Q3 2023 BRC Inc Earnings Call
Greetings and welcome to the Black Rifle Coffee company third quarter 2023 earnings call.
Time, all participants are in a listen only mode. A brief question and answer session will follow the formal presentation.
If anyone should require operator assistance during the conference. Please press star zero on your telephone keypad.
As a reminder, this conference is being recorded.
It's now my pleasure to introduce your host 10 or Das Vice President of Investor Relations. Thank you Tanner you may begin good afternoon, everyone. Thank you for joining Blackrock for coffee Company's conference call to discuss our third quarter 2023 financial results, which we released today and can be found on our website at IR <unk> Black Chrysler coffee Dot Com with me on today's call.
Evan Hafer, founder and CEO, Tom Davin co CEO, Chris months' Olesky, President and Steve to Dennis <unk>, Our Chief Financial Officer before we get started I'd like to remind you the company's safe Harbor language, which I'm sure you're all familiar with on todays 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 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 whenever we refer to EBITDA in our comments, we are referring to adjusted EBITDA unless otherwise noted 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 Black Rifle Coffee company, Kevin. Thank you Tanner and good afternoon, everyone. Today I'm thrilled to discuss our business this quarter as it marks a significant milestone for our company that I founded my garage with some green beans.
And a little two pound roaster less than a decade ago. It first before I go into that I'd like to remind everyone that this weekend is veterans day Veterans day is a time for us to honor and remember the brave men and women that have served in the armed forces showing our deep appreciation for their sacrifices and dedication to our country on behalf of Blackrock.
For coffee company I want to thank all the veterans for their service to this great nation first we're on track for accelerated profitability in an accelerated path to establishing a self sustaining cash generating business that aligns with our mission of serving those who serve Steve will take you through some of the details on these financial milestones in his section.
But for now suffice to say our business has never been stronger financially second the evolution of our core leadership team at Blackrock for coffee has resulted in the most robust team I've ever assembled it takes a distinct kind of leadership team to build a business from zero to $100 million and it takes another team to <unk>.
Scale from 100 million to $1 billion of course every leader no matter what their tenure must embrace the critical mission of black rightful coffee I can confidently say that our efforts to attract the leaders we need to build a thriving billion dollar revenue business are paying off as evidenced by both brand performance in the <unk>.
Fishing operation of the company that is driving our financial results I have never been more confident in our future. We've added several key team members in the past year, including our President Chris Monza, Lucy our Chief Financial Officer, Steve <unk>, Our Chief Technology, and operations Officer, Chris Clark and our chief.
If revenue officer Dania Kennedy. This team is delivering at a world class level, while much of our focus has gone into streamlining our prior inefficiencies in our operations. Our brand continues to be of Paramount importance delivery of our ongoing mission requires us to continue to build new relationships with partners and <unk>.
Humor's, but must always be done through the lens of value creation in particular I'd like to highlight Chris months lewicki or as he is known around here months. He brings over 23 years of experience in CPG, having worked with iconic brands at both Kraft foods and Mars Petcare. Moreover, he's a fellow veteran who shares of <unk>.
Deep connection to our mission and an integral part of our DNA I can confidently say that he is one of the finest executives and one of the finest men I've had the privilege of working with his performance to date has been nothing short of exceptional I'm delighted to announce that effectively January one mines will assume the role as the sole CEO of the company.
As Tom will step away from day to day operations and transition to the board of directors I'm looking forward to remaining deeply involved in working side by side with minds is the founder and executive Chairman of the company and Tom is equally as excited to continue his involvement at the board level. This transition is a natural progression it has been carefully.
Siderca and planned and will allow me to spend the vast majority of my time on marketing brand building and where I can provide the most value for our customers employees partners and shareholders. Moms is supported by a world class team with a strong execution mindset and extensive collective experience in running public companies.
It has been my ambition from day, one in my garage to take black rightful to its highest levels. The mission is one embraced by nearly every American so it's incumbent upon us to ensure that every American has access to the mission I look forward to being there on the front lines with minds and his team as we develop the roadmap to 1 billion.
Business, so with that I'd like to hand over the call to the president and future CEO minds take it away. Thank you Evan before we dive into the Q3 results I want to express my gratitude to Irvine and the board for their trust in me given my family and my personal affiliation to the military and police communities joining the black rifle team has.
