Q2 2023 BRC Incorporated Earnings Call
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Greetings and welcome to the Black Rifle Coffee company to Q23 earnings call. At this time, all participants are in a listen only mode.
Question and answer session will follow the formal presentation if.
If anyone should require operator assistance during the conference. Please press star zero on your telephone keypad. Please note. This conference is being recorded I would now turn the conference over to your host Jenna Das you may begin.
Good afternoon, everyone. Thank you for joining Blackrock for coffee company's conference call to discuss our second quarter 2023 financial results, which were released today and can be found on our website at IR got black rifle coffee Dot Com with me on the call today is Evan Hafer, founder and CEO , Tom Davin co CEO and Greg Iverson, Our Chief Financial Officer, We will also have crisp.
<unk>, our new president as well as Mark Weinstein, our interim CFO on the Q&A portion of today's call before we get started I'd like to remind you of the company's safe Harbor language, which I'm sure you're all familiar with US on today's call management may make forward looking statements, including guidance and underlying assumptions forward looking statements are based on expectations that involve risks and uncertainties that could cause actual results to.
Differ materially for further discussion of our risks related to our business. Please see our previous filings with the SEC. This call will also contain non-GAAP financial measures such as adjusted EBITDA Reconciliations of these non-GAAP measures to the most comparable GAAP measures are included in the earnings release furnished to the SEC and they're also available on our Investor website now I'd like to turn the call over to Evan Hafer, founder and CEO of <unk>.
Blackrock will coffee company and then thanks Tanner and good afternoon, everyone from day, one is starting black rifle Coffee company in my garage. My core focus has been to create a authentic connection between our brand and our community demonstrating to military veterans and first responders that we can build something that will last generations. We on the street from our beliefs.
And it can be felt by our customers who are looking for authenticity in a world where most brands don't stand for anything or change their beliefs based on whoever is yelling the loudest as we transition from a pure direct consumer business into an omnichannel CPG business Black rifle his proven to be a real American business success story.
We're still early in our company's lifecycle, but we've proven that our brand resonates with American public and we're excited to have all of our products show up in stores, where our customers are shopping every day last year, we made the strategic decision to launch our products into food drug and mass and to date that decision has paid off.
We've gone from a niche premium direct consumer coffee brand to the number one selling 12 ounce bag coffee sold in over 4400, Walmart stores across America. This has all been done on the strength of our brand and word of mouth reviews. This excitement for the brand and being on shelf. We're over 30 million people a day shop is.
So increased our aided brand awareness from 20% to over 28% in the last year, while we're pleased with the 8% point increase we have 72% left to go over the last four weeks with little to no marketing spend black raffle coffee represented 4.4% of total coffee sales in the largest coffee aisle within grow.
Sri in F. T M that 4.4% is only made up of 12 ounce bags in K cups or rounds, which is representative of only half of the total categories within the Walmart coffee aisle over the past six months, we've been working with Walmart to create new Skus that we recently launched during their coffee reset that will begin to.
Dress the remaining 50% of the IL.
Although we were early in the reset period, we've seen our new product innovation further increase Walmart coffee sales Tom will share the additional color on this section as we mentioned on our last call. The success of our entry into grocery was going to be building on itself and we would soon be launching additional F. T. M partnerships today I'm excited to announce.
That we are shipping our product to our second national grocery chain and two other regional partners. We are deep in conversations with additional groceries in F. D. M accounts, and we will continue to rollout black rightful coffee into the additional grocery chains during 'twenty 'twenty four in order to capitalize on the growth opportunity of C. P. G. I knew we needed to bring additional talent.
To the team to elevate our brand to the next level, which is why we hired a new president and CMO Chrisman Duluth Ski Christmas brought over 25 years of experience within the CPG industry. Most recently as the Chief growth Officer at Mars, Petcare and more importantly, he has been a coffee subscribers since 2015 he is intimately familiar.
Here with our brand and he understands how to deliver the plaque rightful coffee brand experience to our customer base as well as expand our Tam into new cohorts are potential customers Christian we focused on three main goes over the next year continue to aggressively lead the distribution expansion of our business across channels, especially in F. D. N M works.
