Dutch Bros (BROS) 22 Feb 232022 Q4 Earnings call transcript

Greetings, and welcome to the Dutch Bros Fourth Quarter 2022 Conference Call. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded.

It is now my pleasure to introduce your host, Paddy Warren. ahead. go Please

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

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

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

non-GAAP GAAP financial earnings release. reminder, the prepared of for review neither to GAAP. are measures our that a As are or superior under measures non-GAAP reconciliations results Please substitutes in comparable to measures press

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

Paddy. Good interest continued Bros. you, Thank Dutch afternoon, everyone. your We in appreciate

since year our XXXX. now to of new the another our ability economic year and consecutive systemwide, XXX to our we've well-documented new testament of with count Despite doubled exceeded targets delivered shop growth we XXXX, In have for shop our team's disruption, proven the third March openings a development execute strategy. shop

continue shops to positioned of and the entered XXXX X,XXX next continue our years of we long-term to uncertainty, broader over years. we XX economic market signs against execute share XX to well goal see building Although

to our share points positioning. I'd forward, that in confident a long-term why we As feel we few look like underscore

and quality focused on model drive-through service. speed, Our is

Our which than highlight to We of enjoy XX% our restaurant, of daily several leads beverages, the day, preferences. of relationships. goal More of cold, our more levels is food. XX% high sales dayparts. believe customers if serving beverages helps are believe complexity to lasting than we repetition our service we and a consumer and chain our to to we were be cultivate which the More enables operational menu evolves can without of customization AUVs supply than are and which high

competitive are category and energy about particularly by market. the of growth drinks within positioning encouraged excited this We our

systemwide are to us the new end. and year now have In a demonstrating shops XX achieve of goal pipeline. by XXXX, at XXX five-year our our quarters, systemwide in targeting last of shops opened of each least which shops, XXX systems We six strength we the development people positions

We billion will XXXX. $X striking creates and of XXXX in the half revenue first shops and excites in employees serve. we be and This distance We for growth us communities know within systemwide us. this our and opportunities jobs the X,XXX of by inspires

in economics level XXXX, contribution to target continue demonstrating XXXX margin and opened class quickly. our efficient, shops is predictable shop they approaching attractive group and two the in year shops expectations. of XXXX new are Our XX% be with and of mature and The our maturing XXXX line

performance new growth beyond. and We the near we strategy the gives Bros' trade confidence in zones continue entering both are hitting Dutch targets these This in across us while country. term

Rewards of system, out achieve programs. supply-chain XXXX Dutch enter our believe further we our and and which the beverage also eyeing Pass build We're both will said, we operations. tap optimize beverage a to That efficiencies. opportunities penetration with Dutch rolling We're

XX are continue to growth on we capital, our One with people who started as key public to to great years eye want five shops in in on was four shared and the XX three and the years, shops is beverages experience, company to Here engagement, consolidated journey. is next through was to improve five an increase customer use brand encourage wherever are two we the technology to was and open X,XXX margins to new operating few invest develop to updates people expand deeper awareness objectives customer leverage. attract and

this on Let's focus Christine Earlier new Barone as welcomed President. our people. month, we our

as We we the on level. already getting business speed. to be will up board are and is next take she thrilled to Christine this instrumental

In again in turnover quarter-over-quarter virtually remains turnover industry operator turnover X% level remained range. below once non-existent. low Shop in were turnover was it and staffed. QX, our improved management mid-XX% and sits double-digits the the level and fully about shop averages our manager shops Shop and

aspects We wages. know satisfaction on takes many employee beyond

continue employment to federal Across we we we to pool made across strong competitive. in January a have as the However, strive Bros proactive and wages upon pay select interested available markets, ensure investment far In opportunities. take-home their our in QX, X, people standard. as wage jurisdictions applicant minimum with Dutch increased on all and we to XXXX, more a and wages with people that increased all markets working in rely

These This within To In not promoted more XXXX. create in from service our up people be X,XXX in in clear, across our customer our for enter proactive, XXXX growth field, investment wages reactive. deliver unique brand in XXXX, Dutch consistently utilizes markets. to into culture growth our our in from allows than compelling Bros and organization. model. as we promotions in people of a our XXXX us opportunities new is the scale we continuity ranks

look candidate our as demonstrating we operator pipeline forward now XXXX. about candidates as this opportunities such to expected year of grown to is this a Last manage people XXX is qualified operator has another encouraging, to promoted needs. year our growth growth list we our list. than unit from more ahead individuals, new people in candidate pipeline operators. with bench a XX in candidates well we record qualified The XXX qualified match maintain that internal had help and especially operators pipeline development, Having To we deep of

company accelerating a growth Pacific In the expansion Now we to with the operated shop development. Northwest. outside began model XXXX, deliberate

new We be than is pleased opened for continue with and opened the XX% mature shop in our shops performance, million, shops X.X XXXX higher XXXX prior. since AUV to for approximately

