Black Rock Coffee Bar, Inc. (BRCB) Q3 2026 Earnings Call Transcript

Operator: Good afternoon, and welcome to BlackRock Coffee Bar's Third Quarter 26 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 the conference over to Will MacIntosh, Chief Investor Relations Officer for BlackRock Coffee Bar. Thank you. You may begin.

Will MacIntosh: Good afternoon, everyone, and thanks for joining us for BlackRock 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 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 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 D. Davis and our CFO, Rodd Booth. Following our prepared remarks, we will open the call for your questions. With that, I will turn the call over to Mark.

Mark D. Davis: Thank you, Will, and good afternoon, everyone. We appreciate you joining us today. I am excited to walk you through an exceptional third quarter that once again reflects the strength of the BlackRock brand, the consistency of our operating model, and the disciplined execution of our team. In the quarter, revenue grew 30% to 67 million. Same store sales accelerated to 5.8%, up from 4.2% last quarter or 16.6% growth on a 2 year basis. This marks our 15th consecutive quarter of positive same store sales and the 2 year stack is trending higher reinforced by the third quarter. Transactions increased 2.4% or 8.5% on a 2 year basis as we lapped the onetime loyalty rollout activity that affected our first half comparisons. While continued momentum from our customer engagement initiatives began to contribute more meaningfully to traffic growth. This brought our year to date same store sales back above 5%. With transaction trends continuing to positively build. Importantly, we delivered these results against several of our most difficult comps of the year including landmark days in the prior year where we saw same store sales growth as high as 24% and transaction growth as high as 17%. Adjusted EBITDA grew 22%, 500 basis points better than the prior quarter. In Q3, revenue growth outpaced EBITDA growth based upon public company versus private company comparisons additional investments in our new stores, including our record breaking California openings and labor to support our extended hours initiative. I would add, we expect fourth quarter Adjusted EBITDA growth of more than 30% well ahead of revenue growth and supporting our reaffirmed guidance. At the same time, we opened 11 new stores in the quarter and are now running ahead of our development plan. We now expect 40 new store openings for the full year, up from prior guidance of 38 openings, representing approximately 22% unit growth. Those additional stores and the investments made, particularly in California, are already contributing in the fourth quarter and set us up for an even stronger 2027. Our team is doing a tremendous job executing and delivering exceptional performance. Guests continue to be highly selective with their spending and we are excited to say they continue to choose BlackRock. The strength of the brand is showing up in both sales and transactions. With strong momentum that is carrying into the fourth quarter, which we expect to be our strongest same store sales growth of the year. With openings weighted to the back half of the year, the fourth quarter carries meaningfully more store weeks than the third. Together with fully lapping our public company costs, we are reaffirming our full year revenue and Adjusted EBITDA outlook. Our results continue to reflect the 3 strategic priorities that drive everything we do. Deepening customer engagement, which drives frequency, repeat visits, and same store sales, strengthening our people first culture, which supports guest satisfaction and operational and expanding our market presence to the significant white space in front of us. Let me take you through each. Customer engagement is what turns the first time visit into a lifelong customer. And it is the single biggest driver of our comps. Menu innovation continues to be an important part of the strategy helping us stay top of mind, creating new reasons to visit, and building demand across more occasions and dayparts. In particular, we are seeing encouraging opportunities to drive incremental visits in the afternoon and evening as we broaden our beverage and food platforms. We view our limited time offerings as a programmatic platform that creates reasons to visit helping to drive trial, check, and social engagement while keeping our menu fresh. This fall, campaigns like Pumpkin Passport, delivered a more durable seasonal mix than last year. Our cookie butter cold foam was so popular that guests began adding it to other drinks. Driving check growth through premium add ons. Looking ahead, we see additional opportunities to build on that platform through specialized cold foams, and other beverage enhancements that create new reasons to visit. Fuel and food continue to grow as a percentage of mix with fuel at 26.3% and food at 14.2% for the third quarter. We have grown food attachment across all dayparts each quarter of 2026, we expect both platforms to continue expanding over time. As these categories scale, they are helping broaden customer engagement beyond the morning daypart and drive additional visit occasions throughout the day. Recent menu additions including our cake pops and grilled cheese, are supporting higher food attachment in the afternoon and evening. In particular, grilled cheese has performed well early on and reinforces our confidence in expanding savory offerings and food menu innovation. The strong response to our newly added cake pops also supported our decision to make it a permanent core menu item complemented by rotating seasonal flavors. While we are pleased with the guest's response, we have seen thus far, what excites us most is the opportunity ahead. Our innovation tests this year are creating a foundation for additional menu enhancements focused on a more unified suite and savory food menu with additional snackable offerings designed to support occasions later in the day. The first phase of our enhanced core menu is underway, and has started rolling out this month. This is not a new direction for BlackRock. We have offered food since day 1. What has changed is the success we are seeing from recent tests, which gives us confidence to expand our sweet, savory, and snackable offerings while continuing to use food LTOs