BRC (BRCC) - 2025 Q2 - Quarterly Results

Executive Summary & Financial Highlights BRC Inc. reported mixed Q2 2025 results with revenue growth driven by wholesale, but significant declines in gross profit and adjusted EBITDA, while reaffirming full-year guidance and securing equity funding CEO & CFO Commentary BRC Inc.'s CEO highlighted strong distribution and brand growth, particularly Black Rifle Energy's momentum, while the CFO noted profitability challenges from coffee inflation are being mitigated by strategic investments and equity financing - CEO Chris Mondzelewski highlighted strong Q2 performance with robust distribution growth and expanded shelf coverage, driven by packaged and ready-to-drink coffee, and encouraging national expansion of Black Rifle Energy[4] - CFO Matt Amigh noted that despite recent profitability challenges from coffee inflation, the company is mitigating pressures through strategic investments and a recent equity issuance, which is expected to reduce net debt and lower annual interest expenses by over $2 million[4] Second Quarter 2025 Financial Highlights BRC Inc. achieved 6.5% revenue growth in Q2 2025, primarily from wholesale, but faced significant declines in gross profit and adjusted EBITDA, with an expanded net loss, while reaffirming full-year guidance and securing equity funding | Metric | Q2 2025 (Million USD) | Q2 2024 (Million USD) | Change (Million USD) | Change (%) | | :--- | :---: | :---: | :---: | :---: | | Net Revenue | 94.8 | 89.0 | 5.8 | 6.5% | | Gross Profit | 32.2 | 37.3 | (5.1) | (13.7)% | | Gross Margin | 33.9% | 41.9% | - | - | | Net Loss | (14.5) | (1.4) | (13.1) | - | | Adjusted EBITDA | 2.4 | 7.5 | (5.1) | (68.3)% | - Revenue increased 6.5% year-over-year, primarily driven by a 14.1% growth in wholesale revenue[6] - In Q2 2025, packaged coffee All-Commodity Volume (ACV) penetration increased by 14.9 percentage points to 56.6%, and Ready-to-Drink (RTD) coffee ACV penetration increased by 6.1 percentage points to 53.5%; Black Rifle Energy™ ACV reached 22.5%, up 1.7 percentage points from the prior quarter[6] - Net loss was $14.5 million, an increase of $13.1 million compared to a $1.4 million net loss in Q2 2024; Adjusted EBITDA was $2.4 million, a $5.1 million decrease from $7.5 million in Q2 2024[6] - The company reaffirmed its full-year revenue, gross margin, and adjusted EBITDA guidance[6] - Subsequent to quarter-end, the company raised $40.25 million in gross proceeds through an equity offering[6] Second Quarter 2025 Detailed Results BRC Inc.'s Q2 2025 saw net revenue growth driven by wholesale, offset by DTC declines, while gross profit and margin decreased due to inflation and trade adjustments, and operating expenses increased due to marketing and G&A Net Revenue by Channel Q2 2025 net revenue grew 6.5% to $94.8 million, driven by 14.1% wholesale growth from distribution and Black Rifle Energy sales, while DTC revenue declined 7.8% due to loyalty policy changes and advertising reallocation, and Outposts revenue increased 11.3% from franchise fees and higher average order values - Net revenue increased 6.5% to $94.8 million in Q2 2025, compared to $89.0 million in Q2 2024[7] - Wholesale revenue increased 14.1% to $61.3 million, primarily driven by distribution growth, increased sales volume to food and mass retailers, and Black Rifle Energy sales, partially offset by a $3.0 million net reduction in barter transaction revenue[7] - Direct-to-Consumer (DTC) revenue decreased 7.8% to $27.6 million, primarily due to reduced accruals from loyalty rewards policy changes in Q2 2024 and a strategic reallocation of advertising spend to higher-return business areas, leading to lower customer acquisition[8] - Black Rifle Coffee Outposts revenue increased 11.3% to $5.9 million, primarily driven by increased franchise fees and higher average order values at company-operated stores[8] Gross Profit and Margin Q2 2025 gross profit decreased 13.7% to $32.2 million, with gross margin declining 790 basis points to 33.9%, primarily due to raw coffee inflation, higher trade and pricing adjustments, and loyalty program changes, partially offset by productivity gains and a favorable product mix - Gross profit decreased to $32.2 million in Q2 2025, compared to $37.3 million in Q2 2024, a 13.7% year-over-year decline[9] - Gross margin decreased by 790 basis points to 33.9%, compared to 41.9% in Q2 2024[9] - The decline was primarily due to raw coffee inflation, higher trade and pricing adjustments, and the impact of loyalty rewards program changes, partially offset by productivity improvements and a favorable product mix[9] Operating Expenses In Q2 2025, marketing expenses significantly increased