Since XXXX, we have executed a variety markets of including new fortressing. strategies interest

fortressing to quickly to the deep saturate allows Our strategy us going market, and develop entering scale.

we our predictably demand is lines lines Making demand can customers crew us see sure long-term deep Dutch allowing Bros' manage the a to experience. considerable we customer when this often to Going helps If skillfully, not and market. we new our key long manage risk our enter disrupt do success. navigate efficiently and we

believe In Texas XX% growth fortressing notably market long-term new shops for a key of we Bros. were is strategy our XXXX, executed most Texas. Dutch and We infill, in driver about the our

in supply Over powerhouse the build to demand long-term satisfy creating State. in locations last brand our adequate XX XXX the as the we almost Texas have opened months, we Star Lone

while weekly utilizing the to million. For Texas XXXX, spot considerations. $X.X sweet saturate expand forward customer sales to we This deep Southeast. balance annualized continue our Dutch balancing we experience us implanting entering wide portfolio. look quickly we AUVs into in both and and Bros' to we falls Kentucky. and and flag. beyond, us in our strategies the and development territories into openings In Southwest capture XXXX and We moving holistic positions markets as and XXXX, market continue In volume This helps new confident as a new craft were plan to share, large shop remain Alabama

rewards after By almost Rewards announced current program. members Bros pricing long-term we better Dutch unqualified to XX, March an spent help five current health levels been will has the redemptions all the on with in dollar our or changes This earning at of adjustment morning, and instead Beginning ensure each This result program should align of this metrics, Dutch program. three points success. us points. the

customer points The changes the to value preserve date. earned of

create while enabling on not points changing are headroom, are provide beverage. the XX offers we initiatives. should moves and of some targeted in to better focus a customers, allowing the to us complementary points believe We go-forward Instead, past rise menu the months, key loyal required adjusting those to to us the We redeem customized rate. prices earning in given more amount

In believe as Our from especially a approximately Dutch newer shops. in Dutch to is We grow this Rewards transactions XX% there came Rewards our members. QX, of well. program runway program, continues to expand

since shops X% Our XXXX opened lower compared to have rewards before opened penetration about our XXXX. shops

paying plan is great we of to to to loads. introduce to continue average funds, We doubled these operational encourage through as executed which to users the in we it going customers App. similar look XXXX, our time. daily up promotions in the helps for In promotion QX, line customers the this more forward and of ease funds speed of From pre-loading Dutch Rewards forward app. paying simplicity In to perspective, implementing promoting an benefits load

announce of and and to a content, best with story. launch broistas social to on create the way. in capture agencies authentic excited collective, models move very marketing show continues Bros' and our brand are The the the instead we partner Dutch relying that leading-edge collective effort to away our creative a from us grassroots media growth to so to up employees empowers allows Additionally, creative

talented seat, program creators have marketing the by the Our puts reinforcing while our always at our incredible of a been and window in our employees compelling in This system. features true culture. creating providing experiences driver's for source power unique them

Now let's talk about technology.

better move share we improve so Dutch are added remove we investing us Dutch In of good to to can members to for the XXXX, technology cards in Bros. loved their make In the treat to ones both our free systems rewards vibes tasks. forward QX, and broista form drinks. Pass enable implementing We faster, that customer In digital gift Rewards QX, and users and non-value-added functionality we to launched in experiences. look and decisions share friends

shops, margins to through provide in as bps contribution QX, Finally, is we in expansion portion we increasing saw and QX. over pricing expanding committed our will to related comments, year-over-year to operating margin improvements year-over-year company-operated this In breakage details additional XX.X%. initial booked estimate increase. XXX leverage. improvement contributed of Charley our margin Operational in the are this to time his

in QX QX, Furthermore, of from last bps adjusted a XX% total year. was improvement XXX revenue, G&A

and in support G&A continue as to growth and scale G&A need XXXX the we our investments outpaces to rapid business. revenue expect beyond growth leverage We our

calendar we As our by the year expand are our acceptance a new shops encouraged eastward. company, public of as full complete first we we as

loaded. Our leverage. shop people pipeline XXXX and We in expansion development G&A systems fully meaningful company-operated continued and our a QX saw strong margin is are contribution

despite years four-wall our that to model focused on plan, X,XXX Looking macroeconomic larger long-term in growth towards shops support we XX will the systemwide we ambitions. feel unit and our XXXX, noise, XX remain years our

the at with behind are I'd to every times. supporting of it flexes like of frontline operators and business closing, our who these the In of our this the the all beauty changes The and people and executing thank scene this franchisees, is day efforts.

