Le Lézard
Classified in: Business, Covid-19 virus
Subjects: EARNINGS, Conference Call, Webcast

Dutch Bros Inc. Announces Third Quarter 2022 Financial Results


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 third quarter ended September 30, 2022.

Joth Ricci, Chief Executive Officer and President of Dutch Bros Inc., stated, "We continue to execute our growth strategy, leveraging our strong team to open new shops and our proven operational playbook and loyalty program to engage and connect with new and existing customers. In the third quarter, we opened a record 38 shops, grew our revenue by more than 50%, and once again expanded our company-operated shop gross margins quarter-over-quarter. For perspective, we opened almost as many shops this quarter as we did during the entire year of 2019 and have opened at least 30 shops in 5 consecutive quarters. Dutch Bros' portability and brand acceptance remains impressive as we grow from west to east across the country. Our 2020 and 2021 classes of new shops are generating annualized volumes that are approximately 10% higher than our system average and are exhibiting predictable and consistent sales performance and upward margin progression."

He added, "Our new shops are fueling revenue growth, which increased 53.0% year-over-year to $198.6 million. Company-operated shop gross margins improved in the third quarter to 20.0%, 60bps higher than the second quarter and 720bps higher than the first quarter. During the quarter, we took pricing actions to partially combat inflationary pressures and benefited from operational improvements as well as the increased weighting of newer, higher-margin shops in our portfolio. We are now raising our annual revenue guidance based upon the performance of our new shops and our strong pipeline and remain confident in our expectation to generate at least $90.0 million in adjusted EBITDA1 this year."

He concluded, "We expect to cap off our first full year as a public company by reaching our 2022 development target of at least 130 new shops. Based upon the availability of capable field leaders currently in our people development system and the total number of committed sites in our pipeline, we are targeting at least 150 new shop openings for 2023. This would enable us to reach 800 shops by the end of 2023, a goal we made as a private company five years ago when we had just 328 shops."

Third Quarter 2022 Highlights:

Outlook

Dutch Bros is raising guidance for total revenues and reaffirming other elements of its full-year 2022 outlook.

_________________

1

We have not reconciled guidance for Adjusted EBITDA to the corresponding GAAP financial measure because we do not provide guidance for the various reconciling items. We are unable to provide guidance for these reconciling items because we cannot determine their probable significance, as certain items are outside of our control and cannot be reasonably predicted due to the fact that these items could vary significantly from period to period. Accordingly, reconciliations to the corresponding GAAP financial measure is not available without unreasonable effort.

2

Same shop sales is defined in the section "Select Financial Metrics".

3

3-Year Stack is calculated as current quarter same shop sales growth plus the sum of the same shop sales growth from the same period of the prior two years. Same shop sales data is based on different shop bases for each time period.

4

The Company's historical results have been revised to reflect an immaterial error correction related to employee sick leave accrual. For additional information, see sections "Condensed Consolidated Statements of Operations", "Company-operated Shop Results", and "Supplemental Reconciliation of GAAP Actuals to Non-GAAP Actuals"

5

Reconciliation of GAAP to non-GAAP results is provided in the section "Non-GAAP Financial Measures".

Conference Call and Webcast Today

Joth Ricci, Chief Executive Officer and President, 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 third quarter ended September 30, 2022.

Event: Third Quarter 2022 Conference Call and Webcast

Date: Wednesday, November 9, 2022

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 641 locations across 14 states as of September 30, 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 tm 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 2022, new shop openings, business strategies, potential growth opportunities and the effects of current market conditions. 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," "anticipates," "should," "future," "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 evolving COVID-19 pandemic, and other risks, including those described under the heading "Risk Factors" in our Annual Report on Form 10-K for the year ended December 31, 2021 filed with the SEC on March 11, 2022, our Quarterly Report on Form 10-Q for the period ended September 30, 2022 to be filed with the SEC, and in our future reports to be filed with the SEC. 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.

 

DUTCH BROS INC.

