Black Rock Coffee Bar, Inc.

Good afternoon, everyone, and thanks for joining us for BlackRock Coffee Bar's fourth 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, Rod 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 on our fourth quarter earnings call. I'll start by briefly highlighting our full year performance before walking through our fourth quarter operational highlights. I'll then pass it over to Rod, who will provide an update on our fourth quarter financials, followed by our outlook for 2026 and key metrics. 2025 was the year of strong execution and meaningful acceleration across the business. we delivered 10.1% same-store sales growth, a 16.4% growth stack over the last two years, supported by healthy traffic and strong guest engagement. We opened a total of 32 new stores over the course of the year ahead of our plan, broadening our presence in existing growth markets and driving above-planned new unit cohort performance. As a result, we achieved revenue growth of 25% and expanded adjusted EBITDA by 36% for the year, reflecting operational discipline, cost management, and strong unit-level economics with store-level profit margins of 29% a 130 basis point expansion versus the prior year. These exceptional full-year results underscore the durability of our model and give us tremendous confidence in the momentum we're carrying into 2026. Building off this strong foundation, our investments in our new store pipeline, supported by our growing team, And a scalable development playbook sets us on a clear path to achieve 1,000 units by 2035. In the fourth quarter, BlackRock delivered outstanding results, achieving revenue growth of 25% and adjusted EBITDA growth of 52% compared to the prior year period. We opened 12 new locations in the quarter, and same-store sales growth reached 9.3% or 18.8% on a two-year basis, with another quarter of positive comp growth across all of our markets. Heading into year end, our teams remain focused on execution and advancing our three strategic priorities. One, deepening customer engagement. Two, strengthening our people-oriented culture. And three, expanding our market presence. These priorities are foundational to our business, and will continue to support our long-term growth trajectory. I'll start with a few updates on customer engagement. Our overall same-store transaction growth was 4.2% in the fourth quarter. and 11.2% on a two-year basis for the quarter, highlighting very healthy momentum across our business, supported by a number of engagement initiatives. Starting with loyalty, during the fourth quarter, our loyalty rewards participation rate remained strong at 65%, continuing the trend of healthy guest adoption, and growing engagement since the platform launched in June of 2024. Loyalty members are visiting more often and spending more per visit than non-loyalty members, underscoring the program's role in strengthening retention and deepening customer relationships. Our loyalty database continues to grow every day and has become a key channel for how we communicate and drive value with our guests. In just the first 18 months, we have built a strong data foundation and meaningful guest behavior insights, setting the stage for sustained program growth and customization potential. In the fourth quarter, we tested segmented, targeted offers across specific guest cohorts to improve relevance and performance. Based on those results, we've established a more disciplined segmentation strategy for 2026 that we expect to drive measurable gains in engagement, transaction frequency, and offer efficiency, creating incremental value for both our guests and the business. We are very excited about the significant opportunities we see for loyalty as we expand our reach and elevate the digital experience to more BlackRack fans across markets. Beyond our loyalty program, digital sales also continue to support transaction growth, with app, online ordering, and third-party delivery driving greater guest frequency following our native OLO launch last year. In Q4, alongside our always-on media channels, we increased investment in paid media and through a series of structured tests that have continued into Q1. We're using those results to refine a more performance-driven, regionally tailored approach going forward. Paid media remains a strategic lever for us to efficiently build brand awareness and demand. and we will continue to invest with test and learn discipline to optimize returns by market. Turning to menu mix and performance, in the fourth quarter, we leaned heavily into holiday seasonal flavors across our LTO lineup. The menu featured drinks like butterscotch brevet, sour candy fuel with gummy worms, and guest favorite, Peppermint Bark. These ran alongside a series of surprise and delight one-off drops throughout the quarter, including our Halloween Fuels, Magic Fuels, and Naughty and Nice Fuels, which helped drive traffic, engagement, and trial. Our top performing beverages for the quarter were the Peppermint Bark Blondie, pumpkin blondie, white chocolate Milano mocha, and butterscotch brevet. We had also launched our second collaboration with influencer Avery Woods during the quarter, a tangerine strawberry pomegranate fuel, which outperformed our first viral Avery Woods drink collaboration featured over the summer. The campaign provided valuable learnings on how to authentically connect with our core guests and extend our reach to new audiences through our influencer network and creator partnerships. This quarter, we've started to apply those insights more broadly as we explore a structured micro-influencer strategy to support future LTOs, NSOs, brand awareness, and menu innovation. We're prioritizing local creators who are already genuine fans of BlackRock and have an organic connection to our brand, allowing us to stay authentic while driving high intent engagement with opportunity to scale over time. As it relates to our food offerings, Egg Bites continues to exceed expectations with our guests, driving attachment and check growth over prior year as anticipated. Product mix for fuel and food increased sequentially during the fourth quarter, reflecting continued demand and engagement for our menu innovation and elevated sweet and savory food options. On innovation, This month, we're excited to partner with Olipop to launch a dirty soda drink as a seasonal limited-time offer to kick off the new year. We're intentionally using LTOs to validate guest demand and performance before scaling new items system-wide. We're also continuing to innovate and test across food and functional beverage offerings as part of our 2026 pipeline. Taken together, our diverse menu and multiple points