Dutch Bros Inc. Q3 FY2025 earnings call

• Dutch Bros continues to exceed expectations with revenue growth, system and company-operated same-shop sales growth, and transaction growth. - Differentiated culture, shop growth model, and 4-wall economics are key strengths. - Transaction-driving initiatives show strong results across dayparts. - Food program rollout is expanding, with early positive results and plans for broader 2026 rollout. - Digital presence is strong with Order Ahead and Dutch Rewards showing growth. - Innovation platform drives beverage and brand activations, with successful LTO launches. - Development pipeline is at record levels, supporting shop growth towards 2,029 shops by 2029.

In the third quarter, revenue was $424 million, an increase of 25% from the prior year. System same-shop sales growth was 5.7%, driven by 4.7% transaction growth. Company-operated revenue was $393 million, up 27% year-over-year, with company-operated same-shop sales growth of 7.4% (6.8% from transaction growth). Adjusted EBITDA was $78 million, a 22% increase from the prior year. Company-operated shop contribution was $109 million, up 20% year-over-year, with a contribution margin of 27.8%. Beverage, food, and packaging costs were 25.9% of company-operated shop revenue, labor costs were 27.5%, occupancy and other costs were 17%, and preopening expenses were 1.8%.

• Raised full year system same-shop sales growth guidance to approximately 5%. - Total revenues projected between $1.61 billion and $1.615 billion. - Adjusted EBITDA expected in the range of $285 million to $290 million. - System shop openings in 2025 targeted at 160, with any below 160 incremental to 2026's ~175 shops. - CapEx remains in the range of $240 million to $260 million.

• Coffee cost inflation, which is expected to accelerate into Q4 and remain elevated into 2026. - Elevated costs associated with the broader hot food rollout beginning in Q4 2025. - Higher employer payroll taxes in California, adding ~50 basis points of margin pressure in Q4. - Preopening expenses driven by shops in newer markets and training team support, expected to be consistent per shop in Q4.

Q: Kind of understand levers with highest remaining runway, 2026 product and platform innovations?

A: Christine Barone says they're in early innings in many levers, including innovation (strong fall LTO launch), paid advertising (learning channels), Dutch Rewards (further segmenting), mobile order (steady growth), and food (early positive results).

Q: Consumer spending behavior among younger cohorts?

A: Christine Barone says younger cohorts show strong performance in Dutch Rewards, with customers choosing brands they love.

Q: Customer feedback on food offering, food costs in Q4?

A: Christine Barone says they track customer and Broista feedback weekly, seeing improvements. Josh Guenser notes food COGS is relatively higher, with pressure in Q4 and 2026.

Q: Ticket dynamic, price mix?

A: Joshua Guenser says ~2% price offset by ~1% mix, driven by lower items per transaction. Christine Barone adds food lift includes transaction and attach growth.

Q: Sales in Colorado pilot launch?

A: Christine Barone says no impact on Dutch Bros' shops, continued strong quarter and October.

Q: Coffee market strength, throughput metrics?

A: Christine Barone says coffee market is strong, Dutch Bros well-positioned, and they track throughput metrics but haven't shared specific numbers.

Q: EBITDA guidance range not increasing with sales guidance?

A: Joshua Guenser says preopening costs, accelerated coffee costs, and higher California taxes are cost offsets.

Q: Food lift arrival, how to drive food over time?

A: Christine Barone says food lift is measured pre-post vs control, with 8 SKUs initial rollout and huge potential for growth.

Q: Customer demographic in new markets, market learning?

A: Christine Barone says similar demographics in new markets, with brand awareness and new shop productivity strong.

Q: Real estate dynamics in markets with specialty coffee?

A: Christine Barone says strong brand, attractive cap rates, and 30+ sites per month pipeline indicate good real estate availability.

Q: Paid advertising scale, further build?

A: Christine Barone says they continue to ramp paid advertising to keep pace with sales, paired with Dutch Rewards.

Q: Mobile order mix acceleration, benefits?

A: Christine Barone says 13% mix is customer-driven, expected to increase with new shops, and interplays with food ordering.

Q: Food rollout operational changes, mobile order interplay?

A: Christine Barone says food rollout adds equipment and training, with oven cycle time below drink make time. Mobile order and food interrelate with easy discovery of new offerings.

Q: 50 bps labor headwind duration, CPG rollout?

A: Joshua Guenser says labor headwind is full year, Q4 impact. Christine Barone says CPG rollout is in progress with retailer sales and regional rollout.

Q: Sustaining culture with scale?

A: Christine Barone says using operators with long tenure, measurement mechanisms, and listening systems to ensure cultural consistency.