Dutch Bros Inc. Reports Third Quarter 2024 Financial Results

Achieves $338 million in Revenues in Quarter, a 28% Increase Year-over-Year

Completes Mobile Order Capability Rollout

Raises Revenue and Adjusted EBITDA Guidance

Dutch Bros Inc. (NYSE:BROS, "Dutch Bros" or the "Company")), one of the fastest-growing brands in the quick service beverage industry in the United States by location count, today reported financial results for the third quarter ended September 30, 2024.

Christine Barone, Chief Executive Officer and President of Dutch Bros, stated, "We delivered exceptional performance in the third quarter as we executed our strategic and operational initiatives. We believe our brand is resonating with customers, as we had the highest same shop transaction growth quarter in two years, outside of the impact of Leap Day. In the third quarter we delivered a 28% revenue increase and systemwide same shop sales growth of 2.7%, which exceeded our expectations."

Barone continued, "We believe our refined real estate strategy is working, as we are seeing strong new shop productivity as we have shifted our development focus and elevated our site selection process. We continue to demonstrate remarkable consistency in our shop opening cadence with 38 shop openings in the third quarter. We are making major investments in our development and construction teams and our 2025 pipeline is strong, positioning us to accelerate new shop growth."

Barone concluded, "In the quarter, we accelerated our mobile order rollout, achieving 90% system and 96% company-operated shop coverage as of September 30th. We have received great feedback from broistas and customers and we believe we are beginning to see the impacts on our business."

Third Quarter 2024 Highlights

• Opened 38 new shops, 33 of which were company-operated, across 11 states.
• Total revenues grew 27.9% to $338.2 million as compared to $264.5 million in the same period of 2023.
• System same shop sales¹ and transactions increased 2.7% and 0.8%, respectively, relative to the same period in 2023. Company-operated same shop sales¹ and transactions increased 4.0% and 2.4%, respectively, relative to the same period of 2023.
• Company-operated shop revenues increased 30.4% to $308.3 million, as compared to $236.5 million in the same period of 2023.
• Company-operated shop gross profit was $68.4 million as compared to $57.0 million in the same period of 2023. In the third quarter of 2024, company-operated shop gross margin, which includes 120 bps of pre-opening costs, was 22.2%, a year-over-year decrease of 190 bps.
• Company-operated shop contribution², a non-GAAP financial measure, grew 23.9% to $90.8 million as compared to $73.3 million in the same period of 2023. In the third quarter of 2024, company-operated shop contribution margin, which includes 120 bps of pre-opening costs, was 29.5%, a year-over-year decrease of 150 bps.
• Selling, general, and administrative expenses were $57.5 million (17.0% of revenue) as compared to $50.5 million (19.1% of revenue) in the same period of 2023.
• Adjusted selling, general, and administrative expenses², a non-GAAP financial measure, were $50.3 million (14.9% of revenue) as compared to $40.2 million (15.2% of revenue) in the same period of 2023.
• Net income was $21.7 million as compared to $13.4 million in the same period of 2023.
• Adjusted EBITDA², a non-GAAP financial measure, grew 20.3% to $63.8 million as compared to $53.0 million in the same period of 2023.
• Adjusted net income², a non-GAAP financial measure, was $27.7 million as compared to $22.4 million in the same period of 2023.
• Net income per share of Class A and Class D common stock - diluted was $0.11 as compared to $0.07 per share in the same period of 2023.
• Adjusted net income per fully exchanged share of diluted common stock², a non-GAAP financial measure, was $0.16 as compared to $0.14 in the same period of 2023.

Revised 2024 Outlook

• Total revenues are now projected to be between $1.255 billion and $1.260 billion, up from the prior range of $1.215 billion to $1.230 billion.
• Total system shop openings in 2024 are now expected to be 150, consistent with the previously communicated outlook at the lower end of 150 to 165. Capital expenditures are estimated to be between $245 million to $265 million, down from the prior range of $270 million to $290 million.
• Same shop sales¹ growth for 2024 is expected to be approximately 4.25%, from low single digits previously. Same shop sales¹ growth for the fourth quarter of 2024 is expected to be between 1% and 2%.
• Adjusted SG&A³ is estimated to be between $195 million and $200 million, from $190 million to $200 million previously.
• Adjusted EBITDA³ is now estimated to be between $215 million and $220 million, up from the prior range of $200 million to $210 million.

Conference Call and Webcast Today

Christine Barone, Chief Executive Officer and President, and Josh Guenser, 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 third quarter ended September 30, 2024.

