Q2 2026 BRC Inc Earnings Call

August 4, 2026

Operator 2: Greetings, welcome to the Black Rifle Coffee Q2 2026 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, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Matt McGinley, Vice President of Investor Relations. Thank you. You may begin.

Speaker #1: If anyone should require operator assistance, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. It is not my pleasure to introduce your host, Matt McGinley, Vice President Investment Relations.

Speaker #1: Thank you. You may begin.

Speaker #2: Good morning, everyone, and thank you for joining Black Rifle Coffee Company's second quarter 2026 financial results conference call. We released our results yesterday, and the earnings release and related materials are available on our investor relations website at ir dot black rifle coffee dot com.

Matt McGinley: Good morning, everyone, thank you for joining Black Rifle Coffee Company's Q2 2026 financial results conference call. We released our results yesterday, and the earnings release and related materials are available on our investor relations website at ir.blackriflecoffee.com. Before we begin, I would like to remind you of the company's safe harbor provisions regarding forward-looking statements. During today's call, management may make forward-looking statements, including guidance and the underlying assumptions. These statements are based on expectations that involve risks and uncertainties and could cause actual results to differ materially. For a discussion of these risks, please refer to our filings with the SEC. Additionally, this call will include non-GAAP financial measures such as adjusted EBITDA. Whenever we refer to EBITDA, we mean adjusted EBITDA unless otherwise noted.

Speaker #2: Before we begin, I would like to remind you of the company's safe harbor provisions regarding forward-looking statements. During today's call, management may make forward-looking statements including guidance and the underlying assumptions.

Speaker #2: These statements are based on expectations that involve risks and uncertainties and could cause actual results to differ materially. For a discussion of these risks, please refer to our filings with the SEC.

Speaker #2: Additionally, this call will include non-GAAP financial measures such as adjusted EBITDA. Whenever we refer to EBITDA, we mean adjusted EBITDA unless otherwise noted. Reconciliations of non-GAAP financial measures to the most directly comparable GAAP measures are included in our earnings release, which was furnished to the SEC and is available on our investor relations website, as well as in the investor presentation available there.

Matt McGinley: Reconciliations of non-GAAP financial measures to the most directly comparable GAAP measures are included in our earnings release, which was furnished to the SEC and is available on our investor relations website, as well as in the investor presentation available there. Now, please refer to the presentation and turn to Slide 4. I would now like to turn the call over to Chris Mondzelewski, CEO of Black Rifle Coffee Company. Monz?

Speaker #2: Now, please refer to the presentation and turn to slide four. I would now like to turn the call over to Chris Mondzelewski, CEO of Black Rifle Coffee Company.

Speaker #2: Mons.

Speaker #3: Thanks, Matt. Good morning, everyone. Joining me today are Evan Hayford, our Executive Chairman; Matt Amigh, our Chief Financial Officer; and Matt McGinley, our Head of Investor Relations.

Chris Mondzelewski: Thanks, Matt. Good morning, everyone. Joining me today are Evan Hafer, our Executive Chairman, Matt Amigh, our Chief Financial Officer, and Matt McGinley, our Head of Investor Relations. Through H1 2026, we delivered solid growth, strong profitability, and clear evidence that greater discipline across the business is translating into results. We are allocating resources more deliberately and concentrating our efforts on the customers, channels, and products with the greatest potential to create value. That sharper focus is helping us make decisions faster, direct investment toward the strongest opportunities, and eliminate activity that does not support our most important objectives. We are seeing the impact most clearly in packaged coffee, where expanded retail distribution and strong direct-to-consumer performance are driving growth.

Speaker #3: Through the first half of 2026, we delivered solid growth, strong profitability, and clear evidence that greater discipline across the business is translating into results.

Speaker #3: We are allocating resources more deliberately, and concentrating our efforts on the customers, channels, and products with the greatest potential to create value. That sharper focus is helping us make decisions faster, direct investment toward the strongest opportunities, and eliminate activity that does not support our most important objectives.

Speaker #3: We are seeing the impact most clearly in packaged coffee, where expanded retail distribution and strong direct-to-consumer performance are driving growth. At the same time, tighter cost management, process improvements, and greater accountability are improving the conversion of revenue into earnings and allowing us to operate with greater consistency and control.

Chris Mondzelewski: At the same time, tighter cost management process improvements and greater accountability are improving the conversion of revenue into earnings and allowing us to operate with greater consistency and control. Our H1 results reinforce our confidence in this approach, we will remain focused on the highest return opportunities and on translating strong commercial execution into sustainable, profitable growth. Moving to slide six. In packaged coffee, retail performance remained strong in Q2, driven by continued distribution gains, pricing take into 2025, and broad-based strength across customers and channels. According to Nielsen, Black Rifle packaged coffee sales grew 28.2% in the last quarter, nearly three times the category's 9.9% growth rate. Over the latest 52 weeks, our retail sales increased 32.5%, compared with 12.3% growth for the broader category.

Speaker #3: Our first half results reinforce our confidence in this approach, and we will remain focused on the highest return opportunities and on translating strong commercial execution into sustainable, profitable growth.

Speaker #3: Moving to slide six. In packaged coffee, retail performance remains strong in the second quarter. Driven by continued distribution gains, pricing taken in 2025, and broad-based strength across customers and channels.

Speaker #3: According to Nielsen, Black Rifle packaged coffee sales grew 28.2% in the last quarter, nearly three times the category's 9.9% growth rate. Over the latest 52 weeks, our retail sales increased 32.5% compared with 12.3% growth for the broader category.

Speaker #3: Importantly, bagged coffee velocity reached category-level performance in 2025 and has remained there year to date, despite continued distribution expansion and our price premium. That is an important proof point, because newly added stores and items typically take time to mature.

Chris Mondzelewski: Importantly, bagged coffee velocity reached category-level performance in 2025 and has remained there year-to-date despite continued distribution expansion and our price premium. That is an important proof point because newly added stores and items typically take time to mature. With distribution and productivity both improving, our bagged coffee share increased 60 basis points year-over-year to 3.3%, while pod share increased 30 basis points to 2.2% across the total market. Turning to slide seven. Our land and expand strategy continues to increase both the reach of the brand and our presence on shelf. During Q2, packaged coffee distribution increased by more than two and a half points of ACV year-over-year to 56.5%, reflecting expanded availability across new and existing retail accounts. We are also earning greater shelf presence within the stores that already carry Black Rifle Coffee.

Speaker #3: With distribution and productivity both improving, our bagged coffee share increased 60 basis points year over year to 3.3%, while pod share increased 30 basis points to 2.2% across the total market.

Speaker #3: Turning to slide seven. Our land and expand strategy continues to increase both the reach of the brand and our presence on shelf. During the second quarter, packaged coffee distribution increased by more than 2.5 points of ACV year over year to 56.5%, reflecting expanded availability across new and existing retail accounts.

Speaker #3: We are also earning greater shelf presence within the stores that already carry Black Rifle Coffee. In grocery, the average retail account now carries about 1.3 more Black Rifle Coffee items than it did a year ago.

Chris Mondzelewski: In grocery, the average retail account now carries about 1.3 more Black Rifle Coffee items than it did a year ago, demonstrating our ability to build beyond the initial placements as the brand becomes more established within an account. Together, these results demonstrate the scalability of our land and expand strategy, with growth coming from both broader distribution and deeper assortment within existing customers. Slide eight. Black Rifle's packaged coffee growth reflects strong underlying consumer demand, with meaningful unit growth alongside pricing. Over the latest 52-week period, retail sales increased 32.5%, including 16.6% unit growth, placing Black Rifle among the strongest unit growth performers in the category. That distinction is important because many larger competitors generated most or all of their dollar growth through price increases while units declined. Black Rifle is delivering a more balanced contribution from volume and pricing.

Speaker #3: Demonstrating our ability to build beyond the initial placements as the brand becomes more established within an account. Together, these results demonstrate the scalability of our land and expand strategy, with growth coming from both broader distribution and deeper assortment within existing customers.

Speaker #3: Slide eight. Black Rifle's packaged coffee growth reflects strong underlying consumer demand, with meaningful unit growth alongside pricing. Over the latest 52-week period, retail sales increased 32.5%, including 16.6% unit growth, placing Black Rifle among the strongest unit growth performers in the category.

Speaker #3: That distinction is important because many larger competitors generated most or all of their dollar growth through price increases while units declined. Black Rifle is delivering a more balanced contribution from volume and pricing.

Speaker #3: That unit performance demonstrates sustained consumer demand and strengthens our value proposition to retailers by driving category productivity as distribution expands. Turning to slide nine.

