Q2 2024 BRC Inc Earnings Call

August 8, 2024

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Greetings.

Operator: Welcome to the Black Rifle Coffee Company 2024 earnings call. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance or a conference, please press star zero on your telephone keypad. Please note this conference is being recorded.

Speaker Change: Greetings. Welcome to the Black Rifle Coffee Company 2024 earnings call. At this time, all participants are on a listen-only mode. A question-and-answer session will follow the formal presentation.

Operator: 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 will now turn the conference over to your host, Jason Martini. You may begin.

Operator: Since you require operator assistance during the conference, please press star zero on your telephone keypad. Please note this conference is being recorded. I will now turn the conference over to your host, Jason Martini. You may begin.

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'll now turn the conference over to your host, Jason Martini. You may begin.

Operator: On today's call, management may make forward-looking statements, including guidance and underlying assumptions. Whenever we refer to EBITDA in our comments, we are referring to adjusted EBITDA unless otherwise noted. Now, if you could please refer to the presentation we have provided on our investor relations website and turn to slide four.

Operator: I will now turn the conference over to your host, Jason Martini. You may begin.

Jason Martini: Good morning, everyone. Thank you for joining Black Rifle Coffee Company's conference call to discuss our second quarter 2024 financial results, which we released yesterday and can be found on our website at ir.blackriflecoffee.com. Before we start, I would like to remind you of the company's safe harbor language, which should be familiar to you all. 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 a further discussion of risks related to our business, please see our previous filings with the SEC.

Jason Martini: Thank you for joining Black Rifle Coffee Company's conference call to discuss our second quarter 2024 financial results, which were released yesterday and can be found on our website at ir.blackriflecoffee.com. Before we start, I would like to remind you of the company's safe harbor language, which should be familiar to you all. On today's call, management may make forward-looking statements, including guidance and underlying assumptions. Such statements are based on expectations that involve risks and uncertainties that could cause actual results to differ materially.

Jason Martini: For a 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 even-dough and free cash. Whenever we refer to EBITDA in our comments, we are referring to adjusted EBITDA unless otherwise noted. Reconciliations of these non-gap measures to the most comparable gap measures are included in the earnings release furnished to the SEC and are also available on our investor website.

Speaker Change: Before we start, I would like to remind you of the company's Safe Harbor language, which should be familiar to you all.

Jason Martini: 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

Jason Martini: for a further discussion of risks related to our business please see our previous filings with the sec

Jason Martini: This call will also contain non-GAAP financial measures, such as adjusted EBITDA and free cash flow. Whenever we refer to EBITDA in our comments, we are referring to adjusted EBITDA unless otherwise noted. Reconciliation of these non-GAAP measures to the most capable GAAP measures are included in the earnings release furnished to the SEC and are also available on our investor website.

Jason Martini: this call will also contain non-gaap financial measures such as adjusted ebitda and free cash flow

Jason Martini: Whenever we refer to EBITDA in our comments we are referring to adjusted EBITDA unless otherwise noted.

Jason Martini: Reconciliations of these non-gap measures to the most comparable gap measures are included in the earnings release furnished to the SEC and are also available on our investor website.

Jason Martini: Now, if you could please refer to the presentation we have provided on our investor relations website and turn to slide four.

Jason Martini: Now, if you could please refer to the presentation we have provided on our investor relations website and turn to slide four. I would now like to turn the call over to Chris Mondzelewski, CEO of Black Rifle Coffee Company.

Jason Martini: Now, if you could please refer to the presentation we have provided on our Investor Relations website and turn to slide four.

Chris Monsolesky: I would now like to turn the call over to Chris Monsolesky, CEO of Black Rifle Coffee Company.

Chris Mondzelewski: I would now like to turn the call over to Chris Mondzelewski, CEO of Black Rifle Coffee Company.

Chris Monsolesky: Mons. Thanks, Jason, and good morning, everyone. Joining me today is Evan Hafer, our founder and executive chairman, and Steve Cadenecy, our chief financial officer. On our last earnings call, we highlighted the value of building a better business before building a bigger one, and we can tend you to make progress on building that foundation on which to drive outsized category growth. Our priorities remain number one, establishing a model that sustainably creates value in two, driving the categories in which we choose to compete. In other words, outgrowing our peers and the category. With this, I am pleased with our progress in Q2, delivering gross margins above our initial expectations of 40%, and our continued growth of 8% in the wholesale channel, which was well above the category.

Chris Mondzelewski: Thanks, Jason. And good morning, everyone.

Chris Mondzelewski: Mondze. Thanks Jason and good morning everyone. Joining me today is Evan Hafer, our founder and executive chairman, and Steve Kadenacy, our chief financial officer.

Chris Mondzelewski: Joining me today is Evan Hafer, our Founder and Executive Chairman, and Steve Kadenacy, our Chief Financial Officer. On our last earnings call, we highlighted the value of building a better business before building a bigger one, and we continue to make progress on building that foundation on which to drive outsized category growth. Our priorities remain number one, establishing a model that sustainably creates value, and two, driving the categories in which we choose to compete. In other words, outgrowing our peers and the category.

Operator: On our last earnings call, we highlighted the value of building a better business before building a bigger one. Our products are continuing to perform incredibly well with strong sell-through at our existing retailers. And I expect our additional investments in sales staff, analytics, and forecasting will pay off as we execute on our strategic plan. When we sell more, we do more. It is in that spirit that we announce the release of Black Rifle Energy.

Speaker Change: On our last earnings call, we highlighted the value of building a better business before building a bigger one.

Speaker Change: And we continue to make progress on building that foundation on which to drive outsized category growth.

Jason Martini: our priorities remain number one establishing a model that sustainably creates value in two driving the categories in which we choose to compete in other words outgrowing our peers and the category

Chris Mondzelewski: I am pleased with our progress in Q2, delivering gross margins above our initial expectations of 40% and our continued growth of 8% in the wholesale channel, which was well above the category. While we have much work to do, the progress the team has driven is exceptional. Only one year ago, we found ourselves with negative free cash flow of more than $30 million for the quarter.

Speaker Change: With this, I am pleased with our progress in Q2, delivering gross margins above our initial expectations of 40% and our continued growth of 8% in the wholesale channel, which was well above the category.

Chris Monsolesky: We have much work to do. The progress the team has driven is exceptional. Only one year ago, we found ourselves with negative free cash flow of more than 30 million for the quarter. This year, we are producing a positive 1 million in free cash flow while showing substantial improvements in gross margin and adjusted EBITO. This turnaround is fueled by an ever increasing culture of operational excellence. Investments in forecasting, strong leadership and owned and partner production, and in improving supply chain. We have built a strong foundation and business model that will support the long-term growth we expect in the business.

Jason Martini: While we have much work to do, the progress the team has driven is exceptional. Only one year ago, we found ourselves with negative free cash flow of more than $30 million for the quarter.

Chris Mondzelewski: This year, we are producing a positive million in free cash flow while showing substantial improvements in gross margin and adjusted EBIT. This turnaround is fueled by an ever-increasing culture of operational excellence. Through investments in forecasting, strong leadership and owned and partner production, and an improving supply chain, we have built a strong foundation and business model that will support the long-term growth we expect in the business. With that said, I'm disappointed that our wholesale rollouts are taking longer than our initial expectations. As a result, our growth this quarter and for the year is lower than our initial forecast.

Jason Martini: This year, we are producing a positive $1 million in free cash flow while showing substantial improvements in gross margin and adjusted EBITDA.

Jason Martini: This turnaround is fueled by an ever-increasing culture of operational excellence.

Jason Martini: Investments in forecasting, strong leadership and owned and partner production, and an improving supply chain.

Jason Martini: we have built a strong foundation and business model that will support the long-term growth we expect in the business

Chris Monsolesky: With that said, I am disappointed that our wholesale rollouts are taking longer than our initial expectations. And as a result, our growth this quarter and for the year is lower than our initial forecast. Our products are continuing to perform incredibly well with strong sell-through at our existing retailers, which I will discuss shortly. But some of the distribution we expected in 2024 is now going to come in 2025, which has resulted in a lower sales forecast for this year. This team is steadfast in meeting or exceeding our commitments. And I expect our additional investments in sales staff, analytics, and forecasting will pay off as we execute on our strategic plan.

Speaker Change: With that said, I am disappointed that our wholesale rollouts are taking longer than our initial expectations. And as a result, our growth this quarter and for the year is lower than our initial forecast.

Chris Mondzelewski: Our products are continuing to perform incredibly well with strong sell-through at our existing retailers, which I will discuss shortly. But some of the distribution we expected in 2024 is now going to come in 2025, which has resulted in a lower sales forecast for this. This team is steadfast in meeting or exceeding our commitment. And I expect our additional investments in sales staff, analytics, and forecasting will pay off as we execute on our strategic plan. Before I provide some more color on the quarter, I wanted to share some exciting news. At Black Rifle, we will always stand for veterans and first responders first and foremost.

Jason Martini: Our products are continuing to perform incredibly well with strong sell-through at our existing retailers.

Jason Martini: which I will discuss shortly. But some of the distribution we expected in 2024 is now going to come in 2025, which has resulted in a lower sales forecast for this year.

Jason Martini: This team is steadfast in meeting or exceeding our commitments.

Jason Martini: And I expect our additional investments in sales staff, analytics, and forecasting will pay off as we execute on our strategic plan.

Chris Monsolesky: Before I provide some more color on the quarter, I wanted to share some exciting news with you. At Black Rifle, we will always stand for veterans and first responders first and foremost. And in doing so, we are constantly looking for ways to expand our mission. When we sell more, we do more. It is in that spirit we announced the release of Black Rifle Energy. While we are exceptionally proud of our origins as a premium coffee company, we also realize that traditional coffee products alone do not meet the needs of all of our consumers. The energy drink market is over a $20 billion category.

Jason Martini: before i provide some more color on the quarter i wanted to share some exciting news withyou

Speaker Change: At Black Rifle, we will always stand for veterans and first responders first and foremost.

Chris Mondzelewski: And in doing so, we are constantly looking for ways to expand our mission. When we sell more, we do more. It is in that spirit that we announce the release of Black Rifle Energy. While we are exceptionally proud of our origins as a premium coffee company, we also realize that traditional coffee products alone do not meet the needs of all of our consumers. The energy drink market is a $20 billion category, and we are entering the category with a great tasting, proprietary, clean energy blend that derives energy from natural caffeine sources, including green coffee beans.

Jason Martini: And in doing so, we are constantly looking for ways to expand our mission.

Jason Martini: When we sell more, we do more. It is in that spirit we announce the release of Black Rifle Energy.

Operator: While we are exceptionally proud of our origins as a premium coffee company, we also realize that traditional coffee products alone do not meet the needs of all of our consumers. While the roots of the product tie back to our origins, these refreshing, natural fruit flavor profiles will appeal to a different drinking occasion and, in many cases, bring new consumers to Black Rifle. Post the pandemic, consumer behaviors have shifted.

Jason Martini: While we are exceptionally proud of our origins as a premium coffee company, we also realize that traditional coffee products alone do not meet the needs of all of our consumers.

Chris Monsolesky: And we are entering the category with a great tasting, proprietary, clean energy blend, which derives energy from natural caffeine sources, including green coffee beans. It has been fun to watch our high energy team work to develop for varieties completely different from anything we've launched before. While the roots of the product tie back to our origins, these refreshing natural fruit flavor profiles will deliver to a different drinking occasion, and in many cases bring new consumers to Black Rifle. I'll dive in more on the huge opportunity with Black Rifle Energy shortly. Returning to the quarter's results, Q2 revenue is relatively flat year over year.

Jason Martini: The energy drink market is over a $20 billion category, and we are entering the category with a great tasting, proprietary, clean energy blend, which derives energy from natural caffeine sources, including green coffee beans.

Chris Mondzelewski: It has been fun to watch our high-energy team work to develop four varieties completely different from anything we've launched before. While the roots of the product tie back to our origins, these refreshing, natural fruit flavor profiles will appeal to a different drinking occasion and, in many cases, bring new consumers to Black Rifle. I'll dive in more on the huge opportunity with Black Rifle Energy shortly. Returning to the quarter's results, Q2 revenue was relatively flat year over year. As I mentioned, this was below our expectations.

Jason Martini: It has been fun to watch our high-energy team work to develop four varieties completely different from anything we've launched before.

Jason Martini: While the roots of the product tie back to our origins, these refreshing natural fruit flavor profiles will deliver to a different drinking occasion and in many cases bring new consumers to Black Rifle.

Jason Martini: I'll dive in more on the huge opportunity with Black Rifle Energy shortly.

Jason Martini: Returning to the quarter's results, Q2 revenue is relatively flat year over year.

Chris Monsolesky: As I mentioned, this was below our expectations. Sales growth was lower than we expected for two reasons. First, we cut investment in our direct-to-consumer or DTC business. Post the pandemic, consumer behaviors have shifted. As we look across the entire industry, fewer consumers are choosing to buy products directly from DTC sites. As this occurs, we find that our dollars spent in driving DTC awareness are less effective. And so we have chosen to allocate these dollars where we get a higher ROI. I'm proud of our team's discipline in creating clear principles around when to pull back on this spending.

Chris Mondzelewski: Sales growth was lower than we expected for two reasons. First, we cut investment in our direct-to-consumer, or DTC, business. Post the pandemic, consumer behaviors have shifted. As we look across the entire industry, fewer consumers are choosing to buy products directly from DTC sites. As this occurs, we find that our dollars spent on driving DTC awareness are less effective.

Jason Martini: As I mentioned, this was below our expectations.

Jason Martini: Sales growth was lower than we expected for two reasons.

Jason Martini: First, we cut investment in our direct-to-consumer, or DTC, business.

Jason Martini: Post the pandemic, consumer behaviors have shifted.

Jason Martini: As we look across the entire industry, fewer consumers are choosing to buy products directly from DTC sites.

Jason Martini: As this occurs, we find that our dollars spent in driving DTC awareness are less effective. And so we have chosen to allocate these dollars where we get a higher ROI.

Chris Mondzelewski: And so we have chosen to allocate these dollars where we get a higher ROI. I'm proud of our team's discipline in creating clear principles around when to pull back on this spending, and as our growth shifts to other channels and other products, we will see the benefit of it. The good news is that consumers are continuing to seek out our products, but their shopping behavior is shifting back to either traditional or online retail. This takes me to my second point.

Jason Martini: I'm proud of our team's discipline in creating clear principles around when to pull back on this spending, and as our growth shifts to other channels and other products, we will see the benefit of this.

Chris Monsolesky: And as our growth shifts to other channels and other products, we will see the benefits. of this. The good news is that consumers are continuing to seek out our products. Their shopping behavior is shifting back to either traditional or online retail. This takes me to my second point. While we continue to expect consumers to be able to find our products in almost every major grocery retailer in the US by the end of 2025, the rollout will be a bit slower. While commitments and discussions are going as planned, some retailer shelf resets that we expected to happen in 2024 are shifting to 2025.

Jason Martini: the good news is that consumers are continuing to seek out our products their shopping behavior is shifting back to either traditional or online retail

Chris Mondzelewski: While we continue to expect consumers to be able to find our products in almost every major grocery retailer in the US by the end of 2025, the rollout will be a bit slower. While commitments and discussions are going as planned, some retailer shelf resets that we expected to happen in 2024 are shifting to 2025. Given our strong performance on the shelf, we continue to have very effective conversations with every major retailer in the country.

Jason Martini: This takes me to my second point. While we continue to expect consumers to be able to find our products in almost every major grocery retailer in the U.S. by the end of 2025, the rollout will be a bit slower.

Jason Martini: while commitments in discussions are going as planned some retailerser shelf resets that we expected to happen in two thousand and twenty four are shifting to two thousand and twenty-five

Operator: Given our strong performance on the shelf, we continue to have very effective conversations with every major retailer in the country. Based on this strong consumption, we expect wholesale replenishment to strengthen in the following quarter. Beyond the gains we will continue to drive in RTD Coffee, we're excited about the future of our RTD innovation with the introduction of Black Rifle Energy, a first quality of ingredients and taste. Finally, we developed a design that brings forward our brand with an emphasis on our aggressive, mission-driven ethos.

Chris Monsolesky: Given our strong performance on shelf, we continue to have very effective conversations with every major retailer in the country. Once customers try our products, we find that repeat purchase is strong. You can see this in the performance of our largest in first retail partner, where we grew plus 19 percent in the quarter. We are also seeing strong on-shelf performance from our new retail partners who began their rollouts of Black Rifle through the first two quarters of this year. At this point, we have committed launch windows for the largest five grocery chains between now and Q2 2025.

Jason Martini: Given our strong performance on shelf, we continue to have very effective conversations with every major retailer in the country.

Chris Mondzelewski: Once customers try our products, we find that repeat purchase is strong. You can see this in the performance of our largest and first retail partner, where we grew plus 19% in the quarter. We are also seeing strong on-shelf performance from our new retail partners who began their rollouts of Black Rifle through the first two quarters of this year. At this point, we have committed launch windows for the largest five grocery chains between now and Q2 2025. Rounding out the quarter's highlights,

Jason Martini: Once customers try our products, we find that repeat purchase is strong. You can see this in the performance of our largest and first retail partner, where we grew plus 19% in the quarter.

Jason Martini: We are also seeing strong on-shelf performance from our new retail partners who began their rollouts of Black Rifle through the first two quarters of this year.

Jason Martini: At this point, we have committed launch windows for the largest five grocery chains between now and Q2 2025.

Chris Monsolesky: Rounding out the quarter's highlights, our earnings in free cash flow measures were a tremendous success story for the second quarter. As we saw a 42 percent gross margin, a nearly 700 basis point improvement over Q2 2023. Adjusted EBITDA improved from break even in the prior year to 8.5 million this quarter, and we posted our third consecutive quarter of positive free cash flow, up 31 million from the second quarter of 2023. Now please turn to slide six as I talk about our channel highlights. Based on Nielsen consumption data, we grew 28 percent in the second quarter, and 35 percent year to date compared to a category decline of 2.5 percent in 1.7 percent, respectively.

Chris Mondzelewski: Our earnings in free cash flow measures were a tremendous success story for the second quarter, as we saw a 42% gross margin, a nearly 700 basis point improvement over Q2 2023. Adjusted EBITDA improved from breakeven in the prior year to $8.5 million this quarter, and we posted our third consecutive quarter of positive free cash flow, up $31 million from the second quarter of 2020. Now, please turn to slide six as I talk about our channel highlights.

Jason Martini: Rounding out the quarter's highlights...

Speaker Change: our earnings in free cash flow measures were a tremendous success story for the second quarter as we saw a forty-two percent gross margin a nearly seven hundred basis point improvement over q two two thousand and twenty-three

Jason Martini: Adjusted EBITDA improved from breakeven in the prior year to $8.5 million this quarter, and we posted our third consecutive quarter of positive free cash flow.

