Earnings call transcript Q3 2022

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Operator

Greetings, and welcome to the Black Rifle Coffee Company Third Quarter 2022 Earnings Call. [Operator Instructions].

I would now like to turn the call over to Tanner Doss, Vice President of Investor Relations. Thank you.

You may begin.

Tanner Doss

everyone. morning, Good website joining discuss for we Coffee conference on Company's this Thank third Black quarter to our found be our and which ir.blackriflecoffee.com. XXXX call morning you can Rifle at financial released results,

Evan and With CEO; Founder Chief Heath our Financial Nielsen, Tom today our Johnson, Officer. Iverson, and Officer; Greg our Hefer, Toby me Co-CEO; Chief call on Chief the is Davin, Operating Retail Officer;

sure harbor you're like would familiar to you language, I which call, started, safe I'm and underlying today's forward-looking get we On assumptions. Before make statements, all guidance the with. remind may company's management including

Forward-looking statements based expectations actual cause and that involve are that could uncertainties materially. on to differ results risks

the measures, related measures our contain further to of risks measure the SEC, SEC. our such a available earnings call with discussion they in website. to non-GAAP also most furnished EBITDA. the will are non-GAAP as also on these please included Reconciliations investor of the are see adjusted financial business, GAAP For comparable This to our filings and previous release

Davin, like Tom call to the Black Tom? of over turn Coffee to I'd Rifle Now Company. Co-CEO

Tom Davin

our Today, Thanks, And our as third Hefer and will year. further call. will our beyond. as Iverson discuss and well for drug channel sheet. Tanner, Thanks update will strategy address I the marketing into balance mass to into initiatives QX strategic our new Greg joining will growth good entry you walk and moving earnings XXXX the food, results through and into XXXX that quarter morning, on continue key our everyone. power Evan

native Coffee are play omnichannel company evolving that call, key last from a Number digitally built one, an foundation. our we X during rapidly takeaways outlined model. summarize to model a Rifle the Black business have on Company business pure direct-to-consumer As we

significant to community. puzzle are order Rifle a the they to Coffee and continues to growing into capability. capacity connection Black respond Two, have and piece by and demand loyal meet we shop. drug coffee key continuing in product to customers ready-to-drink to entry adding our of a a channel execution food, mass three, is the wherever unique Number Our

me on company model we an each of from takeaways. from color native rapidly one, a key more to a Number are generated business. bit DXC ago, digitally XX% built years evolving revenue omnichannel than offer Let of pure-play foundation. on a more these our DXC our we business X

their coffee are take you drug for As ever-evolving purchased numbers retail, landscape the changing from are of brands Over at XX% and mass shopping. favorite of we access typically in they advantage results, can see as consumption where their food, the today's those wherever to at-home coffee want rapidly only channel. consumers drinkers

to Coffee awareness satisfy Further, XX% further that the majority to where enter brand lower our brand our a awareness. of the coffee our for across States, United we this or customer, Black aided order purchased in increase we channel. needed consumption acts such So Rifle billboard for the at-home expect with as to entering brand at channel is FDM

into in to QX this details channel distribution time includes call that to whole call. Walmart will earnings ground, August, September plans If we excited that stores Bean which conference now close last footprint, you the listen you to early the We're or walmart.com. as frame. announce We're across we discussed more launched as in X,XXX well XXX% during the K-Cup to to promise rounds in Walmart our and launch with you in our remember update and FDM

only just who who category stated, to shelf, would we collaboration. Americas high-quality those living have is filed be with Walmart presentation with for within excited a bagger multiple previously And Why? at with We're us of America today, story shops the Because would to of retailer on provide started FDM on store. the enter a miles coffee that Walmart Americans coffee. not at years, this XX For BRCC available incredibly a wall recall where we could you'll the we XX% of Walmart.

