BRC Inc.

Greetings and welcome to Black Rifle Coffee Company First Quarter 2025 earnings conference call. At this time, all participants are on a listen-only mode. A question and answer session will follow the formal presentation. If anyone requires operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Matthew McGinley, Vice President, Investor Relations. Thank you. Please go ahead.

Good morning, everyone. And thank you for joining Black Rifle Coffee Company's First Quarter 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 .BlackRifleCoffee.com. Before we begin, I would like to remind you of the company 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 our 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 Monsaleski, CEO of Black Rifle Coffee Company. Mons?

Thanks, Matt. Good morning, everyone. Joining me today are Evan Hafer, our Executive Chairman, Steve Kadenisi, our Chief Financial Officer, and Matt McGinley, our Head of Investor Relations. When we held our last quarterly call, we discussed the work completed in 2024 to strengthen our business foundation, streamlining operations, investing in infrastructure, and building a more agile, efficient organization. These efforts have made us more adaptive to navigate an evolving operating environment, and we are confident in our positioning for 2025 and beyond. Our first quarter financial results were in line with expectations and consistent with our full year plan. While we did not anticipate tariffs or a potentially more challenging macro backdrop to start the year, we have built flexibility into our structure to respond effectively to any potential shifts in external conditions. Looking ahead, our focus remains on positioning the business for long-term growth. We're scaling the brand, deepening our partnerships at retail, and making sure every dollar we invest in the business is working hard for us. That means leaning into what's already working in core categories while also breaking new ground with initiatives like the launch of Black Rifle Energy. Moving to slide six. In the U.S. food, drug, and mass channels, Nielsen data shows the coffee category declined in unit volume during the first quarter, but overall sales remained positive due to pricing actions taken by sellers across the category. Black Rifle took no pricing actions during the period, but still delivered 21% sales growth, well ahead of the category's 4% increase. In grocery, our distribution as measured by ACV increased by 25 percentage points year over year to reach 45%. Across all tracked channels combined, ACV rose 12 points to 50%. We expect to build on this momentum throughout 2025 through new retail partnerships and expanded shelf presence with existing customers. Moving to slide seven. Our -to-consumer channel remains a key part of the business, with over 180,000 active subscribers generating two-thirds of the segment's revenue. It gives us direct access to loyal customers, valuable insights, and a platform to test new products, while also ensuring brand access where retail distribution is limited. We've made meaningful updates to improve both the subscription and non-subscription experience. Recent upgrades to our website and mobile app have improved functionality, while streamlined onboarding, such as simplified ID.me verification and automatic promo application, has made it easier to subscribe. For our coffee club members, we've launched a new brand portal offering exclusive partner perks, expanded the subscriber store with BRCC gear only available to active members, and are introducing prepaid subscription options. On the back end, we've shifted to more data-driven merchandising to guide product assortment, inventory planning, and SKU optimization, while staying true to our roots through founder-led product development. Like many subscription-based DTC businesses, we've felt the impact of consumers shifting toward retail purchases, especially as our products have become more widely available in stores. DTC revenue declined 15 percent in the quarter, though adjusting for last year's loyalty reserve, the decline was closer to 5 percent. It's not yet where we want to be, but the actions we've taken are beginning to show encouraging signs of stabilization. Slide 8. Our -to-drink coffee business continues to outperform the category, with first quarter sales up 7 percent and a category that declined 6 percent, according to Nielsen. This growth underscores the strength of our brand and our ability to drive sales even in a contracting market. We've maintained our standing as the third largest RTD coffee brand in the U.S., with distribution in only half of the available markets. We see significant runway ahead and are using the operational experience we've gained to support our new energy platform. Slide 9. We launched Black Rifle Energy into retail in January, and while it was only on shelves for a portion of the quarter, we're encouraged by the early traction. By the end of the first quarter, the product was available in nearly 12,000 retail locations, reaching 21 percent ACV. Through our partnership with Keurig Dr. Pepper, we have access to a national direct store delivery network covering 180,000 doors. Over the next two years, we expect to continue expanding our footprint in a disciplined way, with a near-term focus on 12 priority markets. We will ramp up energy-specific marketing spend to support awareness and trial, particularly in the convenience channel. Slide 10. Our decision to enter the energy category was backed by consumer data showing that 58 percent of our coffee customers also purchase energy drinks, with a significant portion of our media audience consuming only energy. While it's a competitive category, it represents a significant addressable market, over 20 billion in annual sales. We're pleased with the early momentum and believe this launch lays the foundation for a long-term growth in a high-value category. Slide 11. Before I turn it over to Steve for a deeper dive on the numbers, I want to take a moment to talk about something core to who we are, not just as a business, but as a brand with a mission. In the first quarter, we continued making monetary and product donations to military units and first responder organizations across the U.S. and around the world. That included firehouses, police departments, and deployed units stationed in both expected and unexpected locations, places where a refreshing beverage or great cup of coffee can make a real difference. We're proud to carry this mission forward into the second quarter, with support planned for more than a dozen events and ongoing outreach to those who serve. These efforts aren't side projects. They're fundamental to how we define success. We're building more than a beverage company. We're building a community that stands behind the people who serve, whether it's a no-notice deployment or a fire crew running on fumes, our message is simple. You're not alone. We're with you every step of the way. That commitment is what sets Black Rifle apart. It's what drives loyalty from our customers and pride from our team, many of whom have worn the uniform themselves. This mission is not an initiative. It's a core part of our identity, and it continues to guide everything we do. With that, I'll turn it over to Steve.

