Black Rock Coffee Bar Inc-a Aktie

Good afternoon, and welcome to Black Rock Coffee Bar's First Quarter 2026 Results Conference Call.

Today's call is being recorded, and we have allocated one hour for prepared remarks and Q&A. At this time, I'd like to turn the conference over to Will MacIntosh, Chief Investor Relations Officer for Black Rock Coffee Bar. Thank you, sir. You may begin.

Good afternoon, everyone, and thanks for joining us for Black Rock Coffee Bar's first 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 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. And 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 first quarter earnings. We started 2026 with a clear focus on executing against our strategic priorities and building on the core strengths of our business while staying true to our simple mission: to build connections through caffeine and community.

At the heart of our model is a highly personalized, community-driven experience where every interaction is designed to be memorable, authentic and rooted in connection, driving loyalty and engagement. Equally important, our culture remains a true competitive advantage.

We invest deeply in our people and foster an environment where team members feel empowered, valued and inspired, which translates directly into exceptional service, strong execution and industry-leading retention.

Finally, our growth strategy is anchored in company-operated stores, giving us greater control over our guest experience, the ability to protect our culture and strong unit economics as we scale. Together, these priorities continue to guide our decisions and position Black Rock for long-term value creation.

We delivered strong first quarter performance, achieving both revenue and adjusted EBITDA growth of 24% compared to the prior year period, ahead of our long-term growth algorithm. We opened nine new locations in the quarter, bringing our total stores to 190 as of quarter end. Same-store sales growth was 5.2% or 14.4% on a two-year basis, demonstrating resilient demand and strong execution even as we lapped a strong prior year comp and fully aligned with our mid-single-digit expectations.

Our focus on our three strategic priorities, deepening customer engagement, strengthening our people-oriented culture and expanding our market presence underpin our performance and remains central to our long-term growth strategy. These initiatives are further supported by the strength and resiliency of our customer and our model. Our broad and balanced demographic exposure ranges from ages 18 to 45 and skews slightly higher income.

We also see consistency across both day parts and days of the week, which is a key differentiator for Black Rock. Traffic remained steady from the morning through the afternoon with meaningful opportunity as the day progresses. Sales are also well balanced across weekdays and weekends without reliance on any single day part.

Importantly, approximately 55% of our mix is coffee, a category that has historically proven highly resilient, and we continue to grow our mix in food and energy to drive check across day parts. As a result, our unique positioning insulates us well amidst an uneven macro environment. With that, let me take a few minutes to walk through our first quarter progress against our strategic priorities.

Starting with customer engagement, digital sales grew sequentially as a percent of sales in the first quarter, reaching approximately 17% of our sales, driven by increased guest frequency across app, online ordering and third-party delivery. These channels continue to enhance convenience and provide greater optionality for our guests.

Touching on loyalty. momentum continued through the first quarter with our loyalty rewards participation rate at 66%, reflecting strong guest engagement from the outset with continued month-over-month growth even as we open new locations. Loyalty members continue to demonstrate higher visit frequency and greater spend per visit relative to non-members, highlighting the program's impact on driving repeat behavior and strengthening long-term guest relationships.

Our loyalty database is expanding steadily and has become one of our most effective channels for engaging guests and delivering targeted value. In the last two years, we have established a robust data asset that provides deeper insights into our guest preferences, positioning the program to support continued growth and more personalized engagement over time.

To that end, in Q1, we piloted segmented personalized offers across our loyalty base in our Phoenix, Colorado and Dallas markets with notable results. When we moved from a single blanket offer to segmented incentives tailored by guest type, such as coffee forward rewards for coffee drinkers and fuel-based offers for energy enthusiasts, we saw meaningfully higher engagement and spend.

In one case study, personalized segmentation more than doubled engagement, drove a nearly 100% increase in incremental spend and generated over 3x the incremental visits versus a blanket approach. Lifecycle-based segmentation outperformed one-size-fits-all offers by delivering significantly higher visit lift and incremental spend efficiency as we meet guests where they are in the Black Rock community.

These insights reinforce that personalized value, not just more value is what drives meaningful behavior change. As we look ahead, we plan to expand this disciplined data-driven segmentation strategy into additional markets using loyalty as a powerful lever to engage with our guests, provide a differentiated experience and as a reminder for why they choose Black Rock.

We're a premium offering customized to meet their needs, delivered by an engaged team for a personalized and authentic experience. Additionally, our programmatic marketing campaign launched in the fourth quarter of 2025 continued into the first quarter of 2026, helping maintain same-store sales and guest engagement during a seasonally softer period for Black Rock.

The campaign was designed to extend our reach beyond existing loyalty members while sustaining traffic across our core guest base and results exceeded expectations. From a performance standpoint, we saw the strongest lift in visits from non-customers and our highest frequency visitors, demonstrating the campaign's effectiveness in both attracting new guests and deepening engagement with our most valuable cohorts.

Building on this momentum, we are launching a follow-on programmatic campaign in the second quarter across Phoenix, Dallas and Colorado with a continued focus on prospecting in all markets and an added layer of retargeting in Phoenix, where we delivered the strongest cohort level performance. We anticipate this next programmatic marketing campaign will drive measurable improvements in engagement and visit frequency.

While loyalty remains a valuable lever for influencing repeat behavior, our programmatic campaigns are unlocking stronger growth at the top of the funnel, expanding awareness, reaching new audiences and bringing first-time guests into the brand. As we scale, loyalty will play a key role in enhancing the guest experience, while paid media and programmatic efforts remain focused on attracting and converting new guests.

As it relates to menu and innovation, we were very pleased with the performance of our first seasonal window of the year, which delivered strong year-over-year growth and the product mix of our core offerings increasing more than 60% versus last year. From a product standpoint, results showed particularly strong performance from indulgent flavor-forward beverages such as the Pecan Pie Blondie, Prickly Pear Fuel and Strawberry Blondie, which ranked among our top sellers for the quarter.

The Strawberry Blondie with Sweetheart Cold Foam was especially impactful, performing well as a featured beverage and driving incremental attachment as guests added the Sweetheart Cold Foam across a wide range of drinks. This customization behavior was only highly social with guests sharing these visually compelling beverages online, reinforcing the importance of creating shareable menu items.

Overall, the first quarter reinforced that our LTO strategy, combining bold flavor innovation with seasonal and social relevance is resonating strongly with guests and driving both engagement and incremental traffic.

Furthermore, we're continuing to evolve how we amplify these launches through our influencer strategy. We're encouraged by the early traction we're seeing from this newer component of our marketing mix, particularly on discovery-driven platforms like TikTok, where authentic storytelling resonates strongly with new audiences.

Most importantly, we're learning quickly. Our recent Desert Springs campaign is already delivering stronger engagement and deeper audience interaction, reinforcing that our content approach and creator mix are becoming more effective. We're also seeing meaningful benefits from a regionalized strategy that partners with creators in specific markets, allowing us to show more authentically at the local level while driving increased brand visibility and organic social momentum.

Starting in the second quarter, influencer partnerships will align with our key summer seasonal windows, presenting an exciting opportunity to enhance our reach. Overall, we view micro influencers as a powerful storytelling channel that brings the brand to life through real voices. We will continue to build and scale this program thoughtfully over time.

As it relates to our food offerings, Egg Bites continue to exceed expectations with our guests, driving attachment and check growth over prior year as anticipated. In the second half, we plan to introduce new and innovative food options to continue driving engagement and growth across day parts as we lap the launch of Egg Bites from the prior year.

Product mix for fuel and food increased again sequentially in the first quarter, showcasing the sustained demand and engagement for our menu innovation and elevated sweet and savory food items.

On the innovation front, we were excited to launch a Protein Test in Phoenix in early March, introducing a protein-boosted milk for dairy-based drinks, protein boost for shakes and smoothies and protein cold foam as customizable add-ons across our beverage platform. We've been encouraged by the early results, which have driven incremental attachment and ticket lift, particularly with cold foam, where protein is creating differentiated entry point with FUEL by enabling customers to add protein to energy beverages. This is a capability that remains unique in the category.

Importantly, protein is also performing well in core beverages like lattes and signature drinks, reinforcing that this is a natural extension of our existing menu. Guest response has been very positive with strong satisfaction scores and clear feedback around the value of adding protein without sacrificing flavor or experience.

Based on this performance, we expanded the test into additional markets with a full system rollout completed in April. As we scale, we'll continue to refine positioning and menu integration, but we view protein as a longer-term platform opportunity that aligns well with evolving guest preferences and our broader innovation pipeline.

Regarding other recent innovation, our seasonal Dirty Soda partnership with OLIPOP was an important test-and-learn opportunity, providing valuable data, insights and guest engagement that we will leverage in future offerings. From a guest perspective, response has been encouraging. Customers who have tried the beverage are rating it highly with feedback showing strong alignment with both the flavor profile and the broader Dirty Soda trend.

We're also seeing incremental strength in the afternoon day part, which is a future targeted area of opportunity for us as we work to drive traffic outside of morning peaks. As our near-term focus remains on scaling the recently launched protein platform, we are using this period to gain insights and refine the OLIPOP offering. Looking ahead, we have an OLIPOP recipe refresh planned for the second quarter, along with Barista-driven variations, which we believe will help broaden appeal, encourage repeat trial and inform future innovation decisions.

Overall, our broad menu innovation and multiple points of guest interaction continue to support strong customer engagement while creating meaningful opportunities to deepen brand relevance and expand our presence across markets. Moving to our people-oriented culture. Our continued focus on investing in our people and cultivating a high-performance collaborative culture is driving deeper guest relationships and strong team engagement.

Retention remains a key differentiator for Black Rock and underscores the strength of our operating model, one that is rooted in professional development, increased business acumen and disciplined execution across the organization.

Notably, team member turnover hit an all-time low in the first quarter, ending at approximately 54%, continuing to outperform the industry average and improving year-over-year, driven by the evolution of our Learning Management System.

Stronger onboarding and training have led to higher retention and more confident new hires. Store lead turnover also continues to stay below industry average as we continue building the business acumen and leadership skills of our retail leaders through our career roadmap training program, helping them run their stores more effectively.

Our robust programs in place give us confidence in the ever-growing pipeline of leaders as Black Rock, who are well equipped to support our store opening plan and deliver exceptional guest satisfaction. Importantly, the progress we're seeing in succession planning and internal advancement gives us added conviction that we can scale new store growth with our strongest leaders stepping up to drive execution and foster our people-oriented culture across our newest markets.

Finally, I want to take a moment to welcome Jon Vingo to the Black Rock team as our new Chief Development Officer. I've been fortunate enough to work with Jon during my time at both Panera and Tokyo Joe's, and I've seen firsthand his ability to thoughtfully lead complex large-scale growth initiatives. He brings deep experience in guiding disciplined national store expansion across multiple brands and markets, and we're confident his leadership will be instrumental as we continue to execute our development strategy and scale the brand.

I also want to thank Bobby Kaufmann for his many contributions to Black Rock and wish him all the best in his future endeavors. Last, I'll touch on progress across our expansion strategy in the first quarter.

We opened nine new stores across Colorado, Texas, Arizona and Oregon in the quarter, bringing our total store count to 190. Four of our new store openings in the quarter were in Colorado, a leading growth market for us with terrific momentum. We also continue to build out our more established markets like Portland and Phoenix, which are driving strong early performance despite higher penetration in these areas.

As we grow store density in these maturing markets and add new locations around existing high-volume stores, we are thoughtfully rebalancing demand across our store base to enhance the experience, grow our presence, strengthen our market position and better serve our guests. This dynamic can result in some sales transfer where a portion of volume from existing stores shifts to newer locations that have opened in closer proximity.

In the first quarter, we saw this dynamic in Phoenix, creating a 160 basis point headwind to same-store sales. To be clear, this is a function of the strong underlying demand we are seeing in this market. New stores are performing well. Traffic remains strong and overall market level sales are growing.

As we grow store density and brand awareness in our key markets, we are continuing to see strong demand at the market level, reinforcing our data-driven concentric circle development strategy. Although sales transfer modestly impacted same-store sales in the quarter, we're encouraged by the long-term benefits and believe it reinforces our commitment to showing up for our guests in key markets while strengthening demand and engagement as these markets mature.

Importantly, five of our new unit openings in the first quarter occurred in the last week of the quarter, impacting store weeks during the period as expected. Underlying demand remained healthy, highlighted by our strong comp momentum and the continued growth from our newest stores.

Furthermore, we expect to comfortably hit our commitment of a minimum of 10 stores in Q2 and 36 for the 2026 year. As a reminder, on average, new stores will achieve 1.1 million AUVs by 18 months with incremental growth compounding thereafter. 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 through the remainder of the year.

Across our newest cohort, we are pleased with the year-to-date performance, which is in line with our targets. We continue to see significant opportunity to drive performance and awareness across all markets as we continue to scale and grow our company, including our trajectory to drive AUV growth from $1.3 million system-wide today.

Additionally, as it relates to new development, we maintain significant flexibility on build type, allowing us to pursue multiple development paths to secure the right real estate for our stores with comparable capital deployment. We continue to expect to shift towards more reverse build-to-suit leases in our near-term pipeline, allowing us to more closely manage our development planning and drive greater speed to market.

As we continue to build on our dual format foundation, Black Rock Coffee Bar stands apart by pairing drive-thru access with thoughtfully designed lobbies that enable both speed and connection, supported by a differentiated menu with growing food mix that performs across day parts. This combination allows us to serve a broader demographic, meeting guests where they are with convenience and a community-driven experience that extends well beyond coffee.

With a robust development pipeline, a disciplined and repeatable process and incremental investments supported by strong sales and earnings performance, we remain confident in our long-term growth plan to open 1,000 units by 2035. As we move through the rest of the year, we're energized by the significant white space across our existing markets and the depth of talent across our team, positioning us well to continue executing against our long-term growth plans.

While we are confident in our ability to double our footprint within our existing markets, we have also started evaluating new markets with potential new market entries in 2027 and 2028. I'm incredibly optimistic about the path in front of us and bringing Black Rock to more guests across the country.

Before turning it over to Rodd, I want to thank the entire Black Rock team, our baristas, field operators and home office for their dedication and passion in serving our guests. I'm also grateful to our loyal guests for welcoming Black Rock into their daily routines and to our shareholders for their continued support as we pursue meaningful growth and long-term value creation.

I'll now turn the call over to Rodd to provide more detail on our first quarter 2026 financial performance.

Thank you, Mark. Good afternoon, everyone. We entered 2026 with strong momentum. And in the first quarter, we generated $55.5 million in total revenue, an increase of 23.7% year-over-year. Our performance was driven by 5.2% same-store sales growth despite lapping a strong 9.2% in the same period prior year, and we opened nine new stores in the quarter, bringing our total store count to 190 in counting.

