BRC Inc. Reports First Quarter 2022 Financial Results
BRC Inc. (NYSE: BRCC) reported a 35% net revenue increase in Q1 2022, reaching $65.8 million, driven by significant growth in wholesale and Outpost sales. The company reported a net loss of $(256.8) million, which includes $240.7 million in non-cash expenses. While gross profit rose 18% to $23.2 million, gross margin fell to 35%.
BRCC continues to expand its leadership team, hiring veterans from notable companies to support growth initiatives.
- Net revenue increased 35% year-over-year to $65.8 million.
- Wholesale revenue surged 135% to $22.0 million.
- Outpost revenue increased 397% to $5.5 million.
- Gross profit rose 18% to $23.2 million.
- Net loss of $(256.8) million, including $(240.7) million in non-cash fair value adjustments.
- Gross margins decreased by 499 basis points to 35%.
- Salaries and benefits increased by 106% to $16.0 million.
Net Revenue Increases
More Than Doubles Ready to Drink (RTD) Capacity To Support Demand
Solidifies C-Suite with Hiring of Industry Veterans as Chief Retail Officer and Chief Technology Officer
“The first quarter of 2022 was another milestone on our journey as a newly public company. The strength of our brand continues to drive robust operating performance. In the quarter, RTD beverages gained materially more distribution coupled with strong velocities and our Outposts continue to grow as we expand in new and existing geographies,” said BRCC Founder and Chief Executive Officer
“The work we do to support veterans, active-duty military, and first responders motivates and inspires the entire BRCC team. For example, we recently hosted the Veterans Adaptive Archery Shoot in
First Quarter 2022 Financial Details
-
Net revenue of
$65.8 million 35% year-over-year
-
Gross profit increased
18% year-over-year to$23.2 million 35% of net revenue
-
Net loss of
$(256.8) million $240.7 million
-
Adjusted EBITDA (non-GAAP) of
$(6.2) million
First Quarter 2022 Results
First quarter 2022 revenue increased
Gross profit increased
Marketing expenses increased
Salaries, wages and benefits increased
General and administrative ("G&A") expenses increased
In the first quarter of 2022, we also recognized losses from the change in fair value of earn-out liabilities, warrants and derivative liabilities. The losses recorded for the first quarter of 2022 represent the following:
– Upon the occurrence of the vesting of the first portion of our earn-out shares in
– We also remeasured the warrant liability at the reporting date and recognized a fair value of
– Lastly, we also remeasured the derivative liability relating to the shares issuable in connection with the applicable premium on the Series A Preferred Stock at the reporting date. This was remeasured to a fair value of
Net loss for the first quarter of 2022 was
Conference Call
A conference call to discuss the Company’s first quarter results is scheduled for
About
To learn more about BRCC, visit www.blackriflecoffee.com, follow BRCC on social media, or subscribe to Coffee or
Forward-Looking Statements
