Krispy Kreme shares are dropping in morning trading Wednesday after JPMorgan downgraded the doughnut maker to an “underweight,” citing challenges to its turnaround plan. https://t.co/GEoe9HHkBp ...

Group 1 - Krispy Kreme's stock has dropped 73% from its yearly peak, trading at 0.4 times trailing sales and 0.9 times book value, indicating severe financial distress [1] - The partnership with McDonald's, initiated in October 2022, was initially promising but ultimately led to significant financial burdens for Krispy Kreme [2][3] - The nationwide rollout of the McDonald's deal was halted in Q2 2025 due to high costs associated with the delivery program, which proved unsustainable on a larger scale [3] Group 2 - Krispy Kreme is currently reviewing its logistics setup to find more cost-effective solutions and is terminating hundreds of underperforming delivery contracts [5] - The company plans to replace more than half of the shuttered deals with higher-volume routes by the end of 2025, partnering with major retailers like Walmart, Costco, and Kroger [5][6] - While there is potential for a long-term turnaround if operations focus on profitable routes, the current sentiment among investors is disappointment due to the failed McDonald's experiment [6]

Core Insights - Krispy Kreme's total revenue for the quarter ending June 2025 was $379.77 million, reflecting a year-over-year decline of 13.5% [4] - The company's international revenue accounted for 35% of total revenue, amounting to $132.76 million, which was an 11.48% surprise compared to analyst expectations [6] International Revenue Breakdown - Market Development generated $16.91 million, constituting 4.5% of total revenue, which was a decline of 27.17% from the projected $23.22 million [5] - International revenue showed a positive trend, increasing from $119.64 million (31.9%) in the previous quarter and $125.27 million (28.6%) in the same quarter last year [6] Future Projections - Analysts project total revenues of $381.23 million for the ongoing fiscal quarter, a slight increase of 0.4% from the previous year, with Market Development and International expected to contribute $20.7 million (5.4%) and $126.78 million (33.3%) respectively [7] - For the entire year, total revenue is forecasted to be $1.55 billion, a reduction of 6.8% from the previous year, with Market Development contributing $84.16 million (5.4%) and International $504.2 million (32.5%) [8] Market Context - The reliance on international markets presents both opportunities and challenges for Krispy Kreme, making it crucial to monitor international revenue trends for future projections [9] - Wall Street analysts are increasingly focused on international interdependencies and geopolitical factors that may influence earnings forecasts for companies with a global presence [10]

PART I. FINANCIAL INFORMATION [Item 1. Financial Statements (Unaudited)](index=4&type=section&id=Item%201.%20Financial%20Statements%20%28Unaudited%29) Unaudited Q2 2025 financials report a $441.1 million net loss, driven by a $406.9 million impairment, with revenues down 13.5% and negative operating cash flow [Condensed Consolidated Statements of Operations](index=4&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) Q2 2025 net revenues fell 13.5% to $379.8 million, leading to a $434.6 million operating loss primarily from a $406.9 million impairment Q2 2025 vs Q2 2024 Statement of Operations Highlights (in thousands) | Metric | Q2 2025 (13 weeks) | Q2 2024 (13 weeks) | Change (%) | | :--- | :--- | :--- | :--- | | Total net revenues | $379,767 | $438,809 | -13.5% | | Goodwill and other asset impairments | $406,932 | $201 | N/A | | Operating (loss)/income | $(434,551) | $6,859 | N/A | | Net loss attributable to Krispy Kreme, Inc. | $(435,260) | $(5,491) | N/A | | Diluted Net loss per share | $(2.55) | $(0.03) | N/A | - A substantial goodwill and other asset impairment charge of **$406.9 million** was the primary driver of the significant operating and net losses in the second quarter of 2025[9](index=9&type=chunk) [Condensed Consolidated Balance Sheets](index=6&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) Total assets decreased to $2.63 billion due to goodwill impairment, with retained deficit widening to $774.2 million and total debt increasing Balance Sheet Highlights (in thousands) | Account | June 29, 2025 | December 29, 2024 | | :--- | :--- | :--- | | **Assets** | | | | Cash and cash equivalents | $21,264 | $28,962 | | Goodwill, net | $711,780 | $1,047,581 | | Total assets | $2,630,474 | $3,072,030 | | **Liabilities & Equity** | | | | Total long-term debt (incl. current) | $957,045 | $900,903 | | Total liabilities | $1,912,285 | $1,907,598 | | Retained deficit | $(774,164) | $(299,638) | | Total shareholders' equity | $718,189 | $1,164,432 | [Condensed Consolidated Statements of Cash Flows](index=10&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) H1 2025 operating cash flow was negative $53.4 million, offset by $30.9 million from investing activities, mainly Insomnia Cookies divestiture proceeds Cash Flow Summary - Two Quarters Ended (in thousands) | Cash Flow Activity | June 29, 2025 | June 30, 2024 | | :--- | :--- | :--- | | Net cash (used for)/provided by operating activities | $(53,377) | $15,525 | | Net cash provided by/(used for) investing activities | $30,937 | $(65,161) | | Net cash provided by financing activities | $16,248 | $40,245 | | **Net decrease in cash** | **$(7,492)** | **$(9,506)** | - The company received **$75.0 million** in net proceeds from the divestiture of Insomnia Cookies, which was a major source of cash from investing activities[18](index=18&type=chunk) [Notes to Condensed Consolidated Financial Statements](index=12&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) Notes detail McDonald's USA agreement termination, a $356.0 million goodwill impairment, Insomnia Cookies divestiture, and new legal proceedings - The Business Relationship Agreement with McDonald's USA was terminated effective July 2, 2025, with neither party having further obligations except for confidentiality and indemnification[28](index=28&type=chunk) - The company recognized a cumulative, non-cash, partial goodwill impairment charge of **$356.0 million** in Q2 2025 for its U.S., KK U.K., and KK Australia reporting units[30](index=30&type=chunk) - The company sold its remaining ownership interest in Insomnia Cookies for **$75.0 million** in cash, resulting in a loss on divestiture of **$11.5 million**[40](index=40&type=chunk) - New legal proceedings were filed against the company, including federal securities class actions related to the McDonald's agreement and class actions related to a 2024 data breach[77](index=77&type=chunk)[78](index=78&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=34&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses Q2 revenue decline, McDonald's partnership termination, a $406.9 million impairment, increased leverage, and a new turnaround plan - The company has implemented a comprehensive turnaround plan focusing on refranchising international markets, reducing capital intensity, expanding profit margins through operational efficiency, and pursuing sustainable U.S. growth[104](index=104&type=chunk) - The partnership with McDonald's USA was terminated effective July 2, 2025, as it was deemed unsustainable, with expected positive impact on U.S. segment profitability from Q3 2025[105](index=105&type=chunk) - The company no longer expects to pay quarterly cash dividends, a change from its previously disclosed policy, to better align capital allocation with its growth strategy[174](index=174&type=chunk) [Results of Operations](index=46&type=section&id=Results%20of%20Operations) Q2 2025 net revenue fell 13.5% to $379.8 million, with organic revenue down 0.8%, leading to a $434.6 million operating loss and a 63.3% Adjusted EBITDA decline Q2 2025 vs Q2 2024 Revenue Performance | Metric | Q2 2025 | Q2 2024 | Change (%) | | :--- | :--- | :--- | :--- | | Total Net Revenues | $379.8M | $438.8M | -13.5% | | Organic Revenue Decline | | | -0.8% | Q2 2025 Adjusted EBITDA by Segment (in thousands) | Segment | Q2 2025 | Q2 2024 | Change (%) | | :--- | :--- | :--- | :--- | | U.S. | $9,930 | $32,668 | -69.6% | | International | $18,221 | $21,655 | -15.9% | | Market Development | $8,948 | $12,875 | -30.5% | | **Total Adjusted