Dutch Bros Issues Form 10-Q for First Quarter 2022, Reports $14 million Loss from Operations

Dutch Bros, the coffee shop company headquartered in Grants Pass, Oregon issued its Form 10-Q for the quarter ending March 31, 2022. The Form 10-Q is available through the SEC’s EDGAR database. Dutch Bros, sometimes called Dutch Brothers, reported total assets of $884,506,000. For the first three months of the year, the company reported total revenues of $152,156,000 and a loss from operations of $14,225,000. Cash and cash equivalents for Q-1 2022 were down more than $8,000,000 from the same period in 2021.

In a press release announcing the earnings report, the company described itself as “one of the fastest-growing brands in the food service and restaurant industry in the United State by location count.” The company also touted its growth prospects on its Investor Relations webpage—“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.”

Dutch Bros promoted its growth prospects in the lead up to its September 15, 2021, initial public offering (“IPO”). In Amendment No. 2 to Form S-1 Registration Statement Under the Securities Act of 1933, the company reported, “In the past five and a half years, we have increased our shop count from 254 shops in seven states at the end of 2015 to 471 shops in 11 states as of June 30, 2021.” And, “Despite being an established, time-tested brand, Dutch Bros is still in the early stages of rapid growth as we strategically expand our footprint in existing markets and enter new markets.” 

Growth depends, at least in part, on identifying and training employees to run new locations. “We plan all our new shop growth around existing, high-performing Dutch Bros broistas ready to assume leadership roles and eventually become shop managers and then operators.” The company reported in the Form S-1, “40% of our company-operated shop employees have been with Dutch Bros for more than a year, and 100% of shop managers for the 179 new systemwide shops opened since January 1, 2018 were existing broistas promoted from within.”

Dutch Bros also referred several times in the Registration Statement amendment to the strength of its brand. Under the heading, “A Powerful, Authentic Brand that Shares the ‘Luv’,” the company described itself as “Fun-Loving,” “Mind Blowing,” and “Making a Massive Difference.”

The company set the IPO share price at $23.00 and raised around half a billion dollars through the offering. The IPO generated significant media attention in Oregon and nationally for the company, including news stories published on oregonlive.com. The news site reported in a March 25, 2022, update to a story first published on September 22, 2021, that Travis Boersma, the co-founder and chairman, held shares worth nearly $4 billion. A private equity firm named TSG Consumer Partners was reported holding shares worth almost $3 billion.

Since the IPO, the share price closed as high as $76.25 on November 1, 2021. But as of May 16, 2022, the share price had fallen significantly, closing at $25.50.

According to data available through Yahoo Finance, the company’s market cap has fallen from $2.16 billion at the end of September 2021 to $1.45 billion on May 15, 2022. This is a drop of over $700 million.

In the press release that accompanied the 10-Q, Joth Ricci, the Chief Executive Officer and President, said, “Still, we were not immune to the record inflation that surpassed our expectations and pressured margins in our company-operated shops. While we believe these margin impacts may be short-term, we have opted to take a more conservative stance regarding adjusted EBITDA for 2022 as we monitor our pricing and the escalating cost environment.”

Dutch Bros’ valuation appears to depend significantly on the company’s ability to expand. Whether the drop in share price and market cap is a result of inflation, accounting decisions, or other factors should become clearer with time.