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Date

May 6, 2026

Call participants

  • Chief Executive Officer and President — Christine Barone
  • Chief Financial Officer — Joshua Guenser
  • Head of Investor Relations — Neil Patel

Takeaways

  • Total revenues -- $464 million, up 31%, with growth driven by both transaction volume and strong shop performance.
  • System same shop sales growth -- 8.3%, with transaction growth of 5.1%, underscoring ongoing customer momentum.
  • Adjusted EBITDA -- $79 million, increasing 26% over the prior year, supported by revenue strength and operational efficiency.
  • Adjusted EPS -- $0.16, up from $0.04, reflecting stronger profitability.
  • System shop openings -- Forty-one new shops, including seven Clutch Coffee Bar conversions, marking an acceleration in new store development.
  • Record average unit volumes (AUVs) -- AUV reached $2.2 million, with new shop productivity aligned with fleet averages.
  • Clutch Coffee Bar conversions -- Seven converted shops are delivering more than three times their pre-conversion volumes and exceeding system-wide AUVs.
  • Texas performance -- Texas delivered nearly 20% same shop sales growth as the largest comp state, illustrating the effectiveness of market density and brand investment.
  • Food rollout -- The food program completed across 485 shops, with food attachment rates in the low teens, and is expected to reach nearly all company-operated shops by the end of Q3.
  • Food comp lift -- The food offering is tracking to deliver around a 4% comp lift in participating shops, per management's latest assessment.
  • Limited-time offers (LTO) performance -- The Q1 LTO window drove approximately a 30% increase in unit velocity versus the prior year.
  • Merchandise sales -- Mini charm figurines and mystery bags yielded a ~50% greater sales lift compared to similar drops in the previous year.
  • Mist Energy Refreshers launch -- This new plant-based energy beverage platform launched in May and demonstrated initial strong demand with retention similar to protein coffee introductions.
  • Dutch Rewards penetration -- 74% of transactions now flow through the Dutch Rewards platform; order ahead reached 15% of transactions, showing meaningful adoption.
  • Company-operated shop metrics -- Company-operated revenue was $429 million, up 31%, with same shop sales growth at 10.6% and transaction growth at 6.9%.
  • Company-operated shop contribution margin -- 28.3%, reflecting a 120 basis point favorability in labor costs year over year, but 120 basis points higher in beverage, food, and packaging costs, mainly due to coffee and food rollout expenses.
  • Occupancy and other costs -- These costs accounted for 17% of company-operated shop revenue, up 130 basis points primarily from build-to-suit leases and higher repairs and maintenance expenses.
  • Capital expenditures (CapEx) -- Average CapEx per shop was $1.3 million, in line with Q4 and lower than the $1.7 million reported a year earlier.
  • Liquidity -- The company ended the quarter with approximately $198 million in total liquidity, including $264 million in cash and cash equivalents and an undrawn revolver.
  • Full-year 2026 guidance raised -- Total revenues projected at $2.05 billion-$2.08 billion (25%-27% growth), 185 or more new shops, system same shop sales up 4%-6%, adjusted EBITDA at $370 million-$380 million, with 30 basis points of anticipated EBITDA margin pressure.

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Risks

  • Beverage, food, and packaging costs rose 120 basis points year over year in company-operated shops, "primarily driven by higher coffee costs and costs associated with the continued rollout of our new food program."
  • Occupancy and other costs increased 130 basis points year over year, "primarily due to higher rent on new shops as we shift more of our portfolio to build-to-suit leases and higher repairs and maintenance costs."
  • Joshua Guenser said, "we continue to expect an impact from higher coffee costs as the year progresses," and guided for "approximately 60 basis points of total COGS pressure" in 2026.
  • Management projects "approximately 30 basis points of net adjusted EBITDA margin pressure," reflecting sustained cost headwinds.

Summary

Dutch Bros (BROS +3.31%) reported substantial growth in both revenue and new shop development and raised full-year 2026 guidance across revenue, comp sales, shop openings, and adjusted EBITDA. The company demonstrated continued momentum in core metrics, including record-high average unit volumes, acceleration of the food and beverage innovation pipeline, and deepening engagement through Dutch Rewards and digital adoption. Management highlighted rapid integration and outperformance of Clutch Coffee Bar conversions, as well as the expansion into new energy drink categories with Mist, supporting the company's strategic market expansion.

  • Leadership cited accelerating market planning and a clear path to achieve its target of 2,029 shops by 2029.
  • Innovative limited-time menu offerings and merchandise drops produced measurable transaction and sales boosts, reinforcing the effectiveness of demand-focused initiatives.
  • The operator talent pipeline is robust, with nearly 500 leaders ready for shop expansion and low operator turnover in the low single digits.
  • Initial CPG retail distribution is pacing ahead of early expectations, with higher SKU-level velocity than the market leader in some channels.
  • Throughput enhancements are yielding increased orders per peak hour, with incremental transaction growth supported by better labor deployment and operational improvements.

Industry glossary

  • AUV (Average Unit Volume): The average annual revenue generated per shop, used as a key productivity and performance metric.
  • LTO (Limited Time Offer): Temporary menu items or merchandise, often used to create spikes in demand or brand engagement.
  • Attachment rate: The percentage of customer transactions in which an additional item (e.g., food) is sold alongside the primary purchase.
  • Build-to-suit lease: A real estate leasing model where the landlord constructs a facility to the tenant's specification, often resulting in higher rent but enabling rapid deployment.
  • CPG (Consumer Packaged Goods): Branded products sold through retail or wholesale channels, distinct from company-operated shops.

