BRC Inc. (NYSE:BRCC) Q3 2023 Earnings Call Transcript November 9, 2023 4:30 PM ET Company Participants Tanner Doss - VP of IR Evan Hafer - Founder and CEO Chris Mondzelewski - President Steve Kadenacy - CFO Conference Call Participants Michael Baker - DA Davidson Sarang Vora - Telsey Group Joe Altobello - Raymond James Jon Andersen - William Blair Matt McGinley - Needham and Company Operator Greetings and welcome to the Black Rifle Coffee Company's Third Quarter 2023 Earnings Call. At this time, all partici ...

Our barter arrangement may not provide the benefits we expect. If, for any reason, our co-manufacturers or raw material suppliers cannot fulfill their obligations, or our contract with one or more of our co-manufacturers is terminated, or if our needs are less than we have contracted for, our business may suffer. We have historically experienced meaningful variability of our needs for co-manufacturing and various components of co-manufactured goods, and if we do not effectively manage those arrangements or ...

BRC Inc. (NYSE:BRCC) Q2 2023 Earnings Conference Call August 10, 2023 4:30 PM ET Company Participants Tanner Doss – Vice President-Investor Relations Evan Hafer – Founder and Chief Executive Officer Tom Davin – Co-Chief Executive Officer Greg Iverson – Chief Financial Officer Chris Mondzelewski – President Conference Call Participants Joe Altobello – Raymond James Keegan Cox – D.A. Davidson Jon Andersen – William Blair George Kelly – ROTH Capital Partners Matt McGinley – Needham & Company Operator Greetings ...

FORM 10-Q Title of each class Trading Symbol(s) Name of each exchange on which registered Class A common stock, $0.0001 par value BRCC New York Stock Exchange ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ________ to ________ Commission file number 001-41275 (Exact name of registrant as specified in its charter) (801) 874-1189 Registrant's telephone number, including area code Indicate by check mark whether the registrant: (1) has fi ...

Financial Data and Key Metrics Changes - Total revenue increased by 27% to $83.5 million in Q1 2023, compared to $65.8 million in Q1 2022, driven primarily by the wholesale channel which grew by 82% [13][50] - Gross margin for Q1 was 33%, a decrease of approximately 230 basis points from 35.3% in Q1 2022, attributed to rising costs of coffee and RTD raw materials [51] - Adjusted EBITDA loss improved to $5.1 million in Q1 2023 from a loss of $6.3 million a year ago, indicating progress towards profitability [53] Business Line Data and Key Metrics Changes - Revenue from the wholesale channel reached $40 million, up 82% from $21.9 million in Q1 2022, marking it as the largest revenue driver for the quarter [50][116] - Revenue from Outposts increased by 21% to $6.7 million, driven by an increase in company-owned store count to 16 [14] - Direct-To-Consumer revenue decreased by 4% to $36.8 million, primarily due to reduced digital advertising spend [29] Market Data and Key Metrics Changes - The company maintained a market share of 3.8% in the overall Walmart coffee segment, achieving significant growth without prior marketing or promotion [47][36] - Ready-To-Drink (RTD) percent ACV more than doubled to 38.5% from 15.5% a year ago, driven by the addition of 16,000 incremental doors [120] Company Strategy and Development Direction - The company is shifting focus from maximizing growth to profit and capital-efficient growth, particularly emphasizing the food, drug, and mass (FDM) channel [8][25] - Plans to enter one or more new FDM accounts in the second half of 2023, aligning with Walmart's reset windows [117] - The company aims to optimize marketing spend to enhance growth across all channels, including Direct-To-Consumer [12][57] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's ability to adapt to changing economic conditions and maintain growth [8][24] - The company reaffirmed its full-year outlook of revenue between $400 million to $440 million, with gross margin targets of 36% to 37.5% and positive adjusted EBITDA of $5 million to $20 million [54][119] Other Important Information - The company has committed to supporting the veteran community through various initiatives, including donations from product sales [10][23] - The addition of a new Chief Marketing Officer is expected to enhance marketing strategies and drive growth [12][112] Q&A Session Summary Question: What are the top priorities for the new Chief Marketing Officer? - The focus will be on aligning the omnichannel business with marketing initiatives and optimizing marketing dollars to reach the customer base effectively [55][57] Question: How is the company deepening its relationship with Walmart? - Increased marketing efforts are planned to drive awareness and trial, including the first end cap promotion at Walmart [40][41] Question: What is the outlook for inventory levels by the end of the year? - Inventory levels are expected to normalize in the third and fourth quarters as sales volumes ramp up [69] Question: Can you provide an update on market share growth at Walmart? - The company has maintained a 3.8% market share and is optimistic about driving trial and awareness through promotional efforts [36][64] Question: What is the expected impact of the RTD promotion on gross margins? - The promotion will have some negative impact on Q2 gross margins, but is expected to drive customer trial and market share [32][58]

