Dutch Bros (BROS) Q2 2026 Earnings Call Transcript

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DATE

Wednesday, Aug. 5, 2026, at 5 p.m. ET

CALL PARTICIPANTS

• Chief Executive Officer and President - Christine Barone
• Chief Financial Officer - Joshua Guenser
• Director, Investor Relations - Neil Patel

TAKEAWAYS

• Total Revenue -- $550.9 million, an increase of 32.5% year over year driven by new shop expansion and same shop sales growth.
• Net Income -- $51.6 million, compared to $38.4 million in the same period of 2025.
• Adjusted EBITDA -- $113.7 million, representing 27.8% growth and a margin of 20.6%.
• Adjusted EPS -- $0.33, an increase from $0.26 in the second quarter of last year.
• Systemwide Same Shop Sales -- 5.8%, reflecting a 4.1% increase in ticket and a 1.7% increase in transactions.
• Company-operated Same Shop Sales -- 8.3%, driven by a 4.9% increase in ticket and a 3.4% increase in transactions.
• Systemwide AUV -- $2.2 million, calculated on a trailing 12-month basis for the comparable shop base.
• Company-operated AUV -- $2.2 million, demonstrating continued upward productivity across newer shop vintages.
• New Shop Openings -- 48 shops, including 44 company-operated locations opened during the quarter.
• Total Shop Count -- 1,225 locations, as of June 30, 2026, across 26 states.
• Full Year Revenue Guidance -- $2.1 billion to $2.13 billion, representing projected growth of 28% to 30%.
• Full Year Same Shop Sales Guidance -- 5% to 6%, with management indicating performance is trending toward the midpoint of the range.
• Full Year Adjusted EBITDA Guidance -- $385 million to $390 million, updated to include the impact of the Phoenix market acquisition.
• Full Year Capital Expenditures Guidance -- $350 million to $370 million, which includes an average capex of approximately $1.4 million per shop.
• Q3 Adjusted SG&A Guidance -- $73 million to $74 million, including continued investments in infrastructure and people.
• Phoenix Market Acquisition -- $63.5 million, the total purchase consideration for the franchise rights and assets of 31 locations.
• Phoenix Acquisition Financial Impact -- $25 million in incremental revenue and $5 million in incremental Adjusted EBITDA, expected for the remainder of 2026.
• Dutch Rewards Penetration -- 73% of total transactions, compared to 72% in the second quarter of last year.
• Order Ahead Mix -- 16% of total transactions, reflecting increased customer adoption of digital ordering capabilities.
• Labor Costs -- 25.4% of company-operated revenue, a 120 basis point improvement year over year due to sales leverage.
• Cost of Sales -- 26.1% of company-operated revenue, an 80 basis point increase driven by higher coffee costs and the new food program rollout.
• Preopening Expenses -- 1.6% of company-operated revenue, an increase of 40 basis points year over year due to a higher volume of shop openings.
• Liquidity -- $699 million, including $269 million in cash and cash equivalents and an undrawn revolver.
• Systemwide Sales -- $703.3 million, an increase from $571.3 million in the same period of 2025.
• Adjusted Net Income -- $58.3 million, compared to $45.5 million in the second quarter of 2025.
• Operating Weeks -- 11,189 weeks for company-operated shops, compared to 9,184 weeks in the same period of 2025.

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RISKS

• Guenser stated, "we continue to expect to shift towards build to suit leases will drive higher occupancy costs as a percentage of revenue in 2026," noting a projected 50 basis point impact.
• Guenser warned that the updated 2026 guidance contemplates "approximately 60 basis points of total COGS pressure," reflecting the combined impact of coffee costs and the new food program.
• Management noted that system same shop sales in the third quarter are estimated to be 4% to 5% due to "stronger transaction comparisons" and the sequential stepping down of effective pricing.

SUMMARY

Management reported that Dutch Bros Inc. (NYSE:BROS) achieved its 13th consecutive quarter of positive same-shop sales and its eighth consecutive quarter of transaction growth. The company raised its full-year guidance for revenue, same-store sales, and Adjusted EBITDA based on year-to-date performance and the acquisition of franchise locations in Phoenix. Strategic initiatives focused on expanding the shop footprint to 4,000 locations by 2029, launching the Myst Energy Refresher platform, and completing the food rollout across company-operated shops. The company also entered an agreement to acquire real estate for up to 65 sites to further develop its pipeline in existing markets.

• Barone noted that the Melrose Park shop in the Chicago market is "pacing to a volume of approximately $7 million," which set a new company record for opening day demand.
• Management completed the rollout of the new food program to approximately 750 system shops ahead of schedule, with food becoming a key driver for the morning daypart.
• CEO Barone stated, "our people led culture remains the foundation of our success," serving as the differentiator for the brand as it scales nationally.
• The company introduced Myst Energy Refreshers, a plant-powered energy drink category, which management transitioned to a permanent menu item following "strong repeat rates."
• CFO Guenser indicated that the company has secured approximately 90% of the real estate pipeline needed to reach the target of 4,000 shops by 2029.
• Management attributed the decision to acquire up to 65 Salad and Go lease sites to the opportunity to expand company-operated presence in Arizona, Nevada, Oklahoma, and Texas.
• CFO Guenser noted that other beverage and drive-thru concepts are "rightsizing their drive through fleet," providing additional opportunities to acquire high-quality locations with favorable economics.