Full Conference Call Transcript

Neil Patel: Good afternoon, and welcome. I am joined by Christine Barone, CEO and President, and Joshua Guenser, CFO. We issued our earnings press release for the quarter ended March 31, 2026, after the market closed today. The earnings press release along with the supplemental information deck have been posted to our Investor Relations website at investors.dutchbros.com. Please be aware that all statements in our prepared remarks and in response to your questions other than those of historical fact are forward-looking statements and are subject to risks, uncertainties, and assumptions that may cause actual results to differ materially.

They are qualified by the cautionary statements in our earnings press release and the risk factors in our latest SEC filings, including our most recent Annual Report on Form 10-K and Quarterly Report on Form 10-Q. We assume no obligation to update any forward-looking statements. We will also reference non-GAAP financial measures on today's call. As a reminder, non-GAAP measures are neither substitutes for nor superior to measures that are prepared under GAAP. Please review the reconciliation of non-GAAP measures to comparable GAAP results in our earnings press release. During the question and answer portion of today's call, please limit yourself to one question. With that, I would like to turn the call over to Christine.

Christine Barone: Thank you, Neil, and good afternoon, everyone. Dutch Bros Inc. continues to operate in a category of its own, anchored by a people-led culture that creates authentic customer connection. With disciplined growth and continued investment in our people, the long-term outlook remains incredibly bright. Our first quarter results meaningfully exceeded expectations, driven by the passion of our broistas, the strength of our all-day beverage platform, category-leading innovation, and our idiosyncratic transaction drivers, including the rollout of food. Based on the strength of our performance throughout Q1, our industry-leading value proposition, and performance into Q2, we are raising our full-year guidance. Turning to our Q1 results, total revenues increased an impressive 31%, accompanied by strong profitability with adjusted EBITDA up 26%.

Our transaction-driving efforts maintained momentum from Q4, translating to seven consecutive quarters of transaction growth. Our customers continue to choose us for our customization, innovation, and incredible customer service. Our Q1 2026 shop openings were ahead of schedule, with 41 system shop openings. Our path to 2,029 shops in 2029 remains very clear. This reflects the positive impact of our real estate pipeline work. Moving forward, we remain confident we can continue to accelerate our long-term shop openings as our market planning and real estate investments pay off.

Our AUVs are at record levels and new shop productivity remains in line with system averages as momentum behind our stepped-up brand awareness remains strong and our customers continue to respond to our focus on speed, quality, and service. Our foundation is incredibly strong. Our focus on speed to market with best-in-class innovation, a hyper-customizable menu, and unmatched customer service plays a critical role in delighting customers and building an everyday routine. It is clear we are poised to continue shaping and commanding a leadership position in the large and growing beverage category. In fact, we are consistently rated the top beverage chain for service. At the center of that performance—and what truly sets Dutch Bros Inc. apart—is our people.

Our commitment to our people allows us to consistently invest in culture, development, and leadership. That enables us to build strong teams at scale. We are a great place to work and to grow. We create a fun, high-energy environment for our broistas while also providing clear and compelling futures through internal growth and leadership development. That investment drives strong engagement and retention, and it allows us to develop leaders who build connected, high-performing teams. Our leadership turnover remains incredibly low, with turnover at the operator level in the low single digits. As we continue to grow, we are able to create new opportunities for the nearly 500 leaders we have in our operator pipeline.

To bring this to life, I wanted to share an example of one of our coaches leading our openings in the Greater Chicago market. Ali has been with Dutch Bros Inc. for over a decade, relocating across multiple markets with a team of operators who have continued to follow and grow alongside her. This model allows us to bring a seasoned team of leaders to build and grow a new market quickly with operational consistency and our signature Dutch love. Our results demonstrate this. Our first shop in the Greater Chicago market is already pacing to a volume of approximately $4 million. That kind of performance is a direct reflection of the culture and leadership pipeline we have built.

This strength also shows up in our ability to attract and engage talent at scale. In 2025, we received over 780,000 applications for approximately 19,000 shop roles, and we rank in the top 15% of all companies in employee engagement today according to Gallup. Ultimately, all of this shows up in the customer experience. Our 2,029 shops in 2029 remain very clear, and we are energized by our progress so far. We continue to strengthen our development pipeline. Our market planning team has a robust plan to continue executing our strategy of densifying markets while we expand into new. The buzz and excitement around the Dutch Bros Inc. brand remains strong.

We have no shortage of potential sites for new builds, and have a healthy pipeline of attractive conversion opportunities. These include sites from limited service operators, smaller emerging growth concepts, and legacy beverage brands. Let me share an update on our Clutch Coffee Bar conversions. During Q1, we reopened seven converted shops, and the early response has been incredible. Lines are forming, communities are buzzing, and our brand is showing up in a big way. These converted shops are already outperforming our system-wide AUVs and generating on average more than three times their pre-conversion volumes. I want to sincerely thank our teams and the Clutch teams for making this transition seamless.

Our real estate strategy is centered on building density thoughtfully. We believe that over the long term, density drives stronger brand outcomes—establishing customer routine, improving retention, and creating frequency. We intend to continue executing this strategy, recognizing that while initial openings in new markets may deliver elevated volumes, durability is driven by density and becoming the everyday routine. This strategy is working. Our system-wide AUVs are at record levels, and Texas, our largest comp state by shop count, drove almost 20% same shop sales growth in Q1. Now let me share how we are continuing to widen our competitive moat through a focused set of transaction drivers we have introduced over the past several years.

