Dutch Bros Inc. Reports Fourth Quarter and Fiscal Year 2022 Financial Results

Annual Revenues Increased Almost 50% Year-over-Year to $739.0 million Driven by 133 New Systemwide Shop Openings in 2022

Welcomes New President, Christine Barone

Issues Additional Guidance for 2023

Dutch Bros Inc. (NYSE: BROS; “Dutch Bros” or the “Company”) one of the fastest-growing brands in the food service and restaurant industry in the United States by location count, today reported financial results for the fourth quarter and year ended December 31, 2022.

Joth Ricci, Chief Executive Officer of Dutch Bros Inc., stated, “In 2022, we delivered another strong year of growth with revenue increasing almost 50% to $739.0 million, driven by 133 new shop openings systemwide. For the third consecutive year, we have exceeded our new shop development targets, doubling our shop count since March 2019, despite unprecedented disruption to communities and the economy. These results are a testament to our team’s ongoing ability to execute our proven strategy. As we continue on our 30+ year growth journey, we’re entering 2023 in a position to build market share, supported by our strong people development and new shop pipelines.”

He added, “This year, we are targeting 150 new systemwide shops, which will enable us to achieve our five-year goal of 800 systemwide shops by year-end. Additionally, we expect to be within striking distance of $1 billion in revenue in 2023 and 1,000 systemwide shops by the first half of 2025, creating jobs and opportunities for our employees and the communities in which we serve.”

He added, “On February 6, we welcomed Christine Barone as our new President. Christine will be instrumental in our next phase of growth, helping ensure we are scaling the business in a meaningful, efficient and effective way as we navigate market uncertainty.”

Fourth Quarter 2022 Highlights:

• Opened 30 new shops, 26 of which were company-operated, across 11 states.
• Total revenues grew 44.1% to $201.8 million⁶ as compared to $140.1 million in the same period of 2021.
• System same shop sales² declined (0.6)%, inclusive of the impact of our fortressing strategy, which results in sales being transferred from existing shops to new ones, as compared to the same period in 2021 and grew 15.2% on a 3-year stacked basis³. Company-operated same shop sales declined (2.1)%, inclusive of the impact of our fortressing strategy, as compared to the same period of 2021 and grew 16.2% on a 3-year stacked basis³.
• Company-operated shop revenues increased 53.7% to $175.5 million⁶, as compared to $114.2 million in the same period of 2021.
• Company-operated shop gross profit was $38.8 million as compared to $16.6 million⁴ in the same period of 2021. In the fourth quarter of 2022, company-operated shop gross margins, which includes 220bps of pre-opening expenses and 210bps of Dutch Rewards loyalty app breakage related to 2021⁶, improved to 22.1%. Year-over-year, company-operated shop gross margins increased 760bps.
• Company-operated shop contribution⁵, a non-GAAP financial measure, grew 129.2% to $50.0 million as compared to $21.8 million⁴ in the same period of 2021. In the fourth quarter of 2022, company-operated shop contribution margins, which includes 220bps of pre-opening expenses and 210bps of Dutch Rewards loyalty app breakage related to 2021⁶, improved to 28.5%. Year-over-year, company-operated shop margins increased 940 bps.
• Selling, general, and administrative expenses were $50.6 million (25.1% of revenue) as compared to $41.4 million⁴ (29.5% of revenue) in the same period of 2021.
• Adjusted selling, general, and administrative expenses^5, a non-GAAP financial measure, were $38.1 million (18.9% of revenue) as compared to $28.1 million⁴ (20.1% of revenue) in the same period of 2021.
• Net loss was $(2.8) million⁶ as compared to $(8.2) million⁴ in the same period of 2021.
• Adjusted EBITDA⁵, a non-GAAP financial measure, grew 115.7% to $29.8 million⁶ as compared to $13.8 million⁴ in the same period of 2021.
• Adjusted net income⁵, a non-GAAP financial measure, was $4.8 million⁶ as compared to $5.1 million⁴ in the same period of 2021.
• Net loss per share of Class A and Class D common stock - diluted⁶ was $(0.01)⁶ as compared to net loss per share of $(0.03) in the same period of 2021.
• Adjusted net income per fully exchanged share of common stock⁵, a non-GAAP financial measure, was $0.03⁶ as compared to $0.03 in the same period of 2021.