Condensed Consolidated Statements of Operations

 

 

 

Three Months Ended
September 30,

 

Nine Months Ended
September 30,

(in thousands, except per share amounts; unaudited)

 

2022

 

2021 ¹

 

2022

 

2021 ¹

REVENUES

 

 

 

 

 

 

 

 

Company-operated shops

 

$

173,501

 

 

$

108,661

 

 

$

464,200

 

 

$

289,548

 

Franchising and other

 

 

25,147

 

 

 

21,142

 

 

 

72,985

 

 

 

68,248

 

Total revenues

 

 

198,648

 

 

 

129,803

 

 

 

537,185

 

 

 

357,796

 

 

 

 

 

 

 

 

 

 

COSTS AND EXPENSES

 

 

 

 

 

 

 

 

Cost of sales

 

 

148,092

 

 

 

90,779

 

 

 

410,629

 

 

 

238,754

 

Selling, general and administrative

 

 

45,378

 

 

 

153,700

 

 

 

132,934

 

 

 

223,174

 

Total costs and expenses

 

 

193,470

 

 

 

244,479

 

 

 

543,563

 

 

 

461,928

 

 

 

 

 

 

 

 

 

 

INCOME (LOSS) FROM OPERATIONS

 

 

5,178

 

 

 

(114,676

)

 

 

(6,378

)

 

 

(104,132

)

 

 

 

 

 

 

 

 

 

OTHER EXPENSE

 

 

 

 

 

 

 

 

Interest expense, net

 

 

(5,011

)

 

 

(2,393

)

 

 

(11,096

)

 

 

(5,248

)

Other expense, net

 

 

(1,944

)

 

 

(1,041

)

 

 

(1,662

)

 

 

(1,099

)

Total other expense

 

 

(6,955

)

 

 

(3,434

)

 

 

(12,758

)

 

 

(6,347

)

 

 

 

 

 

 

 

 

 

LOSS BEFORE INCOME TAXES

 

 

(1,777

)

 

 

(118,110

)

 

 

(19,136

)

 

 

(110,479

)

Income tax benefit

 

 

(3,371

)

 

 

(1,280

)

 

 

(2,700

)

 

 

(716

)

NET INCOME (LOSS)

 

$

1,594

 

 

$

(116,830

)

 

$

(16,436

)

 

$

(109,763

)

Less: Net loss attributable to Dutch Bros OpCo prior to the Reorganization Transactions

 

 

?

 

 

 

(74,441

)

 

 

?

 

 

 

(67,374

)

Less: Net loss attributable to non-controlling interests

 

 

(169

)

 

 

(31,312

)

 

 

(12,346

)

 

 

(31,312

)

NET INCOME (LOSS) ATTRIBUTABLE TO DUTCH BROS INC.

 

$

1,763

 

 

$

(11,077

)

 

$

(4,090

)

 

$

(11,077

)

Net income (loss) per share of Class A and Class D common stock 2:

 

 

 

 

 

 

 

 

Basic

 

$

0.03

 

 

$

(0.24

)

 

$

(0.08

)

 

$

(0.24

)

Diluted

 

$

0.03

 

 

$

(0.24

)

 

$

(0.08

)

 

$

(0.24

)

Weighted-average shares of Class A and Class D common stock outstanding:

 

 

 

 

 

 

 

 

Basic

 

 

53,118

 

 

$

45,807

 

 

 

50,719

 

 

$

45,807

 

Diluted

 

 

54,418

 

 

$

45,807

 

 

 

50,719

 

 

$

45,807

 

_________________

1

The Company identified an immaterial error related to the accrual of employee sick leave and the application of ASC 710, Compensation - General, which resulted in corrections to prior period reported amounts within the condensed consolidated statement of operations with impacted line items presented below for the three and nine months ended September 30, 2021, respectively.

