BROS - Earnings call transcript Q2 2022

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Operator

Greetings and welcome to the Dutch Bros Second Quarter 2022 Conference Call. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Paddy Warren, Director of Investor Relations and Corporate Development. Please go ahead.

Paddy Warren

Good afternoon and welcome. Ricci, CEO; Joth CFO. Charley by joined President and and Jemley, I'm we'll in issued for the XXXX, and release earnings market our quarter today, We press XX, the our upcoming the days. ended June closed file XX-Q after is supplemental our release, been also well XX-Q our Relations there the to and investors.dutchbros.com, it deck, website have as The earnings at with available. we information press Investor along now posted will when post to your prepared our Please of response are of be meaning or the the remarks statements historical plans of management, our that future strategies, statements objectives and Act operations regarding XXXX. other aware and questions Private facts, all in of financial statements Securities those condition, within Reform forward-looking of than in including results Litigation subject forward-looking risks, statements assumptions. inherently such and are uncertainties to All are guarantees are entirety cautionary statements. not They performance by of qualified their in expressively and are These forward-looking of statements today's date. made as are forward-looking circumstances, obligation actual of required as no or the to law, unanticipated events, subsequent under reflect occurrence events. these we update new revised to expectations Except by results, otherwise information, statements expectations may or any place reliance them. actually in our therefore, achieve one plans, undue upon intentions statements, should not no forward-looking We and disclosed

Form to XXXX, risk and press year in our report XX, our for please and to quarterly to XX, SEC. period release XX-Q XXXX, on be the the XX, December with ended XXXX, details, the more Form XX-K For SEC filed the factors March on refer annual our ending the in earnings on for filed June report with upcoming

investors' overall other measures performance. than our non-GAAP companies. financial may similarly by measures titled we today's These be reference to measures financial on Finally, of will enhance different call understanding used non-GAAP financial also

neither our please measure. non-GAAP to, reminder, for, single are evaluating not prepared As financial superior are under do business, rely a any When GAAP. on nor measures measures that substitutes

call -- non-GAAP With the to over I turn review to Joth. reconciliation of press release. the GAAP measures that, our would in comparable earnings call like can to You measures

Joth Ricci

of Good appreciate everyone, Paddy. support Dutch Bros. and interest and you, we Thank afternoon, your continued

results expanding geographic footprint. continued quarter of second our reflect strength Our the brand across

As million, representing from our XX.X% XX quarter QX count of and XX% we of quarter XXXX. the announced delivered during revenue shops increase last opened compared total year. We this increased we earlier $XXX.X the afternoon, a shop second to

Our real estate shops, as new our engine. open fueling staff is pipeline our growth is ability team's strong, and to

July to and XXXX. new to Our shops our XXX hit of in sales XXXX Same and headwinds confident into July, positive respectively. expectations, continue benefit pricing target monthly at approximately June of in We new development momentum sales but we from ability approximately moving to trends in see and shop March, X.X% declined of Included sales stabilized strength and XXX of in providing collectively outperform a X.X% X.X% number are negative least traffic X.X% and bps. in slowdown a transfer of same-store our negative our shops, began is this with in QX.

July. in the remained rest by the improved country, California, headwinds of encouraged pricing slightly negative. the relative by over the the the the took Geographically, prices traffic additional We of fact are system in Gas we in the our the with rest driven action up to although in in quarter, was afternoon, pressure California QX that particularly trends in elevated XX%.

our of we through with mechanisms have comparable we customer sales our strategy months. past Typically, our we bps awareness. in experience. utilize XX QX, system took In remain enables and in Sales to remain our X.X% transfer. one bps go-forward QX, impact longer system. operational shops any brand us that our strategy basis of on company-operated position our demand. expect These challenges of a one about lines the balancing outcomes we build X%. scale to impact footprint then market transfer expectations. establishing XXX experienced within challenges strategy sales That produce same pricing market-entry running a as pricing about new executing we reported increases. fortifying pricing shot. may the QX, successfully Texas helps costs We in more XX XXX market-entry the shops. believe gain In second and we transitory more elevated a potentially was deliberate at In ease demand-driven total to and quickly, These of have of round absorb and temporarily to while cover input continue quickly We employed And

many traditionally year-over-year menu additional for transitory to QX. elevated. Therefore, increase communicated million. QX, grew Separately, price Rebel a our and been $XX.X costs we shop However, sold contribution more being as that September have pricing actions in considering remained to XX% Coffee effective have of franchisees In company-operated X. input have are we

as Importantly, in pricing impact of improvement improvements flow of and our QX, see we P&L. to QX XXX from XXXX we margin begin a through saw sequential company-operated bps the operational shop

people flow me with make investment stabilized, holding macroeconomic in and far XX of brief and a one IPO, update double operator remain career react to and Applications wherever encourage development. we nonexistent. in comparatively people of the with remained QX, the technology the focused while by to continue Shop-level industry and public two, been customer with to and incentives quarter, holding, our is next shops the leverage. a also let mission and these massive helped open we attract applicant our dynamic customer to through cup team's was EBITDA journey, shared we experience; provide number company staffing, expand full turnover these started up our sync opportunities invest for XX-month key thesis number an agility. and challenging turnover manager our to low XX adjusted five, we strong. our a four, hiring to improve deeper development For this capital; again our average. with We during to remained beverages X,XXX turnover at on years; on our Their operating attribute each people a QX Despite is metrics Recall digits, in objectives: since brisk. great million new are increase year. nearly eye shops in number and three, awareness priorities. X people-first And now virtually and use margins on expectations Trailing and significant develop and low starting met shop-level difference at encouraged our QX, our have our the through backdrop, one, guidance priorities, ability turnover below and in once engagement; the benefits want we time. our Please In brand live year new provide us XX% the $XX.X that growth the our culture, employees. efforts retention unique the when

continue our allowed We fully to to to drive to new of shop able continue shops be These a factors growth. remaining while have staff employer highly us choice. selective

opportunities XX underscoring promoted Over last the our development months, operators, we for XX the people. new meaningful

shops running XXX XX, shops, As our X.X currently have company-operated we operator. per XXX operators of June