due to advertising and content creation investments, while salaries, wages, and benefits decreased due to reduced headcount, and G&A expenses rose sharply from professional services (litigation-related) and capitalized software depreciation Marketing Expenses Q2 2025 marketing expenses increased 31.8% year-over-year to $9.8 million, rising 200 basis points to 10.3% of revenue, primarily due to increased investment in advertising, shopper marketing, and content creation - Marketing expenses increased 31.8% to $9.8 million, compared to $7.4 million in Q2 2024[10] - As a percentage of revenue, marketing expenses increased by 200 basis points to 10.3%[10] - The increase was primarily driven by greater investments in advertising placements, shopper marketing, and content creation[10] Salaries, Wages, and Benefits Expenses Q2 2025 salaries, wages, and benefits expenses decreased 10.3% year-over-year to $15.8 million, falling 310 basis points to 16.7% of revenue, primarily due to reduced headcount - Salaries, wages, and benefits expenses decreased 10.3% to $15.8 million, compared to $17.6 million in Q2 2024[11] - As a percentage of revenue, salaries, wages, and benefits expenses decreased by 310 basis points to 16.7%[11] - The decrease was due to lower salaries and wages resulting from a reduced headcount compared to Q2 2024[11] General and Administrative (G&A) Expenses Q2 2025 G&A expenses increased 30.7% year-over-year to $14.3 million, rising 280 basis points to 15.1% of revenue, primarily due to increased professional services (litigation-related) and capitalized software depreciation - G&A expenses increased 30.7% to $14.3 million, compared to $10.9 million in Q2 2024[12] - As a percentage of revenue, G&A expenses increased by 280 basis points to 15.1%[12] - The increase was primarily driven by higher professional services fees, mainly related to litigation, and increased depreciation of capitalized software investments[12] Net Loss and Adjusted EBITDA for Second Quarter 2025 In Q2 2025, the company's net loss expanded to $14.5 million, compared to $1.4 million in Q2 2024, and adjusted EBITDA decreased from $7.5 million to $2.4 million over the same period - Net loss for Q2 2025 was $14.5 million, and Adjusted EBITDA was $2.4 million[13] - In comparison, net loss for Q2 2024 was $1.4 million, and Adjusted EBITDA was $7.5 million[13] Financial Outlook BRC Inc. reaffirmed its full-year 2025 financial guidance, projecting net revenue between $395 million and $425 million, gross margin between 35% and 37%, and adjusted EBITDA between $20 million and $30 million, while cautioning that actual results may differ significantly from these forward-looking statements | Metric | FY 2024 Actual (Million USD) | FY 2025 Guidance (Million USD) | | :--- | :---: | :---: | | Net Revenue | 391.5 | 395.0 - 425.0 | | Growth | (1)% | 1% - 9% | | Gross Margin | 41.2% | 35% - 37% | | Adjusted EBITDA | 37.1 | 20.0 - 30.0 | - In 2024, a barter transaction favorably impacted net revenue by $23.9 million, and a change in BRCC's loyalty program points policy increased net revenue by $6.5 million[15] - The guidance provided constitutes forward-looking statements, and actual results may differ materially[16] Company Information This section provides details on BRC Inc.'s upcoming Q2 earnings conference call, an overview of the veteran-founded Black Rifle Coffee Company, and investor contact information Conference Call Details The company will host a conference call on August 5, 2025, at 8:30 AM ET to discuss Q2 results, with participation available via phone or the investor relations website, where a replay will also be provided - The company will host a conference call on August 5, 2025, at 8:30 AM ET to discuss Q2 results[18] - To participate, dial (877) 407-0609 (U.S.) or (201) 689-8541 (International)[18] - A live webcast of the conference call will be available on the investor relations page at ir.blackriflecoffee.com, with a replay available until August 12, 2025[18] About BRC Inc. Black Rifle Coffee Company (BRCC) is a veteran-founded premium coffee and lifestyle brand established in 2014, dedicated to serving those who love America and supporting military, veterans, and first responders - Black Rifle Coffee Company (BRCC) is a veteran-founded premium coffee company and lifestyle brand[19] - Founded in 2014 by Green Beret Evan Hafer, the company is committed to supporting veterans, active-duty military, first responders, and the American lifestyle[19] Investor Relations Investor contact information for BRC Inc. is provided, including email addresses for Matt McGinley and ICR for BRCC - Investor contacts: Matt McGinley (IR@BlackRifleCoffee.com) and ICR