3,

2021

 

September 27,

2020

 

September 29,

2019

 

October 3,

2021

 

September 27,

2020

Net loss

$

(3,752

)

 

 

$

(13,484

)

 

 

$

(4,286

)

 

$

(19,126

)

 

$

(36,117

)

Interest expense, net

7,186

 

 

 

7,908

 

 

 

8,426

 

 

25,228

 

 

26,263

 

Interest expense — related party(1)

 

 

 

5,566

 

 

 

5,630

 

 

10,387

 

 

16,698

 

Income tax (benefit)/expense

(2,342

)

 

 

499

 

 

 

(205

)

 

8,266

 

 

(2,413

)

Depreciation and amortization expense

25,663

 

 

 

20,435

 

 

 

14,860

 

 

74,258

 

 

57,619

 

Share-based compensation

6,315

 

 

 

3,095

 

 

 

2,556

 

 

16,973

 

 

9,236

 

Employer payroll taxes related to share-based compensation

1,171

 

 

 

 

 

 

 

 

2,012

 

 

 

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

732

 

 

 

(357

)

 

 

(64

)

 

(126

)

 

(469

)

New York City flagship Hot Light Theater Shop opening(3)

 

 

 

2,190

 

 

 

1,576

 

 

 

 

6,429

 

Strategic initiatives(4)

 

 

 

4,649

 

 

 

 

 

 

 

13,923

 

Acquisition and integration expenses(5)

1,288

 

 

 

4,274

 

 

 

3,296

 

 

3,663

 

 

8,697

 

Shop closure expenses(6)

 

 

 

2,058

 

 

 

 

 

 

 

4,844

 

Restructuring and severance expenses(7)

57

 

 

 

 

 

 

 

 

1,393

 

 

 

IPO-related expenses(8)

4,018

 

 

 

206

 

 

 

 

 

14,221

 

 

206

 

Other(9)

1,081

 

 

 

746

 

 

 

1,018

 

 

3,064

 

 

(1,218

)

Adjusted EBITDA

$

41,417

 

 

 

$

37,785

 

 

 

$

32,807

 

 

$

140,213

 

 

$

103,698

 

 

Quarter Ended

 

Three Quarters Ended

(in thousands)

October 3,

2021

 

September 27,

2020

 

September 29,

2019

 

October 3,

2021

 

 

September 27,

2020

 

Net loss

$

(3,752

)

 

 

$

(13,484

)

 

 

$

(4,286

)

 

 

$

(19,126

)

 

$

(36,117

)

Interest expense — related party(1)

 

 

 

5,566

 

 

 

5,630

 

 

 

10,387

 

 

 

16,698

 

 

Share-based compensation

6,315

 

 

 

3,095

 

 

 

2,556

 

 

 

16,973

 

 

 

9,236

 

 

Employer payroll taxes related to share-based compensation

1,171

 

 

 

 

 

 

 

 

 

2,012

 

 

 

 

 

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

732

 

 

 

(357

)

 

 

(64

)

 

 

(126

)

 

(469

)

New York City flagship Hot Light Theater Shop opening(3)

 

 

 

2,190

 

 

 

1,576

 

 

 

 

 

 

6,429

 

 

Strategic initiatives(4)

 

 

 

4,649

 

 

 

 

 

 

 

 

 

13,923

 

 

Acquisition and integration expenses(5)

1,288

 

 

 

4,274

 

 

 

3,296

 

 

 

3,663

 

 

 

8,697

 

 

Shop closure expenses(6)

 

 

 

2,058

 

 

 

 

 

 

 

 

 

4,844

 

 

Restructuring and severance expenses(7)

57

 

 

 

 

 

 

 

 

 

1,393

 

 

 

 

 

IPO-related expenses(8)

4,018

 

 

 

206

 

 

 

 

 

 

14,221

 

 

 

206

 

 

Other(9)

1,081

 

 

 

746

 

 

 

1,018

 

 

 

3,064

 

 

 

(1,218

)

Amortization of acquisition related intangibles(10)

7,497

 

 

 

6,566

 

 

 

5,129

 

 

 

22,573

 

 

 

19,138

 

 