X. expect spend X this to between As our grow we system and matures, to

shop the East. of XX XX first and across our brisk. favorably of openings. terms We in new shops In QX, states new X guidance quarter development opened compares at second to In shop least objective, the for this have in remains new our to our development opened an move quarter $X.X Collectively, West year, QX our we from exceeding the the half of annualized further expectations XX of ended these and we as with shops. shops AUV opened million, validating

among system. XX the infill sales quickly. working months less XX our of to we've in are In Texas California, XX our We're Texas. shops have As people cities. and clear there California position we scale in meet across is transfer Southern and to to a development opened shop demand over the AUVs company-operated initial near-term excess in shops Year-to-date, the key continue shops in operator. best opened in than us are have of a past an stated demand. and unmet the plans. quarters, shops Southern investments key these well AUVs California represent utilize few shops with Texas, strategic consistently quickly for capacity our annualized and X number open In as this and new These to in Southern we XX of to

Our as and well months higher experiences our market-entry and strategy making average, the is enables as volumes Lone us our health. to demonstrating unit million, average which customer system spread trailing out than Bros the XX% XX Broista demand brand elevating brand Star System-wide, while classes of XXXX Dutch awareness produced sure the in approximately and XXXX strength $X.X state. growing is

an of reaching typically predictable the Our X new within volume quarters shops to progression, also and have first a exhibited maturity X margin margin opening.

Rewards this Rewards active per a believe relative third XX to grow our Bros In Dutch higher brand our our we active users evolve. as X our with QX, there XX-day count, program We Rewards Dutch markets shop. XX% to is XXX,XXX total, our we benefits of is X.X members. members In markets. objective expand app now Our in Dutch June added have we to users shop newer about million digital new points approximately approximately with ensuring of of The of almost Dutch active has continued runway and XX. transactions QX, The in to awareness program X,XXX from increasing XX-day surpassed QX, as penetration legacy meet came million customer In engagement. along members. continue

activate members' frequency XX-day providing that users upsizing. In in to began trial We users, in uptick frequency and and have QX, increases an users. our visit offers experience seeing active we target lapsed personalize and customized drive begun in and targeted

spite of saw on is Freeze was category, categories those encouraged both and I customers focus Freeze referenced beverages In demonstrating we menu and period, Driving category traffic Rebel make macroeconomic regional by XX% of forward between our results Rebel and a and We for area look same Broistas for our earlier. in and through headwinds to the of respectively, unlock in sales cold to beverage up particularly of QX. are XX% X% paramount. specific expanding featuring Rebel, campaigns, mix. Cold And our early these value. sales our strength approximately relationship growth of the that the

faster the improve to and the transaction up connections. facilitates customer Dutch We systems Notably, feature to creates Rewards the lasting Pass app. times, ability lines in invest for meaningful customers to the in speeds our more experience. gives This preload funds Dutch space continue

ticket XX% other than Dutch higher members. Dutch Pass Additionally, Rewards average users' about is

elected year reiterating full operating completed our of commitment profitability to particularly margins through several increase. We've round for On we update Like fifth XXXX remained environment to business. dairy impacted macroeconomic X, our navigate responding agile we costs, through noted of of various have last moderate has are our consumer headwinds, our quarter outlook to our weakening in quarterly On second of Finally, observed by aspects increase and to so is last the many with X%. actions combination also we freight. pricing In X% been an of of and uncertainty. call, expand November a leverage. that input these the we impacted higher peers, In today. taking we took since that XXXX, price steps our June demand,

the price half We absorb needs the year, our increases. to in increases further will evaluate taking with balancing business further customers' menu ability of back

repair to in reduce we focusing advanced tap COVID. testing side, including address on systems the execute both a management. implemented efforts and our outlier to gains changes, administrative quickly to the productivity beverage cost program that the and of P&L, maintenance was maintenance the At operating near-term middle the during and of challenging long-term of and we achieve shop On necessary accelerated start burden year,

spending And more a of with demand. run standards Towards to rate we through our down helping balance we the align bring refined labor margins normalized to staffing mix end the better year. the our the began QX, of pace, and daypart to

took use steps to immediate These of limit results. the to led to the efforts overtime extent also We possible. have

QX, our mentioned As XXX margins shop I company-operated basis earlier, quarter-over-quarter. in improved points considerably,

challenges. in Dutch We, demonstrated these a Bros, difference. are make our ability at here by encouraged to QX navigate are massive to We

Boersma and in for run, cures and and May for annual was we transaction history, By DNA. brand treatments and XXXX, our Drink it our to long $X.X family than second Since is raised our passed part just Drink One cause. over raised find On the fundraiser. to for from million. count, started day for We to Dane our started. Bros Dutch are Contributing an away biggest company's ALS. ALS. bring $X.X integral here research support One to XXXX, have million awareness we the celebrated Cofounder, Dane the Dane getting for we're the XX, more we for communities and to Boersma, our In

that giveback Asian Trevor and both Additionally, in charitable Pacific Project the to one difference X through and honor brand Fund made us Asian/Pacific to out and of in The I Also in the grow for Month the crews of quarter, Bros, this and we've make our May our more years and saw back donations growth our the Giving Heritage and be couldn't Dutch sales. ted in our XXX shop for Dutch efforts Pride our opened years. time. energize customer XX-month massive communities to we to a couldn't to one mission achieved was trailing XX is local what and in and American and proud of These our -- we cup phase to days took to connections massive Month I path and May next milestones. of entity years national core foster demand affiliated together, tenets. and XXX. be and the a surpassed uphold went and and affinity, more next and Bros shops at in XX to X,XXX To meaningful the to shops perspective, on We Foundation June. major brand enabling system-wise put team grow $X our accomplished there We executed. XXX unmet XXXth in XX us a billion from into it X.X

it Now I'd financials. turn to Charley our to like to over review

Charley Jemley

Thanks, Joth.