Full Year 2022 Highlights:

• Opened 133 new shops, 120 of which were company-operated, across 11 states.
• Total revenues grew 48.4% to $739.0 million⁶ as compared to $497.9 million in 2021.
• System same shop sales² grew 1.0%, inclusive of the impact of our fortressing strategy, which results in sales being transferred from existing shops to new ones, as compared to 2021 and 11.4% on a 3-year stacked basis³. Company-operated same shop sales grew 0.6%, inclusive of the impact of our fortressing strategy, as compared to 2021 and 10.4% on a 3-year stacked basis³.
• Company-operated shop revenues increased 58.4% to $639.7 million⁶, as compared to $403.7 million in 2021.
• Company-operated shop gross profit was $121.3 million as compared to $86.7 million⁴ in 2021. In 2022, company-operated shop gross margins, which includes 280bps of pre-opening expenses and 50bps of Dutch Rewards loyalty app breakage related to 2021⁶, improved to 19.0%. Year-over-year, company-operated shop gross margins decreased 250 bps.
• Company-operated shop contribution⁵, a non-GAAP financial measure, grew 53.1% to $157.6 million as compared to $103.0 million⁴ in 2021. In 2022, company-operated shop contribution margins, which includes 280bps of pre-opening expenses and 50bps of Dutch Rewards loyalty app breakage related to 2021⁶, improved to 24.6%. Year-over-year, company-operated shop margins decreased 90 bps.
• Selling, general, and administrative expenses were $183.5 million (24.8% of revenue) as compared to $264.5 million⁴ (53.1% of revenue) in 2021.
• Adjusted selling, general, and administrative expenses⁵ were $136.4 million (18.5% of revenue) as compared to $96.5 million⁴ (19.4% of revenue) in 2021.
• Net loss was $(19.3) million⁶ as compared to $(117.9) million⁴ in 2021.
• Adjusted EBITDA⁵, a non-GAAP financial measure, increased 8.4% to $91.2 million⁶ as compared to $84.1 million⁴ in 2021.
• Adjusted net income⁵, a non-GAAP financial measure, was $25.2 million⁶ as compared to $51.4 million⁴ in 2021.
• Net loss per share of Class A and Class D common stock - diluted was $(0.09)⁶ as compared to $(0.28) in 2021.
• Adjusted net income per fully exchanged share of common stock⁵, a non-GAAP financial measure, was $0.16⁶ as compared to $0.32 in 2021. 

Outlook

Dutch Bros is providing the following full-year 2023 outlook:

• Total system shop openings in 2023 are expected to be at least 150, of which at least 130 shops will be company-operated.
• Total revenues are projected to be between $950 million and $1 billion.
• Same shop sales growth is estimated to be in the low single digits. At this point we have no plans to take additional menu pricing in 2023. We expect low-single digits growth from pricing to roll-over into 2023 from menu pricing taken in 2022.
• Adjusted EBITDA is estimated to be approximately $125 million. This includes approximately $8 million in labor investments related to wage increases in federal minimum wage markets and approximately $11 million in mandated wage increases in markets that do not adhere to the federal minimum wage standard. This Adjusted EBITDA estimate includes our present assumption around no menu price increases in 2023.
• Capital expenditures are estimated to be in the range of $225 million to $250 million, which includes approximately $15 million to $20 million for our new roasting facility projected to open in 2024.

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Conference Call and Webcast Today

Joth Ricci, Chief Executive Officer, and Charles Jemley, Chief Financial Officer, will host a conference call and webcast today at 5:00 p.m. Eastern Time (ET) to discuss financial results for the fourth quarter and year ended December 31, 2022.