Truly been a dream come true. It is not lost on me that heavy responsibility of continuing to bring our mission to life with consumers customers investors, but most importantly, the veterans and first responders to whom we serve today I'll walk you through some of the key highlights from each of our business units for Q3, providing context and insights into our focus area.
Let's start by emphasizing the strength of the Black rifle brand, which is nothing short of remarkable having worked with numerous fast growing consumer packaged goods brands throughout my career I can confidently say that whats happening at Black rifle is unique over the past year, we have seen awareness of the brand grow by over 50% the unique way that black rifle brings brands to life.
The culture itself of the veteran in the first responder community will ensure that this unique character maintains as we take on new levels of scale across the market. This strength is most evident in our wholesale channel, which saw 23% sequential growth in the quarter versus Q2, and an impressive 91% growth year over year.
Here, just a year ago, we announced our entry into the F. D M market with bagged coffee and rounds, we have since grown that channel from zero to over $100 million in revenue moving forward, we will drive to new heights with our existing partners and work to find new partners aligned with our mission of service and growth. Our brand is now on shelves in 14 F. D. M P.
<unk> up from only one a year ago. We are very early in most of these rollouts, but early indicators show that our newest partner Rollouts are on track for strong results in our largest retail partner. We are now the eighth largest coffee brand overall in force and bagged coffee and our second largest partner having watched only a few months ago, we have already risen to the.
Number 10 brands. This is a promising sign given the relatively limited number of outlets. We currently serve the potential is enormous moving to our ready to drink business. We continued to enjoy success with our growth outpacing the overall category specifically our year over year growth stands at over 16% significantly higher than any other major brand in the.
Laurie our core Skus consistently rank in the top 20 for RTD coffee and our a C V or all commodity volume, which is a more appropriate way to look at our growth versus doors has grown nearly 500 basis points to almost 42%, reflecting our distribution efforts, we see our T. D is a critical strategic category for.
Black rifle and we are committed to dedicating resources to enhance our performance in the market, particularly in demand forecasting and gross margin improvement our past inventory challenges are now being successfully addressed and we expect to benefit from a cash tailwind in the coming quarters, Steve will speak more about this in his prepared comments shifting to our direct to consumer business.
We are adapting to changing consumer habits, and the overall DTC category post Covid and are implementing a number of improvements that should stabilize this business over the next year. Firstly, we have technological enhancements planned for our website and mobile app, making it easier to guide our loyal customers towards subscription. Additionally, we are introducing.
Innovations within our subscription options, providing customers with more flexibility and variety in their purchases our targeted marketing efforts to attract new DTC customers will become increasingly sophisticated in our paid AD optimization efforts are already yielding results are black rifle subscription will continue to progress as a relationship with the branded.
Self as the largest DTC coffee subscription business in the U S. We are committed to maintaining our leading position in attracting new DTC customers is vital to our success within outposts the direct retail component of our business, we achieved a 20% year over year increase in revenue. However, we had a 15.
Percent declined sequentially, which did not meet our expectations. As a result, we are taking a measured approach to investments in this space as we refine our model as we have communicated over the last few quarters, we have shifted resources to our growing high margin asset light FTM business. We believe this focus provides the highest and best return for our shareholders in the short and medium.
Some term that said outposts remain a key element of our long term strategy and we are determined to improve our approach in the coming months. We will keep you informed of our progress as we continue to analyze this segment in the meantime, we will focus on maximizing the performance of our existing company stores and supporting our franchisees in conclusion I want to reiterate the.
Priorities I discussed in the previous quarters call. Our focus is on driving sustainable profitable growth through rigorous execution within the business and the marketplace. We are committed to delivering on our promises and ensuring efficient predictable growth and profitability for the foreseeable future, which in turn supports our mission with that I'd like to now introduce you to <unk>.
One of the newest members of our team Steve could Dennis the formerly joined our team about two months ago, Steve has a long history with Black rifle. However, in fact as organizations silver box capital partnered with Black rifle during the destock process to have a CFO in my team at Steve's experience has been a real pleasure and amazing spark to the organization Steve has always been one of.
Our key investors and now he is there with us day to day in the trenches instantaneously multiplying our strategic and execution capabilities. It Amazes me the quality of talent drawn to emission oriented business, such as black rifle I'll hand, the call over to Steve for a more detailed dive into our Q3 results. Thank you months first I'd like to express my excitement of edits.
