Q4 2023 Dutch Bros Inc Earnings Call

and others I'm Nick Setyan.

Thank you for standing by and welcome to the Dutch Brothers, Inc, fourth quarter and fiscal year 2023 earnings conference call and webcast and conference call and webcast are being recorded today Wednesday February 21st 2024 at 430 P. M. Eastern time and will be available for replay shortly after it gets concluded following the Companys press.

Operator: I'll talk to you soon. Thank you for standing by, and welcome to the Dutch Brothers Inc. fourth quarter and fiscal year 2023 earnings conference call and webcast. This conference call and webcast are being recorded today, Wednesday, February 21st, 2024, at 430 p.m. Eastern Time and will be available for replay shortly after it is concluded. Following the company's presentation, we will open up the lines for questions, and instructions to queue up will be provided at that time. I would now like to turn the call over to Patty Warren, Dutch Brothers' Director of Investor Relations and Corporate Development. Please go ahead.

We will open up the lines for questions and instructions to queue up will be provided at that time I would now like to turn the call over to Patty warned about this director of Investor Relations and corporate development. Please go ahead Sir.

Good afternoon, and welcome I'm joined by Christine Barone, a CEO and President and Charlie generally CFO, we issued our earnings press release for the fourth quarter and year ended December 31, 2023. After the market close today the earnings press release, along with the supplemental information deck has been posted.

Patty Warren: Good afternoon and welcome. I'm joined by Christine Barone, CEO and President, and Charlie Jimley, CFO. We issued our earnings press release for the fourth quarter and year ended December 31st, 2023, after the market closed today. The earnings press release, along with the supplemental information deck, have been posted to our investor relations website at investors.dutchbros.com.

Our Investor Relations website at investors that Dutch Bros. Dot com.

Patty Warren: Please be aware that all statements in our prepared remarks and in response to your questions, other than those of historical fact, are forward-looking statements and are subject to risks, uncertainties, and assumptions that may cause actual results to differ materially. They are qualified by the cautionary statements in our earnings press release and the risk factors in our latest SEC filings, including our most recent annual report on Form 10-K and quarterly report on Form 10-Q. We assume no obligation to update any forward-looking statements. We will also reference non-GAAP financial measures on today's call. As a reminder, non-GAAP measures are neither substitutes for nor superior to measures that are prepared under GAAP.

Please be aware that all statements that are prepared remarks and in response to your question other than those of historical fact are forward looking statements and are subject to risks uncertainties and assumptions that may cause actual results to differ materially.

They are qualified by the cautionary statements in our earnings press release, and the risk factors in our latest SEC filings, including our most recent annual report on Form 10-K.

Quarterly report on Form 10-Q.

We assume no obligation to update any forward looking statements.

We will also reference non-GAAP financial measures on today's call. As a reminder, non-GAAP measures are neither substitutes for or superior to measures that are prepared under GAAP. Please review the reconciliation of non-GAAP measures to comparable GAAP results in our earnings press release.

Patty Warren: Please review the reconciliation of non-GAAP measures to comparable GAAP results in our earnings press release. With that, I'd now like to turn the call over to Christine. Thank you, Patty. Good afternoon, everyone.

With that I'd now like to turn the call over to Christine.

Thank you Patty good afternoon, everyone. We had an exceptional 2023, and we entered 'twenty 'twenty four with great momentum revenue grew 31% year over year and adjusted EBITDA grew an outstanding 76% from 'twenty to 'twenty, two we opened 159 shops of which 100 and <unk>.

Andrew Marc Barish: We had an exceptional 2023, and we entered 2024 with great momentum. Revenue grew 31% year over year, and adjusted EBITDA grew an outstanding 76% from 2022. We opened 159 shops, of which 146 were company operated.

Six four company operated in Q4, we opened 37, new shops, marking our 10th consecutive quarter of 30 or more new shop openings and demonstrating the remarkable consistency of our growth story.

Andrew Marc Barish: In Q4, we opened 37 new shops, marking our 10th consecutive quarter of 30 or more new shop openings and demonstrating the remarkable consistency of our growth story. We ended 2023 with our highest AUVs on record, $1.97 million, and we delivered 2.8% system same shop sales growth for the year. These outstanding results were underpinned by excellent flow-through, driving a substantial expansion of our margins. Dutch Bros is a time-tested, people-driven company that continues to deliver consistent, high-quality growth.

We ended 2023 with our highest aves on record.

$197 million and we delivered two 8% system same shop sales growth for the year. These outstanding results were underpinned by excellent flow through driving a substantial expansion of our margins. Dutch Bros. Is a time tested people driven company that continues to deliver consistent high quality.

The growth this growth is underpinned by excellent four wall economics and is enabled by our shop teams, who remain focused on our key tenants speed quality and service.

Earlier in 2023, we began laying the groundwork with key initiatives to lift traffic, which we shared with you during our Q1 call in May in Q4, we saw the impact of these efforts culminate with 5% same shack sales growth of 100 basis point acceleration from Q3. These results were driven by sequential improve.

Andrew Marc Barish: This growth is underpinned by excellent four-wall economics and is enabled by our shop teams who remain focused on our key tenets—speed, quality, and service. Earlier in 2023, we began laying the groundwork with key initiatives to lift traffic, which we shared with you during our Q1 call in May. In Q4, we saw the impact of these efforts culminate with 5% same-shop sales growth, a 100 basis point acceleration from Q3. These results were driven by sequential improvement in customer traffic, with particular strains in the midday and afternoon day parts. Furthermore, we achieved record Dutch rewards penetration in Q4, with over 65% of transactions attributable to rewards members.

And customer traffic with particular strength in the mid day and afternoon day parts. Furthermore, we achieved record that's rewards penetration in Q4 with over 65% of transactions attributable to rewards members keep in mind that 35% of our shops have been opened less than two years, which.

Makes the 65% penetration number even more impressive.

With such a successful 2023 as our backdrop, we are optimistic for our next phase of growth I will now spend a few minutes discussing our key priorities.

We began any discussion of Dutch bros, with a fundamental differentiator our people.

We aim to deliver unparalleled employee engagement and by extension customer connection recruiting developing and retaining outstanding people remains our primary focus and one of our greatest strengths I am proud to say that last month, we were named the top U S. Our brand and Nations restaurant news and Technomic Americas.

Favorite changed survey.

Andrew Marc Barish: Keep in mind that 35% of our shops have been open less than two years, which makes the 65% penetration number even more impressive. With such a successful 2023 as our backdrop, we are optimistic about our next phase of growth. I will now spend a few minutes discussing our key priorities. We began any discussion of Dutch Bros with our fundamental differentiator, our people.

In part because of our high marks for service once again, the culture, we infused into each shop and the skills and abilities of our pro east does to make drinks and create relationships are evident.

We believe these are the keys to building brand affinity and fueling our growth Dutch Bros. Was also the highest scoring consumer brand among gen Z and the only coffee brand in the top 10.

We view this as a confirmation that exceptional culture exceptional people and exceptional service speak to customers across demographics and generations.

This was underscored this month when we opened our first shop in Orange County, California, where a reception by the community with absolutely electric over the three day opening weekend, we drove over $90000 in sales, but I find remarkable is that after 32 years and over 800 shops, a shop can open with such excitement and that.

Andrew Marc Barish: We aim to deliver unparalleled employee engagement and, by extension, customer connection. Recruiting, developing, and retaining outstanding people remains our primary focus and one of our greatest strengths. I am proud to say that last month we were named the top QSR brand in Nation's Restaurant News and Technomics' America's Favorite Chain Survey, in part because of our high marks for service.

Lines stretch for more than a mile. It's clear to me, we have something special here and that after all these years and all these shops our brand resonates.

We couldn't open shops like this without our people and I am pleased to report that our people pipeline continues to be robust. We now have more than 350 qualified operator candidates in the pipeline with an average tenure of seven years at.

Andrew Marc Barish: Once again, the culture we infuse into each shop and the skills and abilities of our broistas to make drinks and create relationships are evident. We believe these are the keys to building brand affinity and fueling our growth. Dutch Bros was also the highest scoring consumer brand among Gen Z and the only coffee brand in the top 10.

At scale, we anticipate each operator will be capable of leading three to seven shops over the past two years, we've promoted over 60 people to the position of operator.

This model allows many of our highest performing and most committed employees to continue to grow with US. We believe this approach enables us to strengthen our culture and values as we grow reinforcing our competitive moat as we expand into new markets, we take great pride in introducing Dutch bros. At its best homegrown motivated.

Andrew Marc Barish: We view this as a confirmation that exceptional culture, exceptional people, and exceptional service speak to customers across demographics and generations. This was underscored this month when we opened our first shop in Orange County, California, where the reception by the community was absolutely electric. Over the three-day opening weekend, we drove over $90,000 in sales.

At friendly operators steeped in our unique culture and experts and in the operating system, we have been building and refining for over 30 years.

In January we announced three additions to our leadership team Sumi gauche incoming president of operations, Josh concern incoming CFO and Jeff Elmquist Chief people officer. The entire team is looking forward to adding the wealth of experience they bring to what already makes Dutch bros. Great.

Andrew Marc Barish: What I find remarkable is that after 32 years and over 800 shops, a shop can open with such excitement, and that line stretched for more than a mile. It's clear to me we have something special here and that, after all these years and all these shops, our brand resonates. We couldn't open shops like this without our people, and I am pleased to report that our pipeline for talented operators continues to be robust. We now have more than 350 qualified operator candidates in the pipeline, with an average tenure of 7 years.