This press release contains management’s current intentions and expectations for the future, 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 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 profitably and retain our key employees; negative publicity impacting our brand and reputation, which may adversely impact 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 impact 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, which may impact our brand; decrease in success of the direct to consumer revenue channel; loss of one or more of 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; changes in the market for high-quality Arabica 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 retail coffee shops; 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; 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 franchise; failure to raise additional capital to develop the business; risks related to the COVID-19 pandemic, including supply chain disruptions; the loss of one or more of our executive officers and other key employees; failure to hire and retain qualified employees; failure to meet our goal of hiring 10,000 veterans; risks related to unionization of employees; failure to comply with federal state and local laws and regulations; resales from time to time of a significant portion of our shares held by selling holders; and inability to maintain the listing of our Class A Common Stock on the
CONSOLIDATED STATEMENTS OF OPERATIONS |
||||||||
(Amounts in thousands, except share and per share amounts, unaudited) |
||||||||
|
Three Months Ended |
|||||||
|
|
|
|
|||||
|
|
2022 |
|
|
|
2021 |
|
|
Revenue, net |
$ |
65,836 |
|
|
$ |
48,790 |
|
|
Cost of goods sold |
|
42,623 |
|
|
|
29,152 |
|
|
Gross profit |
|
23,213 |
|
|
|
19,638 |
|
|
Operating expenses |
|
|
|
|||||
Marketing and advertising |
|
8,151 |
|
|
|
6,551 |
|
|
Salaries, wages and benefits |
|
16,018 |
|
|
|
7,778 |
|
|
General and administrative |
|
14,887 |
|
|
|
4,838 |
|
|
Total operating expenses |
|
39,056 |
|
|
|
19,167 |
|
|
Operating income (loss) |
|
(15,843 |
) |
|
|
471 |
|
|
Non-operating income (expense) |
|
|
|
|||||
Interest expense |
|
(490 |
) |
|
|
(294 |
) |
|
Other income (expense), net |
|
348 |
|
|
|
8 |
|
|
Change in fair value of earn-out liability |
|
(171,098 |
) |
|
|
— |
|
|
Change in fair value of warrant liability |
|
(62,109 |
) |
|
|
— |
|
|
Change in fair value of derivative liability |
|
(7,507 |
) |
|
|
— |
|
|
Total non-operating expenses |
|
(240,856 |
) |
|
|
(286 |
) |
|
Income (loss) before income taxes |
|
(256,699 |
) |
|
|
185 |
|
|
Income tax expense |
|
128 |
|
|
|
36 |
|
|
Net income (loss) |
$ |
(256,827 |
) |
|
$ |
149 |
|
|
Less: Net loss attributable to non-controlling interest |
|
(193,906 |
) |
|
|
|||
Net loss attributable to |
$ |
(62,921 |
) |
|
|
|||
|
|
|
|
|||||
Net loss per share attributable to Class A Common Stock(1) |
|
|
|
|||||
Basic and diluted |
$ |
(1.36 |
) |
|
|
|||
Weighted-average shares of Class A common stock outstanding |
|
|
|
|||||
Basic and diluted |
|
44,254,837 |
|
|
|
|||
CONSOLIDATED BALANCE SHEETS |
||||||||
(Amounts in thousands, except share and per share amounts, unaudited) |
||||||||
|
|
|
|
|||||
Assets |
|
|
|
|||||
Current assets: |
|
|
|
|||||
Cash and cash equivalents |
$ |
110,102 |
|
|
$ |
18,334 |
|
|
Accounts receivable, net |
|
13,418 |
|
|
|
7,442 |
|
|
Inventories |
|
25,857 |
|
|
|
20,872 |
|
|
Prepaid expenses and other current assets |
|
11,473 |
|
|
|
6,377 |
|
|
Total current assets |
$ |
160,850 |
|
|
$ |
53,025 |
|
|
