Dutch Bros Inc.

Index for Notes to Condensed Consolidated Financial Statements

Notes to Condensed Consolidated Financial Statements (Unaudited)

NOTE 1 — Organization and Background

Business

Dutch Bros Inc., a Delaware corporation, together with its subsidiaries (the Company, we, us, or our, collectively) operates and franchises drive-thru shops as well as sells and distributes coffee, coffee-related products, and accessories. As of September 30, 2026, there were 1,273 shops in operation in 27 U.S. states, of which 960 were company-operated and 313 were franchised.

Organization

Dutch Bros Inc. is the sole managing member of Dutch Bros OpCo and operates and controls all of the business and affairs of Dutch Bros OpCo. As a result, Dutch Bros Inc. consolidates the financial results of Dutch Bros OpCo and reports a non-controlling interest representing the economic interest in Dutch Bros OpCo held by the other members of Dutch Bros OpCo. The Company’s fiscal year end is December 31. As of September 30, 2026, Dutch Bros Inc. held 100.0% of the voting interest and 77.6% of the economic interest of Dutch Bros OpCo. The Continuing Members heldno voting interest and the remaining 22.4% of the economic interest of Dutch Bros OpCo.

NOTE 2 — Basis of Presentation and Summary of Significant Accounting Policies

Financial Statements Presentation

Our condensed consolidated financial statements as of September 30, 2026 and for the three and nine months ended September 30, 2026 and 2025 have been prepared in accordance with GAAP and pursuant to the rules and regulations of the SEC, consistent in all material respects with those applied in the 2025 Form 10-K and as updated by this Form 10-Q.

We have made estimates and judgments affecting the amounts reported in our condensed consolidated financial statements and the accompanying notes. Although management bases its estimates on historical experience and assumptions that are believed to be reasonable under the circumstances, actual results could differ from those estimates. This report should be read in conjunction with the consolidated financial statements in the 2025 Form 10-K that includes additional information on accounting estimates, policies, and the methods and assumptions used in our estimates.

In the opinion of management, the accompanying condensed consolidated financial statements reflect all adjustments, consisting of normal recurring adjustments, necessary to present fairly our consolidated financial statements for the periods presented. Operating results for the three and nine months ended September 30, 2026 are not necessarily indicative of the results that may be expected for the fiscal year ending December 31, 2026.

Significant Accounting Policies Updates

Except for the items noted below, there have been no material updates to our significant accounting policies during the nine months ended September 30, 2026 from those previously reported in the 2025 Form 10-K.

Business Combinations

We allocate the purchase price paid for acquired assets and liabilities acquired in connection with an acquisition based on the estimated fair value at the time of acquisition. This allocation involves a number of assumptions, estimates, and judgments in determining the fair value. In making these determinations, we may use the assistance of an independent third party valuation specialist.

Goodwill, if any, is measured as the excess of the purchase price paid over the net of the acquisition date fair values of assets acquired and liabilities assumed. Additional information may become known during the remainder of the measurement period, not to exceed 12 months from the acquisition date, which may result in changes to the amounts and allocations recorded.

Deferred Revenue

Deferred revenue primarily consists of the unredeemed gift card liability and unredeemed points/rewards earned by customers in connection with a qualifying purchase under our Dutch Rewards loyalty program. Deferred revenue also includes bean and beverage sales to distributors where the performance obligation has not yet been satisfied as control has not transferred to the customer. Awards issued to customers independent of a purchase requirement, such as complimentary birthday drinks and other promotional awards, do not represent a contract liability, as there is no associated contract with the customer, and are recognized within cost of sales when redeemed by the customer.

Loyalty Program

Dutch Rewards, our digital loyalty program accessible via mobile app, provides customers the opportunity to collect points based on purchases. Points can be redeemed for rewards which include free drinks. Additionally, customers can receive complimentary birthday drinks and other promotional awards within Dutch Rewards.