Gift Cards 10 For those points that are earned through other activities, the Company recognizes the redemption of these points as a discount to the transaction price at time of sale. Refer to Note 5, Deferred Revenue and Gift Card Liability for information about changes in the current portion of deferred revenue and gift card liability for the three months ended March 31, 2023 and 2022. The franchise agreements also typically require upfront franchise fees such as initial fees paid for the execution of a fr ...

BRC, Inc. (NYSE:BRCC) Q4 2022 Earnings Conference Call March 15, 2023 4:30 PM ET Company Participants Tanner Doss - VP, Investor Relations Evan Hefer - Founder & CEO Tom Davin - Co-CEO, Black Rifle Coffee Company Gregory Iverson - CFO Toby Johnson - Chief Operating Officer Heath Nielsen - Chief Retail Officer Conference Call Participants Michael Baker - D.A. Davidson Bill Chappell - Truist Securities Joe Altobello - Raymond James Steve Powers - Deutsche Bank Operator Greetings. Welcome to the Black Rifle Co ...

• Failure by third parties involved in the supply chain of coffee, store supplies or merchandise to produce or deliver products, including as a result of ongoing supply chain disruptions, or our failure to effectively manage such third parties; • Failure to successfully compete with other producers and retailers of coffee; • Failure to properly manage our rapid growth and relationships with various business partners; • Failure to successfully integrate into new domestic and international markets; • Failure ...

BRC, Inc. (NYSE:BRCC) Q3 2022 Earnings Conference Call November 10, 2022 8:00 AM ET Company Participants Tanner Doss - VP, Investor Relations Tom Davin - Co-CEO, Black Rifle Coffee Company Evan Hefer - Founder & CEO Gregory Iverson - CFO Heath Nielsen - Chief Retail Officer Toby Johnson - Chief Operating Officer Conference Call Participants George Kelly - ROTH Capital Partners Operator Greetings, and welcome to the Black Rifle Coffee Company Third Quarter 2022 Earnings Call. [Operator Instructions]. I would ...