Chris Mondzelewski: That unit performance demonstrates sustained consumer demand and strengthens our value proposition to retailers by driving category productivity as distribution expands. Turning to slide nine. Our direct-to-consumer business delivered another quarter of solid growth, with revenue increasing 13.6% year-over-year. This marked the third consecutive quarter of growth and our strongest quarterly year-over-year performance in the segment in more than 4 years. In May, we successfully transitioned blackriflecoffee.com to a more scalable and flexible e-commerce platform. Early results are encouraging, including greater product visibility and online shopping results, improved organic search rankings, and stabilization of our subscriber base in the nearly 3 months since the conversion. The new platform provides a stronger technology foundation to improve the customer experience and support future growth in our owned channel.

Speaker #3: Our direct-to-consumer business delivered another quarter of solid growth, with revenue increasing 13.6% year over year. This marked the third consecutive quarter of growth in our strongest quarterly year-over-year performance in the segment in more than four years.

Speaker #3: In May, we successfully transitioned BlackRifleCoffee.com to a more scalable and flexible e-commerce platform. Early results are encouraging, including greater product visibility and online shopping results, improved organic search rankings, and stabilization of our subscriber base in the nearly three months since the conversion.

Speaker #3: The new platform provides a stronger technology foundation to improve the customer experience and support future growth in our owned channel. Black Rifle Coffee.com remains an important part of our DTC model, serving as the core platform for subscriptions, repeat purchases, exclusive offerings, and deeper engagement with our most loyal customers.

Chris Mondzelewski: Blackriflecoffee.com remains an important part of our DTC model, serving as the core platform for subscriptions, repeat purchases, exclusive offerings, and deeper engagement with our most loyal customers. At the same time, third-party marketplace sales increased 90% as we continued to expand our reach and capture demand on the platforms where consumers increasingly choose to shop. We view marketplaces as an incremental customer acquisition channel that complements rather than replaces blackriflecoffee.com. Slide 10, we show that online marketplaces, mass retail, and grocery are all large channels, but consumers shop them differently. The largest online marketplace and the largest mass retailer are similar in size, each generating about $4 billion in annual packaged coffee sales. Both skew heavily toward pods, but their preferred pack sizes differ meaningfully.

Speaker #3: At the same time, third-party marketplace sales increased 90% as we continued to expand our reach and capture demand on the platforms where consumers increasingly choose to shop.

Speaker #3: We view marketplaces as an incremental, customer acquisition channel that complements, rather than replaces, Black Rifle Coffee.com. Slide 10. We show that online marketplaces mass retail and grocery are all large channels but consumers shop them differently.

Speaker #3: The largest online marketplace in the largest mass retailer are similar in size, each generating about 4 billion in annual packaged coffee sales. Both skew heavily toward pods, but their preferred pack sizes differ meaningfully.

Speaker #3: The larger packs purchased online suggest a more planned stock-up or pantry loading mission. While mass retail appears to serve a more routine, household replenishment occasion.

Chris Mondzelewski: The larger packs purchased online suggest a more planned stock-up or pantry-loading mission, while mass retail appears to serve a more routine household replenishment occasion. Grocery is large at $6.8 billion in annual sales, with a more balanced mix of bags and pods. Within grocery, smaller pod counts suggest more frequent replenishment and greater trial or variety-seeking. These differences reinforce the importance of tailoring our assortment and pack architecture to how consumers shop within each channel. At our largest customer, where the brand is most established, sales continue to grow both in-store and online. Combined with our low single-digit share in the largest online marketplace in grocery, that performance highlights the long runway ahead, both within established customers and across large channels where our presence remains underdeveloped. Moving to slide 11. In ready-to-drink coffee, market conditions remain challenging, with the weakness most pronounced in the convenience channel.

Speaker #3: Grocery is large at 6.8 billion in annual sales. With a more balanced mix of bags and pods, within grocery, smaller pod counts suggest more frequent replenishment and greater trial or variety seeking.

Speaker #3: These differences reinforce the importance of tailoring our assortment and pack architecture to how consumers shop within each channel. At our largest customer, where the brand is most established, sales continue to grow both in-store and online.

Speaker #3: Combined with our low single-digit share in the largest online marketplace and grocery, that performance highlights the long runway ahead. Both within established customers and across large channels where our presence remains underdeveloped.

Speaker #3: Moving to slide 11. In ready-to-drink coffee, market conditions remain challenging. With the weakness most pronounced in the convenience channel, performance has been comparatively stronger in grocery where we continue to outpace the category.

Chris Mondzelewski: Performance has been comparatively stronger in grocery, where we continue to outpace the category. We are directing resources towards the channels, customers, and occasions where consumer takeaway is more resilient and using innovation selectively to support the strongest opportunities. The objective is to improve the quality and economics of the business rather than pursue distribution for its own sake. In energy, we exited the quarter at approximately 21% ACV across more than 22,000 doors, reflecting the distribution build since last year's launch, with the footprint remaining broadly consistent with the Q1. Our priority is to build productivity within existing doors while expanding selectively where performance supports additional investment. Before I turn it over to Matt, I want to briefly highlight some of the meaningful ways we supported our community during the Q2.

Speaker #3: We are directing resources towards the channels, customers, and occasions where consumer takeaway is more resilient and using innovation selectively to support the strongest opportunities.

Speaker #3: The objective is to improve the quality and economics of the business rather than pursue distribution for its own sake. In energy, we exited the quarter at approximately 21% ACV across more than 22,000 doors, reflecting the distribution build since last year's launch.

Speaker #3: With the footprint remaining broadly consistent with the first quarter. Our priority is to build productivity within existing doors while expanding selectively where performance supports additional investment.

Speaker #3: Before I turn it over to Matt, I want to briefly highlight some of the meaningful ways we supported our community during the second quarter.

Speaker #3: From April through June, we supported 11 mission-focused events, contributed more than 400,000 dollars to organizations serving veterans, active-duty military personnel, first responders, and their families, and delivered more than 3,000 bags of coffee to military units deployed around the world.

Chris Mondzelewski: From April through June, we supported 11 mission-focused events, contributed more than $400,000 to organizations serving veterans, active duty military personnel, first responders and their families, and delivered more than 3,000 bags of coffee to military units deployed around the world. These efforts included veteran recovery and mental wellness programs, events honoring Gold Star families and Medal of Honor recipients, and a centennial celebration for eight World War II veterans who marked their 100th birthday. This Memorial Day, we launched Folded Flag, a new multi-year initiative dedicated to honoring fallen service members, preserving their legacies, and supporting Gold Star families. As part of America's 250th anniversary, we also introduced our Rewarding Patriotism initiative and distributed 1,000 Patriot Forward boxes, recognizing individuals who embody service, patriotism, and leadership in their communities.

Speaker #3: These efforts included veteran recovery and mental wellness programs, events honoring Gold Star families, and Medal of Honor recipients. In a centennial celebration for eight World War II veterans, who marked their 100th birthday.

Speaker #3: This memorial day, we launched Folded Flag, a new multi-year initiative dedicated to honoring fallen service members preserving their legacies and supporting Gold Star families.

Speaker #3: As part of America's 250th anniversary, we also introduced our Rewarding Patriotism Initiative and distributed 1,000 Patriot Forward boxes, recognizing individuals who embody service, patriotism, and leadership in their communities.

Speaker #3: Each of these efforts gave us an opportunity to honor service, preserve legacy, and provide meaningful support to the people and families who have sacrificed so much.

Chris Mondzelewski: Each of these efforts gave us an opportunity to honor service, preserve legacy, and provide meaningful support to the people and families who have sacrificed so much. We are proud of the impact we made during the quarter and look forward to carrying that commitment forward throughout the remainder of the year.

Speaker #3: We are proud of the impact we made during the quarter and look forward to carrying that commitment forward throughout the remainder of the year.

Speaker #2: Thank you, Mons. I'll begin my remarks on slide 13. Second quarter net revenue increased 13% compared to the prior year period, reflecting growth in both wholesale and direct-to-consumer.

Matt Amigh: Thank you, Monz. I'll begin my remarks on slide 13. Q2 net revenue increased 13% compared to the prior year period, reflecting growth in both wholesale and direct-to-consumer. Wholesale revenue increased 15%, supported by pricing and distribution gains across grocery, mass, and dollar retailers. Performance remained strong across our largest customers, with mass merchant revenue increasing 20% and grocery revenue nearly doubling year over year. The channel also benefited from new bag coffee pack sizes that enabled us to secure additional distribution in the dollar channel earlier this year, building on our existing ready-to-drink presence. Direct-to-consumer revenue increased 14%, accelerating from 7% growth in the Q1, led by continued strength in third-party marketplaces. Turning to slide 14. Q2 gross margin expanded approximately 15 basis points year over year to 34.1%, marking the first year over year improvement in more than four quarters.