Jason Martini: up thirty-one million from the second quarter of two thousand and twenty three

Jason Martini: Now, please turn to slide six as I talk about our channel highlights.

Chris Mondzelewski: Based on Nielsen consumption data, we grew 28% in the second quarter and 35% year to date, compared to a category decline of 2.5% and 1.7%, respectively. Based on this strong consumption, we expect wholesale replenishment to strengthen in the following quarter. In fact, we are now the number seven brand in 12 ounce bagged coffee across the grocery channel and still have significant runway with an ACV of only 40%. Moving to slide seven.

Speaker Change: based on nielsen consumption data we grew twenty-eight percent in the second quarter and thirty-five percent year-to-date compared to a category decline of two point five percent in one point seven percent respectively

Chris Monsolesky: Based on this strong consumption, we expect wholesale replenishment to strengthen in the following quarters. In fact, we are now the number seven brand in 12-ounce bagged coffee across the grocery channel and still have significant runway with an ACV of only 40 percent. Moving to slide seven. Similar to center store coffee, we continue to drive distribution gains and ready-to-drink or RTD. At the end of Q2, our distribution stands at 46.8 percent ACV, a 500 basis point increase versus a year ago. Through the first half of 2024, the RTD coffee category has slowed, with the decline of 6.7 percent versus year ago, but similar to the rest of the business, Black Rifle has exceeded the market by over 500 basis points.

Jason Martini: based on this strong consumption we expect wholesale replenishment to strengthen in the following quarters

Jason Martini: in fact we are now the number seven brand and twelve outs baged coffee across the grocery channel and still have significant runway with an acv of only forty percent

Chris Mondzelewski: Similar to Center Store Coffee, we continue to drive distribution gains in Ready to Drink, or RTD. At the end of Q2, our distribution stands at 46.8% ACV, a 500 basis point increase versus a year. Through the first half of 2024, the RTD coffee category has slowed with a decline of 6.7% versus.

Jason Martini: Moving to slide 7.

Jason Martini: similar to center store coffee we continue to drive distribution gains and ready to drink or rtd

Jason Martini: At the end of Q2, our distribution stands at 46.8% ACV, a 500 bases point increase versus a year ago.

Jason Martini: through the first half of two thousand and twenty-four the rtd coofpy category has slowed with a decline of six point seven percent versus year ago

Chris Mondzelewski: But similar to the rest of the business, Black Rifle has exceeded the market by over 500 Basie points. Beyond the gains we will continue to drive in RTD Coffee, we're excited about the future of our RTD innovation with the introduction of Black Rifle Energy. Black Rifle Energy answers our consumers' desire for clean, low sugar energy delivered in a refreshing flavor profile.

Jason Martini: but similar to the rest of the business black rifle has exceed the market by over five hundred basis points

Unknown Executive: Slide eight.

Chris Monsolesky: Beyond the gains we will continue to drive in RTD coffee, we're excited about the future of our RTD innovation with the introduction of Black Rifle Energy. Black Rifle Energy answers our consumers' desire for clean, low sugar energy, delivered in a refreshing flavor profile. From our research, 58 percent of our customers have already purchased energy products, and about 90 percent of our consumers are interested in energy derived from natural source. and while we love coffee at Black Rifle, we find that many of the fans of our brand are looking for a more refreshing profile for their energy consumption.

Jason Martini: Slide 8

Jason Martini: beyond the gains we will continue to drive in rtd coffee we're excited about the future of our rtd innovation with the introduction of black racfulle energy

Jason Martini: Black Rifle Energy answers our consumers' desire for clean, low-sugar energy delivered in a refreshing flavor profile.

Chris Mondzelewski: From our research, 58% of our customers have already purchased energy products, and about 90% of our consumers are interested in energy derived from natural sources. And while we love coffee at Black Rifle, we find that many of the fans of our brand are looking for a more refreshing profile for their energy consumption. When designing Black Rifle Energy, we focused on three key areas: first, the quality of ingredients and taste. As we have talked about in the past, we buy the very best coffee beans for our coffee.

Jason Martini: From our research, 58% of our customers have already purchased energy products, and about 90% of our consumers are interested in energy derived from natural sources.

Jason Martini: And while we love coffee at Black Rifle, we find that many of the fans of our brand are looking for a more refreshing profile for their energy consumption.

Chris Monsolesky: When designing Black Rifle Energy, we focused on three key areas: first, quality of ingredients and taste. As we have talked about in the past, we buy the very best coffee beans for our coffees. So similarly, we are sourcing the very best ingredients for our energy drinks. Our four flavors, Freedom Punch, Project Mango, Ranger Berry, and Wild Frost, scored exceptionally well with consumers. Second, we focused on energy delivery. As mentioned earlier, we spent a lot of time developing a clean energy delivery system from our green coffee extract and other natural caffeine sources. Finally, we developed a design that brings forward our brand with an emphasis on our aggressive mission-driven ethos.

Chris Mondzelewski: So, similarly, we are sourcing the very best ingredients for our energy drinks. Our four flavors, Freedom Punch, Project Mango, Ranger Berry, and Wild Frost, scored exceptionally well with consumers. Second, we focused on energy delivery. As mentioned earlier, we spent a lot of time developing a clean energy delivery system from our green coffee extract and other natural caffeine sources. Finally, we developed a design that brings forward our brand with an emphasis on our aggressive, mission-driven ethos. We believe it works well in tying existing elements of Black Rifle to a unique graphics architecture that will drive visibility from the shelf. Moving to slide nine.

Jason Martini: when designing blackwayle energy we focused on three key areas

Jason Martini: first quality of ingredients and taste

Jason Martini: as we have talked about in the past we buy the very best coffee beans for our copies

Jason Martini: So, similarly, we are sourcing the very best ingredients for our energy drinks.

Jason Martini: Our four flavors, Freedom Punch, Project Mango, Ranger Berry, and Wild Frost, scored exceptionally well with consumers.

Jason Martini: second we focused on energy delivery as mentioned earlier we spent a lot of time developing a clean energy delivery system from our green coffee extract in other natural caffeine sources

Jason Martini: Finally, we developed a design that brings forward our brand with an emphasis on our aggressive mission-driven ethos.

Operator: We believe it works well in tying existing elements of Black Rifle to a unique graphics architecture that will drive visibility from the shelf. Moving to slide nine. Given the value of this segment of consumers, we will continue our investment in growing subscriptions and increasing our presence as the largest coffee subscription business in the U.S. I will reiterate what we've said previously about our outpost. We will continue to invest our capital in building our brand and wholesale distribution.

Chris Monsolesky: We believe it works well in tying existing elements of Black Rifle to a unique graphics architecture that will drive visibility from the shelf.

Jason Martini: We believe it works well in tying existing elements of Black Rifle to a unique graphics architecture that will drive visibility from the shelf. Moving to slide 9.

Chris Monsolesky: Moving to slide nine, as mentioned, DTC top line was challenged by shifting consumer behavior, and with that, a pullback on investment. As we have said many times, the consumer determines their buying preference, and we need to make sure we align our marketing and sales strategies to their needs. Across the industry, consumers find themselves relying less on the DTC channel. And on top of this, not all of our DTC business is seeing the same declines. Our subscription business, serving those consumers most loyal to the brand, is stabilizing. Given the value of this segment of consumers, we will continue our investment in growing subscriptions and increasing our presence as the largest coffee subscription business in the US.

Chris Mondzelewski: As mentioned, DTC's top line was challenged by shifting consumer behavior and, with that, a pullback on investment. As we have said many times, the consumer determines their buying price, and we need to make sure we align our marketing and sales strategies to their needs. Across the industry, consumers find themselves relying less on the DTC channel. And on top of this, not all of our DTC business is seeing the same declines. Our subscription business, serving those consumers most loyal to the brand, is stabilized. Given the value of this segment of consumers, we will continue our investment in growing subscriptions and increasing our presence as the largest coffee subscription business in the U.S.

Jason Martini: As mentioned, DTC top line was challenged by shifting consumer behavior, and with that, a pullback on investment.

Jason Martini: As we have said many times, the consumer determines their buying preference.

Jason Martini: and we need to make sure we align our marketing and sales strategies to their needs.

Jason Martini: Across the industry, consumers find themselves relying less on the DTC channel. And on top of this, not all of our DTC business is seeing the same declines. Our subscription business, serving those consumers most loyal to the brand, is stabilizing.

Jason Martini: Given the value of this segment of consumers, we will continue our investment in growing subscriptions and increasing our presence as the largest coffee subscription business in the U.S.

Chris Monsolesky: Finally, I will reiterate what we've said previously about our outpost business, while the potential is unlimited in what our outposts can do to build our brand and revenue streams. Now is not the right time for investment. We will continue to invest our capital in building our brand and wholesale distribution. We expect to share the full strategy for our outpost or coffee shop channel sometime in the next year.

Chris Mondzelewski: I will reiterate what we've said previously about our outposts. While the potential is unlimited for what our outposts can do to build our brand and revenue streams, now is not the right time for investment. We will continue to invest our capital in building our brand and wholesale distribution. We expect to share the full strategy for our outpost or coffee shop channel sometime in the next year. Now, turning to our financial results, Steve. Thank you.

Jason Martini: Finally...

Jason Martini: i will reiterate what we've said previously about our outpost business

Jason Martini: while the potential is unlimited in what our outposts can do to build our brand and revenue streams now is not the right time for investment

Jason Martini: We will continue to invest our capital in building our brand and wholesale distribution. We expect to share the full strategy for our outpost or coffee shop channel sometime in the next year.

Steve Kadenacy: Now turning to our financial results, Steve.

Steve Kadenacy: Thank you, Modens. Please turn to slide 11. Our continued efforts towards productivity improvements have resulted in our second consecutive quarter of gross margins in excess of our 40% target. Supply chain efficiencies driven primarily by improvements in our distribution and logistics costs added 420 basis points to our Q2 gross margin as compared to Q2 2023. The efforts to simplify our supply chain in both the number of partners used for manufacturing and distribution, as well as our internal cost management, are continuing to enable dramatically improved gross margin. In addition, our hedging efforts have mitigated the short-term increase in the market price of green coffee, reducing the spikes in our input costs for that important commodity.

Steve Kadenacy: Thank you, Maude.

Steve Kadenacy: Please turn to slide 11. Our continued efforts towards productivity improvements have resulted in our second consecutive quarter of gross margins and excess of our 40% target. Supply chain efficiencies driven primarily by improvements in our distribution and logistics costs added 420 basis points to our Q2 gross margin as compared to Q2 2023. The efforts to simplify our supply chain in both the number of partners used for manufacturing and distribution, as well as our internal cost management, are continuing to enable dramatically improved gross margins. In addition, our hedging efforts have mitigated the short-term increase in the market price of green coffee, reducing the spikes in our input costs for that important commodity.

Steve Kadenacy: Now turning to our financial results, Steve. Thank you, Mondze. Please turn to slide 11.

Steve Kadenacy: Our continued efforts towards productivity improvements have resulted in our second consecutive quarter of gross margins in excess of our 40% target.

Operator: Supply chain efficiencies driven primarily by improvements in our distribution and logistics costs added 420 basis points to our Q2 gross margin as compared to Q2 2023. The efforts to simplify our supply chain in both the number of partners used for manufacturing and distribution, as well as our internal cost management, are continuing to enable dramatically improved gross margin. We also realized a favorable impact as our business shifts towards the high-margin FDM business, which benefits from a more efficient logistics model, adding another 140 basis points. We believe this is a timing difference with respect to the revenue expansion in FDM. As new partners continue to come online, albeit at a slower pace than we presumed at the beginning of the year.

Steve Kadenacy: supply chain efficiencies driven primarily by improvements in our distribution and logistics costs added four hundred and twenty basis points to our q two gross margin as compared to q two two thousand and twenty three

Steve Kadenacy: The efforts to simplify our supply chain in both the number of partners used for manufacturing and distribution, as well as our internal cost management, are continuing to enable dramatically improved gross margins.

Steve Kadenacy: In addition, our hedging efforts have mitigated the short-term increase in the market price of green coffee, reducing the spikes in our input costs for that important commodity.

Steve Kadenacy: We also realize the favorable impact as our business shifts towards the high margin FDM business, which benefits from a more efficient logistics model, adding another 140 basis points. Finally, we did realize a 1.8 million one-time impact in the quarter as we continue to align our loyalty reserve to the most recent trends. Flight 12, adjusted EBITDA for the quarter was 8.5 million, up from break even in the prior year. This is our third consecutive quarter of adjusted EBITDA exceeding 9% of revenue, which brings our year-to-date adjusted EBITDA to 22.6 million, a 27.7 million improvement over the last year-to-date.

Steve Kadenacy: We also realized a favorable impact as our business shifts towards the high margin FDM business, which benefits from a more efficient logistics model, adding another 140 basis points. Finally, we did realize a $1.8 million one-time impact in the quarter as we continue to align our loyalty reserve to the most recent trends. Slide 12.

Steve Kadenacy: We also realized a favorable impact as our business shifts towards the high margin FDM business, which benefits from more efficient logistics model, adding another 140 basis points.

Steve Kadenacy: Finally, we did realize a $1.8 million one-time impact in the quarter as we continue to align our loyalty reserve to the most recent trends.

Steve Kadenacy: Adjusted EBITDA for the quarter was $8.5 million, up from break-even in the prior year. This is our third consecutive quarter of adjusted EBITDA exceeding 9% of revenue, which brings our year-to-date adjusted EBITDA to $22.6 million, a $27.7 million improvement over the last year to date. Our disciplined approach to managing administrative resources and external expenses has proven to be effective.

Steve Kadenacy: slide twelve adjusted ebitda for the quarter was eight -map million up from breakeeven in the prior year

Steve Kadenacy: This is our third consecutive quarter of Adjusted EBITDA exceeding 9% of revenue, which brings our year-to-date Adjusted EBITDA to $22.6 million, a $27.7 million improvement over the last year to date.

Steve Kadenacy: Our disciplined approach to managing administrative resources and external expenses has proven to be effective. This approach will become more impactful as revenue grows, providing additional economies of scale.

Steve Kadenacy: This approach will become more impactful as revenue grows, providing additional economies of scale. Turning to slide 13, our Q2 revenue was challenged by the consumer-driven movement away from DTC and the timing of new wholesale partner loading. We believe this is a timing difference with respect to the revenue expansion in FDM.

Steve Kadenacy: Turning to slide 13, our Q2 revenue was challenged by the consumer-driven movement away from DTC and the timing of new wholesale partner loadings. We believe this is a timing difference with respect to the revenue expansion in FDM. As new partners continue to come online, I'll be at a slower pace than we presumed in the beginning of the year. In fact, our initial estimates are that FY 2025, our business as a whole will show an inflection in revenue buoyed by accelerating FDM growth as ACV expansion and skew enhancement on shelves gains feed, as well as sales of our new energy drinks as we ramp ACV there.

Speaker Change: turning to slide thirteen our q two revenue was challenged by the consumer-driven movement away from dtc and the timing of new wholesale partner loadings

Steve Kadenacy: As new partners continue to come online, albeit at a slower pace than we presumed in the beginning of the year. In fact, our initial estimates are that, in FY 2025, our business as a whole will show an inflection in revenue buoyed by accelerating FDM growth as ACV expansion and SKU enhancement on shelves gain speed, as well as sales of our new energy drinks as we ramp up ACV there. As Mondze pointed out in his comments, we just posted our third consecutive quarter of positive free cash flow.

Steve Kadenacy: We believe this is a timing difference with respect to the revenue expansion in FDM.

Steve Kadenacy: As new partners continue to come online, albeit at a slower pace than we presumed in the beginning of the year.

Operator: In fact, our initial estimates are that, FY 2025, our business as a whole will show an inflection in revenue buoyed by accelerating FDM growth as ACV expansion and SKU enhancement on shelves gain speed. As Mondze pointed out in his comments, we just posted our third consecutive quarter of positive free cash flow. We are proud of the dramatic inflection there as we delivered a $31 million improvement over the year-ago period. Additionally, we have seen a marked improvement in our working capital, including a sequential $6 million decrease in inventory and a $75 million year-on-year total working capital reduction.

Steve Kadenacy: in fact our initial estimates are that fy two thousand and twenty five our business as a whole will show an inflection in revenue booyed by accelerating fdm growth as acd expansion and sskkew enhancement on shelvess gains feet

Steve Kadenacy: As Mons pointed out in his comments, we just posted our third consecutive quarter of positive free cash flow. We are proud of the dramatic inflection there, as we delivered a $31 million improvement over the year-ago period. Additionally, we have seen a market improvement in our working capital, including a sequential 6 million decrease in inventory and a 75 million year-on-year total working capital reduction.

Steve Kadenacy: as well as sales of our new energy drinks as we ramp ACV there.

Steve Kadenacy: As Mondze pointed out in his comments, we just posted our third consecutive quarter of positive free cash flow. We are proud of the dramatic inflection there as we delivered a $31 million improvement over the year-ago period.

Steve Kadenacy: We are proud of the dramatic inflection there as we delivered a $31 million improvement over the year-ago period. Additionally, we have seen a marked improvement in our working capital, including a sequential $6 million decrease in inventory and a $75 million year-on-year total working capital reduction. Please turn to slide 15.

Speaker Change: Additionally, we have seen a marked improvement in our working capital, including a sequential $6 million decrease in inventory and a $75 million year-on-year total working capital reduction.

Steve Kadenacy: Please turn to slide 15. Before I provide color on our revised guidance for 2024, I wanted to share why our confidence in the top line trajectory is still so strong despite some of the delays and customer loadings that are impacting our near-term numbers. We are winning in the markets that we currently serve, bagged in cake-up coffee and retail and RTD coffee. We are outpacing the market in both categories, as we take share, and the result will be increased revenue over the next few years. The markets we serve have significant TAMs and we are just beginning to penetrate.

Steve Kadenacy: Before I provide color on our revised guidance for 2024, I wanted to share why our confidence in the top line trajectory is still so strong despite some of the delays and customer load-ins that are impacting our near-term numbers. We're winning in the markets that we currently serve, bagged K-Cup Coffee in retail and RTD Coffee. We are outpacing the market in both categories as we take share, and the result will be increased revenue over the next few years.

Operator: Before I provide color on our revised guidance for 2024, I wanted to share why our confidence in the top line trajectory is still so strong despite some of the delays and customer load-ins that are impacting our near-term numbers. To dimension the opportunity, we entered the FDM coffee category in only one retailer a little more than 18 months ago. FDM Coffee is an $11 billion market, and as we broaden our exposure, we expect to achieve a 6% share in RTD, which has a TAM of $4 billion. And given our improving distribution and product innovation on the horizon, we think we can at least double our share over the next few years. Finally, we reiterate our 2-1 guidance of 80% free cash flow conversion.

Speaker Change: Please turn to slide 15.

Speaker Change: Before I provide color on our revised guidance for 2024, I wanted to share why our confidence in the top-line trajectory is still so strong despite some of the delays and customer load-ins that are impacting our near-term numbers.