We delivered against our mid-single-digit same-store sales guide despite challenging weather in January, a 60 basis point impact and the initial impact of strategic densification in Phoenix as we added new stores around existing high-volume locations, which resulted in a 160 basis point headwind, as Mark mentioned earlier.

This reflects a deliberate effort to better serve demand, continue investing where demand is strong, maintain our exceptional guest experience and drive incremental market level sales. This is a beneficial outcome of densifying high-demand markets as well as an important driver of long-term growth.

As a result, as we move through the remainder of 2026, we continue to feel good about our mid-single-digit pacing and the initiatives we have in place to drive guest engagement. Same-store transactions declined 0.6%, while pricing contributed 3% and check grew 2.8%. Softer transaction volume in the quarter stemmed from a challenging comp as the prior year period saw elevated transaction growth related to the early accelerated growth of our loyalty program, which launched in June 2024.

As Mark elaborated on earlier, we have several initiatives in place geared towards driving awareness and engaging with our guests, including: one, scaling programmatic marketing campaigns and making additional investments to drive awareness and guest engagement; two, increasing investments in influencer marketing, merchandise activations and paid media; three, expanding loyalty segmentation and day part-based offers to drive frequency; and four, continuing to enhance our menu and attachment opportunities through innovation.

On pricing, we took price late in the fourth quarter 2025 across most of our markets, which we expect to carry through 2026. We don't plan to take additional price through the remainder of the year in those markets, consistent with our historical cadence of measured price increases.

Store level profit was $16.4 million in the first quarter, up 29.2% year-over-year and store level profit margin was 29.6%, 126 basis points favorable year-over-year, highlighting the terrific execution of our teams and their commitment to driving great results.

Consolidated adjusted EBITDA for the quarter was $7.4 million, up 23.5% over the prior year as we continue to execute against our strategic initiatives. Beverage, food and packaging costs were $15 million or 27.1% of total revenue and 122 basis points favorable year-over-year.

Our margin on Food, Beverage & Packaging costs improved year-over-year, driven by strong execution from our retail teams executing against our strategic initiatives like inventory management, along with disciplined procurement and pricing management by our supply chain team. As a result of these efforts, we remain confident in the stability of our COGS margin as we continue through the year.

Store-level labor costs were $11.5 million or 20.7% of total revenue and 32 basis points favorable year-over-year, highlighting our team's excellent work driving operating efficiencies and delivering amazing results. Occupancy and related expenses were $4.7 million or 8.5% of total revenue, up 16 basis points year-over-year.

Other store operating expenses were $7.8 million or 14% of total revenue, up 12 basis points year-over-year. Preopening costs were $1.1 million or 2% of total revenue, driven by 9 new store openings in the quarter.

Adjusted SG&A was $7.9 million in the quarter or 14.3% of total revenue compared to $6 million in the prior year period. We continue to manage SG&A growth closely to support the long-term growth of our business. Our approach remains intentional and disciplined with investments focused on expanding our team to support our key strategic initiatives, sales growth and new store expansion. As a reminder, we expect SG&A to be evenly weighted on a quarterly basis through the remainder of 2026.

Turning to the balance sheet. As of March 31, 2026, we had cash and cash equivalents of $20 million and a total debt position of $27.4 million, consisting of $18.7 million outstanding under our credit facility and $8.7 million of financing obligations related to certain reverse build-to-suit arrangements, resulting in a net debt position of $7.4 million and full access to our unfunded revolver of $25 million.

As it relates to CapEx, Investments were primarily directed towards new unit development, supporting our 2026 and early 2027 pipeline. As Mark mentioned, while we maintain flexibility in our development approach, we expect a near-term shift towards more reverse build-to-suit projects, enabling greater control over development planning and new store delivery. While these projects typically require higher upfront capital, we expect to benefit from TI contributions in 2026 and into 2027. As such, 2026 will be an investment year as we take advantage of real estate opportunities and support our growth targets.

Turning to our outlook. We see a long runway ahead and are excited about the opportunities in front of us, even as we navigate a more dynamic macro environment and lap stronger prior year comparisons. While still early in our journey as a new public company, our progress to date reinforces our conviction in the durability and scalability of our model.

Our 2026 outlook remains consistent with our long-term algorithm, reflecting both underlying momentum in the business and investments to support sustainable long-term value creation. We are reaffirming our full year 2026 guide of 36 new store openings, total revenue of $255 million to $257 million, same-store sales growth in the mid-single digits, consolidated adjusted EBITDA of $33.5 million to $34.5 million, capital expenditures of $40 million to $41 million, inclusive of anticipated tenant improvement allowances or $58 million to $61 million, excluding tenant improvement allowances of $18 million to $20, our capital spending supports our 2026 new store class, continued investments across our existing store base and select investments towards our 2027 class.

Our team continues to execute against our strategic initiatives with discipline, driving strong performance across the organization and the markets we serve. We believe our differentiated guest experience, premium product offering, engaged teams and scalable expansion model positions us well to sustain this trajectory.

Looking further ahead, we remain firmly committed to our long-term target of 20% annual unit growth, revenue growth of 20% or more, mid-single-digit same-store sales growth and adjusted EBITDA growth that outpaces revenue. On this trajectory, we remain confident in our ability to reach 1,000 units by 2035.

With that, I'll turn it over to the operator to open the line for questions.

[Operator Instructions] And the first question comes from the line of David Tarantino with Baird.

I wanted to ask about the strategic densification strategy. And I guess my first question is, I guess, could you elaborate on why you're taking that approach? And then secondly, I'm wondering if the sales impact on the comp base units surprised you at all or if it turned out the way you expected it to turn out?

David, first off, thanks for joining us. It's good to hear your voice. Regarding the densification of the markets, I think as we densify markets, there's probably some level of sales transfer, especially in, call it, Phoenix. When you're looking at the market level and you're thinking about the strong incremental sales and the attractive returns, Phoenix was a little bit easier for us because we've got such high-volume stores. I think it's our highest performing market and most mature, and it was intentional.

We're talking roughly five to six stores. And what it did is it gave us great opportunities with high AUV stores that we opened up. And it also made the stores that were higher in AUV run a little bit better. I'll have Rodd, who's sitting across from me here. He can answer a little bit of the math behind it, but it's pretty immaterial when you look at what we received with the AUV from the new stores.

Yes. David, I think as we talked or as Mark mentioned, what I would add is in terms of sales transfer about 160 basis points, about 130 of transaction. Really, when you look at Phoenix as a whole, as Mark mentioned, it is one of our higher volume markets, our most penetrated market. And really more than anything, it's just, we had really good opportunities. They were within five miles of some existing stores. And so we haven't really seen that historically.

Then historically, when we have only a few instances, those stores really build back in the next 12 to 24 months. And so it's really a way to continue to grow within Phoenix. We like the sites very much. And even looking ahead, giving you a little bit more, we've got another 10 to 12 stores in Phoenix this year, and there's only about three to four, depending on when we open them this year that are within that five-mile range. So we don't see the impact being really significant. And for us, at the moment, really Phoenix is the one market where we're seeing that. I think the white space and all the other markets that we're in don't really give us any concern for a number of years.

Got it. And if I could ask a follow-up. I guess, was this the first quarter you saw an impact or just the first quarter that it was measurable enough to call out? And then I guess the follow-up to that is, is this 160 basis points or so something that we should expect to see for the rest of the year until you cycle all of this? I guess maybe just give us some context on how this all will play out.

Yes. So the first quarter was the first quarter where we saw really some movement in the transfer of the sales. These are stores that we opened at the end of 2025 or towards in the second half of 2025. I think as we think about the 160 basis points, it's really early. We're going to continue to manage it and watch it, and we'll continue to report out on it. But I think more than anything, sometimes the stores, what we found is they'll take that initial hit and then they're building back guests as they continue to grow and the new store continues to grow. And so it's really, really early for us.

Like I said, I know we've shared in the past, we really haven't experienced much, if any, sales transfer. But obviously, Phoenix is our most penetrated high-volume market, and we're going to continue to watch it. And it's also helping from a development strategy to understand what's that right balanced proximity for stores. And so three to five miles is how we've been approaching it. By the way, not every store within five miles has had this transfer of sales. But it's new, and it's something that we're continuing to manage and monitor.

And the next question comes from the line of Brian Harbour with Morgan Stanley.

Yes. Do you care to comment on just the start of the second quarter? Are you still sort of in that mid-single-digit range that you're thinking for the year? Any change there?

So Brian, we again, and we talked about this a little bit earlier. First quarter, we came in at 5.2%. We were lapping the 9.2%. And we have continued to reiterate that we have no issue reaffirming our guidance. I think secondarily, when you look at our long-term algorithm of the 20% system-wide sales, the 20% EBITDA growth and the 20% unit growth, we came in at 24% on the sales. We came in at 24% on the profit, and we're at 23% on the unit growth. And again, as I had said earlier, everyone in the company is very strong in what we guided to, and we will continue to come through on that commitment.

Okay. And just you called out, I think, in particular, some of the segmented offers that drove higher spend. And then you also kind of talked about the new marketing campaign. I guess how broad were those done? And how much of a contributor was that to the first quarter performance? I mean, obviously, you're kind of highlighting the headwind perhaps from sales transfer, but how do you think about sort of the potential tailwind from those other things that you could expand this year?

I appreciate it, Brian. I think for, and I'll give you a couple of answers here. I think on the marketing side, the marketing spend, we have increased our marketing spend by 30% versus prior year. And as you think about that, Brian, what that means is we're going to be about 2% of our sales being marketing. Long term, we see a meaningful opportunity to scale the marketing investment.

I think, Brian, as you think about paid media, Rodd brought up the influencers, the merchandise drops, all of those are driving brand and awareness, which we all know is a new smaller company, we really need. And so we feel like that's a great strategy. We're certainly driving the innovation, which we'll talk about more undoubtedly. On the loyalty, the segmentation, and it obviously drives rewards, which is great on the value side, and we like that very much. And then we're pushing on the food attachment.

With regards to loyalty and the segmented targeted offers, in Q1, we tested segmented offers in selected markets. What that basically means is that coffee-based guests got coffee-based offers, fuel-based offers went to fuel-based guests. And then there's some life cycle-based incentives, which we're trying to use to drive frequency.

Here's a little bit of the math that you're asking about. It doubled the engagement. And when you look at the initial test that we ran, we nearly doubled the spend. We also drove 3x the incremental visits.

So, there is a plan to expand that segmentation and continue to grow the same-store sales, and we'll do that through more personalized value offers. And then just to make sure we follow up on the paid media, we like the paid media because it drives the awareness. And again, that's important to us. And we've been really encouraged by the early results. We're going to continue to invest with the new guests because I think as you look at us, we are currently at about, let's call it, 66% of our traffic is loyalty guests.

Again, loyalty guests spend about $1 more on check than non-loyalty. And as you think about that, while we're so very strong on loyalty, we want to make sure that we're bringing new guests in. And so, we'll continue with that paid media to build brand awareness. We're certainly trying to strengthen the marketing at the top of the funnel. And I think when you look at that paid media, what we're most happy about is that it gives us a chance to introduce Black Rock to people that have never been before.

And the next question comes from the line of Sharon Zackfia with William Blair.

Obviously, the margin performance at the unit level has been jaw-droppingly good. But I think if you kind of back into full year guidance, just given the EBITDA margin guidance, it probably implies flattish full year margins, which again is still a good level. But I'm curious what the pushes and pulls would be for the rest of the year versus the great leverage you saw in the first quarter.

Yes. Thanks for the question, Sharon. When we look at margins in the first quarter, the 29.6%, really, really happy with the team. And I know we've spoke about it in the past. Every year, we go into the year with strategic initiatives for the team that help with the execution.

Last year, a big one was inventory management. That has certainly contributed and helped, when you think about the supply chain team, our procurement team, and working closely with our partners to really help manage costs and make sure we've got a really stable and predictable supply chain. They're doing a tremendous job there. But from a margin standpoint as well in the first quarter, Mark mentioned it, but we're lapping a lot of accelerated growth within the loyalty program.

In the first quarter of 2025, we did have more discounting, more start of the year offers, welcome offers for our guests as that program is building. So there's a little bit of margin in there in the first quarter of this year because the discounts were lower than they were a year ago. But generally speaking, where we ended last year, 29.2%, first quarter 29.6%, we feel really, really good about the margin.

I think for the year, we expect to continue the momentum. But 29.6%, as you suggested, it is a good margin, and we're really proud of the team for their ability to execute and drive performance.

And then can I just follow up on mix because it looked like that gapped up kind of nicely for you sequentially. I mean I know year-over-year, you're talking about the discounts. But is that just a function of lapping those discounts? Or is that also reflecting some of that loyalty work that you did in the quarter with segmentation?

So, Sharon, just to kind of reiterate on the mix, coffee is going to be about 55%. Energy has grown up to 25%. So we're really proud of that. Food is elevating. We're now at about 13%. And again, digital in totality, and again, this goes to your loyalty and everything with that, we are at 17% of sales through the app, online ordering and third party. Again, we expect that to ramp.

We're certainly increasing and enhancing the functionality and the loyalty integration and the targeted offer certainly helps. And I think while digital is growing, we're very cognizant that we want it to be a complementary channel. And while it enhances convenience and frequency, as you're aware, we're really proud of our engagement and the terrific Baristas we have and how they interact with the guests. So what we want is an easy personal and meaningful message that we can give to everybody that engages. But ideally, we would like that digital to be complementary.

Mark, sorry, I meant the 2.8% of mix in the check, which I think is up from like 1% in the back half of last year.

Yes, that's both the incremental growth of food, which is an attachment item for us. And then obviously, yes, discounts coming down as well, which helps with the check.

And again, Sharon, as I commented, that food mix is elevating. And part of that is Jess and the team have done a really great job with some new breakfast items, and we've certainly pushed on that, and I think that's helped in a big way.

And the next question comes from the line of Andy Barish with Jefferies.

Just wondering if the OLIPOP Dirty Pop Soda LTO didn't kind of pop, so to speak, as you guys may have thought and what the learnings were around that, if you could?

Yes. I think, Andy, when you look at OLIPOP, and I'll go back to our Italian soda and everything that way, that's going to be in that 3% to 4% of mix. And I think when you look at OLIPOP, it is fantastic from an awareness. I think it helps with being partnered with a great brand, and it certainly has provided valuable insights I think when you look at it, it gives us a great way to talk to other guests, and it's a new innovative way to talk about the brand.