Matt Amigh: Thank you, Mondze. I'll begin my remarks on slide 13. Q2 net revenue increased 13% compared to the prior year period, reflecting growth in both wholesale and direct-to-consumer. Wholesale revenue increased 15%, supported by pricing and distribution gains across grocery, mass, and dollar retailers. Performance remained strong across our largest customers, with mass merchant revenue increasing 20% and grocery revenue nearly doubling year over year. The channel also benefited from new bag coffee pack sizes that enabled us to secure additional distribution in the dollar channel earlier this year, building on our existing ready-to-drink presence. Direct-to-consumer revenue increased 14%, accelerating from 7% growth in the Q1, led by continued strength in third-party marketplaces. Turning to slide 14. Q2 gross margin expanded approximately 15 basis points year over year to 34.1%, marking the first year over year improvement in more than four quarters.

Speaker #2: Wholesale revenue increased 15%, supported by pricing and distribution gains across grocery, mass, and dollar retailers. Performance remained strong across our largest customers, with mass merchant revenue increasing 20%, and grocery revenue nearly doubling year over year.

Speaker #2: The channel also benefited from new bagged coffee pack sizes that enabled us to secure additional distribution in the dollar channel earlier this year, building on our existing ready-to-drink presence.

Speaker #2: Direct-to-consumer revenue increased 14%, accelerating from 7% growth in the first quarter led by continued strength in third-party marketplaces. Turning to slide 14. Second quarter gross margin expanded approximately 15 basis points year over year to 34.1%, marking the first year-over-year improvement in more than four quarters.

Speaker #2: Higher coffee cost flowing through inventory remained a headwind of more than 100 basis points net of pricing, but that impact was more than offset by a cleaner inventory position and benefits from productivity and mix.

Matt Amigh: Higher coffee costs flowing through inventory remained a headwind of more than 100 basis points net of pricing, but that impact was more than offset by a cleaner inventory position and benefits from productivity and mix. We fully secured our green coffee requirements for 2026 earlier this year and have purchased more than 50% of our anticipated needs for 2027. This provides strong cost visibility for the remainder of 2026 and greater clarity on our cost position for 2027. Based on timing of inventory consumption, we expect lower contracted coffee costs to begin flowing through cost of sales more meaningfully during the H2 of 2026. Although green coffee prices have experienced renewed volatility, coffee costs are only one component of our gross margin outlook.

Speaker #2: We fully secured our green coffee requirements for 2026 earlier this year and have purchased more than 50% of our anticipated needs for 2027. This provides strong cost visibility for the remainder of 2026 and greater clarity on our cost position for 2027.

Speaker #2: Based on the timing of inventory consumption, we expect lower contracted coffee costs to begin flowing through cost of sales more meaningfully during the second half of 2026.

Speaker #2: Although green coffee prices have experienced renewed volatility, coffee costs are only one component of our gross margin outlook. Portfolio mix, trade efficiency, and supply chain productivity remain important drivers of continued gross margin improvement, even without assuming a normalization in green coffee prices.

Matt Amigh: Portfolio mix, trade efficiency, and supply chain productivity remain important drivers of the continued gross margin improvement, even without assuming a normalization in green coffee prices. Moving down the P&L to slide 15. During Q2, we continued to reshape the cost base while selectively investing behind growth. On a reported basis, total operating expenses declined 21% year over year to $35.4 million, primarily reflecting the absence of a prior legal accrual and lower legal, professional, and other general and administrative costs. Marketing expense increased 8% to support key brand and growth initiatives, yet declined approximately 50 basis points as a percentage of revenue to 9.8%, reflecting improved leverage on that investment. Gross profit increased 13% to $36.5 million, contributing approximately $4.3 million of year-over-year improvement in adjusted EBITDA. Adjusted operating expenses increased approximately $400,000, well below the rate of revenue growth.

Speaker #2: Moving down the P&L to slide 15. During the second quarter, we continued to reshape the cost base while selectively investing behind growth. On a reported basis, total operating expenses declined 21% year over year to 35.4 million dollars, primarily reflecting the absence of a prior legal accrual and lower legal, professional, and other general and administrative costs.

Speaker #2: Marketing expense increased 8% to support key brand and growth initiatives, yet declined approximately 50 basis points as a percentage of revenue to 9.8%, reflecting improved leverage on that investment.

Speaker #2: Gross profit increased 13% to 36.5 million dollars, contributing approximately 4.3 million dollars of year-over-year improvement in adjusted EBITDA. Adjusted operating expenses increased approximately 400,000 dollars, well below the rate of revenue growth.

Speaker #2: As a result, adjusted EBITDA increased more than 160% to 6.3 million dollars from 2.4 million dollars in the prior year period. And adjusted EBITDA margin expanded approximately 335 basis points to 5.9%.

Matt Amigh: Adjusted EBITDA increased more than 160% to $6.3 million from $2.4 million in the prior year period, and adjusted EBITDA margin expanded approximately 335 basis points to 5.9%. This performance demonstrates the operating leverage in our model. Turning to the balance sheet. We ended the quarter with $35 million of debt outstanding and a net leverage of approximately three-quarters of a turn on a trailing 12-month adjusted EBITDA, or 0.8 turns based on our 2026 adjusted EBITDA guidance. We ended the quarter with $12 million of cash and approximately $50.5 million of available capacity under our revolving credit facility. Free cash flow was $5.4 million in Q2 and $11.5 million year to date, compared to a $9.6 million use of free cash flow in the prior year period.

Speaker #2: This performance demonstrates the operating leverage in our model. Turning to the balance sheet. We ended the quarter with 35 million dollars of debt outstanding and a net leverage of approximately three-quarters of a turn on a trailing 12-month adjusted EBITDA, or 0.8 turns based on our 2026 adjusted EBITDA guidance.

Speaker #2: We ended the quarter with 12 million dollars of cash and approximately 50.5 million dollars of available capacity under our revolving credit facility. Free cash flow was 5.4 million dollars in the second quarter and 11.5 million dollars year to date, compared to a 9.6 million dollar use of free cash flow in the prior year period.

Speaker #2: The approximately 21 million dollars of year-over-year improvement was driven primarily by higher profitability and additional benefits from working capital efficiency and lower capital expenditures.

Matt Amigh: The approximately $21 million of year-over-year improvement was driven primarily by higher profitability and additional benefits from working capital efficiency and lower capital expenditures. Together with our available liquidity, this cash generation provides the capacity to support our operating and strategic priorities. We regain compliance with the New York Stock Exchange's minimum bid price requirement in early June. Should market conditions warrant, we retain the flexibility to execute the reverse stock split approved by our shareholders in May, subject to final approval by our board. Moving to the outlook on Slide 17. Based on our H1 performance and continued execution against our full year plan, we are maintaining our 2026 outlook of at least 8% revenue growth, or approximately $430 million, and at least 35% adjusted EBITDA growth, or approximately $29 million.

Speaker #2: Together with our available liquidity, this cash generation provides the capacity to support our operating and strategic priorities. We regained compliance with the New York Stock Exchange's minimum bid price requirement in early June.

Speaker #2: Should market conditions warrant, we retained the flexibility to execute the reverse stock split approved by our shareholders in May, subject to final approval by our Board.

Speaker #2: Moving to the outlook on slide 17. Based on our first half performance and continued execution against our full-year plan, we are maintaining our 2026 outlook of at least 8% revenue growth, or approximately 430 million dollars, and at least 35% adjusted EBITDA growth, or approximately 29 million dollars.

Speaker #2: We also continue to expect 2026 gross margin in the range of 34% to 36%, compared with 34.6% in 2025. Revenue and adjusted EBITDA exceeded our expectations in the first half, driven by greater pipeline fills for new package coffee distribution and strong direct-to-consumer performance, as a result, we now expect revenue to be more evenly weighted between the first and second halves of the year, rather than building sequentially through the year as we originally anticipated.

Matt Amigh: We also continue to expect 2026 gross margin in the range of 34% to 36%, compared with 34.6% in 2025. Revenue and adjusted EBITDA exceeded our expectations in H1, driven by greater pipeline fills for new packaged coffee distribution and strong direct-to-consumer performance. We now expect revenue to be more evenly weighted between H1 and H2 of the year, rather than building sequentially through the year as we originally anticipated. We remain encouraged by the underlying performance of the business. That said, H2 comparisons will reflect three factors. First, the year-over-year benefit from previously implemented pricing actions will begin to moderate in Q3 and largely roll off by year-end. Second, Q4 2025 included approximately $5 million of non-recurring liquidation revenue.

Speaker #2: We remain encouraged by the underlying performance of the business. That said, second half comparisons will reflect three factors. First, the year-over-year benefit from previously implemented pricing actions will begin to moderate in the third quarter and largely roll off by year-end.