 

 

  • Decrease in cost of sales of $0.3 million and $1.1 million
  • Decrease in selling, general and administrative of less than $0.1 million and $0.4 million
  • Decrease in total costs and expenses of $0.3 million and $1.5 million
  • Increase in income from operations of $0.3 million and $1.5 million
  • Increase in income before income taxes of $0.3 million and $1.5 million
  • Increase in net income of $0.3 million and $1.5 million
  • Increase in net income attributable to Dutch Bros OpCo prior to the Reorganization Transactions of $1.2 million
  • Increase in net income attributable to non-controlling interests of $0.2 million
  • Increase in net income attributable to Dutch Bros Inc of less than $0.1 million

2

Basic and diluted net income (loss) per share of Class A and Class D common stock are applicable only for periods subsequent to September 14, 2021, which is the effective date of the Company's Reorganization Transactions and IPO.

 

DUTCH BROS INC.

Segment Financials

 

 

 

Three Months Ended
September 30,

 

Nine Months Ended
September 30,

(in thousands; unaudited)

 

2022

 

2021 ¹

 

2022

 

2021 ¹

Revenues:

 

 

 

 

 

 

 

 

Company-operated shops

 

$

173,501

 

 

$

108,661

 

 

$

464,200

 

 

$

289,548

 

Franchising and other

 

 

25,147

 

 

 

21,142

 

 

 

72,985

 

 

 

68,248

 

Total revenues

 

 

198,648

 

 

 

129,803

 

 

 

537,185

 

 

 

357,796

 

Cost of Sales:

 

 

 

 

 

 

 

 

Company-operated shops

 

 

138,781

 

 

 

85,550

 

 

 

381,623

 

 

 

219,407

 

Franchising and other

 

 

9,311

 

 

 

5,229

 

 

 

29,006

 

 

 

19,347

 

Total cost of sales

 

 

148,092

 

 

 

90,779

 

 

 

410,629

 

 

 

238,754

 

Segment gross profit:

 

 

 

 

 

 

 

 

Company-operated shops

 

 

34,720

 

 

 

23,111

 

 

 

82,577

 

 

 

70,141

 

Franchising and other

 

 

15,836

 

 

 

15,913

 

 

 

43,979

 

 

 

48,901

 

Total gross profit

 

 

50,556

 

 

 

39,024

 

 

 

126,556

 

 

 

119,042

 

Selling, general and administrative

 

 

(45,378

)

 

 

(153,700

)

 

 

(132,934

)

 

 

(223,174

)

Interest expense, net

 

 

(5,011

)

 

 

(2,393

)

 

 

(11,096

)

 

 

(5,248

)

Other expense, net

 

 

(1,944

)

 

 

(1,041

)

 

 

(1,662

)

 

 

(1,099

)

Loss before income taxes

 

$

(1,777

)

 

$

(118,110

)

 

$

(19,136

)

 

$

(110,479

)

Depreciation and amortization:

 

 

 

 

 

 

 

 

Company-operated shops

 

$

9,624

 

 

$

4,294

 

 

$

25,071

 

 

$

11,038

 

Franchising and other

 

 

1,478

 

 

 

1,703

 

 

 

4,340

 

 

 

4,728

 

All other

 

 

708

 

 

 

699

 

 

 

2,120

 

 

 

1,961

 

Total depreciation and amortization

 

$

11,810

 

 

$

6,696

 

 

$

31,531

 

 

$

17,727

 

_________________

1

The Company identified an immaterial error related to the accrual of employee sick leave and the application of ASC 710, Compensation - General, which resulted in corrections to prior period reported amounts within segment financials with impacted line items presented below for the three and nine months ended September 30, 2021, respectively.

 

 

  • Decrease in company-operated shops cost of sales of $0.3 million and $1.1 million
  • Decrease in total cost of sales of $0.3 million and $1.1 million
  • Increase in company-operated shops gross profit of $0.3 million and $1.1 million
  • Increase in total gross profit of $0.3 million and $1.1 million
  • Decrease in selling, general and administrative expenses of less than $0.1 million and $0.4 million
  • Increase in income before income taxes of $0.3 million and $1.5 million

DUTCH BROS INC.

