Dutch Bros (BROS) 7 Aug 242024 Q2 Earnings call transcript

Greetings, and welcome to the Dutch Bros Second Quarter 2024 Conference Call. [Operator Instructions].

As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Paddy Warren, Director of Investor Relations and Corporate Development. Please go ahead.

welcome. and afternoon, Good Christine and by Guenser, and CFO. Barone, joined President; CEO Josh I'm earnings the release XX, issued press We our for the closed XXXX, market quarter today. after June ended deck Relations website investors@dutchbros.com. release, the along The at posted earnings Investor supplemental press information our to have with been actual response historical to . Please aware cause facts that statements are subject in are uncertainties materially. statements questions, and other may prepared remarks in forward-looking to be your our than risks, assumptions all and that differ to results those of and qualified by release on our report Form are SEC in the They on our cautionary quarterly including earnings and our Form statements XX-Q. press most filings, factors report and in recent annual the risk XX-K latest

We assume obligation update no to any forward-looking statements.

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

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

the that, call With to Christine. I'd to over now like turn

you, everyone. Thank Paddy. afternoon, Good

results growth Our we strong runway combined lies that again once Bros. growth revenue for of Dutch expanding ahead as profitability. the with demonstrate long

same QX, $XXX last a we increase the revenue a year adjusted of During EBITDA and to compared resulting XX% XX% in $XX revenue million increase EBITDA. of and million drove quarter adjusted

pleased our awareness building brand very are responding expanding and program to our are with We customers our efforts. how rewards our recent Dutch innovations,

lap, paying delivering our Given the off. on intense service backdrop external focus promotional QX products tough and a innovative and incredible is

QX, consecutive new XX XX shops openings. Same-shop more is quarter. record million, posted in opened which sales shop line new were In the X.X%, XXth we or quarter $X the rose with last marking of AUVs and we

exceptional guidance milestone confidence opened revenue Despite give half and EBITDA shop the this for performance, us adjusted year. first another Frisco, our results, to uncertain and our reached our raise Texas. XXXth consumer strong including shop the having environment, also new We an evolving in quarter, both

an our detail our any But of on in We to on update and a people. context more share through differentiator, our Dutch few our results minutes. began like business. fundamental I'd you first, will Josh with financial Bros discussion walk

Our resonate service of backgrounds. and culture, with all ages and exceptional cruise customers

drive and from us set the competitors. service Our and they provide talented our growth brois apart

people XXX lay candidates of more call, X we an alongside in of When our by operators new Our the to is bros average their to in with lead cultural pipeline get Each operators successful. highly foundation are opening over and our an ensure these our success a market the the as includes operator a assuming teams person These experienced to and market tenure strong ready than years. work success new pipeline operator. invest team. the be empowered new

customer deliver exceptional experience combination us and on of service. teamwork quality, helps energy powerful consistently an and This focused speed, experience,

We with continue our with shop expectations. turnover be to are level line pleased our in indicators, which

best Our growing with and us. people are staying

earlier expansion continue The and support to our track, we Arizona, remains on growth. which great in our support people this announced we to center year hire of

location permanent in first eagerly are the move larger of awaiting a the half We into XXXX.

seamless. team leadership transition has been Our

gives the and the experience our This role Officer, their inform of important President Chief Guenser quarter, Operations; our remains this and Sumi on our Enquist, systems as initiatives. Josh assumed business his a Ghosh, spent and leaders first is strategic in officially processes. perspective Charlie our CFO People a several adviser. our while helps learning Jeff unique months key shops, generally earlier have it as

The of building to we people on believe applying the support our leadership in-shop his his taking shops focused the system. is well certified remaining our of areas ability as the focus senior and we learnings Briostas, critical them throughput. in initial are Jeff time is all Sumi to as team have real our field and grow. which strength of members in all spent and is estate on

multipronged plan program environment build Despite which enhanced felt we price adjust more outlined traffic, the awareness innovation, noise strategy. we targeted year, to includes for peers, brand Last macro drive efforts. increased a and and the need haven't to advertising paid rewards an many focus our aggressive promotion designed to on fundamentally

We together driver key market. remain momentum. are how pleased working beverage our is drive with our efforts the a progress and within to Innovation

by building plays products. our moat We Bros and role foundational deepening stage of a innovation also Dutch competitive through sales believe next category-defining in layers growth

both Protein we year, and successful. this advancing launch which our were extremely demonstrated capabilities Belk, innovation of Boba Earlier through the

customers permanent these to to we and decided Our add the them products, love menu.

maintain we Our Freeze energy by across that and on added a that coffee. we In supply report I'm much strawberry of to through back outages Boba well most May. June, Mangonada Churro and performed system. restored product April, focus Freeze, and our happy drinks, Churro of we X and we Mangonada fizz. dual brought experienced and Rebel With new so April Watermelon

Fizz, our soda thousands Watermelon With menu, customers refreshing flavors beverages. our tens to drink. ways of pantry includes enjoy and based an deep of the array and highlight of which With of we toppings, of we their lemonade our breadth favorite tea give

Paid advertising.

encouraged in have were awareness. see our where In were which We are the beginning investment the newer increased DMAs system. impact outpacing We expectations. is growth results, markets sequential traffic incrementally we in to brand paid of paid with by particularly these than initial the higher upsized advertising lower advertising,

