BRC Inc. Reports Fourth Quarter and Full Year 2022 Financial Results

Wholesale Channel Increased 114% to $119 million, Driven by Ready-to-Drink and Entry into Food, Drug and Mass

In Less than Six Months, Risen to the #4 Brand in Bagged Coffee at Walmart, representing 22% of 12oz Bagged Coffee Sales

Net Revenue Increased 29% in 2022 to $301 million

BRC Inc. (NYSE: BRCC), a rapidly growing and mission-driven premium coffee company founded to support Veterans, active-duty military and first responders and serve a broad customer base by connecting consumers with great coffee and a unique brand experience, today announced financial results for the fourth quarter and full year 2022.

“The momentum of the Black Rifle Coffee brand has been incredible throughout 2022. We've moved from a small, niche DTC brand to a mainstream CPG business in less than a couple of years,” said BRCC Founder and CEO Evan Hafer. “We've entered the Food, Drug and Mass (FDM) market and in less than six months have become the number four bagged coffee brand at Walmart and currently represent 3.8% of their total coffee aisle. Outside of FDM, our Ready-to-Drink coffee products have been the fastest-growing RTD coffee brand outpacing the category by almost four times. We also have collaborated with some of the most recognizable brands on the planet with our announcement of becoming the official coffee of the Dallas Cowboys and partnering with Amazon Prime Video on a co-branded coffee for the launch of the “Terminal List.”

“In 2023, we will build on this foundation with our commitment to profitable, sustainable growth. Now that we have built much of our infrastructure for growth in the wholesale channel, we have begun to realize efficiencies and have implemented a number of productivity initiatives throughout the business. These initiatives will result in us generating meaningful profitability in 2023 and beyond. The team is laser-focused on ensuring these results as we recognize profitable growth is the only way to sustain our brand momentum and continue giving back to veterans, active-duty military, first responders and their families. That mission is the foundation for this business and drives us in everything we do.”

Recent Business Highlights

• Ready to Drink (RTD) doors grew 44.5% to 61,230 from 42,370 in 2021
• Wholesale doors ended 2022 at 10,690, an increase of 306.5% from 2021
• Direct to Consumer (DTC) subscribers ended the year at 270,000 a 6.0% decrease from 2021
• Ended the year with 26 Outposts, 15 company-owned and 11 franchised

Fourth Quarter 2022 Financial Details

• Net revenue of $93.6 million, an increase of 30.3% year-over-year
• Gross profit increased 19.4% to $29.5 million or 31.5% of net revenue
• Net loss of $20.0 million
• Adjusted EBITDA (non-GAAP) of $(11.4) million (for more information regarding the non-GAAP financial measures discussed in this press release, see "Non-GAAP Financial Measures" below)

Full Year 2022 Financial Details

• Net revenue of $301.3 million, an increase of 29.3% year-over-year
• Gross profit increased 10.6% to $99.2 million or 32.9% of net revenue
• Net loss of $338.0 million, including $268.7 million equity fair value adjustments
• Adjusted EBITDA (non-GAAP) of $(34.0) million

Fourth Quarter 2022 Results

Fourth quarter 2022 revenue increased 30.3% to $93.6 million from $71.8 million the fourth quarter of 2021. Direct to Consumer revenue decreased 8.1% to $45.6 million compared to $49.6 million in the fourth quarter of 2021. Wholesale revenue increased 140.1% to $41.2 million compared to $17.2 million in the fourth quarter of 2021, and our Outpost revenue increased 34.3% to $6.8 million versus $5.1 million in the fourth quarter of 2021. The year-over-year growth in revenue was primarily driven by entry into FDM and the continued growth in our Wholesale revenue channel due to expanding points of distribution and strong retail velocities in addition to the opening of four company owned outposts in Q4 of 2022.

Gross profit increased 19.4% to $29.5 million compared to $24.7 million in the fourth quarter of 2021. Gross margins decreased 290 basis points to 31.5% from 34.3% for the fourth quarter of 2021. The decrease in our gross margins was driven by inflationary pressures on product and shipping costs (not yet offset by price increases) and startup costs associated with the expansion of our Ready to Drink product.

Marketing expenses increased 22.5% to $13.6 million from $11.1 million in the fourth quarter of 2021. This increase was driven by increased advertising expenditure to increase brand awareness as well as increased costs for production of content. As a percentage of revenue, marketing decreased 90 bps to 14.5% versus 15.4% in the fourth quarter of 2021.

Salaries, wages and benefits increased 87.8% to $16.9 million from $9.0 million in the fourth quarter of 2021, primarily due to the building out of the management teams within the wholesale channel. As a percentage of revenue, salaries, wages and benefits increased 550 bps to 18.0% as compared to 12.5% for the fourth quarter of 2021.

G&A expenses increased 112.6% to $18.5 million compared to $8.7 million in the fourth quarter of 2021. This increase is due primarily to increased technology costs and professional services. As a percentage of revenue, G&A increased 760 basis points to 19.7% compared to 12.1% in the fourth quarter of 2021.