<unk>, becoming a part of the black rightful team having been involved with the company for over two years. Our team has silver box was thrilled to join forces with Black rifle and many of our partners and investors remains shareholders to this day, including myself, we invested and continued to invest in this company because we wholeheartedly believe in the mission and are deeply passionate about the exceptional brand we see.
A clear path to exponential profitable growth for the company in the years to come my decision to join as the CFO stems from the belief that I can make a difference by leveraging my public company experience and my commitment to drive operational excellence across all areas of the business. My key objectives are centered around improving execution against our business plan driving data driven.
Decision, making enhancing our focus on investor returns and building a world class Finance team I am pleased to report that we are well on track to achieving these objectives and my optimism about the company's future has only gotten stronger since I joined the management team. Our Q3 results further bolster this optimism during the third quarter, our total revenue.
Increased 33% to $100 5 million with the wholesale channel, leading the way with a remarkable 91% growth. Additionally, our RTD business continued to expand its reach up 16% delivering well over market growth. Our gross margin improved by 220 basis points from a year ago, reaching 33, 9%. However, we acknowledge that.
There's room for improvement here, we've been candid about our suboptimal execution in this area and we are focused on rectifying. This moving forward are growing pains in the ready to drink business are mostly behind us, though we have incurred noncash losses, which are reflected in our third quarter earnings and will continue to impact earnings through the middle of Q1. However, once these nonrecurring losses.
Have run their course before the end of the first quarter of 2024, our RTD inventory will be right sized and we will be well positioned to further execute our plans to grow our RTD business. Meanwhile, we are confident that our cash flow before debt service in 'twenty 'twenty four will surpass EBITA. We also anticipate a substantial improvement in gross margin in 2024 as we.
Work towards enhancing RTD margins across the supply chain and expand our presence in the broader FTM market. We look forward to providing more details on our 2024 outlook in next quarter's call as I mentioned earlier operational excellence is a core passion and we are committed to executing relentlessly to capture the profitability gains that come with growth and scale. This is rich.
Selected and our SG&A costs, which are starting to show the results of our cost reduction efforts and resource reallocation, our hard work over the past few quarters is paying off as our topline revenue of 33% has significantly outpaced the modest 4% rise in operating expenses. Our adjusted EBITDA is now at record levels and we anticipate further acceleration in Q.
For it's worth noting Additionally, then in Q4, we will implement actions that will lead to significant further improvement in 'twenty 'twenty four SG&A. The combined impact of the work we have done year to date, coupled with further optimization in 2023 will yield cost savings of upwards of $30 million. While these actions may seem dramatic we believe our resources are now effectively aligned.
Against our opportunities further these cost saving opportunities will not impair in any way our ability to continue our market leading growth providing flexibility to lean harder into investments in both brand building and additional capabilities that support growth in the wholesale business. Once again, we will provide more insight into our 2024 expectations next quarter turning to our.
Our balance sheet. We ended the quarter was $6 7 million in cash and $77 3 million in long term debt the increase in our year over year that is due to our recent refinancing which has given us increased liquidity, we forecast continued and significant improvement in cash through 2024 as discussed earlier in his remarks. Furthermore, we are pleased to report that our inventory levels.
<unk> have been reduced in the last quarter to $91 4 million and over $18 million reduction from Q2, and we expect them to continue to come down over the next three quarters. This was driven by healthy demand and strong execution in the business turning to guidance as we head into our final quarter, our visibility is clear and our expected annual results. We continue to expect to be at the low end of our revenue.
Forecast of $400 million to $440 million and well within the range of our adjusted EBITDA guidance. Our gross margin guidance of 36 to 37, 5% will not be achieved due to the reasons. We have discussed but we are pleased to have more than made up for the shortfall with better execution below the gross margin line as I mentioned earlier, we expect material improvements in gross margin and <unk>.
'twenty 'twenty four to summarize I see a clear improving trend in black rifles financial condition, given the continued strength of the brand and the tight execution of the business, we're clearly trending towards profitability and positive cash flow. This acceleration in profitability and cash flow will enable us to invest in new opportunities and fulfill our mission of serving the veteran and first responder communities I've been involved with <unk>.
Rifle for over two years now after having my boots on the ground for the last couple of months I have increased conviction that the opportunity in front of us the incredible senior leadership team and the explosive momentum in the business is further proof that black rightful it can become a $1 billion business over time with that I'll hand, the call over to the operator for the Q&A session.