moved Over XX adjusted the over years, we XX have do last to years, and thing. the the same we continue will and next

a long-term future. focus about our we As a and team, are excited maintain

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

Joth. Thanks

the basis in Recall XX.X%, expenses. financial in Here's first recap includes of a EBITDA total Quarterly was points contribution XXX the QX and XX.X% preopening time, up XXX margin doubled results. contribution this for than same period of of $XXX company-operated quick compared basis going to surpassed that more million same XXXX. XX% Adjusted shop margin period compared XXXX, points the revenues year-over-year. to

points the for to late in expire Dutch recognize one-year in XXXX position XXXX launching customers loyalty the to XXXX, XXXX and since grandfathered that onward In XXXX, QX with will notified early breakage. in earned points we increments in first six-month earned In a Rewards were time that expiration. prior we be would and program a

backlog this is be given modest. we us, expirations expect forward, Going more will behind

following. margin of into recognition QX quarter. result higher breakage, was approximately points compressed basis contribution of terms the impact XXX In the the breakage the note as shop a of company-operated

XXXX a higher impact For with basis the of year points. XX expirations the an full as XXXX $X.X million was contribution result results, of only, margin shop company-operated

XXXX, When performance. in XX% second of on aspect we we a operations. contribution Let's with all are performance, margin is a we headwinds move key company-operated Despite the shop on track of the assess this shop to in new achieving faced objective. shop's year the

and We mature, efficiency their we of XXX class they after reached shops expenses. and in that margin and initial have the XXXX have past preopening consider move company-operated

for our a X this as a these earlier XXXX, presentation margin all year. disruption we achieved In more supplemental refer the we shops in XX.X% which website newer contribution margins reminder around in Slide on to investor the details Please shops. posted X discussed our includes and

solid flow mindful While Dutch to of model of in assess performance increase we a reported the growth the comps margin extensive cash Because the company-operated Bros are shop of a reliability and fortressing, are moving very performance The transfer sales of few steadily to by fund new we decision combination with are down quickly, from the growing company weighted within that development. confidence pace shop years. revenue shop positions the our of a reinforces operations underlying as base we and business. of four-wall

it same challenging said, our XXXX, given year. we peers. due shop related to That were through X.X%, QX prior the is strong less Omicron we pre-pandemic still the XX.X% levels. had systemwide relative expectations impact The metrics. that is shop in sales of lap to higher the sales prior better notable walk the challenging disruption results important XX%-plus from same that from in you QX many in than decreased It XXXX's year to comes lap our of part

an sales the X.X% transfer. from operated well XXXX. At modeling basis impact of experienced is result of sales a range pace of estimated an of our Company-operated basis XXX current within expectations transfer negative XXX of shops points The target transfer, for includes points points a development, sales of company XXX estimated fortressing strategy. to basis XXX the impact

X.X shop recap were grew XXX openings shops currently sales XX% since are conditions annualized will million. are AUVs due market and pace for positive for local executing create and XXXX We XXXX, shops top markets our the of X.XX of opportunistically shop weekly our opened a Now but cases if well-positioned can conditions, XXXX, of strength advantageous new diverse million, AUVs be particularly by strategy revenue some when in our we in aim to development going-forward the some moving XX lower portfolio. and to place. and class is opened market shops driven when XXXX also the mature on estimates of higher, on new average fortressing of to in move slower local in sales. same

In million revenue adjusted XXXX, generated and EBITDA. $XXX $XX.X we in million

bite margins, with uncertainty a of We rising year. the successfully inflation outcome, XXXX took so are out having as first shop in in our the pleased navigated much particularly half of this company

a it's two tale really XXXX, of halves.

but half. declined recovered grow While XX% in both first halves the adjusted had XX% growth, the similar in EBITDA revenue to second half,

by marked was half First rapidly rising costs.