KKI Term Loan Facility interest and debt issuance costs(11)

107

 

 

 

 

 

 

 

 

 

2,448

 

 

 

 

 

Tax impact of adjustments(12)

(5,784

)

 

 

(5,702

)

 

 

(4,388

)

 

 

(10,604

)

 

(14,669

)

Tax specific adjustments(13)

(114

)

 

 

1,975

 

 

 

 

 

 

3,833

 

 

 

1,975

 

 

Adjusted net income

$

12,616

 

 

 

$

11,782

 

 

 

$

10,467

 

 

 

$

50,711

 

 

 

$

28,673

 

 

Net income attributable to noncontrolling interest

(1,907

)

 

 

(1,368

)

 

 

N/A

 

 

(6,736

 

 

(2,880

 

Adjusted net income attributable to Krispy Kreme, Inc.

10,709

 

 

 

10,414

 

 

 

N/A

 

 

43,975

 

 

 

25,793

 

 

Adjustment to adjusted net income attributable to common shareholders

(522

)

 

 

34

 

 

 

N/A

 

 

(1,815

)

 

 

(121

)

 

Adjusted net income attributable to common shareholders - Basic

10,187

 

 

 

10,448

 

 

 

N/A

 

 

42,160

 

 

 

25,672

 

 

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

(88

)

 

 

(22

)

 

 

N/A

 

 

(237

 

 

(48

 

Adjusted net income attributable to common shareholders - Diluted

10,099

 

 

 

10,426

 

 

 

N/A

 

 

41,923

 

 

 

25,624

 

 

Basic weighted average common shares outstanding

166,033,539

 

 

 

124,987,370

 

 

 

N/A

 

 

141,123,999

 

 

 

124,987,370

 

 

Dilutive effect of outstanding common stock options and RSUs

2,041,098

 

 

 

3,065,198

 

 

 

N/A

 

 

2,936,731

 

 

 

2,936,264

 

 

Diluted weighted average common shares outstanding

168,074,637

 

 

 

128,052,568

 

 

 

N/A

 

 

144,060,730

 

 

 

127,923,634

 

 

Adjusted net income per share attributable to common shareholders:

 

 

 

 

 

 

 

 

 

 

 

Basic

$

0.06

 

 

 

$

0.08

 

 

 

N/A

 

 

$

0.30

 

 

 

$

0.21

 

 

Diluted

$

0.06

 

 

 

$

0.08

 

 

 

N/A

 

 

$

0.29

 

 

 

$

0.20

 

 
  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 pre-opening costs related to our New York City flagship Hot Light Theater Shop opening, including shop design, rent, and additional consulting and training costs incurred and reflected in selling, general and administrative expenses.
  4. The quarter and three quarters ended September 27, 2020 consists mainly of consulting and advisory fees, personnel transition costs, and network conversion and set-up costs related to the transformation of the Company’s legacy wholesale business in the United States.
  5. 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-related activities for the applicable period.
  6. Includes lease termination costs, impairment charges, and loss on disposal of property, plant and equipment.
  7. Consists 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.
  8. Includes consulting and advisory fees incurred in connection with preparation for and execution of the Company’s IPO. Due to the timing of the IPO, certain costs were incurred in the quarter ended October 3, 2021 that are not expected to recur in future quarters.
  9. The quarter and three quarters ended October 3, 2021 consist primarily of legal expenses incurred. The quarter and three quarters ended September 27, 2020 consists primarily of fixed asset and impairment expenses, net of a gain on the sale of land.
  10. Consists of amortization related to acquired intangible assets as reflected within depreciation and amortization in the consolidated statements of operations.
  11. 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.
  12. Tax impact of adjustments calculated applying the applicable statutory rates. The three quarters ended October 3, 2021 also includes the impact of disallowed executive compensation expense incurred in connection with the IPO.
  13. The three quarters ended October 3, 2021 consists primarily of the effect of the U.K. 2023 statutory tax rate change from 19.0% to 25.0% on existing temporary differences.

Krispy Kreme, Inc.