INDUSTRY GLOSSARY

• AUV: Average Unit Volume, representing the average annual sales per shop.
• Build-to-suit lease: A real estate agreement where a landlord develops a property according to the specifications of the tenant.
• Dutch Bros OpCo: The primary operating subsidiary through which the company conducts its business.
• Dutch Bros Rebel: A proprietary energy drink platform exclusive to the company.
• Dutch Rewards: The company's digital loyalty program used for customer engagement and data segmentation.
• LTO: Limited Time Offering, referring to temporary menu items or promotions.
• Myst Energy Refresher: A plant-powered energy drink category introduced in the second quarter.
• Vibe check scorecard: An internal tool used to measure shop-level performance across people, customer, and business metrics.

Full Conference Call Transcript

Operator: Thank you for standing by and welcome to the Dutch Bros Inc. Second Quarter 26 Earnings Conference Call and Webcast. This conference call and webcast is being recorded today, 08/05/2026 at 5PM Eastern Time and will be available for replay shortly after it has concluded. Following the company's presentation, we will open the lines for questions and instructions to queue up will be provided at that time. I would now like to turn the call over to Neil Patel Dutch Bros. Director, Investor Relations. Please go ahead.

Neil Patel: Good afternoon. I am joined by Christine Barone, CEO and president and Joshua Guenser, CFO. We issued our earnings press release for the quarter ended 06/30/2026 after the market closed today. The earnings press release along with a supplemental information deck have been posted to our Investor Relations website at investors.dutchpros.com. Please be aware that all statements in our prepared remarks and in response to your questions other than those of historical fact are forward looking statements and are subject to risks, uncertainties and assumptions that may cause actual results to differ materially. They are qualified by the cautionary statements in our earnings press release and the risk factors in our latest SEC filings.

Including our most recent annual report on Form 10 ks And quarterly report on Form 10 Q. We assume no obligation to update any forward looking statements. We will also reference non GAAP financial measures on today's call. As a reminder, non GAAP measures are neither substitutes for nor superior to measures that are prepared under GAAP. Please review the reconciliation of non GAAP measures to compare GAAP results in our earnings press release. During the question and answer portion of today's call, please limit yourself to 1 question and avoid multipart questions that we can accommodate as many participants as possible. With that, I would like to turn the call over to Christine.

Christine Barone: Thank you, Neil, and good afternoon, everyone. Dutch Bros continues to be powered by a differentiated people led culture expanding customer occasions, and a real estate development engine that is unlocking new growth opportunities across the country. The success of our strategy was evident in Q2 as we delivered our 8th consecutive quarter of transaction growth. And again delivered strong comp sales that have compounded year over year. Durable growth built on an already strong base. In fact, Q2 marked our 13th straight quarter of positive comp sales, This performance is the product of years of foundational investment. Not 1 lever, but a full playbook we have built deliberately, and are executing with intention.

This gives us incredible confidence in our ability to continue growing the business for the long term. Based on our performance so far this year, and the recent acquisition of 1 of our Phoenix franchisees, we are raising our full year guidance. Turning to our Q2 results, Total revenues increased an outstanding 32%. Accompanied by strong profitability with adjusted EBITDA up 28%. Our distinctive value proposition continued to resonate in Q2. And we saw system wide transaction growth driven by the strength of our brand and our endlessly customizable offerings delivered with speed, quality, and service. Development momentum remained exceptionally strong during the quarter, with 48 system shop openings.

Reinforcing our confidence in our pipeline and the path ahead to reaching 4 thousand shops in 2029. Our transaction driving initiatives, including the rollout of food, and category leading innovation are working. Serving as an important proof point in our ability to continue growing transactions while scaling nationally. System wide AUVs continued their upward momentum in Q2. And new shop productivity was exceptional. An important validation of Dutch Bros long term growth opportunity and the continued expansion of the beverage category. Our Q2 results are a direct reflection of the investments we have made across the business over the past several years. Our foundation remains exceptionally strong, we are building on that momentum.

As we look ahead, the power of our brand, industry leading innovation, and our ability to grow customer occasions give us tremendous confidence in the long term trajectory of Dutch Bros. But none of it would be possible without our team who bring the Dutch Bros experience to life every day. At Dutch Bros, everything starts with our people. Our people led culture remains the foundation of our success, and the driving force behind how we grow. Our broistas the heartbeat of our brand, pour into their communities, make customers feel seen, and create meaningful moments that keep customers coming back. These genuine customer connections remain the strongest differentiator of the Dutch Bros experience.

Customers come to us for more than a drink, They come for the moment at the window that makes their day a little better. That connection has been the hallmark of our brand since our very first stand. And because we grow our leaders from behind the window, that special feeling of connection only gets stronger as we grow. It is the reason we continue to be at the top of the industry in customer ratings for pleasant and friendly service. The exceptional people across our brand allow us to execute consistently, scale into new markets, and deliver the unmatched Dutch Bros energy our customers know and love.

Today, we have more than 525 operator candidates in our pipeline with an average tenure of nearly 8 years. A leadership bench that gives us tremendous confidence in our ability to continue growing in a unique way only Dutch Bros can. At the end of June, I spent time with more than 2,000 of our field leaders at A Better World. Our immersive and engaging field event focused on developing the next generation of Dutch Bros leaders. Being surrounded by the people who bring our culture to life every day reinforced what makes Dutch Bros so special.

Their passion for growing others, serving with kindness, and living our mission gives me tremendous confidence that our people will continue to be our greatest differentiator as we grow. The road to 4 thousand shops in 2029 remains very clear. Supported by our robust development pipeline. As we deepen our presence in existing markets and thoughtfully expand into new ones, each new shop opening reinforces the power of the Dutch Bros brand from coast to coast. Importantly, density continues to be a competitive advantage. We believe density matters and continue to view it as a strategic asset of both our expansion model and growing brand awareness.

