Earnings call transcript Q1 2023

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Operator

Thank you for standing by, and welcome to the Dutch Bros Incorporated First Quarter 2023 Conference Call and webcast. This conference call and webcast are being recorded today, Tuesday, May 09, 2023 at 5:00 PM Eastern and will be available for replay shortly after it has concluded.

Following the company's presentation, we will open up line for questions and instructions to queue up will be provided at that time.

I will now turn the call over to Paddy Warren, Dutch Bros, Director, Investor Relations and Corporate Development. Please go ahead.

Paddy Warren

you. Thank welcome. and afternoon, Good joined today and Christine President Ricci, by Jemley, CFO. Joth Charley CEO; Barone, I'm We earnings closed March XX, issued quarter XXXX, fourth our after press release the market today. the for ended with The earnings now uploaded our on supplemental investors.dutchbros.com. deck, Relations at have been website the Investor press also information along release

press that statements in uncertainty aware other historical by of latest and than statements remarks cause update any and the subject in assume risks, our cautionary most may Form forward-looking statements in to including Report statements. are filings, forward-looking our risk be assumptions to our recent our Please We They all response earnings results and and those on in and qualified fact obligation prepared Report XX-Q. are on release that XX-K differ no factors to questions, actual to our Annual are the SEC Quarterly your materially. Form

non-GAAP call. reference today's financial on also will We measures

As that substitutes a reconciliations measures reminder, non-GAAP results superior to review press comparable prepared in of GAAP. are to the non-GAAP release. GAAP neither Please nor for earnings under our financial measures are measures

that, call over turn I to the would Joth. With to now like

Joth Ricci

everyone. quarter Bros, of a sustainable which XX deliver the QX Good quarter company for opened solid a Dutch We growth. Thank Paddy. our vision you, system-wide new as in shops afternoon, to continue long-term we was on for record operated. XX were

points opened in Knoxville, and and reaching expansion shops nine year-over-year. basis continued We by eastward, margin shop grew expansion Tennessee, XX.X% states. across our drove XXX contribution We revenue

profitability, in shop company the economic a deliver business. the strength labor accelerating to productivity pleased operated climate shop decisively We to on underlying remain with responded of the and margin. particularly focused level strong We

we on another At continue to growth business, our of grow invest delivering footprint plan. quarter our yet shop to the in new shop time, same

our platform. We as X,XXX the against provides strong, SG&A low our demonstrated margin to saw deep as encouragement shops further we improving systems and we bench to of goal we turnover. built strength already years XX continue and by employee underlying in continued qualified expansion years. shops see XX operator and Our candidates next people This our meaningful scale pipeline and are execute in of new long-term four-wall

quarter, we're shop the same For X%. sales system-wide, negative

at just As comp a of our shops with of base. within decelerated March, reminder, quarter the growth Same into in sales shop stage hitting this before our journey, momentum. sit February inflection XX% point exiting an our

XXXX through see difficult number Earlier in our we the leveraged in we remained over investing as the we in quarter, that in improvement. begin performance the to quarter, the omicron open initiatives traffic left driving wave. strong as assets begin of Later a comparison, unique rolling we

Christine February president, of both and Barone. expand To space. our I'd like joined in we're what and this on more new leading to short already development long-term Dutch the Christine Bros is in introduce doing, and execution strategies

Christine Barone

ahead at my team opportunity It's Joth. into highest is been Dutch pleasures great Bros integrate the Bros. tackling the Dutch priorities. one so much There our career of and Thanks, to begin of great

to for proactively focused are potential on We of the and year the challenges traffic. responding driving remainder macroeconomic

steps priorities. We're taking tackle several to our

brand importantly, promotion, typical is is largest Wednesday. medium shop history joint to higher Most the about. the sales what day that hours a a into four trial than a upwards Dutch all on same [indiscernible]. offered company's sales which promotion single traffic the which in served Bros became promotions resulted is to six group trip of we afternoon, a First, XX% recorded event, our in arriving where drive the One past. we're lasted Wednesday March throwback leaning in and in example structure have This “Fill-a-Tray”

we of Day, of couple reasons. our customers driving our we're The allowed of St. ensure released our add-on Soft lucky premium a was Second, clover to Flavored to needs with for flavors Irish the meeting and our base. ever cream a innovation first celebrate we're Patrick's special customer great Tops. which Fir drink,

increased XX the drove an and overall basis points top adoption higher XX% soft period. it second, LTO check First, by during approximately

we're promotions the The Dutch in not traffic, Finally, funds Dutch to customers one to only intend Bros QX size provides targeted results us remain continue us refresh about excited app approach. doubling drive surgically whenever on down on These from away more us announced flexibility to to moves tell our the but fits load encourage brand. also path. we the within customers to invest and all the rewards a

to traditionally innovation sales, to drive and best are of we've launch QX. momentum the months into Summer build for built. our campaigns marketing continue targeted to intend some on plan and we We

in and efforts. identifying on I operational look these example, efficiencies. these have also our April, Point Mangonada while For the our continuing Rebel and we capitalize customer's opportunities work to team we Double to introduced with with pleased been responses to Tuesdays to forward

