Dutch Bros Inc
For the period ended Jun 30, 2024. Filed Aug 8, 2024.
View on SEC.govAbout this filing
A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.
Jun 30, 2024 · Filed Aug 8, 2024
BROS$33.77-2.3%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-Q
Period ended 2024-03-31; filed 2024-05-08.
0001866581-24-000134
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-Q
Period ended 2024-06-30; filed 2024-08-08.
0001866581-24-000217
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 138 previous paragraphs and 165 current paragraphs.
95 unchanged; 36 reworded; 22 added; 7 removed; 0 previous and 12 current paragraphs rearranged.
Tables are not compared: 25 previous and 29 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (22)
Current report
•Opened our 900th shop during the quarter.
Current report
•Signed lease for new permanent office campus in Arizona.
Current report
•Raised $2.5 million in partnership with the Dutch Bros Foundation for the Muscular Dystrophy Association from our annual Drink One for Dane fundraiser.
Current report
+$66.6 million from company-operated shops not yet in the comparable shop base.
Current report
$124.5 million from company-operated shops not yet in the comparable shop base.
Current report
1 Unless otherwise noted, pricing impacts in this table and the tables below are on the comparable shop base only.
Current report
The beverage, food and packaging costs impacts for the year-over-year comparison, in dollars and basis points (as a percentage of current year company-operated shop revenues), were driven by the following:
Current report
The labor costs impacts for the year-over-year comparison, presented in dollars and basis points (as a percentage of current year company-operated shop revenues), were driven by the following:
Current report
The occupancy and other costs impacts for the year-over-year comparison, presented in dollars and basis points (as a percentage of current year company-operated shop revenues), were driven by the following:
Current report
Three and Six Months Ended June 30, 2024 v. 2023
Current report
Three and Six Months Ended June 30, 2024 v. 2023
Current report
The company-operated shop gross profit for the year-over-year comparison, presented in basis points (as a percentage of current year company-operated shop revenues), was driven by the following:
Current report
-$2.0 million or 60 bps from lower expense for certain legal disputes.
Current report
The selling, general, and administrative impacts for the year-over-year comparison, presented in dollars and basis points (as a percentage of current year total revenues), were driven by the following:
Current report
+$9.3 million or 160 bps from organization realignment and restructuring costs.
Current report
$2.0 million or 30 bps from lower expense for certain legal disputes.
Current report
The decrease in other income, net was primarily driven by remeasurement gains in the prior period related to the TRAs liability compared to none in the current period, partially offset by gain on sale of the Company airplane to our Co-Founder.
Current report
Executive transitions
Current report
Legal proceedings
Current report
Loss accrual related to certain legal disputes.
Current report
Sale of aircraft
Current report
Gain impact related to the sale of the Company airplane to our Co-Founder.
Removed paragraphs (7)
Previous report
•In January 2024, welcomed President of Operations, Sumitro Ghosh, and Chief People Officer, Jess Elmquist.
Previous report
•In February 2024, welcomed Incoming Chief Financial Officer, Joshua Guenser.
Previous report
•Announced a pilot test for mobile order functionality and began operational testing in Arizona.
Previous report
•Raised $0.9 million for our company-wide give back day, Dutch Luv, that supports local organizations to help feed the communities where we operate.
Previous report
+$57.6 million from company-operated shops opened during 2024 and 2023.
Previous report
1 For purposes of calculating company-operated same shop revenue, the revenue for 370 company-operated shops was included in the comparable shop base.
Previous report
Executives transition
Reworded paragraphs (36)
Previous wording
As of March 31, 2024, we had 876 company-operated and franchised shops in 17 states, an increase of approximately 22.3% from the same period in the prior year. For the three months ended March 31, 2024, we generated $275.1 million of revenue, $16.2 million of net income, and $0.08 earnings per diluted share. We have two reportable operating segments: Company-operated shops and Franchising and other.
Current wording
As of June 30, 2024, we had 912 company-operated and franchised shops in 18 states, an increase of approximately 21.0% from the same period in the prior year. For the three months ended June 30, 2024, we generated $324.9 million of revenue, $22.2 million of net income, and $0.12 earnings per diluted share. We have two reportable operating segments: Company-operated shops and Franchising and other.
Previous wording
As a retailer that is dependent upon consumer discretionary spending, our results of operations are sensitive to changes in macroeconomic conditions. A continued economic downturn may have a material adverse effect on our business, financial condition or results of operations. Our customers may have or in the future have less money available for discretionary purchases and may stop or reduce their purchases of our products.
Current wording
As a retailer that is dependent upon consumer discretionary spending, our results of operations are sensitive to changes in macroeconomic conditions. Inflation or a continued economic downturn may have a material adverse effect on our business, financial condition or results of operations. Our customers may have or in the future may have less money available for discretionary purchases and may reduce or stop their purchases of our products.
