GRANTS PASS, Ore., USA – Dutch Bros Inc., one of the fastest-growing brands in the food service and restaurant industry in the United States by location count, yesterday reported financial results for the third quarter ended September 30, 2023.
Joth Ricci, Chief Executive Officer of Dutch Bros, stated, “By all accounts, Q3 was a fantastic quarter, and we are extremely pleased with our unit openings, same shop sales, revenue, and profitability results. I am very proud of the team for their accomplishments, and I am encouraged by the strength of the underlying business as we execute on our plan. In Q3, we opened 39 shops systemwide and entered two new states: Alabama and Kentucky. Despite a difficult consumer backdrop, we drove a 4.0% increase in systemwide same shop sales and delivered 33% growth in our top-line revenue.”
Ricci continued, “Even as we demonstrate our commitment to profitable growth, it is vital that we continue investing in the business. Our focus will therefore remain on recruiting and retaining top talent and keeping our operations efficient and competitive long-term. This way, we can ensure that our people pipeline and systems stay strong while preserving and amplifying our culture.”
He concluded, “During Q3 in a span of less than 45 days, we executed two transactions, an upgrade of our credit facility and a follow-on equity offering, that unlocked a total of almost $500 million in incremental liquidity and positioned our balance sheet to support a long runway of growth. We intend to continue confidently pursuing high-quality investments in new shops on our path to 4,000.”
Director Appointments
Dutch Bros Inc. welcomed two new members of the Board of Directors, C. David Cone and Sean Sullivan, who were recently added to fill vacancies on the Board resulting from the resignations of Shelley Broader and Charles Esserman. Mr. Cone will serve on the Audit and Risk Committee.
Mr. Cone served as Chief Financial Officer and Executive Vice President at Taylor Morrison Home Corporation (NYSE: TMHC), a residential homebuilding business and land developer, from October 2012 to December 2021. Prior to that, he held various roles at PetSmart, Inc. from 2003 to 2012, while the company was publicly-listed, most recently as Vice President, Finance Planning and Analysis. Mr. Cone previously served on the board of directors for Urbi Desarrollos Urbanos SAB DE CV. He received a B.A. in Business Economics with an emphasis in Accounting from the University of California at Santa Barbara.
Mr. Sullivan has served as Executive Vice President, Chief Strategy and Legal Officer of The Duckhorn Portfolio, Inc. (NYSE: NAPA), a producer of luxury wines in North America, since February 2019. Prior to that, he served as an attorney at Gibson, Dunn & Crutcher LLP, a multinational law firm, from 2012 to 2019. Mr. Sullivan previously worked as an investment banker at Credit Suisse Group AG. He received a J.D. from Columbia Law School, and a B.A. in Economics and Politics from St. Mary’s College of California.
Dutch Bros Inc.: Third Quarter 2023 Highlights
- Completed follow-on offering of approximately 13.3 million new shares at $26.00 per share, raising approximately $330.1 million net of offering costs and underwriting discounts and commissions.
- Opened 39 new shops, bringing total shop count to 794 as of September 30, 2023, a 23.9% increase from September 30, 2022. Of these 39 new shops opened across 11 states, 37 were company-operated. All of these new shops continue to be led by existing or newly-promoted regional operators.
- Total revenues grew 33.2% to $264.5 million as compared to $198.6 million in the same period of 2022.
- System same shop sales¹ increased 4.0%, inclusive of the impact of our fortressing strategy, which results in sales being transferred from existing shops to new ones, as compared to the same period in 2022. Company-operated same shop sales increased 2.8%, as compared to the same period of 2022.
- Company-operated shop revenues increased 36.3% to $236.5 million, as compared to $173.5 million in the same period of 2022.
- Company-operated shop gross profit was $57.0 million as compared to $34.7 million in the same period of 2022. In the third quarter of 2023, company-operated shop gross margin, which includes 180bps of pre-opening expenses improved to 24.1%, a year-over-year increase of 410bps.
- Company-operated shop contribution2, a non-GAAP financial measure, grew 65.4% to $73.3 million as compared to $44.3 million in the same period of 2022. In the third quarter of 2023, company-operated shop contribution margin, which includes 180bps of pre-opening expense, improved to 31.0%, a year-over-year increase of 540 bps.
- Selling, general, and administrative expenses were $50.5 million (19.1% of revenue) as compared to $45.4 million (22.9% of revenue) in the same period of 2022.
- Adjusted selling, general, and administrative expenses2, a non-GAAP financial measure, were $40.6 million (15.3% of revenue) as compared to $34.7 million (17.5% of revenue) in the same period of 2022.
- Net income was $13.4 million as compared to $1.6 million in the same period of 2022.
- Adjusted EBITDA2, a non-GAAP financial measure, grew 90.5% to $53.0 million as compared to $27.8 million in the same period of 2022.
- Adjusted net income², a non-GAAP financial measure, was $22.4 million as compared to $14.3 million in the same period of 2022.
- Net income per share of Class A and Class D common stock – diluted was $0.07 as compared to $0.03 per share in the same period of 2022.
- Adjusted net income per fully exchanged share of diluted common stock2, a non-GAAP financial measure, was $0.14 as compared to $0.09 in the same period of 2022.
Outlook
Dutch Bros is providing the following guidance for the year 2023:
- Our expectation for total system shop openings in 2023 remains unchanged. We expect to open at least 150 new shops, of which at least 130 will be company-operated.
- Our expectation for capital expenditures remains unchanged, which we expect to be in the range of $225 million to $250 million. This includes approximately $15 million to $20 million in spending in 2023 for a new roasting facility, which is projected to open in 2024.
- Our estimate of system same shop sales growth in the low single digits remains unchanged.
- Our expectation that revenue would be at the lower end of the range of $950 million to $1 billion remains unchanged.
- Given the strength of company-operated shops and continued SG&A leverage, we now estimate Adjusted EBITDA³ will be between $150 million to $155 million, up $15 million from last quarter. This reflects stronger than expected year-to-date profitability in Q3, partially offset by the increased shop labor investments in the range of $1.5 million to $2.0 million as well as certain investments we intend to make in business building activities throughout the fourth quarter.
1 Same shop sales is defined in the section “Select Financial Metrics”.
2 Reconciliation of GAAP to non-GAAP results is provided in the section “Non-GAAP Financial Measures”.
3 We have not reconciled guidance for Adjusted EBITDA to the corresponding GAAP financial measure because we do not provide guidance for the various reconciling items. We are unable to provide guidance for these reconciling items because we cannot determine their probable significance, as certain items are outside of our control and cannot be reasonably predicted due to the fact that these items could vary significantly from period to period. Accordingly, reconciliations to the corresponding GAAP financial measure is not available without unreasonable effort.
