BRCC

Greetings, welcome to the Black Rifle Coffee Company first quarter 2026 earnings call. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Matthew McGinley, Vice President of Investor Relations. Thank you. You may begin.

Good morning, everyone, thank you for joining Black Rifle Coffee Company's first quarter 2026 financial results conference call. We released our results yesterday and the press release and related materials are available on our investor relations website at ir.blackriflecoffee.com. Before we begin, I would like to remind you of the company's safe harbor statement regarding forward-looking statements. During today's call, management may make forward-looking statements, including guidance and the underlying assumptions. These statements are based on expectations that involve risks and uncertainties, which could cause actual results to differ materially. For a further discussion of these risks, please refer to our previous filings with the SEC. Additionally, this call will include non-GAAP financial measures such as adjusted EBITDA. Whenever we refer to EBITDA, we mean adjusted EBITDA unless otherwise noted.

Reconciliation of non-GAAP measures to the most directly comparable GAAP measures are included in our earnings release, which was furnished to the SEC and is available on our investor relations website. Now please refer to the presentation on our investor relations website and turn to slide four. I would now like to turn the call over to Chris Mondzelewski, CEO of Black Rifle Coffee Company. Mondz?.

Thanks, Matt. Good morning, everyone. Joining me today are Evan Hafer, our Executive Chairman, Matt Amigh, our Chief Financial Officer, and Matt McGinley, our Head of Investor Relations. 2026 is off to a strong start, with first quarter performance reflecting meaningful progress against our core growth priorities. In coffee, we are seeing the benefits of disciplined execution come through clearly in our results. Distribution gains across key retail partners are translating into higher volume, better shelf productivity, and improved SKU-level performance. Importantly, this is not just about expanding doors. It is about expanding our shelf presence and making the space we earn more productive, which improves retailer velocity and supports stronger growth and profitability for both our partners and Black Rifle. We remain focused on disciplined resource allocation, prioritizing the channels, customers, and products where we see the highest return. Operationally, the business is becoming more efficient.

Productivity initiatives and process discipline are contributing to improved margins and more effective conversion of revenue into earnings. While the external environment remains dynamic, we are operating with greater control and visibility, maintaining a clear focus on translating commercial progress into improved business results. Overall, first quarter performance reinforces our confidence in the business and our ability to deliver profitable growth through 2026. Moving to slide six. In packaged coffee, first quarter growth reflected broad-based strength across customers and formats, including strong dollar and unit performance at mass merchants, sales that nearly doubled in grocery, and pack size innovation that supported new bagged coffee distribution in the dollar channel. According to Nielsen, Black Rifle Coffee grew 34.6% in the quarter, or more than 2.5x the category growth rate, driving meaningful share gains.

Bagged coffee dollar share increased 55 basis points to 3.3%, and pods increased 45 basis points to 2.2% at the end of the quarter. Importantly, these gains were supported by continued improvements in shelf productivity. In grocery, bagged coffee unit velocity increased despite higher pricing and expanded shelf presence, underscoring strong consumer demand and our competitive position at retail. Turn to slide seven, please. Execution against our land and expand strategy continues to translate into gains in retail breadth and shelf presence. In the first quarter, we expanded distribution by approximately seven points of ACV year-over-year, reflecting continued success in adding new retail doors and broadening our in-store visibility. At the same time, we are increasing our presence within these doors. The average grocer is now carrying nearly two more Black Rifle items than a year ago.

As we continue to build on initial placements and expand shelf sets, taken together, these results demonstrate that both elements of the strategy are working. We are adding new points of distribution while also deepening our assortment across existing accounts. These gains are strengthening relationships with new and existing retailers while reinforcing our ability to earn additional shelf space over time. Slide eight. Across the broader category, much of the dollar growth remains price-driven, particularly among legacy brands. Our performance continues to be driven by both unit gains and pricing. We remain among the strongest performers in unit growth, reflecting continued consumer demand at the shelf. In a category where much of the reported growth is price-led, that performance is translating into share gains and stronger shelf productivity.

That matters to retailers because they understand that healthy category growth comes from increasing consumer demand on a unit basis, not from pricing alone. These trends reinforce the quality and sustainability of our growth in the category. Turning to slide nine. Our direct-to-consumer business continues to show improvement, delivering its second consecutive quarter of year-over-year growth as our channel strategy evolves. Marketplaces are playing a larger role in scaling the model. These platforms expand our reach by meeting customers where they already shop and provide a low-friction entry point for customer acquisition. Importantly, they add incremental consumer reach and demand while complementing rather than replacing our retail presence and owned channels. At the same time, blackriflecoffee.com serves a distinct strategic role.

It remains the core platform for subscriptions and our most loyal customers, supporting deeper engagement, exclusive offerings, and stronger pricing discipline. We are seeing early traction from this refined approach. Marketplaces are driving customer acquisition and top-of-funnel growth, while our owned channel is focused on retention, repeat purchases, and long-term customer value. As a result, direct-to-consumer is contributing more consistently, reflecting clearer roles for the marketplaces and blackriflecoffee.com within the broader business. Slide 10. In ready-to-drink coffee, category trends remain challenging in the first quarter, with convenience channel softness weighing in on both our performance and the broader category. Despite that, we expanded distribution with ACV up nearly eight points year-over-year, reflecting continued success in adding new doors and broadening our presence across retail. We are concentrating on the areas we can control.

We are prioritizing channels and partners where we are seeing stronger demand while continuing to deepen our presence in grocery, mass merchants, and other retail environments that support more consistent takeaway. At the same time, we are using product and innovation as a disciplined growth lever, ensuring new items and platforms are aligned with the channels and occasions where they can perform most effectively. This approach supports a more focused RTD strategy, prioritizing retail environments where takeaway is most consistent and the economics are most compelling. Slide 11. In energy, we continue to move from our initial launch to a more deliberate phase of expansion, reaching 21% ACV across more than 22,000 doors in the first quarter. Our focus this year in energy remains on selectively expanding in markets and channels where we are seeing early traction.