These drivers deliver long-term structural benefits as we scale not just the number of shops, but also the number of occasions at each shop. Our new food rollout continues to perform exceptionally well. As of Q1, we have completed the rollout across 485 system shops, including 11 franchise shops. The program continues to maintain a high level of operational efficiency even as we launched a ninth SKU as part of the rollout in Q1. We continue to see elevated broista satisfaction and positive customer feedback, particularly around likelihood to recommend food offerings. We are also seeing food attachment rates from the rollout tracking in the low teens, slightly ahead of what we expected from our early test results.

Based on the strength of results to date, we now expect the new food program rollout to be largely complete across our company-operated fleet by the end of Q3. In March, we introduced a trio of nostalgic throwback drinks. Category-wide innovation across our menu continued in Q1, which included a brown butter chocolate chip latte, fruit punch Rebel with a sour candy straw, and cool blue fizz. Innovation like this is a testament to our ability to spot and activate trends early, bringing unique yet accessible innovation to market in a way only Dutch Bros Inc. can.

The Q1 LTO window was one of our strongest on record and drove an approximately 30% increase in LTO unit velocity versus the prior year. In addition to our LTOs, we are continually listening to feedback from our customers and broistas to deliver on-trend merch drops that truly resonate. This quarter, mini charm figurines and mystery bag charms drove high engagement and excitement across the brand and delivered a step change in effectiveness year over year, with approximately 50% higher sales lift than the comparable drops from last year. At the end of May, we launched Mist Energy Refreshers, a new plant-powered energy platform designed to expand our reach.

These beverages are carbonated, light, and refreshing, with antioxidants, electrolytes, and fewer than 100 calories. During testing, Mist saw strong customer demand and notably similar customer retention to our first-to-market protein coffee offering, suggesting potential for this to be part of our longer-term energy platform. We have seen incredibly strong customer feedback since launch, and we plan to continue driving trial of Mist, as the combination of Rebel and Mist enhances our leadership in the customized energy category. Switching to Dutch Rewards, we ended Q1 at an all-time high of 74% of transactions flowing through the program.

Our continued success in acquiring new customers into Dutch Rewards has been supported by order ahead adoption continuing to climb, which reached approximately 15% of the total mix in Q1. We are continuing to grow our segmentation capabilities, and in Q1, we saw meaningful improvement in our in-app offer effectiveness and customer engagement as a result. When we segment our rewards program, transaction growth in Q1 continued to have momentum among Gen Z and millennials. Over the past three years, we have strategically increased our investment in paid working media with a clear objective: introduce more customers to the brand.

Our unaided awareness has more than doubled in the past year and a half, a testament to the momentum that our investments in media, community-driven events, and our best-in-class social media program provide. CPG is our latest initiative to continue building brand awareness. We just completed the first quarter with our CPG products in select retail outlets and are pacing ahead of expectations. While it is still early for us, initial results have indicated exceptional velocity in terms of units per store per week. In fact, select segments of the CPG business have higher SKU-level velocity than the category leader in our initial wave of retailers. Our efforts to improve throughput continue to gain traction.

We have enhanced our labor deployment model by increasing our visibility into hourly and daily staffing levels to match customer demand. We have also streamlined more efficient beverage production, all while continuing to drive transaction growth and protecting the broista and customer experience. Notably, we continued to see improvements in orders per peak hour in Q1. In closing, we are excited by what lies ahead. Dutch Bros Inc. remains a special brand, and our people continue to be at the heart of everything we do. We are growing our people and building compelling futures. Through investments in our teams and our tenured operator pipeline, our people remain at the forefront of how we grow.

The genuine connections our broistas create every day are not only central to the experience today, but a leading indicator of the long-term durability and differentiation of this brand. We are growing our occasions, building everyday routine, and naturally taking share. Transaction growth is consistently strong, and we are excited about our innovation roadmap. Trial continues to rise. Order ahead is working. Our new food program is heating up, and we believe this is fueling continued engagement through Dutch Rewards. We are building our brand for the long term. The strength of Dutch Bros Inc. was evident throughout Q1, with total revenues growing 31%. Our best-in-class value proposition continues to resonate, reflected in seven consecutive quarters of transaction growth.

We are growing our development pipeline with a clear path to further densify existing markets while expanding into white space markets on our way to 2,029 shops in 2029. Our 2026 shop opening cadence is ahead of schedule, and new shop productivity remains in line with system-wide AUVs, which are at record levels. Lastly, we believe our foundational approach is purpose-built to lead the expanding customized beverage category. Dutch Bros Inc. is designed for how customers want to experience beverages—a platform optimized for to-go occasions, cold beverages, customization, and consistency. Our confidence to lead and command the category over the long term has never been stronger. With that, I will pass it to Josh.

Joshua Guenser: Thanks, Christine. I will start with a recap of our first quarter performance and then share our outlook for the remainder of 2026. Our first quarter results exceeded expectations, driven by strong same shop sales growth, supported by effective marketing initiatives, and continued momentum from our new food rollout. These results reinforce our confidence in our long-term growth strategy and the incredible value proposition we offer. For the first quarter, total revenues were $464 million, growing 31% over the first quarter of last year. System same shop sales growth in the first quarter was an exceptional 8.3%, driven by transaction growth of 5.1%. Many of our markets delivered double-digit same shop sales growth in Q1, including Texas, as Christine highlighted.