In the fourth quarter of 2022, we had a net loss of $20.0 million and adjusted EBITDA of $(11.4) million. In the fourth quarter of 2021, net loss was $4.6 million and adjusted EBITDA was $(0.9) million.

Financial Outlook

BRC Inc. provides guidance based on current market conditions and expectations for revenue, gross margin and adjusted EBITDA, which is a non-GAAP financial measure.

For the full-year fiscal 2023, the Company expects:

• Net revenue of $400-$440 million
• Gross Margin Target of 36% - 37.5%
• Adjusted EBITDA of $5M - $20M

The guidance provided above constitutes forward-looking statements and actual results may differ materially. Refer to the “Forward-Looking Statements” safe harbor section below for information on the factors that could cause our actual results to differ materially from these forward-looking statements.

We have not reconciled forward-looking Adjusted EBITDA to its most directly comparable GAAP measure, net income (loss), because we cannot predict with reasonable certainty the ultimate outcome of certain components of such reconciliations, including market-related assumptions that are not within our control, or others that may arise, without unreasonable effort. For these reasons, we are unable to assess the probable significance of the unavailable information, which could materially impact the amount of future net loss. See “Non-GAAP Financial Measures” for additional important information regarding Adjusted EBITDA.

Conference Call

A conference call to discuss the Company’s fourth quarter and full year 2022 results is scheduled for March 15, 2023, at 4:30 p.m. ET. Those who wish to participate in the call may do so by dialing (877) 407-0609 or (201) 689-8541 for international callers. A webcast of the call will be available on the investor relations page of the Company’s website at Black Rifle Coffee Company (BRCC). For those unable to participate in the conference call, a replay will be available after the conclusion of the call on March 15, 2023 through March 22, 2023. The U.S. toll-free replay dial-in number is (877) 660-6853, and the international replay dial-in number is (201) 612-7415. The replay passcode is 13735845.

About BRC Inc.

Black Rifle Coffee Company (BRCC) is a veteran-founded coffee company serving premium coffee to people who love America. Founded in 2014 by Green Beret Evan Hafer, Black Rifle develops their explosive roast profiles with the same mission focus they learned while serving in the military. BRCC is committed to supporting veterans, active-duty military, first responders and the American way of life.

To learn more about BRCC, visit www.blackriflecoffee.com, follow BRCC on social media, or subscribe to Coffee or Die Magazine's daily newsletter at https://coffeeordie.com/presscheck-signup.

Forward-Looking Statements

This press release contains management’s current opinions, expectations, hopes, beliefs, plans, intentions, objectives, strategies, assumptions or projections regarding future events or future results of operations or financial condition, all of which are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Forward-looking statements include statements about the Company’s expectations, beliefs, plans, objectives, intentions, assumptions, future financial performance and other statements that are not historical facts. The words “anticipate,” “believe,” “continue,” “could,” “estimate,” “expect,” “intends,” “may,” “might,” “plan,” “possible,” “potential,” “predict,” “project,” “should,” “will,” “would” and similar expressions may identify forward-looking statements, but the absence of these words does not mean that a statement is not forward-looking. Actual results may differ materially due to various factors. The following include some but not all of the factors that could cause actual results or events to differ materially from those anticipated, including failure to recognize the anticipated benefits of the business combination, which may be affected by, among other things, competition and our ability to grow and manage growth sustainably and retain our key employees; failure to achieve profitability; negative publicity affecting our brand and reputation, or the reputation of key employees, which may adversely affect our operating results; failure by us to maintain our message as a supportive member of the veteran and military communities and any other factors which may negatively affect the perception of our brand; our limited operating history, which may make it difficult to successfully execute our strategic initiatives and accurately evaluate future risks and challenges; failed marketing campaigns, which may cause us to incur costs without attracting new customers or realizing higher revenue; failure to attract new customers or retain existing customers; risks related to the use of social media platforms, including dependence on third-party platforms; failure to provide high-quality customer experience to retail partners and end users, including as a result of production defaults or issues, including due to failures by one or more of our co-manufacturers, affecting the quality of our products, which may adversely affect our brand; decrease in success of the direct to consumer revenue channel; loss of one or more of co-manufacturers, or delays, quality, or other production issues, including labor-related production issues at any of our co-manufacturers; failure to effectively manage or distribute our products through our wholesale business partners; failure by third parties involved in the supply chain of coffee, store supplies or merchandise to produce or deliver products, including as a result of ongoing supply chain disruptions, or our failure to effectively manage such third parties; changes in the market for high-quality coffee beans and other commodities; fluctuations in costs and availability of real estate, labor, raw materials, equipment, transportation or shipping; loss of confidential data from customers and employees, which may subject us to litigation, liability or reputational damage; failure to successfully compete with other producers and retailers of coffee; failure to successfully open new Black Rifle Coffee shops, including failure to timely proceed through permitting and other development processes, or the failure of any new or existing Black Rifle Coffee shops to generate sufficient sales; failure to properly manage our rapid growth and relationships with various business partners; failure to protect against software or hardware vulnerabilities; failure to build brand recognition using our intellectual properties or otherwise; shifts in consumer spending, lack of interest in new products or changes in brand perception upon evolving consumer preferences and tastes; failure to adequately maintain food safety or quality and comply with food safety regulations; failure to successfully integrate into new domestic and international markets; risks related to leasing space subject to long-term non-cancelable leases and with respect to real property; failure of our franchise partners to successfully manage their franchises; failure to raise additional capital to develop the business; risks related to supply chain disruptions; risks related to unionization of employees; failure to comply with federal state and local laws and regulations; inability to maintain the listing of the Company’s Class A Common Stock on the New York Stock Exchange. The forward-looking statements contained in this press release are based on the Company’s current expectations and beliefs concerning future developments and their potential effects on the Company. There can be no assurance that future developments affecting the Company will be those that the Company anticipated. These forward-looking statements involve a number of risks, uncertainties (some of which are beyond the Company’s control) or other assumptions that may cause actual results or performance to be materially different from those expressed or implied by these forward-looking statements. For additional information about the factors that could cause actual results to differ materially from forward-looking statements, please see the Company's documents filed or to be filed with the Securities and Exchange Commission, including our Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and other filings with the Securities and Exchange Commission. You should not place undue reliance on forward-looking statements, which speak only as of the date of this release. Should one or more of these risks or uncertainties materialize, or should any of the assumptions prove incorrect, actual results may vary in material respects from those projected in these forward-looking statements. The Company will not undertake any obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as may be required under applicable securities laws.

