BRC Inc.

Greetings. Welcome to Black Rifle Coffee Company 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. 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 Matt McKinley, head of investor relations. Thank you. You may begin.

Good morning, everyone. And thank you for joining Black Rifle Coffee Company'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. 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 Monzaleski, CEO of Black Rifle Coffee Company. Monz.

Thanks, Matt. Good morning, everyone. Joining me today are Evan Hafer, our executive chairman. Matt Amy, our Chief Financial Officer, and Matt McGinley, our Head of Investor Relations. 2025 was a year of measurable operating progress for Black Rifle, 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 in 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're encouraged by the progress we've made and confident in the trajectory of the business as we enter the new year. Moving to slide seven. 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 in 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 eight, 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 eight 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 directly into higher shelf productivity, which supported broader assortments and additional shelf space. On average, grocers added two incremental black rifle 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, with higher shelf pricing driving dollar expansion across legacy brands, while underlying unit trends remain muted. 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 Black Rifle 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%, with the strongest performance in grocery, mass, and dollar, where we outperformed the category for the full year. The category remained under pressure and 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 Black Rifle 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 million in medical debt for veterans through Operation Debt of Gratitude in partnership with Born Primitive and ForgiveCo. I'm proud to say we exceeded that goal. wiping out more than $34 million 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 Operation 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 isn't a campaign for us. It's foundational. to who we are and how we grow. I will now turn it over to Matt Amy.

Thank you, Mons. I'll 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 non-recurring 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 non-recurring items, reflecting stronger velocity, expanded distribution across both doors and items, and continued contribution from Black Rifle 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 6.5 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 non-recurring revenue in both periods. Wholesale revenue increased 8% year-over-year, or 16%, excluding non-recurring items. Direct-to-consumer revenue increased 7%, marking the first quarter of growth in this segment in more than three years. Turn into 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 non-cash 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 and volatile due to weather-related yield declines and tariff-driven shifts in global supply. US 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 actions. Slide 17. Operating expenses increased 1% year-over-year on a reported basis. Excluding non-recurring items related to our 2025 restructuring and certain legal expenses, operating expenses were lower by 7%. Marketing expense decreased 10%, reflecting lower non-working 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 a lapping of a $3 million incentive compensation reduction in the prior year. General and administrative expenses increased 28% in the quarter and reflect a significant portion of these non-recurring 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 the 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 million in 2025. We ended the year with $39 million of debt outstanding, representing approximately 1.8 times net debt to 25 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 million of total liquidity, including cash on hand and available capacity under our credit facility. Cash used in operating activities was approximately $10 million in 2025, with roughly $9 million 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% or approximately 425 million. 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 the first quarter of 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 34 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 analyzed 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're 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 21.4 million 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're 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 prior year, we expect to be cash flow generative. As we look ahead, the trajectory of the business is clear. We have simplified the model, strengthened our cost structure, and improve 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, where 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 a 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're now ready for the Q&A session.

Thank you. If you would like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. 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. Our first question is from Sarang Vora with Telsey Advisory Group. Please proceed.

Great, thank you. And first of all, congratulations. It's good to see the momentum, business momentum coming back. You know, my first question is on the coffee side. The land and expand strategy that you talked about seemed to be really catching up. You are seeing the momentum in the business. You know, one of the main drivers, I feel, is expansion of SKUs across your retail network. So can you help us understand You know, I see the average number of skews 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 like, you know, bagged coffee or some of the newer products like K-Cups or Cold Brew, like, you know, how the performance of some of these other coffee products have been as well.

Hey, Sarang. It's Chris. Thanks very much for the question. Yeah, so our land and expand strategy is the core of our growth model, and it is working quite well. So, you know, just to reiterate, you know, the strategy is to put two to three of our best items per segment, right, in bags and pods, drive those to strong performance, and then as we move, you know, into that upper half of velocity with that particular retailer, generate shelf expansion off of that. So, To answer your question directly, we've absolutely seen – so you quoted the total number, right? We mentioned that in the upfront comments. We've tripled our number. I'm not going to give you specific retailer names, but if we think about the number of the retailers that launched – well, in 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, 8 items would be, you know, three examples of a national retailer and two large regional retailers. So, the reality is, is that, you know, we believe that, you know, continuing to drive items, you know, up into that, you know, 12 to 15 range is absolutely achievable for us. We've demonstrated that. And, you know, to then, you know, answer your final question on, you know, which items are performing well, you know, it continues to be our core items that drive the highest velocities. We're going to continue to innovate and make sure that we provide items that go within where we know consumers' preferences are moving. We're not going to talk specifically about any of the innovation items that we're launching in those areas this year. They haven't 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 in order to help drive that category expansion.

That's great, and it's 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. So it was a great learning year for us. We were pleased with the first year of execution. As we've 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's obviously the first dollar spent for us. We continue to believe in the potential of energy because of, A, the size of that category and the dynamics of that category, and even more importantly, B, 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. So to answer your question, you know, 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, you know, from three to five units per on shelves at a time and see the velocities respond around that. And we had other markets where we had less success. And I think, you know, not surprisingly, similar to any other CPG business, certainly businesses in the cold, you know, where we get better placement, better distribution, and couple the marketing programs around that, we see the best success. But the key piece for us is that we have seen markets with very high success, and we have seen retail chains, you know, with very high success. I'm not going to say which ones. We haven't given guidance on that. But as we go into 26, the plan very much revolves around that. Rather than saying, you know, we're 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're going to keep a regional focus. You know, we like to talk about the smile states of the U.S., which is where a lot of our brand strength is. So, you know, I'm not going to talk to the specific markets that will continue to be in the regions that we do best in as Black Rifle. And we will focus with our partners, KDP, on very strong execution building off of our learnings in 25 and continue to evaluate, you know, what is the best overall model for us from a marketing and commercialization standpoint to drive success with that item. And again, being sure, you know, being careful that, you more resource than we want to across, you know, 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 on.

That's great, and good luck ahead. Thank you.

Our next question is from Daniel Belozzi 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 and what have you seen with your latest price increase?

Sure, Dan. This is Matt. Yeah, what we're seeing right now is we're seeing that, you know, coffee nearly doubled over the last two years. And in 2023, or excuse me, 2025, we're sitting about $2.83. And in 2026, we expect it to increase slightly. But we are seeing a pullback in the commodities over the last, I would say, 20 days, 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. Now, we have taken two price increases in 2025. One was in Q3, and then the second one just settled in in late Q4. And both of those price increases were in the upper single-digit ranges. The response, the consumer response from that is in line with expectations, relatively low elasticity, sitting in like less than 0.5 elasticity factor. So everything is going according to plan with the price increases we see in market. We'll continue to stay close to how the market performs, how our elasticities look, how trade promotion looks, and we'll adjust as needed.

Thank you. 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, you know, during these times?

No. You know, the reality is that, you know, this brand from its inception, you know, when the founders, you know, first, you know, came up with Black Rifle, it was always centered around veterans. It was, you know, they were at the time, you know, active in the military service. And, you know, we have always had veterans at the core of everything that we do when it comes to you know, our give back to the community, which I talked about earlier, as well as how we market the brand. Obviously, you know, all of the troops overseas are in our, you know, thoughts and prayers like every other American out there, but it doesn't change anything we're doing. We've been focused on veterans from the very beginning. And, you know, 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. And, you know, 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.

So let me just close by saying, you know, we are focused on disciplined growth, continuing to expand our margins, and generating cash. The actions we've taken this year are a foundation for the business as we enter 26th. 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 of time in the company. Execution will continue to be our focus going forward, and again, we appreciate everyone calling in. We 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.