Krispy Kreme, Inc. (DNUT) Q3 2025 Earnings Summary

Executive Summary

Q3 2025 delivered sequential improvement, with Adjusted EBITDA of $40.6M (+17% YoY; >2x Q2) and positive free cash flow of $15.5M, supported by productivity initiatives, SG&A savings, insurance recoveries, and the removal of costs tied to the terminated McDonald’s USA partnership .
Revenue of $375.3M declined 1.2% YoY (Insomnia Cookies exit), and was modestly below consensus; EPS materially beat Street: S&P Global “Primary EPS” actual $0.01 vs -$0.053 consensus, while GAAP diluted EPS was -$0.11 .
Turnaround execution progressed: door optimization lifted U.S. APD 18% to $617; U.S Adjusted EBITDA rose to $21.0M (+50.9% YoY), and international organic revenue grew 6.2% despite UK margin pressure .
Management guided qualitatively to Q4 sequential Adjusted EBITDA improvement and positive free cash flow, refranchising steps (international and WKS JV restructuring), and full outsourcing of U.S. delivery by 2026 as catalysts for deleveraging and margin expansion .

What Went Well and What Went Wrong

What Went Well
- U.S. profitability improved: Adjusted EBITDA rose to $21.0M (+50.9% YoY), aided by insurance recoveries ($9.3M) and cost removal from the McDonald’s USA exit; APD up 18% to $617 from door optimization .
- International organic revenue +6.2% (Canada, Japan, Mexico), with segment Adjusted EBITDA up modestly (+$0.4M to $23.2M); digital engagement strong with U.S. digital sales +17% YoY and >20% of U.S. retail sales per management .
- CEO’s strategic focus: “comprehensive turnaround plan… refranchising… improving returns… expanding margins… sustainable, profitable U.S. growth” . CFO added “positive free cash flow of $15.5M” and “excess liquidity of over $200 million” .
What Went Wrong
- Net revenue -1.2% YoY due to Insomnia Cookies divestiture; GAAP diluted EPS -$0.11 on comparison with prior-year Insomnia gain .
- U.S. organic revenue -2.2% (strategic closures and lower retail transactions); Global Points of Access -6.1% YoY from exit of lower-volume doors including ~2,400 McDonald’s USA DFD doors .
- International margin -90bps to 16.5% amid UK turnaround; Market Development revenue -9.2% YoY on lower product/equipment sales despite margin mix benefits .

Financial Results

Metric	Q3 2024	Q2 2025	Q3 2025
Net Revenue ($USD Millions)	$379.9	$379.8	$375.3
GAAP Diluted EPS ($)	$0.23	$(2.55)	$(0.11)
Adjusted EPS ($)	$(0.01)	$(0.15)	$0.01
Adjusted EBITDA ($USD Millions)	$34.7	$20.1	$40.6
Adjusted EBITDA Margin (%)	9.1%	5.3%	10.8%
Cash from Operations ($USD Millions)	$3.3	$(53.4)	$42.3
Free Cash Flow ($USD Millions)	$(22.9)	$(107.5)	$15.5

Segment Net Revenue

Segment	Q3 2024	Q2 2025	Q3 2025
U.S. ($USD Millions)	$228.4	$230.1	$216.2
International ($USD Millions)	$130.7	$132.8	$140.2
Market Development ($USD Millions)	$20.8	$16.9	$18.9

Segment Adjusted EBITDA

Segment	Q3 2024	Q2 2025	Q3 2025
U.S. ($USD Millions)	$13.9	$9.93	$21.0
International ($USD Millions)	$22.8	$18.2	$23.2
Market Development ($USD Millions)	$11.3	$8.95	$12.0
Corporate ($USD Millions)	$(13.27)	$(16.99)	$(15.56)

KPIs

KPI	Q3 2024	Q2 2025	Q3 2025
Global Points of Access	15,811	18,113	14,851
U.S. Sales per Hub (Trailing 4Q, $USD Millions)	4.9	4.9	4.8
International Sales per Hub (Trailing 4Q, $USD Millions)	9.9	9.8	9.8
Digital Sales % (U.S. Doughnut Shop Sales)	15.5%	18.0%	17.4%

Guidance Changes

Metric	Period	Previous Guidance	Current Guidance	Change
Adjusted EBITDA	Q4 2025	None (no numeric guidance)	Sequential improvement vs Q3; Q4 > Q3	Qualitative raise
Free Cash Flow	Q4 2025	None (no numeric guidance)	Positive FCF expected	Qualitative raise
U.S. Delivery Outsourcing	2026	N/A	Plan to fully outsource U.S. delivery in 2026	New strategic milestone
Refranchising (International)	2025–2026	Initiated in Q1; no numeric targets	Progressing; targeting deals and debt paydown	Maintained (execution emphasis)
WKS JV Restructuring (Western U.S.)	By 2026	Evaluation underway	Reduce ownership to minority position by 2026	Clarified timeline

Notes: No formal numeric revenue/EPS/margin guidance ranges provided; management communicated directional expectations only .