This approach allows us to concentrate investment behind the strongest opportunities while scaling energy at a measured pace. Before I turn it over to Matt, I want to briefly highlight how we're continuing to support the communities at the core of our mission. During the first quarter, we remained active across a range of initiatives that brought together partners, veterans, military families, and local communities through events, direct support, and collaborations. We partnered with Operation Homefront and the Dallas Cowboys to host a baby shower for new and expecting military families. We also partnered with Team Red, White & Blue in support of a nationwide effort to honor those who served in the Global War on Terror while raising funds to support veteran health and wellness.

We worked with Beyond the Call to launch a limited time roast honoring the legacy of World War II veterans and helping fund efforts to preserve their stories. Across these efforts, we continue to support members of our community serving in the Middle East and around the world, helping ensure they and their families have the resources, connection, and recognition they deserve. That same commitment will carry forward as we move through the year, including through initiatives tied to America's 250th anniversary that celebrate service and expand our support for veterans and their families. Supporting this community is not a standalone initiative for us. It is core to who we are and how we operate.

Thank you, Mondz. I'll begin my remarks on slide 13. In the first quarter, net revenue increased 21% year-over-year, driven primarily by both wholesale and direct-to-consumer. Wholesale revenue increased 31.5% year-over-year, reflecting distribution gains, pricing, and continued contribution from Black Rifle Energy. Performance was broad-based across key customers, with sales to mass merchants increasing more than 20% and grocery sales more than doubling. We also benefited from pack size innovation, which supported new placements in the dollar channel. Direct-to-consumer revenue increased 7% in the first quarter, driven primarily by increased sales through third-party marketplaces. Actions taken over the past year to stabilize the business are now translating into more consistent performance and a return to growth. As a result, direct-to-consumer is contributing more consistently to consolidated growth and is positioned to support sustained growth. Turning to slide 14.

First quarter gross margin was 33%, down 305 basis points year-over-year, reflecting the impact of non-recurring items and elevated coffee costs. Importantly, we continue to make progress on controllable levers, including improvements in trade efficiency and supply chain, which help mitigate these pressures. Elevated green coffee costs and carryover impact of 2025 tariffs embedded in inventory continued to weigh on gross margin. However, pricing actions implemented in 2025 largely offset these impacts, with the net effect of inflation and tariffs limited to approximately 20 basis points in the quarter. Gross margin was also impacted by non-recurring items, including roughly 100 basis points of costs associated with onboarding a new direct-to-consumer fulfillment provider and approximately 210 basis points from a one-time non-cash write-down tied to coffee extract resulting from a formulation change.

This extract impact was not added back to adjusted EBITDA. These items were mitigated in part by underlying operational improvements, including approximately 50 basis points of benefit from supply chain initiatives and mix. Looking ahead, we have substantially locked our green coffee requirements for 2026, providing improved cost visibility. Commodity costs remain elevated in the near term, we expect gross margins to stabilize relative to 2025 levels, supported by pricing, productivity initiatives, and favorable mix. This stabilization sets the stage for margin recovery over time. We remain confident in our ability to achieve our long-term gross margin target of 40%, driven primarily by structural improvements within our control, including mix and efficiency in both trade spend and supply chain. Recent movement in the coffee forward curve is constructive, our path to the target does not rely on incremental pricing actions.

Moving down the P&L to slide 15. Operating expense improvements were driven by efficiency gains from last year's operational improvement plan, improved marketing efficiency, and lower spend across consulting, software, and legal. These actions reflect a more targeted allocation of resources towards key growth drivers, enabling greater operating leverage while supporting the business as it scales. Total operating expenses declined over 8% year-over-year, driven by a 10% reduction in marketing expense and a 14% decline in general and administrative expense. Despite the year-over-year decline in gross margin rate, revenue growth drove higher gross profit dollars. Combined with operating expense reductions, this resulted in more than an eightfold increase in adjusted EBITDA and a 570 basis point expansion in adjusted EBITDA margin, with adjusted EBITDA increasing from under $1 million to over $7 million year-over-year.

This performance highlights the operating leverage embedded in the model, as revenue growth translates more efficiently into earnings against a more disciplined and structurally improved cost base. Turning to the balance sheet. We ended the quarter in a strong financial position with $39 million of debt outstanding, or approximately 1x net debt to trailing twelve-month adjusted EBITDA, and about 1x based on our 2026 guidance. At quarter end, we had more than $52 million of total liquidity, including cash on hand and available capacity under our credit facility, providing ample flexibility to support the business. Free cash flow improved by approximately $11 million year-over-year, with $6 million generated in the first quarter of 2026 compared to a use of over $5 million in the prior year period, driven by improved operating profitability and more efficient working capital management.

As previously disclosed, we received notice from the New York Stock Exchange in February regarding the minimum price requirement. Our shares are currently trading above $1, and we would regain compliance if, at the end of the applicable measurement period, both our closing share price and the average closing share price over the prior 30 trading days are at least $1. As we work through the standard cure period, we remain focused on executing our 2026 plan, improving the fundamentals of the business, and driving long-term shareholder value. Moving to the outlook on slide 17. For 2026, we are increasing our revenue outlook to at least 8% growth or approximately $430 million. We're also increasing our adjusted EBITDA guidance to at least 35% growth or approximately $29 million, up from our prior outlook of at least 30% growth.

This updated outlook is supported by current visibility into demand, pricing actions already in market, and secure distribution gains. Consistent with our approach from last quarter, our guidance reflects a level of performance we believe is supported by visibility we have today. We have strong momentum in the business and no reason, based on current trends, to believe that changes in the second half. At the same time, we're taking a disciplined approach and not assuming incremental distribution wins, pricing actions, or other benefits that have not yet been realized. As we gain additional visibility through the year, we will update the outlook as appropriate. From a cadence standpoint, revenue is expected to build over the course of the year, broadly consistent with the progression we saw in 2025.

