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What changed in BRC Inc.'s 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of BRC Inc.'s 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+427 added−385 removedSource: 10-K (2024-03-06) vs 10-K (2023-03-15)

Top changes in BRC Inc.'s 2023 10-K

427 paragraphs added · 385 removed · 295 edited across 8 sections

Item 1. Business

Business — how the company describes what it does

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Biggest changeOur DTC channel includes our e-commerce business, through which consumers order our products online and products are shipped to them. Our Wholesale channel includes products sold to an intermediary such as convenience, grocery, drug, and mass merchandise stores, who in turn sell those products to consumers.
Biggest changeOur Wholesale channel includes products sold to an intermediary such as grocery stores, including the FDM customer set, such as Walmart, Specialty Retailers, such as Bass Pro, and convenience stores which primarily sell our Ready-to-Drink (“RTD”) products, such as 7-Eleven. Our DTC channel includes our e-commerce business, through which consumers order our products online and products are shipped to them.
Results for any quarter will not necessarily be indicative of the results for a full fiscal year. Human Capital We have built a strong and cohesive culture centered around our mission of serving coffee and content to active military, veterans, first responders, and those who love America.
Results for any quarter will not necessarily be indicative of the results for a full fiscal year. Human Capital We have built a strong and cohesive culture centered around our mission of serving coffee and content, and our culture to active military, Veterans, first responders, and those who love America.
Each continuing owner of Authentic Brands also holds a number of shares of Class B Common Stock in the Company equal to the number of Common Units held by such owner, which have no economic value, but which entitles the holder thereof to one vote per share at any meeting of our shareholders.
Each continuing owner of Authentic Brands also holds a number of shares of Class B Common Stock in the Company equal to the number of Common Units held by such owner, which shares of Class B Common Stock have no economic value, but which entitles the holder thereof to one vote per share at any meeting of our shareholders.
We utilize a three-pronged approach to craft a unique brand that resonates with our customer base and enhances brand loyalty: Inform, Inspire, and Entertain. We want our audience to love coffee as much as we do, so we strive to inform them on all the awesome facets to coffee.
We utilize a three-pronged approach to craft a unique brand that resonates with our customer base and enhances brand loyalty: Inform, Inspire, and Entertain. We want our audience to love coffee as much as we do, so we strive to inform them on all the awesome facets of coffee.
Available Information We file annual, quarterly and current reports and other documents with the Securities and Exchange Commission (“SEC”) that are publicly available free of charge on the Investor Relations section of our website at www.blackriflecoffee.com/pages/investor-relations as soon as reasonably practicable after these materials are filed with or furnished to the SEC or at www.sec.gov.
Available Information We file annual, quarterly and current reports and other documents with the Securities and Exchange Commission (“SEC”) that are publicly available free of charge on the Investor Relations section of our website at https://ir.blackriflecoffee.com as soon as reasonably practicable after these materials are filed with or furnished to the SEC or at www.sec.gov.
Today, Black Rifle Coffee operates out of facilities and offices in Salt Lake City, Utah; Manchester, Tennessee; and San Antonio, Texas, and offers over 20 varieties of roasted whole bean and ground coffee, plus our RTD, single-serve, and instant coffee. Our historical performance reflects the scale and growth of our Company.
Today, Black Rifle Coffee operates out of facilities and offices in Salt Lake City, Utah; Manchester, Tennessee; and San Antonio, Texas, and offers over 20 varieties of roasted whole bean and ground coffee, in addition to our RTD, single-serve, and instant coffee. Our historical performance reflects the scale and growth of our Company.
Our DTC platform has been the core of our business from day one starting with www.blackriflecoffee.com. It has enabled us to quickly become a large, recognizable, and fast-growing beverage brand in the United States, while also allowing us to better understand our consumers and their preferences.
Our DTC platform has been the core of our business from day one starting with www.blackriflecoffee.com. It has enabled us to quickly become a large, recognizable, and fast-growing beverage brand in the United States, while also allowing us to better understand our consumers and their preferences. Our Wholesale channel complements our DTC sales.
Quality control is also a critically important part of our manufacturing and supply chain operations. 68% of our bagged roasted coffee is roasted in-house and 100% is roasted in the United States. A licensed, Coffee Quality Institute-certified grader and former Green Beret leads cupping, grading, scoring, and sourcing of our coffees.