Event: Third Quarter 2024 Conference Call and Webcast

Date: Wednesday, November 6, 2024

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 950 locations across 18 states as of September 30, 2024.

To learn more about Dutch Bros, visit www.dutchbros.com, follow Dutch Bros Coffee on Instagram, Facebook, X, 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, the success of Dutch Bros' mobile order capabilities and expansion of such capabilities, estimated capital expenditures, Dutch Bros' possible or assumed future results of operations, including guidance for 2024, 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," "project," "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 current expectations regarding Dutch Bros' leadership performance, the effectiveness of our marketing initiatives and technological advancements, 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, 2023 filed with the SEC on February 23, 2024, and in our future reports to be filed with the SEC, including our Quarterly Report on Form 10-Q for the three months ended September 30, 2024. 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.

Non-GAAP Financial Measures

In addition to disclosing financial results in accordance with U.S. GAAP, this release contains references to the non-GAAP financial measures below. We believe these non-GAAP financial measures provide investors with useful supplemental information about our operating performance, enable comparison of financial trends and results between periods where certain items may vary independent of business performance, and allow for greater transparency with respect to key metrics used by management in operating our business and measuring our performance.

Our non-GAAP financial measures reflect adjustments based on one or more of the following items, as well as the related income tax effects where applicable. Income tax effects have been calculated based on the combined total non-GAAP adjustments using our total effective tax rate. These non-GAAP financial measures should not be considered a substitute for, or superior to, financial measures calculated in accordance with U.S. GAAP, and the financial results calculated in accordance with U.S. GAAP and reconciliations from these results should be carefully evaluated.

Company-operated shop contribution (in dollars and as a percentage of revenue)

Definition and/or calculation

Company-operated segment gross profit, before company-operated shop depreciation and amortization. Company-operated shop contribution in dollars (as defined), taken as a percentage of company-operated shop revenue.

Usefulness to management and investors

This non-GAAP measure is used by our management in making performance decisions without the impact of non-cash depreciation and amortization charges. This is a standard metric used across our industry by investors.

EBITDA, Adjusted EBITDA (in dollars and as a percentage of revenue)

EBITDA — definition and/or calculation

Net income before interest expense (net of interest income), income tax expense, and depreciation and amortization expense.

Adjusted EBITDA — definition and/or calculation

Defined as EBITDA (as defined above), excluding equity-based compensation, expenses associated with equity offerings, executive transitions, (gain) loss on the remeasurement of the liability related to the TRAs, legal proceedings, sale of Aircraft, and organization realignment and restructuring costs.

Adjusted EBITDA in dollars (as defined), taken as a percentage of total revenue.

Usefulness to management and investors

These non-GAAP measures are supplemental operating performance measures we believe facilitate comparisons to historical performance and competitors' operating results. We believe these non-GAAP measures presented provide investors with a supplemental view of our operating performance that facilitates analysis and comparisons of our ongoing business operations because they exclude items that may not be indicative of our ongoing operating performance.

Adjusted selling, general, and administrative (in dollars and as a percentage of revenue)

Definition and/or calculation

Selling, general, and administrative expenses, excluding depreciation and amortization, equity-based compensation expense, expenses associated with equity offerings, executive transitions, legal proceedings, and organization realignment and restructuring costs.

Adjusted selling, general, and administrative in dollars (as defined), taken as a percentage of total revenue.

Usefulness to management and investors

This non-GAAP measure is used as a supplemental measure of operating performance that we believe is useful to evaluate our performance period over period and relative to our competitors. We believe the non-GAAP measure presented provides investors with a supplemental view of our operating performance that facilitates analysis and comparisons of our ongoing business operations because it excludes items that may not be indicative of our ongoing operating performance.

Adjusted net income

Definition and/or calculation

Net income, excluding equity-based compensation expense, expenses associated with equity offerings, executive transitions, (gain) loss on the remeasurement of the liability related to the TRAs, legal proceedings, sale of Aircraft, organization realignment and restructuring costs, and income tax effects of items excluded from net income.

Usefulness to management and investors

This non-GAAP measure is used as a supplemental measure of operating performance that we believe is useful to evaluate our performance period over period and relative to our competitors. We believe this measure facilitates a better comparison with other companies that have different organizational and tax structures, as well as comparisons period over period.

