KKD Jan 2016 Investor Presentation

8/20/2019 KKD Jan 2016 Investor Presentation

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ICR CONFERENCE01.13.2016


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FORWARD-LOOKING STATEMENTSSome of the information in this presentation represents forward-looking statements that are

protected under the Private Securities Litigation Reform Act of 1995. Such statements may

reflect our expectations or beliefs about the future, including, without limitation, expectations

or beliefs regarding our financial performance. We cannot assure you that we will achieve orrealize these expectations.

Like any such statements, they are subject to a number of factors, risks and uncertainties that

could cause actual results to differ materially from our expectations or beliefs. These factors

include items discussed in our SEC filings, including our annual report on Form 10-K for the

year ended February 1, 2015. New factors emerge from time to time, and it is not possible for

us to predict all such factors or assess the impact of each such factor on Krispy Kreme.

If we do make forward-looking statements, we undertake no obligation to update those

statements in the future in light of subsequent events. Please note that all of our SEC filings,

along with other shareholder relevant information, can be found on the IR portion of our

website at www.krispykreme.com.

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Our Mission Statement

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• Global brand w/over 1,100 locations in

25 countries

• $1.3 billion in systemwide sales• Indulgent treat vs. meal replacement

• Dozens based business

• 80% of our business is doughnuts

• Average ticket of approximately $7.75• Daypart transactions are evenly spread

throughout the day

Who We Are

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6

300

142 76

62

67

13

129576

1

18

33

20

114

25

22

87

133

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Where We Are

1,116 locations in 25 countries as of December 27, 2015

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2

21

1

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COMPANY STORES (120) DOMESTIC FRANCHISE (180)

Systemwide sales of $485mm

Revenues of $28mm

INTERNATIONAL FRANCHISE (816)

Gross revenues of $254mm

External revenues of $125mm

[1] Systemwide sales and revenues

represent ttm ending Nov. 1, 2015; store

count as of December 27, 2015.

SUPPLY CHAIN

Systemwide sales of $354mm

Revenues of $15mm

We Operate 4 Unique Business Segments (1)6

Revenues of $346mm: ~55/45 Retail/CPG


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ENHANCING

CORE MENU

ACCELERATING

GLOBAL

GROWTH

MAXIMIZING

BRAND

AWARENESS

LEVERAGING

TECHNOLOGY

Our Business Strategy Revolves Around 4 Pillars

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Domestic• 60/40 Franchise vs. Company-Owned

• Opening 30 shops/year • Long-term potential for an additional 900 to 1,200

drive thru locations plus non-traditional locations

We Continue to Grow Both Domestically & Internationally

ACCELERATINGGLOBAL

GROWTH

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Glasgow, Scotland

International

• Ongoing annual double-digit growth %

• Opening 100 net new shops/year

• Currently in 25 countries and targeting 5 to 7 new countries/year


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• Balance promotion with profitability

• Special event days vs. everyday promotions

• Leverage social media

• Exciting limited time offers (LTOs)

• Tiered/Premium pricing

• Increase coffee attachment rates

• Leverage guest engagement platform

• Opportunistic pricing actions

ACCELERATINGGLOBAL

GROWTH

We Are Intensely Focused on Consistently Driving Comp Sales

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ACCELERATINGGLOBAL

GROWTH


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Doughnuts and Coffee

ACCELERATINGGLOBAL

GROWTH

First Priority: Accelerate attachment• Order flow and operational improvements

• Making coffee part of our cultural DNA

Longer Term: Design intoour shops• Stronger visual and sensory signals

• Warmer, more inviting environment


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ACCELERATINGGLOBAL

GROWTH

Coffee – New Prototype Shop

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ACCELERATINGGLOBAL

GROWTH

The Focus is Enhancing the Overall Guest Experience…

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ACCELERATINGGLOBAL

GROWTH

…including More Inviting Atmosphere & Seating

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Enhanced Customer Ordering Process & Flow

Current Future


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MobileGUESTENGAGEMENT

Platform

Hot Light™ Feature• Find favorite or nearby shop

• Receive notifications for Hot Light

Digital Rewards• Simple program• Dashboard of reward status• Current promotions

• Stored value• Ability to gift

LEVERAGINGTECHNOLOGY

Our Loyalty Program is in Place…

MOBILE GUEST

ENGAGEMENT


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BUSINESS

ANALYTICS

POS

• Rolling out common platform to alldomestic locations by end of January

Business Analytics• Making strong progress with dashboards

and data mining

• Real-time analytics = action

LEVERAGINGTECHNOLOGY

…and We Are Making Headway on Analytics

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Short Term• Emphasis on coffee

• Doughnut variety• Premium offerings, incl. tiered pricing

• Engage millennials

Longer Term

• Explore complementary platforms• Customization

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ENHANCINGCORE MENU

We Continue Enhancing our Menu


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CPG/Wholesale• Grocery/mass merchants &

convenience stores• Incremental business

• Different use occasion

MAXIMIZINGBRAND

AWARENESS

• Coffee products are current focus

o Top-of-mind awareness and trialo Increasing brand equity

• Establishes national platform

• Exploring longer shelf lifeopportunities

FUNDRAISING• Enables local charities to raise more than $35 million

• Uniquely positioned to expand through additional programs,increased awareness and technology.

