Dutch Bros, Inc. Third Quarter 2026 Conference Call and Webcast - DUTCH BROS INC

Explicit Guidance:

• 2026 Full Year:
  • Total revenues: At least $2.1 billion.
  • System same-shop sales growth: At least 5%.
  • Adjusted EBITDA: Approximately $380 million.
  • Capital expenditures: Range of $370 million to $390 million.
  • Unit openings: At least 185 system shops.
• 2027 Full Year:
  • System shop openings: Approximately 250 shops (primarily in existing states).
  • Company-operated shop contribution margin outlook: Targeting 30% (long-term) with current 2026 run-rate north of 28%.
• Q4 2026 Specifics:
  • Beverage, food, and packaging costs: Projected at approximately 27.5% of company-operated shop revenue (reflecting seasonal mix shift and absence of Q3 tariff refunds).
  • Adjusted SG&A leverage: Full-year expectation of 100 basis points of leverage.
  • Four-wall costs: Expected to be largely consistent with Q3 levels (excluding COGS impacts).

Business-Segment Outlook:

• Development & Real Estate:
  • Full visibility into a pipeline of 2,029 shops by 2029.
  • Strategy focused on market densification within existing states to drive convenience and share; new shops in 2027 will primarily target high-conviction trade areas in current markets.
  • Lease mix evolution: Approaching a 60% bill-to-suit lease mix (currently ~45% for 2025 class), which will elevate occupancy costs but drive down average CapEx per shop over time.
• Menu & Product:
  • Beverages: Refreshed Matcha platform launch planned for 2027 following positive market tests; accelerated beverage innovation cadence expected in H1 2027.
  • Energy Mix: Currently 27% (up from 25%); expected to continue growing.
  • Food: Hot food rollout completing for franchise shops in H2 2026; testing additional hot food items and seasonal offerings (e.g., Holiday Sugar Cookie Cake Pop) to drive attach rates and frequency.
  • Digital: Order Ahead penetration reached 17% in Q3; piloting delivery via DoorDash in select markets with plans to expand.
• Customer & Loyalty:
  • Dutch Rewards penetration at 74% of visits; focus on deepening segmentation (frequency + product preference) to drive cross-platform trials (e.g., moving customers from coffee to energy) and frequency uplift in 2027.

Market and Competitive Outlook:

• Competition: Operating in highly competitive environments with legacy players and emerging brands (e.g., Seven Brew); AUVs remain consistent regardless of proximity to competitors (quarter-mile to mile radius).
• Share Gains: Outperforming the broader beverage market growth; gaining share particularly among Gen Z and Gen X cohorts, with sustained strength in the morning daypart.
• Pricing & Costs: Coffee prices remain elevated but stable; capacity to implement pricing increases to offset persistent cost pressures if necessary.
• Unit Economics: New shop 2nd-year performance annualizing at ~$2 million, above the $1.8 million underwriting framework; expected to normalize toward the framework in 2027 as market densification increases cannibalization.

Macro / Industry Outlook:

• Consumer Environment: Acknowledges ongoing consumer volatility driven by rising gas prices and utility cost increases; expects these headwinds to persist into Q4 2026 and potentially impact traffic comparisons in Q4 and 2027.
• Inflationary Pressures: Anticipates elevated utility and freight costs to continue into Q4 2026; food program costs offset by tariff refunds in Q3.
• Tax & Other: No specific tax rate guidance provided, but updated 2026 guidance includes impacts of tariff refunds (recognized in Q3) and their absence in Q4.

Strategic Initiatives:

• Launches: Accelerated innovation calendar for 2027 featuring refreshed Matcha, expanded food platforms, and frequent merch/sticker drops.
• Capacity & Operations: Implementing the VibeCheck scorecard to optimize shop-level execution and labor deployment; continuing rollout of hot food capabilities to franchise locations.
• M&A: No large-scale M&A included in 2027 guidance; pipeline includes occasional site conversions from other players as part of normal growth.
• Community: Continued execution of Buck for Kids and local brand activations to drive affinity and community engagement.

Risks and Headwinds to Outlook:

• Customer Volatility: Potential for softened traffic in Q4 due to difficult year-over-year comparisons and economic pressure on consumers (gas/utilities).
• Cannibalization: Elevated cannibalization expected in 2027 due to aggressive densification in existing markets, potentially impacting same-store sales growth metrics.
• Cost Pressures: Beverage, food, and packaging costs projected to rise to 27.5% in Q4 (from 25.6% in Q3) due to the absence of tariff refunds and seasonal mix shifts.
• Margin Pressure: Occupancy costs expected to remain elevated in 2027 due to the shift toward build-to-suit leases; coffee price stability remains a variable.
• Execution Risks: Successful scaling depends on maintaining the "people-led culture" and speed/quality of service as the fleet grows.

Management Tone on the Future:

• Confidence: High confidence in the 2027 roadmap and development pipeline despite macro uncertainty; described 2026 results as "consistent, durable" and "outstanding."
• Strategic Shift: Emphasis on moving from pure expansion to deliberate growth via densification and operational excellence.
• Guidance Adjustments: Updated 2026 guidance reflects a "thoughtful" stance on consumer volatility and difficult comparisons rather than a fundamental deterioration of the business model.
• Outlook Summary: Management expresses excitement for 2027, citing a strong innovation calendar, digital expansion, and a deep real estate pipeline as key drivers for continued growth.

Miscellaneous:

• Liquidity: Total liquidity of $625 million (including $195 million cash) as of September 30, 2026; recent franchise acquisition in Phoenix funded via cash on hand.
• CapEx Efficiency: Average CapEx per shop at $1.4 million (consistent with Q2), with a trajectory to decrease further as lease structures optimize.
• Regulatory: Mention of tariff refunds ($4 million) impacting Q3 margins, with no indication of new regulatory headwinds other than cost passthroughs.