Net Revenue Increases 35% in Q1 2022 to $66
million
More Than Doubles Ready to Drink (RTD)
Capacity To Support Demand
Solidifies C-Suite with Hiring of Industry
Veterans as Chief Retail Officer and Chief Technology
Officer
BRC Inc. (NYSE: BRCC), a rapidly growing and
mission-driven premium coffee company founded to support Veterans,
active-duty military, first responders and serve a broad customer
base by connecting consumers with great coffee and a unique brand
experience, today announced financial results for the first quarter
of fiscal year 2022.
“The first quarter of 2022 was another milestone on our journey
as a newly public company. The strength of our brand continues to
drive robust operating performance. In the quarter, RTD beverages
gained materially more distribution coupled with strong velocities
and our Outposts continue to grow as we expand in new and existing
geographies,” said BRCC Founder and Chief Executive Officer Evan
Hafer. “Our team is committed to Black Rifle Coffee’s success, and
we are so grateful for the support of our loyal and growing
community. We've continued to bolster our leadership team, bringing
on industry leaders like Chief Retail Officer Heath Nielsen,
formerly of Starbucks, and Chief Technology Officer Chris Clark,
formerly of Levi's. Adding these senior leaders reflects our
commitment to invest in leadership talent as the foundation of our
growth plans."
“The work we do to support veterans, active-duty military, and
first responders motivates and inspires the entire BRCC team. For
example, we recently hosted the Veterans Adaptive Archery Shoot in
San Antonio. We had over 70 participants with over 20 of those
being military veterans physically altered by war. Watching the
veteran adaptive athletes compete on the course and share a laugh
or a fist bump with other competitors was a reminder of why Black
Rifle exists in the first place.”
First Quarter 2022 Financial
Details
- Net revenue of $65.8 million, an increase of 35%
year-over-year
- Gross profit increased 18% year-over-year to $23.2 million or
35% of net revenue
- Net loss of $(256.8) million (including $240.7 million of
expense for non-cash fair value adjustments)
- Adjusted EBITDA (non-GAAP) of $(6.2) million
First Quarter 2022
Results
First quarter 2022 revenue increased 35% to $65.8 million from
$48.8 million in the first quarter of 2021. Direct to Consumer
revenue was $38.3 million during the first quarters of both 2022
and 2021. Wholesale revenue increased 135% to $22.0 million from
$9.4 million in the first quarter of 2021. Outpost revenue
increased 397% to $5.5 million from $1.1 million in the first
quarter of 2021. The wholesale channel performance was primarily
driven by growth in our RTD product and expanding partnerships in
our wholesale channel. The Outpost channel performance was driven
by an increase in our company-owned store count, which increased to
9 in the first quarter of 2022 from 1 company-owned outpost in the
first quarter of 2021.
Gross profit increased 18% to $23.2 million from $19.6 million
in the first quarter of 2021. Gross margins decreased 499 basis
points to 35% from 40% for the first quarter of 2021. The decrease
in gross margin was driven by increases in the cost of coffee and
RTD as well as a continued shift in our product mix, as our RTD has
a higher product cost and lower gross margin as compared to
coffee..
Marketing expenses increased 24% to $8.2 million from $6.6
million in the first quarter of 2021. This increase was driven by a
focused investment in our brand partnerships, such as Travis
Pastrana and Bucky Lasek, to drive further brand awareness,
partially offset by more efficient ad spend. As a percentage of
revenue, marketing decreased 107 bps to 12% versus 13% in the first
quarter of 2021.
Salaries, wages and benefits increased 106% to $16.0 million
from $7.8 million in the first quarter of 2021. Increase in
salaries, wages, and benefits are primarily due to increased
employee headcount to support our significant sales growth across
multiple channels. We added 708 employees since the first quarter
of 2021 with 438 of those employees working in our Outposts. As a
percentage of revenue, salaries, wages and benefits increased 839
basis points to 24% as compared to 16% for the first quarter of
2021.
General and administrative ("G&A") expenses increased 208%
to $14.9 million from $4.8 million in the first quarter of 2021.