[Part I - Financial Information](index=5&type=section&id=Part%20I%20-%20Financial%20Information) [Financial Statements (unaudited)](index=5&type=section&id=Item%201.%20Financial%20Statements%20(unaudited)) The company presents its unaudited consolidated financial statements for the period ended September 30, 2022 [Consolidated Balance Sheets](index=6&type=section&id=CONSOLIDATED%20BALANCE%20SHEETS) Total assets grew to $208.1 million and stockholders' equity became positive due to the Business Combination Consolidated Balance Sheet Highlights (in thousands) | Account | Sep 30, 2022 (unaudited) | Dec 31, 2021 (audited) | | :--- | :--- | :--- | | **Total Current Assets** | $143,888 | $53,025 | | Cash and cash equivalents | $71,211 | $18,334 | | Inventories | $40,933 | $20,872 | | **Total Assets** | **$208,100** | **$87,082** | | **Total Current Liabilities** | $61,199 | $59,018 | | **Total Liabilities** | **$93,630** | **$82,292** | | **Total Stockholders' Equity** | **$114,470** | **($149,491)** | [Consolidated Statements of Operations](index=7&type=section&id=CONSOLIDATED%20STATEMENTS%20OF%20OPERATIONS) The company reported a Q3 net loss of $16.1 million and a nine-month net loss of $318.0 million Statement of Operations Summary (in thousands) | Metric | Q3 2022 | Q3 2021 | Nine Months 2022 | Nine Months 2021 | | :--- | :--- | :--- | :--- | :--- | | **Revenue, net** | **$75,494** | **$60,106** | **$207,695** | **$161,253** | | Gross Profit | $23,945 | $24,063 | $69,714 | $65,008 | | Operating Loss | ($15,618) | ($3,146) | ($48,301) | ($7,510) | | **Net Loss** | **($16,102)** | **($4,053)** | **($318,014)** | **($9,238)** | | Net Loss per Share (Basic & Diluted) | ($0.08) | N/A | ($1.54) | N/A | [Consolidated Statements of Stockholders' Equity (Deficit)](index=8&type=section&id=CONSOLIDATED%20STATEMENTS%20OF%20STOCKHOLDERS'%20EQUITY%20(DEFICIT)) The company's capital structure transformed from a deficit to $114.5 million in equity post-Business Combination - The Business Combination in February 2022 resulted in the conversion of members' deficit into stockholders' equity, including the issuance of **44,009,874 shares of Class A Common Stock** and **139,106,323 shares of Class B Common Stock**[26](index=26&type=chunk) - Vesting events for earn-out shares (First and Second Tier) and a warrant redemption led to the issuance of additional Class A common stock throughout the period[26](index=26&type=chunk) - By September 30, 2022, the company had **53,765,690 shares of Class A Common Stock** and **157,794,609 shares of Class B Common Stock** issued and outstanding[29](index=29&type=chunk) [Consolidated Statements of Cash Flows](index=11&type=section&id=CONSOLIDATED%20STATEMENTS%20OF%20CASH%20FLOWS) Financing activities provided $151.8 million, resulting in a net cash increase of $52.9 million for the period Cash Flow Summary (Nine Months Ended Sep 30, in thousands) | Activity | 2022 | 2021 | | :--- | :--- | :--- | | Net cash used in operating activities | ($78,971) | ($10,654) | | Net cash used in investing activities | ($19,950) | ($11,755) | | Net cash provided by financing activities | $151,798 | $769 | | **Net increase (decrease) in cash** | **$52,877** | **($21,640)** | | **Ending cash and cash equivalents** | **$71,211** | **$13,992** | - Financing activities in 2022 were dominated by **$338.0 million in proceeds from the Business Combination**, offset by $127.9 million for distribution and redemption of Series A preferred equity and $31.6 million in Business Combination costs[31](index=31&type=chunk) [Notes to Consolidated Financial Statements](index=13&type=section&id=NOTES%20TO%20CONSOLIDATED%20FINANCIAL%20STATEMENTS) Notes detail accounting policies, the Business Combination, revenue channels, and subsequent events - The Business Combination on February 9, 2022, was accounted for as a **reverse recapitalization**, with Authentic Brands as the accounting acquirer[37](index=37&type=chunk)[41](index=41&type=chunk) Revenue by Sales Channel (Nine Months Ended Sep 30, in thousands) | Channel | 2022 | 2021 | | :--- | :--- | :--- | | Direct to Consumer (DTC) | $113,376 | $115,656 | | Wholesale | $78,173 | $38,608 | | Outpost | $16,146 | $6,989 | | **Total net sales** | **$207,695** | **$161,253** | - Subsequent to the quarter, the company initiated a voluntary withdrawal of certain RTD products, expecting to issue credits of **$561 thousand** and recording **$2.875 million in cost of goods sold** for replacements and write-offs[152](index=152&type=chunk) - In November 2022, the company entered into a new **$65 million senior revolving credit facility**, replacing its existing facility[153](index=153&type=chunk) [Management's Discussion and Analysis (MD&A)](index=31&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Q3 revenue grew 26% to $75.5 million, but gross margin declined to 31.7% due to mix shift and costs [Results of Operations: Q3 2022 vs. Q3 2021](index=32&type=section&id=Comparison%20of%20the%20three%20months%20ended%20September%2030%2C%202022%20to%20the%20three%20months%20ended%20September%2030%2C%202021) Q3 revenue grew 26% to $75.5 million, while gross margin fell to 31.7% on higher costs and write-offs Q3 2022 vs Q3 2021 Performance (in thousands) | Metric | Q3 2022 | Q3 2021 | $ Change | % Change | | :--- | :--- | :--- | :--- | :--- | | Revenue, net | $75,494 | $60,106 | $15,388 | 26% | | Gross Profit | $23,945 | $24,063 | ($118) | 0% | | Gross Margin | 31.7% | 40.0% | -830 bps | N/A | | Total Operating Expenses | $39,563 | $27,209 | $12,354 | 45% | - Wholesale revenue increased **66% to $32.2 million**, driven by entry into the Food-Drug-Mass (FDM) channel and expansion of RTD doors from 35,800 to 70,400 year-over-year[172](index=172&type=chunk) - Outpost revenue increased **65% to $5.2 million**, primarily due to an increase in company-owned stores from four to eleven year-over-year[173](index=173&type=chunk) [Results of Operations: Nine Months 2022 vs. 2021](index=33&type=section&id=Comparison%20of%20the%20nine%20months%20ended%20September%2030%2C%202022%20to%20the%20nine%20months%20ended%20September%2030%2C%202021) Nine-month revenue rose 29% to $207.7 million, offset by lower margins and higher operating expenses Nine Months 2022 vs 2021 Performance (in thousands) | Metric | Nine Months 2022 | Nine Months 2021 | $ Change | % Change | | :--- | :--- | :--- | :--- | :--- | | Revenue, net | $207,695 | $161,253 | $46,442 | 29% | | Gross Profit | $69,714 | $65,008 | $4,706 | 7% | | Gross Margin | 33.6% | 40.3% | -670 bps | N/A | | Total Operating Expenses | $118,015 | $72,518 | $45,497 | 63% | - Wholesale revenue grew **102% to $78.2 million**, and Outpost revenue grew **131% to $16.1 million**[181](index=181&type=chunk)[182](index=182&type=chunk) - The company recognized non-cash, non-operating losses of **$209.7 million from earn-out liability**, **$56.7 million from warrant liability**, and **$2.3 million from derivative liability**, all related to the Business Combination[190](index=190&type=chunk)[192](index=192&type=chunk)[193](index=193&type=chunk)[195](index=195&type=chunk) [Liquidity and Capital Resources](index=36&type=section&id=Liquidity%20and%20Capital%20Resources) The company held $71.2 million in cash and secured a new $65.0 million credit facility post-quarter - As of September 30, 2022, the company had **$71.2 million in cash and cash equivalents** and **$21.0 million of available borrowings** under credit facilities[197](index=197&type=chunk) Cash Flow Summary (Nine Months Ended Sep 30, in thousands) | Activity | 2022 | 2021 | | :--- | :--- | :--- | | Cash from Operating Activities | ($78,971) | ($10,654) | | Cash from Investing Activities | ($19,950) | ($11,755) | | Cash from Financing Activities | $151,798 | $769 | - In November 2022, the company entered into a new **$65.0 million senior revolving credit facility**, replacing its existing facility and repaying a $14.0 million outstanding balance[202](index=202&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=38&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) Primary market risks include commodity prices (coffee beans), interest rates, and inflation - **Commodity price risk for coffee beans** is a primary market risk, as supply and price are affected by weather, natural disasters, and political/economic conditions in producing countries[213](index=213&type=chunk)[214](index=214&type=chunk) - The company is exposed to **interest rate risk** through its variable-rate credit facility and equipment financing loan[215](index=215&type=chunk) - **Inflation** has increased the cost of products, overhead, and freight, which the company has partially offset with price increases[216](index=216&type=chunk) [Controls and Procedures](index=38&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded that disclosure controls and procedures were effective with no material changes - Management concluded that the company's **disclosure controls and procedures were effective** as of September 30, 2022[218](index=218&type=chunk) - **No material changes** to the internal control over financial reporting occurred during the three months ended September 30, 2022[219](index=219&type=chunk) [Part II - Other Information](index=39&type=section&id=Part%20II%20-%20Other%20Information) [Legal Proceedings](index=39&type=section&id=Item%201.%20Legal%20Proceedings) Current legal proceedings are not expected to have a material adverse effect on the company - The company is involved in various legal proceedings from the ordinary course of business[223](index=223&type=chunk) - Management does not believe any pending claims will have a **material adverse effect** on the company's financial results[223](index=223&type=chunk) [Risk Factors](index=39&type=section&id=Item%201A.%20Risk%20Factors) No material changes to previously disclosed risk factors were reported for the period - **No material changes** to risk factors were reported for the quarter[224](index=224&type=chunk) [Unregistered Sales of Equity Securities and Use of Proceeds](index=39&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) This section is not applicable for the current reporting period - Not applicable[225](index=225&type=chunk) [Other Information](index=39&type=section&id=Item%205.%20Other%20Information) No other information was required to be disclosed during the period - None[228](index=228&type=chunk) [Exhibits](index=39&type=section&id=Item%206.%20Exhibits) This section lists all exhibits filed with the report, including officer certifications and XBRL data - Filed exhibits include **CEO and CFO certifications** pursuant to Sarbanes-Oxley Act Sections 302 and 906[229](index=229&type=chunk) - **Inline XBRL documents** are included as part of the filing[229](index=229&type=chunk)[231](index=231&type=chunk)