Speaker #2: Second, the fourth quarter of 2025 included approximately 5 million dollars of non-recurring liquidation revenue. Third, we are seeing some moderation in the convenience channel, which we believe reflects a combination of higher fuel prices affecting channel traffic and continued category softness in ready-to-drink coffee.

Matt Amigh: Third, we are seeing some moderation in the convenience channel, which we believe reflects a combination of higher fuel prices affecting channel traffic and continued category softness in ready-to-drink coffee. The expected moderation in reported revenue growth primarily reflects these known pricing and comparison factors, while underlying trends in packaged coffee and direct-to-consumer remain healthy. For Q3, we expect revenue growth of at least 5% year over year. At that level, revenue would be approximately $106 million, roughly in line with Q2. At the floor of our full year outlook, Q4 revenue would be modestly below the prior year period, largely due to the lapping of $5 million in liquidation sales in 2025, reflecting significantly improved inventory management. We expect gross margin to approach 36% in both Q3 and Q4, driven by productivity initiatives and lower contracted coffee costs flowing through inventory.

Speaker #2: The expected moderation in reported revenue growth primarily reflects these known pricing and comparison factors, while underlying trends in package coffee and direct-to-consumer remain healthy.

Speaker #2: For the third quarter, we expect revenue growth of at least 5% year over year. At that level, revenue would be approximately $106 million, roughly in line with the second quarter.

Speaker #2: At the floor of our full-year outlook, fourth quarter revenue would be modestly below the prior year period, largely due to the lapping of 5 million dollars in liquidation sales in 2025, reflecting significantly improved inventory management.

Speaker #2: We expect gross margin to approach 36% in both the third and fourth quarters, driven by productivity initiatives and lower contracted coffee costs flowing through inventory.

Speaker #2: For the third quarter, we expect adjusted EBITDA of approximately 7 million dollars. The benefit of higher gross profit is expected to be partially offset by a modest sequential increase in operating expenses, driven almost entirely by the timing of planned marketing investment built around America's 250th anniversary.

Matt Amigh: For Q3, we expect adjusted EBITDA of approximately $7 million. The benefit of higher gross profit is expected to be partially offset by a modest sequential increase in operating expenses, driven almost entirely by the timing of planned marketing investment built around America's 250th anniversary. Based on our year-to-date results and current visibility, we remain confident in our 2026 outlook. It is supported by pricing already in market and secure distribution gains. It does not include potential upside from incremental distribution, additional pricing, or other benefits not yet realized. Our focus for H2 is clear: deliver the expected gross margin improvement, maintain cost and working capital discipline, and convert earnings growth into stronger cash generation. The progress we made in H1 demonstrates the benefits of a more efficient operating model and a more focused approach to investment.

Speaker #2: Based on our year-to-date results and current visibility, we remain confident in our 2026 outlook. It is supported by pricing already in the market and secured distribution gains.

Speaker #2: It does not include potential upside from incremental distribution, additional pricing, or other benefits not yet realized. Our focus for the second half is clear.

Speaker #2: Deliver the expected gross margin improvement, maintain cost and working capital discipline, and convert earnings growth into stronger cash generation. The progress we made in the first half demonstrates the benefits of a more efficient operating model and a more focused approach to investment.

Speaker #2: Operator, we are now ready for the Q&A session.

Matt Amigh: Operator, we are now ready for the Q&A session.

Speaker #1: Thank you. We will now be conducting a question and answer session. If you would like to ask a question, please press star one on your telephone keypad.

Operator 2: Thank you. We will now be conducting a question and answer session. If you would like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star two to remove yourself from the queue. For participants using speaker equipment, it may be necessary to pick up the handset before pressing the star keys. One moment please while we poll for questions. Our first question comes from the line of Mike Baker with D.A. Davidson. Please proceed with your question.

Speaker #1: A confirmation tone will indicate a line is in the question queue. You may press star two to remove yourself from the queue. For participants using speaker equipment, it may be necessary to pick up the handset before pressing the star keys.

Speaker #1: One moment, please, while we pull for questions. Our first question comes from the line of Mike Baker with DA Davidson. Please proceed with your question.

Speaker #3: Okay. Thanks, guys. Thanks for all the call-on-the-guidance. I did want to ask a question on that, though. Understanding all the factors you laid out to think about it in the back half, I think, if my math is even close to right, it implies EBITDA even slightly down in the back half of the year.

Mike Baker: Okay. Thanks, guys. Thanks, Robert Carr, on the guidance. I did want to ask a question on that, though. Understanding all the factors you've laid out to think about it in H2, I think if my math is even close to right, it implies EBITDA even slightly down in H2 of the year. You talked about some of the things you're cycling on the top line, including the $5 million in Q4, just talk about some of the things that might impact the EBITDA in H2 of the year, and do we really think that we're not going to grow EBITDA at all in H2 after being up 3x in H1?

Speaker #3: I guess you talked about some of the things you're cycling. On the top line, including the 5 million dollars in the fourth quarter, but just talk about some of the things that might impact the EBITDA in the back half of the year and do we really think that we're not going to grow EBITDA at all in the back half after being up 3X in the first half?

Speaker #2: Hey, Mike. Thanks. That's a great question. Let me hit that front and center on the EBITDA side. Just keep in mind, I know you know this, but I just want to say more broadly, we're taking a very disciplined approach this year.

Matt Amigh: Hey, Mike. Thanks. That's a great question. Let me hit that front and center on the EBITDA side. Just keep in mind, I know you know this, but I just want to say more broadly, we're taking a very disciplined approach this year. We're only looking at confirmed commercial drivers, pricing already in market, as well as new distribution that's already been secured. We didn't assume any additional wins for distribution or otherwise that haven't been fully realized. Now, the business does have a lot of momentum right now, and based on the way we see it today, there's no reason to believe that that momentum changes in H2. As we continue to execute, we'll update the outlook accordingly. When it comes to EBITDA, you're spot on, right?

Speaker #2: We're only looking at confirmed commercial drivers, pricing already in market, as well as new distribution that's already been secured. We didn't assume any additional wins.

Speaker #2: The distribution or otherwise that haven't been fully realized. Now, the business does have a lot of momentum right now, and based on the way we see it today, there's no reason to believe that momentum changes in the second half.

Speaker #2: As we continue to update, or excuse me, as we continue to execute, we'll update the outlook accordingly. When it comes to EBITDA, you're spot on, right?

Speaker #2: So we're projecting about a 35% increase in adjusted EBITDA year over year. That puts us right around 29 million dollars in EBITDA. If you look at 13.6 million dollars in the first half of the year, we're guiding to 7 million dollars, at least 7 million dollars of adjusted EBITDA in Q3, and that implies at least an 8.3 million dollar EBITDA in Q4.

Matt Amigh: We're projecting about a 35% increase in adjusted EBITDA year over year. That puts us right around $29 million in EBITDA. If you look at $13.6 million in H1 of the year, we're guiding to $7 million, at least $7 million of adjusted EBITDA in Q3, and that implies at least an $8.3 million EBITDA in Q4. You're right, that would show a decline year over year in H2. Keep this in mind. There's a few things happening. Last year, we delivered about 85% of our total adjusted EBITDA in H2 of the year. This year, it's a more predictable, stable

Speaker #2: So you're right, that would show a decline year over year in the back half. To keep this in mind, there's a few things happening.

Speaker #2: Last year, we delivered about 85% of our total adjusted EBITDA in the back half of the year. This year, it's a more predictable, stable EBITDA growth, matching our sales growth.

Chris Mondzelewski: EBITDA growth matching our sales growth. Number two, we did normalize for bonuses this year. We injected 100% payout this year versus a very discounted payout for management team last year. Third, marketing spend more closely aligns to full year revenue growth. If you think about our marketing priorities for H2 of the year, it's essentially America's 250th, which is a major tentpole event that generated over 709 million impressions, as well as other key events, Pay It Forward, the Folded Flag Tribute, our initiatives around Veterans Day and so forth. You'll see about $5 to $6 million more marketing investment in H2 of this year than we saw in the prior year. We'll continue to reinvest in the business.

Speaker #2: Number two, we did normalize for bonuses this year, so we injected 100% payout this year versus a very discounted payout for the management team last year.

Speaker #2: Third, marketing spend more closely aligns to full-year revenue growth. So if you think about our marketing priorities for the back half of the year, it's essentially America's 250th, which is a major 10-fold event that generated over 709 million impressions, as well as other key events, pay it forward, the folded flag tribute.

Speaker #2: Our initiatives around Veterans Day and so forth. So you'll see about $5 to $6 million more in marketing investment in the back half of this year than we saw in the prior year.

Speaker #2: So we'll continue to reinvest in the business. Comps are a little bit tougher, but the way we see it right now, we have a clear line of sight to at least 7 million dollars in Q3 of adjusted EBITDA and at least 8.3 million dollars in adjusted EBITDA in Q4.

