BRC Inc. Q2 FY2024 earnings call

• Q2 progress: Gross margins above expectations, 8% growth in wholesale channel. Turnaround from negative free cash flow last year to positive $1 million in Q2. - Launch of Black Rifle Energy: Entering the $20 billion energy drink category with a natural caffeine-based blend, targeting new consumers. - DTC: Investment pulled back due to shifting consumer behavior, but subscription business stabilizing. - Supply chain: Efficiencies from simplifying manufacturing/distribution partners, hedging green coffee costs, and favorable mix shift to high-margin FDM business.

In Q2, gross margins were above initial expectations at over 40%. Wholesale channel grew 8%, well above the category. Q2 revenue was relatively flat year-over-year. Adjusted EBITDA for the quarter was $8.5 million, up from breakeven in the prior year. Free cash flow was positive, with a $31 million improvement from Q2 2023. The new product segment, Black Rifle Energy, was introduced, targeting the over $20 billion energy drink category with a proprietary clean energy blend.

• Adjusted 2024 revenue guidance down to $385 million to $415 million. - Gross margin guidance moved up to 39% to 42%. - Reiterated adjusted EBITDA guidance of $32 million to $42 million. - Reiterated Q1 guidance of 80% free cash flow conversion. - Anticipate significant revenue inflection in 2025 from FDM growth, Black Rifle Energy launch, and DTC stabilization.

• Delays in wholesale rollouts, with some retailer shelf resets shifting to 2025. - Consumer behavior shifts affecting DTC investment effectiveness. - Spikes in green coffee prices impacting input costs. - Competition in the energy drink category.

Q: On the timing of wholesale delays, how many retailers are you in now and any color on why delays?

A: Chris Mondzelewski said they are in 36 retailers, with ongoing positive conversations with all major retailers, and new distribution in the largest three retailers recently.

Q: When will Black Rifle Energy be launched and details on clean energy delivery?

A: Chris Mondzelewski said they are in conversations with retailers, ready to launch in January 2025, using natural caffeine sources like green coffee beans for clean energy delivery.

Q: Color on Q2 gross margin drivers and operational initiatives?

A: Steve Kadenacy said drivers include supply chain productivity, narrowing manufacturing partners, hedging green coffee, and favorable mix shift to FDM; operational initiatives continue to go well with continued execution.