Welcome everyone. Good afternoon, and welcome to the session for Dutch Bros. I'm David Tarantino, the Restaurants Analyst at Baird, and I'm very excited to introduce you to this story. Dutch Bros is an operator and franchisor of nearly 900 beverage-focused shops. The brand is fairly unique in that it provides a lot of different beverages, you know, in the coffee and non-coffee category, and does it through predominantly a drive-through business. And it generates really good returns and has plenty of room for growth, in our opinion. I'm pleased to welcome two members of the management team with us today: the President and CEO, Christine Barone, who's to my immediate left, and then the relatively new Chief Financial Officer, Josh Guenser. So welcome, both of you. Thank you. Thanks for being here. Thanks so much for having us, David. You're welcome. I think Christine's going to start us off with a few slides here and an overview, and then we'll hop into the fireside chat. Awesome. So for those of you who have not been to a Dutch Bros, just wanted to give a quick overview and share a couple of pictures of who we are and what we do. So just to give a grounding here, we have been around for 30+ years. Our two co-founders started in Grants Pass, Oregon. They were dairy farmers and started with one coffee cart. Trav is still quite involved in the business, and really helps us understand kind of the history and where the brand has come from. We have absolutely amazing people systems. We grow completely from within, and our growth is really predicated on operators being ready to open new markets. We have, we have a very strong culture of connecting with our customers and providing really exceptional service, to our customers. We also have amazing growth and, some great margins. When we look at kind of where we can go, this is a very, high-frequency business. We're in the beverage business. We sell a mix of, iced coffee beverages, a little bit of hot, but not very much. About a quarter of our business is our proprietary Rebel energy drink business, and then we also sell teas and lemonades and smoothies and other beverages like that. Food is about 2% of our business, so really a very beverage-focused, drive-through business. We believe we have huge potential ahead, so potential to grow from 876 shops, where we ended Q1, to over 4,000 shops in the next 15 years or so. Also just wanted to share a little bit, we just had a fantastic Q1. We now have coast-to-coast presence. We're in 17 states. We've got three shops now opened in Florida, so quite far away from our beginnings in Grants Pass. We've also had 11 consecutive quarters of 30+ shop openings. We opened 45 new shops in Q1. We're continuing to grow our system-wide AUVs. Shops that have been opened for at least 15 months are now hitting right around $2 million in AUV. We had great same-shop sales growth on top of that unit growth, so at 10% same-shop sales growth for Q1. And then we also had a lot of margin leverage in the quarter. So as we continue to grow in scale, we're finding efficiencies in our G&A and really continuing to kind of perfect our operating systems. When we look at kind of what's really driving our success right now, I think it's a very strong focus on our core customer that tends to be a little bit younger and skew a little bit more female. And with that, we're driving really neat, I think, innovation across the brand. We launched two big items in Q1, so one, a protein coffee. So we did this as an iced protein coffee with 20 grams of protein in our medium, and so something that could fill you up while you're also enjoying your coffee. We also launched Poppin' Boba. Both of these things did quite well across the quarter, and so we decided to keep them onto the permanent menu as we go forward. We also have a very strong Dutch Rewards program. 66% of our transactions are actually rewards transactions, and so even with that rapid growth, we're really bringing new customers into the brand and into the rewards program so we can speak with them as we continue to grow. And then we've also are focused on paid advertising. So as we grow, there's an incredible opportunity to really drive brand awareness and make sure that new customers find us a little more quickly as we enter new markets, and so we've seen some great success there as well. Other things that are really priorities for us in 2024 and beyond, first one I'll talk about is our real estate strategy. So out of those 876 shops, we've opened about 500 of them over the last five years, so really rapid growth in the last five years. What that means is we have a lot of learnings that we've got from that, and we also have new systems and tools as we go forward with our real estate strategy. So we've made a number of refinements as we continue to grow into new markets and expand. And then finally, also rolling out Mobile Order and Pay. So we believe we'll have this capability in the majority of our shops by the end of this year and are very much in the process of testing it right now and beginning to roll it out to shops. So we have a very popular app, but don't have Mobile Order right now. It's the number one thing that our customers are asking for us to have within our app.... And then finally, as we continue to grow in scale, we're also bringing new folks into the team that have been at scale businesses before and are excited to be a part of Dutch Bros and help us grow. So we've recently hired Sumi Ghosh, who I worked with at another coffee company many years ago, and he most recently came from Nike, but has joined us as President of Operations. He's working closely with Brian Maxwell, who's been with the brand for over 30 years, to really solidify