Quality control is also a critically important part of our manufacturing and supply chain operations. Our coffee beans are primarily roasted in-house and 100% is roasted in the United States. A licensed, Coffee Quality Institute-certified grader and former Green Beret leads cupping, grading, scoring, and sourcing of our coffees.
Risks Related to Regulation and Litigation for further information. Environmental We believe federal and state environmental regulations have not had a material effect on operations, but more stringent and varied requirements of local government bodies with respect to zoning land use and environmental factors could delay construction and increase development costs for new facilities.
Environmental We believe federal and state environmental regulations have not had a material effect on operations, but more stringent and varied requirements of local government bodies with respect to zoning land use and environmental factors could delay construction and increase development costs for new facilities.
At Black Rifle Coffee, we develop our roast profiles with the same mission focus we learned as military members serving our country. We produce creative and engaging, cause-related media content, in-house produced podcasts, and digital and print journalism in-house to inform, inspire, entertain, and build our community.
At Black Rifle Coffee, we develop our roast profiles with the same mission focus we learned as military members serving our country. We produce creative and engaging, cause-related media content to inform, inspire, entertain, and build our community.
Our company began with a simple premise — to provide a quality product while giving back to the 10 Table of Content s veteran, active military, and first responder communities through direct hiring, inspiring stories told through our media channels and charitable donations.
We began with a simple premise — to provide a quality product while giving back to the Veteran, active military, and first responder communities through direct hiring, inspiring stories told through our media channels 8 Table of Contents and charitable donations.
We are also subject to the Fair Labor Standards Act, the Immigration Reform and Control Act of 1986 and various federal and state laws governing such matters such as minimum wage, overtime, employment tax rates, workers compensation rates, citizenship requirements, and other working conditions. A significant number of our personnel are paid at rates related to the federal minimum wage.
We are also subject to the Fair Labor Standards Act, the Immigration Reform and Control Act of 1986 and various federal and state laws governing such matters such as minimum wage, overtime, employment tax rates, workers compensation rates, citizenship requirements, and other working conditions.
We offer a subscription service, our Coffee Club, through which DTC consumers can receive ground, whole bean, single serve, instant, or RTD coffee shipped to their home or office as frequently as every fourteen days. As of December 31, 2022, our Coffee Club subscribers have grown to 270,000 over the past five years.
We offer a subscription service, our Coffee Club, through which DTC consumers can receive ground, whole bean, single serve, or apparel shipped to their home or office as frequently as every fourteen days. Our Coffee Club subscribers have grown over the past five years to 225,800 as of December 31, 2023.
We are also subject to the Americans with Disabilities Act (“ADA”), which prohibits discrimination on the basis of a disability and public accommodations in employment, which may require us to design or modify our facilities to make reasonable accommodations for disabled persons. 13 Table of Content s See Item 1A. Risk Factors.
We are also subject to the Americans with Disabilities Act (“ADA”), which prohibits discrimination on the basis of a disability and public accommodations in employment, which may require us to design or modify our facilities to make reasonable accommodations for disabled persons. See Item 1A. Risk Factors. Risks Related to Regulation and Litigation for further information.
We also operate and franchise Outposts. We believe our Outposts redefine the typical coffee shop experience, offering consumers an immersive environment in which to enjoy a freshly brewed cup of high-quality coffee, stock up on Black Rifle Coffee merchandise and bagged coffee, and connect with members of the local community.
We believe our Outposts redefine the typical coffee shop experience, offering consumers an immersive environment in which to enjoy a freshly brewed cup of high-quality coffee, stock up on Black Rifle Coffee merchandise and bagged coffee, and connect with members of the local community. We opened our first Company-operated Outpost in 2020 in San Antonio, Texas.
We are veteran-controlled, and approximately 50% of our employees are veterans or veteran spouses. Our goal is to maintain our current level of veteran hires as we expand our operations and further develop our Outpost model. As of December 31, 2022, we employed 918 employees across locations in the United States.
We are Veteran-controlled, and approximately 42% of our employees are Veterans or military spouses. Our goal is to maintain our current level of Veteran hires as we expand our operations and further develop our omni-channel business model. As of December 31, 2023, we employed 630 employees across locations in the United States.
Our Outpost channel generated $22.9 million of sales for the year ended December 31, 2022, compared to $12.0 million over the corresponding period in 2021 representing an increase of 90.5%.
Our Outpost channel generated $27.3 million of sales for the year ended December 31, 2023, compared to $22.9 million over the corresponding period in 2022 representing an increase of 19.2%.