Company-Operated Shop Results

 

 

 

Three Months Ended
September 30,

 

Nine Months Ended
September 30,

 

 

2022

 

2021 ¹

 

2022

 

2021 ¹

(in thousands; unaudited)

 

$

 

%

 

$

 

%

 

$

 

%

 

$

 

%

Company-operated shops revenue

 

173,501

 

100.0

 

108,661

 

100.0

 

464,200

 

100.0

 

289,548

 

100.0

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Beverage, food and packaging costs

 

47,092

 

27.1

 

27,846

 

25.6

 

126,262

 

27.2

 

71,564

 

24.7

Labor costs

 

49,000

 

28.3

 

33,307

 

30.7

 

138,001

 

29.8

 

87,695

 

30.3

Occupancy and other costs

 

28,517

 

16.4

 

17,041

 

15.7

 

78,141

 

16.8

 

42,484

 

14.7

Pre-opening costs

 

4,548

 

2.6

 

3,062

 

2.8

 

14,148

 

3.0

 

6,626

 

2.3

Depreciation and amortization

 

9,624

 

5.6

 

4,294

 

3.9

 

25,071

 

5.4

 

11,038

 

3.8

Company-operated shops gross profit

 

34,720

 

20.0

 

23,111

 

21.3

 

82,577

 

17.8

 

70,141

 

24.2

Company-operated shops contribution 2

 

44,344

 

25.6

 

27,405

 

25.2

 

107,648

 

23.2

 

81,179

 

28.0

_________________

1

The Company identified an immaterial error related to the accrual of employee sick leave and the application of ASC 710, Compensation - General, which resulted in corrections to prior period reported amounts within the company-operated shop segment with the impacted line items are presented below for the three and nine months ended September 30, 2021, respectively.

 
  • Decrease in company-operated shops labor costs of $0.3 million and $1.1 million
  • Increase in company-operated shops gross profit of $0.3 million and $1.1 million
  • Increase in company-operated shops contribution of $0.3 million and $1.1 million

2

Reconciliation of GAAP to non-GAAP results is provided in the section "Non-GAAP Financial Measures".

 

DUTCH BROS INC.

Summary Cash Flows Data

 

 

 

Nine Months Ended
September 30,

(in thousands; unaudited)

 

2022

 

2021

Net cash flows provided by operating activities

 

$

42,768

 

 

$

72,304

 

Net cash flows used in investing activities

 

 

(139,411

)

 

 

(76,781

)

Net cash provided by (used in) financing activities

 

 

112,704

 

 

 

(1,300

)

Net increase (decrease) in cash

 

$

16,061

 

 

$

(5,777

)

Cash and cash equivalents at beginning of period

 

 

18,506

 

 

 

31,640

 

Cash and cash equivalents at end of period

 

$

34,567

 

 

$

25,863

 

 

DUTCH BROS INC.

Condensed Consolidated Balance Sheets

 

(in thousands; unaudited)

 

September 30, 2022

 

December 31, 2021 ¹

ASSETS

 

 

 

 

Current assets:

 

 

 

 

Cash and cash equivalents

 

$

34,567

 

 

$

18,506

 

Accounts receivable, net

 

 

14,415

 

 

 

10,644

 

Inventories, net

 

 

33,713

 

 

 

23,345

 

Prepaid expenses and other current assets

 

 

11,110

 

 

 

8,796

 

Total current assets

 

 

93,805

 

 

 

61,291

 

Property and equipment, net

 

 

327,600

 

 

 

301,998

 

Finance lease right-of-use assets, net

 

 

214,903

 

 

 

?

 

Operating lease right-of-use assets, net

 

 

165,682

 

 

 

?

 

Intangibles, net

 

 

9,826

 

 

 

11,103

 

Goodwill

 

 

21,629

 

 

 

18,715

 

Deferred income tax assets, net

 

 

293,108

 

 

 

159,031

 

Other long-term assets

 

 

2,704

 

 

 

1,562

 

Total assets

 

$

1,129,257

 

 

$

553,700

 

LIABILITIES AND EQUITY

 

 

 

 

Current liabilities:

 

 

 

 

Accounts payable

 

$

26,973

 

 

$

20,440

 

Accrued liabilities

 

 

22,850

 

 

 

20,970

 

Other current liabilities

 

 

6,446

 

 

 

6,471

 

Deferred revenue

 

 

28,829

 

 

 

22,807

 

Line of credit

 

 

85,752

 

 

 

64,104

 

Current portion of tax receivable agreements liability

 

 

450

 

 

 

450

 

Current portion of finance lease obligations

 

 

7,004

 

 

 

3,389

 

Current portion of operating lease obligations

 

 

9,462

 

 

 

?