While we continue this densification strategy, we are also entering new markets as we expand our footprint across the country. And new market performance continues to give us even more confidence in our growth path ahead. 1 of the best examples is in the Chicago market. Last quarter, we provided an update on our entry into the Greater Chicago area. Highlighting that our first shop was pacing to a volume of approximately $4 million. During Q2, we expanded our footprint in the greater Chicagoland area with our Melrose Park shop, which is pacing to a volume of approximately $7 million. The response from the community has been incredible. Opening day demand exceeded our expectations and set a new company record.

Further underscoring the portability of the Dutch Bros brand, the early results affirm our belief that the greater Chicagoland area represents a meaningful long term growth opportunity. Across several newer markets, we are also seeing incredible traction. From Atlanta to Charlotte to Tampa, we are seeing many new markets annualizing meaningfully above expectations showcasing firsthand how well the Dutch Bros brand travels and resonates across diverse geographies. We are also excited to have entered our 26 state Mississippi, in July. We recently completed the Phoenix East Valley acquisition, following the retirement of our franchise partner who had been with Dutch Bros for nearly 20 years. Looking ahead, our development momentum remains very strong.

We are opening shops ahead of schedule, Our pipeline is rapidly growing, and we continue to see attractive conversion opportunities. Both from emerging growth concepts and legacy beverage and drive through players. Whether we are entering new markets or building density in existing ones, the broad appeal of the Dutch Bros brand and the significant runway ahead become even more evident with each shop we open. Growth is not just about expanding our footprint. it is also about creating more reasons for customers to choose Dutch Bros throughout the day. In Q2, innovation across our menu and our relentless focus on the customer experience helped strengthen customer routines, drive frequency, and deepen engagement with the brand.

Let me start with food. Food continues to be 1 of our most important sales drivers and a key component of our morning daypart strategy. By the end of Q2, we completed the rollout of our new food program across approximately 750 system shops. Ahead of schedule. Throughout the rollout, the response from customers in Broistas has exceeded expectations. We are seeing customers incorporate Dutch Bros into more morning occasions, creating additional opportunities to engage with the brand and strengthening our position within customers' daily routine. Beyond food, innovation across our beverage menu and merch drop kept customers engaged and excited to visit Dutch Bros in the quarter.

In May, we introduced Myst Energy Refreshers, a new category of plant powered energy drinks to complement our proprietary Rebel platform. Further strengthening our leadership position in the energy space. Mist allows us to broaden our occasions and reach new customers. While bringing meaningful innovation to the beverage industry. At launch, we drove trial of Mist through our Fill-a-Tray event. Making it easy for customers to mix and match and discover this new platform. Mist headlined our Q2 LTO lineup. Alongside the return of fan favorites, Strawberry Colada, Dulce de Leche. And drove outstanding year over year growth in LTO unit velocity.

Since the launch of Mist, we have increased our overall energy mix and driven retention rates ahead of recent LTO benchmarks. Given the overwhelmingly positive customer response, we have made the decision to give Mist a permanent home on the menu alongside our Rebel program. Together, Mist and Rebel reinforce our innovation in energy and create a sustainable growth engine for the business. Beyond beverages, our merch drops continue to generate excitement and engagement. Giving customers another reason to make a special trip to Dutch Bros while becoming truly signature events for the brand.

We saw another quarter of meaningful sales lift with standout drops like the state sticker and frog charm delivering the strongest merchant sticker drops of the year. Our digital ecosystem also continues to deepen customer engagement, We ended Q2 with over 73% of transactions flowing through Dutch rewards. Reflecting continued customer adoption and engagement. Rewards penetration has been on a consistent climb over the last 3 years, and we have grown our registered members per shop by over 50%. In Q2, Dutch rewards also delivered its strongest contribution to comp since the start of our customer segmentation journey.

Our ongoing investment in segmentation and personalization is enabling more relevant customer experiences and remains an important lever to drive long term transaction growth. We are also seeing continued adoption of order ahead, which reached approximately 16% of the total transaction mix. Improving convenience, and making it even easier for customers to engage with us. Our CPG business continues to expand the reach of our brand introducing customers to Dutch Bros and keeping the brand top of mind between visits to our shops. In Q2, the Dutch Bros CPG portfolio continued to show strong customer demand, generating above category average velocity in all formats in which we compete.

As we scale the brand, maintaining strong operational discipline remains a key priority. In Q2, we launched our vibe check scorecard. Giving leaders greater visibility into shop level performance and enabling our field teams to make more informed operational decisions. As we continue to grow, tools like these help our teams maintain consistency and operational discipline. We successfully executed several high demand events during the quarter. Including major sticker, merch drop, and Fill-a-Tray events. Through improved staffing and operational planning, our teams delivered a consistent customer experience even during these periods of elevated demand. Finally, we continue to see improvement in throughput. With further progress already underway.

We are focused on shop layout, equipment optimization, and operational processes that help our brewery to serve customers with speed while maintaining the quality and service our customers expect. In closing, our confidence in the opportunity ahead has never been greater. And it is clear that our strategy is working. Our people led culture continues to scale alongside the business and remains the defining differentiator of the Dutch Bros brand. Backed by our deep leadership pipeline and consistent execution, we believe what sets us apart today will continue to be a key reason why customers choose Dutch Bros and keep coming back.