First quarter performance exceeded our internal expectations, supported in part by normal shipment timing that likely benefited Q1 revenue by a few million dollars. We expect that timing benefit to normalize in the second quarter. Second quarter revenue is expected to be at least 10% year-over-year compared to 21% in the first quarter, reflecting both underlying business momentum and this timing impact. We continue to expect gross margins in a range of 34%-36% in 2026 compared to 34.6% in 2025. The outlook reflects pricing actions taken in 2025, supply chain productivity, and favorable channel and product mix alongside external factors that remain dynamic. Second quarter gross margin is expected to be consistent with the first quarter, reflecting continued pressure from coffee inflation and the more recent impact of higher fuel costs.

Gross margins should improve in the back half of the year as higher cost inventory is worked through and productivity and mix benefits continue to build. For the second quarter, we expect adjusted EBITDA of at least $5 million, more than double the prior year period, while absorbing the impact of the first quarter shipment timing benefit and the timing of certain expenses. Adjusted EBITDA is expected to step up further in the second half of the year as revenue builds, gross margin improves, and operating leverage increases. While we're not providing formal cash flow guidance, we remain focused on margin expansion and improved working capital efficiency to enhance cash generation. With capital expenditures expected to remain in line with prior year levels, we expect to generate positive cash flow. Looking ahead, the business is benefiting from a more streamlined operating structure, stronger cost discipline, and improved earnings conversion.

The actions taken in 2025 are flowing through the P&L, supporting more consistent profitability and greater financial flexibility in 2026. We see this most clearly in coffee, where pricing, distribution gains, and productivity initiatives are expanding gross profit and improving returns.

Our priorities remain focused on operating discipline, cash generation, and thoughtful capital allocation. With visibility into demand pricing and distribution, we are well-positioned to improve earnings quality and sustain profitable growth in 2026 and beyond. Operator, we are now ready for the Q&A session.

Thank you. If you'd like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star two if you'd like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. Our first question comes from the line of Michael Baker with D.A. Davidson. Please proceed with your question.

Hey, thanks. Congratulations on a good quarter. Beating and raising is nice. I did want to ask, you gave a little bit of color on the second quarter guide, but I guess I'm trying to square the at least 8% with, you know, what you talked about as the progression through the year similar to last year. Last year, the year progressed, I think the second quarter was $5 million above the first quarter, then $5 million more in the third quarter, then $10 million in the fourth quarter. If you do that, you get something like 18% growth, which is way above 8%. I guess you just told us that the second quarter will be, I think if I do the math, down about $5 million.

Does the third quarter and fourth quarter progress from there in that $5 million-$10 million growth rate per quarter? Just some more color on squaring all those, you know, different factors that, yeah, how do we sort of reconcile all those?

Yeah, Mike, that's a great question. Let me hit that one straight on. You know, as I mentioned in prepared remarks and also on the last quarter call, we're taking a disciplined approach to guidance. Our outlook reflects only what we have confirmed at this point. That's in market pricing and also distribution gains that have been secured. We're not baking anything else in that has not yet been realized. We do have real momentum in the business, and we don't wanna get too exuberant with that. Based on what we see today, we do expect some of that to carry on through to the second half. We're one quarter in, and we'll update the outlook as things materialize throughout the year. Here's a couple dynamics worth flagging for the shape of the year.

On top line, you know, our comps are going to get progressively tougher as we enter the back part of the year, as we lap four significant tailwinds that all kicked off around mid 2025. The first one being pricing. Remember, we took two pricing actions in 2025, one mid-year and one came in in early Q4. The second one would be the seven point plus ACV gains. Most of the customer resets are in that mid-year timing, that's going to be a, you know, that's a headwind that's going to cause a tougher comp when we get into the back half. Finally, our third-party marketplace acceleration initiative kicked in mid last year, those comps will be tough as well. There is one more.

Remember, we did about $5 million in liquidation in the back half of last year, which we do not plan to replicate in 2026. When you flip to adjusted EBITDA, you know, the Q1 beat of $5 million does flow through to guidance. We took adjusted EBITDA from, as you know, at least 30% growth to at least 35% growth. That was partially offset by a couple things. Number one, we have about a $1.4 million fuel risk related to the fuel surcharges we see coming through parcel as well as line haul rates. Also the $2.3 million one-time write-down of the final installment of extract that hit in Q1.

If you net all that together, that goes to the roughly $1 million increase in EBITDA that we're raising guidance by. Hopefully that clarifies the bridge somewhat, but happy to elaborate.

Yeah. Okay. Thanks. No, I appreciate that. If I could ask one more question unrelated. The SKU count, I think the slide shows about average five SKUs per door, if I'm understanding that slide right. Can you tell us about the spread? Like what's the high? What's the low? What's the art of the possible as you continue to add SKUs per door?

Hey, Mike, this is Chris. Thanks for that question. Just to reiterate, you know, we've been talking about this pretty consistently. Our land and expand strategy, which we've really been pushing here, you know, in the last couple of years as we've been driving this grocery expansion, is really playing out well for us, right? The first aspect of that, of course, is the ACV gains, which we've talked quite a bit about. You see that we continue to tick up on that. We expect to be able to continue to add, you know, to our ACV or our overall breadth, you know, of reach throughout the country. The third item, I'll come back to what you said here last. The third item is velocity.

We feel very good about the fact that our velocity has actually increased as we've been doing this. We don't expect that to happen long term, by the way. We think that velocity will start to level out. As you put more and more items on shelf, your per unit velocities will start to level out. As a premium brand, having our velocity right at the index of the category is a fantastic place to be. You know, what you asked about, you know, the average items is actually the most important part. You know, as you saw in the numbers that we shared, we were sitting at, you know, only a couple items on shelf a couple of years ago. In the last year, we've added two additional items on average across all retailers.

