Greetings, and welcome to the Black Rifle Coffee Company Second Quarter Earnings Call. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Matthew McGinley, Vice President of Investor Relations. Thank you, sir. You may begin.

Good morning, everyone, and thanks for joining Black Rifle Coffee Company's Second 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 new Chief Financial Officer; and Matt McGinley, our Head of Investor Relations. As we enter the second half of the year, I want to acknowledge our team here at Black Rifle. Over the past year, we've taken meaningful steps to build a more disciplined and resilient organization, tightening execution, investing in critical capabilities and preparing the business to scale more efficiently. That foundation enabled us to deliver results in line with our expectations this quarter, even as the macro cost environment became more challenging. As I noted last quarter, our organizational nimbleness has allowed us to navigate change and stay on course. We remain highly focused on positioning the business for long-term growth. We're continuing to expand our footprint with key retail partners to build momentum in both packaged coffee and ready-to-drink beverages and to ensure that every dollar we invest in the brand drives meaningful, measurable impact. That includes leaning into what's working while staying disciplined in our execution and continuing to innovate. We're encouraged by the progress and confident in the opportunities that lie ahead. Let's move to Slide 6. During the second quarter, Nielsen data showed a modest decline in unit volume for the U.S. coffee category within the food, drug and mass channels. Despite this, category sales grew, driven largely by pricing actions taken across the industry. Black Rifle significantly outperformed the category, delivering 32% sales growth on a 29% increase in unit volume, well ahead of the category's 9.6% sales growth and 1% decline in units. Our distribution momentum continued this quarter with strong gains in grocery and mass merch retailers. In grocery, ACV increased by 19 percentage points year-over-year to reach 46.5%, while total ACV across all…

Thank you, Mondz. I've been a huge fan of Black Rifle since the business was founded nearly a decade ago, and it's a real honor to join this team. The brand has a significant opportunity for growth across packaged coffee, ready-to-drink and energy and multiple other channels. I'm excited to be part of that momentum and help support the team as we scale this business together. I'll begin my remarks on the quarter with Slide 11. Second quarter net revenue increased 7% year-over-year, driven primarily by growth in the wholesale segment. We are cycling a net $3 million impact from prior year barter transactions and a $2.4 million benefit related to a change in loyalty reward accruals recognized in the second quarter of 2024. Excluding these items, second quarter revenue increased 14%. Our wholesale segment, which primarily sells packaged coffee and ready-to-drink beverages to retail, grew 14% year-over-year. Adjusting for the $3 million in nonrecurring revenue in the prior year, sales in this segment increased 21% in the second quarter. Growth was led by strong performance from Black Rifle Energy as well as new distribution gains and expanded shelf presence in grocery and mass merchandise retailers. Revenue in our direct-to-consumer segment was 8% lower in the second quarter. Excluding the $2.4 million impact from the prior year loyalty rewards accrual change, revenue in this segment increased modestly. Our focus remains on ensuring the Black Rifle products are available wherever our consumers shop, whether it's in brick-and-mortar retail or online platforms like blackriflecoffee.com, Amazon or walmart.com. While we will continue allocating resources towards the wholesale channel, we're encouraged by the progress we've made in stabilizing our direct-to-consumer business. The Outposts segment grew revenue by 11.3%, driven by higher franchise fees and an increase in average order value, supported by enhanced merchandising…

[Operator Instructions] The first question comes from Mike Baker with D.A. Davidson.

Good quarter. So I wanted to ask you about the 3-year outlook, which you maintained in your presentation. It requires a pretty significant ramp in '26 and '27 versus the 2025 outlook. Can you talk about the key drivers to that? Is it energy drink? Is it ready-to- drink? Is it more retail customers, more door per customers, more SKUs per door, et cetera? Just what are the building blocks to get that kind of ramp in 2026 and 2027?