EBITDA** | **$20,111** | **$54,726** | **-63.3%** | - The U.S. segment's Adjusted EBITDA decline was primarily driven by an estimated **$7 million to $9 million** adverse impact from the now-ended McDonald's USA partnership and lower transaction volumes[148](index=148&type=chunk) [Capital Resources and Liquidity](index=54&type=section&id=Capital%20Resources%20and%20Liquidity) Liquidity sources include cash and credit facilities, with total debt at $957.0 million, a leverage ratio of 4.5x, and a new policy of no quarterly dividends - The company's leverage ratio increased to **4.5 to 1.00** as of the end of Q2 2025, compared to **3.9 to 1.00** at the end of fiscal 2024, remaining in compliance with financial covenants[182](index=182&type=chunk)[183](index=183&type=chunk) - The company has changed its dividend policy and no longer expects to pay quarterly cash dividends to common stockholders[174](index=174&type=chunk) Key Liquidity and Debt Figures (in millions) | Metric | June 29, 2025 | December 29, 2024 | | :--- | :--- | :--- | | Cash and cash equivalents | $21.3 | $29.0 | | Total long-term debt | $957.0 | $900.9 | [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=58&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company faces market risks from commodity price volatility, interest rate fluctuations on variable debt, and foreign currency exchange rate changes - The company faces commodity price risk for key ingredients (flour, sugar, shortening) and gasoline, which are subject to market volatility and geopolitical factors[188](index=188&type=chunk)[189](index=189&type=chunk) - The company has interest rate risk on **$316.3 million** of unhedged variable-rate debt, where a **100 basis point** change in SOFR would alter annual interest expense by approximately **$3.2 million**[190](index=190&type=chunk) - Foreign currency exchange rate risk is significant, as **33%** of revenues come from outside the U.S., with a **10%** change in key exchange rates impacting H1 2025 revenues by an estimated **$25.2 million**[191](index=191&type=chunk) [Item 4. Controls and Procedures](index=59&type=section&id=Item%204.%20Controls%20and%20Procedures) A new material weakness in goodwill impairment assessment controls led to ineffective disclosure controls as of Q2 2025, replacing a remediated weakness - A previously disclosed material weakness related to journal entry system controls has been successfully remediated[194](index=194&type=chunk) - A new material weakness was identified in Q2 2025 related to the review of inputs and assumptions for the non-routine goodwill impairment assessment[196](index=196&type=chunk) - Due to the new material weakness, the CEO and CFO concluded that the company's disclosure controls and procedures were not effective as of June 29, 2025[195](index=195&type=chunk) PART II. OTHER INFORMATION [Legal Proceedings](index=61&type=section&id=Item%201.%20Legal%20Proceedings) The company is involved in various legal proceedings, with new securities class actions and data breach litigation commencing - The company is subject to various legal proceedings, with details on new litigation that began in Q2 2025 available in Note 12 of the financial statements[201](index=201&type=chunk) [Risk Factors](index=61&type=section&id=Item%201A.%20Risk%20Factors) No material changes to previously disclosed risk factors were reported in the current period - No material changes to risk factors were reported compared to the latest Annual Report on Form 10-K[202](index=202&type=chunk) [Other Items (Items 2, 3, 4, 5, 6)](index=61&type=section&id=Other%20Items) Part II includes no unregistered equity sales, no senior security defaults, no mine safety disclosures, and lists exhibits - The company reported "None" for Item 2 (Unregistered Sales of Equity Securities), Item 3 (Defaults Upon Senior Securities), Item 4 (Mine Safety Disclosures), and Item 5 (Other Information)[203](index=203&type=chunk)[204](index=204&type=chunk)[205](index=205&type=chunk)[206](index=206&type=chunk)

Krispy Kreme recorded a bigger loss in the second quarter after writing down multiple operating segments, along with lower sales https://t.co/42OXg4wIhw ...

