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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
______________________________
FORM 10-Q
______________________________
(Mark One)
☒
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period ended September 30, 2024
OR
☐
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ________ to ________
Commission file number 001-40798
______________________________
DB Logo for ER-jpeg.jpg
DUTCH BROS INC.
(Exact name of Registrant as specified in its charter)
______________________________
Delaware
87-1041305
(State or other jurisdiction of
incorporation or organization)
(I.R.S. Employer Identification No.)
300 N Valley Dr
Grants Pass,
Oregon

97526
(Address of Principal Executive Offices)
(Zip Code)
(541) 955-4700
(Registrant's telephone number, including area code)
______________________________

Securities registered pursuant to Section 12(b) of the Act:
Title of Each ClassTrading SymbolName of Exchange on which Registered
Class A Common Stock,
par value $0.00001 per share		BROSThe New York Stock Exchange

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports); and (2) has been subject to such filing requirements for the past 90 days.    Yes x  No o
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).     Yes x   No o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer
x
Accelerated filer
o
Non-accelerated filer
o
Smaller reporting company
o
Emerging growth company
o
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes  o  No  x
As of October 31, 2024, the registrant’s outstanding shares of common stock were as follows:

Class A common stock113,823,181 
Class B common stock35,226,680 
Class C common stock5,142,050 


DUTCH BROS INC.
QUARTERLY REPORT ON FORM 10-Q
TABLE OF CONTENTS
Page
ITEM 1.
ITEM 2.
ITEM 3.
ITEM 4.
ITEM 1.
ITEM 1A.
ITEM 2.
ITEM 3.
ITEM 4.
ITEM 5.
ITEM 6.

GLOSSARY
As used in this Quarterly Report on Form 10-Q (this Form 10-Q), the terms identified below have the meanings specified below unless otherwise noted or the context requires otherwise. References in this Form 10-Q to “Dutch Bros,” the “Company,” “we,” “us” and “our” refer to Dutch Bros Inc. and its consolidated subsidiaries unless the context indicates otherwise.
TERMDEFINITION
2022 Credit Facility
Has the meaning set forth in NOTE 9 — Debt to the condensed consolidated financial statements, included elsewhere in this Form 10-Q
AOCI
Accumulated Other Comprehensive Income
ASU
Accounting Standards Update
AUVAverage Unit Volume
Blocker Companies
TSG7 A AIV VI Holdings, LLC and DG Coinvestor Blocker, LLC
BPS or bps
Basis points, which is used to express differences in rates. One basis point is the equivalent of 1/100 of one percent.
CODM
Chief Operating Decision Maker
Co-Founder
Travis Boersma, our Executive Chairman and Co-Founder, and affiliated entities over which he maintains voting control.
Continuing MembersThe Co-Founder and the Sponsor
Dutch Bros OpCoDutch Mafia, LLC, a Delaware limited liability company and direct subsidiary of Dutch Bros Inc.
Dutch Bros Inc.
A Delaware corporation, the Class A common stock of which is publicly traded on the New York Stock Exchange under the symbol “BROS”.
FASBFinancial Accounting Standards Board
GAAPU.S. Generally Accepted Accounting Principles
IPOInitial Public Offering
N/MA not meaningful percentage.
OpCo LLC Agreement
The Fourth Amended and Restated Limited Liability Company Agreement of Dutch Mafia, LLC, dated as of May 16, 2024.
OpCo Units
Class A common units, Class B voting units and Class C voting units of Dutch Bros OpCo, each as further defined in the OpCo LLC Agreement, collectively.
Pre-IPO Blocker HoldersTSG7 A AIV VI Holdings-A, L.P. and DG Coinvestor Blocker Aggregator, L.P. or their assignees or successors pursuant to the terms of the certain Reorganization Tax Receivable Agreement.
QSRQuick Service Restaurant
RSA
Restricted Stock Awards
RSU
Restricted Stock Units
SECSecurities and Exchange Commission
SOFR
Secured Overnight Financing Rate
SponsorTSG Consumer Partners, L.P. and certain of its affiliates.
Tax Receivable Agreements and TRAs
The Tax Receivable Agreement (Exchanges) and the Tax Receivable Agreement (Reorganization) that Dutch Bros Inc. entered into with the Continuing Members and the Pre-IPO Blocker Holders, respectively, in connection with the IPO.
Western United StatesThe collection of states including Arizona, California, Colorado, Idaho, Nevada, New Mexico, Oregon, Utah and Washington.
Dutch Bros, our Windmill logo (TOC1a.jpg), Dutch Bros Blue Rebel, and our other registered and common law trade names, trademarks and service marks are the property of Dutch Bros Inc. All other trademarks, trade names, and service marks appearing in this Form 10-Q are the property of their respective owners. Solely for convenience, the trademarks and trade names in this Form 10-Q may be referred to without the ® and ™ symbols, but such references should not be construed as any indicator that their respective owners will not assert their rights thereto.
TOC1a.jpgDutch Bros Inc.| Form 10-Q | 1
FORWARD-LOOKING STATEMENTS