Mike, it's Chris. Thanks for the question. Let me frame things up a little bit, kind of how we look at it strategically, and then I'm going to kick it over to Matt here, who can elaborate a little bit on it. So yes, we're going to continue to maintain that guidance. I think when you look at our business right now, one of the things we're very proud of is that all aspects of our business are growing. While we don't give segment guidance at this point, every piece of our business, whether you're talking the pods, the bags, the RTD coffee and of course, energy, which we launched this year are growing for us, as is Outposts, which was not growing a year ago. And then one of the ones we're most proud of given some of the hard work we've done even driving efficiency is our DTC business. So when you look at our DTC business as a whole, as you strip out the loyalty points, that is now growing for us as well. So with every segment of our business growing, while we're not going to give guidance on exactly where that 10% to 15% overall is going to come from, suffice to say that we have a lot of tools in our tool belt that we can pull from. Matt, do you want to build on that [ at all ]?

Yes. I would just say, Mike, that when you look at the ACV that we have right now across packaged coffee and RTD, we still have a ways to go. So we're sitting about 56% on packaged coffee and about 54% on RTD. So we can expect anywhere from 80% to 85% ACV across FDM. As Mondz mentioned, D2C, we're super happy with the performance in the second quarter, stabilizing the business in the second quarter and then looking forward to making the right investments in that business to scale that business in a very efficient manner. So yes, we do see line of sight to the long-range guidance.

Okay. Great. Makes sense. A couple more. One, I wanted to ask about Walmart. In your Q, it was about -- I think it was, what, 26% of sales versus 33% last year. So I guess that's good and that you're seeing some diversification, but there might be some rounding in this, but it does imply down year-over-year. Can you talk about why that would be down? And I guess related to that, I don't know, I've been asked about this and I've seen it. We've seen -- I think it's called Fire Department Coffee advertised from Walmart, looks a lot like you guys. Can you talk about the competition at Walmart?

Yes. Let me address that. So when we look at the overall sales within Walmart, the internal sales, that's going to move back and forth based on a number of factors. timing of shipments, et cetera. We have talked about, we lost one item last year in the canister, which has hit us. We're actually coming up lapping that. We're going to be going back into some regions with that item coming in Q3. But most importantly for us is takeaway, right? So we look at the scanner takeaway in the Walmart stores because that is always what will predict future sales. And the reality is we continue to be very strong in Walmart. Given the fact that we're in full distribution, there is no additional store count benefit that's going to come from Walmart, yet we continue to grow at near 10% in our takeaway or our store consumption with Walmart, which ultimately will lead, of course, to the internal revenue as well. So a component of that is simply timing. And the reality is as we go into Q3, Q4, we're excited about some of the innovation that we're going to be pushing on top of all of the core items that have continued to do well there. We sit very bullish, very bullish with them continue -- obviously, our #1 customer continuing to be by far our #1 customer. Competition, we love competition. I think fire department is a great brand. I don't look at it as direct competition. We don't see any correlation of their success with us. We love the fact that they're a brand that was founded by a first responder. We know him. And again, I think for us, we're going to continue to play our game. Across every segment in grocery and in Walmart, we continue to be able to demonstrate growth at the register, which is what really counts, where that consumer takes it away. So while the competition will always be fierce in these categories, we continue to believe that our distinctive brand positioning is protecting us well there.

Yes. Fair enough. If I could ask one more real quick. The -- what was I going to ask? Yes, I guess I'll turn it over to someone else. If I think of my question, I'll come back.

The next question comes from Glenn West with William Blair.

Glenn West on for Jon Andersen. One thing I wanted to ask about on Slide 8, where you're showing kind of the RTD ACV and share data. Obviously, ACV increasing and there's probably a little slight lag to this, but the share kind of staying steady there at 4.6% for the past couple of quarters. Can you guys talk about what you're going to do to kind of drive that share higher? Is that still just more distribution? Or is there more targeted marketing coming in? How are we going to push it higher from there?