Event: Fourth Quarter 2022 Conference Call and Webcast

Date: Wednesday, February 22, 2023

Time: 5:00 p.m. ET

Dial In: 1-201-493-6779

Webcast: https://investors.dutchbros.com under “Events & Presentations”.

The webcast will be archived shortly after the conference call has concluded. We will also publish earnings presentation slides related to these financial results on our website https://investors.dutchbros.com under “Events & Presentations”.

About Dutch Bros Inc.

Dutch Bros Inc. (NYSE: BROS) is a high growth operator and franchisor of drive-thru shops that focus on serving high QUALITY, hand-crafted beverages with unparalleled SPEED and superior SERVICE. Founded in 1992 by brothers Dane and Travis Boersma, Dutch Bros began with a double-head espresso machine and a pushcart in Grants Pass, Oregon. While espresso-based beverages are still at the core of what we do, Dutch Bros now offers a wide variety of unique, customizable cold and hot beverages that delight a broad array of customers. We believe Dutch Bros is more than just the products we serve—we are dedicated to making a massive difference in the lives of our employees, customers and communities. This combination of hand-crafted and high-quality beverages, our unique drive-thru experience and our community-driven, people-first culture has allowed us to successfully open new shops and continue to share the “Dutch Luv” at 671 locations across 14 states as of December 31, 2022.

To learn more about Dutch Bros, visit www.dutchbros.com, follow Dutch Bros Coffee on Instagram, Facebook, Twitter, and TikTok, and download the Dutch Bros app to earn points and score rewards!

Dutch Bros, our Windmill logo, Dutch Bros. Blue Rebel, and our other registered and common law trade names, trademarks and service marks are the property of Dutch Bros Inc. All other trademarks, trade names and service marks appearing in this Earnings Release are the property of their respective owners. Solely for convenience, the trademarks and trade names in this Earnings Release may be referred to without the ® and ™ symbols, but such references should not be construed as any indicator that their respective owners will not assert their rights thereto.

Forward-Looking Statements

In addition to historical information, this release contains a number of “forward-looking statements” as defined in the Private Securities Litigation Reform Act of 1995. Forward-looking statements include, without limitation, information concerning Dutch Bros’ possible or assumed future results of operations, including guidance for 2023, new shop openings, business strategies, and potential growth opportunities. These statements are based on Dutch Bros’ current expectations and beliefs, as well as a number of assumptions concerning future events. When used in this press release, the words “estimates,” “projected,” “expects,” “should,” “guidance,” and variations of these words or similar expressions (or the negative versions of such words or expressions) are intended to identify forward-looking statements. Such forward-looking statements are subject to known and unknown risks, uncertainties, assumptions and other important factors, many of which are outside Dutch Bros’ control that could cause actual results to differ materially from the results discussed in the forward-looking statements, including those related to general economic conditions, commodity inflation, increased labor costs, disruptions in our supply chain, ability to hire and retain employees, the ongoing COVID-19 pandemic, and other risks, including those described under the heading “Risk Factors” in our Quarterly Report on Form 10-Q for the quarter ended September 30, 2022 filed with the SEC on November 10, 2022 and in our future reports to be filed with the SEC, including our Annual Report on Form 10-K for the year ended December 31, 2022. Forward-looking statements contained in this press release are made as of this date, and Dutch Bros undertakes no duty to update such information except as required under applicable law.

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Consolidated Statements of Operations

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Segment Financials

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Company-Operated Shop Results

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Consolidated Balance Sheets

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Select Financial Metrics

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Non-GAAP Financial Measures

In addition to disclosing financial results in accordance with U.S. GAAP, this release contains references to the non-GAAP financial measures below. We believe these non-GAAP financial measures provide investors with useful supplemental information about our operating performance, enable comparison of financial trends and results between periods where certain items may vary independent of business performance, and allow for greater transparency with respect to key metrics used by management in operating our business and measuring our performance.