Segment Reporting (Unaudited)

(in thousands)

 

 

Quarter Ended

 

Three Quarters Ended

 

October 3,

2021

 

September 27,

2020

 

October 3,

2021

 

September 27,

2020

Net revenues:

 

 

 

 

 

 

 

U.S. and Canada

$

225,807

 

 

$

202,575

 

 

$

679,195

 

 

$

557,280

 

International

87,262

 

 

63,504

 

 

243,005

 

 

158,575

 

Market Development

29,730

 

 

24,154

 

 

91,594

 

 

80,566

 

Total net revenues

$

342,799

 

 

$

290,233

 

 

$

1,013,794

 

 

$

796,421

 

(in thousands except percentages)

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

 

%

(in thousands except percentages)

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

 

%

(in thousands except percentages)

U.S. and Canada

 

International

 

Market

Development

 

Total Company

Total net revenues in fiscal 2020

$

782,717

 

 

 

$

230,185

 

 

 

$

109,134

 

 

 

$

1,122,036

 

 

Total net revenues in fiscal 2019

587,522

 

 

 

223,115

 

 

 

148,771

 

 

 

959,408

 

 

Total Net Revenues Growth

195,195

 

 

 

7,070

 

 

 

(39,637

)

 

 

162,628

 

 

Total Net Revenues Growth %

33.2

 

%

 

3.2

 

%

 

-26.6

 

%

 

17.0

 

%

Impact of acquisitions

(121,671

)

 

 

(42,811

)

 

 

35,053

 

 

 

(129,429

)

 

Impact of foreign currency translation

 

 

 

(906

)

 

 

 

 

 

(906

)

 

Impact of 53rd week

(15,615

)

 

 

(3,287

)

 

 

(1,603

)

 

 

(20,505

)

 

Organic Revenue Growth

$

57,909

 

 

 

$

(39,934

)

 

 

$

(6,187

)

 

 

$

11,788

 

 

Organic Revenue Growth %

9.9

 

%

 

-17.9

 

%

 

-4.2

 

%

 

1.2

 

%

 

Quarter Ended

 

Three Quarters Ended

(in thousands except percentages)

October 3,

2021

 

September 27,

2020

 

September 29,

2019

 

October 3,

2021

 

September 27,

2020

Total net revenues - current year

$

342,799

 

 

 

$

290,233

 

 

 

$

234,484

 

 

 

$

1,013,794

 

 

 

$

796,421

 

 

Total net revenues - prior year

290,233

 

 

 

234,484

 

 

 

197,115

 

 

 

796,421

 

 

 

694,136

 

 

Total Net Revenues Growth

52,566

 

 

 

55,749

 

 

 

37,369

 

 

 

217,373

 

 

 

102,285

 

 

Total Net Revenues Growth %

18.1

 

%

 

23.8

 

%

 

19.0

 

%

 

27.3

 

%

 

14.7

 

%

Impact of acquisitions

(29,123

)

 

 

(34,577

)

 

 

(29,087

)

 

 

(100,646

)

 

 

(96,714

)

 

Impact of foreign currency translation

(5,305

)

 

 

(2,117

)

 

 

3,371

 

 

 

(21,767

)

 

 

822

 

 

Organic Revenue Growth

$

18,138

 

 

 

$

19,055

 

 

 

$

11,653

 

 

 

$

94,960

 

 

 

$

6,393

 

 

Organic Revenue Growth %

6.2

 

%

 

8.1

 

%

 

5.9

 

%

 

11.9

 

%

 

0.9

 

%

 

Trailing Four

Quarters Ended

 

Fiscal Year Ended

(in thousands, unless otherwise stated)

October 3,

2021

 

January 3,

2021

 

December 29,

2019

U.S. and Canada:

 

 

 

 

 

Revenues

$

904,633

 

 

$

782,717

 

 

$

587,522

 

Non-Fresh Revenues (1)

(53,719)

 

 

(128,619)

 

 

(112,051)

 

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

(414,186)

 

 

(323,079)

 

 

(271,067)

 

Sales from Hubs with Spokes

436,728

 

 

331,019

 

 

204,404

 

Sales per Hub (millions)

3.8

 

 

3.5

 

 

3.2

 

 

 

 

 

 

 

International:

 

 

 

 

 

Sales from Hubs with Spokes (3)

$

314,615

 

 

$

230,185

 

 

$

223,115

 

Sales per Hub (millions)

8.6

 

 

6.4

 

 

8.3

 

  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.