Thank you, Mons. I'll start with slide 11. First quarter revenue declined 9% compared to the prior year, primarily due to the impact of $8.5 million in barter transactions and a $3.4 million benefit from a change in loyalty rewards accruals in the first quarter of 2024. Excluding these items, first quarter revenue increased 4%. Our wholesale segment, which primarily sells packaged coffee and -to-drink beverages to retailers, declined 6% year over year. However, excluding the $8.5 million in non-recurring revenue from last year, sales in this segment grew 9% in the first quarter. New distribution and expanded shelf presence drove a fourfold increase in sales to FDM retailers compared to the prior year. Sales to our largest retail customer grew 3% over the same period. Revenue in our -to-consumer segment declined 15% in the first quarter. Excluding the $3.4 million impact from the loyalty rewards accrual change in the prior year, the decline was 5%. This was driven by increased retail availability of Black Rifle products, a broader shift in consumer behavior away from -to-consumer channels, and our deliberate reallocation of resources towards wholesale. Our outpost segment grew revenue by 2%, driven by franchise revenue and continued growth in the average order value from bundling and improved merchant dicing. Slide 12. Gross margin declined 680 basis points in the first quarter to 36% of sales. The primary drivers of the decline were a strong 500 basis point impact from increased investment in trade and pricing, 330 basis points from green coffee inflation, and a 200 basis point impact from the change in loyalty rewards. These pressures were partially offset by nearly 400 basis points of benefit from productivity gains and favorable product mix. Slide 13. As we suggested in our guidance in March, we expect to generate limited EBITDA in the first half of the year, reflecting the impact of non-recurring revenue in the prior year, the timing of trade and advertising, and revenue gains that are expected to build throughout the year. As a result, the adjusted EBITDA declined by 11.6 million compared to the first quarter of last year, reaching approximately 1 million in the first quarter of 2025. Over the past 18 months, we've made significant progress in driving productivity, enhancing operating efficiency, and directing resources towards the highest return initiatives. As a result, salaries, wages, and benefits declined 11% due to a reduction in headcount, while G&A expenses fell 23% year over year, driven by lower professional services spend and reductions in corporate infrastructure. Page 15. We are maintaining our full year revenue guidance of 395 to 425 million, and continue to expect that the first quarter will represent the low point for revenue, with sequential growth throughout the year. This ramp will be supported by ongoing distribution gains in both package copy and energy, along with targeted marketing and trade investments to drive awareness and repeat purchases. As a reminder, 30.4 million in revenue from 2024 will not repeat. We cycled 11.8 million of that non-recurring revenue in the first quarter, and expect an additional $5.8 million impact in the second quarter. While we remain confident in the three-year outlook we outlined in January and in the 2025 operating plans shared in March, our previous guidance did not contemplate tariffs. Virtually all coffee consumed in the US is imported. To help frame the potential impact, we estimate that roughly one-third of our cost goods sold is tied to imports. The majority of this is green coffee or coffee extracts, with a smaller portion related to packaging, apparel, and merchandise. Most of our coffee is sourced from Central America, Brazil, and Colombia. While the situation remains fluid, we currently estimate the impact of tariffs under the existing framework will be approximately $5 million to EBITDA in 2025. We are taking proactive steps to protect gross margin and are accelerating initiatives to enhance productivity across our supply chain. In addition, we recently implemented a price increase, consistent with actions taken by other package coffee manufacturers to offset the significant rise in green coffee prices. Even before tariffs were introduced, prices for high-quality Arabica coffee more than doubled since the beginning of 2024. We remain mindful of maintaining competitive shelf pricing to support strong retail velocity, so this pricing decision was not made lightly. We expect a modest top-line benefit from pricing in the second half of 2025, which will provide a partial offset to the inflationary pressure we are experiencing from green coffee. We now expect gross margin to be in the 35 to 37 percent range compared to our prior estimate of 37 to 39. Key drivers of the outlook compared to prior year results include at least a 300 basis point impact from green coffee inflation net of pricing, with the incremental pressure due to higher production volume requiring more purchases at spot rates, a 250 basis point impact from trade investment behind energy, and a more normalized promotional cadence. At least a 100 basis point impact from tariffs was nearly all of that expected in the second half of the year. These pressures are expected to be partially offset by at least a 200 basis point benefit from productivity initiatives and a more favorable product mix. While tariffs and green coffee inflation create near-term uncertainty, we remain focused on positioning the business for long-term success. Our cost reduction and efficiency initiatives over the past two years have significantly improved margins and cash flow, enabling us to reinvest in the brand and expand into the energy category this year. As part of that effort, we have reviewed our entire cost base and are confident we will achieve 8 to 10 million in annualized cost savings by streamlining operations and driving continuous improvement. As a direct result of operating expense reductions and additional supply chain productivity, we are maintaining our previous EBITDA guidance of 20 to 30 million. To help with modeling, we expect gross margin to be 1 to 2 points lower in the second quarter than the 36% rate in the first quarter, with sequential improvement in the second half as the benefits of pricing and productivity begin to take hold. As previously noted, we anticipate adjusted EBITDA will be limited in the first half with a step up in the back half as revenue builds. We maintain focus on driving operating leverage by tightening managing gross margins and expenses, ensuring that we can scale efficiently while supporting the long-term growth and resilience of the business. While tariffs were not contemplated in our original plan, we are encouraged by the operational progress so far this year, particularly the early distribution gains for Black Rifle Energy. We remain confident in our ability to deliver both top-line growth and adjusted EBITDA in line with the three-year plan we laid out in January. Operator, we are now ready for Q&A.