to test, learn, and drive new occasions. Our lobbies further expand that opportunity. Giving us a differentiated platform to build food occasions and deepen engagement across our afternoon and evening dayparts. Extended hours are another meaningful lever for expanding occasions beyond the morning daypart. While the initiative is still in its early stages, we are seeing encouraging sales and transaction trends. With particularly strong momentum in California. These early results reinforce our belief that staying open later can support increasing average unit volumes over time, and driving incremental same store sales. We have also made the decision to open new stores with the extended hours, which has been beneficial to both our customer base and the company. Our digital and loyalty platforms continue to strengthen that engagement. Loyalty represented approximately 69% of transactions during the quarter, holding steady even as we open new locations and added guests to our customer database. That tells us we are not only attracting new guests, but converting them into loyalty members who visit more often and carry a higher lifetime value. We are now approximately 90 days into testing our customer data platform, which allows us to use point of sale data to reach loyalty guests with more relevant 1-to-1 communication. Early results have been promising and have provided valuable validation that we can more effectively engage both loyalty and nonloyalty guests and drive incremental traffic through more personalized communication. We also completed a regional programmatic media across video, search, streaming audio, and connected television, which has supported awareness as we expand in our market. Looking ahead to 2027, we see an opportunity to increase paid media investment to drive near term traffic and transactions while building broader brand awareness over time, and we will continue to do so in a data driven, and intentional manner as we also prioritize investments in our team, and expansion strategy. Moving to our next priority, our people oriented culture. None of our success happens without our people. And the results speak for themselves. Our turnover runs about half the industry average, Our store lead turnover is well below industry norms. And 98% of our store leaders have been promoted from within. We believe those results reflect 1 of the most important competitive advantages we have. Our people. Our ability to attract, develop, and retain team members continues to differentiate BlackRock and supports the guest experience operational consistency, and growth that drive our financial results. Every day, our team creates the connection speed of service, and welcoming experience that keeps guests coming back drives transaction growth, and supports the strong same store sales performance we have delivered over time. We continue to invest in our people providing the tools, training, and career development opportunities that help our teams grow and succeed. By developing talent from within, building their business acumen, and creating clear pathways for advancement we are reinforcing a strong culture strengthening execution across the system, and further differentiating the BlackRock experience. That investment shows up in the guest experience, Guest satisfaction remains incredibly high. With strong results across speed, cleanliness, customer service, and product quality. Our people also power our growth. Our 2027 store lead pipeline is already in place, giving us confidence that new stores can open with experienced leaders who understand our standards and culture. That depth allows us to grow while ensuring the consistent experience that keeps guests coming back and supports store level margins near 30%. Moving to our third priority, expanding our footprint. We opened 11 stores this quarter across California, Arizona, Colorado and Texas, finishing the quarter with 211 stores system wide. As of today, we have opened 35 stores with the balance of our updated 40-store target expected in the coming weeks. California is a clear proof point of the portability of our model and the runway still ahead for BlackRock. Our California expansion also illustrates how well our model can travel. We opened our first store in the Inland Empire during the quarter, a new market for BlackRock, and had a record breaking early response thanks to the tremendous engagement of our team and that has reinforced our optimism about the market and the openings still ahead. Just as importantly, we see a strong group of team members in the market who wanna grow with BlackRock, supporting the leadership pipeline behind our development plans. With 5 California openings expected this year, and more than doubling to 15 to 20 in 2027, we are confident in the runway ahead and in the team we have to support it. That portability is a big part of why we see a clear path to 1000 stores by 2035. Our model is also built to win in competitive markets. We are built differently. Our lobbies, alongside the drive through, combined with online ordering allow us to serve more occasions and meet our guests wherever they are. Our menu has relevance across more of the day, and we are a 100% company-operated, which helps us deliver a consistent barista experience that drives guest satisfaction on every visit. And as the smaller, younger brand in most of our markets, we have real room to grow volumes as awareness builds. We are proud of where we stand today and the momentum across the business positions us to finish 26 strong, and carry that strength into 2027. Looking ahead, our development and people pipelines are in place for 2027, and we are already building toward an exciting 2028. We are concentrating on our best markets, targeting new deals in areas we believe support AUV growth. Our strong unit returns together with operating cash flow tenant improvement contributions, and our revolving credit facility give us significant flexibility to fund that growth. Our sales momentum our dynamic people, our pipeline, our consistent EBITDA performance, ROI on new units, and our differentiation that is what gives us confidence in the durability our long term growth and success. Before I turn it over to Rodd, to our team, thank you. You make all of this possible. And to our guests and shareholders, thank you for your trust and your belief in what we are building. Rodd? Over to you.