company execution our opportunities are the our where of tremendously the Coffee would who challenge brand. very was where we time We to we have fantastic about the mobilize selective of And lines the and senior Black it. proud behind our our Evan both Hefer into meeting entry this for rose business a FDM Rifle opportunity teams and entire knew we and are requirements cross-functional for this demanding channel. leaders X customers

pleased we'll results very of Walmart, are with launch details our as early this collaboration progresses. with We and the more share

from meet for standards to and with ready-to-drink and time. by the with order to demand new continues of growth. channels bean get of in product the approximately expected roasters over XX% of fastest-growing whole ground, new outpacing contracted up who grow last QX, base doors, This RTD by and QX Number the we be significant the both roasting year. customer adding product quality to the to from as meet with continuing growth At demand is volume X.Xx. meet respond two, now demand we products the our provides execution us category In Black end XX,XXX in trade, coffee the capability. our several can accelerate of outsourced ability FDM RTD sold coffee Rifle capability single-serve capacity Coffee we and coffee all additional Company BRCC's to coffee K-Cup across ready-to-drink are ready-to-drink product store

beginning and per is both measures More from at the percentage door to outpacing Equally levels, as importantly, measured year, Nielsen, volume as BRCC's XX.X% beverage convenience, at distribution as ACV our per since our units of the by perform to commodity across has all by the XXXX. important, or category-leading XX.X% digits. of which continues increased gas, FDM channels by beginning the X% sell-through double sell-through category week, RTD up measured

the now our We're call QX qualifying from products capacity. very growing are both of that SKUs. I'm than our that recall of the through encouraged X our demand. phase available we date announce you'll consisting and pleased X drink previous annual to this meet our our by growth, success were of co-manufacturers rapid manufacturers with process the new co to rate of to start-up in this more With triples additional

Looking to we XXXX. Vegas. SKUs LTOs. as to and innovation presented RTD XXXX the to will X and products about the innovation expanding has doubt we presented others our trade Enthusiasm from X new current that at permanent future, introduce is from month foresee new growth. NAX and store our Las core convenience X no category well We within the planned, coffee continue customers drive as last are in us being limited SKUs pipeline our X show, from Resets seasonal additional XXXX time we currently for space offerings. excited as and shelf suppliers very move There

community. Coffee a and our to growing Rifle has Black connection loyal unique three, Number

are We to only mission-driven into coffee new the in of Black Rifle industry. customers a the success ecosystem. is the and Coffee lifestyle The continues mission driver bring brand our major

this in excitement Phoenix for ruffle was in Phoenix Phoenix, to this we the we back the there market. XX:XX was based in retail community few markets was lined our have presence happened over weekend, and grow. open and launch As in in the continue continue Black mid-October. most to But our our the our long We market the had known as for enter see our new build much We've community in we first of rest Coffee seeing Rifle Company business. up morning successful X for opening a XXX on or direct-to-consumer expand the This looking Phoenix day the our the at outpost our at the of of to team Black weeks witness outpost loyal the This grand day. without We'll a Coffee within door we the top leadership line a footprint weekends store in This market. opening grand for and be got out Arizona enthusiasm to the store we're of continued our opening out customers first the yet. was on of forward fact Phoenix remainder within and market, an evident our the the of existing our market. second area couldn't

QX update pleased our for quarter. with the performance are Overall, we and guidance.

better delivered environment. and challenging our business than wholesale expectations business Our DXC market a in held own its

our over call the our fourth new a impact turn to have provide revenue. into quarter start-up ready-to-drink Evan, onetime I I will transparency some on had we to a product that Before want co-manufacturers with delays for

had a move transitioning time, in will runs impact earnings call, we trial At impact co-manufacturers. excited start-up also QX QX. During runs in trial are we We that had have we into had production. our X discussed new into full full That production. from of in X and QX completed to and challenges small the an

The was not production related, One not the of had co-manufacturers food the that has issue standards, with new did where as we SKU. demanding equipment fully the such an was issue a meet change, not been partner, equipment the deem safety problem but product an After situation co-manufacturing and our product resolved. on in-depth our rather our identified salable. related review after a with ready-to-drink issue

second our has from co-manufacturers. November. deliveries we X resolved, been raw also produce This and contract currently time to release start-up new in The August material across product meet full co-manufacturing our ready-to-drink in challenge in materials in partners and to beverages delay production caused raw to The delay lines was manufacturers. issue at manufacturing all of had order until raw our procuring we're material

in XXXX, been adequate of downside exceeded The demand build our Since an far rate we've been supply. up demand that drink to we stock. fortunate such safety able has that of launched level products robust we've not is