our operations and continue to grow. Tana Davila joined the team last year as Chief Marketing Officer, and I think really a lot of the results we see have been driven by some of the things that she has brought in as our CMO. Josh recently joined, who you'll get to hear from today. And then Jess Elmquist is also a new addition to the team. So, he helped grow the Life Time brand over many years with the founder there, and was excited to, you know, join a brand with such a strong people focus. We also have a number of folks who've been with us for a long time, who are continuing with the brand. So Christine Schmidt, who's been with the brand since the beginning, Brian Maxwell, and then of course, our co-founder, Trav, who continues to be an important part of the brand. That's my quick intro, and then we'll turn it back to you. Great! All right, thanks for that intro. I guess maybe a good place to start, the two of you are relatively new to the company. Christine, you joined a little over a year ago, and Josh more recently. So I'd be curious to hear your thoughts on, you know, as you've kind of started at the business, what's been the biggest surprises? What do you see as the biggest opportunities, you know, with respect to setting up Dutch Bros for future growth? Yeah, I'd be happy to start. I think probably one of the biggest surprises in a very positive way, I started in February. Over the last few months, I've been spending my time getting immersed with the culture, immersed with Charlie, who's our retiring CFO. But I also got to train in our shops, and I went through a two-week onboarding shop training, where I became a certified Broista. But the systems and processes we have in place to bring people on board, what I went through over that two weeks, is the same as what we would take a new Broista through. That involves sitting down with our operator, really getting to know the culture, really getting to know the business, and then spending two weeks shoulder to shoulder with her, learning how to make every one of our beverages, learning how to sit in each one of the positions and be successful before I take what we call our Flow Check. Flow Check's a very intense test that happens at the end to make sure you can become a certified Broista. And what I'd say, what I was most surprised by was, really the level of effort and time that's been put into building these systems that are used across the system as we roll out and build new stores. So we'll take an experienced operator, somebody that's been trained for, you know, been with the company for on average, seven years, to go open a new market, a new shop, and they're going to take the same new people through that same training that I went through. It's something I've never experienced, I think, is powerful as the way we grow rapidly. So it was a very pleasant and a very big surprise. I think I can speak for some of the others that have joined as well, all very surprised by that as well, and in a very positive way. So I think it's a really, really, really cool part of what we do that enables us to really carry this culture forward. I think what I'm most excited by is with this rapid growth, we are starting to build out the infrastructure behind everything else that's going so well. So we have a really strong business. We have a lot of these foundational elements that are in place that are very difficult to replicate and very difficult to build when you're starting to get at scale. But we do have some infrastructure and work we can do to enhance that work in certainly in the finance world and the BI and kind of analytic world, where I think we can even unlock more power. So I think there's certainly a lot of opportunity as we start leaning in and building out that team on top of this system that is truly incredible. Great. Did you pass your Broista test? I did. Okay, congratulations. It took me two times, so it's probably I got 89%. You have to get 90% to pass. Full competition going, so... Maybe a little. Yeah. Yeah. Yeah. And so for me, I would say, I think what, what I knew from the outside is the really hard things to get right in food and beverage are so right at Dutch Bros. So having a super cool brand that really resonates with customers, and then having people systems and being able to completely grow from within, are, are really game changers in this industry and super hard to get right, and those things are very right. And then I would say what surprised me was the incredible consistency of the service across all of our shops. It's pretty easy to have an awesome experience, or maybe kind of easy to have an awesome experience right next to your hometown and where you first started. It is really hard to scale that across the country, and for that service to feel exactly the same when you go from Grants Pass to Kansas, or to Kentucky, or to many of the other places where we've scaled. So I think for me, understanding the depth of our training, all of those things that we do to make that happen, has been a huge pleasant surprise. Then I would share, same thing as, as Josh, the, the really hard things to get right are so right at Dutch Bros, and then we get to do the fun stuff behind the scenes and build process and structure, and all the stuff that's really required to scale at the rate that we're scaling. We're at this really cool stage where we're actually big enough now, where people will work with us to do things like protein coffee and build a proprietary milk, but we can move really fast still because we're actually not that big. And, and so I think it's a really fun stage. It's also a stage where we can really invest in data and analytics, and so take the beautiful art that already exists