Core Insights - Krispy Kreme reported a revenue of $379.77 million for the quarter ended June 2025, reflecting a year-over-year decline of 13.5% and an EPS of -$0.15 compared to $0.05 a year ago [1] - The revenue exceeded the Zacks Consensus Estimate of $376.41 million by 0.89%, while the EPS fell short of the consensus estimate of -$0.04 by 275% [1] Financial Performance - The company’s shares have returned +4.3% over the past month, outperforming the Zacks S&P 500 composite's +1.2% change, and currently holds a Zacks Rank 3 (Hold) [3] - Geographic revenue breakdown shows U.S. revenue at $230.1 million, down 20.5% year-over-year, while International revenue was $132.76 million, up 6% year-over-year [4] Access Points and Estimates - Total Global Points of Access stood at 18,113, slightly below the average estimate of 18,447 [4] - Specific access points in the U.S. included 6 Doughnut Factories, 68 Fresh Shops, and 9,869 DFD Doors, with most figures aligning closely with analyst estimates [4]

Financial Data and Key Metrics Changes - Net revenue for the second quarter was $379.8 million, reflecting a decrease of $64.2 million due to the divestiture of Insomnia Cookies and an organic revenue decline of 0.8% driven by lower transactions related to consumer softness [19] - Adjusted EBITDA was $20.1 million, down from $54.7 million last year, impacted by the divestiture and losses from the ended McDonald's USA partnership [19][14] - The bank leverage ratio was 4.5 at the end of the quarter, below the five leverage ratio limit in the credit facility [24] Business Line Data and Key Metrics Changes - In the U.S. segment, retail transactions improved sequentially, but there was a 3.1% organic revenue decline due to expected consumer softness and strategic closures of underperforming doors [20] - Adjusted EBITDA for the U.S. segment was $9.9 million, down from $32.7 million last year, affected by the McDonald's partnership and retail transaction decline [20] - Within international equity markets, organic revenue grew by 5.9%, driven by growth in Canada, Mexico, and Japan, despite 177 strategic door closures [21] Market Data and Key Metrics Changes - The market development segment saw an organic revenue decline of 14.2%, with growth in new markets like Brazil offset by timing of product and equipment sales [22] - Adjusted EBITDA for the market development segment was $8.9 million, with a margin rate roughly flat year over year at 52.9% [22] Company Strategy and Development Direction - The company is focused on profitable U.S. expansion and capital-light international franchise growth, implementing a comprehensive turnaround plan to deleverage the balance sheet [5][26] - The strategy includes refranchising select international markets and improving returns on capital while expanding margins [5][6] - The marketing focus has shifted to the Original Glazed Doughnut, with a new multimedia campaign launched to drive sales [10] Management's Comments on Operating Environment and Future Outlook - Management acknowledged the challenges faced in recent quarters but expressed confidence in the turnaround plan and the strength of the leadership team [16][12] - The company expects to see benefits from the turnaround plan within the year, with improved EBITDA and positive cash flow anticipated in the second half [39] Other Important Information - The company has halted the quarterly cash dividend and completed the sale of its remaining interest in Insomnia Cookies to pay down debt [5] - A 15% reduction in G&A roles in the support center has been implemented to reduce costs [9] Q&A Session Summary Question: On DFD doors and profitability management - Management emphasized the importance of high traffic and visibility for sustainable sales and mentioned the shift to third-party logistics for predictable costs [29] Question: Productivity in high-cost retail areas - Management acknowledged opportunities for optimizing efficiency in production hubs and improving the DFD footprint [31] Question: Duration risk in refranchising - Management is targeting one to two deals this year in Japan, Mexico, UK, and Australia to deleverage and pay down debt [33] Question: Simultaneous implementation of turnaround components - Management confirmed that all components of the turnaround plan are already underway and expect benefits within the year [38] Question: Rationalizing DFD doors - Management identified 1,500 underperforming doors for closure and plans to replace them with higher sales doors, expecting a small churn of about 5% annually [41] Question: CapEx and capital-light approach - Management indicated that CapEx as a percentage of revenue is expected to decrease as the company moves to a capital-light model [47] Question: Long-term structure of Krispy Kreme - Management reiterated that Krispy Kreme is primarily a growth story, focusing on maximizing shareholder value through franchising and multichannel opportunities [48]

