Krispy Kreme, Inc. (DNUT) Earnings

Management highlights

### Turnaround Plan Progress & Core Strategic Priorities - The company's four-pillar turnaround plan is delivering consistent progress, with four consecutive quarters of adjusted EBITDA growth, accelerated margin expansion, and meaningful deleveraging. - Core long-term priorities are driving profitable U.S. expansion and capital-light international franchise growth to unlock global consumer demand for the brand. #### 1. Re-franchising - Two re-franchising transactions (Japan and Western U.S.) completed year-to-date 2026, reducing net debt and shifting the sales mix toward franchise operations. - Franchisees now account for 42% of system-wide sales, up from ~25% in 2025; the company remains on track to reach ~50% franchise-owned system-wide sales in 2027. - Three new international franchise markets (Netherlands, Estonia, Mauritius) added in 2026, meeting the year-to-date target of 3-4 new markets; the company continues evaluating additional re-franchising opportunities in international and U.S. markets. #### 2. Capital Efficiency & Asset Utilization - Year-to-date capital expenditure reduced 70% compared to the first half of 2025, to $16.1 million, supporting the target of positive free cash flow for full-year 2026. - U.S. production network utilization is currently only ~25%, leaving significant existing capacity to support fresh delivery expansion without incremental capital investment; the company currently serves more than 7,600 U.S. fresh delivery doors via existing facilities. - 59 new shops opened year-to-date 2026, 57 of which are franchise-operated, with growth concentrated in Japan, Brazil, South Korea, and the Middle East; the company remains on track to open at least 100 new shops in 2026. #### 3. Margin Expansion & Operational Optimization - U.S. logistics has been fully outsourced, delivering improved cost predictability and reduced operational risk, allowing teams to focus on core donut production. - An AI-enabled demand planning platform for fresh delivery completed successful testing and is now being rolled out across the company network; the technology is expected to reduce shelf out-of-stocks and minimize returned product. - Cost controls, SG&A savings, and operational efficiencies have driven broad margin expansion across the business, particularly in the U.S. segment. #### 4. U.S. Growth Initiatives - **Shop Sales**: Growth is supported by a stable core menu, five annual seasonal donut collections, and ongoing limited-time offerings (LTOs) that drive consumer engagement; promotional offers such as discounted second dozen increase average ticket size and drive volume. - **Digital Channels**: Digital sales grew 8% year-over-year and now represent 22% of total U.S. retail sales; the U.S. loyalty program has nearly 18 million members, who visit 30% more frequently than non-members. - **Fresh Delivery**: Over 200 new doors added in Q2 2026 with key partners including Walmart, Target, Kroger, and Sam's Club; 450 net new doors added year-to-date 2026. The company is expanding its partnership with Target, including enhanced in-store placement and upcoming availability on Target.com, following similar .com expansions with Kroger and Walmart. - **Consumer Trend Monitoring**: Research shows Krispy Kreme consumers using GLP-1 and other weight loss medications purchase sweet treats for sharing and special occasions at the same rate as non-users; the high-performing minis donut category offers greater value and variety to align with evolving consumer preferences.

Guidance

- Management is maintaining all full-year 2026 financial guidance previously issued to the market, and remains confident in hitting 2026 targets. - Full-year 2026 guidance metrics are maintained at: net revenue of $1.25 billion to $1.35 billion, constant currency system-wide sales growth of 2% to 4%, adjusted EBITDA of $140 million to $150 million, and capital expenditures of $50 million to $60 million. The 2026 target for system-wide sales of over $2 billion is also maintained. - Management confirms seasonal expectations: the fourth quarter of 2026 is expected to deliver higher growth and margins than the third quarter, consistent with historical trends. - Management notes that the 2025 third quarter included a $9.3 million cyber-related insurance gain, which creates a easier comparable base for 2026 third quarter adjusted EBITDA when excluding this one-time item.

