BRC Inc.

Previous wording

•DTC channel revenue decline is slowing as we execute our strategic initiatives to optimize customer acquisition, enhance retention, and improve overall channel efficiency. In addition, we are focused on providing our customers with a personalized and engaging shopping experience through targeted content and tailored product offerings.

Current wording

•DTC channel revenue decline is slowing as we execute our strategic initiatives to optimize customer acquisition, enhance retention, and provide our customers with a personalized and engaging shopping experience through targeted content and tailored product offerings on our website. Additionally, we are increasing our focus on investment on major 3rd Party Ecommerce Marketplaces because of changing consumer trends.

Previous wording

During the second quarter of 2025, management implemented the Operational Improvement Plan to reduce costs and improve efficiency of certain company-wide functions. We estimate the cost of this plan will be approximately $2.1 million which is related to severance costs all of which have been incurred as of June 30, 2025. We estimate that the costs savings as a result of this plan will be approximately $6.5 million on an annualized run rate basis. As of June 30, 2025, we have realized approximately $1.0 million of these savings.

Current wording

During the second quarter of 2025, management implemented the Operational Improvement Plan to reduce costs and improve efficiency of certain company-wide functions. This plan was extended in the third quarter of 2025 as a result of a move of our corporate headquarters and the change in our third party logistics provider. We estimate the cost of this plan will be approximately $3.6 million which is related to severance and transition costs all of which have been incurred as of September 30, 2025. We estimate that the costs savings as a result of this plan will be more than $8.6 million on an annualized run rate basis. As of September 30, 2025, we have realized approximately $3.1 million of these savings.

Previous wording

On July 16, 2025, the Company, entered into an underwriting agreement (the "Underwriting Agreement") with D.A. Davidson & Co. (the "Underwriter"), pursuant to which the Company agreed to use and sell 28,000,000 shares of Class A common stock, par value $0.0001 per share (the "Class A Common Stock"), at an offering price of $1.25 per share (the "Offering"). Pursuant to the Underwriting Agreement, the Company granted the Underwriter a 30-day option to purchase up to an additional 4,200,000 shares of Class A Common Stock, which option was fully exercised by the Underwriter on July 17, 2025. The Offering closed on July 18, 2025.

Current wording

On July 16, 2025, the Company, entered into an underwriting agreement (the "Underwriting Agreement") with D.A. Davidson & Co. (the "Underwriter"), pursuant to which the Company agreed to use and sell 28,000,000 shares of Class A Common Stock, at an offering price of $1.25 per share (the "Offering"). Pursuant to the Underwriting Agreement, the Company granted the Underwriter a 30-day option to purchase up to an additional 4,200,000 shares of Class A Common Stock, which option was fully exercised by the Underwriter on July 17, 2025. The Offering closed on July 18, 2025.

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 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 our sales across our three channels. 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

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.

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. We believe that it is important to our business that we continue innovating with new products and flavors.

Previous 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):

Current wording

This discussion and analysis pertains to comparisons of material changes on the consolidated financial statements for three and nine months ended September 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 Wholesale channel for the three months ended June 30, 2025, increased $7.6 million, or 14%, to $61.3 million as compared to $53.8 million for the corresponding period in 2024. The Wholesale channel improvement was primarily driven by an increase in Energy revenue in 2025, 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 $3.0 million decrease in sales from barter transactions in the second quarter of 2024, whereby finished goods inventory was exchanged for prepaid advertising credits.

Current wording

Net revenue for our Wholesale channel for the three months ended September 30, 2025, increased $3.4 million, or 5%, to $67.0 million as compared to $63.7 million for the corresponding period in 2024. The increase was primarily driven by an increase in Energy revenue in 2025, growth in packaged coffee distribution and SKU expansion at FDM retailers. This increase was partially offset by a $2.3 million decrease in sales from barter transactions in the third quarter of 2024, whereby finished goods inventory was exchanged for prepaid advertising credits.

