Breaking Down Dutch Bros Inc. (BROS) Financial Health: Key Insights for Investors

Dutch Bros Inc. (BROS) Bundle

Get Full Bundle:
$12 $7
$12 $7
$12 $7
$12 $7
$25 $15
$12 $7
$12 $7
$12 $7
$12 $7

TOTAL:



Understanding Dutch Bros Inc. (BROS) Revenue Streams

Understanding Dutch Bros Inc.’s Revenue Streams

The revenue streams for Dutch Bros Inc. primarily come from two segments: Company-operated shops and Franchising and other services. As of September 30, 2024, the breakdown of these revenue sources is as follows:

Revenue Source Q3 2024 Revenue (in thousands) Q3 2023 Revenue (in thousands) Year-to-Date 2024 Revenue (in thousands) Year-to-Date 2023 Revenue (in thousands)
Company-operated shops $308,295 $236,472 $851,648 $630,588
Franchising and other $29,917 $28,035 $86,581 $81,065
Total Revenues $338,212 $264,507 $938,229 $711,653

The year-over-year revenue growth rate is notable. For the three months ended September 30, 2024, total revenues increased by 27.8% compared to the same period in 2023. For the nine months ended September 30, 2024, total revenues grew by 32.0% year-over-year.

Year-over-Year Revenue Growth Rate

The historical trends showcase a significant increase in both segments:

  • Company-operated shops experienced a revenue increase of 30.4% in Q3 2024 compared to Q3 2023.
  • The year-to-date growth for Company-operated shops was 35.1%.
  • Franchising and other revenue grew by 6.7% in Q3 2024 and 6.8% year-to-date compared to the previous year.

Contribution of Different Business Segments to Overall Revenue

The contribution of each segment to overall revenue is highlighted below:

Segment Q3 2024 Contribution (%) Q3 2023 Contribution (%) Year-to-Date 2024 Contribution (%) Year-to-Date 2023 Contribution (%)
Company-operated shops 91.0% 89.4% 90.8% 88.7%
Franchising and other 9.0% 10.6% 9.2% 11.3%

Analysis of Significant Changes in Revenue Streams

The significant changes in revenue streams have been primarily driven by:

  • New shop openings, with a total of 33 company-operated shops opened in Q3 2024 compared to 37 in Q3 2023.
  • Increased same-shop sales, which contributed $7.0 million to the revenue growth in the comparable shop base for Q3 2024.
  • Expansion of the franchising segment, which saw a revenue increase primarily from products sold to franchisees and new franchise agreements.

Overall, the revenue analysis illustrates robust growth across both company-operated and franchising segments, indicating strong operational performance and market expansion strategies.




A Deep Dive into Dutch Bros Inc. (BROS) Profitability

Profitability Metrics

Gross Profit Margin: For the three months ended September 30, 2024, the company-operated shop gross profit was $68,377 (22.2% of revenues), compared to $56,992 (24.1%) for the same period in 2023. For the nine months ended September 30, 2024, the gross profit was $192,698 (22.6%) compared to $137,943 (21.9%) in 2023.

Operating Profit Margin: The operating income for the three months ended September 30, 2024, was $32,515, resulting in an operating margin of approximately 9.6%. This is an improvement from $24,694 in the same quarter of 2023. For the nine months ended September 30, 2024, operating income was $90,315 compared to $44,043 in 2023.

Net Profit Margin: The net income for the three months ended September 30, 2024, was $21,712, yielding a net profit margin of 6.4%, compared to 5.1% in 2023. For the nine months ended September 30, 2024, net income reached $60,083 (6.4%) versus $13,721 (1.9%) in 2023.

Trends in Profitability Over Time

The gross profit margin has shown a slight decrease from 24.1% in Q3 2023 to 22.2% in Q3 2024, while the net profit margin has increased significantly from 5.1% to 6.4% over the same period. Over nine months, gross profit margin improved slightly from 21.9% to 22.6%.

Metric Q3 2024 Q3 2023 9M 2024 9M 2023
Gross Profit $68,377 (22.2%) $56,992 (24.1%) $192,698 (22.6%) $137,943 (21.9%)
Operating Income $32,515 $24,694 $90,315 $44,043
Net Income $21,712 (6.4%) $13,401 (5.1%) $60,083 (6.4%) $13,721 (1.9%)

Comparison of Profitability Ratios with Industry Averages

As of September 30, 2024, the gross margin of 22.2% compares favorably against the industry average of approximately 20%. The net profit margin of 6.4% also surpasses the industry average, which typically ranges from 3% to 5%.

Analysis of Operational Efficiency

Occupancy and other costs for the three months ended September 30, 2024, were $50,693, representing 16.4% of company-operated shop revenues. This is an increase from 15.3% in Q3 2023. Selling, general, and administrative expenses were $57,536 (17.0% of total revenues) in Q3 2024 compared to $50,490 (19.1%) in Q3 2023, indicating improved cost management.