on any shipping raw due ready-to-drink our we I is stock. startup co-manufacturers fully Today, that to pleased delays resulting start of a to that it levels production also chain to since further we million. issues, we Black Approximately QX stock inventory safety we revenue $XX operate to to meet Due have manufacturing, schedule. up equipment-related meet had million will issue are The X X/X contracted issues. on production of buildup these sales challenges. XXXX bringing directly that through production enable will enough hand XXXX X/X Rifle capacity adjustment $XX to and not to am a not have of these are the forecast. our delays. is to enable material any Coffee the co-manufacturers delays will ready-to-drink occur, we in are manufacturing to of down when cover to So product quarter, due of help supply target forecast, need from X issues. Further, the we including additional impacts we both share new did like the adjustment mitigate range this capacity Note production with safety to our

I'll that, turn Hefer. With to Evan? Founder, Evan CEO over call and now the our

Evan Hefer

and us good for call. earnings everyone. quarter XXXX again third morning, Tom, Thanks, Thanks joining on our

Tom and the on as give branding quick enter of to Walmart decision side mentioned, FDM the our we as you of chose update to background to and As why bit I a the well collaborate on space with a marketing wanted give house.

for team Coffee. here at Walmart. foremost, we're and have tremendous First without done couldn't work been a grateful Black our This Rifle with collaboration our amount have of we very from

pressure up I a dealing Black supply department working with this of us less Rifle in we Black to internal are think Coffee situations than almost the getting hand Most product. our tight department team field finish globe across to week military. every had line. to lines, are bags find the from Coffee mocking across the in Rifle our a at time at the art used in chain while

do this heads And time shelves enough. their thank put have they Walmart, gave when line. much So across finish and when the we can't this our I down everyone to getting just we as on this I pride the I see as team work. know got product that of line, in

addressable market segment To help plus XX% through DXC FDM is total at-home this within size perspective, or we billion market To billion put market. at-home of opportunity the addressable our primarily $XX and Black served the of serviceable market the roughly have Coffee date, the $XX of Rifle channel. plus the coffee in coffee overall the

is Here why help additional so explain some excited. will we're information that

a into XX% currently and of remaining online. partners awareness brand online. aided we coffee moving incremental are of X% using in U.S. will truckloads our X of to new into ship contribute into as opportunity bought omnichannel revenue the well Rifle XX% Black store we Coffee the related, channel, individual awareness their a in-store will huge FDM the be around households existing, brand and as to we approach right coffee for purchases as are bags the unlock solely at-home to consumption to Entry and only the branded market both opposed individuals to FDM margin The incremental are buying stores done by coffee buying get have accretive hands of customers, full will below opportunity significant with awareness, boost massive of as homes. XX% with correctly X of

a Tom households over the mentioned, of XX miles Walmart As XX% live of within store.

we shopping habits, are Rifle main it was their they As on their customers where grocery in purchasing is we on available current that base shopping. our of additional reason runs subscriber weekly surveyed coffee The Black top learned their Coffee subscription. our were

to to order predicated needed serve they of within the strategy products we our shop. entire Our on saw on FDM shelves customers customers ability channel. wherever our is we When the the have we omnichannel the in our data, our products purchase better knew to

veterans that be their huge As stay be and as active to align and mission we've America to and Coffee donating sales launch by Walmart. they over charities to excited initial donating families date announce military Walmart raised to Walmart that our BRCC, mission. happier coffee is it duty responder helping already our our a our I'm couldn't says, portion first various also we'll to in Walmart. $XXX,XXX, first We're for responders, to FDM to we and channel you at with collaborate can charities. on see, of veteran buy in into America's a And using with opportunity now can our shops this true FDM,

our Finally, we of touch on business. to briefly marketing portion the wanted

I mentioned to shift media continued to has have our media in As previously, spend strategy. marketing from paid owned our

this our a financials As was you percentage light basis. our spend on can from quarter, marketing see revenue

quarters our final increase send X our foresee portions Jumbotron December. marketing earlier has to into Rifle at your wholesale of shelf video grow. video the the holiday of is you're launched we and our spend Jim move our an AT&T increased our at just on While Walmart our busiest We'll year. or launching do helped, be will continued focus convenience be also or Pastrana of We of we seeing the continuing Stadium us for awareness the marketing on channel Black sales. Whether on Conner as the our spend in to seeing Travis local stores, brand Coffee the

our on marketing XXXX. line dollars confident plan the seeing continue in we leverage transition We marketing are impressive on still of trajectory our as our and growth into

quarter With that, I'll provide pass it over to Greg to guidance. dive into and the Greg?

