# Dutch Bros Inc. (BROS) FY 2024 MD&A

Verbatim Item 7 Management's Discussion and Analysis from Dutch Bros Inc.'s 10-K for fiscal year 2024.

SEC filing source: https://www.sec.gov/Archives/edgar/data/1866581/000186658125000048/bros-20241231.htm
Accession: 0001866581-25-000048
Filing date: 2025-02-13
Report date: 2024-12-31
Extracted structurally from real Item 7 body heading to real Item 7A/8 boundary.
Confidence: high

Company profile: /company/BROS/
All MD&A years: /company/BROS/mda/
Previous year: /company/BROS/mda/fy2023/ (FY 2023)
Next year: /company/BROS/mda/fy2025/ (FY 2025)

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

You should read the following discussion and analysis of our financial condition and results of operations together with our audited consolidated financial statements and the related notes included elsewhere in this Form 10-K. Some of the information contained in this discussion and analysis or set forth elsewhere in this document includes forward looking statements that involve risks, uncertainties, and assumptions. You should carefully read the “Forward-Looking Statements” and “Risk Factors” sections of this Form 10-K for a discussion of important factors that could cause actual results to differ materially from the results described in or implied by the forward-looking statements contained in the following discussion and analysis.

In addition, statements that “we believe” and similar statements reflect our beliefs and opinions on the relevant subject. These statements are based on information available to us as of the date of this Form 10-K. While we believe that information provides a reasonable basis for these statements, that information may be limited or incomplete. Our statements should not be read to indicate that we have conducted an exhaustive inquiry into, or review of, all relevant information. These statements are inherently uncertain, and investors are cautioned not to unduly rely on these statements. Further, the section of this “Management’s Discussion and Analysis of Financial Condition and Results of Operations” generally discusses 2024 and 2023 items and year-to-year comparisons between 2024 and 2023. Discussions of 2022 items and year-to-year comparisons between 2023 and 2022 are not included in this Annual Report on Form 10-K and can be found in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part II, Item 7 of our Annual Report on Form 10-K for the fiscal year ended December 31, 2023, filed with the SEC on February 23, 2024.

Index to Management’s Discussion and Analysis of Financial Condition and Results of Operations

[[GREPCENT_TABLE]]
[["","","Page"],["Overview and Highlights","","73"],["Impact of Global Events","","73"],["Results of Operations","","74"],["Key Performance Indicators","","75"],["Company-operated Shop Results","","77"],["Franchising and Other Segment Performance","","80"],["Selling, General, and Administrative","","80"],["Other Expense","","81"],["Income Tax Expense","","81"],["Liquidity and Capital Resources","","81"],["Non-GAAP Financial Measures","","85"]]
[[/GREPCENT_TABLE]]

Dutch Bros Inc.| Form 10-K | 72

Table of Contents

Overview and Highlights

Dutch Bros is a high growth operator and franchisor of drive-thru shops that focus on serving high QUALITY, hand-crafted beverages with unparalleled SPEED and superior SERVICE. Founded in 1992 by brothers Dane and Travis Boersma, Dutch Bros began with a double-head espresso machine and a pushcart in Grants Pass, Oregon. Today, we believe that Dutch Bros is one of the fastest-growing brands in the quick service beverage industry in the United States by location count.

Key Highlights

•Delivered approximately 33% total revenue growth year-over-year.

•Opened 151 systemwide shops across multiple new operating areas, an increase of approximately 18% over 2023.

•Launched and implemented mobile ordering in over 95% of systemwide shops.

•Opened second roasting facility in Melissa, Texas, increasing the resiliency of our supply chain.

•Welcomed new President of Operations, Chief Financial Officer, Chief People Officer, and Chief Technology and Information Officer.

Impact of Global Events

General Macroeconomic Uncertainties

As a retailer that is dependent upon consumer discretionary spending, our results of operations are sensitive to changes in macroeconomic conditions. Inflation may have a material adverse effect on our business, financial condition or results of operations. Our customers may have or in the future may have less money available for discretionary purchases and may reduce or stop their purchases of our products.

On a macro level, conditions, including changes in interest rates, inflation, bank failures and other events affecting financial institutions, geopolitical conflicts (such as the Russia-Ukraine war, the state of war between Israel and Hamas, and the risk of larger regional conflicts), and significant weather events (such as the recent wildfires in California), have created significant uncertainty in the global economy. While we are not able to fully predict the potential impacts of these conditions, we do not currently believe any potential impacts of these macroeconomic conditions would be material to our business.

Minimum Wage Increases

We continued to experience the effects of legislated minimum wage increases that took effect in 2024 in certain states. We expect these pressures to continue to affect our operating results in the foreseeable future. For example, California’s minimum wage increased to $20 per hour effective April 2024 for covered employees in our industry. Additionally, several other states that we operate in have increased their minimum wage requirements in 2025. While these pressures have impacted our operating results, we have taken measures to gradually increase our menu prices, adjust our Dutch Rewards loyalty program, and make operating adjustments that increase productivity to help offset them. Menu price increases may lead to decreases in consumer demand. We will continue to evaluate further pricing actions to protect our operating results, however, if there is a time lag between increasing costs and our ability to increase menu prices or take other action in response, or if we choose not to pass on the cost increases by increasing menu prices, our operating results could be negatively affected.

Dutch Bros Inc.| Form 10-K | 73

Table of Contents

Results of Operations

As of December 31, 2024, we had 982 company-operated and franchised shops in 18 states, an increase of approximately 18.2% from the same period in the prior year. For the year ended December 31, 2024, we generated $1.3 billion of revenue, $66.5 million net income, and $0.34 income per diluted share. We have two reportable operating segments: Company-operated shops and Franchising and other.