Our strong performance in new markets and continued momentum across our development pipeline reinforces our confidence in the path to 2,029 SHOPs in 2029. Our sales driving initiatives are delivering exceptional results. Exceeding our expectations and delighting customers. Beverage innovation, food, merch drops, and digital advancements. This is our playbook in action. All working together. And 8 consecutive quarters of transaction growth is the clearest proof it is paying off. Looking ahead, we remain confident in our ability to execute against the significant opportunity ahead of us. We continue to see significant runway for growth, supported by the strength of our brand, the passion of our people, and our ability to continue creating more occasions for customers.

Together, these advantages position Dutch Bros to continue taking share. And further solidify our position in the beverage category. With that, I will pass it to Joshua.

Joshua Guenser: Thanks, Christine. I will start with a recap of our second quarter performance. And then share our outlook for the remainder of 2026. Our second quarter results were above our expectations. With upside driven by outstanding execution of our marketing initiatives and the continued traction in our idiosyncratic sales drivers. The dedication of our people, and the strong conviction we have in our brand solidify my confidence in the balance of the year and our ability to drive long term growth. For the second quarter, total revenues were $551 million growing 32% over the second quarter of last year. Company operated same shop sales growth in Q2 was an impressive 8.3%, with transaction growth of 3.4%.

System same shop sales growth in Q2 was 5.8% with transaction growth of 1.7%. The strength of our 2 year transaction stack highlights the effectiveness of the layers of sales driving initiatives we have executed over recent years. And their ability to generate strong customer demand even in an environment of lower consumer sentiment. Performance during the quarter from the continued rollout of our new food program, the continued maturation of newer shop vintages, strength in brand marketing initiatives, and the momentum in customer segmentation within Dutch rewards. And with our system same shop sales performance in Q2, and performance quarter to date in Q3, we are updating our guidance for the full year to 5% to 6%.

Now let me be clear. Given our performance to date and our expectations for the full year, we are trending towards the midpoint of that 5% to 6% range. This guidance reflects transaction comparisons continuing to step up through the remainder of the year, and the lap of the food rollout we began in Q3 of last year which primarily impacts net ticket. Our updated full year comp guidance contemplates system same shop sales growth of approximately 4% to 5% in Q3. Reflecting stronger transaction comparisons and the impact of effective pricing stepping down sequentially. As a reminder, we rolled off another point of price in early July.

And with pricing taken during the year, our ticket will include less than a point of effective pricing in the back half of the year. This reflects our disciplined approach to pricing while preserving our strong value proposition. I am very proud of the momentum we have generated across our business as the number of new shops we opened quarter after quarter continued to reach record volumes. The strength of our brand, the effectiveness of our sales drivers, and the tactical execution of our playbook continue to drive system wide AUVs higher. New shop productivity remained strong in Q2. Keeping pace with this continued upward trajectory system wide AUVs.

And we continue to build momentum across our real estate development pipeline. During the second quarter, we opened 48 new shops, continuing our strong pace of development growth. We now have approximately 90% of our pipeline needed to achieve 4 thousand shops in 2029. The depth of this pipeline coupled with the outstanding execution of our development team, reinforces our confidence in our ability to continue capturing the significant amount of white space ahead of us. Last week, we completed the acquisition of the franchise rights and assets of 31 locations in the Phoenix market. Including 1 location currently under development. Total purchase consideration was $63.5 million.

For the remainder of 2026, we expect this to drive net incremental total revenue of approximately $25 million inclusive of an approximately $5 million reduction in franchise and other revenue. We also expect incremental adjusted EBITDA of approximately $5 million for the balance of the year. Which is net of transition related costs. Earlier this week, we entered into an agreement to acquire the real estate and related site assets of up to 65 Salad and Go locations Arizona, Nevada, Oklahoma, and Texas. An opportunity that we believe enhances our development pipeline and deepens our scale in these markets. We anticipate closing this acquisition this quarter subject to applicable approvals and other customary closing conditions. With conversions expected in 2027.

We are excited to expand our company operated presence in these important growth where we continue to see significant white space opportunity. Shifting to our company operated shops. Performance in Q2 was exceptional. With revenue totaling $510 million. An increase of 34% or $130 million compared to the second quarter of last year. Company operated shop contribution was $156 million representing a year over year increase of 32%. Company operated shop contribution margin was incredibly strong, approximately 31%. Beverage, food, and packaging costs were 26.1% of company operated shop revenue. Which is 80 basis points higher year over year primarily driven by higher coffee costs, and costs associated with the continued rollout of our new food program.

We continue to expect an impact from higher coffee costs in the back half of the year. The updated full year 2026 guidance contemplates approximately 60 basis points of total COGS pressure, which includes the impact from costs associated with the new food program. Labor costs were 25.4% of company operated shop revenue. Which is 120 basis points favorable year over year primarily due to sales leverage. Occupancy and other costs were 16.3% of company operated shop revenue. Which is 50 basis points higher year over year primarily due to higher rent on new shops as we shift more of our portfolio to build to suit leases.

We continue to expect to shift towards build to suit leases will drive higher occupancy costs as a percentage of revenue in 2026. We expect this impact to be approximately 50 basis points for 2026 consistent with what we saw in Q2. Preopening expenses were 1% of company operated shop revenue. Which is 40 basis points higher year over year primarily driven by increased number of shop openings. Moving down the P and L. Adjusted SG and A in Q2 was $72 million or 13.2% of total revenue. While continuing to make investments in our people and infrastructure, we were able to drive 90 basis points of leverage on adjusted SG and A.