Joth Ricci

The doing development, our Christine. Thanks, supports proactive shop On and People investment increased federal and people our key base leverage, awareness business remain people, wage and pillars; January Christine are our technology. focus. we XX, in work markets. wages brand the team in minimum operating made

X% markets fell about level Our shop improved about has responded Shop turnover turnover east X%, well. by level to XX%. those in system-wide

new now than pipeline to candidates XXX operator support growth. more includes shop Our qualified people

for XXXX shops operated operated company XXXX. $X since company were than million, approximately XX% prior open opened AUVs to mature shops higher

expectations, the unintentional new down trends, growth. of shops. shop if many it slightly with remains early AUVs is from in from limited in these QX Estimated XXXX sales transfer still drag shop are maturity any of our While indicating line

the XX% four run we've reaching Shops entered margin just XXXX, our XXXX, trade in country. new zones shop in achieved XXXX, of target, have classes XXXX across contribution even rate, each margin are three opened contribution quarters. and as to XX% The a

order to have escalation. others, offset in been shops pressure working some seen that value build many we portion engineer and have are of Like we -- our on to actively costs

take that We have into of our we can to incorporate plan pipeline. a healthy list and actions

which strong the keep avoid While on cash can't to conditions, Despite investing make we to term in shops improvements we cash forward. plan going long future. the us all to encourages achieve continue these returns, market our escalation,

Continued accrue time benefits brand. expansion helps customers over new of market to scale our we as the us to introduce

developing pace Christine daily combined these takes forming be traffic relationships often are driving continued our considerations steady earlier, of We that other time and with initiatives support These routines proves and to operational growth. sticky. mentioned

grow QX intend level. improvements point basis revenue, In margin of continued XX.X% we both leverage a SG&A SG&A the year. adjusted XXX operational and expansion total shop to at was We through through drive as last improvement from QX,

further outpacing SG&A the need we revenue to continues our support rapid We growth investments leverage development. as expect

XX.X% operated discussed that this in Included began in of this investments realize of points revenue. of significant also Improvements of million our improvements achieving operated We points year-over-year XXX operating leverage basis we year-over-year benefit labor XX% shops, wage quarter. improvement implementing recognized last in the scheduling of in of and $X in company basis believe contribution company our in XXX margin processes expansion revenue. we shop QX a product points shop XXXX. labor tactics of We standards was we company to is were a major steady margin operated in and improvement basis driver to XXX

continues moving the Dutch business us we're processing and be major believe shops. and a reliability, and have helping driver technology The as part satisfaction. investing in as in Used ensuring customer approximately payment customers of speed of App. we're can process our we our a well technology correctly, members. infrastructure traffic Dutch is major rewards in forward, place and Currently, of the support we Dutch from right improve Finally, with our XX% our to coming program systems Bros the transactions Rewards grow to

size discount price. change the following last change a rewards right executed we the on year's our March, In program, to movement

meaningful ability of reinvesting have refresh, we to experienced part We we program based customers any to pushback. As see more now our opportunities the we habits. needs not can are experience believe in one-on-one in have built on in date program and provide a to how wants, a and members. now our the customer's reinvest We and the the

on who of operators we continue beginning to we QX see as driving operational benefits particularly day. It every in to our profitability. million is increase nearly navigate optimizing our adjusted shops. relates the it $XX.X franchisees labor of on impact business focus on environment and goal their as are strong positive this and executing X,XXX a thank ball aim keep look we a EBITDA, eye and great shops. publicly on We as plan in execution, long-term efforts corresponding that its focus outcome, these path we our SG&A ahead, selecting operations, larger the leverage to our our XXX% to and As underpins building deliver to the We are to we strong sites, year-over-year. traffic, want specifically believe I

to turn call the like to review over Charlie our I'd to Now financials.

Charley Jemley

seventh shop at straight of Thanks, least Joth. We quarter reported just XX openings. our

Our team's embrace inherent with across the to high shops operate with expanding of ability increasing impressive. an portfolio states and has to multiple growth been profitability challenges

year in results QX effects than tightening, company sustainable corporate XXXX, by absorbed profitability inflation. a some our do objectives from operations growth. center they retail margin asked we In not our thoughtful were and our on a long-term significant in financial shop was additional productivity My to how higher comments EBITDA teams as capabilities ago. overall and The to we XXX% with excellent to naval extension strategically of so continue way the tasked belt around invest with and then drove or adjusted risk impact growth. Even

XXX only after a of we beginning have As shops company now operated having company the at shops XXXX. reminder, operated XX

XX%. sales million. quarter; shop grew and basis to EBITDA the XXX% includes Adjusted period the expenses. improvement million to that profit XXXX. XXX from over of highlights shop in $XX.X compared a Recall QX quick contribution was this margin lift same shop XX% prior year nearly contribution points company basis that Company points over last Driving Some in pre-opening profit XX.X% to of revenue company $XXX operated an contribution year. grew XXX increase group or the grew margin XX%

labor next expansion. our and to P&L, growth same performance. goals than Rather key quarter points improving and investment start Labor walk from the service. let's shop speed, was to quality well period last through phases company revenue, we move down XX% critical with operated bodes the The Labor margin of basis our is company for XXX driver; an around this year. is of operated shop the what as biggest delivering our costs that

aggregate in rollover the by higher from additional spending XXXX's legislative wage performance, alerted backdrop million for this the recall wage is that the we where we announced This an to wage $XX $XX pricing million Further, quarter minimum partially wages you necessitated by As offset last wage menu be incremental an $X actions. investment in standard. in states a million increases. minimum would federal