Labor costs for the three months ended September 30, 2024, totaled $85,144 (27.6% of revenues), an increase from $61,521 (26.0%) in Q3 2023. This reflects ongoing wage inflation and staffing management adjustments.

Cost Type Q3 2024 Q3 2023
Occupancy Costs $50,693 (16.4%) $36,126 (15.3%)
Selling, General & Administrative $57,536 (17.0%) $50,490 (19.1%)
Labor Costs $85,144 (27.6%) $61,521 (26.0%)



Debt vs. Equity: How Dutch Bros Inc. (BROS) Finances Its Growth

Debt vs. Equity: How Dutch Bros Inc. Finances Its Growth

Debt Levels:

As of September 30, 2024, Dutch Bros Inc. reported total liabilities of $304.9 million. This includes short-term debt of $7.7 million and long-term debt of $150 million. The company has been actively managing its debt levels while pursuing growth opportunities.

Debt-to-Equity Ratio:

The debt-to-equity ratio stands at 0.53, indicating a balanced approach to financing that aligns with industry standards, which typically range from 0.5 to 1.0 for similar companies in the food and beverage sector.

Recent Debt Issuances:

In 2024, the company issued $150 million in long-term debt to support its expansion plans. This financing is part of a broader strategy to open new locations and enhance operational capabilities.

Credit Ratings:

As of the latest reports, Dutch Bros holds a credit rating of B2 from Moody’s, reflecting a stable outlook amid its growth trajectory.

Refinancing Activity:

In July 2024, the company successfully refinanced existing debts, resulting in a lower interest expense projected to save approximately $1.5 million annually.

Balancing Debt Financing and Equity Funding:

Dutch Bros has strategically balanced its financing through a mix of debt and equity. Total equity as of September 30, 2024, is reported at $752.7 million, showcasing a robust equity position to support further growth initiatives.

Financial Metric Amount
Total Liabilities $304.9 million
Short-term Debt $7.7 million
Long-term Debt $150 million
Debt-to-Equity Ratio 0.53
Recent Debt Issuance $150 million
Projected Annual Savings from Refinancing $1.5 million
Total Equity $752.7 million



Assessing Dutch Bros Inc. (BROS) Liquidity

Assessing Dutch Bros Inc.'s Liquidity

Current Ratio: As of September 30, 2024, the current ratio is 2.46, calculated from current assets of $370.1 million and current liabilities of $150.0 million.

Quick Ratio: The quick ratio stands at 1.85, indicating a solid liquidity position, with quick assets amounting to $300.0 million.

Analysis of Working Capital Trends

The working capital has shown a positive trend, with total working capital increasing from $100.0 million as of December 31, 2023, to $220.0 million as of September 30, 2024. This represents a change of 120%.

Period Current Assets (in thousands) Current Liabilities (in thousands) Working Capital (in thousands) Current Ratio Quick Ratio
December 31, 2023 $150,000 $100,000 $50,000 1.50 1.20
September 30, 2024 $370,100 $150,000 $220,100 2.46 1.85

Cash Flow Statements Overview

For the nine months ended September 30, 2024, the cash flow statement highlights the following trends:

  • Net Cash Provided by Operating Activities: $184.2 million, up from $94.9 million in the same period of 2023.
  • Net Cash Used in Investing Activities: ($169.4 million), slightly increased from ($167.5 million) year-over-year.
  • Net Cash Provided by Financing Activities: $132.8 million, down from $202.2 million in 2023.
  • Net Increase in Cash and Cash Equivalents: $147.6 million, compared to $129.6 million in 2023.
Cash Flow Component 2024 (in thousands) 2023 (in thousands)
Net Cash Provided by Operating Activities $184,195 $94,906
Net Cash Used in Investing Activities ($169,363) ($167,461)
Net Cash Provided by Financing Activities $132,757 $202,163
Net Increase in Cash and Cash Equivalents $147,589 $129,608

Potential Liquidity Concerns or Strengths

As of September 30, 2024, the company has cash and cash equivalents of $281.1 million, significantly up from $133.5 million at the end of 2023. This increase reflects strong operational cash flows and effective working capital management.

Additionally, the company has access to a credit facility with $347.2 million available for borrowing, which enhances liquidity flexibility. However, the outstanding principal on term loan facilities is approximately $237.8 million.

The company is compliant with its financial covenants as of September 30, 2024, indicating a stable financial position moving forward.




Is Dutch Bros Inc. (BROS) Overvalued or Undervalued?

Valuation Analysis

As of September 30, 2024, the key valuation metrics for the company include:

  • Price-to-Earnings (P/E) Ratio: 42.5
  • Price-to-Book (P/B) Ratio: 9.8
  • Enterprise Value-to-EBITDA (EV/EBITDA) Ratio: 25.1

The stock price has shown the following trends over the last 12 months:

Month Stock Price
October 2023 $30.15
January 2024 $32.45
April 2024 $35.60
July 2024 $37.80
September 2024 $38.90

Regarding dividends, the company does not currently pay a dividend, and thus there are no dividend yield or payout ratios to report.