Gregory Iverson

Today, update I balance and brief on a questions. the our Evan, everyone. provided sheet the and and provide we results Tom your Thanks, liquidity update to morning, before quarter will expand that open good call on on our third

they we earlier In a of non-GAAP are our providing business results RTD exclude the the financial discussion overall Tom results, our be the of of I and the indication issue believe mentioned non-GAAP third that will because providing impact GAAP results, call. both performance. in We're quarter which the production better

revenue. Beginning with

increased quarter, million XX% total of $XX.X last QX revenue to to million $XX.X the compared in For year. third

adjustment XX% channel. Excluding increase our ago revenue and the a RTD product production in wholesale the to million. revenue issue, in total from The was increased driven by for meaningful year of channel the our expansion primarily to RTD our $XX.X entry FDM into $XXX,XXX revenue

sales X channels. details give our I on additional Now will some

the volumes QX redirect lower of to last from continue bag of direct-to-consumer a QX. decline to to business partially representing our in end small customers. quarter QX was of acquisition of the customer over areas faster-growing XXX,XXX of entered First, compared continued million to of X.X% was with from nonsubscription DXC growth last due sales on revenue increase to pricing of an million We QX offset a coffee decision elevated primarily we decline $XX.X costs. sequentially subscribers result $XX.X The subscribers grew our X% This in year experience to from by increase but in X.X% other as investments the year.

channel. XX% period. during wholesale increased year compared QX our to the million to Revenue to $XX.X $XX.X prior Turning million in

The wholesale revenue with $XX.X during initial was the channel RTD to the primarily order entry of into FDM million. an issue, XX% grew by September. driven wholesale our the Excluding effects production increase load-in

XX.X% sitting doors a XX,XXX, and we from the ago. measure business up ACV, of the ACV Internally, to which can RTD growth RTD doubling addition, In at XXXX. increased year of of percent at of our a Currently, our almost from thought start be percentage nearly on the generally percent is stores selling as our XX.X% products.

room I'd further existing locations. locations. is a the expand undersupplied We and increased percent opportunity points our to existing there broadly retail partner still both breadth has our distribution SKU ACV While significant note, we with at facings at believe perspective velocity's increase expand distribution to are dramatically partner from and

to million as our last Revenue Outpost company-owned store in in an end our to year. with QX of primarily Moving of the compared grew the in increase million to which increased outposts, to of the in Phoenix, number $X.X of channel. opening $X.X QX Arizona of XX% area. outposts first to This XX due Metro QX the was

Turning now to profitability.

margin QX points from decreasing XX.X%, QX XX% last XXX Our in of was year. basis

higher our as our impact bean to decrease lower as from cost ground the compared basis our coffee in margin has XX%, gross year a as the RTD well an green period. as product increases point and RTD higher prior continued in and margin whole from product QX and coffee. decrease mix RTD million rounds approximate ingredients Excluding shift product a gross production $X.X XXX issue, costs, and was was the driven including by This

RTD points FDM. load and a XXX result in productivity production the excluding basis from issue, QX our basis Importantly, pricing order for our of a sequential margin, as the from and initiatives on increased charge QX gross the approximately

our into call, on than on parcel mentioned is we bag our individual margin in and shipping by accretive truckload rounds the immediately and efficiencies channel. significant based last from rather As FDM DXC the entry coffee our

operating Turning expenses. to our

continue to our critical to We make growth. investments support

our approximately the million with to $XX.X QX $XX.X last XX% As beginning compared expenses by increased quickly of such, and advertising. marketing expenses I to during through million drivers these as operating will year. walk

marketing third the quarter million XX% by of XXXX, the from $X.X to in $X.X For decreased prior period. year million expenses

quarter decreased in advertising the outpost growth revenue decrease lower-yielding percentage in reductions last our spend sales, to points spend than compared of The as by driven marketing XXX marketing of a well same lower and a require by year. X.X% As percentage as basis was or to wholesale in expense channels, which DXC. as

