Krispy Kreme Q3 2026 Earnings Call Transcript

Krispy Kreme (NASDAQ:DNUT) reported third-quarter financial results on Thursday. The transcript from the company’s third-quarter earnings call has been provided below.

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Summary

Krispy Kreme reported a 1% increase in global systemwide sales for Q3, with a target of 2-4% growth by 2026, aiming for $2 billion in sales.

The company is focused on a four-pillar turnaround plan: refranchising, improving returns on capital, expanding margins, and driving U.S. growth.

Refranchising efforts continued with Japan and Western U.S., contributing to reduced net debt. Franchisees now account for 42% of systemwide sales.

Capital expenditure was reduced by 65% year-to-date, supporting positive free cash flow goals for 2026.

Q3 net revenue was $329 million, down 12% due to refranchising, but adjusted EBITDA increased by 13% excluding a prior year’s cyber recovery.

The U.S. segment saw a 0.9% organic revenue increase, driven by fresh delivery and digital channels.

International revenue declined due to the UK, but growth was noted in Canada and other franchise markets.

The company raised its full-year revenue guidance but maintained adjusted EBITDA guidance, highlighting cost management successes.

Krispy Kreme announced a development deal for 33 new shops in NYC and plans to enter Pakistan with 120 new shops over five years.

The company remains focused on expanding its fresh delivery business and plans further franchising in the U.S. and internationally.

Full Transcript

Josh Charlesworth (Chief Executive Officer)

Progress on our turnaround to strengthen the balance sheet and drive sustainable, profitable growth, which gives us the confidence to increase our full-year guidance. Krispy Kreme is a compelling growth story supported by sustained consumer demand for our iconic fresh doughnuts. Even in a dynamic macro environment, unlocking that demand continues to be our priority as we pursue profitable U.S. expansion and capital-light international franchise growth.

In the third quarter, global systemwide sales increased by 1%, and our goal remains to grow by 2% to 4% to more than $2 billion in 2026. Our results demonstrate the success of the actions we are taking to drive sustainable growth and improve profitability in the third quarter. Adjusted EBITDA margin expanded 240 basis points compared to last year when excluding the cyber insurance recovery. Now let’s move to the four pillars of our turnaround plan and the progress we are making against each: number one, refranchising; number two, improving returns on capital; number three, expanding margins; and number four, driving sustainable, profitable U.S. growth. Our first pillar, refranchising, enables us to drive more profitable systemwide sales while accelerating new shop development through a capital-light model. Earlier this year, we completed the refranchising of Japan and the Western U.S., with both transactions contributing to a reduction in net debt.

Today, franchisees generate approximately 42% of our systemwide sales, and we expect that percentage to grow as we continue to pursue additional refranchising opportunities. We are disciplined in selecting the right partners both internationally and in the U.S. to maximize value and position the brand for long-term growth. We recently announced a development agreement with an existing franchisee to open 33 new doughnut shops across the New York City metropolitan area over the next five years.

This is an exciting opportunity to expand our presence in one of the country’s largest consumer markets through our capital-light franchise model. As we look ahead, we will continue to evaluate capital-efficient ways to expand the brand. The second pillar of our turnaround is improving returns on capital across the business. We are reducing capital intensity and making better use of our existing assets while our franchisees invest to expand our footprint. Year to date, we have reduced capex by approximately 65%, a meaningful improvement that supports our goal of generating positive free cash flow in 2026. This year, we have already announced three new international franchise agreements: Estonia, Mauritius, and the Netherlands.

Today we announced a fourth agreement to enter Pakistan with Gray Mackenzie Restaurants to open 120 doughnut shops over the next five years. We are also seeing sustained demand in existing international franchise markets including Brazil, Spain, and recently refranchised Japan. By the end of the third quarter, there were 98 new shop openings, nearly all of which are franchised, led by India, South Korea, and the Middle East. The strong interest in development from franchisees around the world speaks to the strength of the Krispy Kreme brand and the significant opportunity to expand our global footprint through our capital-light franchise model.