We embarked on a project last year as a leadership team to outlined how our corporate team can best support our shops, as we scale and grow and expansion of our support center operations into Arizona is a key pillar of this work we recognize the importance of continuing to attract top notch talent and we believe adding a significant presence.

In the Phoenix market positions us to better compete for this talent. We also believe this expansion will enable easier access to our operations as we grow across the United States.

As part of this move we anticipate that approximately 40% of support operation staff will be in Arizona by January of 2025. Many of these positions will focus on driving the strategic direction of the company and assisting day to day operations in the field.

Andrew Marc Barish: At scale, we anticipate each operator will be capable of leading three to seven shops. Over the past two years, we've promoted over 60 people to the position of operator. This model allows many of our highest performing and most committed employees to continue to grow with us. We believe this approach enables us to strengthen our culture and values as we grow, reinforcing our competitive moat. As we expand into new markets, we take great pride in introducing Dutch Bros at its best.

We expect to maintain a significant presence in southern Oregon, where our roasting accounting and select other functions will continue to be based southern Oregon has been a key part of Dutch Bros. Success, and we will continue to be connected to the community in a meaningful way.

That's it for us as a growth company and 2023 was a record year for US we opened 159, new shops across 13 states.

The most new shop openings in our history. This exceeded the expectations, we communicated with you last year of 150 shops.

Over the past five years, we have now opened over 500 system shops, and we have grown our company operated shop count from 90 to 542.

Andrew Marc Barish: Homegrown, motivated, friendly operators steeped in our unique culture and experts in an operating system we have been building and refining for over 30 years. In January, we announced three additions to our leadership team: Sumi Ghosh, incoming President of Operations; Josh Gunser, incoming CFO; and Jess Elmquist, Chief People Officer.

An average annual growth rate of 43% over those years and 2023, our development represented 24% growth in total system shop, count and 37% growth in our company operated shops.

In 'twenty 'twenty four we expect to open 150 to 165, new shops, which would represent another big development year for us another year of growing at this pace demonstrates our confidence confidence in our brand confidence in our people pipeline confidence in our four wall model and confidence in.

Our team.

As we grow toward our goal of 4000, plus shops, we continue to make refinements to our development strategy and market planning approach in 2023 we outline the steps we were beginning to take to shift our strategy, primarily the greater emphasis on balancing speed and market penetration we are.

Andrew Marc Barish: The entire team is looking forward to adding the wealth of experience they bring to what already makes Dutch Bros great. We embarked on a project last year as a leadership team to outline how our corporate team can best support our shops as we scale and grow. An expansion of our support center operations into Arizona is a key pillar of this work. We recognize the importance of continuing to attract top-notch talent, and we believe adding a significant presence in the Phoenix market positions us to better compete for this talent. We also believe this expansion will enable easier access to our operations as we grow across the United States. As part of this move, we anticipate that approximately 40% of our support operations staff will be in Arizona by January of 2025.

Also discussed a renewed emphasis on capital efficiency with a longer term shift towards more build to suit leases and flexibility with the exploration of a wider array of prototype units such as en caps, we would expect to begin seeing the impact of these changes in 2025.

Our exceptional four wall model provides fuel for our growth engine. We continue to work diligently to maintain what we believe is one of the most compelling four wall models in the industry.

Last year, we shared with you our intention to achieve at least 100 basis points of adjusted SG&A leverage this year and 2023 we greatly exceeded this objective delivering 190 basis points of leverage we accomplished this while continuing to invest in building organizational capacity since 2002.

One the year of our IPO, we have delivered 280 basis points of adjusted SG&A leverage in total we delivered 430 basis points of adjusted EBITDA margin expansion in 2023. This underscores our teams' commitment not only to growth but profitable growth.

Andrew Marc Barish: Many of these positions will focus on driving the strategic direction of the company and assisting day-to-day operations in the field. We expect to maintain a significant presence in Southern Oregon, where our roasting, accounting, and select other functions will continue to be based. Southern Oregon has been a key part of Dutch Bros' success, and we will continue to be connected to the community in a meaningful way.

Since I joined a little over a year ago. The team has been focused on delighting, our customers and driving traffic in Q4 total system same shop sales were 5% a sequential improvement of 100 basis points from Q3. We believe this improvement is largely a result of the increasing momentum of our traffic dry.

Andrew Marc Barish: Dutch Bros is a growth company, and 2023 was a record year for us. We opened 159 new shops across 13 states, the most new shop openings in our history. This exceeded our expectations.

<unk> initiatives as our traffic trajectory improved from Q3 to Q4.

Consistent with the larger industry, we saw some softness around weather events in January as weather eased our sales trends have strengthened and we were pleased with the results.

Here's an update on these initiatives innovation, we believe innovation plays a large role in the next stage of growth specifically one of our priorities is category innovation, where we can build sales layers to support visit frequency and introduce new customers and occasions. We believe our operations are uniquely suited for these.

Andrew Marc Barish: We communicated with you last year about one hundred and fifty shops. Over the past five years, we have now opened over 500 system shops, and we have grown our company-operated shop count from 90 to 542, an average annual growth rate of 43 percent over those years. In 2023, our development represented 24 percent growth in total system shop count and 37 percent growth in our company-operated shops. In 2024, we expect to open 150 to 165 new shops, which would represent another big development year for us. Another year of growing at this pace demonstrates our confidence: confidence in our brand, confidence in our pipeline of talented employees, confidence in our four-wall model, and confidence in our team.

Efforts and that as a brand we have an opportunity to play a more active role in curating, developing and bringing forward innovative products.

Earlier this year, we launched protein coffee, a new beverage that delivers at least 20 grams of milk protein in each medium sized surfing and could provide a roadmap for future category expansion products like this really excite us as they have the potential to drive routine with our customers. We will continue to add it.

Fighting L T owes to our lineup and highlight our unique secret menu items as we did in Q4 with our highly successful winter campaign.

The buzz around our truffle Moca platform drove our L. T O makes it to the highest levels on record during the competitive holiday season.

We believe our innovation strategy will bring in new customers to Dutch Bros, and drive awareness interest and loyalty.

We are also focused on driving traffic through paid media utilizing advertising to raise awareness. We believe advertising has a role in educating guests on what Dutch Bros. Is about and we're confident that once people visit us they will have a great experience and want to come back our brand insights work supports our strategy.

Andrew Marc Barish: As we grow toward our goal of 4,000 plus shops, we continue to make refinements to our development strategy and market planning approach. In 2023, we outlined the steps we were beginning to take to shift our strategy, primarily a greater emphasis on balancing speed and market penetration. We also discussed a renewed emphasis on capital efficiency with a longer-term shift toward more built-to-suit leases and flexibility. With the exploration of a wider array of prototype units, such as NCAPS, we would expect to begin seeing the impact of these changes in 2025. Our exceptional four-wall model provides fuel for our growth engine.

As we move into new markets with lower initial brand awareness, we recognize the need to adapt our approach in these new markets. We are leaning into top of the funnel activities, particularly through digital channels and local community Activations. We look forward to continuing to scale. These efforts over time and are optimistic about the long term impact of the.

Sustained efforts.

On Black Friday, we once again recorded our highest sales day on record when we provided shoe charms with the purchase of any two drinks. This was exciting for many reasons specifically demonstrating what we believe is our ability to participate authentically and culturally relevant moments and create strong connections with our Gen Z.

Yes.

Andrew Marc Barish: We continue to work diligently to maintain what we believe is one of the most compelling four-wall models in the industry. Last year, we shared with you our intention to achieve at least 100 basis points of adjusted SG&A leverage this year. In 2023, we greatly exceeded this objective, delivering 190 basis points of leverage. We accomplished this while continuing to invest in building organizational capacity. Since 2021, the year of our IPO, we have delivered 280 basis points of adjusted SG&A leverage. In total, we delivered 430 basis points of adjusted EBITDA margin expansion in 2023.

Third we are continuing to increase the sophistication of offers messaging and capabilities on our App and Dutch rewards platform.

Last quarter, we discussed entering the second phase of our Dutch rewards program, a more tailored approach to promotions in Q4, we achieved our highest rewards penetration on record with more than 65% of our transactions attributable to rewards members.

Moving forward, our focus will be in refining our personalization capabilities. So early we are encouraged by the customer response, particularly with efforts like gamification and segmentation.

Perhaps most excitingly today, we are announcing a pilot test of mobile order functionality in our App, we have begun operational testing and intend to begin beta testing, our new app with mobile ordering in Arizona.

Pending the results, we would expect to conduct a multi shop test as part of our innovation stage gate process.

We recognize this could be a big opportunity for us and also understand the importance of getting this right delivering on our core values of speed quality and service as such it is our goal to roll out this capability to the majority of shops by the end of the year.

Andrew Marc Barish: This underscores our team's commitment not only to growth but profitable growth. Since I joined a little over a year ago, our team has been focused on delighting our customers and driving traffic. In Q4, total system same-shop sales were 5%, a sequential improvement of 100 basis points from Q3. We believe this improvement is largely a result of the increasing momentum of our traffic driving initiatives, as our traffic trajectory improved from Q3 to Q4. Consistent with the larger industry, we saw some softness around weather events in January.

And 'twenty 'twenty four we're taking the steps to build a rock solid foundation upon which to embark on the next phase of our growth story.

I am proud of what the team has accomplished to get us to this point and I am confident we have the building blocks of long term success.

We have terrific customer engagement with rewards members driving a record 65% of our transactions in Q4, and we are excited about opportunities in front of us to further accelerate this platform.

