Greetings, and welcome to the Black Rifle Coffee Company Third Quarter 2025 Earnings Call. 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.

Good morning, everyone, and thank you for joining Black Rifle Coffee Company's Third Quarter 2025 Financial Results Conference Call. We released our results yesterday, and the press 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 statement 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, which could cause actual results to differ materially. For a further discussion of these risks, please refer to our previous 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. Reconciliation of non-GAAP 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. Now please refer to the presentation on our Investor Relations website and turn to Slide 4. I would now like to turn the call over to Chris Mondzelewski, CEO of Black Rifle Coffee Company. Mondz?

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. The third quarter was another solid step forward for Black Rifle. Our team did an outstanding job executing against our priorities, driving strong commercial performance, maintaining cost discipline, and positioning the business for sustainable profitable growth. We continue to see encouraging momentum across both the wholesale and direct-to-consumer channels as our brand gains traction with new customers and deepens its connections with existing ones. As we move to the fourth quarter and into 2026, our focus remains clear; driving strong on-shelf execution as we expand our physical presence, maintaining costs effectively to enable reinvestment in growth initiatives, and continuing to build a scalable platform for long-term success. We're broadening distribution, driving stronger velocities with key retail partners, and advancing our product lineup to keep the brand fresh and relevant. The team's execution this quarter reflects a company that's more agile, more focused, and more confident in its ability to perform even in a challenging cost environment. We're proud of the progress we've made and optimistic about the opportunities ahead. Move to Slide 6, please. In the third quarter, Nielsen data showed continued strength in the U.S. coffee category within Food, Drug, Mass, growing 13.2% as higher shelf pricing to offset commodity inflation flowed through. Black Rifle once again outperformed the market with sales up 36.7% year-over-year, nearly triple the category's growth rate. Our land-and-expand strategy continues to prove effective. We start with a focused set of SKUs to demonstrate performance and earn additional shelf space as we build retailer confidence. In grocery, ACV increased 6 points year-over-year to 48%, and total ACV across all tracked channels increased 9 points to 54%. Even with a 70% increase in average items carried, velocity in grocery improved more than 7%, highlighting the brand's strength with consumers. This combination of faster turns and expanding distribution is translating into stronger partnerships and continued shelf gains. Move to Slide 7. Across the category, most of the dollar growth is being driven by price increases. In contrast, Black Rifle's growth is coming from almost entirely unit gains, which are up more than 20% year-to-date. This reflects real consumer demand, not price inflation. The brand continues to win new households, drive repeat purchases, and gain share at retail. As we expand distribution and sustain velocity, we're driving durable volume-led growth that supports long-term brand health. Slide 8. Our Direct-to-Consumer business remains an important part of our omnichannel strategy, deepening customer relationships, strengthening brand loyalty, and providing valuable insights that guide how we engage with consumers across every channel. It also allows us to test new offerings, refine messaging, and stay closely connected to our most engaged fans. Through both our own site and digital retail partners, Black Rifle products remain easily accessible to customers who prefer the convenience of home delivery. While most of our recent top line growth has come from retail distribution and velocity gains, we're encouraged by the continued stabilization of our digital channels this quarter. Sales in our Direct-to-Consumer segment declined 4% year-over-year in the third quarter. However, after adjusting for the prior year benefit related to our loyalty reserve and the timing shift of promotion, results were slightly positive compared to last year. We also saw meaningful gains through leading third-party marketplaces, where awareness of the brand and repeat rates continue to build. Beyond top line growth, we've made steady progress improving the overall customer experience. Website and mobile updates have enhanced navigation and checkout speed, while back-end improvements support smarter merchandising and more efficient SKU management. Within our subscription platform, we're adding new functionality and greater flexibility for members, including prepaid options, exclusive offers, and a refreshed brand portal that highlights partner benefits and members-only gear. These ongoing upgrades reflect our focus on building a digital ecosystem that not only drives sales but deepens brand loyalty and supports the broader omnichannel strategy. Slide 9. The Ready-to-Drink coffee category continued to face headwinds in the third quarter, particularly within the convenience channel. While category sales declined 3.1%, our performance remained resilient, down just 0.6% overall, reflecting solid execution and strong brand loyalty. In grocery, sales grew 18%, partially offsetting the softness seen in C-stores. Even in a challenging environment, we're gaining ground. Black Rifle remains the third largest RTD coffee brand in the U.S., and we expanded our ACV by 7 points year-over-year to 53%. That growth underscores the confidence our retail partners have in the brand and our proven ability to perform on the shelf. We're still in the early stages of unlocking the full RTD opportunity with roughly half the category yet to be reached. Slide 10. Black Rifle Energy continues to expand its footprint, now available in nearly 20,000 retail locations and reaching approximately 22% ACV. Distribution growth has been disciplined and targeted, guided by learnings from early markets. The energy drink category remains one of the largest and fastest-moving segments in beverages, and roughly 2/3 of the category's sales come from convenience stores. That channel remains a primary focus for expansion as Black Rifle Energy currently has its lowest penetration there and meaningful white space ahead. Our approach remains deliberate, focusing on building awareness, driving new consumer trial, and earning shelf space through performance rather than overextension. We're encouraged by the early traction and see meaningful opportunities for the brand to expand reach and contribution within our broader beverage portfolio in 2026. Before I hand it off to Matt, I want to pause and reflect on what makes this company special. I'm incredibly proud of the progress we're making across the business and just as proud of the way our team continues to live out our mission every day. As we approach Veterans Day, it's a time to honor the men and women who have served our country and to recognize the many ways our team continues to serve them in return. This year, we're working with Born Primitive and ForgiveCo to help forgive up to $25 million in medical debt for more than 10,000 veterans. One in five veterans carries medical debt in collections compared to about 13% of the general population. That burden often leads to financial stress in housing and security, and this effort is about lifting that weight and giving back to those who have served. Whether it's helping rebuild communities after a flood, supporting warriors in crisis, or rallying around causes like suicide prevention, Black Rifle is driven by our mission to veterans. I'm proud of what this team has achieved and excited about the road ahead.