Speaker Change: we are winning in the markets that we currently served bagged in kcup coffee and retail and rtd coffee we are outpacing the market in both categories as we take share and the result will be increased revenue over the next few years

Steve Kadenacy: The markets we serve have significant TAMs, and we are just beginning to penetrate. To dimension the opportunity, we entered the FDM coffee category in only one retailer a little more than 18 months ago. We are now rolling out to almost all retailers in the channel. FDM coffee is an $11 billion market.

Speaker Change: the markets we serve has significant tams and we are just beginning to penetrate

Steve Kadenacy: To dimension the opportunity, we entered the FDM coffee category in only one retailer a little more than 18 months ago. We are now rolling out to almost all retailers in the channel. FDM coffee is an $11 billion market, and as we broaden our exposure, we expect to achieve 6% share. In RTD, which has a tan before billion, and given our improving distribution and product innovation on the horizon, we think we can at least double our share over the next few years. And last but certainly not least, the RTD energy category is roughly a $20 billion market, and we believe we will achieve similar share in this market.

Speaker Change: To dimension the opportunity, we entered the FDM coffee category in only one retailer a little more than 18 months ago.

Steve Kadenacy: And as we broaden our exposure, we expect to achieve a 6% share in RTD, which has a TAM of $4 billion. And given our improving distribution and product innovation on the horizon, we think we can at least double our share over the next few years. And last but certainly not least, the RTD energy category is roughly a $20 billion market, and we believe we will achieve a similar share in this market. This gives us confidence in our long-term outlook.

Speaker Change: we are now rolling out to almost all retailers in the channel

Speaker Change: FDM Coffee is an $11 billion market, and as we broaden our exposure, we expect to achieve 6% share.

Speaker Change: In RTD, which has a TAM of $4 billion, and given our improving distribution and product innovation on the horizon, we think we can at least double our share over the next few years.

Speaker Change: And last, but certainly not least, the RTD Energy category is roughly a $20 billion market, and we believe we will achieve similar share in this market. This gives us confidence in our long-term outlook.

Steve Kadenacy: This gives us confidence in our long-term outlook. For the reasons we have discussed, we are adjusting our 2024 revenue guidance down to $385 million to $415 million. However, we are moving our gross margin up to 39% to 42% and reiterating our adjusted EBITDA of 32 to 42 million. Finally, we reiterate our Q1 guidance of 80% free cash flow conversion. In summary, we are developing a trend of profitable quarterly results and expect to continue this trend in the quarters to come, which will ultimately enable us to provide maximum service to the veteran and first responder communities and long-term value to our shareholders.

Steve Kadenacy: For the reasons we've discussed, we are adjusting our 2024 revenue guidance down to $385 million to $415 million. However, we are moving our gross margin up to 39% to 42% and reiterating our adjusted EBITDA of $32 to $42 million. Finally, we reiterate our Q1 guidance of 80% free cash flow conversion. In summary, we are developing a trend of profitable quarterly results and expect to continue this trend in the quarters to come, which will ultimately enable us to provide maximum service to the veteran and first responder communities and long-term value to our shareholders. With that, I'll pass the call to the operator for the Q&A. Thank you.

Speaker Change: for the reasons we 've discussed

Speaker Change: We are adjusting our 2024 revenue guidance down.

Speaker Change: to three hundred and eighty five millions of four hundred and fifteen million however we are moving our gross margin up to thirty nine percent to forty two percent

Speaker Change: and reiterating our adjusted EBITDA of $32 to $42 million.

Speaker Change: Finally, we reiterate our Q1 guidance of 80% free cash flow conversion.

Speaker Change: In summary, we are developing a trend of profitable quarterly results and expect to continue this trend in the quarters to come, which will ultimately enable us to provide maximum service to the veteran and first responder communities and long-term value to our shareholders.

Operator: With that, I'll pass the call to the operator for the Q&A. Thank you. At this time, we will be conducting a question-and-answer session. If you would like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate a line is in the question queue. You may press star 2 if you would 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 2s. One moment please, while you pose for a question.

Speaker Change: With that, I'll pass the call to the operator for the Q&A.

Operator: Thank you. At this time, we will be conducting a question and answer session. If you would like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate your line is busy. You may press star 2 if you would 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 2 button.

Speaker Change: Thank you. At this time we will be conducting a question and answer session. If you would like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue.

Speaker Change: You may press star 2 if you would 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.

Operator: One moment, please, while we poll for questions. And our first question comes from the line of Michael Baker with D.A. Davidson. Please proceed with your question.

Speaker Change: One moment, please, while we poll for questions.

Michael Baker: And our first question comes from the line of Michael Baker with DA Davidson. Please proceed with your question. Thank you. So my question is going to be on the timing of these delays. So first of all, you hit a few retailers. You know, any more color on that? How many retailers are you in now? Where are you seeing the delays? I don't know if you want to name names or not. You said you expect to be in, I think you said top five grocery partners. I think you said by 2Q25. How many of those are you in now?

Operator: And our first question comes from the line of Michael Baker with D.A. Davidson. Please proceed with your question.

Michael Baker: Thank you. So, my question is going to be on the timing of these delays. First of all, you said a few retailers. Any more color on that?

Speaker Change: and our first question comes from the line of michael baker with da davidson please will see which your a question

Michael Baker: Thank you. So, my question is going to be on the timing of these delays. First of all, you said a few retailers. Any more color on that?

Michael Baker: thank you so my question is going to be on the timing of these delays the first ofall you had a few retailers you know any more color on that how many retaers you in now

Chris Mondzelewski: How many retailers are you in now? Where are you seeing the delays? I don't know if you want to name names or not, but you said you expected to be in, I think you said, the top five grocery partners. I think you said by 2Q25. How many of those are you in now? Any more color on where and why we're seeing these delays? And I guess you've expressed some confidence, but maybe we should be confident that it's just delays and not a pushback on the product or some other reason why you won't be on the shelf?

Michael Baker: How many retailers are you in now? Where are you seeing the delays? I don't know if you want to name names or not, but you said you expected to be in, I think you said, the top five grocery partners. I think you said by 2Q25. How many of those are you in now? Just any more color on where and why we're seeing these delays? And I guess you've expressed some confidence, but, you know, maybe we should be confident that it's just delays and not a pushback on the product or some other reason why you won't be on the shelf?

Speaker Change: Where are you seeing the delays? I don't know if you want to name names or not. You said you expect to be in, I think you said, the top five grocery partners. I think you said by 2Q25. How many of those are you in now? Just any more color on where and why we're seeing these delays.

Chris Monsolesky: Just any more color on where and why we're seeing these delays? And I guess you could express some confidence, but, you know, maybe just why should we be confident that it's just delays and not a pushback on the product or some other reason why you won't be on the shelves. Thanks. Yeah. Thanks for the question, Michael.

Speaker Change: and I guess you've expressed some confidence but you know maybe just why should we be confident that it's just delays and not a push back on the product or some other reason why you won't be on the shelves. Thanks.

Chris Mondzelewski: Yeah, thanks for the question, Michael. So, let me elaborate a little bit. I mean, as I said, you know, in the kickoff, obviously, we're disappointed that there's any delay at all.

Operator: Yeah, thanks for the question, Michael. So, let me elaborate a little bit. I mean, as I said in the kickoff, obviously, we're disappointed that there's any delay at all.

Chris Monsolesky: So let me elaborate a little bit. I mean, as I said, you know, in the kickoff, you know, obviously we're disappointed that there's any delay at all, but at the end of the day, you know, as we look to build a business like this, we understand that, you know, not everything's going to play out the way that we initially expect. So, you know, I hold my team accountable to make sure we've got plans in place to be able to adjust to things, you know, like this. And, you know, that's exactly kind of what we're imparting.

Speaker Change: yesthanks for the question michael so let me elaborate a little bit imean as i said and in the kickoff

Operator: But at the end of the day, as we look to build a business like this, we understand that not everything's going to play out the way that we initially expect. So I hold my team accountable to make sure we've got plans in place to be able to adjust to things like this. And that's exactly the kind of message we're imparting. So I'm not going to go into the specifics of the timing of any particular retailer. We stay away from that. Those are confidential conversations we have with each other. But let me give you a little bit of color on where we stand right now.

Speaker Change: You know, obviously, we're disappointed that there's any delay at all, but at the end of the day, you know, as we look to build a business like this, we understand that, you know, not everything's going to play out the way that we initially expect. So, you know, I hold my team accountable to make sure we've got plans in place.

Chris Monsolesky: So I'm not going to go into the specifics of the timing of any particular retailer. We stay away from that. Those are confidential conversations we have with each one, but let me give you a little bit of color on where we stand right now. We are, as we speak, in the largest three, you know, retailers in the country. One of the largest three is your shift very, very recently. So that's new distribution for us that's kind of going in as we speak. And, you know, we talked publicly, obviously, you know, last year about, you know, the launch in Albertsons, which of course follows our initial customer Walmart, where we still continue to perform very well, you know, with results of 15%.

Speaker Change: to be able to adjust to things like this and you know that's exactly kind of what we're parting so i'm not going to go into the specifics of the timing of any particular retailer stay away from that those are confidential conversations we have with eachone but let me giveyoua little bit of coloron wherewe stand right now

Chris Mondzelewski: But at the end of the day, you know, as we look to build a business like this, we understand that, you know, not everything's going to play out the way that we initially expect. So, you know, I hold my team accountable to make sure we've got plans in place to be able to adjust to things like this. And, you know, that's exactly the kind of message we're imparting. So I'm not going to go into the specifics of the timing of any particular retailer; we stay away from that. Those are confidential conversations we have with each one, but let me give you a little bit of color on where we stand right now.

Operator: We are, as we speak, in the largest three retailers in the country. One of the largest three just shipped very, very recently. So that's new distribution for us that's kind of going in as we speak. And we talked publicly, obviously, last year about the launch in Albertsons, which, of course, follows our initial customer, Walmart, where we still continue to perform very well with results of 15%. So again, I think with the retailers that we've been able to move into, we've been able to have good success. We feel good.

Speaker Change: We are, as we speak, in the largest three retailers in the country.

Speaker Change: One of the largest three just shipped very, very recently, so that's a new distribution for us that's kind of going in as we speak.

Speaker Change: And, you know, we talked publicly, obviously, you know, last year about, you know, the launch in Albertsons, which, of course, follows

Chris Mondzelewski: We are, as we speak, in the largest three retailers in the country; one of the largest three just shipped very, very recently. So that's new distribution for us that's kind of going in as we speak. And, you know, we talked publicly, obviously, last year about the launch in Albertsons, which, of course, follows our initial customer Walmart, where we still continue to perform very well, you know, with results of 15%.

Speaker Change: our initial customer walmart where we still continue to perform very well with results of fifteen percent

Chris Monsolesky: So, you know, again, I think with the retailers that we've been able to move into, we've been able to have, you know, good success. We feel good. We have ongoing conversations with those retailers about how we continue to build that business. And as I've talked about in previous calls, you know, getting the distribution on shelf of step one, but then from there, you know, you've got to build the business. It took us some time to get above a foreshare in Walmart. And with all of these other retailers, you know, the same will be true as well.

Speaker Change: So, you know, again, I think with the retailers that we've been able to move into, we've been able to have, you know, good success. We feel good. We have ongoing conversations with those retailers about how we continue to build that business. And as I've talked about in previous calls,

Operator: We have ongoing conversations with those retailers about how we continue to build that business. And as I've talked about in previous calls, getting distribution on the shelf is step one, but then from there, you've got to build the business.

Operator: It took us some time to get above a four percent share in Walmart. And with all of these other retailers, the same will be true as well. To specifically answer your question, we're in 36 retailers right now. Obviously, there's a wide variety of sizes in that. But, as I said, we have the three largest. And I'll continue to reiterate what I said on every call, which is that we are having positive conversations with quite literally every retailer in the country.

Speaker Change: You know, getting the distribution on shelf is step one, but then from there, you know, you've got to build the business. It took us some time to get above a four share in Walmart.

Chris Mondzelewski: So, you know, again, I think with the retailers that we've been able to move into, we've been able to have, you know, good success, we feel good, and we have ongoing conversations with those retailers about how we continue to build that business. And as I've talked about in previous calls, you know, getting distribution on the shelf is step one. But then from there, you know, you've got to build the business; it took us some time to get above a four percent share in Walmart.

Chris Monsolesky: To specifically answer your question, we're in 36 retailers right now. Obviously, there's a wide variety of sizes in that, but as I said, you know, we have the three largest. And I'll continue to reiterate what I've said every call, which is that we are having positive conversations with quite literally every retailer in the country. Just a point.

Speaker Change: And with all of these other retailers, you know, the same will be true as well. To specifically answer your question, we're in 36 retailers right now. Obviously, there's a wide variety of sizes in that, but as I said, you know, we have the three largest.

Speaker Change: i'll continue to reiterate what i've said every call which is that we are having positive conversations with quite literally every retailer in the country at this point

Chris Mondzelewski: And with all of these other retailers, you know, the same will be true as well. To specifically answer your question, we're in 36 retailers right now, and obviously, there's a wide variety of sizes in that. But as I said, you know, we have the three largest, and I'll continue to reiterate what I've said on every call, which is that we are having positive conversations with quite literally every retailer in the country.

Michael Baker: Thank you for that color.

Michael Baker: So if I could ask one fall, fall up, what kind of ramp should we look for in 2025? I don't know if it's too early to talk about that, but maybe if you don't want to give a number, is that plan different than what it was? If this is just delay, you know, 2025. By the time we get to mid 2026, your top on expectation should have not changed.

Collar: Thank you for that, Collar. So if I could ask one follow-up. What kind of ramp should we look for in 2025?

Steve Kadenacy: Thank you for that, Collar. So if I could ask one follow-up question, what kind of ramp should we look for in 2025? I don't know if it's too early to talk about that, but maybe, if you don't want to give a number, is that plan different than it was? If this is just a delay, 2025, by the time we get to mid-2026, your top-line expectations should not have changed. So I wonder if you can give us any color on what kind of ramp we can expect in the coming year and a half.

Speaker Change: Who earlier to talk about that, but maybe if you don't want to give a number, is that plan different than what it was? If this is just a delay, you know, 2025, maybe by the time we get to mid-2026, your top line expectation should have not changed. So I wonder if you can give us any color on what kind of ramp we can expect in the coming, you know, year, year and a half.

Steve Kadenacy: So I wonder if you can give us any color on what kind of ramp? We can expect in the coming year, year and a half.

Steve Kadenacy: Yeah, Michael, this is Steve. We haven't given color on 25 yet, but the way we look at it, as Mausha said, you get the ACV; the revenue follows. We've always looked forward to that in 25.

Steve Kadenacy: Yeah, Michael, this is Steve. We haven't given color on 25 yet, but the way we look at it, as Mondze just said, you get the ACV, and the revenue follows. We've always looked forward to that in 25, and we look forward to giving you specific guidance later in the year. But we do anticipate that we'll continue to ramp up and wholesale as we roll out. And Mondze talked about some of the delays, and we didn't say specific names, but there are significant grocery retailers that got pushed into Q1 and Q2 that are also very consistent with our geographies where we do very well. So between those FDM ramps, the stabilization of DTC, and then Black Rifle Energy, we anticipate a significant inflection in our revenue for next year.

Steve Kadenacy: Yep, Michael, this is Steve. We haven't given color on 25 yet, but...

Steve Kadenacy: The way we look at it, as Monsh just said, you get the ACV, the revenue follows. We've always looked forward to that in 2025, and we look forward to giving you specific guidance later in the year. But we do anticipate.

Steve Kadenacy: And we look forward to giving you specific guidance later in the year. But we do anticipate that we'll continue to ramp in wholesale as we roll out. And you know, Maus talked about some of the delays, and we didn't say specific names. But there's significant grocery retailers that got pushed in the Q1 and Q2 that are also very consistent with our geographies, where we do very well. So between those FDM ramps, the stabilization of DTC and then Black Rifle Energy, we anticipate a significant inflection in our revenue for next year.

Steve Kadenacy: that will continue to ramp and wholesale as we roll out. And Mondze talked about some of the delays, and we didn't say specific names. But there's significant grocery retailers that got pushed into Q1 and Q2 that are also very consistent with our geographies, where we do very well.

Speaker Change: Between those FDM or AMSTA stabilization of DTC and then Black Rifle Energy, we anticipate a significant inflection in our revenue for next year.

Michael Baker: Great. I'll turn it over to someone else.

Operator: Great. I'll turn it over to someone else. Thank you.

Operator: Thank you.

Speaker Change: Great, I'll turn it over to someone else. Thank you.

Matt Mcginley: Thank you. Our next question comes from the line of Matt McGinley with Needham & Company. Please proceed with your question.

Matt McKinley: Our next question comes from the line of Matt McKinley. Would need him and company. Please proceed with your question. Thank you. On the Black Rifle Energy Drink, do you expect that to use the same supply chain and distributors as the bread and did your coffee product? And do you think there'll be a lot of expense around that as you want that product? Or are you pretty much locked and loaded with what you already have in place with the distribution and how your coffee products is pretty good. It's currently.

Speaker Change: thank you our next question come from the line of matt gally would need him in company please will see which for a question

Chris Mondzelewski: Thank you. On the Black Rifle energy drink, do you expect that to use the same supply chain and distributors as the ready-to-drink coffee product? And do you think there'll be a lot of expense around that as you launch that product? Or are you pretty much locked and loaded with what you already have in place with the distribution and how your coffee product is produced currently?

matt gally: thank you on the black rful energy drink and you expect that these the same supply chain in distributors as the ready to drink coffe product and think there'll be a lot of expense around that issuyou as you want that product is are you pretty much often loaded with what you already have in place with the distribution and how to redict your copy products is produced currently

Chris Mondzelewski: Hey Matt, let me give some color on that. So, you know, I think I'll start by saying, you know, we're very proud of what we've been able to do to build and then evolve our RTD coffee business. The RTD category is a tough category.

Chris Monsolesky: Hey Matt, you know, let me give some color on that. So, you know, I think I'll start by saying, you know, we're very proud of what we've been able to do to build and then evolve our RTD coffee business. RTD categories, a tough category as you recall, you know, even a year ago, we were really struggling with profitability of that business. And a big part of our margin recovery has been our, you know, outstanding operations team, you know, really rolling their sleeves up and understanding how to produce that product. You know, at what I'll call market levels, you know, coffee products are expensive to produce. You know, the ingredients are tend to be some of the most expensive in the category.

matt gally: Hey Matt, you know, let me give some color on that.

matt gally: I'll start by saying we're very proud of what we've been able to do to build and then evolve our RTD coffee business. RTD category is a tough category.