_________________

1    Reconciliation of GAAP to non-GAAP results is provided in the section “Non-GAAP Financial Measures” in Part II, Item 7 “Management’s Discussion and Analysis of Financial Condition and Results of Operations”.

[[GREPCENT_TABLE]]
[["","","2024 vs 2023","","2023 vs 2022"],["Increase in total shops","","18.2","%","","23.8","%"],["Increase in total revenue","","32.6","%","","30.7","%"]]
[[/GREPCENT_TABLE]]

Dutch Bros Inc.| Form 10-K | 74

Table of Contents

Key Performance Indicators

The key performance indicators that we use to effectively manage and evaluate our business are as follows:

[[GREPCENT_TABLE]]
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[[/GREPCENT_TABLE]]

Dutch Bros Inc.| Form 10-K | 75

Table of Contents

[[GREPCENT_TABLE]]
[["","","","","Year Ended December 31,"],["","","","","","","2024","","2023","","2022"],["(in thousands; unaudited)","","","","","","","","","","$","","%","","$","","%","","$","","%"],["Company-operated shop revenues","","","","","","","","","","1,165,830","","","100.0","","","857,939","","","100.0","","","639,710","","","100.0"],["Company-operated shop gross profit","","","","","","","","","","259,959","","","22.3","","","180,235","","","21.0","","","121,327","","","19.0"],["Company-operated shop contribution 7","","","","","","","","","","346,768","","","29.7","","","242,323","","","28.2","","","157,633","","","24.6"],["Selling, general, and administrative expenses","","","","","","","","","","234,036","","","18.3","","","205,074","","","21.2","","","183,528","","","24.8"],["Adjusted selling, general, and administrative expenses 7","","","","","","","","","","202,720","","","15.8","","","159,101","","","16.5","","","133,725","","","18.1"],["Net income (loss)","","","","","","","","","","66,450","","","5.2","","","9,952","","","1.0","","","(19,253)","","","(2.6)"],["Adjusted EBITDA 7","","","","","","","","","","230,283","","","18.0","","","160,062","","","16.6","","","91,181","","","12.3"]]
[[/GREPCENT_TABLE]]

_________________

1    Re-opening of a shop that was temporarily closed in 2021.

2    AUVs are determined based on the net sales for any trailing twelve-month period for systemwide and company-operated shops that have been open a minimum of 15 months. AUVs are calculated by dividing the systemwide and company-operated shop net sales by the total number of systemwide and company-operated shops, respectively. Management uses these metrics as an indicator of shop growth and future expectations of mature locations.

3    Same shop sales represents the estimated percentage change in year-over-year sales, for the comparable shop base, which we define as shops open for 15 complete months or longer as of the first day of the reporting period. Same shop sales can be impacted by changes in customer transaction counts and by changes in the per-ticket amounts. Management uses these metrics as an indicator of shop growth and future expansion strategy. The number of shops included in the systemwide and company-operated comparable bases for the respective periods are presented in the following table.

[[GREPCENT_TABLE]]
[["","","","","Year Ended December 31,"],["(unaudited)","","","","","","2024","","2023","","2022"],["Systemwide shop base","","","","","","641","","503","","414"],["Company-operated shop base","","","","","","370","","246","","173"]]
[[/GREPCENT_TABLE]]

4    Systemwide sales and systemwide same shop sales are operating measures that include sales at company-operated shops and sales at franchised shops during the comparable periods presented. Franchise sales represent sales at all franchise shops and are revenues to our franchise partners. We do not record franchise sales as revenues; however, our royalty revenues and advertising fund contributions are calculated based on a percentage of franchise sales. As these metrics include sales reported to us by our non-consolidated franchise partners, these metrics should be considered as a supplement to, not a substitute for, our results as reported under GAAP. Management uses these metrics as indicators of our system’s overall financial health, growth and future expansion prospects.

5    Company-operated and franchise shop operating weeks are calculated based on the number of operating days for the shop base and dividing by 7. Our shop base is defined as shops opened as of the period end date. The operating weeks calculations reflect re-acquired franchises through 2022. Management uses these metrics as indicators of our system’s overall financial health, growth and future expansion prospects.

6    Dutch Rewards is our digitally based rewards program available exclusively through the Dutch Rewards app. Management uses this metric as an indicator of customer loyalty adoption of our Dutch Rewards app and future promotional plans.

7    Reconciliation of GAAP to non-GAAP results is provided in the section “Non-GAAP Financial Measures” in Part II, Item 7 “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”

Dutch Bros Inc.| Form 10-K | 76

Table of Contents

Company-operated Shop Results

Results for our company-operated shops segment were as follows:

[[GREPCENT_TABLE]]
[["","","","","Year Ended December 31,"],["","","","","","","2024","","2023","","2022"],["(in thousands; unaudited)","","","","","","","","","","$","","%","","$","","%","","$","","%"],["Company-operated shop revenues","","","","","","","","","","1,165,830","","","100.0","","","857,939","","","100.0","","","639,710","","","100.0"],["Beverage, food, and packaging costs","","","","","","","","","","296,752","","","25.5","","","230,133","","","26.9","","","171,864","","","26.9"],["Labor costs","","","","","","","","","","315,805","","","27.1","","","230,505","","","26.9","","","182,861","","","28.6"],["Occupancy and other costs","","","","","","","","","","191,372","","","16.4","","","140,895","","","16.4","","","109,366","","","17.1"],["Pre-opening costs","","","","","","","","","","15,133","","","1.3","","","14,083","","","1.6","","","17,986","","","2.8"],["Depreciation and amortization","","","","","","","","","","86,809","","","7.4","","","62,088","","","7.2","","","36,306","","","5.6"],["Company-operated shop costs and expenses","","","","","","","","","","905,871","","","77.7","","","677,704","","","79.0","","","518,383","","","81.0"],["Company-operated shop gross profit","","","","","","","","","","259,959","","","22.3","","","180,235","","","21.0","","","121,327","","","19.0"],["Company-operated shop contribution 1","","","","","","","","","","346,768","","","29.7","","","242,323","","","28.2","","","157,633","","","24.6"]]
[[/GREPCENT_TABLE]]