Our updated 2026 guidance now contemplates a approximately 90 basis points of leverage on adjusted SG and A for the full year. Our full year guidance contemplates Q3 adjusted SG and A of $73 million to $74 million In the quarter, adjusted EBITDA was $114 million an increase of 28% over Q2 of last year. And we delivered $0.33 of adjusted EPS, up from $0.26 in the second quarter of last year. Let me now provide an update on our liquidity and CapEx. As of June 30, we had approximately $699 million in liquidity. including $269 million in cash and cash equivalents, and the balance in our undrawn revolver.

In Q2, our average CapEx per shop was approximately $1.4 million consistent with Q2 of last year. We remain on track toward our long term goal of 60% build to suit lease mix. And we continue to increase the number of high quality sites we are adding to our pipeline. As other concepts continue to rightsize their drive through fleet, they are creating even more opportunities for us to expand into high quality locations with exceptional long term economics. Turning to our guidance. Are approaching the back half of the year from a position of strength. We have a highly focused plan, long term visibility into our key growth initiatives, and a very clear objective.

To continue converting the significant white space ahead of us into durable growth. Given the performance we have seen thus far, and the impact of the Phoenix franchise acquisition, we are raising our 2026 guidance in the following areas. Total revenues are now projected to be between $2.1 billion and $2.13 billion representing 28% to 30% growth year over year. System same shop sales growth is now estimated to be in the range of 5% to 6%, with us trending towards the midpoint of that range. Adjusted EBITDA is now estimated to be in the range $385 million to $390 million The midpoint of this range contemplates approximately 20 basis points of year over year net adjusted EBITDA margin pressure.

Reflecting the impact of higher coffee costs, and increased occupancy costs partially offset by leverage on adjusted SG and A. Capital expenditures are now expected to be in the range $350 million to $370 million We remain very confident in opening at least 150 system shops in 2026. I am very proud of the results our team delivered in Q2. Strong operational execution, the continued focus on establishing the everyday routine for our customers, an incredibly strong 4 wall economics, give me even greater conviction that we are set up for long term success. Thank you, everyone. We will now take your questions. Operator, please open the lines.

Operator: Thank you. We will now be conducting a question-and-answer session. Please limit yourself to 1 question. Your handset before pressing the star keys. And our first question will come from Dennis Geiger with UBS.

Dennis Geiger: Joshua, you gave some really help helpful color on the rest of the year guidance and including as it relates to the same store sales target. Wanted to know if you could get into that a little bit more as far how you are thinking about the back half outlook. Any other puts and takes as it relates to some of the key initiatives that you have got in place and how you are thinking about contribution as we move through the back half of the year as well as just kind of anything on broader macro backdrop competition, anything else that might impact the back half of the year comps?

Joshua Guenser: Yes, Dennis. Thanks for the question. So as we think about our guide for the full year of the midpoint of the 5% to 6% range, that really does reflect the continued step up in transaction comparison. So we see step up in Q3. And Q4. We also are rolling off net pricing as we head into Q3, so we will see that impact our ticket. And then we begin to roll over actually the start of the rollout of our food program that we started in of last year. And then more meaningfully in Q4. So all those factors lead us to that 5% to 6% range for the full year and 4 to 5 points comp for Q3.

Christine Barone: Yeah. And as we look at the broader macro environment, we are feeling really good about how we are positioned. We think that we continue to be positioned to really outcompete the rest of the industry and outperform with mobile order, with Dutch rewards, with the food program, and all of the different initiatives that we have added together are just really performing. Our customers are loving them and our Broistas are serving them with exceptional service.

Operator: And our next question will come from Andrew Charles with TD Cowen.

Andrew Charles: Great. Thank you. Just a little on the guidance for 4-5%. It implies a deceleration from the strong 2Q results on both the 2 year basis as well as a seasonal basis. And I know you caught out rolling off some price, but are there other dynamics to think about considering, you know, perhaps the implied deceleration? In particular, are you seeing any headwinds from the surges of gas prices? Obviously, Starbucks had a big launch this month with blended energy as well. Just have the dynamics that we should be thinking about as well here.

Joshua Guenser: Yeah. Andrew, thanks for the question. I would really point you towards the primary driver being that transaction lapse starting to step up here and then what we are rolling off both in terms of pricing and the rollover of, the start of our food program. So we do feel very good about the position that we are in as we head into Q3 and for the balance of the year and how things are shaping up for us.

Operator: We will go next to Jeffrey Farmer with Gordon Haskett.

Jeffrey Farmer: Thanks. Over the last couple of quarters, you guys pointed out some pretty big increases in your LTO unit velocity. So just looking for a little bit more color there. And then more importantly, what is the relationship between increased LTO velocity and your traffic and same store sales numbers? Thank you.

Christine Barone: Thanks for the question. So we continue to be really pleased with how our LTOs are performing. When you look at Q2, I would highlight the launch of Mist. This is an incredibly important-- we are the leader, the category creator in customized energy. And having that full platform, including Mist, really just adds to what our customers can choose across that. We actually saw an incremental increase in energy as a total percent of our sales as we looked over that quarter. So really excited to see how that is performing. We did launch that as an LTE LTO, and with that strong performance, have decided to keep that on the menu.