Our most important trademark might be our “BRCC” logo, which immediately identifies the brand. We believe that the Black Rifle Coffee Company name and all of its associated marks are of significant value and importance to our business.
Our most important trademark might be our “BRCC” logo, which immediately identifies the brand. We believe that the Black Rifle Coffee Company name and all of its associated marks are of significant value and importance to our business. As a general policy, we pursue registration and monitor the use of our marks in the United States and challenge unauthorized users.
We also sell coffee, apparel, and gear online for individual purchase on a non-subscription basis. Our DTC channel generated $159.0 million of sales for the year ended December 31, 2022, compared to $165.3 million over the corresponding period in 2021, representing a decrease of 3.8%. More than 72% of our 2022 DTC channel revenue came from recurring subscriptions.
We also sell coffee, apparel, instant and RTD coffee, and gear online for individual purchase on a non-subscription basis. Our DTC channel generated $143.2 million of sales for the year ended December 31, 2023, compared to $159.0 million over the corresponding period in 2022, representing a decrease of 9.9%.
To meet the increasing popularity of our RTD, rounds, and bagged coffee, we rely on co-manufacturers to provide us with a portion of our production capacity. Maintaining these relationships enable us to quickly scale the production of our products to meet consumer demands.
Our Outpost channel includes revenue from our Company-operated and franchised Black Rifle Coffee retail coffee shop locations. To meet the increasing popularity of our RTD, rounds, and bagged coffee, we rely on co-manufacturers to provide us with a portion of our production capacity. Maintaining these relationships enables us to quickly scale the production of our products to meet consumer demands.
We have also expanded our Wholesale channel by adding a number of partnership programs, including partnerships with social media influencers and sports teams. Select influencers who partner with us to promote our products are awarded equity in our Company. In July, 2022, we announced a partnership with the Dallas Cowboys that includes product placement at AT&T Stadium.
We also continue to expand by adding a number of partnership programs, including partnerships with social media influencers and sports teams. In July 2022, we announced a partnership with the Dallas Cowboys that includes product placement at AT&T Stadium and in February 2024, we announced a three-year marketing partnership with UFC.
We opened our first 11 Table of Content s Company-operated Outpost in 2020 in San Antonio, Texas. We are in the early stages of our nationwide growth, with twenty-six Outposts, of which fifteen were company-operated and eleven were franchised open across eight states, including Texas, Utah, Arizona, Tennessee, Georgia, Oklahoma, Florida and Virginia as of December 31, 2022.
We are in the early stages of our nationwide growth, with thirty-six Outposts, of which eighteen were Company-operated and eighteen were franchised across ten states, including Texas, Utah, Tennessee, Georgia, Virginia, Arizona, Oklahoma, Florida, South Carolina, and Louisiana as of December 31, 2023.
Employee Wellness 12 Table of Content s We promote health, wellness, and safety through a variety of means which include, but are not limited to, onsite employee training modules, external support such as employee assistance programs and crisis counseling, and universal escalation procedures as it pertains to safety protocols.
We will continue to focus on hiring Veterans and first responders and training our employees to provide the authentic Black Rifle Coffee Company experience in our Outpost locations. 10 Table of Contents Employee Wellness We promote health, wellness, and safety through a variety of means which include, but are not limited to, onsite employee training modules, external support such as employee assistance programs and crisis counseling, and universal escalation procedures as it pertains to safety protocols.
Government Regulations We are subject to extensive federal, state, and local government regulation, including those relating to, among others, public health and safety, nutritional content labeling and disclosure requirements, food safety regulations, zoning and fire codes, and franchising. Failure to obtain or retain licenses and registrations or exemptions would adversely affect the operation of our Outposts and other properties.
Government Regulations We are subject to extensive federal, state, and local government regulation, including those relating to, among others, public health and safety, food labeling and advertising, food safety and manufacturing, zoning and fire codes, and franchising. Failure to comply with these regulations would adversely affect our activities manufacturing and selling food.
Evan Hafer founded the Company in 2014 with a one-pound roaster in his garage, roasting, packaging, and shipping bagged coffee direct to consumers.
Our Business Black Rifle Coffee Company is a rapidly growing Veteran-controlled and led, coffee and media company that operates through three channels: Wholesale, DTC, and our Outposts. Evan Hafer founded the Company in 2014 with a one-pound roaster in his garage, roasting, packaging, and shipping bagged coffee direct to consumers.