Certain statements in this Form 10-Q that are not historical facts, including those regarding the impact of inflation, increased minimum wages, and general macroeconomic conditions on our results of operations, supply chain, or liquidity, the potential impact of actions we have taken to mitigate the impact of unforeseen circumstances, taxes and tax rates, our expectations regarding the number of new shops we may open, anticipated future revenues and earnings, consumer demand, and our expectations to generate positive cash flow in the foreseeable future are forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995. We use words such as “anticipate,” “believe,” “could,” “should,” “estimate,” “expect,” “intend,” “may,” “predict,” “project,” “target,” and similar terms and phrases, including references to assumptions, to identify forward-looking statements. These forward-looking statements are based on information available to us as of the date any such statements are made, and we assume no obligation to update these forward-looking statements. 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 subject to risks and uncertainties that could cause actual results to differ materially from those described in the statements. You should not place undue reliance on forward-looking statements, which speak only as of the date of this Form 10-Q.
You should read the following unaudited condensed consolidated financial statements and the related notes in this Form 10-Q together with our analysis and discussion of our financial condition and results of operations and other financial information included elsewhere in this Form 10-Q. You should also read our Annual Report on Form 10-K for the year ended December 31, 2023, filed with the Securities and Exchange Commission on February 23, 2024 (2023 Form 10-K).
While we believe that our assumptions are reasonable, we caution that it is very difficult to predict the impact of known factors, and it is impossible for us to anticipate all factors that could affect actual results. You should evaluate all forward-looking statements made in this report in the context of the factors that could cause outcomes to differ materially from expectations. These factors include, but are not limited to, those listed under the “Risk Factors” section of this Form 10-Q, as such risk factors may be amended, supplemented or superseded from time to time by other reports we file with the Securities and Exchange Commission.
Website Disclosure
We use our website as a distribution channel of material company information. Financial and other important information regarding our company is routinely posted on and accessible through our website at https://investors.dutchbros.com. In addition, you may automatically receive email alerts and other information about our company when you subscribe your email address by visiting the “Investor Email Alerts” section of our investor relations page at https://investors.dutchbros.com/resources. The information on our website is not incorporated herein or otherwise a part of this Form 10-Q.

TOC1a.jpgDutch Bros Inc.| Form 10-Q | 2
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
DUTCH BROS INC.
Condensed Consolidated Balance Sheets
(in thousands, except per share amounts; unaudited)
September 30,
2024		December 31,
2023
ASSETS
Current assets:
Cash and cash equivalents$281,134 $133,545 
Accounts receivable, net10,362 9,124 
Inventories, net38,381 46,953 
Prepaid expenses and other current assets12,168 15,637 
Total current assets342,045 205,259 
Property and equipment, net662,759 542,440 
Finance lease right-of-use assets, net377,561 382,734 
Operating lease right-of-use assets, net301,896 199,673 
Intangibles, net3,455 5,415 
Goodwill21,629 21,629 
Deferred income tax assets, net718,543 402,995 
Other long-term assets3,628 3,865 
Total assets$2,431,516 $1,764,010 
LIABILITIES AND EQUITY
Current liabilities:
Accounts payable$31,880 $29,957 
Accrued compensation and benefits
39,106 31,405 
Other accrued liabilities
26,162 15,770 
Other current liabilities5,962 6,423 
Deferred revenue35,738 30,349 
Current portion of finance lease liabilities12,845 9,482 
Current portion of operating lease liabilities12,987 10,239 
Current portion of long-term debt15,746 4,491 
Total current liabilities180,426 138,116 
Deferred revenue, net of current portion6,367 6,676 
Finance lease liabilities, net of current portion369,206 367,775 
Operating lease liabilities, net of current portion293,474 191,419 
Long-term debt, net of current portion224,361 93,175 
Tax receivable agreements liability
605,003 290,920 
Other long-term liabilities8 8 
Total liabilities1,678,845 1,088,089 
Commitments and contingencies (Note 15)