This performance reinforces the benefits of market density, continued maturation of newer vintages, and strong brand execution across our fleet. With our Q1 same shop sales results and performance into Q2, we now expect full-year system same shop sales growth of 4% to 6%. Our guidance reflects the performance we have seen thus far in Q2, while being mindful of the fact that our transaction comparisons continue to step up throughout the remainder of the year. Our full-year guidance assumes Q2 system same shop sales growth approaching 5%. Same shop sales growth drove AUVs to another record high in Q1, reaching $2.2 million, while new shop productivity remains in line with system-wide AUVs.

In the first quarter, we opened 41 new shops, including seven Clutch Coffee Bar conversions in North and South Carolina that opened late in the quarter. Based on current inspection and permitting timelines, we expect to have remaining Clutch conversions completed by the end of Q3. Conversion costs for the Clutch sites remain in line with our original expectations, with average CapEx, including an allocation of the purchase price, at approximately $1.4 million per shop. Considering how rapidly we have been able to reopen these sites under the Dutch Bros Inc. brand, this is proving to be a very efficient use of our capital.

While our development team continues to accelerate the number of leases we are adding to our new shop pipeline, these conversions highlight one of the various tools we have available to continue capturing our sizable white space ahead. I am incredibly proud of our teams for executing this project with speed and precision. We remain highly confident in our path to 2,029 shops in 2029 as we continue to see our efforts translate into tangible development momentum. Given the momentum we are building, we now expect to open at least 185 system shops in 2026.

Switching to company-operated shop performance in Q1, revenue totaled $429 million, an increase of 31%, or $103 million, compared to the first quarter of last year. Company-operated same shop sales growth was an outstanding 10.6%, primarily driven by transaction growth of 6.9%. Company-operated shop contribution was $121 million, representing a year-over-year increase of 26%. Company-operated shop contribution margin was 28.3%. Beverage, food, and packaging costs were 26.2% of company-operated shop revenue, which is 120 basis points higher year over year, primarily driven by higher coffee costs and costs associated with the continued rollout of our new food program. COGS in Q1 were better than expected due to savings generated in other categories, primarily dairy.

As a reminder, we continue to expect an impact from higher coffee costs as the year progresses. The updated full-year 2026 guidance now contemplates approximately 60 basis points of total COGS pressure. This also includes the impact from costs associated with the continued rollout of the new food program. Labor costs were 26.2% of company-operated shop revenue, which is 120 basis points favorable year over year, primarily due to sales leverage on better-than-expected same shop sales. Occupancy and other costs were 17% of company-operated shop revenue, which is 130 basis points higher year over year, primarily due to higher rent on new shops as we shift more of our portfolio to build-to-suit leases and higher repairs and maintenance costs.

We continue to expect the shift towards build-to-suit leases will drive higher occupancy costs as a percentage of revenues in 2026. Moving down the P&L, Q1 adjusted SG&A was $66 million, or 14.1% of total revenue. We were able to drive 100 basis points of leverage on adjusted SG&A while continuing to make investments in our people and infrastructure. Our updated 2026 guidance now contemplates approximately 80 basis points of leverage on adjusted SG&A for the full year. In the quarter, adjusted EBITDA was $79 million, an increase of 26% over the first quarter of last year, and we delivered $0.16 of adjusted EPS, up from $0.04 in Q1 of last year.

Let me now provide an update on our liquidity and cash flow. As of March 31, we had approximately $198 million in total liquidity, including $264 million in cash and cash equivalents, and the balance in our undrawn revolver. During the quarter, our net cash position decreased by approximately $5 million in Q1, largely driven by timing. We continue to have strong cash flow from operations and remain confident in our self-funded outlook. In Q1, our average CapEx per shop was $1.3 million, largely consistent with Q4 and well below the $1.7 million in Q1 of last year. We continue to have clear visibility to our long-term target of an approximate 60% build-to-suit lease mix.

We also continue to see an increasing number of sites available as demand for our brand grows across the country. Shifting to our 2026 guidance, we have a long runway ahead and remain confident in producing exceptional results in this dynamic macro environment. Given the strong performance throughout Q1 and performance we have seen thus far in Q2, we are raising our full-year guidance in the following areas: Total revenues are now projected to be between $2.05 billion and $2.08 billion, representing 25% to 27% growth year over year. Total system shop openings are now estimated to be at least 185 shops. System same shop sales growth is now estimated to be in the range of 4% to 6%.

Adjusted EBITDA is now estimated to be in the range of $370 million to $380 million. The midpoint of this range contemplates approximately 30 basis points of net adjusted EBITDA margin pressure. This reflects the impact of higher coffee costs and increased occupancy costs, partially offset by leverage on adjusted SG&A. There are no changes to our guidance for capital expenditures. It remains within the $270 million to $290 million range. We are very proud of the results our team delivered in Q1. Our people, our resilient financial model, and our differentiated transaction-driving initiatives continue placing us in a category of our own. We remain very excited by our business momentum and have strong visibility into our multiyear growth runway.

Thank you, everyone. We will now open the call for questions. Operator, please open the lines.

Operator: Thank you. Ladies and gentlemen, if you would like to ask a question, please press 1 on your telephone keypad, and a confirmation tone will indicate your line is in the question queue. You may press 2 to remove your question from the queue. In the interest of time, we ask that each analyst limit themselves to one question. Thank you. The first question comes from the line of Jeffrey Bernstein with Barclays. Please proceed.

