Black Rifle Coffee Company (BRCC) reported a robust 51% YoY wholesale growth in the Food, Drug and Mass (FDM) market, despite softening performance from its brick-and-mortar cafes.
Here’s the top-level view:
- Net revenue increased 18% to $98.4 million, primarily driven by the strong wholesale performance.
- Direct-to-consumer (DTC) revenue dropped 11.4% to $32.6 million in Q1, driven by lower customer acquisition as the company shifted advertising spending to areas with higher returns.
- Revenue from BRCC “Outposts” (on-premise cafés) slid 19.4% to $5.4 million.
- Gross margin was 42.9%, driven by a shift in product mix, productivity improvements in ready-to-drink (RTD) products, decreasing warehousing costs, and lower green coffee costs.
“As we have said for three quarters now, our goal is to drive shareholder value by following through on our commitments on a daily basis. We are delighted that our focus on operational excellence is paying off with a dramatic improvement in profitability at gross margin, EBITDA margin, net income, and free cash flow,” said Steve Cadency, BRCC CFO, in a statement.
Net income for the Utah-based specialty coffee company in Q1 was $1.9 million and EBITDA was $14.1 million, compared to a net loss of $17.3 million and adjusted EBITDA loss of $5.2 million in Q1 2023.
BRCC will pause the expansion of its outposts – which are spread evenly between company-operated and franchise locations – to focus on store fundamentals in preparation for the company’s longer-term strategic growth plan.
BRCC is counting on its recently formed partnership with Keurig Dr Pepper for K-Cup pod manufacturing and distribution to accelerate its top line growth over time while also driving operational efficiencies including sales and marketing, supply chain and distribution.
Looking ahead, the company has increased its FY 2024 guidance to an adjusted EBITDA of $32 million to $42 million with a free flow cash conversion of approximately 80% of adjusted EBITDA. Additionally, BRCC now expects 2024 gross margin to be at the end of the range of guidance of 37%-40%.
“Three quarters ago, we said that our inflection point and our consistently improving results are proving that to be true as we continue to see sequential revenue and profitability growth,” CEO Chris Mondzelewski told investors during today’s call. “This performance converts to cashflow, which opens opportunities for reinvesting in the business.”