Glenn, it's Chris. Yes, I mean, you're right in your assumption. I think that's one factor, which is that ACV is always a leading indicator of what's then going to come from sales. So we've talked about this a bit in the past. As we build ACV, and we tend to give guidance on ACV, but we'll always remind that ACV in itself is not always a direct indicator of revenue. It's a direct indicator that you're on shelf of a new set of customers, which then assuming we execute well, will result in revenue in that particular customer group. So that is largely what you're seeing. We have some large national customers that have come on board with us, which is driving that spike in ACV. Those velocities always start lower as they come up, and you're going to start to see that share number come up as well. But broadly, we just couldn't be more excited about this piece of our business. I mean we're the #3 player in the market right now, and we continue to grow at a much faster rate than the other larger players in the category. And we're going to continue to take advantage of that because it's a strong story for us with retailers. We have some significant innovation, which we're not ready to talk about specifically yet that will be coming later this year. We're going to use our momentum to build off of that. And we've talked a bit in the past about what we've been doing to optimize our organization in facing into cost pressures. But within that, we have been investing heavily in the areas that we know are going to be important to us to succeed. So the sales force in this case, we've put some really powerful sales assets in place, particularly with our RTD business that, again, are going to just be sharpening that execution even further. So high level of confidence on my part that you're going to start to see those share numbers start to tick up behind that ACV increase as well.

Okay. That's helpful color. And then maybe one follow-up, not to hit on ACV again, but energy, one thing that stuck out to me is that it's only 7% ACV in convenience stores. Obviously, C-store is super important for energy. So what's kind of the distribution look like and the strategy there for energy, specifically in that C-store channel?

Yes. That was a very specific target that we went after. We're actually right where we had hoped to be on energy. You may recall in the past, I've talked a bit about the markets. We chose to go into a limited number of markets in the first year, and that was a conversation we had with KDP. We really wanted to get the model right. We really wanted to learn how to market this correctly in those cities. We chose cities that had strong category and brand indexes. Obviously, you can imagine across the South Texas, San Diego was one. And we've done well there. We -- in many of those cities, the ACV within those cities tends to be somewhere between 50% and 70%. And the aggregate of that, of course, is a lower number when you look at it nationally because there are some very big geographies that were simply not distributed in yet, that was a purposeful choice that we made alongside Dr Pepper. Energy for us is a great future growth platform, but we also want to make sure that we're never stealing resource from coffee, which is core to us, right? And we just talked about our RTD coffee business and the size of that, #3 in the market. And then, of course, our pods, our bags business continue to grow well ahead of the market. So the lion's share of our resource will continue to go against that. That allowed us to put targeted strong investment in those launch markets for energy. And again, the aggregate of that ended up being that 7% ACV you see.

Next question comes from George Kelly with ROTH Capital Partners.

First one is just on your expectations for pricing in the back half of the year. Wondering if you could share a little bit just about what your plans are by business segment just broadly? And I guess, secondarily, have you continued to tweak your bagged coffee pricing at Walmart? I thought I saw another change just recently when I was on the store. So any detail there would be helpful.

Good question, George. Thanks for that. So we never comment on future pricing. Obviously, you can appreciate that. We'd want to tell our customers first and then go to the Street. But I can tell you that we did execute a pricing action across packaged coffee in May, which is settling into the marketplace right now, which probably explains why you've seen the pricing change on shelf that you've seen. So that was largely across packaged coffee and largely across the wholesale market.

Okay. Okay. And then second question, you mentioned club in your prepared remarks. So I guess I'm curious if you could be more specific just about the kind of what you're seeing at club? And are you getting more club distribution? Is it becoming a sort of more material channel for you? I know you've had a long-standing customer there, but maybe it's broadened. And how big can that channel be for you? Like is that a big focus for '26?

So I want to be careful. We're not going to give any specific guidance on any customer individually. However, club as a channel is a significant portion of the categories that we operate in. They're great sellers of coffee, ready-to-drink coffee and energy. They obviously play a different role than the other channels that we're in. But for a brand with our strength, well over 50% brand awareness at this point, a channel like this makes a lot of sense. And our early indicators are that we're going to have a great deal of success here. What I will say is at this point in time, we have programs going with all 3 major clubs. We are in distribution with all 3 major clubs. As you know, they all operate very differently. So the way we're doing these programs, we're working in line with their go-to-market strategies. And again, like every other part of the business, we're going to test our way in to ensure that we understand the model, that we understand how to get strong returns on the marketing that we put against that channel or that customer. And then as we see success with that, we're going to double down on it. So final point, you mentioned it will be part of our plan in '26. Again, we're not going to piece apart where that growth plan comes from. But back to the earlier question, 10% to 15% guidance that we're giving over the next few years, this is just one additional tool, as you point out, all of that open distribution in the market that we know, given some of the successes we've had against the 3 largest clubs out there that we have some great growth opportunity going forward.