_________________

1    Reconciliation of GAAP to non-GAAP results is provided in the section “Non-GAAP Financial Measures” in Part I, Item 2 “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”

Company-operated Shops Segment Performance

Company-operated Shop Revenue

[[GREPCENT_TABLE]]
[["","","","","Year Ended December 31,"],["(in thousands; unaudited)","","","","","","","","2024","","2023","","2022","","2024 v. 2023","","2023 v 2022"],["Company-operated shop revenue","","","","","","","","","","$1,165,830","","$857,939","","$639,710","","$307,891","","35.9%","","$218,229","","34.1%"]]
[[/GREPCENT_TABLE]]

Year Ended December 31, 2024 v. 2023

The company-operated shop revenue increase was driven by $262.3 million from newly opened shops not yet in the comparable shop base and $45.6 million from an increase in same shop sales within the comparable shop base.

_________________

1    The comparable same shop bases were 370, 246, and 173 for the three years ended December 31, 2024, 2023, and 2022, respectively.

Dutch Bros Inc.| Form 10-K | 77

Table of Contents

Beverage, Food, and Packaging Costs

[[GREPCENT_TABLE]]
[["","","","","Year Ended December 31,"],["(in thousands; unaudited)","","","","","","","","2024","","2023","","2022","","2024 v. 2023","","2023 v 2022"],["Beverage, food and packaging costs","","","","","","","","","","$296,752","","$230,133","","$171,864","","$66,619","","28.9%","","$58,269","","33.9%"],["As a percentage of company-operated shop revenues","","","","","","","","","","25.5%","","26.9%","","26.9%","","N/A","","(140) bps","","N/A","","\u2014 bps"]]
[[/GREPCENT_TABLE]]

Year Ended December 31, 2024 v. 2023

As a percentage of company-operated shop revenues, beverage, food and packaging costs decreased by 140 basis points. This was primarily due to a 110 basis point decrease due to the impact of increased pricing on the comparable shop base.

Labor Costs

[[GREPCENT_TABLE]]
[["","","","","Year Ended December 31,"],["(in thousands; unaudited)","","","","","","","","2024","","2023","","2022","","2024 v. 2023","","2023 v 2022"],["Labor costs","","","","","","","","","","$315,805","","$230,505","","$182,861","","$85,300","","37.0%","","$47,644","","26.1%"],["As a percentage of company-operated shop revenues","","","","","","","","","","27.1%","","26.9%","","28.6%","","N/A","","20 bps","","N/A","","(170) bps"]]
[[/GREPCENT_TABLE]]

Year Ended December 31, 2024 v. 2023

As a percentage of company-operated shop revenues, labor costs increased by 20 basis points. This was primarily due to 180 basis points from increased wages, partially offset by a decrease of 110 basis points from the impact of increased pricing and a decrease of 50 basis points driven by staffing management.

Occupancy and Other Costs

[[GREPCENT_TABLE]]
[["","","","","Year Ended December 31,"],["(in thousands; unaudited)","","","","","","","","2024","","2023","","2022","","2024 v. 2023","","2023 v 2022"],["Occupancy and other costs","","","","","","","","","","$191,372","","$140,895","","$109,366","","$50,477","","35.8%","","$31,529","","28.8%"],["As a percentage of company-operated shop revenues","","","","","","","","","","16.4%","","16.4%","","17.1%","","N/A","","\u2014 bps","","N/A","","(70) bps"]]
[[/GREPCENT_TABLE]]

Year Ended December 31, 2024 v. 2023

As a percentage of company-operated shop revenues, occupancy and other costs were flat. This was primarily due to a 40 basis point increase driven by higher repairs and maintenance, offset by a decrease of 50 basis points from the impact of increased pricing.

Dutch Bros Inc.| Form 10-K | 78

Table of Contents

Pre-opening Costs

[[GREPCENT_TABLE]]
[["","","","","Year Ended December 31,"],["(in thousands, except shop data; unaudited)","","","","","","","","2024","","2023","","2022","","2024 v. 2023","","2023 v 2022"],["Pre-opening costs","","","","","","","","","","$15,133","","$14,083","","$17,986","","$1,050","","7.5%","","$(3,903)","","(21.7)%"],["As a percentage of company-operated shop revenues","","","","","","","","","","1.3%","","1.6%","","2.8%","","N/A","","(30) bps","","N/A","","(120) bps"],["New company-operated shops opened","","","","","","","","","","128","","146","","120","","(18)","","(12.3)%","","26","","21.7%"],["Pre-opening costs per new company-operated shop","","","","","","","","","","$118","","$96","","$150","","$22","","22.9%","","$(54)","","(36.0)%"]]
[[/GREPCENT_TABLE]]

Year Ended December 31, 2024 v. 2023

The increase in pre-opening costs was primarily driven by increased travel for setup and training teams and lease expense related to unopened shops, in the year ended December 31, 2024 as compared to the same period in 2023.

Depreciation and Amortization

[[GREPCENT_TABLE]]
[["","","","","Year Ended December 31,"],["(in thousands; unaudited)","","","","","","","","2024","","2023","","2022","","2024 v. 2023","","2023 v 2022"],["Depreciation and amortization","","","","","","","","","","$86,809","","$62,088","","$36,306","","$24,721","","39.8%","","$25,782","","71.0%"],["As a percentage of company-operated shop revenues","","","","","","","","","","7.4%","","7.2%","","5.6%","","N/A","","20 bps","","N/A","","160 bps"]]
[[/GREPCENT_TABLE]]

Year Ended December 31, 2024 v. 2023

The increase in depreciation and amortization was primarily driven by the opening of 128 new company-operated shops during 2024.

