Krispy Kreme(DNUT) - 2025 Q1 - Quarterly Results

First Quarter 2024 Performance Overview First Quarter Highlights Krispy Kreme's Q1 2024 exceeded expectations with strong net and organic revenue growth, driven by DFD expansion and digital sales, despite a GAAP net loss - The company announced a significant expansion of its Delivered Fresh Daily (DFD) program through a nationwide rollout with McDonald's, expecting to add over 12,000 new points of access by the end of 2026[3] Q1 2024 Financial Highlights (vs Q1 2023, in Millions) | Financial Highlights | Q1 2024 | Q1 2023 | Change | | :--- | :--- | :--- | :--- | | GAAP | | | | | Net revenue | $442.7M | $419.0M | +5.7% | | Operating income | $11.9M | $14.9M | -20.3% | | Net (loss)/income | $(6.7)M | $1.6M | nm | | Diluted loss per share | $(0.05) | $0.00 | $(0.05) | | Non-GAAP | | | | | Organic revenue | $440.9M | $413.3M | +6.7% | | Adjusted EBITDA | $58.2M | $54.9M | +5.9% | | Adjusted diluted EPS | $0.07 | $0.09 | $(0.02) | - Global Points of Access (POA) saw a significant increase of 19.4%, reaching 14,814 locations, supporting the company's omni-channel strategy[5] Key Operating Metrics Key operating metrics in Q1 2024 showed strong growth, with Global Points of Access up 19.4%, increased sales per hub in U.S. and International markets, and digital sales rising to 23.0% of retail sales Q1 2024 Key Operating Metrics (vs Q1 2023) | Key Operating Metrics | Q1 2024 | Q1 2023 | Change | | :--- | :--- | :--- | :--- | | Global Points of Access | 14,814 | 12,410 | +19.4% | | Sales per Hub (U.S.) TTM | $4.9M | $4.6M | +6.5% | | Sales per Hub (International) TTM | $10.2M | $9.8M | +4.1% | | Digital Sales as a % of Retail Sales | 23.0% | 19.6% | +340 bps | First Quarter 2024 Consolidated Results Q1 2024 consolidated net revenue grew 5.7% with 6.7% organic growth, driven by increased Points of Access, but the company reported a GAAP net loss and a decline in Adjusted Diluted EPS due to higher expenses - Total company organic revenue growth of 6.7% was fueled by a 19.4% increase in Points of Access and successful brand activations like Valentine's Day and St. Patrick's Day doughnuts[8] - Adjusted Diluted EPS declined from $0.09 to $0.07 year-over-year, mainly due to increased depreciation, amortization, and interest expenses related to ongoing investments in global expansion[9] Segment Performance U.S. Segment The U.S. segment saw increased net and organic revenue, driven by DFD network expansion and sales per hub growth, leading to a 10.6% rise in Adjusted EBITDA and margin expansion - U.S. net revenue grew by $14.6 million (5.2%), with organic revenue growth at 7.4%[10] - U.S. Adjusted EBITDA increased 10.6% to $42.6 million, and margins expanded by 70 basis points to 14.4%, attributed to labor and waste optimization[12] - Digital sales as a percentage of U.S. Fresh retail doughnut sales grew by 480 basis points to 19.3%[11] International Segment The International segment achieved strong net and organic revenue growth, driven by a significant increase in Points of Access, with Adjusted EBITDA up 8.2% despite margin declines due to lower U.K. volumes - International net revenue grew 11.4% ($12.8 million), with organic growth of 9.8%, driven by a nearly 24% increase in Points of Access (917 new locations)[13] - Adjusted EBITDA margin declined by about 50 basis points, as continued lower volumes in the U.K. offset strong performance in Canada and Mexico[14] Market Development Segment The Market Development segment experienced a 14.1% revenue decline due to prior year equipment sales timing, yet Adjusted