Rodd Booth: Thank you, Mark. Good afternoon, everyone. We delivered a strong third quarter with total revenue of $66.8 million, up 29.7% over the prior year. Same store sales growth was 5.8% in the quarter, and on a 2 year basis, our same store sales growth was 16.6%. We opened 11 new stores in the quarter 30 new stores through the first 3 quarters, and we now have 211 stores system wide. Turning to same store sales, transactions were up 2.4% Pricing contributed 2.4%, and check 1%. Against our highest comp from a year ago, our transaction growth for the quarter was strong. Underscoring and reinforcing the underlying strength of our business. Our team, guest engagement, and innovation strategy is connecting with our existing guests and attracting new guests to come experience BlackRock. Early performance of our strategic initiatives including menu innovation, targeted loyalty engagement, and expanded operating hours continues to drive positive transaction growth and traffic trends. Now turning to profitability. Store level profit grew 26.5% to $19.3 million and store level margin was a strong 28.9% during the quarter. Store level margin was led by leverage in beverage, food and packaging costs, down 100 basis points to 26.8% of revenue driven by disciplined procurement and the consistent execution of our team against our strategic initiatives. Labor increased 110 basis points to 22.1% as we strategically invested in new store openings as Mark alluded to, as well as additional hours around the afternoon and evening dayparts to support our team and drive meaningful guest engagement. These investments reflect our commitment to expanding our sales volumes and AUV. As we see significant opportunity to reach new guests and increase engagement with our existing customer base, throughout the day. As traffic, during our extended hours continues to build, we expect to drive improved productivity and leverage our labor investments over time. Occupancy increased 50 basis points to 8.3% and other store operating expense increased 10 basis points to 13.9%. We are encouraged by the consistent execution of our teams and remain well positioned to deliver strong store level profitability in the fourth quarter and beyond. Adjusted SG&A was $8.9 million in the quarter, or 13.4% of total revenue, in line with the prior year even as we now carry a full quarter of public company costs and down from 15% in the fourth quarter of 25 our first full quarter as a public company. Our approach to SG&A remains disciplined, as we continue to invest in our key strategic initiatives supporting sustained demand long term growth, and new store expansion. We also expect our SG&A to continue to leverage as we scale and grow. Consolidated Adjusted EBITDA was $8.5 million, up 22.1% over the prior year period. And an acceleration of approximately 500 basis points from the second quarter. Starting in the fourth quarter, we expect consolidated EBITDA growth to outpace revenue growth based upon the lap of prior year public company cost improved new store opening processes, and continued growth and learning from our afternoon evening dayparts. Preopening costs were $1.9 million, or 2.9% of total revenue. The increase over the prior year reflects accelerating our openings ahead of plan and our investments in grand opening support teams primarily in California, which supports higher volume openings. These investments will drive both short and long term growth. Turning to the balance sheet. We ended the quarter with $13.6 million in cash and cash equivalents, and access to $21 million under our revolving line of credit. Giving us ample liquidity to fund our growth. Our term loan balance was $19.5 million, and we drew $4 million on a revolving line of credit to balance working capital needs while collecting tenant improvement allowances associated with openings of our reverse build to suit locations. Remain focused on maintaining a disciplined balance sheet and supporting healthy operating cash flows. New unit development supporting our 2027 and 2028 pipeline remains key. As we continue to prioritize capital investments in expansion, while maintaining a focus on thoughtful site selection, balancing build types, and driving returns to support our short and long term growth targets. We continue to maintain flexibility in our approach to new store development and site selection, And as we have shared previously, we expect a near term shift towards more reverse build to suit projects. Enabling greater control over planning and our delivery of new stores. As Mark mentioned, the strength of our development pipeline continues to build. We now expect to open more stores in 2026 than initially anticipated, while the depth and quality of our 2027 pipeline gives us confidence in our ability to sustain that momentum. Turning to our outlook for the remainder of the year. Updates on guidance. The momentum we are seeing across the business underscores the durability of our growth strategy and the substantial opportunity that remains ahead of us. Our strong results for the quarter are fueled by our ongoing focus on strategic execution deepening customer engagement, and driving profitability. Reinforcing our confidence that BlackRock is well positioned to capitalize on the white space we see ahead as we scale the business and create long term value for our shareholders. We now expect 40 new store openings, up from 38 We continue to expect total revenue in the range of $255 million to $257 million, representing 27% growth over the prior year. Well ahead of our long term growth algorithm. The additional units will have a negligible contribution to 2026 but position us for continued success in 2027. We are excited by our growth trajectory, which is supported by our strong pipeline of new stores and significant white space opportunity ahead. We continue to expect same store sales growth in the mid single digits, We continue to expect Adjusted EBITDA to be in the range of $34 million to $35 million, representing 24% to 27% growth over the prior year. This implies fourth quarter Adjusted EBITDA growth of more than 30%, well ahead of revenue growth. We now expect capital expenditures of $47 million to $48 million, inclusive of tenant improvement allowances or of $64 million to $66 million, excluding tenant improvement allowances of $17 million to $18 million. As a reminder, our capital is predominantly focused on new store development supporting not only our 2026 pipeline of new stores, but also our 2027 pipeline. With approximately $14 million to $15 million of our total capital supporting growth in future years and a meaningful portion of our 2027 openings are already funded and underway. Our differentiated guest experience, premium menu offering, engaged teams, and scalable expansion model gives us confidence that this momentum will continue into the fourth quarter and through 2027. We remain confident in our ability to deliver on our long term growth targets 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. With that, I will turn it back to the operator to open the line for questions.