Chris Mondzelewski: Comps are a little bit tougher, but the way we see it right now, we have a clear line of sight to at least $7 million in Q3 of adjusted EBITDA and at least $8.3 million in adjusted EBITDA in Q4.

Speaker #3: Okay. Yeah, that makes a lot of sense. If I could ask, just on the pricing, you said you're fully locked in now for 2026 on coffee and I forget the percent you said for next year, but some percent.

Matt Amigh: Okay. Yeah, that makes a lot of sense. If I could ask, just on the pricing, you said you're fully locked in now for 2026 in coffee, and I forget the percent you said for next year, but some percent. At what price are you locked in on coffee?

Mike Baker: Okay. Yeah, that makes a lot of sense. If I could ask, just on the pricing, you said you're fully locked in now for 2026 in coffee, and I forget the percent you said for next year, but some percent. At what price are you locked in on coffee?

Speaker #3: At what price are you locked in on coffee?

Speaker #2: In 2026, we're locked in at $2.95 a pound. For 2027, we have 50% coverage right now, and we're locked in at $2.65 for that 50% coverage.

Matt Amigh: In 2026, we're locked in at $2.95 a pound. 2027, we have 50% coverage right now, and we're locked in at $2.65 for that 50% coverage.

Speaker #3: Okay. And just one last one—remind us, what's the price that you paid in 2025 on average, just so we can compare it?

Mike Baker: Okay. Just one last one from me. What's the price that you paid in 2025 on average, just so we compare it?

Speaker #2: $285.

Matt Amigh: $2.85.

Speaker #3: Okay. Got it. Okay. Thanks. I'll pass it on.

Mike Baker: Got it. Okay. Thanks, I will pass it on.

Speaker #2: Thanks, Mike.

Chris Mondzelewski: Thanks, Mike.

Operator 2: Thank you. Our next question comes from the line of Sarang Vora with Telsey Advisory Group. Please proceed with your question.

Speaker #1: Thank you. Our next question comes from the line of Sarang Vora with Tulsi Advisory Group. Please proceed with your question.

Sarang Vora: Great. Thank you. Congrats on a good quarter. A couple of questions. The first one, just following on Mike's question, Matt's question about EBITDA. As you look out at 2020, we talked about H2 of the year, but as you look out at 2027, is gross margin the biggest opportunity for you as you look out for next two or three years? Seems like the operating cost structure has been streamlined. You had pressures on the pricing, pressures from promotion coffee prices, stuff like that. As you look out beyond H2, is gross margin the primary driver for margin expansion in the future? Can you expand on that one?

Speaker #4: Great. Thank you. And congrats on a good quarter. A couple of questions. The first one, just following on Mike's question, Matt's question about EBITDA.

Speaker #4: Can you so as you look out at 20 we talked about back half of the year, but as you look out at 2027, is gross margin the biggest opportunity for you as you look out for next two or three years?

Speaker #4: It seems like the operating cost structure has been streamlined. And you had pressures on the pricing—pressures on the pricing—pressures from promotional coffee prices.

Speaker #4: Stuff like that. So, as you look out beyond the second half, is gross margin the primary driver for margin expansion in the future? Can you expand on that one?

Speaker #2: Yeah, absolutely. I'll start, and I'm going to kick it over to Matt here, who can talk to some of the specifics. Yes. I mean, I think at the end of the day, we believe in building a better business before we build an aggressively bigger business.

Chris Mondzelewski: Yeah, absolutely. I will start, and I am going to kick it over to Matt here, who can talk to some of the specifics. Yes. I think at the end of the day, we believe in building a better business before we build an aggressively bigger business. I think you have seen that in the way that we have landed now disciplined quarters sequentially, and we are going to continue that. Margin is not the only thing. Having a growth model that can deliver category level growth for our customers is always number one. Your consumer and your customer have to be at the top of your agenda. If you are not putting a product out at a value that is competitive in the market, obviously you do not have a good business model overall.

Speaker #2: I think you've seen that in the way that we have landed now—disciplined quarters, sequentially. And we're going to continue that. Margin is not the only thing.

Speaker #2: I mean, having a growth model that can deliver category-level growth for our own. Your consumer and your customer have to be at the top of your agenda if you're not putting a product out at a value that is competitive in the market.

Speaker #2: Obviously, you don't have a good business model overall. And so what we're proudest of is really the performance that we've continued to be able to drive there.

Chris Mondzelewski: What we are proudest of is really the performance that we have continued to be able to drive there, the share gains that we have driven across channel, in particular with our largest mass customer, the grocery channel. As we talked about accelerating that even now in DTC across both Total Marketplace as well as stabilization of our own DTC channel, which we feel great about. With that, we obviously need to be able to deliver that in a profitable way. Again, I think with our disciplined approach on pricing on top of unit growth, we have been able to do that effectively. Again, when you think about where our growth has come from, it is split close to 50/50. Actually, slightly more is coming from unit growth. We are getting growth from pricing as well.

Speaker #2: The share gains that we have driven across channel in particular with our largest mass customer, the grocery channel, and then as we talked about, accelerating that even now in DTC across both marketplace as well as stabilization of our own DTC channel, which we feel great about.

Speaker #2: With that, we obviously need to be able to deliver that in a profitable way. And again, I think with our disciplined approach on pricing, on top of unit growth, we've been able to do that effectively.

Speaker #2: So again, when you think about where our growth has come from, it's split close to 50/50. Actually, more of it's coming slightly more is coming from unit growth.

Speaker #2: But we are getting growth from pricing as well. So we've been disciplined about making sure that we do put the pricing in when we need to get on top of costs.

Chris Mondzelewski: We have been disciplined about making sure that we do put the pricing in when we need to get on top of costs. As Matt has already talked about and as he can elaborate on, I think we have done an incredible job of really controlling on the cost side of the business, ensuring that we are only putting $ against what we know we can really create value for in the market, and being disciplined about how we go out to buy, like the previous question said, our coffee, et cetera. Matt, please elaborate.

Speaker #2: And then, as Matt has already talked about and as he can elaborate on, I think we've done an incredible job of really controlling the cost side of the business, ensuring that we're only putting dollars against what we know we can really create value for in the market.

Speaker #2: And being disciplined about how we go out to buy, like the previous question said—our coffee, etc. But Matt, please elaborate.

Speaker #3: Yeah, for sure. Outside of the top-line drivers, when you get into the gross margin drivers for next year, Sarang, it comes back to the four that we talked about.

Matt Amigh: Yeah, for sure. Outside the top-line drivers, when you get into the gross margin drivers for next year, Sarang, it comes back to the four that we talked about. As Monz mentioned, the more we sell in packaged coffee, which is our most profitable product segment, and the more we sell within the wholesale channel, which is our most profitable channel, the better we will do as a company. You get an organic mix impact that will accrete margins. Number two, we continue to focus on trade spend efficiency. Big line on the P&L, driving the lifts to generate the right returns is paramount, and we are focused maniacally on that. When it comes to supply chain productivities, we have a full list of projects that we are going after, everything from manufacturing to third-party logistics and so forth, and they are progressing very well.

Speaker #3: As Mon's mentioned, the more we sell in packaged coffee, which is our most profitable product segment, and the more we sell within the wholesale channel, which is our most profitable channel, the better we'll do as a company.

Speaker #3: So you get an organic mix impact that will create margins. Number two, we continue to focus on trade spend efficiency. It's a big line on the P&L. Driving the lifts to generate the right returns is paramount.

Speaker #3: And we're focused, maniacally, on that. When it comes to supply chain productivity, we have a full list of products or projects that we're going after—everything from manufacturing to third-party logistics and so forth.

Speaker #3: And they're progressing very well, so I think that'll be a key player in our margin expansion next year. And then it comes down to where green coffee ends up going.

Matt Amigh: I think that'll be a key player in our margin expansion next year. It comes down to where does green coffee end up going? Those are things we can't directly control. The pace in which we achieve our long-term gross margin objective depends on that. If prices moderate as they may, with the Brazil crop coming in as a bumper crop, it could happen sooner. If it doesn't, it could take longer to achieve that 40%. At the end of the day, we still see a good path for our long-term gross margin targets. Again, we talked about what the key drivers are. I don't want to leave out operating expenses. That's work that will continue to go forward. Everything from just driving the operating leverage of the business, maintaining OpEx and decreasing it where we can, and looking at marketing efficiencies.

Speaker #3: Those are things we can't directly control. Now, the pace in which we achieve our long-term gross margin objective depends on that. If price is moderate as they may with the Brazil crop coming in as a bumper crop, it could happen sooner.

Speaker #3: If it doesn't, it could take longer to achieve that 40%. So at the end of the day, we still see a good path for our long-term gross margin targets.

