BRC (BRCC) - 2025 Q2 - Quarterly Report

Cautionary Note Regarding Forward-Looking Statements This section outlines forward-looking statements, noting they are based on current expectations and involve risks that could cause actual results to differ - Forward-looking statements are based on current expectations and beliefs, but actual results may differ due to various risks and uncertainties[7][9] - Key risk factors include competition, ability to manage growth, retain employees, financial performance, brand perception, supply chain management, and regulatory compliance[7][10] Part I - Financial Information Item 1. Financial Statements This section presents BRC Inc.'s unaudited consolidated financial statements, including balance sheets, statements of operations, stockholders' equity, and cash flows, with detailed notes Consolidated Balance Sheets The Consolidated Balance Sheets show BRC Inc.'s financial position as of June 30, 2025, and December 31, 2024, highlighting changes in assets, liabilities, and stockholders' equity Consolidated Balance Sheets (in thousands) | Metric | June 30, 2025 (in thousands) | December 31, 2024 (in thousands) | Change (in thousands) | % Change | | :-------------------------------- | :----------------------------- | :------------------------------- | :-------------------- | :------- | | Cash and cash equivalents | $4,304 | $6,810 | $(2,506) | -36.8% | | Total current assets | $106,242 | $95,471 | $10,771 | 11.3% | | Total assets | $225,253 | $227,382 | $(2,129) | -0.9% | | Total current liabilities | $82,106 | $75,218 | $6,888 | 9.2% | | Total liabilities | $189,603 | $177,886 | $11,717 | 6.6% | | Total stockholders' equity | $35,650 | $49,496 | $(13,846) | -28.0% | - Assets held for sale increased from $0 to $4,294 thousand, indicating a reclassification of property for sale[13] - Inventories, net increased by $5,935 thousand (13.9%) from $42,647 thousand to $48,582 thousand[13] Consolidated Statements of Operations The Consolidated Statements of Operations detail the company's revenues, costs, and expenses, leading to net income or loss for the three and six months ended June 30, 2025 and 2024 Metric (in thousands) | Metric (in thousands) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Change ($) | Change (%) | | :-------------------- | :------------------------------- | :------------------------------- | :--------- | :--------- | | Revenue, net | $94,837 | $89,017 | $5,820 | 6.5% | | Cost of goods sold | $62,664 | $51,758 | $10,906 | 21.1% | | Gross profit | $32,173 | $37,259 | $(5,086) | -13.6% | | Operating income (loss) | $(12,624) | $978 | $(13,602) | -1390.8% | | Net income (loss) | $(14,512) | $(1,374) | $(13,138) | -956.2% | | Net income (loss) attributable to BRC Inc. | $(5,329) | $(482) | $(4,847) | -1005.6% | | Basic and diluted EPS | $(0.07) | $(0.01) | $(0.06) | -600.0% | Metric (in thousands) | Metric (in thousands) | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | Change ($) | Change (%) | | :-------------------- | :----------------------------- | :----------------------------- | :--------- | :--------- | | Revenue, net | $184,812 | $187,409 | $(2,597) | -1.4% | | Cost of goods sold | $120,165 | $107,966 | $12,199 | 11.3% | | Gross profit | $64,647 | $79,443 | $(14,796) | -18.6% | | Operating income (loss) | $(18,056) | $4,934 | $(22,990) | -466.0% | | Net income (loss) | $(22,357) | $482 | $(22,839) | -4738.4% | | Net income (loss) attributable to BRC Inc. | $(8,216) | $67 | $(8,283) | -12362.7% | | Basic and diluted EPS | $(0.10) | $0.00 | $(0.10) | - | Consolidated Statements of Stockholders' Equity The Consolidated Statements of Stockholders' Equity present changes in equity components for BRC Inc. and non-controlling interests for the six months ended June 30, 2025 and 2024 - Total stockholders' equity decreased from $49,496 thousand at January 1, 2025, to $35,650 thousand at June 30, 2025, primarily due to net losses attributable to BRC Inc. and non-controlling interests[19] - Equity-based compensation contributed $2,591 thousand and $2,740 thousand for the three months ended March 31, 2025, and June 30, 2025, respectively[19] - Net loss attributable to BRC Inc. was $(2,888) thousand for the quarter ended March 31, 2025, and $(5,329) thousand for the quarter ended June 30, 2025[19] Consolidated Statements of Cash Flows The Consolidated Statements of Cash Flows summarize cash generated from or used in operating, investing, and financing activities for the six months ended June 30, 2025 and 2024 Cash Flow Activity (in thousands) | Cash Flow Activity (in thousands) | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | Change ($) | Change (%) | | :-------------------------------- | :----------------------------- | :----------------------------- | :--------- | :--------- | | Operating activities | $(7,464) | $7,212 | $(14,676) | -203.5% | | Investing activities | $(2,147) | $(3,977) | $1,830 | -46.0% | | Financing activities | $7,105 | $(7,191) | $14,296 | 198.8% | | Net decrease in cash, cash equivalents and restricted cash | $(2,506) | $(3,956) | $1,450 | -36.7% | | Cash and cash equivalents, end of period | $4,304 | $9,642 | $(5,338) | -55.4% | - Net cash used in operating activities significantly increased by $14.7 million, primarily due to a net loss of $22.4 million in 2025 compared to net income of $0.5 million in 2024[21][198] - Net cash provided by financing activities increased by $14.3 million, driven by a net increase in ABL facility borrowings and $1.0 million from a legal settlement[21][200] Index for Notes to Consolidated Financial Statements This section provides an index to the detailed notes accompanying the consolidated financial statements, outlining the specific topics covered in each note Notes to Consolidated Financial Statements These notes provide detailed information and explanations regarding accounting policies, financial statement line items, and other relevant disclosures for BRC Inc.'s consolidated financial statements Note 1. Organization and Nature of Business This note describes BRC Inc.'s formation as a Delaware public benefit corporation, the Business Combination, and its core business of purchasing, roasting, and selling coffee and related products - BRC Inc. operates as a Delaware public benefit corporation, with Authentic Brands as its solely managed subsidiary[30][31] - The company's business involves purchasing, roasting, and selling high-quality coffee, coffee accessories, energy drinks, and branded apparel through online channels and business networks, including the Black Rifle Coffee Company (BRCC) brand[31] Note 2. Summary of Significant Accounting Policies This note details significant accounting policies, including basis of presentation, revenue recognition, inventory valuation, property, plant and equipment, leases, income taxes, and equity-based compensation - Revenue is disaggregated by sales channel: Wholesale, Direct-to-Consumer (DTC), and Outpost[51] Revenue by Sales Channel (in thousands) | Channel | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :-------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Wholesale | $61,316 | $53,761 | $118,107 | $114,189 | | DTC | $27,640 | $29,970 | $55,361 | $62,584 | | Outpost | $5,881 | $5,286 | $11,344 | $10,636 | | Total | $94,837 | $89,017 | $184,812 | $187,409 | - The company adopted ASU 2023-09, 'Improvements to Income Tax Disclosures,' effective January 1, 2025, and is evaluating ASU 2024-03, 'Disaggregation of Income Statement Expenses,' effective for fiscal years beginning after December 15, 2026[86][87] - A change in the Loyalty Program policy in March 2024, regarding point expiration, resulted in a reduction to deferred revenue liability and an increase to DTC Channel revenue of $1,754 thousand and $5,115 thousand for the three and six months ended June 30, 2024, respectively[44] Note 3. Inventories, Net This note provides a breakdown of the company's inventory components, including coffee, energy drinks, apparel, and other merchandise, as of June 30, 2025, and December 31, 2024 Inventories, Net (in thousands) | Inventory Type | June 30, 2025 | December 31, 2024 | | :---------------------- | :------------ | :---------------- | | Unroasted Coffee | $5,399 | $3,180 | | Finished Goods Coffee | $16,810 | $16,502 | | Ready-to-Drink (raw) | $5,576 | $10,206 | | Ready-to-Drink (finished) | $15,813 | $9,545 | | Apparel and other | $4,984 | $3,214 | | Total Inventories | $48,582 | $42,647 | - Total inventories, net increased by $5,935 thousand (13.9%) from December 31, 2024, to June 30, 2025, primarily driven by increases in unroasted coffee and finished goods for Ready-to-Drink products[88] Note 4. Property, Plant and Equipment, Net This note details the composition of property, plant, and equipment, net, and reports the reclassification of an office property to assets held for sale during Q2 2025 Property, Plant and Equipment, Net (in thousands) | Asset Category | June 30, 2025 | December 31, 2024 | | :---------------------------- | :------------ | :---------------- | | Building and leasehold improvements | $24,110 | $27,429 | | Machinery and equipment | $20,033 | $19,946 | | Computer equipment and software | $19,132 | $17,814 | | Furniture and fixtures | $2,937 | $2,949 | | Land | $110 | $1,547 | | Vehicles | $762 | $762 | | Construction in progress | $10,336 | $10,925 | | Gross PP&E | $77,420 | $81,372 | | Less: accumulated depreciation | $(28,069) | $(22,168) | | Total PP&E, net | $49,351 | $59,204 | - An office property in Salt Lake City, Utah, with a net carrying value of $4,294 thousand, was reclassified to 'Assets held for sale' as of June 30, 2025, with the sale expected to close by September 15, 2025, for $5,350 thousand[91] - Total depreciation expense for internal use software was $4,059 thousand for the six months ended June 30, 2025, a significant increase from $2,003 thousand in the prior year period[89] Note 5. Other Assets This note details the company's prepaid advertising credits, which are non-cash consideration received in exchange for finished goods and apparel inventory - Prepaid advertising credits totaled $48,661 thousand as of June 30, 2025, with $5,040 thousand classified as current and $43,621 thousand as non-current[92] - Revenue recognized from shipments of inventory in exchange for prepaid advertising decreased significantly to $406 thousand for the six months ended June 30, 2025, from $11,904 thousand in the prior year period[93] Note 6. Accrued Liabilities This note provides a detailed breakdown of accrued liabilities, including significant increases in accrued contingencies and other accrued expenses Accrued Liabilities (in thousands) | Accrued Liability | June 30, 2025 | December 31, 2024 | | :-------------------------- | :------------ | :---------------- | | Accrued contingencies | $8,325 | $0 | | Accrued compensation and benefits | $4,645 | $5,873 | | Accrued professional fees | $4,359 | $3,014 | | Deferred purchase incentive | $2,403 | $2,264 | | Accrued inventory purchases | $1,868 | $2,175 | | Accrued marketing | $1,701 | $4,180 | | Accrued freight | $1,516 | $478 | | Accrued sales and other taxes | $971 | $1,164 | | Accrued interest | $796 | $61 | | Credit card liabilities | $400 | $780 | | Other accrued expenses | $11,364 | $7,911 | | Total Accrued Liabilities | $38,348 | $27,900 | - Total accrued liabilities increased by $10,448 thousand (37.4%) from December 31, 2024, to June 30, 2025, primarily due to the recognition of $8,325 thousand in accrued contingencies[94] Note 7. Deferred Revenue and Gift Card Liability This note outlines changes in deferred revenue, gift card liability, and loyalty program balances for the three and six months ended June 30, 2025 and 2024 Deferred Revenue and Gift Card Liability (in thousands) | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :-------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Balance at beginning of period | $3,814 | $7,562 | $3,918 | $11,030 | | Sales of gift cards | $108 | $145 | $433 | $451 | | Redemption of gift cards | $(157) | $(121) | $(552) | $(491) | | Increase from deferral of revenue | $1,738 | $2,056 | $1,738 | $2,056 | | Decrease from revenue recognition | $(1,760) | $(2,297) | $(1,784) | $(2,832) | | Loyalty Program points earned | $342 | $608 | $660 | $1,329 | | Loyalty Program points redeemed/expired | $(315) | $(2,361) | $(643) | $(5,951) | | Balance at end of period | $3,770 | $5,592 | $3,770 | $5,592 | - The balance of deferred revenue and gift card liability decreased from $5,592 thousand at June 30, 2024, to $3,770 thousand at June 30, 2025, primarily due to a significant reduction in Loyalty Program points redeemed/expired in 2025 compared to 2024[95] Note 8. Long-Term Debt This note details the company's credit facilities, including the ABL Facility and Term Loan Facility, and notes payable, outlining their terms, maturities, and outstanding balances Long-Term Debt (in thousands) | Debt Component | June 30, 2025 | December 31, 2024 | | :-------------------------- | :------------ | :---------------- | | Term Loan Facility | $39,500 | $40,000 | | ABL Facility | $37,032 | $28,853 | | Notes payable | $1,047 | $1,446 | | Total principal | $77,579 | $70,299 | | Less: debt issuance costs and OID | $(4,914) | $(5,225) | | Long-term debt, net | $72,665 | $65,074 | - Total principal debt increased by $7,280 thousand (10.4%) from December 31, 2024, to June 30, 2025, primarily due to an increase in the ABL Facility balance[96] - The ABL Facility has an aggregate principal amount of up to $75,000 thousand, with $13,912 thousand available borrowings as of June 30, 2025, while the Term Loan Facility has an aggregate principal amount of $40,000 thousand[97][98][102] Future Contractual Maturities of Credit Facilities (in thousands) | Year | Amount | | :---------------- | :----- | | Remainder of 2025 | $1,147 | | 2026 | $2,400 | | 2027 | $2,000 | | 2028 | $2,000 | | 2029 | $70,032 | | Total | $77,579 | Note 9. Stockholders' Equity This note describes the company's capital structure, including Class A, Class B, and Class C Common Stock, Preferred Stock, and Common Units, along with their respective voting and economic rights, and details non-controlling interests - BRC Inc.'s authorized capital stock includes 2,500,000,000 shares of Class A Common Stock, 300,000,000 shares of Class B Common Stock, 1,500,000 shares of Class C Common Stock, and 1,000,000 shares of Preferred Stock[109] - Class A and Class B Common Stock holders are entitled to one vote per share, while Class C Common Stock has no voting rights, and only Class A Common Stock holders are entitled to dividends[110] - As of June 30, 2025, BRC Inc.'s ownership percentage in Authentic Brands was 36.5%, with non-controlling interests holding 63.5%[116] - On July 16, 2025, the Company closed an underwritten offering of 28,000,000 shares of Class A Common Stock, plus an additional 4,200,000 shares from the underwriter's option, at $1.25 per share[117] Note 10. Equity-Based Compensation This note details the company's equity incentive plans, including Incentive Units, Stock Options, RSUs, PSUs, and ESPP, along with their valuation assumptions and activity Equity-Based Compensation Activity (Six Months Ended June 30) | Award Type | Outstanding at Jan 1, 2025 | Granted | Forfeited | Vested/Exercised | Outstanding at June 30, 2025 | | :--------- | :------------------------- | :------ | :-------- | :--------------- | :--------------------------- | | Stock Options | 5,424,411 | 3,760,948 | (1,189,691) | - | 7,995,668 | | RSUs | 2,232,952 | 3,808,610 | (867,187) | (715,258) | 4,459,117 | | PSUs | 8,462,412 | - | - | - | 8,462,412 | - Total unrecognized equity compensation expense for stock options was $8,255 thousand and for RSUs was $9,195 thousand as of June 30, 2025, both to be recognized over approximately two years[124][125] - The company issued 100,626 shares under its ESPP for $183 thousand during the six-month offering period ending March 8, 2025[128] Note 11. Defined Contribution Plan This note provides information on the company's matching contributions to its voluntary qualified defined contribution plan for eligible employees Company Matching Contributions (in thousands) | Period | 2025 | 2024 | | :------------------------ | :----- | :----- | | Three Months Ended June 30 | $219 | $413 | | Six Months Ended June 30 | $430 | $617 | - Company matching contributions decreased by $194 thousand (47.0%) for the three months and $187 thousand (30.3%) for the six months ended June 30, 2025, compared to the prior year[129] Note 12. Income Taxes This note explains the company's income tax structure, including its status as a managing member of Authentic Brands, and discusses the effective tax rate, tax examinations, and valuation allowances against deferred tax assets - BRC Inc. consolidates Authentic Brands, which is taxed as a partnership, except for one subsidiary, and is subject to U.S. federal and state income taxes on its allocable share of Authentic Brands' income/loss[130] - The company has recorded a valuation allowance against deferred tax assets due to significant uncertainty regarding their realization, primarily stemming from a limited operating history and historical losses[133] - The IRS has commenced an examination of Authentic Brands' U.S. income tax return for 2021, expected to conclude within the next twelve months[131] Note 13. Net Income (Loss) Per Share This note details the computation of basic and diluted net income (loss) per share for Class A Common Stock, including the treatment of potentially dilutive securities Net Income (Loss) Per Share Attributable to Class A Common Stock | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :-------------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Net income (loss) attributable to BRC Inc. (in thousands) | $(5,329) | $(482) | $(8,216) | $67 | | Weighted-average shares of Class A Common Stock outstanding - Basic | 79,146,003 | 68,209,081 | 78,780,708 | 67,260,724 | | Weighted-average shares of Class A Common Stock outstanding - Diluted | 79,146,003 | 68,209,081 | 78,780,708 | 68,333,260 | | Basic and diluted EPS | $(0.07) | $(0.01) | $(0.10) | $0.00 | - Potentially dilutive securities, including stock options, Common Units, RSUs, PSUs, and Incentive Units, were excluded from diluted EPS calculations for periods of net loss as their inclusion would be antidilutive[134][135] Note 14. Commitments and Contingencies This note outlines the company's purchase agreements, legal proceedings, and potential tax