Thank you, Mondz. I'll begin my remarks on the quarter with Slide 12. Third quarter net revenue increased 3% year-over-year, driven primarily by growth in our Wholesale segment. We are cycling a $2.4 million net benefit recognized in the prior year related to barter transactions and a change in loyalty reward accruals. Excluding these items, revenue increased 5%. Our Wholesale segment, which primarily sells packaged coffee and ready-to-drink beverages to retailers, grew 5% year-over-year. Adjusting for the net $2.1 million in nonrecurring revenue recognized in the prior year, sales in this segment increased 9% in the third quarter. Growth was driven by gains in velocity and distribution, including increases in the number of doors and items carried, as well as continued growth in sales from Black Rifle Energy. Revenue in our Direct-to-Consumer segment was 4% lower in the third quarter. A high-volume promotional event occurred later in the quarter compared to the prior year, which we estimate shifted approximately $1 million in revenue from the third quarter into the fourth. Excluding this timing impact and the prior year benefit from the loyalty reserve change, revenue would have been slightly positive year-over-year. Fans of the Black Rifle brand now have more ways to find our products as brick-and-mortar retail distribution expands and online sales through platforms such as Amazon and Walmart.com continue to grow. This increased availability is critical to the brand's long-term growth and health, and we will continue investing in wholesale and other channels that we expect will drive the most sustainable long-term growth. Outpost segment revenue grew 6%, benefiting from higher franchise fees and continued progress in merchandising. Better bundling and in-store presentation helped drive the average order value. Turning to Slide 13. Gross margin was 36.9% in the third quarter, a decrease of 520 basis points compared to the prior year. The decline was primarily driven by a 390 basis point impact from increased trade investment and a 300 basis point impact from green coffee inflation and tariffs, partially offset by pricing actions. These pressures were further mitigated by approximately 170 basis points of benefits, including productivity gains and a more favorable product mix. Slide 14. Operating expenses declined by $3.6 million or 9% compared to the third quarter of last year. Marketing expenses decreased 14% on a dollar basis and improved 165 basis points as a percentage of sales, reflecting lower nonworking advertising spend and a reallocation of dollars towards programs more directly tied to revenue growth. Salaries, wages, and benefits declined 13% on a dollar basis and improved by 255 basis points year-over-year. The quarter included approximately $800,000 of severance expense, and total headcount was down 19% compared to the third quarter last year. General and administrative expenses increased 5%, primarily due to costs related to settled legal matters, partially offset by efficiencies gained in our corporate infrastructure. Despite the gross margin pressure we faced, scale benefits from revenue growth and efficiency gains drove a 19% increase in adjusted EBITDA to 8.4% of sales, representing a 115 basis point improvement compared to the same quarter last year. Turning to capital and cash flow. We raised $40.25 million in gross proceeds through an equity offering in July, which enabled us to pay off the outstanding balance of our revolving credit facility and strengthen our cash position. We also generated $5.6 million of free cash flow in the quarter, further improving liquidity. Moving to the outlook on Slide 16. On last quarter's call, we discussed our expectations that results would be toward the lower end of the full-year guidance range we provided at the start of the year. We expect to finish the year with at least $395 million in revenue and at least 35% gross margin and at least $20 million in adjusted EBITDA, each of which remain within the previously communicated ranges. We continue to expect a sequential step-up in revenue throughout the year, driven by ongoing distribution gains across both packaged coffee and ready-to-drink product lines. In the fourth quarter, this step-up should be slightly larger than the roughly $5 million quarterly increases seen earlier in the year, reflecting normal seasonality and a greater benefit from pricing actions. As a reminder, we are cycling $30.4 million of prior year revenue related to one-time items that are not expected to recur in 2025. This represents a $9.1 million headwind in the fourth quarter, which we expect will be the final quarter impacted by these prior year items. Turning to gross margin. While commodity pressures and tariffs have been a meaningful headwind to the gross margins this year, we delivered a solid sequential improvement in the third quarter, reaching 36.9% compared to 35% in the first half of the year. We expect to see additional pricing benefit in the fourth quarter. However, that period is typically more promotional, and we'll also see a slightly greater impact from tariffs as higher-cost inventory flows through the P&L. As such, we expect the fourth quarter gross margins to be closer to the 35% level we saw in the first half of the year rather than the nearly 37% achieved in the third quarter. Our assumptions regarding the key drivers of the margin outlook compared to the prior year remain unchanged and include at least a 300 basis point headwind from green coffee inflation, net of pricing actions; a 250 basis point impact from increased trade investment behind the energy line and more normalized promotional cadence; at least a 100 basis point margin impact from recently implemented import duties, with the full effect building through the second half of the year. These pressures are expected to be partially offset by at least a 200 basis point benefit from productivity initiatives and a more favorable product mix. Green coffee prices have been volatile and remain elevated relative to historical levels. While movements in coffee and tariff costs are largely outside our control, we are not assuming any relief as we plan for 2026. Our focus remains on the elements we can control; executing productivity initiatives across the supply chain and refining our pricing architecture as needed. As part of our operational improvement plan launched in the second quarter, we continue to expect to deliver $8 million to $10 million in annualized cost savings in the second half of 2025. We remain disciplined in managing expenses while continuing to invest selectively in capabilities to support growth and margin expansion. Looking ahead, our priorities are clear; sharpen execution, drive efficiency, and build a stronger, more resilient business. The opportunities ahead are substantial, and we're focused on converting that potential into measurable progress. I'm confident in our plan, our team, and the momentum we're carrying into 2026.