Hand in hand, with me on the marketing and branding fried to unlock marketing programs and expand into new customer groups working with Tom Davin and the rest of the business units to continue to drive efficiencies and be predictable across the business, having Chris in this new role will allow me to get back to doing what I love, which is 100% focused on.
Building and evolving the Blackrock for coffee brand I will be working on our large strategic partnerships at Blackrock for coffee more importantly, I will be 100% on the needs and wants of our customers.
We are still very early in the cycle of Blackrock for coffee.
And I couldn't be more excited for the future. We also have months, our new president and Mark Weinstein, our interim CFO on the call to answer any additional questions you might have before I turn the call over to Tom to walk through the quarter I want to say, thanks to Greg Iverson on its last earnings call as our CFO , Greg was instrumental in getting this business ready for I P O.
And he has also done an amazing job. The last three years, we will miss having him around the office and I want to wish him luck in his next mission with that I'll turn the call over to Tom T. D. Go ahead, thanks, Kevin and good afternoon, everyone I'll start with the topic of company profitability, then address performance by channel and conclude with 2023.
Guidance.
Before addressing these topics. Unlike preface my comments with some observations to set the context first of Blackrock for coffee brand is gaining broad acceptance and as a result, we are growing rapidly far outpacing the coffee category and a long list of competitors as military veterans, leading a public company we've.
Drive to set aggressive, but achievable goals supported by initiatives to mitigate risk. This our seventh earnings calls a public company, obviously, our omnichannel growth strategy has evolved over time as we've responded to consumer behavior and results in the marketplace.
Success, we've seen in the wholesale segment, particularly food drug and mass has enabled us to sharpen our focus and more clearly charter path to profitability, one investor said recently I'd like to see Blackrock for coffee be more boring at least as a business model, we've taken that sentiment to heart, meaning we will continue to streamline.
And our processes using technology to drive productivity and hold ourselves accountable to do what we said we would do profitability as I outlined on our Q1 call we're committed to becoming profitable in 'twenty two 'twenty three at the adjusted EBITDA line I am pleased to report that we achieved adjusted EBITDA profitability in Q.
Two and are trending hit our profitability targets for the year. The key levers are the continued mix shift into the food drug and mass channel costs.
Cost savings and productivity across the business our entire organization is aligned behind the imperatives of focus and profitable growth.
I will now highlight each of our business channels wholesale the strategic decision to focus on this channel is starting to prove out over the past two quarters. Our wholesale channel revenue growth was 109% year over year, proving again that the b or C. C brand has broad appeal with a wide range of shoppers.
Food drug and mass.
No we are still less than a year into our launch within the F. D. M channel, we continue to gain market share rapidly.
Haven't shared that according to the most recent Nielsen data over the last four weeks Black rifle coffee represented 4.4% of total Walmart coffee sales as success of Walmart discern b or C. C. The opportunity to begin to address the remaining 50% of Walmart's coffee business.
16, new innovation Skus are being shipped to stores as we speak including our first canister coffee SKU, comprising 24 ounces of ground coffee cold brew concentrates and 32 fluid ounces with multiple flavors to ask your use of instant coffee and three additional bank coffees and sue.
Six additional pack sizes and flavors of rounds, our K cups with a new product launches, we are increasing our shelf facings at Walmart by roughly 67% based on Nielsen data Walmart's coffee sales continue to outpace the total F. D M category by more than two and a half times Blackrock coffee was honored to be.
Part of its ongoing success story relative to the new F. T. M accounts have been referenced we look forward to sharing additional details as Blackrock coffee product arrives on shelf ready to drink. Our RTD product continues to outperform the segment, which has enabled b or C. C to continue to take market share.
Over the last 52 weeks black rival outperformed the category by over eight times in terms of units and dollars.
Our products are now being sold in over 82000 doors, well on our way to the 100000 door target by year end 2023 our percentage a C. V continues to grow currently at 41% with F. D. M. In convenience stores combined up from 38% at year end 2022 range.
Drink segment as a whole experienced some deceleration over the past couple of quarters although.
Although black rifle Coffees unit sales were up 26% quarter over quarter. The category has seen unit sales fall almost 8% during the same time period.
Our growing an RTD and taking share we did not expect category to slow in the last quarter.