We have top tier growth, we delivered 31% year over year revenue growth in 2023. This growth has been consistent demonstrated by 10 consecutive quarters of opening 30 or more shops on our way to 4000 plus.

Andrew Marc Barish: As the weather eased, our sales trends strengthened, and we were pleased with the results. Here is an update on these initiatives. Innovation.

We have excellent shop margins, we have demonstrated that we can drive this exceptional growth with profitability.

Andrew Marc Barish: We believe innovation plays a large role in the next stage of growth. Specifically, one of our priorities is category innovation, where we can build sales layers to support visit frequency and introduce new customers and occasions. We believe our operations are uniquely suited for these efforts, and that as a brand, we have an opportunity to play a more active role in curating, developing, and bringing forward innovative products. Earlier this year, we launched Protein Coffee, a new beverage that delivers at least 20 grams of milk protein in each medium-sized serving and could provide a roadmap for future category expansion.

We are well capitalized we believe our recent primary offering and credit upsizing provides a long runway and plenty of flexibility upon which to execute our growth plan and capture our considerable white space.

And most importantly, we have great people, we have outstanding and engage Bro east in our shops, and a strong pipeline of operators ready to open up new markets.

These factors give us great confidence in our future with that I'll turn it over to Charlie to review our financials. Thanks, Christine as Christine's comments shared 2023 finished on a particularly high note key operating metrics were excellent all around including unit openings revenue and adjusted EBITDA grew.

And same shop sale, all of which exceeded our expectations.

Andrew Marc Barish: Products like these really excite us, as they have the potential to drive routine with our customers. We will continue to add exciting LTOs to our lineup and highlight our unique secret menu items, as we did in Q4 with our highly successful winter campaign. The buzz around our Truffle Mocha platform drove our LTO mix to the highest levels on record during the competitive holiday season.

For the financial year, 2023 revenue grew 31% to $966 million, we achieved over $1 $4 billion in system wide sales or 24% growth sit.

System <unk> reached $197 million the highest on record since.

Same shack sales were two 8%.

In line with our guidance of low single digits.

Company operated shop contribution reached $242 million growing an impressive 54% company operated shop contribution margin was 28, 2% expanding 360 basis points year over year.

Andrew Marc Barish: We believe our innovation strategy will bring in new customers to Dutch Bros and drive awareness, interest, and loyalty. We are also focused on driving traffic through paid media, utilizing advertising to raise awareness. We believe advertising has a role in educating guests on what Dutch Bros is about.

Adjusted EBITDA margin was 16, 6%.

Expanding 430 basis points year over year.

In the fourth quarter. The company operated shops segment delivered outstanding performance generating $227 million in company operated shop sales and $60 million in shop contribution.

Your over year net sales increased 30% and company operated shop contribution grew approximately 21%.

As a percentage of company operated sales company operated shop contribution was 26, 5%.

Andrew Marc Barish: And we're confident that once people visit us, they will have a great experience and want to come back. Our brand insights work supports this strategy. As we move into new markets with lower initial brand awareness, we recognize the need to adapt our approach. In these new markets, we are leaning into top-of-the-funnel activities, particularly through digital channels and local community activations. We look forward to continuing to scale these efforts over time and are optimistic about the long-term impact of these sustained efforts. On Black Friday, we once again recorded our highest sales day on record when we provided shoe charms with the purchase of any two drinks.

When making a comparison of these results to the prior year recall that in Q4 of 2022, our sales and margins were positively impacted by approximately $7 $4 million of breakage in the revenue line.

Related primarily to the 2021 launch of our Dutch rewards program.

Please make reference to our supplemental investor materials are win demonstrates the changes in company shop margins outside.

Outside the negative impact on a comparable basis of 2022 breakage income company shop margins increased as a result of pricing sales leverage and beneficial preopening costs, partly offset by slightly elevated ingredient costs and other operating expenses.

As I mentioned, we achieved 360 basis points of margin expansion in 2023.

Shifting to SG&A for the quarter SG&A was approximately $57 million, which includes about $10 million in stock based compensation.

We anticipate that in 2024 ongoing stock based compensation will be approximately 30% to 40% of 2023 levels as equity compensation awards associated with the IPO fully vested in January 'twenty 'twenty four.

Andrew Marc Barish: This was exciting for many reasons, specifically demonstrating what we believe is our ability to participate authentically in culturally relevant moments and create strong connections with our Gen Z guests. Third, we are continuing to increase the sophistication of offers, messaging, and capabilities on our app and Dutch Rewards platform. Last quarter, we discussed entering the second phase of our Dutch Rewards Program, a more tailored approach to promotions. In Q4, we achieved our highest rewards penetration on record, with more than 65% of our transactions attributable to rewards members.

With the exclusion of stock based compensation and other nonrecurring expenses adjusted SG&A was approximately $44 million or 17, 4% of revenue compared to 18, 9% in Q4 last year.

We're adding organizational capacity to support scaling the business. We're also making a concerted effort to stage those investments that over time.

For the year adjusted SG&A was 16, 6% an improvement of 190 basis points compared to 2022.

Regarding our balance sheet and liquidity as of December 31, we had approximately $683 million in total liquidity compared to approximately $700 million at the end of Q3.

We believe our liquidity position is sufficiently robust.

To support our currently contemplated growth plans as we scale towards 4000 plus shops.

Andrew Marc Barish: Moving forward, our focus will be on refining our personalization capabilities. Though early, we are encouraged by the customer response, particularly with efforts like gamification and segmentation. Perhaps most excitingly, today we are announcing a pilot test of mobile order functionality in our app.

As of December 31.

Quiddity was comprised of the following $134 million in cash and equivalents 349 million Undrawn revolver 200 million in undrawn delayed draw term loans.

Yesterday prior to the expiration at the end of February we drew a portion of our delayed draw term loans totaling $150 million, we intend to utilize these funds for general corporate purposes, including but not limited to building new shops. Meanwhile, this cash will be invested in short term interest bearing securities.

Andrew Marc Barish: We have begun operational testing and intend to begin beta testing our new app with mobile ordering in Arizona. Pending the results, we would expect to conduct a multi-shop test as part of our innovation stage gate process. We recognize this could be a big opportunity for us and also understand the importance of getting this right, delivering on our core values of speed, quality, and service. As such, it is our goal to roll out this capability to the majority of shops by the end of the year. In 2024, we are taking the steps to build a rock-solid foundation upon which to embark on the next phase of our growth story. I am proud of what the team has accomplished to get us to this point, and I am confident we have the building blocks of long-term success.

Until we can fully deploy it.

Moving on to 2024 guidance in early January we shared our expectation to open 150 to 165, new shops, we expect low single digit system same shop sales growth in 2024 revenue is expected to be within the range of $1, one $9 billion to 1.2.

Zero $5 billion the midpoint of this range would reflect 24% growth over 2023, and 62% growth on a two year basis.

Adjusted SG&A is expected to be between 15, 3% and 15, 8% of total revenue at the midpoint of the revenue range. This would represent continued leverage of approximately 75 to 125 basis points as compared to 2023 stock.

Stock based compensation, which is excluded from adjusted SG&A is expected to be 12 million to $17 million for the year.

Andrew Marc Barish: We have terrific customer engagement, with rewards members driving a record 65% of our transactions in Q4, and we are excited about opportunities in front of us to further accelerate this platform. We have top-tier growth. We delivered 31% year-over-year revenue growth in 2023. This growth has been consistent, demonstrated by 10 consecutive quarters of opening 30 or more shops on our way to 4,000 plus. We have excellent shop margins. We have demonstrated that we can drive this exceptional growth with profitability. We are well capitalized. We believe our recent primary offering and credit upsizing provide a long runway and plenty of flexibility upon which to execute our growth plan and capture our considerable white space. And most importantly, we have great people.

From $39 million in 2023.

Adjusted EBITDA is expected to be in the range of $185 million to $195 million or approximately 15, 9% of total revenue at the midpoint of these ranges for context, the midpoint of the adjusted EBITDA range represents approximately 19% year over year growth.

And more notably 108% growth on a two year basis.

Like to highlight a few key assumptions underlying this guidance.

First we continue to make investments in our people in Q3, 2023, we announced an investment in higher pay nationwide for our shop managers further on April one, California wages will rise to $20 per hour minimum representing an increase of approximately 25% year over year collectively.

We would expect a 50 to 100 basis points headwind on adjusted EBITDA margins from these pay changes.

We are planning to make P&L investments and increased technology at the shop level to support scheduling throughput and mobile order initiatives.

Andrew Marc Barish: We have outstanding and engaged grocers in our shops and a strong pipeline of operators ready to open our new market. These factors give us great confidence in our future. With that, I'll turn it over to Charlie to review our financials. Thanks, Christine.

Collectively we would expect 75 to 125 basis points headwind on adjusted EBITDA margins from these investments.

Bind with the expected adjusted SG&A leverage I just mentioned, we would expect these actions to collectively represent 50 to 100 basis points of overall margin pressure year over year.

Charlie Jimley: As Christine's comments shared, 2023 finished on a particularly high note. Key operating metrics were excellent all around, including unit openings, revenue, and adjusted EBITDA growth, and same-shop sales, all of which exceeded our expectations. For the financial year 2023, revenue grew 31% to $966 million. We achieved over $1.4 billion in system-wide sales, or 24% growth. System AUVs reached $1.97 million, the highest on record

Furthermore, we intend to embark on a large scale organizational change in 2024 to support this move we would anticipate incurring between $24 million and $31 million in cost, which we deem as nonrecurring and would anticipate will be almost entirely excluded from adjusted EBITDA.