Jeffrey Bernstein: Great. Thank you very much. My question is on the broader category and your core consumer tied to it. From a category perspective, you mentioned your confidence in the brand is never stronger—the first quarter results and the guidance raise would demonstrate that. But within that confidence, just talk about any incremental learnings you have or comfort you have to withstand the intrusion from two of the largest restaurant chains that seem to want to get into your categories of energy and refreshers and protein and all the others. It does seem like it is a major hurdle or potential competitive threat.

And as you think about that, with your very strong results you saw in the first quarter and seemingly into April, any change in trend due to the spike in gas prices? It would seem like the discretionary beverage concept might be more vulnerable than the average. Any color there would be great. Thank you.

Christine Barone: Jeff, thanks so much for your question. Starting with competition and what we are seeing in the overall energy market, I think that our success and innovation has really led others to recognize that and take a look at us. We have never been stronger in the energy category, and if you look at what we are doing, it is quite different than what else is out there. We are the category creator of customized energy. We strengthened that category leadership with the launch of Mist, which we just launched over this past weekend. Mist is another type of energy drink that is really complementary to our Rebel energy drink.

It has antioxidants and electrolytes, and it is under 100 calories. What we are seeing already is customers coming in for both of those beverages and using them in different ways. Based on testing, we launched a Rebel drink that had a great weekend and, on top of that, a Mist drink that had a great weekend. Again, we are really building on our category leadership within energy. What we are doing is quite different—having it blended, having it iced, and offering a large number of different flavor combinations.

We actually see, particularly within energy, that customers are building their own beverages, and so that importance of customization and being able to customize with speed is incredibly important in that market. We feel really great about where we are sitting in the energy market. If anything, others recognizing how large this market is and coming in with large marketing dollars could lead to customers wanting to come and try all of that customization and all of those different ways that you can have energy at Dutch Bros Inc. Looking at how we have been performing in this environment, we had an exceptional Q1 with 8.3% system same shop sales. We felt really good as we went into April.

We saw exactly what we thought we would see from an expectation standpoint and feel like we are incredibly well set up. As you look across all of the things that we have put in place over the last couple of years from a marketing standpoint, our ability to grow within lots of different market conditions makes us feel incredibly well positioned.

Operator: The next question comes from the line of Sharon Zackfia with William Blair. Please proceed.

Sharon Zackfia: Hi. Thanks for taking the question. I think I heard you correctly that Texas had a 20% comp in the quarter. Maybe I misheard that. That sounded like a really big number. Christine, can you give us some more thoughts on what is going on in Texas that you are finding to be particularly impactful, and if there is a playbook there that you think is of use in other markets going forward?

Christine Barone: Yeah, Sharon, we did share that we saw an almost 20% comp in the state of Texas for Q1. It is our largest comp state by number of shops, and we shared that figure because Texas has become really meaningful in our comp base now. If we look at that performance, it is indicative of what things can look like as we grow. We have spent time building brand awareness in Texas. It is one of the places where we have been focused on building that brand awareness, enhancing paid media as we grow. We also continue to densify our markets within Texas. It is one of those markets where we see all different flavors of competition.

I think Texas is a great example to see how we do within all of those different circumstances. What we are seeing in Texas is that combination of all of those marketing levers working together along with what happens when you really densify and build a brand within a market. We are super excited by what we are seeing. It gives us great confidence in our long pipeline to get to 2,029 shops in 2029 and beyond and what our real estate strategy will do for us.

Operator: The next question comes from the line of Brian Harbour with Morgan Stanley. Please proceed.

Brian Harbour: Thanks. Good afternoon, guys. I was curious about the new energy drink too. What was the catalyst for this, and did you think there was a different customer need state? You mentioned taking share more broadly. Is energy a big piece of that? Do you feel like you are taking share from other beverage occasions? It feels like energy is growing faster than the overall beverage category right now. Do you see that, and what continues that?

Christine Barone: Thanks, Brian. Great question. When you look at Mist, we approach this from both an art and a science perspective. We were really looking at what was going on in the CPG market as energy continues to grow and expand. You see a whole group of new-age energy players that are focused on functional benefits. As we looked at the energy market and surveyed our customers, we did extensive testing of Mist before we launched it. We believe it is a different occasion that our customers have, and that many customers are going to have both a Rebel occasion and a Mist occasion. Rebel is for when I want to get hyped up or need to stay up.

Mist is for when I just need a little pick-me-up in the afternoon, want those electrolytes, and want a beverage with lower calories. In this initial launch, those different need states and occasions are very important in energy. From a taking share perspective, we believe we are taking share in both the coffee market and the energy market at the same time. In routinized coffee behavior, especially in the morning daypart, the rollout of food and mobile order is really important, and we are seeing strong growth in that daypart. In the energy market, we believe that is a high-growth spot.

We are clearly the category leader in customized energy, and Mist is a great addition to extend that category leadership.

Operator: The next question comes from the line of Dennis Geiger with UBS. Please proceed.

Dennis Geiger: Great. Thanks, and kudos on the strong results. Quick clarification and then a question. Josh, I think you mentioned 5% same store sales for Q2. You have significantly exceeded same store sales guidance in recent quarters, so are the trends you are seeing into Q2 so far trending toward that guide, or is there some conservatism given the uncertain macro backdrop? And, Christine, you spoke to strong numbers—30% increase in LTO unit velocity versus last year and a 50% sales lift on merchandise. Is this more a function of the products and merch being stronger than last year, or something more systematic like marketing, media support, and overall brand strength?

