Krispy Kreme, Inc. (DNUT)

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion and analysis of our financial condition and results of operations should be read together with our unaudited Condensed Consolidated Financial Statements and related notes included elsewhere in this Quarterly Report on Form 10-Q (this “Form 10-Q”), as well as our audited Consolidated Financial Statements and related notes included in our Annual Report on Form 10-K, and in other reports filed subsequently with the U.S. Securities and Exchange Commission (“SEC”).

Cautionary Note Regarding Forward-Looking Statements

Certain information included in this Form 10-Q is forward-looking within the meaning of the Private Securities Litigation Reform Act of 1995, and involves risks, assumptions, and uncertainties that could cause actual results to differ materially from those expressed or implied by forward-looking statements. Forward-looking statements can be identified by use of forward-looking terminology, including terms such as “plan,” “believe,” “may,” “continue,” “could,” “will,” “should,” “would,” “anticipate,” “attempt,” “estimate,” “expect,” “intend,” “objective,” “seek,” “pursue,” “strive,” or, the negatives of these words, comparable terminology, or other 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 herein. We consider the assumptions and estimates on which 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 any 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; our ability to execute our business strategy, including our turnaround plan and growth through international development with strategic partners and profitable expansion of our fresh delivery and digital channels; our ability to realize the anticipated benefits from past or potential future strategic transactions (including refranchising); failure by our franchisees, subfranchisees, or third-party service providers to operate effectively and in compliance with our standards and applicable law; any harm to our reputation or brand image; negative impacts on our business due to changes in consumer spending habits, consumer preferences, or demographic trends; our ability to open new and maintain existing shops and points of access both domestically and internationally; disruptions to our and our franchisees’ supply chain, including the loss of or failure to perform by single-source or limited suppliers, vendors, distributors, or manufacturers; our significant indebtedness and our ability to meet the financial and other covenants under our credit facilities; changes in the cost of raw materials and fuel or other commodities, including due to import and export requirements (including tariffs), inflation, fluctuations in foreign exchange rates, or heightened geopolitical tensions (including the recent Iran conflict); our ability to recruit and retain key personnel; failure to develop or maintain effective internal control over financial reporting or disclosure controls and procedures; adverse regulatory actions or publicity concerning food or occupational safety, food quality, health, and other issues or regulatory investigations, enforcement actions, or material litigation; and other risks and uncertainties described under the heading “Risk Factors” and elsewhere in our Annual Report on Form 10-K, filed by us with the 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.

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Overview

We believe Krispy Kreme is one of the most beloved and well-known sweet treat brands in the world. Krispy Kreme operates in more than 40 countries through its unique network of shops (“Doughnut Shops”), partnerships with leading retailers, and growing digital business. Our purpose is to touch and enhance lives through the joy that is Krispy Kreme. We are an omni-channel business that focuses on fresh, high-quality doughnuts with 15,665 points of access globally as of the end of the second quarter of fiscal 2026. We refer to the points of access where consumers can purchase our doughnuts as our “Global Points of Access” or, when referring to points of access in a particular region or segment, “Points of Access.” We sell doughnuts to consumers through three main channels: (1) Hot Light Theater Shops and Fresh Shops, (2) fresh delivery, and (3) digital.

The following table presents a summary of our financial results for the periods presented:

(1)Organic revenue decline was 0.3% and 1.5%, respectively, in the quarter and two quarters ended June 28, 2026. Refer to “Results of Operations” below for more information on and the calculation of organic revenue growth/(decline).

(2)Refer to “Key Performance Indicators and Non-GAAP Measures” below for more information as to how we define and calculate Adjusted EBITDA and Adjusted Net Income/(Loss), Diluted and for a reconciliation of Adjusted EBITDA and Adjusted Net Income/(Loss), Diluted to the most comparable measure calculated under GAAP.

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Significant Events and Transactions

Turnaround Plan

The Company’s comprehensive turnaround plan, announced in August 2025, is designed to deleverage the balance sheet and deliver sustainable, profitable growth. The four components of the plan and certain progress made on each component are as follows:

•Refranchising: Improve financial flexibility through pursuit of opportunities to refranchise certain international equity markets. In the first two quarters of fiscal 2026, we restructured our consolidated subsidiary in the western U.S., W.K.S. Krispy Kreme, to a minority ownership interest and completed the sale of our operations in Japan. We continue to evaluate additional refranchising opportunities and remain focused on identifying the right partners both in international markets and the U.S. to maximize value and position the Company for long-term growth.