Capital expenditures are expected to be in the range of $280 million to $320 million up from $227 million in 2023.

This year over year increase will be driven primarily by a higher percentage of ground leases in 2024 as compared to 2023.

Last year, we began a proving more future sites using build to suit leases to shift our capital back to more normative levels. We would expect any capital expenditure benefit to take hold more firmly beginning with the class of 2025.

Charlie Jimley: System's same shop sales were 2.8%, in line with our guidance of low single digits. Company-operated shop contribution reached $242 million, growing an impressive 54%. Company operated shop contribution margin was 28.2 percent, expanding 360 basis points year over year. Adjusted EBITDA margin was 16.6 percent, expanding 430 basis points year over year. In the fourth quarter, the company-operated shop segment delivered outstanding performance, generating $227 million in company-operated shop sales and $60 million in shop contribution. Year-over-year net sales increased 30 percent, and company-operated shop contribution grew approximately 21 percent. As a percentage of company-operated sales, company-operated shop contribution was 26.5%.

In 2023, we spent approximately $18 million on our roasting facility.

We expect to spend approximately $10 million in 2024, and we anticipate that this facility will open in the middle of this year.

We also expect to spend between $6 million and $10 million in capital expenditures related to the Arizona office expansion.

Thank you and now we will take your questions operator, please open the lines.

Thank you we will now be conducting a question and answer session. If you would like to ask a question. Please press one on your telephone keypad, a confirmation tone will indicate that your line is in the question queue. You May press star two if he would like to remove your question from the queue. We ask that you limit your questions to one so that others may have an opportunity to ask questions.

For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys, one moment. Please all we pull for questions.

Our first question comes from Andrew Charles with TV Cowen. Please proceed with your question.

Charlie Jimley: When making a comparison of these results to the prior year, recall that in Q4 of 2022, our sales and margins were positively impacted by approximately $7.4 million of breakage in the revenue line, related primarily to the 2021 launch of our Dutch Rewards program. Please make reference to our Supplemental Investor Materials, where we demonstrate the changes in company shop margins. Outside the negative impact on a comparable basis of 2022 breakage income, company shop margins increased as a result of pricing, sales leverage, and beneficial pre-opening costs, partly offset by slightly elevated ingredient costs and other operating expenses. As I mentioned, we achieved 360 basis points of margin expansion in 2023. Shifting to SG&A, for the quarter, SG&A was approximately $57 million, which included about $10 million in stock-based compensation. We anticipate that in 2024, ongoing stock-based compensation will be approximately 30 to 40 percent of 2023 levels, as equity compensation awards associated with the IPO fully vested in January 2024. With the exclusion of stock-based compensation and other non-recurring expenses, adjusted SG&A was approximately $44 million, or 17.4% of revenue, compared to 18.9% in Q4 last year.

Great. Thank you Kristina you implement the new enhancements and development in 2025 like more built to suit and focusing more on white space and then Billy do you expect that you can increase the number of store openings above the roughly 160 per year in 'twenty, three and got them for 24 should we expect.

Perhaps truncated 2025 opening class to better observe the enhancements youre, making.

Thanks for your question, Andrew I think as we look forward, we're really not talking about guidance today for 2025.

We feel good about where our pipeline is about the guidance that we provided at four for shops for 2024 and feel like we have a robust pipeline to support our future.

Great and then I just want to ask about the digital ordering offsets what are you looking to observed during that time and how are you kind of maybe you can just kind of shorten way how how are you kind of mapping the south to not cause congestion distress are you very productive restaurants.

Absolutely. So as you know are what really drives our brand is our service and so having that connection between the broadly used to and the customer so as we test mobile and digital ordering we're really looking to you know continue to have that same experience between our belief is and our and our customers. So that's really what we're looking for.

As we test this we're thinking through operations. So what does this do to lightspeed.

Are we slotting into drinks as they're ordered all of those different things as we operationally tested them.

As you know we also have drive through shops that are set up with a walk up window. So looking at how people will come up and pick up their drinks from a walk up window also help I'll go through our drive through lanes and a number of our new workshops, we have escaped lanes and so yeah. We can even began testing things like delivering a drink to occur.

Car that can then pull out the escape lane as they pick up their mobile order.

Thank you.

Our next question comes from Jeffrey Bernstein with Barclays. Please proceed with your question.

Great. Thank you very much.

Question is just on the growth outlook.

Thank you would you would enter 'twenty four with some strong momentum I'm wondering if you could just talk about the <unk>.

<unk> you are assuming for the 2024 comp guidance I think you said low single digit how.

How much pricing, we should assume the.

I move for the traffic assumption and any color you can provide them on the first quarter I know, it's been choppy as you mentioned with the weather. It historically just trying to get a sense for the first quarter is tracking relative to obviously the fourth quarter and what your guidance is for full year 'twenty four.

Charlie Jimley: While we are adding organizational capacity to support scaling the business, we are also making a concerted effort to stage those investments in over time. For the year, adjusted SG&A was 16.6%, an improvement of 190 basis points compared to 2022. Regarding our balance sheet and liquidity, as of December 31, we had approximately $683 million in total liquidity compared to approximately $700 million at the end of Q3. We believe our liquidity position is sufficiently robust to support our currently contemplated growth plans as we scale towards 4,000 plus shocks. As of December 31, that liquidity was comprised of the following: $134 million in cash and equivalents, $349 million in undrawn revolver, and $200 million in undrawn delayed draw term loans. Yesterday, prior to the expiration at the end of February, we drew a portion of our delayed-draw term loans totaling $150 million.

Hi, Jeff.

Yeah.

We'll have pricing rollover from 2023 in the low single digits are we have not yet refined how we'll price in 'twenty four and you mentioned, the California wage impact and those comments, we would expect our.

Sales transfer from new units and dollar terms to be similar but as a percentage of our comp base to begin to decline.

Versus this year's levels of 200 to 300 basis points.

And then we're looking at a low single digit comp number so the balance of that is just.

Pretty nominal on the traffic side.

From a growth perspective.

I would share and add to that that as we ended Q4 with that 5% same shop sales.

Rolling off 300 basis.

Between Q3, and Q4, so that sequential lift in same shop sales.

Between the two quarters, we were really encouraged with with what we saw from a customer reaction standpoint.

Got it and just to clarify Christie and I know you mentioned, obviously speed of service within your operation is important but then you also talked about category innovation.

Which is obviously important to concurred more trial and increase frequency.

The balance of two of those will not be free you would think that they would kind of run counter to one another how do you think about that more broadly.

Charlie Jimley: We intend to utilize these funds for general corporate purposes, including, but not limited to, building new shops. Meanwhile, this cash will be invested in short-term interest-bearing securities until we can fully deploy it. Moving on to 2024 guidance. In early January, we shared our expectation to open 150 to 165 new shops. We expect low single-digit system same shop sales growth in 2024.

Yeah, I think as we think about category innovation. It really has to be something that's impactful say something that's either driving a new day part or a new occasion for a customer or bringing in new customers and and then thinking through you know what types of what types of things are really within the routines that we already.

We have you know some putting sprinkles on top of some things really is within our existing routines and doesn't drive really a layer of extra complexity, whereas other things might so really balancing all of those different things as we think about our innovation and adding but speed of service is really incredibly important to us so as we think.

Through any new innovation are any new thing that we introduced to the shops were always thinking through how will this impact speed quality or service for our customers.

Charlie Jimley: Revenue is expected to be within the range of $1.19 billion to $1.205 billion. The midpoint of this range would reflect 24% growth over 2023 and 62% growth on a two-year basis. Adjusted SG&A is expected to be between 15.3 percent and 15.8 percent of total revenue at the midpoint of the revenue range. This would represent continued leverage of approximately 75 to 125 basis points as compared to 2023. Stock-based compensation, which is excluded from adjusted SG&A, is expected to be between $12 million and $17 million for the year, down from $39 million in 2023.

Yeah.

Understood. Thank you.

Thank you.

Our next question comes from Chris I'll call with Stifel. Please proceed with your question.

I had a follow up question related to mobile ordering and then another question, but I'm curious if you guys can just offer any touchstones around what the size of the mobile ordering opportunity might be or how youre thinking about the contribution or the return on that type of investment and then secondly kristi.

I wanted to ask a question about paid advertising. It just seems like paid advertising could be an important tool in the companys Arsenal when it comes to transaction growth.

It looked like advertising expense last year at least through the third quarter was relatively flat year over year. Despite obviously a lot of sales growth. Just wondering if you expect paid advertising to increase meaningfully year over year, and then has the company considered budgeting. This line is maybe a percentage of sales going forward.

Yeah. So I'll take the first question on mobile order and the size of the opportunity. So as we look at this.

The number one thing that our customers ask for is an app enhancement is mobile ordering so that would point to us that our that our customers really really want this enhancement in our in our App. We also look across the industry and understand how important this type of technology is for customers across the industry. We don't believe it.

Charlie Jimley: Adjusted EBITDA is expected to be in the range of $185 million to $195 million, or approximately 15.9% of total revenue at the midpoint of these ranges. For context, the midpoint of the adjusted EBITDA range represents approximately 19% year-over-year growth, and more notably, 108% growth on a two-year basis. I'd like to highlight a few key assumptions underlying this guide. First, we continue to make investments in our people. In Q3 2023, we announced an investment in higher pay nationwide for our shop managers. Furthermore, on April 1, California wages will rise to $20 per hour minimum, representing an increase of approximately 25% year-over-year.