TOC1a.jpgDutch Bros Inc.| Form 10-Q | 3
DUTCH BROS INC.
Condensed Consolidated Balance Sheets (continued)
(in thousands, except per share amounts; unaudited)
September 30,
2024		December 31,
2023
Preferred stock, $0.00001 par value per share - 20,000 shares authorized; zero shares issued and outstanding as of September 30, 2024 and December 31, 2023, respectively
— — 
Class A common stock, $0.00001 par value per share - 400,000 shares authorized; 113,823 and 69,958 shares issued and outstanding as of September 30, 2024 and December 31, 2023, respectively
1 1 
Class B common stock, $0.00001 par value per share - 144,000 shares authorized; 35,227 and 60,629 shares issued and outstanding as of September 30, 2024 and December 31, 2023, respectively
— 1 
Class C common stock, $0.00001 par value per share - 105,000 shares authorized; 5,142 and 35,864 shares issued and outstanding as of September 30, 2024 and December 31, 2023, respectively
— — 
Class D common stock, $0.00001 par value per share - 42,000 shares authorized; zero and 10,669 shares issued and outstanding as of September 30, 2024 and December 31, 2023, respectively
— — 
Additional paid-in capital
506,785 379,391 
Accumulated other comprehensive income310 544 
Retained earnings (accumulated deficit)
16,054 (15,592)
Total stockholders' equity attributable to Dutch Bros Inc.523,150 364,345 
Non-controlling interests229,521 311,576 
Total equity752,671 675,921 
Total liabilities and equity$2,431,516 $1,764,010 
See accompanying notes to condensed consolidated financial statements.
TOC1a.jpgDutch Bros Inc.| Form 10-Q | 4
DUTCH BROS INC.
Condensed Consolidated Statements of Operations
Three Months Ended September 30,Nine Months Ended September 30,
(in thousands, except per share amounts; unaudited)
2024202320242023
REVENUES
Company-operated shops$308,295 $236,472 $851,648 $630,588 
Franchising and other29,917 28,035 86,581 81,065 
Total revenues338,212 264,507 938,229 711,653 
COSTS AND EXPENSES
Cost of sales248,161 189,323 686,048 519,482 
Selling, general and administrative57,536 50,490 161,866 148,128 
Total costs and expenses305,697 239,813 847,914 667,610 
INCOME FROM OPERATIONS32,515 24,694 90,315 44,043 
OTHER EXPENSE
Interest expense, net(6,869)(9,325)(20,259)(26,269)
Other income (expense), net764 (140)7,357 2,206 
Total other expense(6,105)(9,465)(12,902)(24,063)
INCOME BEFORE INCOME TAXES26,410 15,229 77,413 19,980 
Income tax expense4,698 1,828 17,330 6,259 
NET INCOME$21,712 $13,401 $60,083 $13,721 
Less: Net income attributable to non-controlling interests
9,068 9,191 28,437 10,601 
NET INCOME ATTRIBUTABLE TO DUTCH BROS INC.
$12,644 $4,210 $31,646 $3,120 
Net income per share of Class A and Class D common stock:
Basic$0.11 $0.07 $0.32 $0.05 
Diluted$0.11 $0.07 $0.32 $0.05 
Weighted-average shares of Class A and Class D common stock outstanding:
Basic113,819 59,366 99,756 57,598 
Diluted114,252 60,214 100,070 57,598 
See accompanying notes to condensed consolidated financial statements.


TOC1a.jpgDutch Bros Inc.| Form 10-Q | 5
DUTCH BROS INC.
Condensed Consolidated Statements of Comprehensive Income

