BRC (BRCC) - 2022 Q3 - Quarterly Report

Part I - Financial Information Financial Statements (unaudited) The company presents its unaudited consolidated financial statements for the period ended September 30, 2022 Consolidated Balance Sheets 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 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) 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] - 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] - 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] Consolidated Statements of Cash Flows 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] Notes to Consolidated Financial Statements 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][41] 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] - In November 2022, the company entered into a new $65 million senior revolving credit facility, replacing its existing facility[153] Management's Discussion and Analysis (MD&A) 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 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] - 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] Results of Operations: Nine Months 2022 vs. 2021 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][182] - 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][192][193][195] Liquidity and Capital Resources 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] 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] Quantitative and Qualitative Disclosures About Market Risk 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][214] - The company is exposed to interest rate risk through its variable-rate credit facility and equipment financing loan[215] - Inflation has increased the cost of products, overhead, and freight, which the company has partially offset with price increases[216] Controls and Procedures 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] - No material changes to the internal control over financial reporting occurred during the three months ended September 30, 2022[219] Part II - Other Information Legal Proceedings 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] - Management does not believe any pending claims will have a material adverse effect on the company's financial results[223] Risk Factors 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] Unregistered Sales of Equity Securities and Use of Proceeds This section is not applicable for the current reporting period - Not applicable[225] Other Information No other information was required to be disclosed during the period - None[228] Exhibits 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] - Inline XBRL documents are included as part of the filing[229][231]