BRC Inc (BRCC) Q3 2024 Earnings Call Highlights: Navigating Revenue Decline with Strategic ...

GuruFocus.com11-06

Revenue: Declined 2% year-over-year. Adjusted EBITDA: Increased 15% compared to the third quarter of last year, reaching $7.1 million. Gross Margin: Improved by over 8 basis points year-over-year to ...

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GuruFocus has detected 5 Warning Signs with BRCC.\n\nRelease Date: November 05, 2024\nFor the complete transcript of the earnings call, please refer to the full earnings call transcript.\n Positive Points \n\nBRC Inc (NYSE:BRCC) reported a 15% growth in adjusted EBITDA compared to the third quarter of last year, indicating improved profitability.\nThe company announced a new energy distribution partnership with Keurig Dr. Pepper, which will provide access to over 180,000 retail outlets nationwide.\nBRC Inc (NYSE:BRCC) achieved a 15% growth in the food, drug, and mass channel, outperforming a flat category, and nearly 25.8% year-to-date growth.\nThe company has seen a year-over-year improvement in gross margin by more than 8 basis points, reflecting operational efficiencies.\nBRC Inc (NYSE:BRCC) has a strong brand identity and a loyal customer base, with 58% of its consumers already being energy drinkers, supporting the launch of Black Rifle Energy.\n\n Negative Points \n\nThird quarter revenue declined 2% year-over-year, primarily due to cycling of barter transactions and shifting consumer preferences away from direct-to-consumer channels.\nThe direct-to-consumer business continues to be impacted by broader market trends, with consumers shifting back to retail purchasing patterns post-pandemic.\nHigher green coffee prices exerted modest pressure on gross margins, despite efforts to mitigate margin volatility.\nThe company expects increased trade and slotting fees in 2025, which could impact margins.\nBRC Inc (NYSE:BRCC) adjusted its free cash flow conversion expectations due to higher inventory levels than originally planned to support growth in the FDM channel.\n\n Q & A Highlights \nQ: Can you provide an update on the timing of new retail partnerships expected in early 2025? A: Chris Mondzelewski, CEO: The progress is on track as discussed last quarter. Conversations with major retailers are going well. We added Food Lion and Harris Teeter, increasing our distribution to 47% ACV. We aim for 70-75% ACV, aligning with top brands in the category, with further distribution growth expected in Q2 of next year.\nQ: Could you clarify the changes in free cash flow guidance due to higher inventory levels? A: Stephen Kadenacy, CFO: We expect robust cash flow for the year, with a $60 million improvement year-over-year. The change in guidance is due to accelerated K-Cup purchases, which provided cost savings. Despite higher inventory, we anticipate strong cash flow in Q4.\nQ: What is driving the sequential improvement in sales for the fourth quarter, excluding the barter transaction? A: Stephen Kadenacy, CFO: Despite headwinds in DTC and Outpost businesses, we saw tailwinds in other areas. Excluding the barter transaction, revenue was up 2%, with wholesale up 12%. Our promotional activities and market strategies are yielding positive results.\nQ: Can you provide more details on the energy drinks launch and its expected impact in 2025? A: Chris Mondzelewski, CEO: We are excited about the energy drinks launch with Keurig Dr. Pepper (KDP). The rollout will focus on high-demand channels like convenience stores. We aim for 80% ACV over time, leveraging KDP's distribution network. Initial margins will be below 40% due to slotting and trade expenses, but we expect strong growth.\nQ: What are your expectations for full distribution in the FDM channel by the end of 2025? A: Chris Mondzelewski, CEO: We expect to reach full distribution by the end of 2026, targeting 70-75% ACV. Conversations with retailers are positive, and we anticipate continued success in gaining distribution and increasing market share.\nFor the complete transcript of the earnings call, please refer to the full earnings call transcript.This article first appeared on \nGuruFocus.","kind":null,"is_publish_news":true,"is_publish_highlight":false,"is_publish_live":false,"is_publish_wemedia":null,"editions":null,"column":"","sentiment":"0","news_tag":"","news_rank":0,"symbols":[],"gpt_button":1},"commentList":[],"isCommentEnd":true,"newsSizeData":{"likeSize":0,"commentSize":0,"repostSize":0,"favoriteSize":0,"likeStatus":false,"favoriteStatus":false},"APP":{"userAgent":"Mozilla/5.0 AppleWebKit/537.36 (KHTML, like Gecko; compatible; ClaudeBot/1.0; +claudebot@anthropic.com)","isDev":false,"isTTM":true,"deviceId":"web-server-community-laohu8-v3","version":"4.29.2","shortVersion":"4.29.2","platform":"web","vendor":"web","appName":"ttm","isIOS":false,"isAndroid":false,"isTiger":false,"isTHS":false,"isWeiXin":false,"isWeiXinMini":false,"isWeiBo":false,"isQQ":false,"isBaiduSwan":false,"isBaiduBox":false,"isDingTalk":false,"isToutiao":false,"isOnePlus":false,"isHuaWei":false,"isXiaomi":false,"isXiaomiWebView":false,"isOppo":false,"isVivo":false,"isSamsung":false,"isMobile":false},"href":"/m/news/2481642429"}