You're right. The number that, you know, we show as our average is just that. There are obviously some retailers that sit, you know, right at that five and a half mark, but most of them are either under or above that. New retailers, when they come on, will tend to come on with two to four SKUs, depending on what their shelf set looks like and what channel they compete in. You know, from there, we often see an expansion up to six to eight. Then to directly answer your question, you know, we have grocery customers who are as high as 13 or 14. I'd like to believe that that is, you know, what ultimately a healthy shelf set for us looks like right now.

Although as we continue to innovate over time, that number will continue to grow. As we think about a growth profile and how our model will continue to work, it's gonna be off of the back of that ACV increase. We still have plenty of room to push that north. Most importantly, on those average items, you know, while we sit at five and a half now, there's no reason that we can't be at, you know, 12, 13, 14 items on a grocery shelf.

Great. Appreciate the call. Thank you.

Thanks, Mike.

Thank you. Our next question comes from the line of Sarang Vora with Telsey Advisory Group. Please proceed with your question.

Great. Congratulations on the quarter as well and positive momentum in second. You know, my question is more on a product level. You know, I know in the prepared remarks, you talked about expansion of a new pack size across dollar stores. It seems like your Walmart business or the mass business is running double digits. Can you talk from a product standpoint, what's driving this trend? Is it the packed coffee or like some of the newer ones that, you know, cold brew? Just from a product level standpoint, can you help us unpack the strong results? What's helping the trend?

Sarang. It's Chris. Thanks for the question. From an overall standpoint, you know, very much in coffee, right? Bagged and pod coffee continue to have incredible momentum. In fact, if we go to, you know, what is, you know, still the core of our business, our number one customer, you know, Walmart, we are looking at share growth in both segments. You know, despite having a well-established, you know, brand at Walmart, we have 9.4% share now in the bag category, and we are up 30 basis points to a 5.3% share in the pods category.

That illustrates that, you know, even with our most established, you know, pieces of business, we continue to drive very strong share gains in, you know, what is the core of our business, which is the pods and the bags. You know, RTD coffee continues to be a very important part of our business. We have not had as strong a growth. We've been right with the category, where the category has been, you know, down low single digits. We expect that to recover. We're playing a very important role. We see ourself as the number three player in RTD coffee. We see ourselves as playing a key role in turning that category. We had a couple innovation items this year, our cold brew.

We have a few more innovation items that we're working on in the background. You asked about cold brew. Is that playing a key role? Not yet. You know, very early. We're just in the initial shipments of that item as we go into the summer season, you know, for cold consumption, you know, overall in the category. We're excited about it. We're excited about the potential. You know, we continue to feel great about the fact that we have the number 3 cold coffee business in America.

Again, you know, the pods and the bags, you know, based off of the model that I just talked about, in Mike's question, the land and expand strategy, driving ACV, driving average items, we believe there's just, you know, continued, you know, great potential to run that model and generate growth over the next, you know, two to three years.

That's great. You know, I had a follow-up on marketing spend. I think the dollar, marketing spend dollar continues to be down year over year, past few quarters. Can you help us understand how we should think about marketing going forward?

Yeah, Sarang, that's a great question. The marketing spend has been down over the last couple quarters, and it's primarily due to us reallocating more spending upper funnel and taking away some of the lower ROAS, bottom funnel activity. You're going to see that ramp up considerably as we go into late Q2 and into Q3 and Q4 as we hit America's 250th and a lot of our promotional windows that happen through the summer. You will see an uptick. Again, year-over-year, we're looking at relatively the same level of spending when it comes to a % of sales basis. We will spend more year-over-year on marketing in total.

I think it's important to reinforce.

Great. Thanks.

Sarang, you know, which we've talked about before, that our, you know, marketing is, we believe a substantial competitive advantage for us as a business, you know. The reality is it's a very efficient model for us. We don't have to spend the same kind of percentages as some of our competitors in order to be able to get equal or even better results. Behind the scenes, we obviously track our brand awareness, attributes of our brand, and we feel great about how all of those things are progressing. The result of that of course is, you know, ultimately what we see as far as takeaway on the shelf. Dollars only tell a piece of the story for us.

It's really impressions and quality impressions, you know, that become most important to us, you know, being able to build a brand over the long term.

That's great. Good luck. Thank you.

Thank you. Our next question comes from the line of Daniel Biolsi with Hedgeye. Please proceed with your question.

Good morning. How did your wholesale growth breakdown between price and volume in the quarter? Is it similar to, with the 22% units and X% price for the year?

Get that, Manny.

Yeah. Dani, the overall, like we had, you know, we had 21% growth in the quarter. We had about 6% of that came from pricing. The vast majority of that growth that we had was unit growth for the quarter. For the year, you know, the pricing will begin to fade a little bit as we get to the back half. You know, overall, the unit growth is gonna be the dominant driver of our overall top line this year, and that's driven by the things that Mondz was talking about. One is the velocity increases we've seen year-over-year. Second is the more doors that we're in, and the third thing is the increase in average items carried.

It's really a volume-driven, gain year. It's one where pricing has helped, but it's not the primary driver of our upside.

Okay. Did you see any change in the consumer behavior from higher fuel costs? Could you note any difference between the C stores or RTDs compared to your packaged coffee sales?

We're not. It's obviously something we're going to be watching. We don't specifically, you know, track that traffic. I think we can expect that when fuel costs go up, there always is less store traffic. It's not just C store, it's also grocery and mass. I think those are potential category dynamics to watch out for. As of right now, no, we're not seeing that. We're seeing, actually, you know, pretty consistent unit and price growth across, you know, the grocery categories. Units as a category have been declining due to the higher pricing. Just to reinforce, our unit growth has been exceptionally strong, you know, despite that. In case of C store, you know, categories that have been growing, such as energy, continue to grow.

The declines in RTD coffee actually are starting to stabilize. They were a bit higher a year ago. We're now seeing them come down into the low single digits. While that's a watch-out, Dan, we're not really seeing anything that would tell us that it's an issue.