Adjusted fully exchanged weighted-average shares of diluted common stock outstanding

Definition and/or calculation

Weighted-average shares of Class A and Class D common stock outstanding - basic with addition of dilutive impacts of restricted stock awards and units, as well as the assumed exchange of all of the Dutch Bros OpCo Class A common units not held by Dutch Bros Inc. for Dutch Bros Inc. Class A common stock.

Usefulness to management and investors

This non-GAAP measure is used as a supplemental measure of operating performance that we believe is useful to evaluate our performance period over period and relative to our competitors. By adding in the assumed exchange of all of the outstanding Dutch Bros OpCo Class A common units not held by Dutch Bros Inc. for Dutch Bros Inc. Class A common stock, we believe this measure facilitates a better comparison with other companies that have different organizational and tax structures, as well as comparisons period over period.

Adjusted net income per fully exchanged share of diluted common stock

Definition and/or calculation

Net income per share of Class A and Class D common stock - diluted, excluding per share impacts of equity-based compensation expense, expenses associated with equity offerings, executives transition costs, (gain) loss on the remeasurement of the liability related to the TRAs, legal proceedings, sale of Aircraft, organization realignment and restructuring costs, income tax effects of items excluded from net income, and removal of per share impacts of controlling and non-controlling interests.

Usefulness to management and investors

This non-GAAP measure is used as a supplemental measure of operating performance that we believe is useful to evaluate our performance period over period and relative to our competitors. By assuming the full exchange of all of the outstanding Dutch Bros OpCo Class A common units not held by Dutch Bros Inc. for Dutch Bros Inc. Class A common stock and related net income adjustments, we believe this measure facilitates a better comparison with other companies that have different organizational and tax structures, as well as comparisons period over period.

Non-GAAP adjustments

Below are the definitions of the non-GAAP adjustments that are used in the calculation of our non-GAAP measures, as described above.

Equity-based compensation

Non-cash expenses related to the grant and vesting of stock awards, including restricted stock awards and restricted stock units in Dutch Bros Inc. to certain eligible employees.

Expenses associated with equity offerings

Costs incurred as a result of our equity offerings, including secondary offerings by TSG Consumer Partners, L.P. and certain of its affiliates. These costs include, but are not limited to, legal fees, consulting fees, tax fees, and accounting fees.

Executive transitions

Employee severance and related benefit costs, as well as sign-on bonus(es) for several executive level transitions occurring in 2022 and 2023, and amortized through the first quarter of 2024.

TRAs remeasurements

(Gain) loss impacts related to adjustments of our TRAs liabilities.

Legal proceedings

Loss accrual related to certain legal disputes.

Sale of Aircraft

Gain impact related to the sale of our airplane, hangar and related equipment to our Co-Founder.

Organization realignment and restructuring

Fees and costs, including consulting, employee-related and other costs, in connection with our comprehensive initiative to develop and implement a long-term strategy involving changes to our organizational structure to support our growth. This initiative resulted in realignment activities that occurred in 2023, and restructuring activities that commenced in 2024, and are expected to continue for at least the next year. Given this strategic initiative's magnitude and scope, we do not expect such costs will recur in the foreseeable future, and do not consider such costs reflective of the ongoing costs necessary to operate our business.

Dilutive effects of restricted stock awards and units

Addition of incremental shares of restricted stock awards and units calculated under the treasury stock method, when they are dilutive for the calculation of weighted-average shares on a non-GAAP basis.

Assumed exchange of weighted-average LLC interests for shares of Class A common stock

Weighted-average of all outstanding Dutch Bros OpCo Class A common units not held by Dutch Bros Inc. that are assumed to be exchanged for Dutch Bros Inc. Class A common stock.

Controlling and non-controlling interest adjustments

Adjustments to controlling and non-controlling interests to align the numerator of the net income per share to the denominator, which assumes the full exchange of all outstanding Dutch Bros OpCo Class A common units not held by Dutch Bros Inc. for Dutch Bros Inc. Class A common stock.

Supplemental Reconciliations of GAAP Actuals to Non-GAAP Actuals

Following are the reconciliations of the most comparable GAAP financial measure to non-GAAP financial measure. These non-GAAP financial measures should not be considered a substitute for, or superior to, financial measures calculated in accordance with U.S. GAAP, and the reconciliations from U.S. GAAP to Non-GAAP measures should be carefully evaluated. Please refer to "Non-GAAP Financial Measures" in this release for a detailed explanation of the adjustments made to the comparable U.S. GAAP measures, the ways management uses the non-GAAP measures, and the reasons why management believes the non-GAAP measures provide useful information for investors.

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