Chris Mondzelewski: As you recall, even a year ago, we were really struggling with the profitability of that business. And a big part of our margin recovery has been our, you know, outstanding operations team, really rolling their sleeves up and understanding how to produce that product. You know, at what I'll call market levels, coffee products are expensive to produce, and the ingredients tend to be some of the most expensive in the category. And so those tend to be, you know, lower than some of our center store products and energy, and the margins overall tend to be a bit higher.

matt gally: As you recall, even a year ago, we were really struggling with profitability of that business. And a big part of our margin recovery has been our outstanding operations team really rolling their sleeves up and understanding how to produce that product.

Speaker Change: You know, at what I'll call market levels, you know. Coffee products are expensive to produce. You know, the ingredients tend to be some of the most expensive in the category, so those tend to be, you know, lower than some of our center store products.

Chris Monsolesky: So those tend to be, you know, lower than some of our center store products and energy. You know, the margins overall tend to be a bit higher. And as such, you know, we've continued to push our production team to say, you know, we want to be at market. We're not ready to announce exactly how we're going to be producing or distributing, but our expectation is going to be the same, which is two things. One that, you know, as you kind of question on the cross side, you know, are we going to be able to kind of maintain the market?

Chris Mondzelewski: And as such, you know, we've continued to push our production team to say, you know, we want to be in the market. We're not ready to announce exactly how we're going to be producing or distributing, but our expectation is going to be the same, which is two things. One, that, you know, as you kind of question on the cost side, you know, are we going to be able to kind of maintain the market?

Speaker Change: And energy, you know, the margins overall tend to be a bit higher. And as such, you know, we've continued to push.

Speaker Change: our production team to say you know we want to be at market we're not ready to announce exactly how we're going to be producing or distributing but our expectation is going to be the same which is two things one that you know as you kind of question on st we going to be able to kind of maintain the market the answerthatis yes we'll continue to hold our teams accountable ofabout

Chris Mondzelewski: The answer to that is yes, we'll continue to hold our teams accountable for that because we believe that it's quite achievable. And then two is, you know, how do we really get the most out of this? And I'll kind of go to a point that I made in previous quarters, which is that we're constantly evaluating, you know, what is the right distribution system for us. We're very proud of our team. They've done an incredible job of building our coffee business to, you know, 100 million plus.

Chris Monsolesky: The answer to that is yes; we'll continue to hold our teams accountable to that because we believe that's quite achievable. And then two is, you know, how do we really get the most out of this? And I'll kind of go to a point that I made previous quarters, which is we're constantly evaluating, you know, what is the right, you know, distribution system for us. We're very proud of our team. They've done an incredible job of building our coffee business to a, you know, 100 million plus. But, you know, at the end of the day, there are many different ways and avenues, you know, to expanding distribution, you know, in that category.

Speaker Change: because we believe that's quite achievable.

Speaker Change: and then two is...

Speaker Change: You know, how do we really get the most out of this? And I'll kind of go to a point that I made previous quarters, which is we're constantly evaluating, you know, what is the right distribution system for us. We're very proud of our team. They've done an incredible job of building our coffee business to a, you know, 100 million plus.

Chris Mondzelewski: But, you know, at the end of the day, there are many different ways and avenues of expanding distribution in that category. And we're going to constantly be assessing, you know, what are those right partnerships for us as we go forward. But, you know, nothing specific that we're in a position to talk about yet for energy.

Speaker Change: but you knowatthe end of the day there are there are many different ways and avenues you know to expanding distribution you know in that categoryand we're going to constantly be assessing know what are those right partnerships for us as we go forward but you know nothing specific that we' in a position to to talk about yet for energy

Chris Monsolesky: And we're going to constantly be assessing, you know, what are those right partnerships for us as we go forward.

Chris Monsolesky: But, you know, nothing specific that we're in a position to talk about yet for energy.

Matt McKinley: And on the gross margin, your first half gross margin was above the high end of your 39 to 42% guidance for the full year.

Steve Kadenacy: And on gross margin, your first half gross margin was above the high end of your 39 to 42% guidance for the full year. Is there anything different with the outlook in the back half around inflation in the supply chain or mix or promotion that would push the gross margin down for the rest of the year?

Speaker Change: And on the gross margin, your first half gross margin was above the high end of your 39% to 42% guidance for the full year. Is there anything different with the outlook in the back half around inflation in the supply chain or mix or promotion that would push the gross margin down for the rest of the year?

Steve Kadenacy: Is there anything different with the outlook in the back half around inflation, the supply chain, or makes a promotion that would push the gross margin down for the rest of the year? No, there's nothing specific that the. I think one thing we're always cautious about is that, you know, to the extent that there are promotions in store, some of that does hit above the line, but we have great confidence that we'll be able to continue our margin run.

Steve Kadenacy: No, there's nothing specific, Matt. I think one thing we're always cautious about is that to the extent that there are promotions in stores, some of that does hit above the line. But we have great confidence that we'll be able to continue our margin run. All right, thank you very much.

Matt: No, there's nothing specific, Matt. I think one thing we're always cautious about is that, you know, to the extent that there are promotions in stores, some of that does hit above the line, but we have great confidence that we'll be able to continue our margin run.

Matt McKinley: All right, thank you very much. Thanks, Beth.

Matt: All right. Thank you very much.

George Kelly: Thank you. Our next question comes from the line of George Kelly with Ross, Capitol Partners. Please proceed with your question. Everybody, thank you. First, I guess a couple more questions on the energy business. I'm curious, when do you plan on launching it? Do you have those initial retail partners secured? And then you mentioned in your prepared remarks about clean energy delivery. And I was hoping you can just sort of expand on how you're achieving that.

Matt: Thanks, Matt.

Operator: Our next question comes from the line of George Kelly with Ross Capital Partners. Please proceed with your question.

Speaker Change: thank you

Operator: Please proceed with your questions.

george keilling: are next question comfortfrom line george keilling with row capat partners

George Kelly: Everybody, thank you. First, I guess a couple more questions on the energy business. I'm curious, when do you plan on launching it? Do you have those initial retail partners secured? And then you mentioned in your prepared remarks about clean energy delivery. And I was hoping you could just sort of expand on how you're achieving that.

Speaker Change: Please proceed with your question.

Operator: First, I guess a couple more questions on the energy business. I'm curious, when do you plan on launching it? Do you have those initial retail partners secured? And then you mentioned in your prepared remarks about clean energy delivery. And I was hoping you could just sort of expand on how you're achieving that.

Speaker Change: everybody thank you

Speaker Change: Thank you. Thank you.

George Keilling: First, I guess a couple more questions on the energy business.

Speaker Change: i'm curious when do you plan on launching it do you have those initial retail partnnerers secured and then you mentioned in your prepared remarks about clean energy delivery and i was hoping you can just sort of expand on how you're achieving that

Chris Mondzelewski: Yeah, sure, George. So I'll break it down into the two questions you asked. So in the first piece, yes, we're having conversations as we speak with retailers. You know, that process has just begun. We want to be in a position to be ready to launch as, you know, retailers open up their windows, you know, next year. So essentially, we'll be ready to go in January, as some of the earlier resets might go in place.

Chris Monsolesky: Yeah, sure, George, so I'll break it out into the two questions. Yes, so in the first piece, yes, we're having conversations as we speak with retailers. You know, that process has just begun. We want to be in a position to be ready to launch as retailers open up their windows, you know, next year. So essentially, we'll be ready to go in January as some of the earlier resets might go in place. And you know, obviously, for something like the North American Convenience Store Show. You know, later this year, we'll clearly be having a large presence there to have the right conversations with partners in that setting.

Speaker Change: yeah sh george so i'm breakking out into the two questions you have so in the first pie

Speaker Change: Yes, we're having conversations as we speak with retailers, you know, that process has just begun.

Speaker Change: We want to be in a position to be ready to launch as, you know, retailers open up their windows, you know, next year. So, essentially, we'll be ready to go in January as some of the earlier resets might go in place.

Chris Mondzelewski: And, you know, obviously, for something like the North American convenience store show later this year, we'll clearly be having the right conversations with partners in that setting. So yeah, we feel confident, you know, again, one of our advantages, our core strategic advantage in Black Rifle is our authenticity and how we hold true to, you know, everything we stand for in our communities.

Speaker Change: Obviously, for something like the North American convenience store show later this year, we'll clearly be having a large presence there to have the right conversations with partners.

Unknown Executive: Greetings. Welcome to the Black Rifle Coffee Company 2024 earnings call. At this time, all participants on a listen-only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance or an conference, please press star zero on your telephone keypad. Please note this conference is being recorded. I will now turn the conference over to you host, Jason Martini. You may begin.

Chris Monsolesky: So yeah, we feel confident, you know, again, one of our advantages, our core strategic advantage in Black Rifle is our authenticity and how we hold true to everything we stand for in our communities. But I think our second is really our speed and our ability to be able to evolve to, you know, what we see as tailwind markets. And I think we can do that much faster than our competition, and we're demonstrating that here. So, you know, we are going to be absolutely ready to go as we go into the year, and that, you know, we had to move on a very quick timeline to do that.

Speaker Change: in that setting. So, yeah, we feel confident, you know, again, one of our...

Speaker Change: One of our advantages, our core strategic advantage in Black Rifle is our authenticity and how we hold true to everything we stand for in our communities, but I think our second...

Speaker Change: is really our speed and our ability to be able to evolve.

Chris Mondzelewski: But I think our second is really our speed and our ability to be able to evolve to, you know, what we see as tailwind markets. And I think we can do that much faster than our competition. And we're demonstrating that here. So, you know, we are going to be absolutely ready to go as we go into the year. And you know, we had to move on a very quick timeline to do that.

Speaker Change: to you know what we see as tailwinds markets andi think we can do that much faster than our competition and we're demonstratingin that here so you know we are going to be absolutely ready to go as we go into the year that what youknow we had to move on a very quick timeline to do that i will tell you though get into the second part of your question there was no compromise on quality whatsoever we are extremely proud of this product

Chris Monsolesky: I will tell you, though, getting to the second part of your question, there was no compromise on quality whatsoever. We are extremely proud of this product. You know, not only the flavor profile, but the ingredients that we're using to do that. We are a super premium business. And so I'm not going to talk specifically about the ingredients themselves. We're putting in the energy blend, but it is all natural. And we are taking advantage of the fact that we have very strong roots into procurement of coffee-based products. And so, you know, I'm not going to get into the science of this, but if you think about, you know, the fruit, the cherries that come from coffee, you know, that actually is a great natural sustainable source of caffeine.

Speaker Change: not only the flavor profile but the ingredients thatwere using to do that weare a superpremium business and so i'm not going to talk specifically about the ingredients themselves we're putting in

Chris Mondzelewski: I will tell you, though, getting to the second part of your question, there was no compromise on quality whatsoever; we are extremely proud of this product. You know, not only the flavor profile but the ingredients that we're using to make that. We are a super premium business. And so I'm not going to talk specifically about the ingredients themselves, we're putting in the energy blend, but it is all natural. And we are taking advantage of the fact that we have very strong roots in the procurement of coffee-based products. And so, you know, I'm not going to get into the science of this.

Chris Mondzelewski: But if you think about, you know, the fruit, the cherries that come from coffee, you know, that actually is a great, natural, sustainable source of caffeine. So that is a core part of it. And we have ensured that we built a suite of ingredients around that that delivers a great final product.

Speaker Change: The energy blend, but it is all natural, and we are taking advantage of the fact that we have very strong roots into procurement of coffee-based

Jason Martini: For a further discussion of risks related to our business, please see our previous filings with the SEC. This call will also contain non-gap financial measures, such as adjusted EBITDA and free cash flow. Whenever we refer to EBITDA in our comments, we are referring to adjusted EBITDA unless otherwise noted. Reconciliation of these non-gap measures to the most capable gap measures are included in the earnings release furnished to the SEC and are also available on our investor website. Now, if you could please refer to the presentation we have provided on our investor relations website and turn to slide four.

Speaker Change: products. And so, you know, I'm not going to get into the science of this, but if you think about, you know, the fruit, the cherries that come from

Speaker Change: coffee, you know, that actually is a great, natural, sustainable source of caffeine. So that is a core part of it and, you know, we ensured that we built, you know, a suite of ingredients around that that delivers a great final profile.

Chris Monsolesky: So, that is a core part of it. And, you know, we ensured that we built, you know, a suite of ingredients around that that delivers a great final profile. Okay.

Operator: Okay, thank you. And then, just one quick follow up.

George Kelly: Thank you. And then just one quick follow-up on Walmart. You shared in the past year share there.

Speaker Change: Okay, thank you. And then just one quick follow-up. On Walmart, you shared in the past your share there. How did that trend in the quarter and anything you can announce as far as plans to, I don't know if it's promotions or anything else, to continue taking share at Walmart?

Chris Mondzelewski: On Walmart, you shared in the past your share there. How did that trend in the quarter? And any things you can announce as far as plans to, I don't know if it's promotions or anything else, to continue taking share at Walmart.

Chris Monsolesky: How did that turn into the quarter and anything you can announce as far as plans to, I don't know if it's promotions or anything else to continue taking sure of. at Walmart. Yeah, so the share at Walmart continues to hold at above four. Yes, we are at a position now. Walmart is, of course, our first fully established retailer. They've been a great partner. We added a lot of new items last year with a full suite of distribution. Within Walmart, we're very much focused on how we continue to build the velocity of that business. So yeah, you're actually right.

Chris Mondzelewski: I would now like to turn the call over to Chris Monsolesky, CEO of Black Rifle Coffee Company. Mons. Thanks Jason and good morning everyone. Joining me today is Evan Hafer, our founder and executive chairman and Steve Cadenecy, our chief financial officer. On our last earnings call, we highlighted the value of building a better business before building a bigger one and we can tend you to make progress on building that foundation on which to drive outsized category growth.

Operator: Yeah, so the share at Walmart continues to hold at, you know, above four. You know, we are in a position now where Walmart is, of course, our first fully established retailer. They've been a great partner.

Chris Mondzelewski: Yeah, so the trend, the share at Walmart continues to hold at, you know, above four. Yes, we are in a position now, you know, Walmart is, of course, our first fully established retailer, they've been a great partner, we added a lot of new items last year, with a full suite of distribution, you know, within Walmart. We're very much focused on how we continue to build the velocity of that business. So yeah, you're actually right. I think, as we look at the back half of the year, that's exactly what we're going to do as we move back into the seasonality of coffee and center store coffee.

Speaker Change: Yeah, so the share at Walmart continues to hold at, you know, above four, you know. Yes, we are in a position now, you know, Walmart is of course, you know, our first

Operator: We added, you know, a lot of new items last year. And with a full suite of distribution, you know, within Walmart, we're very much focused on how we continue to build the velocity of that business. So, yeah, you're actually right.

Speaker Change: Fully Established Retailer. They've been a great partner. We added...

Speaker Change: You know, a lot of new items last year. With a full suite of distribution, you know, within Walmart, we're very much focused on how we continue to build.

Chris Mondzelewski: Our priorities remain number one, establishing a model that sustainably creates value in two, driving the categories in which we choose to compete. In other words, outgrowing our peers and the category. With this, I am pleased with our progress in Q2, delivering gross margins above our initial expectations of 40% and our continued growth of 8% in the wholesale channel, which was well above the category. We have much work to do. The progress the team has driven is exceptional.

Operator: I think as we look at the back half of the year, that's exactly what we're going to do as we move back into the seasonality of coffee and center store coffee. We want to make sure that we continue to help Walmart to be at the head of that category. I think, you know, they've had great category growth versus the rest of the market. And so we're going to go and push, you know, hard, with any of our partners, obviously, you know, not only Walmart, but any of the partners that we work with to enable their category growth as we move back into the high seasonality periods for coffee. So I won't talk about the specific programs we're doing, but we've got some great stuff for the back half. And I would add George to Steve.

Steve Kadenacy: I think as we look at the back half of the year, that's exactly what we're going to do as we move back into the seasonality of coffee and center store coffee. We want to make sure that we continue to help Walmart to be at the head of that category. I think they've had great category growth, you know, versus the rest of the market. And so we're going to go and push hard, you know, with any of our partners. Obviously, you know, not only Walmart, but any of the partners that we work with to enable their category growth as we move back into the high seasonality periods for coffee.

Speaker Change: the velocity of that business. So yeah, you're actually right. I think as we look at the back half of the year, that's exactly what we're gonna do as we move back into the seasonality of coffee and center store coffee.

Chris Mondzelewski: We want to make sure that we continue to help Walmart to be at the head of that category. I think, you know, they've had great category growth versus the rest of the market. And so we're going to go and push hard with any of our partners, obviously, you know, not only Walmart but any of the partners that we work with, to enable their category growth as we move back into the high seasonality periods for coffee. So I won't talk about the specific programs we're doing, but we've got some great stuff for the back half. And I would add George and Steve.

Speaker Change: We want to make sure that we continue to help Walmart.

Speaker Change: to be at the head of that category. I think, you know, they've had great category growth.

Speaker Change: versus the rest of the market and so we're going to go and push hard with any of our partners obviously not only wal mart but any of the ners that we work with to enable their category growth as we move back into the high seasonality periods

Chris Mondzelewski: Only one year ago, we found ourselves with negative free cash flow of more than 30 million for the quarter. This year, we are producing a positive 1 million in free cash flow while showing substantial improvements in gross margin and adjusted EBITO. This turnaround is fueled by an ever increasing culture of operational excellence. Investments in forecasting, strong leadership and owned and partner production and in improving supply chain. We have built a strong foundation and business model that will support the long-term growth we expect in the business.

Steve Kadenacy: So I won't talk about the specific programs we're doing, but we've got some great stuff at the back half. And I would add, George, Steve, I think the same is true for FDM in general. If you look at the sell-through numbers, you can tell that we're dramatically outpacing the industry. We're the category. We grew at 28% while coffee as a whole is slightly down. So we're seeing that same performance as we ramp. And the same is true when you look at our revenue for the second half. I think it's important. We've talked about the barter transaction previously.

Speaker Change: for coffee so i won'to talk about the specific programs we're doing but we've got some great stuff the backhalf

Steve Kadenacy: And I would add, George, to Steve, I think the same is true for FDM in general. If you look at the sell-through numbers, you can tell that we're dramatically outpacing the industry or the category. We grew at 28% while coffee as a whole was slightly down. So we're seeing that same performance as we ramp up.

George Keilling: and i would add george to steve i think the same is true for f m in general if you look at the cell numbers you can tell that were're dramatically outpacing the industry that were or the category grouw twenty eight percent while copy as a whole is slightly down

Steve Kadenacy: And the same is true when you look at our revenue for the second half. I think it's important; we've talked about the barter transaction previously. If you recall, the barter transaction in the second half of last year was pretty significant to our revenue. But it's not in our revenue for the second half at all. So if you look at the midpoint of our range, we actually have pretty significant growth in the second half, core to core, and all of that is driven by the FDM market.

Speaker Change: So, we're seeing that same performance as we ramp. And the same is true when you look at our revenue for the second half. I think it's important. We've talked about the barter transaction.