EBITDA grew 3.0% with significant margin expansion to 54.1% - Net revenue and organic revenue both declined by 14.1% ($3.6 million), primarily due to the timing of equipment sales in the prior year[15] - Adjusted EBITDA margins expanded by an impressive 900 basis points to 54.1%, reflecting the impact of lower-margin equipment sales in the prior year and Hub and Spoke model expansion in international franchises[16] Financial Position and Outlook Balance Sheet and Capital Expenditures Q1 2024 capital expenditures totaled $29.1 million, primarily for U.S. expansion, with the company maintaining $133.6 million in liquidity and managing total debt of $946.2 million, extending its primary debt facility maturity to 2028 - Capital expenditures in Q1 2024 were $29.1 million, primarily for investments in the Hub and Spoke model to support the U.S. DFD network expansion[17] - As of March 31, 2024, the company had total available liquidity of $133.6 million, including $33.1 million in cash[18] - Total debt stood at $946.2 million, with net debt at $913.1 million[18][19] Full Year 2024 Financial Guidance Krispy Kreme reaffirmed its full-year 2024 guidance, projecting net revenue growth of 5-7%, organic revenue growth of 6-8%, and Adjusted EBITDA growth of 8-11%, with Adjusted Diluted EPS between $0.27 and $0.31, including Insomnia Cookies operations Full Year 2024 Guidance (vs FY2023, in Millions, except EPS and percentages) | Metric | Guidance Range | | :--- | :--- | | Net Revenue Growth | +5% to +7% | | Organic Revenue Growth | +6% to +8% | | Adjusted EBITDA Growth | +8% to +11% | | Adjusted Diluted EPS | $0.27 to $0.31 | | Income Tax Rate | 26% to 28% | | Capital Expenditures (% of net revenue) | 7% to 8% | | Interest Expense, net | $55M to $65M | - The company is continuing to explore strategic alternatives for its Insomnia Cookies brand, but the 2024 guidance includes its operations[19] Financial Statements & Supplemental Data Condensed Consolidated Statements of Operations The unaudited statement of operations for the 13 weeks ended March 31, 2024, shows total net revenues of $442.7 million, an operating income of $11.9 million, and a net loss of $6.7 million, resulting in a diluted loss per share of $0.05 Condensed Consolidated Statements of Operations (Unaudited, in thousands) | | Quarter Ended March 31, 2024 | Quarter Ended April 2, 2023 | | :--- | :--- | :--- | | Total net revenues | $442,698 | $418,950 | | Operating income | $11,908 | $14,948 | | (Loss)/income before income taxes | $(2,401) | $1,961 | | Net (loss)/income | $(6,663) | $1,644 | | Net loss attributable to Krispy Kreme, Inc. | $(8,534) | $(301) | | Diluted loss per share | $(0.05) | $0.00 | Condensed Consolidated Balance Sheets The unaudited balance sheet as of March 31, 2024, shows total assets of $3.234 billion, slightly down from $3.241 billion at year-end 2023 Condensed Consolidated Balance Sheet Highlights (Unaudited, in thousands) | | As of March 31, 2024 | As of December 31, 2023 | | :--- | :--- | :--- | | Cash and cash equivalents | $33,132 | $38,185 | | Total current assets | $174,014 | $173,581 | | Total assets | $3,234,318 | $3,240,592 | | Total current liabilities | $490,058 | $525,593 | | Total liabilities | $1,986,431 | $1,976,809 | | Total shareholders' equity | $1,247,887 | $1,263,783 | Condensed Consolidated Statements of Cash Flows Q1 2024 saw net cash used for operating activities of $17.7 million, a reversal from the prior year, with net cash used for investing activities at $29.0 million, resulting in a $5.0 million net decrease in cash and negative free cash