Property, plant and equipment, net |
|
34,341 |
|
|
|
31,114 |
|
|
Operating lease, right-of-use asset |
|
7,340 |
|
|
|
— |
|
|
Identifiable intangibles, net |
|
251 |
|
|
|
167 |
|
|
Restricted cash |
|
8,265 |
|
|
|
— |
|
|
Other |
|
795 |
|
|
|
2,776 |
|
|
Total assets |
$ |
211,842 |
|
|
$ |
87,082 |
|
|
|
|
|
|
|||||
Liabilities and stockholders' deficit/members’ deficit |
|
|
|
|||||
Current liabilities: |
|
|
|
|||||
Accounts payable |
$ |
6,427 |
|
|
$ |
17,387 |
|
|
Accrued liabilities |
|
25,387 |
|
|
|
22,233 |
|
|
Deferred revenue and gift card liability |
|
7,768 |
|
|
|
7,334 |
|
|
Current maturities of long-term debt, net |
|
2,867 |
|
|
|
11,979 |
|
|
Current operating lease liability |
|
432 |
|
|
|
— |
|
|
Current maturities of finance lease obligations |
|
100 |
|
|
|
85 |
|
|
Total current liabilities |
$ |
42,981 |
|
|
$ |
59,018 |
|
|
Non-current liabilities: |
|
|
|
|||||
Long-term debt, net |
$ |
15,777 |
|
|
$ |
22,712 |
|
|
Finance lease obligations, net of current maturities |
|
273 |
|
|
|
228 |
|
|
Operating lease liability |
|
7,037 |
|
|
|
— |
|
|
Earn-out liability |
|
217,404 |
|
|
|
— |
|
|
Warrant liability |
|
98,593 |
|
|
|
— |
|
|
Derivative liability |
|
17,248 |
|
|
|
— |
|
|
Other non-current liabilities |
|
482 |
|
|
|
334 |
|
|
Total non-current liabilities |
$ |
356,814 |
|
|
$ |
23,274 |
|
|
Total liabilities |
$ |
399,795 |
|
|
$ |
82,292 |
|
|
Commitments and Contingencies |
|
|
|
|||||
Stockholders' equity: |
|
|
|
|||||
Preferred stock, |
$ |
— |
|
|
$ |
— |
|
|
Class A common stock, |
|
4 |
|
|
|
— |
|
|
Class B common stock, |
|
15 |
|
|
|
— |
|
|
Series C common stock, |
|
— |
|
|
|
— |
|
|
Series A preferred equity, less issuance costs (151,406 units authorized, issued and outstanding as of |
|
— |
|
|
|
154,281 |
|
|
Additional paid in capital |
|
38,814 |
|
|
|
— |
|
|
Accumulated deficit |
|
(83,748 |
) |
|
|
(19,996 |
) |
|
Members’ deficit (18,769 Class A units and 73,890 Class B units authorized, issued and outstanding as of |
|
— |
|
|
|
(129,495 |
) |
|
|
$ |
(44,915 |
) |
|
$ |
(149,491 |
) |
|
Non-controlling interests |
|
(143,038 |
) |
|
|
— |
|
|
Total stockholders' equity (deficit) |
$ |
(187,953 |
) |
|
$ |
(149,491 |
) |
|
Total liabilities and stockholders' deficit |
$ |
211,842 |
|
|
$ |
87,082 |
|
|
CONSOLIDATED STATEMENTS OF CASH FLOWS |
|||||||
(Amounts in thousands, unaudited) |
|||||||
|
Three Months Ended |
||||||
|
|
2022 |
|
|
|
2021 |
|
Operating activities |
|
|
|
||||
Net income (loss) |
$ |
(256,827 |
) |
|
$ |
149 |
|
Adjustments to reconcile net income (loss) to net cash used in operating activities: |
|
|
|
||||
Depreciation and amortization |
|
989 |
|
|
|
499 |
|
Equity-based compensation |
|
2,259 |
|
|
|
317 |
|
Non-employee equity-based compensation |
|
355 |
|
|
|
368 |
|
Amortization of debt issuance costs |
|
243 |
|
|
|
42 |
|
Bad debt expense (recovery) |
|
— |
|
|
|
(51 |
) |
Change in fair value of earn-out liability |
|
171,098 |
|
|
|
— |
|
Change in fair value of warrant liability |
|
62,109 |
|
|
|
— |
|
Change in fair value of derivative liability |
|
7,507 |
|
|
|
— |
|
Changes in operating assets and liabilities: |
|
|
|
||||
Accounts receivable, net |
|
(5,976 |
) |
|
|
(300 |
) |
Inventories |
|
(4,985 |
) |
|
|
(4,266 |
) |
Prepaid expenses and other assets |