Through surprise sticker channel, cornerstone innovative special products, make investments. driving promotions a and and this incentivize directly traffic customer communicate days like Based decided interact geographies on have segments, is key we introduce results, further visits across Rewards allows communication new our us we to to drops and merch dayparts. to and Dutch strategy in customers our these with customers.

which focused our transactions repeat approximately broader-based efforts elected our our QX, truly in we are We markets. to of In members, several to in given as newcomer the believe and channel not attributable XX% our is Rewards relative many growth promotions. in Dutch promotional and of our incredible a of Rewards business the status our Industrial

our have in existing at large Bros, increasing Dutch Dutch to new our that said, We new base. believe effectively introducing effective customers found That especially us promotions and customer markets. program particularly our enables broad-based in target to sophistication are Rewards we efficiently

order we We test July. with XX about of continue XX and track this our the remain on to the capabilities capability approximately and to to in initiative. as California make and XXX Arizona, June end of out with have of ahead the progress the Texas shops as We of expanded scope rolled shops

We in end of by the our are mobile majority shops available capabilities be will increasingly XXXX. the optimistic that order of

advantages some channel, this believe approximately including starting we enjoy Rewards structural point. penetration we XX% by We are encouraged with our of Dutch the

Additionally, mobile an bring double drive-through our drink many could After if setups which utilized runner customers before of where reaches for it their that the our order the mobile a include can in, be lane, directed is customer can checking order. ready plane, to be right-hand shops have the escape window.

potential locations. that their many use We operational customer eliminating open the then a to line at bottleneck can already window. of The using in right, our escape this tactic

choose our suggests also makes use window, our of an Early the order of customers a utilization to data of majority about currently up walk-up order improve We mobile order window. to business. mobile opportunity XX% which our mobile walk-up see for

display streamline kitchen with are the existing Our system, compatible nets leading integration. to

to of expectations. the of some of the intend higher said, given We capable of of customer high necessary our recognize volume many across we capacity channels. That of believe competitors, customer from our and orders setting learnings we shops throughput importance are planning where to throttle productive levels shops. maintain service on our significantly most Based

which up These high existing the have as portfolio. much makes our of our prototype, shops throughput same standard footprint

learning We a observe sharing period are customer and behavior over feedback and this longer of excited adoption time. incrementality as potential to to from rollout, we forward continue look we on

in business, given years shop consistent spot IPO our is XXXX, as XXX little Since Texas, shop base from has market X We QX ago. shops remarkable XXX have new to the our been of development over opened XXXX. having the XXX which of our almost September in nearly for end bright currently a a doubled

into entrance a from learned have Texas. We lot our

updated we XX helping reminder, our and the recalibrated a over our refine models real have estate. As approach to months, past

to an new planning in these using combined effort performance revenue insights better are We with drive shops. enhanced market

removed As pipeline would our have began recalibrated regularly continued reassess to investment we quality have objectives. not pipeline this since mid-XXXX sites part modeling meet We that for site under our our our work, of these and of refinements then. in

Rapidly has bringing process had forward into pipeline X learnings the impacts. main

giving year XXXX. First, we performance for raise see to shops, of revenue the our revenue is us which to confidence our portfolio guidance full begun the have total new in stronger

XXXX. development that we more on as we Second, focused now is our new range shops XXX potential in lower XXX AUV will sites end to it higher likely land of towards the have of

year. a opened shops first of As half reminder, have through we already XX the this

pipeline which It felt these our lease we real in will encouraged towards improvements Additionally, will by rebalance beginning be are shop make estate an through way refinements said, to back impact are the seeing the their likely more to in we capital-efficient pipeline, take and That XXXX. begin we for now. are attempting time arrangements. to new productivity,

Let me conclude with our to structuring. relate corporate that X items

to call Directors, maintain rights offering consumer and our TSG after registration voting partners for thresholds the elevated SEC registered waiting below This Board affiliates a nominate director quarter, period to required fell the of of our rights under a agreement.

On Bros years. Dutch behalf a for past fast-growing, the foundational support entire family, a would these Dutch over public role played to its we of formally TSG like high-performing company. preparing Bros be thank PSG to in X

industry chairs is to of Committee, Texas presently and Directors, and the G.J. In directors added extensive Robin Kitchen QX, our X Pizza the Hart has California we Tacos. G.J. of and CEO former our of expertise Compensation independent is CEO independent. which Torchy's and Roadhouse, Todd G.J. now Red Penegor. Board

industry Officer. Chief Papa Board of a Wendy's Directors served John's earlier Vice in also was Todd Papa extensive as CEO experience XXXX month. President of the CEO just Wendy's company. and and joined has appointed member He President John's Todd Senior Previously, the Financial of of this as and and

forward to CeloNova Todd's we Wendy's, our growth boardroom We contributions various roles story. in as tenure Ford in Todd G.J. served Prior of the and at our and Company. next navigate Motor at his phase look to

pleased with foundation are We strong for build XXXX, continue to an and growth. start a to we excellent

our this terrific through are engagement program of further rewards front to us in accelerate platform. about have and opportunities customer We excited

year-over-year yet new We and XX-plus in delivered quarter growth. QX XX% top-tier shop have another least openings. revenue of We at growth

excellent have growth Shop margins, top-tier delivering We this profitably.