Previous wording
On a macro level, conditions (including bank failures and other events affecting financial institutions, rising interest rates, and the impacts of the Russia-Ukraine and Israel-Hamas wars) have created significant uncertainty in the global economy. While we are not able to fully predict the potential impacts of these conditions, we do not currently believe any potential impacts of these macroeconomic conditions would be material to our business.
Current wording
On a macro level, conditions (including bank failures and other events affecting financial institutions, increased interest rates, and the impacts of the Russia-Ukraine and Israel-Hamas wars) have created significant uncertainty in the global economy. While we are not able to fully predict the potential impacts of these conditions, we do not currently believe any potential impacts of these macroeconomic conditions would be material to our business.
Previous wording
We continued to experience the effects of elevated commodity costs due to inflation, including in dairy, sugar, packaging, coffee and fuel, and continuing legislated minimum wage increases that took effect this year in certain states. We expect these inflationary pressures to continue to affect our operating results in the foreseeable future. For example, California’s minimum wage increased to $20 per hour effective April 2024 for covered employees in our industry. While these pressures have impacted our operating results, we have taken measures to gradually increase our menu prices, adjust our Dutch Rewards loyalty program, and make operating adjustments that increase productivity to help offset them. Menu price increases may lead to decreases in consumer demand. We will continue to evaluate further pricing actions to protect our operating results, however, if there is a time lag between increasing commodity prices and our ability to increase menu prices or take other action in response, or if we choose not to pass on the cost increases by increasing menu prices, our operating results could be negatively affected.
Current wording
We continued to experience the effects of legislated minimum wage increases that took effect this year in certain states. We expect these pressures to continue to affect our operating results in the foreseeable future. For example, California’s minimum wage increased to $20 per hour effective April 2024 for covered employees in our industry. While these pressures have impacted our operating results, we have taken measures to gradually increase our menu prices, adjust our Dutch Rewards loyalty program, and make operating adjustments that increase productivity to help offset them. Menu price increases may lead to decreases in consumer demand. We will continue to evaluate further pricing actions to protect our operating results, however, if there is a time lag between increasing costs and our ability to increase menu prices or take other action in response, or if we choose not to pass on the cost increases by increasing menu prices, our operating results could be negatively affected.
Previous wording
1 Included in selling, general and administrative expenses and not part of segment contribution calculation.
Current wording
1 All other depreciation and amortization is included in selling, general and administrative expenses and is not part of the segment contribution calculations.
Previous wording
2 Same shop sales reflects the change in year-over-year sales, for the comparable shop base, which we define as shops open for 15 complete months or longer as of the first day of the reporting period. Management uses this metric as an indicator of shop growth and future expansion strategy. The number of shops included in the systemwide and company-operated comparable bases for the respective periods are presented in the following table.
Current wording
2 Same shop sales reflect the change in year-over-year sales, for the comparable shop base, which we define as shops open for 15 complete months or longer as of the first day of the reporting period. Management uses this metric as an indicator of shop growth and future expansion strategy. The number of shops included in the systemwide and company-operated comparable bases for the respective periods are presented in the following table.
Previous wording
4 Company-operated and franchise shops operating weeks are calculated based on the number of operating days for the shop base and dividing by 7. Our shop base is defined as shops opened as of the period end date. The operating weeks calculations, reflect re-acquired franchises through 2022. Management uses these metrics as indicators of our system’s overall financial health, growth and future expansion prospects.
Current wording
4 Company-operated and franchise shop operating weeks are calculated based on the number of operating days for the shop base and dividing by 7. Our shop base is defined as shops opened as of the period end date. The operating weeks calculations reflect re-acquired franchises through 2022. Management uses these metrics as indicators of our system’s overall financial health, growth and future expansion prospects.
Previous wording
5 Dutch Rewards, a digitally-based rewards program available exclusively through the Dutch Rewards mobile app, was launched February 2021. Management uses this metric as an indicator of customer loyalty adoption of our Dutch Rewards mobile app and future promotional plans.
Current wording
5 Dutch Rewards is our digitally based rewards program available exclusively through the Dutch Rewards app. Management uses this metric as an indicator of customer loyalty adoption of our Dutch Rewards app and future promotional plans.
Previous wording
$17.4 million from increase in same shop sales in the comparable shop base.1
Current wording
$7.7 million from increase in same shop sales in the comparable shop base.
Previous wording
1 The comparable shop bases were 370 and 246 for the three months ended March 31, 2024 and 2023, respectively. The comparable shop base includes mature shops, which we define as open longer than 15 months.
