Release Date: August 08, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- BRC Inc (BRCC, Financial) achieved a gross margin of 42% in Q2, a nearly 700 basis point improvement over the previous year.
- The company reported a positive free cash flow of $1 million, a significant turnaround from a negative $30 million in the same quarter last year.
- BRC Inc (BRCC) outpaced the market with a 28% growth in the second quarter, compared to a category decline of 2.5%.
- The introduction of Black Rifle Energy is expected to tap into the $20 billion energy drink market, leveraging natural caffeine sources.
- The company has seen strong performance in retail, with a 19% growth in its largest retail partner and ongoing positive conversations with major retailers.
Negative Points
- Wholesale rollouts are taking longer than expected, leading to a lower sales forecast for the year.
- Q2 revenue was relatively flat year-over-year, falling below expectations due to delays in distribution and reduced investment in the direct-to-consumer channel.
- The direct-to-consumer business faced challenges due to shifting consumer behavior post-pandemic, leading to a pullback in investment.
- The rollout of new products in major grocery retailers has been delayed to 2025, impacting near-term revenue expectations.
- Despite improvements, the company had to adjust its 2024 revenue guidance down to $385 million to $415 million.
Q & A Highlights
Q: Can you provide more details on the timing of retail rollout delays and the confidence in future distribution?
A: Chris Mondzelewski, CEO, explained that while there are delays, they are confident in their ongoing discussions with retailers. Currently, BRC Inc is in 36 retailers, including the largest three in the country. The delays are not due to product pushback but rather timing issues, and they expect to be in the top five grocery partners by Q2 2025.
Q: What are the expectations for Black Rifle Energy's supply chain and distribution?
A: Chris Mondzelewski, CEO, stated that while they are not ready to announce specifics, they aim to maintain market-level costs and are evaluating the best distribution systems. The energy drink margins are expected to be higher than their coffee products, and they are committed to maintaining quality and cost efficiency.
Q: With the first half gross margin above guidance, is there anything that might affect margins in the second half?
A: Chris Mondzelewski, CEO, noted that there are no specific concerns affecting margins in the second half. They are cautious about promotions impacting margins but remain confident in maintaining their margin performance.
Q: When is the Black Rifle Energy drink expected to launch, and what is the clean energy delivery approach?
A: Chris Mondzelewski, CEO, mentioned that they plan to launch as early as January, aligning with retailer resets. The energy drink will feature a clean energy blend derived from natural caffeine sources, including coffee cherries, ensuring a high-quality product.
Q: How is the partnership with Keurig Dr Pepper (KDP) performing, particularly with Black Rifle pods on keurig.com?
A: Chris Mondzelewski, CEO, expressed satisfaction with the partnership, emphasizing the quality and consistency of the pods. Stephen Kadenacy, CFO, added that they are starting to accrue royalties from KDP's sales and that KDP views the potential as significant.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