Speaker #3: Again, we talked about what the key drivers are. But I don't want to leave out operating expenses. That's work that will continue to go forward.

Speaker #3: So everything from just driving the operating leverage of the business, maintaining OpEx and decreasing it where we can, and looking at marketing efficiencies. We're driving every decision that we make in marketing based upon reach and target rating points as well as what kind of net revenue generation comes from it.

Matt Amigh: We're driving every decision that we make in marketing based upon reach and target rating points, as well as what kind of net revenue generation comes from it. With that, we'll drive the top line at a faster rate than we'll drive margin, or excuse me, marketing investment. The combination of what Monz mentioned on the top line, as well as the mix, the productivity savings, trade promotion, efficiency, and operating leverage at the bottom of the P&L, will drive the margin, gross margin, as well as EBITDA margin.

Speaker #3: So, with that, we'll drive the top line at a faster rate than we'll drive margin or—excuse me—marketing investment. So the combination of what Mon's mentioned on the top line, as well as the mix, the productivity savings, trade promotion efficiency, and operating leverage at the bottom of the P&L, will drive the margin—gross margin as well as EBITDA margin.

Speaker #4: That's great. I just had a follow-up on the market-based business. It seems like in the last two or three quarters, it's really stepping up for you guys.

Sarang Vora: That's great. I just had a follow-up on the marketplace business. Seems like in last two, three quarters, it's really stepping up for you guys. Can you talk a little bit more about what kind of customer are you attracting? How is the fulfillment? Are you using the third-party fulfillment? Are you fulfilling it? Any color on the margin profile? Because in the slide, there is a pretty big opportunity on the marketplace side. Where are you in terms of achieving that opportunity? Just curious how fast it is ramping as well. Any color on that business would be helpful. Thank you.

Speaker #4: Can you talk a little bit more about what kind of customer you are attracting? How is the fulfillment? Are you using third-party fulfillment?

Speaker #4: Are you fulfilling it? Any color on the margin profile? Because in the slide, there is a pretty big opportunity on the marketplace side. So where are you in terms of achieving that opportunity?

Speaker #4: Just curious how fast it is ramping as well. So any color on that business would be helpful. Thank you.

Speaker #2: Yeah, thanks, Sarang. We are proud of the progress there. And again, I think we think of our online business as one holistic piece. And that's why we refer to it as total marketplace.

Chris Mondzelewski: Yeah. Thanks, Sarang. We are proud of the progress there. We think of our online business as one holistic piece, and that's why we refer to it as Total Marketplace. Customers have the option. They can purchase off our site, blackriflecoffee.com. We've made some incredible improvements to the site. We have re-architectured it. We are seeing great results from that from an efficiency standpoint. We've talked in the past about how much less we spend on our own site, and that has continued. Even with that lower spend, we're seeing greater stabilization and greater overall efficiency in the takeaway off of our site. Which allows us to then put additional investment against other components of marketplace that we've talked about. Third parties that we work with.

Speaker #2: And so again, customers have the option. They can purchase off our site, Black Rifle Coffee.com. We've made some incredible improvements to the site. We have re-architectured it.

Speaker #2: We are seeing great results from that, from an efficiency standpoint. We've talked in the past about how much less we spend on our own site.

Speaker #2: And that has continued but even with that lower spend, we're seeing greater stabilization and greater overall efficiency in the takeaway off of our site, which allows us to then put additional investment against other components of marketplace that we've talked about.

Speaker #2: So third parties that we work with. And we maintain our own business. We maintain our own subscription profiles there as well. Which allows us to still have that closeness with our customers, gives them the option to be able to buy in the most convenient way that they would like to.

Chris Mondzelewski: We maintain our own business, we maintain our own subscription profiles there as well, which allows us to still have that closeness with our customers. It gives them the option to be able to buy in the most convenient way that they would like to. The overall driver is really fundamentals. We continue to manage our fundamentals, ensure that we're putting our money in the most efficient places, making sure we're putting the right product offerings. We're excited, and we think that we can continue that growth going forward.

Speaker #2: And the overall driver is really fundamentals. We continue to manage our fundamentals and ensure that we're putting our money in the most efficient places.

Speaker #2: Making sure we're putting the right product offerings. So we're excited and we think that we can continue that growth going forward.

Speaker #3: And I'd like to add to that. If you think about the two different components we have—BlackRifleCoffee.com—on that business, it was all about shoring up our subscription business as well as changing the platform to give us something that's more scalable over time at a lower cost.

Matt Amigh: I'd like to add to that. If you think about the two different components, we have blackriflecoffee.com. On that business, it was all about shoring up our subscription business, as well as changing the platform to give us something that's more scalable over time at a lower cost. So far, that platform has yielded great results in terms of organic search and response times. A very effective project that'll drive value going forward. When it comes to marketplaces, Sarang, to answer your question, we do use third-party fulfillment. We use the marketplace fulfillment. It's a little bit more pricey, but consumer gets it in less than two days, so there's an added benefit in terms of convenience. Both of those channels are working very well together. Most loyal consumers go into blackriflecoffee.com. When it comes to Amazon, that's about loyalty as well.

Speaker #3: And so far, that platform has yielded great results in terms of organic search and response times. A very, very effective project that'll drive value going forward.

Speaker #3: When it comes to marketplaces, Sarang, to answer your question, we do use third-party fulfillment. So we use the marketplace fulfillment. It's a little bit more pricey, but consumer gets it in less than two days.

Speaker #3: So there's an added benefit in terms of convenience, but both of those channels are working very well together. It's our most loyal consumers going to BlackRifleCoffee.com.

Speaker #3: And when it comes to Amazon, that's about loyalty as well. There's a $4.4 billion category out there for our largest marketplace, and we need to partake in that.

Matt Amigh: There's a $4 billion category out there for our largest marketplace, we need to partake in that. As you could see from the materials that Monz presented earlier, we feel like we're under-penetrated when it comes to third-party marketplaces, that's an area we have to develop, we see a good amount of opportunity there.

Speaker #3: And as you can see from the materials that Mon's presented earlier, we feel like we're under-penetrated when it comes to third-party marketplaces. And that's an area we have to develop.

Speaker #3: And we see a good amount of opportunity there.

Speaker #4: That's great. And one final question on Black Rifle Energy. Can you update us the plans for this year, next year? How is the ACV ramping?

Sarang Vora: That's great. One final question on Black Rifle Energy. Can you update us the plans for this year, next year? Like how is the ACV ramping? Any color you can share on the selective growth in key markets? Thank you.

Speaker #4: Any color you can share on the selective growth in key markets? Thank you.

Speaker #2: Yeah, absolutely, Sarang. So, nothing has changed in our plans for energy. We've talked in the previous couple of quarters about having a very focused approach in a couple of ways.

Chris Mondzelewski: Yeah, absolutely, Sarang. Nothing has changed in our plans for Energy. We've talked in the previous couple quarters about having a very focused approach in a couple ways. Number one, we want to be very focused on investment. We are a hot coffee business, and we are driving our hot coffee engine with a great deal of success, as we've talked about in the opening comments. The majority of our spending will continue to go against ensuring that we can further build out that highly profitable component of our business. Like any great growth-oriented business, we need to be constantly innovating and figuring out where are those growth angles for the future, and that's really where Energy plays for us. We continue to be excited about the category. We continue to be excited about the overlap with our consumers who are already buying that category.

Speaker #2: Number one, we want to be very focused on investment. We are a hot coffee business, and we are driving our hot coffee engine with a great deal of success, as we've talked about in the opening comments.

Speaker #2: The majority of our spending will continue to go against ensuring that we can further build out that highly profitable component of our business. And then, like any great growth-oriented business, we need to be constantly innovating and figuring out where are those growth angles for the future.

Speaker #2: And that's really where energy plays for us. We're continuing to be excited about the category and continue to be excited about the overlap with our consumers who are already buying that category.

Speaker #2: And from a store standpoint, we're going to continue to stay focused. We're in 22,000 doors. We're going to stay focused on the doors that we know are most productive for us.

Chris Mondzelewski: From a store standpoint, we're going to continue to stay focused. We're in 22,000 doors. We're going to stay focused on the doors that we know are most productive for us. We're going to continue to work with our partners at KDP to ensure that we're getting the most efficiency that we can out of that footprint that we have in place. We think the progress is good. Again, I think for us, this is going to continue to be an area that we'll learn and we'll get better with every quarter. That is exactly the progress we're seeing. There are areas where it hasn't worked as well as we'd like, but there are other areas where we're really seeing that advancement, and that's obviously what we're going to continue to build off of as we think about that going forward.

Speaker #2: We're going to continue to work with our partners at KDP to ensure that we're getting the most efficiency that we can out of that footprint that we have in place.