Current wording
1 The comparable same shop bases were 396 and 276 for the three months ended June 30, 2024 and 2023, respectively, and 370 and 246 for the six months ended June 30, 2024 and 2023, respectively. The comparable same shop bases include mature shops, which we define as open longer than 15 months.
Previous wording
The beverage, food and packaging costs impacts for the year-over-year comparison, in dollars and basis points, were driven by the following:
Current wording
The beverage, food and packaging costs impacts for the year-over-year comparison, in dollars and basis points (as a percentage of current year company-operated shop revenues), were driven by the following:
Previous wording
The labor costs impacts for the year-over-year comparison, presented in dollars and basis points, were driven by the following:
Current wording
The labor costs impacts for the year-over-year comparison, presented in dollars and basis points (as a percentage of current year company-operated shop revenues), were driven by the following:
Previous wording
The occupancy and other costs impacts for the year-over-year comparison, presented in dollars and basis points, were driven by the following:
Current wording
The occupancy and other costs impacts for the year-over-year comparison, presented in dollars and basis points (as a percentage of current year company-operated shop revenues), were driven by the following:
Previous wording
The increase in pre-opening costs was primarily driven by opening a lower proportion of shops in existing markets, in the three months ended March 31, 2024 as compared to the same period in 2023.
Current wording
The increase in pre-opening costs was primarily driven by opening a lower proportion of shops in existing markets, including increased travel for setup and training teams and lease expense related to unopened shops, in the three and six months ended June 30, 2024 as compared to the same period in 2023.
Previous wording
The increase in depreciation and amortization was primarily driven by the opening of new company-operated shops during both 2024 and 2023.
Current wording
The increases in depreciation and amortization were primarily driven by the opening of new company-operated shops during both 2024 and 2023.
Previous wording
The Company-operated shop gross profit for the year-over-year comparison, presented in basis points, was driven by the following:
Current wording
The company-operated shop gross profit for the year-over-year comparison, presented in basis points (as a percentage of current year company-operated shop revenues), was driven by the following:
Previous wording
+$1.5 million from same shop sales.
Current wording
+$0.5 million from same shop sales.
Previous wording
$2.0 million primarily from products sold to franchisees, net of costs and adjustments.
Current wording
$0.5 million primarily from products sold to franchisees, net of costs and adjustments.
Previous wording
The selling, general, and administrative impacts for the year-over-year comparison, presented in dollars and basis points, were driven by the following:
Current wording
The selling, general, and administrative impacts for the year-over-year comparison, presented in dollars and basis points (as a percentage of current year total revenues), were driven by the following:
Previous wording
+$4.0 million from investments in human capital, processes, and systems to support our revenue growth.
Current wording
+$8.3 million from investments in human capital, processes, and systems to support our revenue growth.
Previous wording
+$2.6 million or 100 bps from organization realignment and restructuring costs.
Current wording
+$6.7 million or 210 bps from organization realignment and restructuring costs.
Previous wording
+$1.0 million or 30 bps from expenses related to equity offerings.
Current wording
+$0.5 million or 20 bps from expenses related to equity offerings.
Previous wording
$7.3 million or 270 bps from lower equity-based compensation charges.
Current wording
$7.1 million or 220 bps from lower equity-based compensation charges.
Previous wording
The summation of the dollar impacts of the latter three items above would have decreased selling, general and administrative expenses by 140 bps to be 21.9% of revenue. However, leverage from revenue growth reduces that percentage by 510 bps to be 16.8% of revenue.
Current wording
The summation of the dollar impacts of the latter four items above would have decreased selling, general and administrative expenses by 50 bps to be 20.2% of revenue. However, leverage from revenue growth reduces that percentage by 230 bps to be 17.9% of revenue.
Previous wording
The increase in tax expense was primarily driven by changes in the state earnings mix and its impacts on deferred taxes.
Current wording
The increase in tax expense was primarily driven by changes in state earnings mix, and its impact on deferred taxes.
Previous wording
We had cash and cash equivalents of $262.7 million and $133.5 million as of March 31, 2024 and December 31, 2023, respectively.
Current wording
We had cash and cash equivalents of $260.9 million and $133.5 million as of June 30, 2024 and December 31, 2023, respectively.
Previous wording
For the three months ended March 31, 2024, our principal sources of liquidity were cash flows from our delayed draw term loan facility and operations. Our principal uses of liquidity for the three months ended March 31, 2024 were to fund our new shop builds and other working capital needs.
Current wording
For the six months ended June 30, 2024, our principal sources of liquidity were cash flows from our delayed draw term loan facility and operations. Our principal uses of liquidity for the six months ended June 30, 2024 were to fund our new shop builds and other working capital needs.
Previous wording
•Operating lease liabilities — increased approximately $67 million from newly commenced leases.