Company-operated Shop Gross Profit and Contribution1

[[GREPCENT_TABLE]]
[["","","","","Year Ended December 31,"],["(in thousands; unaudited)","","","","","","","","2024","","2023","","2022","","2024 v. 2023","","2023 v 2022"],["Company-operated shop gross profit","","","","","","","","","","$259,959","","$180,235","","$121,327","","$79,724","","44.2%","","$58,908","","48.6%"],["As a percentage of company-operated shop revenues","","","","","","","","","","22.3%","","21.0%","","19.0%","","N/A","","130 bps","","N/A","","200 bps"],["Company-operated shop contribution 1","","","","","","","","","","$346,768","","$242,323","","$157,633","","$104,445","","43.1%","","$84,690","","53.7%"],["As a percentage of company-operated shop revenues","","","","","","","","","","29.7%","","28.2%","","24.6%","","N/A","","150 bps","","N/A","","360 bps"]]
[[/GREPCENT_TABLE]]
_______________________

1    Reconciliation of GAAP to non-GAAP results is provided in the section “Non-GAAP Financial Measures” in Part II, Item 7 “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”

Dutch Bros Inc.| Form 10-K | 79

Table of Contents

Year Ended December 31, 2024 v. 2023

The increase in the company-operated shop gross profit margin of 130 basis points was driven primarily by a 270 basis point increase due to the impact of increased pricing on the comparable shop base, offset by a 140 basis point decrease due to increased labor costs.

Franchising and Other Segment Performance

[[GREPCENT_TABLE]]
[["","","","","Year Ended December 31,"],["(in thousands; unaudited)","","","","","","","","2024","","2023","","2022","","2024 v. 2023","","2023 v 2022"],["Franchising and other revenue","","","","","","","","","","$115,185","","$107,837","","$99,302","","$7,348","","6.8%","","$8,535","","8.6%"],["Franchising and other gross profit","","","","","","","","","","$80,170","","$71,061","","$59,589","","$9,109","","12.8%","","$11,472","","19.3%"],["As a percentage of franchising and other revenue","","","","","","","","","","69.6%","","65.9%","","60.0%","","N/A","","370 bps","","N/A","","590 bps"]]
[[/GREPCENT_TABLE]]

Year Ended December 31, 2024 v. 2023

The franchising and other gross profit increase of $9.1 million was driven by $4.6 million due to newly opened franchised shops not in the comparable shop base, $2.6 million from same shop sales, and a $1.9 million increase from products sold to franchisees, net of costs and adjustments.

Selling, General, and Administrative

[[GREPCENT_TABLE]]
[["","","","","Year Ended December 31,"],["(in thousands; unaudited)","","","","","","","","2024","","2023","","2022","","2024 v. 2023","","2023 v 2022"],["Selling, General and Administrative","","","","","","","","","","$234,036","","$205,074","","$183,528","","$28,962","","14.1%","","$21,546","","11.7%"],["As a percentage of total revenues","","","","","","","","","","18.3%","","21.2%","","24.8%","","N/A","","(290) bps","","N/A","","N/M"]]
[[/GREPCENT_TABLE]]

Year Ended December 31, 2024 v. 2023

The selling, general, and administrative increase of approximately $29.0 million was primarily driven by increased expenses of $25.8 million primarily consisting of investments in human capital to support our revenue growth and higher performance-based compensation; an increase of $15.7 million of organization realignment and restructuring costs (which includes a $1.8 million net expense that resulted from the donation of our former Grants Pass headquarters building for the development of a children’s learning center); $12.6 million of increased professional fees and technology services to support our growing business; and $4.0 million of increased donations to our Foundation. These increases were partially offset by lower equity-based compensation of $28.6 million.

Dutch Bros Inc.| Form 10-K | 80

Table of Contents

Other Expense

[[GREPCENT_TABLE]]
[["","","","","Year Ended December 31,"],["(in thousands; unaudited)","","","","","","","","2024","","2023","","2022","","2024 v. 2023","","2023 v 2022"],["Interest expense on finance leases","","","","","","","","","","$","(22,053)","","","$","(17,516)","","","$","(9,296)","","","$","(4,537)","","","25.9%","","$","(8,220)","","","88.4%"],["Other interest expense, net","","","","","","","","","","(4,967)","","","(14,805)","","","(8,722)","","","9,838","","","(66.5)%","","(6,083)","","","69.7%"],["Interest expense, net","","","","","","","","","","$","(27,020)","","","$","(32,321)","","","$","(18,018)","","","$","5,301","","","(16.4)%","","$","(14,303)","","","79.4%"],["Other income","","","","","","","","","","5,812","","","3,018","","","3,976","","","2,794","","","92.6%","","(958)","","","(24.1)%"],["Total other expense","","","","","","","","","","$","(21,208)","","","$","(29,303)","","","$","(14,042)","","","$","8,095","","","(27.6)%","","$","(15,261)","","","108.7%"]]
[[/GREPCENT_TABLE]]

Year Ended December 31, 2024 v. 2023

The decrease in interest expense, net was primarily driven by interest income on cash invested in money market funds, partially offset by additional interest on finance leases for new shop builds.

The increase in other income was primarily driven by higher remeasurement gains in the current year related to the TRAs liability and the gain on sale of our airplane and hangar.