liabilities, including details on ongoing lawsuits and recent settlements Future Minimum Purchase Commitments (in thousands) | Year | Amount | | :---------------- | :----- | | Remainder of 2025 | $12,185 | | 2026 | $30,018 | | 2027 | $32,427 | | 2028 | $15,141 | | 2029 | $14,934 | | Total | $104,705 | - The company settled a lawsuit with Tang Capital Partners, LP for $8,250 thousand on July 21, 2025, and a lawsuit with Alta Partners, LLC for $1,000 thousand cash payment from Alta and issuance of 2,300,100 shares of Class A Common Stock on June 20, 2025[141][144] - Accrued contingencies of $8,325 thousand were recognized as of June 30, 2025, related to legal matters[94] Note 15. Operational Improvement Plan This note describes the Operational Improvement Plan implemented in Q2 2025 to reduce costs and improve efficiency, including workforce reductions and associated severance costs - The Operational Improvement Plan, initiated in Q2 2025, involved a reduction of approximately 48 employees, incurring $2,149 thousand in severance costs[146][147] - As of June 30, 2025, $1,586 thousand in severance costs were accrued, expected to be fully paid by Q1 2026[147][148] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations This section provides management's perspective on the company's financial condition and results of operations, discussing key trends, recent developments, and a detailed comparison of financial results Overview This overview introduces Black Rifle Coffee Company as a Veteran-founded premium coffee, energy drink, and media company operating through Wholesale, DTC, and Outpost channels - Black Rifle Coffee Company is a Veteran-founded and led premium coffee, energy drink, and media company[150] - The company operates through three primary channels: Wholesale, Direct-to-Consumer (DTC), and Outposts[150] - The Business Combination in February 2022 was accounted for as a reverse acquisition and recapitalization of Authentic Brands, with SilverBox treated as the acquired company[151] Trends This section highlights key trends affecting the company's business within its sales channels, noting growth in Wholesale, slowing decline in DTC, and stabilization in Outpost revenue - Wholesale channel revenue increased due to new customers, expansion in the Food, Drug, and Mass (FDM) market, and new product launches like Black Rifle Energy[155] - DTC channel revenue decline is slowing, with strategic initiatives focused on optimizing customer acquisition, enhancing retention, and improving channel efficiency[155] - Outpost channel revenue is stabilizing, with efforts to improve transaction volumes and average order values, but limited growth is anticipated in 2025 due to reallocation of investments and potential closure of underperforming locations[155] Recent Developments This section details recent significant events, including the implementation of an Operational Improvement Plan and a public offering of Class A Common Stock - An Operational Improvement Plan was implemented in Q2 2025 to reduce costs and improve efficiency, with an estimated cost of $2.1 million in severance and anticipated annualized savings of $6.5 million[152] - On July 18, 2025, the company closed an underwritten offering of 28,000,000 shares of Class A Common Stock, plus an additional 4,200,000 shares from the underwriter's option, at $1.25 per share[153] Key Factors Affecting Our Performance This section outlines critical factors influencing the company's performance, such as brand awareness, customer acquisition and retention, product line expansion, and supply chain management - Maintaining and growing brand awareness and loyalty is crucial, with a focus on refining marketing strategy through streaming advertising, social media, and targeted digital advertising[154] - Key performance drivers include expanding the Wholesale customer base, acquiring and retaining customers at a reasonable cost, driving repeat purchases, and continuously expanding the product line with new innovations[156][157][158][159] - Effective supply chain management, including sourcing green coffee beans from diverse countries and maintaining quality control, is vital for meeting future demand[160] Components of Our Results of Operations This section defines the key components of the company's results of operations: Revenue, net; Cost of goods sold; Operating expenses; and Interest expense - Revenue, net, includes product sales through various platforms, adjusted for returns, discounts, and loyalty rewards[161] - Cost of goods sold comprises raw material, labor, shipping, handling, fulfillment, credit card fees, and royalty fees[162] - Operating