Every day we work to inspire our customers; we take pride in the coffee we roast, the veterans we employ and the causes we support. We give back to the community and are committed to support those who serve. Our “Entertain” marketing strategy drives brand excitement, along with valuable customer insights and data.
Every day we work to inspire our customers; we take pride in the coffee we roast, the Veterans we employ and the causes we support. We give back to the community and are committed to support those who serve. To support our premium quality product, we own one roasting facility focused on large and small batch roasting.
These agreements typically restrict third parties’ activities with respect to use of the marks and impose brand standards requirements. We require licensees to inform us of any potential infringement of the marks. We register some of our copyrighted material and otherwise rely on common law protection of our copyrighted works. Such copyrighted materials are not material to our business.
We license the use of our marks to franchise partners, third-party vendors, and others through franchise agreements, vendor agreements, and licensing agreements. These agreements typically restrict third parties’ activities with respect to use of the marks and impose brand standards requirements. We require licensees to inform us of any potential infringement of the marks.
As a business founded and led by combat veterans of the Global War on Terror, we are mission-driven: everything we do, every decision we make, is in service of our mission. It begins with our people. At Black Rifle Coffee, our goal is to hire veterans and be the employer of choice for individuals seeking a post-military career.
As a business founded and led by combat Veterans of the Global War on Terror, we are mission-driven: everything we do, every decision we make, is in service of our mission which is intrinsically entwined with growth and maintenance of shareholder value.
We also sell RTD coffee in leading convenience, grocery, FDM merchandise retailers, including Casey’s General Store, Circle K, Kum & Go, Speedway, 7-Eleven, Publix, HEB, Walmart, and Sam’s Club. Our Wholesale channel generated $119.4 million of sales for the year ended December 31, 2022, compared to $55.8 million over the corresponding period in 2021, representing an increase of 114.1%.
In our Wholesale channel, we sell packaged coffee at Walmart and FDM and RTD coffee in leading convenience, grocery, and FDM merchandise retailers including Casey’s General Store, Circle K, Kum & Go, Speedway, 7-Eleven, Publix, HEB, Walmart, and Sam’s Club.
Our Ready-To-Drink line continues to be the fastest growing single serve RTD coffee across all channels of trade. Our entry into the Food, Drug and Mass (“FDM”) market in collaboration with Walmart unlocks significant incremental opportunity to build brand awareness and ensures customers can purchase our products in more places where they shop.
Our entry into the Food, Drug and Mass (“FDM”) market in collaboration with Walmart unlocks significant incremental opportunity to build brand awareness and ensures customers can purchase our products in more places where they shop. We are a digitally native brand with an established omnichannel business model, reaching our customers through one reportable segment that is comprised of three channels.
Revenue increased to $301.3 million for the year ended December 31, 2022, from $233.1 million for the year ended December 31, 2021, and from $163.9 million for the year ended December 31, 2020, representing growth of 29.3% and 42.2% respectively. Growth in 2022 was primarily driven by expansion of our customer base, increasing Wholesale doors, and new Outpost openings.
Revenue increased to $395.6 million for the year ended December 31, 2023, from $301.3 million for the year ended December 31, 2022, and from $233.1 million for the year ended December 31, 2021, representing growth of 31.3% and 29.3%, respectively.
Our Wholesale channel complements our DTC sales. In our Wholesale channel, we sell coffee, apparel, and gear through leading outdoor, DIY, and lifestyle retailers, including Bass Pro Shops, Scheels, and Ace Hardware, as well as specialty retailers.
We also sell coffee, apparel, and gear through leading outdoor, DIY, and lifestyle retailers, including Bass Pro Shops, Scheels, and Ace Hardware, as well as other specialty retailers. Our Wholesale channel generated $225.1 million of sales for the year ended December 31, 2023, compared to $119.4 million over the corresponding period in 2022, representing an increase of 88.6%.
We also sell Black Rifle Coffee-brand apparel, coffee brewing equipment, and outdoor and lifestyle gear that our consumers proudly wear and use to showcase our brand. Merchandise and equipment sales as a percentage of revenue accounted for approximately 9.0% of DTC revenues for the years ended December 31, 2022 and 2021.
We also sell Black Rifle Coffee-brand apparel, coffee brewing equipment, and outdoor and lifestyle gear that our consumers proudly wear and use to showcase our brand. At the heart of everything we do is our commitment to supporting active duty military, Veterans, first responders, and those who love America.