of service are driving healthy customer engagement, and we believe they provide significant opportunity to further elevate brand visibility and expand within our markets. Turning now to our people-oriented culture, investing in our teams, and fostering a collaborative and performance-driven culture is translating into stronger guest connection and amazing engagement for team members. Retention rates continue to be a real strength at BlackRock, highlighting our unique model, approach, and incentives, which are grounded in business acumen, career growth, and operational execution across our teams. Team member turnover improved year over year, driven by the evolution of our learning management system, which delivers onboarding and training support, builds business acumen, and drives greater new hire confidence, which supports even stronger engagement with our guests. Store lead turnover also improved year over year, supported by our career roadmap training program, which focuses on elevating the business acumen and leadership skills of our retail leaders, enabling them to run their stores more effectively and thrive in their roles. This program gives us confidence in the ever-growing pipeline of leaders at BlackRock who are well-equipped to support our store opening plan. To compliment the success of our career roadmap program, in the fourth quarter, we launched our new high-potential talent development program in partnership with the BoldFont team. prepping our most advanced team members for senior leadership. In conjunction with our career roadmap, this talent development program is designed to build a high performing organization while investing deeply in our people and their long-term career growth. As we've outlined, the career development and business acumen of our teams is a core business pillar at BlackRock. We're committed to teaching, coaching, and growing our people at every step so they know BlackRock is a place to build a career, not just a job. These programs meaningfully contribute to our success and have resulted in a stronger BlackRock delivering exceptional guest satisfaction. I'm incredibly proud of our team and we are energized about continuing to develop our people pipeline for long-term growth. In addition to our training programs, our inventory management module, designed to enhance COGS performance and elevate business acumen across our employee base, continues to drive improvements. As we deepen our team's understanding of the why behind inventory management, the efficiencies we create allow us to reinvest those savings into our people. We are optimistic about the impact this program will have over time on the performance of each store, area, and region as we continue to scale its implementation. Finally, I want to highlight one of the most important moments in our year, our annual top quartile meeting, which took place in Scottsdale, Arizona, just last week. It's a cornerstone of who we are as a company, a time when we come together to celebrate the year's accomplishments, recognize our top performers across the organization, and align on our goals for 2026. This gathering reinforces the culture we're building, one rooted in growth, accountability, and appreciation, and ensures our teams feel connected to both our purpose and our future. Last, I'll share a few updates on our expansion strategy in the fourth quarter. We opened 12 new locations across several growth markets, Arizona, Colorado, Texas, and California, bringing our store openings for the year to 32, ahead of plan and our total store count to 181. Of the 12 new store openings in the quarter, we opened our first modular prototype with a lobby, marking an important milestone as we look to accelerate our speed to market and drive cash-on-cash returns. Our California stores are already producing strong AUVs out of the gate, reinforcing the effectiveness of our disciplined and data-driven site selection strategy while also lifting brand awareness in the market. Following the successful opening of our first drive-through with a lobby in Southern California in the third quarter, our second opening in quarter four was another exciting addition in this high-performing market. More broadly, our 2025 new unit cohort continues to perform ahead of plan, exceeding sales forecasts, delivering strong store level margin acceleration and strong cash on cash returns, while also leading the system in barista retention and guest satisfaction. This sustained outperformance, together with the depth of our development pipeline, gives us confidence in our ability to drive continued AUV growth from $1.3 million system-wide as we close the year. As we communicated last quarter, unexpected landlord delays and extended permitting timelines caused several planned store openings to shift later in the quarter. This timing dynamic in the third quarter also reduced the store weeks we carried into the start of quarter four. and modestly limited new unit contribution early in the fourth quarter. Despite the temporary shift in timing, underlying demand remained healthy, highlighted by our strong comp momentum and the continued outperformance from our newest stores. Our development pipeline has continued to mature, and the learnings from this process have allowed us to refine our systems, strengthen cross-functional coordination, and position ourselves for a more robust 2026 opening cadence, which ensures we capture the full benefit of store weeks throughout the year. Our robust pipeline refine process and additional investments backed by our strong earnings and sales growth further drives our confidence to open 1,000 units over the next 10 years. As we step into a new year, we are energized about the opportunities ahead of us, with significant white space for continued growth across our existing markets, supported by our deep bench of talented team members and leaders. Before turning it over to Rod, I want to thank the BlackRock team, our baristas, our field operators, and our home office for their dedication and passion in serving our guests, our loyal guests for being a part of our community and making BlackRock part of their daily routines, and to our shareholders for their support as we pursue significant opportunities for growth and value creation ahead of us. I also want to thank Jake Spellmeyer and Brian Paraboo. who have retired from their board roles effective February 25th, 2026 to focus on family and pursue other interests. We're grateful for their contributions to BlackRock over the years and wish them the very best in this next chapter. With that, I'll turn the call over to Rod to provide more detail on our fourth quarter 2025 financial performance and 2026 guidance.

