Release Date: August 07, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Dutch Bros Inc (BROS, Financial) reported a 30% increase in revenue and a 34% increase in adjusted EBITDA for Q2 2024.
- The company opened 36 new shops in Q2, marking the 12th consecutive quarter of 30 or more new shop openings.
- Same shop sales rose by 4.1%, and average unit volumes (AUVs) were $2 million, consistent with the previous quarter's record.
- The company raised its revenue and adjusted EBITDA guidance for the year, reflecting strong performance and confidence in future growth.
- Dutch Bros Inc (BROS) has a robust pipeline of over 400 operator candidates, ensuring a steady supply of experienced leaders for new shops.
Negative Points
- Labor costs increased by 50 basis points year over year, driven primarily by wage growth.
- The company is facing an evolving and uncertain consumer environment, which could impact future performance.
- Dutch Bros Inc (BROS) expects to land towards the lower end of its development range of 150 to 165 new shops in 2024.
- The company is navigating increased promotional activity in the market, which may pressure margins.
- There are concerns about potential negative same-store sales in the back half of the year due to rolling off significant pricing actions from last summer.
Q & A Highlights
Q: There is some concern that the comp guidance might imply negative comps in the back half of the year. Can you address that? Also, on mobile ordering, is it redeploying some labor, and if so, are you seeing improved customer satisfaction and throughput?
A: On mobile order, it's early days with about 40 shops testing it. We're focused on maintaining customer service while redeploying labor to enhance customer interaction. Regarding same shop sales, we are pleased with the first half of the year and the strength of our rewards program, innovation, and paid advertising. We expect increased promotional activities in the second half, which may impact comps.
Q: Does the guidance for same-store sales contemplate the potential lift from mobile order? How quickly do you see mobile order typically kick in terms of sales lift?
A: Mobile order is still in early stages, and we are rolling it out gradually to ensure operational smoothness. We believe it will be a larger driver in 2025 as we continue to refine the process.
Q: On unit development, the guidance implies a slowdown in the second half. What does this mean for 2025? Are there any redesigns to increase throughput?
A: We are seeing higher new shop AUVs, which gives us confidence in raising revenue guidance. We are focused on returns and productivity of new shops. We are also working on reducing per unit shop CapEx. For 2025, we are not commenting on specific numbers yet but are optimistic about our long-term potential.
Q: Can you clarify the second half commentary on comp guidance? Are you expecting average check growth to be flat, and how does this impact traffic?
A: We expect about four points of price, offset by mix and increased promotional activities. This implies flattish comps for the second half, factoring in the current consumer environment.
Q: How is the volatile consumer environment impacting your business?
A: We feel good about our Q2 performance and the returns from innovation and paid advertising. We are empathetic to our customers' needs and continue to focus on generosity through our rewards program and customer service.
Q: Can you provide more details on the increased SG&A guidance?
A: The increase is due to investments in paid media, support center roles, and performance-related compensation. We are ramping up hiring to support our expansion and driving the business forward.
Q: How are you managing the increased promotional environment?
A: We are focusing on our strengths in innovation, paid advertising, and the rewards program. We believe our strategy of targeting core customers with fun, innovative products is paying off.
Q: Can you provide more insights on the performance of the Florida market?
A: We are pleased with the initial performance in Florida. Customers are driving long distances and waiting in lines, indicating strong brand strength. We are cautious about projecting long-term performance from just a few shops but are encouraged by the early results.
Q: How is the mobile order impacting customer behavior, particularly with the walk-up window?
A: Early data shows customers prefer the walk-up window for mobile orders, which helps balance volume between the drive-through and walk-up window. This operational balance is beneficial for high-volume shops.
Q: Can you clarify the impact of the pricing roll-off in California and the consumer response?
A: California saw a 25% wage increase, impacting about 20% of our shop base. We took a 1.5% weighted price increase in California and are monitoring the overall P&L and new shop openings. We remain bullish on our prospects in California.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