Operator: Thank you. We will now be conducting a question and answer session. We ask that you please limit yourself to 1 question and 1 follow-up. You may press star 2 if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset Please. 1 moment, please, while we pull for questions. Our first question is from Andrew North with Baird. Please proceed with your question.

Patrick: Great. Thanks, guys. This is Patrick on for Andrew North. Mark, you mentioned several drivers that are reaching new customers or opening up incremental new use cases across the dayparts. As we about the transaction drivers as you move into 2027, you help rack and stack those initiatives and how you think about the relative capacity of each to drive new guest growth from a magnitude perspective?

Mark D. Davis: Patrick, first off, thank you for joining us. I would reiterate that when you are thinking about our same store sales and how it is trending, it is really strong. And, again, as you heard, we reiterated mid single digit comp guides. You know, in the third quarter, we ran right at that 2.4 same store transactions. And when you think about that, we had given July, and we had talked about that trying to be, you know, up and make sure that everybody knew how we were doing. Obviously, the trend was good in the third quarter, and we are really confident in the trend in the fourth quarter. I wanna reiterate that on a 2 year basis, the third quarter transaction growth was 8.5 And, again, more on a year to date, when you go back and you look at the first and second quarter where we were negative, we are now gonna be positive in transactions for the year, which we feel really, really strong about. Regarding the drivers, Patrick, menu innovation is a big 1, and we talked about that. I think the segmentation is a big driver as well. And as we target loyalty, we are looking at daypart offers specifically using paid programmatic media and then the extended hours has certainly been a positive for us as well.