|
(5,193 |
) |
|
|
(1,629 |
) |
Accounts payable |
|
(10,960 |
) |
|
|
(247 |
) |
Accrued liabilities |
|
6,174 |
|
|
|
(911 |
) |
Deferred revenue and gift card liability |
|
434 |
|
|
|
340 |
|
Other liabilities |
|
148 |
|
|
|
— |
|
Net cash used in operating activities |
$ |
(32,625 |
) |
|
$ |
(5,689 |
) |
Investing activities |
|
|
|
||||
Purchases of property, plant and equipment |
$ |
(4,207 |
) |
|
$ |
(2,024 |
) |
Net cash used in investing activities |
$ |
(4,207 |
) |
|
$ |
(2,024 |
) |
Financing activities |
|
|
|
||||
Proceeds from issuance of long-term debt, net of cash paid for debt issuance costs of |
$ |
5,285 |
|
|
$ |
707 |
|
Repayment of long-term debt |
|
(23,174 |
) |
|
|
(267 |
) |
Financing lease obligations |
|
60 |
|
|
|
(119 |
) |
Distribution and redemption of Series A preferred equity |
|
(127,853 |
) |
|
|
— |
|
Proceeds from Business Combination, including PIPE investment |
|
337,957 |
|
|
|
— |
|
Payment of Business Combination costs |
|
(31,638 |
) |
|
|
— |
|
Redemption of Class A and Class B units |
|
(20,145 |
) |
|
|
— |
|
Redemption of incentive units |
|
(3,627 |
) |
|
|
— |
|
Net cash provided by financing activities |
$ |
136,865 |
|
|
$ |
321 |
|
Net increase (decrease) in cash, cash equivalents, and restricted cash |
$ |
100,033 |
|
|
$ |
(7,392 |
) |
Beginning cash, cash equivalents, and restricted cash |
|
18,334 |
|
|
|
35,632 |
|
Ending cash, cash equivalents, and restricted cash |
$ |
118,367 |
|
|
$ |
28,240 |
|
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED) |
|||||
(Amounts in thousands, unaudited) |
|||||
|
Three Months Ended |
||||
|
|
2022 |
|
|
2021 |
Non-cash operating activities |
|
|
|
||
Recognition of right-of-use operating lease assets |
$ |
7,560 |
|
$ |
— |
|
|
|
|
||
Non-cash investing and financing activities |
|
|
|
||
Recognition of earn-out liabilities |
$ |
218,679.00 |
|
$ |
— |
Recognition of warrant liabilities |
|
36,484 |
|
|
— |
Recognition of derivative liability |
|
9,741 |
|
|
— |
Series A preferred exchange for PIPE shares |
|
26,203 |
|
|
— |
Series A preferred equity amortization |
|
5,390 |
|
|
2,612 |
Accrued capital expenditures |
|
1,171 |
|
|
287 |
|
|
|
|
||
Supplemental cash flow information |
|
|
|
||
Cash paid for income taxes |
$ |
218 |
|
$ |
28 |
Cash paid for interest |
$ |
377 |
|
$ |
178 |
KEY OPERATING AND FINANCIAL METRICS |
||||||
(unaudited) |
||||||
Revenue by Sales Channel |
|
|
|
|||
(Amounts in Thousands) |
|
|
|
|||
|
Three Months Ended |
|||||
|
|
|
|
|||
|
2022 |
|
2021 |
|||
Direct to Consumer |
$ |
38,332 |
|
$ |
38,323 |
|
Wholesale |
|
21,955 |
|
|
9,351 |
|
Outpost |
|
5,549 |
|
|
1,116 |
|
Total Net Revenue |
$ |
65,836 |
|
$ |
48,790 |
|
Key Operational Metrics |
|
|
|
|
Three Months Ended |
||
|
|
|
|
|
2022 |
|
2021 |
DTC Subscribers |
295,900 |
|
265,800 |
Wholesale Doors |
3,640 |
|
1,350 |
RTD Doors |
47,100 |
|
24,100 |
Outpost |
18 |
|
4 |
Company-owned Stores |
9 |
|
1 |
Franchise stores |
9 |
|
3 |
Common Stock Activity |
|
|
|
|
|
|
|
Class A Common
|
|
Class |
|
Class |
|
|
44,009,874 |
|
139,106,323 |
|
1,388,125 |
|
First Tier Vesting Event |
694,062 |
|
9,926,563 |
|
(694,062 |
) |
Second Tier Vesting Event |
694,063 |
|
9,926,562 |
|
(694,063 |
) |
Warrant Redemption |
6,376,346 |
|
— |
|
— |
|
Applicable Premium shares |