Previous wording

Net revenue for our DTC channel for the three months ended June 30, 2025 decreased $2.3 million, or 8%, to $27.6 million as compared to $30.0 million for the corresponding period in 2024. The decline was primarily driven by the impact of a $1.8 million decrease in the accrual for loyalty rewards points in the second 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. This decrease was partially offset by an increase in sales through third party online retailers.

Current wording

Net revenue for our DTC channel for the three months ended September 30, 2025 decreased $1.2 million, or 4%, to $27.8 million as compared to $29.0 million for the corresponding period in 2024. The decrease was primarily driven by the impact of a $0.6 million decrease in the accrual for loyalty rewards points in the third 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. This decrease was partially offset by an increase in sales through third party online retailers.

Previous 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.

Current wording

Net revenue for our Outpost channel for the three months ended September 30, 2025, increased $0.3 million, or 6%, to $5.8 million as compared to $5.5 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 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.

Current wording

Cost of goods sold for the three months ended September 30, 2025 increased $6.7 million, or 12%, to $63.6 million as compared to $56.9 million for the corresponding period in 2024. Gross margin decreased to 37% for the three months ended September 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 third 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

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.

Current wording

Salaries, wages and benefits expenses for the three months ended September 30, 2025 decreased $2.2 million, or 13%, to $14.4 million as compared to $16.5 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

General and administrative expenses for the three months ended June 30, 2025 increased $3.4 million, or 31%, to $14.3 million as compared to $10.9 million for the corresponding period in 2024. This increase was primarily as a result of an increase in legal fees related to ongoing litigation matters which were settled in the second and third quarters of 2025, partially offset by an overall decrease in general and administrative expense 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 three months ended September 30, 2025 increased $0.6 million, or 5%, to $12.9 million as compared to $12.3 million for the corresponding period in 2024. This increase was primarily as a result of costs related to the change in our third party logistics provider and an increase in depreciation expense as a result of a change in useful life of certain software during the second quarter of 2025, partially offset by an overall decrease in general and administrative expense 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

Other operating expense, net for the six months ended June 30, 2025 increased $5.8 million, or, 1,801%, to $6.2 million as compared to $0.3 million for the corresponding period in 2024. The increase was primarily related to a $4.7 million increase in legal contingencies, net of insurance recoveries. For further discussion see Note 14, Commitments and Contingencies, of our consolidated financial statements.

Current wording

Other operating expense, net for the three months ended September 30, 2025 decreased $0.7 million, or 53%, to $0.6 million as compared to $1.3 million for the corresponding period in 2024. The decrease was primarily related to a decrease in site termination costs for our Outpost locations.

Previous 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.

Current wording

Net revenue for our Wholesale channel for the nine months ended September 30, 2025 increased $7.3 million, or 4%, to $185.1 million as compared to $177.8 million for the corresponding period in 2024. The increase was primarily driven by revenue from Black Rifle Energy launched in the fourth quarter of 2024, growth in packaged coffee distribution and SKU expansion at FDM retailers. This increase was partially offset by a $13.8 million decrease in revenue recognized related to a barter transaction in 2024, whereby we exchanged finished goods inventory for prepaid advertising credits.

Previous 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.

Current wording

Net revenue for our DTC channel for the nine months ended September 30, 2025 decreased $8.4 million, or 9%, to $83.2 million as compared to $91.6 million for the corresponding period in 2024. The decrease was primarily driven by the impact of a $5.7 million decrease in the accrual for loyalty rewards points in 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

Net revenue for our Outpost channel for the six months ended June 30, 2025 increased $0.7 million, or 7%, to $11.3 million as compared to $10.6 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 nine months ended September 30, 2025 increased $1.0 million, or 6%, to $17.2 million as compared to $16.1 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 six months ended June 30, 2025 increased $12.2 million, or 11%, to $120.2 million as compared to $108.0 million for the corresponding period in 2024. Gross margin decreased to 35% for the six 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 first half 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.

Current wording

Cost of goods sold for the nine months ended September 30, 2025 increased $18.9 million, or 11%, to $183.7 million as compared to $164.8 million for the corresponding period in 2024. Gross margin decreased to 36% for the nine months ended September 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 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 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.