But I think as you look at our coffee mix, you look at our energy mix, again, OLIPOP is going to be on the smaller side. I would say, generally, the protein has been a strong addition. And in the near term, we'd love to scale that protein. And again, I'll use an example that we're able to put the protein cold foam on top of energy and our peer group typically doesn't do that. And so that has been a real positive for us as well.

Okay. And then a follow-up, just in terms of kind of the recent quarter-to-date and all the noise out there with gasoline prices and such and Starbucks putting up a good quarter and McDonald's launching some beverages. Anything you'd call out, any changes in consumer behavior you're seeing? Or was really the sales transfer in the first quarter kind of the primary reason there was an upside kind of to the mid-single-digit comps?

Well, Andy, I think starting with the mid-single-digit comp, one of the things that we have tried to reiterate through this call, and we'll continue to do through the Q&A we're running right in the neighborhood of 7% to 7.5% on a two-year basis, which, again, is really, really strong. I think when you look at the consumer, as you're aware, we've got a balanced demographic where we're going to be 18% to 45%.

Again, with that coffee at 55%, it certainly leans higher income. We have not seen slowing of momentum whatsoever. I think I'd go a step further that Jess and the team have worked real hard to push the Black Rock value proposition. We're trying to drive a higher quality item at a competitive price, and we drive that through an exceptional guest experience. And as you look at the satisfaction that Clay and the team have run, we have never been higher. So that's fantastic. And I think what we believe is that, again, if we deliver on what we're supposed to operationally, we're in a really, really good place.

And the next question comes from the line of John Ivankoe with JPMorgan.

There are comments made on some of the higher volume stores on Phoenix, and I think implicitly just overall being pleased with Portland. So I wanted to get a sense of some of your other markets.

First, I'm going to call them opportunity markets where you're not growing much that have lower average volumes in a Dallas, a Houston and San Antonio. So that's kind of the first bucket I'd like to talk about cohort I'd like to talk about. And then secondly, some higher volume markets like Denver and Austin where you are growing, I wanted to get a sense of how the new unit volumes have been in the Denver and Austin units specifically as I do think they're making up a pretty decent part of the 2026 class.

Thanks for being on, John. So I'll start with Texas. We opened two units in Texas in the first quarter, and we are certainly feeling very, very strong in those. They've come out great. When you look at the densification opportunity, we see that we can progress on that. And I think what you're going to see through regionalized marketing and innovation, that's going to help quite a bit.

With regard to Texas, Austin continues to be the strongest market, and the openings have done really, really well. Pflugerville, which is one of our newest openings, has done just outstanding. And we had a chance to take the leadership team down there and spend time in Austin, and it was really a tremendous experience, team doing really, really well. I think as you think about Texas, the concentric circles and our ability to open stores near the stores we're in has shown to be really positive, and we're continuing to try to be predictable and make sure we're doing this in a cautious way, but it's starting to go really, really well for us.

I think when you speak to Colorado, and we're really proud of Colorado, Colorado at the moment, and I'll give you, and especially with the McDonald's test there, and I know that's come up in the past, we have not felt any impact from the McDonald's test. Energy continues to grow.

McKenzie and the team in Colorado on a two-year basis on their comp of 17.3% or they're averaging 8.7%. So it's an incredibly strong market with strong AUVs. And then just to follow up a little more on that competition, which I know has come up through other earnings calls.

I'll give you three different units. On a mature basis, Castle Rock, which again is in Colorado, is doing $40,000 a week. It is going to be right by a Dutch, right by a Starbucks and right by a McDonald's, and it's up 15% with a 7.4% same-store transaction.

I'll then go to last year's class, Power and Elliott, which is in Arizona, is, again, right by our peer groups. I mentioned the three earlier, and it's doing $35,000 a week and growing. And so we love that not only are we seeing success in mature, but we're seeing it in last year's cohort.

And then, John, here's the one we're most proud of. Jess Williams, who runs the Pacific Northwest, that market is among our highest comp this year, again, with the most competition. And we opened Cedar Hills, which is dead in the middle of Oregon with all that competition around it, and that new store has opened up at $26,000 a week. And so we feel that we've got that winning model with not only the drive-thru, but we've got the great lobbies with the engagement. We've got the online ordering and the third party. And so I feel really, really strong about that. Does that answer your question?

Yes. All that color is helpful, Mark. And I don't expect to talk city to city forever, but I know there's a lot of different kind of micro stories within the business. So thank you for that color.

Let me ask, it's tough to do this on the fly, but I just wanted to make sure that I heard something right, maybe it will benefit some others as well. So there was a comment made, and I think it was 2-year traffic of 7% to 7.5% in the second quarter. Just clarify what that 7% to 7.5% was.

And just maybe simplify the math to me, does that imply that we're running in line with mid-single-digit comps for the year for the second quarter or maybe a little bit below mid-single-digit comps for the second quarter? I just want to make sure that I'm not going to mischaracterize anything. So I just want to give you the opportunity to clarify it for me and perhaps some others.

Thank you, John. So Colorado, on a two-year basis, just the state of Colorado has a comp of 17.3% or they are averaging 8.7.

That was in reference to a previous question, not just what you said in Colorado. I didn't mean to interrupt you. So I just, maybe I misheard the number on 7% to 7.5% in a previous question, but we can follow up on that if I'm taking a number out of context.

Yes. I think, John, what we said is we were up against 9.2% in the first quarter of last year. We ran 5.2% in the first quarter of this year. And I think what we said was that there was 1.5% of sales transfer and there was 0.6% of negative sales transactions from some of the lap of the loyalty program, et cetera. And so what we have said regarding the second quarter is that we feel very good about our guidance, and we are reaffirming that we will be mid-single digit.

And the next question comes from the line of Chris O'Cull with Stifel.

Not to beat a dead horse here, but can you just clarify whether you expect transactions to be positive in the second quarter?

Yes. Thanks for the question, Chris. Like I mentioned previously, about 130 basis points of transaction decline from the sales transfer primarily in Phoenix. I think that was something that we didn't originally anticipate. But I think really to Andy's point, that was what kept us from the upside of the mid-single digits on comp. I think as we continue to move forward, we're going to continue to monitor it and we'll report out. I think at the moment, mid-single digits for the year kind of as we've guided, we feel really good about. And I think as those newer stores transfer from the old stores continue to build back and grow, we still see great opportunity with all that and returns are incredibly strong because they're coming from our highest performing market.

Okay. My other question, Mark, was just regarding the investments in the segmented loyalty offers. I'm just curious what gives you confidence that you're driving incrementality with those offers versus just pulling forward demand, let's say, over a year?

Yes. I think when we look at our loyalty, Chris, what we're seeing is that, obviously, that 66% of our transactions has again grown, and we're very, very proud of that. I think when you're looking at, and what I had said is we've seen on the initial test doubled in engagement. We've seen nearly double the spend, which was surprising to us, but great. And then we've seen about 3x the incremental visits.

Again, these are in initial tests, we did this in Colorado and Phoenix, and we feel good about it. But I think, Chris, what I'd like to make sure is that Jess and the team have more time to make sure that, that trend continues. I think as far as the math goes, we, each and every time we have an investment, and part of this is being small and nimble. We are very, very clear on what is the return on investment and are we seeing incrementality. And so we have seen that initially, and we expect that to continue.

And the next question comes from the line of Brian Vaccaro with Raymond James.

Just following up on the segmented offers. You talked about testing those in certain markets here in the first quarter. Is there any way to frame sort of the pace of the rollout the rest of the year, kind of high level of percentage of units that could benefit maybe in the next couple of months and how that benefit could build through the year, how that coverage could kind of build?

Brian, thank you for being on. I think when you look at the segmented offers, we originally tested them in Phoenix. I think, one, back to David Tarantino's question, around the fact that we had some sales transfer. We wanted to see if we could push people in, and we've been able to do that. So, we like that very much. We again tried it in Colorado. Colorado, I want to say two years ago was right around five stores, and we are now sitting at 12, and we've got a lot of openings coming second part of this year.

So once again, we were able to look at that and go, "Hey, we're going to use this and see if we can push more frequency, " et cetera, in, and that's worked out really, really well. I think as you look at the remainder of the year, Brian, we are trying to pace this in a way where we can be predictable and consistent. One of the things that we have found and when you look at some of the double spend, triple incremental visits, doubled engagement, it's really important to us that everybody gets that great experience.

So, we're trying to make sure that while driving people in that there's a great, consistent operational experience. I brought up earlier, we've never had a better mystery shop. And again, Clay Geyer, who you've met and the operators have done just fantastic for us. And so, what I believe is you will see more of that as we move forward. Again, Mr. Ivankoe, you'll smile when you hear this, we are spending more marketing dollars. And so, Brian, when you think about that, all of that should push to better sales, better AUV. And again, with the great profitability that we leverage, we should be in a great spot.

All right. That's helpful. And if I could just squeeze one in on the COGS line. Obviously, another solid quarter of leverage, the ratio in the low 27s. Could you just walk us through sort of your commodity inflation outlook and coffee costs specifically and just where you see that ratio? Did I hear correctly in this 27%, maybe low 27s then going forward through the year. But if you could just walk through some of the finer points there, Rodd, that would be helpful.

Yes. No problem. Thanks, Brian. I think we've shared in the past, when you look at our actual cost of coffee, it's just under 3% of our sales. It's about 10.5% of our COGS mix. When we look ahead, I mentioned this last quarter, we see some opportunity, commodity costs coming down, there will be some benefit. But at 3%, less than 3% of our sales, you'll see maybe 30 to 50 basis points of opportunity. I think when you look at the rest of our COGS mix and any commodity pressure, I think our team has done a really good job, like I mentioned, working with our partners.

When you look at dairy, when you look at the sugars, we feel really good about where they're at today. And we don't have any immediate indications that any of that is going to change meaningfully. I think our team has done a tremendous job with costs essentially staying very stable for us, them going out, really leveraging the tools, the inventory management, things we're giving them to drive the expansion, which has helped in a big, big way.

Our final question comes from the line of Matt Curtis with D.A. Davidson.

I just have a question on development. I think you mentioned potential new market entries in 2027. I was just wondering what new markets you're looking at? And I guess, equally important, why move up the time line? Because I believe you previously planned no new markets before 2028, if I'm not mistaken.

Yes. And Matt, first off, I believe you're new to follow. So I wanted to say thank you for that. Secondarily, when you look at the openings from this first quarter, we opened two in Arizona, two in Texas. We had four in Colorado and then one in Oregon, which did really, really well. As we've committed to, we will, at a 20% growth rate, eclipse 1,000 units by 2035. And so when you think about that, we're in seven states. And within those seven states, we have been able to show that we can grow and not need to add a state.

Now I would say to you that we want to be, and Mr. Tarantino asked this question earlier, but we want to be careful that we're not opening a bunch of stores that cannibalize other stores. And so we're trying to be incredibly, I guess, the term would be predictable in the way that we do that. When we look at other new states, we're looking at states where, obviously, there's a coffee culture. I think when you look at the new states, you're looking at similar analogs around the customer base and things like that. And then obviously, competition, income levels, education, all of the above.

So, I think more than anything, we're just trying to make sure that we stay ahead of our commitments. Matt, you being new to us, we had been taught early and often you better do what you say you're going to do. So, it's real important to us that we hit that system-wide sales of 20%, we want to make sure we hit the profitability, but we also want to make sure that we grow in a way that's purposeful and predictable. And especially with people being such a big part of our culture, it's better to have that spread out.

I'll go quickly to California. One of the things that didn't come up today, we have an incredibly strong pipeline that Will MacIntosh has done a great job helping us with. I'll go a step further that we have Evy, we have Lauren and we have Grayson who are going to be leaving existing markets. They are among the very best that we have, and they're going to go out to California to help us grow that. You'll see substantial growth here over the next, call it, 3 to 4 quarters. And we're really proud of the fact that we have that pipeline, but we're really fortunate to have Evy, Lauren and Grayson help us out in that way.

Okay. Understood. I guess I was thinking more in the context of ongoing AUV improvement as you continue to close the gap versus your peers. So I was wondering on AUVs, which have continued to grow, obviously. I mean, which levers, whether it be loyalty segmentation, food marketing are expected to contribute the most to the improvement going forward if you think about the AUV trajectory over, say, the next two years?

Well, and again, Matt, you've being new to us, I would tell you where we have awareness, I'll use Phoenix we do incredibly well on AUV, and we have AUVs that rival anybody in the peer group and are better, right? We do incredibly well. So I think I would say awareness out of the gate. I think when you look at Colorado and if we can get you into one of these markets, you'll see where we have done the concentric circles.

So again, I'll use Castle Rock, the Tech Center, Highlands Ranch, Littleton, they're all reasonably close together. And these stores do incredibly well on awareness. And what you get from that is going to work, going to school, going to the high school football game, going out to dinner, you pass Black Rock along the way. And I think that's been really, really strong for Colorado.

When you look at the marketing specific offerings, that segmentation has certainly helped, and it drives great frequency and transaction. And I think the other part of it is it really helps with the value proposition that, as you're aware, high-frequency business being coffee, when you can reward people for coming in, it's exceptional. And so to your point, I think awareness and building awareness through the programmatic marketing is fantastic. I think segmentation on loyalty is important. And then the best thing is we've got these great baristas that drive fantastic experience, and that truly is the best marketing we can have. And just quickly, as I realize we're coming to the end here, I want to reiterate, and I have said this to Matt as we closed out, we have been taught even before we went public that it's really important to hit your commitments.

And again, when you look at the 20-20-20, grow your system-wide sales at 20%, your profit at 20% and your unit growth, we have done that all three quarters. And what is typically from a seasonality, our toughest quarter, the first quarter, we are at sales growth of 24%, we're at EBITDA growth at 24% and units at 23%.

Again, Bobby Kaufmann initially set it up, and Jon Vingo will continue to drive it. But that unit growth, the store weeks, the revenue, all of that will continue to be great. And if we get that with Clay Geyer's guidance on the operations and that great store level margin, we leverage in a big way. And so I want to say thank you to the teams for another great quarter. I think it makes it much easier to have these calls when they perform the way they do. And then I want to thank everybody for being on the call. I know there's a lot of preparation that goes into this, and we're super grateful. I hope everybody has a great night.

Thank you, sir. Ladies and gentlemen, thank you for your participation. That does conclude today's teleconference. Please disconnect your lines, and have a wonderful day.

Good afternoon, everyone, and thanks for joining us for Black Rock 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, 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 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 Rodd, who will provide an update on our fourth quarter financials, followed by our outlook for 2026 and key metrics.

2025 was a 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 2 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, Black Rock 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 2-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 3 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 2-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 Black Rock 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 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 Breve, 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 Breve. We 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 Black Rock 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 Black Rock, 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 road map 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 Black Rock who are well equipped to support our store opening plan.

