Dutch Bros Inc. Reports Second Quarter 2023 Financial Results

Dutch Bros Inc. (NYSE: BROS; “Dutch Bros” or the “Company”), one of the fastest-growing brands in the food service and restaurant industry in the United States by location count, today reported financial results for the second quarter ended June 30, 2023.

Joth Ricci, Chief Executive Officer of Dutch Bros, stated, “In Q2, we delivered 34% year over year revenue growth, driven by new shop openings and 3.8% systemwide same shop sales growth. Within the quarter, we continued to see meaningful company-operated shop margin expansion, driven by significant labor efficiency improvement. This speaks to the benefit of our company-operated model as we were able to effect changes across our shops and then directly benefit from those changes. In Q2, we continued to see general and administrative leverage, which taken together with our growing shop margins, demonstrates our commitment to profitable growth.”

He continued, “In Q2, we executed against our traffic-driving initiatives, which underpinned 580 basis points of sequential same shop sales growth quarter-over-quarter. We are encouraged by customer response to these initiatives, and are excited to welcome new Chief Marketing Officer, Tana Davila, to build upon this momentum.”

He concluded, “I am very proud of the team for what they have accomplished, and I am encouraged by the strength of the underlying business. Our people pipeline and systems are as strong as ever - we have a deep and growing bench of qualified operator candidates and low, and further improving, employee turnover. We continue to see meaningful expansion in shop profitability and leverage in general and administrative costs as we scale our business. We continue to keep a close eye on our costs, particularly those related to new shop development, which we are working diligently to mitigate. Taken together, this gives us confidence to remain committed to our long-term new shop growth plan.”

Executive Leadership Transition and Succession

The Board of Directors approved a plan to transition Christine Barone, who has served as the Company’s President since February 2023, into the role of Chief Executive Officer effective January 1, 2024. The remainder of 2023 will serve as a transitional period for both leaders.

Travis Boersma, Co-founder and Executive Chairman, said, "Joth has been a true partner and will forever be part of the Dutch Bros family. I'm thankful for the work he's done helping us transition from a small, regional business to one on the national stage. He's been key in helping us grow and nurture our people-first culture so we can continue to be a force for good in every community we serve. I'm confident in the foundation he's created and I'm grateful for the years he's dedicated to Dutch Bros and our crews."

Boersma added, "Christine is perfectly suited to take on the President and CEO role at Dutch Bros. Since joining us in February, she's become an integral part of this organization, demonstrating her passion and ability to affect positive change in our business. She has the experience and knowledge to help us scale, as well as a true passion for people. I'm confident she is the best leader to help us in our next phase."

Ricci stated, “It has been my great honor to serve as CEO and I’m so proud of all this team has accomplished. Dutch Bros is a strong, healthy business with a very special culture and long runway of growth ahead. I feel very fortunate to have been a part of its success for more than five years.”

Ricci added, “In setting the stage for the next phase of scaling the company, Christine has demonstrated her abilities and deep industry knowledge and experience. Over the last six months, she has immersed herself in our business and culture, and her impact has been felt immediately and decisively, notably in our real estate strategy, data analytics and marketing. Having played a key part in shaping our priorities and action plans moving forward, I am confident the time is right for me to pass the baton to Christine.”

Second Quarter 2023 Highlights

• Opened 38 new shops, bringing total shop count to 754 as of June 30, 2023, a 25.0% increase from June 30, 2022. Of these 38 new shops opened across 8 states, 35 were company-operated. All of these new shops continue to be led by existing or newly-promoted regional operators.
• Total revenues grew 34.1% to $249.9 million as compared to $186.4 million in the same period of 2022.
• System same shop sales² increased 3.8%, inclusive of the impact of our fortressing strategy, which results in sales being transferred from existing shops to new ones, as compared to the same period in 2022. Company-operated same shop sales increased 1.6%, as compared to the same period of 2022.
• Company-operated shop revenues increased 37.7% to $221.0 million, as compared to $160.5 million in the same period of 2022.
• Company-operated shop gross profit was $52.1 million as compared to $31.2 million in the same period of 2022. In the second quarter of 2023, company-operated shop gross margin, which includes 150bps of pre-opening expenses, improved to 23.6%, a year-over-year increase of 420bps.
• Company-operated shop contribution¹, a non-GAAP financial measure, grew 69.2% to $66.9 million as compared to $39.5 million in the same period of 2022. In the second quarter of 2023, company-operated shop contribution margin, which includes 150bps of pre-opening expense, improved to 30.3%, a year-over-year increase of 570 bps.
• Selling, general, and administrative expenses were $51.7 million (20.7% of revenue) as compared to $42.3 million (22.7% of revenue) in the same period of 2022.
• Adjusted selling, general, and administrative expenses¹, a non-GAAP financial measure, were $39.3 million (15.7% of revenue) as compared to $31.9 million (17.1% of revenue) in the same period of 2022.
• Net income (loss) was $9.7 million as compared to $(1.8) million in the same period of 2022.
• Adjusted EBITDA¹, a non-GAAP financial measure, grew 103.0% to $48.6 million as compared to $23.9 million in the same period of 2022.
• Adjusted net income¹, a non-GAAP financial measure, was $20.9 million as compared to $8.7 million in the same period of 2022.
• Net income (loss) per share of Class A and Class D common stock - diluted was $0.05 as compared to $(0.02) per share in the same period of 2022.
• Adjusted net income per fully exchanged share of diluted common stock¹, a non-GAAP financial measure, was $0.13 as compared to $0.05 in the same period of 2022.

