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Dutch Bros Inc. Announces Second Quarter 2022 Financial Results

·15 min read

Opened 31 Shops, Revenue Up 44% Year-over-Year to $186.4 Million

Surpassed 600 Shops and Celebrated Exceeding $1 Billion in Trailing-Twelve Month1 Systemwide Sales2 Milestone

Raised $2.3 million for ALS Research in Annual "Drink One for Dane" Fundraiser

GRANTS PASS, Ore., August 10, 2022--(BUSINESS WIRE)--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, 2022.

Joth Ricci, Chief Executive Officer and President of Dutch Bros Inc., stated, "We surpassed two major brand milestones during the second quarter: opening our 600th shop and exceeding $1 billion in systemwide sales2 on a trailing twelve-month basis. These milestones demonstrate the strength of our people-first culture and our new shop development pipeline. We have opened 65 shops in the first half of 2022 and are on track for at least 130 shop openings for the full year. Our newest shops are exhibiting predictable and consistent sales and upward margin progression, while our 2020 and 2021 classes are generating annualized volumes that are 10% higher than our system average. As we pursue strategic growth from west to east, Dutch Bros’ portability and brand acceptance have been outstanding."

He added, "Like many of our peers, the macro-economic environment is impacting various aspects of our business, and our company-operated shop margins continue to be pressured by record inflation in the second quarter. That said, our team accelerated efforts to increase productivity in the middle of our P&L, and we took a 3% price increase in the second quarter. These actions contributed to 630bps of sequential improvement in company-operated shop margins from 18.3% to 24.6% when compared to the first quarter of 2022. We are evaluating further menu pricing action as needed in the back half of the year."

He concluded, "We celebrated our annual Drink One for Dane fundraiser on May 20, and it was the second-largest day by transaction-count in our history. In 2022 we raised $2.3 million, and since 2018, we have raised over $8.3 million. We are upholding our mission to contribute to communities, making a massive difference, one cup at a time."

Second Quarter 2022 Highlights:

  • Opened 31 new shops across 9 states. The shops opened in Q2 ended the quarter with an annualized AUV of $2.1 million, exceeding our expectations.

  • Total revenues grew 44.2% to $186.4 million as compared to $129.2 million in the same period of 2021.

  • Company-operated shop revenues increased 55.9% to $160.5 million as compared to $103.0 million in the same period of 2021.

  • System same shop sales3 declined (3.3)% but grew 6.9% vs. 2019. Included in this result is a positive benefit of aggregate pricing of approximately 5.3% taken since November 2021 and headwinds from sales transfer from existing to new units of approximately 1.4%. Company-operated same shop sales declined (4.3)% but grew 4.3% vs. 2019. July system same-store sales stabilized, declining only (0.9)% with incremental traffic improvement.

  • Company-operated shop gross profit was $31.2 million as compared to $29.5 million4 in the same period of 2021.

  • Company-operated shop contribution5, a non-GAAP financial measure, grew 20.0% to $39.5 million as compared to $32.9 million4 in the same period of 2021. In the second quarter, company-operated shop margins improved 630bps from 18.3% to 24.6% when compared to the first quarter of 2022.

  • Net loss was $(1.8) million as compared to net income of $11.9 million4 in the same period of 2021. For the second quarter of 2022, we recognized $10.4 million of non-cash equity-based compensation.

  • Adjusted EBITDA5, a non-GAAP financial measure, was $23.9 million as compared to $30.7 million4 in the same period of 2021, which is reflective of inflationary pressures.

  • Adjusted net income5, a non-GAAP financial measure, was $8.7 million as compared to $22.7 million4 in the same period of 2021.

  • Net loss per share of Class A and Class D common stock - diluted was $(0.02) and Adjusted net income per fully exchanged share of common stock5, a non-GAAP financial measure, was $0.05.

Outlook

Dutch Bros is affirming its full-year 2022 outlook:

  • Total system shop openings are expected to be at least 130, of which at least 110 shops will be company-operated.

  • Total revenues are now projected to be at least $715 million.

  • Same shop sales3 growth is estimated to be approximately flat.

  • Adjusted EBITDA6 is estimated to be at least $90 million.

  • Capital expenditures are estimated to be in the range of $175 million to $200 million, which includes approximately $15 million to $20 million for our new roasting facility that we project will open in late 2023 / early 2024.