Of the 918 employees, 68 are focused on production, 479 are in marketing, operations or other administrative roles, and 371 are in roles at Outposts. In addition, we employ part-time and seasonal workers. We will continue to focus on hiring veterans and training our employees to provide the authentic Black Rifle Coffee Company experience in our Outpost locations.
Of the 630 employees, 19 are focused in manufacturing, 345 are in corporate or other administrative roles, and 266 are in roles at Outposts. In addition, we employ part-time and seasonal workers.
We own two roasting facilities, one fo cused on large batch roasting and the other on small batch roasting. The coffee beans are primarily roasted in-house in the United States to ensure consistency and quality of product. Our coffee beans have an 83-point grade or higher and are sourced only from high quality suppliers.
Our coffee beans are primarily roasted in-house and 100% in the United States to ensure consistency and quality of product. Our coffee beans are sourced only from the highest quality suppliers. Our state-of-the-art equipment guarantees freshness and offers significant capacity for expansion. We continue to experience strong revenue growth.
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Company Overview Black Rifle Coffee Company is a veteran-controlled company that through its subsidiaries serves premium coffee, content and merchandise to active military, veterans, first responders, and those who love America. Our mission-driven brand is devoted to cause-related content that informs, inspires, entertains, and builds our community.
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Company Overview Black Rifle Coffee Company is a rapidly growing Veteran-controlled and led coffee and media company that operates through three channels: Wholesale, Direct to Consumer, and our Outposts.
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We are committed to producing great coffee that consumers love, and high-quality merchandise that enables our community to showcase our brand. By consistently delivering exceptional products and content, we have built and retained a strong following of loyal customers throughout the United States.
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Our business started with a loyal and quickly expanding community of consumers through our DTC channel and we now have more than 225,800 active Coffee Club subscribers as of December 31, 2023. We are now experiencing rapid growth in our Wholesale channel as we have continued our expansion into grocery stores, specialty stores, and other intermediaries.
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Our owned roasting facilities offer significant capacity for expansion and allow us to provide our customers with a fresh product. We have experienced strong revenue growth since inception.
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We have also experienced growth in our Outpost channel as we opened additional company owned stores and franchises in 2023. At Black Rifle Coffee, we develop our roast profiles with the same mission focus we learned as military members serving our country. We produce creative and engaging cause-related media content to inform, inspire, entertain, and build our community.
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We expect our entry into the FDM market will contribute significant incremental growth, revenue and brand awareness. We are a digitally native brand that operates as one reportable segment. Our omnichannel distribution strategy has three key components: Direct to Consumer, Wholesale, and Outposts.
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Growth in 2023 was primarily driven by expansion of our customer base, which was primarily due to increasing points of distribution in Wholesale, and new Outpost openings.
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Wholesale channel sales comprise a broad array of our products, including our roasted bagged coffees and k-cups, our merchandise, and our RTD products. Our Wholesale customers include the FDM customer set, such as Walmart; specialty retail, such as Bass Pro; and convenience stores which primarily sell our RTD products, such as 7-Eleven.
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BRCC was founded with a commitment to give back, which guided our decision to convert into a public benefit corporation.
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Our Outpost channel includes revenue from our Company-operated and franchised Black Rifle Coffee retail coffee shop locations. Revenue is driven primarily by our DTC channel which contributed to approximately 52.8%, 70.9% and 84.0% of our total revenue in 2022, 2021 and 2020, respectively.
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Unlike a traditional corporation, which focuses upon maximizing shareholder value above all else, a public benefit corporation balances the shareholder interests for profit, against both the intended public benefit purpose, and the interests of any stakeholders that are materially affected by the corporation’s conduct (i.e. employees, customers, and suppliers).
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We aim to not just hire veterans, but also inspire veterans to become entrepreneurs and highlight for other businesses the benefits of hiring veterans. Today, veterans and veteran spouses comprise approximately half of our total employee base of over 900 people, including part-time and seasonal workers.
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At BRCC, our public benefit purpose is to support the underserved active military, Veteran and first-responder communities.
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Black Rifle Coffee donated over $1.6 million of coffee to military and first responder units and through our affiliated 501(c)(3) non profit corporation, (“BRCC Fund”), we donated over $1.8 million in other donations to charitable organizations in 2022.
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In order to support such a broad public benefit purpose, we established several objectives: create meaningful post-service career opportunities for Veterans, first responders and their families; donate resources to charities that support the needs of active military, Veterans, and first-responders; donate to charities focusing on mental health issues in the Veteran community; inspire Veterans to become entrepreneurs through various programs and donations; and provide quality products and media relating to these communities.