Three Months Ended September 30,Nine Months Ended September 30,
(in thousands; unaudited)
2024202320242023
Net income$21,712 $13,401 $60,083 $13,721 
Other comprehensive income (loss):
Unrealized gain (loss) on derivative securities, effective portion, net of income tax expense (benefit) of $(247), $112, $(183), and $137, respectively
(1,324)385 (537)659 
Comprehensive income20,388 13,786 59,546 14,380 
Less: comprehensive income attributable to non-controlling interests8,506 9,388 28,134 10,980 
Comprehensive income attributable to Dutch Bros Inc.$11,882 $4,398 $31,412 $3,400 
See accompanying notes to condensed consolidated financial statements.
TOC1a.jpgDutch Bros Inc.| Form 10-Q | 6
DUTCH BROS INC.
Condensed Consolidated Statements of Stockholders’ Equity
Three Months Ended September 30, 2024
Dutch Bros. Inc. Stockholders’ Equity
Class A
Common Stock
Class B
Common Stock
Class C
Common Stock
Class D
Common Stock
(in thousands; unaudited)SharesAmountSharesAmountSharesAmountSharesAmountAdditional Paid-in-CapitalAccumulated Other Comprehensive Income
Retained Earnings (Accumulated Deficit)
Non-Controlling InterestsTotal Equity
Balance, June 30, 2024113,817 $1 35,227 $— 5,142 $— — $— $504,657 $1,072 $3,410 $220,672 $729,812 
Net income— — — — — — — — — — 12,644 9,068 21,712 
Unrealized loss on derivative securities, effective portion, net of income tax benefit of $247
— — — — — — — — — (762)— (562)(1,324)
Equity-based compensation expense— — — — — — — — 1,902 — — 1,059 2,961 
Issuance of Class A common stock pursuant to vesting of equity awards, net of stock withheld for tax and forfeitures6 — — — — — — — (36)— — (21)(57)
Effect of exchanges of Dutch Bros OpCo Class A common units— — — — — — — 8 — — (8)— 
Tax impacts of other equity-related transactions— — — — — — — — 254 — — — 254 
Distributions paid to non-controlling interest holders— — — — — — — — — — — (687)(687)
Balance, September 30, 2024113,823 $1 35,227 $— 5,142 $— — $— $506,785 $310 $16,054 $229,521 $752,671 

TOC1a.jpgDutch Bros Inc.| Form 10-Q | 7
DUTCH BROS INC.
Condensed Consolidated Statements of Stockholders’ Equity (continued)

Nine Months Ended September 30, 2024
Dutch Bros Inc. Stockholders’ Equity
Class A
Common Stock
Class B
Common Stock
Class C
Common Stock
Class D
Common Stock
(in thousands; unaudited)
SharesAmountSharesAmountSharesAmountSharesAmountAdditional Paid-in-CapitalAccumulated Other Comprehensive Income
Retained Earnings (Accumulated Deficit)
Non-Controlling Interests Total Equity
Balance, December 31, 202369,958 $1 60,629 $1 35,864 $— 10,669 $— $379,391 $544 $(15,592)$311,576 $675,921 
Net income
— — — — — — — — — — 31,646 28,437 60,083 
Unrealized loss on derivative securities, effective portion, net of income tax benefit of $183
— — — — — — — — (328)(234)— (303)(865)
Equity-based compensation expense— — — — — — — — 4,866 — — 3,354 8,220 
Issuance of Class A common stock pursuant to vesting of equity awards, net of stock withheld for tax and forfeitures71 — — — — — — — 1,831 — — (2,763)(932)
Issuance of Class A common stock, and surrender and cancellation of Class B, C , and D common stock, pursuant to secondary offerings following exchange of Dutch Bros OpCo Class A common units43,794 — (2,402)— (30,722)— (10,669)— — — — — — 
Effect of exchanges of Dutch Bros OpCo Class A common units— — — — — — — — 110,093 — — (110,093)— 
Tax impacts of other equity-related transactions— — — — — — — — 254 — — — 254 
Impacts of Tax Receivable Agreements— — — — — — — — 10,678 — — — 10,678 
Class B common stock decoupled from Dutch Bros OpCo Class A common units, surrendered and cancelled— — (23,000)(1)— — — — — — — — (1)
Distributions paid to non-controlling interest holders— — — — — — — — — — — (687)(687)
Balance, September 30, 2024113,823 $1 35,227 $— 5,142 $— — $— $506,785 $310 $16,054 $229,521 $752,671 

TOC1a.jpgDutch Bros Inc.| Form 10-Q | 8
DUTCH BROS INC.
Condensed Consolidated Statements of Stockholders’ Equity (continued)

Three Months Ended September 30, 2023
 Dutch Bros. Inc. Stockholders’ Equity
Class A
Common Stock
Class B
Common Stock
Class C
Common Stock
Class D
Common Stock
(in thousands; unaudited)SharesAmountSharesAmountSharesAmountSharesAmountAdditional Paid-in-CapitalAccumulated Other Comprehensive Income
Accumulated Deficit
Non-Controlling Interests
Total Equity
Balance, June 30, 202345,674 $1 64,699 $1 41,056 $— 12,411 $— $152,900 $905 $(18,400)$134,668 $270,075 
Net income
— — — — — — — — — — 4,210 9,191 13,401 
Unrealized gain on derivative securities, effective portion, net of income tax expense of $112
— — — — — — — — (168)188 — 197 217 
Equity-based compensation— — — — — — — — 3,864 — — 5,834 9,698 
Issuance of Class A common stock pursuant to vesting of equity awards, net of stock withheld for tax and forfeitures
5 — — — — — — — — — — — — 
Issuance of Class A common stock sold pursuant to follow-on offering, net of offering costs13,269 — — — — — — — 330,098 — — — 330,098 
Effect of acquisition of Dutch Bros OpCo Class A common units— — — — — — — — (189,072)— — 189,072 — 
Tax impacts of follow-on offering— — — — — — — — 46,594 — — — 46,594 
Tax impacts of other equity-related transactions— — — — — — — — 555 — — — 555 
Balance, September 30, 202358,948 1 64,699 1 41,056 — 12,411 — 344,771 1,093 $(14,190)$338,962 $670,638 
TOC1a.jpgDutch Bros Inc.| Form 10-Q | 9
DUTCH BROS INC.
Condensed Consolidated Statements of Stockholders’ Equity (continued)