rose ingredients basket. dairy makes up our XX% For of and example, about it year-over-year XX%

good healthy We money maintaining the willing profitable elected something a margin are model, margins. particularly healthy take to respect XXXX to base, but approach measured need who deliver we entered to price We menu as as a given we increases during year, for the with a compression a customer short-term absorb, was paramount. loyal views to value the and

the rebounded year, half. Adjusted second environment also we the from or that In our period in prices. the profit of for the compared half began cost menu million second second year, between than in half. operations XX%. and $XX.X quickly segment, close gross flow to achieved Cash had EBITDA generating last to gap experienced franchising grew we the same another full that in $XX the XX% million more of In $XX year. $XX.X to million million the moderated We

program In to transactions QX our the franchisees by bringing approximately recovered million Rewards market. on paid Dutch bank to we expedite fees from of XXXX, behalf of $X Dutch

we year, the the in Excluding now that first profit our after the that on of flat sell have to stabilized products inflation to in this absorbing QX franchisees. eight the XXXX indicating quarter prior item, was months segment profitability we

to now Shifting SG&A.

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

people expect going adjusted Please growth We XX the SG&A. the continued and SG&A of outpaces a infrastructure SG&A between Page anticipated growth leverage for forward supplemental with in revenue as associated refer investments. reconciliation costs to and slides

our had QX, we of of health million the facility. million of increase EBITDA. $XXX two on our year in sheet comments million million about At This we $XXX net times debt, liquidity. were liquidity credit $XXX $XX on of was few undrawn a an Now had balance end, adjusted

grow capable decade free Our our business this outlook. or and well the objective sheet exit remains our the projection thereafter, of debt to balance support capitalized quickly, It's growth. and to scale long-term supporting shortly financial

on Finally, to XXXX guidance.

our revenue be time, XXX of million the $X For avoid issuing a digits. the shop Total XXXX, additional point shops is company Total XXXX. is single operated. pricing full $XXX year At system openings least to we're at which the menu to to following to be low shop are least expected growth in in guidance. at taking objective Same of billion. range XXX in be any sales estimated this in will

proactive uncertain desire an cautiously Please additional be $X in adjusted pricing, includes to to Despite to optimistic minimum for wage million increased are note, in in expense this we addition minimum avoid increases XXXX, million approximately This million. to in wage wage is labor estimate present labor wages investments $XX our legislative states. federal environment markets. consumer in and increases an related and non-federal approximately of $XXX EBITDA approximately from

local Our wage to conditions. structure indexes market

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

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

comes Instructions] with [Operator ahead. from David Baird. first Please go question Tarantino Your

maybe I some secondly, of assuming at not XXXX, was at could you on contribution margin underpinning learning and inflation guess, labor frame profit that for or Thanks. us point? that more Hi. hoping factors I level little up but the you're outlook the a Good against about bit what investments, could this afternoon. in for help you why know separately so Charley, you're you mentioned I was elaborate the shop interested pricing the I

you. David. Hi Thank

flat. So with on we puts expect the that contribution shop and the be takes, to margin all

We two in year and And essentially this this big big I movements about. items in that'll of are refresh There the that pricing our are point, have wage stage. the rewards in in absorb my comments, other not by as at 'XX. at offset commodities those noted full inflationary we costs investments happened benefits 'XX we we as be talked things any

And of second part get question. to me then let your

the has rewards we and now two at and looking are take So, appropriate just where to we're absorb in our this where in changes at typically we move, this traffic point, rewards, to refresh We consumer stage. wouldn't pricing be be our is, just all these it I we'd that at let prices consumer for just think and spring made given And rising prices of make aware through. right the consumer what And trends the us windows been settle the all 'XX in and environment the to also like without a able move down. fall.

a we important our value that basis. business a short-term It's on money really that maintain for and in at not good look position

And that move? think Got that? to implications how the on on should that I program be, would opportunities guess, what discount, a but we about reinvest the change, the of can less P&L behind financial elaborate So you of impact guess, I mentioned it. then some you of rewards presumably be

and about and particular is to try customers. comments phase rewards forward. portion points things effect incentivizing to get incentives to next we and three of new customers given out lower we do price five as of So a we'd discounts we're had originally increases, of that to to an fair as in different has and a move in And for to to we lower the the lot mentioned back our it costs that will offers we've earned go the of what more to things will talked to experience what points promotion them be targeted it program bring on discount starts going that his spend like going then, intended do program Joth points so from as things really back cost menu

it. Got

feel onward. It's David, announced impact today, of but it the the you to until won't note, second all quarter important we this that

Thank understood. you very Yes, much.

you. Thank

Blair. Next ahead. William question, Please Sharon with go Zackfia

Hi, or And fourth thanks think update within improve release. price you you question. for just press like question, to price the efficiencies us unlock it I quarter, throughput? on maybe mistaken, is I guess first was residually taking the you an I but think carrying have it secondarily, the then are that kind speed I running some in XX% had more increased of of you'd maybe single maybe low the could be initiatives seems Charley, in the box and into give in XXXX that but

walk would that So of through what be you. you can Thank you when kind rollout year us price helpful? this

Yes.