This increase is primarily related to consulting and other expenses
to support our strategic growth and productivity initiatives as
well as additional support to operate as a publicly traded company.
As a percentage of revenue, G&A increased 1,270 basis points to
23% compared to 10% in the first quarter of 2021.
In the first quarter of 2022, we also recognized losses from the
change in fair value of earn-out liabilities, warrants and
derivative liabilities. The losses recorded for the first quarter
of 2022 represent the following:
– Upon the occurrence of the vesting of the first portion of our
earn-out shares in March 2022, the earn-out liability was
remeasured to the fair value and a realized loss of $60 million was
recorded. In conjunction, the earn-out liability for the final
portion of our earn-out shares was also remeasured at the reporting
date and we recorded a loss of $111.1 million. This change in fair
value of the earn-out liabilities was primarily a result of the
increase of the closing price of our Class A Common Stock at the
reporting date.
– We also remeasured the warrant liability at the reporting date
and recognized a fair value of $98.6 million versus $36.5 million
at the closing date of our business combination. This change in
fair value on the warrant liabilities was primarily a result of the
increase of the closing price of our Class A Common Stock at the
reporting date.
– Lastly, we also remeasured the derivative liability relating
to the shares issuable in connection with the applicable premium on
the Series A Preferred Stock at the reporting date. This was
remeasured to a fair value of $17.2 million versus $9.7 million at
the closing of the business combination. This change in fair value
on the derivative liabilities was primarily a result of the
increase of the closing price of our Class A Common Stock at the
reporting date.
Net loss for the first quarter of 2022 was $(256.8) million and
Adjusted EBITDA was $(6.2) million. This compares to net income of
$0.1 million and Adjusted EBITDA of $2.3 million in the first
quarter of 2021.
Conference Call
A conference call to discuss the Company’s first quarter results
is scheduled for May 12, 2022, at 8:00 a.m. ET. Those who wish to
participate in the call may do so by dialing (877) 407-0609 or
(201) 689-8541 for international callers. A webcast of the call
will be available on the investor relations page of the Company’s
website at Black Rifle Coffee Company (BRCC). For those unable to
participate in the conference call, a replay will be available
after the conclusion of the call on May 12, 2022 through May 19,
2022. The U.S. toll-free replay dial-in number is (877) 660-6853,
and the international replay dial-in number is (201) 612-7415. The
replay passcode is 13729159.
About BRC Inc.
Black Rifle Coffee Company (BRCC) is a veteran-founded coffee
company serving premium coffee to people who love America. Founded
in 2014 by Green Beret Evan Hafer, Black Rifle develops their
explosive roast profiles with the same mission focus they learned
while serving in the military. BRCC is committed to supporting
veterans, active-duty military, first responders and the American
way of life.
To learn more about BRCC, visit www.blackriflecoffee.com, follow
BRCC on social media, or subscribe to Coffee or Die Magazine's
daily newsletter at https://coffeeordie.com/presscheck-signup.
Forward-Looking Statements
This press release contains management’s current intentions and
expectations for the future, all of which are forward-looking
statements within the meaning of Section 27A of the Securities Act
of 1933 and Section 21E of the Securities Exchange Act of 1934.