As we have talked over the last couple of quarters and look at our innovation, we really look at innovation as platform innovation and then some of those LTOs, those new flavors that just drive excitement across our business. And this quarter we were really focused on that platform innovation with launching Mist. You know, the other thing we saw too is as we look at our LTOs, we look each year at what is performing really well and saw a continued really great performance out of strawberry colada. So to see both Mist performing and our strawberry colada along with very strong performance out of Dulce de Leche for that second year as well.

Operator: Moving on to Sara Senatore with Bank of America.

Sara Senatore: Oh, thank you. I wanted to ask about the franchisee comps perhaps. It looks like the gap is widening, although certainly, I think the 2 year gap maybe is more stable. I guess the reason I ask is twofold. 1, trying to distinguish kind of how much of your strength in the company system was kind of the wind at your back from a strong segment versus I think you tend to do more preopening. You tend to do, like, more local marketing. So just as I think about your underlying drivers, sort of feels like maybe franchise is a control group. And then the other piece is I know you bought in a franchise system.

I guess is there an opportunity to maybe you know, increase or accelerate comps from that business as well? Thank you.

Joshua Guenser: Yes, Sara. I will I will I will just talk about the broader spread to start with. You know, as we shared in the past, the 1 of the biggest drivers of the spread between company franchise is really that we see strong comp tailwinds coming from the newer vintages of shops. And our growth is more heavily weighted towards the company operated side. So that just disproportionately benefits our company operated system more. I would say adding to that, as we have rolled out food, we completed the rollout of food into our company operated system during the quarter. We will start rolling that out into the franchise system starting next quarter.

So certainly, that helped Create some more of the spread, especially on the ticket side as we look at Q2.

Christine Barone: And then just as a reminder about 350 of our shops will not be able to have the hot food program. And that really is disproportionately in the franchise shops. The franchise shops that we have been testing with, have started to roll out food, and those that have all of the new bakery are seeing great results with it.

Operator: We will go next to Andrew North with Baird.

Andrew North: Great. I had a follow-up on the food platforms, so you teed it up well. I was hoping you could expand a bit on your opportunity to raise awareness of the offering. I think, as you mentioned, I mean, food is rolled out to majority of the company operated locations now to date. I was wondering if you were seeing sales mix continue to build as awareness has naturally grown and maybe how you are thinking about putting marketing dollars if that is a consideration behind food to drive year 2 of growth in that platform? Thanks.

Christine Barone: Yeah. So, if we look at the food platform, our teams are really excited about the platform. So we actually see really, from the very beginning of launch of food that we see that pop up in food attach very, very quickly within our shops. And as we look at what we are trying to do with food, really, the first thing that we are trying to do is we heard from our customers loud and clear that, hey. I love Dutch Bros the most, but some days I go to another place because I want a breakfast sandwich or something like that in the morning.

And so it is really important for us to add this for our customers, and we are seeing that attached you know, right away as we roll out the program. So we are very focused right now on executing the program really well. We are really pleased with the lift that we are seeing, As we look at the long term opportunity, I think not only do we have an opportunity to grow awareness of the program, but we also now have a very important food capability as part of our toolkit. And so as we look ahead, I think there are other platforms we can look at that might still be missing, within our offering.

We only have 9 SKUs right now, within our shops. I think food can also play a nice role in seasonal offerings to help drive that awareness and that traffic. And as we roll out into new markets, I think another thing that is neat to see is customers really expect us to have that broader food offering. And so I think are very pleased when they come to our shop. So some of those new shops that we spoke about are seeing really great success, with food as well.

Operator: And our next question will come from John Ivankoe with JPMorgan.

Analyst: Good evening, guys. Can you help us understand how the new store product has been steadily ticking higher I mean, look, what is being done differently, especially as many stores are not necessarily been opening in the newer markets? And I have a follow-up.

Christine Barone: Yeah. So if we look at our new shop performance, we continue to be incredibly pleased. As you know, we have been on a journey in really developing our real estate capabilities. So starting with market planning, you know, understanding how each store that we open is going to perform not only when it opens, but also as we fill out that whole market. Then looking at how we do our marketing within a new market, how we think about what really works, what helps to drive customers in.

We have been on a march to build brand awareness as we go into new markets And I think as you look across all of those things, it is clearly working and we are opening great new shops as we continue to roll out in the country. I think 1 of the big highlights that we had in this quarter was opening in Chicago, our second shop there. I think to set an opening day record when we are at 1.2 thousand+ shops in a new market, just really speaks to the incredible strength of the brand and all of the awesome work that our teams are doing.

Operator: We will go next to Nerses Setyan with Mizuho Securities.

Nerses Setyan: Hi, thank you. Just in terms of the guidance for second half, any way to kind of break out company owned versus franchise, you know, given the expanding gap here? That would be very helpful. And aside from, you know, the food rollout, being delayed at the franchise stores. Are any of the other initiatives that are taking place in company owned stores not taking place within the franchise stores.

Joshua Guenser: Yeah, Nick. So we do not provide guidance on the components of company versus franchise. Certainly, as we think about the some of the drivers for that spread there, you expect there to remain a spread as we continue to our shop growth cadence on the company side is certainly outpacing the franchise side. But that is about as much detail as we would give on guidance as it relates to the spread between the 2.

Christine Barone: And then our food rollout really is ahead of schedule. I think as we have continued to see how our teams have embraced the food rollout, we always expected to actually roll out the company operated shops first. And for our franchisees to get to see that great performance and then adopt that program.

Operator: We will go next to Sharon Zackfia with William Blair.

Sharon Zackfia: Hi. Thanks for taking the question. Sorry. I am losing my voice. Can you talk about what you are seeing with Mist in terms of the demographic and the dayparts that might differ from what you see with Rebel?

