BRC Inc.

Greetings. Welcome to the Black Rifle Coffee Company fourth quarter 2023 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. Please note this conference is being recorded. I will now turn the conference over to your host, Tanner Doss, Vice President of Investor Relations. You may begin.

Good morning, everyone. Thank you for joining Black Rifle Coffee Company's conference call to discuss our fourth quarter 2023 financial results, which we released yesterday and can be found on our website at ir.blackriflecoffee.com. Before we start, I would like to remind you of the company's Safe Harbor language, which I'm sure you are all familiar with. On today's call, management may make forward-looking statements including guidance and underlying assumptions. Forward-looking statements are based on expectations that involve risks and uncertainties that could cause actual results to differ materially. For further discussion of risks related to our business, please see our previous filings with the SEC. This call will also contain non-GAAP financial measures such as adjusted EBITDA. Wherever we refer to EBITDA in our comments, we are referring to adjusted EBITDA unless otherwise noted. Reconciliations of these non-GAAP measures to the most comparable GAAP measures are included in the earnings release, furnished to the SEC, and they are also available on our investor website. Now, if you could please turn to slide three in the presentation that we provided on our investor relations website, I'd like to turn the call over now to Chris Monzelewski, CEO of Black Rifle Coffee Company. Monze?

Thanks, Tanner, and good morning, everyone. Joining me today is Steve Cadenicy, our chief financial officer, and Evan Hafer, our founder and executive chairman. We've also provided a presentation that we will refer to throughout the call, which you can find on our investor website. Please turn to slide four of that presentation. Before I get into the details of our business, I want to reflect for a minute on what it means to lead Black Rifle Coffee Company. Steve and I will talk about an exceptionally healthy business model that we believe is on the precipice of changing how the wider population thinks about brands in the coffee category. In fact, the data would say we are already doing that. But leading Black Rifle goes much deeper. I have the honor and the responsibility to partner on a mission first set out upon by Evan Hafer and a founder team that truly understands service to country. Through countless deployments and combat missions, they came to know what sacrifice truly means. And as a Marine before my career in business, I also saw this sacrifice on a day-to-day basis. In fact, nearly half of our employees at Black Rifle are veterans. And we'd like to believe we have a deeper understanding of what sacrifice and mission mean than most consumer companies. Demonstrating this, Evan is currently in Florida training for a founder-led initiative to commemorate the 80th anniversary of D-Day, an event of profound historical significance. To honor this, Evan organized a training trip for employees and fellow veterans to Florida, where they will prepare for an era-appropriate parachute jump onto the beaches of Normandy during the 80th anniversary. This initiative not only pays homage to the bravery and sacrifices of our veterans, but also reinforces our ongoing commitment to the veteran community. Americans more than ever are demanding that brands they buy stand for something. And at Black Rifle, we stand for those who serve. My team and I firmly believe that success at Black Rifle is a symbiotic marriage of value creation and mission. With value creation and mission, we enable Black Rifle to form strategic partnerships with the world's most successful companies. This is demonstrated with our ongoing grocery expansion and our recently announced partnership with the UFC. It creates awareness of our brand, enabling sales, and thereby multiplying our mission. We will always measure our success through both shareholder value and veteran and first responder lives we impact. What is enabling us to grow at four times the market in RTD? How did we become the fourth largest bag coffee brand and the world's largest retailer in just one year? It's a steadfast, unfaltering commitment to both value creation and mission. What we are seeing right now is a company coming into full stride, maturing, executing with precision, and creating a market through mission in a manner that was never done in this category. In this discussion, we will speak about how we are becoming more consistent in our delivery, expanding the reach of our brand and strategically taking market share. We will methodically build our market distribution in both packaged coffee and ready to drink beverages, ensuring we stay true to our high level of service to both partners and consumers. As should be expected of a super premium mission oriented brand. Black Rifle will also continue to evaluate partnerships to increase our value and further extend our mission. The service of the veteran and first responder communities is not something we will take on alone. 94% of Americans want to find ways to support the veteran community. And we are confident that the biggest companies and brands in the world, and most importantly, our consumers will continue to support us in bringing this mission to life. I will now discuss our results and the trends across our business units. Steve will then review our financial performance and outlook in greater detail. Before turning the call over for the question and answer session, please turn to slide five. We continue to see the company transforming on many of our key metrics. We finished the year up 31% in net revenue, while also having the most profitable year to date with adjusted EBITDA of $13.3 million. This was primarily due to the remarkable success of our wholesale business, which grew by 89%. and our focus on operational excellence, which Steve will discuss in more detail in a moment. Turning to our channel highlights, please turn to slide seven. 