We are actively pursuing new ways to expand. Next week, one of our longtime franchisees will open a reimagined shop prototype in Las Vegas designed to bring the Krispy Kreme Hot Light Experience and fresh hot Original Glazed doughnuts to consumers in a smaller shop format. While we’re in the initial phase of testing the new Hot Light Express concept, we are encouraged by the interest we’ve already seen from franchisees as we focus on ways of improving capital returns within our hub-and-spoke model.

The third pillar of our turnaround is expanding margins. We are simplifying the business and taking meaningful costs out of the P&L. These actions are producing significant year-over-year margin improvement, especially in our U.S. segment. In the U.S., we are making doughnuts more efficiently through enhanced production planning, labor optimization, and streamlined hub operations, resulting in a meaningful reduction in labor spending. We’re also increasing delivery efficiency through improved route management and demand planning, as well as optimized production and delivery schedules.

The fourth pillar of our turnaround is sustainable, profitable growth in the U.S. across our doughnut shops, digital channels, and fresh delivery. Our doughnut shops are an important driver of profitable U.S. growth. We continue to see success with our expanded core menu led by the iconic Original Glazed doughnut, along with a steady rotation of seasonal collections and innovative limited-time offerings, including our recent popular Pokémon collection.

Each plays an important role. Our core menu delivers consistency and value, seasonal collections provide variety and new flavors, and limited-time offerings create excitement and cultural relevance. Together, they keep the brand fresh, give consumers new reasons to visit, and drive sustained demand. As we saw last weekend with a successful Halloween, our digital channel continues to be a key driver of U.S. growth as a result of our ongoing improvements to our proprietary digital platforms, including more convenient payment options, as well as the continued growth of our loyalty program, which now has more than 18 million U.S. members.

Since announcing our turnaround plan just over a year ago, we have taken action to improve profitability and position our U.S. Fresh Delivery business for sustainable growth. As a reminder, after a thorough assessment of our Fresh Delivery network last year, we exited approximately 1,500 underperforming doors across the channels we serve today. Since then, we have been adding more profitable, high-volume doors, and Fresh Delivery returned to growth in the third quarter.

We have added 715 net new doors year over year, which have higher average weekly sales than those we exited. In total, together with our franchisees, we now serve approximately 7,700 Fresh Delivery doors across the U.S. Sustainable, profitable growth in Fresh Delivery depends on having the right conditions in place, namely high-traffic locations and prominent in-store visibility. We are gathering insights specific to each channel, including mass, grocery, club, and convenience, to better understand what drives success.

In mass, including Walmart and Target, securing planogram placement with customers drives growth and unlocks digital opportunities. In grocery, more prominent front-of-store placement increases visibility and drives sales. We’re working with several customers to improve our placement and make our doughnuts more accessible to shoppers. Publix is an example of this and has been a key driver of our recent door growth. In club, which includes Costco and Sam’s Club, large store size and seasonal product rotations require a different approach.

At Sam’s Club, we’ve seen success by improving the prominence of our displays, making it easier for customers to find our products. In August, we concluded our latest rotation at Costco in the U.S., and we are now exploring different opportunities with them, including seasonal offerings and roadshows. And finally, in convenience stores, where we sell mostly loose doughnuts, traffic trends are very important. We believe increased fuel prices have been a factor in reduced traffic this year.

As a result, we are reviewing our footprint to optimize our door counts based on where we believe the conditions are right to support sustainable, profitable sales. Overall, we are pleased with the progress in Fresh Delivery and remain focused on adapting our approach to drive sustainable, profitable growth. On the topic of GLP-1 medications, our research shows that Krispy Kreme consumers who use GLP-1s are just as likely as non-users to purchase sweet treats for holidays and special occasions. While we recognize that GLP-1 users generally have lower appetites, our research shows that they have higher purchase consideration for Krispy Kreme. We believe this reflects three factors: quality matters when consumers choose to indulge; Krispy Kreme is typically purchased just two to three times per year, often tied to special occasions; and our fresh doughnuts are often purchased for others, with approximately 80% shared and 40% gifted. We believe our focus on quality, occasional indulgence, and sharing positions us well as consumer habits evolve. For example, our growing Minis category, featuring doughnut minis, Dots, and Mini Crullers, offers consumers compelling value and greater variety in smaller sharing sizes.

