Dutch Bros Inc. (BROS) Earnings

Management highlights

### Culture and Leadership - Dutch Bros' people-led culture is its core competitive differentiator, with 525 operator candidates in the pipeline averaging nearly 8 years of tenure, providing a deep leadership bench to support national expansion. - The company recorded its 8th consecutive quarter of transaction growth and 13th straight quarter of positive comp sales, driven by long-term foundational investments across the business. ### Store Development and Expansion - 48 new system shops were opened in Q2, keeping the company on track to reach 4,000 total shops by 2029; the company already holds ~90% of the pipeline needed to hit this target. - Market density is a key strategic advantage; new market performance has exceeded expectations, highlighted by the second Chicago market location pacing to $7 million in annual volume and setting a new company opening day demand record. The company entered its 26th state, Mississippi, in July 2026. - The company completed the acquisition of 31 Phoenix market franchise locations, and entered an agreement to acquire up to 65 Salad and Go locations across Arizona, Nevada, Oklahoma, and Texas to expand its pipeline and deepen scale in high-potential markets. ### Menu Innovation and Sales Drivers - The new food program rollout was completed ahead of schedule across ~750 system shops, driving morning daypart growth and expanding customer occasions; customer and employee response has exceeded expectations. - Myst Energy Refreshers (Mist), a new plant-powered energy drink launched in Q2, drove strong LTO velocity, increased overall energy category mix, and delivered retention rates above recent LTO benchmarks. Following strong customer demand, Mist was added permanently to the menu alongside the existing Rebel energy platform. - Merch drops continued to drive incremental foot traffic and engagement, with state sticker and frog charm drops delivering the strongest merch sticker sales of the year to date. ### Digital and Operational Efficiency - 73% of transactions now flow through the Dutch Rewards program, with registered members per shop growing over 50% over the past 3 years. In Q2, Rewards delivered its strongest comp contribution since the start of customer segmentation, with personalized offers driving higher frequency and engagement. Order ahead adoption reached 16% of total transactions, improving customer convenience. - The new vibe check scorecard was launched to improve shop-level performance visibility, enabling field teams to identify best practices and address operational gaps proactively. The company is also focused on improving throughput via optimized labor deployment, shop layout, and equipment design to handle elevated demand during peak events.

Guidance

Management raised full-year 2026 guidance following stronger-than-expected Q2 performance and the Phoenix franchise acquisition: - Total revenue guidance raised to $2.1 billion to $2.13 billion, representing 28% to 30% year-over-year growth. - System same-shop sales growth guidance revised upward to 5% to 6%, with the company currently trending toward the midpoint of this range. Q3 same-shop sales growth is projected to be 4% to 5%, reflecting tougher transaction comparisons and rolling off prior year pricing increases. - Adjusted EBITDA guidance set at $385 million to $390 billion, with the midpoint reflecting ~20 basis points of net year-over-year margin pressure from higher coffee costs and increased occupancy costs, partially offset by SG&A leverage. - Capital expenditures guidance updated to $350 million to $370 million, which includes the Phoenix franchise acquisition but not the pending Salad and Go transaction. - The company reaffirmed its plan to open at least 150 new system shops in 2026.

Segment performance

Dutch Bros operates primarily through two segments: company-operated shops and franchise. For Q2 2026: - Total company revenues: $551 million, growing 32% year-over-year. - Company-operated shops: Revenue totaled $510 million, an increase of 34% ($130 million) year-over-year, representing 92.6% of total revenue. Company-operated shop contribution was $156 million, up 32% year-over-year, with a contribution margin of 31%. Company-operated same-shop sales growth was 8.3% with 3.4% transaction growth. - Franchise: Franchise revenue contributed ~$41 million (7.4% of total revenue) in Q2 2026, following a $5 million reduction from the Phoenix franchise acquisition. System-wide same-shop sales growth was 5.8% with 1.7% transaction growth. - Adjusted EBITDA for the total company was $114 million, up 28% year-over-year, with adjusted EPS of $0.33, up from $0.26 year-over-year.

Risks & headwinds

- Higher coffee commodity costs are expected to continue pressuring COGS in the back half of 2026, with full-year 2026 guidance incorporating ~60 basis points of total COGS inflation from coffee and food rollout costs. - The ongoing shift to build-to-suit leases is expected to increase occupancy costs as a percentage of revenue by ~50 basis points for full-year 2026, consistent with the impact seen in Q2. - Tough year-over-year transaction comparisons and the lap of 2025's food rollout will create headwinds for comp growth in the back half of 2026. - Approximately 350 existing shops (disproportionately franchise locations) cannot accommodate the hot food program, limiting the initiative's near-term impact on franchise comps. - Forward-looking performance is subject to broader macroeconomic uncertainty and competitive pressure in the beverage category, as noted in standard forward-looking statement disclosures.

Analyst Q&A

• Q: What factors explain the projected deceleration of same-store sales in the back half of 2026, beyond rolling off prior pricing, and what macro and competitive risks should be considered? /

  A: The primary driver of projected deceleration is tougher year-over-year transaction comparisons, and lap of the 2025 start of the food rollout that benefited 2025 comparables. Management stated they remain well-positioned to outperform the broader industry, supported by their mobile ordering, rewards program, food initiative, and strong customer service, with confidence in current full-year guidance.

• Q: What is behind the recent strong LTO velocity, and how does LTO performance impact traffic and same-store sales? /

  A: Q2's top LTO performer was the launch of Mist, a new plant-powered energy platform that expanded the company's category leading customized energy offering. Mist increased overall energy as a percentage of total sales, and its strong performance led management to add it to the permanent menu. Along with strong performance from returning fan-favorite LTOs, platform innovation like Mist drives customer excitement and repeat traffic.

• Q: Why did Dutch Bros pursue the Salad and Go site acquisition, given that Arizona and Nevada are already among the company's most penetrated markets? /

  A: Management views the acquisition as an opportunity to acquire high-quality, appropriately-sized real estate in markets that still have significant untapped white space for continued growth. The site footprints are very close to the size of a standard Dutch Bros shop, which will simplify conversion, and the acquisition adds attractive sites to the company's long-term pipeline for expansion toward the 4,000 shop 2029 target.

• Q: What drove the recent strong contribution of the Dutch Rewards program to comp sales? /

  A: The stronger contribution came from increased sophistication in data segmentation and personalization. The company now uses customer behavior data to deliver targeted, relevant offers to different customer segments to encourage increased frequency and trial of new products. The company has also added new program features like usage streaks to boost ongoing engagement, built on new technological capabilities developed over time.

• Q: What metrics justified adding Mist to the permanent menu so quickly after launch, particularly repeat rate performance? /

  A: Mist went through extensive concept testing, taste testing, and small market testing prior to full launch, which already generated strong data indicating customer demand. Post-launch, Mist delivered strong trial and higher-than-expected repeat retention rates, and attracted new customer occasions beyond the existing Rebel platform, including drawing customers from other beverage categories like lemonade that would not have otherwise visited Dutch Bros.