Christine Barone: I will take the LTO and merch drop velocity question first. When we look at that, it is really our teams looking at what is working well and building on top of that. You are also seeing the continued strength of our brand, the investments we have made in growing brand awareness, the popularity of these merch drops, and there is even a resale market for them afterwards. It is us learning, continuing to get better, and the strength of the brand showing up.

Joshua Guenser: On Q2, as Christine highlighted, the strength of the LTO performance in Q1 was a large contributor to our outperformance. We set up Q1 with a high bar and significantly exceeded it, with a big part being the LTO performance we launched at the end of February, which carried through Q1. Excluding that LTO, we saw very strong performance throughout the quarter, and we have seen strong performance coming into Q2. Our Q2 guidance—approaching 5% comp—is reflective of what we have seen to date and the underlying strength of the brand and transactions.

Operator: The next question comes from the line of Andrew Charles with TD Cowen. Please proceed.

Andrew Charles: Great. Thank you. Christine, given the strength you have cited with traffic, new store productivity, free cash flow generation, and the people pipeline, what is the argument for not stepping on the gas with development? It seems like the system is ready for it, especially with more sites becoming available given your scale.

Christine Barone: Thanks, Andrew. As we look at development, we shared last quarter that we continue to build the development pipeline. We are adding sites into our pipeline at a much more rapid rate than the year prior, and we continue to add at a rapid rate. We are very excited by what we are seeing—great growth in the existing base, strong AUVs as we open, and strong customer reception. We have an operator pipeline of almost 500 people ready to open shops. We are ready to continue to grow and expand, and now we just need to continue to get the shops open. We feel really good about where we are.

Operator: The next question comes from the line of Andy Barish with Jefferies. Please proceed.

Andy Barish: Wondering if you can give us an operational shakedown on food. Anything that surprised you, and is the comp lift still tracking in that 4% range as you roll out?

Christine Barone: Thanks, Andy. The operational rollout is going very smoothly. We learned a lot from rolling out mobile order and took those learnings into food. We have done this in stages, with a lead part of the market going first, learning from those shops, and then continuing the rollout within markets. We are doing substantial customer testing to measure sentiment and ensure the tools we provide to shops are working well. We continue to see a step up in likelihood to recommend and how smoothly the food offering is going. We now believe we will have our company-owned shops’ rollout complete by the end of Q3 given how well it is going.

Joshua Guenser: To the second part, we are still tracking on a system-wide basis to the 4% comp lift for shops that will have food. As a reminder, about 300 shops in our system will not be able to accommodate the new food program. We did see the lift a bit elevated in the shops we have rolled out to date, but as we roll through the system, we are still tracking to about that 4% comp lift.

Operator: Christine, your line is live.

Neil Patel: Yep. I think we are ready for the next question, operator.

Operator: The next question will come from the line of Chris O'Cull with Stifel. Please proceed.

Chris O'Cull: Great, thanks, and congratulations on a great start to the year. Christine, the company's development strategy has some clear advantages, but how do you ensure the faster-growing direct competitors do not beat you to some attractive markets or achieve scale before you can get there? Have you evaluated how new units perform in markets where direct competitors have a significant head start?

Christine Barone: As we look at our market growth, we are very thoughtful about how we plan and grow into a market. We believe it is important to enter a market and then densify so that we become the everyday routine. We are able to look closely at how we perform when we go in first to a market or when someone gets there before we do. We are confident that brand strength allows us to grow strongly. A couple of things solidify that: with Clutch, we saw how another beverage player performed before we went in, then we opened the same exact shop and are doing almost 3x the pre-conversion volume. That demonstrates the strength of this brand.

We also shared Texas, a competitive market, and our ability to continue to grow and take share there.

Operator: The next question comes from the line of Drew North with Baird. Please proceed.

Analyst: Great. Thanks for taking the question. On competition, do you think the recent launch of energy drinks by Starbucks has had any influence on your trends over the last month or so? Any color on what you are seeing at the ground level in that category after these launches?

Christine Barone: We do not believe we have seen any impact from that launch. As we look at the strength of our energy platform and how differentiated it is, we really are the category leader here. We continue to see great trends in our energy business and solidified that even more as we launched Mist.

Operator: The next question comes from the line of Jacob Aiken-Phillips with Melius Research. Please proceed.

Jacob Aiken-Phillips: Hi. Good afternoon. You mentioned improvements in orders per peak hour. How much of the transaction growth is coming from demand generation versus better capacity capture at peak periods?

Joshua Guenser: Thanks, Jacob. The throughput initiatives we put in place and our ability to drive increased transactions per peak hour have really enabled the transaction growth we saw in Q1. We do not break down and attribute comp growth to specific elements, but as we improve throughput and enable our broistas to better serve customers, it allows us to drive the fantastic transaction growth we saw in Q1.

Operator: The next question comes from the line of Sara Senatore with Bank of America. Please proceed.

Sara Senatore: Thank you. Two follow-ups. First, Christine, you said Mist and Rebel are two different use cases. Are you seeing evidence that Mist might be bringing in a different customer—perhaps older—given the plant-based energy and lower calories? Second, on Clutch, can you parse out what drove the 3x volumes—brand awareness, broader menu, better throughput?