Yeah, we've specifically looked at that quite a bit, with regard to the convenience channel, really beginning in March and through April. You know, we looked at it extensively, and we just couldn't see any impact yet with the higher fuel cost impacting the category or the channel at all. Not that that couldn't happen, but we haven't seen those impacts yet. Thank you.

Thank you. Ladies and gentlemen, that concludes our question and answer session. I will turn the floor back to management for any final comments.

Yeah. Thank you. As we close, I wanna highlight a couple of key points for us. First, fundamentals of our business continue to strengthen. We're delivering growth that is increasingly driven by distribution gains, improved shelf productivity, as I talked about earlier, and then, you know, unit velocity. It's not just the pricing. It is gains that we believe are healthy, they're more durable, that are gonna carry us over the next two to three years. That is driven by our operating model then. Those actions that we've been taking over the last couple of years to simplify the business, improve cost discipline, focus our resources, are now really starting to translate into results.

We are converting revenue into earnings more effectively than we have before, and we are generating positive cash flow. With all of that, we're maintaining flexibility on the balance sheet, and we're gonna continue to do that strategically in the business. Third, we're operating with greater control and visibility. Our 2026 outlook is grounded in confirmed drivers, as Matt talked about. These are not things we're still working against. We actually have, you know, built them. We've secured them, distribution-wise, pricing-wise, productivity initiatives that we know are within our control. As we execute, we expect to build on the foundation throughout the year, and we'll continue to obviously update as that happens. Overall, we remain focused on disciplined execution, improving our earnings quality, and driving long-term shareholder value.

Appreciate everybody's continued support. Look forward to updating you next quarter.

Thank you. This concludes today's conference. You may disconnect your lines at this time. Thank you for your participation.

Greetings. Welcome to BRC Inc. Fourth Quarter 2025 Earnings Call. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation. Please note this conference is being recorded. I will now turn the conference over to Matthew McGinley, Head of Investor Relations. Thank you. You may begin.

Good morning, everyone, and thank you for joining BRC Inc.'s fourth quarter and fiscal year 2025 financial results conference call. We released our results yesterday, and the press release and related materials are available on our Investor Relations website at ir.blackriflecoffee.com. Before we begin, I would like to remind you of the company's Safe Harbor statement regarding forward-looking statements. During today's call, management may make forward-looking statements including guidance and the underlying assumptions. These statements are based on expectations that involve risks and uncertainties which could cause actual results to differ materially. Additionally, for a further discussion of these risks, please refer to our previous filings with the SEC. This call will include non-GAAP financial measures such as adjusted EBITDA. Whenever we refer to EBITDA, we mean adjusted EBITDA unless otherwise noted. Reconciliations of non-GAAP measures to the most directly comparable GAAP measures are included in our earnings release which was furnished to the SEC and is available on our Investor Relations website. Now please refer to the presentation on our Investor Relations website and turn to Slide 4. I would now like to turn the call over to Christopher Mondzelewski, CEO of BRC Inc. Chris?