Our non-GAAP financial measures reflect adjustments based on one or more of the following items, as well as the related income tax effects where applicable. Income tax effects have been calculated based on the combined total non-GAAP adjustments using our total effective tax rate. These non-GAAP financial measures should not be considered a substitute for, or superior to, financial measures calculated in accordance with U.S. GAAP, and the financial results calculated in accordance with U.S. GAAP and reconciliations from these results should be carefully evaluated.

Company-operated shop contribution (in dollars and as a percentage of revenue)

Definition and/or calculation

Company-operated segment gross profit, before company-operated shop depreciation and amortization. Company-operated shop contribution in dollars (as defined), taken as a percentage of company-operated shop revenue.

Usefulness to management and investors

This non-GAAP measure is used by our management in making performance decisions without the impact of non-cash depreciation and amortization charges. This is a standard metric used across the industry by our investors.

EBITDA, Adjusted EBITDA (in dollars and as a percentage of revenue)

EBITDA — definition and/or calculation

Net income (loss) before interest expense (net of interest income), income taxes expense (benefit), and depreciation and amortization expense.

Adjusted EBITDA — definition and/or calculation

Defined as EBITDA (as defined above), excluding equity-based compensation, expenses and donations associated with equity offerings, COVID-19: “Thank You” pay and catastrophic leave expenses, COVID-19: prepaid costs not utilized, costs incurred for company-wide milestone events, executives transition costs, and (gain) loss on the remeasurement of the liability related to the TRAs.

Usefulness to management and investors

These non-GAAP measures are supplemental operating performance measures we believe facilitate comparisons to historical performance and competitors’ operating results. We believe the non-GAAP measures presented provide investors with a supplemental view of our operating performance that facilitates analysis and comparisons of our ongoing business operations because they exclude items that may not be indicative of our ongoing operating performance.

Adjusted selling, general, and administrative (in dollars and as a percentage of revenue)

Definition and/or calculation

Selling, general, and administrative expenses, excluding equity-based compensation expense, expenses and donations associated with equity offering, COVID-19: prepaid costs not utilized, costs incurred for company-wide milestone events, and executive transitions costs.

Usefulness to management and investors

This non-GAAP measure is used as a supplemental measure of operating performance that we believe is useful to evaluate our performance period over period and relative to our competitors. We believe the non-GAAP measures presented provide investors with a supplemental view of our operating performance that facilitates analysis and comparisons of our ongoing business operations because they exclude items that may not be indicative of our ongoing operating performance.

Adjusted net income

Definition and/or calculation

Net income (loss), excluding equity-based compensation expense, expenses and donations associated with equity offering, COVID-19: “thank you” pay and catastrophic leave expenses, COVID-19: prepaid costs not utilized, costs incurred for company-wide milestone events, executives transition costs, (gain) loss on the remeasurement of the liability related to the TRAs, and income tax effects of items excluded from net income (loss).

Usefulness to management and investors

This non-GAAP measure is used as a supplemental measure of operating performance that we believe is useful to evaluate our performance period over period and relative to our competitors. We believe this measure facilitates a better comparison with other companies that have different organizational and tax structures, as well as comparisons period over period.

Adjusted fully exchanged weighted-average shares of diluted common stock outstanding

Definition and/or calculation

Weighted-average shares of Class A and Class D common stock outstanding - basic with addition of dilutive impacts of RSAs and RSUs, as well as the assumed exchange of the weighted-average shares of Class B and Class C common stock.

Usefulness to management and investors

This non-GAAP measure is used a supplemental measure of operating performance that we believe is useful to evaluate our performance period over period and relative to our competitors. By adding in the assumed full exchange of all of our outstanding Class B and Class C common stock, we believe this measure facilitates a better comparison with other companies that have different organizational and tax structures, as well as comparisons period over period.

Adjusted net income per fully exchanged share of diluted common stock

Definition and/or calculation

Net income per share of Class A and Class D common stock – diluted, excluding per share impacts of equity-based compensation expense, expenses and donations associated with equity offering, COVID-19: “thank you” pay and catastrophic leave expenses, COVID-19: prepaid costs not utilized, costs incurred for company-wide milestone events, executives transition costs, income tax effects of items excluded from net income (loss), and removal of per share impacts of controlling and non-controlling interests.