Okay. That's helpful. And then last one, just some I noticed in your Q, the Salt Lake property, it looks like that's either going to go up for sale or has sold already. What is the plan there? Are you going to lease it? Or like are you moving headquarters? Any detail there.

George, thanks for the question. So yes, the facility is held for sale right now. You saw that in the Q. We're looking for something that's more suitable for the size of the organization. The building was great as we started to evolve the business. But now with distribution centers across the U.S. and manufacturing in Tennessee, we no longer need a facility of that size. So it doesn't change our structure of the organization, which will be head office in Salt Lake City. We have an office in Nashville and one in San Antonio, Texas.

The next question comes from Joseph Altobello with Raymond James.

This is Martin on for Joe. I just want to quickly touch on the energy rollout. Congratulations on getting over 15,000 doors. You described the rollout as disciplined. So just trying to get an idea of what the back half ramp-up might look like for energy. Is there a target for how many doors?

We're not going to release a target on number of doors. We're going to stick to kind of what we said, which is that it's a limited number of geographies that we're going into. So the geographies we're operating in now are the geographies that we will continue to operate in the remainder of the year. And then obviously, as we go into next year, there will be significant expansion. The reality, though, is that you are going to see upside simply because we're going to continue to drive those markets, right? So as we have gone into the year, we've been able to drive ACV to a higher level. And the marketing that began, as you recall, back in March, April is going to continue, and we continue to build awareness of obviously, the brand, but even more importantly, the particular the specific offerings of energy in a specific case. So again, I'm not going to give guidance on any increases we expect to see in the back part of the year. But suffice to say, within the geography that we have operated in thus far in the year, we continue to hopefully see increases behind the marketing that we're doing in the back part of the year.

Okay. Understood. And just as a follow-up, sort of a housekeeping item. You released preliminary gross margins and the reported gross margins fell just a little bit short of that. Was there something that happened that sort of impacted the margins in between the time between the preannounced numbers and the actual results?

Yes. Thanks for that question. So yes, the -- when we did the raise, we were in the midst of the second quarter close. And through that close process, we identified some obsolete inventory raw materials, and we took a reserve against the raw materials. It wasn't a very material item, and that's the difference between the 34.1% and the 33.9% gross margin that we ended with.

The next question comes from Daniel Biolsi with Hedgeye.

I was wondering if you could share the price versus volume components of the 14% wholesale growth for RTD and bag coffee and if you don't have it exactly just directionally.

100% of volume.

Yes. Thanks for the question. So it is 100% of volume. The pricing really didn't settle in until the third quarter. So we'll see that effect going forward, partial quarter impact in Q3, full-on impact in Q4.

I think, Daniel, that's one of the things we're really excited about is that we've been able to drive the growth that we have purely off of units, which, again, for a business in our situation where penetration is going to be king for us, bringing on new consumers and every customer, that's kind of a bellwether metric for us. And then to Matt's point, we'll have the additional weapon of pricing going forward.

Okay. So I think this probably half answers my next question. So I was hoping you can sort of bucket the biggest swing factors from the first half of the year to the second half of the year with the -- maybe the $20 million plus adjusted EBITDA target for the year. What are the biggest swing factors from the first half to the second half? I guess pricing is going to be the number one.

