Krispy Kreme Reports Fourth Quarter and Full Year 2024 Financial Results

Full Year 2024 Net Revenue of $1.7 billion and Full Year Organic Revenue growth of 5.0%

Introduces 2025 guidance

Krispy Kreme, Inc. (NASDAQ:DNUT) ("Krispy Kreme", "KKI", or the "Company") today reported financial results for the fourth quarter and full year ended December 29, 2024.

Fourth Quarter Highlights (vs Q4 2023)

• Net revenue of $404.0 million
• Organic revenue⁽¹⁾ grew 1.8%, to $400.6 million, and was impacted adversely by an estimated 280 basis points from lost revenue linked to the 2024 Cybersecurity Incident
• GAAP net loss of $22.2 million
• Adjusted EBITDA⁽¹⁾ of $45.9 million, impacted adversely by an estimated $10 million impact from the 2024 Cybersecurity Incident
• GAAP operating cash flow of $27.0 million

Full Year Highlights (vs FY 2023)

• Net revenue of $1,665.4 million
• Organic revenue⁽¹⁾ grew 5.0%, to $1,658.1 million, and was impacted adversely by an estimated 70 basis points from lost revenue linked to the 2024 Cybersecurity Incident
• GAAP net income of $3.8 million
• Adjusted EBITDA⁽¹⁾ of $193.5 million, impacted adversely by an estimated $10 million impact from the 2024 Cybersecurity Incident
• GAAP operating cash flow of $45.8 million
• Global Points of Access increased 3,410, or 24.1% to 17,557

"We delivered an 18th consecutive quarter of year-over-year organic sales growth. Excluding the estimated cybersecurity incident impact, results were largely in line with our expectations," said Josh Charlesworth, Krispy Kreme CEO.

"Last quarter, we announced we were aligning our talent and capital to our business priorities, and we have taken significant action. We have restructured our management teams to maximize profitable U.S. expansion and capital-light international growth. We expect to soon award contracts to outsource U.S. logistics. Finally, we have begun a process to evaluate refranchising certain international markets. I believe these changes will drive capital efficient growth, as we continue our transformation into a bigger and better Krispy Kreme."

Fourth Quarter 2024 Consolidated Results (vs Q4 2023)

Krispy Kreme's fourth quarter results reflect the strength of the omni-channel model, delivering net revenue of $404.0 million, a decline of 10.4%, compared to $450.9 million in the same quarter last year primarily due to the sale of a majority ownership stake of Insomnia Cookies in the third quarter of 2024 ($101 million impact) and the 2024 Cybersecurity Incident (estimated $11 million impact). Organic revenue grew 1.8%, driven by the Company's first quarter of Delivered Fresh Daily ("DFD") sales in excess of $100 million worldwide. Organic revenue was impacted adversely by an estimated 280 basis points from lost revenue linked to the 2024 Cybersecurity Incident.

GAAP net loss was $22.2 million, compared to income in the prior year of $1.9 million. GAAP Diluted Loss per Share was $(0.13), a decline of $(0.15) from the same quarter last year.

Global Points of Access grew 24.1%, linked to the Company's accelerating U.S. expansion now reaching more than 1,900 McDonald's restaurants with daily deliveries of Krispy Kreme doughnuts, alongside growth internationally.

Adjusted EBITDA in the quarter declined 28.4% to $45.9 million, linked to an estimated $10 million dollar impact from the 2024 Cybersecurity Incident, with Adjusted EBITDA margins contracting 280 basis points to 11.4%. Adjusted EBITDA Margin reflects an estimated 210 basis point negative impact from the 2024 Cybersecurity Incident.

Adjusted Net Income, diluted declined to $1.2 million in the quarter from $15.1 million in the same quarter last year. Adjusted EPS declined $0.08 to $0.01 from $0.09 in the same quarter last year, due to increased interest expense and depreciation and amortization and an estimated impact of $0.04 due to the 2024 Cybersecurity Incident.

Full Year 2024 Consolidated Results (vs FY 2023)

Krispy Kreme's full year results reflect the sale of a majority ownership stake of Insomnia Cookies, as net revenue declined 1.2% to $1.67 billion in 2024, compared to $1.69 billion in the prior year. GAAP net income was $3.8 million, compared to a loss of $36.6 million. GAAP Diluted EPS was $0.02 compared to a loss of $0.23.