for BRCC (BlackrifleIR@icrinc.com)[21] Forward-Looking Statements This press release contains numerous forward-looking statements subject to risks and uncertainties that could cause actual results to differ materially, including factors like competition, growth management, supply chain disruptions, and commodity price volatility - This press release contains forward-looking statements regarding the company and its industry, involving significant risks and uncertainties[22] - Factors that could cause actual results to differ materially include competition, growth management, key employee retention, limited operating history, rapid growth management challenges, capital raising ability, long-term profitability, debt management, maximizing barter transaction asset value, negative publicity, brand perception maintenance, changes in consumer spending, marketing activities, DTC channel performance decline, wholesale distribution management, supply chain operations, loss of co-manufacturers, supply chain disruptions, commodity market fluctuations, changes in costs and availability, new store openings, lease obligations, franchisee capabilities, customer experience, food safety, market expansion, legal compliance, risk of employee unionization, cybersecurity threats, and other risks and uncertainties disclosed in SEC filings[23] - The company undertakes no obligation to update or revise any forward-looking statements, except as required by applicable securities laws[23] Consolidated Financial Statements This section presents BRC Inc.'s consolidated statements of operations, balance sheets, and cash flows for the specified periods, detailing financial performance, position, and liquidity Consolidated Statements of Operations This section provides BRC Inc.'s consolidated statements of operations for the three and six months ended June 30, 2025 and 2024, detailing net revenue, cost of goods sold, gross profit, operating expenses, operating income/loss, non-operating expenses, income/loss before taxes, and net income/loss attributable to BRC Inc | Metric (Thousand USD) | Q2 2025 | Q2 2024 | H1 2025 | H1 2024 | | :--- | :---: | :---: | :---: | :---: | | Net Revenue | 94,837 | 89,017 | 184,812 | 187,409 | | Cost of Goods Sold | 62,664 | 51,758 | 120,165 | 107,966 | | Gross Profit | 32,173 | 37,259 | 64,647 | 79,443 | | Total Operating Expenses | 44,797 | 36,281 | 82,703 | 74,509 | | Operating Income (Loss) | (12,624) | 978 | (18,056) | 4,934 | | Income (Loss) Before Taxes | (14,468) | (1,323) | (22,269) | 582 | | Net Income (Loss) | (14,512) | (1,374) | (22,357) | 482 | | Net Income (Loss) Attributable to BRC Inc. | (5,329) | (482) | (8,216) | 67 | | Net Income (Loss) Per Share (Basic and Diluted) | (0.07) | (0.01) | (0.10) | — | Consolidated Balance Sheets This section presents BRC Inc.'s consolidated balance sheets as of June 30, 2025, and December 31, 2024, detailing the company's assets (cash, receivables, inventory, fixed assets), liabilities (payables, accrued liabilities, long-term debt), and stockholders' equity | Metric (Thousand USD) | June 30, 2025 | December 31, 2024 | | :--- | :---: | :---: | | ASSETS | | | | Cash and Cash Equivalents | 4,304 | 6,810 | | Accounts Receivable, Net | 29,554 | 33,604 | | Inventories, Net | 48,582 | 42,647 | | Total Current Assets | 106,242 | 95,471 | | Property, Plant and Equipment, Net | 49,351 | 59,204 | | Total Assets | 225,253 | 227,382 | | LIABILITIES AND STOCKHOLDERS’ EQUITY | | | | Accounts Payable | 34,919 | 38,817 | | Accrued Liabilities | 38,348 | 27,900 | | Total Current Liabilities | 82,106 | 75,218 | | Long-Term Debt, Net | 70,118 | 63,027 | | Total Liabilities | 189,603 | 177,886 | | Stockholders’ Equity Attributable to BRC Inc. | 10,101 | 13,174 | | Total Stockholders’ Equity | 35,650 | 49,496 | | Total Liabilities and Stockholders’ Equity | 225,253 | 227,382 | Consolidated Statements of Cash Flows This section provides BRC Inc.'s consolidated statements of cash flows for the six months ended June 30, 2025 and 2024, detailing cash flows from operating, investing, and financing activities, along with non-cash operating activities and supplemental cash flow information | Metric (Thousand USD) | H1 2025 | H1 2024 | | :--- | :---: | :---: | | Operating Activities | | | | Net Income (Loss) | (22,357) | 482 | | Net Cash Provided by (Used in) Operating Activities | (7,464) | 7,212 | | Investing Activities | | | | Net Cash Used in Investing Activities | (2,147) | (3,977) | | Financing Activities | | | | Net Cash Provided by (Used in) Financing Activities | 7,105 | (7,191) | | Net Decrease in Cash and Cash Equivalents | (2,506) | (3,956) | | Cash and Cash Equivalents at End of Period | 4,304 | 