Points earned and not redeemed for rewards within 180 days automatically expire, and rewards that are not used within 180 days of issuance automatically expire. Separately, complimentary birthday drinks and other promotional awards generally automatically expire after 30 days, depending on the specific award.

Based on historical expiration rates, a portion of points and rewards are not expected to be redeemed. Accordingly, we defer revenue based on the estimated value of beverages for which the points and rewards are expected to be redeemed.

Recently Issued Accounting Standards

In September 2025, the FASB issued ASU 2025-06, Intangibles - Goodwill and Other - Internal-Use Software (Subtopic 350-40): Targeted Improvements to the Accounting for Internal-Use Software. The intent of this ASU is to address businesses’ shift from using prescriptive and sequential software development methods to using incremental and iterative development methods. The amendments in this ASU remove all references to prescriptive and sequential software development stages, and also provides criteria for when an entity is required to start capitalizing software costs. ASU 2025-06 is effective for all entities' annual reporting periods beginning after December 15, 2027, and interim periods within those annual reporting periods using a prospective transition, modified transition or retrospective transition approach. Early adoption is permitted as of the beginning of an annual reporting period. We are currently assessing potential impacts of this standard on our business processes and future disclosures.

In November 2024, the FASB issued ASU No. 2024-03, Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures (Subtopic 220-40). The intent of this ASU is to improve public entity financial footnote disclosures around types of expenses in commonly presented expense categories (i.e., cost of sales; selling, general, and administrative expense; and research and development expense). The amendments in this ASU do not change or remove current expense disclosure requirements, but rather 1) impact where this information appears in the notes to the consolidated financial statements and 2) add additional disclosure requirements for certain expense line items appearing on the face of our consolidated statements of operations. ASU 2024-03, as amended, is effective for annual reporting periods beginning after December 15, 2026 and interim reporting periods beginning after December 15, 2027. Early adoption is permitted. We are currently assessing potential impacts of this standard on our business processes and future disclosures.

NOTE 3 — Revenue Recognition

Deferred Revenue

Components of our deferred revenue liability are as follows:

1 Initial unearned franchise fees are recorded as a contract liability, and revenue is recognized ratably over the term of the franchise agreement, which is generally ten years.

Deferred revenue activity was as follows:

1 Revenue deferred includes gift card activations, loyalty app cash loads and loyalty points/rewards earned.

2 Revenue recognized includes redemptions of gift cards, loyalty app cash loads and rewards, as well as breakage.

3 Beginning in 2026, complimentary birthday drinks and other promotional awards, which are not issued in connection with a purchase, have been excluded from the population of deferred revenue activity. For the nine months ended September 30, 2025, complimentary birthday drinks and other promotional awards activity of revenue deferred and revenue recognized was approximately $79.1 million and $77.7 million, respectively. This change did not have a material effect on the ending deferred revenue balance.

Revenue recognized during the three and nine months ended September 30, 2026 and 2025, respectively, that was included in the deferred revenue liability balances at the beginning of the period, are shown below.

1 Amounts exclude cash loads and customer visits related to our loyalty rewards program.

NOTE 4 — Acquisitions

Asset Acquisition

On January 23, 2026, we purchased certain assets of Clutch Coffee, primarily consisting of leasehold interests for $19.8 million in cash. Clutch Coffee was a regional drive-thru chain with 22 locations operating or under construction in North Carolina and South Carolina. This acquisition was accounted for as an asset acquisition in accordance with ASC 805, Business Combinations, with the purchase price and transaction costs allocated to the assets acquired based on their relative fair value as of the acquisition date.

Franchise Buyback

On July 27, 2026, we reacquired the franchise rights and assets of 32 locations in Arizona from a franchisee for approximately $63.5 million due to the franchise owner’s decision to retire. The purchase was funded with cash on hand. The acquisition was accounted for as a business combination and the results of operations and goodwill are included in the Company-operated shops segment as of the acquisition date.