Chris Mondzelewski: With that said, I am disappointed that our wholesale rollouts are taking longer than our initial expectations. And as a result, our growth this quarter and for the year is lower than our initial forecast. Our products are continuing to perform incredibly well with strong sell-through at our existing retailers, which I will discuss shortly. But some of the distribution we expected in 2024 is now going to come in 2025, which has resulted in a lower sales forecast for this year. This team is steadfast in meeting or exceeding our commitments. And I expect our additional investments in sales staff, analytics and forecasting will pay off as we execute on our strategic plan.

Operator: If you recall, the barter transaction in the second half of last year was pretty significant to our revenue. It's not in our revenue for the second half at all. So if you look at the midpoint of our range, we actually have pretty significant growth in the second half, core to core, and all of that is driven by the FDM market. Thank you.

Speaker Change: Previously, if you recall, the barter transaction in the second half of last year was pretty significant to our revenue. It's not in our revenue for the second half at all. So if you look at the midpoint of our range, we actually have pretty significant growth in the second half.

Speaker Change: cor a core and all of that is driven by the fdm market

Operator: Thank you, and as a quick reminder, if anyone has any questions, you may press star 1 on your telephone keypad to join the question and answer queue at any time.

Operator: Thank you. And as a quick reminder, if anyone has any questions, they may press star 1 on your telephone keypad to join the question and answer queue at any time. Our next question comes from the line of David Shatner with William Blair. Please proceed with your question.

David Shaq: And, as a quick reminder, if anyone has any questions, you may press star one on your telephone keypad to join the question and ask you any time. Our next question comes from the line of David Shaq; no, it wasn't there. Please proceed with your question.

Speaker Change: Okay, thank you.

Speaker Change: Thank you. And as a quick reminder, if anyone has any questions, you may press star 1 on your telephone keypad to join the question and answer queue anytime.

Chris Mondzelewski: Before I provide some more color on the quarter, I wanted to share some exciting news with you. At Black Rifle, we will always stand for veterans and first responders first and foremost. And in doing so, we are constantly looking for ways to expand our mission. When we sell more, we do more.

Speaker Change: Our next question comes from the line of David Shacknell with William Blair. Please proceed with your question.

David Shatner: Hi, David Shatner stepping in for Jon Andersen. Can you guys highlight early reads you're seeing with Black Rifle pods on karrig.com and the partnership with KDP thus far?

David Shatner: Hi, David Chackneaux, stepping in for Jon Andersen. Can you guys highlight early reads you're seeing with Black Rifle pods on karrig.com and the partnership with KDP thus far?

David Shaq: David Shaq knows definitely for John Anderson. Can you guys highlight early reads you're seeing with Black Rifle pods on Carry.com and the partnership with KDP thus far? Yeah, sure, David. I think we're delighted with the partnerships so far. I think one of the core elements of this partnership was really quality and consistency of quality. We wanted to make sure again as a super premium business that we had the highest and most consistent quality on our pods business. And as we've said before, you know, Curry is the best in the business, and we've been delighted; you know, early feedback from our consumers is that they're really liking the product itself.

David Shatnow: Hi, David Shatnow stepping in for Jon Andersen. Can you guys highlight early reads you're seeing with Black Rifle pods on Keurig.com and the partnership with KDP thus far?

Chris Mondzelewski: It is in that spirit we announced the release of Black Rifle Energy. While we are exceptionally proud of our origins as a premium coffee company, we also realize that traditional coffee products alone do not meet the needs of all of our consumers. The energy drink market is over a $20 billion category. And we are entering the category with a great tasting, proprietary, clean energy blend, which derives energy from natural caffeine sources, including green coffee beans.

Chris Mondzelewski: Yeah, sure, David. I think we're delighted with the partnership so far. I think, you know, one of the core elements of this partnership was really quality and consistently quality. We wanted to make sure, again, as a super premium business, that we had the highest and most consistent quality in our pods business. And as we've said before, Keurig is the best in the business, and we've been delighted. Early feedback from our consumers is that they're really liking the product itself.

Speaker Change: Yeah, sure David. I think we're delighted with the partnerships so far. I think, you know, one of the core elements of this partnership was really quality and consistently a quality. We wanted to make sure, again, as a super premium business that we had the highest

Speaker Change: The most consistent quality on our pods business and

Speaker Change: As we've said before, you know, Keurig is the best in the business and we've been delighted. You know, early feedback from our consumers is that they're really liking the product itself. So, you know, of course, that's in all channels, not just their, you know, owned channels. As far as

Chris Mondzelewski: So, you know, and of course, that's in all channels, not just their own channels. As far as sales for them go, I'm not going to quote their numbers, I think, you know, but yeah, it's doing quite well. You know, it's a brand that, you know, is focused, that they have focused on. We, of course, are working directly with them to make sure that we continue to educate their sales force so that they can really open that up in the channels that they want to be able to do that with. And, you know, again, it's a great route for expansion for us. Yeah, and we're delighted.

Chris Monsolesky: So, you know, of course, that that's in all channels, not just their own channels as far as sales for them. I'm not going to quote their numbers. I think, you know, but yeah, it's doing quite well. You know, it's a brand that, you know, is focused that they have focused on. We, of course, are working directly with them to make sure that we continue to educate their sales force so that they can really open that up in the channels that they want to be able to do that with. And, you know, again, it's a great route for expansion for us.

Chris Mondzelewski: It has been fun to watch our high energy team work to develop for varieties completely different from anything we've launched before. While the roots of the product tie back to our origins, these refreshing natural fruit flavor profiles will deliver to a different drinking occasion and in many cases bring new consumers to Black Rifle. I'll dive in more on the huge opportunity with Black Rifle Energy shortly. Returning to the quarter's results, Q2 revenue is relatively flat year over year.

Speaker Change: Sales for them, I'm not going to quote their numbers, I think...

Speaker Change: You know, but, yeah, it's doing quite well. You know, it's a brand that, you know, is focused.

Speaker Change: that they have focused on. We, of course, are working directly with them to make sure that we continue to educate.

Speaker Change: Their Salesforce so that they can really open that up and the channels that they want to be able to do that with, and you know, again, it's a great route for expansion for us. Yeah, and we're delighted by the early performance as well. We are starting to accrue royalty from their sales on...

Operator: Yeah, and we're delighted by the early performance as well. We are starting to accrue royalty from their sales on their DTC, and they're also expecting a significant uptick from Black Rifle. As mentioned on their earnings call, they view that potential as quite significant.

Chris Mondzelewski: Yeah, and we're delighted by the early performance as well. We are starting to accrue royalty from their sales on their DTC. And they're also expecting a significant uptick from Black Rifle. As mentioned on their earnings call, they view that potential as quite significant.

Steve Kadenacy: Yeah, and we're delighted by their early performance as well. We are starting to accrue royalty from their sales on their DTC. And they're also expecting a significant uptick from Black Rifle, as mentioned on their earnings call. They view that potential as quite significant. for them.

Chris Mondzelewski: As I mentioned, this was below our expectations. Sales growth was lower than we expected for two reasons. First, we cut investment in our direct to consumer or DTC business. Post the pandemic, consumer behaviors have shifted. As we look across the entire industry, fewer consumers are choosing to buy products directly from DTC sites. As this occurs, we find that our dollars spent in driving DTC awareness are less effective. And so we have chosen to allocate these dollars where we get a higher ROI.

Operator: their DTC. And they're also expecting significant uptick from Black Rifle. As mentioned on their earnings call, they view that potential as quite significant for them.

David Shaq: Great, thank you. Just one other thing.

Steve Kadenacy: Great, thank you. And if I, just one other thing, following up on somebody who asked about gross margin before, I think the discussion was more about the second half of the year, but just talking about the second quarter specifically, could you provide more color on the drivers there? You guys had a nice quarter on gross margin and also any color on where things stand with the operational initiatives would be great.

Steve Kadenacy: Following up on somebody that asked about gross margin before, I think the discussion was more about the second half of the year, but just talking about the second quarter specifically, could you provide more color on the drivers there? You guys had a nice quarter on gross margin, and also any color on where things stand with the operational initiatives. That'd be great. The operational initiatives continue to go quite well. I mean, we had a number of positive impacts to our margin. Productivity was the most important, and that just goes to our supply chain, the narrowing of our manufacturing partners, and the hedging that we do around green coffee.

Speaker Change: Great, thank you. Just one other thing, following up on somebody had asked about gross margin before, I think the discussion was more about the second half of the year, but just talking about the second quarter specifically.

Speaker Change: Could you provide more color on the drivers there? You guys had a nice quarter on gross margin. And also any color on where things stand with the operational initiatives. That'd be great.

Chris Mondzelewski: I'm proud of our team's discipline in creating clear principles around when to pull back on this spending. And as our growth shifts to other channels and other products, we will see the benefits, of this. The good news is that consumers are continuing to seek out our products. Their shopping behavior is shifting back to either traditional or online retail. This takes me to my second point. While we continue to expect consumers to be able to find our products in almost every major grocery retailer in the US by the end of 2025, the rollout will be a bit slower.

Steve Kadenacy: The operational initiatives continue to go quite well. I mean, we had a number of positive impacts on our margin. Productivity was the most important thing, and that just goes to our supply chain, the narrowing of our manufacturing partners, and the hedging that we do around green coffee. There's a favorable mix shift as we ramp into FDM that will continue. Those are the main drivers, really. It's good, solid, continued execution. And ramping into markets that are more profitable to us from a shipping and logistics standpoint. I would just emphasize

Speaker Change: the operational initiatives continue to go quite well i mean we had a number of positive impact to our margin productivity was the most important

Speaker Change: And that just goes to our supply chain, the narrowing of our manufacturing partners, and you know, the hedging that we do around green coffee.

Steve Kadenacy: There's a favorable mix shift as we ramp into FDM that will continue. Those are the main drivers, really. It's good, solid, continued execution, and ramping into markets that are more profitable to us from a shipping and logistics standpoint.

Speaker Change: There's a favorable mix shift as we ramp into FDM that will continue.

Speaker Change: Those are the main drivers, really. It's good, solid, continued execution.

Chris Mondzelewski: While commitments and discussions are going as planned, some retailer shelf resets that we expected to happen in 2024 are shifting to 2025. Given our strong performance on shelf, we continue to have very effective conversations with every major retailer in the country. Once customers try our products, we find that repeat purchase is strong. You can see this in the performance of our largest in first retail partner where we grew plus 19 percent in the quarter.

Speaker Change: and Ramping into markets that are more profitable to us from a shipping and logistics standpoint. I would just, you know, emphasize, you know, we had talked about this almost a year ago now that, you know, this was going to be the core focus for Steve, myself, the rest of the team, you know, knowing that a healthy gross margin is really the fuel that will continue to be needed, you know, to drive the growth in the business and

Chris Mondzelewski: I would just, you know, emphasize that we talked about this almost a year ago now that, you know, this was going to be the core focus for Steve, myself, and the rest of the team, knowing that a healthy gross margin is really the fuel that will continue to be needed to drive growth in the business. And obviously, we're pleased with the results. But even more so, I think, you know, the system that has been developed that is delivering what Steve's talking about, so we feel confident that it's not just, you know, a one-time hit, but there's a continuous line of productivity and optimization of the business as we move forward into the next years. That is one of the things that gives us a great deal of confidence. Because as we do that again, you know, we increase our firepower to spend back on the market. Great.

Chris Monsolesky: I would just emphasize, we had talked about this almost a year ago now that this was going to be the core focus for Steve, myself, the rest of the team. Knowing that a healthy gross margin is really the fuel that will continue to be needed to drive the growth in the business. Obviously, we're pleased with the results, but even more so, I think this system that has been developed that is delivering what Steve's talking about so that we feel confident that it's not just one-time hip, but there's a continuous line of productivity and optimization of the business as we move forward into the out years.

Speaker Change: Obviously, we're pleased with the results, but even more so, I think...

Chris Mondzelewski: We are also seeing strong on shelf performance from our new retail partners who began their rollouts of Black Rifle through the first two quarters of this year. At this point, we have committed launch windows for the largest five grocery chains between now in Q2 2025.

Speaker Change: you know, the system that has been developed.

Speaker Change: that is delivering what Steve's talking about, so that we feel confident that it's not just a one-time hit, but there's a continuous line of productivity and optimization of the business as we move forward into the out years. That is one of the things that gives us a great deal of confidence. Because as we do that, again, we increase our firepower to spend back on the market.

Chris Monsolesky: That is one of the things that gives us a great deal of confidence, because as we do that, again, we increase our firepower to spend back on the market. Great.

Chris Mondzelewski: Rounding out the quarter's highlights, our earnings in free cash flow measures were a tremendous success story for the second quarter. As we saw a 42 percent gross margin, a nearly 700 basis point improvement over Q2 2023. Adjusted EBITDA improved from break even in the prior year to 8.5 million this quarter, and we posted our third consecutive quarter of positive free cash flow, up 31 million from the second quarter of 2023. Now please turn to slide six as I talk about our channel highlights.

David Shatner: That's all from me. Thank you.

Operator: That's all from me. Thank you.

David Shaq: That's all from me. Thank you.

Speaker Change: Great. That's all from me. Thank you.

Operator: Our next question comes from the line of Joe Altebello with Maiden James. Please proceed with your question. Thank you, morning. This is Martin Dr. Joe. I just want to touch on the guide real quick. You lowered your revenue guide by about $45 million from midpoint, but you only missed 2Q by about 3rd; that implies that there's some sort of impact in 2H. Is that all those delays? Or is there something else going on there? There's nothing else going on. I did just mention on the previous question, there's a lot of shipments last year and the second half around that barter transaction, so that's part of it.

Operator: Our next question comes from the line of Joe Altobello with Raymond James. Please proceed with your question.

Joe Altobello: Our next question comes from the line of Joe Altobello with Raymond James. Please proceed with your question.

Joe Altobello: Thank you.

Martin: Hey, good morning. This is Martin. I'm for Joe.

Operator: Our next question comes from the line of Joe Altobello with Raymond James. Please proceed with your question.

Martin: I just want to touch on the guide real quick. You lowered your revenue guide by about $45 million at midpoint, but you only missed 2Q by about a third of that. So it implies that there's some sort of impact in 2H. Is that all those delays, or is there something else kind of going on there?

Martin: Hey, good morning. This is Martin on behalf of Joe.

Martin: Hey, good morning. This is Martin on for Joe. I just want to touch on the guide real quick. You lowered your revenue guide by about $45 million at midpoint, but you only missed 2Q by about a third of that. So it implies that there's some sort of impact in 2H. Is that all those delays or is there something else kind of going on there?

Steve Kadenacy: So there's nothing else going on. I did just mention in the previous question that there were a lot of shipments last year in the second half around that barter transaction. So that's part of it. But most of it is what we talked about is the movement to the right, a delay in timing issue relative to the FDM load-ins. It's taking a bit longer than expected.

Chris Mondzelewski: Based on Nielsen consumption data, we grew 28 percent in the second quarter, and 35 percent year to date compared to a category decline of 2.5 percent in 1.7 percent respectively. Based on this strong consumption, we expect wholesale replenishment to strengthen in the following quarters. In fact, we are now the number seven brand in 12 ounce bagged coffee across the grocery channel and still have significant runway with an ACV of only 40 percent.

Speaker Change: So there's nothing else going on. I did just mention...

Speaker Change: on the previous question, there's a lot of shipments last year in the second half around that barter transaction, so that's part of it. But most of it is what we talked about is the movement to the right, a delay in timing issue relative to the FDM load-ins, it's taking a bit longer than expected.

Joe Altebello: But most of it is what we talked about: the movement to the right, delay, and timing issue relative to the FBM load-ins. It's taken a bit longer than expected. Okay. Great.

Martin: Okay, great. And just really quickly, touching on gross margins as well, you did lower that top-line outlook in what is a margin-accretive channel, but you did raise your gross margin guidance. So just trying to get some color about what's driving it.

Martin: Okay, great. And just really quickly, touching gross margins as well, you did lower that top-line outlook in what is a margin-accretive channel, but you did raise your gross margin guidance, so just trying to get some color about what's driving that.

Steve Kadenacy: And just really quickly, no question, gross margins as well. You didn't lower that top line outlook in what is a margin-to-creative channel, but you did raise your gross margin guidance. So just trying to get some color about what's driving that. We just talked about that when the last question is really about that supply chain productivity element. It's execution day in, day out. We are very pleased by the execution within the business. It's broader than just gross margin. It's also EBITDA margin. We're managing our expenses from top to bottom much better. And that's just about execution.

Martin: okay great and just really quickly not suchou gross margin as well you didn' lo that top line outlook in what is a margin accreativeve channel but you did raise your gross marchin gotidance so just tryingto get color about whatwiths driving that

Chris Mondzelewski: Moving to slide seven. Similar to center store coffee, we continue to drive distribution gains and ready to drink or RTD. At the end of Q2, our distribution stands at 46.8 percent ACV, a 500 basis point increase versus a year ago. Through the first half of 2024, the RTD coffee category has slowed with the decline of 6.7 percent versus year ago, but similar to the rest of the business, Black Rifle has exceeded the market by over 500 basis points.

Steve Kadenacy: We just talked about that in the last question. It's really about that supply chain productivity element. It's execution day in, day out. We are very pleased with the execution within the business. It's broader than just gross margin. It's also EBITDA margin. We're managing our expenses from top to bottom much better. And that's just about execution. It's about following up and maintaining discipline throughout the business. And that, to us, means, just as Monde said, it gives us the ability to have positive free cash flow for the first half while we burned $40 million last year, which allows us to fuel our mission one and also reinvest in the business. And Black Rifle Energy is an example of that. Great, I appreciate it.

Speaker Change: We just talked about that in the last question. It's really about that supply chain productivity element. It's execution.

Speaker Change: Day in day out. We are we are very pleased by the execution within the business. It's broader than just gross margin. It's also EBITDA margin We're managing our expenses from top to bottom much better and that's just about execution. It's about

Joe Altebello: It's about following up and maintaining discipline throughout the business. And that, to us, means just what Mons said. It gives us the ability to have positive free cashflow for the first half while we burned 40 million last year, which allows us to fuel our mission one and also reinvest in the business. And Black Rifle Energy is an example of that. Great. Appreciate it. That's the luck.

Chris Mondzelewski: Slide eight. Beyond the gains we will continue to drive in RTD coffee, we're excited about the future of our RTD innovation with the introduction of Black Rifle energy. Black Rifle energy answers our consumers desire for clean, low sugar energy, delivered in a refreshing flavor profile. From our research, 58 percent of our customers have already purchased energy products in about 90 percent of our consumers are interested in energy derived from natural source, and while we love coffee at Black Rifle, we find that many of the fans of our brand are looking for a more refreshing profile for their energy consumption.

Martin: following up and maintaining discipline throughout the business and that to us means just what Monde said is it gives us the ability to have positive free cash flow for the first half while we burned 40 million last year which allows us to fuel our mission one and also reinvest in the business.

Martin: Great, I appreciate it.

Martin: Great, I appreciate it. Best of luck.

Martin: and Black Rifle Energy is an example of that.