expenses include marketing and advertising, salaries, wages and benefits, and general and administrative costs[163] - Interest expense covers interest on borrowings, amortization of debt discounts, and deferred financing costs[164] Results of Operations This section provides a detailed comparative analysis of the company's financial performance for the three and six months ended June 30, 2025, versus 2024 Comparison of the three months ended June 30, 2025 to the three months ended June 30, 2024 For the three months ended June 30, 2025, net revenue increased by 7% to $94.8 million, while gross profit decreased by 14% due to higher costs and loyalty program changes, and operating expenses rose by 23% Key Financials (Three Months Ended June 30, in thousands) | Metric | 2025 | 2024 | $ Change | % Change | | :---------------------- | :-------- | :-------- | :-------- | :------- | | Revenue, net | $94,837 | $89,017 | $5,820 | 7% | | Cost of goods sold | $62,664 | $51,758 | $10,906 | 21% | | Gross profit | $32,173 | $37,259 | $(5,086) | (14)% | | Gross margin | 34% | 42% | - | - | | Total operating expenses | $44,797 | $36,281 | $8,516 | 23% | - Wholesale channel revenue increased by $7.6 million (14%), driven by Energy revenue, packaged coffee distribution, and online retailer sales, partially offset by a $3.0 million decrease from barter transactions[168] - DTC channel revenue decreased by $2.3 million (8%), primarily due to a $1.8 million decrease in loyalty rewards accrual and lower customer acquisition[169] - Marketing and advertising expenses increased by $2.4 million (32%), supporting new partnerships, research, shopper marketing, and the Black Rifle Energy launch[174] - Other operating expense, net, increased by $4.6 million (1,484%), mainly due to a $4.7 million increase in legal contingencies[177] Comparison of the six months ended June 30, 2025 to the six months ended June 30, 2024 For the six months ended June 30, 2025, net revenue slightly decreased by 1% to $184.8 million, with gross profit declining by 19%, and operating expenses increasing by 11%, resulting in a net loss Key Financials (Six Months Ended June 30, in thousands) | Metric | 2025 | 2024 | $ Change | % Change | | :---------------------- | :-------- | :-------- | :-------- | :------- | | Revenue, net | $184,812 | $187,409 | $(2,597) | (1)% | | Cost of goods sold | $120,165 | $107,966 | $12,199 | 11% | | Gross profit | $64,647 | $79,443 | $(14,796) | (19)% | | Gross margin | 35% | 42% | - | - | | Total operating expenses | $82,703 | $74,509 | $8,194 | 11% | - Wholesale channel revenue increased by $3.9 million (3%), driven by Black Rifle Energy launch and expanded distribution, offset by an $11.5 million decrease from barter transactions[180] - DTC channel revenue decreased by $7.2 million (12%), primarily due to a $5.1 million decrease in loyalty rewards accrual and lower customer acquisition[181] - Marketing and advertising expenses increased by $6.1 million (40%), supporting partnerships, research, shopper marketing, and the Black Rifle Energy launch[186] - Other operating expense, net, increased by $5.8 million (1,801%), mainly due to a $4.7 million increase in legal contingencies[189] Components of Our Non-Operating Expenses This section analyzes changes in non-operating expenses, specifically interest expense, for the three and six months ended June 30, 2025, compared to 2024 Interest Expense, Net (in thousands) | Period | 2025 | 2024 | $ Change | % Change | | :------------------------ | :-------- | :-------- | :-------- | :------- | | Three Months Ended June 30 | $(1,844) | $(2,301) | $(457) | (20)% | | Six Months Ended June 30 | $(4,213) | $(4,352) | $(139) | (3)% | - Interest expense, net, decreased by $0.5 million (20%) for the three months and $0.1 million (3%) for the six months ended June 30, 2025, primarily due to debt refinancing in Q4 2024[190][193] Liquidity and Capital Resources This section discusses the company's liquidity position, primary sources and uses of cash, cash flow activities, and future commitments, including capital expenditures - As of June 30, 2025, cash and cash equivalents were $4.3 million, working capital was $24.1 million, and available borrowings under credit facilities were $13.9 million[195] - The company believes current liquidity sources are sufficient for working capital and commitments for at least the next twelve months[195] - Net cash used in operating activities was $7.5 million for the six months ended June 30, 2025, a $14.7 million decrease from the prior year, primarily due to a net loss[198] - Net cash provided by financing activities increased by $14.3 