The following table summarizes the allocations of the purchase price to the estimated fair values of assets acquired and liabilities assumed:

1 Primarily relates to customers’ gift card liabilities.

Reacquired franchise rights had weighted-average useful lives of 5.4 years at the time of purchase.

The excess of the purchase price over the aggregate fair value of net assets acquired was allocated to goodwill and is attributable to the benefits expected as a result of the acquisition. This transaction was treated as a taxable asset acquisition for income tax purposes. As such, the amount of goodwill recognized is expected to be fully deductible for tax purposes.

The purchase price allocation as of the date of the acquisition was based on a preliminary valuation performed by third-party valuation specialists and is subject to revision within the measurement period (up to one year from the acquisition dates) as more detailed analyses are completed and additional information about the fair value of assets acquired and liabilities assumed becomes available. The primary areas that remain preliminary relate to the fair values of building and leasehold improvements purchased and franchise rights reacquired.

For the reacquired franchise shops, net incremental revenue of approximately $13.5 million and net income of approximately $1.6 million are included in our consolidated statements of operations for the period from the acquisition date through September 30, 2026.

The following table reflects our unaudited pro forma results as if the acquisition had taken place as of January 1, 2025:

The unaudited pro forma information has been prepared for comparative purposes only, in accordance with the acquisition method of accounting, and is not necessarily indicative of the results of operations that would have occurred if the acquisition had been completed on the date indicated, nor is it indicative of future operating results. The pro forma information includes adjustments to eliminate historical franchise-related revenues and expenses associated with the acquired shops.

Other Acquisition Activity

During the three months ended September 30, 2026, we entered into an agreement to acquire certain Salad and Go TM sites pursuant to a Chapter 11 bankruptcy proceeding, and funded a $10.0 million escrow deposit. The deposit was refunded in full in the fourth quarter of 2026.

NOTE 5 — Supplemental Financial Information

Inventories

Inventories, net consisted of the following:

Other current liabilities

Other current liabilities consisted of the following:

NOTE 6 — Property and Equipment

Property and equipment, net consisted of the following:

1 Construction-in-progress primarily consisted of construction and equipment costs for new and existing shops.

Depreciation expense included in our condensed consolidated statements of operations was as follows:

NOTE 7 — Other Long-Term Assets

The details of other long-term assets were as follows:

1 Weighted-average amortization periods (in years) were approximately 5.1 and 2.9 as of September 30, 2026 and December 31, 2025, respectively.

2 Goodwill increased approximately $15.1 million as a result of our franchise buyback. Refer to NOTE 4 — Acquisitions for additional information.

Amortization expense of reacquired franchise rights included in our condensed consolidated statements of operations was as follows:

The estimated future amortization expense of the reacquired franchise rights as of September 30, 2026 is as follows:

NOTE 8 — Leases

A summary of finance and operating lease right-of-use assets and lease liabilities as of September 30, 2026 and December 31, 2025 is as follows:

The components of lease costs, excluding short-term lease costs and sublease income (both immaterial for the periods presented), were as follows:

Supplemental cash flow information related to leases is as follows for the periods presented:

NOTE 9 — Debt

Credit Facility

On May 29, 2025 (the Effective Date), we amended and restated our existing $650 million senior secured credit facility with JPMorgan Chase Bank, N.A. The 2025 Credit Facility consists of a $500 million revolving credit facility and a term loan facility of up to $150 million. The 2025 Credit Facility also includes sublimits for letters of credit and swingline loans of up to $100 million and $20 million, respectively. The 2025 Credit Facility expires on May 29, 2030. Interest on borrowings under the 2025 Credit Facility is based on (i) the Alternate Base Rate plus an applicable margin, or (ii) the Term SOFR Rate plus an applicable margin (each as defined in the 2025 Credit Facility).