David Holcomb: Thank you. Again, I have a quick reminder: if anyone has any questions, you may press star one on your telephone key back to join the queue. Our next question comes from the line of Bill Chappell with Jewish Security. Please proceed with your question. Hi, good morning. This is David Holcomb on for Bill Chappell.

Martin: Great, appreciate it. Best of luck.

Operator: Thank you. Again, as a quick reminder, if anyone has any questions, you may press star 1 on your telephone keypad to join the queue. Our next question comes from the line of Bill Chappell with Truist Securities. Please proceed with your question.

Speaker Change: Thank you. Thank you.

Speaker Change: Thank you. Again as a quick reminder if anyone has any questions you may press star 1 on your telephone keypad to join the queue.

Operator: Our next question comes from the line of Bill Chappell with Truist Securities. Please proceed with your question.

Bill Chappell: Hi, good morning. This is Davis Holcombe on behalf of Bill Chappell.

Davis Holcombe: Hi, good morning. This is Davis Holcombe on behalf of Bill Chappell.

Chris Mondzelewski: When designing Black Rifle Energy, we focused on three key areas, first quality of ingredients and taste. As we have talked about in the past, we buy the very best coffee beans for our coffees. So similarly, we are sourcing the very best ingredients for our energy drinks. Our four flavors, Freedom Punch, Project Mango, Ranger Berry, and Wild Frost, scored exceptionally well with consumers. Second, we focused on energy delivery. As mentioned earlier, we spent a lot of time developing a clean energy delivery system from our green coffee extract and other natural caffeine sources.

Davis Holcombe: I just wanted to ask kind of a higher-level strategic question on energy. You know, with the category having slowed so much recently and it being so unexpected, there's a lot of concern that the category is kind of reaching maturity, and we were just kind of wanting to get a little bit more color on what was driving this decision and why now.

Davis Holcombe: I just wanted to ask kind of a higher-level strategic question on energy. You know, with the category having slowed so much recently and it being so unexpected, there's a lot of concern that the category is kind of reaching maturity. And we were just kind of wanting to get a little bit more color on what was driving this decision and why now.

David Holcomb: Just wanted to ask kind of a higher level strategic question on the energy. You know, with the category having slowed so much recently and being so unexpected, there's a lot of concern that the category is kind of reaching maturity, and we were just kind of wanting to get a little bit more color on what was driving this decision and widen out. Yeah, thanks. Great question. You know, as I've said a number of times, and I'll continue to double down on it because I just think this is sort of a mantra for us. You know, the term I like to use into tailwind categories and what that means ultimately is the categories that consumers are choosing to buy.

Davis Holcombe: Hi, good morning. This is Davis Holcombe on for Bill Chappell.

Davis Holcombe: I just wanted to ask kind of a higher-level strategic question on the energy, you know, with the category having slowed so much recently and it being so unexpected.

Davis Holcombe: There's a lot of concern that the category is kind of reaching maturity, and we were just kind of wanting to get a little bit more color on what was driving this decision and why now.

Chris Mondzelewski: Yeah, thanks. Great question. You know, as I've said a number of times, and I'll continue to double down on because I just think this is a sort of a mantra for us, you know, we need to continue to navigate, you know, the term I like to use into tailwind categories. And what that means, ultimately, is the categories that consumers are choosing to buy. This is one of the key elements that I've learned over 20 plus years in CPG.

Speaker Change: yeah thanks great question you know as i said a number of times and i'll continue to dbledown because i just thinkthisis a sort of a mont for us you know is we need to continue to navigate you know the term i like to use into tailwind categories and what that what that means ultimately as the categories that consumers are choosingto buy this is one of the

Chris Mondzelewski: Finally, we developed a design that brings forward our brand with an emphasis on our aggressive mission driven ethos. We believe it works well in tying existing elements of Black Rifle to a unique graphics architecture that will drive visibility from the shelf. Moving to slide nine, as mentioned, DTC top line was challenged by shifting consumer behavior and with that, a pullback on investment. As we have said many times, the consumer determines their buying preference, and we need to make sure we align our marketing and sales strategies to their needs.

Chris Monsolesky: This is one of the key elements that I've learned over 20 plus years in CPG. You've got to be moving your business to where consumer demand is. And I think we're very proud of the fact that, you know, we're anchored in coffee, and coffee is a category that will always have strength in the US. We believe that. But particularly with younger generations, we've alluded to this a bit in the past; you know, preferences are changing and they're broadening. There's a desire to have, you know, different types of more refreshing profiles tied to energy consumption. And that is ultimately what built the 20 billion dollar energy category.

Operator: key elements that I've learned over 20 plus years in CPG. You've got to be moving your business to where consumer demand is. And I think we're very proud of the fact that we're anchored in coffee. And coffee is a category that will always have strength in the US. We believe that, but particularly with younger generations, as we've alluded to a bit in the past, preferences are changing, and they're broadening. There is a desire to have different types of more refreshing profiles tied to energy consumption.

Chris Mondzelewski: You've got to be moving your business to where consumer demand is, and I think we're very proud of the fact that we're anchored in coffee. And coffee is a category that will always have strength in the US. We believe that But particularly with younger generations, as we've alluded to a bit in the past, preferences are changing, and they're broadening. There's a desire to have different types of more refreshing profiles tied to energy consumption.

Operator: key elements that I've learned over 20 plus years in CPG. You've got to be moving your business to where consumer demand is. And

Operator: I think we're very proud of the fact that we're anchored in coffee, and coffee is a category that will always have strength in the U.S., we believe that.

Operator: But, particularly with younger generations, we've alluded to this a bit in the past, you know, preferences are changing and they're broadening. There's a desire to have, you know, different types of more refreshing profiles.

Chris Mondzelewski: That is ultimately what built the $20 billion energy category. I think my opinion is when you look at it as a whole, it can be a bit misleading. You're right.

Operator: And that is ultimately what built the $20 billion energy category. But I think my opinion is when you look at it as a whole, it can be a bit misleading. You're right, it is a very large category, which means there are a lot of players in it, and there are a lot of different types of products. And when you sub-segment that, I think what you find is that there are elements of it that are still growing at very, very high levels.

Operator: tied to energy consumption and that is ultimately what built the 20 billion dollar energy category.

Chris Monsolesky: I think, you know, my opinion is, you know, when you look at it as a whole, it can be a bit misleading. You're right. You know, it is a very large category, which means there's a lot of players in there. And there's a lot of different types of products. And when you sub-segment that, I think what you find is that there are elements of it that are still growing, you know, at very, very high levels. And that's really what we're focused on. So when you look at the formulation of our product and how we're going to market that product and the demographic that we're going to go after and how we're, you know, going to generate awareness, we feel very confident that that is going to be an area that we believe that we can source exceptionally high growth.

Chris Mondzelewski: Across the industry, consumers find themselves relying less on the DTC channel. And on top of this, not all of our DTC business is seeing the same declines. Our subscription business, serving those consumers most loyal to the brand, is stabilizing. Given the value of this segment of consumers, we will continue our investment in growing subscriptions and increasing our presence as the largest coffee subscription business in the US.

Operator: I think, you know, my opinion is, you know, when you look at it as a whole, it can be a bit misleading. You're right, you know, it is a very large category, which means there's a lot of players in there, and there's a lot of different types of products. And when you sub-segment that, I think what you find is that...

Chris Mondzelewski: It is a very large category, which means there are a lot of players in it, and there are a lot of different types of products. And when you sub-segment that, I think what you find is that there are elements of it that are still growing at very, very high levels. And that's really what we're focused on. So when you look at the formulation of our product and how we're going to market that product and the demographic that we're going to go after and how we're going to generate awareness, we feel very confident that that is going to be an area that we believe that we can source exceptionally well.

Davis Holcombe: Got it. Thank you.

Operator: And that's really what we're focused on. So when you look at the formulation of our product and how we're going to market that product and the demographic that we're going to go after and how we're going to generate awareness, we feel very confident that that is going to be an area that we believe that we could source exceptionally well.

Operator: There are elements of it that are still growing at very, very high levels.

Davis Holcombe: Got it. Thank you.

Davis Holcombe: Really what we're focused on so when you look at the formulation

Davis Holcombe: of our product and how we're going to market that product and the demographic.

Chris Mondzelewski: Finally, I will reiterate what we've said previously about our outpost business, while the potential is unlimited in what our outposts can do to build our brand and revenue streams. Now is not the right time for investment. We will continue to invest our capital in building our brand and wholesale distribution. We expect to share the full strategy for our outpost or coffee shop channel sometime in the next year.

Davis Holcombe: that we're going to go after and how we're going to generate awareness. We feel very confident that that is going to be an area that we believe that we can source exceptionally high growth.

David Holcomb: Got it. Thank you.

Steve Kadenacy: And also, just wanted to ask about additional color on inputs, specifically green coffee. Costs are up, you know, 50% in the last year, another 30% or so in the last six months. You guys said you have a hedging program in place that kind of smooths out the short-term pricing for you all. So just wanted to see how those price rises are going to be affecting you all going forward. What kind of hedging schedule you all have, like how far out are you all hedged?

Operator: And also, just wanted to ask about some additional color on inputs, specifically green coffee. Costs are up, you know, 50% in the last year, another 30% or so in the last six months. You guys said you have a hedging program in place that kind of smooths out the short-term pricing for you all. So just wanted to see how those price rises are going to be affecting you all going forward. What kind of hedging schedule you all have, like how far out are you all hedged?

Chris Monsolesky: And also just wanted to ask about some additional color on inputs, specifically green coffee. Costs are up, you know, 50% in the last year. Another like 30% or so in the last six months. You guys said you have a hedging program in place that kind of smoothed out the short-term pricing for you all. So just wanted to see how those price rises are going to be affecting you all going forward. What kind of hedging schedule you all have, like how far out you'll hedge. I mean, we hedge pretty far out, but the bulk of our hedging is about a year out.

Operator: Got it, thank you. And also just wanted to ask about

Speaker Change: Chris Mondzelewski, Gregory Iverson, Chris Mondzelewski, Thomas Davin, Evan Hafer, Tanner Dosslewski,

Steve Kadenacy: Now turning to our financial results, Steve. Thank you, Maude. Please turn to slide 11. Our continued efforts towards productivity improvements have resulted in our second consecutive quarter of gross margins and excess of our 40% target. Supply chain efficiencies driven primarily by improvements in our distribution and logistics costs, added 420 basis points to our Q2 gross margin as compared to Q2 2023. The efforts to simplify our supply chain in both the number of partners used for manufacturing and distribution, as well as our internal cost management are continuing to enable dramatically improved gross margins.

Operator: I mean, we had... pretty far out. But the bulk of our hedging is about a year out. We're super proud of our buyer program; we monitor it very closely. The real significant increases in coffee beans are, quite frankly, much more impacting Robusta than it is Arabica. And obviously, our coffees are on the higher end and higher quality beans. There's been less of an impact there, but we still are taking advantage of those forward prices. And we're also taking advantage of differentials between markets. Our group there is quite sophisticated. And quite frankly, they're keeping it where it's not a material impact on our near-term or 25-year forecast.

Steve Kadenacy: I mean, we had, were pretty far out. But the bulk of our hedging is about a year out. We're super proud of our buyer program; we monitor it very closely. The real significant increases in coffee beans are, quite frankly, much more impacting Robusta than it is Arabica. And obviously, our coffees are on the higher end and higher quality beans, so there's been less of an impact there, but we still are taking advantage of those forward prices, and we're also taking advantage of differentials between markets. Our group there is quite sophisticated, and quite frankly, they're keeping it where it's not a material impact on our near-term or 25-year forecast.

Speaker Change: hedging schedule you all have, like how far out are you all hedged.

Operator: Thank you. And our next question comes from the line of Sarang Vora with the Felty Advisory Group. Please proceed with your question.

Davis Holcombe: Excellent. I appreciate it.

Operator: I mean, we hedge.

Chris Monsolesky: We're super proud of our buyer program. We monitor it very closely. The real significant increases in coffee beans, quite frankly, is much more impacting robusta than it is, and obviously our coffees are on the higher end and higher quality beans. So there's been less of an impact there, but we still are taking advantage of those forward pricing, and we're also taking advantage of differentials between markets. Our group there is quite sophisticated and, quite frankly, they're keeping it where it's not a material impact to our near term or 25 forecast.

Operator: pretty far out but the bulk of our hedging is about a year out.

Operator: Our buyer program, we monitor it very closely. The real significant increases in coffee beans, quite frankly, is much more impacting Robusta than it is Arabica.

Operator: And obviously our coffees are on the higher end and higher quality beans.

Steve Kadenacy: In addition, our hedging efforts have mitigated the short-term increase in the market price of green coffee, reducing the spikes in our input costs for that important commodity. We also realize the favorable impact as our business shifts towards the high margin FDM business, which benefits from more efficient logistics model, adding another 140 basis points. Finally, we did realize a 1.8 million one-time impact in the quarter as we continue to align our loyalty reserve to the most recent trends.

Operator: There's been less of an impact there, but we still are taking advantage of those forward pricings and we're also taking advantage.

Operator: of differentials between markets our group there is quite sophisticated and quite frankly they're keeping it where it's not a material impact to near term or twenty-five forecast

Sarang Vora: Excellent, appreciate it. I'll pass it on.

Sarang Vora: Thank you. And our next question comes from the line of Sarang Vora with Healthy Advisory Group. Please proceed with your question. Great, thank you guys. So I have a question. It's a little bit of a philosophical question. You know, you guys are doing a great job in managing the profitability. But you know, at a big picture, how do you think of balancing, you know, sales were down, you know, a bit of a softer in the second half as well. So how do you think about balancing sales and profitability? You know, a lot of brands are investing back in pricing.

Operator: Thank you. And our next question comes from the line of Sarang Vora with Kelsey Advisory Group. Please proceed with your question.

Operator: Thanks.

Steve Kadenacy: Flight 12, adjusted EBITDA for the quarter was 8.5 million, up from break even in the prior year. This is our third consecutive quarter of adjusted EBITDA exceeding 9% of revenue, which brings our year-to-date adjusted EBITDA to 22.6 million, a 27.7 million improvement over the last year-to-date. Our disciplined approach to managing administrative resources and external expenses has proven to be effective. This approach will become more impactful as revenue grows, providing additional economies of scale.

Speaker Change: Thank you. And our next question comes from the line of Sarang Vora with Pellissippi Advisory Group. Please proceed with your question.

Sarang Vora: Great, thank you guys. So I have a question. It's a little bit of a philosophical question. You know, you guys are doing a great job of managing profitability. But, you know, in the big picture, how do you think of balancing, you know, sales were down, a bit of a softer in the second half as well? So how do you think about balancing sales and profitability? You know, a lot of brands are investing back in pricing, they're stepping up promotion to boost volume, and marketing as well.

Sarang Vora: great thankyou vys so i have a question it's a little bit of philosophical question

Sarang Vora: You guys are doing a great job in managing the profitability.

Sarang Vora: But, you know, at a big picture, how do you think of balancing, you know, sales were down, you know, a bit of a softer in the second half as well. So how do you think about balancing sales and profitability? You know, a lot of brands are investing back in pricing, they're stepping up promotion to boost volume, marketing as well. So I'm just curious to...

Chris Monsolesky: They're stepping up promotion to boost volume, marketing as well. So I'm just curious to hear your part on how you are thinking to revamp the sales unit volume, you know, while profits are stronger right now. So just trying to understand the balance of your time to do that. Thank you. Yeah, thanks, Sarang.

Sarang Vora: So I'm just curious to hear your thoughts on how you are thinking to revamp the sales unit volume, you know, while profits are stronger right now. So just trying to understand the balance of how you're trying to do that.

Sarang Vora: to hear your thoughts on how you are thinking to revamp the sales unit volume while profits are stronger right now. So just trying to understand the balance of how you're trying to do that.

Operator: Thank you. Yeah. Thanks, Sarang. I'll start on that, and Steve can build it if you'd like. I think, you know, look, that's a great question. Ultimately, let me be very clear.

Chris Mondzelewski: Thank you. Yeah. Thanks, Sarang. I'll start on that, and Steve can build it if you'd like.

Chris Monsolesky: I'll start on that, and Steve can build if you'd like. I think, you know, look, that's a great question. Ultimately, let me be very clear. This is a, this is a growth business. We are doing this ultimately to set up a mission, you know, that we all believe in. And that mission only comes to life, you know, as we grow this business significantly from where it is right now. So our ambitions remain exceptionally high. At the same time, you know, we've a very experienced discipline team. And I would tell you that we're going to have patience in doing that.

Chris Mondzelewski: I think, you know, look, that's a great question. Ultimately, let me be very clear. This is a growth business. We are doing this, ultimately, to set up a mission that we all believe in. And that mission only comes to life as we grow this business significantly from where it is right now. So our ambitions remain exceptionally high. At the same time, we have a very experienced discipline team.

Operator: Thank you. Yeah, thanks Sarang. I'll start on that and Steve can build if you'd like. I think, you know, look, that's a great question. Ultimately, let me be very clear.

Operator: This is a growth business. We are doing this ultimately to set up a mission, you know, that we all believe in. And that mission only comes to life, you know, as we grow this business significantly from where it is right now. So our ambitions…

Steve Kadenacy: As Mons pointed out in his comments, we just posted our third consecutive quarter of positive free cash flow. We are proud of the dramatic inflection there, as we delivered a $31 million improvement over the year ago period. Additionally, we have seen a market improvement in our working capital, including a sequential 6 million decrease in inventory and a 75 million year-on-year total working capital reduction.

Steve: remain exceptionally high. At the same time, you know, we have a very experienced discipline team and I would tell you that we're going to have patience in doing that. We're going to do it at

Chris Mondzelewski: And I would tell you that we're going to have patience in doing that. We're going to do it at the rate that we believe is right for us as a business. And yeah, I mean, that obviously has changed a bit since the announcement that we made this quarter, but it doesn't take anything away from the amount of growth that we ultimately believe we can deliver with this business. So again, I'm not going to go through all the factors that we've elaborated on in this call.

Chris Monsolesky: We're going to do it at, you know, the rate that we believe is right for us as a business. And yeah, I mean, that obviously has changed a bit per the announcement that we made this quarter, but it doesn't take anything away from the amount of growth that we ultimately believe we can deliver with this business. So, you know, again, I'm not going to go through all the factors that we've elaborated on in this call, but I think going forward, what you call out is exactly what we are going to do. You know, we've talked a lot about the fact that by building the gross margin that we built, that does give us additional fire power.

Speaker Change: You know, the rate that we believe is right for us as a business. And, yeah, I mean, that obviously has changed a bit per the announcement that we made this quarter. But it doesn't take anything away from the amount of growth that we ultimately believe we can deliver with this business. So,

Steve Kadenacy: Please turn to slide 15. Before I provide color on our revised guidance for 2024, I wanted to share why our confidence in the top line trajectory is still so strong despite some of the delays and customer loadings that are impacting our near-term numbers. We are winning in the markets that we currently serve, bagged in cake-up coffee and retail and RTD coffee. We are outpacing the market in both categories, as we take share and the result will be increased revenue over the next few years.