In enjoyed retail points we the QX as improved million optimizing implemented when operations we resetting what wage late traffic $X basis We in P&L can improvement standards. of effects of in QX's operating benefit of increasing labor of spite expense the standards came XXXX, and XXXX, XXX in began be believe full productivity, labor in together deleverage. and delivered schedules incremental negative this

shop Cost while shop inflation has XX.X% same costs costs the basis of within period zone. revenue sequence operated year. company a a are elevated from year. of up last XXX remain of X.X% trade sold Pre-opening operated the same company from slowed opening shop QX measurably, costs XX as points goods basis period delivered year revenue were were Pre-opening of the over in down year, in points function shops of QX last

a our of we subsequent highest opened shop as support, second trade with result, requires shops and a and levels within of support. lower level First zone

support, expense infill pre-opening we much down of In proportion quarter. QX, which as higher timing our shops, driving not a do for had the require

each year in full expense to to As of this versus number we pipeline managed of the flows a see and function sequence. its sequence. shops mix have as that natural be quarter, let ebbs the We you'll first subsequent on take a

in in another QX In We on in same offset and to inflation price goods roast cost executed including segment, action million franchisees, sold was the and year. the profit increase improved $XX.X the Pass, to designed of our a our sell XXXX. we our profitability franchising gross last This to compared our product segment, million period our proudly and input Grants helping franchisees to $XX.X plant quality shore high in coffee onward Oregon. the to we

million and was Shifting includes million SG&A compensation. QX decline last SG&A SG&A revenue as in to $X.X now million. the QX quarter, Adjusted year. XX.X% compared This $XX.X to for for to percent of stock-based to XX.X% was in $XX continues a

component SG&A. of the for continued expect SG&A forward adjusted supplemental reconciliation and SG&A an and as we between We thesis. investment to are leverage make our pleased in with reference leverage QX a adjusted slides ongoing going Please

Now on of our reported. finished liquidity. an $XX.X openings tied balance increase represents those to health QX $XXX.X of debt, from a and of on the sheet directly few QX that record to million We net comments with million we

credit million have We of million $XXX facility. liquidity undrawn $XXX the present on

We flexible to are remaining to and sheet, committed maintaining being well-capitalized long advantage take of a balance ahead. full growth runway the ready

affirming in to to XXX, are shop in of expected billion. sales be million total full our shop $X Total $XXX be estimated at shops low will Same system openings we is are digits. operated, Finally, least least XXXX single year to which of revenue be at XXX company the range the guidance. growth

early our too guidance fiscal to in EBITDA. our full at QX's our we adjusted million. EBITDA view results change days it any year of adjusted maintaining towards of translate believe just least $XXX is We year, into Being are the XX

example, the initiatives may the in in in pre-opening investing a company improvements moderation will to in noted, of we we the throughout designed Furthermore, the traffic. remainder we year drive operated favorability the in margins, continue year, QX. as the remainder underlying shop For despite see of experience

on will progress share we'll We early results. in when August our updating to forward you QX look

million facility, be to for estimated are which which includes to approximately expenditures open in will million $XXX Capital to in we million million, a of XXXX. $XX the in roasting $XX second XXXX in project spending range $XXX

lines. now And please will the you. take Operator, Thank your we questions. open

Operator

with [Operator Andy instructions] Barish proceed. comes from Please Our Jefferies. first question

Andy Barish

back and asked some which Northwest, of question areas, key you first you of I'd touched figured months, 'XX see kind today rest the in the you on impressions opportunities on your for and the aboard welcome focusing in in few the just Christine up of guys. the first of that and as Hey beyond. the you're Pacific what

Christine Barone

and here of Absolutely. your today be voice. to Thanks be hear to Nice team. Andy. Excited part this to

think, it's that even culture lot a that than at our and would the our in company, Bros spending be. Dutch of I of lot thought of sauce And, into going about I meeting And, I'd it walking shops, time Bros. here heard have special kind some East a say the better would in having openings, much we is going energy and and the been as life to making fun people just into some really shop so, be of excited our here team. our customers. we're translates see awesome to to in headquarters new that drinks energy how it's comes really to shops same with our are the the for The I

in As for the some priority is continuing driving about and of forward that I certainly transactions. momentum in driving traffic look the earlier spoke year, the I

about and on base we that'll a areas things drive of be of in program we so us a big is here where highlight things there out really One rewards soften the excited and can on that area which took to as I to rewards that some concentration. going different a move it's that focus transactions the we that the of of see with wanted and and way to made discount, move use really discount program, to allow

seeing, we'll efficiencies continuing We you the know, to very pleased also, delivering margins we're are on those and to shops. with operational so the our be focus that

So thanks, Andy.