It won't be material to our 2024 numbers. However, we do think it's really a big opportunity. We do believe also that it's something that has the potential to bring in new customers and has the potential to introduce new occasions. So if you're in a hurry and you remember that we had a really long line one day you can.

When you do that a few mobile order you can adjust your timing and help you get to wherever you're going on time from an advertising perspective, we would agree with you that we really do believe that advertising.

Is an opportunity for us, especially as we're reaching scale in some of our new markets, where we have a lower brand awareness as we went into Q4, we did some testing in top of the funnel advertising, especially in markets like Texas, where we know we have it really awesome brand awareness opportune.

In front of us.

Yeah.

Thank you.

Our next question comes from Sara Senatore with Bank of America. Please proceed with your question great. Thank you I was wondering if two questions actually the first is just if you could maybe decompose that traffic improvement in the sequential improvement you saw as I think you've done in previous quarters, you know obviously.

Charlie Jimley: Collectively, we would expect a 50 to 100 basis points headwind on adjusted EBITDA margins from these pay changes. Second, we are planning to make P&L investments and increase technology at the shop level to support scheduling, throughput, and mobile order initiatives. Collectively, we would expect 75 to 125 basis points of headwind on adjusted EBITDA margins from these investments. Combined with the expected adjusted SG&A leverage I just mentioned, we would expect these actions to collectively represent 50 to 100 basis points of overall margin pressure year over year. Furthermore, we intend to embark on a large-scale organizational change in 2024. To support this move, we would anticipate incurring between $24 million and $31 million in costs, which we deem as non-recurring and would anticipate will be almost entirely excluded from adjusted EBITDA. Capital expenditures are expected to be in the range of $280 to $320 million, up from $227 million in 2023.

You had somewhat easier comparisons on traffic, but then you know kind of understanding how much of that you thought was advertising versus digital versus you know that any kind of L. T. O is just as it is a sort of underlying comp driver question.

Yeah, I can start with the underlying comp driver question, and then turn it over to Charlie for the specifics. So it was we looked at customer behavior in the fourth quarter, we really saw strength in both the mid day and afternoon day parts.

Fall growth across especially our proprietary menu items, so things like Dutch freezes and rebel. We also saw continued strength in the cold beverage platforms and an increase in mix in cold beverage.

We felt like our L. T OS really resonated with our customers over the quarter as well. So I think it's a lot of different drivers that really helped to drive an excellent Q4.

Qualitatively the decomposition of our same store sales as you know we reported five plus five or pricing rollover is approximately 5%. Our sales transfer estimate is right in our range up to hundreds of 300 basis points and then the balance of that really is the traffic.

Underlying traffic, which is growing and we note sequentially grew and so back to Christine's comments, we really think some of the activities that we.

We activated in Q4 really did help us move from the traffic position in Q3 sequentially to a better performance in Q4 and I think as we noted we also saw really strong performance in our rewards program, so that 65% penetration in.

Charlie Jimley: This year-over-year increase will be driven primarily by a higher percentage of ground leases in 2024 as compared to 2023. Last year, we began approving more future sites using build-a-suit leases to shift our capital back to more normative levels. We would expect any capital expenditure benefit to take hold more firmly beginning with the class of 2025. In 2023, we spent approximately $18 million on our roasting facility. We expect to spend approximately $10 million in 2024, and we anticipate that this facility will open in the middle of this year. We also expect to spend between $6 million and $10 million in capital expenditures related to the Arizona office expansion.

In transactions.

And again, just noting we have so many new shops in the base to have that continue to to stay at that nice steady weight is really encouraging to us.

Got it. Thank you very helpful. And then just a follow up to that is you know how are you thinking or feeling about the your ability to use that data you are accruing about your customers and you know and and do your transactions through loyalty or through digital ordering at presumably they're helping to inform what you do across the board, but you know it goes.

Where are you or whether you want to put it in innings or some kind of other measurement like just sort of how much progress, you're making and sort of the the analytics piece of this.

Yeah, I think we're kind of in the second inning moving into the third is what I would say and I'm feeling really good. So one we've continued to test different types of offers suitable for the program. So understanding what level of points what types of promotions work. We also added in.

Operator: Thank you, and now we will take your questions. Operator, please open. Thank you. We will now be conducting a question and answer session. If you would like to ask a question, please press 1 on your telephone keypad. A confirmation tone will indicate that your line is in the question queue. You may press star 2 if you would like to remove your question from the queue.

Number of give away things like bestie bracelets and the shoe charms that I mentioned, so looking at that and in all of that is giving us data on how our customers react to the types of things, we're doing and we combine this with looking at you know, how our new customers coming into brands and bringing in some external research as well.

Operator: We ask that you limit your questions to 1 so that others may have an opportunity to ask questions. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the start button. One moment, please, while we poll for questions. Our first question comes from Andrew Charles with TD Cowan. Please proceed with your question. Great, thank you.

And looking at that altogether to really map out calendar for the year that drives new customers drive some occasions and so we feel we're feeling good about the path that we're on a in a way that we're able to use data.

Terrific. Thank you so much.

Our next question comes from David Tarantino with Robert W. Baird. Please proceed with your question.

Hi, good afternoon, Mike.

My question.

Harley's on the new unit productivity and I was just wondering if you could maybe give us an update on what youre seeing on that front for the most recent class of openings.

Andrew Marc Barish: Christina, as you implement the new enhancements in development in 2025, like more built to suit and focusing more on white space than in billing, do you expect that you can increase the number of store openings above the roughly 160 per year in 2023 and guided for 2024? Or should we expect a perhaps truncated 2025 opening class to better observe the enhancements you're making? Thanks for your question, Andrew.

As you completed the most recent fiscal year and then.

Wanted to understand a bit more about what you're assuming in the guidance for this year on new stores, specifically, because I guess by our math it looked a little lower than what it was in 2023, but I might have that math wrong. So could you help us out on that front. Thanks.

Hi, David.

We did have a great year of 31% revenue growth EBITDA Levered up 76% St dropped sales plus plus five and our system au vs. Notably reached a record high in 2023 of $1 $97 million.

We do.

I believe we have opportunities in new markets to both refine that strategy and to build customer awareness.

Andrew Marc Barish: I think if we look forward, we're really not talking about guidance today for 2025. We feel good about where our pipeline is and about the guidance that we provided for SHOPS for 2024, and feel like we have a robust pipeline to support our customers. Great. And then I just want to ask about the digital ordering operations test. You know, what are you looking to observe during that time? And, you know, how are you kind of, maybe in a shortened way, how are you kind of mapping this out to not cause congestion and stress?

As we mentioned we've refined our real estate strategy and we're reflecting those learnings on impact in sequence and how we go into new markets.

Customers, we know they love us in the market something tried us and we see the differential really isn't awareness between our new and existing markets.

But not a difference in satisfaction of visit we have an opportunity to build those au vs. In the markets, where the combination of top of the funnel, which Christine just mentioned, how we're testing that and how we do community building. We're very focused on that we're very pleased with the early results, but we recognize brand building does take place and building sale.

Overtime, but new sales layers like mobile order that we just announced so we do share the system either you vehicles company operated Aedes every quarter reflects how the system is evolving.

Andrew Marc Barish: You're very productive. Absolutely. So, as you know, what really drives our brand is our service, and so having that connection between the barista and the customer. So as we test mobile and digital ordering, we're really looking to, you know, continue to have that same experience between our baristas and our customers. So that's really what we're looking for. As we test this, we're thinking through operations. So what does this do to line speed?

And we realize that that pretty much all ships theyre going to rise with the tide of how we drive traffic focus on awareness focus on brand building.

And and really we're going to continue that into next year.

And try to achieve.

Achieve similar or better results in 2024 in terms of these new market openings.

Understood I guess, maybe ill ask it a different way. It does does the guidance for 2024 include I mean, when you think about the average weekly sales our average volumes for the two.

2024 classes that are you assuming something similar to what you read.

Your lives in 2023 at least Directionally could you comment on that proximity similar understand that we will do more sites and existing markets like California, We will do less relative sites in Texas.

Andrew Marc Barish: How are we slotting in the drinks as they're ordered, all of those different things as we operationally test this? As you know, we also have drive-thru shops that are set up with a walk-up window. So we looked at how people would come up and pick up their drinks from a walk-up window, and also how they'd go through our drive-thru lane. In a number of our newer shops, we have escape lanes. And so we can even begin testing things like delivering a drink to a car that can then pull out of the escape lane as it picks up its mobile order.

And as we.

Go through this year and we note that we're opening in Florida. This week.

And that's going to be a new market for us so.

No we would assume a similar result, it will it will come out and partly how new markets like Florida, do and we're very optimistic about that.

Yeah, David I think is as we look at how were we were continuing to update our real estate model as we grow adding in that new data from each of the new shops, it opens and walking out of that performance and again continuing to refine that real estate strategy.

So you know assuming assuming similar levels of volume, but we're continuing to look at ways to enhance that.

Jeffrey Andrew Bernstein: Thank you. Our next question comes from Jeffrey Bernstein with Barclays; please proceed with your question. Great, thank you very much. Questions just on the comp growth outlook. It seems like you've entered 24 with some strong momentum.

Please.

Great. Thank you very much.

Our next question comes from John even though with J P. Morgan. Please proceed with your question.

Hi, Thank you I E. The question or the topic I guess is on category innovation and building sales layers and certainly that leads me to think about you know your morning business, particularly our habitual morning business and how bros. Under indexes relative to some peers. So I wanted to talk about the opportunity that you may have.