Total company organic revenue grew 5.0%, and was impacted adversely by an estimated 70 basis points from lost revenue due to the 2024 Cybersecurity Incident. Organic revenue growth was driven by Global Points of Access growth, strong marketing activations, and pricing actions.

Adjusted EBITDA declined 8.6% to $193.5 million, primarily linked to the sale of a majority ownership stake of Insomnia Cookies and an estimated $10 million impact from the 2024 Cybersecurity Incident. Adjusted Net Income, diluted declined to $19.2 million from $46.2 million in the prior year. Adjusted EPS declined $0.16 to $0.11 from $0.27 in the prior year, due to increased depreciation and amortization, as we invested in our global expansion as well as higher tax rates with a greater portion of earnings generated in higher tax rate jurisdictions.

Diluted weighted average common shares outstanding for the full year 2024 were 171.5 million, compared to 170.5 million for the full year 2023.

Fourth Quarter 2024 Segment Results (vs Q4 2023)

U.S.: In the U.S. segment, net revenue declined $50.9 million, or 17.2%, largely attributable to the sale of Insomnia Cookies ($57.4 million impact), a decline in retail sales, and the 2024 Cybersecurity Incident; partially offset by growth in the DFD business. Organic revenue declined by 1.2%, with an estimated headwind of 460 basis points attributable to the 2024 Cybersecurity Incident. Sales per Hub in the U.S. remained consistent at $4.9 million and DFD average sales per door per week decreased, as expected, and were $631, driven by changing customer mix.

U.S. Adjusted EBITDA decreased 44.0% to $23.6 million with Adjusted EBITDA margin contraction of 460 basis points to 9.6%, of which an estimated 350 basis points were attributable the 2024 Cybersecurity Incident.

International: In the International segment, net revenue grew $7.4 million, or 5.7%. International organic revenue grew 7.8%, driven by points of access growth of 648, or 14%, and continued premiumization efforts.

International Adjusted EBITDA declined 7.7% to $25.7 million with adjusted EBITDA margin declining approximately 270 basis points, as strength in Australia was offset by lower volume in the U.K. leading to deleveraging.

Market Development: In the Market Development segment, net revenue declined $3.4 million, or 14.2%, driven by the impact of franchise acquisitions. Organic revenue decline in the segment was 0.7%.

Market Development Adjusted EBITDA grew 6.8% to $11.9 million. Adjusted EBITDA margins expanded to 57.8%, driven by favorable sales mix and selling, general and administrative expense improvement.

Balance Sheet and Capital Expenditures

During the fourth quarter 2024, the Company invested $33.9 million in capital expenditures, driven primarily by investments in the Hub and Spoke model for the U.S. expansion of the DFD network. For the full year 2024, capital expenditures as a percentage of revenue were 7.25%.

In the full year 2024, the Company reduced its supply chain financing liabilities by $44.3 million, including a $23.2 million impact from the Insomnia Cookies divestiture. The company generated Operating Cash Flow of $45.8 million in the year.

2024 Cybersecurity Incident

As previously disclosed, unauthorized activity on a portion of our information technology systems resulted in the Company experiencing certain operational disruptions, including with online ordering in parts of the U.S. (the "2024 Cybersecurity Incident"). Online ordering, retail shops, and core business functions are now fully operational. The incident materially affected the Company's business operations and is reasonably likely to materially impact the Company's results of operations and financial condition. In the fourth quarter of 2024, we incurred approximately $3 million of remediation expenses related to the 2024 Cybersecurity Incident. In addition, we estimate that we lost revenue within our U.S. segment in an amount of $11 million related to the incident with a corresponding estimated $10 million impact on Adjusted EBITDA (includes margin on the aforementioned lost revenues, as well as operational inefficiencies). We expect to continue to incur costs in full year 2025 related to the incident, including operational inefficiencies early in the first quarter and costs related to fees for our cybersecurity experts and other advisors. The Company holds cybersecurity insurance that is expected to offset a portion of the losses and costs from the incident.