Nine Months Ended September 30, 2023
Dutch Bros. Inc. Stockholders’ Equity
Class A
Common Stock
Class B
Common Stock
Class C
Common Stock
Class D
Common Stock
(in thousands; unaudited)
SharesAmountSharesAmountSharesAmountSharesAmountAdditional Paid-in-CapitalAccumulated Other Comprehensive Income
Accumulated Deficit
Non-Controlling Interests
Total Equity
Balance, December 31, 202245,544 $1 64,699 $1 41,056 $— 12,411 $— $145,613 $813 $(17,310)$122,858 $251,976 
Net income
— — — — — — — — — — 3,120 10,601 13,721 
Unrealized gain on derivative securities, effective portion, net of income tax expense of $137
— — — — — — — — (187)280 — 379 472 
Equity-based compensation— — — — — — — — 10,609 — — 18,408 29,017 
Issuance of Class A common stock pursuant to vesting of equity awards, net of stock withheld for tax135 — — — — — — — (661)— — (1,234)(1,895)
Issuance of Class A common stock sold pursuant to follow-on offering, net of offering costs13,269 — — — — — — — 330,098 — — — 330,098 
Effect of acquisition of Dutch Bros OpCo Class A common units— — — — — — — — (187,950)— — 187,950 — 
Tax impacts of follow-on offering— — — — — — — — 46,594 — — — 46,594 
Tax impacts of other equity-related transactions— — — — — — — — 655 — — — 655 
Balance, September 30, 202358,948 $1 64,699 $1 41,056 $— 12,411 $— $344,771 $1,093 $(14,190)$338,962 $670,638 
See accompanying notes to condensed consolidated financial statements.
TOC1a.jpgDutch Bros Inc.| Form 10-Q | 10
DUTCH BROS INC.
Condensed Consolidated Statements of Cash Flows
Nine Months Ended September 30,
(in thousands; unaudited)
20242023
Cash flows from operating activities:
Net income$60,083 $13,721 
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization67,484 49,411 
Non-cash interest expense834 609 
Gain on disposal of assets
(1,373)(245)
Equity-based compensation8,220 29,017 
Deferred income taxes15,335 5,600 
Remeasurement gain on TRAs
(5,687)(1,740)
Non-cash operating lease cost11,334 8,363 
Changes in operating assets and liabilities:
Accounts receivable, net(1,238)2,830 
Inventories, net8,572 (11,067)
Prepaid expenses and other current assets2,894 (943)
Other long-term assets(729)(544)
Accounts payable3,236 3,429 
Accrued compensation and benefits
7,701 4,196 
Other accrued liabilities
9,804 3,894 
Other current liabilities(461)(466)
Deferred revenue5,080 (3,516)
Operating lease liabilities(6,894)(7,643)
Net cash provided by operating activities184,195 94,906 
Cash flows from investing activities:
Purchases of property and equipment(178,969)(167,732)
Proceeds from disposal of fixed assets9,606 271 
Net cash used in investing activities(169,363)(167,461)
Cash flows from financing activities:
Proceeds from line of credit— 90,000 
Payments on line of credit— (202,705)
Payments on finance lease liabilities(7,726)(10,556)
Proceeds from long-term debt150,000 — 
Payments on long-term debt(7,898)(1,951)
Payments of debt issuance costs— (1,350)
Proceeds from equity offering, net of underwriting discounts and commissions
— 331,200 
Payment of deferred offering costs— (579)
Tax withholding payments upon vesting of equity awards(932)(1,896)
Distributions to non-controlling interest holders
(687)— 
Net cash provided by financing activities132,757 202,163 
Net increase in cash and cash equivalents147,589 129,608 
Cash and cash equivalents, beginning of period133,545 20,178 
Cash and cash equivalents, end of period$281,134 $149,786 
TOC1a.jpgDutch Bros Inc.| Form 10-Q | 11
DUTCH BROS INC.
Condensed Consolidated Statements of Cash Flows (continued)