We are required to pay a commitment fee on a quarterly basis, at a per annum rate of between 0.20% and 0.45%, depending on the Net Lease-Adjusted Total Leverage Ratio (as defined in the 2025 Credit Facility), based on the average daily unused portion of the revolving credit facility. These fees are recorded as interest expense on our condensed consolidated statements of operations.

The 2025 Credit Facility contains financial covenants that require us to not exceed a maximum Net Lease-Adjusted Total Leverage Ratio and maintain a minimum Coverage Ratio (as defined in the 2025 Credit Facility). The 2025 Credit Facility also contains certain negative covenants that, among other things, restrict our ability to incur additional debt, grant liens on assets, merge with or acquire other companies, make other investments, dispose of assets, and make restricted payments. Obligations under the 2025 Credit Facility are guaranteed by Dutch Bros OpCo and its subsidiaries, and secured by a first priority perfected security interest in substantially all of the assets of the guarantors.

As of September 30, 2026, $50.0 million was outstanding on our revolving credit facility, and $430.2 million was available for borrowing, net of $19.8 million in letters of credit, and $145.3 million of principal was outstanding on the term loan facility. The revolving loan and term loan both bear interest at approximately 5.15% as of September 30, 2026, excluding any impacts from our interest rate swap. We were in compliance with our financial covenants as of that date.

Long-Term Debt

Our long-term debt consisted of the following for the periods presented:

1 Represents failed sale-leaseback arrangements, and also in 2025, a consideration payable associated with acquired leases.

Future annual maturities of long-term debt as of September 30, 2026 are as follows:

NOTE 10 — Derivative Financial Instrument

We have a receive-variable (Receive Leg), pay-fixed (Pay Leg) interest rate swap with JPMorgan Chase Bank, N.A. As of September 30, 2026, the interest rate swap had a notional amount of approximately $52.5 million and hedges interest rate risk on the term loan under the 2025 Credit Facility. The interest rate swap matures on February 28, 2027, and has a fixed rate of 2.67% per annum for the Pay Leg. The variable rate on the Receive Leg of the interest rate swap is the one-month adjusted term SOFR plus an applicable margin. As of September 30, 2026, the one-month adjusted term SOFR was 3.90%.

Our interest rate swap has been designated as a cash flow hedge, and as such, we record the change in fair value for the effective portion of the interest rate swap in AOCI rather than in current period earnings until the underlying hedged transaction affects earnings. As of September 30, 2026, we expect to reclassify a gain of approximately $0.3 million from AOCI to earnings within the next twelve months.

Designated as a Level 2 instrument within the fair value hierarchy, the fair value and effect of the derivative instrument included in our condensed consolidated financial statements was as follows:

NOTE 11 — Income Taxes

The effective tax rate for the quarter ended September 30, 2026, was 19.1%, which reflects the US federal statutory rate of 21% on pre-tax income, offset with the tax benefits of federal tax credits and income attributable to non-controlling interests. The decrease in the effective tax rate from 21.9% in the same period in 2025 is primarily due to a valuation allowance increase booked in Q3 2025.

The effective tax rate for the nine months ended September 30, 2026, was 18.0%, which reflects the US federal statutory rate of 21% on pre-tax income, increased by the impact of state income taxes, offset with the tax benefits of federal tax credits, income attributable to non-controlling interests, and stock compensation windfall benefits realized during the quarter. The increase in the effective tax rate from 15.7% in the same period in 2025 is due to a decrease in the benefit of stock compensation in 2026 compared to 2025, as well as an increase in our ownership interest of Dutch Bros OpCo.

Tax Receivable Agreements

In connection with our IPO, we executedtwo TRAs which require payment to certain Dutch Bros OpCo owners of 85% of the income tax benefits, if any, that we actually realize or in some cases are deemed to realize (calculated using certain assumptions) as a result of certain tax attributes and benefits covered by the TRAs.

