BRC Inc.

Greetings and welcome to the Black Rifle Coffee Company fourth quarter and fiscal year 2024 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, Mr. Matthew McGinley. Vice President of Investor Relations for Black Rifle Coffee Company. Thank you. You may begin.

Good morning, everyone, and thank you for joining Black Rifle Coffee Company's fourth quarter in fiscal year 2024 financial results conference call. We released our results yesterday, and they can be found on our website at ir.blackriflecoffee.com. Before we begin, I would like to remind you of the company's safe harbor statement. During today's call, management may make forward-looking statements, including guidance and the underlying assumptions, These statements are based on expectations that involve risk 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 and free cash flow. 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 four. I would like to now turn the call over to Chris Monsaleski, CEO of Black Rifle Coffee. Mons?

Chris Monsaleski, CEO, Black Rifle Coffee Thanks, Matt. Good morning, everyone. Joining me today are Steve Cadenicy, our Chief Financial Officer, and Matt McGinley, our Head of Investor Relations. In 2024, Black Rifle focused on strengthening our core business to position the company for long-term success. Strategic investments in operations, infrastructure, and brand drove meaningful financial improvements while enhancing our operating structure and efficiency. These efforts have laid the foundation for scalable growth that will expand our market reach and drive long-term profitability for the business. I'm pleased with this distribution growth, financial improvements, and adjacent category expansion we achieved in fiscal year 2024. Adjusted EBITDA tripled, gross margin improved by 9.5 points, and we saw outstanding distribution growth in packaged coffee at grocery, with ACV increasing by 28 points to 45% over the year. These improvements demonstrate the strength of our business model and the results we can achieve with disciplined execution. Looking ahead to 2025, we will remain focused on driving brand awareness, expanding distribution, and deploying capital efficiently to maximize returns. We remain committed to product innovation in existing categories while expanding into new segments, including our recent launch of Black Rifle Energy. The energy launch is off to a strong start and will continue to ramp throughout 2025 and 2026. In packaged coffee, we continue to gain share and expect further retail expansion, including new distribution, and an increased shelf presence at existing food, drug, and mass retailers as we add SKUs. While our direct-to-consumer segment is not a primary growth driver, it remains an important part of our long-term strategy that connects us to our most loyal consumer. Our focus in 2025 will be on stabilization and optimization of this channel. Moving to slide seven. According to Nielsen consumption data in the US food, drug, and mass channels, The coffee category declined modestly in 2024 due to a drop in unit volume, turning positive only in the fourth quarter as mainstream and value brands implemented price increases. As reported by Nielsen, Black Rifle sales grew by 13% in a category that was up 1% in the fourth quarter. For the year, Black Rifle grew 22% despite the category declining by half a percent. Across all channels, our distribution as measured by ACV reached 49% in the fourth quarter. And in grocery, our ACV increased by 28 points to 45%. We anticipate continued distribution growth in 2025, both through new retail partnerships and expanded shelf presence with existing retailers. Move now to slide eight. Our direct-to-consumer segment, which ships coffee, apparel, and accessories to Black Rifle fans, was the original business line when the company was founded a decade ago and remains a core part of our operations. It serves as an excellent platform to build brand awareness, test new products, and provide access to the brand for those who appreciate the convenience of direct delivery, those who don't have access to the brand at retail, and those who enjoy exclusive limited-edition roast available only on our website. As is the case with most DTC business in recent years, ours has been impacted by shifts in consumer spending, with behavior moving away from DTC channels and back toward brick and mortar retail locations. Overall, this has been beneficial. The growth of our wholesale business has made the brand more accessible, allowing our DTC customers to find the brand in about half of retail locations within the grocery and convenience store channels as measured by ACV. We will continue to allocate resources to prioritize growth in the wholesale channel, but our goal is to revitalize our DTC segment in 2025 and stabilize transactions. We've enhanced our leadership team and are improving the user interface of our website and app, while simultaneously enhancing our product offerings and assortment. Coffee Club members account for two-thirds of the revenue in this segment. We've made improvements to the subscriber experience by enhancing access to and awareness of features in the subscriber brand portal, such as perks and discounts with partner brands. Additionally, we've improved areas like the subscriber store where customers can find exclusive products and promotions. For non-subscribers, we are focusing on driving higher quality traffic by adopting a more strategic approach