Company Performance - Krispy Kreme reported a quarterly loss of $0.15 per share, which was worse than the Zacks Consensus Estimate of a loss of $0.04, and compared to earnings of $0.05 per share a year ago, indicating an earnings surprise of -275.00% [1] - The company posted revenues of $379.77 million for the quarter ended June 2025, surpassing the Zacks Consensus Estimate by 0.89%, but down from $438.81 million in the same quarter last year [2] - Over the last four quarters, Krispy Kreme has surpassed consensus EPS estimates just once and topped consensus revenue estimates two times [2] Stock Performance - Krispy Kreme shares have lost approximately 65.6% since the beginning of the year, while the S&P 500 has gained 7.9% [3] - The current consensus EPS estimate for the coming quarter is -$0.04 on revenues of $381.23 million, and for the current fiscal year, it is -$0.16 on revenues of $1.55 billion [7] Industry Outlook - The Consumer Products - Staples industry, to which Krispy Kreme belongs, is currently in the bottom 26% of over 250 Zacks industries, indicating a challenging environment [8] - Empirical research shows a strong correlation between near-term stock movements and trends in earnings estimate revisions, which can impact Krispy Kreme's stock performance [5]

Financial Performance - Krispy Kreme's net revenue for Q2 2025 was $3798 million[18] - The company experienced an organic revenue decline of 08% in Q2 2025[18] - GAAP net loss was $4411 million, including $4069 million in non-cash impairment charges[18] - Adjusted EBITDA for Q2 2025 was $201 million[18] - Cash used for operating activities amounted to $325 million[18] Growth and Expansion - Global Points of Access (POA) increased by 2,260, a 143% rise, reaching 18,113[18] - U S organic revenue declined by 31%[38] - International organic revenue grew by 59%[38] - Market Development organic revenue declined by 142%[38] Strategic Initiatives - Krispy Kreme is implementing a turnaround plan focused on profitable U S expansion and capital-light international franchise growth[18] - The company aims to deleverage the balance sheet through refranchising international markets and restructuring the JV in the Western U S [19] - Actions include outsourcing U S logistics and expanding with high-return U S DFD customers[21]

[Executive Summary & Turnaround Plan](index=1&type=section&id=Executive%20Summary%20%26%20Turnaround%20Plan) [Second Quarter 2025 Highlights](index=1&type=section&id=Second%20Quarter%202025%20Highlights) Krispy Kreme reported a significant GAAP net loss in Q2 2025, primarily due to a large impairment charge and the terminated McDonald's partnership | Metric | Q2 2025 Value | Note | | :--- | :--- | :--- | | Net Revenue | $379.8 million | - | | Organic Revenue Decline | 0.8% | YoY | | GAAP Net Loss | $441.1 million | Includes $406.9M in impairment charges | | Adjusted EBITDA | $20.1 million | - | | Global Points of Access (POA) | 18,113 | +14.3% YoY | - The company's Q2 results were primarily impacted by **unsustainable operating costs** related to the McDonald's USA partnership, which ended on July 2, 2025[2](index=2&type=chunk) [Turnaround Plan](index=1&type=section&id=Turnaround%20Plan) The company launched a four-part turnaround plan to deleverage, improve capital returns, expand margins, and drive profitable growth - The turnaround plan is built on four key pillars: * **Refranchising:** Improving financial flexibility by refranchising international markets and restructuring a U.S. joint venture * **Driving Return on Invested Capital:** Reducing capital intensity by leveraging existing assets and focusing on franchisee development * **Expanding Margins:** Increasing operational efficiency, including outsourcing U.S. logistics * **Driving Sustainable, Profitable Growth:** Focusing on profitable revenue streams in the U.S. market[4](index=4&type=chunk) [Financial Performance](index=2&type=section&id=Financial%20Performance) [Consolidated Financial Results (Q2 2025)](index=2&type=section&id=Consolidated%20Financial%20Results%20(Q2%202025)) Consolidated net revenue decreased by **13.5%** in Q2 2025, resulting in a **$441.1 million GAAP Net Loss** primarily from impairment and the McDonald's partnership impact | Metric | Q2 2025 | Q2 2024 | Change | | :--- | :--- | :--- | :--- | | Net Revenue | $379.8M | $438.8M | (13.5)% | | Organic Revenue | $371.7M | $374.6M | (0.8)% | | GAAP Net Loss | $(441.1)M | $(4.9)M | nm | | GAAP Diluted EPS | $(2.55) | $(0.03) | $(2.52) | | Adjusted EBITDA | $20.1M | $54.7M | (63.3)% | | Adjusted EBITDA Margin | 5.3% | 12.5% | (720) bps | | Adjusted Diluted EPS | $(0.15) | $0.05 | $(0.20) | - The **$59.0 million decline** in net revenue was primarily caused by a **$64.2 million reduction** associated with the sale of a majority stake in Insomnia Cookies in Q3 2024[6](index=6&type=chunk) - A non-cash goodwill and other asset impairment charge totaling **$406.9 million** was the main driver of the significant GAAP Net Loss[7](index=7&type=chunk) [Segment Performance (Q2 2025)](index=2&type=section&id=Segment%20Performance%20(Q2%202025)) Segment performance in Q2 2025 was mixed, with U.S. declines from divestiture and partnership termination, and International organic growth [U.S. Segment](index=2&type=section&id=U.S.%20Segment) - Net revenue declined by **20.5%** (**$59.2 million**), primarily due to the **$64.2 million impact** from the sale of Insomnia Cookies[9](index=9&type=chunk) - Organic revenue declined by **3.1%** (**$6.9 million**) due to consumer softness and strategic door closures[9](index=9&type=chunk) - U.S. Adjusted EBITDA decreased by **69.6%** (**$22.7 million**), driven by the Insomnia Cookies sale, the terminated McDonald's partnership, and lower transaction volumes[10](index=10&type=chunk) [International Segment](index=3&type=section&id=International%20Segment) - Organic revenue grew by **5.9%** (**$7.4 million**), led by strong performance in Canada, Japan, and Mexico[11](index=11&type=chunk) - Adjusted EBITDA declined by **15.9%** (**$3.4 million**), with margins falling **360 basis points** to **13.7%**, primarily due to the ongoing turnaround in the U.K[12](index=12&type=chunk) [Market Development Segment](index=3&type=section&id=Market%20Development%20Segment) - Net revenue declined by **30.2%** (**$7.3 million**), and organic revenue declined by **14.2%**, as growth in new markets was offset by the timing of product and equipment sales to franchisees[13](index=13&type=chunk) - Adjusted EBITDA decreased by **30.5%** (**$3.9 million**), with a slight margin decline of **20 basis points** to **52.9%**[13](index=13&type=chunk) [Financial Position and Capital Management](index=3&type=section&id=Financial%20Position%20and%20Capital%20Management) [Balance Sheet and Liquidity](index=3&type=section&id=Balance%20Sheet%20and%20Liquidity) Krispy Kreme maintained **$243.8 million** in total available liquidity as of June 29, 2025, and amended its credit agreement while remaining compliant with covenants - Total available liquidity stood at **$243.8 million**, composed of **$21.3 million** in cash and **$222.5 million** in undrawn credit capacity[16](index=16&type=chunk) - The company amended its credit agreement, adding **$125.0 million** in term loans to pay down its revolving credit facility[15](index=15&type=chunk) | Metric | As of June 29, 2025 | | :--- | :--- | | Net Debt | $939.4 million | | Net Leverage Ratio | 7.5x | [Capital Allocation and Expenditures](index=3&type=section&id=Capital%20Allocation%20and%20Expenditures) The company is actively managing capital by halting dividends, selling Insomnia Cookies for **$75 million** to reduce debt, and pursuing refranchising - The quarterly cash dividend has been halted to preserve capital[17](index=17&type=chunk) - The remaining ownership stake in Insomnia Cookies was sold, generating **$75 million** in cash proceeds used for debt reduction[17](index=17&type=chunk) - The company is actively pursuing refranchising of markets including Australia, New Zealand, Japan, Mexico, and the U.K. to enhance financial flexibility and pay down debt[18](index=18&type=chunk) - Capital expenditures for the first half of 2025 totaled **$54.1 million** (**7.2% of net revenue**), but future investment in new capacity will be curtailed[14](index=14&type=chunk) [Key Business Developments](index=3&type=section&id=Key%20Business%20Developments) [McDonald's USA Partnership Termination](index=3&type=section&id=McDonald's%20USA%20Partnership%20Termination) Krispy Kreme and McDonald's USA mutually terminated their partnership effective July 2, 2025, due to misaligned operating costs - The partnership was terminated effective July 2, 2025, by mutual agreement[19](index=19&type=chunk) - The primary reason for termination was the failure to align Krispy Kreme's operating costs with the unit demand from McDonald's locations[19](index=19&type=chunk) [Goodwill