 

Current portion of long-term debt

 

 

2,608

 

 

 

103

 

Total current liabilities

 

 

190,374

 

 

 

138,734

 

Deferred revenue, net of current portion

 

 

5,118

 

 

 

5,030

 

Tax receivable agreements liability, net of current portion

 

 

225,849

 

 

 

109,283

 

Finance lease obligations, net of current portion

 

 

209,257

 

 

 

79,588

 

Operating lease obligations, net of current portion

 

 

157,319

 

 

 

?

 

Long-term debt, net of current portion

 

 

96,879

 

 

 

3,503

 

Deferred rent

 

 

?

 

 

 

3,153

 

Other long-term liabilities

 

 

659

 

 

 

680

 

Total liabilities

 

 

885,455

 

 

 

339,971

 

Equity:

 

 

 

 

Common stock

 

 

2

 

 

 

2

 

Additional paid in capital

 

 

141,480

 

 

 

107,193

 

Accumulated other comprehensive income

 

 

848

 

 

 

?

 

Accumulated deficit

 

 

(16,647

)

 

 

(12,679

)

Total stockholders' equity attributable to Dutch Bros Inc. / members' equity

 

 

125,683

 

 

 

94,516

 

Non-controlling interests

 

 

118,119

 

 

 

119,213

 

Total equity

 

 

243,802

 

 

 

213,729

 

Total liabilities and equity

 

$

1,129,257

 

 

$

553,700

 

_______________

1

The Company identified an immaterial error related to the accrual of employee sick leave and the application of ASC 710, Compensation - General, which resulted in corrections to prior period reported amounts within the consolidated balance sheet as of December 31, 2021 with impacted line items presented below.

 

 

  • Decrease in accrued liabilities of $3.5 million
  • Decrease in total current liabilities of $3.5 million
  • Decrease in total liabilities of $3.5 million
  • Increase in additional paid in capital of $0.8 million
  • Decrease in accumulated deficit of $0.2 million
  • Increase in total stockholders' equity attributable to Dutch Bros Inc. / members' equity of $1.0 million
  • Increase in non-controlling interests of $2.5 million
  • Increase in total equity of $3.5 million

DUTCH BROS INC.

Select Financial Metrics

 

 

 

Three Months Ended
September 30,

 

Nine Months Ended
September 30,

(in thousands, except number of shops data; unaudited)

 

2022

 

2021 ¹

 

2022

 

2021 ¹

Shop count, beginning of period

 

 

 

 

 

 

 

 

Company-operated

 

 

336

 

 

 

207

 

 

 

271

 

 

 

182

 

Franchised

 

 

267

 

 

 

264

 

 

 

267

 

 

 

259

 

 

 

 

603

 

 

 

471

 

 

 

538

 

 

 

441

 

Company-operated new openings

 

 

34

 

 

 

30

 

 

 

94

 

 

 

52

 

Franchised new openings

 

 

4

 

 

 

3

 

 

 

9

 

 

 

11

 

Acquisition of franchise shops

 

 

?

 

 

 

4

 

 

 

5

 

 

 

7

 

Shop count, end of period

 

 

 

 

 

 

 

 

Company-operated

 

 

370

 

 

 

241

 

 

 

370

 

 

 

241

 

Franchised

 

 

271

 

 

 

262

 

 

 

271

 

 

 

262

 

Total shop count

 

 

641

 

 

 

503

 

 

 

641

 

 

 

503

 

 

 

 

 

 

 

 

 

 

Average unit volume (AUV) 2

 

 

N/A

 

 

 

N/A

 

 

$

1,917

 

 

$

1,808

 

Company-operated shops

 

 

N/A

 

 

 

N/A

 

 

$

1,875

 

 

$

1,699

 

 

 

 

 

 

 

 

 

 