Patrick: Great. that is helpful. And then just a quick 1 on new units. Can you guys provide an update on how the 2026 cohort is tracking in terms of actual build out costs per unit relative to the $650 thousand-$700,000 average that you have been targeting? And just give us a sense of the variability around that mean. I mean, I am assuming that a new unit in California is coming in quite a bit higher than a new unit in Texas. So how is that geographic mix impacting the CapEx outlay?

Rodd Booth: Yes. I will take that 1, Patrick. As far as the 2026 class and how the capital is coming in, you guys have heard us say this before, but we intend to and really are working real hard on continuing to be efficient with our capital. You know, our average cost to build last year was about $6.50. As we came into the year, we are looking at the average cost this year between $700,000 and $750,000 and the classes coming in around $800,000 per store. that is, of course, inclusive of those tenant improvement allowances that offset some of that cash or capital out for us. And then in terms of markets across all of our markets, while, yes, California would be a higher cost market if we were doing, you know, those reverse build to suit deals or we are doing ground lease type deals, we are actually balancing the capital in California with conversions, which are really helping. And we are gonna do that and have been doing that across all of our markets, but we really see that as a big opportunity in California. Especially those, again, second gen buildings that have the drive through. It works really well for us. It allows us to prioritize the lobby, but also not go out and really see the capital grow substantially in terms of a per unit cost in California. And so we are gonna continue to balance it. You know, we have modeled our capital continue to grow as we grow, but still trying to be really efficient with our dollars.

Patrick: that is helpful. Appreciate the color. Thanks, guys.

Operator: Our next question is from Brian M. Vaccaro with Raymond James. Please proceed with your question.

Brian M. Vaccaro: Hi, thanks and good evening. I wanted to circle back on the expanded hours. And I know it is still early, but could you elaborate on what you are seeing in terms of the customer response and maybe help us frame a little bit the sales or comp benefit that you have seen since the system wide launch in July?

Mark D. Davis: Sure. Thanks for joining us, Brian. So on the extended hours, I think I would start with reminding everybody, we started this right at the end of June, beginning of July. What we came across. And, again, because it is so early, we came back and said, hey. It is driving not only same store sales, it is driving same store transactions. And we see it as a real positive for us. Bryan, we are about 70% of our stores running with the extended hours, and we have decided to make that permanent. You know, a couple things I would say there. Again, really pleased with the positive performance. I think 1 of the things that has come out of it is we have broadened the food off offering. And that menu innovation really has supported the check growth, which Rodd will speak to later. The other thing that has been exciting is that when you look at the extended hours, while they are profitable and they are helping with the same store sales and the transaction Another real positive is the hours prior to the hour that we added, has been really beneficial and grown as well. And then the last thing I would bring up that I think is important when you look at our new stores that we have opened, we open them with the extended hours, And what we are seeing is now not only higher AUVs and higher trends coming out of that new store and, again, the cohort, which has been exciting, But it has certainly, helped drive some of the performance. And I think when you look at California as an example, you have got Mackenzie, You have got Evie. You have got Grayson, and you have got Lauren. They have done an outstanding job, and what is occurred is we have had some record breaking opening weeks because of it. And so again, at the moment, we like it very much. it is been great for the company, great for the consumer, and we are gonna continue to do it.

Brian M. Vaccaro: Alright. that is very helpful. And then back to the topic of segmentation and personalization, can you elaborate just on how much engagement is up year on year? There anything you can share just around the percentage of customers that open or view your or that are redeeming your offers? Just if you could just broaden that part of the conversation, that would be great. Thanks again.

Mark D. Davis: Thank you, Brian. So we have never actually given the exact percentages But regarding segmented loyalty, we continue to scale the personalized offers. You are gonna see continued leverage around the behavioral data. And that is, again, what we are sending to our loyalty guests. We are trying to give them relevant timely, and personalized offers. I think some of the things that is been really great, and Jessica and her team have done great with it, We have the triggered campaign journeys which basically is based on real time guest behavior. And when we do that, as an example of a guest purchase food, we are able to automate an offer that drives them back in 3 days and reaffirms that behavior in a attachment. I would go a step further. We brought up the CDP, which is the gap between loyalty and non loyalty. This has really been great from Jessica. And what that has done is engage directly with nonloyalty guests who have previously visited And what it is a targeted offer We move into personalized segmented offers, which builds obviously deeper relationships. And at the top of the funnel initiative, We are gonna continue to test and refine that platform, but it is been really great for us And as we said in the remarks, we are now pushing in the high sixties, almost 69%. On the portion of transactions that are loyalty, and that is been really strong as well.