Christine Barone: Yeah. So as we look at Mist we really are seeing that afternoon daypart strength continue. But we also do see Mist occasions in the morning as well. And I do think that it is a lighter customizable caffeine that is that is in the Mist product. it is plant powered. And it provides that really refreshing platform that our customers love. As far as demographics go, again, it looks fairly similar, I think, to what we are seeing, from Rebel as well. But it is incredibly early days still for Mist. We think this platform just has a long way to go.

And I think that, you know, as this energy market to evolve, we would expect that you would continue to see more of those occasions come into the morning as well. And I think that it is becoming something that our customers are really drinking throughout the day.

Operator: Moving on to Gregory Francfort with Guggenheim Partners.

Gregory Francfort: Hey. Thanks for the question. I just I just wanted to ask about the thought behind the Salad and Go lease acquisition. I mean, I think these are a thousand square feet, so it is pretty comparable to the size of a Dutch Bros. But I think Arizona and Nevada might be 2 of your 3 or 4 most penetrated states, and you kind of have been growing mid single digit unit growth in those markets. Just like is this to kind of turbocharge? Is there a lot of overlap with your stores? Just anything on the thought process there. Thanks.

Joshua Guenser: Yeah, Gregory. So, you know, we really look at this as we shared in the past even with something like Clutch. We look at this as a great opportunity for us to get a hold of some fantastic real estate in markets where we see a lot of potential to continue growing. So while you are right, we have several shops here in Arizona and Nevada, we still see a significant amount of white space ahead and availability for us to be able to go after creating more of that daily routine and a daily occasion with customers. So we see this as a nice addition to the overall portfolio.

To your point, the real the sites themselves are right around our size. Shop. So it should lead to easier conversion to a Dutch Bros.

Operator: Moving next to John Tower with Citigroup.

Jon Tower: Great. Thanks for taking the question. Maybe quick clarification on the question. On the clarification front, just want to make sure that the bump in CapEx that you guys had for the year guidance that includes the acquisition of the franchise market in Arizona, 1. And then the question is, on the rewards program. You know, I think Christine, you had mentioned that, it delivered its strongest contribution to comp since the start of the customer segmentation journey. So can you just speak to what exactly contributed to that? Is it something that you are doing explicitly in the program that drew customers back? Was it products in the period?

Was it, you know, exclusive merch that maybe they had access to? Just curious what moved the needle there.

Joshua Guenser: Yeah. I will start with the CapEx question quickly. That does-- the increase does-- the franchisee acquisition, does not include the announcement around Salad and Go.

Christine Barone: Yeah. And then on the rewards program, we have really been on a journey, and so a lot of this is actually us taking our data and being able to segment it in new ways and then be able to provide very unique offers, to different customer segments that really match with what we are seeing from their behavior patterns. So when we see a behavior pattern trying to get someone into that next layer of frequency, trying to get them into that next drink, trying to make them aware of other products that we have, things like that.

So it actually really is an increase in our sophistication in data and the way that we are using it within our rewards program. So it is a new capability that we have developed over time. We are also adding different ways that we can encourage our customers to try new things, so things like streaks in the program, So we are actually building out new technological capabilities as well along with all of that data segmentation that we are working through.

Operator: And moving next to Jacob Aiken-Phillips with Melius Research.

Jacob Aiken-Phillips: Good afternoon, guys. Thanks so much for taking our question. So between the 150 planned openings this year, acquired franchise shops, the Salad and Go conversions, You know, I was just curious as to how you are planning on segment sequencing these projects to ensure that the operator and MOB pipeline is not stretched. Is people capacity permitting or construction now the primary constraint? Thanks.

Christine Barone: Yeah. So as we look at our, openings, so 1, the franchise shops we actually continuously operate at those. So that acquisition is complete. They closed 1 night at the franchisee shop, opened the next morning, and our teams did just such an incredible job with that, seamless operation. I think you know, given the proximity to our headquarters, we have had the teams in here getting them getting ready for that, and they have done just a fantastic job with that. You know, on things like Salad and Go, and, like, clutch, that really is just adding, real estate to our pipeline.

So that is part of our normal process, that we go through. it is really just building on that pipeline as we are on that March to 4 thousand shops in 2029. We have an incredible pipeline of leaders. So as I mentioned on the call, we have 525 operator candidates in our pipeline. Our operators sit just above SHOP, so they manage multiple shops. And so we have a very, very strong group of leaders.

And as we look, you know, in particular at adding shops, in our pipeline in some of our markets that have been with us for the longest, like our Arizona market, we have an incredible bench of really, really strong leaders in the Arizona market. In the Vegas market. And so as we look to add more sites, we have got great people ready to operate those shops.

Operator: Moving on to Brian Mullan with Stephens.

Analyst: If you could provide us any detail on geographic distribution in terms of same restaurant sales drivers. I know in 1Q, you guys highlighted very strong results out of Texas, and that helped support the kind of system wide results. I am wondering if there is any other callouts this quarter and if you see any particular strength across any geographies?

Christine Barone: Yeah. So we do not typically share strength across geographies. We had shared that last quarter really just to highlight 1 of our most competitive markets and to show how well Dutch Bros is showing up and competing in those markets. But as we look across our comp and our very strong comp, both from a system perspective and then from a company operated perspective, we are seeing strength across all dayparts with positive comp on all dayparts. We are seeing particular strength in the morning, and that is something, you know, as we roll out these different initiatives, we have been very focused on growing that morning daypart.