Andy Barish

Thanks diving Hey, one cogs into line Christine. a Charlie, little question the bit. quick

and current we freeze costs. of higher think forward? was that about on dairy it's how talked that that of on over on lag at the kind in least Is of about were and environment rolling a down as going the first cogs product, you bit pressure the commodity some little costs going should a delivered changes than think sales percentage I with, even I can time remember your labor, significantly

Joth Ricci

question. that for thanks Andy,

So cogs, there couple side on year-over-year. dairy up cost of is in still the things

there's the lag it many and us, to mentioned, when into up we cogs of for got, year many, flows are elevated from over then hired, sea the is of a labor ago our rebalancing flows was comes the digits. price our leverage cost costs As in months that The system. less labor through the low when a the we that down product that mid-single and about percentage. coffee price then of system. commodity escalation goods And and year and more And efficiency being of

Operator

The O'Cull from proceed. Stifel. question next comes Chris Please with

Chris O'Cull

you afternoon exited some you Joth, Yeah, quarter comp good guys. with momentum. mentioned the sales

in looks seen transactions just what I'm like curious current in kind in the so first may if of range it of far digit transactions So you single in high been improvement have the sequential but level down quarter? that have quarter,

Joth Ricci

Well, we of we Fill-a-Tray out And that. coming improvement on XX. coming happened days talk about March. out of The had March momentum sequential promotion of

first talking not to a from and came I balance lapping driving the of mid of feel in plans QX quarter are just she and And as really weren't about put did kind like March April to good start what opportunities We think on really were QX going kind of was we QX. not of into late traffic focus listen, We to We're and omicron XXXX. those forward. Christine get today. execute we when really overall, place until in to look go able at through we the tough

about underlying flat we're versus for QX QX. on So, traffic

kind that after and our opportunities. a the see here we're steady go year there So as investment dissect of the market out using rewards really of plays there new of ability to itself that building and and discussed programs balance the how Christine our some program of coming was we'll rate out and

Chris O'Cull

this planning That's helpful. to year. like take pricing It you're additional any sound doesn't

of programs especially improvement these course in in that you're off, that on that to see rest type can So rely success you over comp traffic the you half? guidance. of the the year, need with confidence the hit of the to I guess as pricing performance that to comp roll gives starts you that going better to seeing back presumably Are

Joth Ricci

No, We're is is We've I programs. talking We've some the to Chris kind of new year right some continuing the continuing evaluated We're -- be marketing think half local and that pricing in to look of related discussion the we rewards see our of everything run area evaluate about. something we're evaluation some mode. now program. back what programs. like to some programs new ran testing we've

we be all But of tell. out and that but think QX pleased Christine the to will and those business, the really started in will team plans these of kind coming we're for with overall place, momentum of time have very positive put

Operator

comes with Please JPMorgan. John Ivankoe question next from proceed. The

John Ivankoe

Hi, up on I and up in on is the think the slower started maybe your their curve and maturity volumes question of some new unit they I of Joth, picked ramp remarks, kind units numbers that new as little on unit system-wide any picked in year calculation the means, we lower. bit year, that certainly, not perfect that at by our basis, looked over least volumes, but a a a

of So, that you're topic can markets. you, guess types seeing I on expand different what

you or to in open really units expectations the of see or to to anything you quarter. so couple a are series just averages months If know that's your quarters take a like couple it's many a their get that given of below just up going

Joth Ricci

Yeah. John, I think you're, is of comment super I think the last that part insightful.

think amazing openings had some listen, we I well. -- we've that as

things and new done we've go But as we've we've locations If in rolled, opened history that months. XXX to of the those some markets. Texas some openings volumes the in there, in the in larger basically have Southern of XX seen you some of happened in California the we've

to shops happening we in cases, quarter, lot in of some some Antonio, those I does market. infill last and year we've Houston opened and a in, talked XX Dallas, of And, take those locations that curate over about estate, a build opportunistic there's San in in real the of little are a as time think

experience had Dutch takes benefit up is the than part, we of customers, you you give have we're for like term of doing seen to in to lower we something great that our time to trying and business, for in to invest time has that them one and great service XX open confident them think build and have Colorado and real I a years and model We're Dutch think move this not is build and average, the over been I and we've markets the into and curate when we've those some And margins in Springs and it those where that and trying the bring Bros great Las other long it the feel Vegas buy markets And, Bros along. allows go. Tucson customers. things studies other,

be and we've pleased has to that Tennessee being we're and in So, bit The opening fantastic and all reception had far had talked all we the Even, every way, with to going we've markets. about the to a that been we forward reception Knoxville, everywhere different market's little East build now. customer continuing that. very look

John Ivankoe

a secondly, that, for in were if you XX, seen March those you your system our to getting aren't of store very move and I crew responses XX new still and you What You've may is that very, system from customer thank from efficiency? a expected are to operationally, in around July have operational correct. new notes month numbers correct if at margin Okay, about I the in Are shops tap me, talk system? the taps? seeing a terms you every

Joth Ricci

we systems which get place. five was five our Texas those taps March new. in Yeah, call We tap the had since very launched in five last it's was our to still the program,

starting intact launch, in Our the we'll shops to the to by and July. implement executed plan back start XX have in the second really in quarter new end in locations remains we'll of then

I we think So the a give in call specific that really be we'll it's early have any the position what far to us as execute Obviously, next but the the are going. like. as operational counting indicators to on hopefully tests efficiencies, be for too buildout early we to on like looks way plan like or that the we some and touting

Operator

Cowen. The with Andrew TD Please next from question Charles proceed. comes

Andrew Charles

rebound same through of just to kind different reiterate will sales cadence. to lapsing how Great, manifest, walk just with amount XXXX, progress the a store the thanks. Joth, your us sales through given expect what this I'm Can of of dynamics I broadly traffic, have list price how you on going you amount that and questions. thoughts of guidance. two within

And when from given positive expectations, were up expect can be really made guys XQ a separately, that we below, XQ? then just the for the thinking to was bit just that our you quarter, shortfall

Charley Jemley

of in quarter, the progress pricing with through the first start terms So the rollover.