Current wording

Marketing and advertising expenses for the nine months ended September 30, 2025 increased $4.7 million, or 19%, to $29.8 million as compared to $25.1 million for the corresponding period in 2024. This increase was due to our expansion of partnerships, an increase in research data, incremental shopper marketing, an increase in overall marketing to support the launch of Black Rifle Energy, and an increase in performance-based initiatives that are expected to generate higher returns on investment and more directly support revenue growth.

Previous wording

Salaries, wages and benefits expenses for the six months ended June 30, 2025 decreased $3.5 million, or 11%, to $29.4 million as compared to $32.9 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.

Current wording

Salaries, wages and benefits expenses for the nine months ended September 30, 2025 decreased $5.7 million, or 11%, to $43.7 million as compared to $49.4 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

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.

Current wording

General and administrative expenses for the nine months ended September 30, 2025 increased $0.4 million, or 1%, to $39.0 million compared to $38.6 million the corresponding period in 2024. This increase was primarily a result of an increase in depreciation expense as a result of a change in useful life of certain software during the second quarter of 2025, an increase in legal fees related to ongoing litigation which was settled in the second and third quarters of 2025, and costs related to the change in our third party logistics provider, 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

Other operating expense, net for the three months ended June 30, 2025 increased $4.6 million, or 1,484%, to $4.9 million as compared to $0.3 million for the corresponding period in 2024. The increase was primarily related to a $4.7 million increase in legal contingencies, net of insurance recoveries. For further discussion see Note 14, Commitments and Contingencies, of our consolidated financial statements.

Current wording

Other operating expense, net for the nine months ended September 30, 2025 increased $5.2 million, or, 326%, to $6.7 million as compared to $1.6 million for the corresponding period in 2024. The increase was primarily related to a $4.3 million increase in legal contingencies, net of insurance recoveries, partially offset by a decrease in termination costs for our retail outpost locations in 2025. For further discussion around legal contingencies see Note 14, Commitments and Contingencies, of our consolidated financial statements.

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 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.

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 September 30, 2025, our cash and cash equivalents was $9.5 million, our working capital was $27.3 million, and under our credit facilities, we had $49.3 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

On July 18, 2025, we closed an underwritten offering and issued 28,000,000 shares of Class A Common Stock and an additional 4,200,000 shares of Class A Common Stock as a result of the exercise in full of the underwriter's option, for total net proceeds of $38.0 million.

Current wording

On July 18, 2025, we closed the Offering and issued 28,000,000 shares of Class A Common Stock and an additional 4,200,000 shares of Class A Common Stock as a result of the exercise in full of the underwriter's option, for total net proceeds of $37.4 million.

Previous 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.

Current wording

Net cash used in operating activities was $1.1 million for the nine months ended September 30, 2025, compared to net cash provided by operating activities of $9.1 million for the corresponding period in 2024. The total decrease of $10.2 million in net cash provided by operating activities was primarily due to net loss of $23.6 million for the nine months ended September 30, 2025 compared to net loss of $0.9 million for nine months ended September 30, 2024.

Previous 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.

Current wording

Net cash used in investing activities was $2.9 million for the nine months ended September 30, 2025, compared to net cash used in investing activities of $6.1 million for the corresponding period in 2024. The $3.2 million decrease in net cash used in investing activities 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 $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.

Current wording

Net cash provided by financing activities was $6.6 million for the nine months ended September 30, 2025, compared to net cash used in financing activities of $9.3 million for the corresponding period in 2024. The $15.9 million increase in net cash provided by financing activities was primarily due to $37.4 million of net proceeds received from the public offering in the third quarter of fiscal year 2025 and $1.0 million of net proceeds from shares issued for legal settlement, offset by a net decrease of $30.8 million on long-term debt, primarily due to repayment of our ABL facility.

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 $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.

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 $7.0 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 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.

Current wording

Liabilities relating to operating leases that have commenced as of September 30, 2025 have been reported on the consolidated balance sheets as "Operating lease liabilities". Payments on leases are expected to be approximately $3.7 million in the next twelve months, and approximately $32.2 million beyond twelve months through 2043.