6,196 |
|
820,310 |
|
— |
|
|
51,780,541 |
|
159,779,758 |
|
— |
|
Non-GAAP Financial Measures
To evaluate the performance of our business, we rely on both our results of operations recorded in accordance with 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 define Adjusted EBITDA as EBITDA, excluding certain non-cash fair value adjustments, as adjusted for equity-based compensation, system implementation costs, transaction expenses, executive recruiting, severance and sign-on bonus, outpost pre-opening expenses and strategic initiative related costs. When used in conjunction with GAAP financial measures, we believe that EBITDA and Adjusted EBITDA are useful supplemental measures of operating performance because it facilitates 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 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:
Reconciliation of Net Income (Loss) to Adjusted EBITDA |
|
|
||||
(Amounts in Thousands) |
|
|
|
|||
|
Three Months Ended |
|||||
|
|
|
|
|||
|
|
2022 |
|
|
|
2021 |
Net income (loss) |
$ |
(256,827 |
) |
|
$ |
149 |
Interest expense |
|
490 |
|
|
|
294 |
Tax expense |
|
128 |
|
|
|
36 |
Depreciation and amortization |
|
989 |
|
|
|
499 |
EBITDA |
$ |
(255,220 |
) |
|
$ |
978 |
|
|
|
|
|||
Non-cash fair value adjustments |
|
|
|
|||
Change in fair value of earn-out liability expense(1) |
|
171,098 |
|
|
|
— |
Change in fair value of warrant liability expense(2) |
|
62,109 |
|
|
|
— |
Change in fair value of derivative liability(3) |
|
7,507 |
|
|
|
— |
EBITDA, excluding non-cash fair value adjustments |
|
(14,506 |
) |
|
|
978 |
Equity-based compensation(4) |
|
2,614 |
|
|
|
685 |
System implementation costs(5) |
|
252 |
|
|
|
206 |
Transaction expenses(6) |
|
983 |
|
|
|
— |
Executive recruiting, severance and sign-on bonus(7) |
|
806 |
|
|
|
326 |
Outpost pre-opening expenses(8) |
|
95 |
|
|
|
84 |
Strategic initiative related costs(9) |
|
3,550 |
|
|
|
— |
Adjusted EBITDA |
$ |
(6,206 |
) |
|
$ |
2,279 |
(1) Represents non-cash expense recognized to remeasure the earn-out liability to fair value as of
(2) Represents non-cash expense recognized to remeasure the warrant liability to fair value as of
(3) Represents non-cash expense recognized to remeasure the derivative liability to fair value as of
(4) Represents the non-cash expense of our equity-based compensation arrangements for employees, directors, consultants and wholesale channel partner.
(5) Represents costs associated with the implementation of our enterprise-wide resource planning (ERP) system.
(6) Represents expenses related to becoming a public company such as public company readiness, consulting and other fees that are not related to core operations.
(7) Represents nonrecurring payments made for executive recruitment and severance.
(8) Represent costs incurred prior to the opening of an Outpost including labor, rent and utilities, travel and lodging costs, legal fees and training expenses.
(9) Represents third-party consulting costs related to the planning and execution of our growth and productivity strategic initiative.
View source version on businesswire.com: https://www.businesswire.com/news/home/20220512005373/en/
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ICR for BRCC: BlackrifleIR@icrinc.com
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