Speaker #2: And I think that we think the progress is good. Again, I think for us, this is going to continue to be an area that we'll learn and we'll get better with every quarter.

Speaker #2: But that is exactly the progress we're seeing. There are areas where it hasn't worked as well as we'd like, but there are other areas where we're really seeing that advancement.

Speaker #2: And that's obviously what we're going to continue to build off of as we think about that going forward. But again, I'd finish with kind of what I started.

Chris Mondzelewski: Again, I finish with kind of what I started. Coffee is where we're going to continue to put the majority of the investment until we feel that we've got that idea to a point where we want to drive scalability in the market. We obviously will talk to you all about that at that point.

Speaker #2: Coffee is where we're going to continue to put the majority of the investment. Until we feel that we've got that idea to a point where we want to drive scalability in the market, and we obviously will talk to you all about that at that point.

Speaker #4: Great. Thank you. Good luck.

Sarang Vora: Great. Thank you. Good luck.

Speaker #2: Thanks, Sarang.

Chris Mondzelewski: Thanks, Sarang.

Speaker #4: Thank you. All right, next question. Comes from the line of Eric DeLorea with Craig Allen. Please proceed with your question.

Operator 2: Thank you. Our next question comes from the line of Eric Des Lauriers with Craig-Hallum. Please proceed with your question.

Speaker #3: Great. Thank you for taking my questions and congrats on a nice quarter here. So my first question, referring to page 10, the channel expansion opportunity outline there, I think it's quite helpful in understanding the whitespace remaining and both online marketplace and grocery.

Eric Des Lauriers: Great. Thank you for taking my questions, and congrats on a nice quarter here.

Chris Mondzelewski: Appreciate it.

Eric Des Lauriers: My first question, referring to page 10, the channel expansion opportunity outlined there. I think it is quite helpful in understanding the white space remaining in both online marketplace and grocery. Both of these channels sort of similar market share for you guys right now, and also both growing very robustly. How do you sort of just look at the white space opportunity between this online marketplace and grocery? Where do you see the opportunity to sort of gain share more quickly? And how does any of this sort of difference in category mix or consumer purchasing behavior sort of impact that outlook?

Speaker #3: Both of these channels, sort of similar market share, for you guys right now, and also both growing very robustly. How do you sort of just look at the whitespace opportunity between this online marketplace and grocery?

Speaker #3: Where do you see the opportunity to sort of gain share more quickly? And how does any of this sort of difference in category mix or consumer purchasing behavior sort of impact that outlook?

Speaker #2: Hi, Eric. It's Chris. Thanks. Great question. So yeah, we obviously see opportunity in both areas, right? It's a little different how we look at both of them.

Chris Mondzelewski: Hi, Eric, it's Chris. Thanks. Great question. Yeah, we obviously see opportunity in both areas, right? It's a little different how we look at both of them. With grocery, you've heard us talk about our land and expand model. We continue to drive that with great discipline. And if you think about it, our ACV is up in grocery, which we feel great about, but we still sit in the mid-50s, which gives us massive amounts of opportunity just from a total breadth of the country standpoint. Within that, if you look at our average items carried, again, very proud of the fact that we are up double digits in growth on average items carried in grocery.

Speaker #2: So with grocery, you've heard us talk about our land-and-expand model. We continue to drive that with great discipline. And if you think about it, our ACV is up in grocery, which we feel great about, but we still sit in the mid-50s.

Speaker #2: Which gives us massive amounts of opportunity just from a total breadth of the country standpoint. Within that, if you look at our average items carried, again, I'm very proud of the fact that we're up double digits in growth on average items carried in grocery.

Speaker #2: But we're still sitting in those mid-single digits, and we know that in our top grocery accounts—the ones that we started distribution in a couple of years ago—we're well up into the teens, right?

Chris Mondzelewski: We are still sitting in those mid-single digits, and we know that in our top grocery accounts, the ones that we started distribution in a couple years ago, were well up into the teens, right? 12, 13, 14 average items on shelf. Again, even bigger opportunity potentially there to continue to expand those shelf sets. And the way it ends up working statistically is we will start with two to four items at a new retailer, and that will then obviously expand over the next year, and then eventually, often by the third year, you are getting to a full shelf set. So when you think about the 5.6 average we have on shelf, that is a combination of scaled-out accounts and a combination of those that are just starting. And then the third element is the actual velocity of our business. And again, we are going to be prudent about that.

Speaker #2: 12, 13, 14 average items on shelf. So again, even bigger opportunity potentially there to continue to expand those shelf sets. And the way it ends up working statistically is we'll start with two to four items at a new retailer, and that'll then obviously expand over the next year and then eventually often by the third year, you're getting to a full shelf set.

Speaker #2: So when you think about the 5.6 average we have on shelf, that's a combination of scaled-out accounts and a combination of those that are just starting.

Speaker #2: And then the third element is the actual velocity of our business. And again, we're going to be prudent about that as we're expanding shelf.

Chris Mondzelewski: And again, we are going to be prudent about that. As we are expanding shelf, we do not necessarily expect the velocity of a particular item to grow. That being said, we have been very pleased with the fact that we have been able to hold even there. Again, we do expect share growth in the grocery channel. We have a lot of room to be able to drive that, not only because of the relevance of our brand, which is at the end of the day, what drives all of this, but all the factors that I then talked about. As you look online at marketplace, it is an even bigger overall opportunity, potentially, depending on how you look at it. The coffee category is at least as big as what you see in mass. On top of that, we are under-penetrated.

Chris Mondzelewski: As we are expanding shelf, we do not necessarily expect the velocity of a particular item to grow. That being said, we have been very pleased with the fact that we have been able to hold even there. Again, we do expect share growth in the grocery channel. We have a lot of room to be able to drive that, not only because of the relevance of our brand, which is at the end of the day, what drives all of this, but all the factors that I then talked about. As you look online at marketplace, it is an even bigger overall opportunity, potentially, depending on how you look at it. The coffee category is at least as big as what you see in mass. On top of that, we are under-penetrated. We have a lower share than we do in mass, to use that as the comparison.

Speaker #2: We don't necessarily expect the velocity of a particular item to grow. That being said, we've been very pleased with the fact that we've been able to hold even there.

Speaker #2: So again, we do expect share growth in the grocery channel. We have a lot of room to be able to drive that, not only because of the relevance of our brand, which is at the end of the day what drives all of this, but all the factors that I then talked about.

Speaker #2: As you look online, it marketplace it's even bigger overall opportunity potentially depending on how you look at it. The coffee category is at least as big as what you see in mass.

Speaker #2: And on top of that, we are underpenetrated. We have a lower share than we do in mass to use that as the comparison. So similar category size, with lower current penetration again, we're going to continue to manage the fundamentals of that channel, making sure we don't overextend ourselves, but we get the right items at the right price points.

Chris Mondzelewski: We have a lower share than we do in mass, to use that as the comparison.

Chris Mondzelewski: Similar category size with lower current penetration. Again, we're going to continue to manage the fundamentals of that channel, making sure we don't overextend ourselves, but we get the right items at the right price points, and we are utilizing our advertising dollars in the right way within that. We brought a lot of expertise in from the outside. We've got some great people in the building who really understand this model well. Again, there's a lot of belief that we can catch up on fair share in that channel to what we have seen in our other channels. Again, just as a reminder, if you think about our share in our largest mass retailer, as an example, 9.7% market share on 12-ounce bags. We're the number 1 player, actually, other than private label. 5% share in pods. We're nowhere near that.

Speaker #2: And we are utilizing our advertising dollars in the right way within that. We brought a lot of expertise in from the outside. We've got some great people in the building who really understand this model well.

Speaker #2: And so again, there's a lot of belief that we can catch up on fair share in that channel to what we have seen in our other channels.

Speaker #2: And again, just as a reminder, if you think about our share in our largest mass retailer as an example, 9.7% market share on 12-ounce bags were the number one player actually, other than private label.

Speaker #2: 5% share in pods were nowhere near that. We have a lower share almost a fourth of that on bags and half of that on pods.

Chris Mondzelewski: We have a lower share, almost a fourth of that on bags and half of that on pods. Again, the opportunity in marketplace is even bigger when you strip it apart. Again, for us, it's always going to be about, we'll put the spending where we see ourselves getting the greatest returns. That discipline across any channel has ultimately worked well for us.

Speaker #2: So again, the opportunity and marketplace is even bigger when you strip it apart. But again, for us, it's always going to be about we'll put the spending where we see ourselves getting the greatest returns.

Speaker #2: And that discipline across any channel has ultimately worked well for us.

Speaker #3: Eric, I'd add one more thing too. So when we look at the large online marketplace, that's a channel that has a very low cost to acquire a consumer.