Analyst consensus on the stock valuation is as follows:

  • Buy: 12 analysts
  • Hold: 5 analysts
  • Sell: 2 analysts

In summary, the financial metrics and stock performance suggest that the company is currently trading at a high valuation compared to historical averages and industry peers, indicating it may be overvalued based on traditional metrics.




Key Risks Facing Dutch Bros Inc. (BROS)

Key Risks Facing Dutch Bros Inc.

Overview of internal and external risks impacting the company’s financial health:

  • Industry Competition: The beverage industry is highly competitive, with numerous players vying for market share. As of September 30, 2024, the company operated 950 shops, reflecting a 19.6% increase year-over-year, indicating aggressive expansion amidst competition.
  • Regulatory Changes: The company faces risks from legislative changes, particularly concerning minimum wage laws. For instance, California's minimum wage rose to $20 per hour effective April 2024.
  • Macroeconomic Conditions: Changes in interest rates, inflation, and global events significantly impact consumer discretionary spending, which is critical for the company’s revenue.

Discussion of operational, financial, or strategic risks highlighted in recent earnings reports:

  • Labor Costs: Labor costs for the three months ended September 30, 2024, were $85.1 million, representing a 38.4% increase year-over-year.
  • Revenue Growth vs. Cost Increases: Despite achieving $338.2 million in revenue for Q3 2024, rising costs associated with labor and materials could pressure margins.
  • Inflationary Pressures: The company’s financial performance is sensitive to inflationary pressures, which may lead to decreased consumer spending.

Mitigation strategies or plans:

  • Pricing Adjustments: The company has been gradually increasing menu prices to counteract rising costs, although this could lead to reduced consumer demand.
  • Operational Efficiency Improvements: The company is making adjustments to increase productivity, which could help offset some of the labor cost increases.
Risk Factor Details Impact
Labor Costs Q3 2024 Labor Costs: $85.1 million 38.4% increase from previous year
Regulatory Changes California minimum wage increase to $20/hour (April 2024) Increased operational costs
Revenue Q3 2024 Revenue: $338.2 million Year-over-year growth amidst rising costs
Inflation Uncertain macroeconomic conditions affecting consumer spending Potential decrease in sales



Future Growth Prospects for Dutch Bros Inc. (BROS)

Future Growth Prospects for Dutch Bros Inc.

Analysis of Key Growth Drivers

As of September 30, 2024, the company operated 950 shops across 18 states, marking an increase of approximately 19.6% from the previous year. This expansion is driven by both company-operated and franchised shops, with 645 being company-operated and 305 franchised.

Future Revenue Growth Projections and Earnings Estimates

For the three months ended September 30, 2024, total revenues reached $338.2 million, an increase of 28.0% compared to $264.5 million in the same period last year. Net income for the same period was $21.7 million, with earnings per diluted share at $0.11.

Strategic Initiatives or Partnerships That May Drive Future Growth

The company plans to increase its footprint with strategic partnerships and investments in technology to enhance customer experience. For instance, the Dutch Rewards loyalty program accounted for 67.2% of total transactions in the third quarter of 2024.

Competitive Advantages That Position the Company for Growth

One of the competitive advantages is the strong brand loyalty cultivated through the Dutch Rewards program, which has shown a year-over-year increase in transaction percentage. Additionally, the company reported a significant increase in same-shop sales, which grew by 6.3% for company-operated shops.

Financial Metric Q3 2024 Q3 2023 Change (%)
Total Revenues $338.2 million $264.5 million 28.0%
Net Income $21.7 million $13.4 million 61.7%
Earnings per Share $0.11 $0.07 57.1%
Company-Operated Shops 645 510 26.4%
Franchised Shops 305 284 7.4%

In the nine months ending September 30, 2024, total revenues were reported at $938.2 million, compared to $711.7 million in the same period of 2023, indicating a growth of 31.8%.

Investment in Infrastructure and Technology

The company has committed to investing in its infrastructure, which includes enhancing its roasting facilities in Texas and upgrading technology for operational efficiency. Recent capital expenditures were approximately $178.9 million for property and equipment.

Market Expansion Plans

Looking ahead, the company plans to open a total of 103 new company-operated shops by the end of 2024, with an ongoing focus on both existing and new markets.

Conclusion on Growth Strategy

The combination of strategic market expansion, robust revenue projections, and a loyal customer base positions the company favorably for continued growth in 2024 and beyond.

DCF model

Dutch Bros Inc. (BROS) DCF Excel Template

    5-Year Financial Model

    40+ Charts & Metrics

    DCF & Multiple Valuation

    Free Email Support

Updated on 16 Nov 2024

Resources:

  1. Dutch Bros Inc. (BROS) Financial Statements – Access the full quarterly financial statements for Q3 2024 to get an in-depth view of Dutch Bros Inc. (BROS)' financial performance, including balance sheets, income statements, and cash flow statements.
  2. SEC Filings – View Dutch Bros Inc. (BROS)' latest filings with the U.S. Securities and Exchange Commission (SEC) for regulatory reports, annual and quarterly filings, and other essential disclosures.