As a result of the category deceleration, we've completed a full top down and bottoms up review of the RTD business. The outcome of this review has resulted in renewed focus on quality of distribution greater sense of urgency around margin and increased profitability all supported by leadership.
Changes to enable execution of our ready to drink playbook, who.
Continue to monitor the overall macro trends in RTD and improve our execution throughout the system direct to consumer.
We operate the largest branded subscription coffee business in the United States with over 239000 subscribers. We've continued to see a slight decline in new customers quarter over quarter, which aligns with our internal models as we reduce investments that fall below our hurdle rates with profitability as an.
Parrott of we continue to be disciplined on CAC, our cost to acquire customers has CAC is still elevated relative to the LTV of new customers. We continue to direct investment dollars into the F. T. M category. The area of the business that is providing the greatest returns outposts as we announced last call.
Order I've assumed direct leadership the outpost division for the immediate future. We have three main objectives in 2023 for the retail business number one continue to enhance the customer experience within our company owned and franchise locations to maximize revenue number to.
Developed the leadership capabilities of the outpost team in order to drive performance at each resell outpost.
Three refine our new prototype model to further elevate the b or C suite experience, while value engineering overall build out costs to ensure future outposts generates strong returns on investment we continue to see significant long term opportunity for this segment of our growth strategy.
Wrapping up my section I'll provide an update on guidance for 2020 three.
As you know we previously guided to revenue the range of 400 band of $440 million.
Gross margin, 36% to 37.5% adjusted EBITDA 5 million to $20 million for the year.
With the aforementioned ready to drink category deceleration. We now expect 2023 results to be at the low end of the guidance across all three metrics, representing a low to mid 30% revenue growth continued improvement in gross margin and adjusted EBITDA profitability, we expect to see sequential improvements in gross.
Margins and adjusted EBITDA in both Q3 and Q4 I'll now turn the call over to Greg Iverson to walk through the quarter in more details Greg.
Thanks, Tom and good afternoon, everyone today, I will discuss our 2023 second quarter financial results.
But before I review the financials I'd like to thank Evan Tom and the entire B or C. C family for their support and friendship over the past three and a half years, while I will Miss working closely with everyone. I know that the company is in extremely capable hands and I will remain a committed black raffle coffee customer for life in the context of doing what we say, we're going to do well.
We previously guided towards 91 million of revenue and adjusted EBITDA that approaches breakeven in the second quarter and I am pleased to report we exceeded both forecasts.
For the second quarter total revenue increased 39% to 91.9 million compared to $66 4 million in Q2 of last year.
Now I will give some additional details on our three sales channels.
I'll begin with wholesale where revenue increased 109% to $50 million in Q2 compared to $24 million during Q2 of last year the.
The increase was primarily driven by our entry into food drug and mass as we began selling our bag coffee and rounds and over 4400 Walmart stores beginning in September of last year. We also saw a material increase in our ready to drink product sales as our product is being sold in over 82000 doors up from 67000 doors a year ago.
<unk> net.
Next our direct to consumer revenue decreased by 6% to $34 6 million in Q2 of 2022 compared to $37 million in Q2 of last year.
This expected decline was mainly the direct result of decreased digital advertising spend as we continue to prioritize our high growth and high returning wholesale channel next revenue from outposts increased 35% to 7.4 million in Q2 compared to $5 4 million last year. The main driver was an increase in our.
Company owned store count, which increased to 17 outposts as of Q2, 'twenty twenty-three compared to 10 in Q2 'twenty 'twenty. Two this brings our total number of outposts to 30 was 17 company owned and 13 franchise stores turning to profitability. Our Q2 gross margin was 35% increasing approximately 100.
Basis points from 34% in Q2 of last year sequentially gross margin improved 210 basis points versus the first quarter of 2023 the increase was driven primarily by channel mix shift as our wholesale channel has higher gross margins than our other channels next our total operating expenses for Q2 increased by <unk>.
$5 5 million or 14% to $44 9 million versus $39 4 million in Q2 of last year.
As a percentage of revenue our operating expenses during Q2 decreased by 987 basis points to 49.5% as compared to last year as we drove significant operating leverage across our expense base.
I will walk through our operating expenses in more detail, beginning with marketing and advertising, which decreased 22.3% to $7 million from $9 million in the second quarter of last year as.