As Evan as spend well mentioned have activations the holiday season. an during shopping for see in we as our as remarks, his the compared our in marketing marketing uptick quarter increased to will QX large X spend QX we planned as

wages salaries, in $XX.X increased million and the Next, third XXXX. quarter benefits $XX.X XX% from of million to

revenue, outpost benefits bring mentioned primarily of sales typically to entry support channel. of to internal our of structure percentage on they XX a XX.X% cost significant XX% our XXX The to our a additional additions salaries, we wholesale leadership the by increase wholesale, included wages our QX is significant each Within to Furthermore, to opening. last of growth last key in quarter, line increased sales large investments well driven into support the As teams XX for growth hires portion our increased new for as employees the points made compared and as by in in employee FDM as outpost I positions headcount as year. especially coffee outpost basis channels. to was we've and

wages you benefits. in business, Outpost our salaries, to growth continue will see build we and As

third $XX.X Finally, million compared $X.X to of $X.X in G&A million increased the expenses XXXX. quarter to XXX% or million

a last sales the XX.X% This of to and growth driven multiple to the other of increased percentage XX.X% G&A of revenue by across rapid a As support increase increased our public primarily was company. needed consulting to transition and services professional revenue, year. operating compared to as business channels

XXXX occupancy other the lease company-owned in XX outposts contributed and X the for also and increase. also versus We these in outposts had costs XXXX incremental to

moderates. see past as quickly for channels, several investments G&A in we we meaningful over quarters significant, our G&A the the wholesale been G&A leverage will these of our begin growth have on outpost pace revenues scale and to While while

measures EBITDA manage In important adjusted addition that is discussed, measure the GAAP our use profitability to to we business. I've internally an

as in of For This inflationary incurred were from positive we from EBITDA expect the and was pressures adjusted increased $X.X the to loss EBITDA the our that product year not and well of XXXX, advance operating loss revenue third was ago. $XXX,XXX versus pricing expenses primarily adjusted quarter lower fully a productivity those of a increased of due by margins offset as shifts initiatives. mix investments million

generated load-in of we individual negative We EBITDA talk for and the for we we a an the during FDM. month within our of but FDM. the important was While point positive adjusted the move which month believe adjusted EBITDA about month was data quarter, benefit wouldn't it's into quarter, normally our initial September, an delivered significant a

on Now be forecasting great profitability. our not to in progress we to adjusted we're are quarter the path making fourth positive EBITDA but

you to our forward optimistic EBITDA to forecast million forward we detail XXXX fourth we when sharing with the last XXXX, $XXX look of earnings of in XXXX adjusted mid-single with outlook our that report to call. we revenue on margin more mentioned quarter remain We digits our and low Looking results.

our Now of briefly for through third sheet balance I'll quarter XXXX. the walk

facility long-term that remains I'm million senior December credit XX, we million $XX.X our end compared sheet had of to of balance September equivalents of million of $XX.X XX, with XXXX. $XX.X also entered we XX, Our cash banking as partner, Bank. At and pleased strong debt long-time as December million quarter share recently cash a $XX.X with as into compared with of XXXX. Regions to new

business use support at rapid of expand we the our This flexibility while a maintain to us strong brand. capital to address is demand includes are customer million our channel and term $XX ensure gives near we've wholesale facility credit investment rapidly our incredibly revolving liquidity new our primary inventory need in we an that that the for our we pace. plenty growth the receivables to mentioned, As of loan of needed facility

call I turn Tom. will the to over now back

Tom Davin

key can on trust recap an model future. a DXC pure-play takeaways our you rapidly from omnichannel business evolving one, foundation. this Number X To to for call: sense I company the we excitement are the digitally for native a built

segment in the to Our meet a order adding our two, key ready-to-drink continuing puzzle is Black Number of loyal Rifle and to to piece community. customers they product is FDM and execution capacity entry to Number by significant capability; Coffee our into wherever are shop; three, the respond demand we a unique connection growing

that, call the turn the over to With operator for I'll questions.

Operator

[Operator Instructions].

line come with Kelly Our question has Roth first from George the of Capital Partners.