Jeffrey Andrew Bernstein: So I'm wondering if you could just talk about the components you're assuming for the 2024 comp guidance. I think you said low single digits, how much pricing we should assume, and therefore the traffic assumption and any color you can provide on the first quarter. I know it's been choppy, as you mentioned, with the weather to start, but just trying to get a sense for the first quarter's tracking relative to, obviously, the fourth quarter and what your guidance is for full year 2020. Oh, hi, Jeff. We will have pricing rollover from 2023 in the low single digits. We have not yet refined how we'll price in 24, and we mentioned the California wage impact in those comments. We would expect our sales transfer from new units, in dollar terms, to be similar, but as a percentage of our comp base to begin to decline versus this year's levels of 200 to 300 basis points. And then we're looking at a low single-digit comp number.

The increase in frequency, particularly in the morning, and Christine, especially given some of your background at a previous employer around executing.

Food programs that in fact could drive beverage sales you know if bros. As any closer to considering piloting some food in some markets, especially as we have mobile order and pay finally discussed as an incremental initiative. Thank you.

Thanks for the question John So yeah. We are excited about protein milk that we launched in Q1 and you think that that actually does serve a unique need set for folks who are trying to get that all in one protein as they start their morning or continue their afternoon. You know as we look at innovation going forward and building the sales layers.

For now we're really really focused on mobile order. We think that this can be something that is really strong for us and you know as we test is getting this just right and doing it in a way that works for Dutch Bros is going to be incredibly important to us.

Andrew Marc Barish: So the balance of that is pretty nominal on the traffic side, from a growth perspective. And I would share and add to that that as we ended Q4 with that 5% same-shop sales, we were rolling off 300 base points of price between Q3 and Q4. So that sequential lift and same shop sales between the two quarters, we were really encouraged by what we saw from a customer reaction standpoint. And just to clarify, Christine, I know you mentioned obviously that speed of service within your operation is important, but then you also talked about category innovation, which is obviously important to encourage more trial and increased frequency. How do you balance the two of those when, obviously, you would think that they would kind of run counter to one another?

And I do recognize you know I think we do recognize as we look at where we might have opportunities that the morning day part is it's one of those areas. So continuing to think through like what what works for others and you know what would be uniquely Jessica Grossman, what can work for us.

Thank you.

Thank you.

Our next question comes from Jeff Farmer with Gordon Haskett. Please proceed with your question. Thank you I'm just curious how your Florida development strategy in 'twenty, four and moving into 'twenty five.

It has been impacted or or influenced by everything you've learned with what happened with your Texas development strategy over the last couple of years, So basically lessons from Texas that you're applying to Florida.

Yeah. So a couple of things one I think starting with how do we enter the market. We've actually had our mobile Dutch Bros unit in Florida.

For for the last little bit so building kind of that excitement and awareness as we go into the market. We've gotten some really nice take up from the activities that we've done with that we are planning on opening our first shop in Orlando are at.

Andrew Marc Barish: How do you think about that? Yeah, I think if we think about category innovation, it really has to be something that's impactful. So something that's either driving a new daypart or a new occasion for a customer or bringing in new customers. And then thinking through, you know, what types of things are really within the routines that we already have. So putting, you know, sprinkles on top of something really is within our existing routines and doesn't really drive a layer of extra complexity, whereas other things might.

At the end of at the end of the week. We're also as we as we look at approving sites through our pipeline. We have just every single year and given the amount of shops, we're opening we're including that in our new models as we go and so each time that we open shops I can update it as we look at.

Our clothing insights and going into a new market. So we also are not feeling well.

What we're really looking at the infill strategy and we're finding that a little bit. So we believe that the ultimate outcome is is exactly the same as we would have ended up on our on our way to 4000 plus shops, but we do believe that we can tweak that a little bit as we as we go into these new markets like Florida.

Andrew Marc Barish: So really balancing all of those different things as we think about innovation and adding, but speed of service is really incredibly important to us. So as we think through any new innovation, any new thing that we introduce to the shops, we're always thinking through how this impacts speed, quality, or service for our customers. Thank you. Our next question comes from Chris O'Call with Stiefel. Please proceed with your question. Thanks. I had a follow-up question related to mobile ordering and then another question, but I'm curious if you guys can just offer any touchstones around what the size of the mobile ordering opportunity might be or how you're thinking about the contribution or the return on that type of investment.

That's helpful. Thank you for that and an unrelated a little bit of a pivot here.

Just moving back to the potential, California price increase that would come in spring of 'twenty 'twenty four.

Just looking to protect dollar profit or you're looking to protect margin or you're going to take sort of a wait and see attitude see what some of the peers do how are you guys thinking about that bigger picture.

Yeah.

I think in general, we'll we'll look at profitability not percentage margin and we are aware of what others are doing.

We also want to time anything we do with the.

With the.

Media and event in the market not lag too much into that so so we'll we'll take some price we know that and we're a value are evaluating that right now so that we're ready.

Chris O'Call: And then secondly, Christine, I wanted to ask you a question about paid advertising. It just seems like paid advertising could be an important tool in the company's arsenal when it comes to transaction growth. And it looked like advertising expense last year, at least through the third quarter, was relatively flat year over year, despite obviously a lot of sales growth.

When this happens thank you.

Our next question comes from Andy Barish with Jefferies. Please proceed with your question.

Thanks, Good evening.

Just wanted to kind of work out some of the margin.

Puts and takes you gave us two the two sort of at the restaurant level shop level profitability, Charlie and I just wanted to make sure what was just mentioned on California as well as the.

The manager and pay increases starting in for Q is that combined are expected to be about 50 to 100 basis point impact on the labor line for.

Andrew Marc Barish: Just wondering if you expect paid advertising to increase meaningfully year over year? And then has the company considered budgeting this line as maybe a percentage of sales going forward? Yes, I'll take the first question on mobile orders and the size of the opportunity.

24, and is that kind of the you know the primary mover in shop level margins or do you anticipate kind of any other lines that we should be paying attention to there.

So in terms of the forward guide Youre correct. Its the combination of those two wage events that are the largest driver of any margin contraction, we are making some other P&L investments.

Andrew Marc Barish: So if we look at this, the number one thing that our customers ask for as an app enhancement is mobile ordering. So that would point to us that our customers really, really want this enhancement in our app. You know, we also look across the industry and understand how important this type of technology is for customers across the industry. But we don't believe that it will be material to our 2024 numbers.

We will support what we need and mobile order and pay towards the end of the year and other technology things that we're doing to be ready to go and make sure our point of sale system and our operations are ready. There's some investment there and then we get to offset that by continuing to get our G&A leverage. So that then the net margin contraction, we're expecting an interest and adjusted.

EBITDA level as what we mentioned there which is about 50 to 100 basis points in aggregate.

Gotcha helpful and then.

Kristine there was some you know early back in the in the previous regime discussion on operational.

Andrew Marc Barish: However, we do think it's really a big opportunity. We also believe that it's something that has the potential to bring in new customers and has the potential to introduce new occasions. So if you're in a hurry and you remember that we had a really long line one day, you can either use the fact that if you order mobile, you can adjust your timing and help you get to wherever you're going on time.

Efficiency opportunities through tap systems, and I know a lot of other things have moved to the forefront, but where do you where do you kind of envision that at this point.

In terms of.

Revisiting that that potential initiative down the road.

Yeah, what I would share on that as throughput is still really important to us we know that our long lines can be an inhibitor, sometimes to our customers visiting us more frequently.

Andrew Marc Barish: From an advertising perspective, we would agree with you that we really do believe that advertising is an opportunity for us, especially as we're reaching scale in some of our new markets where we have lower brand awareness. As we went into Q4, we did some testing and top of the funnel advertising, especially in markets like Texas, where we know we have a really awesome brand awareness opportunity in front of us. Our next question comes from Sara Senatore with Bank of America. Please proceed with your question. Great, thank you. I was wondering, actually two questions. The first is just if you could maybe decompose that traffic improvement, the sequential improvement you saw, I think you did in previous quarters, you know, obviously you had somewhat easier comparisons on traffic but then, you know, kind of understanding how much of that you thought was advertising versus digital versus, you know, any kind of LTOs as a sort of underlying comp driver question. Yeah, I can start with the underlying comp driver question and then turn it over to Charlie for the specifics.

Specifically I'm as we as we look at caps, we have rolled out to over 100 shops now the tap system and so you know we are encouraged by the results that we're continuing to see with the tap system.

We are also planning on investing in the tap system to put it into a majority of our new shops, as we rollout new shops as well.

Great. Thank you very much.

Thank you.

Our next question comes from Nick's It set him with Wedbush Securities. Please proceed with your question.

Thank you and congrats on a great Q4.

My question is you mentioned sort of the margin impact from the labor investments is that before any pricing actions or does that actually contemplate the pricing actions.

Within that guidance.

Yes, it does contemplate some pricing within the guidance, we did take price a little bit of price in January related to some of the minimum wage moves in the legislated markets already and then it does contemplate a level that will take through the through the year.

<unk> situation and others as well so that's that's really the net impact.

Got it and so.

Andrew Marc Barish: So as we looked at customer behavior in the fourth quarter, we really saw strength in both the midday and afternoon dayparts. We saw growth across, especially, our proprietary menu items, so things like Dutch Freeze and Rebel.

Going into the call you know I had about 4% in Q1 and Q2 in terms of pricing.

Is that correct, 4% in Q1 and Q2 in terms of menu pricing.