•Improving return on invested capital: Reduce capital intensity by using existing assets and focusing on franchise development. During the first two quarters of fiscal 2026 capital expenditures decreased by $38 million when compared to the first two quarters of 2025, and we expect to continue to reduce capital investment in fiscal 2026 compared to fiscal 2025. We are also making selective, capital-light investments in geographies which currently have limited access to our products or where we have insufficient production to meet demand. This includes expansion into new international franchise markets. We entered into agreements for three new markets, the Netherlands, Estonia, and Mauritius, during the first two quarters of fiscal 2026. In the first half of the year, we opened 59 shops, nearly all franchised and remain on track to open at least 100 new shops in 2026.

•Expanding profit margins: Expand profit margins through greater operational efficiency. During the first two quarters of fiscal 2026, we continued our focus in the U.S. on making doughnuts more efficiently through optimizing production, streamlining Hub operations, and improving labor productivity. In addition, we continued our focus on delivering fresh doughnuts more efficiently through improved route management, improved demand planning, optimization of production and delivery schedules, and outsourced U.S. logistics to third-party logistics (“3PL”) carriers which we completed in the second quarter of fiscal 2026.

•Driving sustainable, profitable growth: Pursue U.S. growth based upon sustainable and profitable revenue streams. During the first two quarters of fiscal 2026, the number of fresh delivery doors, inclusive of both Company- and franchise-operated locations, increased 448 doors in the U.S. with strategic partners.

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Digital, Brand, and Innovation

We continue to prioritize expanding our digital channel sales, which grew in the first two quarters of fiscal 2026 compared to the first two quarters of fiscal 2025. Growth in our digital channel is due to improvements in our branded digital platform as well as increasing product availability through third party digital channels, including delivery apps and our customers’ digital platforms. Innovation is also a significant driver of frequency as we create promotions and products that attract media outlets to our brand across our Global Points of Access. Additionally, we deliver new product experiences that align with seasonal and trending consumer and societal interests and create positive connections through simple, frequent, brand-focused offerings that encourage shared experiences. During the second quarter of fiscal 2026, we delivered the joy that is Krispy Kreme by spotlighting our core offerings such as the Original Glazed doughnut, supplemented by specialty doughnut offerings and seasonal activations, including MilkBar Collection, Mother’s Day with minis for Mom, Masters of the Universe, Match Day Dozen, and many others around the world.

Termination of the Business Relationship Agreement with McDonald’s USA

On June 24, 2025, we and McDonald’s USA announced that our companies jointly decided to terminate the Business Relationship Agreement effective July 2, 2025, resulting in the reduction of approximately 2,400 fresh delivery doors in the third quarter of fiscal 2025. We worked to quickly remove costs related to the McDonald’s USA partnership. Refer to Note 1, Description of Business and Summary of Significant Accounting Policies, to the Condensed Consolidated Financial Statements included in Item 1 of Part I of this Form 10-Q for further information (the “Condensed Consolidated Financial Statements”).

2024 Cybersecurity Incident

As previously disclosed, during the fourth quarter of fiscal 2024, unauthorized activity on a portion of our information technology systems resulted in our experiencing certain operational disruptio

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Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion and analysis of our financial condition and results of operations should be read together with our audited Consolidated Financial Statements and related notes included elsewhere in this Annual Report. This section of the Annual Report generally discusses fiscal 2025 and fiscal 2024 items and year-to-year comparisons of fiscal 2025 to fiscal 2024. Discussions of fiscal 2023 items and year-to-year comparisons of fiscal 2024 and fiscal 2023 are not included in this Annual Report and can be found in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report for the year ended December 29, 2024. This discussion contains forward-looking statements that involve risks and uncertainties. For more information, see the section of this Annual Report titled “Cautionary Note Regarding Forward-Looking Statements.”