Earnings Call Themes & Trends

Topic	Q1 2025 (Prior)	Q2 2025 (Prior)	Q3 2025 (Current)	Trend
Turnaround plan priorities (refranchising, margins, U.S. growth)	Introduced; focus on deleveraging, profitable growth	Detailed actions and SG&A/door optimization	Reinforced; early progress, sequential EBITDA improvement	Strengthening execution
U.S. logistics outsourcing	Goal to fully outsource by mid‑2026; early carriers signed	40% outsourced; cost predictability	~54% outsourced; plan for full in 2026	Advancing
Door optimization (DFD churn vs profitable doors)	5–10% exits contemplated	Identified ~1,500 underperforming doors; add ~1,100 profitable doors	Program largely done; APD +18% to $617	Completed major wave
McDonald’s USA partnership	Paused rollout; reassessing economics	Terminated effective July 2, 2025	Cost removal benefiting EBITDA; ~2,400 doors exited	Exited; focus on profitable partners
International operations	Capital‑light franchise push; market entries (Brazil, Spain)	Organic +5.9%; UK margins weak	Organic +6.2%; UK improving sequentially; EBITDA +$0.4M	Gradual recovery
Capital allocation	Dividend halted; credit facility amended; delever focus	>$200M liquidity	$215.2M total liquidity at Q3	Liquidity stable

Management Commentary

CEO: “comprehensive turnaround plan… focused on refranchising… improving returns on capital… expanding margins… driving sustainable, profitable U.S. growth” .
CFO: “Adjusted EBITDA was $40.6M… more than double Q2… positive free cash flow of $15.5M… excess liquidity of over $200M… reducing net leverage” .
CEO on outsourcing: “We expect to fully outsource U.S. delivery in 2026… long‑term tailwind… more predictable costs” .
CEO on U.S. demand: “We intentionally exited… poorer performing doors… added 1,000 high‑volume doors… average weekly sales jumping back over $600” .
Strategic product/menu: refreshed everyday lineup with nine new flavors to drive variety and choice (e.g., Oreo Cookies & Kreme; Biscoff Cookie Butter) .

Q&A Highlights

Sequential improvement: Management expects Q4 Adjusted EBITDA to be higher than Q3, with positive Q4 FCF; no formal guidance ranges provided .
U.S. delivery outsourcing economics: Predictable costs, reduced casualty loss exposure, partner technology to improve route management; full outsourcing targeted for 2026 .
Door strategy: Major rationalization complete; going forward expect ~5% annual churn; focus on high‑traffic, high‑visibility partners (Walmart, Target, Costco, Sam’s) .
Refranchising trajectory: Targeting one to two deals in 2025, with proceeds to delever; WKS JV restructuring to minority position by 2026 .
International outlook: Continued momentum in Japan/Mexico; franchise expansion (Brazil, UAE KFC collaboration) .

Estimates Context

Revenue: Slight misses vs S&P Global consensus across Q1–Q3 as Insomnia divestiture and door optimization weighed modestly (actual vs consensus shown below).
EPS: Q3 delivered a significant beat on S&P “Primary EPS” (actual $0.01 vs -$0.053 consensus), reflecting mix, cost removal, and insurance recoveries; Q2 missed vs consensus amid impairment and McDonald’s partnership losses.
Target price and recommendation datapoints were limited; consensus target price observed at $3.825 (6 estimates)*. Estimates may adjust upward for near‑term EBITDA/FCF on sequential improvement; revenue expectations likely reflect footprint optimization and mix shift toward profitable doors.

Trailing Three Quarters – Actuals vs S&P Global Consensus*

Metric	Q1 2025	Q2 2025	Q3 2025
Revenue Actual ($USD Millions)	375.184*	379.767*	375.298*
Revenue Consensus ($USD Millions)	384.375*	382.250*	378.285*
Primary EPS Actual ($)	(0.05)*	(0.15)*	0.01*
Primary EPS Consensus ($)	(0.0459)*	(0.0325)*	(0.0527)*
# of EPS Estimates	6*	6*	5*
# of Revenue Estimates	7*	6*	5*

*Values retrieved from S&P Global.

Key Takeaways for Investors

Sequential earnings momentum: Q3 Adjusted EBITDA more than doubled vs Q2 and management expects Q4 EBITDA higher with positive FCF; near‑term estimate revisions should skew positive for profitability .
Quality over quantity: Door optimization and exit of ~2,400 McDonald’s doors reset U.S. footprint; APD +18% and U.S Adjusted EBITDA +50.9% YoY signal improved unit economics .
Deleveraging pathway: Refranchising (international) and WKS JV restructuring (to minority by 2026) create avenues to reduce net debt and drive capital‑light expansion .
Margin tailwinds: U.S. delivery outsourcing (~54% outsourced, fully outsourced in 2026) enhances cost predictability and reduces loss exposure; SG&A savings ($12–$15M annualized) bolster margin trajectory .
International recovery: Canada/Japan/Mexico growth offsets UK pressure; steady EBITDA and margin mix from franchised markets support medium‑term margin expansion .
Product/brand catalysts: Everyday menu refresh (nine new flavors) and culturally relevant LTOs amplify digital and retail engagement .
Execution focus: No numerical guidance, but clear operational milestones and sequencing (sequential EBITDA, positive FCF, refranchising pipeline, outsourcing timeline) are the primary stock reaction drivers in the near term .