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Additionally, certain legacy holders of SilverBox Engaged Merger Corp I, a Delaware corporation ("SilverBox") and Authentic Brands, LLC, a Delaware limited liability company through which the Company conducts its business donated over 530,000 shares of Class A Common Stock to the BRCC Fund in 2022.
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A large part of Black Rifle Coffee’s success is due to the outstanding work ethic and discipline of our Veteran employees. As a Veteran-founded and Veteran-controlled company, we are committed to hiring Veterans and military spouses. We strive to provide opportunities to the military community that helped build us.
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The BRCC Fund focuses on veteran-related causes important to the Company, including education and job training for veterans and scholarships for family members of veterans killed or wounded in action. Our mission-driven approach and brand values resonate with our consumers and allowed us to build a growing Black Rifle Coffee community.
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This objective is intended to help other service-members successfully transition from the military into private industry and in turn, contributes to a strong and cohesive culture at Black Rifle Coffee Company dedicated to our people. Our aim is to have half of our new hires be Veterans and military spouses as we continue to expand our operations.
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According to a Company survey, the top three reasons that customers purchase from Black Rifle Coffee are due to our support for the military and veterans, our great tasting coffee, and our brand’s alignment with their values. Our community is broad and reaches a diverse audience across geographies and demographics.
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Our corporate giving is bolstered by our ability to donate directly to charities aligned with our public benefit purpose, coupled with our ability to donate directly from The BRCC Fund to individuals and other organizations. The BRCC Fund is our 501(c)(3) nonprofit organization and its focus is on Veteran-related causes important to Black Rifle Coffee.
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Our Business BRCC is a rapidly growing, veteran-controlled and led coffee and media company with a loyal and quickly expanding community of mor e than 2 mil lion consumers through our DTC channel since inception, more than 270,000 active Coffee Club subscribers, and 13.1 million social media followers across Black Rifle Coffee’s, co-founders’, and key media personalities’ accounts as of December 31, 2022.
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We also sell BRCC-brand apparel, coffee brewing equipment, and outdoor and lifestyle gear that our consumers proudly wear and use to showcase our brand. At the heart of everything we do is commitment to supporting active-duty military, Veterans, first responders, and those who love America.
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As a general policy, we pursue registration and monitor the use of our marks in the United States and challenge any unauthorized use. We license the use of our marks to franchise partners, third-party vendors, and others through franchise agreements, vendor agreements, and licensing agreements.
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More than 60% of our 2023 DTC channel revenue came from recurring subscriptions. 9 Table of Contents We also operate and franchise Outposts.
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We own a variety of copyrighted materials, chiefly in the form of original artwork presented on our bagged coffee. We rely on the protection of the United States Copyright Act for the protection of our copyrighted works, and challenge unauthorized users both within and outside of the U.S.
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Failure to obtain or retain licenses and registrations or exemptions would adversely affect the operation of our Outposts and other properties.
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A significant number of our personnel are paid 11 Table of Contents at rates related to the federal minimum wage.

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeIf our information technology networks and systems or data processing suffers damage, security breaches, vulnerabilities, disruption or shutdown, and we do not effectively resolve the issues in a timely manner, they could cause a material adverse impact to, our Business Functions and our business, reputation and financial condition. 24 Table of Content s An actual or perceived breach of our security systems or those of our third party service providers may require notification under applicable data privacy regulations or for customer relations or publicity purposes, which could result in reputational harm, costly litigation (including class action litigation), material contract breaches, liability, settlement costs, loss of sales, regulatory scrutiny, actions or investigations, a loss of confidence in our business, systems and Processing, a diversion of management’s time and attention, and significant fines, penalties, assessments, fees, and expenses.
Biggest changeAn actual or perceived incident affecting of our security systems or those of our third party service providers may require notification under applicable data privacy regulations or for customer relations or publicity purposes, which could result in reputational harm, costly litigation (including class action litigation), material contract breaches, liability, settlement costs, loss of sales, regulatory scrutiny, actions or investigations, a loss of confidence in our business, systems and Processing, a diversion of management’s time and attention, and significant fines, penalties, assessments, fees, and expenses.