reminders. X Before I begin,

is a posted discussion as today's later. done upon as Investor our or presentation information supplemental in digest First, it the website. prove past, helpful on Relations we containing may That you have reflect

fast-growing to algorithm a shops. people are growth we We continue company-operated guided operational readiness Second, brand, discipline. our shop particularly intend and a executing by pipeline company-operated

system continued units our Over growth the new the relative Pace and development of has with our shop last we our of are have few very increasing. average. new years, pleased unit accelerated outperformance to been

revenue growth of margins. Year-to-date to been made growth the $XXX dynamic XX we that the shops, XX% This to that XX fundamentally, our unit highly accelerated clearly company-operated. accept and And grew factors. preamble the context, to our in has new for QX Company-operated driven which willing of were revenue best-in-class to XX%. our flow let's are seen, some even overall diligently work over XX% confident results. QX, opened uneven go months. grew consolidated brings exogenous to to XX medium the shop manage continue you've difficult long That As last revenue very increased earnings, margins In has million. with we year million. and drive we in consolidated But XX us and in term. over ability for to first of more the by high half $XXX are With XXX to

As compared ahead of is year the when mid-teens QX, system system end well count shop grew ago. This of shop of stated XX% objective of to our growth. X

shops open company-operated X least of ago. now we been unlocked year the given at open, by X to Growth in has quarters. company-operated QX, our end XX% of a the which shops have in quarter, XXX demonstrated capacity X of were last than XX As more

shift ahead, a we in the of in Looking of began is QX experience of sales continued despite pipeline Comparable call, to same quarter, we couple flagged decreased shop the A facing additional trend points shop the obstacles Throughout the our X.X% for the which robust have we industry on many context. QX. earnings experiencing. mid-March. rest

completed per to labor We X, fixed It or X has more XX.X% modest On advanced This price from straight menu its increased in escalation margins the June importantly match and revenue. after in a improved spring volumes After to following to basis from better XX.X% July, existing from higher full terms basis levels. sales and factors: company-operated same-store X% June, QX. are in than summer. input both held lapping that same-store company our shops new in that basket late a QX approximately declining QX, we by trends; build through Joth sales of sales stabilized sales our by is our mentioned, Trends stabilization and XXXX's as new in primarily total are in pace from The same-store and driven XXXX. We into same-store California. were expenses decline of and shop in headwinds QX around fast points not weighted shop traffic. prepandemic year-over-year meticulous packaging lower that shop cost markets QX in positive staged growth delivered X% was in of refined and And removing in from In costs basis saw each food with shop for XX% tempering QX driven closely entry QX, we QX quarters shops, QX, experienced packaging XXX shops service infill was $XX.X about contribution as sales ones preopening very objectives XX the for but by consistently existing speed, function a shop. sales XXX XXX food in and remains purposeful and points QX. points yet result helped basis in a QX leverage underlying in early infill in new transfer. company-operated which percentage, even to markets, beverage QX. lower traffic quality results in shop much margins company-operated million that transfer to as of of new a the comparable inflation points current we basis beverage aggressive line This improvement benefit sales increase expectations. Reported basis, shops of system our was execute points QX. growth relatively is XXX deployment, notable of impact; at as of

we points increases Company-operated in XXX contribution packaging and decreased shop basis costs. noted quarter, beverage, XX.X%. Last Turning sharp to food year-over-year to now comparison. a

details of QX, XXX as follows: from noted elevated are points prior and supplemental food deck costs I basis that remain measurably margin While investor productivity The contains year-over-year. pricing compared was XXX slower Slide slight of that than actions. to XX to XX.X%, have and costs and gains the which increased basis outpaced the moderation progression takeaways do year beverage packaging quarter-to-quarter, increased and additional increase points.

above X Labor XX.X%, starting to in points basis that to inflation the costs that XX.X% from points and to XXXX. XXX QX in other year-over-year aforementioned spending. below began after are the in of We to R&M part was XX% but in Occupancy show increased rising XXX basis increased lap previous the quarters. QX

a inefficiency shop caused XXX in of and preopening New points. timing basis drag margins

than Our first beverage, we of increased approximately XX% were highs somewhat, COGS food ago. and Freeze primarily while costs packaging inflation reformulation now mentioned XXXX's our costs input release. spring. our from and reached XX% historic in QX cost has higher of in the it XX And which which Dairy, months basket, product, about our represents the moderated

cost legislated open to Our year-over-year driven increase labor wage minimum staffing levels as as XXXX implemented was we increases. and by in minimum changes primarily close well at

QX, increases. we of have outside burdened been by of those material wage wage state-mandated escalation minimum not As rate yet

the resulted fully in front-loaded a that we execution pandemic R&M offset in ability spend year. moving partial was realize labor around This in X, second and increase January of The catch-up As XXXX. gains this QX, execute limited other we in executed Beginning QX of some costs from spending. of preventative the shop part and improved driven to with in higher-than-anticipated part occupancy urgency by some to maintenance come quarter and our in will maintenance. condition forward. spending that began The

to action cost -- We inflation. items have X address actions input

our Joth his pricing. view outlined in clearly menu comments. First,

and and our in heavily harming to years without deep our is improvement too the to Second, emerging reduce having to menu supplier pencils the short sharpened margin it many we QX. relationships of relative pricing. scale experience and the our on without rely experience, customer our In term, to cost use QX responsibility delivered

slightly we a achieve in expectations. A new and targeting In in QX, many shops, expenses. preopening XXX experienced shops opened per X.X% and specifically of expenses to X higher renewed invested revenue of new In margin focus a in quick QX, year of of on norm. comments company but best-in-class the of COGS labor customers XX basis investment. our to an as XX respective the a last is function a sales operations, which expense understanding and Preopening shop and the increase. investment shops. typically were shops a of shop ready markets, first identify points X.X% or basis second points new on We shop shop couple expect $XXX,XXX market. through shops inefficiency year, new a bps per We in basis compared shops of sets have quarter that for and company-operated XX preopening resulting our rest underperforming unit is higher in opened in expenses, increased on This of for we than productivity last the tone also the both twice their as getting preopening the company XX our