Our first question comes from Michael Baker with D.A. Davidson.

Two-parter as it relates to the guidance. So there is a change in the language on that guidance. It feels to me as if it's a little bit more cautious than what you thought 3 months ago. Is that the correct interpretation? And then my second guidance-related question is, in the presentation, you're sticking with the 3-year targets using 2024 as the base, and I think growing out to 2027 requires a pretty big ramp in '26 and '27 versus 2025. Can you remind us why you have confidence in that?

Michael, this is Matt Amigh. Let me clarify our guidance change. While we haven't altered our overall guidance, we are aiming for the lower end of the range. As we stated in the previous call, we prefer to guide towards the lower end, though the fundamental factors remain unchanged. We're still experiencing coffee inflation, and trade investments will be higher in the fourth quarter compared to the third. Tariffs are still present, but they'll be balanced by the operational improvement plan we discussed. We phrase our guidance using "at least" to prevent analysts from focusing solely on the midpoint, ensuring clarity about our minimum expectations. We're confident we'll reach $395 million for the year, maintain 35% gross margins, and achieve at least $20 million in adjusted EBITDA. This means we expect about $110 million in revenue for Q4, with gross margins similar to what we had in the first half, and around $8.4 million in EBITDA, consistent with Q3. For comparison, that $110 million in net revenue for Q4, after excluding nonrecurring revenue from last year’s barter transaction, presents a comparable base of $97 million from last year, marking roughly 13% growth. Regarding your second question, we remain confident in our long-term guidance, targeting 10% to 15% CAGR on the top line and approaching 40% margins by 2027. For the bottom line, we are aiming for a more ambitious 15% to 25% CAGR over this period. Growth will begin in '26, with a significant increase into '27 as we fully leverage the distribution points acquired in '26. However, we still have some distance to cover regarding margins. We have implemented two price increases in 2025, one in Q3 and another currently being executed in Q4, which will benefit us in 2026. We're also facing more inflation in green coffee, which is currently at record highs of $4 per pound, with the forward curve around $3.30 for the year. Despite the ongoing tariffs and green coffee inflation, we anticipate margin improvement as we move from 2026 into 2027.