Thank you. The floor is now open for questions. If you would like to ask a question, please press star 1 on your telephone keypad at this time. A confirmation tone will indicate your line is in question Q. You may press star 2 if you would 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. We do ask that you please limit yourself to one question and one follow-up. Again, that's star 1 to register a question at this time. Today's first question is coming from Michael Baker of D.A. Davidson. Please go ahead. Mr. Baker, your line is live. Please make sure your phone is not on mute.

Got it. Sorry, it was on mute. One bigger picture question and then a more specific follow-up. Bigger picture, how do you think your business reacts to what looks like an economic slowdown? I suppose on one hand, if things get tough for the consumer, you get a little bit more coffee at home rather than going out to Starbucks or other restaurants. On the other hand, you guys have a little bit of a premium positioning. Do you think you get any trade down? Have you seen any kind of trade down and any sort of view on the consumer right now?

Thanks, Michael. Great question. I think you nailed a component of it already, but just to elaborate a bit on that, we've seen this a number of times in the business. When the economy slows down, what you said is true. We do see a shift of consumers that move from coffee shop to at-home coffee. In that case, those are coffee heads that want a high-quality product. They tend to shift to super premium brands, and we see a tailwind around that. We obviously do have coffee shops, but that's a very small percentage of our portfolio overall versus other brands in the category. We feel great about that. As far as the category then within grocery, yes, some of the lower-priced brands are doing well, but overall, the category is doing very well. A lot of that is on the back of some of the price increases, but even on a unit standpoint, there's reasonable stabilization in the category, even given some of these price increases. For us, we're seeing our units up 34% across the market in Q1, so we feel great about just the number of black rifle products that are being taken home.

Okay. Thank you. That makes sense. My more specific question on the guidance, a couple of changes, particularly in gross margin, the trade spend and normal promotion, that's now going to be a 250 basis point hit. I think last quarter you talked about it being 150 basis point hit. Were you spending more now than you had originally anticipated, and if so, why?