XXXX to you've factor positive So transfer you, the over. piece if There's also that sorry full the comp will single-digit is Sharon, so that guided the sales of for year you've price got map to X% number, if rollover you're to in. pricing got you've to, the approximately we also, low carry got but trying rollover,

Thanks for that.

with a testing launched one just a quarter few systems another of tap list test touch in Dallas. -- are five We're in of started San XXXX. implementation in Bros. shot the cap on at The Texas. of let's locations let's long, is we've We've One and discussed single Antonio Dutch in new but in fourth ones. improvements and a key We maybe systems operational

believe to everything as of from every back-end think and We the to to the we implementation. making believe drink we'll share the improvement related will quality the it inventory to probably shows metrics product expect start that happen hand those to in tap of customer. be quarter, system we at production next we speed to the that of able to We delivery one to what

program and continuing and transaction or our of credit Dutch QR our remove make really or around the to rewards customers Pass our continues and a more of the with and us the it dollars dollars get for pay system, just Dutch people Pass, can part load we we but we line. unlock through of around work announce just just big quick the big to the did cash point to changes code scan into loading other move The If to card one Pass. more unnecessary is can the and to a Dutch bumbling be with

if help working really business I then really two to unlocks, big long of work continue those and affect the speed. -- know several So, are know is on other smaller that And team the operational the will short we on term. improvements to

Chris Next question, go with O'Cull ahead. Please Stifel.

thanks, of shop help how was Hi, good think out last Charley, two cadence presentation tale of was pointed should understand comp you your a in as and so about the afternoon. I halves, that year the you maybe hoping of margin you us progress could year? performance we through kind

Yes.

over the loaded rollover will as more by fourth be as full X%, it for the be pricing comp So, quarter. zero carry we year we rollover will XXXX from front

prices going that of first being business we QX our seasonality. from second If and more in refresh recovery didn't of I being QX the up in QX and seasonality, you quarter making basis of that inflation seasonality QX we're fourth a to because lowest think will impact shape QX curve half. what our we to cadence and think half the margins in labor will feel third, you're follow in second, investments the the to sequential some about normalize normal mentioned, the then on a when immediately and the on create will around rewards in those margin all our comes that margin from the the is see that as you to XXXX so catching then highest margins to

stores levels. I I that's stores $X.X have then Okay, opened in And you helpful. said at think the you're been at sales, opening assuming million believe but higher new annualized

a So didn't of in I conservative. curious in know geography higher anything to you more just not the I'm cause if why by be maybe seeing into terms projection. you're volume build variability that

classes stores $X that Yes, the stores, whereas XX million our recent XX $X.X about of our forward. averaging latest of average we're our prior million. million, wasn't assuming no It was -- was that $X.X going class at class it

we So that our the was comments. distinction made in

I that. sorry Okay, you. misheard Thank

With actual results.

Yes.

Next go question, Andrew Cowen with Please Company. Charles and ahead.

you can tested changes, Great, what talk a sour young changes kind won't how customer thanks. Joth, program the you of you given Dutch the gives curious accrual reaction? just just the that Rewards drive confidence how is, about

different Dutch as we've think for started we launching, as on lot time Rewards been was levels preference about. testing, all we level a The from behavior day were -- spent and have promotions understanding year points. I that talking gathering, program, this of different two, the consumer actually journey. incentive understanding the many as we did the to iterating, level, with we how saw lower drove that Well, in that customer points responded customer the they market type kind with about several points, individual cases, with we higher was point and we really the same that of a we Year of one

how we points are think we refine in taking points think the it like that program, all and we -- and to of to take think think free that adjusted have we not five that the the as to looked and we data confidence program, our last in I as the have year define the three really we learnings of at now then couple how And about there, execute in can has the is and move really program feel we're I team too this at and think forward so years offering change the and we initial basically XXXX. drink fair three, the we basically maintained to customer, over bank fair is the now concerned about don't this with the launched to we we're basically price that that

