BRC Inc.

Previous 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.

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, including our Black Rifle Energy product line, and distribution expansion in the FDM market.

Previous 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.

Current wording

•Outpost channel revenue is stabilizing as we focus on improving transaction volumes and average order values through customer retention programs and tailored product offerings. 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.

Previous 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.

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 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

Operating expenses consist of marketing and advertising expenses related to brand marketing campaigns through various online platforms, including email, digital, website, social media, search engine optimization, as well as performance marketing efforts including retargeting, paid search and product advertisements, as well as social media advertisements and sponsorships. Operating expenses also consist of salaries, wages, and benefits of payroll and payroll related expenses for labor not directly related to producing our products. Payroll expenses include both fixed and variable compensation. Variable compensation includes bonuses and equity-based compensation. General and administration costs include other professional fees and services, and general corporate infrastructure expenses, including utilities and depreciation and amortization.

Current wording

Operating expenses consist of marketing and advertising expenses related to brand marketing campaigns through various online platforms, including email, digital, website, social media, search engine optimization, as well as performance marketing efforts including retargeting, paid search and product advertisements, as well as social media advertisements and sponsorships. Operating expenses also consist of salaries, wages, and benefits of payroll and payroll related expenses for labor not directly related to producing our products. Payroll expenses include both fixed and variable compensation. Variable compensation includes bonuses and equity-based compensation. General and administrative costs include other professional fees and services, and general corporate infrastructure expenses, including utilities and depreciation and amortization.

Previous 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):

Current wording

This discussion and analysis pertains to comparisons of material changes on the consolidated financial statements for three and six months ended June 30, 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 Outpost channel for the three months ended March 31, 2025, increased $0.1 million, or 2%, to $5.5 million as compared to $5.4 million for the corresponding period in 2024. The increase was primarily driven by higher franchise fees and increased average order values, supported by efforts to drive add-on and bundled purchases through company-owned retail stores.

Current wording

Net revenue for our Outpost channel for the three months ended June 30, 2025, increased $0.6 million, or 11%, to $5.9 million as compared to $5.3 million for the corresponding period in 2024. The increase was primarily driven by higher franchise fees and increased average order values, supported by efforts to drive add-on and bundled purchases through company-owned retail stores.

Previous wording

Cost of goods sold for the three months ended March 31, 2025 increased $1.3 million, or 2%, to $57.5 million as compared to $56.2 million for the corresponding period in 2024. Gross margin decreased to 36% for the three months ended March 31, 2025 as compared to 43% for the corresponding period in 2024. The decrease in gross margin was driven by the decrease in revenue as a result of the decrease in the accrual for loyalty reward points in the first quarter of 2024. The decline also reflected higher coffee bean prices and increased investments in trade and pricing, partially offset by productivity improvements and favorable mix.

Current wording

Cost of goods sold for the three months ended June 30, 2025 increased $10.9 million, or 21%, to $62.7 million as compared to $51.8 million for the corresponding period in 2024. Gross margin decreased to 34% for the three months ended June 30, 2025 as compared to 42% for the corresponding period in 2024. The decrease in gross margin was driven by the decrease in revenue as a result of the decrease in the accrual for loyalty reward points in the second quarter of 2024. The decline also reflected higher inflationary costs, primarily in coffee bean prices and shipping cost. In addition, we have increased investments in trade and promotions, partially offset by productivity improvements and favorable mix.

Previous 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.

Current wording

Marketing and advertising expenses for the three months ended June 30, 2025 increased $2.4 million, or 32%, to $9.8 million as compared to $7.4 million for the corresponding period in 2024. This increase was due to our expansion of partnerships, increase in research data, incremental shopper marketing, and an increase in overall marketing to support the launch of Black Rifle Energy.

Previous wording

Salaries, wages and benefits expenses for the three months ended March 31, 2025 decreased $1.7 million, or 11%, to $13.6 million as compared to $15.3 million for the corresponding period in 2024. This decrease was as a result of reduced compensation costs through headcount reductions.

Current wording

Salaries, wages and benefits expenses for the three months ended June 30, 2025 decreased $1.8 million, or 10%, to $15.8 million as compared to $17.6 million for the corresponding period in 2024. This decrease was primarily a result of reduced compensation costs through headcount reductions, partially offset by an increase in severance costs associated with our Operational Improvement Plan.

Previous wording

Total operating expenses for the three months ended March 31, 2025 decreased $0.3 million, or 1%, to $37.9 million as compared to $38.2 million for the corresponding period in 2024.

Current wording

Net revenue for the six months ended June 30, 2025 decreased $2.6 million, or 1%, to $184.8 million as compared to $187.4 million for the corresponding period in 2024.

Previous 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.

Current wording

Net revenue for our Wholesale channel for the six months ended June 30, 2025 increased $3.9 million, or 3%, to $118.1 million as compared to $114.2 million for the corresponding period in 2024. The increase in Wholesale channel revenue was primarily driven by revenue from Black Rifle Energy launched in the fourth quarter of 2024, growth in packaged coffee distribution at FDM retailers, expansion of ready-to-drink coffee distribution, and increased sales through online retailers. This increase was partially offset by a $11.5 million decrease in revenue recognized related to a barter transaction in the first half of 2024, whereby we exchanged finished goods inventory for prepaid advertising credits.

Previous 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.

Current wording

Net revenue for our DTC channel for the six months ended June 30, 2025 decreased $7.2 million, or 12%, to $55.4 million as compared to $62.6 million for the corresponding period in 2024. The decline was primarily driven by the impact of a $5.1 million decrease in the accrual for loyalty rewards points in the first half 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

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.

Current wording

General and administrative expenses for the six months ended June 30, 2025 decreased $0.2 million, or 1%, to $26.1 million compared to $26.3 million the corresponding period in 2024. This is primarily as a result of an increase in legal fees related to ongoing litigation which was settled in the second and third quarters of 2025, partially offset by decreases 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 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.

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 June 30, 2025, our cash and cash equivalents was $4.3 million, our working capital was $24.1 million, and under our credit facilities, we had $13.9 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

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.

Current wording

Net cash used in operating activities was $7.5 million for the six months ended June 30, 2025, compared to net cash provided by operating activities of $7.2 million for the corresponding period in 2024. The total decrease of $14.7 million in net cash provided by operating activities was primarily due to net loss of $22.4 million for the six months ended June 30, 2025 compared to net income of $0.5 million for six months ended June 30, 2024.

Previous 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.

Current wording

Net cash used in investing activities was $2.1 million for the six months ended June 30, 2025, compared to net cash used in investing activities of $4.0 million for the corresponding period in 2024. The $1.8 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 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.

Current wording

Net cash provided by financing activities was $7.1 million for the six months ended June 30, 2025, compared to net cash used in financing activities of $7.2 million for the corresponding period in 2024. The $14.3 million increase in net cash provided by financing activities was primarily due to a net increase in borrowings on our ABL facility of approximately $13.4 million primarily driven by normal operating activity as well as $1.0 million of cash received as part of a legal settlement.

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 $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.

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 $12.2 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 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.

Current wording

Liabilities relating to operating leases that have commenced as of June 30, 2025 have been reported on the consolidated balance sheets as "Operating lease liabilities". Payments on leases are expected to be approximately $3.9 million in the next twelve months, and approximately $35.4 million beyond twelve months through 2043.