The TRAs-related liabilities are classified on our condensed consolidated balance sheets as current or non-current based on the expected date of payment under the captions “Current portion of tax receivable agreements liability” and “Tax receivable agreements liability, net of current portion,” respectively.

As of September 30, 2026, our total TRAs-related liabilities were$973.8 million. The changes related to these liabilities were as follows:

1 For 2025, the impact primarily related to state tax rates and adjustments from previous estimates upon finalization of the tax attributes subject to the TRAs.

For the nine months ended September 30, 2026 in connection with our TRAs, deferred tax assets associated with our investment in Dutch Bros OpCo increased $179.4 million due to the exchange of approximately 10.6 million units of our Class A common units for Class A common stock. In addition, during the nine months ended September 30, 2026 the TRA liability increased $166.7 million as a result of these exchanges.

NOTE 12 — Equity-Based Compensation

Restricted Stock Units

RSU activity was as follows:

PSU activity was as follows:

Total release date fair value of vested equity awards for the nine months ended September 30, 2026 and 2025 are presented below:

Equity-Based Compensation

Equity-based compensation expense is recognized on a straight-line basis and is included in our condensed consolidated statements of operations as follows:

As of September 30, 2026, total unrecognized stock-based compensation related to unvested RSUs and PSUs was $52.7 million, which will be recognized as follows:

NOTE 13 — Non-Controlling Interests

Dutch Bros Inc. is the sole managing member of Dutch Bros OpCo, and, as a result, consolidates the financial results of Dutch Bros OpCo. We report a non-controlling interest representing the economic interest in the Dutch Bros OpCo held by the other members of Dutch Bros OpCo. The OpCo LLC Agreement provides that holders of Dutch Bros OpCo Class A common units may, from time to time, require Dutch Bros OpCo to redeem all or a portion of their Dutch Bros OpCo Class A common units for newly issued shares of Class A common stock on aone-for-one basis. In connection with any redemption or exchange, Dutch Bros Inc. will receive a corresponding number of Dutch Bros OpCo Class A common units, increasing Dutch Bros Inc.’s total ownership in Dutch Bros OpCo. Changes in Dutch Bros Inc.’s ownership in Dutch Bros OpCo, while Dutch Bros Inc. retains its controlling interest in Dutch Bros OpCo, will be accounted for as equity transactions. As such, future redemptions or direct exchanges of Dutch Bros OpCo Class A common units by the other members of Dutch Bros OpCo will result in a change in ownership and reduce the amount recorded as non-controlling interest and increase additional paid-in-capital.

The following table summarizes the ownership interest in Dutch Bros OpCo:

1 Non-controlling interest ownership includes approximately 3.1 million Class A common units that were decoupled from Class B common stock; these units can be converted on aone-for-one basis to Class A common stock.

The following table summarizes the effect of changes in ownership of Dutch Bros OpCo on our equity for the periods presented:

The weighted-average ownership percentage for the applicable reporting period is used to attribute net income to Dutch Bros Inc. and the non-controlling interest holders. The non-controlling interest holders’ weighted-average ownership percentages were as follows for the periods presented:

Under the OpCo LLC Agreement, Dutch Bros OpCo is required to make certain distributions to its members with regard to tax obligations. Such distributions paid to members were as follows for the periods presented, and no amounts were payable as of the periods then ended.

NOTE 14 — Income Per Share

The following tables set forth the numerators and denominators used to compute basic and diluted net income per share of Class A common stock for the periods presented:

The following Class A common stock equivalents were excluded from diluted net income per share in the periods presented because they were anti-dilutive:

NOTE 15 — Commitments and Contingencies

Purchase Obligations

We enter into fixed-price and price-to-be-fixed green coffee purchase commitments. For both fixed-price and price-to-be-fixed purchase commitments, we expect to take delivery of green coffee and to utilize the coffee in a reasonable period of time in the ordinary course of business. Such contracts are used for the normal purchases of green coffee and not for speculative purposes. We do not enter into futures contracts or other derivative instruments related to our green coffee purchase commitments.