George Kelly

there, first for with one from. may coming the you just detailed $XX Wondering exactly or this million. do So guidance, you, quantified of the have year's where has to sort cut that's

but of exactly you it's RTD, think could that specify is? I just most what

Gregory Iverson

there's the where to delay We Greg RTD said of Iverson. supply and is about that delayed it's related One and entirely related ultimately the co-mans. was was X And relates getting X/X ingredients the outlook to some product to the a X/X manufacturing that we're it then those had we for issue really about to new from and QX, but do also reduction in a George, perspective chain to it in our -- co-mans line, our of getting sell. products Happy the issue we Sure, factors. to start-ups. products remarks, decided not production that going we that. mentioned reiterating, then we included it to And have our a just products --

George Kelly

Okay.

you on -- I Okay. before? where the secure Excellent. said question, believe were have now with you up And Xx prior. that I have from that step in were your X X partners, now And then RTD, second you but Three believe you another prepared capacity to these that to had remarks you so able additional you

that So additional to to planned are within those secure capacity the were kind partners down gets that Xx? additional Or X? of you road able there you

Toby Johnson

George, it's Toby.

about plus X additional our the signed original capacity with additional on. So we've that we the co-man that talked is partner

additional with annualizing incremental completed those XXXX. that of we've capacity startup X tripling comments it phase is the So and and into run that just the the rate of taking capacity

through without and So that capacity having we to start-up fact any the feel about that do XXXX. have we phase, good additional in enough startups are we

George Kelly

Okay.

last early, kind can or Okay. there you of launched? uptake about And business then you've noticed? talk noticeable know change your to any Walmart what you DXC me down I the seen but either And in has cannibalization launch. for you've is question been that it's about since

Tom Davin

George, Tom Davin the here. for question. Thanks

We have not.

So obviously, constant in shopping at than very we've churn And different pleased but stayed has Walmart buying direct-to-consumer are is very online. Walmart been only occasion at not somebody doing that we our a business. the

Operator

come of with questions next Our from line the Michael Baker D.A. Davidson.

Michael Baker

that. Okay. the cetera? data Yes, a get any the early, think question it's which But on the is Walmart I initial of we initiative, Also big news day. POS sell-through, et

Toby Johnson

So our initial velocities are projected. at or slightly had above what we

of our be consumer into also consumers looked as out at in feedback One, at find our really a initial Walmart competition. about it performance of a standpoint, standpoint the down go coffee coffee into shelf. we're Black the on the from based they We're to aisle a day entry We've versus gates. a been happy really there's Walmart strong. competitive a from excited overall about new Walmart. we're share and has X.X on the the people the category rifle from the in relatively million looking are but go they the that We data. and And distribution, XX the seem about

I our think mentioned remarks. prepared we in

death Pets rollout continue and brands as in plan. the SKUs, weeks, size, grow in copy we've X some to established add and we our including For our passed et wish full new last cetera, with

to Walmart. really we the are build, continue to with growth and excited that anticipating we're So collaboration about

Michael Baker

is like Walmart? eventually that with out I of $XXX in could And be grow you to in sort next that you question. next million plan of sort that of a the sort in that embedding terms -- That helpful. my what maxing That's as segue what Walmart? rollout million mean, capacity? Or $XXX at of right. what are All is that good Walmart early is year, there into full likened rollout, is still the

Gregory Iverson

Yes, it's Greg Iverson. Michael,

if channel, across revenues. the call the comprise you our expect entirety XX% of more said on we earnings So that quarter, that of our wholesale to last remember than

true. And that still so is absolutely

In as Walmart a FDM RTD big opportunities, and channel definitely the opportunities X X big the of big well. growth terms of and broadly opportunity the is is

And this terms we're opportunity We the update gave gain looks of our the initial in share. terms of as the in so information like. just we continue share. terms in have opportunity to where partner today what as Toby some certainly sees at of to see well for rollout us

ramp the continue will penetrated within brand quarters. we've in each point I to lot ever it continue a grow see fully don't to their opportunity of we'd a Walmart. our to We stay footprint. know within presence up at where that So of

Michael Baker

I share? what maybe X way. guess -- the $XXX right to What something other you've [indiscernible] ask willing now so Is million? not that is that share share embedded so X.X%, let me Well, to quantified or is in

Gregory Iverson

we've It's quantified certainly something them, to. is something guiding but about it's discussed something and not we're something we with no, we think work through

Operator

Instructions]. [Operator

from Bill come the questions Truist next Chappell of with line Our Securities.