Roughly you know low single digit rollover is are is in the 24 coming from 'twenty. Three if you look at our price moves and I think it's also very important to note.

Andrew Marc Barish: We also saw, you know, continued strength in the cold beverage platforms and an increase in mix in cold beverages. We felt like our LTOs really resonated with our customers over the quarter as well. So I think there were a lot of different drivers that really helped to drive an excellent Q4.

That we had been bolstering our margins throughout 'twenty three to help us to prepare to take on what's coming at us in 'twenty four.

Okay. So low single digit pricing in Q1 and Q4, that's the rollover. So that's the rollover bits in place already from 2023 pricing.

And then there's additional pricing that where we're clearly SYGMA.

Signaling that we're going to take in 2024, and then we did take some pricing in Q1 and change one in January inline with some wage increases and some of the western states, including Arizona, California, Colorado and Washington.

Charlie Jimley: Qualitatively, the decomposition of our same store sales, as you know, we reported five plus five. Our pricing rollover is approximately 5%. Our sales transfer estimate is right in our range of 200 to 300 basis points.

Okay Fair enough and then you know you mentioned entering 2024 with a lot of comp momentum any sort of incremental clarity around what quarter to date trends look like.

Charlie Jimley: And then the balance of that really is the traffic, underlying traffic, which is growing, and we note that it sequentially grew. And so back to Christine's comments, we really think some of the activities that we activated in Q4 really did help us move from the traffic position in Q3 sequentially to better performance in Q4. And I think, as we noted, we also saw really strong performance in the rewards program. So that 65% penetration in transactions.

You know relative to Q4.

No I mean, what we what we shared in our prepared remarks is kind of where we are is a I think like everyone else. We saw some impacts of weather, but outside of the weather. We're really pleased with what we saw in January.

Got it.

And then just on the Cogs line, you know sequentially, you know a little bit of an uptick on the Cogs line Charley how are we thinking about sort of Cogs in 2024 could we actually see some leverage there.

The direct ingredient costs have moderated, but we also know that sugar is continuing to rise and that's it that's part of our basket.

Charlie Jimley: And again, just noting that we have so many new shops in the base. To have that continue to stay at that nice steady rate is really encouraging to us. Thank you. Very helpful. And then just to follow up on that, how are you thinking or feeling about your ability to use the data you are accruing about your customers and, you know, and your transactions through loyalty or through digital ordering? Presumably, they're helping to inform what you do across the board. But you know, I guess, where are you or whether you want to put it in innings or some kind of other measurement, like the sort of how much progress you're making in sort of the analytics piece of this? Yeah, I think we're kind of in the second inning, moving into the third, is what I would say, and feeling really good.

And that our distribution costs are still pretty sticky given energy costs and wages involved in that given we're a small drop business. So we think cogs as a pretty benign impact in 'twenty four we're not expecting a lot of benefit there.

Fair enough. Thank you very much.

There are no further questions at this time I would now like to turn the floor back over to Christine Barone for his closing comments.

Thank you for your questions as we conclude I wanted to highlight our recently completed Dutch loved get back each year, our shops customers franchisees and foundation work together to donate to local organizations working to end hunger in our communities. This year, we adjusted the give back and pivoted from one day of giving to our campaign.

That allowed us to make a dollar donation for each Dutch loved feature drink sold from February one through the 18th this campaign not only drove traffic. It also gave our customers an opportunity to give each time they came to a window and it was a huge success I look forward to announcing our results and and I'm grateful for the opportunity to truly live.

Andrew Marc Barish: So one, we've continued to test different types of offers through the rewards program, so understanding what level of points, what types of promotions work. We also added in, you know, a number of giveaway things like Bestie bracelets and the shoe charms that I mentioned.

Ill turn mission of making a massive difference one cup at a time in closing we are pleased with our strong results in Q4 and believe we are in a position of strength entering into 2024 I want to thank all of our teams that create this exceptional performance by connecting with our customers and communities every single day. Thank you.

Andrew Marc Barish: So looking at that, and then all of that is giving us data on how our customers react to the types of things we're doing. And then we combine this with looking at, you know, how are new customers coming into the brand. So bringing in some external research as well.

This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.

Hum.

Uh-huh.

Yeah.

Yes.

Hum.

Andrew Marc Barish: And looking at that all together to really map out a calendar for the year that drives in new customers and drives new occasions. And so we feel good about the path that we're on in the way that we're able to use data. Terrific, thank you so much.

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Hum.

Okay.

Yes.

Okay.

Okay.

Yeah.

Yeah.

Yeah.

David E. Tarantino: Our next question comes from David Tarantino with Robert W. Baird. Please proceed with your question. Hi, good afternoon. My question, Charlie, is about the new unit productivity. And I was just wondering if you could.

Yeah.

Yeah.

Yeah.

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Charlie Jimley: Give us an update on what you're seeing on that front for the most recent class of openings, as you completed fiscal year. I wanted to understand a bit more about what you're assuming in the guidance for this year on news stories, and others. We appreciate it. Thank you. By our math, it looks a little lower than what it was in 2023, but I might have that math wrong. Okay. Hi David.

Yeah.

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Yeah.

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Charlie Jimley: So, we did have a great year, 31% revenue growth, EBITDA levered up 76%, same shop sales plus five, and our system AUVs notably reached a record high in 2023 of 1.97 million. So, we do believe we have opportunities in new markets to both refine that strategy and to build customer awareness. As we mentioned, we've refined the real estate strategy and are incorporating those learnings on impact, sequence, and how we go into new markets. Customers, we know they love us in the markets once they've tried us, and we see the differential really is an awareness between our new and existing markets, but not a difference in satisfaction of the visit.

Hum.

Oh.

[music].

Yeah.

Okay.

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Charlie Jimley: We have an opportunity to build those AUVs and new markets with a combination of top of the funnel, which Christine just mentioned, how we're testing that, and how we do community building. We're very focused on that. We're very pleased with the early results, but we recognize that brand building does take place and building sales over time with new sales leaders like Mobile Order that we just announced. So we do share those system-wide AUVs, those company-operated AUVs, every quarter. Reflects how the system is evolving.

Charlie Jimley: And we realized that pretty much all ships are going to rise with that tide of how we drive traffic, focus on awareness, focus on land building, and really, we're going to continue that into next year and try to achieve similar or better results in 2024 in terms of these new market openings. Okay. I guess maybe I'll ask it a different way.

David E. Tarantino: Does the guidance for 2024 include, and when you think about the average weekly sales or average volumes for the, Are you assuming something similar to what you realized in 2023, at least directionally? To comment on that, Approximately similar.

Uh huh.

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Uh huh.

Uh huh.

[music].

Okay.

[music].

Yeah.

Yeah.

Yeah.

Yeah.

Oh.

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Charlie Jimley: Understand that we will do more sites in existing markets like California. We will do fewer relative sites in Texas. And as we go through this year, and we note that we're opening Florida this week, and that's going to be a new market for us, so. You know, we would assume a similar result.

Yeah.

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Charlie Jimley: It will come out partly how new markets like Florida do, and we're very optimistic about that. Yeah, David, I think as we look at how we're, we are continuing to update our real estate models as we grow, adding in the new data from each of the new shops that opens and looking at that performance, and again, continuing to refine that real estate strategy. So, you know, assuming similar levels of volume, but we're continuing to look at ways to enhance those units. Great, thank you very much.

Okay.

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John William Ivankoe: Our next question comes from John Ivankoe with J.P. Morgan. Please proceed with your question.

John William Ivankoe: Thank you. The question, or the topic, I guess, is category innovation and building sales layers. And certainly, you know, that leads me to think about, you know, your morning business, particularly your habitual morning business, and how Bros under-indexes relative to some peers.

Yes.

Yes.

Yes.

Hum.

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Andrew Marc Barish: So I wanted to talk about the opportunity that you may have to increase in frequency, particularly in the morning. You know, and Christine, especially given, you know, some of your background at a previous employer around executing food programs that, in fact, could drive beverage sales, you know, if Bros is any closer to considering piloting some food in some markets, especially as we have mobile order and pay, you know, finally discussed as an incremental initiative. Thank you. Thanks for the question, John. So, you know, we are excited about the protein milk that we launched in Q1. And, you know, I think that that actually does serve a unique need set for folks who are trying to get that all-in-one protein as they start their morning or continue their afternoon.

Okay.

[music].

Yeah.

Oh.

[music].

Andrew Marc Barish: You know, as we look at innovation going forward and building those sales layers, for now, we're really, really focused on mobile ordering. We think that this can be something that is really strong for us. And, you know, as we test this, getting this just right and doing it in a way that works for Dutch Bros is going to be incredibly important to us. And I do recognize, you know, I think we do recognize as we look at where we might have opportunities that the morning part, you know, is one of those areas.

Okay.

[noise].

Okay.

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Andrew Marc Barish: So continuing to think through, like, what works for others and, you know, what would be uniquely Dutch Bros and what can work for us. Thank you. Our next question comes from Jeff Farmer with Gordon-Haskett.

Jeffrey Andrew Bernstein: Please proceed with your question. Thank you. I'm just curious how your Florida development strategy in 24 and moving into 25, has been impacted or influenced by everything you've learned from what happened with your Texas development strategy over the last couple of years. So basically, lessons from Texas that you're applying to Florida.

Andrew Marc Barish: Yeah, so a couple of things. One, I think, starting with how we enter the market. We've actually had our mobile Dutch Bros unit in Florida for the last little bit. So building kind of that excitement and awareness as we go into the market. We've gotten some really nice take-up from the activities that we've done with that. We are planning on opening our first shop in Orlando at the end of the week.

