Krispy Kreme(DNUT) - 2026 Q2 - Quarterly Results

Executive Summary & Turnaround Plan Second Quarter 2025 Highlights 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] Turnaround Plan 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] Financial Performance Consolidated Financial Results (Q2 2025) 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] - A non-cash goodwill and other asset impairment charge totaling $406.9 million was the main driver of the significant GAAP Net Loss[7] Segment Performance (Q2 2025) Segment performance in Q2 2025 was mixed, with U.S. declines from divestiture and partnership termination, and International organic growth U.S. Segment - Net revenue declined by 20.5% ($59.2 million), primarily due to the $64.2 million impact from the sale of Insomnia Cookies[9] - Organic revenue declined by 3.1% ($6.9 million) due to consumer softness and strategic door closures[9] - 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] International Segment - Organic revenue grew by 5.9% ($7.4 million), led by strong performance in Canada, Japan, and Mexico[11] - 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] Market Development Segment - 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] - Adjusted EBITDA decreased by 30.5% ($3.9 million), with a slight margin decline of 20 basis points to 52.9%[13] Financial Position and Capital Management Balance Sheet and Liquidity 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] - The company amended its credit agreement, adding $125.0 million in term loans to pay down its revolving credit facility[15] | Metric | As of June 29, 2025 | | :--- | :--- | | Net Debt | $939.4 million | | Net Leverage Ratio | 7.5x | Capital Allocation and Expenditures 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] - The remaining ownership stake in Insomnia Cookies was sold, generating $75 million in cash proceeds used for debt reduction[17] - 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] - 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] Key Business Developments McDonald's USA Partnership Termination 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] - The primary reason for termination was the failure to align Krispy Kreme's operating costs with the unit demand from McDonald's locations[19] Goodwill and Other Asset Impairments 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] - Impairment indicators included a significant and sustained decline in stock price and market capitalization, and downward revisions to internal forecasts[20] - 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] - The impairment charges do not impact the company's compliance with its debt covenants[22] Key Operating Metrics Global Points of Access and Hubs 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] Sales per Hub and Digital Sales 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) Condensed Consolidated Statements of Operations 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 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 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 Reconciliation of Adjusted EBITDA and Adjusted EBIT 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][40] Reconciliation of Adjusted Net (Loss)/Income 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][42] Reconciliation of Organic Revenue 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]