Chris Mondzelewski: But I think going forward, what you call out is exactly what we are going to do. We've talked a lot about the fact that by building the gross margin that we've built, that does give us additional firepower. And so as we move into the back part of the year and as we expose our business to more and more tailwind areas of the market where we know consumers are voting with their wallets, we will be well prepared to ensure that we can make the investments, whether those are at the retailer level or whether those are more macro-based marketing programs to continue to build our overall equity.

Steve: Again, I'm not going to go through all the factors that we've elaborated on in this call, but I think going forward, what you call out is exactly what we are going to do. We've talked a lot about the fact that by building the gross margin...

Chris Monsolesky: And so, as we move into the back part of the year, and as we expose our business to more and more tailwind areas of the market where we know consumers are voting with their wallets, we will be well prepared to ensure that we can make the investments. You know, whether those are at the retailer level or whether those are more, you know, macro-based marketing programs to continue to build, you know, our overall equity will continue to obviously, you know, do both. But again, you know, don't ever, you know, when you hear us talking about profitability, don't ever let that take away from, you know, ultimately our belief that this is a growth business.

Steve: that we've built that does give us additional firepower. And so as we move into the back part of the year and as we expose our business to more and more tailwind

Steve: areas of the market where we know consumers are voting with their wallets.

Steve: We will be well prepared to ensure that we can make the investments, you know, whether those are at the retailer level or whether those are more, you know, macro-based marketing programs to continue to build, you know, our overall equity. We'll continue to obviously, you know, do both.

Steve Kadenacy: The markets we serve have significant tams and we are just beginning to penetrate. To dimension the opportunity, we entered the FDM coffee category in only one retailer a little more than 18 months ago. We are now rolling out to almost all retailers in the channel. FDM coffee is an $11 billion market and as we broaden our exposure, we expect to achieve 6% share. In RTD, which has a tan before billion, and given our improving distribution and product innovation on the horizon, we think we can at least double our share over the next few years.

Chris Mondzelewski: We'll continue to obviously do both. But again, when you hear us talking about profitability, don't ever let that take away from our belief that this is a growth business. And the two things just have to go together. Without building that strong core to the business and the ability to have a high gross margin, we know growth won't come. So again, it's both.

Steve Kadenacy: You know, and the two things just have to go together. Without building that strong core to the business and the ability to have a high gross margin, we know the growth won't come. So again, it's a both. And I agree with that 100% Serang.

Steve Kadenacy: And I agree with that 100%, Sarang, and if you look back on my prepared comments towards the end of my discussion, I kind of gave you the tools on how we think about this philosophically into the future as well. We've got FDM, where we've only been in FDM for 18 months, really, with one retailer. We're going to expand ACV capture there. We have line of sight, and we have said over and over again that we want to be fully deployed in FDM. That ACV captures by itself...

Operator: And I agree with that 100%, Sarang, and if you look back on my prepared comments towards the end of my discussion, I kind of gave you the tools on how we think about this philosophically into the future as well. We've got FDM, where we've only been in FDM for 18 months, really, with one retailer. We're going to expand ACV capture there. We have line of sight, and we have said over and over again that we want to be fully deployed in FDM. That ACV captures by itself...

Steve Kadenacy: And if you look back on my prepared comments towards the end of my discussion, I kind of gave you the tools on how we think about this philosophically into the future as well. We've got FDM, where we've only been in FDM for 18 months really with one retailer. We're going to expand the ACV capture there. We have line of sight, and we have said over and over again that we want to be fully deployed into FDM. That ACV capture by itself. And, in addition, skew enhance them. We've got over 30 skews of Walmart. We've got Ford Albertsons.

Steve Kadenacy: And last but certainly not least, the RTD energy category is roughly a $20 billion market and we believe we will achieve similar share in this market. This gives us confidence in our long-term outlook. For the reasons we have discussed, we are adjusting our 2024 revenue guidance down to $385 million to $415 million. However, we are moving our gross margin up to 39% to 42% and reiterating our adjusted EBITDA of 32 to 42 million. Finally, we reiterate our Q1 guidance of 80% free cash flow conversion.

Chris Mondzelewski: In summary, we are developing a trend of profitable, quarterly results and expect to continue this trend in the quarters to come, which will ultimately enable us to provide maximum service to the veteran and first responder communities and long-term value to our shareholders.

Steve Kadenacy: In addition, SKU enhancements. We've got over 30 SKUs at Walmart. We've got four at Albertsons.

Steve Kadenacy: That will change over time. Between those two enhancements, there's significant upside on FDM just for coffee. RTD Coffee.

Steve Kadenacy: That will change over time between those two markets. Between those two enhancements, there's significant upside on FDM just on coffee. RTD coffee. We've got significant ACV enhancements to come there. We believe that we can we can match the share that we have in core coffee and RTD coffee. There's no reason we can't. And then you look at energy. It's a very significant, significantly greater size than TAM. And we believe that we can take share there. So, between those, you can kind of do the math yourself that leads to a very significant revenue company as we grow into our goals there.

Steve Kadenacy: We've got significant ACV enhancement to come there, but we believe that we can match the share that we have in Core Coffee and RTD Coffee. There's no reason we can't. Then you look at energy. It's a very significant, significantly greater size TAM, and we believe that we can take share there. So between those, you can kind of do the math yourself that leads to a very significant revenue company as we grow into our goals there.

Speaker Change: RTD coffee, we've got significant ACD enhancement to come there we believe that we can we can match.

Operator: Sure that we have in core coffee and RTD coffee Theres. No reason, we can't then you look at energy, it's a very significant significantly greater size Tam and we believe that we can take share there. So between those you can kind of do the math yourself that leads to a very significant revenue company.

Unknown Executive: With that, I'll pass the call to the operator for the Q&A. Thank you.

Unknown Executive: At this time, we will be conducting a question-and-answer session. If you would like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate a line is in the question queue. You may press star 2 if you would 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 2s. One moment please, while you pose for a question.

Operator: We grow into our goals there.

Sarang Vora: Now that makes sense; there's a lot. You know, just a housekeeping question Steve, for you. You guys have done a good job bringing the inventory levels down. Just curious, is that the level you expect now, or is there more room to go down from here?

Sarang Vora: Now that makes sense; there's a lot. You know, just a housekeeping question, Steve, for you. You guys have done a good job bringing the inventory levels down. Just curious, is that the level you expect now, or is there more room to go down from here?

Sarang Vora: No, that makes sense. There's a lot.

Sarang Vora: No that makes sense, there's a lot.

Steve Kadenacy: You know, just a housekeeping question for you. You know, you guys have done a good job in bringing the inventory levels down. Just curious, is it the level you expect now, or is there more room to go down from here? I think we're at the level now where we're quite happy, but we will not rest. I think that from here, managing our margin, our inventory is part of that program. It's about the margins of the margin; the pennies will lead to the dollars, so to speak. And so we're always refining that; it's a source of potential cash for us during the year.

Speaker Change: Just a housekeeping question for you you guys have done a good job in bringing the inventory levels down.

Speaker Change: Just curious is that the level you expect now are there more room to go down from here.

Steve Kadenacy: Well, I think we're at a level now where we're quite happy, but we will not rest. I think that from here on, managing our margin, and our inventory is part of that program. It's about the margins of the margin. The pennies will lead to the dollars, so to speak. And so we're always refining that. It's a source of potential cash for us during the year if we do it better. So I'm not committing to significantly lower, but there's always opportunity. Thank you.

Operator: Well, I think we're at a level now where we're quite happy, but we will not rest. I think that from here on, managing our margin, and our inventory is part of that program. It's about The margins of the margin, the pennies, will lead to the dollars, so to speak. And so we're always refining that. It's a source of potential cash for us during the year if we do it better. So I'm not committing to significantly lower, but there's always opportunity.

Steve: Well I think we're at the level now where we are quite happy, but we will not rest I think from here managing our margin and our inventory as part of that program. It's about.

Michael Baker: I think you said by 2Q25. How many of those are you in now? Just any more color on where and why we're seeing these delays? And I guess you could express some confidence, but, you know, maybe just why should we be confident that it's just delays and not a pushback on the product or some other reason why you won't be on the shelves. Thanks. Yeah. Thanks for the question, Michael. So let me elaborate a little bit.

Operator: The margins of the margin the pennies will lead to the dollar so to speak.

Operator: And so we're always refining that.

Operator: It's a source of.

Operator: Potential cash for us during the year, if we do it better so I'm not committing to significantly lower but theres always optional opportunities.

Steve Kadenacy: If we do it better, so I'm not committing to significantly lower, but there's always opportunities. Thank you.

Sarang Vora: That's great. Thank you, guys.

Speaker Change: Thank you you bet.

Operator: We had reached the end of the question-and-answer session.

Ryan: Thanks Ryan.

Chris Mondzelewski: Thank you. We have reached the end of the question and answer session. I'll now turn the call over to Mons for his closing remarks.

Operator: Thank you. We have reached the end of the question and answer session. I'll now turn the call over to Mondez for his closing remarks.

Speaker Change: Thank you we have reached the end of the question and answer session I will now turn the call over to the bonds were closing remarks.

Chris Monsolesky: I'll turn the call over to the mods. We're closing remarks. Yeah, thank you. Fantastic questions. It was good to be able to have a chance to talk about the business.

Chris Mondzelewski: Yeah, thank you. Fantastic questions. It was good to be able to have the chance to talk about the business. I'm going to reiterate just a couple of things in closing. Yeah, we ran into some things that were unexpected for us, as every business does. It's been a great chance for me as the leader of this business alongside the founders to see how the team reacts to that and how we evolve with it. And I'm very, very proud of what we've seen.

Mondez: Yes. Thank you.

Mondez: Fantastic questions. It was going to be able to have the chance to talk about the business I'm going to reiterate just a couple of things in closing.

Chris Monsolesky: I'm going to reiterate, you know, just a couple of things in closing. You know, we, yeah, we faced into some things that were unexpected for us as every business does. It's been a great chance, you know, for me, as the leader of this business alongside the founders, to see how the team reacts to that and how we evolved with it. And you know, I'm very, very proud of, you know, what we've seen. I think we're going to continue to stay very focused on what our long-term mission is. You know, one of the things I've emphasized many times and I always like to bring into our closing is, you know, what this business ultimately was created for and what we exist for, which is to stand as an authentic representation of the military and first responder community.

Chris Mondzelewski: I mean, as I said, you know, in the kickoff, you know, obviously we're disappointed that there's any delay at all, but at the end of the day, you know, as we look to build a business like this, we understand that, you know, not everything's going to play out the way that we initially expect. So, you know, I hold my team accountable to make sure we've got plans in place to be able to adjust to things, you know, like this.

Mondez: Yes, we faced into some some things that were unexpected for us as every business does.

Mondez: It's been a great chance for me as the leader in this business alongside the founders to see how the team reacts to that and how we evolve with it.

Mondez: I am very very proud of what we've seen I think we're going to continue to stay very focused on what our long term mission is one of the things I've emphasized many times and I always like to bring into our closing is.

Chris Mondzelewski: I think we're going to continue to stay very focused on what our long-term mission is. You know, one of the things I've emphasized many times and I always like to bring up at our closing is, you know, what this business ultimately was created for and what we exist for, which is to stand as an authentic representation of the military and first responder community. And in doing so, creating a distinctive position in the market that we believe will resonate with a very, very high percentage of Americans and probably even beyond Americans, but we're focused on America right now.

Chris Mondzelewski: And, you know, that's exactly kind of what we're imparting. So I'm not going to go into the specifics of the timing of any particular retailer. We stay away from that. Those are confidential conversations we have with each one, but let me give you a little bit of color on where we stand right now. We are, as we speak, in the largest three, you know, retailers in the country. One of the largest three is your shift very, very recently.

Speaker Change: What this business ultimately was created for and what we exist for which is to stand as an authentic representation of the military and first responder community and in doing so creating a distinctive position in the market that we believe will resonate with the very very high percentage of of American.

Chris Monsolesky: And in doing so, creating a distinctive position in the market that we believe will resonate with the very, very high percentage of Americans and, you know, probably even beyond Americans, but we're focused on America right now. With that, you know, I think what you'll see us continue to do is evolve. You know, you're never going to hear us change on, you know, kind of a core fundamentals that we talk about on growth or profitability. But we will continue to push our business to be most relevant to consumer needs, and that's what you're seeing on some of the news, you know, that we announced this quarter.

Chris Mondzelewski: So that's new distribution for us that's kind of going in as we speak. And, you know, we talked publicly, obviously, you know, last year about, you know, the launch in Albertsons, which of course follows our initial customer Walmart, where we still continue to perform very well, you know, with results of 15%. So, you know, again, I think with the retailers that we've been able to move into, we've been able to have, you know, good success.

Mondez: And probably even beyond Americans.

Speaker Change: So America right now.

Chris Mondzelewski: With that, you know, I think what you'll see us continue to do is evolve. You know, you're never going to hear us change on, you know, kind of the core fundamentals that we talk about in growth or on profitability, but we will continue to push our business to be most relevant to consumer needs.

Mondez: With that I think what Youll see us continue to do is evolve.

Speaker Change: You're never going to hear us change on kind of a core fundamentals that we talked about on growth or on profitability, but we will continue to push our business to be most relevant to consumer needs and thats, what youre seeing on some of the news that we announced this quarter and so we will.

Chris Mondzelewski: We feel good. We have ongoing conversations with those retailers about how we continue to build that business. And as I've talked about in previous calls, you know, getting the distribution on shelf of step one, but then from there, you know, you've got to build the business. It took us some time to get above a foreshare in Walmart. And with all of these other retailers, you know, the same will be true as well.

Chris Mondzelewski: And that's what you're seeing in some of the news that we announced this quarter. And so we'll, you know, we'll continue to drive with that kind of flexibility. Likewise, we're continuing to invest in our mission because we know that our mission gives back. In fact, one of our founders, Matt, is up in New York this week. He's working with the Special Operation Warriors Fund.

Chris Monsolesky: So we'll, you know, we'll continue to drive with that kind of flexibility. Likewise, we're continuing to invest in our mission because we know that our mission gives back. In fact, you know, one of our founders, Matt, is up in New York this week. He's working with the Special Operation Warriors Fund. We're going to be supporting a program that works very closely with fallen heroes' families, particularly families that have disabled children, making sure that they still have access to the right kinds of education and needs as they grow up, you know, without their parent, you know, who sadly had lost their lives.

Speaker Change: We will continue to drive with that kind of flexibility Likewise, we're continuing to invest in our mission because we know that our mission gives back in fact, one of our founders Matt is up in New York. This week. He is working with the special Operation Warriors Fund, we're going to be supporting our program that.

Chris Mondzelewski: To specifically answer your question, we're in 36 retailers right now. Obviously, there's a wide variety of sizes in that, but as I said, you know, we have the three largest. And I'll continue to reiterate what I've said every call, which is that we are having positive conversations with quite literally every retailer in the country. Just a point.

Chris Mondzelewski: We're going to be supporting a program that works very closely with fallen heroes' families, particularly families that have disabled children, making sure that they still have access to the right kinds of education and needs as they grow up without their parent, who sadly has lost his life. So, you know, these are the types of things that we are doing on an ongoing basis that, you know, it's why we're here, candidly.

Speaker Change: Works very closely with fallen heroes families.

Speaker Change: Particularly families that have disabled children.

Mondez: I'm sure that they still have an area have access to the right kinds of education.

Mondez: As they as they grow up without their parents, who sadly had lost their lives. So.

Steve Kadenacy: Thank you for that color. So if I could ask one fall, fall up, what kind of ramp should we look for in 2025? I don't know if it's too early to talk about that, but maybe if you don't want to give a number, is that plan different than what it was? If this is just delay, you know, 2025, by the time we get to mid 2026, your top on expectation should have not changed.

Chris Monsolesky: So, you know, these are the types of things that we are doing on an ongoing basis that, you know, it's why we're here, candidly. It's why everybody on the leadership team and everyone else in the businesses here. And that authenticity we believe will continue to give us that differentiation with our consumers in the market as well. That being said, you know, we have to be nimble to be able to then evolve with that and make sure we're putting products out there that are the highest quality and in our segments of the market that we know are going to drive high growth.

Mondez: These are the types of things that we're doing on an ongoing basis that.

Chris Mondzelewski: It's why everybody on the leadership team and everyone else in the business is here. And that authenticity, we believe, will continue to give us that differentiation with our consumers in the market as well. That being said, you know, we have to be nimble to be able to evolve with that and make sure we're putting products out there that are of the highest quality and are in segments of the market that we know are going to drive high growth.

Mondez: It's why we're here candidly, it's why everybody on the leadership team and everyone else in the business is here and that authenticity. We believe we'll continue to give us that differentiation with our consumers in the market as well.

Mondez: That being said we have to be nimble to be able to then involved with that and make sure. We're putting products out there that are of the highest quality and are in segments of the market that we know are going to drive high growth. So those two things will continue to work hand in hand.

Steve Kadenacy: So I wonder if you can give us any color on what kind of ramp? We can expect in the coming year, year and a half. Yeah, Michael, this is Steve. We haven't given color on 25 yet, but the way we look at it, as Mausha said, you get the ACV, the revenue follows. We've always looked forward to that in 25. And we look forward to giving you specific guidance later in the year.

Chris Monsolesky: So those two things will continue to work hand in hand.

Chris Monsolesky: and ultimately, like I said, you know, as we evolve this business, the one thing that will never waver, you know, will be our authenticity.

Operator: And ultimately, like I said, as we evolve this business, the one thing that will never waver will be our authenticity. So I'll close with that, and thank you all very much.

Chris Mondzelewski: So those two things will continue to work hand in hand. And ultimately, like I said, as we evolve this business, the one thing that will never waver will be our authenticity. So I'll close with that. And thank you all very much.

Mondez: And ultimately like I said as we evolve this business.

Operator: One thing that will never waiver will be our authenticity I'll close with that and thank you all very much.

Chris Monsolesky: So I'll close with that, and thank you all very much.

Steve Kadenacy: But we do anticipate that we'll continue to ramp in wholesale as we roll out. And you know, Maus talked about some of the delays and we didn't say specific names. But there's significant grocery retailers that got pushed in the Q1 and Q2 that are also very consistent with our geographies, where we do very well. So between those FDM ramps, the stabilization of DTC and then Black Rifle Energy, we anticipate a significant inflection in our revenue for next year. Great. I'll turn it over to someone else.

Operator: Yes.

Operator: And this concludes today's conference, and you may disconnect your lines at this time. Thank you for your participation. Like, Share, and Subscribe

Speaker Change: And this concludes today's conference and you may disconnect. Your lines at this time. Thank you for your participation.

Unknown Executive: Thank you.

Operator: Thank you for watching!