Thanks, Matt. Good morning, everyone. Joining me today are Evan Hafer, our Executive Chairman, Matthew Amigh, our Chief Financial Officer, and Matthew McGinley, our Head of Investor Relations. 2025 was a year of measurable operating progress for BRC Inc., led by strong performance in packaged coffee. For the year, packaged coffee grew 31.1%, approximately three times the broader category growth rate, with units up more than 22% and share up 60 basis points in bagged coffee. That momentum accelerated in the fourth quarter, as distribution expansion translated into measurable improvements in productivity and share with key retail partners. The combination of expanded doors and stronger per-SKU productivity materially strengthened our retail position as we exited the year. We also advanced our ready-to-drink and energy platforms, securing incremental distribution and broadening our presence in priority accounts. These gains reflect disciplined commercial execution and reinforce the strength of the brand. 2025 presented a challenging operating backdrop. Coffee markets remained volatile, and consumers faced ongoing pressure. Throughout the year, we remained disciplined on pricing, tightly managed expenses, and aligned resources with the highest-return opportunities across the portfolio. We also took meaningful steps to streamline our platform. Our asset base is leaner and more focused, with capital and talent directed towards initiatives that support durable, profitable growth. As we look ahead, the actions taken in 2025, combined with expanding distribution, improving shelf productivity, and moderating cost pressures, position us for a return to strong EBITDA growth in 2026. We are encouraged by the progress we have made and confident in the trajectory of the business as we enter the new year. Moving to Slide 7. Momentum in packaged coffee accelerated as we exited the year. In the fourth quarter, our packaged coffee business grew 34% compared to nearly 13% growth for the broader category. That performance translated into continued share gains. In bagged coffee, market share reached 3.3% nationally, up 60 basis points year over year, while pods increased to 2.2% nationally, up 40 basis points. Importantly, these gains were supported by improving shelf productivity, not just expanded distribution. Velocity strengthened throughout the year and reached parity with the overall bagged coffee category in grocery, despite pricing approximately 40% above the category average. We are seeing stronger consumer takeaway and repeat purchase, reinforcing sustained velocity improvement. Achieving category-level velocity at a premium price point reinforces the strength of consumer demand and the durability of our retail position as we enter 2026. Move to Slide 8, please. Our land-and-expand strategy continues to prove itself as a scalable and repeatable growth engine. We begin with a focused assortment, entering retailers with a concentrated set of high-performing items designed to demonstrate the value of the brand to the category. Once performance is established, we earn the right to broaden the assortment by adding incremental items to the shelf. On the land side, we delivered another year of retail expansion. Distribution reach increased nearly 8 points in 2025, bringing ACV to 54.9%. That steady expansion reflects continued success in adding new retail doors and strengthening our national presence. The expand component is working as well. Improving velocity translated to directly higher shelf productivity, which supported broader assortments and additional shelf space. On average, grocers added two incremental BRC Inc. items in 2025 alone. And since entering grocery three years ago, we have nearly tripled our shelf presence. This disciplined execution is translating into greater shelf visibility, stronger retail economics, and deeper long-term retailer commitment to the brand. Slide 9. Looking at the broader category, much of the reported growth continues to be price-led, while underlying unit trends remain muted, with higher shelf pricing driving dollar expansion across legacy brands. Our performance looks different. The majority of our growth is volume-driven. Units increased more than 22% in 2025, reflecting real consumer takeaway rather than pricing actions. That distinction matters. We are adding households, increasing purchase frequency, and expanding share within existing accounts. As distribution expands and repeat purchase strengthens, our growth is becoming broader and more sustainable. In a category heavily influenced by price, our gains are rooted in unit expansion, repeat purchase, and stronger shelf productivity. Those dynamics reinforce durable top-line momentum and operating leverage. As volume scales, we expand gross profit dollars and improve fixed cost absorption, while delivering strong productivity and economics to our retail partners. Packaged coffee is firmly established as the core economic engine of the business, and we see meaningful runway for continued growth. Turning to Slide 10. Our direct-to-consumer business stabilized in 2025 and returned to growth in the fourth quarter. While retail continues to be the primary driver of top-line growth, direct-to-consumer remains an important strategic channel. Our owned website allows us to engage directly with our most loyal customers, gather insight and feedback, and introduce new products and messaging. Our approach is not to force traffic to a single destination, but to ensure BRC Inc. products are available wherever consumers choose to shop. We saw improvement on our core website during the year, and at the same time continued growth across third-party marketplaces. Those platforms are extending our reach, supporting repeat purchase, and complementing retail distribution. Taken together, direct-to-consumer is operating from a more stable base and contributing positively to the broader business. Slide 11. In ready-to-drink coffee, performance in 2025 varied by channel. We expanded distribution, increasing ACV by 10 points to 55.9%. The strongest performance was in grocery, mass, and dollar. We outperformed the category for the full year. The category remained under pressure in convenience, which represents more than half of tracked ready-to-drink sales. As c-store trends weakened, fourth quarter results reflected that softness. We are not assuming a category recovery and are focused on the factors we can control. That means prioritizing our top retail partners, improving shelf productivity, and using innovation as a disciplined growth lever. New flavors in our cold brew platform are intended to drive incremental takeaway and improve velocity within our existing distribution footprint. Packaged coffee remains our core economic engine. RTD is an important adjacency, and we are scaling it deliberately with a focus on returns and disciplined execution. Slide 12. In energy, distribution expanded in line with our launch-year plan, reaching approximately 22% ACV across nearly 20,000 retail doors in 2025. As we move into 2026, the focus shifts from launch execution to scaling the business in the right markets, with the right partners, and with a clear emphasis on where we can win. That discipline continues to guide our approach. We are prioritizing geographies and channels where we can drive velocity and returns, rather than pursuing distribution for its own sake. This return-focused strategy positions the energy business to scale responsibly and contribute to the overall growth of the BRC Inc. brand. Before I hand it off to Matt, I want to briefly touch on how we continue to show up for the communities we serve. Last quarter, we committed to eliminate $25,000,000 in medical debt for veterans through Operation Debt of Gratitude, in partnership with Born Primitive and ForgiveCo. I am proud to say we exceeded that goal, wiping out more than $34,000,000 in medical debt and helping approximately 15,000 veterans enter 2026 free from that burden. We also helped feed more than 1,000 military families through Operation Homefront during the holidays and continued supporting the Special Operations Warrior Foundation and other veteran and first responder organizations across the country. With members of our community and even our families currently deployed in the Middle East and around the world, we remain committed to supporting them and those waiting for them at home. That same commitment will guide us as we move into 2026 and honor America's 250th birthday through initiatives that celebrate service and expand programs that create meaningful impact for veterans and their families. Supporting this community is not a campaign for us. It is foundational to who we are and how we grow. I will now turn it over to Matthew Amigh.