Nine Months Ended September 30,
(in thousands; unaudited)
20242023
Supplemental disclosure of cash flow information
Interest paid
$29,125 $27,663 
Income taxes paid, net of refunds
1,824 1,447 
Supplemental disclosure of noncash investing and financing activities
Additions of property and equipment accrued as of end of period13,155 14,207 
Deferred offering costs accrued— 523 
See accompanying notes to condensed consolidated financial statements.
TOC1a.jpgDutch Bros Inc.| Form 10-Q | 12
DUTCH BROS INC.
Index for Notes to Condensed Consolidated Financial Statements
NotePage
NOTE 1 — Organization and Background
NOTE 2 — Basis of Presentation and Summary of Significant Accounting Policies
NOTE 3 — Revenue Recognition
NOTE 4 — Organization Realignment and Restructuring
NOTE 5 — Inventories
NOTE 6 — Property and Equipment
NOTE 7 — Intangible Assets
NOTE 8 — Leases
NOTE 9 — Debt
NOTE 10 — Derivative Financial Instruments
NOTE 11 — Income Taxes
NOTE 12 — Equity-Based Compensation
NOTE 13 — Non-Controlling Interests
NOTE 14 — Income Per Share
NOTE 15 — Commitments and Contingencies
NOTE 16 — Related Party Transactions
NOTE 17 — Segment Reporting
TOC1a.jpgDutch Bros Inc.| Form 10-Q | 13
DUTCH BROS INC.
Notes to Condensed Consolidated Financial Statements (Unaudited)
NOTE 1 — Organization and Background
Business
Dutch Bros is in the business of operating and franchising drive-thru coffee shops as well as the wholesale and distribution of coffee, coffee-related products, and accessories. As of September 30, 2024, there were 950 shops in operation in 18 U.S. states, of which 645 were company-operated and 305 were franchised.
Organization
Dutch Bros Inc. was formed on June 4, 2021 as a Delaware corporation for the purpose of facilitating an IPO and other related transactions in order to carry on the business of Dutch Bros OpCo. Dutch Bros Inc. is the sole managing member of Dutch Bros OpCo and operates and controls all of the business and affairs of Dutch Bros OpCo. As a result, Dutch Bros Inc. consolidates the financial results of Dutch Bros OpCo and reports a non-controlling interest representing the economic interest in Dutch Bros OpCo held by the other members of Dutch Bros OpCo. The Company’s fiscal year end is December 31.
As of September 30, 2024, Dutch Bros Inc. held 100.0% of the voting interest and 64.2% of the economic interest of Dutch Bros OpCo. The Continuing Members held none of the voting interest and the remaining 35.8% of the economic interest of Dutch Bros OpCo.
NOTE 2 — Basis of Presentation and Summary of Significant Accounting Policies
Financial Statements Presentation
The Company’s condensed consolidated financial statements as of September 30, 2024 and for the three and nine months ended September 30, 2024 and 2023 have been prepared in accordance with GAAP and pursuant to the rules and regulations of the SEC, consistent in all material respects with those applied in the Company’s 2023 Form 10-K and as updated by this Form 10-Q.
The Company has made estimates and judgments affecting the amounts reported in its condensed consolidated financial statements and the accompanying notes. Although management bases its estimates on historical experience and assumptions that are believed to be reasonable under the circumstances, actual results could differ from those estimates. This report should be read in conjunction with the consolidated financial statements in the Company’s 2023 Form 10-K that includes additional information on accounting estimates, policies, and the methods and assumptions used in its estimates.
In the opinion of management, the accompanying condensed consolidated financial statements reflect all adjustments, consisting of normal recurring adjustments, necessary to present fairly the Company’s consolidated financial statements for the periods presented. Operating results for the three and nine months ended September 30, 2024 are not necessarily indicative of the results that may be expected for the fiscal year ending December 31, 2024.
Significant Accounting Policies Updates
There have been no material updates to the Company’s significant accounting policies during the nine months ended September 30, 2024 from those previously reported in the Company’s 2023 Form 10-K.
TOC1a.jpgDutch Bros Inc.| Form 10-Q | 14
Recently Issued Accounting Standards
In December 2023, the FASB issued ASU No. 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures. The amendments in this update are intended to enhance the transparency and decision usefulness of income tax disclosures, primarily through improvements to the rate reconciliation and income taxes paid information, specifically requiring (1) consistent categories and greater disaggregation of information in the rate reconciliation, and (2) income taxes paid disaggregation by jurisdiction. These amendments are effective for public business entities' annual periods beginning after December 15, 2024 and interim periods within fiscal years beginning after December 15, 2025, and should be applied on a prospective basis. Early adoption is permitted for annual financial statements that have not yet been issued. The Company is currently assessing the potential impacts of this standard on its income tax disclosures, and expects to provide additional detail and disclosures under the new guidance.