at Dutch Bros and kinda combine that with a little bit of science to get to even better answers and, and more precise rollouts of things for our teams. Great. How fast do you envision the business growing? I know you've had some growth targets out there since the IPO, but, I guess, you know, perhaps you can remind the folks who are fairly new to the story what those are, and whether you think that's the right pace of growth going forward. Yeah, so we have shared that we believe we can grow our system shop count in that mid-teens range. We've been trending a little bit higher than that, and still believe that that's a really good target for us. I think that, you know, as we continue to learn, the interesting thing is that we when we entered some of the newer markets as we accelerated our growth, we were using data from mature West Coast markets, which sometimes don't behave like the middle of the country and oftentimes don't behave like brand-new markets for you because the brand awareness is quite different. And now, as we go into Florida and other new markets, we actually have a really rich set of data of which to learn from, and so we feel very comfortable with that growth rate and also feel comfortable that as we, you know, continue to learn more and get more precise about our ability to predict our AUV levels as we open, that, you know, there's some potential we could, you know, enhance that at some point. Got it. I want to come back to growth in a second, but first I wanted to ask about some nearer-term themes, and one of the themes that we've seen in 2024 is very mixed consumer spending environment. Some brands calling out weakness and underlying trends among lower-income consumers and some not. So I just wanted to first ask kind of how are you viewing the current consumer spending environment? And then I might have a follow-up on that. Absolutely. So we are listening and watching really closely, I think, like everyone else is doing. I think that we are in a really different environment than we were in two years ago. We want to be super thoughtful about where we are from a pricing perspective. I also think that when you, when you seem to look at what's happening, is customers are clearly making choices right now about the experiences and the products they love, and we feel like we're sitting in a really great place with that. And, and I think that it's more important than ever to know why, why do your customers come to you, specifically, and making sure that you are really fulfilling that promise right now. Because as customers are looking at their wallet and peeling away little pieces of that, I think that you don't want to be the piece that they peel away. You know, just to put it in context, so I mean, your Q1 performance was really good. You know, same-store sales were up 10%. A lot of that was check-driven, but still, you know, holding on to the traffic or growing it was, you know, relatively unique compared to what we're seeing from others. So I guess, you know, do you think or what do you think drove the outperformance versus the industry in Q1? Yeah, so I mean, one thing I want to note, because we're always really thoughtful as we look at the numbers, we did have a weak Q1 last year, and so sometimes in this industry, that lapping over something weaker, you get to have a benefit of that next year. So you know, on with that context, I would share, I think our innovation really hit at our core customer. So it was what they wanted. It's what kind of got them out to come and visit Dutch Bros. The rewards program, we made a change to our rewards program at the end of March of last year, where we took it all from a base rewards program to a base program plus an incentive program, so really incenting through personalized marketing. Although we are not at the personalized stage yet, we're more at the mass stage. But there's a lot of ability that we have to talk to our customers now and help incent behavior. And then finally, our media strategy. We really switched from a media strategy of doing a lot of retargeting with our customers to really working on finding new customers. And so one of the things that we understood was that our brand awareness in new markets is much lower than in our mature markets. And so going after customers who have not visited us yet and have yet to discover us is a really effective way to spend those dollars. Yep. Great. I think maybe that's a good segue. You know, with respect to unit growth, we have seen, at least according to our calculations, the sales volumes for the new units have come down in each of the last few years. And you've commented previously on Texas being, you know, lower volume with the lower brand awareness. So, first, I wanted to maybe ask you, you know, is this just... You know, essentially the new unit volumes coming down, is this just a function of the sales mix kind of shifting into those markets where brand awareness is low? Or how would you characterize why this is happening? Yeah, so we, we do see when we go into new markets where we haven't been before, much lower brand awareness, which does result in lower AUVs in those markets. So when we open a new unit in Arizona or Southern California, we see very high volumes versus some of the new markets. And, and, and I think that that is the largest piece of, of what we've seen. We've seen... Now, despite that, this is a really attractive beverage model that is highly variable, so there's not a lot of fixed cost in the business. So at very different, AUVs, we're actually highly profitable. And so given the return profile of it, we, we think that the growth rate is very appropriate, and we're not- it- our goal is not to have the highest AUV units, but