To complement the success of our career road map program, in the fourth quarter, we launched our new high-potential talent development program in partnership with the Bold Font team, prepping our most advanced team members for senior leadership. In conjunction with our career road map, 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 Black Rock. We're committed to teaching, coaching and growing our people at every step, so they know Black Rock is a place to build a career, not just a job. These programs meaningfully contribute to our success and have resulted in a stronger Black Rock, 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-thru with a lobby in Southern California in the third quarter, our second opening in quarter 4 was another exciting addition in this high-performing market. More broadly, our 2025 new unit cohort continues to perform ahead of plan, exceeding sales forecast, 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 time lines 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 4 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 refined 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 Rodd, I want to thank the Black Rock 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 Black Rock 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 Bryan Pereboom, who have retired from their Board roles effective February 25, 2026, to focus on family and pursue other interests. We're grateful for their contributions to Black Rock over the years and wish them the very best in this next chapter.

With that, I'll turn the call over to Rodd 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 counting. 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 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. Preopening 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 margin improved year-over-year as a result of great execution from our retail teams in addition to closely manage 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 31, 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 costs remained stable despite a volatile environment, a testament to our disciplined project management and vendor relationships. And as Mark mentioned, we have made additional investments in our pipeline to support our growth targets and build on the momentum from 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 to date 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 million to $257 million, same-store sales growth in the mid-single digits and consolidated adjusted EBITDA in the range of $33.5 million to $34.5 million and capital expenditures in the range of $40 million to $41 million, including anticipated tenant improvement allowances or $58 million to $61 million, excluding anticipated tenant improvement allowances of $18 million 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 in 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.

[Operator Instructions] Our first question is from John Ivankoe with JPMorgan.

The question is on new unit development. I want to go a couple of places with this. First, an increase in CapEx from $35 million approximately to $40 million to $41 million in '26. Does that partially include maybe more units than we were previously expecting in '27? At least the number that I have in the model is 43 units in '27. And I wonder if there's kind of a change to that number that we can begin to talk about in '26.

And secondly, if I may, as you're entering new markets and also as competition is entering your markets, are you seeing a change in the competitive intensity for your employees, which sounds like it's not, but comment on your employees, customers and also site availability as capital in this industry is clearly chasing some of the high returns that you and some others are getting.

Thanks for the question, John. I think I'll take the first one, the first part, and Mark can take the second. To your point about CapEx, you're spot on it. And Mark mentioned it, as did I. I think what we learned in the third quarter and in the fourth quarter was just really giving ourselves a little bit more in terms of investment in the pipeline and more opportunity. And so when you think about those targets for 2026, probably about 25% of that CapEx is actually going to be committed to the 2027 pipeline. Obviously, we've got the 2026 class of stores and then the ongoing maintenance CapEx.

But yes, to your point, a significant portion of that is going to be for the 2027 class. And then you had asked another question, what was that?

Okay. So is 43 still the right number for '27? Or might there be an upward bias to that relative to the previous expectations?

No. We're still committed to the modeling at the moment. Again, as we've continued to build out not only the '26, but the '27 class, we're getting way out in front of that. And so again, when we look at some of these stores where they have a longer build time, when you think about some of these reverse build-to-suits where there's about a 9- to 12-month build time for us, you'll see some of that CapEx in '26 for stores that open in '27, but no change to the total units.

And then, John, you asked about the competitors and markets. And I think as Rodd pointed out, when you look at our third quarter with the store weeks, we have adjusted the pipeline to make sure that not only are we going to be great on store weeks, but we're going to be great on the units. When you look at the availability, we have seen no pressure. And if anything, we've seen significant opportunity of volume. The quality of sites has improved and nothing has suggested that the market dynamics are changing. Us being a growing brand, again, has made us a really attractive tenant.

You also asked about the people pipeline. Again, 98% of our team members above the barista are promoted within. And again, as you think about the acumen, the career road map, the leadership pathway, the high potential talent development, profit sharing and then the scorecard, all of that has produced very strong store leads, multi-store leads and AMs in every state that we're in. We've got an incredibly deep bench. And when you think about the career development, both professional and personally, it's really helped. And that ownership from the team from the ground floor has really made us a great growing company.

And so I think ultimately, the answer to your question is we're going to make sure we hit the store weeks. We're going to make sure that we hit the development pipeline that we've committed to. And then on the people side, we've really doubled down to make sure that we've got the right teams to open each of those stores up in a quality way.

Our next question is from Andy Barish with Jefferies.

A few things I just wanted to touch on. The first being kind of increased paid media and still, I know, in the testing mode. But I'm assuming that's in your newer markets. Would you care to kind of comment on how many of those newer markets you're seeing or testing paid media to drive brand awareness?

So Andy, thanks for being on. I think, one, paid media doesn't drive loyalty. It obviously drives awareness. When you look at our loyalty at 18 months, we've got about 2 million members, and that participation rate is growing month after month.

Regarding the paid media, we're using it to support all of the new store openings and the new member acquisition. And again, while it's still very early, what we've seen is an increased personalization and scale, and that's driving higher traffic check and overall sales. And so as you know, Jessica, our CMO, she's done great things with it. We not only feel good about how the paid media has gone, but we're going to continue to do more of it. And as you pointed out, we're going to do it in all the new markets.

Got you. And then just circling back on the OLIPOP dirty soda LTO. Is there -- was there an implication there that if it really well in terms of customer demand that, that could wind up being a permanent addition to the menu in terms of dirty sodas?

Yes. So when you look at OLIPOP, you're aware we're only a couple of days in, but the partnership was intentional, and it's driven by guest demand for functional cleaner label beverage. I think it allows us to enter the dirty soda space in a differentiated elevated way. And to your point, the way that we roll out from an expansion system-wide, it's an LTO today. And the hope is that we gain some insights that guide us to the next steps. We certainly see it as an avenue where we can grow the business. And at the moment, we feel really strongly about it.

Our next question is from David Tarantino with Baird.

Mark, I just want to come back to the timing of your openings. And I guess, the second quarter in a row here, we've seen the openings kind of very back weighted in the quarter and causing you not to capture all the revenue that you might have hoped for. And I guess the explanation for that is kind of landlord delays. And I'm just wondering how you resolve that issue. I know you sound pretty confident that you can get that done, but it sounds like the explanation is a bit out of your control. So I guess what are you going to do exactly to sort of get a more even weighted set of openings across the quarter?

David, thank you for being on, and I appreciate the opportunity to talk about it. I think when we went public, we had a pipeline where we felt we had enough buffer. And what we found is the way to be better at that is to not only have more stores in the pipeline, but also going through the database approach and pushing on that. And so when you look at store weeks, I would say generally that what was once our opportunity is now one of our strengths. I think when you look at the third quarter, when we had the landlord issues, we pulled stores forward from the fourth quarter, which obviously took some of the stores out of the fourth quarter. We did that again to make sure that we were ahead. And what we did, and I'm really proud of, the team was able to hit the units and again, I think for the future, where we've added into the pipeline, we are far better set up for success.

I'd say that we have better systems. We've got cross-functional support that works. When you look at the 2026 pipeline, David, we have a larger pipeline and we have more buffer. And again, based on that, what you're going to see is better performance on store weeks. We'll be ahead of it. And what will end up happening is we're going to have this strong pipeline, quality stores. And a goal -- again, the goal is to eclipse that commitment on store weeks. Really, if I could go back in time, we would have had more buffer as we went public. And I think what we've done now is made sure moving forward that we're in a better place. And so you won't see that in the 2026 year.

Got it. And then if I can tack one more on development. You mentioned this modular prototype that you opened in the quarter. Can you elaborate on what the benefits of that prototype are and maybe specifically address whether it's lower cost to build or the same cost? I guess, kind of what are the total benefits of that prototype?

Of course. And so when you look at the modular, we originally had drive-thru only, and we now have a modular that is also with the lobby. Again, because we build end caps reverse build-to-suits, build-to-suits and ground leases, it's very site specific. And as you think about it, it varies quarter-to-quarter dependent upon the site. It does, in fact, reduce the capital expenditures. And I think the greatest thing back to your first question is it speeds up store openings and it gets us more store weeks. And so with those 2 formats, we'll continue to do the drive-thru only and the drive-thru with the lobby, and that will help us leverage.

I think when you're looking at the units, we obviously -- we opened 6 in Arizona, 1 in Texas, 4 in Colorado and 1 in California in the fourth quarter. And what we're seeing again is that we're going into those high-performing markets, and we're seeing really strong success with the current cohort and the prior cohort, and that's been really good for us. And so back to your original question, by having more quality sites in the pipeline and again, pushing them earlier into the quarter, you'll see that in the quarters ahead. We will have that strong same-store sales with the addition of the store weeks, and it sets us up to leverage and hit the guidance that Rodd provided.

Our next question is from Sharon Zackfia with William Blair.

I think in the adjusted EBITDA guidance, it's for a slight decline in margin year-over-year, I think, 30 to 60 bps. Can you talk about what the embedded outlook is for unit level margins within that? And is there enough opportunity with the inventory management system to kind of keep that margin stable even with higher coffee costs in the first half?

Yes. Thanks for the question, Sharon. I think to start, what I would say is when you look at our overall company adjusted EBITDA margin, we're keeping it pretty consistent with our modeling. And what you have is all of these new stores that are coming online, and we've modeled them, you've seen it where they're coming online and they're comping just below the base and then they ramp up to the base between, call it, that 18, 24, 36-month range. And so really consistent with how we've been thinking about it.

I think the opportunity in terms of the margin, you're essentially asking can it be better? I think we saw costs elevated with beans throughout 2025, as I mentioned, end of 2025 and into 2026. But we have seen some relief coming. And I think one of the things we take a lot of pride in our team does a really, really good job and is really executing on our internal strategic initiatives. Mark mentioned the inventory management. We talked about it last time. But that was a big one to help out in terms of margin. We still think we have opportunity there. And so even if in the first half of the year, the coffee costs remain high, they're not going to be much higher than they were in the fourth quarter and really the opportunity in the second half. But we're also trying to be cautious with that because last year was a pretty tough year to predict it that way.

And so I think we feel really good about the guidance, really -- feel really good about our model. And then it's our opportunity and our team's opportunity to continue to go out and execute and continue performing at a high level.

And then, Mark, you talked about the segmented targeted offers that you did in test and you kind of teased with some positive results you saw there. Can you put some more maybe meat on the bone of what you saw and how quickly you're going to roll that out more broadly in '26?

You bet. And so Sharon, when you're looking at the marketing spend, we had tested segmented targeted marketing to deliver more customized offers. That's the first time we had done that. And what we found is that the broad scalable approach, one being data-driven has worked really well for us. Jess has done a great job of pushing that multichannel strategy. And so you're seeing it across loyalty. We've obviously got paid media innovation and the new store openings. And Rodd spoke to this when he talked about the sales and the traffic. But what you're seeing is it's been effective in driving traffic and spend. So obviously helped with awareness.

And I think for everybody on the call, what we've tried to do, and Jess has pushed real hard on this is be responsible in our spend. We're increasing year-over-year. And really what we want from that is to support the unit growth, the brand awareness, and we want to make sure it's targeted. And so we'll have more results as we come into the first quarter. And then I think what you'll see is we'll continue to do that through the year. It's obviously helped us with the sales and the transactions, and we see it as something we're going to push in the future.

Our next question is from Brian Harbour with Morgan Stanley.

Since we're almost through it, I guess, would you care to say anything about the first quarter? Do you think -- would you sort of endorse current consensus estimates? Or is the growth rate kind of consistent with your full year guidance, for example?

Of course. Brian, thank you for being on. So when you look at the first quarter, we feel really, really good about it. The quarter is trending strong, and it allowed us to provide that guidance. We're excited about the momentum. With that momentum, we had about 200 basis points of weather in January that was in Texas. But again, based upon what we're seeing, we still felt good to increase our initial guidance. And so I would say, generally speaking, the first quarter is off to a great start, and we feel good about it.

Okay. Sounds good. What -- how are you thinking about new store productivity? Is this -- this year, it seems like you have an expectation that it will be higher than the prior year. Is that driven by sort of the markets you're entering? Or maybe comment specifically on that piece.

I'll take that one, Brian. I think from in terms of store productivity, we're essentially modeling our stores to produce similar margins as they did in 2025. I think our opportunity is always to, as Mark mentioned earlier, to go after the sales, to leverage those sales into better margin and then also just continue to focus on those newer cohorts and the way those stores ramp to profitability. And so I think we feel really good from a modeling standpoint and our opportunity is just for the team to continue to go out and execute and our new stores continue to get better.

Our next question is from Chris O'Cull with Stifel.

This is Patrick on for Chris. Mark, given the momentum in the business, I know at one point, you were holding back on discounted loyalty offers within the loyalty program. And I was wondering if that was still the case here as you think about going into 2026. And as you think about the slate of LTOs that you have coming in 2026, given you had a lot of effectiveness in '25, what gives you confidence you can continue to drive some of that strong engagement you've seen from the innovation standpoint this year?

Yes. And Patrick, it's great to hear from you. I think when you look at our marketing, we had always planned on doing segmented offers and driving more of the loyalty. I think one of the things that we're very proud of, and Rodd spoke to this, but when you look at our 2-year comp, it's going to be right around 18.8, 9.4 on average. And so one of the things that Jessica again, has pushed on is the ability to go out and test these different offers and try them and all of the above there.

We obviously are looking at collaborations. I spoke to it on the call, but we had a very strong second collaboration around the LTO. You think about the OLIPOP we're doing that's coming on. And all of these things, I think, are incremental. I'll go back to Egg Bites for a moment. Egg Bites has been really, really strong for us as well. And what we've seen there is while coffee and beverage are our primary focus, what we've seen is that the LTOs, the segmented loyalty and then obviously, the food platform has provided opportunities for us to grow our business and grow our AUV, which we're really proud of.

You look at that AUV, and we said this in the script as well, but we came in right at $1.3 million. And again, when you look at that same-store sales and how it's growing, I think what we see is we're going to be able to continue to grow the business and leverage and all of the platforms I spoke to earlier help with that.

Great. That's helpful. And then, Rodd, I know you touched on the fact that EBITDA is growing at a slightly slower rate than revenue this year, and that's largely due to coffee costs. But is there anything else in the sort of the waterfall of the P&L down to EBITDA that we should keep in mind that's kind of helping to drive that dynamic outside of elevated coffee costs this year?

No. I think, again, when you -- I think we even touched on this last call, but when you think about coffee, it really represents just under 3% of our net sales. And so certainly, if it were to stay elevated, it could impact the business. But like I said, we're buying coffee 4 to 6 months out. And I think if anything, we expect that to continue to come down, which would help.