G&A? the Got $XXX it guys my the investments XXXX just but you the you, totally with at helpful. to bridge EBITDA margins? EBITDA being for flat the it consensus it, callout your Charley proactive Is if on, the Is obviously better bridge think might around slide plus. get, we around to $XXX is within just trying XXXX, but where slide flex on in million just perhaps kind potential at is pointing that's numbers? million trying to be labor shop Is it adjusted guidance And it guidance, question performance just the semantics, understand based in other of adjusted date are those least I about conservatism to sales as the to consensus, it try

we're dairy the upsides. of prices pricing We're watching in not is some commodity any Yes, closely. flex

that our platforms those bit, making we but So wise set $X take bank down million it's on investment across don't little technology we a see the year-over-year business in real. from the in feel come basis. platforms, the have a a it We're the about of until to all to

that's of the part So factor.

not And then in, we're move. wages we normally fact that million and just being that's to been quickly price would the have scope walk and we number about the think additional you do $XXX can you We that of careful don't why a really the yourself come I we've how we take And you. to careful to guide. million investing what thoughtful $X outside the beyond up and pretty back want to to about built and

Thanks sense. guys. Makes

you. Thank

Please with Sara Senatore Bank of question, go ahead. America. Next

units about how of in-depth the very I'll on Great, on much. then and and Quick question thank a you to the think question more breakage margin of returns. new accounting for kind the have sort

of was boost about understand breakage, the it context. has to sort trying no I so that's sort a you of with that in this have comp? think basically tailwind I'm that and And margins, to margins that why to was associated so a just just normalized just So costs it top-line

thought. CapEx back on, the is if going guess bit than to returns may business, on marginal step we I I a higher to be then And have the

talked I EBITDA, being, there were. that economics trying much unit but apply? in to the I than different? on guess, markets? of any conservative a how Just new is bit there be perhaps no to just that means it lower reason past this to You sort growing think versus about anything Is you've in new they structurally are think that Thanks. what volumes transitory the appropriately understand longer is of

Thank you.

offers in the a release sign-on and million not accounting, number you in things comps, disclosed related gave we it we the So to on number. in lot of And rewards $X.X the the in it that gave made, XXXX. is a this back point to points is and we affect does profit revenue but and

So in you about XX is we release for the piece points prior way that. XXXX normalize at look between way The put for basis it year best we that. if the distinguish was to that

In of your structure. question cost the go-forward around No. terms

to Our cash returns get objective was on a ground weighted XX% lease a rates.

that's we we million build unit to in well margins, have XX% excess most our we when were severe ourselves. So AUVs At $X the of return. entire have those that and return the

double side things And we saw going double-digit forward think probably to into thesis. in that we'll of model had strong the mid-double-digit look have, continue four-wall up, term. inflation, meaning potentially our absorb costs investment we that and able I we we believe numbers excess But cost still cost eat high the from build margins to we some the as the build moderating, see at will going inflation near us the return is we to our tell in any have punishment

versus to the X.X infill new attention the the that? more just of And more pay sort -- you. the to infill, markets? there thank Is because X of anything is of Okay, that

months, in So opened In build quickly where we especially we've had particular Texas very we some can XX places we going shops. one deep, market. are XX where opportunistic out

portfolio. So we on It's that. the when open. some shops of also depends It timing see the

waiting have the and that we of like fourth we In less and quarter, deeper in. in. we high-volume markets the Sometimes more the Texas trading markets went California, had the Arizona of shops

will flow that time. ebb over and So

Understood. Thank you so much.

Please ahead. JPMorgan. go with Ivankoe John question, Next

Thanks. been understand some on The labor, that as and well quarter? I Hi, the week that sales quite for Is of down, can. like the a basis. did anything would which fourth in And forward. question in quarter but fourth really operating turnover efficiencies expectations, is tips have on traffic percentage relative going system the thank changed talk to per also ask in if also, about I'd make both you you find model your sense Could do you. labor go-forward actually if labor? on lot about and what I hourly our down hourly a to is

it, improvement Yes. to It's three there see aspects at our shops, really a staff from clearly of and that way look of labor lot costs in about points QX fourth we looking allows of to year basis things, of were has cost John. last numbers the our there's the same I if at year. the one do pricing you structure XXX you're this in us Hi X.X, fixed labor the that. quarter, some

got also and staffed, of good out well And so because we out going positioned take so worked to all because out stick leverage improvements these we over-time well hard better in we something made really take productivity. this and so We that this -- of similar year operate. will do to to dramatically have some our we're over-time forward, staffing how