As we approach the end of the year, we are pleased with our operational and financial momentum. The actions we have taken are positioning Krispy Kreme for sustainable, profitable long-term growth and delivering the outcomes our turnaround plan was designed to achieve: improved financial flexibility, reduced capital intensity, expanded margins through greater operational efficiency, and improved sustainable, profitable U.S. growth. With that, I will turn the call over to Rafael to review our financial results.

Raphael Duvivier (Chief Financial Officer)

Thank you, Josh. I’m pleased with our continued operational improvements and the strong financial momentum we have experienced this year driven by our turnaround plan. As expected, due to refranchising year to date, net revenue is down to $1 billion, but our adjusted EBITDA of $97 million is up $13 million versus last year, reflecting the benefit of our turnaround actions. Adjusted EBITDA margin improved by 200 basis points to 9.5% and free cash flow increased by $82 million.

Our leverage is now 1.2 turns lower than it was at the end of 2025. Now turning to the third quarter, net revenue was $329 million, down 12% primarily due to refranchising of our Western U.S. and Japan businesses. Organic revenue, which excludes refranchising and FX, was essentially flat. Adjusted EBITDA of $35.3 million decreased 13.1% due primarily to lapping the $9.3 million cyber recovery in the third quarter of last year. Excluding the one-time cyber recovery, our adjusted EBITDA increased 13% and our adjusted EBITDA margin improved by 240 basis points, driven by productivity initiatives across our network and cost controls at the corporate level.

In our U.S. segment, organic revenue increased 0.9% driven by fresh delivery and digital. We continue to take disciplined actions to optimize productivity in our production hubs, which is reflected in more than 10% growth in our sales per hub year over year. As reported, adjusted EBITDA for the U.S. segment declined to $13.9 million. Excluding the $9.3 million cyber-related insurance recovery in the third quarter of last year, our U.S. adjusted EBITDA grew 18% and adjusted EBITDA margin increased 320 basis points, reflecting greater operating efficiencies.

In our international segment, organic revenue was down 5.4% due primarily to declines in the UK, partially offset by growth in Canada. Adjusted EBITDA of $20.1 million was 13.2% lower, driven by the refranchising of Japan. Additionally, our adjusted EBITDA margin for the international business was 16.3%, a slight decrease of 20 basis points. In the UK, we’re starting to see improved profitability following operational improvements we implemented during the summer.

In October, we also implemented a restructuring of our UK production network to increase efficiencies and profitability. In our market development segment, organic revenue increased 14% driven by growth in royalty revenues from the U.S., Middle East, Japan, and Brazil. Adjusted EBITDA increased 54% to $18.5 million due to the refranchising of the Western U.S. and Japan. Adjusted EBITDA margin decreased to 41.6% driven by a higher domestic versus international revenue mix associated with refranchising.

We reported adjusted earnings per share of $0.06, an improvement of $0.05 versus last year. This was driven by a favorable tax rate, our refranchising deals, and cost efficiencies from our turnaround plan, partially offset by the cyber insurance recovery in 2025. Moving to our balance sheet. As I said previously, our net leverage ratio of 5.5 times was 1.2 turns better than at the end of 2025. We are pleased with the progress but continue to view lowering our leverage ratio as a top priority. We expect to do this through net debt reduction and adjusted EBITDA growth and still anticipate our full year net leverage ratio to be below 5.5 times. Free cash flow, which includes approximately $4 million in transaction-related fees, improved by $82 million in the first three quarters of 2026, driven by our focus on reducing capital intensity.