we grow ready growth considerable with and We great anchored outstanding us. our capitalized. believe by have well importantly, Most a upon engaged raises plenty to pipeline which of operators flexibility a strong have are to of plan we people capture space. and execute We white

financials With our more to Josh review that, on details and I'll to over turn guidance. give our it

their flow for our team increasing outstanding Thanks, Christine. delivered positive which shop QX by of headlined revenue combination same-shop and financial sales was thank entire efforts. a alongside We through. growth Once strong strong by in margin great again, productivity and driven results our growth, new was performance

Here's growth XX.X%, net a Company record. sales a XX% XX%. brief basis XX recap. contribution. AUVs points growth shop increase sales with in strong year-over-year. in Revenue $X were line X.X%. million, growth X-wall company-operated Systems with company-operated remains XX% same-shop shop last was contribution quarter's grew reaching with System productivity was margin

investments Adjusted sustaining XXX to we from we basis margin XXXX. to XX% basis between over up self-funded continue EBITDA year. last new and increased and achieving is growing QX $XX close flow Adjusted points lower the was towards cash SG&A XX as of work of operations gap And year-over-year. shops, XX.X%, XX.X% QX growth. EBITDA points in Adjusted than million,

decreased The by in points increased labor by year-over-year, company-operated partially our basis growth. driven sales leverage, strong of basis shops costs. driven sold primarily XXX ticket margin Cost goods offset expansion points XX of by was

a coffee We continue a factor key to in the which keep including close XXXX. commodity may costs, commodity price, on watch become elevated

wage as points shop X, flat. increased company-operated year-over-year, were by growth. wage On a about April XX Labor costs approximately our of basis starting Occupancy other year-over-year. increased XX basis and Preopening percentage in increased primarily California XX% costs costs revenue year-over-year. points driven

restructuring million in $XX For SG&A stock-based realignment approximately compensation. includes and was $X costs organizational in and the which $X million million, about quarter,

QX these of expenses, nonrecurring in exclusion XX.X% and items year. the of $XX last compared million, falling With to adjusted SG&A was other XX.X% approximately revenue to

hiring with timing benefited people pleased we our leverage to in partially as of Arizona adjusted transition roles office. are in support the which saw We the from we quarter, for SG&A

in current million disposal sheet to our our June have that liquidity, at balance Regarding total $XXX end we at of our million as support of and growth plans. XX, and QX the approximately we approximately compared liquidity believe to sufficient had $XXX liquidity we

of decline interest comprised $XX equivalents, from revolver income outstanding net was reduction is interest which delayed June and in reductions in million driven following the quarter, amount together cash million that XX, million year undrawn investments loans. in ago of and expense The As facility, to $X.X securities our cash In by in the X $X primarily declined marketable and elements: liquidity million $X million. to draw balances received paid term in our in $XXX undrawn million net. expense on on interest in credit $XXX a

by This million was QX, an in million related $X.X $X.X finance in which rose from partially to XXXX. offset in leases expense increase interest of QX, $X.X to XXXX million,

$XXX operating liabilities. As liabilities of lease June had $XXX we million in and million XX, in finance lease

support liabilities, new which lease center balance During liabilities $XX to and in million our for lease in office. million $XX the quarter, million our operating included we sheet added finance $X.X

to flow us in cash maximum which believe will self-funding a towards capitalization. business, capital move continue our Regarding optionality having we provide expenditures, we long-term and

base towards a the combination SG&A goal. move profitable of expect We the towards capital-efficient an arrangements this control more of over will lease and expanding business shops rebalance adjusted

our QX million of was this plant QX continues In operations. from The we million, equipment $XX year. This of $XX growth our from $X cash QX, company-operated flow property, million $XX last shop to up compares than million year. and more which of quarter expand generated of last to in purchases base

to to basis. high That there's through new new be XXXX, shop reduce development will capital look work CapEx said, down that blending unit time, costs we process done. business' a noted, As we in and the a intensity per may more take believe represent on unit per This shop watermark.

from continued between $X.XX updated million last the an updated the our we of EBITDA projected $XXX our balance guidance quarter. of are and now for $XXX or or year. revenues of are of and strength billion million be estimated billion Given our from performance, is business be an guidance updating now guidance between Total to million the increase increase from last million $XX Adjusted from to $X quarter. $X.XXX

SG&A invest upsized adjusted brand well with Arizona million, as the million paid be compensation. to forward million expect support to range million, as $XXX from our now expansion performance-related to in up $XXX build and media in prior awareness We driving hiring increased as $XXX between and business the of new $XXX markets we in to

of our to be shop million of Total $XXX projected million. near openings bottom are system to the previously range provided $XXX

are As to estimated million. now a capital expenditures be to of the in range result, $XXX $XXX million

same-shop There are low no growth. the for growth changes in to our digits. the remain original guidance as Same-shop it single year relates sales to expectations sales

performance initiatives, we're XXX we through our by navigating confident last environment action summary, results points reminder, our And of summer. traffic-driving in near in a we basis the As we continue from of In remain uncertain pricing rolling off be an in pleased while be term. consumer will to approximately XXXX. the

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

Zackfia Sharon William from question Blair. First comes Instructions] with [Operator .