Having that have wage we're said also investments I that, the noted. going to

that is us that So off we go announced. of come but QX, up because you'll -- number then number the in the quarter, going investments first this watch in back of that delivered developed just wage that we we see to

of And can ask hourly hourly turnover about also I level and tips? the

Joth. is What's your it John, Hi, Yes. question?

at tips down Hourly and for If going going level. still that that's were point was if something turnover or it actually those you're year-over-year. at stabilized at? employee one I know are one the up looking point

Yes. QX range. that that last turnover interesting XXX stabilized we've in that it of and monthly from had November the bps What's We're mid-XXs was in turnover so lowest about is the is kind in and was down QX. months. actually XX December

it's really across seeing So I our think see shops, a continue strong -- a but we're impact sign. definitely to good labor

actually And slight From are a that stabilizing. a showing increase we tips, tip in actually minimum recent think wage it's non-federal states quarters. standpoint,

that down in XXXX. fourth we're seems tracking the lot noise settled to as into was and quarter we have get out obviously, So of closely there that tip

That's you. great. Thank

Haskett. Please with Next question, go Gordon Farmer ahead. Jeff

Great, thank you.

follow-up wage just labor a mandated increases, investments of On the couple and minimum questions. have I

level of sort sort the the XXXX first of increases? what inflation? be would So, across two to of wage equate this Does blended in

the margin be about both in I combination of points. in points. exact have but of of those don't increase, will can margin me percentage two about The front I it's talk two points. margin

minimum just federal wage own forward decided to out this a discretion, more in which size that wage dynamic to see inflation again, terms actually of at Or of some wage raise guys terms again there in states, just thinking be Okay. again your just XXXX? that's we appearing increases so going as we're wages an XXXX, And rate in more it's mandated theoretically, you specifically you'll these a is of on is in what's XXXX is unique going to come this where forward? there minimum the to so year outlier or it find and then move mandated year in of increases

with So year. continue things thing kind the this which proactive wouldn't which expect to minimum separate of states. We federal wage question, done, you we're two the wages is beyond have in doing in your that

So, is one-time there's move always we but move. escalation, of be going sharp wage that to made a kind

having to through mandated really moves going fashion. I going have we is to to to escalation against get continue The because part trying other that to used would would The take we up. in to without your pricing factors onward that of we're a it's 'XX say, wage similar continue prices of unusual situation, and our pay about, talked typically for point, is

would through productivity. some increases you 'XX, to us price 'XX, that forward, expect normal of absorb going and So

be follow-up. will And just one I bit straightforward. Okay. one a believe this little then more more

and mean XXXX? you of had of what does commodities, those both on was you quote. not think the movement, guys that for but been call, in It's for coffee exactly inflation for much So commodities touched upon said dairy guys I on in terms this

in The are and XX than the XX on the 'XX. half, less of those higher slowed costs down, sharp is increase we you if slope of but months first first all, 'XX, of rise of reflect full in a definitely planning the versus right, months impact

it's for and dairy to piece come that this, to take really the been biggest us there but dairy long frankly. not bank, the down, seeing are We is enough of

So view partial a for out annualizing is that's hope that's that downward over we is year some get Hope of of our not and moderates a that. reality a inflation, upside some dairy strategy us. but

I capitalized as one, you that this investment. I'm sort one if P&L, to you curious I And giving sheet, here, are show $X is does up guys you the follow-up. tuck some How balance shows apologize, or going meant as of the me just on million investment? where technology mentioned expense? up but that appreciate $X just million latitude that last more we see the

In the line. SG&A

Okay. I it. appreciate Thank you.

go ahead. Securities. Next Wedbush Please question, Nick Setyan with

in transaction quarter? Thank wonder if could down the you. break check you just I average the growth versus

Yes.

minus on some bps, sales mentioned use reported. it sales. the here's decomp numbers sizing XX It's of X discount round X any I'll a on just we easy, pricing, didn't from X% same-shop So sold. XXX minus mixture estimated to menu plus transfer, [X.XX] trade-down goods higher promo make QX that I costs, see Notable, actually negative we was from there. shifts. that mix

underlying And so what's negative QX left X% was negative is X. traffic. the

a to we're negative our good amazingly was QX it reported XXXX. also more QX want traffic, on basis, XXXX, lapping So understand everybody so in an best was but quarter we decelerated, we

the we're that industry really trends, sort solid And commentary how any in started? top-line terms helpful. you. and seeing That's Yes. of given the around has date just very Thank the January across February QX of data to early

through so open I events, Dutch winter how stayed the virus were we've various think the one fully reacted and the 'XX the of staffed about thing of to operating. winter we in is and remember to largely Open meaning that's different 'XX. episodes we