Thank you we will now be conducting a question and answer session. If you'd like to ask a question. Please press star one on your telephone keypad, a confirmation tone will indicate your line is in the question queue. You May press star two if you'd like to remove your question from the queue for participants using speaker equipment. It may be necessary to pick up your handset before pressing the star keys.
One moment, please while we poll for questions.
Thank you. Our first question is from Michael Baker with da Davidson. Please proceed with your question.
Hi, great. Thanks, guys.
Couple of things one.
You said 14.
Wholesale partners can you give us some more color there we know it's Walmart.
It's a big one.
You said, you're going to be in the second big partner, who I don't know if you've officially announce it but we think we know who that is but what are the other 14, I imagine a lot of smaller <unk> partners, but any color on that would be helpful. Thank you.
Hey, Michael This is Chris I'll address your question. So yeah, yeah, our largest partners Walmart we've been thrilled with that partnership we did talk last quarter about.
The second largest partner, we've got into Albertsons and that launch has thus far gone.
Well we're.
We're still in early days.
Full distribution with them, but as we mentioned on the call.
So far the performance looks great I think as far as the other 14 customers. It's a collection of mid and smaller sized customers I would say at this point, we're having conversations with really all major customers in the U S. So what we're going to continue to do is find the biggest ACB opportunities.
Focus our resources against that and we're going to continue to drive the right partnership for Black rifle. So we're going to continue to make sure that we are operating with customers that gives us an opportunity to create great value overall in the premium coffee category, but then also meet our mission, which obviously is very fundamental to us.
Okay.
And the other the other wholesale question the RTD business, just just update us.
When I'm out with a little bit more color on what's going on there I guess, we get the growth but.
It sounds like you're taking an inventory write down so youre, eliminating skus I think that that have underperformed a little bit more color on what's going on in the ready to drink business. Please.
Sure. This is Steve I'll take that one just relative to the write downs and the adjustments that we took obviously during the year, we were a bit over inventory and we've been doing everything we can to bring that down.
We've struck a few deal to help us in that regard, which all have kind of improved our position going into 2024, there's a little bit to be done in the fourth quarter, but we've taken some noncash hits that allowed us to offload.
Inventory during the quarter plus we had the strong demand as months mentioned in his prepared comments for RTD in general, which has brought down our inventory overall, but the noncash hits.
Really I think are mostly done other than the deal that we've done with KBS, which will help us bring down inventory in Q4, and a little bit in Q1 as well.
Got it okay.
If I could ask one more in.
Hopefully I answered I imagine you all but you keep talking about clear path to $1 billion.
Can you help can you help us see that clear path.
In terms of which channels and how long and at one point you had been talking about a 20% EBITDA margin a lot has changed since.
You guys first went out with.
With a 20% EBITDA margin I mean is that still on the table and anyway. Thanks.
Yes.
So I'll start off and then I'll kick it over to Steve So as far as the route to $1 billion I'm not going to go into a lot of detail on that we'll continue to reveal more as we write our strategic plan here over the next year, but suffice.
Suffice to say we are only in the beginning stages of penetrating the wholesale channel as a starting point if you look at our <unk> and <unk>.
About 32% on packaged coffee, we're at 41% within RTD. So.
Given our strong results, we expect that we should continue to be able to push those ACB numbers significantly higher.
Within the doors themselves that we are in currently again theres strong room for expansion in the customers that we've already been in for a year. We had a lot of success in getting innovation and year to continue to push our distribution and our share numbers higher so again that ability to really work within the doors as a secondary factor.
And then the third is really what are all the other areas that.
A super premium coffee company can operate and again, we've talked about our output business in the past we have have 30 stores now.
We have taken a bit of a tactical pause on out post as we have been investing in the areas of the growth that we think are most.
Accretive to building our brand and build on the momentum that we've had but in the background. We are of course working our strategy there as well. So all of these pieces will play a factor in our route to $1 billion.
Yes, just to add to that in terms of our longer term goals for profitability. We are going to come back to you in Q4 and talk much more detail, obviously about 2024 and ideally we hope to be able to give you some insight into kind of high level goals for 25, and 26 as well, but you are.
Nearly seeing currently an inflection of the business you've got <unk>.