Forward-looking statements include statements about the Company’s
expectations, beliefs, plans, objectives, intentions, assumptions
and other statements that are not historical facts. The words
“anticipate,” “believe,” “continue,” “could,” “estimate,” “expect,”
“intends,” “may,” “might,” “plan,” “possible,” “potential,”
“predict,” “project,” “should,” “will,” “would” and similar
expressions may identify forward-looking statements, but the
absence of these words does not mean that a statement is not
forward-looking. Actual results may differ materially due to
various factors. The following include some but not all of the
factors that could cause actual results or events to differ
materially from those anticipated, including failure to recognize
the anticipated benefits of the business combination, which may be
affected by, among other things, competition and our ability to
grow and manage growth profitably and retain our key employees;
negative publicity impacting our brand and reputation, which may
adversely impact our operating results; failure by us to maintain
our message as a supportive member of the veteran and military
communities and any other factors which may negatively impact the
perception of our brand; our limited operating history, which may
make it difficult to successfully execute our strategic initiatives
and accurately evaluate future risks and challenges; failed
marketing campaigns, which may cause us to incur costs without
attracting new customers or realizing higher revenue; failure to
attract new customers or retain existing customers; risks related
to the use of social media platforms, including dependence on
third-party platforms; failure to provide high-quality customer
experience, which may impact our brand; decrease in success of the
direct to consumer revenue channel; loss of one or more of
co-manufacturers; failure to effectively manage or distribute our
products through our wholesale business partners; failure by third
parties involved in the supply chain of coffee, store supplies or
merchandise to produce or deliver products; changes in the market
for high-quality Arabica coffee beans and other commodities;
fluctuations in costs and availability of real estate, labor, raw
materials, equipment, transportation or shipping; loss of
confidential data from customers and employees, which may subject
us to litigation, liability or reputational damage; failure to
successfully compete with other producers and retailers of coffee;
failure to successfully open new retail coffee shops; failure to
properly manage our rapid growth and relationships with various
business partners; failure to protect against software or hardware
vulnerabilities; failure to build brand recognition using our
intellectual properties; shifts in consumer spending, lack of
interest in new products or changes in brand perception upon
evolving consumer preferences and tastes; failure to adequately
maintain food safety or quality and comply with food safety
regulations; failure to successfully integrate into new domestic
and international markets; risks related to leasing space subject
to long-term non-cancelable leases and with respect to real
property; failure of our franchise partners to successfully manage
their franchise; failure to raise additional capital to develop the
business; risks related to the COVID-19 pandemic, including supply
chain disruptions; the loss of one or more of our executive
officers and other key employees; failure to hire and retain
qualified employees; failure to meet our goal of hiring 10,000
veterans; risks related to unionization of employees; failure to
comply with federal state and local laws and regulations; resales
from time to time of a significant portion of our shares held by
selling holders; and inability to maintain the listing of our Class
A Common Stock on the New York Stock Exchange. For additional
information about the factors that could cause actual results to
differ materially from forward-looking statements, please see the
Company's documents filed or to be filed with the Securities and
Exchange Commission (the "SEC"), including our Quarterly Report on
Form 10-Q for the three months ended March 31, 2022, to be filed
with the SEC, and our Annual Report on Form 10-K for the year ended
December 31, 2021 filed on March 16, 2022. You should not place
undue reliance on forward-looking statements, which speak only as
of the date of this release. Except as is required by law, the
Company expressly disclaims any obligation to publicly release any
revisions to forward-looking statements to reflect events after the
date of this release.
CONSOLIDATED STATEMENTS OF
OPERATIONS
(Amounts in thousands, except
share and per share amounts, unaudited)
Three Months Ended
March 31,
March 31,
2022
2021
Revenue, net
$
65,836
$
48,790
Cost of goods sold
42,623
29,152
Gross profit
23,213
19,638
Operating expenses
Marketing and advertising
8,151
6,551
Salaries, wages and benefits
16,018
7,778
General and administrative
14,887
4,838
Total operating expenses
39,056
19,167
Operating income (loss)
(15,843
)
471
Non-operating income (expense)
Interest expense
(490
)
(294
)
Other income (expense), net
348
8
Change in fair value of earn-out
liability
(171,098
)
—
Change in fair value of warrant
liability
(62,109
)
—
Change in fair value of derivative
liability
(7,507
)
—
Total non-operating expenses
(240,856
)
(286
)
Income (loss) before income
taxes
(256,699
)
185
Income tax expense
128
36
Net income (loss)
$
(256,827
)
$
149
Less: Net loss attributable to
non-controlling interest
(193,906
)
Net loss attributable to BRC
Inc.