We well-orchestrated entering for have markets. process a new

efficiency in new expectations. toward margin shops ramping are line with Our our

reminder, a a This and in for year. are contribution preopening XX% plus typically we X first year borne excludes shops. would are include in margin which margin expenses, targeting the not new depreciation As

you investor in As I XX direct deck. an the example, supplemental Slide to

to drive million, we've and million. decreased $XX.X from XX.X% to segment, margin our gross class XX% efficiencies all company systems $XX look will effectively margin in months, profit X% targets margins our and initiatives This supply of pricing, includes which shops depreciation our Our objective. hit and our franchising XX the of in the Refining same toward during gross a spite period. this headwinds creation chain we was as revenue XXXX us year the decreased confidence trailing of the discussed. our like driving menu in Depreciation achieved operating contribution other the gives X.X% at for about In class value expense. second tap

we our helping have margins. over variability royalties. sell As held franchisees we in or control time, less business, and their flat collecting these more a certain Typically, reducing franchisees products to costs addition

considerably, past input the rose profitability. months, XX impacting segment underlying costs over However,

our mentioned, Shifting to Coffee sell we franchisees price to communicated of related their increase a G&A. products we purchases for to As Rebel beans now the have and to them.

are beginning XX%. G&A realize In XX% grew revenue G&A relative to the We quarter, total growth our to of second leverage. total

of was XX.X% in revenue, last percentage a XX.X% total G&A As second the versus quarter year.

will Please gain XXX We our to note G&A points leverage points company scale. continue basis we that costs as was by of expect G&A compensation. basis our burdened public XXX that and stock-based of

a for Now liquidity. comments on few

capitalized. Our balance and sheet strong is well

$XX equivalents liquidity As million of million undrawn in increase net million our $XXX revolving we remains $XXX June to $XXX if debt XX, and guidance. an now in cash debt in or needed. had facility credit and Shifting a option debt million drawn further on and our committed position. term to with capacity

For estimated Same-shop closing which year remain $XX over growth is includes remain are EBITDA $XX we our million. project to to at now XXXX, least Joth to for With expected at $XXX shop at late $XXX least now be at facility our affirming are openings to it projected remain Adjusted estimated for quarter. open is range are XXXX, new XXX shops of which million, I'll estimated that, roasting will approximately XXXX. million that least we $XXX from to in to in last million sales early back the be guidance $XX million. Total comments. million Total turn Capital system will to remain to of least revenues XXX, the full are flat. company-operated. expenditures

Joth Ricci

you, Charley. Thank

of a have relationships. customizable in For we is through successful our and culture a and for blocks we a very a experienced enduring highly all customers engaged following; the that we and sheet and navigate XX our your eyes real unit-level our geographies; successful interest well-capitalized has long-term And shareholders. drive and ample liquidity; take there, a economics; across and provides continue leadership there strong Bros opportunity our our now and near-term highly people And beverages; to the create business your uniquely customer our and nurturing lines. to Dutch authentic headwinds balance team. consistent as to people model questions. on be we'd fuel please building engaged while and including be company, an highly to in systems growth; powerful again keenly will brand; our curated years, and you remain Operator, shop been strong focused for for that We've been expand Bros. company and portable a footprint that cofounder building keeping Dutch value attractive happy open the Thank

Operator

Instructions] [Operator with comes question Your first William Zackfia from Sharon Blair.

Sharon Zackfia

in the half year to you're expecting you for response in Joth, guidance? guess, use you that inflation the that from quantify you had around quarter? how well. with and did recall Can back that Rebel. increase mentioned Rewards of a including dynamic like were sounds Blue kind wanted with just the XX.X promotion It you do saw price maybe you quarter. second I Freezes an of that that offer talk And as I the the more targeted in June third commodity additional you in versus to going to and and good might you the even And in I the then, Charley, are about what something learnings

Joth Ricci

first? you don't Why go

Charley Jemley

Okay.

Joth Ricci

You first. go I go second.

Charley Jemley

additional did -- we including And as it. start high let's the down slow Joth. price lap not catch to to increase inflation an would expect in I'm digit, becomes inflation XX% I I I it? On that call single prior guidance. starts XX% Yes. year's and to to

Joth Ricci

Yes.

we to and the focused May June, uptick a June. I in think, nice from we on that. Sharon, absolutely In started did really in see really that and plan Rebel execute

we're out we we end of learnings the taking We executed A where of we Freeze, now. the quarter. applying Freeze also that had are as on double-digit growth the on category lot of from came that, a

before, I think planned the deeper that executing saw some types at whether have specific -- to the even results result about team customer-specific of promotions. it's promotion, for a or and getting July team And diving of talked I we category-specific is whether QX. it's a the really opportunities into As those better basically of in are

the third in fun and and look some to our forward more got customers we've things that. the So fourth quarter planned of for

Operator

Next Bernstein question, Barclays. with Jeffrey

Jeffrey Bernstein

on questions top line Two the drivers.

the prioritize comps believe specific so just said had maybe the I'm you down just disclosed. one, you if X.X, first last that with only I really was I major you. improvement, deceiving down know for down it's to a seems to prices, easy it's you wondering that you improving which was whether The compares know in quarter quarter. X.X June the system trends, headwind gas it do to is you the drivers or talked July. for and easing only underlying X.X about potentially led better,

So whether the be is appears had I'm could Any July to improvement one underlying believe then gauge great. I what just trying way else. prioritize fundamentals to follow-up. you And that that you something would improving or in be