not to open very many. We think that we have a huge white space in front of us, and our growth model is really predicated on giving our operators new opportunities to go and open a market. We have a very strong pipeline for many years of operators, and so keeping that compelling future for them open and those new markets for them to open is really important for us also for our growth. Right. The other piece I would add to it is, I think another piece is we're refining the real estate strategy is really that much deeper understanding now of what drives AUVs even within a new market. And so, you know, is it better to place it here or here? What is the right population density that we want? What is the right radius that we have around our shops? All of those things are also refinements now that we have in our real estate models that will help us balance out those AUVs. It just takes a long time for a real estate pipeline to adjust. Right. Yeah. Yeah, I wanted to, Yeah A sk you about that. On this point, though, you know, I think you've characterized it as mostly a brand awareness issue. I guess, what's giving you that read versus maybe it being a brand acceptance issue? You know- Mm-hmm I don't see why it wouldn't be a, you know, wouldn't be more related to brand awareness, but I guess, what data points do you have that would reinforce that idea? Yeah. So, I think a couple of things. So from a brand acceptance standpoint, we have some, a very small handful, not even a percentage of shops that are doing, like, over $5 million in AUV. It doesn't mean to me that, oh, if we go into a new market and do $1.5 million, that the brand hasn't been accepted. Doing $5 million in beverage isn't something that we're going for. In fact, it's not. We try to put a shop right next to that shop to actually pull off some of the volume. So I'll start there, is I think that it is that, that history doesn't necessarily define what brand acceptance is, it's what is that right level that you're going to get really attractive returns, that your margins really work and that work for, for our shop performance. So I think the way that we are looking at brand acceptance is, you know, we have, we have a fair amount of data now where we can look at how do we perform versus others out there who are in similar spaces to us. When we go and put a unit next to someone or they put a unit next to us, what happens when we see that? And we feel really across a wide range of folks that we're competing very favorably. Again, we're a beverage-only business, so trying to kind of extract of what might someone's beverage volume look like, you know, compared to ours. Again, we feel really, really great about where we're going. And then I think the second piece is, that's relatively new in what we're seeing, is that a little bit of paid media spend against awareness seems to really be driving something we're pleased with. Yeah. Great, great. So. Good to hear. And then you mentioned fine-tuning the real estate strategy, and I know you had a pipeline you had to kind of... You're already baked with this year. Is that - I guess, when is the first time we're going to start to see the new real estate strategy manifest itself? Is that in early 2025 or is it later 2025? I guess, give us a sense of when we're going to see the change. Yeah. So I would—I think we've shared, in 2025, you would start to see some change. A real estate pipeline really does evolve over time. Mm-hmm. We have shops we're opening today that we might have signed leases for 4 years ago. The vast majority, it's about, you know, an 18- to 22-year timeline. Mm-hmm. But there are, you know, things that we signed a while ago, and then we are also all human beings. So as we adjust to a new strategy, sometimes you're adjusting, adjusting how you, the new developers that you're talking to or the new way that we are evaluating sites takes a little bit of time. So I would say we would expect to start to see some changes from that in 2025. Got it. A couple of things, around kind of comp drivers, I think one of which has been, over the past year, you've had a lot more activity in the rewards program. I guess, how would you, how would you characterize that? It seems, it seems like it's been a, a pretty big success story, but I guess I don't want to put words in your mouth, but, I guess would, would you say that's been a pretty big driver of the business as you kind of looked at the last three or three quarters or so? Yeah, I would say it's a big driver for a number of reasons. So one, it's like our first time that we can actually incent different behaviors and watch that this customer loves this product and comes every Tuesday afternoon and looks a lot like this customer. And so how do we introduce our customers to new products that they're going to care about, introduce them to new day parts, and give them a little bit of an incentive to get there? And so that seems to be very successful. I also think rewards programs right now are really important in signaling value, and that you feel really great when you've been coming to Dutch Bros, and on this trip you get to use a free reward. And so I also think just making sure that we have the right number of kind of incentives and points out in the market is something that our customers see as value. Right. And I guess the good news is, you know, as you start to cycle the introduction of some of those changes, you have another potential nice driver of the business coming in Mobile Order and Pay. So perhaps maybe you can just share your thoughts on what that could mean, you know, for Dutch Bros as you roll that out. Yeah, and what we would share now is we're super early in the rollout, so I don't think we