Income Tax Expense

[[GREPCENT_TABLE]]
[["","","","","Year Ended December 31,"],["(in thousands; unaudited)","","","","","","","","2024","","2023","","2022","","2024 v. 2023","","2023 v 2022"],["Income tax expense","","","","","","","","","","$18,435","","$6,967","","$2,599","","$11,468","","164.6%","","$4,368","","168.1%"],["Effective tax rate","","","","","","","","","","21.7%","","41.2%","","(15.6)%","","N/A","","N/M","","N/A","","N/M"]]
[[/GREPCENT_TABLE]]

Year Ended December 31, 2024 v. 2023

The increase in tax expense was primarily driven by increased current year pre-tax income and the increase in our ownership interest of Dutch Bros OpCo, changes in state earnings mix, and its impact on deferred taxes.

Liquidity and Capital Resources

Cash Overview

We had cash and cash equivalents of $293.4 million and $133.5 million as of December 31, 2024 and December 31, 2023, respectively.

For the year ended December 31, 2024, our principal sources of liquidity were cash flows from operations and our delayed draw term loan facility. Our principal uses of liquidity for the year ended December 31, 2024 were to fund our new shop builds, our new Texas roasting facility, and other working capital needs.

Dutch Bros Inc.| Form 10-K | 81

Table of Contents

Cash Flows

The following table summarizes our cash flows for the periods presented:

[[GREPCENT_TABLE]]
[["","","Year Ended December 31,"],["(in thousands; unaudited)","","2024","","2023","","2022","","2024 v. 2023","","2023 v 2022"],["Net cash provided by operating activities","","$","246,432","","","$","139,915","","","$","59,883","","","$","106,517","","","76.1%","","$","80,032","","","133.6%"],["Net cash used in investing activities","","(212,072)","","","(227,280)","","","(192,572)","","","15,208","","","(6.7)","","(34,708)","","","18.0"],["Net cash provided by financing activities","","125,449","","","200,732","","","134,361","","","(75,283)","","","(37.5)%","","66,371","","","49.4%"],["Net increase in cash and cash equivalents","","$","159,809","","","$","113,367","","","$","1,672","","","$","46,442","","","41.0%","","$","111,695","","","6680.3%"],["Cash and cash equivalents at beginning of period","","133,545","","","20,178","","","18,506","","","113,367","","","561.8","","1,672","","","9.0"],["Cash and cash equivalents at end of period","","$","293,354","","","$","133,545","","","$","20,178","","","$","159,809","","","119.7%","","$","113,367","","","561.8%"]]
[[/GREPCENT_TABLE]]

Operating Activities

The increase in operating activities cash flows was primarily driven by higher net income as a result of year-over-year sales growth, expanded company-operated shop contribution, leverage of selling, general and administrative costs, and working capital management.

Investing Activities

The decrease in investing activities cash outflows was primarily driven by lower investment in capital expenditures due to fewer new company-operated shop openings in the current period compared to last period, and higher proceeds from disposal of fixed assets in the current year, driven by the sale of our company plane (a non-recurring event).

Financing Activities

The decrease in financing activities cash flows was primarily driven by proceeds received in 2023 from our follow-on offering, partially offset by a prior year payoff of our net revolving credit facility, and our delayed draw term loan advance in 2024.

Cash Requirements

We believe that cash provided by operating activities and proceeds from our 2022 Credit Facility are adequate to fund our debt service requirements, lease obligations, cash distributions required by the OpCo LLC Agreement and the TRAs, and working capital obligations for at least the next 12 months.

Our future capital requirements may vary materially from period to period and will depend on many factors, primarily our expansion and growth by opening additional company-operated shops and/or reacquiring existing franchised shops, and our large-scale organization realignment including relocation of key business operations to Arizona. Further, the payments that we may be required to make under the TRAs may be significant. We currently expect to fund our current and long-term material capital requirements with operating cash flows and, as needed, additional proceeds from our 2022 Credit Facility, but we may also seek additional debt or equity financing. From time to time, we may explore additional financing sources which could include equity, equity‑linked, and debt financing arrangements.

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Other than operating expenses, our cash requirements for 2025 are expected to consist primarily of capital expenditures for investments in our new and existing shops, our supply chain, and our corporate facilities. The total capital expenditures for 2025 are estimated to be approximately $240 million to $260 million.

Our current and long-term material cash requirements as of December 31, 2024, primarily include the following:

•Debt Obligations: Refer to NOTE 9 — Debt, of the notes to the consolidated financial statements, included elsewhere in this Form 10-K, for further information of our obligations and the timing of expected payments.

•Operating and Finance Leases: Refer to NOTE 8 — Leases, of the notes to the consolidated financial statements, included elsewhere in this Form 10-K, for further information of our obligations and the timing of expected payments.

•Purchase Obligations: include all legally binding contracts, including firm minimum commitments for inventory purchases, commitments for the purchase, construction or remodeling of real estate facilities, equipment purchases, marketing-related contracts, software acquisition/license commitments and service contracts. As of December 31, 2024, purchase obligations were approximately $210 million, of which substantially all are expected to be paid within one to two years.

•TRAs Obligations: Refer to NOTE 11 — Tax Receivable Agreements and NOTE 17 — Commitments and Contingencies, of the notes to the consolidated financial statements, included elsewhere in this Form 10-K, for further information of our obligations.

Credit Facility

JPMorgan Credit Facility

On August 4, 2023, we amended our senior secured credit facility, dated February 28, 2022 with JPMorgan Chase Bank, N.A. (as amended, the 2022 Credit Facility) to increase borrowing capacity by $150 million to a total of $650 million. The 2022 Credit Facility consists of a $350 million revolving credit facility, a term loan facility of up to $100 million, and a delayed draw term loan facility of up to $200 million. The 2022 Credit Facility also includes sublimits for letters of credit and swingline loans of up to $50 million and $15 million, respectively. The 2022 Credit Facility expires on February 28, 2027 (the Maturity Date).