_________________
1 Trailing-twelve months are the results for the past twelve consecutive months ended on June 30, 2022.
2 Definition of systemwide sales is provided in the section "Select Financial Metrics".
3 Same shop sales is defined in the section "Select Financial Metrics".
4 The Company’s historical results have been revised to reflect an immaterial error correction related to employee sick leave accrual. For additional information, see sections "Condensed Consolidated Statements of Operations", "Company-operated Shop Results", and "Supplemental Reconciliation of GAAP Actuals to Non-GAAP Actuals"
5 Reconciliation of GAAP to non-GAAP results is provided in the section "Non-GAAP Financial Measures".
6 We have not reconciled guidance for Adjusted EBITDA to the corresponding GAAP financial measure because we do not provide guidance for the various reconciling items. We are unable to provide guidance for these reconciling items because we cannot determine their probable significance, as certain items are outside of our control and cannot be reasonably predicted due to the fact that these items could vary significantly from period to period. Accordingly, reconciliations to the corresponding GAAP financial measure is not available without unreasonable effort.

Conference Call and Webcast Today

Joth Ricci, Chief Executive Officer and 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, 2022.

Event: Second Quarter 2022 Conference Call and Webcast

Date: Wednesday, August 10, 2022

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 603 locations across 14 states as of June 30, 2022.

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, Drink One for Dane, 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 2022, new shop openings, business strategies, potential growth opportunities and the effects of current market conditions. 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," "anticipates," "should," "future," "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 the evolving COVID-19 pandemic, 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, 2021 filed with the SEC on March 11, 2022, our Quarterly Report on Form 10-Q for the period ended June 30, 2022 to be filed with the SEC, and in our future reports to be filed with the SEC. 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.

DUTCH BROS INC.

Condensed Consolidated Statements of Operations

Three Months Ended
June 30,

Six Months Ended
June 30,

(in thousands, except per share amounts; unaudited)

2022

2021 ¹

2022

2021 ¹

REVENUES

Company-operated shops

$

160,512

$

102,970

$

290,699

$

180,887

Franchising and other

25,869

26,238

47,838

47,106

Total revenues

186,381

129,208

338,537

227,993

COSTS AND EXPENSES

Cost of sales

141,370

81,467

262,537

147,975

Selling, general and administrative

42,342

33,488

87,556

69,474

Total costs and expenses

183,712

114,955

350,093

217,449

INCOME (LOSS) FROM OPERATIONS

2,669

14,253

(11,556

)

10,544

OTHER EXPENSE

Interest expense, net

(3,596

)

(1,838

)

(6,085

)

(2,855

)

Other income (expense), net

61

(5

)

282

(58

)

Total other expense

(3,535

)

(1,843

)

(5,803

)

(2,913

)

INCOME (LOSS) BEFORE INCOME TAXES

(866

)

12,410

(17,359

)

7,631

Income tax expense

885

521

671

564

NET INCOME (LOSS)

$

(1,751

)

$

11,889

$

(18,030

)

$

7,067

Less: Net income attributable to Dutch Bros OpCo prior to the Reorganization Transactions

11,889

7,067

Less: Net loss attributable to non-controlling interests

(845

)

(12,177

)

NET LOSS ATTRIBUTABLE TO DUTCH BROS INC.

$

(906

)

$

$

(5,853

)

$

Net loss per share of Class A and Class D common stock 2:

Basic

$

(0.02

)

N/A

$

(0.12

)

N/A

Diluted

$

(0.02

)

N/A

$

(0.12

)

N/A

Weighted-average shares of Class A and Class D common stock outstanding:

Basic

50,926

N/A

49,500

N/A

Diluted

50,926

N/A

49,500

N/A

_________________

1 The Company identified an immaterial error related to the accrual of employee sick leave and the application of ASC 710, Compensation - General, which resulted in corrections to prior period reported amounts within the condensed consolidated statement of operations with impacted line items presented below for the three and six months ended June 30, 2021, respectively.

  • Decrease in cost of sales of $0.4 million and $0.8 million

  • Decrease in selling, general and administrative of less than $0.1 million and $0.4 million

  • Decrease in total costs and expenses of $0.4 million and $1.2 million

  • Increase in income from operations of $0.4 million and $1.2 million

  • Increase in income before income taxes of $0.4 million and $1.2 million

  • Increase in net income of $0.4 million and $1.2 million

  • Increase in net income attributable to Dutch Bros OpCo prior to the Reorganization Transactions of $0.4 million and $1.2 million

2 Basic and diluted net loss per share of Class A and Class D common stock are applicable only for periods subsequent to September 14, 2021, which is the effective date of the Company’s Reorganization Transactions and IPO.

DUTCH BROS INC.