Outlook

Dutch Bros is providing the following guidance for the year 2023:

• Total system shop openings in 2023 are expected to remain at least 150, of which at least 130 shops will be company-operated.
• Total revenues are projected to be at the lower end of the previously communicated range of $950 million to $1 billion, which reflects current new shop AUV trends of approximately $1.7 million, partially offset by improved traffic trends and Q3 pricing actions.
• Same shop sales²growth is estimated to remain in the low single digits.
• Adjusted EBITDA³ is now estimated to be between $135 million and $140 million, up from at least $125 million. This reflects stronger than expected year-to-date profitability trends, partially offset by revised revenue expectations and increased levels of investment in support of key priorities.
• Capital expenditures are estimated to be in the range of $225 million to $250 million, which includes approximately $15 million to $20 million in spending in 2023 for our new roasting facility projected to open in 2024.

Conference Call and Webcast Today

Joth Ricci, Chief Executive Officer, Christine Barone, President, and Charles Jemley, Chief Financial Officer, will host a conference call and webcast today at 5:00 p.m. Eastern Time (ET) to discuss financial results for the second quarter ended June 30, 2023.

Event: Second Quarter 2023 Conference Call and Webcast

Date: Tuesday, August 8, 2023

Time: 5:00 p.m. ET

Dial In: 1-201-493-6779

Webcast: https://investors.dutchbros.com under “Events & Presentations”.

The webcast will be archived shortly after the conference call has concluded. We will also publish earnings presentation slides related to these financial results on our website https://investors.dutchbros.com under “Events & Presentations”.

About Dutch Bros Inc.

Dutch Bros Inc. (NYSE: BROS) is a high growth operator and franchisor of drive-thru shops that focus on serving high QUALITY, hand-crafted beverages with unparalleled SPEED and superior SERVICE. Founded in 1992 by brothers Dane and Travis Boersma, Dutch Bros began with a double-head espresso machine and a pushcart in Grants Pass, Oregon. While espresso-based beverages are still at the core of what we do, Dutch Bros now offers a wide variety of unique, customizable cold and hot beverages that delight a broad array of customers. We believe Dutch Bros is more than just the products we serve—we are dedicated to making a massive difference in the lives of our employees, customers and communities. This combination of hand-crafted and high-quality beverages, our unique drive-thru experience and our community-driven, people-first culture has allowed us to successfully open new shops and continue to share the “Dutch Luv” at 754 locations across 14 states as of June 30, 2023.

To learn more about Dutch Bros, visit www.dutchbros.com, follow Dutch Bros Coffee on Instagram, Facebook, Twitter, and TikTok, and download the Dutch Bros app to earn points and score rewards!

Dutch Bros, our Windmill logo, Dutch Bros. Blue Rebel, and our other registered and common law trade names, trademarks and service marks are the property of Dutch Bros Inc. All other trademarks, trade names and service marks appearing in this Earnings Release are the property of their respective owners. Solely for convenience, the trademarks and trade names in this Earnings Release may be referred to without the ® and ™ symbols, but such references should not be construed as any indicator that their respective owners will not assert their rights thereto.

Forward-Looking Statements

In addition to historical information, this release contains a number of “forward-looking statements” as defined in the Private Securities Litigation Reform Act of 1995. Forward-looking statements include, without limitation, information concerning Dutch Bros’ possible or assumed future results of operations, including guidance for 2023, new shop openings, business strategies, and potential growth opportunities. These statements are based on Dutch Bros’ current expectations and beliefs, as well as a number of assumptions concerning future events. When used in this press release, the words “estimates,” “projected,” “expects,” “should,” “guidance,” and variations of these words or similar expressions (or the negative versions of such words or expressions) are intended to identify forward-looking statements. Such forward-looking statements are subject to known and unknown risks, uncertainties, assumptions and other important factors, many of which are outside Dutch Bros’ control that could cause actual results to differ materially from the results discussed in the forward-looking statements, including those related to general economic conditions, commodity inflation, increased labor costs, disruptions in our supply chain, ability to hire and retain employees, and other risks, including those described under the heading “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2022 filed with the SEC on February 27, 2023, and in our future reports to be filed with the SEC, including our Quarterly Report on Form 10-Q for the period ended June 30, 2023. Forward-looking statements contained in this press release are made as of this date, and Dutch Bros undertakes no duty to update such information except as required under applicable law.