2023 was the first full year that we entered the FDM or Food Drug Mass channel with our bags and rounds. The performance was tremendous. Our success began with our largest customer where we outperformed the category by over 18 times over the last quarter. We are proud of our partnership with the largest FDM retailers, significantly outpacing the category in our first full year, all while selling a premium priced coffee. This continued brand success has allowed us to begin what will be a two-year process of rolling out bagged coffee in rounds into the broader FDM market. It's clear that the market is welcoming this rollout. We introduced new grocery partners throughout Q3 and Q4, ending the year with 23 retail partners and an all commodity volume or ACV of 37%, up significantly from the beginning of the year, but still only a fraction of the total market. This illustrates that the majority of the opportunity is still in front of us. It is worth pausing for a moment to consider the trends within the bagged coffee and rounds market to understand our success. We are benefiting from a trend towards premiumization of at-home coffee as customers look to replicate the premium experience typically delivered in the out of home market. As a result, super premium brands, particularly Black Rifle, are benefiting. Just a few metrics to highlight these macro trends at work. We continue to build distribution across the coffee aisle, expanding ACV eight points from 29% to 37%. In a little over a year, we've grown into the eighth largest brand in the coffee aisle, fourth in bagged coffee, and our largest partner. In grocery, more broadly, we have risen to the number eight brand, up from number 10 when we spoke last quarter. These early indicators of success are encouraging as we continue to methodically build distribution and availability in 2024. We will do so in an aggressive but measured fashion, ensuring a high level of service and continued super premium positioning. And by the end of 2025, we expect to be present in every major FDM retailer. Turning to slide eight, we're showing a similar success story within Ready to Drink or RTD. While the category has been stable to slightly down in 2023, we grew significantly, 32%, taking 90 basis points of market share on the year. Our core SKUs remain ranked in the top 20 for RTD coffee, and our ACV continues to climb, ending the year at 43.4%, a 480 basis point jump from a year ago. In 2024, we will continue to drive both distribution of our existing six core SKUs, as well as partnership with new retailers across both grocery and convenience stores. Black Rifle has been the clear winner across RTD Coffee. Consumers are voting for the brand. We will take advantage of this momentum and similar to our bagged coffee and rounds, expect our RTD products to be present in most of the country by 2025. Additionally, We will focus heavily on our RTD business model through strategic cost optimization. Steve will talk more about this in his section. Beyond our core six SKUs for RTD, we will continue to consider the opportunities for strategic innovation. Consumers are increasingly looking for new and interesting alternatives as they drink beverages throughout the day. With our strong brand and coffee credentials, we have the market access and permission to take advantage of trends with new and exciting products. We look forward to sharing more on the timing and specifics of our innovation work later this year. Moving on to direct to consumer, please flip to slide nine. Before discussing our DTC business, it is useful to step back and note the trends in the broader DTC market. The reality is that post-COVID, the behavior of purchasing direct to consumer is down across the board. Consumer patterns change over time. It's absolutely critical to be where the consumer wants to buy. Post-COVID, consumers shifted back into stores, and that's okay because we are making significant strides in those locations as well. While DTC will not likely drive growth for Black Rifle in 2024, we are smartly optimizing the business, allowing us to stabilize our subscription and revenue trends. DTC will always be a core piece of our portfolio as it allows us a deeper relationship with our most loyal customers, many of whom are veterans and first responders themselves. We are committed to maintaining the position of the largest and most exciting DTC coffee subscription business in the US. As a result, we are investing in our platform to make it better. We recently implemented changes to our website and mobile app, giving our 226,000 Coffee Club subscribers more subscription options and providing them flexibility and variety with their current subscription offerings. On the back end, these optimizations have also helped us with customer retention. satisfaction, and further supply chain optimization. We look to our direct-to-consumer channel as a lab for innovation as we can rapidly iterate innovative ideas to our most loyal customer base. Please move to slide 10. We ended the year with 36 outposts, our version of coffee shops. While we are still in our tactical pause phase with outposts and not allocating any growth capital to them in 2024, we remain bullish that they will be a key element to our long-term growth, which we expect will recommence in 2025 and beyond. As we've communicated previously, we are analyzing the segment to support our franchisees and maximize the performance of our existing locations before pushing forward with the rapid expansion of this critical market. I am personally spending a lot of time working with our franchise partners and internal outpost team to ensure that the next evolution of the Black Rifle Outposts will represent a unique Black Rifle experience. Before Steve dives into more detail about our financial results, I want to reiterate how proud I am of our new leadership team. I continue to be amazed by the talent our brand attracts, and the team has really gelled in pursuit of a common purpose over the last year. We have faced a number of challenges head on, and we have been able to navigate our way while implementing processes and procedures to ensure that our business is prepared for a decade of sustainable growth. Our team's commitment to the mission, unmatched CPG and public company knowledge, and tireless effort on focused execution make this possible. I couldn't be prouder to stand alongside you as we build and execute the roadmap to becoming a billion-dollar business. With that, turning to our financial results, Steve.