As a percentage of revenue marketing decreased by approximately 600 basis points to 7.6% compared to the same quarter last year.
This decrease in expense was driven by reductions in spend on lower returning advertising platforms. In addition, our focus on our wholesale channel is continuing to drive the leverage and efficiency with their marketing and advertising spend that we have been anticipating next our salaries wages and benefits increased 20% to 18.4.
Million from $15 5 million in the second quarter of last year.
Importantly, as a percentage of revenue decreased by approximately 350 basis points to 20% compared to 23, 4% in Q2 of last year as again, we are driving leverage in our operating expenses.
The increase in dollars was due to a year over year increase in employee head count to support our significant revenue growth, while we increased head count year over year, we actually reduced our head count excluding employees at newly opened outposts sequentially in both Q1 and Q2 as part of our efforts to improve operational efficiency moving on.
On our G&A expenses increased 27.7% to 18.9 million compared to $14 8 million in the second quarter of last year as.
As a percentage of revenue G&A decreased by approximately 175 basis points to 26% of revenue compared to 22.3% last year.
This increase in dollars was driven primarily by non routine legal expenses as.
As with our marketing and our salaries and wages, we achieved significant leverage in our G&A expense in the quarter. In addition to the GAAP measures I've discussed adjusted EBITDA is an important profitability measure that we use internally to manage our business for the second quarter, we generated positive adjusted EBITDA of 147000.
Versus a loss of 10.5 million a year ago. This massive improvement was driven by our revenue growth gross margin improvement and operating expense leverage we're very proud of the great work. Our teams have done to drive profitable revenue growth and optimize our expense structure, which supported our modest profitability in Q2.
We continue to expect profitability to improve sequentially in the back half of this year as we continued to drive revenue growth, while improving the efficiency of our business now I'll briefly walk through our balance sheet for the first quarter of 2023.
We ended Q1 with 19.8 million of cash on the balance sheet compared to 39 million as of December 31st. We also had $77.9 million of debt compared to 49.2 million as of December 31st.
As expected our inventory balance grew slightly and it was at its peak in Q2 as it has now begun decreasing in July and August you.
You will continue to see our inventory balance decrease throughout the remainder of the year as we convert our RTD inventory into cash over the coming quarters.
Lastly, I'm pleased to announce that earlier today, we closed on a new credit facility, consisting of an ABL credit agreement and a term loan credit agreement, which collectively provide aggregate borrowing capacity of up to $125 million. This.
These facilities have allowed us to repay most of our existing indebtedness and will provide us with additional liquidity and our long term capital structure to support our continued growth.
With that I will turn the call over to the operator for questions.
At this time, we will be conducting a question and answer session.
If you'd like to ask a question. Please press star one on your telephone keypad.
Confirmation tone will indicate your line and then the question you May Press Star two if he would like to remove your question from the queue. So participants using speaker equipment and may be necessary to pick up your handset before pressing the star keys.
Our first question comes from the line of Joe <unk> with Raymond James. Please proceed with your question.
Hey, good afternoon guys.
A couple of questions first.
First just to start with the RTD category.
I think he said the category was down.
In the second quarter is that correct.
That's correct, Joe or Tom Davin here.
And what that looked like in the first quarter just want to see what the sequential slowdown was.
It was down we pulled that pattern, yes, it was down four.
It was down 2% in Q4 of last year 2022.
Okay. So it's been good.
Slowing.
Given your your view of the category, what what's driving that.
We don't have a good answer for that I mean, you had a nice pop during the Covid period.
I can't say that traffic into convenience and gas has gone down it does seem like people may be shifting into energy drink.
Months.
I think the one factor would be higher prices, we've seen higher prices continue to.
Moving to the market and as that becomes more of a differential than we've seen the <unk>.
Category sort of commensurately moved out with.
Okay.
Then maybe a little bit more color on the on the new F. B M. Partnership you guys announced you said you have a new national partner.
And.
A new regional grocery partners can you give us some insight as to who they are.
When do you expect to start shipping.
Yeah, I'm going to pitch that one to Chris Monzo, Lucy who we call mines, So monza overnight.
Thanks, Tom.
Yes, we're excited we do have a new its a large.
West Coast retailer. We're currently shipping all divisions of that retailer, we expect to be in all stores by the end of the year and then.