Significant synergies of scale happening, where the growth on the topline is 33% as I mentioned in my prepared comments and only 4% growth in total Opex and then were taken out.
As I mentioned, another $15 million of costs in Q4 for a total of 30 year over year and some of that will put back into our marketing, but youre clearly seeing an inflection of profitability for the business and also by the way relative to our liquidity and inflection in cash flow into 2024, which I mentioned.
In my prepared comments as well.
Okay.
I appreciate the color.
Thank you. Thank you.
Next question is from strong Bora with the Telsey Group. Please proceed with your question.
Congress.
See you on the new role.
Hum.
Good to see the acceleration of the business.
Let me start both with the Walmart team can you. It seems like the relationship is going quite strong for you guys.
Are you, adding stores, we saw the new canisters and instant coffee and stuff. So can you help us.
And how the how the new products are driving success over there and then.
There's almost a year that you will have the bagged coffee. So how are you thinking about growth of the bagged coffee business at Walmart and then any changes you plan to do over there in terms of pricing promotion as you start to lap.
Going into the second year of the business at Walmart about gloves.
Thanks, Ron Thanks for the question, let me, let me kick off I think.
Yes, we've had outstanding partnership with Walmart through the existence of the brand there.
So to specifically address your question around some of the new items that we talked about in the last quarter's call. Yes. The performance has been has been outstanding I think our share position has continued to advance.
As you recall the share was at one three we talked about it being three eight is now $4 two over the latest 13 weeks so as that share continues to advance.
An element of that of course is those new items and those new segments that have come into.
Our product portfolio there moving forward.
We will continue to drive our core business as well as look for ways to expand as we work with any customer I think.
We have great shelf set already at Walmart, if you walk into the stores, we certainly have room for improvement as far as areas that we can continue to move into.
But yes, I mean, primarily what we're going to continue to do is drive strong marketing and build awareness of our brand. Our brand awareness has built over the last three months and additional from 27% to 31% we're going to be investing we're not getting one of the details of this today, but we're going to be investing.
Into our brand awareness next year at an even higher level to drive that awareness further and we are confident that that will continue to convert again not only around those new items, but the velocity of our existing items in store as far as pricing, we're not going to go into any details on that will continue to monitor the market and.
And find opportunities to make sure we're delivering the best value for our consumers.
That's great.
And my second question, Steve I think you mentioned there is a substantial.
Potential opportunity to improve gross margins next year.
And I know you aren't giving like a very specific guidance, but can you help us walk through some of those.
Yes.
You know should strongly help you next year I think our duty margins is the one that you mentioned, but just curious if you can help us more on the gross margin expansion next year.
Yes.
Sure. Good question I think if you look at our current quarter and you remove some of the onetime hits that we took.
To rightsize, our inventory our margins were closer to 37%.
As we look forward into the new year, we're looking across the the entire supply chain for further savings, but also we get natural benefit from the <unk>.
Category in general because we're more profitable there.
But we will give you more detail on that we certainly believe there's more upside to where we are we're clear we believe there's more upside to even though the adjusted number that I just gave you a 37.
And when we come back next quarter, we will give you what we believe we can do in 2024 and perhaps beyond.
Thank you.
Thank you. Our next question is from Joe <unk> with Raymond James. Please proceed with your question. Thanks.
Thanks, Hey, guys good afternoon.
First question on the cost savings of $30 million.
Certainly <unk> got my attention can you give us a little more detail on where that's coming from you know what time period do you expect to realize those savings in and.
Does that drop to the bottom line or do you see that getting reinvested.
So the timing has been about $15 million that happened prior to the quarter. There is another 15 million coming out in the quarter. It's a combination of.
Very.
The types of expenses like professional fees and other things that are naturally rolling off <unk>, we're bringing more discipline into the business for us to do things ourself.
And the other are reallocating our resources to the things that are really growing and driving profitability. Now. So there is a head count element to that I'm not going to get into the detail side of that but that's all coming out in the quarter.
Okay.
I guess a follow up on that when do you expect to realize all of it though.
Sorry, but it'll all be realized through by the end of the year and then your second part of the question, which I didn't address I apologize for that is are we going to reinvest some of that yes, we will and that'll be largely on the marketing side.
Okay got it.
And then secondly in terms of the FTM partners you mentioned, you're at 14 today I think you mentioned you had one a year ago, if I look at your wholesale doors.