just clarification. question I is guess first a

comps year. the there's the of back some that comp negative concern half the imply in think might guidance I

you then potentially maybe that? ordering, of separately So if mobile redeploying And labor. X ordering address mobile on of think the I some could was ideas

is And at you improved satisfaction where if curious if have I'm and/or the mobile customer ordering? you throughput. so, that happening are locations And seeing

absolutely. Yes,

then the start tackle order and sales same-shop and question. I Josh with will I'll So mobile

really it's order, On thanks, early So mobile Sharon. days.

time. shops is So of from our about is what it's incredibly longer redeployment labor, service period XX focused customer really differentiation. really in And for of just a on we're a

that time mobile with so we both sure really drive-through at the order that customers, our we in roll we And have connection that have teams as window still so customers. are focused on out our the for and order providing the it's those that making incredible ensuring mobile

what phone day labor to and redeploy make happens sure taking about have so with is our which -- least it's kind of interaction And conversation with order in the the thinking part really to your of move goes transaction that interactive a what's customers. what away so what we happens itself, is can great. is happening going actually our is and to That someone's the that

those feels question. are how sales think moving believe, And just so all And excited seamless on really initial to of operational with to order. mobile the by are happen. I Briosta's experience then And our starting things the we same-shop

Just the to address quarter first.

of really year pleased in we're half So customers with what our and first the we're quarter this and seeing general. from

the quarter and seeing we We strength we're advertising. paid strength things rewards were program, that comping were of the just over that in the number based a we seeing we're to repeat we're decided this seeing and and that see in seeing not promotions the strength that the on large-scale innovation we that our

hand of for the of to deconstruct it year . kind you. over I'll that to Josh second half

Yes, Sharon.

just moment, maybe of by -- that mix. our of roughly point So in the comp included And saw come range the points about X X X about offset we lower of of X and points sales a for decompose to transfer then X QX of to end partially X price, was points.

as activities, the off little we forward bit a but with would we're as off, the as house. which of up price of carrying into year, that But up than about the points we're X.X mentioned, ends on investments increase expect, well. balance We in a QX going think that pressure So more we discounts some going put as more we in heading in bit rolling point showing would to a are promotional here, that side of of into little QX. rolling replaced price about

shape rest the to you down if the that's on kind based will of of how the year just performance, of were the rest thinking back up. build So year we're QX's

Cowen with . Andrew Next question, TD Charles

lift Does order guidance you're I same-store the but here. base well you obviously, for as nearly at sales. ended quarter of for XXX, the with potential know contemplate stores, that the wanted mobile I that XX around the that ask now you're to about store XX%

when benefit guidance you this order So potential mobile related is point, fine, of kick but you're typically this? the which to it quickly just just to do from question reflect from numbers of there. mobile not I perspective, know a a quickly stores? the at introduce lift terms does see order incrementality seeing in, sales in are -- I mean qualitative and how how new giving you you

absolutely. Yes,

what's we're the of best is in you is we're So actually it our know, now, perspective, focused right most happening gradually. innings where it's early as really order, which still operational an with there. that mobile From stores for very the happens

So as these it's roll we new actually are available. capabilities and out very shops, limited sharing we doing that

on time So available you as through believe of sure to forward, those going to given get have used thoughtfulness it's app, And it their of our that orders new this rolling driver can then continue all functionality. and this going get are thoughtful but They out this far see to initiative be with. shops a certainly the very we we're we to to actually being make flows see the that that how as is things. larger XXXX to that in kind

question Next with . Ivankoe is JPMorgan. John

on is question of couple The different a to places this. want go there's with development, and unit I

it we your in does for Firstly, second get relative lower the I were end slow thinking. of imply previously guidance half we the down what year, to mean that.

up? 'XX this to pick will brakes or be trough on for further year to go means in the what course, of I 'XX So Do 'XX. have ask a

first question. That's part of the the

future, to a of you that you location, mention kind allow if did even working design of previously it or was. and looking will, Bros could than maybe box more at be be estate on might the Sumi's Secondly, the on just he real focused Dutch productive throughput,

absolutely. Yes,

talk I'll development. first, about So unit

at primary think to I higher X year. to shop innings brand very building we is One, comfortable we we're there's seeing of very new the raising are that here. this reasons potential. the our long-term attention revenue really, believe, in and pay we AUVs main we of And felt that this So term, dynamics X early building guidance. And look as again, the long

shops, we're shops super the in that runway shops. our the on of in of the having focused so new returns front And of our us, AUVs on our productivity long new new

some So or over been that we're that working of super fruit. so to last really encouraged months market the through we've bear are beginning the really XX planning activities

at seeing number we've is piece kind the as X that, before, that, doing shared with So really new as encouraged shifts. what units primary seeing. a of what the of I shop we're at I productivity we're AUVs. From look that we're development you as work that work, think planning market really that's as a we from We're through and look and

models as So they will far one, ensuring we the of will open, AUVs that what that like we're continuous exercise look that's be predictability recent and recalibrating our as what most our have and our data ongoing. a when

early And again, very pleased with results.

at forward. of second piece there's at front to shop those the ahead, really as is us. the CapEx looking in per X we're trying shops it's have, unit And overall a go we lot have we look down The the where, as potential we shifting bring great that things that of we of combination