Segment Financials

Three Months Ended
June 30,

Six Months Ended
June 30,

(in thousands; unaudited)

2022

2021 ¹

2022

2021 ¹

Revenues:

Company-operated shops

$

160,512

$

102,970

$

290,699

$

180,887

Franchising and other

25,869

26,238

47,838

47,106

Total revenues

186,381

129,208

338,537

227,993

Cost of Sales:

Company-operated shops

129,294

73,518

242,842

133,857

Franchising and other

12,076

7,949

19,695

14,118

Total cost of sales

141,370

81,467

262,537

147,975

Segment gross profit:

Company-operated shops

31,218

29,452

47,857

47,030

Franchising and other

13,793

18,289

28,143

32,988

Total gross profit

45,011

47,741

76,000

80,018

Selling, general and administrative

(42,342

)

(33,488

)

(87,556

)

(69,474

)

Interest expense, net

(3,596

)

(1,838

)

(6,085

)

(2,855

)

Other income (expense), net

61

(5

)

282

(58

)

Income (loss) before income taxes

$

(866

)

$

12,410

$

(17,359

)

$

7,631

Depreciation and amortization:

Company-operated shops

$

8,307

$

3,473

$

15,447

$

6,744

Franchising and other

1,520

1,532

2,862

3,025

All other

712

676

1,412

1,262

Total depreciation and amortization

$

10,539

$

5,681

$

19,721

$

11,031

_________________

1 The Company identified an immaterial error related to the accrual of employee sick leave and the application of ASC 710, Compensation - General, which resulted in corrections to prior period reported amounts within segment financials with impacted line items presented below for the three and six months ended June 30, 2021, respectively.

  • Decrease in company-operated shops cost of sales of $0.4 million and $0.8 million

  • Decrease in total cost of sales of $0.4 million and $0.8 million

  • Increase in company-operated shops gross profit of $0.4 million and $0.8 million

  • Increase in total gross profit of $0.4 million and $0.8 million

  • Decrease in selling, general and administrative expenses of less than $0.1 million and $0.4 million

  • Increase in income before income taxes of $0.4 million and $1.2 million

DUTCH BROS INC.

Company-Operated Shop Results

Three Months Ended
June 30,

Six Months Ended
June 30,

2022

2021 ¹

2022

2021 ¹

(in thousands; unaudited)

$

%

$

%

$

%

$

%

Company-operated shops revenue

160,512

100.0

102,970

100.0

290,699

100.0

180,887

100.0

Beverage, food and packaging costs

43,548

27.1

25,520

24.8

79,170

27.2

43,718

24.2

Labor costs

47,240

29.4

29,048

28.2

89,001

30.6

54,388

30.1

Occupancy and other costs

26,621

16.6

13,642

13.2

49,624

17.1

25,443

14.1

Pre-opening costs

3,578

2.2

1,835

1.8

9,600

3.3

3,564

2.0

Depreciation and amortization

8,307

5.2

3,473

3.4

15,447

5.3

6,744

3.7

Company-operated shops gross profit

31,218

19.4

29,452

28.6

47,857

16.5

47,030

26.0

Company-operated shops contribution 2

39,525

24.6

32,925

32.0

63,304

21.8

53,774

29.7

_________________

1 The Company identified an immaterial error related to the accrual of employee sick leave and the application of ASC 710, Compensation - General, which resulted in corrections to prior period reported amounts within the company-operated shop segment with the impacted line items are presented below for the three and six months ended June 30, 2021, respectively.

  • Decrease in company-operated shops labor costs of $0.4 million and $0.8 million

  • Increase in company-operated shops gross profit of $0.4 million and $0.8 million

  • Increase in company-operated shops contribution of $0.4 million and $0.8 million

2 Reconciliation of GAAP to non-GAAP results is provided in the section "Non-GAAP Financial Measures".

DUTCH BROS INC.

Summary Cash Flows Data

Six Months Ended
June 30,

(in thousands; unaudited)

2022

2021

Net cash flows provided by operating activities

$

16,713

$

56,199

Net cash flows used in investing activities

(88,633

)

(36,386

)

Net cash provided by (used in) financing activities

74,707

(31,876

)

Net increase (decrease) in cash

$

2,787

$

(12,063

)

Cash and cash equivalents at beginning of period

18,506

31,640

Cash and cash equivalents at end of period

$

21,293

$

19,577

DUTCH BROS INC.

Condensed Consolidated Balance Sheets

(in thousands; unaudited)

June 30, 2022

December 31, 2021 ¹

ASSETS

Current assets:

Cash and cash equivalents

$

21,293

$

18,506

Accounts receivable, net

14,070

10,644

Inventories, net

32,854

23,345

Prepaid expenses and other current assets

7,050

8,796

Total current assets

75,267

61,291

Property and equipment, net

290,721

301,998

Finance lease right-of-use assets, net

167,220

Operating lease right-of-use assets, net

159,680

Intangibles, net

10,881

11,103

Goodwill

21,629

18,715

Deferred income tax assets, net

223,336

159,031

Other long-term assets

801

1,562

Total assets

$

949,535

$

553,700

LIABILITIES AND EQUITY

Current liabilities:

Accounts payable

$

22,511

$

20,440

Accrued liabilities

20,849

20,970

Other current liabilities

6,106

6,471

Deferred revenue

26,966

22,807

Line of credit

...