Same shop sales growth 3, 5

 

 

1.7

%

 

 

7.3

%

 

 

1.4

%

 

 

8.0

%

Company-operated shops

 

 

1.0

%

 

 

4.7

%

 

 

1.1

%

 

 

8.3

%

 

 

 

 

 

 

 

 

 

Company-operated shop revenues

 

$

173,501

 

 

$

108,661

 

 

$

464,200

 

 

$

289,548

 

Company-operated gross profit

 

$

34,720

 

 

$

23,111

 

 

$

82,577

 

 

$

70,141

 

Company-operated shop contribution 4

 

$

44,344

 

 

$

27,405

 

 

$

107,648

 

 

$

81,179

 

Company-operated shop gross profit as a % of

company-operated shop revenue

 

 

20.0

%

 

 

21.3

%

 

 

17.8

%

 

 

24.2

%

Company-operated shop contribution as a % of

company-operated shop revenues 4

 

 

25.6

%

 

 

25.2

%

 

 

23.2

%

 

 

28.0

%

 

 

 

 

 

 

 

 

 

Net income (loss)

 

$

1,594

 

 

$

(116,830

)

 

$

(16,436

)

 

$

(109,763

)

Adjusted EBITDA 4

 

$

27,830

 

 

$

20,955

 

 

$

61,431

 

 

$

70,339

 

Net income (loss) as % of revenue

 

 

0.8

%

 

 

(90.0

) %

 

 

(3.1

) %

 

 

(30.7

) %

Adjusted EBITDA as % of revenue 4

 

 

14.0

%

 

 

16.1

%

 

 

11.4

%

 

 

19.7

%

 

 

 

 

 

 

 

 

 

Systemwide sales 5

 

$

312,961

 

 

$

241,254

 

 

$

864,929

 

 

$

673,297

 

Dutch Rewards member registrations 6

 

 

566

 

 

 

509

 

 

 

1,551

 

 

 

2,738

 

___________

1

The Company identified an immaterial error related to the accrual of employee sick leave and the application of ASC 710, Compensation - General, which resulted in corrections to prior period reported amounts within the condensed consolidated statement of operations, segment financials, company-operated shop segment financial results, and non-GAAP results for the three and nine months ended September 30, 2021 with impacted line items presented below.

 
  • Net income prior period adjustment details are provided in the section "Condensed Consolidated Statements of Operations".
  • Company-operated segment gross profit and segment contribution prior period adjustment details are provided in the sections "Segment Financials" and "Company-operated Shop Results".
  • Adjusted EBITDA prior period adjustment details are provided in the section "Non-GAAP Financial Measures".

2

AUVs are determined based on the net sales for any trailing twelve-month period for systemwide and company-operated shops that have been open a minimum of 15 months. AUVs are calculated by dividing the net sales by the total number of systemwide and company-operated shops, respectively. Management uses this metric as an indicator of shop growth and future expectations of mature locations.

 

3

Same shop sales growth (decline) 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. 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.

 

 

Three Months Ended
September 30,

 

Nine Months Ended
September 30,

 

 

2022

 

2021

 

2022

 

2021

Systemwide shop base

 

 

452

 

 

384

 

 

414

 

 

354

Company-operated shop base

 

 

203

 

 

145

 

 

173

 

 

120

4

Reconciliation of GAAP to non-GAAP results is provided in the section "Non-GAAP Financial Measures".

 

5

Systemwide sales and systemwide same shop sales include company-operated shop revenue and sales at franchised shops during the comparable periods presented. Franchise sales represent sales at all franchise shops and are revenues to our franchisees. We do not record franchise sales as revenues; however, our royalty revenues and advertising fund contributions are calculated based on a percentage of franchise sales. As these metrics include sales reported to us by our non-consolidated franchise partners, these metrics should be considered as a supplement to, not a substitute for, our results as reported under GAAP. Management uses these metrics as indicators of our system's overall financial health, growth and future expansion prospects.

 

6

Dutch Rewards, a digitally-based rewards program available exclusively through the Dutch Rewards app, was launched February 2021. Management uses this metric as an indicator of customer loyalty adoption of our Dutch Rewards app and future promotional plans.