I think in terms of store productivity, we talked about that one. And then as a company, we're just continuing to manage our G&A and the growth of that G&A, especially as a new public company closely. Mark mentioned it, but we'll continue to invest in marketing, try new things. We'll continue to invest in the team to really support our growth. But we're really happy with our modeling of how we think about sales, how we think about profitability from the stores and then the overall company profitability.

Our next question is from Jared Klein with Raymond James.

Hi, this is Jared on for Brian. Just 2 quick ones. Sorry if I missed this, but could you share the level of commodity inflation and pricing that is embedded within the guidance? And then just more of a high-level one on the customer base. Are there any changes you may be seeing in order patterns or maybe daypart trends that are worth noting?

Sure. Jared, thanks for the question. What was the first part of the question? Sorry, it cut out for me.

Yes. Could you share the level of commodity inflation and pricing that is embedded within the guidance?

Yes. So from a pricing standpoint, we've continued to approach price essentially with the goal of being neutral with inflation. I think we saw in 2025 that was harder to do. We've continued to do that in 2026, although I don't think you'll see us take as much price just considering we've got healthy margins. We're really happy with our margins and our real opportunity is to go after more sales and leverage they provide.

And so from a modeling standpoint, we are expecting the same level of store level productivity and really the balance between price and inflation overall is something we're continuing to manage and monitor. But again, we feel pretty good about it, knowing we've got some opportunity for it to come down with coffee. And then our other cost, primary inputs when you think about dairies, the sugars and the things like that, they've been very stable for us.

And then, Jared, the second part of your question, and I'll talk a little bit about the positioning. Our demographic is roughly 18 to 45. And what that does is it allows us to have a little bit of diversity in the mix. We are coffee first. And again, our coffee mix is going to be about 55%. Our energy has grown to about 24%. And again, you had asked about dayparts and different mediums. The digital mix is going to be right around 51.5%, 52% on coffee, and it's going to be around 27% on energy. And with the Egg Bites and everything else, our food has grown to about 12%.

All of this, what it does for us, especially with that broad demographic, we lean heavy on coffee and coffee is obviously resilient, which is great for us. We focus on that strong customer experience. And when you think about the strategy, when you're pushing on quality beverage and you've got that great experience, it attracts new guests and increased transaction frequency, which is great. And so I think overall, when you look across the company, while the volume is growing, our mix has stayed fairly consistent. And I think that gives us great confidence in our brand growth even despite the macroeconomic pressures that some of our peer group is feeling.

Thank you. There are no further questions at this time. I would like to hand the floor back over to Mark Davis for any closing comments.

Thank you. I appreciate it very much. I want to thank everyone for what was an outstanding fourth quarter and a 2025 year. I'm also excited for the guidance we provided for '26 and our ability to continue to advance our company for our customers, our teams and our shareholders.

I wanted to reiterate because I think we had a really strong quarter and a really strong year that in the fourth quarter, revenue growth was 25.3%. And again, the same-store sales over the 2 years was 18.8% averaging 9.4%. The store level profit in the fourth quarter was up 35.8% over the prior year.

Going to 2025, the revenue growth was 24.5%, and it was driven by same-store sales of 10.1%. Again, the EBITDA for the year was 36.2% better. We opened 32 stores against the target of 30, which is growth of 21.4%. And back to David's question, we have continued to learn and get better on the store weeks, which you'll see as we move forward. Better based upon the performance in '25, Rodd came out and helped guide to $255 million to $257 million of total revenue. And again, we guided to 33.5% to 34.5% of consolidated adjusted EBITDA, which is all ahead of our long-term algorithm. Most importantly, we continue to double down on our world-class teams. We run exceptional team member turnover, and our baristas continue to be the point of difference with the experience they provide.

Our culture and our exceptional retention continues to drive what we believe is a very sustainable team member model that continues to help us exceed expectations. And I just want to say that I'm beyond grateful for our teams and everyone that continues to believe in what Black Rock can be.

I appreciate your time today.

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

Hi, everyone. I'm Brian Harbour. I cover restaurants and food distributors here at Morgan Stanley. Real quickly, for important disclosures, please see morganstanley.com/researchdisclosures. If you have any questions, please reach out to your Morgan Stanley sales representative. Now we're going to talk Black Rock Coffee. Mark Davis, the CEO; Rodd Booth, CFO. Guys, thank you for coming. Welcome.

Thanks for having us.

Well, Mark, you actually were here last year, but I was going to say, obviously, you're new to the public markets this year, so a little bit different scene here. Maybe just could you quickly intro yourselves and kind of your backgrounds, what brought you to Black Rock.

Sure. First, thanks for having us. My name is Mark Davis. I have been the CEO of Black Rock for coming up on 3 years. And background, I started with Panera when there were about 200 stores and left when there were about 2,000. And I worked within the development, the franchise and the operations and learned a lot of the process, some incredibly good people back then that worked for Panera and learned a lot from them. And so that's going to be a lot of my background.

And then Rodd Booth, I've been with Black Rock for coming up on 5 years now. Black Rock was actually a client of mine before I joined. I was helping Jeff and Dan and the founders on the consulting side as they were looking at growing the business. I spent my entire career in financial services, so large national and West Coast CPA consulting advisory firms. And I like to think I did a good enough job where they couldn't do it without me, and here I am.

Cool. And where -- many people here will know this, but where does Black Rock sort of fit into the beverage ecosystem? What makes people want to come to Black Rock as customers?

So BlackRock, when you look at the concept, we are going to have lobbies in about 75% of our locations. We are going to be -- every location has a drive-through. We recently added the app and online ordering. And then our big point of difference is going to be around the barista and the experience. We're fortunate enough that we run right around 93% to 95% on guest satisfaction. I've never seen anything like it. And that's predicated around these great baristas. Baristas, when you look at our turnover, we run about 74%. Industry runs about 150 to 160. And on a tenure, industry is about 6 months, we're about 3 years. And so when you think about that, these great baristas given the great experience based upon their tenure, you then turn around and you have this great guest satisfaction drives this unbelievably good sales and sales growth, and then we're able to leverage that.

And so I would say that lobby is a big point of difference. It's a great place to connect, but the baristas are certainly our big significant point of difference.

Okay. Maybe let's talk about demand and the sales side a bit. Just bigger picture, how do you see demand today into next year? There's been a lot of discussion kind of by customer cohort, if you want to distinguish between some of those. But how are you feeling about the demand side?

So I think first off, we're very fortunate to be in the beverage side of the category. Beverage, as you look at Christine from Dutch, you look at 7 Brew, you look at Starbucks, they all do very, very well. As you think about demand and you look at our third quarter, again, we had significant same-store sales. We were up over 10%. Our 2-year number is really, really strong at almost 10% a year. And as you look at the way our dayparts are growing, our belief would be that the traditional breakfast, lunch and dinner are moving into beverage. And so what you're seeing is growth in the beverage category.

We're also going to have a demographic that's 18 to 45. And as you think about that demo, we're going to be about 55% to 60% coffee, more disposable income. And as such, you see that, that's been really strong for us. And so based on all of that, great same-store sales. By the way, that same-store sales is coming from transaction growth. And we think overall, we're in a really great place and really strong for us.

And what's your kind of longer-term same-store sales target? And talk about the different layers that drive that?

Yes. So as Mark mentioned, we've had a lot of great success this last year, 2 years from a same-store sales comp standpoint. I think long term, we're really looking at that mid-single digits from a same-store sales standpoint. It's a pretty good place to be for us. I think when you think about the brand, the growth, the awareness, Mark mentioned, and we've talked a lot about with many of you in this room, the loyalty program and how that's really engaging to our guests. It's really the first time we had a chance to engage with our guests digitally in that way. And that will help, Brian, to your question on what are the layers to that specifically. I mean we've launched the program, it was nothing more than making it available to the guests providing very generic offers. But over time, what you'll see, and we'll probably see some of this next year, we'll layer in segmentation, we'll increase the frequency and really leverage the program to drive the sales as opposed to right now. It's gone really well, but it's really just been making it available.

We're finding that our guests want to be a part of a program. They want to earn points, redeem those points, get the free drinks. And then again, even everything we're doing around innovation, be it the fuel category, the food, which helps with the check, all those types of things, we've got a lot of runway, and they're still really early from an adoption standpoint. And I think that will help support same-store sales growth for us for quite a while.

Can you explain sort of the dynamic in 3Q where you did have very strong same-store sales. Some of the non-comp contribution was less. You had some delays in store openings. What -- how do you avoid that issue going forward. Could you just dig into that a bit?

Sure. I think when you look at our system-wide sales, and I'd say to everybody in the room, we're going to grow our sales by 20% a year. We're going to grow our EBITDA by 20% a year and our stores by 20% a year. We had 10 openings that we had guided that we were going to open in the third quarter. Of those 10, we had 4 landlords who came back and said, "Hey, based upon costs, we don't want to build it. We don't want to develop it in this quarter, and we're either not going to do it or we're going to push it out."

We have built a very, very strong pipeline for 2026, and we essentially moved 4 from '26 into the fourth quarter. We moved 4 from the fourth quarter into the third quarter, and we were able to actually beat and raise. We opened 11 versus the 10, opportunity being that we lost store weeks based upon the 4 that disappeared. You'll see a little bit of that in the fourth quarter because, again, it just bleeds from the third quarter into the fourth quarter. But generally speaking, what we have done to circumvent that, when you look at the 2026 pipeline, we will guide to 20% growth. That will be 36 units. We have an abundance plus on that 36 to make sure that, that doesn't happen again. And as such, we're protecting on that store weeks moving forward.

Okay. Got it. Makes sense. When we think about next year and sort of sales drivers, I mean, you mentioned loyalty. But what are some of the other things we should think about, whether it's product innovation, there's probably more you can do with marketing. Anything with food, you have food, of course, but new food items. Like what else should we be thinking about into next year?

So when you look at our levers currently, and Rodd spoke to this on the earnings call, we're right about 1.25 pushing 1.3 in AUV. So we've grown substantially here in the last couple of years. When you think about that, Rodd brought up earlier that loyalty is right now not segmented. And so -- and we're doing roughly 1 to 2 offers a month. And so when you think about that, as we accelerate the offers and we segment, you'll see loyalty jump. Food, we recently rolled out -- soft rolled out egg bites. So we did that in July. And we switched back past October, our menu from, call it, donuts, muffins, et cetera, to more savory items.

And what we've seen now is that our food mix has gone from 9% 2 years ago to 13%, and our mix is 70% savory. And so what you're seeing is food is jumping in a considerable way, and it will continue. You go a step further, about a year ago, we rolled out frozen fuel. Our fuel mix was about 17% to 18%. It's now pushing 24%. And so energy continues to grow. And then last, we're going to start programmatic marketing, and we're going to start pushing more on the awareness. And so when you see that, even with the IPO, we've seen a halo that's really helped. But we'll continue to see it. So it's loyalty, it's food, it's energy, and it's marketing.

What else is needed to close that AUV -- maybe just compare it to Starbucks, for example, right? Your price point isn't that different. But what else is it that you think gets you closer to something like a $2 million AUV.

I would say time. I mean, when you think about the concept today, 149 stores as we started the year, we're still building the brand. We're still building the awareness. Brian, I know we've talked about it, but -- and as we've talked about it with some of you in the room, as we think about the great same-store sales and the comp that we've had this year, we're not just getting that from the new stores that are coming online and really driving it, but we're getting it from our mature stores. And as we've advanced things like food, as we've advanced things like the frozen fuel and provided the loyalty as a way again to connect with the guests, we're seeing the entire system lift. And I think that's exactly what we want to see and what we want to continue to push into the future.

I think 1.2 -- almost 1.3 in AUV, certainly lower than our peers by a considerable amount, for us, particularly at the margins we're at today is really a big opportunity for us as we continue to grow.

And how do you think about the competition here right now, right? I mean this is still probably one of the fastest-growing categories, which I think is good because it sort of helps everyone succeed right now. But how does it sort of play out if somebody -- for example, Starbucks is resurgent, how do you sort of think about the competitive backdrop here over a multiyear time horizon?

Sure. So when you look at beverage, and we spoke to this earlier, I think our point of difference around the lobby is important. When you look at Dutch Bros as an example, Dutch Bros is going to be drive-through only, and they are predominantly energy. That's what they sell. It's going to be a different demographic. I would use the -- for any of you that have been in Denver, we just -- we took over a conversion of a [ needeters ] that sits literally 50 yards away from a Dutch, sits right next to it. And what you can see is a different customer. We, again, being more coffee, demo being 18 to 45, I think it really serves us.

When you compare us to, say, a 7 Brews, 7 Brews is going to have a similar mix, but it's going to be drive-through only. And again, because it's franchise, we believe we're more predictable, more consistent, better experience and all those things really, really help. And so to your point, Brian, while I believe that the beverage category is jumping in a significant way and will continue to, we've competed with Dutch and Starbucks and the rest for a long, long time and continue to grow our AUV and our same-store sales and our transactions.

Okay. Maybe I'll shift to the development side a bit. So you talked about 1,000 units over 10 years, 20% plus annual unit growth. Why was that the right number? What markets will drive that 1,000 store target 10 years out?

So we're currently in 7 states, nothing west of Texas at the moment. Texas up to Idaho, Idaho over to Washington, Oregon, California, Colorado and Arizona. If you think about people being our most precious resource, we don't want to grow more than 20% because we want to make sure we have the right people running the right stores and provide the right experience. As you think about that growth and how we're moving through the states, we are putting 70% of our new openings in our high-performing markets. And what that does is allows us to have a cohort that has the right cost, has the right cash on cash, call it, at maturity north of 40%, but it also has the right experience, which we like very much.

And when you think about our newer markets, we're able to sprinkle them in and give them time to develop that awareness to grow, and it works out really, really well. What we have committed to and spoken to when we have had our calls is that we will add a state within the next 18 months. And then you'll see states come about every 2 years thereafter and make sure that we keep up with the growth, and we can do it while taking care of our people.

Okay. What define the best markets, those ones that are standouts, what defines that? And I guess as part of that, sort of talk about Texas and your lessons learned from entering there?

Sure. So I think when you look at every market we are in, I would say this, one, last year, every DMA was up in same-store sales and transactions. Same thing this year. So we're very strong across every market that we're in. I think when you talk specifically to locations, when we were originally Jeff and Dan founders, I think as founders, when you think about how they think about the business differently, they want to go in and find the cheapest real estate they can get and make the most money so that they can go and build the next one.

As we become public, you and I have talked about this, the desire to have higher AUVs and everything that way, we've implemented a development committee where we literally have the development team, the operations team, Rodd and I sign off on every site, and it's run through calibrate. Rodd spoke to earlier, and it's compared on analogs. But this year's cohort has been stronger than any other cohort we've had. So that's exciting.