So what we have been expecting to see is really showing up in the numbers. And just super pleased by how that is going.

Operator: And our next question comes from Margaret-May Binshtok with Wolfe Research.

Margaret-May Binshtok: Hey guys, thanks for taking my question. I just wanted to ask on the vibe check scorecard that you guys, just launched. I guess, can you talk a little bit about what it measures on, like, what the intent is? Is it behind, like, catching issues early or just identifying best practices so you can replicate them to other shops? Thank you.

Christine Barone: Great. So if we look at the Vibe check scorecard, it is really measuring those things that are important to our business. So like everything at Dutch Bros, starts with our people, so really understanding turnover, we are working on a metric to really understand how are our crews doing and to make sure that our teams you know, have great visibility across the board to the shop. We also have customer metrics. So what do our customers think of how we are doing? What do they think of our speed, quality, and service? And what differences do we see across shops? And then finally, business metrics. So how are we staffing our shops?

Are we staffing against the demand really well? And then how are we growing our customers? Are we inviting more customers into Dutch Bros? So it is really all of those things. That are a good important check. And as we roll this out, I think the most important thing at the beginning of the rollout is really the learning that our teams can see from each other. So we might have a shop that is doing particularly well in motivating their teams, and they have really great turnover metrics. And then the whole rest of that region will get to learn from that great operator and understand what they are doing.

And so we will use it to understand where things are, where we can improve, But I think the greatest use of a tool like this is really the learning that our operators can provide for each other.

Operator: We will hear next from Christopher Carril with KeyBanc Capital Markets.

Christopher Carril: Hi. Thanks for taking the question. Can you expand on throughput opportunities that you are seeing today? Maybe how much potential upside you see from increasing throughput? Over the near to medium term? And if you could maybe speak to this in the context of your highest volume stores, maybe touch upon some of the learnings from the Melrose Park shop that would be helpful. Thank you.

Christine Barone: Yeah. So we think we have a great path ahead of us to expand our throughput. And, you know, as we look at what is driving at what is driving the most right now, it really is on labor deployment. And so what we are looking at giving our shops very detailed and great information around how are they staffing versus the demand by day and by daypart. And as you look at that, it really helps match the demand, and then we can go through those very long lines that we have in some of our shops much quicker.

And as I look at that and learnings from some of those very high volume shops, you know, I think we are doing a really great job of that, and our highest volume shops but really labor deployment helps across our entire system. And so getting that correct. The other thing we are working on is longer term opportunities. And really looking at the shop layout. So as we look at the demand, how much of the demand is coming out the drive through window, how much of the demand is coming out of our walk up window, especially now with mobile order at 16% sales.

How do we balance that demand and make sure that the stations are in the right place and the work is happening in the right place at the shop. So very early days on that, but it excited by the work that the teams are starting to do on that.

Operator: And we will go next to Matthew Curtis with D. A. David.

Matthew Curtis: Hi, thanks. I have another question on Mist. With being added to the permanent menu. I mean, what metrics gave you confidence in making that decision to make it permanent so quickly? Is there any additional color you can provide on repeat rates, perhaps how they are tracking relative to Rebel? Or prior successful product introductions? Thank you.

Christine Barone: Yeah. So if we look at adding Mist to the permanent menu, we have actually been working on MIST for quite some time. And so kind of starting from the beginning and how we develop a product first, we do concept testing to understand how does the as we describe this product to customers, how do we think they are going to react to it? We are actually asking them how does this product sound? What about these benefits? Things like that. Then we take it through some taste testing to see, is this really the best product on the market, and how do customers react to the taste of the product?

Then we go and we actually do a market test. So we are looking for a smaller market test first to really test operations. And so can we make this? Does it fit within the cadence of what we are trying to do? And then we go to a broader market test where we are actually looking at volumes, we are looking at repeat rates, things like that.

So even before the launch of Mist, we had a lot of great data indicating that we were likely going to leave this on as a permanent menu item, given what we had seen and really given the reaction as we as we had to temporarily take it off the menu for a little bit, and the customers really begging for it to come back. And then as we roll out, we look very carefully at what customers are new, where is it, again, occasions, what other platforms do we see the product drawing from?

And what is interesting here is with Mist, not only do we see new occasions, occasions, we do see some of it drawing from Rebel, but we also see it drawing from things like lemonade. And so I think there is this real need in the market for that type of energy that a product like Mist provides. And then as we look at it, we look at repeat rates and what happens as we launch a normal LTO then what happens to that curve afterwards. And so we saw really great trial and then really strong repeat rates as Mist continued throughout quarter.

Operator: And this now concludes our question and answer session. I would like to turn the floor back over to Christine Barone for closing comments.

Christine Barone: Thank you for your questions. Before we wrap up, I would like to recognize an achievement that reflects the very best of Dutch Bros. In Q2, Drink 1 for Dame Day raised more than $1.7 million for the Muscular Dystrophy Association. The event also marked an incredible milestone, helping us surpass $20 million in lifetime donations to the MDA. Supporting critical ALS research, care, and services for families affected by the disease. Our partnership with the MDA continues to honor the legacy of our cofounder, Dane Boersma, and reflects our deep commitment to giving back to the communities we serve. As Dutch Bros continues to grow, so does the impact we are able to make together.

Thank you to our broistas, our customers, and our community partners for helping us honor Dane's legacy and make a massive difference 1 cup at a time.

Operator: Ladies and gentlemen, thank you for your participation. This does conclude today's teleconference. You may disconnect your lines, and have a wonderful day.

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