$
(62,921
)
Net loss per share attributable to
Class A Common Stock(1)
Basic and diluted
$
(1.36
)
Weighted-average shares of Class A
common stock outstanding
Basic and diluted
44,254,837
CONSOLIDATED BALANCE
SHEETS
(Amounts in thousands, except
share and per share amounts, unaudited)
March 31, 2022
December 31, 2021
Assets
Current assets:
Cash and cash equivalents
$
110,102
$
18,334
Accounts receivable, net
13,418
7,442
Inventories
25,857
20,872
Prepaid expenses and other current
assets
11,473
6,377
Total current assets
$
160,850
$
53,025
Property, plant and equipment, net
34,341
31,114
Operating lease, right-of-use asset
7,340
—
Identifiable intangibles, net
251
167
Restricted cash
8,265
—
Other
795
2,776
Total assets
$
211,842
$
87,082
Liabilities and stockholders'
deficit/members’ deficit
Current liabilities:
Accounts payable
$
6,427
$
17,387
Accrued liabilities
25,387
22,233
Deferred revenue and gift card
liability
7,768
7,334
Current maturities of long-term debt,
net
2,867
11,979
Current operating lease liability
432
—
Current maturities of finance lease
obligations
100
85
Total current liabilities
$
42,981
$
59,018
Non-current liabilities:
Long-term debt, net
$
15,777
$
22,712
Finance lease obligations, net of current
maturities
273
228
Operating lease liability
7,037
—
Earn-out liability
217,404
—
Warrant liability
98,593
—
Derivative liability
17,248
—
Other non-current liabilities
482
334
Total non-current liabilities
$
356,814
$
23,274
Total liabilities
$
399,795
$
82,292
Commitments and Contingencies
Stockholders' equity:
Preferred stock, $0.0001 par value,
1,000,000 shares authorized; no shares issued and outstanding
$
—
$
—
Class A common stock, $0.0001,
2,500,000,000 shares authorized; 44,703,936 shares issued and
outstanding
4
—
Class B common stock, $0.0001 par value,
300,000,000 shares authorized; 149,032,886 shares issued and
outstanding
15
—
Series C common stock, $0.0001 par value,
1,500,000 shares authorized; 694,063 shares issued and
outstanding
—
—
Series A preferred equity, less issuance
costs (151,406 units authorized, issued and outstanding as of
December 31, 2021)
—
154,281
Additional paid in capital
38,814
—
Accumulated deficit
(83,748
)
(19,996
)
Members’ deficit (18,769 Class A units and
73,890 Class B units authorized, issued and outstanding as of
December 31, 2021 )
—
(129,495
)
Total BRC Inc.'s stockholders'
deficit/Members' deficit
$
(44,915
)
$
(149,491
)
Non-controlling interests
(143,038
)
—
Total stockholders' equity (deficit)
$
(187,953
)
$
(149,491
)
Total liabilities and stockholders'
deficit
$
211,842
$
87,082
CONSOLIDATED STATEMENTS OF
CASH FLOWS
(Amounts in thousands,
unaudited)
Three Months Ended March
31,
2022
2021
Operating activities
Net income (loss)
$
(256,827
)
$
149
Adjustments to reconcile net income (loss)
to net cash used in operating activities:
Depreciation and amortization
989
499
Equity-based compensation
2,259
317
Non-employee equity-based compensation
355
368
Amortization of debt issuance costs
243
42
Bad debt expense (recovery)
—
(51
)
Change in fair value of earn-out
liability
171,098
—
Change in fair value of warrant
liability
62,109
—
Change in fair value of derivative
liability
7,507
—
Changes in operating assets and
liabilities:
Accounts receivable, net
(5,976
)
(300
)
Inventories
(4,985
)
(4,266
)
Prepaid expenses and other assets
(5,193
)
(1,629
)
Accounts payable
(10,960
)
(247
)
Accrued liabilities
6,174
(911
)
Deferred revenue and gift card
liability
434
340
Other liabilities
148
—
Net cash used in operating activities
$
(32,625
)
$
(5,689
)
Investing activities
Purchases of property, plant and
equipment
$
(4,207
)
$
(2,024
)
Net cash used in investing activities
$
(4,207
)
$
(2,024
)
Financing activities
Proceeds from issuance of long-term debt,
net of cash paid for debt issuance costs of $3 as of March 31, 2022
and $338 as of December 31, 2021
$
5,285
$
707
Repayment of long-term debt