So is a much something won't rebound perspective many the a outages have. to because won't of the we you're never of from seeing have We -- related we data had rebound that.

is those we is because it lap episodes. our what down in So it go is what didn't

out as right negative come West Coast to seen weather the and this now. impacts, in December some We've we year especially

see call we're -- peers not in will that our just to we Omicron QX. it going we're that of many bounce So see

a March us, talked about we what's going we of in lap we for sales where period some to was May through difficult in period half the move better Now, back see happen QX start the to that is will so last March. may

in Okay, very of QX? just terms lesser helpful. going in change And starting the anyway that's loyalty, the discount in then to forward the quantify

flow in QX. in Yes, so P&L will and build and peak it'll in ramp. It through to QX the start

will basis through XXX to a XXX margin about So improvement of that. at points looking we're come that

price. about using. we we're and for that benefit, paying Now, right, investment, taking this with talked We're not

just for that with pay you we terms labor, across the company in could earlier I that and the as And margin said question, think year-over-year? last this clarification. Understood. then take you be or program, labor investments When the of a loyalty entire said should the call in in change again flat

that, to Well, you million labor $X million if it. minimum wage. of We're back, wage wage on and to floor that is right? investment. I still going not talked spend the the there the take would that there's going to refresh, there's we're cover pieces, do say value piece we two left about $XX So that rewards in the

Okay, you very understood. much. Thank

No, obviously.

question go Securities. from next Instructions] [Operator Gregory comes Your Please Francfort Guggenheim with ahead.

as of 'XX should Hi and doing portion other guys, -- -- have a her kind just what for think only do expect focus you G&A can had was be just thanks I either as the one do rule question. we the but of in to on days do as early do over first about what one, I out of thumb on Christine's my in, you President? and should years think then Thanks. you know And her take two, is responsibilities in what she just and role I what coming be revenue, the you growing think that? her

for that. Charley. This thanks is Yes,

now into which lock means, the down, to revenue. in than road, do want you of get XX% in we slower drive we number but the went that how to can XX%, that So, below almost want is release 'XX, our see number was the that 'XX. number right rate that, in it, right? and in grow trying SG&A reconciliation When we're to about XX% locked to want grows thinking slow down to down what want drive below percentage We public do adjusted into course, that driving so XXXX. Ultimately, it don't G&A of

Christine the it's business. day-to-day think think operations to I I of all for the And question about will great a the us, Christine tie-in because run that

we this The to to retail thing has team somebody out, people candidate who systems feel that operating Christine like marketing job landed So to this and scale. through our a the AOP. the look we in for be our systems efforts was executing able best operating and really team in to really country really everything could larger our we business our been and build we wanted to from -- like looked for who

industry term. the how our to So get and execute of to other that some will like business the to grow to understand we a at continue peers number the speaks to that we numbers Charley in is key at and some and long component look of we'd scale the

ability big same team in, Christine's time, to that at be really So, come so small look lead our and picture, can at big a at important the we the be business our aspects.

runs plan behind people. operate that and I growth she be AUVs, we our to those with experience it operating has new locations serve be do into, be and employee follow scenes to XX,XXX the So are got shop driving will things really systems to term XX,XXX all program, really correctly rewards across between that X,XXX get rapidly and mean, that. base will executing long the systems out every program, our able the building to hitting logistics building people and day, driving then the

Thank you.

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

Thank you.

the attractive highly blocks uniquely building successful in Dutch we the to that been highly that an For real model These and an of engaged powerful co-founder and that enduring for attributes consistent shop drive strong customizable business and and shareholders. more brand, have include well-capitalized ample a is balance the sheet highly and team. experienced value has authentic and than the our and curated beverages, strong years, portable our company geographies, the provides company, a liquidity people relationships economics, systems fuel across customer building engaged a Bros unit-level XX nurturing following, growth, creating and while and culture successful leadership all remain

Dutch always, Thank for for everybody. Bros. our as your of support the you, thank time, and continued And investors, you

teleconference. This concludes today's

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