So gets round year bit is easier then is six, QX then three, in year. terms, a and is rollover QX is for four, full through eight, little QX the the flat a traffic of QX and as we move

how So progress the the that's we would things through of year. balance to expect

terms a on being comparable day part part. In about of basis, a a tendency more QX the afternoon which is per It's sales question or have does the afternoon be your bit below that discretionary. It not a for in se. to day that's geography a anchored product part, most

Andrew Charles

XXXX were Okay. the XXXX, up the digit about million. embedded store, I per store? double IPO, They your at X.XX-ish new terms In construction And X.XX-ish. in of can were around time then you or CapEx in remember in about costs you investment per what's talking costs $X.X cost so, to guys about talk

Charley Jemley

embedded Yeah. We upper CapEx ones. in do in have the our elevated cost the guidance

funded we But, those all-in for terms depending year for in on the additional So that our the million on $X.X be this $X.X, around with an well guidance feel capital side. to site cost. have guided project quote $X.X million escalated like CapEx is what around covers and we of those you pre-opening, to we should numbers where

Andrew Charles

new on referred call open-minded to the you Charlie, that lastly just sources. And to funding you're

proactive, versus Just to would into you use interest the with up, longer rates more of picking revolver? the with current lead looking bit liquidity be more sources a what term

Charley Jemley

elevated liquidity CapEx would look at into our in saw that's our that, those that the bill look moderating always hired. we for QX shops and get given and cause needs, think I terms think and we'll being between to the QX, it, season tax, coming evaluating of nothing in at we always year I QX the our the margins us and built AUVs QX Well, change There's reassess. high performance through we're present has plan cost have as our this in we of revenue of but

Operator

proceed. Blair. Next question with William comes Sharon Please from Zackfia

Sharon Zackfia

Hi, good afternoon.

voice. Sorry question. Hopefully it the about my I'll through make

bit So ago I commentary little but had into April, and seem recall to to and period the prices. on related momentum questions. I gas I of two also you March a slowdown the coming had I'm year curious, in appreciate because the a

when you you're looking thinking natural lift business, as in of a momentum and might multi-year So the from that opposed up? just are follow then impacted on kind those the comparisons a about at have get I to gas lapping basis you

Christine Barone

Absolutely.

offering look then looking think at week-by-week stack So different the looking, when I promotions over we're those We're we looking have momentum, are of the several impact we at what's at and that the years. promotions. different comp of we happening the we're during time periods

do think March at just seeing we more momentum, it's lapping positive. something the were end that So of what positive we is we at look than if

Sharon Zackfia

That's really just frequency wanted average customer how helpful, thank kind has you. And your to been I of inquire then on trending.

the of the IPO? lot curious evolved how of You obviously and a data have that's time since kind of I'm now

Joth Ricci

look the in seem now and we break what's consumer the of frequency, As first and as we of far environment as, in time happened going we And from on down group of kind our, what's that cohort, our at top we routine. business group actually into Everybody have our lifestyles everybody that regular much all. that is interesting seen getting change kind our top is cohorts the also XX% for doing kind haven't be what's with actually back to market at as with a back open.

and We're is really quartile up very held well. and held the the held, cohorts. first it actually of through frequency lower actually of It's kind more that quarter seeing softness

be So softness bottom has bottom seems like come frequency. of in third group that where kind to the

on are and actually related loyals family. tiers different sales of and cohorts and as and that of that another of strong Dutch then very transactions, that playing reminder part of So, app the strong and how really news, customer's about, impact the at our we that the Bros a through a the constantly transfer have we to our interactions infill and XX look are look about a have is that then to some to really looking good and of we're And at that's indicator they're But maintained using the out have XX% at we the well. at is the be manage app the rate. loyal with us how coming also

Operator

proceed. Bernstein question calls next Please from The Jeffrey Barclays. with

Jeffrey Bernstein

Two questions. Thank you.

about the vulnerable first more just or macro seems than in a And it most. day I more focused parts. broadly you're maybe more think The more you're as one, the clearly we outlook, vulnerable discretionary brand, just mentioned as afternoon like beverage you think

Just do you you were I you and about to see think maybe tools if your pressures sales have had and wondering one positioning to mitigate up. follow brand then how accelerating what