9,642 | | Non-Cash Operating Activities (Thousand USD) | H1 2025 | H1 2024 | | :--- | :---: | :---: | | Revenue recognized from inventory exchanged for prepaid advertising | 406 | 11,904 | | Increase in insurance receivable due to legal settlement | 2,500 | — | | Income taxes paid | 334 | 345 | | Interest paid | 1,822 | 3,567 | Key Operating and Financial Metrics This section presents BRC Inc.'s revenue breakdown by sales channel and key operational metrics, including ACV penetration, DTC subscribers, and Outposts store count, for the specified periods Revenue by Sales Channel This section provides BRC Inc.'s revenue data by sales channel for the three and six months ended June 30, 2025 and 2024, including net sales from wholesale, direct-to-consumer (DTC), and Outpost stores | Sales Channel (Thousand USD) | Q2 2025 | Q2 2024 | H1 2025 | H1 2024 | | :--- | :---: | :---: | :---: | :---: | | Wholesale | 61,316 | 53,761 | 118,107 | 114,189 | | Direct-to-Consumer (DTC) | 27,640 | 29,970 | 55,361 | 62,584 | | Outpost | 5,881 | 5,286 | 11,344 | 10,636 | | Total Net Sales | 94,837 | 89,017 | 184,812 | 187,409 | Key Operational Metrics This section lists BRC Inc.'s key operational metrics as of June 30, 2025 and 2024, including FDM ACV%, RTD ACV%, DTC subscriber count, and total company and franchised Outposts store count | Metric | June 30, 2025 | June 30, 2024 | | :--- | :---: | :---: | | FDM ACV % | 56.6 % | 41.7 % | | RTD ACV % | 53.5 % | 47.4 % | | DTC Subscribers | 175,500 | 201,200 | | Total Outposts | 37 | 36 | | - Company-owned Outposts | 17 | 18 | | - Franchised Outposts | 20 | 18 | - FDM ACV% increased from 41.7% as of June 30, 2024, to 56.6% as of June 30, 2025[38] - RTD ACV% increased from 47.4% as of June 30, 2024, to 53.5% as of June 30, 2025[38] - DTC subscribers decreased from 201,200 as of June 30, 2024, to 175,500 as of June 30, 2025[38] - Total Outposts increased from 36 as of June 30, 2024, to 37 as of June 30, 2025, with company-owned Outposts decreasing by 1 and franchised Outposts increasing by 2[38] Non-GAAP Financial Measures Reconciliation This section defines BRC Inc.'s non-GAAP financial measures (EBITDA and Adjusted EBITDA), outlines their limitations, and provides a detailed reconciliation to GAAP net income (loss) Definition and Limitations of Non-GAAP Financial Measures BRC Inc. uses non-GAAP EBITDA and Adjusted EBITDA to assess business performance and liquidity, which are not GAAP compliant, have limitations, and should not replace GAAP reporting, as they do not reflect cash requirements for working capital, debt, taxes, or capital expenditures - EBITDA is defined as net income (loss) before interest expense, income tax expense, depreciation, and amortization[41] - Adjusted EBITDA further adjusts EBITDA for stock-based compensation, system implementation costs, outpost development cost write-offs, non-routine legal fees, and restructuring and related costs[41] - Effective with Q1 2025 results, the company modified its Adjusted EBITDA presentation to no longer exclude RTD transformation costs and executive search fees, which reduced Adjusted EBITDA by $0.9 million and $2.5 million for the three and six months ended June 30, 2024, respectively[41] - EBITDA and Adjusted EBITDA have limitations as analytical tools and should not be considered in isolation or as substitutes for GAAP reporting, as they do not reflect cash requirements for working capital, debt interest or principal payments, income taxes, historical or future capital expenditures, and stock-based compensation, while a non-cash expense, is an important component of employee incentives[42] Reconciliation of Net Income (Loss) to Adjusted EBITDA This section provides a detailed reconciliation of BRC Inc.'s net income (loss) to EBITDA and Adjusted EBITDA for the three and six months ended June 30, 2025 and 2024, listing adjustments such as interest expense, taxes, depreciation, stock-based compensation, and non-routine legal fees | Metric (Thousand USD) | Q2 2025 | Q2 2024 | H1 2025 | H1 2024 | | :--- | :---: | :---: | :---: | :---: | | Net Income (Loss) | (14,512) | (1,374) | (22,357) | 482 | | Interest expense | 1,844 | 2,301 | 4,213 | 4,352 | | Income tax expense | 44 | 51 | 88 | 100 | | Depreciation and amortization | 3,960 | 2,384 | 6,536 | 4,797 | | EBITDA | (8,664) | 3,362 | (11,520) | 9,731 | | Stock-based compensation | 2,741 | 3,305 | 5,331 | 5,257 | | System implementation costs | — | 140 | — | 520 | | Outpost development cost write-offs | (14) | 1,041 | 811 | 2,222 | | Non-routine legal fees | 6,172 | (327) | 6,510 | 2,044 | | Restructuring and related costs | 2,149 | — | 2,149 | 266 | | Adjusted EBITDA | 2,384 | 7,521 | 3,281 | 20,040 |