Thanks, Mark. Good afternoon, everyone. We ended the 2025 calendar year with strong momentum across the business, and we are excited about the growth and opportunity ahead in 2026. let me start with a brief overview of our 2025 results before diving into our fourth quarter performance. For the 2025 year, we achieved $200.3 million in total revenue and $27.5 million in adjusted EBITDA. We recognized revenue growth of 24.5%, driven by 10.1% same-store sales growth and 32 new store openings, ending the year with 181 stores and counties. our adjusted EBITDA growth was 36.2%, and our adjusted EBITDA margin expanded 120 basis points to 13.7%. We're very proud of our team for their strong performance throughout 2025, which underscores the long-term growth opportunity that Mark highlighted earlier. Turning to the fourth quarter, we generated $53.6 million in total revenue, an increase of 25.3% year-over-year. Our growth was fueled by 9.3% same-store sales growth, despite lapping a strong 9.5% comp in the prior year, along with same-store transaction growth of 4.2% and 12 new store openings during the quarter. Store-level profit was $15.7 million in the fourth quarter, up 35.8% over the prior year, and store-level profit margin was a strong 29.4%, 230 basis points favorable year over year. Notably, for the full year, store-level profit margin expanded to 29.2%, up from 27.9% in the prior year, highlighting the commitment and execution of our retail teams across the organization, driving operating efficiencies and store-level profitability. And as Mark mentioned, our annual top quartile meeting last week was a key moment for us to recognize our team's contributions, celebrating their success, and building excitement for the year ahead. Consolidated adjusted EBITDA for the quarter was $6.5 million, up 52.4% over the prior year as we executed against our strategic initiatives. Beverage food and packaging costs were $14.7 million, or 27.4% of total revenue, and 190 basis points favorable year over year. Store-level labor costs were $11.4 million, or or 21.3% of total revenue, and 70 basis points favorable year over year. Occupancy and related expenses were $4.4 million, or 8.3% of total revenues, and 20 basis points unfavorable year over year. Pre-opening costs were $1.2 million, or 2.3% of total revenues, driven by 12 new store openings in the quarter. And as Mark mentioned, we have continued to invest and reinforce our pipeline to support our long-term target of 1,000 stores by 2035. Cost margins improved year over year as a result of great execution from our retail teams, in addition to closely managed procurement and pricing with our supply chain team. We closely track cost centers and work with our partners to offset any potential increases whenever we can. As it specifically relates to coffee costs, while prices remained elevated through the fourth quarter and into the early part of 2026, we do anticipate some relief in the second half of the year. Adjusted SG&A was $8 million in the quarter, or 15% of revenue, compared to $6.4 million in the prior year period. We will continue to manage our SG&A growth with discipline to ensure it supports our ongoing expansion of our business. Our approach remains deliberate and focused, investing in team growth that enables our strategic initiatives, fuel sales performance, and underpins our new store development. Shifting to the balance sheet. As of December 31st, 2025, we had cash and cash equivalents of $28.4 million and a total debt position of $26.7 million, consisting of $18.7 million outstanding under our current credit facility and $8 million of financing obligations related to failed sale leaseback arrangements. We had a net cash position of $9.7 million and access to our unfunded revolver of $25 million. As it relates to CapEx, we invested $35.3 million for the year. Total CapEx for our 2025 class was $27.5 million before TI contributions of $6.7 million, with the remaining investments attributable to our existing stores and our 2026 pipeline of new stores. Build cost remains stable despite a volatile environment, a testament to our discipline project management and vendor relationships and as mark mentioned we have made additional investments in our pipeline to support our growth target and build on the momentum for 2025. turning to our outlook as we look ahead to 2026 we're building off an exceptionally strong year of performance in 2025 marked by industry leading same store sales growth strong store level margins and continued unit expansion. While it's early in our journey as a new public company and our performance today has been strong, we have tremendous conviction in our model. Our 2026 outlook aligns with our long-term algorithm, reflecting strong momentum in the business and the investments we're making to position the company for sustained long-term success. For the full year 2026, we expect 36 new store openings, total revenue in the range of $255 to $257 million, same-store sales growth in the mid-single digits, and consolidated adjusted EBITDA in the range of $33.5 to $34.5 million, and capital expenditures in the range of $40 to $41 million, including anticipated tenant improvement allowances, or $58 to $61 million, excluding anticipated tenant improvement allowances, of $18 to $20 million. Our CapEx guidance supports our 2026 class, our existing stores, as well as investments in our 2027 class later this year. Our teams continue to execute on our strategic initiatives with discipline, driving strong performance across our organization and the markets we operate in. Our ability to deliver a differentiated guest experience paired with a premium product offering, engaged teams, and a scalable expansion model gives us confidence in our ability to sustain this trajectory. Looking further ahead, we remain firmly committed to delivering on our long-term targets of 20% annual new unit growth, revenue growth of 20% or more, mid-single-digit same-store sales growth, and adjusted EBITDA growth that outpaces revenue growth. With this trajectory, we are confident we will achieve 1,000 units by 2035. With that, I'll turn it over to the operator to open the line for questions.