We as you mentioned, we do have a number of our smaller retailers that we're working with.
Towards the end of the year as well.
And we're in conversations with honestly at this point most most large retailers in the United States.
Okay.
Thank you.
Sure.
Our next question comes from the line of Keegan Cox with D. A Davidson. Please proceed with your question.
Hi.
I was just wondering like we've seen coffee.
Creation of David down heading towards like a deflationary environment.
I was wondering what the impact of lower coffee prices would be on gross margins.
Sure Keegan. This is Greg Iverson I can take that and then just stepping back as we've said on past calls our practice is to is to place forward purchase contract for coffee, usually about 12 months out. So what you said is exactly right. The Costa coffee is a commodity has gone down pretty significantly over the last several.
<unk> or or quarters, the coffee that's flowing through our P&L right. Now is all coffee that we had we had purchased not physically but at least had placed contracts on AD rates last year that were higher so we're not seeing the benefit of the lower cost of coffee going through our P&L. This year, but we certainly will as we go into 2024.
Awesome and then just.
A follow up.
Right. If we are heading to a deflationary coffee environment, what do you think.
The benefit or impact will be on Laguna.
When you say the last part of your question there has said either.
Yeah.
It would be the impact on unit like bagged coffee sold or ground stalled.
Is your question around demand or potentially pricing at the retail level.
Yeah pricing and demand at the retail level.
Yeah from a demand perspective, I think we go back and look look over time, the Costa coffee hasn't had a big impact on demand at the consumer level in terms of any deflationary pressure or risk that's something that we watch closely as I'm sure everybody within the coffee space does but where we're not seeing any indications yet that the.
Mrs are going down or pressure from the retailers to start lowering price.
Thank you.
Thank you.
Our next question comes from the line of Jon Andersen with William Blair. Please proceed with your question.
Hey, good afternoon everybody.
Hey, John .
Hey, I wanted to start with with Walmart.
And ask them based on the the performance to date and congrats on hitting four 4%.
Are you are you seeing similar strength similar results across geographies or is there anything.
Have you learned from maybe performance urban versus rural or different parts of the country and then also on Walmart as you get ready to launch or have launched some of these new skus. It sounds like you've already launched.
How quickly do those get to the shelf.
What are your expectations in terms of kind of increments.
Of those Skus do those tend to be highly incremental because they're different form factors different flavors.
Just some thoughts or Nick mentality there. Thanks.
Yes, great, yes, John so on the first question.
Interestingly, we've had pretty steady performance across the entire market. So when we look at all Walmart divisions, we've seen the products performing well.
There is a there is a bit of an index towards the Midwest and South you know when you look at it from an index standpoint, but obviously in larger geographies like.
Like the West coast the northeast, we still we see larger volumes as you would expect so the performance has been strong nationally.
We've been we've been real happy thus far with the cut in of our new items.
They are on shelf here, you should see them in a lot of the Walmart you would go to now possibly not all stores six to eight weeks is when we'd expect to see full distribution of those new items on shelf and increments Audi will really depend on the item itself. So.
For any of the items that are going into segments, where we have existing distribution. So K cups.
As an example.
We will obviously see some level of cannibalization that we built that in to.
Our own internal forecast.
That being said given while we're very happy with our market share. It still is a lower market share overall versus the category. We expect as a result of that to see a high level of instrumentality on items, where we don't actually have within the segment for instance, our cold brew item, we actually expect that we'll see almost 100% of her mentality.
That makes sense and then with regard to the expansion at F E M and the large west coast retailer in some of the regionals by the year end.
Can you talk about.
Our U K.
Kind of criteria, you've used to kind of.
Select this this next phase of retailers in.
And then for.
The second half of 2023.
And then you know.
Are we talking about maybe a much.
Well more sounds like you are talking to most large retailers as you said a broader rollout across a number of new.
Change in 2024.
To get a sense for again, what kind of criteria, how youre thinking about phasing. It in why you selected retailers could have.
Post Walmart and then yeah, we'll start there.
Yes, it's a great question I think you know we're very proud of the brand that's been built and as you know, it's a very premium brand.
So we will seek partnerships with retailers that really see eye to eye with us on that.
Delighted with the partnership with Walmart.