2025 Financial Outlook

Krispy Kreme issues the following guidance for the full year 2025 (vs FY2024)

• Net Revenue of $1,550 to $1,650 million
• Organic Revenue growth⁽¹⁾ of +5% to +7%
• Adjusted EBITDA⁽¹⁾ of $180 to $200 million
• Adjusted EPS⁽¹⁾ of $0.04 to $0.08
• Income Tax rate between 32% and 36%
• Capital Expenditures of 6% to 7% of net revenue
• Interest Expense, net of $65 million to $75 million

The company expects leverage to trend towards 4.0x by year end 2025.

Definitions

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

• Global Points of Access: Reflects all locations at which fresh doughnuts can be purchased. We define global points of access to include all Hot Light Theater Shops, Fresh Shops, Carts and Food Trucks, DFD Doors (which includes Delivered Fresh Daily ("DFD") branded cabinets and merchandising units within high traffic grocery and convenience stores, quick service or fast casual restaurants ("QSR"), club memberships, and drug stores) and Cookie Bakeries (through the date of the Insomnia cookies divestiture), and other points at which fresh doughnuts can be purchased 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 and by asset type.
• 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.
• Hubs with Spokes: Reflects Hubs currently producing product for other Fresh Shops, Carts and Food Trucks, or DFD Doors, and excludes Hubs not currently producing product for other shops, Carts and Food Trucks, or DFD Doors.
• 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 is a measure focused on the Krispy Kreme doughnut business and includes product sales generated from our Hot Light Theater Shops, Fresh Shops, Carts and Food Trucks, DFD Doors, and digital channels and excludes sales from Cookie Bakeries and Branded Sweet Treats (through the date of the Insomnia cookies divestiture and Branded Sweet Treats exit, respectively). Fresh Revenues from Hubs with Spokes equals the Fresh Revenues derived from Hubs with Spokes.
• 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 and webcast at 8:30 AM Eastern Time today to discuss its results for the fourth quarter of 2024. To register for the conference call, please use this link. After registering, confirmation will be sent through email, including dial-in details and unique conference call codes for entry. To listen to the live webcast and Q&A, visit the Krispy Kreme investor relations website at investors.krispykreme.com. A replay 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.

Investor Relations

[email protected]

Financial Media

Edelman Smithfield for Krispy Kreme, Inc.

Ashley Firlan & Ashna Vasa

[email protected]

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 40 countries through its unique network of fresh doughnut shops, partnerships with leading retailers, and a rapidly growing digital business with more than 17,500 fresh points of access. 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 and follow us on social: X, Instagram and Facebook.

Cautionary Note Regarding Forward-Looking Statements

This press release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements can be identified by the use of forward-looking terminology, including terms such as "plan," "believe," "may," "continue," "guidance," "could," "will," "should," "would," "anticipate," "estimate," "expect," "intend," "outlook," "objective," "seek," "strive," "working towards" or, in each case, the negatives of these words, comparable terminology, or similar references to future periods; however, statements may be forward-looking whether or not these terms or their negatives are used. Forward-looking statements are not 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 in this press release. We consider the assumptions and estimates on which our forward-looking statements are based to be reasonable, but they are subject to various risks and uncertainties relating to our operations, financial results, financial conditions, business, prospects, future plans and strategies, projections, liquidity, the economy, and other future conditions. Therefore, you should not place undue reliance on any of these forward-looking statements. Important factors could cause our actual results to differ materially from those contained in forward-looking statements, including, without limitation: food safety issues, including risks of food-borne illnesses, tampering, contamination, and cross-contamination; impacts from the 2024 Cybersecurity Incident or any other material failure, inadequacy, or interruption of our information technology systems, including breaches or failures of such systems or other cybersecurity or data security-related incidents; any harm to our reputation or brand image; changes in consumer preferences or demographic trends; the impact of inflation or changes in foreign exchange rates; our ability to execute on our omni-channel business strategy; regulatory investigations, enforcement actions or material litigation; and other risks and uncertainties described under the heading "Risk Factors" in our Annual Report on Form 10-K filed with the Securities and Exchange Commission ("SEC") and in other filings we make from time to time with the SEC. These forward-looking statements are made only as of the date of this document, and we undertake no obligation to publicly update or revise any forward-looking statement whether as a result of new information, future events, or otherwise, except as may be required by law.

