Dutch Bros Inc. Shines in Earnings Call Despite Coffee Cost Woes

Dutch Bros Inc. Class A ((BROS)) has held its Q4 earnings call. Read on for the main highlights of the call.

Dutch Bros Inc. Reports Strong Growth Amidst Challenges in Latest Earnings Call

In a recent earnings call, Dutch Bros Inc. showcased a robust performance with strong revenue and EBITDA growth, largely attributed to successful new shop openings and increased mobile order adoption. The company also highlighted positive outcomes from its Dutch Rewards program and seasonal offerings. However, there is an anticipated margin pressure in 2025 due to rising coffee costs, which the company acknowledges as a potential challenge.

Strong Revenue Growth

Dutch Bros achieved an impressive revenue growth of 33% in 2024, fueled by an 18% increase in new shop growth with the opening of 151 new shops. The company also experienced a 5.3% increase in system same-shop sales growth. Notably, Q4 revenue surged by 35% compared to the same quarter in the previous year.

Record New Shop Openings

The company set a record in 2024 with the opening of 151 new shops, 128 of which were company-operated. In the fourth quarter alone, Dutch Bros opened 32 new locations, bringing their total shop count to 982. This expansion underscores the company’s aggressive growth strategy.

Adjusted EBITDA Growth

In 2024, Dutch Bros reported a 44% growth in adjusted EBITDA, with a notable 41% increase in the fourth quarter year-over-year. The adjusted EBITDA margin expanded by 140 basis points to reach 18% for the year, reflecting improved operational efficiency.

Mobile Order Success

By the end of 2024, 96% of the system and 99% of company-operated shops had incorporated mobile order functionality. This channel represented approximately 8% of the total mix, demonstrating the growing importance of digital sales channels.

Candy Cane Mocha Platform Success

The Candy Cane Mocha platform achieved its highest performance ever, with nearly 40% more total units sold compared to the previous year. This seasonal offering played a significant role in enhancing customer engagement and sales.

Dutch Rewards Program Expansion

The Dutch Rewards program saw significant expansion, with transactions accounting for a record 71% of total transactions, marking an increase of over 500 basis points year-over-year. This reflects the program’s growing appeal and effectiveness in driving customer loyalty.

Coffee Cost Pressure

Rising coffee prices throughout 2024 and into 2025 are expected to exert about 110 basis points of net COGS margin pressure starting in Q1 and increasing in Q2. This is a notable concern for the company as it could impact profitability.

Impact of Elevated Coffee Prices on Margins

Dutch Bros anticipates approximately 150 basis points of overall adjusted EBITDA margin impact due to elevated coffee costs in 2025. This highlights the challenges the company faces in maintaining its margins amidst rising commodity prices.

Forward-Looking Guidance

During the earnings call, Dutch Bros provided optimistic guidance for 2025, projecting a total revenue growth of 21% to 23%, reaching between $1.555 billion and $1.575 billion. The company plans to open at least 160 new shops, representing a system growth of 16%, and anticipates a system same-shop sales growth of 2% to 4% for the year. Adjusted EBITDA is expected to grow by 15% to 20%, ranging from $265 million to $275 million, highlighting a strategic focus on expansion and operational efficiency.

In conclusion, Dutch Bros Inc. demonstrated a strong performance with significant growth in revenue and shop openings. While the company faces challenges from rising coffee costs, its strategic initiatives and optimistic guidance for 2025 indicate a commitment to continued expansion and operational excellence. Investors and stakeholders will be keenly watching how Dutch Bros navigates these headwinds while capitalizing on its growth opportunities.