As part of our long-term strategy, we intend to grow our market share and revenue through various initiatives, including, but not limited to: continued growth of our direct to consumer sales through online channels; growth of our RTD and Wholesale channel including expansion of distribution channels, velocity growth, and product innovation; and growth of our Outpost business including opening new Company-operated and franchised Outposts, driving sales growth at existing Outpost locations, and developing new digital platforms such as digital ordering and loyalty programs for customers at our Outpost locations.
As part of our long-term strategy, we intend to grow our market share and revenue through various initiatives, including, but not limited to: continued growth of our direct to consumer sales through online channels; growth of our Wholesale and RTD channel including expansion of distribution channels, velocity growth, and product innovation; and growth of our Outpost business including opening new Company-operated and franchised Outposts, driving sales growth at existing Outpost locations, and developing new digital platforms such as digital ordering and loyalty programs for customers at our Outpost locations.
To effectively manage and capitalize on our growth, we must continue to expand our sales and marketing, focus on innovative product and content development, upgrade our management information systems and other processes, and continue to hire and retain employees.
To effectively manage and capitalize on our growth, we must continue to expand our sales and marketing, focus on innovative product and content development, upgrade our information management systems and other processes, and continue to hire and retain employees.
If we fail to offer high-quality customer experience, our business and reputation will suffer. Numerous factors may impact a customer’s experience which may in turn impact the likelihood of such customer returning. Those factors include customer service, convenience, taste, price, quality, location of our Outposts, and brand image.
If we fail to offer a high-quality customer experience, our business and reputation will suffer. Numerous factors may impact a customer’s experience which may in turn impact the likelihood of such customer returning. Those factors include customer service, convenience, taste, price, quality, location of our Outposts, and brand image.
We purchase, roast and sell high-quality whole bean coffee beans and related coffee products. The high-quality coffee of the quality we seek tends to trade on a negotiated basis at a premium above the “C” price. This premium depends upon the supply and demand at the time of purchase and the amount of the premium can vary significantly.
We purchase, roast and sell high-quality whole bean coffee beans and related coffee products. The high-quality coffee we seek tends to trade on a negotiated basis at a premium above the “C” price. This premium depends upon the supply and demand at the time of purchase and the amount of the premium can vary significantly.
Unless waived by the Agent under the Tax Receivable Agreement, where applicable, the Tax Receivable Agreement provides that if certain mergers, asset sales, other forms of business combination, or other changes of control were to occur, if we were to breach any of its material obligations under the Tax Receivable Agreement, if certain events relating to bankruptcy, insolvency or similar proceedings with respect to us were to occur, or if, at any time, we elect an early termination of the Tax Receivable Agreement (with the consent of a majority of its disinterested directors and of the Agent under the Tax Receivable Agreement), then the Tax Receivable Agreement will terminate and its obligations, or its successor’s obligations, to make future payments under the Tax Receivable Agreement would accelerate and become due and payable in a lump-sum amount representing the present value of all forecasted future payments that would have otherwise been made under the Tax Receivable Agreement.
Unless waived by the Agent under the TRA, where applicable, the TRA provides that if certain mergers, asset sales, other forms of business combination, or other changes of control were to occur, if we were to breach any of its material obligations under the TRA, if certain events relating to bankruptcy, insolvency or similar proceedings with respect to us were to occur, or if, at any time, we elect an early termination of the TRA (with the consent of a majority of its disinterested directors and of the Agent under the TRA), then the TRA will terminate and its obligations, or its successor’s obligations, to make future payments under the Tax Receivable Agreement would accelerate and become due and payable in a lump-sum amount representing the present value of all forecasted future payments that would have otherwise been made under the TRA.
Data Protection Laws are, and are likely to remain, uncertain for the foreseeable future, and our actual or perceived failure to address or comply with these laws could: increase our compliance and operational costs; limit our ability to market our products or services and attract new and retain current customers; limit or eliminate our ability to Process; expose us to regulatory scrutiny, actions, investigations, fines, and penalties; result in reputational harm; lead to a loss of customers; reduce the use of our products or services; result in litigation and liability, including class action litigation; cause us to incur significant costs, expenses, and fees (including attorney fees); cause a material adverse impact to business operations or financial results; and otherwise result in other material harm to our business (“Adverse Data Protection Impact”).
