Release Date: November 06, 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 28% increase in revenue and a 20% rise in adjusted EBITDA for Q3 2024, exceeding expectations.
- The company successfully opened 38 new shops in Q3, bringing the total to 950, and plans to open at least 160 shops in 2025.
- Mobile order rollout reached 90% system coverage, contributing to a 5% increase in customer frequency and higher tip rates.
- Dutch Rewards program saw significant growth, with over 1 million new registrations in Q3, accounting for 67% of transactions.
- Paid advertising efforts have tripled unaided brand awareness in Texas and are driving sales growth in new and mature markets.
Negative Points
- Labor costs increased by 160 basis points year-over-year, primarily due to higher compensation expenses in California.
- Occupancy and other costs rose by 110 basis points, driven by elevated repair and maintenance expenses.
- The company faces challenges in reducing per unit development costs, with average CapEx per shop at approximately $1.7 million.
- Despite strong growth, food sales remain less than 2% of total sales, indicating limited current impact from food offerings.
- The mix of transactions showed a negative trend, with a 2% decline in Q3, attributed to discounts and mix changes.
Q & A Highlights
Q: Can you share insights on the shops with higher mobile order penetration and their performance?
A: Christine Barone, CEO, explained that newer shops are seeing higher mobile order usage, establishing new customer routines. This is also linked to increased Dutch Rewards registrations, potentially bringing new customers into the brand.
Q: What are your strategic thoughts on the food opportunity at Dutch Bros?
A: Christine Barone noted that while it's early days for food, they see it as a strategic opportunity to enhance morning routines alongside mobile orders. They plan to expand testing in 2025, with a more robust food offering likely playing a role in 2026 and beyond.
Q: Can you provide more color on the Q4 guidance and the impact of mobile order and pay?
A: Josh Guenser, CFO, stated that Q4 guidance includes 1-2% comp growth, reflecting current trends. Mobile order trends from Q3 are factored in, but any dramatic changes are not included in the guidance.
Q: How are you measuring the incrementality of mobile orders?
A: Christine Barone highlighted three dynamics: a 5% frequency lift for existing customers, new customer acquisition through Dutch Rewards, and increased throughput during peak hours, indicating mobile order's positive impact.
Q: What factors contributed to the better-than-expected Q3 results?
A: Christine Barone attributed the results to a combination of effective paid advertising, increased Dutch Rewards registrations, and the accelerated rollout of mobile orders, all resonating well with customers.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