We continue to expect to report positive free cash flow of more than $15 million in 2026. Our year-to-date CapEx of $28.6 million decreased approximately 65% compared to the same period last year. We continue to focus invested capital on repairs and maintenance of existing infrastructure, which is in line with our asset-light business model and should contribute positively to free cash flow generation. Moving to our financial targets, I’m pleased to say we are improving and narrowing guidance for some metrics as laid out in our earnings release. This includes increasing and narrowing our net revenue range to $1.35 to $1.4 billion, maintaining our adjusted EBITDA range of $140 to $150 million despite inflation in global commodities this year, maintaining our systemwide sales growth range of 2% to 4% in constant currency, and lowering and narrowing our CapEx to $40 to $45 million.

Finally, before I close, I wanted to provide context for our 2026 adjusted EBITDA guidance. Our guidance range represents an increase of $25 to $35 million compared to 2025 when excluding the $14.1 million cyber insurance recovery last year and an estimated $11 million of adjusted EBITDA from our WKS and Japan operations that were refranchised in March 2026. We believe this allows investors to better understand our 2026 guidance and the positive impact our turnaround is having in our financials.

Operator, you may now open the line for questions.

OPERATOR

Thank you. We will now be conducting a question-and-answer session. We ask that you please limit yourself to one question and one follow-up. If you would like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star two if you would like to remove your line from the question queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys.

One moment please while we poll for questions. Our first question is from Sarah with Bank of America. Please proceed with your question.

Aisling (Analyst at Bank of America)

Hi, good morning, this is Aisling on for Sarah. Thanks for taking my questions. So you raised the fiscal 26 revenue guide by $100 million at the midpoint, but you held the adjusted EBITDA flat. Can you just walk through what drove the higher revenue outlook and why it doesn’t carry through to EBITDA? Is that mostly just lower-margin product sales to refranchise partners?

Raphael Duvivier (Chief Financial Officer)

Hey, hi. Thanks for the question. This is Raphael. Look, we are pleased we could raise our revenue guidance range—actually tighten it—in such what I call a dynamic macro environment, and with that actually maintaining the EBITDA range guidance. Look, we have worked hard this year to control costs. We believe the financial results combined with our increased revenue guidance speak to the results of the turnaround plan.

Aisling (Analyst at Bank of America)

Just as a follow-up on the New York City development agreement for the 33 shops, it’s kind of the first sizable U.S. franchise development commitment we’ve seen. Should we read that as a template for other company-operated U.S. markets, or is it specific to that franchisee and territory?

Josh Charlesworth (Chief Executive Officer)

We’re really pleased to be able to announce the expansion in New York. This is an existing franchisee we’ve been working with for a few years, but adding more than 30 shops over the next five years. It’ll be exciting to bring Krispy Kreme to more places, make it more convenient for people to access our doughnuts. And in fact, when you look across the U.S., we have great partners across the U.S.—already more than 20 franchisees—our biggest being the WKS Restaurant Group, which is also looking to expand in the western states.

So pleased to work to bring our doughnuts to more places and make it convenient for people to access them.

Aisling (Analyst at Bank of America)

Great. Thanks for the color. I’ll pass it back.

OPERATOR

Our next question is from Brian Harbor with Morgan Stanley. Please proceed with your question.

Brian Harbor (Analyst at Morgan Stanley)

Thanks. Morning, guys. I guess just because there’s so much movement in the P&L right now, it’s a little bit hard to discern this, but just demand generally in the U.S.—how would you characterize that, maybe 3Q versus the start of the year? How do you think it looks into 4Q here?

Josh Charlesworth (Chief Executive Officer)

Yeah. Hi, Brian. Well, we’re seeing sustained consumer demand in, as Raphael described, this dynamic macro environment. The areas where we’re seeing most growth in the U.S. are in our digital and fresh delivery channels. Internationally, it’s with our franchise partners. When you go deeper and look where the growth is being driven, we’re seeing value important to our consumer. We’re seeing strength with our dozens business and, in fact, the promotions with our double dozens, where we provide a discount on the second dozen, performing particularly well. But interestingly, in this environment, Krispy Kreme as a sharing special occasion business also does well. We saw our Pokémon collection was very popular earlier in the quarter and just last weekend we had a successful Halloween.