Christine Barone: Yes, Sara, thanks. While the example I gave was customers using both Mist and Rebel, we do believe Mist expands the category and the customers who come in. Looking at CPG, as energy brands proliferate, the category expands, driven by new-age energy drinks. On Clutch, volumes popped right away. That speaks to the strength of our brand—customers were excited and waiting for us to come into the market. We saw lines as we first opened the doors, we served customers with speed, quality, and service, and they are coming back. It is a strong example of brand strength.

Operator: The next question comes from the line of Jeff Farmer with Gordon Haskett. Please proceed.

Jeff Farmer: Thanks. Following up on Texas, what percent of the comparable shop base does the state represent? Do you see Texas continuing to deliver meaningful same store sales momentum?

Christine Barone: Texas is our largest comp base by number of shops, and we are very pleased with our results there. It highlights our ability to compete across many areas. In fact, one of the things we see not only in Texas but across the board is that our highest AUV shops consistently operate in close proximity to legacy competitors, often within a half-mile radius. We actually see higher AUVs the closer we get to some of those large legacy competitors.

Operator: The next question comes from the line of John Ivankoe with JPMorgan. Please proceed.

John Ivankoe: Thank you. On conversion opportunities and sites being left by others—does the classic 900-square-foot Dutch Bros box remain optimal given higher AUVs, food, growing morning business, and mobile order and pay? Do conversions give you a chance to rethink square footage to drive even higher AUVs?

Christine Barone: Thanks, John. The 900 square feet is all back of house, and we can have multiple beverage stations and the full food platform and equipment within that footprint. We often have only a few deliveries each week, so we can fit extra product into the site. The 900 square feet works well for how we are operating today and going forward. As a reminder, we have walk-up shops, like in California, that are quite small and doing 3x the system volume. We feel very good operating within that 900 square feet. That said, conversion opportunities often already have the drive-thru space ready to go, allowing us to quickly open shops, and we feel very good about that as well.

Operator: The next question comes from the line of Jon Tower with Citi. Please proceed.

Jon Tower: Great. Maybe two, if I can. First, any updates on the walk-up shop in California and thoughts on further expansion into other markets over time? And, Josh, on the model, occupancy and other was up pretty high this quarter. You talked about higher R&M and the pivot to build-to-suit. How much of the year-over-year pressure was driven by build-to-suit versus higher R&M, and will R&M persist?

Christine Barone: The Downtown LA shop continues to operate quite well and perform very well. We are looking for additional walk-up sites to test.

Joshua Guenser: On occupancy and other, we had two impacts. Higher occupancy costs from our shift to build-to-suit leases put about 50 basis points of margin pressure in that line, which is around what we would expect for the year. The rest was related to R&M and some other investments we made during the quarter, not necessarily a run-rate item. If you look at our history, we will, from time to time, make investments in that space, and we did that this quarter.

Operator: The next question comes from the line of Christopher Carril with KeyBanc Capital Markets. Please proceed.

Christopher Carril: Could you expand a bit more on order ahead? You mentioned it reached 15% in Q1. How are you thinking about the channel going forward, and do you see more opportunities to ramp up marketing around it this year?

Christine Barone: We are really pleased with how order ahead continues to grow. We are focused on how customers want to use Dutch Bros Inc. The most important metric we track for order ahead is “Was your order ready on arrival?” With a very high mix of Dutch Rewards customers, we can survey many customers every week. We continue to see positive momentum on that metric. When customers are pleased with that experience, they come back and use the channel more. We are thoughtful in tracking the right metrics to ensure the customer experience remains at the center of everything we do.

Operator: The next question comes from the line of Nerses Setyan with Mizuho Securities. Please proceed.

Nerses Setyan: Thank you. Hoping you can help us think through the CPG contribution. By my math, in Q1 the franchise and other line was up by about $4 million. Was most of that CPG-led growth, and what is the flow-through in terms of EBITDA contribution? How should we think about that for the rest of the year and into 2027?

Joshua Guenser: Thanks, Nick. The franchise growth is predominantly related to product orders to our franchisees, so not driven by CPG growth. On CPG, it is still early. We are not even in all the storefronts we expect to be in yet. We are still rolling this out and expect it to grow into Q2 and throughout the year. As it becomes more significant, we will talk about it. It is included in that line, but it is a much smaller order of magnitude than what you highlighted.

Christine Barone: I would add we are very pleased with what we are seeing initially—great customer taste on the products and really great velocity. We will continue to roll this out across many retailers.

Operator: The next question comes from the line of Logan Reich with RBC Capital Markets. Please proceed.

Logan Reich: Hey. Thanks for taking my questions. Two if I may. Within the check, can you break out price versus mix for the quarter? And on regional performance, with Texas comping well above the consolidated number, for markets below the consolidated number, is there anything in common and anything you can do to bring those up closer to Texas?

Joshua Guenser: Thanks, Logan. We had about a point and a half of price in Q1 that will continue into Q2, before we roll off about a point of price at the start of Q3. On comps across markets, we see a range. Generally, our newer markets tend to contribute the highest proportion to our comp growth versus the legacy markets. All vintages continue to contribute positively, but newer vintages contribute a disproportionate amount. We have a lot of new shops in Texas, which is part of why Texas is outperforming. We feel good about comp contribution across all vintages, and our initiatives are targeted at driving transaction growth across the fleet.

Christine Barone: We are also continuing to roll out food, and food is performing quite well. We see differences in markets based on where food has been rolled out.

Operator: The next question comes from the line of Gregory Francfort with Guggenheim Partners. Please proceed.