flow of $46.8 million Condensed Consolidated Statements of Cash Flows (Unaudited, in thousands) | | Quarter Ended March 31, 2024 | Quarter Ended April 2, 2023 | | :--- | :--- | :--- | | Net cash (used for)/provided by operating activities | $(17,705) | $10,365 | | Net cash used for investing activities | $(29,045) | $(16,446) | | Net cash provided by financing activities | $43,577 | $1,808 | | Net decrease in cash | $(5,002) | $(5,646) | | Free cash flow | $(46,769) | $(16,188) | Reconciliation of Non-GAAP Financial Measures This section details GAAP to non-GAAP reconciliations, showing Q1 2024 Net Loss of $6.7 million reconciled to Adjusted EBITDA of $58.2 million and Adjusted Diluted EPS of $0.07 Reconciliation of Net (Loss)/Income to Adjusted EBITDA (in thousands) | | Q1 2024 | Q1 2023 | | :--- | :--- | :--- | | Net (loss)/income | $(6,663) | $1,644 | | Interest expense, net | 13,736 | 11,988 | | Income tax expense | 4,262 | 317 | | Depreciation and amortization | 33,586 | 27,939 | | Share-based compensation | 6,986 | 5,545 | | Strategic initiatives | 4,821 | 13,469 | | Other adjustments | 1,464 | (6,630) | | Adjusted EBITDA | $58,188 | $54,928 | Reconciliation to Adjusted Net Income and Adjusted Diluted EPS (in thousands) | | Q1 2024 | Q1 2023 | | :--- | :--- | :--- | | Net (loss)/income | $(6,663) | $1,644 | | Total adjustments (incl. tax effects) | 19,875 | 15,572 | | Net income attributable to noncontrolling interest | (1,871) | (1,945) | | Adjusted net income attributable to common shareholders - Diluted | $11,321 | $15,261 | | Diluted weighted average common shares outstanding | 171,173 | 169,991 | | Adjusted Diluted EPS | $0.07 | $0.09 | Segment Reporting and Key Metrics This section details segment revenues, organic growth, and key performance indicators, highlighting Q1 2024 total Points of Access reaching 14,814 and a slight increase in the net leverage ratio to 4.2x Segment Revenue and Organic Growth This section details segment revenue contributions and reconciles net to organic revenue growth, showing Q1 2024 total company organic revenue growth of 6.7%, with U.S. and International segments leading in growth Q1 2024 Net Revenue by Segment (in thousands) | Segment | Q1 2024 Net Revenue | Q1 2023 Net Revenue | | :--- | :--- | :--- | | U.S. | $295,935 | $281,344 | | International | $124,750 | $111,988 | | Market Development | $22,013 | $25,618 | | Total | $442,698 | $418,950 | Q1 2024 Organic Revenue Growth % by Segment | Segment | Organic Revenue Growth % | | :--- | :--- | | U.S. | 7.4% | | International | 9.8% | | Market Development | -14.1% | | Total Company | 6.7% | Global Points of Access This section provides a detailed count of global points of access, which reached 14,814 in Q1 2024, primarily driven by an increase in Delivered Fresh Daily (DFD) doors Global Points of Access Breakdown | Point of Access Type | March 31, 2024 | April 2, 2023 | | :--- | :--- | :--- | | Total Shops | 2,239 | 1,976 | | Total DFD Doors | 12,529 | 10,390 | | Total Global Points of Access | 14,814 | 12,410 | Net Debt and Leverage This table outlines the company's net debt calculation and resulting leverage ratio, with net debt at $913.1 million and a net leverage ratio of 4.2x as of March 31, 2024 Net Debt and Leverage Ratio (in thousands, except ratio) | Metric | March 31, 2024 | December 31, 2023 | | :--- | :--- | :--- | | Total long-term debt | $946,213 | $895,617 | | Less: Cash and cash equivalents | $(33,132) | $(38,185) | | Net debt | $913,081 | $857,432 | | Adjusted EBITDA - TTM | $214,884 | $211,624 | | Net leverage ratio | 4.2x | 4.1x |