Current wording
•Operating lease liabilities — increased approximately $158 million from newly commenced leases.
Previous wording
•Debt obligations — increased approximately $148 million on a net basis primarily due to the proceeds from the delayed draw term loan under our 2022 Credit Facility.
Current wording
•Debt obligations — increased approximately $145 million on a net basis primarily due to the proceeds from the delayed draw term loan under our 2022 Credit Facility.
Previous wording
Net income (loss) before interest expense (net of interest income), income tax expense, and depreciation and amortization expense.
Current wording
Net income before interest expense (net of interest income), income tax expense, and depreciation and amortization expense.
Previous wording
Defined as EBITDA (as defined above), excluding equity-based compensation, expenses associated with equity offerings, executives transition, (gain) loss on the remeasurement of the liability related to the TRAs, and organization realignment and restructuring costs.
Current wording
Defined as EBITDA (as defined above), excluding equity-based compensation, expenses associated with equity offerings, executive transitions, (gain) loss on the remeasurement of the liability related to the TRAs, legal proceedings, sale of aircraft, and organization realignment and restructuring costs.
Previous wording
Selling, general, and administrative expenses, excluding depreciation and amortization, equity-based compensation expense, expenses associated with equity offerings, executives transition, and organization realignment and restructuring costs.
Current wording
Selling, general, and administrative expenses, excluding depreciation and amortization, equity-based compensation expense, expenses associated with equity offerings, executive transitions, legal proceedings, and organization realignment and restructuring costs.
Previous wording
Non-cash expenses related to the grant and vesting of stock awards, including restricted stock awards and restricted stock units, in Dutch Bros Inc. to certain eligible employees.
Current wording
Non-cash expenses related to the grant and vesting of stock awards, including RSAs and RSUs, in Dutch Bros Inc. to certain eligible employees.
Previous wording
Employee severance and related benefit costs, as well as sign-on bonus(es) for several executive-level transitions occurring in 2022 and 2023, and amortized through early 2024.
Current wording
Employee severance and related benefit costs, as well as sign-on bonus(es) for several executive-level transitions occurring in 2022 and 2023, and amortized through the first quarter of 2024.
Previous wording
(Gain) loss impacts on condensed consolidated statements of operations related to adjustments of our TRAs liabilities.
Current wording
(Gain) loss impacts related to adjustments of our TRAs liabilities.
Previous wording
Fees and costs, including consulting fees and costs, related to a comprehensive initiative to develop and implement a long-term strategy involving changes to our organizational structure to support our growth, and the resulting realignment activities that have occurred in 2023 and 2024, and are expected to continue for at least the next year. Given this strategic initiative's magnitude and scope, the Company does not expect such costs will recur in the foreseeable future. The Company does not consider such costs reflective of the ongoing costs necessary to operate its business.
Current wording
Fees and costs, including consulting, employee-related and other costs, in connection with our comprehensive initiative to develop and implement a long-term strategy involving changes to our organizational structure to support our growth, and the resulting realignment activities that have occurred in 2023 and 2024, and are expected to continue for at least the next year. Given this strategic initiative's magnitude and scope, the Company does not expect such costs will recur in the foreseeable future. The Company does not consider such costs reflective of the ongoing costs necessary to operate its business.
Rearranged current paragraphs (12)
Current report — wording carried from elsewhere
The company-operated shop revenue increase was primarily driven by the following:
Current report — wording carried from elsewhere
$24.7 million from an increase in same shop sales in the comparable shop base.
Current report — wording carried from elsewhere
The franchising and other gross profit impacts for the year-over-year comparison, presented in dollars, were driven by the following:
Current report — wording carried from elsewhere
$2.2 million from shop weeks, driven by shop openings during the period.
Current report — wording carried from elsewhere
+$1.9 million from same shop sales.
Current report — wording carried from elsewhere
$2.4 million primarily from products sold to franchisees, net of costs and adjustments.
Current report — wording carried from elsewhere
+$12.3 million from investments in human capital, processes, and systems to support our revenue growth.
Current report — wording carried from elsewhere
+$1.5 million or 20 bps from expenses related to equity offerings.
Current report — wording carried from elsewhere
-$14.4 million or 240 bps from lower equity-based compensation charges.
Current report — wording carried from elsewhere
The summation of the impact of the latter four items above would have decreased selling, general and administrative expenses by 90 bps to be 20.9% of revenue. However, leverage from revenue growth reduced that percentage by 350 bps to be 17.4% of revenue.
Current report — wording carried from elsewhere
The decrease in interest expense, net was primarily driven by interest income on cash invested in money market funds, partially offset by additional finance leases for new shop builds.
Current report — wording carried from elsewhere
The increase in tax expense was primarily driven by increased current year pre-tax income.