 

Quarter Ended

 

Three Quarters Ended

 

October 3,

2021

 

September 27,

2020

 

October 3,

2021

 

September 27,

2020

Segment Adjusted EBITDA:

 

 

 

 

 

 

 

U.S. and Canada

$

19,912

 

 

 

$

20,028

 

 

 

$

75,760

 

 

 

$

69,216

 

 

International

21,655

 

 

 

15,098

 

 

 

60,676

 

 

 

27,909

 

 

Market Development

9,033

 

 

 

9,374

 

 

 

29,782

 

 

 

27,959

 

 

Corporate

(9,183

)

 

 

(6,715

)

 

 

(26,005

)

 

 

(21,386

)

 

Total Adjusted EBITDA

$

41,417

 

 

 

$

37,785

 

 

 

$

140,213

 

 

 

$

103,698

 

 

Krispy Kreme, Inc.

Condensed Consolidated Balance Sheets

(in thousands, except per share data)

 

 

As of

 

(Unaudited)

October 3,


2021

 

January 3,

2021

ASSETS

 

 

 

Current assets:

 

 

 

Cash and cash equivalents

$

44,895

 

 

 

$

37,460

 

 

Marketable securities

614

 

 

 

1,048

 

 

Restricted cash

193

 

 

 

23

 

 

Accounts receivable, net

60,069

 

 

 

74,351

 

 

Inventories

36,141

 

 

 

38,519

 

 

Prepaid expense and other current assets

22,068

 

 

 

12,692

 

 

Total current assets

163,980

 

 

 

164,093

 

 

Property and equipment, net

423,547

 

 

 

395,255

 

 

Goodwill

1,089,914

 

 

 

1,086,546

 

 

Other intangible assets, net

993,440

 

 

 

998,014

 

 

Operating lease right of use asset, net

414,612

 

 

 

399,688

 

 

Other assets

17,165

 

 

 

17,399

 

 

Total assets

$

3,102,658

 

 

 

$

3,060,995

 

 

LIABILITIES AND SHAREHOLDERS’ EQUITY

 

 

 

Current liabilities:

 

 

 

Current portion of long-term debt

$

38,608

 

 

 

$

41,245

 

 

Current operating lease liabilities

42,637

 

 

 

45,675

 

 

Accounts payable

170,780

 

 

 

148,645

 

 

Accrued liabilities

132,638

 

 

 

124,951

 

 

Structured payables

108,969

 

 

 

137,319

 

 

Total current liabilities

493,632

 

 

 

497,835

 

 

Long-term debt, less current portion

682,676

 

 

 

785,810

 

 

Related party notes payable

 

 

 

344,581

 

 

Noncurrent operating lease liabilities

397,640

 

 

 

376,099

 

 

Deferred income taxes, net

155,982

 

 

 

144,866

 

 

Other long-term obligations and deferred credits

53,008

 

 

 

63,445

 

 

Total liabilities

1,782,938

 

 

 

2,212,636

 

 

Commitments and contingencies

 

 

 

Shareholders’ equity:

 

 

 

Common stock, $0.01 par value; 300,000,000 and 174,500,000 shares authorized as of October 3, 2021 and January 3, 2021, respectively; 167,112,953 and 124,987,370 shares issued and outstanding as of October 3, 2021 and January 3, 2021, respectively

1,671

 

 

 

1,250

 

 

Additional paid-in capital

1,410,724

 

 

 

845,499

 

 

Shareholder note receivable

(4,216

)

 

 

(18,660

)

 

Accumulated other comprehensive loss, net of income tax

(6,707

)

 

 

(1,208

)

 

Retained deficit

(173,911

)

 

 

(142,197

)

 

Total shareholders’ equity attributable to Krispy Kreme, Inc.

1,227,561

 

 

 

684,684

 

 

Noncontrolling interest

92,159

 

 

 

163,675

 

 

Total shareholders’ equity

1,319,720

 

 

 

848,359

 

 

Total liabilities and shareholders’ equity

$

3,102,658

 

 

 

$

3,060,995

 

 

Krispy Kreme, Inc.