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.

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, and 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.

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, 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, 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, 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 a donation to the Dutch Bros Foundation. This donation is 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 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.

TRA remeasurement

Loss impact on condensed consolidated statements of operations of adjustments to liabilities under our TRAs.

Dilutive effects of RSAs

Addition of incremental shares of RSAs 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.

___________

1

Dutch Bros PubCo refers to Dutch Bros Inc., a Delaware Corporation, of which its Class A common stock is publicly traded on the New York Stock Exchange under the symbol "BROS".

 

2

Dutch Bros OpCo refers to Dutch Mafia, LLC, a Delaware limited liability company, and a direct subsidiary of Dutch Bros Inc.

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.

 

 

Three Months Ended
September 30,

 

Nine Months Ended
September 30,

 

 

2022

 

2021 ¹

 

2022

 

2021 ¹

(in thousands; unaudited)

 

$

 

%

 

$

 

%

 

$

 

%

 

$

 

%

Company-operated shop gross profit

 

34,720

 

20.0

 

23,111

 

21.3

 

82,577

 

17.8

 

70,141

 

24.2

Depreciation and amortization

 

9,624

 

5.6

 

4,294

 

3.9

 

25,071

 

5.4

 

11,038

 

3.8

Company-operated shop contribution

 

44,344

 

25.6

 

27,405

 

25.2

 

107,648

 

23.2

 

81,179

 

28.0

_________________

1

The Company's historical results for the three and nine months ended September 30, 2021 have been revised to reflect an immaterial error correction related to employee sick leave accrual. For additional information, see section "Company-operated Shop Results".

 

 

Three Months Ended
September 30,

 

Nine Months Ended
September 30,

 

 

2022

 

2021 ¹

 

2022

 

2021 ¹

(in thousands; unaudited)

 

$

 

%

 

$

 

%

 

$

 

%

 

$

 

%

Net income (loss)

 

1,594

 

 

0.8

 

 

(116,830

)

 

(90.0

)

 

(16,436

)

 

(3.1

)

 

(109,763

)

 

(30.7

)

Depreciation and amortization

 

11,810

 

 

5.9

 

 

6,696

 

 

5.2

 

 

31,531

 

 

5.9

 

 

17,727

 

 

5.0

 

Interest expense, net 2

 

5,011

 

 

2.5

 

 

2,393

 

 

1.8

 

 

11,096

 

 

2.1

 

 

5,248

 

 

1.5

 

Income tax benefit

 

(3,371

)

 

(1.7

)

 

(1,280

)

 

(1.0

)

 

(2,700

)

 

(0.5

)

 

(716

)

 

(0.2

)

EBITDA

 

15,044

 

 

7.6

 

 

(109,021

)

 

(84.0

)

 

23,491

 

 

4.4

 

 

(87,504

)

 

(24.5

)

Equity-based compensation

 

10,649

 

 

5.4

 

 

124,779

 

 

96.1

 

 

30,995

 

 

5.8

 

 

147,761

 

 

41.3

 

Expenses associated with equity offerings

 

?

 

 

?

 

 

3,332

 

 

2.6

 

 

?

 

 

?

 

 

5,661

 

 

1.6

 

Donations associated with equity offerings

 

?

 

 

?

 

 

1,392

 

 

1.1

 

 

?

 

 

?

 

 

1,392

 

 

0.4

 

COVID-19: "thank you pay" and catastrophic leave

 

227

 

 

0.1

 

 

473

 

 

0.4

 

 

1,401

 

 

0.3

 

 

3,029

 

 

0.8

 

COVID-19: prepaid costs not utilized

 

?

 

 

?

 

 

?

 

 

?

 

 

1,200

 

 

0.2

 

 

?

 

 

?

 

Milestone events

 

?

 

 

?

 

 

?

 

 

?

 

 

2,434

 

 

0.5

 

 

?

 

 

?

 

TRAs remeasurement

 

1,910

 

 

1.0

 

 

?

 

 

?

 

 

1,910

 

 

0.4

 

 

?