Non-GAAP Financial Measures

To evaluate the performance of our business, we rely on both our results of operations recorded in accordance with generally accepted accounting principles in the United States ("GAAP") and certain non-GAAP financial measures, including EBITDA and Adjusted EBITDA. These measures, as defined below, are not defined or calculated under principles, standards or rules that comprise GAAP. Accordingly, the non-GAAP financial measures we use and refer to should not be viewed as a substitute for performance measures derived in accordance with GAAP or as a substitute for a measure of liquidity. Our definitions of EBITDA and Adjusted EBITDA described below are specific to our business and you should not assume that they are comparable to similarly titled financial measures of other companies. We define EBITDA as net income (loss) before interest, state income taxes, depreciation and amortization expense. We also present EBITDA excluding non-cash fair value adjustments relating to the remeasurement of earn-out and derivative liabilities upon vesting events and the remeasurement of a warrant liability upon redemption of warrants. We define Adjusted EBITDA as EBITDA, as adjusted for equity-based compensation, system implementation costs, transaction expenses, executive recruiting, severance, relocation and sign-on bonus, write-off of site development costs, strategic initiative related costs, non-routine legal expenses, RTD start-up production issue, and contract termination costs. Investors should note that, beginning with results for the quarter ended December 31, 2022, we have modified the presentation of Adjusted EBITDA to no longer exclude Outpost pre-opening expenses. To conform to the current period’s presentation, we have excluded Outpost pre-opening expenses when presenting Adjusted EBITDA for the year-to-date period and periods presented for 2021. This change decreased Adjusted EBITDA for the years ended December 31, 2022 and 2021 by $1.1 million and $0.9 million, respectively, and for the quarter ended December 31, 2022 and 2021 by $0.5 million and $0.6 million, respectively. When used in conjunction with GAAP financial measures, we believe that EBITDA and Adjusted EBITDA are useful supplemental measures of operating performance because these measures facilitate comparisons of historical performance by excluding non-cash items such as equity-based payments and other amounts not directly attributable to our primary operations, such as the impact of system implementation, acquisitions, disposals, executive searches, executive severance, non-routine investigations, litigation and settlements. Adjusted EBITDA is also a key metric used internally by our management to evaluate performance and develop internal budgets and forecasts. EBITDA and Adjusted EBITDA have limitations as an analytical tool and should not be considered in isolation or as a substitute for analyzing our results as reported under GAAP and may not provide a complete understanding of our operating results as a whole. Some of these limitations are (i) they do not reflect changes in, or cash requirements for, our working capital needs, (ii) they do not reflect our interest expense or the cash requirements necessary to service interest or principal payments on our debt, (iii) they do not reflect our tax expense or the cash requirements to pay our taxes, (iv) they do not reflect historical capital expenditures or future requirements for capital expenditures or contractual commitments, (v) although equity-based compensation expenses are non-cash charges, we rely on equity compensation to compensate and incentivize employees, directors and certain consultants, and we may continue to do so in the future and (vi) although depreciation, amortization and impairments are non-cash charges, the assets being depreciated and amortized will often have to be replaced in the future, and these non-GAAP measures do not reflect any cash requirements for such replacements.

A reconciliation of net income, the most directly comparable GAAP measure, to EBITDA and Adjusted EBITDA is set forth below:

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