On February 4, 2025, we drew the remaining $50 million on our delayed draw term loan facility before this portion was set to expire on February 4, 2025.

Interest on borrowings under the 2022 Credit Facility is based on (a) the Alternate Base Rate plus an applicable margin, or (b) the Adjusted Term SOFR plus an applicable margin, and is payable in accordance with the selected interest rate period (at least quarterly) and upon maturity. Principal payments for the term loans are required on a quarterly basis in accordance with an amortization schedule up through and including the Maturity Date.

Obligations under the 2022 Credit Facility are guaranteed by each of Dutch Bros Inc.’s subsidiaries, and secured by a first priority perfected security interest in substantially all of the assets of the guarantors.

Interest Rate Swap Contract

We have an interest rate swap with JPMorgan Chase Bank, N.A. As of December 31, 2024, the interest rate swap had a notional amount of approximately $63.9 million and hedges interest rate risk on the term loan under the 2022 Credit Facility. The purpose of the floating-to-fixed interest rate swap is to fix the interest base rate charged on the term loan at 2.67% for the notional amount. The interest rate swap matures on February 28, 2027.

See NOTE 9 — Debt and NOTE 10 — Derivative Financial Instruments for additional details related to our 2022 Credit Facility and interest rate swap contract.

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Critical Accounting Estimates

The methods, assumptions, and estimates that we use in applying our accounting policies may require us to apply judgments regarding matters that are inherently uncertain. We consider an accounting policy to be a critical estimate if: (1) we must make assumptions that were uncertain when the judgment was made, and (2) changes in the estimate assumptions, or selection of a different estimate methodology, could have a significant impact on our financial position and the results that we report in our consolidated financial statements. While we believe that our estimates, assumptions, and judgments are reasonable, they are based on information available when the estimate was made.

Refer to NOTE 2 — Basis of Presentation and Summary of Significant Accounting Policies within the consolidated financial statements, included elsewhere in this Form 10-K, for further information on our critical accounting estimates and policies, which are as follows:

Leases

At the commencement of each lease, we evaluate the lease agreement to determine whether it is an operating or finance lease. The evaluation requires significant judgments in determining the fair value of the lease right-of-use asset and the lease liability and appropriate lease terms.

Our lease agreements generally do not provide an implicit interest rate; as such, the discount rate used to measure the initial lease liability is equal to the rate the Company would pay on a collateralized basis to borrow an amount equal to the lease payments under similar terms. Management uses a specialist to determine the discount rate, which is subject to fluctuation based on market interest rates and our credit risk profile.

We also estimate the lease term at commencement. The lease term commences on the date when we take possession of the leased property. To determine the length of the lease term at inception, we consider both termination and renewal option periods available. Reasonably certain renewal periods are included in the lease term at commencement.

Variations in judgment applied to these estimates could result in material differences such as the following:

• Lease expenses, including rent, depreciation and amortization

• Present value of lease right-of-use assets and lease liabilities

• Reasonably certain lease term

See NOTE 8 — Leases for further details.

Income Taxes

In determining the provision for income taxes, we make estimates and judgments which affect our evaluation of the carrying value of our deferred tax assets as well as our calculation of certain tax liabilities. We evaluate the carrying value of our deferred tax assets on a quarterly basis. In completing this evaluation, we consider all available positive and negative evidence. Such evidence includes historical operating results, the existence of cumulative earnings and losses in the most recent fiscal years, taxable income in prior carryback year(s) if permitted under the tax law, expectations for future pre-tax operating income, the time period over which our temporary differences will reverse, and the implementation of feasible and prudent tax planning strategies. Estimating future taxable income is inherently uncertain and requires judgment.

Our expense/(benefit) for income taxes, deferred tax assets and liabilities including valuation allowance requires the use of estimates based on our management’s interpretation and application of complex tax laws and accounting guidance.

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Deferred taxes are recorded using the asset and liability method, whereby tax assets and liabilities are determined based on the differences between the financial statement and tax basis of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse. We regularly evaluate the valuation allowances established for deferred tax assets for which future realization is uncertain. In assessing the realizability of deferred tax assets, we consider both positive and negative evidence, including scheduled reversals of deferred tax assets and liabilities, projected future taxable income, tax planning strategies and results of recent operations. If, based on the weight of available evidence, it is more likely than not that the deferred tax assets will not be realized, a valuation allowance is recorded. See NOTE 12 — Income Taxes for further details.

Tax Receivable Agreements

In connection with our IPO, we entered into two TRAs with the Continuing Members and Pre-IPO Blocker Holders. The TRAs generally provide for us to pay the Continuing Members and Pre-IPO Blocker Holders 85% of the net cash savings, if any, in U.S. federal, state and local income tax or franchise tax that we actually realize or are deemed to realize in certain circumstances. We will retain the benefit of the remaining 15% of these net cash savings. As of December 31, 2024, we recognized $627.8 million of liabilities relating to our obligations under the TRAs.

Changes in the projected TRAs liability resulting from these tax benefit arrangements may occur based on changes in anticipated future taxable income, changes in applicable tax rates or other changes in tax attributes that may occur and impact the expected future tax benefits to be received by the Company. Estimating future taxable income is a key input in calculating the TRAs liability, and is inherently uncertain and requires judgment. In projecting future taxable income, we consider our historical results and incorporate certain assumptions. See NOTE 11 — Tax Receivable Agreements for further details.

Non-GAAP Financial Measures

In addition to disclosing financial results in accordance with GAAP, this document contains references to the non-GAAP financial measures below. We believe these non-GAAP financial measures provide investors with useful supplemental information about our operating performance, enable comparison of financial trends and results between periods where certain items may vary independent of business performance, and allow for greater transparency with respect to key metrics used by management in operating our business and measuring our performance.