Gregory Francfort: Thanks. Maybe I am beating a dead horse on Texas, but I think you and several smaller-footprint competitors opened around 500 stores in five years in Texas. AUVs were lower than your system. With the 20% comp, are you at, above, or below the rest of the system today? Are you seeing competitors close stores, or are you picking off sales as they slow? Any more context?

Christine Barone: We continue to be very pleased with what we are seeing in Texas. As we have shared, for the last couple of years we have focused on building brand awareness there. We have seen the investment we made in paid media pay off. We continue to drive customers into Dutch Rewards, with very high penetration in Texas. With over 200 shops now in Texas, that concentration and density is allowing us to be the beverage player of choice in the state.

Operator: The next question comes from the line of Brian Hugh Mullan with Piper Sandler. Please proceed.

Brian Hugh Mullan: Thank you. On the long-term contribution margin goal of 30%, is that still the goal even with the launch of food and the ongoing mix shift toward higher-rent build-to-suit locations? Do you expect to get back there within the 2029 development plan period, or is it more over the long term?

Joshua Guenser: Thanks, Brian. We feel very good about our trajectory toward the longer-term margin target of about 30%. The biggest headwind we are facing now is high coffee costs. Coffee remains in the $2.80 to $3.00 range and has remained elevated. Assuming it normalizes to historical averages, you would see us move closer to that 30% target. We have not given a specific time horizon, but that target incorporates the shift to build-to-suit leases and everything else we are seeing in our business.

Operator: The next question comes from the line of Matt Curtis with D.A. Davidson. Please proceed.

Analyst: Hi. Good afternoon. You added a ninth SKU to the food platform in Q1. Are you thinking about expanding the food menu more meaningfully once you have completed the initial rollout, and if so, what might this look like?

Christine Barone: For food, we have built a platform. As we added that ninth SKU, we were thoughtful about SKUs that might drive a beverage occasion. We added a cake pop to help the afternoon business. We will be very thoughtful. We are pleased with how successful our teams are with a very limited offering. Our goal with food is the lowest SKU count and lowest complexity possible to drive our goals and transactions.

Operator: The next question comes from the line of Margaret May Binchtuck with Wolfe Research. Please proceed.

Analyst: Hi, thanks for taking my question. Given you have had food in some stores for quite some time, do you have detail on how food mix has trended as a percentage of sales? Does it plateau? And what do you see in terms of daypart mix—is it driving the morning occasion?

Christine Barone: Thanks for the question. We are very pleased with how food continues to perform. Across the system, it is still quite new in most shops. The early testing was in six or seven shops in Arizona, so we are not even a year into the rollout yet. We continue to build the morning occasion and are seeing what we expected from a morning perspective. Food is an important piece in driving that morning beverage occasion.

Operator: The next question comes from the line of Brian Bittner with Oppenheimer & Co. Please proceed.

Analyst: Thanks, and congratulations on great results. On shop margins, labor leverage has shown solid improvements versus prior quarters. Beyond sales leverage, what else are you doing to unlock these improvements? Are you improving labor productivity tools, or are newer stores showing better discipline?

Joshua Guenser: Great question. Anytime we have quarters where we significantly exceed our expectations on same shop sales, we are able to drive meaningful leverage on the labor line because we did not anticipate that level of sales. Over the longer term, it is not an area we look to drive meaningful leverage in; it is an area we will continue to reinvest in to take care of our people. There is leverage throughout the rest of the P&L that we can drive over the longer term, but outsized labor leverage has really been a function of outsized same shop sales performance.

Christine Barone: I would add that our teams are doing an excellent job matching customer demand to labor deployment, and we continue to get better at that.

Operator: The next question comes from the line of Christine Cho with Goldman Sachs. Please proceed.

Analyst: Thank you, and congrats on another great quarter. Dutch Rewards comprises about 74% of transactions now. Can you share color on how it is impacting guest frequency, ticket, and LTO conversion? Additionally, do you have plans to evolve the program, such as status tiers or premium benefits?

Christine Barone: Thanks, Christine. Dutch Rewards is now at 74% of our transactions. We are still in the early innings of personalized segmentation. We started with broad offers, then win-back campaigns, and now frequency-level campaigns. We have just launched the ability to do streaks, with positive early results. As we add data and watch customers evolve as Dutch Bros Inc. customers, we think there are real opportunities to introduce a product layer as well. We are very pleased with what we are seeing and excited about the future of the program.

Operator: Thank you. This concludes the question and answer session, and I would like to turn the call back over to the Dutch Bros Inc. management team for closing remarks.

Christine Barone: Thank you for your questions. Our first quarter results were exceptional, and I continue to be energized by the progress we are making. What I am most proud of is our community-driven approach and the love our teams have for giving back. We have built Dutch Bros Inc. around community since the beginning, and our give-back days are one of the most meaningful ways we live our mission of making a massive difference one cup at a time. During our annual Dutch Luv Day of giving in February, we supported more than 240 organizations nationwide, contributing to the local communities we serve.

In addition, more than 120 shops hosted local give-back days in Q1, creating lasting impact where our broistas live and work. Our annual Drink One for Dane Day is next Friday, May 15. We hope you will join us as we come together with the Muscular Dystrophy Association in the fight against ALS. Thanks again to our team for bringing joy to our customers each and every day.

Operator: Thank you. This concludes today's conference. You may disconnect your lines at this time, and we thank you for your participation.