Dutch Bros(BROS) - 2025 Q2 - Quarterly Report

PART I FINANCIAL INFORMATION Financial Statements (Unaudited) Unaudited H1 2025 financial statements reflect significant revenue and net income growth, with total assets increasing to $2.81 billion and liabilities rising due to TRAs Condensed Consolidated Balance Sheets As of June 30, 2025, total assets increased to $2.81 billion, while liabilities grew to $1.98 billion, primarily due to tax receivable agreements Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Total Assets | $2,812,247 | $2,501,085 | | Cash and cash equivalents | $254,415 | $293,354 | | Property and equipment, net | $747,831 | $683,971 | | Deferred income tax assets, net | $955,190 | $742,126 | | Total Liabilities | $1,978,318 | $1,737,220 | | Long-term debt, net | $196,838 | $219,755 | | Tax receivable agreements liability | $824,447 | $627,834 | | Total Equity | $833,929 | $763,865 | Condensed Consolidated Statements of Operations Q2 2025 total revenues increased 28.0% to $415.8 million, with net income growing 73.1% to $38.4 million, driven by company-operated shops Statement of Operations Summary (in thousands) | Metric | Q2 2025 | Q2 2024 | YoY Change | H1 2025 | H1 2024 | YoY Change | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Total Revenues | $415,813 | $324,918 | +28.0% | $770,965 | $600,017 | +28.5% | | Company-operated shops | $380,500 | $295,268 | +28.9% | $706,921 | $543,353 | +30.1% | | Franchising and other | $35,313 | $29,650 | +19.1% | $64,044 | $56,664 | +13.0% | | Income from Operations | $54,659 | $32,184 | +69.8% | $85,731 | $57,800 | +48.3% | | Net Income | $38,357 | $22,156 | +73.1% | $60,837 | $38,371 | +58.6% | | Diluted EPS | $0.20 | $0.12 | +66.7% | $0.33 | $0.20 | +65.0% | Condensed Consolidated Statements of Cash Flows H1 2025 operating cash flow increased to $126.8 million, while financing activities shifted to a $66.0 million outflow due to debt refinancing Cash Flow Summary - Six Months Ended June 30 (in thousands) | Cash Flow Category | 2025 | 2024 | | :--- | :--- | :--- | | Net cash provided by operating activities | $126,781 | $100,729 | | Net cash used in investing activities | $(99,731) | $(113,240) | | Net cash provided by (used in) financing activities | $(65,989) | $139,888 | | Net (decrease) increase in cash | $(38,939) | $127,377 | Notes to Condensed Consolidated Financial Statements Notes detail significant accounting policies, including headquarters relocation costs, debt refinancing, and an increase in the Tax Receivable Agreements liability to $824.4 million - The company is undergoing a significant organizational realignment, relocating its headquarters from Grants Pass, Oregon to Phoenix, Arizona, with a new restructuring program approved in May 2025 expected to incur up to $8.5 million in charges[66][67] - On May 29, 2025, the company amended and restated its credit facility, establishing a new $500 million revolving credit facility and a $150 million term loan facility (the '2025 Credit Facility'), which matures in 2030, with all outstanding debt under the previous facility repaid[77][78] - The liability related to the Tax Receivable Agreements (TRAs) increased from $627.8 million at year-end 2024 to $824.4 million as of June 30, 2025, primarily due to the exchange of Dutch Bros OpCo units[94] - The company operates two reportable segments: Company-operated shops, which generate revenue from retail sales, and Franchising and other, which includes sales to franchisees, royalties, and fees[117] Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses strong Q2 2025 performance driven by shop growth and same-shop sales, improved margins, debt refinancing, and addresses macroeconomic risks Results of Operations Q2 2025 total revenue grew 28.0% driven by company-operated shops, with gross profit margin expanding due to sales leverage and reduced labor costs Key Performance Indicators - Q2 2025 vs Q2 2024 | Metric | Q2 2025 | Q2 2024 | | :--- | :--- | :--- | | Total Shop Count | 1,043 | 912 | | Systemwide Same Shop Sales | 6.1% | 4.1% | | - Transactions | 3.7% | (2.0)% | | - Ticket | 2.4% | 6.1% | | Company-operated Same Shop Sales | 7.8% | 5.2% | | - Transactions | 5.9% | (0.8)% | | - Ticket | 1.9% | 6.0% | - Company-operated shop revenue growth in Q2 2025 was driven by $63.9 million from new shops and $21.3 million from a 7.8% increase in same-shop sales[140] - Labor costs as a percentage of company-operated shop revenue decreased by 60 basis points in Q2 2025 due to the impact of pricing, while beverage, food, and packaging costs