Thank you, Chris. I will begin my remarks on Slide 14. For the full year, net revenue increased 2% year over year. Excluding the impact of the 2024 loyalty rewards accrual change and other nonrecurring items in both periods, net revenue increased 8%, primarily driven by wholesale growth. Our wholesale segment, which sells packaged coffee and ready-to-drink beverages to retailers, grew 5% year over year, or 13% excluding nonrecurring items, reflecting stronger velocity, expanded distribution across both doors and items, and continued contribution from BRC Inc. Energy. Sales to mass merchants increased double digits and grocery sales more than doubled. Direct-to-consumer declined 5% for the year, but was slightly positive excluding the 2024 loyalty benefit. With the stabilization achieved in 2025, direct-to-consumer is no longer a material offset to growth elsewhere in the business, allowing wholesale performance to more clearly drive consolidated results. Moving down the P&L, operating efficiency gains in 2025 from restructuring actions and reallocating resources towards higher-return initiatives partially offset higher commodity costs and tariffs. For the year, gross margins declined 650 basis points and EBITDA declined more than 40%. As shown on Slide 15, the operating expense reductions we implemented combined with improving revenue limited the fourth quarter EBITDA decline to just 2%. In the fourth quarter, revenue increased 7% year over year, or 11% excluding nonrecurring revenue in both periods. Wholesale revenue increased 8% year over year, or 16% excluding nonrecurring items. Direct-to-consumer revenue increased 7%, marking the first quarter of growth in this segment in more than three years. Turning to Slide 16. We provide a detailed view of this year's gross margin drivers and the path forward. Gross margin was 32.1% in the fourth quarter, a decrease of 610 basis points year over year. One-time items, including startup costs associated with onboarding a new direct-to-consumer fulfillment provider and a noncash impairment of coffee extract related to a formulation change, pressured margins by 270 basis points, partially offset by 170 basis points of productivity and favorable mix. Coffee inflation and tariffs, net of pricing, were the single largest headwind, impacting gross margins by approximately 420 basis points in the fourth quarter and 350 basis points for the full year. Coffee prices nearly doubled from 2024 to 2025 and remain elevated due to weather-related yield declines and tariff-driven shifts in global supply. U.S. tariffs on coffee were fully removed in November, and improved harvest expectations have contributed to a recent price moderation. Arabica prices peaked near $3.75 in early January, and have since declined into the high $2 range, while the futures curve implies continued normalization through 2026 and 2027. We expect some residual impact from elevated coffee costs and previously capitalized tariffs to flow through inventory in 2026. However, pricing actions, productivity initiatives, and favorable mix are expected to offset those pressures and stabilize gross margins relative to 2025. Longer term, we remain confident in our ability to reach our 40% gross margin target. The path is driven primarily by structural levers within our control, including product and channel mix, trade efficiency, and supply chain productivity. The green coffee forward curve has recently shown downward pricing pressure which would accelerate progress. That said, reaching our long-term target does not rely on additional pricing action. Slide 17. Operating expenses increased 1% year over year on a reported basis. Excluding nonrecurring items related to our 2025 restructuring and certain legal expenses, operating expenses were lower by 7%. Marketing expense decreased 10%, reflecting lower nonworking spend and a reallocation towards programs more directly tied to revenue. Salaries, wages, and benefits were flat despite a 15% reduction in headcount, primarily due to the lapping of a $3,000,000 incentive compensation reduction in the prior year. General and administrative expenses increased 28% in the quarter and reflect a significant portion of these nonrecurring items. Excluding those items, general and administrative expenses decreased 25%. Fourth quarter performance demonstrates the operating leverage now embedded in the model as revenue improves against a more disciplined cost structure. Turning to the balance sheet. Through the equity offering completed in July, we repaid the outstanding balance of our asset-based lending facility and reduced total debt by more than $30,000,000 in 2025. We ended the year with $39,000,000 of debt outstanding, representing approximately 1.8 times net debt to 2025 adjusted EBITDA and approximately 1.4 times adjusted EBITDA based upon our 2026 guidance. At the end of the year, we had more than $50,000,000 of total liquidity, including cash on hand and available capacity under our credit facility. Cash used in operating activities was approximately $10,000,000 in 2025, with roughly $9,000,000 attributable to working capital normalization. We do not expect working capital to be a comparable use of cash in 2026. As previously disclosed, we received notice from the New York Stock Exchange regarding the minimum price requirement. The notice has no immediate impact on our listing, operations, or financial reporting obligations. We have the standard cure period and are focused on executing our business plan to regain compliance. Our focus remains on disciplined execution and driving long-term shareholder value. Moving to the outlook on Slide 19. In 2026, we expect revenue growth of at least 7% to approximately $425,000,000. This outlook reflects current visibility into demand trends, pricing already in market, and distribution gains that are secured and operationally in place while incorporating category volatility within our ready-to-drink portfolio. Our guidance is grounded in confirmed commercial drivers and does not assume incremental distribution wins or other actions that remain pending. As we continue executing against our 2026 priorities, we expect to incorporate incremental gains through our regular quarterly updates. From a quarterly cadence standpoint, we expect revenue dollars to build sequentially through the year, consistent with the progression experienced in 2025. In the first quarter, we expect revenue growth of at least 10% compared to 2025, reflecting current momentum in the business and the early year benefit of distribution gains implemented in late 2025. We expect gross margins in the range of 33% to 36% in 2026 compared to 34.6% in 2025. The range reflects continued execution progress and external variables that remain dynamic. We benefit from the annualized impact of pricing actions taken in 2025, continued productivity initiatives across our supply chain, and favorable channel and product mix. At the same time, coffee prices have moderated in recent months, but remain above the 2025 average cost, which limits the pace of our margin expansion. We also expect residual tariff impacts early in 2026 as inventory produced under prior tariff rates flows through cost of goods sold. In addition, we are making incremental trade and slotting investments to support distribution expansion, which will weigh modestly on gross margins as we scale into new doors. We expect at least 30% growth in EBITDA in 2026 compared to the $21,400,000 generated in 2025. The primary drivers of the growth are higher gross profit dollars from revenue expansion and a reduction in operating expenses. We expect operating expenses to decline year over year, driven largely by lower general and administrative expenses as cost savings actions implemented in 2025 continue to benefit us in 2026. Marketing expense is expected to grow in line with sales, while labor expense growth should remain muted. From a cadence standpoint, we expect EBITDA will remain second-half weighted. In 2025, approximately 15% of the full-year EBITDA was generated in the first half. In 2026, we expect the first half EBITDA to represent roughly one quarter to one third of the full year, with the balance generated in the back half of the year as revenue scales and leverage increases. While we are not providing formal cash flow guidance, converting revenue growth into higher profit margins and improved working capital efficiency is a core focus. We will continue to invest where appropriate to support growth, but at capital expenditure levels consistent with the prior year, we expect to be cash flow generative. We have simplified the model, strengthened our cost structure, and improved the underlying economics of our company. The actions we took in 2025 are translating to higher profitability, tighter expense discipline, and a stronger balance sheet entering 2026. We are carrying real momentum into the year, particularly in coffee. Pricing, distribution gains, and productivity initiatives are working together to expand gross profit dollars and improve returns on invested capital. At the same time, we are converting that growth into EBITDA expansion and operating cash flow, reinforcing financial flexibility. Our focus remains consistent: disciplined execution, operational efficiency across the entire income statement, structural efficiency within operating expenses, and thoughtful capital allocation. We believe that combination positions us to further strengthen the business and drive durable, profitable growth in 2026 and beyond. Operator, we are now ready for the Q&A session.

Thank you. Our first question is from Sarang Vora with Telsey Advisory Group. Please proceed.

