Black Rock Coffee Bar, Inc. Class A Common Stock 2026 Q2 Earnings Call

Good afternoon, everyone, and thanks for joining us for Black Rock Coffee Bar's second quarter results. Before we begin, we would like to remind you that this conference call may include forward-looking statements. These statements, which are subject to various risks, uncertainties, and assumptions, could cause our actual results to differ materially from these statements. These risks, uncertainties, and assumptions are detailed in this afternoon's press release, as well as our filings with the SEC, which can be found on our IR website. We undertake no obligation to revise or update any forward-looking statements or information except as required by law. During our call today, we will also reference certain non-GAAP financial information. We use non-GAAP measures to assist investors and analysts in comparing our operating performance across reporting periods on a consistent basis by excluding items that we do not believe are indicative of our operating performance.

The presentation of this non-GAAP financial information is not intended to be considered in isolation or as a substitute for the financial information prepared and presented in accordance with GAAP. Reconciliations of GAAP to non-GAAP measures can be found in this afternoon's press release and in our SEC filings. Joining me on the call today is our CEO, Mark Davis, and our CFO, Rodd Booth. Following our prepared remarks, we'll open the call for your questions. With that, I'll turn the call over to Mark.

Thank you, Will. Good afternoon, everyone. We appreciate you joining us today to discuss our second quarter results. Our second quarter results reflect the strength of Black Rock's differentiated operating model and the disciplined execution of our team. It starts with our people, our greatest competitive advantage. They bring our premium beverages and continuous product innovation to life every day, creating exceptional guest experiences that continue to broaden our appeal across more guests, occasions, and day parts. Because every Black Rock location is company-owned, our welcoming lobbies and convenient drive-throughs allow us to consistently deliver that experience regardless of how our guests choose to engage with us. Together, these differentiated advantages provide a strong foundation for durable long-term growth, reflected in another strong quarter that delivered 25% revenue growth, 28% store-level profit growth, and 17% adjusted EBITDA growth compared to the prior year period.

Even as we absorb the incremental costs of operating as a public company, which were not present in the same period last year, we expect to leverage those costs over time with EBITDA growth trending toward and ultimately surpassing our store-level growth. Something we expect to become visible in the third and fourth quarters as we begin lapping periods that fully reflect our public company cost base. We did this while opening 10 new locations in the quarter, reaching 200 stores system-wide, momentum that is leading us to raise our new store guidance. Store-level margins have never been stronger. Our team is executing at a high level and continues to strive to exceed our long-term growth algorithm of 20% unit growth, 20% revenue growth, and EBITDA growth that exceeds revenue growth, a trajectory we expect to sustain for years to come.

Same-store sales increased 4.2%, or 15.1% on a two-year basis. Incredibly strong two-year comps reflecting the continued strength of our brand and customer engagement strategy. This performance was achieved against our strongest same-store sales comparison in the last three years as we lapped 10.9% same-store sales growth in the second quarter of 2025. Transactions were down 2% in the quarter. This was largely influenced by the growth of free drink redemptions from the launch and transition of our loyalty platform in the second half of 2024 and the structural changes made in the first half of 2025 surrounding the expiration of rewards. In July, we have lapped those changes, demonstrated by positive transaction growth that we continue to see today. Even more, this marks our 14th consecutive quarter of positive same-store sales. Underscoring the resilience of our customer demand and the consistency of our operating model.

These results reflect the three strategic priorities that guide everything we do. Deepening customer engagement, which drives frequency, repeat visits, and same-store sales. Strengthening our people-oriented culture, which powers both guest satisfaction and the strong retention that underpins our margins. Expanding our market presence to capture the significant white space ahead of us. Let me take each in turn, starting with customer engagement. I'll start by sharing some updates on the great work our teams are doing around customer engagement, the single biggest driver of our same-store sales. Menu innovation is a core focus. It's how we stay top of mind, strengthen our connection with loyal guests, and give new customers a reason to try us. Our seasonal lineup continues to grow as a share of sales. This spring and summer, guests responded strongly to drinks like our Orange Blossom Mocha and Blueberry Cobbler Latte.