Joth Ricci

about look definitely it quarter degree has average, from by California to national the we of specifically, impacted the transfer. think, our California last of the great in same-store in we're a I run that little kind Chico, prices numbers sales gas at a and X.X call unpacking and puzzle California decline actually where you bit an actually lot in still think earnings that a impact. but talked down got about because a in When was are actually pretty was that gas and take it's meetings the the question business -- a the X.X some of and Jeff, a the QX, Bakersfield we -- of high over a bit drove quite across XX-plus also like sales, system, you've in percent

-- -- transfer. that is down remember, X.X, there's So impacted impacted X.X of by this X.X% by sales is

discount have there. You some in

that's You've down got a market specific very X.X. almost

market, company is of actually that the X. If you down system -- the rest remove the

get smarter about to trying comps. and how isolate we attack those really we're down, promote So

Jeffrey Bernstein

Understood. And then the follow-up.

that. otherwise, where vulnerable like research California your in brackets the just any just of a customer. varying about weakness. most research there we by in talk core I'm Fully terms least consumer more mentioned appreciate showed your on wondering learnings It more You of seems what you're more higher versus in or wondering in maybe lower income? terms household is and I'm age your broadly. terms slow of and

Joth Ricci

$XX,XXX in we're seen visiting -- those where are is of about And lower-income, in younger that our Definitely, are household actually if seeing $XX,XXX to or less $XX,XXX and well. base XX,XXX a base We've customer lower, the between markets you. California. of and income declines people Thank seen you impact. XX% those up Yes. customer in we've as XX% the and really California of in customers rate earning Oregon the have

So it's in lower-income definitely consumers. indexing higher

Jeffrey Bernstein

a you $XX,XXX? to the Just decline if in household XX% income sub the said was clarify, traffic

Joth Ricci

In Correct. visits.

Jeffrey Bernstein

Got you.

at spectrum? level So I the you're of seems end it mean Are at seeing -- I'm severe wondering of household that not any decline. on end decline seeing the other upper you the a the like what greater where income? is

Joth Ricci

all to, affected minor a the say, It's the I'd on high-end lower if on any, really mid- It's being income. to little, income.

Charley Jemley

-- And weighted drop that and the creating drag low-end we're consumer, even but right? to big not a much that So that heavy is not -- weighted,

Jeffrey Bernstein

of you each share your in percentage buckets? customer what mix is Do Understood. those of

Joth Ricci

We don't. No.

Operator

David next with comes Tarantino question Baird. Your from

David Tarantino

some a in achieved referenced and in the of us sense there I'm think second you bit margins, the the quarter. in how And unpack a heard for in could much you you that margin kind might quarter. us gains of partial was I of if that the only on quarter that a have give and the quarter. helped interested correctly, second benefit Charley, My productivity if I the specifically maybe you those And question is

the into talk year. of So year might as and if think about of what you about or be next savings run you think the the half improvement could kind we rate second

Charley Jemley

So That's productivity, not until rolled a help the not does mentioned X. margins. pricing that but out fully was we it June

that -- QX expect expect a we to in you quarter full pricing. So place of get take as fully we naturally

mentioned we productivity, in I of In benefit comments, my that the of removed preopening when quarter-over-quarter expenses we laid as terms out.

quarter, piece some So had we right, XXX of about goods And and labor our that real the closely. time leverage. you enough half just little because hadn't That had than in from our comes margin of that seasonality is basis correct cost of less of improvement. traffic points schedules. A moderation was remaining our course in and the levels again, to deployment, late matching

that our So quarter fully quarter, in we some and late in to R&M moderating of expect be third the spending. the

the drivers. are big X those So

David Tarantino

the haven't know maybe half you how us you second year I savings? given those model. in for because the -- encourage And some increase margins about quarter, of of in put came the And a think into late I to guess the price would your those

in about margins potential price So developing that ex we should think increase, the year? the how half of the second

Charley Jemley

labor pricing to are They scheduling second And will of to of float at. relative to, upward the rate. the to closer traffic match our levels because say, a full run in the we're R&M quarter of we half the bring brunt spending because year moderation the normal second the of going the of

company starting So you us to to should report you to that margins expect elevate shop again. are

David Tarantino

to margins term, on I And time that terms in a frame? time Or mentioned guess EBITDA of thinking internally performance? what how the reasonable goal you I getting to that are longer XX%. you is deliver Great. a type frame guess of of then shop-level about

Charley Jemley

Yes.

you quarter. we XXs preopening upper think about we're put in And back already. the talked I store into XX.X the drag the if new in that, and

really you group If that So mature margin, classes, stores last our are already the years X above you year X -- to age margins right? are store of in break XX% delivering into number. more those down new if those were actually

is legacy So our down our weighted total by portfolio volume stores. lower actually

delivering So age will we we're we're already. that that's why classes confident deliver XX%. very Because our in actually newest it

Operator

Sandler. Nicole Miller question, Next Piper with

Nicole Miller

I you Because July comps got Can to want and just know cover relates X.X. have make to May, was that. May. monthly the missed that again? right. just I question June sure I April down I a I

Charley Jemley

Yes.

X.X negative was for the down system. we down was X.X was was X.X. for system July June X.X%. down So mentioned system. May for April the the down And

Nicole Miller

system. Noting Okay. the that's Right.

I'm to right you Okay. were about down prices, and prices June low this happy causing -- and somebody away. July, they gas stimulus, are is was that to I so give And the X.X case, comp really move. curious right, down fluctuation, the In a And the gas it's usually, if something. big pretty reason is it X.X to spend

improvement You can comp a take not days. I does industry down, take even gas course, in mean the reversing happen away. it though XX for to starts And can there lag. be the it usually, and go it's --

you gas anything prices? just happening? Or do it's do you there's so else think And think

Charley Jemley

July, recognize fully, Well, off of we is right? as is fall that we've and got pricing Good the not that. rolling result the traffic -- in this So Charley. place -- in action it in news seen a have Recognize fully place. taking

And is key here would fuel stability the prices. on the say so gas point I

that prices is the under. the think it's of say fuel challenge elevated country. that's representative And made a well. as for the And why Because California think lagging duress similar always in is seeing I has are result, we highest some consumer would in the that gas it as trend we're prices we consumers.