Non-GAAP Measures

This press release includes certain financial information that is not presented in conformity with accounting principles generally accepted in the U.S. ("GAAP"). These non-GAAP financial measures including organic revenue growth/(decline), Adjusted EBITDA, Adjusted EBITDA margin, Adjusted EBIT, Adjusted Net Income, Diluted, Adjusted EPS, Free Cash Flow, Net Debt, Fresh Revenue from Hubs with Spokes and Sales per Hub. These non-GAAP financial measures are not standardized, and it may not be possible to compare these financial measures with other companies' non-GAAP financial measures having the same or similar names, 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 or a substitute for results reported under GAAP. In order to facilitate a clear understanding of our consolidated historical operating results, we urge you to review our non-GAAP financial measures in conjunction with our historical consolidated financial statements and notes thereto filed with the SEC and not to rely on any single financial measure.

The Company does not provide reconciliations of forward-looking non-GAAP financial measures to the most directly comparable GAAP financial measure because it is unable to predict with reasonable certainty or without unreasonable effort non-recurring items, such as those reflected in our reconciliation of historic numbers. The variability of these items is unpredictable and may have a significant impact.

See "Reconciliation of Non-GAAP Financial Measures" below for a reconciliation of the non-GAAP financial measures to the most directly comparable GAAP financial measure.

Krispy Kreme, Inc.

Reconciliation of Non-GAAP Financial Measures

(unaudited and in thousands, except per share amounts)

We define "Adjusted EBITDA" as earnings before interest expense, net, income tax expense, and depreciation and amortization, with further adjustments for share-based compensation, certain strategic initiatives, acquisition and integration expenses, and certain other non-recurring, infrequent or non-core income and expense items. Adjusted EBITDA is a principal metric that management uses to monitor and evaluate operating performance and provides a consistent benchmark for comparison across reporting periods. "Adjusted EBITDA margin" reflects Adjusted EBITDA as a percentage of net revenues.

We define "Adjusted EBIT" as earnings before interest expense, net and income tax expense, with further adjustments for share-based compensation, certain strategic initiatives, acquisition and integration expenses, and certain other non-recurring, infrequent or non-core income and expense items. Adjusted EBIT is a principal metric that management uses to monitor and evaluate operating performance and provides a consistent benchmark for comparison across reporting periods.

We define "Adjusted Net Income, Diluted" as net income/(loss) attributable to common shareholders, adjusted for interest expense, share-based compensation, certain strategic initiatives, acquisition and integration expenses, amortization of acquisition-related intangibles, the tax impact of adjustments, and certain other non-recurring, infrequent or non-core income and expense items. "Adjusted EPS" is Adjusted Net Income, Diluted converted to a per share amount.

Adjusted EBITDA, Adjusted EBITDA margin, Adjusted EBIT, Adjusted Net Income, Diluted, and Adjusted EPS have certain limitations, including adjustments for income and expense items that are required by GAAP. In evaluating these non-GAAP measures, you should be aware that in the future we will incur expenses that are the same as or similar to some of the adjustments in this presentation, such as share-based compensation. Our presentation of these non-GAAP measures should not be construed to imply that our future results will be unaffected by any such adjustments. Management compensates for these limitations by relying on our GAAP results in addition to using these non-GAAP measures supplementally.

Organic revenue growth measures our revenue growth trends excluding the impact of acquisitions, divestitures, and foreign currency, and we believe it is useful for investors to understand the expansion of our global footprint through internal efforts. We define "organic revenue growth" as the growth in revenues, excluding (i) acquired shops owned by us for less than 12 months following their acquisition, (ii) the impact of foreign currency exchange rate changes, (iii) the impact of shop closures related to restructuring programs such as the shop portfolio optimization program initiated for Krispy Kreme U.S. during fiscal 2022, (iv) the impact of the Branded Sweat Treats business exit, (v) the impact of the divestiture of Insomnia Cookies, and (vi) revenues generated during the 53^rd week for those fiscal years that have a 53^rd week based on our fiscal calendar.