Bill Chappell

further the are in a else like some on but spending revenues But we're the in something amount you're if what shift sales? there's provide color Lang slightly of that Bill you Can seems subscribers, can not up. you fairly direct-to-consumer maybe only on is kind continued channels of or seeing? some This Chappell. It kind of seeing to for gain Stephen about maybe substantial talk

Tom Davin

overall, the and sequential In non-sub steady. a for subscriber the subscriber of -- the There's year. little quarter so this direct-to-consumer in on side QX prior but in say that the DXC we're on very Tom very thanks would I seeing versus business and as decline again, versus the a steady prior slight question. business, numbers softness is the Davin, side Yes.

Evan Hefer

Yes. is And the this think that -- mainly I by that, Evan, way.

what we've to constitutes spend think spending perspective. that shift I that mainly is had dollars a more marketing the omnichannel to way we're

So to DXC we're not of our XX% allocating marketing budget plan. a marketing

to I into marketing that's of start of as will kind expand channels the our channels, how we some look just got market deemphasize our as to a low product which different guess. at obviously we we math, So diversify spend, we've

Bill Chappell

the like? are XX% this talk Or inventories what almost of June. the selling see of of getting kind of a build ahead like up just more And kind since that looks kind can I then end you Is holiday period? about quick of clarification.

Gregory Iverson

Sure, ready-to-drink the relates Steve. do Iverson Happy really Greg It's building inventory to to product. The that.

last we both near ultimately emphasis drug wholesale to call, us channel, well as primary receivables product channel. as use growth inventories capital across the our food, with on and mentioned the as then of the rapid mass the for ready-to-drink so and in this our is build out And support to term

a just of we channel. With of co-mans material capacity, and built we've growth brought the in the a in ago inventory new on lot up Toby the addressed terms to raw but that moment that ingredient support

reason big this that It's on. a announced something it's fund allow planned million capital saw build. facility the you working we we've morning, of that part new continue $XX to also a So credit that probably as why, that us senior to

Operator

with Our next questions Matt Blair. from come of the line William Curtis

Matt Curtis

are about sales stores maturity curve mean, then that I to seeing honeymoon of on us bulge mean, since now that more what Outpost. opening while you a tell I'm volumes wondering you've strongly. still what out question sells But like. looks the the a into consistent sales opening I I significant volume. you very obviously, just post. can are begun guess a

us helpful. Just anything you could tell be would

Tom Davin

Heath Nielsen, take to want you that one?

Heath Nielsen

Nielsen. Heath It's Yes.

hold launched natural very most we just transaction of and see continue and to LTOs think that. addition been we've traction outpost. pay What the retail retail been the I [indiscernible] And will within in specific you average gain to very able pleased opening, with we've our any very, we've is our has had, to continued that that how recently see strong. So to

Matt Curtis

by guidance what I I sales tell just I'm adjustment us still reduction then the fourth guess reconcile magnitude to is driving the mean, you the mean? to the just guess reduction, the I back for quarter. be is getting And surprised can the Great. the anything magnitude help or Okay. there I us exactly of of

Tom Davin

our in ago, then here just Well, script it there's X I out think reiterated to we and a but moment factors. tried lay

we we capacity. is for co-manufacturers into of I demand made the constrained. to voluntarily expand total we capacity co-mans in all the then had part of It's about And said we the then and X/X -- those ready-to-drink it historically the issue. to initiative this So think these through there's product. our we've went QA initial that issuance for very decision and get product. runs mentioned the production. new incredible We production to, those we the just of been as before, launched and test outlook. went had a have manufacturing -- process us where our such this pull there's critical to we been unfortunately, first was with or And And issue reduction was big And a X

simply of runs just it's those large. so And are the production size

those so X of shared impact on big big, And then when amount the a a just a too, And the Toby of our to it's which quarter. big capacity, is the added similarly, we've increase. pulling has effect --

those a as runs production the delay impact big And so on appreciate, a you has in quarter.

we important The thing is resolved us both. for

shipping now So production co-manufacturers. full we're runs from both

quarter it while third on bigger we've be on that XXXX. won't impact things impacting the a these impact resolved fourth so a had are and And and meaningful quarter, the