Nicole Miller

you back And be be sales insights just then you no no curious channel, have sales where to curious something ready-to-drink? afternoon store, from somebody general? will treat think California, treats no getting where those or did in about Do from from understand, thinking all? went. those just -- any Or substitute eventually? Just at you I'd coffee in convenience another home

Joth Ricci

frost, me that evening. that which when really, amount seems would loss. it you about And it's of of to lower-income of is definitely ties -- the iced And of and like down weighted to afternoon it, really where be classics, when to we afternoon smoothies, and where Great tea, heavily it's believe customer. down that Yes. see kind kind it question. boil in kind up California makes lead And iced you a to is again, back cold break loss, evening. brew,

So our that going? to know convenience customer we are customer in we because it's it's Do actually exactly dayparts. that is Hypothesis interchange. isolate and But now Rewards back and saw talked Dutch the headed and to interface where Dutch back growth Bros dayparts programming, where our promotion saw stores. convenience and have me interaction that No. about would think our afternoon, bring And it's morning I going? to after morning between do programming, still tell that we can into how improving we evening start in where

got think who really we've to customer down that day category, and we it of isolated So time is.

Nicole Miller

getting that to do happening one, know last time? guests you we trouble do driving that far thing. those And is they far hear well? to possibly you a see are having you distance just they Is travel guests in less? as I know you, all And how mean or are that -- how or usually

Joth Ricci

stores. stores if if we we have have to don't in call radius, I it, try don't they exactly a, only we drive. have a can, anecdotal our evidence, how know right Nicole. map in the We -- I far X-mile those to volume X-

work. But it's it are know in we a people their stopping radius. we think within So some shorter as of back-to-school that to on cases, could Or X-mile market, a buy way a say directly. that's if don't trip. then to But

Operator

Andrew question, Cowen. with Next Charles

Andrew Charles

comps, you for points half sales the wanted XQ. I Charley, dig impact, guidance of Can the for it easing to drove flat of If XXX was that correctly, in running year? trends points how the through XQ sales within into back talk impact basis what basis recall the and we I in to think transfer. about XXX of around should

Charley Jemley

Yes.

for as and system. was company the XXX the for point So a was the shops XXX reference

in We network. company slightly are the seeing sales transfer rise

we bit way terms quarter. that the And it's within shop, in so of across look our last seeing is get when to and try well to comfortable from the And up we we this And sales we it. just that that's a -- way that are little open at what shop is incrementality we network the measure of incremental. expectations, percentage new be a

of a sales are at drag much report add we how infill incremental comp, a network, we're shop. really on we the looking time when every So the but we

Andrew Charles

of transfer fair this of it Is the to something half growth assume embedded expectations? sales kind that continues in Is it's in back the slight Okay. in year?

Charley Jemley

dramatically year going the The of not open are the I We're quarter. of we're will shops program company think be development is because similar for similar. ratio expecting different. very a shop what balance XX levels to our about

So expect persist. to we would this

Andrew Charles

distraction low XXXX and are Notwithstanding the Joth, the sales in development trajectory the that July, a improved but question intensify And back you. same-store help slowing same-store sales focus the your single-digit eliminate flat XXXX to to true, for Yes. if rebounding proves on for growing you to targeted hoping in sales quarter those and guidance range? exiting in

Joth Ricci

No.

year-over-year growth In that fact, laid new out shop stay XXXX as that expectations. as will plan plan for far within we've our the mid-teens

I unit is think that of one it kind that is new we've and which impacts, of markets. story obviously Dutch, the transfer about of growth, those in that talked sales the see -- growth and we

on also top sales working line The of this important are and too, is because market that as other we -- a about, I are think growing talked really one, I've share. measure

we're long-term So combination sure market in trend for of had, market. that at share $X.X transfer a we're that lines, in that almost top the that new we QX, in opening market markets. all that and share and That's our example, to sales, markets XX the grew of is expectation. with the kind we're within of looking that all we're total and expectations delivering tracking of grow what kind on guidance And are total of things we the stores line make the combination growing have XX of AUV at of we sales million seeing

Andrew Charles

you the mid-teens, number When referring to openings. just then you're clarification And of on helpful. say one last very store actual That's that.

if saying apples-to-apples. for XXX that mid-teens being plus just was basically you're year, XX%, year? next sure this Just talking make for XXX So to we're

Joth Ricci

XX% with on top it. XXX be of would That

So you to, be the gets that whatever yes. number, would that number

Operator

of Bank with Senatore Sara America. question, Next

Sara Senatore

questions have I related. actually, unit a growth, of about couple

new long-term units factor, guide growth open? of as is can mid-teens you should that a Or limiting as talk the Can what implies. about absolute number of kind or gating obviously, it First the you're that think of ahead made rate point as about high it a is we of Because well the sort rate? just the is of all, you factor guidance. you twice whether

have we as follow-up, rate, please. a think that? that And long-term of through on I'll sort converging the think we about And do then so how

Joth Ricci

Yes.

markets, in where to I think first And XXX that to year, a be year settle fast Sara, raised it's the to number from we've pretty XXX We going high on to really can And XXs we we guidance to XX% it's growth year. quarter, like low somewhere high this We'll -- in. right? -- that I ramped last vary XXs, But that our into think the great range. number rate. this obviously settle we'll at the to we've spot, question. I gone So I'd mid-teens look get And think the the us where to number. look that opportunistic in want at that like new might opportunities. see be but

think on pressure the puts it manage that I to system. have we the

and has and and for how -- that as I've develop we we're to we We we for manage people, as fit how it we have the growth to and developing how culture -- develop opportunities how manage said before, our does will the because build our pipeline into people that.