Brian M. Vaccaro: that is helpful. Thank you.

Operator: Our next question is from Sharon Zackfia with William Blair. Please proceed with your question.

Sharon Zackfia: Hi. Thanks for taking the question. I had a follow-up on extended hours Can you kind of help us think about the margin profile of the extended hours? And then from a demographic standpoint, are you bringing in kind of a different kind of customer than you see during the rest of the day? And what does that beverage food mix look like during those later, evening hours?

Mark D. Davis: I think, Sharon, what we have tried to do on the extended hours, you brought up the demographic. It is certainly a younger demographic. You know, what we-- when we made the decision to make them permanent, they are definitely profitable. They are contributing to the same store sales, and they are contributing to the transactions. I think when you look at food attachment, second part of your question, we are growing in every day part and food has certainly been a benefit of the extended hours. But I would also say to you that it is not as good as we want it to be, and I think we will continue to drive that. I think when we look at it, we have a peer group that is really successful in the afternoon and evening, and we see that as an opportunity. And we see through our engagement, through our dining rooms, and certainly through the offerings we provide, including food, that it will continue to grow and be more successful.

Sharon Zackfia: Thanks for that. And then a follow-up on food. You kind of mentioned a lot of runway to expand in sweets, savory, snacks, Can you remind us of kind of how you test new food before you decide to roll it out more broadly, kind of what that what that process looks like and what your key parameters are in terms of either attach or ease of operation.

Mark D. Davis: Absolutely. I think first off, and you hit this right on the head, we wanna have a menu that does not grow substantially. And so I think as we bring things on, we take things off. You know, you specifically asked about prioritizing investments. And I think we want items that drive attachment certainly ticket and day part expansion. Think we wanna strengthen the value and the relevance of our menu. I go to grilled cheese. We are really encouraged by it. And, again, when you look at the grilled cheese, when you look at the cake pops, really, when you look at anything that we have added, we have always started with the l perspective. And what that does is really drives the ability to see how it performs with the guests. But I think even more important, it allows us to see how we execute with the teams, And really what that does, you know, when you are looking at I will use the cake pop pops as an example. Really, we decided to put a cake pop on the menu that became part of that core menu. But then as an example, we have dropped in rotational cake pops. They are great on the grab and go great for the team because it is easy, and it gives our customers something new to try. We did the same thing with cold foams and things like that as well. And so the idea again is that through the LTO process, we are gonna do our very best to make sure we iron out any kinks. We make sure that it is really relevant to the customer. And I think back to your point in the question, we are gonna make sure the team can execute against it.

Sharon Zackfia: Thank you.

Operator: Our next question is from Rahul Krotthapalli with JPMorgan. Please proceed with your question.

Rahul Krotthapalli: Hey guys, thanks for all the detail. Mark, the question is on the new store productivity. I think we did some more incremental drag versus the same store sales reported. Can you remind us, some of the drivers there given most of the stores are open in Arizona and Colorado as expected? And then you did mention California, we are opening pretty strongly. I think even above 1.5 to 1.6 million in the past, Can you help us reconcile how the rest of the stores were opening? And then also, if there is any headwind in Colorado and Arizona that we are still seeing today.

Mark D. Davis: Of course, Rahul. I appreciate you joining us very much. So I think for starters, we opened 11 stores in the quarter. We did them in California. We did them in Arizona. We did them in Colorado. And we did them in Texas. 1 of the things that has worked out really well for us, I think, from point of differentiation is that we are able to do a variety of build types, and that is really helped us with not only landlords, but site selection. I think when you look at the pipeline, we have had strength in all of those markets and their performing very well. I would say if you look at the opportunity in the quarter, when you look at where we opened them, we brought up that we had record breaking that first week in the Empire and Riverside, etcetera. That is a from San Diego. And so when you think about it, you know, when you think about how we opened it, we brought in extra team members, and we wanted to make sure we provided the great experience and all of the above. And it is worked out really well. I think what is been great. And, again, Grace and Lauren McKenzie in that Los Angeles area, they continue to get leverage and get better every day. But I would say if you look at the third quarter, 1 of our opportunities is we went into Killeen. We went into Prescott, Arizona. We went into Los Angeles, and these are new for us, which caused us to fly more people in and make sure that the experience was great. That will continue to leverage as we more, and I think we will be in a really, really great place there.