So overall sustained demand is what we’re seeing.

Brian Harbor (Analyst at Morgan Stanley)

Okay, thanks. Just, I guess currently, and then as we start to think about next year, where are you on COGS inflation across your three major inputs, plus also just trucking? I assume there’s kind of fuel cost that gets passed through. I don’t remember exactly how much and what the timing is, but could you just talk about that a little bit?

Raphael Duvivier (Chief Financial Officer)

Hey, Brian, this is Raphael. Look, inflation I would say is higher, certainly, in both commodities and fuel. If you think about edible oils, we’ve seen what is a significant increase since last quarter. But we have been able to manage that. That’s why we’re keeping guidance. Look, we are not discussing 2027 outlook yet at this time, but our plan is to continue to cover food commodity inflation through cost initiatives and some modest and selective pricing.

OPERATOR

Our next question is from John Tower with Citi. Please proceed with your question.

John Tower (Analyst at Citi)

Hi, this is John Tower. I was wondering if you could maybe provide some color on how volumes have been at big-box retail partners relative to your initial expectations, and how much additional distribution opportunity do you have in the U.S.?

Josh Charlesworth (Chief Executive Officer)

Could you just repeat the question? I just didn’t quite catch it.

John Tower (Analyst at Citi)

Yeah, sure. Sorry. Can you hear me?

Josh Charlesworth (Chief Executive Officer)

Yeah, go for it.

John Tower (Analyst at Citi)

Yeah, if you could just provide some context on volumes of big-box retail partners—how has that tracked relative to your initial expectations, and how much additional distribution opportunity do you have across the U.S.?

Josh Charlesworth (Chief Executive Officer)

Thank you. So by big-box retailers I assume you’re referencing the likes of Walmart and Target, where we have been adding distribution over the last year. We were pleased today to share that our fresh delivery business as a whole is back to growth after the interventions we made last year to make sure it’s sustainable, profitable growth. And those big-box retailers are an important part of that turnaround. We’ve been adding distribution with them because they have higher traffic and because the partners really understand the importance of merchandising and prominence in stores.

So we’re pleased with the momentum we’re seeing with them, and we still see plenty of opportunity. We are not in all the Walmarts or Targets. In fact, we are in less than half of both. So we look forward to continuing to work with them to expand access to our doughnuts.

John Tower (Analyst at Citi)

Thank you.

OPERATOR

Our next question is from Daniel Guillermo with Capital One Securities. Please proceed with your question.

Daniel Guillermo (Analyst at Capital One Securities)

Hi everyone. Thank you for taking my questions. You all have made great inroads with the franchise development growth, and in the opening remarks you mentioned a few new countries that you’re adding as well. So can you just remind us what the operational lift is for you all to stand up a new franchise market in a different country? I’m sure you have a pretty good playbook at this point, so any insights would be helpful?

Josh Charlesworth (Chief Executive Officer)

Yes, we do. We’ve been adding countries to the system for a number of years now. We have a team in Dubai dedicated to supporting those international franchise partners as well as here in North Carolina. We’re well used to helping people source ingredients. We have a very well thought through network across the world and supply chain that helps people open up new markets. As a reminder, we actually still make the equipment here in North Carolina and service it, and so we’re able to support our various partners directly.

And it was exciting today to announce a fourth country for this year as an agreement. We’ve announced this time with Pakistan and the business there that we partner with, Gray Mackenzie Restaurants. They’ve outlined a commitment to 120 new shops in the next five years. So it was a great addition to our pipeline of growth with international franchisees. Thank you.