make it of important that those we hit So as construction the we'll manage the the long-term expectation. it, recipe is of for people side to as side is and that success sure

Sara Senatore

also as transfer, one those things? there X know do or are just that I market there, seeing sales volumes question. sales different? of talk I you density understand made related is kind I impact can prices I these gas think the always then reconcile relatively also different such transfer of degrades. about high you greatest for some I the is growth support some of to transitory. argument California just is you're perhaps growth long somehow And the But the be wanting I are but key there. Great. But you long both lines you. probably the not Is service that a of as about guess, how a runway know high that where mentioned

Joth Ricci

Yes.

think California So in when California, I ways. I talk X of

part of Chico and Southern business Fresno, our lot about developed in think because California, the you we've where markets is Coast, our history in to the it basin the from of years. look last is very in few up different I long-term opened new basically which at when Central those California a

in AUV the markets -- and have one our the area system. is So largest we Sacramento of that Sacramento

okay that it infill customer impacts naturally We've have we're knock start but in So market, And that, an some years in to that about been with see of we units piece as experience, going in when X.X to opened got California. will we've we -- we're down do will that overall X the volumes. important last business. in the said, like average that's million improve

to great were that volume developed. the highly But response one And into so of think and to new kind come start in actually those objectives markets I we're balance long-term to markets. of outlets stabilize out seeing that -- will here

volume growing to we markets probably see out that in you we how to better see see purposely And at So and we'll and get and guys. doing where you are analyze even Tucson, in We provide We it market it knockdown spreading of need in share. that continue do information a to California. that Vegas. like and

Operator

JPMorgan. with Ivankoe John question, Next

John Ivankoe

getting be Sara's might make back to and just to on growth sure, question. made I mean, the in mid-teens point some just again, I just there to Settling apples So -- you and think oranges.

I In you'll fact, in given open XX% point I've perpetuity, Settling made high we growth count a mid-teens some the on that more in guess, mistake stratospherically unit Or units number? until some think myself. into get, year? ending a at you year

Charley Jemley

XX% talked system in The about plus getting growth, offering, growing the right? system year-over-year shop we XX%. John,

last As actually our very months XX%. over comments, That's grown XX the mentioned growth. we we high in have

down. slam We're going We're going XX%. from So slow brakes on. down we're towards the XX% ultimately, going to slope not to to

to openings going to Joth now, would, were Now XX% if year. every XX%, remain we XX%, as we were mentioned, we at at and add XX% more

target year-over-year, more the will XX% to over XX% down to rate time. the So growth right us towards from now, openings slope which allow down XX% we're going

long As --

John Ivankoe

And got I coincidental would you. to pencil. you. my need that get I -- are it's maybe I those numbers just up got just

be reflective Just have same happened just different the to but things. those numbers of

Okay. and loud clear. I got And you. that's

of interesting your -- to achieving in and pressure, for because that's minimum comment making pressure of just which at unique because store -- market you in talking the opposed wages you're minimum as level increases the mandated is market were and about thank wage not levels that Secondly up like wages. staffing very literally, terms

different Broistas, mature of what Do anywhere, are you're or assistant some seeing? have see, in currently at pressure kind level wage signs of the of you're if at cohorts you to store types And to seeing of wanted pockets any the general all stands. you? in people your managers, pockets Broistas, the there of be of you just that comment, Are I good in looking across employees, want can tenure or proactive if system just in as managers, of new any any change again, terms there the terms store? it So keeping turnover

Joth Ricci

Yes.

So that, a couple of things on John.

the the I wage market wage. that think wage that states are different in high West I the say would Coast states from we've that and you is had where those watching federal minimum states have very we learning because minimum

X,XXX -- And couple of applicants couple I wage of minor responded having micro But them. hired in XX,XXX had increase second really a where so were we've We staffing in places situations in on we on of we've a things. mean a of some the quarter. very interesting. kind working it's

problem any system. having problem having We're not we're so Turnover getting good not applicants. people, and across moderated. the And any that hiring goes

it. that. ago and the far, agile. at I the haven't we held. needed -- on working and evaluate at wanted think value so and really of But responsive market -- working hiring, to of and we remain tips. like the that we so Dutch Bros in talking because remain challenge really we had we'll have put we'll place year market to a why strategy good any Dutch how needs, that we wages never like about Bros ago, combination about to and were we We'll haven't or did was the that what has months of play and And But or XX -- important focus the need we to we things game continue bonuses to the Well,

John Ivankoe

you terms terms number retention -- in in to employees Or recognize that is Bros something a good seen tipping great from the and be that you hourly you it of in others customers attract any replicate? to? your something that call of Do of should culture to making see for difficult the service. able customers increased is And very marketplace? of special easy been for I'll have it, you've customers kind recognition, employees employees and changes is between sensitive be others to of for and will that tipping your just who Is to the

Joth Ricci

put culture the is think way it. to of recognition I great a

back kind appreciates service opened it, and and to have we kind is. back in appreciation a and the whatever open customer I years the seen think here, taking any that kind was of flowed changes was of, normalized of I call something. think up And over the high what for of versus I and and customer again, have that they being think to kind COVID of I There we're as last the kind the we like for tipping markets have we've about. of what would a say, cash. we've really But let's feeling customer. there is and seen the taking that of believe to X really the that culture for couple stabilize what through great tipping X not We've care do, months being do

John Ivankoe

commentary low side? general I comment you And finally, just may, just what's mean overall the manager on that at I mean the record of if you were base? employee I can turnover before.