Overview

We operate and report financial information on a 52 or 53-week fiscal year ending on the Sunday closest to December 31. Fiscal 2025 reflects our results of operations for the 52-week period ended December 28, 2025. Fiscal 2024 reflects our results of operations for the 52-week period ended December 29, 2024.

We conduct our business through the following three reported segments:

•U.S.: Includes all Company-owned operations in the U.S., and Insomnia Cookies Bakeries globally through the date of deconsolidation (refer to Note 3, Acquisitions and Divestitures, to the audited Consolidated Financial Statements for more information);

•International: Includes all Company-owned operations in the U.K., Ireland, Australia, New Zealand, Mexico, and Canada, as well as Japan for all periods covered by this Annual Report; and

•Market Development: Includes franchise operations across the globe.

The following table presents a summary of our financial results for the periods presented:

(1)Organic revenue decline was (1.3)% in fiscal 2025. Refer to “Results of Operations” below for more information on and the calculation of organic revenue growth.

(2)“nm” as used here and within “Results of Operations” means “not meaningful.”

(3)Refer to “Key Performance Indicators and Non-GAAP Measures” below for more information as to how we define and calculate Adjusted EBITDA, Adjusted EBIT, and Adjusted Net (Loss)/Income, Diluted and for a reconciliation of Adjusted EBITDA, Adjusted EBIT, and Adjusted Net (Loss)/Income, Diluted to net (loss)/income, the most comparable measure calculated under accounting principles generally accepted in the U.S. (“GAAP”).

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Significant Events and Transactions

Our Turnaround Plan

During fiscal 2025, we implemented a comprehensive turnaround plan to deleverage the balance sheet and deliver sustainable, profitable growth through a focus on the following components:

•Refranchising: Improve financial flexibility through pursuit of opportunities to refranchise certain international equity markets, and to restructure our consolidated subsidiary in the western U.S., W.K.S. Krispy Kreme, LLC, which accounts for approximately 15% of revenues in the U.S. segment as of the fourth quarter of fiscal 2025, to a minority ownership interest while adding current Company-owned shops to the joint venture. In the first quarter of 2026, we completed the previously announced transaction to sell our operations in Japan, and we have taken steps towards refranchising our business in Canada;

•Improving return on invested capital: Reduce capital intensity by using existing assets and focusing on franchise development. We reduced capital expenditures by 18.9% from $120.8 million in fiscal 2024 to $97.9 million in fiscal 2025, and we expect to continue to reduce capital investment in fiscal 2026 compared to fiscal 2025. We are also making selective, capital-light investments in geographies which currently have limited access to our products or where we have insufficient production to meet demand. This includes opening in new international franchise markets such as Uzbekistan in the fourth quarter of 2025;

•Expanding profit margins: Expand profit margins through greater operational efficiency. During fiscal 2025, we focused on making doughnuts more efficiently through optimizing production, streamlining Hub activities, and improving labor productivity. In addition, we are focused on delivering fresh doughnuts more efficiently through outsourcing U.S. logistics and improving route management and demand planning, and through optimizing production and delivery schedules to support cost-effective expansion. During the fourth quarter of fiscal 2025, we continued to outsource some of our U.S. fresh deliveries to 3PL carriers, and expect to complete the transition to 3PL carriers during fiscal 2026; and

•Driving sustainable, profitable growth: Pursue U.S. growth based upon sustainable and profitable revenue streams. During fiscal 2025, we added more than 1,100 profitable fresh delivery doors with strategic partners and strategically closed approximately 1,400 underperforming fresh delivery doors in the U.S. (excluding McDonald’s USA doors). Our Global Points of Access at the end of fiscal 2025 of 15,194 represented a decrease of 13.5% compared to fiscal 2024, primarily driven by the strategic closure of underperforming fresh delivery doors including the exit of McDonald’s USA doors in the third quarter of fiscal 2025 discussed below.