and Other Asset Impairments](index=3&type=section&id=Goodwill%20and%20Other%20Asset%20Impairments) The company recognized **$406.9 million** in non-cash impairment charges in Q2 2025, triggered by stock price decline and revised forecasts - A cumulative, non-cash partial goodwill impairment charge of **$356.0 million** was recognized in Q2 2025[20](index=20&type=chunk) - Impairment indicators included a significant and sustained decline in stock price and market capitalization, and downward revisions to internal forecasts[20](index=20&type=chunk) - Additional non-cash charges of **$22.1 million** for long-lived assets and **$28.9 million** for lease impairment and termination costs were recorded, partly due to the termination of the McDonald's agreement[21](index=21&type=chunk) - The impairment charges do not impact the company's compliance with its debt covenants[22](index=22&type=chunk) [Key Operating Metrics](index=2&type=section&id=Key%20Operating%20Metrics) [Global Points of Access and Hubs](index=2&type=section&id=Global%20Points%20of%20Access%20and%20Hubs) Global Points of Access grew **14.3%** to **18,113** in Q2 2025, including McDonald's locations subsequently closed, and total production hubs increased | Metric | Q2 2025 | Q2 2024 | Change | | :--- | :--- | :--- | :--- | | Global Points of Access | 18,113 | 15,853 | +14.3% | | Total Hubs | 430 | 419 | +2.6% | - The Q2 2025 Global Points of Access count includes approximately **2,400 McDonald's doors** that were exited in Q3 2025[49](index=49&type=chunk) [Sales per Hub and Digital Sales](index=2&type=section&id=Sales%20per%20Hub%20and%20Digital%20Sales) Sales per Hub declined slightly in both U.S. and International segments, while digital sales as a percentage of doughnut shop sales increased to **18.0%** | Metric (Trailing Four Quarters) | Q2 2025 | Q2 2024 | Change | | :--- | :--- | :--- | :--- | | Sales per Hub (U.S.) | $4.9M | $5.0M | (2.0)% | | Sales per Hub (International) | $9.8M | $9.9M | (1.0)% | | Digital Sales % of Doughnut Shop Sales | 18.0% | 16.4% | +160 bps | [Financial Statements (Unaudited)](index=6&type=section&id=Financial%20Statements%20(Unaudited)) [Condensed Consolidated Statements of Operations](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) This section provides the unaudited consolidated statement of operations for the 13 and 26 weeks ended June 29, 2025, detailing revenues, costs, expenses, and net loss [Condensed Consolidated Balance Sheets](index=7&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) This section presents the unaudited consolidated balance sheet as of June 29, 2025, outlining the company's assets, liabilities, and shareholders' equity [Condensed Consolidated Statements of Cash Flows](index=8&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) This section details the unaudited consolidated cash flows from operating, investing, and financing activities for the 26 weeks ended June 29, 2025 [Reconciliation of Non-GAAP Financial Measures](index=9&type=section&id=Reconciliation%20of%20Non-GAAP%20Financial%20Measures) [Reconciliation of Adjusted EBITDA and Adjusted EBIT](index=9&type=section&id=Reconciliation%20of%20Adjusted%20EBITDA%20and%20Adjusted%20EBIT) This section provides a detailed reconciliation from GAAP Net Loss to non-GAAP Adjusted EBIT and Adjusted EBITDA, detailing key adjustments including goodwill impairment - Adjusted EBITDA is reconciled from Net Loss by adding back interest, taxes, D&A, and other items such as share-based compensation, strategic initiative costs, and impairment charges[36](index=36&type=chunk)[40](index=40&type=chunk) [Reconciliation of Adjusted Net (Loss)/Income](index=11&type=section&id=Reconciliation%20of%20Adjusted%20Net%20(Loss)%2FIncome) This section reconciles GAAP Net Loss to non-GAAP Adjusted Net (Loss)/Income and Adjusted EPS, detailing adjustments for goodwill impairment and strategic initiatives - Adjusted Net (Loss)/Income is reconciled from Net Loss by adjusting for items such as share-based compensation, goodwill impairment, strategic initiatives, and the tax impact of these adjustments[38](index=38&type=chunk)[42](index=42&type=chunk) [Reconciliation of Organic Revenue](index=14&type=section&id=Reconciliation%20of%20Organic%20Revenue) This section reconciles total net revenue growth to organic revenue growth by segment, excluding impacts from divestitures, acquisitions, and foreign currency - Organic revenue growth is calculated by excluding the impacts of acquisitions, divestitures (like Insomnia Cookies), and foreign currency translation from total net revenue growth[45](index=45&type=chunk)