Rahul Krotthapalli: Thanks for that. And then staying on the top the real estate market is just getting more and more competitive as we speak. And I think gap between the areas like, A or A plus sites are the ones that are most sought after is expanding versus the rest of the sites? Like, how are you navigating this approaching expansion in some of the nascent and highly competitive markets like California, or even in Colorado where you. there is so much growth ahead. Kind of conversations or concessions are you having with landlord on the. On what are they able to accommodate in the current landscape? And thank you for the question.

Mark D. Davis: I. When you look at competition, we, as you know, Rahul, have had competition since we started. I think when you look at the new markets now, 1 of our very best advantages is, again, that we can come in and we can do a variety of build types. 1 of the things that has helped us in a big way is a smaller company, we are a little bit more nimble. And when you think of yourself as a landlord, they want somebody that can come in, that can go through the permitting quickly, that can adapt and get that open and get it going. And what that does for them is it allows them to charge rent faster. And so I think that is a big advantage for us. And then I think when you look at our lobbies our drive throughs, all the above, And, again, you have seen some of these in California, but we have the ability to come in and take over a conversion. And we can convert that in a way when you think about John, you think about Ted, you think about Tony and the way we are converting these stores, we are able to make a variety of different sites work. And as we see concepts go out and we take over those particular stores, not only are we quick in getting it designed and built and up and running, but I think, again, from a landlord standpoint, when you look at the peer group, there are very few out there that can do what we can do. And that is been a significant strength of ours.

Rahul Krotthapalli: Thanks for all the detail. Thank you.

Operator: Our next question is from Brian Harbour with Morgan Stanley. Please proceed with your question.

Brian Harbour: Yes, thanks. Hi, guys. Mark, just to that kind of, you know, what makes a good conversion? And I guess, is that something that is more applicable specifically in California? You know, maybe talk about the real estate market there.

Mark D. Davis: Sure. I think and you guys cover this, so you are aware of this every day, Brian. When you think about concepts that go out, you have landlords that are typically, hey. I want somebody to come in can take it over, can design it, can make it relevant, I think us going public a year ago has certainly helped, and there are people that very much want that particular site to be a BlackRock. I think the second part is that when you look at it, because of our dining rooms, we do not need that long, long stack that comes with not having a dining room. And so what is the occurred is that anytime there is a conversion that comes up, Ted, John, and team are quickly getting those opportunities And then, really, when you said what makes a great conversion, we have gotten better at the follow-up prior to signing the lease. And I think what that does is helps make sure that we are managing the costs appropriately, which, again, is getting that great, you know, first year 35% cash on cash, Second year, 40% cash on cash. And so I would say if we have learned anything, our follow-up prior to signing the lease has been better and that has helped with the cost of build.

Brian Harbour: Okay. Sounds good. And you know, you have had that kind of modest pressure on both labor and other operating. And I mean, as you mentioned, some of this is this labor investment. Obviously, you have done a little bit more marketing. Is that something that we should. It. You know, it seems like that is worked well in your view. I is that something we should expect to continue as we you know, think about 2027 and 2028 as well?

Rodd Booth: Yes, I will take that 1, Brian. Thanks for the question. Yes, we spoke to the 110 basis points of margin in terms of the third quarter 25. I think to Mark's point, and he mentioned it, but when we you know, really invested in those what we see as a giant opportunity, afternoon and evening, particularly with the extended hour dayparts, And then, again, you look at some of our openings, and we had more travel teams than we had bigger grand opening teams. There were certainly some investment there in terms of labor. And so while the 110 basis points was more than you guys have typically seen from us in the past, we wanna make sure we are showing up supporting the team, and providing a great guest experience. I think that 110 we really see an opportunity for that to come down some, especially in those afternoon, evening dayparts as we continue to build the sales and leverage those sales into better margin. But, you know, I think generally, when you think about the fourth quarter, margin, it is probably gonna look pretty similar to the third quarter. And then, again, you know, when we look at the margin for the whole year 2026, we had said it before, but we ended 2025 at a 2022, and we expect to be very similar to that this year as well.