Joth Ricci

a So yeah, long to question. it's answer that's -- a that

I think think I running a -- from specific part we of ways that that we've day by that very specific was the on the that was that towards softness. responded, base. to a It were Wednesday, where seeing towards a Jeff, I customer six the think targeted some program think I absolutely that targeted Fill-a-Tray noon of

spill largest history day about had recorded sales for company's was digit growth. -- by great sales grew was is that what the double and it in And actually XX% single the day over transaction

a based that you're markets because when market the know we business, going can are some execute that different business attack we be XX-year and know to for that So we needs the traffic. running us well. there stable of We on are again, very drive can

and in it your Dutch go markets testing the business. the other new something beauty customer driving It's more thing add there's and we're of to very Christine And And we've allows and, routine have teaching that's been locations been work for Bros, Dutch how running the that of up interact new where after hundred And the Bros Bros business think us I rewards make programs. through. building how to of with specific of as of Dutch and about still the freeing we and we're to do still a daily app needs part some it, over about, that's that kind of the a invest think, lot months, we've for and us talked as program we've And us. I when brands. to a the been you not course XX

Christine we few last wide, launched Mangonada a mentioned it we we year early in program April. took that tested in a before system the actually that which markets program was

So anchored and we're for right trends it's that what's taking brand such a in excited kind which to to something on that's Mangonada flavor Dutch share with great consumer. hot to that is way more you Bros of to is with by are Taheen, flex and addition and beverage that a on important more we're business trend about how the now, happened

Jeffrey Bernstein

climate And of Understood. particular in could some them decisively. the the service maybe like of traditional climate beverage the food a more about in seem know beneficiary economic bit down. a up, little be about talk headlines view? really trade because climate responded then some and what to does teams that just quickly the they referring they are I quick you or haven't changed just your it change just a of a in in mentioned, you follow of I'm to wondering noted how Or and peers, maybe

wondering trying did you're sales, their more to get to what referring what you're of respond in terms just the to some response. in talking just color about Perhaps team than in you. Thank particular but So margins on as to? particular

Joth Ricci

Yeah, headlines specific. I response probably more think the anything on in than it it's is

labor labor driving market I the think in challenges some and that the and in improvement. of the challenges

I that facets be great or statement. how all of at every their they think think looking income business honestly across whether and macroeconomic should challenges improve trends I it's

a the too of So, a becoming I doing board. into business, our we getting large and running a labor I efficiently percentage saw where last job spot much of was year think team across and more think and better it the up today that creeping when attacked it's

we wage another where down total turnover is we states took think around to minimum at in states XX% what in which the for the by I minimum listened second down come seeing not employees markets, and federal was and X%. mandated in our wage the on now and those X% a turnover but area seeing investment, the company also just wide

Bros great trend, the also a work. indicators how Dutch are not but I all make continue just place strong attacking about to we're we're think how those to customer

Operator

America. question next The comes Senatore from Bank Please proceed. with of Sara

Sara Senatore

please. Two you. clarifications, Thank

mentioned commodities at just still and least up look know is We're first ahead it is. those the you on costs, at and like I The be Charlie, I looks dairy. If coffee futures tailwinds. markets, should

right should thinking margin that going be we forward? the to that way about? that about other is Are think So offsets there

that's actually for sugar, is example, inflationary year. one been know, this I

flows So direction when you how about and that contract inflation can give or do any you of kind thinking through forward. given that buy, buy you

So first second. you. I'll question the Thank then the was that and

Charley Jemley

Okay.

month On the the input flows to and the sugar that it our the lag from time XX time of sugar, moves system. about a into on coffee, cost price there's

even you price year. see wouldn't you're that current in any of So though or moderate, financial seeing the much

in area. we're When just in thankful that summer is production best more production to on, the hot the we're it's mindful in or comes while the it spring is dairy that volatile dairy, and not moderated, summer, depending

So at wait we're cautious to you whether And and and looking a you plays see that had or not. up? just just have a, follow had out that we

Sara Senatore

guess, think This you've other California Texas on slightly actually I Yeah. new being you lower, but is entered the ramped, some Thank and in like markets where always, know high watching. the lower being of volumes still unit and they've said I markets I and one in new volumes unit bears you. very newer

So of of of you a pay for, kind you markets, was sort have of sort and would pace newer growth of just contemplate ramp exactly just looking looks those in the be would some perhaps attention you until less like of you that sense what wondering to. any just being what flags I opportunistic that slowing

Joth Ricci

One Joth. the response as Hey, is the in We're kind units been We're in start down Texas. way that community not with pleased ahead. we look of Sara, way this intention and the very have that with here answer. pleased of actually new is I'll that executed. with we our every have any do slowing that had we've

businesses flexibility shops continue build and can been of can given the to open It's related and operate, we actually the unit these we way can invest to how economics flex do, when base our great and four in. and a numbers, it have great the go you margins and great strong gives to way us wall to you've some customer able be to that we we fantastic got

Fort and in feels you're California, there. about amazing Dutch Houston turning that of the we'll And and approach pleased build in way or I in did with Lubbock the it market or in ago down like weeks business seeing that or what's way customer responses. we'll in was or between, and enjoyed gate and an way shops just done out so, Dallas we're the very same we've everywhere the the three Worth same the or come we whether Waco and done long same Bros to we've And take Colorado in a Arizona. really

very So pleased with we're that.