The success, we've had there so I think every retailer obviously is different they operate under different models and we understand that but it is important to us that we know that whatever deal we strike with that particular retail chain.
We're going to get that execution that we would expect as you know.
Premium brand in the market so again.
Working that within their own individual criteria is obviously important on their side, but then we have.
Criteria on our side to ensure that we're getting execution that we would expect as a premium brand in the market.
<unk>.
So again.
That's the criteria that we're primarily focused on.
That's helpful and last one for me just as you get.
Brian .
You'll hire HCV.
Food drug and mass more.
Average items at shelf.
Is that what you know is going to drive greater awareness for the brand or are there other things that youre going to be doing to try and increase that 28% awareness, which frankly seems like a great opportunity 28 seems low relative to some of the other obviously big brands in the market.
And are there also.
Is there a shifting kind of the marketing mix as you go forward, maybe in store activity and as again you build a C V in food drug and mass. Thank you.
Yes. This is Kevin I think that Chris coming in.
I've got three months ago, now and kind of redefining what we're doing specifically in the marketing department, allowing us to get what I would say is is that more efficient with our marketing dollars, we've been able to ultimately.
Build out a more strategic game plan related to how we're going to activate with FDA and then also what does the future of marketing look like for Black rifle, how do we build out more of our strategic partnerships that allow us to grow awareness at the same time.
What I would say, it's more efficient dollar so as we start to expand outside of D to C.
There's a lot of opportunity there to spend more efficiently with our marketing budget, which is obviously reflected in some of the financials.
Yes, absolutely.
Go ahead sorry.
No go ahead.
Yes, I was going to build just a bit to say.
I wanted to address the first part of your question as well you mentioned the ACB expansion.
Yeah, absolutely I think that.
Certainly in any category in CPG.
You're on shelf awareness is a huge part of your advertising.
That's something that we focus a lot on the distinctiveness of our brand the distinctiveness of our package the ability to drive secondary display. These things will all drive awareness in the market, but to <unk> point. We're also very excited about our ability to do that through advertising of the brand and again. This is a brand that's been that's been built very much through one.
<unk>.
Media and we're we're continuing to find other ways to do that through paid and earned and Youre going to see a lot more of that.
Going forward with the business.
And just one quick one are there from a capacity standpoint.
Any constraints in terms of.
Continuing the ACB expansion and adding new partners.
No.
Not an issue there is plenty of capacity out there pluses, we've talked before we're building more capacity rose in Manchester, Tennessee, So that is not an issue.
Thanks, so much.
You bet. Thank you John .
Our next question comes from the line of George Kelly with Roth Capital Partners. Please proceed with your question.
Hey, everyone. Thanks for taking my questions.
So first another question on Walmart and I was curious if you could.
Talk about the percent of the idled cold brew and canisters represents.
George I'm going to kick that one over to mind. So you are getting at the fact that we've talked about 50% of coffee at Walmart, we have not participated in yet.
Yeah right, Yeah, just curious what those two new products the innovation skus what they represent.
Our title.
You said cold brew and which are the one im sorry, a canister all cancer.
So very different I think.
<unk> is actually a very small percentage of the overall aisle, it's really a newer category for them.
Okay.
Sure.
So versus canister, which actually is a huge ah.
A portion of what they are selling already so in the case of the canister that's okay.
<unk> overall of what their businesses from a category standpoint, So obviously, we're excited about having potential incremental.
Incremental sales within that and then in the case of Cold Brew. It's really just a very small segment at this point, it's growing it's less than 2%.
We're excited about the potential of that when you look at the consumer trends.
That is where consumption is beginning to shift too so.
We expect to see probably in the case of canister there'll be but more moderate growth of that segment. While it's larger has scale now in the case of cold brew. It has obviously a much smaller overall play currently but we expect to see much more explosive growth of that segment.
Okay, Great that's helpful and then.
Second question for you I guess, a few questions on your RTD business.
I was curious.
If you could spend a bit of time you mentioned just briefly in the prepared remarks about your focus on margin in that business.
And so just curious is it still a pretty challenging kind of near and medium term outlook is there much you can do internally.
To improve margin there and then the second part of your question is.
No.