Our Fuel platform in particular is accelerating. Seasonal Fuel drinks like the Prickly Pear Fuel was among our best sellers this year, and because Fuel skews to the afternoon, it's the direct lever to grow our afternoon and evening day parts. We are also expanding our food offering and growing occasions beyond the morning day part through a combination of innovation, value, and convenience. On the food innovation front, we launched our grilled cheese as a summer limited time test in Arizona and the Pacific Northwest in early June, before expanding system-wide in July. Early guest response has been very strong, and as such, we are adding this as a permanent menu item. Grilled cheese continues to gain traction, contributing incremental sales and visits, elevating our afternoon and evening food offering.

It is building on the positive momentum we've continued to see with Egg Bites, with food now 13% of our product mix. We also began testing extended operating hours in select stores so we can better align with guest demand. It's still early, but the results are encouraging. We are seeing incremental sales in the hours before close, and we expect extended hours to contribute to same-store sales and AUV. Together with food, these initiatives work together to expand the occasions for our guests. Turning to digital sales, we saw a sequential improvement as a percent of sales in the second quarter, reaching 17.2%. The continued growth of this platform highlights the momentum we're seeing in guest frequency across the app, Olo, and third-party delivery, which drive convenience and provide great optionality for our guests while driving higher average check.

Our loyalty platform continues to be one of our strongest tools for driving engagement and frequency while providing great value with loyalty members demonstrating higher visit frequency and spend per visit versus non-members. While loyalty is still in its early innings, we continue to see meaningful opportunities to grow our database and enhance engagement over time. We're increasingly leveraging segmented and personalized offers to connect with our guests and drive incremental afternoon visits. In addition, we continue to test, learn, and refine these offers, and we're encouraged by the early response. As a result, loyalty participation increased to 68% of our transactions. During the quarter, we also launched a customer data platform, enhancing our ability to engage directly with guests outside of our loyalty platform.

We're encouraged by the early results and see this as an important addition to our always-on marketing efforts, helping us drive traffic, deepen guest engagement, and ultimately convert more customers into loyalty members. More broadly, our marketing strategy continues to become more sophisticated through programmatic media, which remains an effective channel for both re-engaging existing guests and reaching non-loyalty members. While loyalty continues to be an important driver of customer retention and engagement, our marketing investments in paid media are fueling growth at the top of the funnel by expanding brand awareness, reaching new audiences and attracting first-time guests, an area where we see tremendous opportunity. As we continue to scale the brand, we see loyalty and customer acquisition working hand in hand. Loyalty is strengthening long-term guest relationships and lifetime value, while our paid media and other marketing initiatives drive new customer discovery and trial.

Moving to our people-oriented culture. Our continued investment in our people and our focus on building a high-performance, values-driven culture remain important drivers of both guest satisfaction and operational execution. Engaged, well-supported teams deliver the speed, hospitality, and consistency that keeps guests coming back, and that same engagement is what underpins our store-level margins of 30%. The engagement of our team shows up first in retention. Team member turnover was 59.8% on an annualized basis, roughly half the industry average. Store lead turnover continues to be below industry norms at 23.5%. Retaining experienced store leaders matters, especially as we scale, as they play a key role in developing talent, reinforcing our culture, and ensuring consistent execution. You can see the consistency in the guest experience itself.

Guest satisfaction remains consistently strong, a direct reflection of the experience our teams deliver, and it's a meaningful contributor to repeat visits and same-store sales. Roughly 98% of our store leaders were promoted from within, and our leadership pipeline is staffed ahead of our growth. We have named store leads for each store we plan to open over the next 12 months, so each new store opens to the same standard our guests experience today. We believe this reflects the investments we have made across the team member experience, particularly in onboarding, training, and development. Programs like Black Rock University, the career path roadmap, and our leadership pathway platform continue to deepen our bench. We believe our ability to attract, develop, and retain great people is a meaningful competitive advantage.

Our improving retention, strong store lead stability, and growing leadership pipeline give us confidence that we can scale the organization efficiently while preserving the people-oriented culture and exceptional guest experience that differentiates. Last, our third priority, expanding our market presence. Development is our most visible growth engine, continuing to outpace our projected growth. We opened 10 new stores this quarter to reach 200 locations system-wide, bringing us to 19 openings through the first half of the year. With a back half-weighted pipeline, we're raising our full-year target to at least 38 new stores, up from 36, and we expect to move ahead on store operating weeks in the third quarter, carrying that momentum into 2027. Across the system, our newer store classes are performing above our expectations. California is the clearest example.