BRC Inc.

Previous wording

•Wholesale channel revenue has increased as we have added new customers and we continue to grow our presence in the FDM market. We expect to see increased revenue within this channel as we increase investment to obtain new customers, launch new products, and expand in the FDM market.

Current wording

•Wholesale channel revenue increased as we added new customers and continued to expand our presence in the Food, Drug, and Mass ("FDM") market. We expect further revenue growth in this channel as we invest in customer acquisition, new product launches, and distribution expansion in the FDM market.

Previous wording

•DTC channel revenue growth has declined as a result of a decline in the DTC market as well as our decision to redirect investments to other growing areas of the business as we continue to experience elevated DTC customer acquisition costs. In addition, we have limited our promotional offerings while focusing on profitability.

Current wording

•DTC channel revenue growth declined due to both a channel level decline in the DTC category and our strategic decision to redirect investments into higher-growth areas of the business amid elevated DTC customer acquisition costs. In addition, we have limited our promotional offerings to focus on profitability.

Previous wording

•Outpost channel revenue has decreased due to declining volumes at our existing Outpost retail locations. We anticipate limited growth in this channel in 2024 as we shift investments into other channels while we work to improve the quality of our earnings through operational and strategic changes, some of which might result in store closures for underperforming Outposts. We expect accelerated growth in the Outpost channel in future years as we recommence investment in this part of our business.

Current wording

•Outpost channel revenue decreased due to lower transaction volumes at existing Outpost retail locations. In 2025, we anticipate limited growth in this channel as we reallocate investments to other channels while we work to improve profitability through operational and strategic changes, which may include closing underperforming Outposts. We expect accelerated growth in future years as we resume investment in this part of the business.

Previous wording

Our ability to promote and maintain brand awareness and loyalty is critical to our success. We believe we have created a highly efficient marketing strategy that provides us the ability to increase brand awareness and drive consumer interaction. Consumer appreciation of our brands is primarily reflected in the increase of our sales across our three channels over the last few years. We expect to continue to develop and implement forward-looking brand strategies that utilize highly efficient, reach-based formats such as national television, streaming advertising, and other select avenues. In addition, we will leverage our social media footprint and employ targeted digital advertising to expand the reach of our brand.

Current wording

Maintaining and growing brand awareness and loyalty is critical to our success. We believe we have developed an efficient marketing strategy that enhances brand awareness and drives consumer engagement. Consumer appreciation of our brands is primarily reflected in the increase of our sales across our three channels over the last few years. We expect to continue to refine and develop our brand strategy utilizing reach-based formats such as national television, streaming advertising, and other select avenues. In addition, we will leverage our social media presence and employ targeted digital advertising to expand the reach of our brand.

Previous wording

Our Ability to Grow Our Customer Base in Our Outposts and Wholesale Channels

Current wording

Our Ability to Grow Our Customer Base in Our Wholesale Channel

Previous wording

We are currently growing our customer base through our Wholesale channel. Our products are also sold through a growing number of physical retail channels. Wholesale customers include large national retailers, regional retailers, distributors, and dealers.

Current wording

We continue to expand our customer base through our Wholesale channel, with our products now available in a growing number of physical retail locations. Wholesale customers include large national retailers, regional retailers, distributors, and dealers, reflecting our increases in market presence and distribution reach.

Previous wording

We believe our ability to consistently acquire and retain new customers at a reasonable cost will be a key factor affecting our future performance. We continue to have a strong presence activating in major markets to reach new consumers and drive brand awareness. As we continue to expand our deployment venues, our expertise in digital creative and engagement provides a distinct advantage to reach, engage and convert our consumers. We will continue to utilize marketing measurement to ensure our advertising and marketing spend is effective and efficient while expanding our brand reach and managing customer acquisition cost and returns on marketing investments.

Current wording

We believe that consistently acquiring and retaining customers at a reasonable cost will be a key driver of our future performance. We continue to build brand awareness and reach new consumers by investing in existing and new channels and markets. Our expertise in digital creative and engagement provides a distinct advantage in attracting, converting, and retaining our consumers. We remain focused on measuring and optimizing marketing performance to ensure that our advertising spend is both effective and efficient, while managing customer acquisition costs and maximizing returns on marketing investments.

