Dutch Bros Inc. Q3 FY2024 earnings call

• Brand Strength: The brand is resonating with customers, with Q3 having the highest transaction quarter in two years.
• Mobile Order: Achieved 90% system and 96% company-operated shop coverage, with 858 shops having mobile order functionality enabled. Customers are enthusiastic, with high satisfaction and increased frequency.
• Real Estate: Opened 38 new shops in Q3, with a strong 2025 shop pipeline. New shop productivity is strong, and site selection process has been elevated.
• Innovation: Introduced new fall drinks, sticker drops, and merch giveaways to strengthen brand loyalty.
• Paid Advertising: Upsized investment is driving brand awareness, with unaided brand awareness tripling in Texas and positive results in mature markets.
• Dutch Rewards: Approximately 67% of transactions were from Dutch Rewards members, with over one million new registrations in Q3.
• Food Test: Limited food test in six shops, with early results indicating potential for an expanded food menu in the future.

In Q3, revenue grew 28% to $338 million. Adjusted EBITDA increased 20% to $64 million. System-wide same shop sales rose 2.7%, with company-operated same shop sales growing 4%. Company-operated shops had $308 million in revenue, a 30% year-over-year increase. Franchising and other revenue was $30 million, up 7% year over year. System-wide AUVs were $2 million, in line with the all-time record. Company-operated shop contribution was $91 million, up 24% year over year, with a contribution margin of 29.5%.

• Total revenues projected to be between $1.255 billion and $1.26 billion, an increase from previous guidance.
• Expect to open 150 new shops in 2024, consistent with prior guidance.
• Capital expenditures estimated to be in the range of $245 million to $265 million.
• System same shop sales growth estimated to be approximately 4.25% for 2024, with Q4 same shop sales growth expected to be 1% to 2%.
• Adjusted SG&A expected to be between $195 million and $200 million.
• Adjusted EBITDA now estimated to be between $215 million and $220 million.

Q: Dennis Geiger with UBS asked about commonalities in shops with higher mobile order penetration and food test insights.

A: Christine Barone mentioned new shops establishing routines and Dutch Rewards program growth in mobile order areas, and food test is early with strategic focus on morning routine.

Q: Chris O'Cull with Stifel inquired about Q4 comps and mobile order impact.

A: Josh Guenser said Q4 same shop sales growth is expected to be between 1-2%, with trends in Q4 trending to the higher side and mobile order trends factored in but not dramatically changing guidance.

Q: Andrew Charles with TD Cowen asked about mobile order incrementality.

A: Christine Barone stated existing customers have a 5% frequency lift, new customers are coming in via Dutch Rewards, and there's an uptick in peak hour throughput.

Q: Sara Senatore with Bank of America asked about better-than-expected results.

A: Christine Barone said paid advertising was more effective, Dutch Rewards had outsized registrations, and mobile order rollout was accelerated.

Q: Gregory Francfort with Guggenheim Partners asked about pricing mix and new store productivity.

A: Josh Guenser said ticket was about 1.9% with price offset by mix and discounts, and Christine Barone discussed real estate strategy improvements and data-driven site selection.

Q: Andy Barish with Jefferies followed up on price mix and marketing between markets.

A: Josh Guenser and Christine Barone discussed price mix including sales transfer and advertising strategies for new and mature markets.

Q: David Tarantino with Baird asked about unit growth, build-to-suit vs ground lease, and free cash flow.

A: Christine Barone and Josh Guenser talked about real estate process investments, progress in lease arrangements, and free cash flow guidance to be shared at Investor Day.

Q: Nick Setyan with Wedbush Securities asked about mobile order mix and ticket impact.

A: Josh Guenser said mobile order mix is similar to overall system ticket, and Christine Barone noted morning day part and coffee-based beverage focus.

Q: Rahul Kohli with JPMorgan asked about mobile order sources and lessons learned.

A: Christine Barone mentioned Dutch Rewards app, word-of-mouth, and focus on service with kitchen display units and labor reinvestment.

Q: Jeffrey Bernstein with Barclays asked about unit growth and food test consumer feedback.

A: Christine Barone said 160 shops is the floor for 2025 and franchisees are enthusiastic about food test.

Q: Jeff Farmer with Gordon Haskett asked about rewards customer same store sales trends.

A: Josh Guenser said they don't segment customers by rewards status but are pleased with program growth.