(23,174
)
(267
)
Financing lease obligations
60
(119
)
Distribution and redemption of Series A
preferred equity
(127,853
)
—
Proceeds from Business Combination,
including PIPE investment
337,957
—
Payment of Business Combination costs
(31,638
)
—
Redemption of Class A and Class B
units
(20,145
)
—
Redemption of incentive units
(3,627
)
—
Net cash provided by financing
activities
$
136,865
$
321
Net increase (decrease) in cash, cash
equivalents, and restricted cash
$
100,033
$
(7,392
)
Beginning cash, cash equivalents, and
restricted cash
18,334
35,632
Ending cash, cash equivalents, and
restricted cash
$
118,367
$
28,240
CONSOLIDATED STATEMENTS OF
CASH FLOWS (CONTINUED)
(Amounts in thousands,
unaudited)
Three Months Ended March
31,
2022
2021
Non-cash operating activities
Recognition of right-of-use operating
lease assets
$
7,560
$
—
Non-cash investing and financing
activities
Recognition of earn-out liabilities
$
218,679.00
$
—
Recognition of warrant liabilities
36,484
—
Recognition of derivative liability
9,741
—
Series A preferred exchange for PIPE
shares
26,203
—
Series A preferred equity amortization
5,390
2,612
Accrued capital expenditures
1,171
287
Supplemental cash flow
information
Cash paid for income taxes
$
218
$
28
Cash paid for interest
$
377
$
178
KEY OPERATING AND FINANCIAL
METRICS
(unaudited)
Revenue by Sales Channel
(Amounts in Thousands)
Three Months Ended
March 31,
March 31,
2022
2021
Direct to Consumer
$
38,332
$
38,323
Wholesale
21,955
9,351
Outpost
5,549
1,116
Total Net Revenue
$
65,836
$
48,790
Key Operational Metrics
Three Months Ended
March 31,
March 31,
2022
2021
DTC Subscribers
295,900
265,800
Wholesale Doors
3,640
1,350
RTD Doors
47,100
24,100
Outpost
18
4
Company-owned Stores
9
1
Franchise stores
9
3
Common Stock Activity
Class A
Common Stock
Class B
Common Stock
Class C
Common Stock
February 9, 2022
44,009,874
139,106,323
1,388,125
First Tier Vesting Event
694,062
9,926,563
(694,062
)
Second Tier Vesting Event
694,063
9,926,562
(694,063
)
Warrant Redemption
6,376,346
—
—
Applicable Premium shares
6,196
820,310
—
May 12, 2022
51,780,541
159,779,758
—
Non-GAAP Financial Measures
To evaluate the performance of our business, we rely on both our
results of operations recorded in accordance with GAAP and certain
non-GAAP financial measures, including EBITDA and Adjusted EBITDA.
These measures, as defined below, are not defined or calculated
under principles, standards or rules that comprise GAAP.
Accordingly, the non-GAAP financial measures we use and refer to
should not be viewed as a substitute for performance measures
derived in accordance with GAAP or as a substitute for a measure of
liquidity. Our definitions of EBITDA and Adjusted EBITDA described
below are specific to our business and you should not assume that
they are comparable to similarly titled financial measures of other
companies. We define EBITDA as net income (loss) before interest,
state income taxes, depreciation and amortization expense. We
define Adjusted EBITDA as EBITDA, excluding certain non-cash fair
value adjustments, as adjusted for equity-based compensation,
system implementation costs, transaction expenses, executive
recruiting, severance and sign-on bonus, outpost pre-opening
expenses and strategic initiative related costs. When used in
conjunction with GAAP financial measures, we believe that EBITDA
and Adjusted EBITDA are useful supplemental measures of operating
performance because it facilitates comparisons of historical
performance by excluding non-cash items such as equity-based
payments and other amounts not directly attributable to our primary
operations, such as the impact of system implementation,
acquisitions, disposals, executive searches, executive severance,
non-routine investigations, litigation and settlements. Adjusted
EBITDA is also a key metric used internally by our management to
evaluate performance and develop internal budgets and forecasts.