Previous wording

Our Ability to Drive Repeat Usage of Our Products

Current wording

Our Ability to Drive Repeat Purchases of Our Products

Previous wording

Our goal is to continue to expand our product line over time to increase our growth opportunity and reduce product-specific risks through diversification into multiple products each designed around daily use. Our pace of growth will be partially affected by the cadence and magnitude of new product launches over time. We realized All Commodities Volume ("ACV") of 47% at September 30, 2024. Moving forward, we believe that it is important to our business that we continue innovating with new products and flavors.

Current wording

Our goal is to continue to expand our product line over time to increase our growth opportunity and reduce product-specific risks through diversification into multiple products each designed around daily use. Our pace of growth will be partially affected by the cadence and magnitude of new product launches over time. Moving forward, we believe that it is important to our business that we continue innovating with new products and flavors.

Previous wording

Our ability to grow and meet future demand will be affected by our ability to properly plan for and source inventory from a variety of suppliers and co-manufacturers located inside and outside the United States. The majority of our green coffee beans come from Colombia, Nicaragua, and Brazil, and since 2020, we have also sourced green coffee beans from over ten countries in Latin America, Africa, and Asia to diversify our supply chain and offer our customers specialty and limited-time-only roasts. Quality control is also a critically important part of our manufacturing and supply chain operations. 100% of our coffee is roasted in the United States. Our licensed, Coffee Quality Institute-certified grader and former Green Beret, leads cupping, grading, scoring, and sourcing of our coffees. We also must effectively manage our co-manufacturers and suppliers.

Current wording

Our ability to grow and meet future demand will be affected by our ability to properly plan for and source inventory from a variety of suppliers and co-manufacturers located inside and outside the United States. The majority of our green coffee beans come from Colombia, Brazil, and Nicaragua, and since 2020, we have also sourced green coffee beans from over ten countries in Latin America, Africa, and Asia to diversify our supply chain and offer our customers specialty and limited-time-only roasts. Quality control is also a critically important part of our manufacturing and supply chain operations. 100% of our coffee is roasted in the United States. Our licensed, Coffee Quality Institute-certified grader and former Green Beret, leads cupping, grading, scoring, and sourcing of our coffees. We also must effectively manage our co-manufacturers and suppliers.

Previous wording

We sell our products both directly and indirectly to our customers through a broad set of physical and online platforms. Our net revenue reflects the impact of product returns as well as discounts and fees for certain sales programs, trade spend, promotions, and loyalty rewards.

Current wording

We sell our products both directly and indirectly to our customers through a broad set of physical and online platforms. Our revenue, net reflects the impact of product returns as well as discounts and fees for certain sales programs, trade spend, promotions, and loyalty rewards.

Previous wording

Cost of goods sold primarily includes raw material costs, labor costs directly related to producing our products including wages and benefits, shipping costs, and other overhead costs related to certain aspects of production, warehousing, fulfillment expense, shipping, and credit card fees.

Current wording

Cost of goods sold primarily includes raw material costs, labor costs directly related to producing our products including wages and benefits, shipping costs, and other overhead costs related to certain aspects of production, warehousing, fulfillment, shipping, and credit card fees.

Previous wording

This discussion and analysis pertains to comparisons of material changes on the unaudited consolidated financial statements for three and nine months ended September 30, 2024 and 2023. The following table represents the selected results of operations for BRC Inc. for the periods indicated (dollars in thousands, unaudited):

Current wording

This discussion and analysis pertains to comparisons of material changes on the consolidated financial statements for three months ended March 31, 2025 and 2024. The following table represents the selected results of operations for BRC Inc. for the periods indicated (dollars in thousands, unaudited):

Previous wording

Net revenue for our Wholesale channel for the three months ended September 30, 2024, increased $2.1 million, or 3%, to $63.7 million as compared to $61.5 million for the corresponding period in 2023. The Wholesale channel performance was primarily driven by growth in distribution of packaged coffee in the FDM market along with increased sales in our RTD product line, partially offset by a $4.2 million decrease related to barter transactions whereby we exchanged finished goods inventory for prepaid advertising credits and decreases in some declining categories impacting select retailers.