Yes, that's a great question. So we provide annual guidance, and I don't want to get in the habit of providing quarter-to-quarter guidance. But given that our expectations are a large step-up in revenue as well as EBITDA, I think the -- I can certainly appreciate the question, and we'll provide some color on that. When we look at revenue, revenue is going to step up from Q2 to Q3 and then take a larger step into Q4. And that is driven by the significant distribution gains and the velocity strength that we're seeing across food, drug and mass right now as well as the stabilization and the pivot to modest growth on D2C. Now couple that with the growth that we're seeing across C-store when it comes to the RTD and of course, energy is in the mix. Pricing does play a large part in that sequential step-up. Again, that pricing will affect the partial quarter impact in Q3 and then full on in Q4. But also keep in mind, we're going to have lower slotting as we get to the back half of the year. Most of the slotting dollars behind new distribution on coffee as well as ready-to-drink and energy happened in the first half. So that will be a tailwind going into the quarter. When you think about the quarterly step-up, Q1 about $90 million, moving to Q2 of $94.8 million. Q3 will be at or above $100 million, and then you can do the math on Q4 where we have another sequential step-up. The sequential step-up in Q4 is very important because that's where we have the highest seasonality in the business. And think about that as direct-to-consumer with Cyber Week and Black Friday as well as the increased foot traffic that really bodes well for our wholesale business through the holiday season. When you look at EBITDA, so EBITDA, we're guiding to $20 million to $30 million. We feel like we're going to fall below that midpoint, but there is a significant step-up in EBITDA. Now the EBITDA trails revenue, right? So the gross profit dollars come along with the growth in revenue over the back part of the year. But taking account, we're also going to bring more operational efficiencies into the picture in Q3 and Q4 as the operational efficiency project kicked off in the second quarter really matures and generates savings in the back half. And then finally, there's a modest decrease in marketing investment. Our plan was mostly front-end loaded, and we have a modest decrease in marketing investment in the back half.

[Operator Instructions] We have a follow-up question from Mike Baker with D.A. Davidson.

I remember my question. I wanted to ask about the energy drink. Any color you have? You gave us some ACV numbers and talked about sell-in. Any -- maybe it's more qualitative but discussion on sell-through, what are your retailers telling you? And then related to that, can you remind us about the customer merchandising agreement that kicks in next year and how that can help the energy rollout?

Yes. Mike, thanks. I think I'll reiterate what I said before and maybe give a little bit more color. Yes, we're very pleased with where we're at with the rollout. Again, limited geographies, only a couple of national customers. We've been very focused on those national customers. So I talked to the geographies a bit. I think if you think about the national customers we're in, we've been delighted with the performance. If you look at -- it's one large national C-store chain, and it's obviously our other largest national customer. And in both cases, the velocities have increased quarter-on-quarter, which is exactly what we would expect beyond -- in both cases, the velocity has increased quarter-on-quarter. And on top of that, we're starting to get -- I'm not going to quote velocity numbers, but we are starting to get into the range of some of the larger players that are out there, which means that, yes, to answer your question, I'm not going to speak for the retailers, but we're having very positive conversations with them about the product and the performance of the product on shelf. So we're bullish as we go in. Obviously, the sell season is going to be an important one for us this year. As you would imagine, we're approaching a lot more national customers as well as additional regional customers as we go into next year. So that sell season is going to be very important for us. We believe that we are armed with exactly what we wanted, which was the data from our initial rollout in order to be able to go in and put a strong proposal together that says, this is why Black Rifle can play a very important part of your overall energy portfolio. So whether you're looking…

At this time, I'd like to turn the floor back over to management for any additional or closing comments.

Yes. Just real quickly, I think we always talk a lot about the numbers of the business. I want to just point everyone to really what the founders, myself are proudest of in this business is our brand, the fact that we continue to build that brand in such an authentic manner. You heard about some of the stuff I talked about upfront in my comments, the programs we have going on. For those that are newer to Black Rifle, this is the lifeblood of what our business is. It's why we're all here. It allows us to play a meaningful role in giving back to America and those that matter most in America. Our veterans are first responders, but it also builds our brand. It builds authenticity in our brand. It builds distinctiveness, and it's actually building awareness. We're seeing our brand awareness go up significantly off of these programs we're doing. So we're super proud of that, and I want to make sure that that gets mentioned. With that, I appreciate everyone taking the time, and we'll talk to you next quarter.

Thank you. This does conclude today's teleconference and webcast. You may disconnect at this time. Thank you for your participation, and have a great day.