Let me just build a little bit on that, Michael. As we think about the second part of your question, the 3-year guidance that we gave for the business, we're feeling more confident than ever on that guidance. If you think about the fundamentals that we talked about in the opening remarks, we're growing share in every segment of the business. We are the strongest unit growth player right now in the U.S. in coffee, and we still have significant distribution room. So on top of the unit growth we're driving and the velocity that we're driving, we still have significant room to continue to expand distribution in every segment of our business. So again, as we think about the 10% to 15% guidance range that we put out there through '27, we feel highly confident in that.

Okay, great. That was a very complete answer. If I could ask one more question, I presume this will be more qualitative, but could you provide any insight on how consumers are responding to the energy drink? I believe it's still in 12 markets, but please correct me if I'm wrong. I'm interested in how that is progressing in relation to your expectations.

Yes. I'll start off, Michael. I think we're pleased with the overall performance. So to remind everyone, we had a very limited launch this year. We went into 12, what are called up and down the street markets in partnership with our distribution partners, KDP. And on top of that, we had 2 national customers, a mass customer and a C-store customer. That was all we wanted to bite off in the first year, and we're pleased with the results. We've seen improvements in those customers through the year as we've been able to track them. And as we think about '26, it's going to continue to be careful steps forward with that business. We have an incredible coffee business right now. We are growing every segment, as I just mentioned, and we want to be very careful that we continue to put as much investment as is necessary in continuing the momentum in coffee. We're excited about energy, and we're going to continue to take strategic steps to expand that on a more regional basis. So while I'm not in a position to talk specifically about our plan in '26, it will be a step forward from where we were, but still really managing that in a targeted way where we can build that business the right way.

Our next question comes from the line of Sarang Vora with Telsey Advisory Group.

So one of the words you used on the transcript was expansion of portfolio. I think it related to the energy category. So can you help us understand how the category is expanding as you look at stronger growth out here along with distribution on the energy side?

Yes, let me address that. Regarding energy, we have shared some information previously. We are continuously refining our portfolio to align with the most relevant flavor segments. We are excited to launch grape, and the initial feedback from customers, in collaboration with KDP, has been very positive. Additionally, we are introducing a limited-time item called Tiger Strike, which celebrates America's 250th anniversary next year, and we are looking forward to this seasonal item. It's crucial for us to stay relevant with our flavor offerings, and we plan to enhance our distribution with current customers while also seeking new opportunities. We are also innovating in other areas of our business. We’re enthusiastic about our initiatives in coffee, including pods and bags, as well as our ready-to-drink cold brew items, which are low-calorie and low-sugar, and have already received a strong response from retailers. At Black Rifle, we recognize the importance of leading in these categories rather than just participating. Expect to see ongoing innovation in every segment we engage in, and with our partnership with KDP in the energy category, we are committed to driving significant growth and increasing our market share.

That's great. We can't wait to drive new products. I had a follow-up question on marketing. Dollars were down in the quarter. You are very focused on marketing. There are new brands coming and these flavor profiles coming in. How should we think about marketing spend as you look out for like next year and just the broader role of marketing in leveraging the cost part of the business?

Yes, as we approach 2026, we are planning to maintain our marketing expense as a percentage of net sales. However, we will be shifting our focus from nonworking expenditures to working ones. This means we will reduce our use of contractors and agency fees, redirecting those resources towards tactics and strategies that have a more immediate impact on sales. You'll notice this change. Additionally, one important aspect we'll highlight is how we are enhancing our activations with key partnerships. Essentially, we aim to maximize what we already have and translate that into quicker sales.

Building on what Matt mentioned, we will keep enhancing our operations as we expand the business. As we increase our profit margins, our goal is to reinvest those funds into effective marketing strategies. We're fortunate to have a strong brand team and brand. Our primary focus is on boosting top-of-funnel brand awareness, which has proven successful. Over the past three years, we've seen a rise in awareness each quarter, and nearly half of the country is now aware of Black Rifle. We plan to continue increasing this awareness through robust media execution. Additionally, we have strong partnerships with organizations like the UFC and the Dallas Cowboys, and we will announce more significant partnerships as the year progresses. This year, we've also improved our in-store execution, and we plan to invest in our retail partners to ensure our products are prominently displayed at competitive price points. We are confident that our marketing efforts are well positioned as we move into 2026.