Andrew Marc Barish: We're also, as we look at approving sites through our pipeline, we have just every single year, given the amount of shops we're opening, we're including that in our new models as we go. And so each time that we open new shops, that gets updated as we look at approving new sites and going into a new market. So we also are not feeling, I think we're really looking at that infill strategy, and we're signing on to that a little bit. So we believe that the ultimate outcome is exactly the same as we would have ended up on our way to 4,000 plus shops.

Andrew Marc Barish: But we do believe that we can tweak that a little bit as we go into these new markets like Florida. That's helpful. Thank you for that. And unrelated, a little bit of a pivot here, just moving back to the potential California price increase that would come in the spring of 2024. Are you guys looking to protect dollar profit? Are you looking to protect margin?

Okay.

Hum.

Okay.

Yeah.

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Charlie Jimley: Are you going to take sort of a wait-and-see attitude, see what some of the peers do? How are you guys thinking about that bigger picture? I think, in general, we'll look at profitability, not percentage margin, and we are aware of what others are doing. We also want to time anything we do with the media and events in the market, not lag too much behind that.

Yeah.

Charlie Jimley: So we'll take some price, we know that, and we're evaluating that right now so that we're ready when this happens. Thank you. Our next question comes from Andy Barish with Jeffreys. Please proceed with your question. Thanks. Good evening.

Yeah.

Okay.

Yeah.

[music].

Yeah.

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Andrew Marc Barish: Just wanted to kind of work up some of the margin, Puts and Takes he gave us to sort of the restaurant level, shop level profitability, Charlie. And I just wanted to make sure, what was just mentioned about California as well as the manager and pay increases, you know, starting in 4Q, is that combined expected to be about 50 to 100 basis points impact on the labor line for 24? And is that kind of the, you know, the primary mover in shop level margins? Or do you anticipate, you know, kind of any other lines that we should be paying attention to there? So, in terms of the Forward Guide, you're correct.

Yeah.

Thank you.

No.

Mhm.

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Charlie Jimley: It's the combination of those two wage events that is the largest driver of any margin contraction. We are making some other P&L investments. We will support what we need in mobile order and pay towards the end of the year and other technology things that we're doing to be ready to go and make sure our point of sale system and our operations are ready. There's some investment there. And then we get to offset that by continuing to get G&A leveraged. So, the net margin contraction we're expecting at an adjusted EBITDA level is what we mentioned there, which is about 50 to 100 basis points in aggregate.

Mhm.

[music].

Hum.

Yeah.

[music].

Yeah.

Andrew Marc Barish: Gotcha. Very helpful. And then, Christine, there was some early discussion in the previous regime on, you know, operational efficiency opportunities through TAP systems, and I know a lot of other things have moved to the forefront, but where do you, where do you kind of envision that at this point, you know, in terms of revisiting that potential initiative down the road? Yeah, what I would share on that is throughput is still really important to us. We know that our long lines can sometimes be an inhibitor to customers visiting us more frequently.

[music].

Yeah.

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Andrew Marc Barish: Specifically, as we look at taps, we have rolled out the tap system to over a hundred shops now. And so, you know, we are encouraged by the results that we're continuing to see with the tap system. We are also planning on investing in the tap system to put it into a majority of our new shops as we roll out new shops as well.

Andrew Marc Barish: Our next question comes from Nick Setyan with Leadbush Securities. Please proceed with your question. Thank you and congratulations on a great Q4. My question is, you know, you mentioned sort of the margin impact from the Labor Investment. Is that before any pricing actions, or does that actually contemplate the pricing action? What's in that guy's head?

Yeah.

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Yeah.

Nick Setyan: Yes, it does contemplate some pricing within the guidance. We took a little bit of a price increase in January related to some of the minimum wage moves in the legislated markets already, and then it does contemplate a level that will take into account through the year the California situation and others as well. So that's really the net impact.

Yeah.

Yeah.

Yeah.

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Charlie Jimley: Got it. And so, going into the call, you know, I had about 4% in Q1 and Q2 in terms of pricing. Is that correct, 4% in Q1 and Q2 in terms of menu pricing? A roughly low, you know, low single-digit rollover is ours is in the 24 coming from 23.

Yeah.

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Charlie Jimley: If you look at our price move, and I think it's also very important to note that we had been bolstering our margins throughout 23 to help us to prepare to take on what's coming at us in 24. Okay, so low single-digit pricing in Q1 and Q2. Well, that's the rollover. So that's the rollover that's already in place from 2023 pricing. And then there's additional pricing that we're clearly signaling that we're going to take in 2024. And then we did take some pricing in Q1 in January in line with some wage increases in some of the Western states, including Arizona, California, Colorado, and Washington.

Yeah.

Okay.

Uh huh.

[music].

[music].

Okay.

Charlie Jimley: Okay, fair enough. And then, you know, you mentioned entering 2024 with a lot of comp momentum, any sort of incremental clarity around what quarter date trends look like, you know, relative to Q4? No, I mean, what we what we shared in our prepared remarks is kind of where we are is, I think, like everyone else, we saw some impacts of weather, but outside of the weather, we're really pleased with what we saw in January, and John O'Connor. Thank you for joining us. We'll see you next time. And then just on the COGS line, you know, sequentially, you know, a little bit of an uptick on the COGS line, Charlie, how are we thinking about sort of COGS? in 2024.

Nick Setyan: Can we actually see some leverage there? The direct ingredient costs have moderated, but we also know that sugar is continuing to rise. And that's a cost that's part of our basket. And that our distribution costs are still pretty sticky, given energy costs and wages involved in that, given we're a small drop business. So we think COGS is a pretty benign impact in 24. We're not expecting a lot of benefits.

Charlie Jimley: Fair enough. Thank you very much. There are no further questions at this time. I would now like to turn the floor back over to Christine Veron for closing comments. Thank you for your questions. As we conclude, I wanted to highlight our recently completed Dutch Love Give Back. Each year, our shops, customers, franchisees, and foundation work together to donate to local organizations working to end hunger in our communities. This year, we adjusted the Give Back and pivoted from one day of giving to a campaign that allowed us to make a dollar donation for each Dutch Love featured drink sold from February 1 through the 18th.

Yeah.

[music].

Okay.

Uh huh.

Okay.

Uh huh.

Andrew Marc Barish: This campaign not only drove traffic, but it also gave our customers an opportunity to give each time they came to our window, and it was a huge success. I look forward to announcing our results soon, and I'm grateful for the opportunity to truly live up to our mission of making a massive difference one cup at a time. In closing, we are pleased with our strong results in Q4 and believe we are in a position of strength entering into 2024.

Okay.

Hum.

Okay.

Okay.

[music].

Andrew Marc Barish: I want to thank all of our teams that create this exceptional performance by connecting with our customers and communities every single day. Thank you. This concludes today's teleconference. You may disconnect your lines at this time.

Operator: Thank you for your participation. Thanks for watching, and others. I'm Nick Setyan. Thanks for watching. Edited by David Wise, John Tarantino, Nick Setyan, Andrew Barish, John Ivankoe, Sara Senatore, Jeffrey Bernstein, Dutch Bros John Tarantino, Nick Setyan, Andrew Barish, John Ivankoe, Sara Senatore, Jeffrey Bernstein, Dutch Bros John Tarantino, Nick Setyan, Andrew Barish, John Ivankoe, Sara Senatore, Jeffrey Bernstein, Dutch Bros and many more.

Yeah.

Yeah.

Yes.

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Nick Setyan: Thank you, and many more. And don't forget to subscribe to our channel. We post videos every week. And, as always, thanks for watching. And until next time, peace out.

Nick Setyan: Thank you for watching. I hope you enjoyed this video. If you did, please give it a thumbs up and subscribe to my channel. I'll see you in the next video. Sara Senatore, Nick Setyan, Andrew Barish, and many more.

Nick Setyan: Thank you for watching. We hope you enjoyed the video. If you did, please give us a like and subscribe. Thanks for watching!

Nick Setyan: Thank you for watching. I'm Nick Setyan, and many more. Thank you for watching. And I'll see you in the next video, and many more. Thanks for watching. I'll see you in the next video, and many more. Thank you for watching. I hope you enjoyed this video. If you did, please like, comment, and subscribe. I'll see you in the next video, and others. Thank you. Thank you, and others.

Yes.

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Nick Setyan: Thank you for watching. I'm Nick Setyan. Like, comment, and subscribe, and others. I'm Nick Setyan. I'm a professor of political science at the University of Washington, and many more. And as always, thanks for watching. I'm your host, Sarah Setton. , it it it, ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? Don't disturb Please Subscribe, Copyright © 1988, New Thinking Allowed Foundation A rough translation of the Great Ohio tragedy To be continued… ?? ?? ?? ?? ?? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? Co-Producers Episode 5 To be continued ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? Andrew Barish, Nick Setyan, Jeffrey Bernstein, John Ivankoe, Sara Senatore, Jeffrey Bernstein, Nick Setyan, Jeffrey Bernstein, John Ivankoe, Sara Senatore, Jeffrey Bernstein, John Ivankoe, Jeffrey Bernstein, Nick Setyan, Jeffrey Bernstein, Nick Setyan, Jeffrey Bernstein, Jeffrey Bernstein, [inaudible] Jeffrey Bernstein, Jeffrey Bernstein, Jeffrey Bernstein,

Okay.

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Okay.

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