Segment performance

1. U.S. Segment: Organic revenue increased 0.1% year-over-year; excluding the impact of the ended McDonald's USA partnership from 2025, organic revenue rose 4.4% year-over-year. Adjusted EBITDA increased 38% to $13.8 million, with adjusted EBITDA margin expanding 370 basis points to 8%. U.S. average weekly sales per door (including both company and franchise-operated locations) increased 33% year-over-year to ~$697. The U.S. segment contributed 47.9% of total consolidated adjusted EBITDA. 2. International Segment: Organic revenue decreased 5.1% year-over-year, with declines in the UK and Australia partially offset by growth in Canada. Adjusted EBITDA declined 22% to $14.2 million, driven by the re-franchising of Japan operations. Adjusted EBITDA margin was 12.1%, down 160 basis points year-over-year due to mix shifts from the Japan re-franchising. The international segment contributed 49.3% of total consolidated adjusted EBITDA. 3. Market Development Segment: Organic revenue increased 14.4% year-over-year, driven by royalty growth from the Middle East, Japan, and Brazil. Adjusted EBITDA increased 117% to $19.4 million, driven by Western U.S. and Japan re-franchising transactions and higher royalty revenue. Adjusted EBITDA margin was 47.3%, with a decline driven by a change in domestic/international revenue mix from re-franchising. The market development segment contributed 67.4% of total consolidated adjusted EBITDA. Consolidated results: Total net revenue was $331 million, down 13% year-over-year due to planned re-franchising. Consolidated adjusted EBITDA was $28.8 million, up 43% year-over-year, with adjusted EBITDA margin expanding 340 basis points to 8.7%. System-wide sales were $497 million, up 2.6% in constant currency excluding the 2025 McDonald's USA partnership impact.

Risks & headwinds

- Macroeconomic uncertainty and dynamic market conditions could impact consumer demand and input costs, though management has not seen material impacts to date. - Underperformance in key company-owned international markets (UK and Australia) pressured the international segment's results in Q2 2026, with declines driven by prior underperforming location rationalization and temporary headwinds from extreme hot weather. - Re-franchising transactions can result in near-term income statement dilution, even as they are expected to be accretive to free cash flow over the long term. - Fuel and commodity price inflation could pressure margins, though management noted that logistics outsourcing efficiencies are currently expected to more than offset any potential fuel price increases, and commodity inflation is expected to remain at low single-digits.

Analyst Q&A

• Q: With logistics outsourcing complete and significant cost cutting done, what are the key drivers for future margin expansion, and where could margins trend next year and beyond?

  A: The Q2 2026 margin improvement reflects the full P&L impact of the completed Japan and Western U.S. re-franchising deals. While logistics outsourcing is already delivering cost certainty and efficiency that offsets current gas price inflation, most of the long-term margin benefits from this transition have not yet flowed through to the income statement, and will support margin upside going forward.

• Q: U.S. organic sales were up 4.4% excluding the exited McDonald's business, are there any incremental ramp costs for retail partner expansion that should be modeled for the second half of 2026? What trends are visible in underperforming international markets?

  A: Underlying U.S. growth is strong, driven by affordable core products, popular promotions, and consistent product innovation that drives consumer engagement. Q2 2026 U.S. margins nearly doubled sequentially from Q1, and margins will continue to rise in the second half due to typical seasonal strength. International results saw declines in the UK from prior location rationalization and extreme hot weather, but the UK turnaround plan is on track, and refranchised Japan grew with 5 new shops opened in Q2, while Canada delivered strong organic growth.

• Q: Underperforming UK and Australia are pressuring international results; does weak performance make these markets more or less attractive for re-franchising?

  A: The company remains committed to its long-term goal of re-franchising all non-U.S. markets, including the UK and Australia, where the company sees significant untapped brand opportunity. Management is actively seeking the right local partners who can invest capital to grow these markets, and believes local ownership will improve performance long-term.

• Q: What is current fresh delivery penetration at major U.S. retail partners, and what is the outlook for future profitable growth? How does Krispy Kreme position against competing dessert brands?

  A: Krispy Kreme is currently only present in ~30% of eligible retail partner locations, leaving significant long-term growth room. The company is growing thoughtfully, focusing on sustainable profitable expansion by only adding locations where traffic is strong, good in-store placement is secured, and delivery routes are efficient, after adding 450 net new doors year-to-date. Krispy Kreme is uniquely positioned as a fresh, made-from-scratch brand purchased primarily for special sharing occasions 2-3 times per year, with a large 18 million member loyalty program and growing convenient access via digital and retail delivery, so it focuses on product quality and accessibility rather than direct competition.