to promotion to optimize repeat purchases. Similar to our approach in retail distribution, we want consumers to have the flexibility to purchase Black Rifle products through the channel they prefer. Walmart.com, Amazon, and other online retailers provide excellent access to the brand, and we plan to enhance our efforts this year by improving search support and enhancing the effectiveness of paid advertising to drive awareness and conversion in this channel. Slide nine. According to Nielsen, the ready-to-drink coffee category declined by 8% in 2024, but our RTD sales increased by half a percent. In the fourth quarter, category trends improved to a 4% decline, and we maintained a similar spread in outperformance, delivering 5% growth. For the year, we increased ACV by 4 points to 47%, and grew our market share by 50 basis points to 4.6%, making us the number three brand in the RTD coffee category, behind only Starbucks and Monster. We built this portion of our business from the ground up, establishing manufacturing partnerships and working with over 210 distributors to bring our products to retail. While I'm proud that we've achieved the number three position, what's even more remarkable is that we are only distributed in about half of the available markets for RTD coffee. This category presents a significant growth opportunity as we expand distribution and narrow the gap with the market leaders. RTD Coffee is now a meaningful part of our business. And while the route to market differs, the lessons we've learned in this category are being directly applied to our energy launch. Moving to our new energy offerings on slide 10. We took Black Rifle Energy from concept to commercialization in about six months. We shipped our first orders of Black Rifle Energy in December 2024, and the product became available at retail with limited distribution starting in January 2025. Given that the product has only been in stores for a limited time, we don't yet have conclusive data on market performance. That said, in the first month, we reached 17% ACV, and Black Rifle Energy is available in nearly 7,000 retailers. With the support of our partner, Keurig Dr. Pepper, we expect our energy product line to be a significant contributor to growth in 2025. To support this, we are prioritizing 12 key launch markets and allocating resources to drive early adoption. Energy-specific marketing spend will ramp up throughout the year in parallel with distribution expansion. In 2025, we anticipate distribution gains in convenience, FDM, and other channels. The energy drink category generated over $20 billion in sales in 2024, significantly larger than the packaged coffee category at $12 billion and ready to drink coffee at $4 billion. Our research shows 58% of our coffee consumers also drink energy beverages, with 90% preferring natural ingredients. We designed BlackRifle Energy with a clean energy system, featuring green coffee extract and natural caffeine sources, in four delicious flavors validated through consumer testing. Additionally, the can design is distinctively Black Rifle and crafted for strong visibility on shelves and in coolers. The partnership we announced last year with Keurig Dr. Pepper for the manufacture and distribution of Black Rifle energy will enable us to ramp up at a fast and disciplined pace, particularly in sea storm. KDP has been an excellent partner providing not only access to its DSD network, which reaches 180,000 retail doors, but also for their shared commitment to supporting veterans. We'll have more to share on energy in future quarters, but we are pleased with the product and its initial launch trajectory. Before I turn the call over to Steve for a review of the financials, I want to take a moment to talk about something bigger than our business, our mission. Black Rifle Coffee creates shareholder value as a premium beverage company. But at our core, we have always been committed to supporting our active duty service members, veterans, first responders, and all those who serve our nation. That commitment recently took our community outreach team to New York City and Los Angeles. In New York City, we visited firehouses where firefighters are constantly called into action and police stations in Brooklyn where officers face daily challenges few truly understand. In Los Angeles, as wildfires tore through communities, we delivered seven pallets of coffee and energy drinks to the firefighters and sheriff's departments working around the clock. Some of these men and women had been on the front lines for two weeks, exhausted, covered in ash, but still showing up because that's what they do. Our goal was simple, to say thank you. to remind them that their sacrifice is seen, valued, and deeply appreciated. We also remain steadfast in our commitment to supporting our service members. In recent months, we've sent Black Rifle products to deployed and deploying army infantry units, naval special warfare teams, and special operations forces, to name just a few. This is what Black Rifle Coffee is all about. It's not just about selling beverages. It's about building a community. It's about showing up for the people who have shaped us, the veterans and first responders who make up half of our team, and the customers who stand with us. Because when you truly serve those who serve, you don't just gain customers, you create lifelong supporters. And that's what we're here to do. With that, I would like to turn the call over to Steve.