Condensed Consolidated Statements of Cash Flows (Unaudited)

(in thousands)

 

 

Three Quarters Ended

 

October 3, 2021

(39 weeks)

 

September 27,

2020 (39 weeks)

CASH FLOWS FROM OPERATING ACTIVITIES:

 

 

 

Net loss

$

(19,126

)

 

 

$

(36,117

)

 

Adjustments to reconcile net loss to net cash provided by operating activities:

 

 

 

Depreciation and amortization expense

74,258

 

 

 

57,619

 

 

Deferred income taxes

9,168

 

 

 

(4,623

)

 

Loss on extinguishment of debt

1,700

 

 

 

 

 

Impairment and lease termination charges

854

 

 

 

3,287

 

 

Loss on disposal of property and equipment

157

 

 

 

773

 

 

Share-based compensation

16,973

 

 

 

9,236

 

 

Change in accounts and notes receivable allowances

133

 

 

 

700

 

 

Inventory write-off

2,983

 

 

 

34

 

 

Other

(315

)

 

 

276

 

 

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

12,003

 

 

 

(433

)

 

Net cash provided by operating activities

98,788

 

 

 

30,752

 

 

CASH FLOWS USED FOR INVESTING ACTIVITIES:

 

 

 

Purchase of property and equipment

(83,485

)

 

 

(69,437

)

 

Proceeds from disposals of assets

202

 

 

 

2,793

 

 

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

(33,888

)

 

 

(59,658

)

 

Principal payments received from loans to franchisees

67

 

 

 

519

 

 

Purchases of held-to-maturity debt securities

 

 

 

(56

)

 

Maturities of held-to-maturity debt securities

388

 

 

 

517

 

 

Net cash used for investing activities

(116,716

)

 

 

(125,322

)

 

CASH FLOWS FROM FINANCING ACTIVITIES:

 

 

 

Proceeds from the issuance of debt

670,000

 

 

 

263,097

 

 

Repayment of long-term debt and lease obligations

(1,115,910

)

 

 

(206,966

)

 

Payment of financing costs

(1,700

)

 

 

 

 

Proceeds from structured payables

194,927

 

 

 

211,892

 

 

Payments on structured payables

(223,063

)

 

 

(155,951

)

 

Payment of contingent consideration related to a business combination

 

 

 

(506

)

 

Capital contribution by shareholders

120,532

 

 

 

 

 

Proceeds from IPO, net of underwriting discounts (excluding unpaid issuance costs)

527,329

 

 

 

 

 

Proceeds from sale of noncontrolling interest in subsidiary

53,337

 

 

 

17,592

 

 

Distribution to shareholders

(42,334

)

 

 

(19

)

 

Payments for repurchase and retirement of common stock

(138,501

)

 

 

 

 

Distribution to noncontrolling interest

(17,257

)

 

 

(6,553

)

 

Net cash provided by financing activities

27,360

 

 

 

122,586

 

 

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

(1,827

)

 

 

759

 

 

Net increase in cash, cash equivalents and restricted cash

7,605

 

 

 

28,775

 

 

Cash, cash equivalents and restricted cash at beginning of period

37,483

 

 

 

35,450

 

 

Cash, cash equivalents and restricted cash at end of period

$

45,088

 

 

 

$

64,225

 

 

Supplemental schedule of non-cash investing and financing activities:

 

 

 

Accrual for property and equipment

$

3,137

 

 

 

$

11,280

 

 

Stock issuance under shareholder notes

446

 

 

 

 

 

Accrual for distribution to noncontrolling interest

(5,056

)

 

 

 

 

Accrual for distribution to shareholders

(5,853

)

 

 

 

 

Accrual for repurchase and retirement of common stock

(188

)

 

 

 

 

Reconciliation of cash, cash equivalents and restricted cash at end of period:

 

 

 

Cash and cash equivalents

$

44,895

 

 

 

$

64,154

 

 

Restricted cash

193

 

 

 

71

 

 

Total cash, cash equivalents and restricted cash

$

45,088

 

 

 

$

64,225

 

 

Krispy Kreme, Inc.