Daniel Guillermo (Analyst at Capital One Securities)

Okay, awesome, thanks. And then on the 2026 goals from last year, one goal was to target two to three international refranchising deals. You got Japan done earlier this year, but there are still more to go. So can you just talk about how those conversations have changed throughout the year with interest rates rising quickly across the globe? Any color there would be helpful.

Raphael Duvivier (Chief Financial Officer)

Hi Dan, good to hear from you. This is Raphael. Look, as you said, we are pleased with the deals that we did this year. I would say not only Japan but WKS. And as you can see, they are flowing to the P&L as expected. On your comments, look, we still have kept our goal of 2 to 3. We’re still pursuing one additional one. I think it’s important to remember that as we think about partners, we want to make sure that we bring in partners that have capital and we need to commit for growth, and we do deals that are accretive to the P&L from a DCF but also from an EPS perspective, which is what we have accomplished so far. So we’ll keep you guys updated as we progress on that front.

Josh Charlesworth (Chief Executive Officer)

One thing I’ll add is in Japan, obviously we refranchised earlier this year and we’re pleased to see shop openings and growth momentum with a new partner there. And that’s top of mind for us is opening new shops. Opened 98 this year with our franchise partners around the world. So refranchising is an important enabler to grow the brand and expand.

Daniel Guillermo (Analyst at Capital One Securities)

Great, thank you.

OPERATOR

Once again, if you would like to ask a question, please press star one on your telephone keypad. Our next question is from Rahul Kratopally. Please proceed with your question.

Crystal (Analyst)

Hi, good morning, this is Crystal on for Rahul. I wanted to first ask on competition. Given some other sweet treat concepts have been struggling, is there any opportunity for you to market your way into this to take some share?

Josh Charlesworth (Chief Executive Officer)

Well, you know, I focus on what we do best, and we’re pretty differentiated, which is offer awesome fresh doughnuts, particularly for sharing and gifting occasions. This quarter we saw our limited-time collections doing really well, such as the Pokémon and, as I said, the seasonal celebrations. Some other innovation that we brought is smaller sharing sizes to bring variety and smaller portions—smaller sharing portions—for our customers. We have a mini crullers range that’s still relatively new and growing well in our fresh-delivery channel, for example.

So our job is to bring to the consumer what they’re looking for and make it easier for them to find. And we’ve certainly been benefiting from making those doughnuts available in more convenient locations, and so that’ll be our focus and let them make the choice.

Crystal (Analyst)

Perfect. And then also, given the category tailwinds that specialty beverage coffee is seeing, would refreshing the platform make sense or be a priority to improve profitability? And do you see any maybe attachment opportunity?

Josh Charlesworth (Chief Executive Officer)

Oh, we’re very proud of our coffees and beverages, but our focus is naturally on the fresh doughnuts. That’s what we absolutely excel in, welcoming consumers to our doughnut shops, bringing the fresh doughnuts to more convenient locations like our fresh-delivery partners and also online in a digital channel, making it more convenient to pick up. And I tell you, the fourth quarter is our peak season. We’re very focused on meeting that demand for the different celebrations and seasonal moments that people are looking for our doughnuts for.

Crystal (Analyst)

Thank you.

OPERATOR

We have reached the end of the question and answer session. I would like to turn the floor back over to Josh Charlesworth for closing comments.

Josh Charlesworth (Chief Executive Officer)

We are pleased to have delivered another consecutive quarter of significant progress on our turnaround, strengthen the balance sheet, drive sustainable, profitable growth. We’re confident in the foundation we’re building for Krispy Kreme’s next era of growth and believe our results continue to demonstrate that we’re well on our way. Thank you very much for joining us. This concludes today’s teleconference. You may disconnect your lines at this time.

Thank you for your participation.

Disclaimer: This transcript is provided for informational purposes only. While we strive for accuracy, there may be errors or omissions in this automated transcription. For official company statements and financial information, please refer to the company’s SEC filings and official press releases. Corporate participants’ and analysts’ statements reflect their views as of the date of this call and are subject to change without notice.