And in front temporary have for a how period many potentially year made shops where strategy room so we're adjusting high of of kind to we're us down we this decided take those. a of time we great AUV given to in more where couple shops sense make here it a

expect its to relates potentially box about still out made, X do costs And I you as increase Bros as on, separate 'XX'specifically, self-funding be is it of some be a corporation? comments . secondly, to I And a desire What Dutch box, throughput. business. you times if then the well understand think, self-funding your some year trying of get you're redesign I'm the to there to that to but

on shops of Sumi of spent throughput, very the redesign on his working in Great. we're months And the in Sumi's I days. and focus on still bar. couple first think much and and the then early

like. would that that do in we have of so we but And I the have have I look point opportunities as Dutch share at we Bros this might far wouldn't we do as share what that -- future believe something throughput,

points Yes. think then to question on X your John. self-funding, And make. on want there's I'd I

shops capital comment we As leases. those is on how and lease the a of new driving function really contributing or we to negotiate down the structure

cost of Dutch contributing to So we're amount that's of capital build. driving the is the down the

It's less shop. the a about full redesign of

to about then it's and going of at the that to be forward to EBITDA shifting lead pace are opening eventually margin going to overall the going drive to And breakeven start this the rate function think we're growth we performance. factors at which strong we a to can cash in going getting continuing flow that capital and we're as be Now and the these reduction sites in our to shops. which contributing are

now, is, to developing here when So it's some time getting model, with into spend be able to you in for our on and commenting update something certainly future. longer-term not the more I the business like we're I'd as that guys

that to discuss Is like not myself going And we're making what 'XX asked this I now. to a of I'm kind on twice, bit call. want you initiate. that sounds development, it . -- fun little Is since of

Baird. Next Tarantino . question, with David

just second clarify, the the to commentary Josh, First, for guidance I on comps. wanted half

flat. the you into maybe traffic would that's extend saw think range the pieces which quarter, for average me the in you settle if were that to check you was Correct there, were guess, the expectations kind that ex I moving wrong. the -- I all cannibalization you growth So of indicating flattish and second

in that scenario. that then about Is flattish that that the be to think be that right the . comps would of it? So would way net

about And some is I that underlying then not the think the that transfer The X referenced and we'll changes increased X drive traffic. points underlying of right. that you're way increased sales have offset getting price the with mix describe down meaningful would I points have it be it promotional would we would investments math of discounts. by that we'd about any around on

Got it.

uncertainty forward? guess X I you already Is follow-up you that's third this then is see I run here? get to what July at Or And may that what in quarter, Or as that. from what the the you're to expect informing seeing is I'm guidance? some that move already rate and you trying factoring in the outlook are that guess seeing? your you're be or of in sort Okay. to

say of is into we've aware what's factored on July What we're we're certainly, the guidance going Yes. has I -- providing. that in

commenting nothing jumping is cause differently specifically about on here. we're I'd So us there's off that page July What the for would to the performance the not say think providing. guidance

Next question, . Andy Barish with Jefferies.

guess guys, more environment. on consumer thing Yes, I the the and just X

You really, really how cap. on noted which a your appears volatile solid. surface I consumer guess, in being is witnessed business, the . that back

Andy. absolutely, Yes,

we year-over-year between I feel that about our we XXXX, just So if feel about do think really good in of good where think QX performance QX meaningful in in. you -- and QX. And really step-up and comp about QX came

the see place, great as playbook continuing quarter, comfortable felt got in we that to think from innovation. the we also returns we've I through -- just with We went are

Boba the know, especially menu. kept do As well protein you had the when we kept We Those quarter, stock. continue actually on in to throughout back strawberry Boba. we

newer We're brand and markets with performance our to really also nice see advertising. paid awareness in building that continuing

through quickly The make as that about year. look we'll the what we is go can additional So as those watch to we it's thing driving. investments far returns neat pretty as

year. make the as seeing we're And on on return advertising we from a go so that through basis decisions what

customer, And right on so our think going far broadly is with of now that as what as the customer. what's that -- there's feeling we're

generous very been brand. a always have We

important right that, now. I is generosity that think

business doing business drink. ICE lot Over XX-ounce a the XX% the of ICE in now. is size in of medium Our We're is right space. the quarter

I happening generosity generosity to think got program what's we're now that right every and and think empathetic our delivered that as Brois top stay goal continue where about. I and that I our our with of and now rewards is thinking is, with of with our think that always customers try even make to is super lot a out give the happy. cups we are responding We way customer do, ahead the really And But right what continue day. they're to we've dogs in our we the that

Yes, on pretty and to half on dairy the you makes coffee, goods of line? and Anything cost Josh, terms feel And seat the Or sugar. you're would then discussion price on the comfortable that? with around the in cocoa . material been out in maybe discussion sense. back of looking anything just, seeing that be 'XX,

but we're to full for in expecting increase of the Yes, year year, full for of did fairly the quarter the nothing the say it costs, a I'd still for little see us. year. thinking expect way flat we're through We dairy the we'd significant be bit balance that

question of Next . with Sara Bank Senatore America.