Current wording

Net revenue for our Wholesale channel for the three months ended March 31, 2025, decreased $3.6 million, or 6%, to $56.8 million as compared to $60.4 million for the corresponding period in 2024. The Wholesale channel decline was primarily driven by a $8.5 million decrease in revenue recognized related to a barter transaction in the first quarter of 2024, whereby we exchanged finished goods inventory for prepaid advertising credits. The decline was partially offset by growth in packaged coffee distribution at FDM retailers, expansion of ready-to-drink coffee distribution, and increased sales through online retailers.

Previous wording

Net revenue for our DTC channel for the nine months ended September 30, 2024 decreased $12.5 million, or 12%, to $91.6 million as compared to $104.2 million for the corresponding period in 2023, primarily due to lower customer acquisition due to declines in the overall DTC market, a strategic shift in advertising spend to other areas with higher returns, and an increase in points of distribution in the Wholesale channel, that provides increased brick and mortar availability for the Black Rifle Coffee consumer. This decrease was partially offset by an increase of $5.7 million as a result of the decrease in the accrual for loyalty rewards points as a result of BRCC's change in policy around expiration of points in the first quarter of 2024.

Current wording

Net revenue for our DTC channel for the three months ended March 31, 2025 decreased $4.9 million, or 15%, to $27.7 million as compared to $32.6 million for the corresponding period in 2024. The decline was primarily driven by the impact of a $3.4 million decrease in the accrual for loyalty rewards points in the first quarter of 2024 following a change in policy on expiration of points. In addition, our DTC channel experienced lower customer acquisition due to declines in the overall DTC market, a strategic reallocation of advertising spend to higher return areas, and an increase in points of distribution in the Wholesale channel, which expanded brick and mortar availability for Black Rifle Coffee consumers.

Previous wording

Marketing and advertising expenses for the three months ended September 30, 2024 increased $1.8 million, or 22%, to $10.1 million as compared to $8.3 million for the corresponding period in 2023. This increase was due to our expansion of partnerships, including our engagement with UFC, higher advertising spend, incremental shopper marketing, and an increase in trade promotions.

Current wording

Marketing and advertising expenses for the three months ended March 31, 2025 increased $3.7 million, or 49%, to $11.3 million as compared to $7.6 million for the corresponding period in 2024. This increase was due to our expansion of partnerships, higher advertising spend, incremental shopper marketing, and an increase in marketing to support the launch of Black Rifle Energy.

Previous wording

General and administrative expenses for the three months ended September 30, 2024 decreased $7.2 million, or 37%, to $12.3 million as compared to $19.5 million for the corresponding period in 2023. This decrease was due to reductions in our corporate infrastructure and support that were inefficient or duplicative, including professional services, information technology, and office space.

Current wording

General and administrative expenses for the three months ended March 31, 2025 decreased $3.6 million, or 23%, to $11.8 million as compared to $15.3 million for the corresponding period in 2024. This decrease was as a result of our continued efforts to find efficiencies in our corporate infrastructure and remove inefficient or duplicative expenses in professional services, information technology, and other expense areas.

Previous wording

Our primary sources of cash are (1) cash on hand, (2) cash provided by operating activities, and (3) net borrowings from our credit facilities. As of September 30, 2024, our cash and cash equivalents was $7.3 million, our working capital was $12.4 million, and under our credit facilities, we had $9.4 million of available borrowings, after the consideration of the $15.0 million reduction required before the Availability Block Release Date, the date on which we have maintained a fixed charge coverage ratio of not less than 1.10 to 1.00 based on a trailing four fiscal quarter calculation for two consecutive fiscal quarters following August 10, 2023, and no defaults or events of default are then continuing. Our ability to draw from the credit facilities is subject to a borrowing base and other covenants. There are no defaults or events of default at this time. We believe that these sources of liquidity will be sufficient to fund our working capital requirements and to meet our commitments in the ordinary course of business and under the current market conditions for at least the next twelve months.

Current wording

Our primary sources of cash are (1) cash on hand, (2) cash provided by operating activities, and (3) net borrowings from our credit facilities. As of March 31, 2025, our cash and cash equivalents was $3.9 million, our working capital was $21.7 million, and under our credit facilities, we had $18.2 million of available borrowings. Our ability to draw from the credit facilities is subject to a borrowing base and other covenants. There are no defaults or events of default at this time and the Company is in compliance with all covenants. We believe that these sources of liquidity will be sufficient to fund our working capital requirements and to meet our commitments in the ordinary course of business and under the current market conditions for at least the next twelve months.