Great. Thank you. And first of all, congratulations. It is good to see the business momentum coming back. My first question is on the coffee side. The land-and-expand strategy that you talked about seems to be really catching up. You are seeing the momentum in the business. One of the main drivers I feel is expansion of SKUs across your retail network. So can you help us understand, I see the average number of SKUs is about five to six right now across the retail doors. Can you help us understand where it is at some of the higher level, which retailers you see at the higher level penetration, and then any color you can share in terms of bagged coffee or some of the newer products like K-Cups or cold brew, how the performance of some of these other coffee products has been as well?

Hey, Sarang. It is Chris. Thanks very much for the question. Yes, so our land-and-expand strategy is the core of our growth model, and it is working quite well. Just to reiterate, the strategy is to put two to three of our best items per segment, in bags and pods, and drive those to strong performance. Then as we move into that upper half of velocity with that particular retailer, generate shelf expansion off of that. To answer your question directly, we have absolutely seen the total number increase. We mentioned that in the upfront comments. We have nearly tripled our number. I am not going to give you specific retailer names, but if we think about a number of the retailers that launched well, our largest retailer, we have 20 items on shelf. That may not be a comparative across grocery, but in a number of our grocery retailers that launched shortly thereafter, we have 14 items, 12 items, and 8 items—those would be three examples of a national retailer and two large regional retailers. The reality is that we believe that continuing to drive items up into that 12 to 15 range is absolutely achievable for us. We have demonstrated that. To answer your final question on which items are performing well, it continues to be our core items that drive the highest velocities. We are going to continue to innovate and make sure that we provide items that go where we know consumers’ preferences are moving. We are not going to talk specifically about any of the innovation items that we are launching this year. They have not yet hit the shelf. But like every year, we are going to bring new news to our retailers. We believe heavily in driving new items in order to help drive that category expansion.

That is great, and it is really good to see the momentum coming back on the coffee side. My second question is on the energy side. We are almost a year into the launch of the energy drinks. Can you share any lessons learned over the year, and also a little more color on the plans for 2026, like markets that you are trying to expand, flavor profiles, changes in SKUs? Any color you can share on the energy side would be helpful. Thank you.

Sure. It was a great learning year for us. We were pleased with the first year of execution. As we have talked about, it was a regional launch position for us in the first year. We want to continue to be very careful that we do not put more resource against energy than our core coffee business with the kind of momentum we have in coffee. That is obviously the first dollar spent for us. We continue to believe in the potential of energy because of the size of that category and the dynamics of that category and, even more importantly, because nearly two thirds of our consumers are already drinking energy as part of their routine. So we know that it is a tight fit to our consumer base. To answer your question, in the first year we did a regional launch as we talked about. We had markets that were very successful for us where we were able to drive from three to five units on shelves at a time and see the velocities respond around that. We had other markets where we had less success. Not surprisingly, similar to any other CPG business, certainly businesses in the cold, where we get better placement, better distribution, and couple the marketing programs around that, we see the best success. The key piece for us is that we have seen markets with very high success and we have seen our retail chains with very high success. I am not going to say which ones; we have not given guidance on that. As we go into 2026, the plan very much revolves around that. Rather than saying we are going to continue to drive our ACV to a significantly higher level, which would cost us a lot more in marketing dollars to support that, we are going to keep a regional focus. We like to talk about the smile states of the U.S., which is where a lot of our brand strength is. I am not going to talk to the specific markets. We will continue to be in the regions that we do best in as BRC Inc., and we will focus with our partners KDP on very strong execution, building off of our learnings in 2025, and continue to evaluate what is the best overall model for us from a marketing and commercialization standpoint to drive success with that item. Again, we will be careful that we do not ever pull more resource than we want to from the coffee business. Coffee is core for us. Energy is an incredible opportunity for us that we want to continue to prepare for the future.

That is great and good luck ahead. Thank you.

Our next question is from Daniel Biolsi with Hedgeye. Please proceed.

I was wondering if you could share what you expect lower coffee bean costs will impact for the industry prices on the shelf? What have you seen with your latest price increase?

Sure, Dan. This is Matt. What we are seeing right now is we are seeing that coffee nearly doubled over the last two years, and in 2025 we were sitting about $2.83, and in 2026 we expect it to increase slightly. We are seeing a pullback in the commodities over the last, I would say, 20 trading days, where the price per pound of coffee has gone down on average about 18% for the forward curve months. So we are seeing a moderation there. We have taken two price increases in 2025. One was in Q3 and then the second one just settled in late Q4, and both of those price increases were in the upper single-digit ranges. The consumer response to that is in line with expectations—relatively low elasticity, sitting less than a 0.5 elasticity factor. So everything is going according to plan with the price increases we see in market. We will continue to stay close to how the market forms, how our elasticities look, how trade promotion looks, and we will adjust as needed.

Thank you. And then I know you guys think about this a lot more than most of us, but do the current actions by our military change your messaging or your priorities in terms of marketing during these times?

No. The reality is that this brand, from its inception, when the founders first came up with Black Rifle, was always centered around veterans. They were at the time active in the military service, and we have always had veterans at the core of everything that we do when it comes to our give back to the community, which I talked about earlier, as well as how we market the brand. Obviously, all of the troops overseas are in our thoughts and prayers like every other out there, but it does not change anything we are doing. We have been focused on veterans from the very beginning, and times like this are just a great reminder to everyone in America as to why we need to be backing our veterans every single day because they are constantly put in harm's way. We all owe a real debt of gratitude to them for that.

Thanks.

There are no further questions at this time. I would like to hand the call back over to management for closing remarks.

Let me close by saying we are focused on disciplined growth, continuing to expand our margins, and generating cash. The actions we have taken this year are foundational for the business as we enter 2026. We have very clear priorities, very measurable targets, and our brand is stronger than ever. Distribution is growing, and we have greater financial flexibility than at any other point in time in the company. Execution will continue to be our focus going forward. We appreciate everyone calling in, appreciate your continued support, and look forward to updating you next quarter.

Thank you. This will conclude today's conference. You may disconnect at this time, and thank you for your participation.