Operator: Our next question is from Andrew Barish with Jefferies. Please proceed with your question.

Andrew Barish: Hey, guys. Great quarter. Just another follow-up on well, the labor line, partly, but seems like compared to a few months ago, the opening cadence was perhaps a bit delayed than initially expected. Just wondering how much that of an impact that had, not just on margins, but on revenues? And the full year guide being reiterated given those strong comps?

Rodd Booth: Yes. Thanks for the question, Andrew. In terms of opening cadence, we have actually gotten better each quarter throughout each quarter. The third quarter, we were better than the second. And I think, you know, even going back to our comments in the past, more reverse build to suits stores given us the chance to really be more predictable with the openings and the cadence there. In terms of overall revenue, you know, 30% revenue growth in the third quarter, we were very pleased with that. We reiterated the 255 to 257 million in sales for the year, and we expect to have a great fourth quarter as well. And so, you know, in terms of the comp, 5.8, we expect to have a really strong fourth quarter comp in comparison because we saw that momentum build through the third quarter. And then, really, you know, I mentioned it in the remarks, but, you know, those incremental stores that we have added certainly are later in the quarter. And so there is not gonna be a huge lift in terms of our benefit in terms of sales in the fourth quarter, but it is really going to get off to the right start and benefit 2027.

Andrew Barish: Great. Just a quick follow-up. If Certainly update on your wage inflation rates and commodity inflation, which seems to be perhaps a bit benign besides coffee still elevated. Is that all fair?

Rodd Booth: Yeah. We have not really seen throughout the entire year and even the third quarter any meaningful pressure in terms of inflation, the supply chain, we feel is very steady for us. I think our procurement teams are doing a great job balancing both purchasing of beans and everything else in that regard. No meaningful pressure. And, you know, I mentioned earlier in the year, our coffee is about 3% of our sales, you know, coffee purchases. And we have seen some relief there this year. I think I had mentioned in the past first quarter, we expected maybe 50 basis points in the second half of the year. We have seen about 30 basis points of that, so it is gotten better, and we are still lapping high higher costs from a year ago. And so in terms of cost inflation, labor, you know, labor's been pretty consistent every year the last couple of years, you know, that 3% to 4%. And then overall, cost of goods and supply chain, feel strongly about.

Andrew Barish: Thank you.

Operator: We have reached the end of the question and answer session. I would like to turn the floor back over to Mark D. Davis for closing comments.

Mark D. Davis: Thank you. I would start with a year ago that BlackRock became a public company, and I am really proud of what we have accomplished in that time. We have delivered this progress against a really tough consumer backdrop with guests being highly selective about where they spend. They continue to choose BlackRock, And I think when you think about that, and again, the health of the consumer it is obviously more challenging than it was a year ago, but I wanna make sure that everybody hears this. When you think about our same store sales in quarter 1, we were at 5.2. And the 2 year trend was 14.4, which was really strong. As you think about it as an investor, and, again, the idea that you wanna see that trend continue to get stronger, In quarter 2, we were at 4.2, but the 2 year was 15.1, so up again from 14.4. And if you thought about quarter 3, we again just ran a 5.8 with a 2 year of 16.6. And so 14.4, 15.1, 16.6 on a 2 year. And if you thought about how do we wanna grow those same store sales, we wanna do it through transactions. And, again, transactions were -0.6 in the first quarter with a 2 year stack of 5.5, In the second quarter, they were -2 with a 2 year stack of 8.4. And, again, both of those were lapping the loyalty rollout. And then as everybody is aware, Rodd and I tried to make sure that everyone knew how July looked on transactions We were at 1.7 and for the quarter ended at 2.4, which again shows a really strong trend and that third quarter again did with a 2 year of 8.5. I think the important thing that I want everybody to hear is we reaffirmed our guide. And if you do the math of the first 3 quarters, you will see that even with that strong trend, on same store sales and same store transactions, we believe that the fourth quarter will be our strongest in both same store sales and same store transactions, which is exciting. Finally, I just wanna thank our team members, our customers, and our stockholders for their continued support We are beyond grateful for your trust, and we look forward to updating you on the progress next quarter. Thank you, and have a great day.

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