And then the last thing on Texas, when you think about it, Jeff and Dan initially would pick cheapest real estate. And what you would find is the first 4 stores we opened in Dallas were 150 miles apart. We now do concentric circles where when you drive and you go to work, when you take the kids to school, when you turn around and go out to dinner or go to the high school football game, you see Black Rocks continuously. And it's really helped with the awareness, which has, in turn, really helped with the frequency of visit and driven the AUV.

Is there -- when you think about site selections, is there sort of a speed-to-market advantage today? And I mean, just among a few of your peers, right, there's probably 500 or 600 stores that are going to be added this year, right? What -- how do you think about that?

Yes. Again, I think it's so important that when any of you come in that you're going to have the right experience. And we drive that in the most influential way. We want you to have the speaker box or the register that 90 seconds later, you get your drink and your food, which is really unparalleled at the moment, and we're really, really proud of that. And so if you were to say to me, is it more important to get to market faster? Or is it more important to deliver on the experience with the stores you're going to open, we would always pick experience first. We think 20% is right for us.

Okay. You mentioned sort of your unit economics, but could you run through that again? And I mean, is it fair to assume you're running ahead of those numbers, maybe on margins, right, maybe not on build costs, but margins and AUVs, you may be running ahead of those today. But what could drive upside to those over time?

Yes. So I think as we've spoken to already, and I'm sure many of you know, almost 1.3 AUV and then in the third quarter up 29.6% on a store level margin. So really, really giant success from a team member standpoint in understanding the importance of how do their stores operate, what are the levers to pull to drive it. And I think when you think about where can it go, maybe to your question, Brian, have we run ahead of it. I think when you think about the business today, we finished the year right around 179 stores. We still have a lot of opportunity, by the way, we've got 35 stores right now in the non-comp base that are still ramping and growing. And so I think there's a lot of opportunity.

I think our team's ability to understand what it is we're going after, what are the levers they have to pull and how are they really driving the performance, whether it's a sales standpoint, what are they doing from a cost of goods and their variance standpoint, how are they managing their labor. And then really, at the end of the day, I think from a margin standpoint, our biggest opportunity is just more sales, more transactions and the leverage they provide to the P&L. And so as we continue to grow those, the question will be how do we reinvest those things back into the business, back into the team, making sure that we can continue to sustain this long into the future.

Okay. What work have you done to sustain build costs where they are. I mean you have pretty favorable build costs, but what -- how sustainable are those? What work have you done on that?

Yes. I think it's balanced. I mean when you think about how we're entering each market, how we're signing leases, how we're really building new stores, we're trying to take a balanced and intentional approach with our capital. And so we've been really flexible and we'll continue to be flexible in the different types of deals that we do, whether it's build-to-suits all the way up to ground leases or as Mark mentioned, conversions. And we're really trying to think about each class as far as how are we balancing the markets that we're in the 70% growth markets, 70% high-performing, 30% growth markets, but also what does the capital look like with the types of deals that we're doing, really making sure that as we continue to grow, one of the things we've talked about a lot as a business is we really want to leverage our margins, leverage our profitability and really become a company that could be free cash flow positive in the future.

And I think for us, a big, big part of that is just balancing the build costs and the different deals that we do because we'll essentially do all the different deal types to manage the cost across the cohort.

And how does your supply chain need to evolve to support that unit growth as well. And I guess any other sort of constraints or how do you get around those? I mean people is certainly one of them, but you've kind of talked about how you develop your people. But what else is key to driving that unit growth rate.

Yes. We have national partners that support us as we've grown. And I think when you look at the 7 states, that's -- it's 1/3 of the United States right now. We just -- we're growing within those 7 states. We use Sysco, and that's worked out really, really well for us. And then where we will go into some markets and have local partners that we partner with. I'll use -- for some of you in Austin, we use Tacodeli. And that relationship has worked out really, really well. But generally speaking, we don't have any constraints around the growth outside of making sure we keep up with the people pipeline. We're about 5 quarters ahead right now.

Got it. Just capital priorities. Obviously, most of it goes to new stores, but anything else, tech projects, any other big buckets that we should think about.

Yes. No doubt, new stores is the biggest allocation of capital, as you mentioned. As we think about technology, how do we support the team, I mean, everything we do is really in support of our team, making sure that we're driving process, we're driving efficiency. That in turn drives a great guest experience. At the moment, I wouldn't say we have any big tech initiatives that support those things. I'd say the biggest capital project in the future is we're potentially looking at a third roasting facility really so that we can maintain high-quality fresh beans. It's really one thing that we do. We're very, very proud of Jeff and Dan, who started the business, really started with we got to have a high-quality premium product. And so really all of our beans from the time they're roasted to the time they're in the stores is about 7 days.

And then really from the time they hit the store to the time they're used, it's about 7 days. So the vast majority of our stores have beans that have been roasted and used within 2 weeks, and it's a big part of who we are. And so that's why we're looking at a third roasting facility just to maintain that small batch quality roast.

And I mean, you've sort of -- you're mostly debt-free at this point post IPO. But when do you think you'll be free cash positive. Do you have a view on that?

Yes. So we have a very manageable amount of debt coming out of the IPO, which we're very proud of. I think as a business, free cash flow positive is something that we're certainly focused on in the short to near term. And I think from a debt standpoint, the quicker we can get to free cash flow positive, the quicker we can make sure we're managing the debt, there's no reason why we, as a business can't self-fund our growth long into the future.

Okay. Let's start with the margin side a bit. I guess just as we think about puts and takes on store margins into next year, what should we be thinking about that could shift versus '25.

Yes. So I think we've had great success in managing to a really strong margin as a company. That's a testament to our team. We are an operations-based business, and we spend a lot of time with our operators to drive margin. I think in terms of puts and takes, we've gotten a lot of questions today from many of you in the room about coffee costs, commodity costs. Really, the exemption -- tariff exemption on beans, we think could help us. It's still early. We won't see much of that in the fourth quarter, but potentially, there's some upside there into 2026, and that's something we're watching very closely.

I think as we continue to grow, the question we'll always have is how do we take the profitability of our stores and either continue to grow that or reinvest that back in our teams, be it tools to help them grow, be it additional marketing dollars from a G&A standpoint to really help drive the business forward. And so just trying to take a balanced approach to it. I think really, there's puts and takes across the entire P&L, and we really look at it as what's our expectation from a performance standpoint year in and year out. We really want to continue to grow and build and maintain our margins at a high level, and that's really what we're focused on.

I guess is there anything specific that would help kind of offset -- including in coffee, but offset inflation, any specific initiatives you'd highlight.

Yes. I'd say a big initiative for us this year, which is still new and the team is doing a great job of it, but we certainly have opportunity is really looking at this year, we talked about 3.9 was our price in the comps. And really from a pricing standpoint, we always try to look at it as balancing to be margin neutral with inflation. I think that was a lot more challenging in 2025, and we didn't take full price to stay neutral with inflation. But ultimately, we're rolling out initiatives to the team like inventory management, bringing down waste, helping from a cost of goods standpoint. And I think the team has done a great job, and I think there's still opportunity and some runway into 2026 on that as well.

What is the right level of price over time in your view?

So we have historically taken an approach that 3% to 4% is where we've been from a pricing standpoint. And I think we always look at price again as where are labor rates within the markets that we're in, where do we think costs from a cost of goods standpoint are going? And ideally, like I said, we'd like to be margin neutral. I think this last year has made that a little bit more challenging. So we're sort of driving the initiatives to close that gap and still maintain strong margins. And I think more than anything, it depends. We also understand that at the end of the day, we want to provide a high-quality products, great speed of service and a great experience for our guests. And so we're also trying to balance our pricing against our peers so that from a guest standpoint, it doesn't feel like it's getting expensive, and that's really a goal for us as well.

Are there specific pieces that you think will continue to go up as a percent of sales. Maybe marketing is one area, maybe rents also just based on some of your lease mix, but what else.

Yes. I think occupancy is a great one. I mean I think most of the leases we're signing today are higher than they were 5 or 10 years ago. And so I think while occupancy rates can go up, our focus on those higher-performing markets, those higher AUVs sort of leverage that and really leverage the system. And then I think in terms of just G&A and continued investment, no question, marketing is one where we will continue to invest more. We spend about 1% of our sales on marketing today. We've driven really strong comps with that, but at the same time, understanding that as we continue to grow, build out the brand, build out the awareness that there will be more investments in that as well.

Okay. What should we think of -- so coffee, the tariffs have been removed, right? Maybe just ex that, right, spot coffee prices are still high. I mean what -- I don't know, what are your wholesalers saying about coffee at this point.

Yes. I mean it is a conversation -- that's a new one in the last couple of weeks, but it's certainly a conversation that we're having with our brokers. And at the end of the day, there is a belief that coffee should come down. Historically, you'll see a couple of peaks and a couple of valleys like anything in a commodity standpoint year in and year out. This year, they started high, stayed high and they continue to be high at the moment. But a lot of that is just supply and demand. I mean Brazil is the biggest producer of coffee. And when they had the large tariffs, even though we were moving our origins around to sort of help offset, when other countries know that Brazil isn't driving it, they're also increasing their prices. And so I think there's certainly an opportunity. And the thought is that with tariffs removed or coffee being exempt from tariffs that really it should create some relief in the market. And then ideally, it should come down. But still early, and we haven't seen that just yet, but it certainly is an opportunity next year.

We'll see, right. What drives your -- you have a very favorable labor cost ratio? What drives that?

So we, as a group, have tried to invest in the team members, and we think that's really important. We want them to see it as a career versus a job. And so when you look at our overall culture, we have a big push around acumen. And what we essentially teach the team is you will receive, we have a budget, an external budget. We're going to push that down and you'll have an external budget. And in turn, you'll get a chance to write your own internal budget where you will forecast sales. You will understand that retention is more than a number. We want you to understand that when you retain, they drive a better experience.

Guest satisfaction instead of the strive for 5 or I need a 10, we want you to understand that when people like your business, they're going to come more frequently. And as such, you're going to have more sales and you're going to leverage. We then turn around and we teach them that on the profitability, the whole idea of flow-through. And so I think, first off, the teams are unbelievably excited about the acumen that they learn. We then have profit sharing. And I would tell you that as I look back on my career, I can think of many concepts that started with it and did so, so very well. Some have left it. Now I would say there are some that have kept it, Texas Roadhouse that have done exceptionally well with it, and we have profit sharing. And so when you think about it, if Rodd were to have an external budget, he writes an internal, he then turns around and grows his business, he receives profit sharing. We have a performance culture where we have driven essentially if you're on the scorecard, you get ranked on sales, on people retention, on satisfaction and then how you beat your budget. And then you are able to produce a winner for the quarter, for the month and for the year, and we can stack rank. And what we've found is as much as people love the acumen and as much as people love the profit sharing, what they really love is the ability to compete with one another and give each other a bad time about where they are on the scorecard.

And then last, we have a top quartile meeting where we take the top 25% and we take them to a great hotel. Think back to when each of you were 21, 22 years old. They go to a JW Marriott. They get the float in the Lazy River. They get to do the casino night with the leadership team and they win prizes. Next day, they learn about their company. And then last, we give away trips, and we basically give the trip away for 2 anywhere within the United States. And the whole idea there is Brian wins, Brian comes back with pictures. And when this whole group comes back and says, "Hey, we were the top 25%," the other 75% wants to go to the meeting. And what that has done is basically driven this unbelievably great performance over the last several years where you've seen great same-store sales, great transaction growth, retention satisfaction, but also these great profitability growth.

And I think for any of us that have kids, and I believe this in my soul, you want your kids to do better than you have. And when you think about it, they have a voice, they're a part of it and they see it as their company. We had talked about this earlier. We had our first earnings call, and we have about 3,000 employees and about 25% of them called into the earnings call because they wanted to hear about their company. And I would say that, that engagement is what drives the company and certainly drives it forward, and I think it's a big point of difference on what we do.

Okay. Got it. That said, I mean, any areas for investment in labor, anything about new markets we should think about over the next year or 2?

Yes. I think when you look at the labor, most restaurants have a real hard time because they push on that labor, hey, hit labor, run labor. When you think about what we're teaching, they're running a complete business and they're running it as if it's their own. It's fantastic. I think when you look at our investments in labor, we are always looking at keeping the spans small. I think that's important. And then secondarily, Will, who's in the front row is our Chief People Officer, we are doing all sorts of ways that we invest to drive that retention, which is so important. And so you'll see more of that. I would say at that 29.5 store level EBITDA, we don't have a margin issue. We want to continue to grow the sales and taking care of the team is the best way to do that.

Okay. And remind us, so you have good store margins. How much is G&A leverage a driver of kind of the future EBITDA growth.

Yes. I think certainly, as we grow, the expectation from us is that the G&A will leverage. I know, Brian, we've talked about it. certainly, we think about, hey, we just went out public company, all the costs that come with it. I think it's going to be harder to find opportunities to leverage G&A in the next, call it, 12 months. But certainly, with time, with sales growth, that's really our goal and our focus. We're trying to build the business, but also make sure we're taking care of the team to support the business. And no question, as a public company, there are significant incremental costs that come with it. And at the moment and in the short term, those certainly outpace the sales, but that's really a product of investments to be a public company, not continued investments long term.

Yes. Makes sense. Okay. Maybe I'll finish with my lightning round question. These are the same for everyone, right. Demand outlook relative to recent trends, how do you expect demand over the next 12 months, accelerate, decelerate, remain stable.

We have seen nothing but acceleration. I think to your point, our benefits starting at the lower AUV, when we add all of these strategic initiatives, our AUV has grown. And even with the IPO, the halo of it has helped. And so we would say acceleration.

Okay. Margin outlook, same thing over the next 12 months, more tailwinds, more headwinds, balance of the 2.

I'd say it's probably a balance given 2025 had certainly its challenges and opportunities. But again, going back to it, I think there are some things, particularly on beans, tariff exemption that certainly have some opportunity that can help. But there is really nothing else that we see that should actually cause margins to really be impacted from a negative standpoint. If anything, I would say neutral with certainly opportunity.

Okay. Capital allocation, well, prioritization for you, it's just CapEx. So I'll answer that one. But a subquestion of that, maybe CapEx intensity related to technology, would you expect that to increase, stable, decrease?

Yes. I would say stable. I mean, again, when we think about the tools we're providing the team to really grow and really drive performance of their business, we're going to continue to do that. I would say at the moment, there are no big initiatives from a technology or an AI standpoint that we think really support the growth of the business today, but it's something that we're always continuing to monitor. And again, as long as it supports the team, it supports a great guest experience, that's certainly something we're going to continue to explore.