EBITDA and Adjusted EBITDA have limitations as an analytical tool
and should not be considered in isolation or as a substitute for
analyzing our results as reported under GAAP and may not provide a
complete understanding of our operating results as a whole. Some of
these limitations are (i) they do not reflect changes in, or cash
requirements for, our working capital needs, (ii) they not reflect
our interest expense or the cash requirements necessary to service
interest or principal payments on our debt, (iii) they do not
reflect our tax expense or the cash requirements to pay our taxes,
(iv) they do not reflect historical capital expenditures or future
requirements for capital expenditures or contractual commitments,
(v) although equity-based compensation expenses are non-cash
charges, we rely on equity compensation to compensate and
incentivize employees, directors and certain consultants, and we
may continue to do so in the future and (vi) although depreciation,
amortization and impairments are non-cash charges, the assets being
depreciated and amortized will often have to be replaced in the
future, and these non-GAAP measures do not reflect any cash
requirements for such replacements.
A reconciliation of net income, the most directly comparable
GAAP measure, to EBITDA and Adjusted EBITDA is set forth below:
Reconciliation of Net Income (Loss) to
Adjusted EBITDA
(Amounts in Thousands)
Three Months Ended
March 31,
March 31,
2022
2021
Net income (loss)
$
(256,827
)
$
149
Interest expense
490
294
Tax expense
128
36
Depreciation and amortization
989
499
EBITDA
$
(255,220
)
$
978
Non-cash fair value adjustments
Change in fair value of earn-out liability
expense(1)
171,098
—
Change in fair value of warrant liability
expense(2)
62,109
—
Change in fair value of derivative
liability(3)
7,507
—
EBITDA, excluding non-cash fair value
adjustments
(14,506
)
978
Equity-based compensation(4)
2,614
685
System implementation costs(5)
252
206
Transaction expenses(6)
983
—
Executive recruiting, severance and
sign-on bonus(7)
806
326
Outpost pre-opening expenses(8)
95
84
Strategic initiative related costs(9)
3,550
—
Adjusted EBITDA
$
(6,206
)
$
2,279
(1) Represents non-cash expense recognized to remeasure the
earn-out liability to fair value as of March 31, 2022. The change
in fair value was a result of the increase of the closing price of
our publicly traded common stock subsequent to the closing of our
business combination.
(2) Represents non-cash expense recognized to remeasure the
warrant liability to fair value as of March 31, 2022. The change in
fair value was a result of the increase of the closing price of our
publicly traded common stock subsequent to the closing of our
business combination.
(3) Represents non-cash expense recognized to remeasure the
derivative liability to fair value as of March 31, 2022. The change
in fair value was a result of the increase of the closing price of
our publicly traded common stock subsequent to the closing of our
business combination.
(4) Represents the non-cash expense of our equity-based
compensation arrangements for employees, directors, consultants and
wholesale channel partner.
(5) Represents costs associated with the implementation of our
enterprise-wide resource planning (ERP) system.
(6) Represents expenses related to becoming a public company
such as public company readiness, consulting and other fees that
are not related to core operations.
(7) Represents nonrecurring payments made for executive
recruitment and severance.
(8) Represent costs incurred prior to the opening of an Outpost
including labor, rent and utilities, travel and lodging costs,
legal fees and training expenses.
(9) Represents third-party consulting costs related to the
planning and execution of our growth and productivity strategic
initiative.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20220512005373/en/
Investor Contact Tanner Doss: IR@BlackRifleCoffee.com ICR
for BRCC: BlackrifleIR@icrinc.com
Media Contact TrailRunner International for BRCC: Pat
Shortridge, (651) 491-6764; pats@trailrunnerint.com
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