decreased by 20 basis points[145][148] Liquidity and Capital Resources The company ended Q2 2025 with $254.4 million in cash, generated $126.8 million from operations, and refinanced its debt with a new $500 million revolver and $150 million term loan - The company refinanced its debt in May 2025, securing a new facility consisting of a $500 million revolving credit facility and a $150 million term loan, which expires in May 2030[182] - As of June 30, 2025, cash and cash equivalents stood at $254.4 million, down from $293.4 million at the end of 2024[174] Non-GAAP Financial Measures Non-GAAP measures show Q2 2025 Adjusted EBITDA increased to $89.0 million (21.4% of revenue), and company-operated shop contribution margin improved to 31.1% Adjusted EBITDA Reconciliation (in thousands) | Metric | Q2 2025 | Q2 2024 | | :--- | :--- | :--- | | Net income | $38,357 | $22,156 | | Depreciation and amortization | $27,893 | $22,350 | | Interest expense, net | $7,076 | $6,997 | | Income tax expense | $7,243 | $3,860 | | EBITDA | $80,569 | $55,363 | | Equity-based compensation | $4,671 | $3,326 | | Expenses associated with credit facility refinancing | $2,000 | $— | | Organization realignment and restructurings | $1,763 | $6,694 | | Other adjustments | $— | $(224) | | Adjusted EBITDA | $89,003 | $65,159 | Quantitative and Qualitative Disclosures About Market Risk The company faces market risks from commodity price fluctuations, rising labor costs, and interest rate exposure on its floating-rate debt, partially mitigated by hedging - The company faces significant commodity risk from inputs like dairy, coffee, fuel, and sugar, and has been raising menu prices to offset inflation[213] - Labor costs are pressured by rising minimum wage requirements, notably in California, which increased to $20/hour for the industry in April 2024[214] - The company is exposed to interest rate risk on its $200 million of outstanding floating-rate debt as of June 30, 2025, where a 1% rate increase would raise annual interest expense by approximately $2.0 million, excluding swap impacts[215] Controls and Procedures Management concluded that disclosure controls and procedures were effective as of June 30, 2025, with no material changes to internal control over financial reporting - As of June 30, 2025, the CEO and CFO concluded that the company's disclosure controls and procedures were effective[218] - No material changes to internal control over financial reporting occurred during the three months ended June 30, 2025[219] PART II OTHER INFORMATION Legal Proceedings The company is involved in routine legal actions incidental to its business, not currently expected to have a material adverse effect - The company is subject to routine litigation and claims incidental to its ordinary course of business[222] Risk Factors Material changes to risk factors include potential impacts from international trade policies and evolving regulations and consumer attitudes regarding health and food additives - A new risk factor highlights that U.S. tariffs and restrictive trade policies could raise costs of imported green coffee beans, reduce margins, and disrupt supply chains[225][226] - The company notes increasing risk from government regulations and consumer attitudes regarding diet and health, including menu labeling laws and potential restrictions on food additives and dyes, which could negatively influence demand[231][232] Unregistered Sales of Equity Securities and Use of Proceeds On April 28, 2025, the company issued 1.75 million Class A common shares in an unregistered exchange for Dutch Bros OpCo units, with no proceeds received - On April 28, 2025, the company conducted an unregistered issuance of 1.75 million shares of Class A common stock in exchange for an equal number of Dutch Bros OpCo units held by the Co-Founder's entities, with no proceeds received[237] Defaults Upon Senior Securities There were no defaults upon senior securities during the period - There were no defaults upon senior securities[238] Mine Safety Disclosure This disclosure item is not applicable to the company's operations - This section is not applicable to the company[239] Other Information No other material information is required to be reported under this item - There is no other information to report for this item[240] Exhibits This section lists exhibits filed with the Form 10-Q, including the new Credit Agreement and Sarbanes-Oxley certifications - Key exhibits filed include the new Second Amended and Restated Credit Agreement and Sarbanes-Oxley certifications[242]