Down year over year, and I think they were up very modestly sequentially. So help us understand the big growth in the partnerships yet.
You have very few incremental doors coming from that.
Yes, that's a great question, Joe I think really we're looking to re guide the way we look at this two AC <unk> all.
<unk> volume, it's just for US, it's a better way to guide that our resources are going against where we believe we're going to get the greatest returns. So.
We've been ensuring that we go after the customer partners.
Again, I want to reiterate that we believe are going to deliver the greatest value and the alignment to our mission, but that are also allowing us to impact.
ACB in the most efficient way.
Against the.
The fewest number of doors and these of course are going to end up being your larger partners.
So I think when you look at the math of what you are talking about a lot of that is.
Really the migration of the business and again.
When you look at where we were a year ago. It was one major FTM partner, we had a lot of smaller partners, who were still showing up and when those partners come in promotional et cetera and of the business. It can affect how those door numbers look which again, we believe does not allow us sometimes to make the best internal decisions and again. This is why you're going to see is talking <unk>.
Much more around <unk> as a guiding metric.
Okay understood. Thank you.
Sure.
Thank you. Our next question is from Jon Andersen with William Blair. Please proceed with your question.
Hey, good afternoon everybody.
I wanted to ask about brand awareness you mentioned in the prepared comments I think the brand awareness has doubled over the past year, whereas you werent as collateral for the brand today.
How does that compare to some of the other bigger package coffee brands in the marketplace.
And you referred to 2024 marketing initiatives.
Designed to drive brand awareness.
Presumably more kind of.
Ah trial.
More entry into the brand if you could discuss.
The kind of the magnitude of the step up you would expect it to help some of that money might be spent thank you.
Yes, Thanks, Jon I'll address that I think.
Brand awareness is.
Measured based on whatever sort.
Supplier you choose to measure it with so any number that I would put out would be directional in nature, but as I mentioned on the previous.
Set of questions, we've seen it move from 'twenty.
27% brand awareness up to about 31 that was just in the last quarter.
When you look at that versus year ago, then, yes, as I said in the prepared comments it has essentially doubled.
One of the biggest components of what drives our brand awareness is actually our distribution in the market. So.
Not to minimize marketing I'll talk about marketing here in a second but simply driving our distribution on shelf is actually the most efficient way for us to be able to raise our brand awareness and we've seen that come through as we've been able to increase our distribution on the marketing front, we talked a little bit about this last quarter.
We're going to continue to ensure that we are maximizing our efficiency of marketing spend so again theirs.
We would be spending against the entire marketing funnel, but when you start to talk about brand awareness, that's top of funnel awareness and will ensure that we're generating as much awareness in the right ways again, bringing the black rightful brand to life.
As we can so we've we've been able to do a lot of that in the last quarter and increasing our efficiency numbers. That's part of what's leading to some of the increases you're seeing in the last quarter as we are gaining those learnings.
We really look forward to being able to.
Quote unquote doubled down on that as we go into 'twenty four again, we're not going to reveal any specific numbers around that but suffice to say, we're looking forward to being able to spend at a bit of a higher level now that we have those learnings.
Makes sense. Thanks.
With your largest FTM customer that you've now been in market with for a year or so.
Can you talk about any learnings you've had there around the incrementals of the brand.
I think for that partner, how they view it.
Obviously.
Your ability to.
Add new items in year, two and build your presence in.
In more segments of their coffee aisle.
Jess it's been kind of a win win.
But if you could talk a little bit more about that.
And kind of the prospects for these newer items going forward that.
That would be helpful. Thanks.
Yes, sure I think what I'm not going to represent the view of any of our customers.
But that being said.
Have we been able to grow the category. Yes, we have I think you can see that in the category trends.
Pull those up in the IRI or Nielsen data a lot of the partners are the main part of that we have worked with us actually.
Been able to grow their category significantly over the last year I think.
As we look at our business that is a key component as to what we do with our customers.
We that is <unk>.
Role that we play as their partner is to be able to grow their coffee category. So that's actually one of the key kpis that we measure ourselves against with any of our retail partners is is the growth that we are generating for them, creating that category instrumentality. So again, while I don't want to mention any specifics about what a customer might or might not feel about us I will say.
Any success that we have with the customer and the ability to put additional items on shelf is generally going to be related to our ability to be able to grow category with them.
