DNUT — Q2 2026 Financial Report Analysis

Krispy Kreme's second quarter (13 weeks to June 28, 2026) shows a business getting smaller and less unprofitable. Net revenue fell 12.8% to $331.0 million, mostly because the company sold its Japan business and its western-U.S. joint venture to franchisees in March and shut roughly 2,400 McDonald's USA delivery points last year. Adjusting for those moves and currency, sales were roughly flat (organic revenue -0.3%). The GAAP net loss narrowed to $20.3 million from $435.3 million a year ago, when a $356.0 million goodwill write-down hit, and Adjusted EBITDA rose 43.2% to $28.8 million. Management kept its full-year guidance.

Q2 2026 results

Systemwide sales count every Krispy Kreme sale, including franchisees' (whose sales aren't company revenue), so they show demand for the brand separately from the shrinking store base the company owns. "Organic" revenue removes refranchising, acquisitions and currency moves. n/m = not meaningful.

Where the money came from

The company is reshaping itself into a mostly franchised brand, so comparing segments year on year mixes real performance with businesses moving between segments. Franchised locations now account for about 42% of systemwide sales, up from about 25% in fiscal 2025, and the target is about 50% from fiscal 2027.

• U.S.: revenue fell $57.4 million, and the filing puts $57.5 million of that down to refranchising and door closures. Excluding the ended McDonald's USA partnership, organic growth was 4.4%. Average revenue per delivery door per week rose 33.2% to about $697, so the doors that are left sell far more. That is what the closures were meant to achieve. Margin improved about 370 bps to 8.0% as delivery logistics moved to a third party.
• International is the weak spot. Organic revenue fell 5.1% on declines in the U.K. and Australia, partly offset by Canada. For the half, the 10-Q says "lower transaction volume continued to impact operating leverage... particularly the U.K." Restructuring costs this quarter were mainly for Australia and New Zealand. A $6.9 million currency tailwind made the reported decline smaller than it would otherwise have been.
• Market Development (royalties and franchise sales) more than doubled, but $18.0 million of the $24.1 million increase is just the sold Japan and western-U.S. businesses now being reported here as franchisees. Underlying growth came from royalties in the Middle East, Japan and Brazil. The margin fell to 47.3% because lower-margin U.S. franchise sales now sit in this segment.

What the headline numbers hide

• The comparison flatters the loss. The $415 million swing in the net loss is mostly last year's one-off charges: a $356.0 million goodwill impairment, $51.0 million of other impairments and lease charges, and an $11.5 million loss on selling Insomnia Cookies. The business still lost money this quarter. The operating loss was $11.0 million, and a $4.3 million tax benefit kept the net loss from being bigger.
• Interest is still bigger than adjusted operating profit. Adjusted EBIT (EBITDA after depreciation, with the company's adjustments) was $8.0 million against $13.4 million of net interest expense. Even on management's own adjusted basis, the business doesn't yet earn its interest bill. That is why the Adjusted EPS is still negative, at $(0.03).
• GAAP vs adjusted. The $0.09-per-share gap between GAAP EPS of $(0.12) and Adjusted EPS of $(0.03) is mainly $6.2 million of amortization of acquired intangibles, $3.3 million of stock compensation, $3.1 million of "strategic initiatives" (refranchising deal costs and the logistics transition), $2.7 million of shop closures and $2.0 million of acquisition costs, less tax effects. These add-backs are far smaller than last year's $22.9 million of strategic-initiative costs and $35.7 million of shop closures. Even so, restructuring has now been "adjusted out" for several quarters in a row.
• Cash conversion is weak. Operating cash flow was -$10.2 million this quarter, and free cash flow (operating cash flow minus capital spending) was -$17.5 million. For the half, operating cash flow was +$10.0 million, but that relied on a $36.5 million inflow from "other current and non-current assets" in Q1. First-half free cash flow was -$6.1 million, a big improvement on -$107.5 million, helped by a 70% cut in capex to $16.1 million.
• Receivables are rising while revenue falls. Accounts receivable rose to $77.4 million from $61.6 million at year-end (+26%), a $27.6 million cash drag in Q2 alone. It may reflect the shift to billing franchisees, but the filing doesn't explain it, so it's worth watching.
• Debt-like items outside "net debt." Structured payables, a card-based supplier financing program, rose to $107.0 million from $92.4 million. This program is not included in the $845.7 million net debt figure. Leases are also excluded: $398.0 million of operating lease liabilities.
• Leverage: two ratios. The headline 5.4x (net debt divided by $158.0 million of trailing Adjusted EBITDA) is above the 3.9x the lenders' covenant calculation produces. The covenant limit is below 5.0x, so there is real headroom. Note that the trailing $158.0 million is above the full-year 2026 EBITDA guidance of $140–150 million, partly because the trailing period includes earnings from the businesses sold in March. As those quarters roll out of the calculation, debt must keep falling for the ratio to hold. The credit facility matures in March 2028. The dividend remains suspended ("does not currently pay cash dividends").

Takeaway: The turnaround so far is a margin and balance-sheet story, not a growth story. EBITDA margin rose 340 bps and the term loan fell from $900.3 million to $791.9 million, but the debt reduction was funded mainly by selling Japan and the western-U.S. JV, organic revenue was flat, and adjusted operating profit still doesn't cover interest. The next leg of deleveraging has to come from cash the business generates, which so far is barely positive.

Outlook

Management maintained its 2026 guidance, which includes only the refranchising deals already completed:

Our read: the revenue range looks reachable at Q2's run-rate. The EBITDA and cash targets need a clearly stronger second half: about $39–44 million of Adjusted EBITDA per quarter versus $28.8 million in Q2. Capex also has to roughly double from the first-half pace while free cash flow still turns positive. Management is still targeting two to three international refranchising deals this year. More sales would cut debt faster, but they would also shrink revenue and EBITDA again, as Q2 showed. In Q3, watch whether International's organic decline (U.K., Australia) bottoms out, whether quarterly free cash flow turns positive, and whether the net leverage ratio keeps falling as the sold businesses drop out of the trailing EBITDA.

Source: Krispy Kreme Form 10-Q for the quarter ended June 28, 2026 (filed August 6, 2026) and the Q2 2026 earnings release (Exhibit 99.1). Adjusted EBITDA, Adjusted EPS, organic revenue, free cash flow and net leverage are company-defined non-GAAP measures.