I a clarification. just quick had

of I refinements ultimate It's onetime said, terms new to process. of a is? are is your kind doesn't just I guess, I'm correctly, you Or change that And you make as I'm to in sure how the assume, think mentioned broad year In you onetime applying process. adjustment, guess, understand is understanding change of Texas? I that it approach it how in I about about talking about want TAM. more that kind this to trying you your this -- markets? a

was with and I If business. customers, compares the try And pretty question to I control all of do generous the desire about like but sequentially. for understand a be different kind looks all it have actually to then it I your underlying thing. that stable

benefit off all an curious get I'm you why that traffic. given So that more wouldn't you're in you expect if you and have, offsetting price the promotional would rolls drivers

Yes.

So with there. estate I'll real start process the

learnings that what process be there's So through of we noted some ongoing, new changes shift. our our previously, in we've which onetime that we go from going other are estate that those think I'll and that like enter things there a and real are then learn are from as of to markets all continuous And more I do shops.

more is in that that ramp shifts the we that going think versus of shops some we I are Texas, how market. and is So -- onetime like, data, things is in that those this just more new we because on happening data of particular, more a we refined so of and many wider a deeper so just from data coming of as incorporate Texas year of what -- opened we what or we X have we look more in from lot mentioned

We what that we are under like have And scenarios. like the and all our new so up that we various really unit. of data a can sales types data now as different refine to using enter more markets of AUV looks transfer approach we of average refined on Florida, that bring big

that in what like at now feel of site looking very And new where process. process it to of estate level impacts what of we a all site open look goal is will we in we're our refined we markets. site each as look higher and a the has those like have led real by confidence have like what That's AUVs

to going that pipeline that now in forward. right is go feeling that what as the so leads building we we're us that because estimates we about of And forward, excited have we're confidence the increased that

on we a The at refinements spend of making that Dutch the of Bros the amount second money site. part moving we're really that is

lot those shop so ground most the a and in what And looking for the previously the high A X contribution. seeing could to finding that towards is we're expensive And of refining is number between the market some which level about a that are leases, market so us money think build-to-suit developers out what for of leases for XXXX and I as a get and right spend we've we the ground build-to-suit. of shared, to are hybrid watermark back ground. mix way talked we believe we've now in that we're be of

ending So that space. some of up hybrid in

piece well. other the on we as are that's that working So

starting market find other we might to more I could seen be that pursuing aggressively someone is were we're the there else as in might maybe think believe sites that take some that actually site kind -- that attractive of aren't a as to we available. entering a market, where dynamic new there's be we they the might have sites out I there the others as or be in think, see to has that looking

when drivers, seeing what stable, about And your all And the with that the pretty refinements to we're the that environment. of QX pretty around we is really our so would all good again, from real I comment underlying you echo going feeling like a there. as we're these direction estate are then far that of comment in things, QX stable process as move

question don't And well. TAM, as shift Sara, on prior answer the just we in certainly your any to see maybe that

to you highlighted feel I still think just the about that that, wanted long-term potential we I confirm but very business. confident of this

Right.

price your Okay. because payoff higher is down why of you question coming guess, then some less assume and get transactions. why growth promotions, wouldn't be ticket And then wouldn't -- just environment, I better you in on the there'll if was transaction

environment I certainly to of think operating mindful we're want we in. that the be

we're there's to We in consumer we're how I an us, going very concern the about . ourselves around positioning in thoughtful make increase seeing think forward. sure space. we're want

Stifel. Next with question, Chris O'Cull

had a and a clarification question. just that regarding follow-up I

plans . Or is mentioned and the the activity Is in it related that to impetus what's third environment? going the to related of Mobile which is to rollout that Order behind that activity? promotional the to You increase mix. the competitive quarter, what's Or Pay? impact promotional increasing the

Yes.

So a really, it's on of more comment year-over-year.

So in program bit which of most to We rewards as of the kind QX had a as in ability we on in our ability XXXX. up program changed environment offers the lighter know to ramping our rewards the kind little were offers were effective. of of QX XXXX, a of segment we've

this staying on. seeing now of the we're we've looking believe same We have continuing year, reaction so pace great really to again, our really been the And right staying to that our customer in important I customers. it's that from ahead on think,

growth to as will just how keep advertising. I'm unit if that Can sales advertising quantify then additional -- you you try a percentage Okay. you'll And the be paid investments you and budgeting able years. plans in investment? grow with that thinking it in going to about of few to out And you wondering next then, it so forward? comps are make look mentioned Christine, as

Yes.

I as maximize our And to in spend in guidance. advertising advertising is -- included brand. what that can still into brand customers awareness we there's the where are think of phase helping learning the and we building can new drive So increased that is increased share we go I forward,

is learning advertising to And we think land. spend that still ultimately are going where of so amount right I

quite I believe that there business returns really think with is advertising. can yet the seeing, continue drive where paid we not in . the we to with news the with good a right now we're we're profitable way

Geiger Dennis question, with Next UBS.

ask environment. your believe sort Anything quarters? was on intensity impacting is there that's increased on increasingly to the if from, been and I maybe that a intense want promotions I where really prior of relative to following up comments increasingly, about just to promotional add it business, X more coming it's how on change your

more as there's I where general lot mean in do I from, as far that coming market, been activity historically. in has there than Yes. think a just the it's promotional

across . within certainly our and And space. what and shops. what's even well so kind to than customers the we're from believe to again, And broader understand watching we, our work our seeing, is of and really strategy best beverage space the beverage that really then our brand really going

that that dual fun, are with really the on the we for several that quarters, energy how found really is innovation so to energy what And which strategy coffee after focus market things most and on QX, was is our last that customer, growth. to business our on need we in we've now important deploying the have oftentimes focus effective that core been continue ensuring to given

seeing about the early do I I rewards think, paid And with stages we the think then compared are we've there. can advertising again, what lot we program. to of in talked what a others, and we're

other each like to bit offers resonate that of extra a merch customers other are customers. things do with so to. it's sense and ahead What our And drops, quarter, that, most and a make can our march responding which things we how segment, figuring are really out little sticker drops