Global Points of Access

 

 

Global Points of Access (1)

 

Quarter Ended

 

Fiscal Year

Ended

 

October 3,

2021

 

September 27,

2020

 

January 3,

2021

U.S. and Canada: (2)

 

 

 

 

 

Hot Light Theater Shops

238

 

 

206

 

 

229

 

Fresh Shops

57

 

 

48

 

 

47

 

Cookie Shops

206

 

 

178

 

 

184

 

DFD Doors (3)

5,220

 

 

2,846

 

 

4,137

 

Total

5,721

 

 

3,278

 

 

4,597

 

International:

 

 

 

 

 

Hot Light Theater Shops

30

 

 

28

 

 

28

 

Fresh Shops

352

 

 

353

 

 

348

 

Carts, Food Trucks, and Other (4)

12

 

 

10

 

 

11

 

DFD Doors (3)

2,415

 

 

1,833

 

 

1,986

 

Total

2,809

 

 

2,224

 

 

2,373

 

Market Development: (5)

 

 

 

 

 

Hot Light Theater Shops

113

 

 

144

 

 

119

 

Fresh Shops

761

 

 

716

 

 

732

 

Carts, Food Trucks, and Other (4)

30

 

 

30

 

 

30

 

DFD Doors (3)

607

 

 

470

 

 

465

 

Total

1,511

 

 

1,360

 

 

1,346

 

Total global points of access (as defined)

10,041

 

 

6,862

 

 

8,316

 

Total Hot Light Theater Shops

381

 

 

378

 

 

376

 

Total Fresh Shops

1,170

 

 

1,117

 

 

1,127

 

Total Cookie Shops

206

 

 

178

 

 

184

 

Total Shops

1,757

 

 

1,673

 

 

1,687

 

Total Carts, Food Trucks, and Other

42

 

 

40

 

 

41

 

Total DFD Doors

8,242

 

 

5,149

 

 

6,588

 

Total global points of access (as defined)

10,041

 

 

6,862

 

 

8,316

 

  1. Excludes Branded Sweet Treat Line distribution points and legacy wholesale business doors.
  2. Includes points of access that were acquired from franchisees in the United States during the first quarter of fiscal 2021 and the second half of fiscal 2020. These points of access were previously included in the Market Development segment.
  3. DFD Doors for both the U.S. and Canada and Market Development segments exclude legacy wholesale doors, which have been declining consistent with our strategy to evolve our legacy wholesale business to focus on the new DFD model and our new Branded Sweet Treat Line. As of July 4, 2021 legacy wholesale doors for the U.S. and Canada and the Market Development segments were substantially eliminated.
  4. Beginning in the quarter ended October 3, 2021, the Company includes Carts and Food Trucks in its calculation of global points of access. 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. They are primarily found in international locations, in airports, train stations, etc. Comparative data has been included in all periods presented above.
  5. Includes locations in Japan, which were acquired in December 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

 

 

Hubs

 

Quarter Ended

 

Fiscal Year

Ended

 

October 3,

2021

 

September 27,

2020

 

January 3,

2021

U.S. and Canada:

 

 

 

 

 

Hot Light Theater Shops (1)

234

 

 

203

 

 

226

 

Doughnut Factories

4

 

 

7

 

 

5

 

Total

238

 

 

210

 

 

231

 

Hubs with Spokes

121

 

 

112

 

 

113

 

International:

 

 

 

 

 

Hot Light Theater Shops (1)

25

 

 

27

 

 

27

 

Doughnut Factories

10

 

 

9

 

 

9

 

Total

35

 

 

36

 

 

36

 

Hubs with Spokes

35

 

 

36

 

 

36

 

Market Development:

 

 

 

 

 

Hot Light Theater Shops (1)

111

 

 

141

 

 

116

 

Doughnut Factories

26

 

 

26

 

 

26

 

Total

137

 

 

167

 

 

142

 

Total Hubs

410

 

 

413

 

 

409

 

  1. Includes only Hot Light Theater Shops and excludes Mini Theaters. A Mini Theater is a spoke location that produces hot doughnuts.

 

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