In November 2023, the FASB issued ASU No. 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures. The amendments in this update are intended to improve reportable segment disclosure requirements, primarily through enhanced disclosures about significant segment expenses. Effective for annual periods beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024, with early adoption permitted. Public entities should apply the amendments in this update retrospectively to all prior periods presented in the financial statements. Upon transition, the segment expense categories and amounts disclosed in the prior periods should be based on the significant segment expense categories identified and disclosed in the period of adoption. The Company has completed its analysis and identified significant segment expenses for disclosure commencing with the 2024 Form 10-K, primarily related to cost of sales for the Company-operated shops segment. The new standard is not expected to have a material impact on its consolidated financial statements; however, the Company expects to provide additional detail and disclosures under the new guidance.
NOTE 3 — Revenue Recognition
Revenue
The following table disaggregates revenue by major component:
Three Months Ended September 30,Nine Months Ended September 30,
(in thousands)2024202320242023
Company-operated shops$308,295 $236,472 $851,648 $630,588 
Franchising28,694 26,691 82,545 76,860 
Other1,223 1,344 4,036 4,205 
Total revenues$338,212 $264,507 $938,229 $711,653 
TOC1a.jpgDutch Bros Inc.| Form 10-Q | 15
Deferred Revenue
Deferred revenue activity related to the Company’s gift card and loyalty programs was as follows:
Nine Months Ended September 30,
(in thousands)20242023
Beginning balance$34,616 $26,904 
Revenue deferred - gift card activations, loyalty app loads, and loyalty points and rewards earned312,963 255,782 
Revenue recognized - gift card, loyalty app, loyalty rewards redemptions, and breakage
(308,012)(257,144)
Ending balance39,567 25,542 
Less: current portion(35,316)(21,999)
Deferred revenue, net of current portion, gift card and loyalty programs$4,251 $3,543 
Deferred revenue also includes initial unearned franchise fees from franchise partners. These deferred revenues reported in the Company’s condensed consolidated balance sheets were as follows:
(in thousands)September 30, 2024December 31, 2023
Total deferred revenue, excluding gift card and loyalty programs$2,538 $2,409 
Less: current portion(422)(412)
Deferred revenue, net of current portion, excluding gift card and loyalty programs$2,116 $1,997 
Revenue recognized during the three and nine months ended September 30, 2024 and 2023 that was included in the respective deferred revenue liability balances at the beginning of the period are shown below.
Three Months Ended September 30,Nine Months Ended September 30,
(in thousands)2024202320242023
Gift card redemptions 1
$637 $553 $5,737 $4,742 
Earned franchise fees
112 114 336 342 
_____________________
1     Amounts exclude cash loads and transactions related to the Company’s loyalty rewards program.
Future recognition of initial unearned franchise fees as of September 30, 2024 is as follows:
(in thousands)
Remainder of 2024$111 
2025409 
2026367 
2027322 
2028273 
Thereafter1,056 
Total$2,538 
TOC1a.jpgDutch Bros Inc.| Form 10-Q | 16
NOTE 4 — Organization Realignment and Restructuring
On January 29, 2024, the Company’s Board of Directors approved an organizational realignment and restructuring plan to expand the Company’s support operations at its Phoenix, Arizona office. As part of this large-scale initiative, the Company will relocate certain of its support center staff from the Grants Pass, Oregon headquarters to the Phoenix office, and anticipates that by January 1, 2025, approximately 40% of the Company’s total support operations staff will be located in Phoenix, Arizona. All affected employees were either offered an opportunity to continue employment in the Phoenix office or were offered a severance package; these communications were largely completed by February 9, 2024. The Company expects to incur total aggregate charges of approximately $18 million to $22 million related to this initiative, consisting of (i) approximately $14 million to $18 million in employee-related costs, including relocation, retention and transition costs, termination benefits, and duplicate transition wages and benefits; and (ii) approximately $4 million in other costs, including consulting fees and costs and duplicate rent. Substantially all of the estimated charges are expected to result in current and future cash expenditures.