have meaningful data yet to understand what it could mean for us from a business perspective. What I can share is that the way that we're thinking about it, our differentiator is our service. We spend time chatting with you when you're in your car and getting your order, and that can't change. And so if mobile order becomes impersonal, it would not be a win for us, and that's the primary thing that we're really working through. That, and making sure our Broistas are having an incredible experience, as we roll out mobile order. So really listening to what they're seeing, what they're feeling as we, as we roll it out, and making sure that we're adjusting quickly to anything we hear that they're-they don't love. ... I'll say it's also the number one requested item of our customers in our loyalty program, is that we enable that mobile order capability. And obviously, we're not the first to do this, so a lot of other brands have this and kinda set expectations with customers. So certainly, you'd expect that there's there'd be easier customer adoption because of that. Have you decided how this is going to work with consumers? So if I order ahead, do I have, can I go through the drive-through line if I want to, or can I, you know, park and pick it up at the window, or are you gonna give me that option? I guess, how is this all gonna work? In many shops, you will have that option. So you'll get to pick which thing, which way you want to receive your order. So you go in, you pick what you want, you decide if you want some extra toppings or a different syrup in your beverage, whatever you want. And then the next thing you get to choose is the time that you pick it up. And then you get to choose if you're going through the drive-through or the window to pick it up. And then finally, you get to decide if you'd like to leave a tip for your Broista, and then you get to check out. And, there will be some shops, like, if we have very limited parking, we'll route traffic through the drive-through. So we can change all of the settings on an individual shop basis to best serve that shop. We can also, if we have a very busy drive-through line and a lot of parking, direct all that traffic to the walk-up window. Got it. And I guess in the early stages of piloting this, you know, what's been the experience? I think some brands have run into issues with this, where the people who are in the regular line, who didn't order in advance, start to get frustrated because they don't realize that they're, you know, 20th in line instead of 3rd in line. So I guess, how are you managing through that and making sure that the people who don't order ahead get the right experience? Yeah, so for us it's a little different. So the majority of our volume is going through the drive-through channel. Mm-hmm. Like almost 95% of, of the volume in most shops is going through the drive-through. So if you come in, you, your car is in the order in which it came in. And so what will happen is, if you decide to go through the drive-through, which a lot of people do, 'cause they're doing that for convenience, they don't wanna get out of their car, that actually will speed up the line for everyone. Mm-hmm. Because the order time will be redeployed to make time. So that will actually benefit the group. Then if you do come to the walk-up window, you'll get to see that, yeah, there's customers who are mobile ordering and be introduced to mobile order that way. So that's something we're gonna be very thoughtful about, but I do think the model is different enough that, you know, the car line is the car line as to when they arrive. One thing that, depending on volume, we might do is many of our shops have a double drive-through lane. So if mobile order becomes a very significant volume of our sales, we might direct that outer lane, where we sometimes have what we call an escape lane, where you can leave the line before you get to the drive-through. We might direct mobile order traffic through that outside lane. Got it. One other advantage I think we have in rolling this out, that maybe other concepts that we've worked at in the past have not experienced, is we have a kitchen display system that actually prioritizes and shows the sequence of orders and the channel that they're coming through. So you have the visual cue and the ability to help guide customers through, so that it's not just printing out potentially in a random order that doesn't match with the flow of people coming through. Got it. Yep, makes sense. And then, on, maybe a segue. Well, one more question on this. Would you expect, and I know you don't have a lot of data on it yet, but would you expect this to be something that leads to more of a step change in business, given the unlock and capacity it could create, or do you think it'll build gradually? I guess, what's your sense- We- Based on your prior experience, what would you say? I think that we actually don't know the answer. I think the things that are really different is, one, I think my guess is 99% of our customers has, have used mobile order somewhere else before. Mm-hmm. Which was not the case when others rolled this out. And then too, we have such high adoption of the app, that 66% of transactions already going through the app, that, you know, we would expect this could be a significant channel pretty quickly. What we don't know is how incremental it will be. And I think that for others, it's built up for so long over time, that it's hard to kind of look at others' experience and understand what incrementality of the channel might be. Got it. We'll see soon. We'll see soon enough, right? Well, I think we're out of time here, so I'll wrap it there. So please join me in thanking the team.