We're really driving the energy launch on the trade side, although we did have some pricing actions actually pricing down in some of our grocery retailers to drive trial. We don't expect it to be quite as significant over the course of the full year, but it was impact in the quarter. Then obviously, copy inflation is a significant piece of that because of the higher volumes that we're driving. We actually had to go out into the spot markets versus utilizing the contracts that we have already in place at lower prices, so that drove some of it. Then we have in that gross margin full year outlook, we've got some indication in there around tariffs, which actually should push us to below the midpoint of our EBITDA range. If those do materialize, we think we can make up and keep within the range given our actions within the business to be more efficient and more productive, but those tariffs are another element of it.

Right, but specific to the 2.5 point impact from trade spending and normal promotional cadence, I think that was 150 in the fourth quarter report. That's due to driving some trial from lower pricing, is that right?

Correct.

Got it. Thank you.

Thank you. The next question is coming from Sarang Vora of Telsey Advisory Group. Please go ahead.

Thank you for taking the question. My first question is on the energy drink. Very good launch in the last three months on the energy side. Can you share any early feedbacks? I know you talked about positive and the ramp is strong, but any early feedbacks on pricing, taste, flavor, distribution that positively surprised you and anything that you feel like you can change as the year goes by?

Hi, Sarang. Thanks for the question. So far we feel great about the launch. It is early days. We're not in a position to be able to talk to some of the specific numbers around how we're doing in any particular retailer. We're just not far enough into the season yet and deep enough into the distribution, but we are ahead of our expectations, as I mentioned in the prepared comments on distribution at over 20% of the market already. And just as a reminder, the way we're doing this strategically, so we do have our largest customer in distribution, there will be other food customers in distribution. And then we're focusing from a convenience standpoint in 12 key markets, which we're working hand in hand with correct Dr. Pepper on not only the regional or national customers in those markets, which can be tracked, but many of the C stores in those markets are what we call up and down the street or UDS convenience stores. And those actually cannot be publicly tracked. So, you know, we will, as we get deeper into the season, start to release some information around those customers as well, which we'll work hand in hand with Dr. Pepper on. But yes, some of the upfront non-quantitative feedback is that the product is selling well. Marketing programs are just now turning on in those markets. You'll start to see them across those 12 markets. Some of the programs obviously will be national, particularly in our owned media. And then you asked on product, we feel good about the product. We're tracking this very closely. We went after, we talked about this, we went after a very clean flavor profile to match the clean ingredients that we're using in Black Rifle Energy. So, we're not putting a lot of the same chemicals that are in other products into our product. And with that clean product delivery, we're getting a very, very good feedback on a clean, crisp flavor profile. So, again, meeting what we intended, but long way to go.

That's great. I love the product, so that's good to hear. You know, Steve, there's a question on your second half guidance. Now it includes -the-states promotion, as we talked before. They all stepped up. Coffee inflation stepped up. But you maintain the guidance, even the guidance of 20 to 30 million dollars. And, you know, obviously the savings went up in the back half of about 8 to 10 million. Can you share some of the incremental cost-saving initiatives or buckets that, you know, gives you a greater confidence in achieving the EBITDA range? Thanks.

Well, at a high level, Sarang, we can share. I mean, we are always focused on continuous improvement. So, a lot of the things that we're focused on are just being more efficient as a business, cutting out inefficiencies that slow us down, being quick to market. We're clearly facing a fair number of headwinds in terms of inflation and tariffs. So, I think that just kind of comes with the territory for us. I don't want to get into specifics of the 8 to 10 specifically. We will give you more details on that as we go. But it's kind of across the board in terms of business, largely positioning us so that we can be agile and nimble going forward and continue to scale off a low base. We're already scaling off of our salaries and wages and SG&A costs in general from the prior year. We just think we can do it even better. That's great. Good luck. Thank you.

Thank you. The next question is coming from Glenn West, a Plume player. Please go ahead.

Hey, guys. Glenn West, stepping in for John Andickson. I was hoping that touch on the DTC business quickly. I know in the past, we've kind of been talking about approaching a stabilization there. And then, you know, I was down 5% adjusted for those loyalty reserves. I guess I'm curious kind of what strategies are being implemented to, you know, kind of further prevent the decline and ultimately get to a more stabilization there in light of kind of the reallocated investment and ad spend away from there.