And Sarang, just one more point on that is we have a maniacal focus on returns. So when it comes to the digital spending, we are looking at the right metrics to make sure that the activities are working out and paying out and breakeven or better. So we're focused on that.

Our next question comes from the line of Joseph Altobello with Raymond James.

This is Martin on for Joe. I want to quickly touch on the energy distribution. You've previously given a goal of an ACV about 70%, 80% by the end of next year. Is that still something you're targeting?

In the case of energy, I want to emphasize that we will build on our existing targeted plan for this year. We have not provided guidance for what we expect in 2026 yet; however, as we get closer to finalizing our 2026 guidance, we can consider it. We've experienced success in many markets where we've entered, and in others, we've gained valuable insights, which is typical for any new brand launch. Most importantly, with the two national customers we worked with, one convenience store and one mass retailer, we've achieved very positive results, including the expansion of items on shelves. We will use these learnings to extend our reach into a broader geography. However, at this moment, I don't want to provide specific guidance on what that will entail.

No, I understand. That's helpful. Would you just mind reminding us how much of your green coffee needs are already locked in for 2026?

Yes. Right now, we have approximately 50% of our coverage locked in for '26.

Our next question comes from the line of Daniel Biolsi with Hedgeye.

Are you seeing a different demographic with your energy drinks versus the RTDs? And then do you envision the distribution to be the same between the RTDs and energy drinks when they mature?

As far as the demographics, it's similar. There are some differences as we look at it. It does tend to skew younger on the energy drinks. Our coffee portfolio is actually quite broad. So when you look at the total coffee portfolio as a whole, we actually hit a very, very wide range of demographics with that portfolio. When you start to talk about the cold canned beverages, the RTD coffee and the energy, the demographics are quite similar. It does tend to be a younger customer that skews towards that behavior. As far as energy ultimate distribution, we'll see. Ultimately, they're very different categories. And so we're going to build those categories very differently. It's important to us that when we take on a market with energy, we can be concentrated in that market, and that we can really go and invest the right way to win there. In the case of RTD coffee, we're already the #3 player in America, and we are the fastest growing of all the major brands in America. So we're in a different position scale-wise. It allows us to play that differently from a national basis at this point with different forms of national marketing versus on energy in '26. You're going to see us marketing very heavily against that business, but it's going to be targeted within the geographies that we choose to go and compete with them.

Okay. And if you can sort of bracket how much of your distribution gains for RTDs and energy is between the coolers versus the center of store. How would you think about it in '25 versus '26? Are you sort of pursuing the same sort of goal to be in the coolers or is there more of an opportunity to maybe the center store or at some point, the club channel?

Well, it's a great point you're making. I'm not going to give specific numbers on cooler versus center store. We do track that, right? Our sales team, we're very fortunate to have a lot of deep RTD experience in our sales team. And one of their favorite sayings is cold is sold. So when you can get canned beverages into cold distribution, you see your sales increase dramatically. So that's a big part of the game. We have a lot of tactics that we operate down in our sales organization to ensure that we're not just getting distribution, but that we're getting that cold distribution, and that's a constant negotiation between us and our retailers. Some retail partners are exclusively in cold distribution; that's particularly true of the C-stores. A lot of times in grocery, you may have dual distribution; you may have center store ambient as well as the cold distribution. It can be harder to get that cold distribution in a grocery store simply because it's more limited, the amount of space they have available. But that is absolutely right, what you're saying. As we drive into '26, we will have internal goals to increase those percentages, in some cases, pretty dramatically, right, in areas where we've already had success with the brand. It allows us to go in and say, let's increase that percentage of cold distribution. So what you're describing is a very fundamental part of how we're going to build and drive that business.

And also keep in mind, like the growth in the business is going to be coming from our coffee business, our packaged coffee business. And when you look at our distribution we have right now, it's roughly 50%. So we have a lot of headroom in terms of growing that business out, great margins on that business. The business is not just growing in terms of distribution, but average number of items is increasing, velocities are increasing, and it's a real powerhouse for us. So that's a business that we'll be very, very much focused on as we exit the year and move into '26.

And there are no further questions at this time. Therefore, I'd like to turn the floor back over to management for any additional or closing comments.

Yes. No, thanks very much. To close, I'll just say we're delivering disciplined profitable growth. We have a clear path forward. Our teams are executing well. We feel we have incredible brand momentum. We're going to continue to stay very focused on our customers, and we're going to balance that with our mission, as I talked about in the opening remarks. And we believe that that combination will continue to drive stronger and stronger results for us. So we're grateful for your continued support, and we look forward to updating you over the next couple of quarters here as we continue to build on this momentum.

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