Our non-GAAP financial measures reflect adjustments based on one or more of the following items, as well as the related income tax effects where applicable. Income tax effects have been calculated based on the combined total non-GAAP adjustments using our total effective tax rate. These non-GAAP financial measures should not be considered a substitute for, or superior to, financial measures calculated in accordance with GAAP, and the financial results calculated in accordance with GAAP and reconciliations from these results should be carefully evaluated.

Segment contribution

Definition and/or calculation

Segment gross profit, before depreciation and amortization.

Usefulness to management and investors

This non-GAAP measure is used by our management in making performance decisions without the impact of non-cash depreciation and amortization charges. This is a standard metric used across our industry by investors.

EBITDA, Adjusted EBITDA

EBITDA — definition and/or calculation

Net income before interest expense (net of interest income), income tax expense, and depreciation and amortization expense.

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Adjusted EBITDA — definition and/or calculation

Defined as EBITDA, excluding equity-based compensation, expenses associated with equity offerings, COVID-19: catastrophic leave expenses, COVID-19: prepaid costs not utilized, costs incurred for company-wide milestone events, executives transitions costs, (gain) loss on the remeasurement of the liability related to the TRAs, estimated expenses related to certain legal disputes, sale of aircraft, and organization realignment and restructuring costs.

Usefulness to management and investors

These non-GAAP measures are supplemental operating performance measures we believe facilitate comparisons to historical performance and competitors’ operating results. We believe these non-GAAP measures presented provide investors with a supplemental view of our operating performance that facilitates analysis and comparisons of our ongoing business operations because they exclude items that may not be indicative of our ongoing operating performance.

Adjusted selling, general, and administrative

Definition and/or calculation

Selling, general, and administrative expenses, excluding depreciation and amortization, equity-based compensation expense, expenses associated with equity offerings, COVID-19: prepaid costs not utilized, costs incurred for company-wide milestone events, executive transitions, legal proceedings, and organization realignment and restructuring costs.

Usefulness to management and investors

This non-GAAP measure is used as a supplemental measure of operating performance that we believe is useful to evaluate our performance period over period and relative to our competitors. We believe the non-GAAP measure presented provides investors with a supplemental view of our operating performance that facilitates analysis and comparisons of our ongoing business operations because it excludes items that may not be indicative of our ongoing operating performance.

Non-GAAP adjustments

Below are the definitions of the non-GAAP adjustments that are used in the calculation of our non-GAAP measures, as described above.

Equity-based compensation

Non-cash expenses related to the grant and vesting of stock awards, including RSAs and RSUs, in Dutch Bros Inc. to certain eligible employees.

Expenses associated with equity offerings

Costs incurred as a result of our equity offerings, including secondary offerings by our Sponsor. These costs include, but are not limited to, legal fees, consulting fees, tax fees, and accounting fees.

COVID-19: Catastrophic leave

Costs related to a catastrophic leave policy that provided paid leave to employees who were required to quarantine due to in-shop exposures and could not work their regular hours. The catastrophic leave program was retired in May 2023.

COVID-19: Prepaid costs not utilized

Costs related to the write-off of previously prepaid expenses for the development of a virtual corporate engagement platform built in response to the health restrictions of the COVID-19 pandemic. The platform was developed as a substitute for in person engagement practices used pre-pandemic. The platform has been determined ineffective, particularly as we shift back to in-person events with the easing of restrictions related to the COVID-19 pandemic.

Milestone events

Costs incurred for company-wide events to celebrate 30 years of serving high QUALITY, hand-crafted beverages with unparalleled SPEED and superior SERVICE to our customers.

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Executive transitions

Employee severance and related benefit costs, as well as sign-on bonus(es) for several executive-level transitions occurring in 2022 and 2023, and amortized through the first quarter of 2024.

TRAs remeasurements

(Gain) loss impacts related to adjustments of our TRAs liabilities.

Legal proceedings

Loss accrual related to certain legal disputes.

Sale of Aircraft

Gain impact related to the sale of our airplane, hangar and related equipment to our Co-Founder.

Organization realignment and restructuring

Fees and costs, including consulting, employee-related and other costs, in connection with our comprehensive initiative to develop and implement a long-term strategy involving changes to our organizational structure to support our growth. This initiative resulted in realignment activities that occurred in 2023, and restructuring activities that commenced in 2024, and are expected to continue through the first half of 2025. Given this strategic initiative's magnitude and scope, we do not expect such costs will recur in the foreseeable future, and do not consider such costs reflective of the ongoing costs necessary to operate our business.

The following are reconciliations of the most comparable GAAP metric to non-GAAP metrics (presented in dollars and as a percentage of revenue):

Segment contribution:

[[GREPCENT_TABLE]]
[["","","","","Year Ended December 31,"],["","","","","","","2024","","2023","","2022"],["(in thousands; unaudited)","","","","","","","","","","$","","%","","$","","%","","$","","%"],["Company-operated shop gross profit","","","","","","","","","","259,959","","","22.3","","","180,235","","","21.0","","","121,327","","","19.0"],["Depreciation and amortization","","","","","","","","","","86,809","","","7.4","","","62,088","","","7.2","","","36,306","","","5.6"],["Company-operated shop contribution","","","","","","","","","","346,768","","","29.7","","","242,323","","","28.2","","","157,633","","","24.6"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["","","","","Year Ended December 31,"],["","","","","","","2024","","2023","","2022"],["(in thousands; unaudited)","","","","","","","","","","$","","%","","$","","%","","$","","%"],["Franchising and other gross profit","","","","","","","","","","80,170","","","69.6","","","71,061","","","65.9","","","59,589","","","60.0"],["Depreciation and amortization","","","","","","","","","","4,915","","","4.3","","","5,398","","","5.0","","","5,706","","","5.8"],["Franchising and other contribution","","","","","","","","","","85,085","","","73.9","","","76,459","","","70.9","","","65,295","","","65.8"]]
[[/GREPCENT_TABLE]]