Matt Amigh: Eric, I'd add 1 more thing to it. When we look at the large online marketplace, that's a channel that has a very low cost to acquire a consumer. When you look at the lifetime value to CAC ratio, it's a strong performer for us to make some investments and drive consumers into the franchise. Those consumers are already there. $4 billion are already there. We just need to capture them and bring them back. What's interesting about that particular channel is that it's concentrated in the pods. As you can see, about 70% of the largest online marketplace is pods. Now, if you look at our brcc.com site, it's about the opposite of that, so it's more on the bag coffee side. It complements the BRCC website very well.

Matt Amigh: Eric, I'd add one more thing to it. When we look at the large online marketplace, that's a channel that has a very low cost to acquire a consumer. When you look at the lifetime value to CAC ratio, it's a strong performer for us to make some investments and drive consumers into the franchise. Those consumers are already there. $4 billion are already there. We just need to capture them and bring them back. What's interesting about that particular channel is that it's concentrated in the pods. As you can see, about 70% of the largest online marketplace is pods. Now, if you look at our brcc.com site, it's about the opposite of that, so it's more on the bag coffee side. It complements the BRCC website very well.

Speaker #3: So when you look at the lifetime value to CAC ratio, it's a strong performer for us to make some investments and drive consumers into the franchise.

Speaker #3: And as consumers are already there, at $4 billion—they're already there. We just need to capture them and bring them back. What's interesting about that particular channel is that it's concentrated in the pods.

Speaker #3: As you can see, about 70% of the largest online marketplace is pods. Now, if you look at our BRCc.com site, it's about the opposite of that.

Speaker #3: So it's more on the bagged coffee side, so it complements the BRC website very well.

Speaker #1: That's great, Caller. I appreciate that from both of you. And then, just overall, so understood that guidance here does not include additional distribution wins.

Eric Des Lauriers: That's great color. I appreciate that from both of you. Just overall, understood that guidance here does not include additional distribution wins. Certainly, the longer-term value proposition to retailers is very strong with your brand performance. Just wondering at a high level, what is the near-term prospect for further distribution gains, and how are these conversations going? Should we look for more distribution gains to come sort of next spring? Is it something that you don't really expect too much more of in what remains of this year? Just any sort of cadence on how you're thinking about potential distribution wins and how those conversations are going would be very helpful. Thank you.

Speaker #1: Certainly, the longer-term value proposition of retailers is very strong with your brand performance. Just wanted to at a high level, what is the near-term prospect for further distribution gains and how are these conversations going?

Speaker #1: Should we look for more distribution gains to come sort of in the next spring? Is it something that you don't really expect too much more of in what remains of this year?

Speaker #1: Just any sort of cadence on how you're thinking about potential distribution wins and how those conversations are going would be very helpful. Thank you.

Speaker #2: Yeah. I'll start out, Eric. I think we're not going to give guidance on specifically how we see our distribution growing other than we do continue we do expect it to continue to grow.

Chris Mondzelewski: I'll start out, Eric. I think we're not going to give guidance on specifically how we see our distribution growing other than we do expect it to continue to grow. The process for us has, again, been a disciplined one. We continue to negotiate customer by customer. Yes, you're right, the brand proposition right now is appealing. We have demonstrated in the customers that we've gone into that we can grow category profitably for those customers, and that's a big part of our land and expand strategy, is ensuring that retailer is also growing profitability with us as they expand Black Rifle, and that has played itself out. That becomes a strong selling point going forward. Any of the larger retailers in the US and the smaller retailers that we're not in distribution in now, I can assure you we're having conversations with.

Speaker #2: So the process for us has, again, been a disciplined one. We continue to negotiate customer by customer. Yes, you're right. The brand proposition right now is feeling we have demonstrated in the customers that we've gone into that we can grow category profitably for those customers.

Speaker #2: And that's a big part of our land and expand strategy is ensuring that that retailer is also growing profitability with us as they expand Black Rifle.

Speaker #2: And that has played itself out. So that becomes a strong selling point going forward. Any of the larger retailers in the US, and the smaller retailers that we’re not in distribution with now, I can assure you we’re having conversations with.

Speaker #2: And we will always continue to push to make sure that we can put a mutual model in place where both us and our customers can see profitability and most importantly, that we are protecting the aspects of what we have built in this brand.

Chris Mondzelewski: We will always continue to push to make sure that we can put a mutual model in place where both us and our customers can see profitability, and most importantly, that we are protecting the aspects of what we have built in this brand. This is a super premium brand, and we want to ensure that the execution plans against this, when you think about merchandising, et cetera, what our expectations will be, are going to allow us to continue to maintain this being a super premium brand. All those factors play a role in how quickly we roll with any particular customer. As far as how you'd see it play out into 2027, it always depends on the reset windows. We've gotten the question in the past as to why sometimes the revenue seems to be slightly out of line with consumption.

Speaker #2: This is a super premium brand, and we want to ensure that the execution plans against this, when you think about merchandising, etc., what our expectations will be are going to allow us to continue to maintain this being a super premium brand.

Speaker #2: So all those factors play a role in how quickly we roll with any particular customer. As far as how you'd see it play out into '27, it always depends on the reset windows.

Speaker #2: We've gotten the question in the past as to why sometimes the revenue seems to be slightly out of line with consumption a lot of times.

Chris Mondzelewski: A lot of times, this is because we're pipelining those customers. It doesn't come in a smooth way in the beginning. We'll tend to ship all of the stores or a significant portion of the stores all at once. Some customers reset in Q1, some customers reset in Q3, it'll depend. As we get closer, and as Matt said earlier, as we get to higher probability with a given customer, a negotiated deal, we'll be transparent about that. We'll make sure you all know that. Again, just because we haven't said it doesn't mean that we aren't working it in the background, but we want to be careful not to talk about that publicly until we're really sure we have a deal in place.

Speaker #2: This is because we're pipelining those customers. It doesn't come in a smooth way in the beginning. We'll tend to ship all of the stores or a significant portion of the stores all at once.

Speaker #2: Some customers reset in Q1. Some customers reset in Q3. So it'll depend. But as we get closer, and as Matt gets to a higher probability with a given customer or a negotiated deal, we'll be transparent about that.

Speaker #2: We'll make sure you all know that. So again, just because we haven't said it doesn't mean that we aren't working on it in the background, but we want to be careful not to talk about that publicly until we're really sure we have a deal in place.

Speaker #3: Yeah, certainly makes sense to me. And all that background info is encouraging. Seems like momentum continues to be strong kind of across the board here.

Eric Des Lauriers: Certainly makes sense to me, all that background info is encouraging. Seems like momentum continues to be strong kind of across the board here. Congrats again on the strong results, guys, good luck for the rest of the year.

Speaker #3: Congrats again on the strong results, guys, and good luck for the rest of the year.

Speaker #1: Thanks, Eric.

Chris Mondzelewski: Thanks, Eric.

Speaker #2: Thanks, Eric.

Matt McGinley: Thanks, Eric.

Speaker #1: Thank you. And ladies and gentlemen, this concludes our question-and-answer session. I'll turn the floor back to management for any final comments.

Operator 2: Thank you. Ladies and gentlemen, this concludes our question and answer session. I'll turn the floor back to management for any final comments.

Speaker #2: Okay. We delivered a strong quarter: revenue grew 13%, profit increased 164%, gross margin improved, and free cash flow has swung more than $20 million, as we talked about.

Chris Mondzelewski: Okay. We delivered a strong quarter. Revenue grew 13%, profit increased 164%, gross margin improved, free cash flow has swung more than $20 million. As we talked about, coffee has remained our growth engine. We're proud of what we're doing across all segments. Our margin trajectory has turned this quarter, which is big. We're going to continue to build off of that. Sharper focus is converting growth into earnings and cash. We see that working. As we enter the H2, we're confident. We're going to remain disciplined, as Matt talked about. We're going to execute against what we can control, invest where the returns are highest, and let consistent results speak for themselves. We believe the best work and the greatest value creation is still ahead of us. Look forward to talking to you next quarter.

Speaker #2: Coffee has remained our growth engine. But we're proud of what we're doing across all segments. Our margin trajectory has turned. This quarter, which is big, and we're going to continue to build off of that.

Speaker #2: Sharper focus is converting. Growth into earnings and cash. And we see that working. As we ended the second half, we're confident we're going to remain disciplined, as Matt talked about.

Speaker #2: We're going to execute against what we can control: invest where the returns are highest, and let consistent results speak for themselves. So we believe the best work and the greatest value creation is still ahead of us.

Speaker #2: Look forward to talking to you next quarter.

Operator 2: This concludes today's conference, and you may disconnect your lines at this time. We thank you for your participation.

Q2 2026 BRC Inc Earnings Call

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Black Rifle Coffee Company

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