Joth Ricci

we've That end. on basically our stage, X operator that on side, turnover had

system. side, manager still low the double the On the it's digits in on

stabilized on way system with we've happy taken the that we've the I'm entire So how really it. across

pressure as I COVID, think that to on kind of some back work. of of a managing mid-management challenges coming the managing there's of lot been

kind job a keeping that that. right now. around, and good our take a we think have challenges And teams continue those making of mid-level of sure we'll to of manager I people, people I those a care do of lot for think there's done

have that really numbers many up. new that of even we've again, and stay opened proven So our in low markets the

Operator

Jefferies. Andy Barish question, with Next

Andy Barish

quarter. Nice in progress here the

you think expect kind the you're help you about of Is and easier, the kind the holiday season would of on you how sales thinking you back a the progression, year? in little July in I IPO from I be Any XQ then mean negative last the half that rest we some it? what the XQ for X compares that, the saw guess, good As of get bit year. same-store about had appreciated. and but can help a halo

Charley Jemley

differently, through say we it evidence view look mean that negative to pricing and I any extends have don't I what little -- enough And as bit took traffic slightly the we is we're candidly. just would -- a we're to that feeling. really

with was And closely. right encouraged the remaining we'll so stronger in we're our with a where flooring, in in could view. wish it shape July. And we of prior and we'll next And coming through the now, it, were call things. I an uncharted get guidance or We watching kind up, as really weeks the we you to we're a and all stability I more, saw give hope but outlook September, that'll sitting that August territory. give better for see us just

Andy Barish

again? implemented if at you direction? do on -- a in are flexible it have Yes. when look would Or be and No, you go that's quickly to you decide totally can fairly fairly And that you when understandable. pricing do mindset

Joth Ricci

we Well, increase the QX. -- did in for franchisee mentioned, And we're I then of now, we announced another think right business. the increase as side our the we price evaluating

So a implemented it's get to implemented, and have decision docket X literally pricing or yet. pretty our weeks need on make that we because a here on to quickly we X not

Andy Barish

bps, is on margin in openings, at just of looking mean, that I you of the and the level, this lap just kind at a And in you that XQ, popping sort XXX now, should start headwind? at out this finally, about that a be company-owned of site is the settle kind that in, then that -- purely number quarter inefficiencies here new to XX shop on Okay. as

Charley Jemley

it's to Remember, Andy, think that expect Yes. an absolute I should you number. continue.

quarter. margin had an you'll of X popped dragged So the it's at those is opened just we see see We made expansion, just margins. not right? But It's could of kind articulated to X-month old, deck, just margin absolute interestingly, it kind that's at in you new add hey, if important And a continue compression back take absolute by consider -- year bps. that we we're distinction you the in our into -- And X manageable. with trajectory that number, x, we quarter. what we And margin. in would in for this two our broke say, look we've down inefficiency. of look we up stores our new the our are a out if And windows stores. it's preopening. saying it's not We shops. That's already already very this year-over-year so months the margin I XXX our that margin have where We of year compression, that strong

Operator

Chris O'Cull Stifel. question, Next with

Chris O’Cull

kept expects number total revenue openings to high company comp unchanged. be now its shop end of but and target the the outlook of The at

So missed may are year the at you just the have shops? new weeks this, expecting operating or but new higher I this more -- AUVs being

Charley Jemley

and AUVs X the of there's And that that now have end held, evidence just think months to now. I we're top go guidance therefore, the we'll in. more

becomes it It going math. forward. a becomes So algebra

Chris O’Cull

Or being you are little the they've what higher average first that you new are conservative Fair stores, assuming like AUV? outlook? they enough. type with averaged a that of that half, And still Charley, the

Charley Jemley

think of there. I at Texas. I there aggressively we months, stores open in got shy look infilling. aggressively infilled XX you we're mean should just XX and We've be because conservative we already

overdeclare why on to knocking That's AUVs shop we're down. volumes we're So meticulously new those now. right being reticent

Chris O’Cull

terms if you're Okay. could I'm And and terms just seeing given transfer provide still on uptick customer it's come this presence? in or meaningful your strong market That's Tennessee helpful. -- farthest you East what then adoption and in -- in furthest of an sales you're market you've wondering East just the entry into update the loyalty. seeing of if you're seeing kind a of

Charley Jemley

Yes.

spaced We've are shops enough Tennessee stores transfer. we sales any recently. out where a of a number wouldn't the real there So approved right now -- experience lot

that's locations good. hustled to Tennessee Like get start going far, will we're even to place. down. going. But more -- and knock so we're in have we volumes in pleased So not And how with out why so really we is

Chris O’Cull

been have long. lines The

and well. related looks can performance of and traffic. July? us but what it mentioned June just follow-up traffic in you -- to help lastly, understand had So you're going then it's seeing And in you that I to stabilized it's like know July, level a transactions

Charley Jemley

traffic it's to the very group, in just I just counts, June, itself. transactions at our similar right, actual customer the look I'm per If to right? absolute There's talking -- store and comp

to flattish, And down You go at we've it. would very seasonally, been -- to July from normally it's expect I'll summertime. June right, seen call

you and prior the and right, COVID week-to-week really there's But the over look negative. habits encourage and you a environment, near us month-to-month. really again, also And year-over-year number, closing. we in report in of openings look lot disruption, it, this year, as is you when term, compare I and So and

now, we're many just a looking at how people are right coming through so world And in sequentially the day. every of shop

Operator

Joth Thank you. I for would over to the like to floor turn remarks. Ricci closing

Joth Ricci

everyone Dutch very in thank support, and for to to Bros. our out your team commitment And what are operator. you plan our again, committed year you, to your we interest a set your Thank We and ago.

and As really the markets many, Dutch things I to excited ahead. about the we're more that day every of progress we've the we We're said many excited learning Bros amount about in that made. years earlier, are take to excited

So you Have thank interest. and the again for you great the thank afternoon, a time. for

Operator

today's teleconference. This concludes

for may lines at disconnect and time, You thank your you participation. your this

Dutch Bros (BROS) 11 Aug 222022 Q2 Earnings call transcript