Makes sense last question for me I guess I wanted to I know it's.
Mauler in terms of focus right now, but an outpost.
I guess why is that still important to black rifle and to the brand why not focus all of your resources to drive FTE.
FTM RTD DTC. It seems like you have higher kind of ROI opportunities and those those business areas.
Yes, that's a great question. There's a couple of reasons why why it's so important to us and again I'll reiterate what I said earlier, we are right now and a bit of a tactical pause. So obviously, we're resourcing of stores we have in place.
But we have limited the spending for exactly the reason you talked about we want to make sure. We're spending our money, where we are getting the best overall return for shareholders and in generating our brand awareness, which we believe is critical to our long term Mitch.
Mission.
The reason is why outpost, we believe is still quite important to us are twofold one.
We're all about premium coffee and when Youre about premium coffee the ability to be able to deliver that coffee experience to consumers in as many ways possible is a very very important part of that element of our business and so.
Obviously at home consumption is an area that we're going to continue to press on and resource as we have been.
Everything we've discussed up to now that ability to deliver that out of home is something that again based on our learnings. We believe we can do very efficiently as well.
Element is just as important which is around our mission.
Our mission is around veterans and first responders and as you know we do that in many ways, we do that and the money that we give back philanthropic lead to many different organizations, but we also do that too.
How we are able to bring.
Employment opportunities to veterans and first responders and we're very proud of the fact that 50% of our workforce is veteran first responder the ability to drive that into out of home consumption allows us to double down on that element of our mission as well.
We made a statement at one point that we're going to employ 10000.
Veterans and first responders and that has a vision for us, but that vision drives us in every decision that we make so again coffee veterans those are the simple mantra for us in each one of those is very is quite important when you think about that out of home consumption.
Really helpful. Thanks, so much.
Sure.
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Our next question is from Matt Mcginley with Needham <unk> Company. Please proceed with your question.
Thank you.
SDN retailers that you hope to add next year do you already have visibility into adding those new FTM retailers or are those discussions more ongoing and is there any seasonality around the shelf resets and the coffee Alan that if youre not on target by a certain date for sell in you might that might not get that discharge until later in the year.
Yes, that's a great question so we.
It's kind of both.
We have a lot of those locked up at this point that we have some ongoing conversations going on with other retailers.
As far as coffee, obviously does have seasonality.
In moving into kind of the core seasonality of the coffee category itself as we move into the colder months as far as the retailers it really depends on their operational schedule. So we have we're having very transparent conversations with any of those potential partners and we will make sure that we can adjust our business around their need.
To hit those schedules I will say that even in the retailers that we have moved into most recently.
We've begun to have conversations of further accelerating.
Set timelines on different segments of their business. So for instance in our.
A retailer where we may go in and bags, maybe they reset their their pods business on a different schedule. Some of the successes that we've been having are are driving conversations for retailers to say.
Would open up windows to potentially get us on shelf, even sooner. So in some cases, we're going to work through their schedule in some cases, we're going to push hard to say hey, based off of really strong performance, we're going to suggest that we push our business our shelf, even even earlier than maybe where their current reset arm.
Got it and on the you had a big.
Big drop in salaries wages and benefits that I assume was driven by the cost cutting program that you instituted in the first quarter is that $14 million base now the right dollar level to assume in the fourth quarter and you made the comment about some of the $30 million in cost savings might be realized by year end, but I'm not sure if youre, implying that there is a further decline here if we could just.
And it's kind of around this the filing base into year end.
Yeah, and I don't want to guide on a singular line item, but I wouldn't I wouldn't adjust your models down that far there were some obviously one time benefits that we took relative to.
Stock based compensation for some of the senior executives that left that were unique that won't reoccur.
But.
I would bring it back up if thats, what youre thinking for the model.
Yeah, Okay. Thank you.
Thank you there are no further questions at this time I'd like to hand, the floor back over to Chris <unk> for any closing comments.
Well I want to thank everyone for their time. Thank you for the questions on the business and the involvement in the business I just want to close the call and the way that that have been opened it to reiterate our thanks to all of the veterans out there around the country around the world better that have served in the past that are that are serving currently so everyone.
Please have those people.
In your mind as you as you move into the weekend and again it was great having the conversation I hope everyone has a great rest of the day.
This concludes today's conference you may disconnect. Your lines of course home. Thank you for your participation.