Guarantees

We periodically provide guarantees to franchise partners for lease payments. As of September 30, 2026 and December 31, 2025, we had guaranteed approximately $7.5 million and $7.8 million, respectively, in franchise partners’ lease payments and have not established a liability for these guarantees as any liability arising from the guarantees is not material to the condensed consolidated financial statements.

Legal Proceedings

The Company is a party to routine legal actions arising in the ordinary course of and incidental to its business. These claims, legal proceedings, and litigation principally arise from alleged casualty, employment, and other disputes.

In determining loss contingencies, the Company considers the likelihood of loss as well as the ability to reasonably estimate the amount of such loss or liability. An estimated loss is recognized when it is considered probable that a liability has been incurred and when the amount of loss can be reasonably estimated.

Because litigation is inherently unpredictable, assessing contingencies is highly subjective and requires judgments about future events. When evaluating litigation contingencies, we may be unable to provide a meaningful estimate due to a number of factors, including the procedural status of the matter in question, developments in legislation or regulations that affect the validity of certain claims and defenses, the availability of appellate remedies, insurance coverage related to the claim or claims in question, the presence of complex or novel legal theories, and/or the ongoing discovery and development of information important to the matter.

Any claim, proceeding, or litigation has an element of uncertainty, and an unfavorable outcome may have a material adverse effect on the Company’s financial condition, results of operations, or cash flows.

Liabilities Under Tax Receivable Agreements

Under the TRAs, Dutch Bros Inc. is contractually committed to pay the non-controlling interest holders 85% of the amount of any tax benefits that Dutch Bros Inc. actually realizes, or in some cases is deemed to realize, as a result of certain transactions. As of September 30, 2026, Dutch Bros Inc. recognized $973.8 million of liabilities related to its obligations under the TRAs. Refer to NOTE 11 — Income Taxes for additional information.

NOTE 16 — Related Party Transactions

Related party transactions were as follows for the periods presented:

1 See NOTE 11 — Income Taxes for further information.

The Dutch Bros Foundation is a not-for-profit organization founded by our company that provides grants to other not-for-profit organizations throughout the communities we serve. Our Vice Chair, Chief Financial Officer, Chief Legal Officer, Chief Development Officer, and SVP of Brand Marketing serve on the board of directors, our Vice Chair serves as the President, and our Chief Legal Officer serves as the Secretary-Treasurer.

NOTE 17 — Segment Reporting

Segment information is prepared on the same basis that our CEO, who is the CODM, manages the segments, evaluates financial results and makes key operating decisions. Our CEO evaluates financial performance based ontwo operating segments, which offer distinct products and services to different customers: Company-operated shops and Franchising and other. The Company-operated shops segment includes retail beverage shop sales to end consumers. The Franchising and other segment includes bean and product sales to franchise partners, initial franchise fees, royalties, and marketing fees related to the franchise partners, as well as sales of products through our website.

The CODM reviews segment performance and allocates resources based upon segment contribution, which is defined as segment gross profit before depreciation and amortization. Segment contribution is used to monitor and assess segment results compared to prior periods, forecasted results, and our annual operating plan.

All segment revenue is earned in the United States. All intercompany sales amongst the Dutch Bros entities are fully eliminated in consolidation. Further, there are no intersegment revenues. The CODM does not evaluate operating segments using discrete asset information.

Selling, general and administrative expenses primarily consist of unallocated corporate expenses. Unallocated corporate expenses include corporate administrative functions that support the segments but are not directly attributable to or managed by any segment and are not included in the reported financial results of the segments.

No changes have been made to our segments during the three and nine months ended September 30, 2026. In addition, no customer represented 10% or more of total revenue for the three and nine months ended September 30, 2026 and 2025.

Financial information for our reportable segments was as follows for the periods presented:

1 Segment cost of sales for this presentation excludes the impact of depreciation and amortization.