Krispy Kreme(US:DNUT)2024-11-08 01:55Financial Performance - For the quarter ended September 29, 2024, net revenues were $379.9 million, a decrease of 6.8% compared to $407.4 million for the same period in 2023[109]. - The company reported a net income attributable to Krispy Kreme, Inc. of $39.6 million, compared to a net loss of $40.5 million in the prior year, representing a 197.8% improvement[109]. - Adjusted EBITDA for the quarter was $34.7 million, down 20.7% from $43.7 million in the same quarter last year[109]. - Total net revenues for the quarter ended September 29, 2024, decreased by $27.5 million, or approximately 6.8%, compared to the same quarter in 2023, primarily due to a $43.5 million reduction from the divestiture of Insomnia Cookies[145]. - The company reported a gain on divestiture of Insomnia Cookies amounting to $(87,128,000) for the quarter ended September 29, 2024[136]. - Net income for the quarter ended September 29, 2024, was $37,572,000, compared to a net loss of $(40,258,000) for the quarter ended October 1, 2023[136]. - Adjusted net loss attributable to common shareholders (diluted) was $(2,498) for the quarter ended September 29, 2024, compared to $4,406 for the quarter ended October 1, 2023[136]. Revenue Growth - The company achieved 3.5% organic revenue growth for the quarter and 6.1% for the three quarters ended September 29, 2024[109]. - Organic revenue growth was $12.6 million, or approximately 3.5%, driven by successful execution of the omni-channel growth strategy and increased pricing of approximately 4%[145]. - The U.S. segment net revenue declined by $31.8 million, or approximately 12.2%, while organic revenue increased by $5.5 million, or approximately 2.5%[146]. - The International segment net revenue grew by $4.6 million, or approximately 3.7%, with organic revenue growth of $5.3 million, or approximately 4.2%[147]. Expansion and Development - Krispy Kreme added 244 new Global Points of Access in Q3 2024, bringing the total to 15,811[111]. - The company expanded its DFD network by adding 210 DFD Doors globally, primarily in the U.S., contributing to a 2.5% organic revenue growth in the U.S. segment[111]. - The company opened its first franchise shops in Morocco and plans to expand into Brazil, Spain, and Germany in the future[114]. - As of September 29, 2024, the total number of Hubs increased to 423, up from 408 in the previous year, representing a growth of approximately 3.7%[125]. - The U.S. segment saw an increase in Hot Light Theater Shops to 230, compared to 222 in the prior year, marking a growth of 3.6%[125]. - The number of Hubs with Spokes in the U.S. segment increased to 152, up from 148 in the previous year, indicating a growth of 2.7%[125]. - The total number of Doughnut Factories in the U.S. increased to 6, up from 4 in the previous year, representing a 50% growth[125]. Strategic Initiatives and Expenses - The company reported strategic initiative expenses of $11.4 million for the quarter, compared to $5.9 million in the same quarter last year, indicating an increase of approximately 93.2%[134]. - The company incurred strategic initiatives expenses of $11,426,000 for the quarter ended September 29, 2024, compared to $5,895,000 for the quarter ended October 1, 2023[136]. - The company reported acquisition and integration expenses of $1,938,000 for the quarter ended September 29, 2024, compared to $49,000 for the quarter ended October 1, 2023[136]. Operating Costs and Expenses - Operating expenses decreased by $3.4 million, or 1.7%, but as a percentage of revenue, they increased by approximately 260 basis points to 50.6%[151]. - Selling, general and administrative expenses increased by $2.8 million, or 4.1%, with SG&A as a percentage of revenue rising to 18.7%[152]. - Interest expense increased by $3.5 million, or 27.1%, primarily due to the maturity of prior interest rate swap agreements[155]. - Product and distribution costs decreased by $19.6 million, or 5.9%, as a percentage of revenue improved by approximately 210 basis points to 24.6%[171]. - Operating expenses increased by $33.8 million, or 5.9%, primarily due to labor cost inflation and investments to support growth, with operating expenses as a percentage of revenue rising to 48.3%[173]. Cash Flow and Financing - Cash provided by operating activities totaled $18.8 million, a decrease of $25.2 million compared to the first three quarters of fiscal 2023[193]. - Cash used for financing activities totaled $77.3 million, primarily driven by the pay down of long-term debt with proceeds from the divestiture of Insomnia Cookies[196]. Market and Commodity Risks - The company experienced commodity inflation globally during Q3 of fiscal 2024, particularly in the costs of flour, sugar, and shortening[209]. - The company has implemented strategies to manage inflationary cost increases, including rapid inventory turnover and reduced inventory waste[209]. - The company is exposed to fluctuations in gasoline prices for delivery vehicles and may purchase commodity futures contracts to mitigate this risk[210]. - The company does not engage in speculative foreign currency or hedging transactions[213].