Yeah. Thanks, Glenn, for the question. So, you know, as you call it out, this is a part of our business that it declined last year. We know we've talked about how our consumers are shifting from a behavioral standpoint to buying in wholesale, either brick and mortar wholesale or digital wholesale. We feel great the growth as I talked about. We've got 34% unit increase, 24% revenue increase on the wholesale side of our coffee business. For DTC, the idea for us is to create stabilization, which we feel like we've been able to do in Q1. So, as you mentioned, 5% after you adjust for the loyalty points decline. And that is with less dollars going into that business. As you would expect, we are shifting our spending towards our energy launch, towards the continued support of our great coffee business, you know, in pods and bags, and of course, our RTD coffee business where we're number three, you know, in the market right now. With DTC, there's less spending, which means you're going to have less folks coming in the front or the top of the funnel. But we're operating much more efficiently with the folks that are coming in. So, with a focus on the mobile app in particular, because we know over two-thirds of our consumers are using the mobile app, we've been able to really increase our conversion numbers significantly so that even with a declined number of folks coming in with less spending to drive them in the top of the funnel, we're still able to get, you know, close to a stable revenue number. And most importantly for us, we are seeing a full stabilization of our subscription business. And those are our most valuable consumers. We love all of our that long-term value for us is significant. So, the focus will continue to be on conversion, and in particular conversion to our subscription-based products. You're going to see more and more benefits for subscribers in order to be able to set that. And, you know, we expect the stabilization to continue through the rest of the year.

Thank you, guys. That's helpful, Keller. I'll pass it on there.

Thank you. The next question is coming from George Kelly of Roth's Capital Partners. Please go ahead.

Hey, everybody. Thanks for taking my questions. So, a couple different topics I wanted to cover. The first is just on gross margin. I was hoping you could give a little more detail on the pricing you took. How much was it? When did you take it? And then secondly, how long are, I guess, how kind of forward, the forward green coffee buying that you have under contract, how far does that get you? And kind of how should we think high level about 2026? And I know it's a long time from now. But when do you start sort of buying your 2026 needs?

Yeah, no, great questions. On the pricing side, so we're a challenger brand, so we do not lead on the pricing side. So our comments and the prepared comments is about the future. And we plan to take pricing going forward that will largely hit towards the end of second quarter and into the third and fourth quarter. We're very meticulous about how we do that. We're looking at the prices of the brands that we're challenging. We want to stay competitive to them. So it really varies depending on whether you're buying bag, coffee, ground or pods. We tend to be at a premium to our competitors in the bag, coffee and ground. However, we tend to be more on par relative to the pods. We will continue to do that. So we're pricing against what our competitors are doing and they've all taken price. So we'll continue to kind of be where we want to be relative to them. We're not going to give you specifics on each category. But we've done a heck of a lot of research around pricing actions and understanding the elasticity of the segment in general, which tends to be quite low. So that we are not putting ourselves at risk in terms of the pricing action to impact our volumes. There could be some, but we think where we're going to end up limits that risk dramatically. On the green coffee side, great question. We are about 95% hedged out for 2025. We're happy about that. On average, our competitors, based on our understanding and speaking with folks out there in the coffee market, are about 90 days out. So we're in a better position. Even though there's a 40% increase relative to where we were last year, our competitors are looking at over 100% increase relative to where they were last year. We were already looking out in 2026. It's a complex environment to try to understand. We look at that on a quarter by quarter basis and future contracts are priced on a quarter by quarter basis. You're generally seeing the prices of those four contracts being lower than what current coffee prices are. The closer you get to Q1, the higher price, the outside of Q1, Q2, Q3, and Q4, you see the cost of those futures going down. Our intention in 2026 will be to get hedged against whatever plan we put in place and whatever guidance we give the street rather than taking risk in, similar to how we're priced now. So right now, we certainly are staring at higher coffee prices out in 2026, but we continue to look at that on an active basis and we'll limit that risk as we go.

Okay, that was helpful. Thank you. And then second question from me on your FDM business. You gave a lot of numbers that I just had a hard time keeping up with. So I guess the one that I was hoping that you could revisit or expand on, you gave your largest customer, I think you said was plus 3% in the quarter. Can you give a breakdown on volume and price there? Because I noticed that you lowered price a bit on shelf at least. So just wondering how that all shook out. And then just broadly, you also gave a growth number for your smaller FDM partners outside of that large customer. And I think it was huge, but I maybe missed that. So just if you could give a little bit more about volume and price about both your largest and then the smaller business, the smaller partners there too, that would be great. Thank you.