Okay. Great. I'll leave it there. Thank you guys for being with us.

Good afternoon, and welcome to Black Rock Coffee Bar's Third Quarter 2025 Results Conference Call. Today's call is being recorded, and we have allocated 1 hour for prepared remarks and Q&A.

At this time, I would like to turn your call over to Will MacIntosh, Chief Investor Relations Officer for Black Rock Coffee Bar. Thank you. You may begin.

Good afternoon, everyone, and thanks for joining us for Black Rock Coffee Bar's third 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 morning'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 morning'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 it over to Mark.

Thank you, Will. Good afternoon, everyone. We appreciate you joining us today on our first earnings call as a public company. While our recent IPO marks a significant milestone in Black Rock's growth journey, we are even more excited about the opportunities we see ahead for this business.

On today's call, I'll begin with a brief recap of the Black Rock equity story we introduced during our IPO, followed by highlights from our third quarter performance. Then you'll hear from our CFO, Rodd Booth, providing updates on our third quarter financials, along with our outlook for the remainder of 2025.

For those of you new to our story, Black Rock was founded in 2008 with a simple mission: to build connections through caffeine and community. What began as a single store has grown into 169 locations across 7 states as of September 30, 2025.

We believe Black Rock is uniquely positioned to become a leading force in the specialty beverage space, with a long-term goal of reaching 1,000 stores by 2035. We demonstrated the strength of our model and the demand for our brand through our strong unit economics and rapid expansion. Our growth is fueled by: one, our people-first culture; two, a differentiated guest experience; and three, a disciplined expansion strategy that thrives across geographies.

Starting with our people-first culture. At Black Rock, our culture is our competitive advantage. We foster a workplace where team members feel empowered, valued and inspired to deliver exceptional service. This collaborative and performance-driven culture translates directly into guest satisfaction and operational excellence. Our commitment to staying true to our values while hiring and developing exceptional individuals drives high team member retention, which in turn fuels strong store performance and guest loyalty. When we take care of our team, they take care of our guests, that's how we win together.

Next, turning to our guest experience. At Black Rock, every guest interaction is designed to be personal, memorable and rooted in connection. Our baristas are the heart of the experience, creating premium, handcrafted beverages with speed, care and a human touch. The menu is built with simplicity and intentionality, featuring core coffee forward offerings while also providing our signature Fuel energy drinks. We also provide chillers, teas and curated food offerings designed for all-day engagement, which is reflected in our balanced daypart and by day mix.

Guests can personalize their drinks based on espresso strength, sweetness, flavor and topping supported by our small batch roasting at 2 company-owned facilities to ensure quality, freshness and consistency. Whether in our drive-thrus or welcoming lobbies, guests find spaces that foster community, often referring to their local store as my Black Rock, a reflection of the belonging we strive to create.

Furthermore, we're focused on meeting our guests wherever they are, whether in store, drive-thru or online. Our modern inviting store format paired with a robust digital platform allows us to deliver a dynamic multifaceted experience that balances convenience with connection.

With the launch of our mobile app, online ordering and expanded loyalty platform in July of 2024, we've created seamless pathways for engagement that reflects how our guests live, work and interact with our brand. These tools are driving deeper relationships and increasing frequency while reinforcing our commitment to innovation and guest first service.

As it relates to our guests, our broad and balanced demographic exposure ranging from ages 18 to 45 years old, leaning higher in income and slightly more male also highlights the broad appeal we have in the communities where we operate. while also providing significant opportunity to continue driving penetration across more targeted guest cohorts.

And last, we're expanding our presence and experience to new consumers every day. Black Rock's expansion strategy is centered on company-operated stores, which allows us to maintain consistent execution, strong unit economics and scalable growth. A key driver of this strategy is our internal career development pathway, which equips team members with business acumen and leadership skills, empowering them to grow from barista to multi-unit manager to senior leadership and beyond. This approach creates a deep bench of experienced operators who understand our culture, values and operational standards, enabling us to open new stores with confidence and consistency.

The ownership mindset fostered through this pathway drives alignment, engagement, performance and retention across the organization, ensuring that each new store is led by someone deeply invested in its success. As it relates to new unit growth, we follow a disciplined data-driven approach to site selection, focusing on high-traffic suburban areas and expanding outward from our proven markets and concentric circles. This strategy allows us to build awareness with limited sales transfer and ensure operational consistency while also leveraging overhead effectively.

Our dual format model is designed for connection, high volume, speed and efficiency. Every location has a drive-thru with lobbies at 75% of our stores, balancing convenience with community and offering flexible spaces for guests to connect. As we grow, we continue to prioritize lobby inclusion, staying true to our vision of being more than a coffee shop, a place of connection. With significant white space opportunity in both new and existing markets, our cost-efficient and proven concept is well positioned to support our expansion ambitions.

With that, let me now shift to our third quarter performance. Black Rock delivered excellent third quarter results, continuing our strong momentum from the first half of the year with revenue and adjusted EBITDA growth of 24% and 35%, respectively, compared to the prior year. We continue to drive store expansion, opening 11 new locations in the third quarter and totaling 20 new stores opened year-to-date.

Same-store sales finished ahead of expectations at 10.8% in the third quarter with positive comp growth in all of our markets. Our teams have done a terrific job executing against our plan and driving our 3 strategic initiatives forward: customer engagement, fostering a people-oriented culture and market expansion. These 3 priorities are at the core of what we do. So let me take a few minutes to talk through our progress against each during the quarter.

Starting with customer engagement. In the third quarter, our loyalty rewards platform participation rate continued to increase, signaling strong guest adoption and growing engagement since its launch in July 2024. Loyalty guest frequency rate and check have both increased as a result, highlighting the program's effectiveness in driving repeat business, retention and deeper customer relationships.

Overall, same-store transaction growth was 6.1%, showing continued healthy momentum. Digital sales continued to grow sequentially as a percent of total sales, as app, online ordering and third-party delivery saw increased guest frequency following our native OLO launch last year. We're pleased with the continued traction we're seeing in these initiatives, which drive higher engagement, reach and optionality for our customers.

As it relates to product mix assortment and menu performance, during our seasonal LTO windows in the quarter, we saw standout performance from the Pumpkin Blonde and Butterscotch Breve. Our 3 Pumpkin-inspired LTO drinks have sustained strong momentum, which has continued into the fourth quarter. We continue to explore new avenues of product innovation across our menu, from expanding into functional and flavor forward offerings to potential seasonal food items while maintaining a strong focus on testing new beverage and food ideas that align with evolving guest preferences.

Importantly, we are closely tracking menu adjustments across markets with ongoing regional menu optimization efforts to ensure we're addressing the unique preferences of guests across various markets to maximize our same-store sales and AUVs.

To that end, we're especially encouraged by the early success of our newest food offering, Egg Bites, which officially launched in July and is gaining solid traction with guests across our locations. Product mix for both coffee-based beverages and food increased sequentially during the third quarter, reflecting continued demand and engagement with our menu innovation and elevated sweet and savory food options. We expect the addition of Egg Bites as a new savory and protein-focused food offering will support both food product mix growth as well as daypart mix growth in the coming quarters as we continue to lean in.

All in all, our broad range of offerings across menu and point of service continue to support our strong customer engagement performance, and we see significant opportunity to continue leveraging these to build brand awareness and expand our presence in our existing markets.

Turning to our robust people-oriented culture. As I touched on earlier, at the heart of our brand is a simple belief. Investing in our people and culture drives stronger guest connections and better experiences. Our overall strong retention rates driven by our clear career growth paths and meaningful incentives speaks to the strength of our people-first approach.

Our team member and store lead turnover both improved year-over-year. The initiatives we've implemented over the years focused on business acumen, skill development, career growth and operational efficiency across stores have contributed meaningfully to our success and continue to strengthen our foundation for long-term growth. For example, our learning management system delivers strong onboarding and training support, builds business acumen and ultimately leads to more confident new hires and improved engagement outcomes.

To further strengthen our people pipeline and help our store leads run the stores more effectively, we launched our career road map training program earlier this year. This initiative is designed to build leadership capabilities, enhance team management and drive greater structure and consistency across our operations, supporting long-term growth through talent development. We are actively scaling our career road map training program across all growth markets with a continuous goal of building a strong bench of future leaders to support Black Rock's expansion strategy.

Store lead retention continues to outperform the top quartile of industry benchmarks, sustaining the positive momentum we've built over the past 24 months. We're proud of the strong traction we're seeing and remain deeply committed to equipping our teams with the tools, training and support they need to manage their stores effectively and thrive in their roles. These efforts have been bearing fruit with team member engagement up, strong guest satisfaction and overall strong turnover.

In addition to our training programs, we also recently launched our inventory management module, which is designed to enhance COGS performance and elevate business acumen across our employee base. While still in the early stages of rollout, our team has shown strong initiative in applying early learnings to refine and strengthen the program, positioning us to drive meaningful impact across the organization as implementation scales.

Finally, I'll touch on market expansion progress in the third quarter. We opened 11 new locations in the period across several growth markets, Arizona, Texas, Colorado and California, bringing our year-to-date store openings to 20 and our total store count to 169. Notably, we opened our first drive-thru store with a lobby in Southern California, which is driving strong brand awareness and AUV growth. This early traction reinforces our confidence as we expand our footprint in the region.

Overall, we're pleased with the year-to-date performance of our newest cohort, encompassing our new units in 2025, which continues to exceed sales projections and store level profit goals while delivering strong cash-on-cash returns and outperforming the system on retention and guest satisfaction. The consistently strong performance of our new cohorts, combined with the depth of our development pipeline, gives us great confidence in our ability to drive continued AUV growth, building off our reported $1.3 million this quarter. Importantly, we take a disciplined and data-driven approach to site selection, identifying high-performing and high-traffic locations for our stores.

During the quarter of our 11 new store openings, all except one included lobbies and one leveraged our modular prototype, which we are rolling out to further accelerate our speed to market and drive cash-on-cash returns. Build costs remained stable despite a volatile environment, a testament to our disciplined project management and vendor relationships.

Looking ahead, we see substantial white space for continued growth across the 7 states we operate in today, and we will continue to drive new store momentum with our proven and scalable development playbook, supported by our deep bench of experienced team members and leaders. While we're still early in our accelerated expansion efforts, we're energized by the opportunity we see ahead, and I'm confident in our ability to open 1,000 units over the next 10 years.

Before I turn it over to Rodd, I want to take a moment and thank the Black Rock team, our baristas, our leadership team and our home office for their hard work, commitment and passion they bring every day to delight our guests and build connections through caffeine and community. I also want to thank our shareholders for supporting us as we embark on this exciting journey, where we see tremendous runway to drive long-term sustainable growth, and ultimately, shareholder value creation.

With that, I'll turn the call over to Rodd to provide an update on our third quarter 2025 financial performance.

Thanks, Mark. Good afternoon, everyone. We continued our strong momentum in the third quarter, generating $51.5 million in total revenue, an increase of 24.2% year-over-year. Our growth was driven by 10.8% same-store sales growth despite lapping a strong 8.6% comp in the prior year, along with same-store transaction growth of 6.1% and 11 new store openings Mark mentioned previously. Store level profit was $15.2 million in the third quarter, up 30.7% over the prior year and store level profit margin was 29.6%, 150 basis points favorable year-over-year.

Consolidated adjusted EBITDA for the quarter was $6.9 million, up 35.1% over the prior year as we continue to execute against our strategic initiatives. Beverage, food and packaging costs were $14.3 million or 27.8% of total revenue and 40 basis points favorable year-over-year. Store level labor costs were $10.8 million or 21% of total revenue and 120 basis points favorable year-over-year, highlighting the strength of our retail teams.

Occupancy-related expenses were $4 million or 7.8% of total revenue and remained margin neutral year-over-year. Preopening costs were $1.5 million or 2.9% of total revenue, driven by 11 new store openings in the quarter.

On the topic of tariffs, import tariffs are being imposed on coffee beans and select equipment. And while trade policy remains fluid and tariff rates have been evolving, we believe our tariff exposure is limited. Our team has been able to effectively manage the impact of tariffs through strategic procurement and pricing, allowing us to maintain healthy margins year-over-year.

We're closely monitoring our cost centers and collaborating with our partners to maintain margins and offset any future cost increases whenever we can. We remain confident in our positioning. And as the business grows, we are continuing to drive efficiencies in our cost of goods. Despite the ongoing macro uncertainty, we continue to see strong customer engagement and performance, as Mark mentioned earlier.

Adjusted SG&A was $6.9 million in the quarter, or 13.3% of revenue compared to $5.4 million in the prior year period. We continue to manage our SG&A growth closely to support the continued growth of our business. We are taking an intentional and disciplined approach with SG&A, with a focus on growing our team to support our strategic initiatives, our sales growth and new store expansion.

Turning to the balance sheet. As of September 30, 2025, we had cash and cash equivalents of $32.6 million and a total debt position of $18.9 million, resulting in a net cash position of $13.7 million and access to our unfunded revolver of $25 million. Net proceeds from our IPO in conjunction with proceeds from our co-founder contribution and $50 million from our new term loan, were used to repay all amounts outstanding under our prior credit facility and eliminated a portion of our preferred equity position with our sponsors, with the remaining converting to common shares.

Subsequent to our IPO, we made a principal payment of $30 million, reducing the outstanding balance of our new term loan. We remain focused on deploying capital responsibly and efficiently to support new store openings while maintaining a strong financial position to capitalize on future growth opportunities.

Looking ahead, we plan to provide annual guidance across several key metrics. And for the full year 2025, we expect 30 new store openings, total revenue in the range of $199 million to $200 million, same-store sales growth in the high single digits, consolidated adjusted EBITDA in the range of $26.5 million to $27 million and capital expenditures in the range of $30 million to $32 million.

Despite the ongoing macroeconomic uncertainty, we remain confident in our outlook for the year as our team remained focused on executing against our strategic initiatives and fueling performance across markets. This is evident in our strong comp momentum exiting the third quarter, where we saw same-store sales growth of 8.7% in October, lapping 13.6% same-store sales growth in October of the prior year.

We believe our differentiated guest experience and premium offering, engaged teams, and proven expansion model position us well to sustain our strong momentum. Importantly, long term, we remain committed to our annual growth targets of 20% new unit growth, 20-plus percent revenue growth, mid-single-digit same-store sales growth and adjusted EBITDA growth greater than revenue growth.

With that, I'll turn it over to the operator to open the line for questions.

[Operator Instructions] Our first question is from Brian Harbour with Morgan Stanley.