Charley Jemley

launching a particularly Yeah, and of but years. It was 'XX significantly to Sara, so units, 'XX new in at add you those look was just in in new there lot Texas. move infill to if into you markets, and launch the less

that's markets which go the then things XX% try out into we'll into as then we'll we then and the which flow. at see look QX, go to to nearly We'll backfill. backfill out, and part and QX you again Knoxville, got to and nearly go XX% of ebb infill, we if Now got then got moderation, new openings, another infill, take

So time. flow over we as ebb our the move will through and pipeline AUVs

Sara Senatore

it. Got

much. you Okay. That's Thank Thank both. very you helpful. very

Operator

The with W. comes Baird. Tarantino from Please David proceed. Robert question next

David Tarantino

in good you're the Hi that performance you questions the My what of had the afternoon. year. for really and assuming about margin rest QX

drove the the now, what and might but have are So guess level those year, seeing I simply something and that it? second start how those what I extent that mentioned the but else? full wanted Charlie, less you, confirm, I can how this, now you and just would you you're changes you Is I you in to said at the the guess, -- or unit were remind think us I changed it would of guess, some productivity hours of describe improvements of exactly those half was

Charley Jemley

there. things couple So

removed time. reasonable we we at with degree last our would've had this at deployed basis, all, better that a better relative of year hours to what overtime. scheduling. less We've versus a scheduling of being deployed a the And last yes, lot look system way are on of of First out a year

So straight productivity. that's just

bank of QX. benefit see the in of to of that in We against started mobilizing fair a on and QX, Saw of saw some in that part that degree we it, latter last didn't enough it year.

in have escalation. through spoke itself year coffee the So, what the and have from move but dairy that's to think rest our out play earlier going commodities perspective, of we moderated, we as commodities as margin slowed then the that to, is, as I and view down far of terms a of

going bodes So for and to stabilize good all well that our be very margins shop forward. company now

David Tarantino

level accustomed the I know, you that the been traffic the, levels? your tied experience to? really of while to that, guess accomplishing reduced guess, on how still guests providing are reduced is And that same Great. have I this you hospitality hours, and customer

Charley Jemley

specifically and we working and to made, the hours appropriately scheduling reducing more beyond those matching you to labor then working the when have drinks going schedule. be Yeah, actually that are schedules, forecast less matching and in

productivity that at micro we is lower and weekly have at versus So traffic, necessarily which at year. on a looking level, product it. it track a specifically how measure the We're ability looked direct it do basis to of didn't we've last we a

Christine Barone

time that come, can take really Yeah, bit well you price of that as and with so scheduling want I and would, on come the took would along we based out to on year, last increases we and sometimes that. little I that dollars come to of add teams a as were sales

to So were that labor if we, pricing that to the leverage we able those as moves teams as well. investment adjusted

David Tarantino

And quarter. guidance, this sort continues, then you're the front, adjusted assuming nearly your thank deliver of $XXX take question the or on on you doesn't EBITDA, on million so like if points literally seem line, last you. maybe first performance margin the I assuming basis helpful, full margin That's it's in midpoints Great. of look this your revenue improvement ranges very year the XX I'm, EBITDA at and Charlie, and of

of dynamic? year So guess, it a be related what is basis, that's on this the less good I balance guess, going the to year-over-year I about to

Charley Jemley

it talked were that about ramp investments wage go we building million add as increase, markets going $XX full for legislative of more bigger, the in minimum we the through on the are we increases, So year, federal the relative making year, on basis. and a wage themselves, then gets that's wage to top

the take and through a So we piece larger of will productivity have going edge go the that little of an bit forward. as off that'll we that year that today, get benefits

any guidance, quarter, was year. accretion we're to also assuming climbing fourth over relative that XXXX margin we're And the remember in that the million. breakage, not last the in $X So, points

We have a to lap perspective. that margin from

Operator

from Wedbush. The Nick next Setyan with Please comes proceed. question

Nick Setyan

Thank you.

targets Is in in single you Just terms guidance and to line it reiterate low comp then the QX, performance? comp full planned? year sales? that else quarter revenue obviously the, reiterated of confidence the of gives full the have performance, and context year you Is date the what something it top

Charley Jemley

and of I'll QX One place of too this traffic things, business Christine plans a be rate think more build we in that business. of think QX, to think things have, to balance early early. drive few. I there's talked index a about at We is to related that We and predicting QX still and continue anything it's the QX Well, the highlight year. it's higher to in but seasonality the be to too able to be that more much several still the whole

work that So able are our on markets traffic in margin soft that. another to one. in working done identify is we or to feel day parts The teams the initiatives and allow to be drink driving mix to do build we've investments build programming like that to us

opportunities have of us. front in and we think So, we think early. love of our that the we love it's We team kind we

Nick Setyan

some Was should on out about? promotions it moderating? are some second, lower, declines? QX, now QX, trying benefit sequentially going to level is, Thank guess the that is, QX, as And this is you the QX, you. drivers beverage of uptick, mix? question that that And there. was what in beverage, forward, this then And just we're particularly food what we if other again, think year-over-year get inflation's drove Or Is all pricing figure to particularly, pricing uptick then were it there and running? big the XX.X% there a XX% I

Charley Jemley

last first, XX% heavily year, that remember costs had in XX%, Well, are the last of that we part very anchored so up sharp we and early inflation dairy moved in year. and

rollover you is down when cogs -- our when we've look at and inflation had earlier. even the So you up, from has had as perspective, slowed year coffee I a people margins over that feeling year, though impact in mentioned