I So working off our are And our what brand what's is about focus that are we're really time same with at . the a for that we're think and the our on us. thoughtful seeing within. being we environment strengths service paying that within

Christine. helpful, very That's

based it to sort early Just observations? sort . any and X on more there Florida share incremental of of thoughts as relates to days

so Yes. We're how the is with far. really going Florida pleased rollout

our from what strength of look the come lines it Florida like we're shops potentially of drive just reflects to thoughtful Florida. our about a our brand customers couple some that far in And we to not again, is just I so going projecting very we have I -- think will think waiting that shops. to to

well. the certainly, But performing really initial shops are

Piper Mullan Brian question with Sandler. Next

price you on in And ask traffic dynamics in about anything. seeing X. you a California. consumer to market a how that response you the much Remind if regards incremental are took in wanted Just from there? since maybe to us what talk April Can perspective question California, just

Yes.

XX% holistically So about in California, had we shop is base. increase. about our a California, XX% wage of

been we've carefully. So really watching

our being watching overall as which We're the year. look think very in and to about continue and our continue openings California this of . we new in about far first of for California far California. P&L. took we'll very weight watching we're seeing, California of of shop we And shops system on that X bullish California. the would be had in some the first actually I opening we As pricing, up top kind as as a of week what in what end continue half we're on performers X.X% in to in prospects . And sites

on pay the And Okay. testing. then mobile just follow-up order a

around to direct to actual curious you on they referenced to Just excitement you You in the is window? get tests do? some utilizing Or naturally? your window, walk-up Are . was an occurring have doing anything take that consumers the better And walk-up what interesting. which part. do these to preference that proactively

Yes.

think the of direct place how early of customer X of all or want to come walk-up choosing seeing they testing, might to their are days up what other more the how typically either they're mobile be early or more customers situations line our places. of because of kind we window, orders in picking at works, that on . But is the those I to parking things. are because So us our given are still really work. There unique where we for understand it's just better preferences to of and how it's another what shops

And of that repeating behavior us. so kind with

wanted for walk-up the is additional us the in of bars. that's then is shops, X bars, we window window put high-volume have one and about that drive-through nice the One and things in we

and mobile And order think, out for that some so the is is walk-up preference I window volume. of that the new with it really thing, balancing

drive-through of got doing you've is of much side. if walking window drive-through more typically, to window, out what drinks window the side we're that are the actually the walk-up volume from over So coming we

a nice the that actually out, order drinks where we're testing. so mobile that being thing handed they're make in to is early And ability very the again, on seeing,

Next with Farmer question Jeff Haskett. Gordon

same-store between? same I on half sales to guide. or consider continuing in apologize Is the guess, . everyone the have slightly back Do But guys somewhere we I harp it get an sales that? on in you is implied to the anything the the can it page, same-store guidance flattish? effort XXXX of year could you offer on negative for for

back We're the into similar from think driving specific mean, and rolling QX what of to I of had I for -- Yes. rollover off best it we'll that X.X be expect We quarterly as some would comps from the rollout of not mix. promotional the about X replaced about you way we'd activities in to on be would about the price. back price guidance higher than QX, past. point about more I a But where is I half provided slightly points offer we the and all think QX. giving little guidance. in discount guess our a

but So I the as guide that well. QX, get that would full think put QX the to what can year do imply then and guys for into to you math I

Okay. then that I'll alone. the just And follow-up. leave

own down drilling your So on just customers.

I headwind of that, do your reduced see about headwinds just that talked terms consumer you have manifest itself about but intensity does up. And of guess, How call, it up, on this sort picking picking guys terms the wondering in customers' You behavior? in of competitive Or . frequency of that's these to absorbing continuing or the check first arise, XXXX, the secondly, that's peak perspective? as sort happens we is these What management? this headwinds think the headwinds? of do something intensify you get when through question. we're And

Yes.

do looking could members. that that behavior we're seeing. So things for different seeing we I is recall that there's cohort potential things number we are of we track rewards for a be stable. as look of We constant a there

nothing really there. And so

add-ons, modifier like usage, look We that. things at also

really if And seeing is not in think do just, that there. hey, the at would anything something. data we're everyone's I of anything clearly, the Again, overall it's is environment, part what indicate we're looking customers feeling

we've what how And environment, that. customers I do continue what that's of type of deliver we that. a this so ahead done stay And we thinking think do our to really most want through job that, good and of in do how

up seeing end don't we cracks. to that some of that start So might things show those some

now, right up. we're so really with our holding And very seeing customer pleased what we're is and how

with Securities. Next Wedbush Setyan Nerses question

parse guide, the uptick? question. of The drivers can of that different SG&A Thanks for all the kind we just increased out

through investments bit walk we've paid well as Happy without giving in in in center both specific transition. Certainly, made the media increased slowing of as in had efforts part we've those performance-related to were going year. got to roles first what the strong the up half this that then as is our support is to a very Yes, increased was in a be there dollar the a yes. amounts, we're here there good being back increase of we transitioning the and compensation. as That's ramping folks office, the size balance of year, we've

that . So those for I'd year. balance biggest the pieces X are highlight

second to clarify, think dairy guys not half. in or coffee the And you said . that Is you're fair? just worried about too Okay. impact the I

an Yes. don't significant there in eye keeping on have it. We anything right. That's obviously