 

 

?

 

Adjusted EBITDA

 

27,830

 

 

14.0

 

 

20,955

 

 

16.1

 

 

61,431

 

 

11.4

 

 

70,339

 

 

19.7

 

 

 

Three Months Ended
September 30,

 

 

2022

 

2021 ¹

(in thousands; unaudited)

 

$

 

%

 

$

 

%

Selling, general, and administrative 3

 

$

45,378

 

 

22.8

 

 

$

153,700

 

 

118.4

 

Equity-based compensation

 

 

(10,649

)

 

(5.4

)

 

 

(124,779

)

 

(96.1

)

Expenses associated with equity offerings

 

 

?

 

 

?

 

 

 

(3,332

)

 

(2.6

)

Donations associated with equity offerings

 

 

?

 

 

?

 

 

 

(1,392

)

 

(1.1

)

Adjusted selling, general, and administrative

 

$

34,729

 

 

17.5

 

 

$

24,197

 

 

18.6

 

 

 

Three Months Ended
September 30,

(in thousands; unaudited)

 

2022

 

2021 ¹

Net income (loss)

 

$

1,594

 

 

$

(116,830

)

Equity-based compensation

 

 

10,649

 

 

 

124,779

 

Expenses associated with equity offerings

 

 

?

 

 

 

3,332

 

Donations associated with equity offerings

 

 

?

 

 

 

1,392

 

COVID-19: "thank you pay" and catastrophic leave

 

 

227

 

 

 

473

 

TRAs remeasurement

 

 

1,910

 

 

 

?

 

Income tax effects

 

 

(115

)

 

 

(1,793

)

Adjusted net income

 

$

14,265

 

 

$

11,353

 

_________________

1

The Company identified an immaterial error related to the accrual of employee sick leave and the application of ASC 710, Compensation - General, which resulted in corrections to prior period reported amounts within the condensed consolidated statements of operations and non-GAAP results for the three and nine months ended September 30, 2021 with impacted line items presented below.

 

 

  • Decrease in selling, general, and administrative expenses of less than $0.1 million and $0.4 million
  • Decrease in adjusted selling, general, and administrative expenses of less than $0.1 million and $0.4 million
  • Increase in net income of $0.3 million and $1.5 million
  • Increase in EBITDA of $0.3 million and $1.5 million
  • Increase in adjusted EBITDA of $0.3 million and $1.5 million
  • Increase in adjusted net income of $0.3 million

2

Effective for the three months ended September 30, 2022 and on a prospective basis, we recorded commitment fees for the unused portion of the revolving credit facility as interest expense. These amounts were previously recorded as selling, general, and administrative expense.

 

3

Selling, general, and administrative expenses include depreciation and amortization.

 

 

Three Months Ended
September 30,

(in thousands, except per share amounts; unaudited)

 

2022

 

2021 ¹

Weighted-average shares of Class A and Class D common stock outstanding - diluted

 

 

54,418

 

 

 

45,807

 

Dilutive effects of RSAs

 

 

?

 

 

 

2,241

 

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

 

 

107,920

 

 

 

113,705

 

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

 

 

162,338

 

 

 

161,753

 

 

 

 

 

 

Net income (loss) per share of Class A and Class D common stock - diluted

 

$

0.03

 

 

$

(0.24

)

Controlling and non-controlling interest adjustments

 

 

(0.02

)

 

 

(0.48

)

Equity-based compensation

 

 

0.07

 

 

 

0.77

 

Expenses associated with equity offerings

 

 

?

 

 

 

0.02

 

Donations associated with equity offerings

 

 

?

 

 

 

0.01

 

TRAs remeasurement

 

 

0.01

 

 

 

?

 

Income tax effects

 

 

?

 

 

 

(0.01

)

Adjusted net income per fully exchanged share of common stock

 

$

0.09

 

 

$

0.07

 

_________________

1

Weighted-average shares, net income (loss) per share, and related adjustments on a diluted basis are applicable only for the periods subsequent to September 14, 2021, which is the effective date of the Company's Reorganization Transactions and IPO.

 


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