So the the, that's then the of and the cogs. coffee year dairy both full you're in annualization cost increase, what seeing

of but change way expecting a also there, we're or in we're any not expecting benefit In real terms the that? lot of not forward, change

Nick Setyan

that XX% forward? this to rest food a for sort 'XX? clarify, of the going level level And is cost way just going and The beverage cottage forward so about think to level of fair like

Charley Jemley

is things, QX promote quarter. a of significantly There's but the about going going we we'd really product than of quarter see forward bit would expect higher cost different We nothing from little changes goods, level to mix. not higher. That what So forward, it's

Operator

The from Please next proceed. Francfort comes Guggenheim. question with Gregory

Gregory Francfort

the question. thanks Hey for guys,

not bit in comp of where similar lot may guys traffic? a you digit seeing other a stores Texas couple opening I'm by, by think was, and the you're that I'm some different than you've on maybe down points you the levels maybe of seen single if or high of down curious Oregon and markets? are anymore, you're seeing in just curious a what I'm that sorry Charlie, I just not guess what have like me, it you have earlier surprised and I comps, excuse your seen thoughts, mentioned that disparity regional

Charley Jemley

get Oregon flat to Oregon slightly. actually and us the was Let slightly. comp actually the actually up group up was QX, Oregon data

Washington actually group it up, have was see, tracking flat. basically, the call let's You

the history, that would that's stores basis are been of flat XX-year in I of more say that, traffic. those So,

or not to positive relative development, rest, did point. without if see Joth any, we So Oregon, much it the be to veer off

that us there tells like So no of indication kind Oregon's everybody else. there's anything

Gregory Francfort

And wonder could you you're there your Texas Understood. building expand I entering Got cities. how entering strategy just, awareness and it. brand of and if then how on you're different

as grown And they kind as where suggested Thanks. you evidence set opportunity Are of quick stores? just like take they c you has is. customers the you've and what in grown that service? who Just market of your view terms is competitive I'm where they curious home? share there, from the do sales coming Are from? from coming share from at can coming Are the are?

Charley Jemley

we we into locations our really Yeah, could of showed modeled original go so modeling Texas when the that hundreds marketplace.

in share feel that of out like early in state. market So, we still actually building innings we're the

go to some I is is at just build think Bros that a awareness, we business. opening and of look a it as of actually mouth key driver in we're as word and we Dutch going for market,

of trade We do brand lot, a in build call back to a a that do through -- family again not in work we mouth we to build givebacks philanthropy. to lot of in and a very do work kind community providing work zone awareness of friends friends use We community. lot to we we of family, word local in open. awareness, and or we do what We do opening do a where local a

amount job times parties actually have in have, people throw for you of many might the might a hiring XX get where, that cases We hired. we applying

we So open. there's several ways that

word what shopping look the of how a with And so from mouth and help is really Bros do awareness you experience. to we build Dutch interact for

that be It really that a you is is it in it be the anywhere convenience anywhere grocery promoting where section Starbucks, business beverage routine, a getting really, where from? And are right? that a know, grab share immediate could interesting have be, you our beverage go and you're competition a is about and daily strong store. Two what's is could a to store, is consumption think So this going a could of could I be beverage. that

the opportunities business to is categories in day different that beauty that's and I the and And big parts of grab set are so outstanding. the set different the product go is competitive think market

stop. ever you why So don't really that's

You you're actually the continue day. to that people's beverages build building routine into because every it and way consume people

Gregory Francfort

funding of an can maybe positive? us is X%, your of your you're of I Can last that? debt if negative raise funding I flow one free or maybe in one now. to with curious it. that, you cash some than when I, the And free comment And that. made funding I cash rather terms equity something flow. in why you for that your X% right think remind just thoughts, funding on expectation Thanks sneak just guess, like I'm flipping appreciate

Charley Jemley

couple Well, a, it's and we a question. as, times, a good I, said it's as very

First work we, ability the our given but we some in may to see to bill hard get try of down. positive that delay back to all knock we're cash knock it to of going some elevated free costs, and to

good we say a very have that. in would on in the today. of terms funding, activate we'll sizable type credit so I then And I guess And and of place facility

We're on the sitting open as now, initially. And or what do fallow the to with not doing but what equity with always not what cash sheet. exploring to lot we're makes are that right forced compelled an raise a anything do We're sense. is need efficiently of most drawing we we balance very may versus different

going funded are what to business will absolutely TAM, So get make options that we and unit again, sure X,XXX shop our this to forward we're, open is we're well to

Operator

back questions. to for there this would further At to time, turn you. no Thank management are I home call like the closing comments.

Joth Ricci

everyone and, for thank you Thank you, questions. and your operator

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most largest year. our back of is the this day exciting give and Typically,

you to for our on For you visiting Bros. Thank you. the we support your are thank areas, market and participate invite May as of investors, by for time you Dutch continued always, those and XXth us that of our

Operator

today's webcast. Thank and teleconference you. concludes This

your time You may thank this disconnect participation. and your line you with for

Dutch Bros (BROS) 9 May 232023 Q1 Earnings call transcript