Could you just comment on sort of noncomp store revenue and new store productivity, and how that has trended relative to recent quarters and how you'd expect that to end the year?

Brian, thanks for the question. Yes, I would say our non-comp store revenue has continued to grow. I think our stores, especially our -- as Mark mentioned, our newest class 2025, those stores are coming on stronger than we expected. I think they're trending in a great direction. And I would say they continue to improve year-over-year. But when you think about the pipeline '24, the pipeline '25 and all these stores that are continuing to grow and mature, we're seeing growth across all of our markets.

Primarily, when you think about our more mature markets, they're growing a little bit faster. But even in our growth markets, we're still seeing great trends and great comps, or at least sales that are growing that will start comping in a good spot next year.

Okay. And then where are you running on price today? You mentioned that as a tool to offset some of the tariff dynamics. Where would you expect that to run next year? What's your kind of broader philosophy on price?

Yes. So in the 10.8% for the quarter, as we said, we had 6.1% in transactions. Price was right about 3.9%, and then our check has grown 0.8%. And I think when we think about price, we always look at price as a way to stay margin neutral against inflation wherever we can. I think that's been harder for us this year. But our team has done a really, really good job of leaning into the strategic initiatives that we have.

Mark mentioned the inventory management. And for us to really go out and find the difference and make up for it and maintain strong margins, and we've seen that. I think when you think about 2025, the cost pressures and really our performance, the third quarter was really, really strong for us and our cost of goods and our leverage continued to get better, and it's exactly what we want to see.

Our next question is from David Tarantino with Baird.

Just one clarification first. On the new unit store contribution, I guess our calculation of new store productivity is based on kind of starting and ending unit counts, and we don't know when you open those during the quarter. So can you just maybe comment on whether the openings in the quarter were weighted towards the end of the quarter, which might be influencing that calculation? And then I have a follow-up to that.

Yes, no problem. Thanks for the question, David. Yes, to your point, many of the stores in the third quarter opened a little bit later than we had originally anticipated. When we think about our pipeline of stores, we built our pipeline to really deliver on the number of units that we expect to deliver. And we feel really, really confident in our ability to do that. I would say if there was one area this year with all the costs and the things we've done to improve there, I would say if there was one area this year where we had a little bit more of a surprise, if you will, it was really on the delivery of stores.

Some of our preconstruction, the permitting, things like that in the development phase have taken a little bit longer, certainly longer than we've historically seen. But the stores we delivered, we were really, really happy with, and they did deliver a little bit later in the quarter. But again, I think when we think about the '25 pipeline and 30 stores, we have all the confidence in the world on hitting those numbers, and we feel really, really good about our '26 pipeline as well.

Great. And then on the sales trends or the comp trends, very strong, including in October. Thank you for that update. If I look at the guidance that you've given for the year, it does imply that you're expecting perhaps a bit of a slowdown from what you're seeing in October. One, do I have that right? And then I guess, can you just maybe explain why that would be the case? Is that just conservatism in this environment? Or are you anticipating something in November, December that might slow down the trend?

Yes. No, it's a great question. When we think about 10.3% year-to-date, 10.8% same-store sales in the third quarter, we're lapping really strong numbers in the fourth quarter of '24, up 9.5%. And so we're trying to be really mindful of what we're lapping. When you look at the 2-year comps, they're really, really strong. As I mentioned, 8.7% in October was a great number. Certainly, it wasn't the 8% or the 10.8% that we saw in the quarter, but it was also up against 13-plus percent from the prior year. And so we're really, really pleased with the 2-year comps and the trend.

I think when you take a step back and you look at the fourth quarter, going to give us -- going up against 9.5%, modeling 9% or high single digits in the fourth quarter would put us at high single digits for the year, which is why you see that in the guidance.

Our next question is from John Ivankoe with JPMorgan.

You've gotten 2 questions on new unit volumes. And firstly, just a housekeeping question. Do you have the number of store operating weeks by any chance, handy, in the third quarter of '25 versus the third quarter of '24? That would at least help us do some calculations on our end with new unit volumes? Is that something you keep in front of you?

Yes. We haven't guided to that number. But -- yes, we haven't guided to that number.

All right. And we can just try to find some store openings over '25 and just try to estimate that. So okay. And now for my real question. So driving awareness in new markets, obviously, it's an opportunity, a market like Southern California. The question that I'm going to ask you is maybe what we've learned from the past to be able to go into a market like Southern California and to be open well in a market like that, that's typically actually quite hard to break into from an awareness perspective.

And the second part of that, do we have an opportunity to go back and revisit the 40 or so stores that are in Houston, San Antonio, Dallas, and maybe look at some different pieces of the puzzle and help drive awareness in those markets as Black Rock has a relatively small number of stores in what is otherwise a potentially big market. In other words, what are we learning from an awareness perspective that maybe we can apply both to a few select existing markets and as well as new markets in the future?

John, thank you for being on the call very much. With regards to learnings, and you had started with California, I would start again by saying to everybody, that is one of the largest volume, most profitable markets that we have. The new store in California has done exceptional. And I think when you look at how we approach marketing, we would start by being data-driven, and we're certainly trying to approach that, that way as we look at a new market or we look at an existing market.

Certainly, have multichannel strategies. And I think those are one of the learnings that when you look at how we did it in the past, we've tried to adopt that moving forward. As we market, we're trying to grow both brand awareness, but we're also trying to drive that engagement. And I think -- and you've commented on this when you've been with us, but I think one of our advantages is when you look at our spend on marketing, we're currently below the average. And I think when you think about that, that allows us to not only have a scalable lever that drives future growth, but then we can double down. And again, this would be more of the learnings around promos, LTOs.

I think being coffee forward is a huge driver for us. It helps in a big way, and we've seen that in California already. And then Rodd spoke to it a moment ago with the Egg Bites. That's been great across the country, but it's certainly been a way that we can introduce ourselves in California, newer markets. And I think as you think about all that type of stuff, our energy is still growing. And again, if you look at loyalty and some of the things we're doing there, we're now pushing where not only can we strengthen that customer relationship, we can push segmentation.

Obviously, that drives more transactions, and I think allows us to be personal and meaningful. And I think that's really important. And then last, we can own that relationship, and that's certainly been strong for us in, call it, the last 6 to 9 months.

And if I can -- I revisit the question in terms of just those few select Texas markets, if we have an opportunity to kind of go back and rehit some opportunities around bringing those up. Certainly, Egg Bites would be a piece, but how do we maybe communicate to customers that haven't necessarily had exposure to your brand directly?

So Jessica, who you've met, our CMO, has done an excellent job driving food. I would say that the state of Texas is one of the very best markets we have on food. And as Rodd spoke to, every market we have in the system has had really strong growth. I think that's great on the, call it, legacy cohorts. So that's really strong on that standpoint. But when you look at our new stores, especially in Texas, they are among the leaders in same-store sales. And all of those things point to a really successful future in the state of Texas.

Our next question is from Chris O'Cull with Stifel.

Mark, I wanted to follow up on the loyalty program that you alluded to, but you're now officially past the 1-year mark. And I was curious if you could elaborate a bit more about the insights you've gained into customer behavior, and maybe just how you plan to utilize those insights as you move into the programs second year to drive that awareness forward?

So Chris, first, thank you for being on. Our loyalty has been remarkably strong. When you look at our transactions, we are running 64% of our transactions are loyalty transactions. And again, we're seeing checks that, again, is going to be about $0.70 up on a non-loyalty check. So when you look at the acumen and the way we teach the teams, we have literally taught them that, "Hey, the more loyalty members that you have, the more often they come." Again, when we were on the road shows, we spoke to this. But the top 25% are coming 10x a month right now. And again, that's only growing. When you look at the next 2 quartiles growing again, at 5x more a month. And so we like that very, very much. And then when you think about it, all of that loyalty, all of those people that are excited to be part of Black Rock, they are currently not being segmented to.

And so Chris, when I go back to you, in the future, Jessica and the team will be driving the ability to not only market to you, but get specifically what you'd like to have and drive you in more frequently. And again, I would just positively speak to how well the team has done that when we get those extra transactions, they do great things with them. And I think you see that in the transaction growth in the same-store sales.

Great. That's helpful. And I know the company has implemented a lot of new systems recently that have improved inventory management and labor scheduling and deployment, among other things. I was hoping, Mark, you could just elaborate on where you are a bit more in terms of realizing the full benefit of those capabilities and what you believe you still have on the table to capture as your teams get more comfortable with the utilization.

So Chris, I appreciate it. When you look at inventory management, we rolled that out in the first quarter of the year. And I would say that probably the original thought was that we're teaching, we're coaching, we're demonstrating acumen, and we saw a little bit of lift. I would say over the third quarter, we have continued to get better.

Now, Chris, I would also say that when you think about the end of the year, we expect to see improvement. But as Rodd guides to next year, we're certainly going to build in more improvement based upon that inventory management. So I think it is several years in the ability to really maximize what we want there. But we've been really proud of the team and how they've adopted it and learned from it, and I think continue to get better with it.

Our next question is from Sharon Zackfia with William Blair.

I know your comps have been so strong and so consistently strong all year that you haven't maybe leaned as much into loyalty with offers as you may have originally planned. I'm curious, as you look into kind of '26, what the plans are on loyalty offer cadence? And if you have any kind of accelerated plan in terms of menu innovation?

So Sharon, it's good to hear your voice. Thanks for being on. From a loyalty perspective, we have minimally marketed this year because we've had such strong comp and strong transaction. When you look at the offer cadence, it is pretty limited at the moment. And again, as Chris asked, it is not segmented. What you will see in the future, and again, we had originally planned on doing that in the second half of the year and with the success, Rodd spoke to October, we had made the decision to wait.

I think what you'll see in the first and second and even more in the latter part of the year, next year is that, that cadence will continue to improve. It will get larger. And as such, we'll get that chance to really drive guests in with the particular drink that they want to have.

From an innovation, we're going to continue with the regular cadence of innovation that we have. I've been really proud of the marketing team. And I think as they look at trending new flavors, certainly trying to have the differentiated offerings. And I think having a relevant core menu that is highly customizable is important to us. Rodd brought up, again, the Egg Bites, and it has been really strong. And as we launched that in July, that was -- and certainly helped us in the third quarter, but continues to grow and be a stronger part of our business each day and each quarter. And I think you'll see that continue to jump.

Our LTOs have been the strongest we've ever had. And one of the things as I think you look at the macro environment, what we've found is being coffee forward has really helped us. And while our Fuel continues to grow and our food continues to grow, I think we've been really, really thrilled that the coffee growth has also been there. And all of this goes back to John's question around the AUVs and everything that we're seeing those jump as well as a result as all of the mix items continue to improve.

And Mark, how do we think about kind of marketing in terms of influencer strategy? I know you've had some success there. Is that an area where you will build on kind of what you've seen in 2025?

So as you're aware, Sharon, we had Avery Woods, who helped us in the third quarter, and it was, again, very, very good for the company. Avery is going to help us in the fourth quarter as well. We've got a drink out currently that's doing very well that she's supporting. And we've been really proud of the partnership. Jessica, again, is doubling down on that, and you will see more influencer campaigns as we move into next year. Again, trying to broaden that again with more and more, but I would say, generally speaking, it's been a real success for us.

[Operator Instructions] Our next question is from Brian Vaccaro with Raymond James.

I appreciate all the color today. And sorry if I missed it, but could you share what the food mix in the quarter was or just how much your food sales were up sort of year-on-year compared to the third quarter, or some perspective on that? And Mark, I think you also talked about some opportunities to regionally optimize the food offering. Maybe you could just expand on where you see some of those opportunities.

Sure. So I would start, Brian, that -- and by the way, great to have you on the call. Quarter 3 of 2024, we were 10.5%. We have seen food, as we have optimized the menu, really move towards savory. And again, we've tried to have higher quality, again, with the idea that it works within our drink window so that we can provide that fast and accurate experience. When you look at food as of quarter 3 this year, it finished at 12.6%, which means that in a year-over-year basis, it grew by 210 basis points.

That's great. And then any comments or thoughts on the regional opportunities you were mentioning that sort of optimize your regional offerings?

So Brian, we have optimized. And I would say that when you look at that growth, especially with our coffee and our Fuel also growing, all of those being big positives. I think when you look at the optimization, what we've found is savory is certainly where we want to invest more of our time. It's gone really, really well for us.

I think when you look at specific -- I'll use Texas as an example. Texas has seen really strong food growth, which has helped with that AUV. And I would say that the savory is the second part of that. And we have some regional offerings down there that have really helped. And you can see that throughout the system, but specifically in Texas, you've seen some pretty dramatic growth, and that's been great for us.

All right. I appreciate that. And then just a quick follow-up, if I could, on the store margins. And the other OpEx line, I noticed it was just up a little bit year-on-year despite the strong sales leverage. And I just wanted to see if there were any onetime sort of catch-up items or maybe you could elaborate on what drove that? And would you expect -- kind of looking forward, would you expect to leverage that line going forward year-on-year?

Yes. Thanks for the question, Brian. Yes, that's more than anything, just our continued investment in our teams and giving them the tools to support their growth, like the inventory management and some other things we're doing. I don't -- at the moment, we don't have any other plans to make additional investments.

So I think with additional sales growth, you'd see that leverage. I think that would certainly be an opportunity on a go-forward basis. But you're seeing that margin of the other go up as we -- again, as we talked about, we're continuing to invest in the team, especially as we continue to perform, have great sales, we're finding leverage in our cost of goods and the team are running their labor and other costs in an efficient manner.

Our next question is from Marshall Pittman with Jefferies.

I just had a quick one. Just on commodity and labor inflation, just wondering if you could give an indication on what those were in the quarter? And looking at 4Q, if we could expect any sort of change in the basket for either of those? Particularly looking at coffee, I know you said no real tariff impact, but even excluding tariffs, just wondering if we should expect a bit of a step-up in the 4Q here.

Yes. Thanks for the question, Marshall. When we think about the fourth quarter coming out of October and now into November, we've seen essentially our costs in the fourth quarter look very similar to the cost in the third quarter. I think this year, for everyone, has been a bit of a challenge trying to predict those. But I think our team has done a great job. And like we said, when you look at pricing, when you look at the things we've done from a strategic standpoint, we're really continuing to invest in the team, and the team is driving great results, and that's very much what we expect on a go-forward basis as well.

With no further questions, I would like to turn the conference back over to Mark Davis for closing remarks.

Thank you. I just -- for the entire Black Rock team, I want to say how much we appreciate everyone's participation in our first earnings call. And I want to say that we look forward to speaking with each of you on future calls. And I hope everybody enjoys your night. Thanks for being on.

Thank you. This will conclude today's conference. You may disconnect at this time, and thank you for your participation.