Previous wording

See Note 8, Long-Term Debt, to the unaudited consolidated financial statements included in Item 1 of Part I of this Quarterly Report for information regarding the Credit Agreements.

Current wording

See Note 8, Long-Term Debt, to the consolidated financial statements included in Item 1 of Part I of this Quarterly Report for information regarding the Credit Agreements.

Previous wording

Net cash provided by operating activities was $9.1 million for the nine months ended September 30, 2024, compared to net cash used in operating activities of $40.4 million for the corresponding period in 2023. The total increase of $49.5 million in net cash provided was primarily due to a net loss of $42.7 million improving to net loss of $0.9 million for 2024.

Current wording

Net cash used in operating activities was $4.1 million for the three months ended March 31, 2025, compared to net cash provided by operating activities of $4.9 million for the corresponding period in 2024. The total decrease of $9.1 million in net cash provided by operating activities was primarily due to net income of $1.9 million for the quarter ended March 31, 2024 compared to net loss of $7.8 million for the quarter ended March 31, 2025.

Previous wording

Net cash used in investing activities was $6.1 million for the nine months ended September 30, 2024, compared to net cash used in investing activities of $13.3 million for the corresponding period in 2023. The $7.2 million decrease in net cash used was primarily due to reduced capital expenditure projects for our Outpost locations, roasting facilities and information technology.

Current wording

Net cash used in investing activities was $1.2 million for the three months ended March 31, 2025, compared to net cash used in investing activities of $2.7 million for the corresponding period in 2024. The $1.5 million decrease in net cash used in was primarily due to reduced capital expenditure projects for our Outpost locations, roasting facilities and information technology.

Previous wording

Net cash used in financing activities was $9.3 million for the nine months ended September 30, 2024, compared to net cash provided by financing activities of $22.8 million for the corresponding period in 2023. The $32.1 million decrease in net cash provided by financing activities was primarily due to a decrease in proceeds from issuance of long-term debt net of debt issuance costs of $84.6 million, partially offset by a decrease in repayments of long-term debt of $52.6 million.

Current wording

Net cash provided by financing activities was $2.4 million for the three months ended March 31, 2025, compared to net cash used in financing activities of $10.7 million for the corresponding period in 2024. The $13.1 million increase in net cash provided by financing activities was primarily due to an increase in proceeds from issuance of long-term debt net of debt issuance costs of $77.1 million, partially offset by repayments of long-term debt of $63.9 million.

Previous wording

The Company has entered into several manufacturing and purchase agreements to purchase coffee products from third-party suppliers. The minimum purchase amounts are based on quantity and in the aggregate will be approximately $5.7 million for the remainder of 2024; $26.1 million for 2025; and $30.0 million for 2026. See Note 14, Commitments and Contingencies to the unaudited consolidated financial statements included in Item 1 of Part I of this Quarterly Report for information regarding such manufacturing and purchase agreements.

Current wording

The Company has entered into several manufacturing and purchase agreements to purchase coffee products from third-party suppliers. The minimum purchase amounts are based on quantity and in the aggregate will be approximately $20.0 million for the remainder of 2025; $30.0 million for 2026; and $32.4 million for 2027. See Note 14, Commitments and Contingencies to the consolidated financial statements included in Item 1 of Part I of this Quarterly Report for information regarding such manufacturing and purchase agreements.

Previous wording

Liabilities relating to operating leases that have commenced as of September 30, 2024 have been reported on the balance sheet as operating lease liabilities. As of September 30, 2024, we have entered into operating leases that have not yet commenced which primarily relate to real estate leases. These leases will commence in fiscal year 2024 and fiscal year 2025 with lease terms of 15 years. Payments on leases are expected to be approximately $3.6 million in the next twelve months, and approximately $37.9 million beyond twelve months through 2043.

Current wording

Liabilities relating to operating leases that have commenced as of March 31, 2025 have been reported on the consolidated balance sheets as "Operating lease liabilities". Payments on leases are expected to be approximately $3.8 million in the next twelve months, and approximately $36.4 million beyond twelve months through 2043.