Dutch Bros Inc.| Form 10-K | 87

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[[GREPCENT_TABLE]]
[["","","","","Year Ended December 31,"],["","","","","","","2024","","2023","","2022"],["(in thousands; unaudited)","","","","","","","","","","$","","%","","$","","%","","$","","%"],["Net income (loss)","","","","","","","","","","66,450","","","5.2","","","9,952","","","1.0","","","(19,253)","","","(2.6)"],["Depreciation and amortization","","","","","","","","","","93,005","","","7.3","","","69,135","","","7.2","","","44,728","","","6.0"],["Interest expense, net","","","","","","","","","","27,020","","","2.1","","","32,321","","","3.3","","","18,018","","","2.4"],["Income tax expense","","","","","","","","","","18,435","","","1.4","","","6,967","","","0.8","","","2,599","","","0.4"],["EBITDA","","","","","","","","","","204,910","","","16.0","","","118,375","","","12.3","","","46,092","","","6.2"],["Equity-based compensation","","","","","","","","","","11,482","","","0.9","","","39,222","","","4.1","","","41,657","","","5.6"],["Expenses associated with equity offerings","","","","","","","","","","1,489","","","0.1","","","\u2014","","","\u2014","","","\u2014","","","\u2014"],["COVID-19: Catastrophic leave","","","","","","","","","","\u2014","","","\u2014","","","\u2014","","","\u2014","","","1,468","","","0.2"],["COVID-19: prepaid costs not utilized","","","","","","","","","","\u2014","","","\u2014","","","\u2014","","","\u2014","","","2,305","","","0.3"],["Milestone events","","","","","","","","","","\u2014","","","\u2014","","","\u2014","","","\u2014","","","2,434","","","0.3"],["Executive transitions","","","","","","","","","","75","","","\u2014","","","1,000","","","0.1","","","691","","","0.1"],["TRAs remeasurement","","","","","","","","","","(4,247)","","","(0.3)","","","(2,638)","","","(0.3)","","","(3,466)","","","(0.4)"],["Legal proceedings","","","","","","","","","","\u2014","","","\u2014","","","1,950","","","0.2","","","\u2014","","","\u2014"],["Sale of aircraft","","","","","","","","","","(1,302)","","","(0.1)","","","\u2014","","","\u2014","","","\u2014","","","\u2014"],["Organization realignment and restructuring:"],["Consulting","","","","","","","","","","\u2014","","","\u2014","","","2,153","","","0.2","","","\u2014","","","\u2014"],["Employee-related costs","","","","","","","","","","15,549","","","1.2","","","\u2014","","","\u2014","","","\u2014","","","\u2014"],["Other costs","","","","","","","","","","2,327","","","0.2","","","\u2014","","","\u2014","","","\u2014","","","\u2014"],["Total organization realignment and restructuring","","","","","","","","","","17,876","","","1.4","","","2,153","","","0.2","","","\u2014","","","\u2014"],["Adjusted EBITDA","","","","","","","","","","230,283","","","18.0","","","160,062","","","16.6","","","91,181","","","12.3"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["","","","","Year Ended December 31,"],["","","","","","","2024","","2023","","2022"],["(in thousands; unaudited)","","","","","","","","","","$","","%","","$","","%","","$","","%"],["Selling, general, and administrative","","","","","","","","","","234,036","","","18.3","","","205,074","","","21.2","","","183,528","","","24.8"],["Depreciation and amortization","","","","","","","","","","(1,281)","","","(0.2)","","","(1,648)","","","(0.1)","","","(2,716)","","","(0.4)"],["Equity-based compensation","","","","","","","","","","(10,595)","","","(0.8)","","","(39,222)","","","(4.1)","","","(41,657)","","","(5.6)"],["Expenses associated with equity offerings","","","","","","","","","","(1,489)","","","(0.1)","","","\u2014","","","\u2014","","","\u2014","","","\u2014"],["COVID-19: prepaid costs not utilized","","","","","","","","","","\u2014","","","\u2014","","","\u2014","","","\u2014","","","(2,305)","","","(0.3)"],["Milestone events","","","","","","","","","","\u2014","","","\u2014","","","\u2014","","","\u2014","","","(2,434)","","","(0.3)"],["Executives transition","","","","","","","","","","(75)","","","\u2014","","","(1,000)","","","(0.1)","","","(691)","","","(0.1)"],["Legal proceedings","","","","","","","","","","\u2014","","","\u2014","","","(1,950)","","","(0.2)","","","\u2014","","","\u2014"],["Organization realignment and restructuring:"],["Consulting","","","","","","","","","","\u2014","","","\u2014","","","(2,153)","","","(0.2)","","","\u2014","","","\u2014"],["Employee-related costs","","","","","","","","","","(15,549)","","","(1.2)","","","\u2014","","","\u2014","","","\u2014","","","\u2014"],["Other costs","","","","","","","","","","(2,327)","","","(0.2)","","","\u2014","","","\u2014","","","\u2014","","","\u2014"],["Total organization realignment and restructuring","","","","","","","","","","(17,876)","","","(1.4)","","","(2,153)","","","(0.2)","","","\u2014","","","\u2014"],["Adjusted selling, general and administrative","","","","","","","","","","202,720","","","15.8","","","159,101","","","16.5","","","133,725","","","18.1"]]
[[/GREPCENT_TABLE]]

Dutch Bros Inc.| Form 10-K | 88

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