Yeah, in general, it is volume and price. We don't get into the details of both at a customer level, but you're right, our largest customer was up 3% net of all of that. And you are also correct that we have had aggressive pricing in that customer against our competitors and that has paid off. That's the results of that 3% increase. And the rest of FDM, I believe the number we said was we were up 400% in the rest of grocery. And that's largely through the ACV gains, distribution gains that we've had year over year.

I think just to build on Steve's comment, when we look at our delivery, the number I mentioned earlier in the questions was for the total market, if I look at all the customers combined, our coffee business was up 24% in dollars and 34% in units. And for a brand in our position, we feel great about that. To Steve's point, we did sharpen the price in a number of customers promotionally. Obviously, we talked about the base price increase that we're taking on the business. That doesn't mean that we won't sharpen up promotion prices in order to be able to drive trial. And we feel great about the effectiveness of that, given the 34% increase in units. That's 34% more units being trialed by our consumers. We believe in our product quality. So when that happens, that allows us to build a long-term business. And yes, just to further elaborate on Walmart, where we feel great about our partnership, they've been there with us since day one. Fantastic partners to us. As Steve said, we don't talk in detail about specific numbers. But suffice to say, based off of what continues to be category leading numbers that we have driven year after year with our largest customer, we have great plans in place for the back part of the year to continue to be able to increase our expansion of the business, not only through our coffee business, but as we've talked about in energy as well.

Okay. Appreciate the color. Thanks. Sure.

Thank you. The next question is coming from Joseph Althevelo of Raymond James. Please go ahead.

Hey, good morning. This is Martin on for Joe. I just want to touch on the pricing and sort of the guide for sales. That hasn't moved at all, but you did mention that you took up pricing and that it could provide a modest tailwind to wage. So just trying to gauge, was that originally contemplated in the guidance? And would that sort of imply maybe lower volumes in the second half? Or should we take away that maybe we should just have more confidence in the upper side of that range?

I think there's puts and takes as you go through the year. We were always contemplating potential price increase. We didn't give specifics on what was within that range. But yeah, the put is the pricing on the revenue side and you could have some elasticity in that number, but we're taking all of that into account without getting into specifics.

Okay. Great. Thank you. Hello.

Thank you. The next question is coming from Daniel Boce of Hedgeye. Please go ahead.

Morning. How much of the 510 basis points of trade and price investment was due to the energy drink slotting fees and what was related, if any, to the package coffee?

Trade and slotting would be almost entirely the energy side of the business.

And the slotting fees in particular or?

Sorry, you're coming in a bit muffled.

Sorry. And that's related to the slotting fee for the energy drinks launch?

Correct.

And then what is the lag on importing the coffee beans to being sold? Is that the 90 days you were

our competitors seem to be hedged out? We're hedged out almost entirely for the full year. Based on our discussions with folks within the community of forward purchase contracts, the indication is that in aggregate, our competitors are hedged out about 90 days. In other words, in three months from now, they either have to put in new contracts within that time or they'll be buying at spot rates.

When do we start? How long does it take for the tariffs before they start running through a year? Cost of goods sold?

Third quarter is our expectation.

You could see a little bit of it in a second, but we expect that to primarily be into the third quarter.

Thank you. You're welcome.

Thank you. At this time, I'd like to turn the floor back over to management for any additional or closing comments.

Yeah, thanks everyone for the great questions. I will just summarize very quickly. Tough operating environment right now. We feel great about where our business stands. As we've talked about for our coffee business, which is the heart and soul of what we do at Black Rifle, we are growing share aggressively across all three segments, all three we feel great about our expansion into energy. We're going to talk a lot about that next quarter as we have more metrics coming out of the season, but feel like we're off to a great start. Then finally, we have a lot of focus on the cost side of our business, which is something that Steve, myself, the rest of our management team have really been focused on from day one. This isn't new for us. Really, given that infrastructure and thinking that we've had in the business since day one, we feel very well positioned to be able to take on these additional challenges cost wise that have come our way. Excited about the results and look forward to talking to you next quarter.

Ladies and gentlemen, thank you for your participation. This concludes today's event. You may disconnect your lines or log off the webcast at this time and enjoy the rest of your day.