The Company records severance related to this initiative as a one-time termination benefit and recognizes the expense ratably over the employees’ required future service period.
All other costs, including other employee transition costs, recruitment and relocation costs, and third-party costs, are recognized in the period incurred.
There have been no material lease terminations or lease abandonment related to this initiative.
During the three and nine months ended September 30, 2024, the Company recorded restructuring charges for employee-related and other costs in selling, general and administrative expenses on the condensed consolidated statements of operations as follows:
(in thousands)Three Months Ended September 30, 2024Nine Months Ended September 30, 2024
Relocation and travel costs
$2,217 $9,710 
One-time termination benefits
1,781 3,577 
Total employee-related costs
3,998 13,287 
Duplicate rent
193 223 
Total other costs
193 223 
Total restructuring costs incurred$4,191 $13,510 
As of September 30, 2024, the accruals for corporate restructuring costs are included in accounts payable, accrued compensation and benefits, and accrued expenses on the condensed consolidated balance sheets. The following table summarizes the activity for the restructuring liability during the nine months ended September 30, 2024:
(in thousands)Liability, December 31, 2023Charges
Cash Payments
Liability, September 30, 2024
Relocation and travel costs
$— $9,710 $(8,866)$844 
One-time termination benefits
— 3,577 (719)2,858 
Total employee-related costs— 13,287 (9,585)3,702 
Duplicate rent
— 223 (221)2 
Total other costs
— 223 (221)2 
Totals
$— $13,510 $(9,806)$3,704 
TOC1a.jpgDutch Bros Inc.| Form 10-Q | 17
NOTE 5 — Inventories
Inventories, net consist of the following:
(in thousands)September 30, 2024December 31, 2023
Raw materials$19,965 $28,523 
Finished goods18,416 18,430 
Total inventories$38,381 $46,953 
NOTE 6 — Property and Equipment
Property and equipment, net consists of the following:
(in thousands)
Useful Life (Years)
September 30, 2024December 31, 2023
Software3$10,252 $7,212 
Equipment and fixtures3—7199,155 157,352 
Leasehold improvements5—1551,308 42,441 
Buildings10—20386,500 269,186 
LandN/A7,781 7,338 
Aircraft 1
N/A— 9,195 
Construction-in-progress 2
N/A
167,962 166,054 
Property and equipment, gross822,958 658,778 
Less: accumulated depreciation(160,199)(116,338)
Property and equipment, net$662,759 $542,440 
_______________
1     Airplane, and hangar and related equipment, were sold to the Company’s Co-Founder in June 2024 and July 2024, respectively. See NOTE 16 — Related Party Transactions for additional information.
2    Construction-in-progress primarily consists of construction and equipment costs for new and existing shops, as well as our new roasting facility in Texas.
Depreciation expense included in the Company’s condensed consolidated statements of operations was as follows:
Three Months Ended September 30,Nine Months Ended September 30,
(in thousands)2024202320242023
Cost of sales$16,556 $11,157 $45,579 $30,403 
Selling, general and administrative expenses373 408 841 1,235 
Total depreciation expense$16,929 $11,565 $46,420 $31,638 
TOC1a.jpgDutch Bros Inc.| Form 10-Q | 18
NOTE 7 — Intangible Assets
The details of the intangible assets are as follows:
(in thousands)
Weighted-average amortization period (in years)
September 30, 2024December 31, 2023
Reacquired franchise rights2.97$27,049 $27,049 
Less: accumulated amortization(23,594)(21,634)
Intangibles, net$3,455 $5,415 
Amortization expense included in the Company’s condensed consolidated statements of operations was as follows:
Three Months Ended September 30,Nine Months Ended September 30,
(in thousands)2024202320242023
Cost of sales$508 $820 $1,960 $2,589 
NOTE 8 — Leases
A summary of finance and operating lease right-of-use assets and lease liabilities as of September 30, 2024 and December 31, 2023 is as follows:
(in thousands)Balance Sheet ClassificationSeptember 30,
2024		December 31,
2023
Right-of-use assets
Finance leasesFinance lease right-of-use assets, net$377,561 $382,734 
Operating leasesOperating lease right-of-use assets, net301,896 199,673 
Total right-of-use assets$679,457 $582,407 
Lease liabilities
Finance leasesCurrent portion of finance lease liabilities$12,845 $9,482 
 Finance lease liabilities, net of current portion369,206 367,775 
Operating leasesCurrent portion of operating lease liabilities12,987 10,239 
 Operating lease liabilities, net of current portion293,474 191,419 
Total lease liabilities $688,512 $578,915 

TOC1a.jpgDutch Bros Inc.| Form 10-Q | 19