million to $7.1 million, driven by increased ABL facility borrowings and a legal settlement[200] Future Commitments (in thousands) | Commitment Type | Remainder of 2025 | 2026 | 2027 | 2028 | 2029 | Beyond 2029 | | :---------------- | :---------------- | :-------- | :-------- | :-------- | :-------- | :---------- | | Purchase Agreements | $12,185 | $30,018 | $32,427 | $15,141 | $14,934 | - | | Operating Leases | $3,900 | - | - | - | - | $35,400 | Critical Accounting Estimates This section states that there have been no material changes to the company's significant accounting policies or critical accounting estimates during the three months ended June 30, 2025 - No material changes to significant accounting policies or critical accounting estimates occurred during the three months ended June 30, 2025[205] Item 3. Quantitative and Qualitative Disclosures About Market Risk This section discusses the company's exposure to market risks, primarily focusing on interest rate risk associated with its variable-rate debt facilities - The company's Term Loan Facility and ABL Facility bear variable interest rates tied to a reference rate or term SOFR plus a margin[206] - As of June 30, 2025, outstanding variable rate debt included $39.5 million on the Term Loan Facility and $37.0 million on the ABL Facility[206] - A hypothetical 5% increase in interest rates on outstanding variable rate borrowings would result in approximately $3.8 million in additional annual interest expense[206] Item 4. Controls and Procedures This section reports on the effectiveness of the company's disclosure controls and procedures and confirms no material changes in internal control over financial reporting - Management, with CEO and CFO participation, concluded that disclosure controls and procedures were effective as of June 30, 2025[207] - There were no material changes in internal control over financial reporting during the three months ended June 30, 2025[208] Part II - Other Information Item 1. Legal Proceedings This section refers to Note 14, 'Commitments and Contingencies,' for detailed information regarding the company's involvement in various legal proceedings - Information on legal proceedings is provided in Note 14, 'Commitments and Contingencies,' of the consolidated financial statements[210] Item 1A. Risk Factors This section highlights new or updated risk factors, specifically concerning changes in U.S. trade policies and the potential impact of the Operational Improvement Plan - Changes in U.S. trade policies, including tariffs on coffee beans, may adversely impact the business by increasing product costs and reducing demand[212][213] - The Operational Improvement Plan, involving an 8.7% workforce reduction, may not yield intended efficiencies, could strain resources, negatively impact morale, and slow strategic execution[214] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds This section states that there are no unregistered sales of equity securities or use of proceeds to report for the period - This item is not applicable for the reporting period[215] Item 3. Defaults Upon Senior Securities This section indicates that there are no defaults upon senior securities to report for the period - This item is not applicable for the reporting period[216] Item 4. Mine Safety Disclosures This section states that there are no mine safety disclosures applicable to the company - This item is not applicable for the reporting period[218] Item 5. Other Information This section reports on Rule 10b5-1 Trading Plans, indicating that no directors or Section 16 officers adopted or terminated such arrangements during the three months ended June 30, 2025 - No director or officer adopted or terminated a Rule 10b5-1 trading arrangement or non-Rule 10b5-1 trading arrangement during the three months ended June 30, 2025[219] Item 6. Exhibits This section lists all exhibits filed as part of the Quarterly Report on Form 10-Q, including organizational documents, credit agreements, settlement agreements, and certifications - Exhibits include amended and restated certificates of incorporation and by-laws, amendments to financing and credit agreements, a settlement and release agreement with Alta Partners, LLC, and certifications from the Principal Executive and Financial Officers[220] Signatures This section contains the required signatures of the registrant's authorized officers, including the Chief Executive Officer and Chief Financial Officer, certifying the filing of the report - The report is signed by Christopher Mondzelewski, Chief Executive Officer, and Matthew Amigh, Chief Financial Officer, on August 4, 2025[225]