Licensing

And, We Continue to Leverage our Brand in Other Channels

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FINANCIAL UPDATE

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Company-owned Retail Same-store Sales

FY13 excludes revenues for 53rd week

We Have Experienced Solid Financial Growth

Revenues ($’s in millions)

$0.31

$0.47

$0.61$0.70

FY12 FY13 FY14 FY15

Adjusted EPS

$34

$59 $57$63

FY12 FY13 FY14 FY15

Cash Flow from Operations ($’s in millions)

Adjusted EPS is a non-GAAP measure

6.2%6.9%

8.3%

1.3%

FY12 FY13 FY14 FY15

$403$427

$460$490

FY12 FY13 FY14 FY15


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• Consistently allocating capital to share repurchases to compliment organic growth

• Since FY 2013 through FY16 Q3, we have repurchased $132 million worth of stock

$’s repurchased in millions

We Have Used Excess Cash Flow to Repurchase Stock

$20$23

$39

$50

FY13 FY14 FY15 FY16Q3 YTD


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Driving New Shop Returns Continues to be a Focus

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• We have 35 company-owned small shops

• On average, the returns are exceeding our cost of capital

• We modified our site selection process

• We continue to focus on enhancing returns:

o Topline

o Margins

o Investment Cost


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We Will Remain Disciplined With Our Capital• Growing at a rate that is right for us

• Funding business growth with cash flow from operations

• Use of capital expenditures to build new small retail

shops, remodel and maintain existing shops and invest in

technology

• Returning excess capital through share repurchases

o Repurchased $132mm of common stock since FY 2013

• Maintain a prudent balance sheet

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Summary• The KKD brand is much larger than the

company

• We are growing shops at a low double digit

rate

• We are intensely focused on further

improving our (and franchisee) returns

• We have a number of initiatives to continue

driving comp sales• We are maintaining a prudent balance sheet,

while continuing to return significant capital

via share repurchases


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APPENDIX


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KRISPY KREME DOUGHNUTS, INC.NON-GAAP FINANCIAL INFORMATION

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As of February 1, 2015, the Company had net deferred income tax assets of approximately $92 million, of which approximately $44

million related to federal and state net operating loss carryovers. The Company’s federal net operating loss carryovers totaled

approximately $159 million.

The Company has reported cumulative pretax income of over $160 million since the beginning of fiscal 2010, and the Companyalso has generated significant taxable income during this period. However, because of the Company’s utilization of its federal and

state net operating loss carryovers and other deferred tax assets, the Company’s cash payments for income taxes have been

relatively insignificant during this period. As a result, the provision for income tax expense has substantially exceeded cash

payments for income taxes. Until such time as the Company’s net operating loss carryovers are exhausted or expire, GAAP income

tax expense is expected to continue to substantially exceed the amount of cash income taxes payable by the Company.

The Company recorded a pretax charge of approximately $2.5 million in the fourth quarter of fiscal 2015 for the settlement of

amounts due under an employment agreement with the Company’s former chief executive officer. That officer, who was mostrecently the Company’s Executive Chairman, transitioned from that role to the non-employee role of non-executive chairman of the

board of directors in late January 2015. Charges of this nature are not expected to recur on a regular basis.

The following non-GAAP financial information and related reconciliation of adjusted net income to GAAP net income are provided

to assist the reader in understanding the effects of the above facts and transactions on the Company’s results of operations. In

addition, the non-GAAP financial information is intended to illustrate the material difference between the Company’s income tax

expense and income taxes currently payable. These non-GAAP performance measures are consistent with other measurements

made by management in the operation of the business which do not consider income taxes except to the extent to which those taxescurrently are payable, for example, capital allocation decisions and incentive compensation measurements that are made on a pretax

basis.


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KRISPY KREMEDOUGHNUTS, INC.NON-GAAP FINANCIALINFORMATION

The Company’s fiscal year ends on the Sunday closest to January 31, which periodically results in a 53-week year. Fiscal 2013 contained 53 weeks.

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Historical Periods

Year Ended Year Ended Year Ended Year Ended

January 29, February 3, February 2, February 2,

2012 2013 2014 2015

(In thousands, except per share amounts)

Net income (loss), as reported................................................. $ 166,269 $ 20,779 $ 34,256 $ 30,060

Charge for settlement of employment contract.................... 2,464

Loss on refinancing of debt...................................................... - - 967

Gain on sale of interest in KK Mexico

(net of income taxes of $1,492)............................................. (4,706) - -

Earnings for the 53rd week..................................................... - (1,273) -

Provision for deferred income taxes...................................... (139,403) 13,413 8,014 15,729

Adjusted net income (loss)....................................................... $ 22,160 $ 32,919 $ 43,237 $ 48,253

Adjusted earnings (loss) per common share:

Basic............................................................................ $ 0.32 $ 0.49 $ 0.64 $ 0.73

Diluted......................................................................... $ 0.31 $ 0.47 $ 0.61 $ 0.70

Weighted average shares outstanding:

Basic............................................................................ 69,145 67,624 67,261 66,360

Diluted......................................................................... 71,497 69,896 71,054 68,929

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KKD Jan 2016 Investor Presentation