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Digital, Brand, and Innovation

We continue to prioritize expanding our digital channel sales, which grew in fiscal 2025 compared to fiscal 2024. Growth in our digital channel is due to improvements in our branded digital platform as well as increasing product availability through third party digital channels, including delivery apps and our customers’ digital platforms. Innovation is also a significant driver of frequency as we create promotions and products that attract media outlets to our brand across our Global Points of Access. Additionally, we deliver new product experiences that align with seasonal and trending consumer and societal interests and create positive connections through simple, frequent, brand-focused offerings that encourage shared experiences. During the fourth quarter of fiscal 2025 we delivered the joy that is Krispy Kreme through powerful specialty doughnuts and seasonal activations including Halloween, Fall, and Christmas among many others around the world.

Termination of the Business Relationship Agreement with McDonald’s USA

On June 24, 2025, we and McDonald’s USA announced that our companies jointly decided to terminate the Business Relationship Agreement effective July 2, 2025, resulting in the reduction of approximately 2,400 fresh delivery doors in the third quarter of fiscal 2025. We worked to quickly remove costs related to the McDonald’s USA partnership which we expect to continue positively impacting profitability trends for our U.S. segment in the first half of fiscal 2026. Refer to Note 1, Description of Business and Summary of Significant Accounting Policies, to the audited Consolidated Financial Statements for further information.

2024 Cybersecurity Incident

As previously disclosed, during the fourth quarter of fiscal 2024, unauthorized activity on a portion of our information technology systems resulted in our experiencing certain operational disruptions (the “2024 Cybersecurity Incident”). We incurred losses and costs from the incident, primarily in the fourth quarter of fiscal 2024 and early in the first quarter of fiscal 2025, which were estimated to have had an approximately $15 million aggregate impact on Adjusted EBITDA in those periods (includes margin on lost revenues, as well as operational inefficiencies). Our cybersecurity insurance offset a portion of the losses and costs from the incident. We accrued for $4.8 million of business interruption insurance proceeds during the fourth quarter of fiscal 2025 (subsequently received in the first quarter of fiscal 2026), resulting in cumulative business interruption proceeds of $14.1 million. In addition, we incurred $12.9 million of remediation costs, including fees for cybersecurity experts and other advisors, and received $2.4 million of insurance proceeds for these costs. The investigation of the 2024 Cybersecurity Incident was substantially completed in the second quarter of fiscal 2025.

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Tariffs and Global Trade Uncertainty

The imposition of tariffs by the U.S. on imports has heightened uncertainty in the global trade environment. These tariffs, along with retaliatory measures by other countries, may increase inflationary pressure and raise the costs of our imported commodities, including, but not limited to, vegetable oil. Additionally, the broader implications of tariff-driven price increases could influence consumer spending habits and negatively affect our business. These factors have caused, and may continue to cause, substantial uncertainty and volatility in financial markets, and may result in further retaliatory measures. We may be unable to fully offset the impacts of these factors by adjusting the pricing of our products.

Goodwill and Other Asset Impairments

We assess goodwill for impairment at least annually during the fourth quarter and whenever events or changes in circumstances indicate that the carrying value may not be recoverable. During the second quarter of fiscal 2025, we identified events and conditions that required a quantitative assessment of goodwill, as well as other long-lived fixed assets and leases. Refer to Note 1, Description of Business and Summary of Significant Accounting Policies, to the audited Consolidated Financial Statements for further information.

Revision of Financial Statements

As discussed in Note 2, Revision of Financial Statements, to the audited Consolidated Financial Statements, the Company identified and corrected an error in the classification of its redeemable noncontrolling interests. Management determined the error did not materially misstate previously issued financial statements and would be appropriate to correct in the current period.

The Company has revised previously issued financial information included in this Annual Report . The revisions do not affect the Company’s previously reported operating results, cash flows, or financial condition apart from the reclassification within the equity section of the balance sheet and the required redemption value accretion recognized in fiscal 2025.

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Key Performance Indicators and Non-GAAP Measures

We monitor the key business metrics and non-GAAP metrics set forth below to help us evaluate our business and growth trends, establish budgets, measure the effectiveness of our sales and marketing efforts, and assess operational efficiencies. The calculation of the key business metrics discussed below may differ from other similarly titled metrics used by other companies, securities analysts, or investors.

Throughout this Annual Report, we utilize “Global Points of Access” as a key performance indicator. Global Points of Access reflect all locations at which fresh doughnuts can be purchased. We define Global Points of Access to include all Hot Light Theater Shops, F

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