Usefulness to management and investors

This non-GAAP measure is used as a supplemental measure of operating performance that we believe is useful to evaluate our performance period over period and relative to our competitors. By assuming the full exchange of all of our outstanding Class B and Class C common stock and related net income (loss) adjustments, we believe these measures facilitate a better comparison with other companies that have different organizational and tax structures, as well as comparisons period over period.

Non-GAAP adjustments

Below are the definitions of the non-GAAP adjustments that are used in the calculation of our non-GAAP measures, as described above.

Equity-based compensation

Non-cash expenses related to the grant and vesting of stock awards, restricted stock awards and restricted stock units in Dutch Bros PubCo¹ and/or Profit Interest Units in Dutch Bros OpCo² to certain eligible employees. These awards are accounted for in accordance with guidance prescribed for in accounting for share-based compensation.

Expenses associated with equity offerings

Costs incurred as a result of our stock offerings. These costs include legal fees, consulting fees, tax and accounting fees, and payroll taxes related to the grant and vesting of stock awards for certain employees.

Donations associated with equity offerings

In connection with our IPO, we made donations to the Dutch Bros Foundation. These donations are separate from other donations to the Dutch Bros Foundation that we may periodically make.

COVID-19: “thank you” pay and catastrophic leave

Costs related to two separate programs established to support employees during the COVID-19 pandemic. We implemented an hourly wage supplement program for shop employees who continued to work while their state or county was under a stay at home order or similar lockdown requirement. This program lasted in various markets until April 2021. We also established a catastrophic leave policy that provided paid leave to employees who were required to quarantine due to in-shop exposures and could not work their regular hours. All COVID-19-related protocols, including catastrophic leave, will remain in effect until the end of the COVID-19 pandemic as determined by the appropriate government agency.

COVID-19: Prepaid costs not utilized

Costs related to the write-off of previously prepaid expenses for the cancellation of our 2023 annual kick-off meeting as a result of COVID-19 concerns and the development of a virtual corporate engagement platform built in response to the health restrictions of the COVID-19 pandemic. The platform was developed as a substitute for in person engagement practices used pre-pandemic. The platform has been determined ineffective, particularly as we shift back to in-person events with the easing of restrictions related to the COVID-19 pandemic.

Milestone events

Costs incurred for company-wide events to celebrate 30 years of serving high QUALITY, hand-crafted beverages with unparalleled SPEED and superior SERVICE to our customers.

Executives transition costs

Employee severance and related benefit costs, as well as sign-on bonus(es) for several executive level transitions occurring in 2022 and 2023.

TRAs remeasurements

(Gain) loss impacts on consolidated statements of operations related to adjustments of our TRAs liabilities.

Dilutive effects of RSAs and RSUs

Addition of incremental shares of RSAs and RSUs calculated under the treasury stock method, when they are dilutive for the calculation of weighted-average shares on a non-GAAP and GAAP basis.

Assumed exchange of weighted-average Class B and Class C shares of common stock

Weighted-average shares of Class B and C common stock that are assumed to be exchanged for Class A common stock.

Removal of allocation for controlling and non-controlling interests

Removal of the net income (loss) allocation to controlling and non-controlling interests to align the numerator of the net income (loss) per share to the denominator, which assumes the full exchange of shares of Class B and Class C common stock.

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Supplemental Reconciliations of GAAP Actuals to Non-GAAP Actuals

Following are the reconciliations of the most comparable GAAP financial measure to non-GAAP financial measure. These non-GAAP financial measures should not be considered a substitute for, or superior to, financial measures calculated in accordance with U.S. GAAP, and the reconciliations from U.S. GAAP to Non-GAAP actuals should be carefully evaluated. Please refer to "Explanation of Non-GAAP Financial Measures" in this release for a detailed explanation of the adjustments made to the comparable U.S. GAAP measures, the ways management uses the non-GAAP measures, and the reasons why management believes the non-GAAP measures provide useful information for investors.

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