Operator: [music]

Operator: Okay.

Operator: Uh-huh.

Operator: [music].

Operator: Yes.

Matt McKinley: Our next question comes from the line of Matt McKinley would need him and company. Please proceed with your question. Thank you. On the Black Rifle Energy Drink, do you expect that to use the same supply chain and distributors as the bread and did your coffee product? And do you think there'll be a lot of expense around that as you want that product? Or are you pretty much locked and loaded with what you already have in place with the distribution and how your coffee products is pretty good.

Chris Mondzelewski: It's currently. Hey Matt, you know, let me give some color on that. So, you know, I think I'll start by saying, you know, we're very proud of what we've been able to do to build and then evolve our RTD coffee business, RTD categories, a tough category as you recall, you know, even a year ago, we were really struggling with profitability of that business. And a big part of our margin recovery has been our, you know, outstanding operations team, you know, really rolling their sleeves up and understanding how to produce that product.

Operator: Yeah.

Operator: Uh-huh.

Operator: Hum.

Operator: [music].

Operator: Oh.

Operator: Mhm.

Operator: [music].

Chris Mondzelewski: You know, at what I'll call market levels, you know, coffee products are expensive to produce, you know, the ingredients are tend to be some of the most expensive in the category. So those tend to be, you know, lower than some of our center store products and energy, you know, the margins overall tend to be a bit higher. And as such, you know, we've continued to push our production team to say, you know, we want to be at market.

Operator: Uh-huh.

Operator: Okay.

Chris Mondzelewski: We're not ready to announce exactly how we're going to be producing or distributing, but our expectation is going to be the same, which is two things. One that, you know, as you kind of question on the cross side, you know, are we going to be able to kind of maintain the market? The answer to that is yes, we'll continue to hold our teams accountable to that because we believe that's quite achievable.

Chris Mondzelewski: And then two is, you know, how do we really get the most out of this? And I'll kind of go to a point that I made previous quarters, which is we're constantly evaluating, you know, what is the right, you know, distribution system for us. We're very proud of our team. They've done an incredible job of building our coffee business to a, you know, 100 million plus. But, you know, at the end of the day, there are many different ways and avenues, you know, to expanding distribution, you know, in that category. And we're going to constantly be assessing, you know, what are those right partnerships for us as we go forward.

Steve Kadenacy: But, you know, nothing specific that we're in a position to talk about yet for energy. And on the gross margin, your first half gross margin was above the high end of your 39 to 42% guidance for the full year. Is there anything different with the outlook in the back half around inflation the supply chain or makes a promotion that would push the gross margin down for the rest of the year? No, there's nothing specific that the, I think one thing we're always cautious about is that, you know, to the extent that there are promotions in store, some of that does hit above the line, but we have great confidence that we'll be able to continue our margin run.

Matt McKinley: All right, thank you very much. Thanks, Beth.

Unknown Executive: Thank you.

George Kelly: Our next question comes from the line of George Kelly with Ross, Capitol Partners. Please proceed with your question. Everybody, thank you.

George Kelly: First, I guess a couple more questions on the energy business. I'm curious, when do you plan on launching it? Do you have those initial retail partners secured? And then you mentioned in your prepared remarks about clean energy delivery. And I was hoping you can just sort of expand on how you're achieving that. Yeah, sure, George, so I'll break it out into the two questions. Yes, so in the first piece, yes, we're having conversations as we speak with retailers.

George Kelly: You know, that process has just begun. We want to be in a position to be ready to launch as retailers open up their windows, you know, next year. So essentially, we'll be ready to go in January as some of the earlier resets might go in place. And you know, obviously for something like the North American convenience store show. You know, later this year, we'll clearly be having a large presence there to have the right conversations with partners in that setting.

George Kelly: So yeah, we feel confident, you know, again, one of our advantages, our core strategic advantage in Black Rifle is our authenticity and how we hold true to everything we stand for in our communities. But I think our second is really our speed and our ability to be able to evolve to, you know, what we see as tailwind markets. And I think we can do that much faster than our competition and we're demonstrating that here.

George Kelly: So, you know, we are going to be absolutely ready to go as we go into the year and that, you know, we had to move on a very quick timeline to do that. I will tell you, though, getting to the second part of your question, there was no compromise on quality whatsoever. We are extremely proud of this product. You know, not only the flavor profile, but the ingredients that we're using to do that.

George Kelly: We are a super premium business. And so I'm not going to talk specifically about the ingredients themselves. We're putting in the energy blend, but it is all natural. And we are taking advantage of the fact that we have very strong roots into procurement of coffee-based products. And so, you know, I'm not going to get into the science of this, but if you think about, you know, the fruit, the cherries that come from coffee, you know, that actually is a great natural sustainable source of caffeine. So, that is a core part of it. And, you know, we ensured that we built, you know, a suite of ingredients around that that delivers a great final profile.

George Kelly: Okay. Thank you.

George Kelly: And then just one quick follow up on Walmart. You shared in the past year share there. How did that turn into the quarter and anything you can announce as far as plans to, I don't know if it's promotions or anything else to continue taking sure of, at Walmart. Yeah, so the share at Walmart continues to hold at above four. Yes, we are at a position now. Walmart is of course our first fully established retailer.

George Kelly: They've been a great partner. We added a lot of new items last year with a full suite of distribution. Within Walmart, we're very much focused on how we continue to build the velocity of that business. So yeah, you're actually right. I think as we look at the back half of the year, that's exactly what we're going to do as we move back into the seasonality of coffee and center store coffee. We want to make sure that we continue to help Walmart to be at the head of that category.

George Kelly: I think they've had great category growth, you know, versus the rest of the market. And so we're going to go and push, you know, hard, you know, with any of our partners. Obviously, you know, not only Walmart, but any of the partners that we work with to enable their category growth as we move back into the high seasonality periods for coffee. So I won't talk about the specific programs we're doing, but we've got some great stuff at the back half.

George Kelly: And I would add George, Steve, I think the same is true for FDM in general. If you look at the sell-through numbers, you can tell that we're dramatically outpacing the industry. We're the category. We grew at 28% while coffee as a whole is slightly down. So we're seeing that same performance as we ramp. And the same is true when you look at our revenue for the second half. I think it's important.

George Kelly: We've talked about the barter transaction previously. If you recall, the barter transaction in the second half of last year was pretty significant to our revenue. It's not in our revenue for the second half at all. So if you look at, at the midpoint of our range, we actually have pretty significant growth in the second half, core to core, and all of that is driven by the FDM market. Thank you.

Unknown Executive: And as a quick reminder, if anyone has any questions, you may press star one or your telephone keypad to join the question and ask you any time.

David Shaq: Our next question comes from the line of David Shaq, no it wasn't there. Please proceed with your question. David Shaq knows definitely for John Anderson. Can you guys highlight early reads you're seeing with black rifle pods on carry.com and the partnership with KDP thus far? Yeah, sure David. I think we're delighted with the partnerships so far. I think one of the core elements of this partnership was really quality and consistently of quality.

David Shaq: We wanted to make sure again as a super premium business that we had the highest and most consistent quality on our pods business. And as we've said before, you know, Curry is the best in the business and we've been delighted, you know, early feedback from our consumers is that they're really liking the product itself. So, you know, of course, that that's in all channels, not just their own channels as far as sales for them.

David Shaq: I'm not going to quote their numbers. I think, you know, but yeah, it's doing quite well. You know, it's a brand that, you know, is focused that they have focused on. We, of course, are working directly with them to make sure that we continue to educate their sales force so that they can really open that up in the channels that they want to be able to do that with. And, you know, again, it's a great route for expansion for us.

David Shaq: Yeah, and we're delighted by their early performance as well. We are starting to accrue royalty from their sales on their DTC. And they're also expecting significant uptick from Black Rifle, as mentioned on their earnings call, they view that potential as quite significant, for them.

David Shaq: Great, thank you. Just one other thing.

Steve Kadenacy: Productivity was the most important, and that just goes to our supply chain, the narrowing of our manufacturing partners and the hedging that we do around green coffee. There's a favorable mix shift as we ramp into FDM that will continue. Those are the main drivers, really. It's good, solid, continued execution, and ramping into markets that are more profitable to us from a shipping and logistics standpoint. I would just emphasize, we had talked about this almost a year ago now that this was going to be the core focus for Steve, myself, the rest of the team.

Steve Kadenacy: Knowing that a healthy gross margin is really the fuel that will continue to be needed to drive the growth in the business. Obviously, we're pleased with the results, but even more so, I think this system that has been developed that is delivering what Steve's talking about so that we feel confident that it's not just one-time hip, but there's a continuous line of productivity and optimization of the business as we move forward into the out years. That is one of the things that gives us a great deal of confidence, because as we do that, again, we increase our firepower to spend back on the market.

Unknown Executive: Great. That's all from me. Thank you.

Joe Altebello: Our next question comes from the line of Joe Altebello with Maiden James. Please proceed with your question. Thank you, morning. This is Martin Dr. Joe. I just want to touch on the guide real quick. You lowered your revenue guide by about $45 million from midpoint, but you only missed 2Q by about 3rd that implies that there's some sort of impact in 2H. Is that all those delays? Or is there something else going on there?

Steve Kadenacy: There's nothing else going on. I did just mention on the previous question, there's a lot of shipments last year and the second half around that barter transaction, so that's part of it. But most of it is what we talked about is the movement to the right delay and timing issue relative to the FBM load-ins. It's taken a bit longer than expected. Okay. Great. And just really quickly, no question gross margins as well.

Steve Kadenacy: You didn't lower that top line outlook in what is a margin-to-creative channel, but you did raise your gross margin guidance. So just trying to get some color about what's driving that. We just talked about that when the last question is really about that supply chain productivity element. It's execution day in, day out. We are very pleased by the execution within the business. It's broader than just gross margin. It's also EBITDA margin.

Steve Kadenacy: We're managing our expenses from top to bottom much better. And that's just about execution. It's about following up and maintaining discipline throughout the business. And that to us means just what Mons said. It gives us the ability to have positive free cashflow for the first half while we burned 40 million last year, which allows us to fuel our mission one and also reinvest in the business. And Black Rifle Energy is an example of that. Great. Appreciate it. That's the luck. Thank you.

Unknown Executive: Again, I have a quick reminder if anyone has any questions, you may press star one on your telephone key back to join the queue.

David Holcomb: Our next question comes from the line of Bill Chappell with Jewish Security. Please proceed with your question. Hi, good morning. This is David Holcomb on for Bill Chappell. Just wanted to ask kind of a higher level strategic question on the energy.

Chris Mondzelewski: You know, with the category having slowed so much recently and being so unexpected, there's a lot of concern that the category is kind of reaching maturity and we were just kind of wanting to get a little bit more color on what was driving this decision and widen out. Yeah, thanks. Great question. You know, as I've said a number of times, and I'll continue to double down on it because I just think this is sort of a mantra for us.

Chris Mondzelewski: You know, the term I like to use into tailwind categories and what that what that means ultimately is the categories that consumers are choosing to buy. This is one of the key elements that I've learned over 20 plus years in CPG. You've got to be moving your business to where consumer demand is. And I think we're very proud of the fact that, you know, we're anchored in coffee and coffee is a category that will always have strength in the US.

Chris Mondzelewski: We believe that. But particularly with younger generations, we've alluded to this a bit in the past, you know, preferences are changing and they're broadening. There's a there's a desire to have, you know, different types of more refreshing profiles tied to energy consumption. And that is ultimately what built the 20 billion dollar energy category. I think, you know, my opinion is, you know, when you look at it as a whole, it can be a bit misleading.

Chris Mondzelewski: You're right. You know, it is a very large category, which means there's a lot of players in there. And there's a lot of different types of products. And when you sub segment that I think what you find is that there are elements of it that are still growing, you know, at very, very high levels. And that's really what we're focused on. So when you look at the formulation of our product and how we're going to market that product and the demographic that we're going to go after and how we're, you know, going to generate awareness, we feel very confident that that is going to be an area that we believe that we can source exceptionally high growth. Got it.

Chris Mondzelewski: Thank you.

Steve Kadenacy: And also just wanted to ask about some additional color on inputs, specifically green coffee. Costs are up, you know, 50% in the last year. Another like 30% or so in the last six months. You guys said you have a hedging program in place that kind of smoothed out the short term pricing for you all. So just wanted to see how those price rises are going to be affecting you all going forward.

Steve Kadenacy: What kind of hedging schedule you all have, like how far out you'll hedge. I mean, we hedge pretty far out, but the bulk of our hedging is about a year out. We're super proud of our buyer program. We monitor it very closely. The real significant increases in coffee beans quite frankly is much more impacting robusta than it is, and obviously our coffees are on the higher end and higher quality beans. So there's been less of an impact there, but we still are taking advantage of those forward pricing and we're also taking advantage of differentials between markets. Our group there is quite sophisticated and quite frankly they're keeping it where it's not a material impact to our near term or 25 forecast.

Unknown Executive: Thank you.

Sarang Vora: And our next question comes from the line of Sarang Vora with Healthy Advisory Group, please proceed with your question. Great, thank you guys. So I have a question.

Chris Mondzelewski: It's a little bit of philosophical question. You know, you guys are doing a great job in managing the profitability. But you know, at a big picture, how do you think of balancing, you know, sales were down, you know, a bit of a softer in the second half as well. So how do you think about balancing sales and profitability, you know, a lot of brands are investing back in pricing. They're stepping up promotion to boost volume, marketing as well.

Chris Mondzelewski: So I'm just curious to hear your part on how you are thinking to revamp the sales unit volume, you know, while profit are stronger right now. So just trying to understand the balance of your time to do that. Thank you. Yeah, thanks, Sarang. I'll start on that and Steve can build if you'd like. I think, you know, look, that's a great question. Ultimately, let me be very clear. This is a, this is a growth business.

Chris Mondzelewski: We are doing this ultimately to set up a mission, you know, that we all believe in. And that mission only comes to life, you know, as we grow this business significantly from where it is right now. So our ambitions remain exceptionally high. At the same time, you know, we've a very experienced discipline team. And I would tell you that we're going to have patience in doing that. We're going to do it at, you know, the rate that we believe is right for us as a business.

Chris Mondzelewski: And yeah, I mean, that obviously has changed a bit per the announcement that we made this quarter, but it doesn't take anything away from the amount of growth that we ultimately believe we can deliver with this business. So, you know, again, I'm not going to go through all the factors that we've elaborated on in this call, but I think going forward, what you call out is exactly what we are going to do.

Chris Mondzelewski: You know, we've talked a lot about the fact that by building the gross margin that we built that does give us additional fire power. And so as we move into the back part of the year, and as we expose our business to more and more tailwind areas of the market where we know consumers are voting with their wallets, we will be well prepared to ensure that we can make the investments. You know, whether those are at the retailer level or whether those are more, you know, macro based marketing programs to continue to build, you know, our overall equity will continue to obviously, you know, do both.

Chris Mondzelewski: But again, you know, don't ever, you know, when you hear us talking about profitability, don't ever let that take away from, you know, ultimately our belief that this is a growth business. You know, and the two things just have to go together without building that strong core to the business and the ability to have a high gross margin, we know the growth won't come. So again, it's a both. And I agree with that 100% Serang.

Chris Mondzelewski: And if you look back on my prepared comments towards the end of my discussion, I kind of gave you the tools on how we think about this philosophically into the future as well. We've got FDM where we've only been in FDM for 18 months really with one retailer. We're going to expand the ACV capture there. We have line of sight and we have said over and over again that we want to be fully deployed into FDM.

Chris Mondzelewski: That ACV capture by itself. And in addition, skew enhance them. We've got over 30 skews of Walmart. We've got Ford Albertsons. That will change over time between those two markets. Between those two enhancements, there's significant upside on FDM just on coffee. RTD coffee. We've got significant ACV enhancements to come there. We believe that we can we can match the share that we have in core coffee and RTD coffee. There's no reason we can't.

Chris Mondzelewski: And then you look at energy. It's a very significant significantly greater size than TAM. And we believe that we can take share there. So between those, you can kind of do the math yourself that leads to a very significant revenue company as we grow into our goals there. No, that makes sense. There's a lot. You know, just a housekeeping question for you. You know, you guys have done a good job in bringing the inventory levels down.

Chris Mondzelewski: Just curious, is it the level you expect now or there's more room to go down from here? I think we're at the level now where we're quite happy, but we will not rest. I think that from here, managing our margin, our inventory is part of that program. It's about the margins of the margin, the pennies will lead to the dollars, so to speak. And so we're always refining that it's a source of potential cash for us during the year. If we do it better, so I'm not committing to significantly lower, but there's always opportunities. Thank you.

Steve Kadenacy: We had reached the end of the question and answer session. I'll turn the call over to the mods we're closing remarks. Yeah, thank you. Fantastic questions. It was good to be able to have a chance to talk about the business. I'm going to reiterate, you know, just a couple of things in closing. You know, we, yeah, we faced into some things that were unexpected for us as every business does. It's been a great chance, you know, for me, as the leader of this business alongside the founders to see how the team reacts to that and how we evolved with it.

Steve Kadenacy: And, you know, I'm very, very proud of, you know, what we've seen. I think we're going to continue to stay very focused on what our long-term mission is. You know, one of the things I've emphasized many times and I always like to bring into our closing is, you know, what this business ultimately was created for and what we exist for, which is to stand as an authentic representation of the military and first responder community.

Steve Kadenacy: And in doing so, creating a distinctive position in the market that we believe will resonate with the very, very high percentage of Americans and, you know, probably even beyond Americans, but we're focused on America right now. With that, you know, I think what you'll see us continue to do is evolve. You know, you're never going to hear us change on, you know, kind of a core fundamentals that we talk about on growth or profitability.

Steve Kadenacy: But we will continue to push our business to be most relevant to consumer needs and that's what you're seeing on some of the news, you know, that we announced this quarter. So we'll, you know, we'll continue to drive with that kind of flexibility. Likewise, we're continuing to invest in our mission because we know that our mission gives back. In fact, you know, one of our founders, Matt, is up in New York this week.

Steve Kadenacy: He's working with the special operation Warriors Fund. We're going to be supporting a program that works very closely with fallen heroes, families, particularly families that have disabled children, making sure that they still have have access to the right kinds of education and needs as they grow up, you know, without their parent, you know, who sadly had lost their lives. So, you know, these are the types of things that we are doing in an ongoing basis that, you know, it's why we're here candidly.

Steve Kadenacy: It's why everybody on the leadership team and everyone else in the businesses here. And that authenticity we believe will continue to give us that differentiation with our consumers in the market as well. That being said, you know, we have to be nimble to be able to then evolve with that and make sure we're putting products out there that are the highest quality and in our segments of the market that we know are going to drive high growth.

Steve Kadenacy: So those two things will continue to work hand in hand, and ultimately, like I said, you know, as we evolve this business, the one thing that will never waver, you know, will be our authenticity. So I'll close with that and thank you all very much.

Q2 2024 BRC Inc Earnings Call

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