We anticipating closely, aren't will that but any currently . all follow impact.

but those are And increased for in. the you're not of of being lower credit into you're given headwinds selective that then that those might basically is sort ad of result to transaction say openings, fair from spend, that increased any kind taking kind activity cannibalization more growth necessarily all unit things incremental the it comp, because promotional putting

that's we think and into I we the it. Look, that guide, today taking our think about things that Yes. know are how would we

that, quite on from business believe do strategic very a we and sales comment, is level from like still do specifically I the a perspective, of to that healthy having that comment as far feel there just are comfortable want that. a transfer As transfer we perspective, sales

put that for really for go we convenient shop when someone is who that us. in and convenient more lot mean Dutch Bros loves I of makes a We're to decide a sense more to they new shop. --

understanding to that a actively we thorough want open we like trying shops. number that guide will of what And is a new make have and what We not as really down. will it to very it sure so that that look be just we're

so to that. comment on And did want specifically we

Next question, Jeffrey Bernstein with Barclays.

much. very you Thank Great.

Just curious on the Rewards program.

now it's of to said you think X% transactions. I X%

I seeing what versus average non-reward of which But be members spend of come in statistics wondering consumers are or Just and think more . any terms seemingly would and positives. more you they rewards often, the and frequency check both how you have brand? net those use around they

comes we that now. X do do out we've right we share rewards given to bring that customers But can brand. someone of We if on don't rewards focused is is are that to what experience see think I more the into our excited break I program. something program, really the it's that things been what in

We high have very that satisfaction ratings at customer visit. first

have high rates. truly we that so we And conversion believe

seeing. as really really very helpful are drink that going I program we also many transactions welcome our us pleased X to rewards did And free that's do then to given the order. new reinstate XX% the we up really, our be penetration has of program, is But as allowed going we're important think, be with to going out of mobile believe to again, that And we're with what And awards. so through roll that of rewards things the entering I think that, we markets. something that was kind even keep

So the on just get mobile that the an already to becomes app app, using you're and available functionality to update really is order your that rewards.

define end data. where like the the curious, you're days. it would happy like, early several how have Understood. for the the metrics there any looking or And I or with in kind to mobile weeks' you and success? those you that worth pushing sounds along going you're mentioned of a you because lines of just then of lift It the across be the you you're by is anything it, year. just guess, I'm XXX XX units of But most sales as you're system know,

just what gauge success. looking to to view for as So trying . overall you're

looking about the think stages are are lot would if our metrics, right Briostas having and most important ones feeling our really what the their X seeing and good now there really really say with thing of easy, Briostas pieces who the operational customers does really seeing our they we do early order that's of is mobile right mobile looking what work at how something that we . in feel actually are them like helping we're now. most And that a rollout, order. the feel kind Well, we're we're is the are our customers. for like I that conversations providing track for initially it's because initially works they important I and a this we're that believe on of on And

Partners. Guggenheim with Francfort Gregory question Next

of quarter? is the does a roll the that question. . I -- just off have in the when One And pricing that quarter? technical Josh, Was beginning at the then

the Yes, at the . start quarter. of

themes any of any regionality? Is And in it's that getting new Texas Okay. on think thoughts your is rolling Just stores some are new the advertising Is that? big base, improvement. on it all right then of some comp other you the improvements, there like a seems or to NSP markets? openings just out the -- into of been there any

So .

Yes, absolutely.

improvements But we paid is that I of also actions The that real a what perspective. think our right levers. planning from I driver from are the think real So that and process, think of that there, the market at our the estate think markets taking from process do really we the new is recalibration new awareness. number I very lot as likely performance seeing think I estate have learning productivity. are on we in and look a do brand strength and is shop we of the concentrated strategy intentional different I it's now we advertising. in a are building advertising paid primary

seeing great from we're maybe there. comp of piece taking function sales performance mean, guide all up grew and add I well is why perspective. strong is to the total Christine is the it's Greg, we're our base a final that as that It things really I'd that a of a big the productivity function highlighted

So possibly. strength seeing really good we're this

remarks. . would to closing the to turn . I floor like over Christine for

your for drink for On we May Dan annual Thanks our Day. X held XX, questions.

honor Our more customers Dutch meaningful a following we of together to the away and $X IPO, This days passed a who crews have co-founder, find since came in than ALS. the for Muscular XXXX our is our Borsa, to with battle most help to cure Association Dane for Dystrophy And X of year Bros. the donated million ALS.

continues is impact our The to Bros making grow. of the our Broistas in lives Dutch and communities

business of every believe teams customers communities our in this thank and single to in We results performance and all QX by want exceptional day. Thank a are with I is you. position pleased create our of our connecting strength. that our with

concludes teleconference. This today's

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