Business Context and Reporting Period
Company: Dutch Bros Inc.
Filing Type: Form 10-Q (Unaudited)
Reporting Period: Three months ended March 31, 2026
Business Overview: Dutch Bros operates and franchises drive-thru coffee shops. As of March 31, 2026, the system comprised 1,177 shops (844 company-operated, 333 franchised) across 25 U.S. states. The company reported a 16.3% increase in total shop count year-over-year.
Key Financial Metrics
| Metric (in thousands, except per share) | Q1 2026 | Q1 2025 |
|---|---|---|
| Total Revenues | $464,412 | $355,152 |
| Net Income | $23,664 | $22,480 |
| Net Income Attributable to Dutch Bros Inc. | $16,097 | $15,353 |
| Diluted EPS | $0.13 | $0.13 |
| Operating Cash Flow | $84,724 | $36,884 |
| Adjusted EBITDA | $79,373 | $62,906 |
| Cash and Cash Equivalents (End of Period) | $263,517 | $316,441 |
| Total Debt (Principal) | $201,487 | $202,463 |
Margins: Company-operated shops gross profit margin was 20.0% (down 190 bps from 21.9%). Segment contribution margin for company-operated shops was 28.3% (down 110 bps from 29.4%).
Material Changes vs. Prior Period
- Revenue Growth: Total revenue increased 30.8% year-over-year, driven by a 31.4% increase in company-operated shop revenue and a 23.1% increase in franchising revenue.
- Same Shop Sales: Systemwide same shop sales grew 8.3% (driven by 5.1% transaction growth and 3.2% ticket growth). Company-operated same shop sales grew 10.6%.
- Acquisition: On January 23, 2026, the company acquired assets of Clutch Coffee (22 locations) for $19.8 million in cash, accounted for as an asset acquisition.
- Cost Pressures: Beverage, food, and packaging costs rose 38.0% (120 bps increase as a % of revenue) due to higher coffee costs and food program expansion. Labor costs decreased as a percentage of revenue by 120 bps due to sales leverage.
- Tax Rate: The effective tax rate increased to 12.4% from 6.1%, primarily due to a reduction in excess tax benefits from stock-based compensation.
Outlook, Risks, and Management Commentary
- Expansion Strategy: Management continues to prioritize opening new company-operated shops. Pre-opening costs increased 13.0% due to travel and lease expenses for unopened shops.
- Liquidity: The company maintains a $650 million credit facility (2025 Credit Facility). As of March 31, 2026, $50 million was outstanding on the revolver and $147.2 million on the term loan. Management believes operating cash flows and the credit facility are sufficient for the next 12 months.
- Risks:
- Commodity Inflation: Exposure to rising costs of coffee, dairy, sugar, and packaging. The company mitigates this through menu price increases and operational adjustments.
- Labor Costs: Minimum wage increases in several states effective in 2026 may pressure margins.
- Tax Receivable Agreements (TRAs): The company has a liability of $820.1 million related to TRAs, requiring payments to certain OpCo owners of 85% of realized tax benefits.
- Restructuring: The company completed a restructuring program related to relocating back-office operations to Phoenix, incurring approximately $8.6 million in total charges to date.
Investor Verification Checklist
- Margin Compression: Verify the sustainability of the 190 bps decline in company-operated gross profit margin amidst rising commodity costs.
- TRA Liability: Review the $820.1 million Tax Receivable Agreement liability and its potential impact on future cash flows.
- Acquisition Integration: Monitor the conversion progress and performance of the 22 acquired Clutch Coffee locations.
- Debt Covenants: Confirm continued compliance with the Net Lease-Adjusted Total Leverage Ratio and Coverage Ratio covenants under the 2025 Credit Facility.
- Non-GAAP Reconciliations: Scrutinize the adjustments made to calculate Adjusted EBITDA, specifically the exclusion of equity-based compensation and restructuring costs.