Might you kind of deep prioritize growth in that business you have got this wonderful retail business, that's emerging and I think carries a much higher margin profile. So is RTD still as much of a priority is it was a year or two years ago.
Yes, George its Tom Thanks for the question yes.
So if you think about our history with our TD, we've had a number of startup issues. As you know we brought a new co Mans as we've fired up new Skus, both core and L. P O.
So that's been a drag on profitability this year, particularly as we look to next year that will not be an issue. So we feel good about the future RTD margin profile, we really have good relationships with our external co Packers and we understand where we need to be we know what their needs are.
So that margin has stabilized and really to your second point.
We are prioritizing, making money and RTD over just purely growing so we're.
We're not going to be adding a lot more skus, we've got plenty of Skus right now it's really about focus plan the accounts execute at the street level and drive incremental profitability.
Okay. Thank you.
You bet.
Okay.
And our next question.
From the line of Matt Mcginley with Needham <unk> Company. Please proceed with your question.
Thank you so with the revenue guidance revision on the ready to drink packaged velocities.
Ready to drink product perform in new doors versus doors, where you already have distribution.
Slowdown that you saw consistent in all doors versus new doors.
And secondarily, if you don't get to the 100000 ready to drink doors by year end, what's your revenue guide fall below that 30% for the year or do you have good enough line of sight on that ready to go in distribution that even if you take 1000.
100000, magic number or not but did you still living within our guided range I guess I'd put it put it another way is that is that 100000 really an important deliverable.
Hey, its Tom Matt So I would say I'll ask I'll answer the second one first no. It's not critical it's more directional so we feel pretty good about the doors. We're in we feel like we will continue to add doors and gain more HCV. So that's not a big lever to your first point it really is more unit.
It's per door per month.
And in particular, we've not been happy with the performance of our L. T O ready to drink products.
So they've come up short on us, but overall, it's a matter of the category not being as strong as we expected and we know we can execute better. So as mentioned in my prepared remarks, we've done a deep dive review on the business minds, obviously coming on board has worked closely with the sales and marketing teams we've made changes.
<unk> and everybody understands what they need to do so we feel good about being able to hit that number for the year.
And then and Matt. This is Greg I'll, just add to this because the whole idea of Doris comes up quite a bit in these calls and other conversations and so one of the things that's important for US to reiterate is you really can't model our business accurately using doors as a proxy for revenue and in some cases, it's not even get a lineup directionally. So.
Back to your specific question. If you were to look at how how we expect doors to grow throughout the rest of the year versus versus revenue, it's definitely not going to be linear.
Got it.
And on the restructuring that you indicated in the first quarter I don't think you expecting to fully realize those savings in the second quarter, but should we expect to see your opex dollars decline in the third quarter from restructuring or does that outposts that headcount increase that you referenced prevent does opex dollars from falling and just kind of wondering.
Should we expect that that would be down from here or there.
Does the Atlas kind of grow up.
Yes, Matt Greg again, that's a good question so you're absolutely right in terms of the outpost head count. So as we mentioned most of the outpost cost structure sits within the G&A line. So all the salaries and wages for the folks who work at the outposts are in salaries and wages rent occupancy and other costs are in G&A and so there was definitely growth.
And those areas in the second quarter as we opened new stores that growth offset some of the efficiencies that we saw in both of those line items. So I think the important messages. We've made really good progress in terms of simplifying our business improving our cost structure finding efficiencies.
Within our G&A and that work isn't complete that that work will continue we'll continue to find some opportunities to streamline the business, while serving our customers and our consumers and that will be offset a little bit by increases in salaries and wages and other costs as we do open one more output this year.
Okay. Thank you very much.
Thank you.
And we have reached the end of the question and answer session I will now turn the call back over to Davin for closing remarks.
Thank you to everyone, who joined our Q2 Blackrock with coffee company financial results earnings call just to recap net revenue increased 39% in the quarter to $91 9 million, that's up from 27% growth in Q1.
As committed we achieved EBITDA adjusted profitability.
We're feeling excellent about where we'll end up for the balance of year, and we've announced that we've launched a second national grocery customer with two additional regional chains and we completed a major refinancing. So thank you for your questions and we look forward to the follow up call.
Yeah.
This concludes today's conference you may disconnect your lines at this time. Thank you for your participation.
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