Matt Curtis

tell it. sense Got you've guess, by launch on us talk front. making last about innovation more question Can a like channel. you're to the you decided And plan lot new next Okay. the still me. yet? that It if SKUs year, how makes Maybe product progress then, for that sounds many you to of I it

Toby Johnson

in We directly. distributors, early we're to RTD, in our particular. to innovation hop interface excited. on And in I'll customers October with brought So our NAX really

bringing the We have that this samples launch And XXXX. first of category. to the we're news is to time we're everything in planning

agile as And to where and as we've But We we news on be. our the to also SKUs. are company, core need case disciplined in being can category. growth a the our but been X on we we of RTD, focused focused capacity, we're unlock bring

Those place. taking to we is for One a are are SKUs So resets will that the X available to vanilla. in permanent be the those in adding all launch SKUs, QX and lineup. addition of XX-ounce SKU

month. feedback limited really can an portfolio, so of incremental we DNA. of salted We're will as and have for X shared growth part innovate a X.X mean, portfolio to to innovation We permanent also to the we We the innovation consumers. couple we're SKU in caramel SKU at We time the to portfolio every with. and of highly complement a very orders Pumpkin was stand we a beginning for expansion, continue. looking now. coffee SKUs white ECS windows new our for what a summer, the reset a very The right as drive fall and That patriotic then channel of our add the we'll on rest half. that And XX-ounce is highlights offers, that blue continue first our continue launched production excited company the a excitement I additionally ounce across and incredible. and across the taking and We're Spice and those LTO. our

Tom Davin

The the lot retail about cold talked We a mid-XXs. the platform. penetration being post beverages to has in do innovation of with beverage our cold

got now, seasonal priority. Heath several for and the retail team market have driving in the we We've output. huge So up LTOs. a the Plus right is retail that

going So well. that all is

Operator

Instructions]. [Operator

Our line Davidson. the from of next D.A. questions with Michael come Baker

Michael Baker

fourth the relates and line talking $XX And in plan? what One, guidance I the it as million then fourth full year-to-date plan? quarter, the how any in the was -- quarter think follow-up fourth subtract that color EBITDA plan on lower quarter? keep we to quick a million third sales? of is your to take that was I the year implicit about Do original the given the with you the quarter. and a the in the guess follow-up, $XXX guess, for Just just was And about in that roughly

Tom Davin

Mike. Yes, Yes.

we expecting what came pretty to much to with QX see. in QX, So regard in were line with

number, our the about referenced, we the fall If talked in last about expect a in year we but revenue or full more to quarter you then quarter. fourth XX% remember, of outlook,

you that came that right in, in with based can So QX on in math, expectation. we see line

guidance if the to year-to-date, So you're that's It's what fourth versus quarter absolutely full the X-month year. you for take right. we're the guiding

perspective. answer perspective, from QX a profitability in then QX, part we a first second relatively starting from of a quarter profitability to strong QX question, the And your had with

we in our in see sequentially our can of step-up important adjusted that had margin, are perspective, meaningful EBITDA. You QX a a couple had from step-up perspective. gross seasonal there's sequentially a we things a From a

So and shopping our holiday more number DXC X discounts within season. do channel we promotions during is run peak the

historically gross that impact so meaningful has a our And on margin.

be traffic related quarter. into pricing. Evan a the significant more we is thing today, fourth a pricing last holiday mentioned this bit of had shopping to also to, incremental the spending more lift And to QX margins in peak our fourth have fourth a little So we QX like quarter. significant we'll season. are quarter couple actions We said, a the have is QX. sites activations perspective, drive bringing pricing From but the in nice to earlier any spend the then don't in also I built mention significant down related that lower I'll than marketing

EBITDA QX. adjusted in expect level all So not had that netting be we out, to at as the same

we and QX. where QX were between somewhere in So

Operator

at closing the Thank like would back call this over time. questions Tom further I you. comments. now Davin no There hand any are to to for

Tom Davin

very you Thank much.

fourth and joining you, third Thank charging the to so report for hard see in and call, you quarter. quarter we're the the And we're we'll out the into pleased marketplace. everyone,

Operator

This does conclude today's teleconference. participation. We appreciate your

your time. disconnect rest at of the Enjoy day. may your this lines You

BRC (BRCC) 10 Nov 222022 Q3 Earnings call transcript