Changes in Data Protection Laws are, and are likely to remain, uncertain for the foreseeable future, and our actual or perceived failure to address or comply with these laws could: increase our compliance and operational costs; limit our ability to market our products or services and attract new and retain current customers; limit or eliminate our ability to Process; expose us to regulatory scrutiny, actions, investigations, fines, and penalties; result in reputational harm; lead to a loss of customers; reduce the use of our products or services; result in litigation and liability, including class action litigation; cause us to incur significant costs, expenses, and fees (including attorney fees); cause a material adverse impact to business operations or financial results; and otherwise result in other material harm to our business (“Adverse Data Protection Impact”).
Among other things, the Charter and Bylaws include provisions regarding: • a classified board of directors with three-year staggered terms, which could delay the ability of stockholders to change the membership of a majority of our Board; • the ability of our Board to issue shares of preferred stock, including “blank check” preferred stock and to determine the price and other terms of those shares, including preferences and voting rights, without stockholder approval, which could be used to significantly dilute the ownership of a hostile acquirer; • the limitation of the liability of, and the indemnification of, our directors and officers; • the right of our Board to elect a director to fill a vacancy created by the expansion of our Board or the resignation, death or removal of a director, which prevents stockholders from being able to fill vacancies on our Board; • the requirement that directors may only be removed from our Board for cause, upon the affirmative vote of the holders of at least 66-2/3% of the voting power of all of then outstanding shares of the voting stock, voting together as a single class; • the requirement that a special meeting of stockholders may be called only by our Board, the chairman of our Board or our chief executive officer, which could delay the ability of stockholders to force consideration of a proposal or to take action, including the removal of directors; • controlling the procedures for the conduct and scheduling of our Board and stockholder meetings; • the requirement for the affirmative vote of holders of (i) (a) at least 66-2/3%, in case of certain provisions or (b) a majority, in case of other provisions, of the voting power of all of then outstanding shares of the voting stock, voting together as a single class, to amend, alter, change or repeal certain provisions of the Charter; and (ii) (a) at least 66-2/3%, in case of certain provisions, or (b) a majority, in case of other provisions, of the voting power of all of then outstanding shares of the voting stock, voting together as a single class, to amend, alter, change or repeal certain provisions of the Bylaws, which could preclude stockholders from bringing matters before annual or special meetings of stockholders and delay changes in our Board and also may inhibit the ability of an acquirer to effect such amendments to facilitate an unsolicited takeover attempt; • the ability of our Board to amend the Bylaws, which may allow our Board to take additional actions to prevent an unsolicited takeover and inhibit the ability of an acquirer to amend the Bylaws to facilitate an unsolicited takeover attempt; and • advance notice procedures with which stockholders must comply to nominate candidates to our Board or to propose matters to be acted upon at a stockholders’ meeting, which could preclude stockholders from bringing matters before annual or special meetings of stockholders and delay changes in our Board and also may discourage or deter a potential acquirer from conducting a solicitation of proxies to elect the acquirer’s own slate of directors or otherwise attempting to obtain control of the Company.
Among other things, the Charter and Bylaws include provisions regarding: • a classified board of directors with three-year staggered terms, which could delay the ability of stockholders to change the membership of a majority of our Board; • the ability of our Board to issue shares of preferred stock, including “blank check” preferred stock and to determine the price and other terms of those shares, including preferences and voting rights, without stockholder approval, which could be used to significantly dilute the ownership of a hostile acquirer; • the limitation of the liability of, and the indemnification of, our directors and officers; • the right of our Board to elect a director to fill a vacancy created by the expansion of our Board or the resignation, death or removal of a director, which prevents stockholders from being able to fill vacancies on our Board; • the requirement that directors may only be removed from our Board for cause, upon the affirmative vote of the holders of at least 66-2/3% of the voting power of all of then outstanding shares of the voting stock, voting together as a single class; • the requirement that a special meeting of stockholders may be called only by our Board, the chairman of our Board or our chief executive officer, which could delay the ability of stockholders to force consideration of a proposal or to take action, including the removal of directors; • controlling the procedures for the conduct and scheduling of our Board and stockholder meetings; • the requirement for the affirmative vote of holders of (i) (a) at least 66-2/3%, in case of certain provisions or (b) a majority, in case of other provisions, of the voting power of all of then outstanding shares of the voting stock, voting together as a single class, to amend, alter, change or repeal certain provisions of the Charter; and (ii) (a) at least 66-2/3%, in case of certain provisions, or (b) a majority, in case of other provisions, of the voting power of all of then outstanding shares of the voting stock, voting together as a single class, to amend, alter, change or repeal certain provisions of the Bylaws, which could preclude stockholders from bringing matters before annual or 40 Table of Contents special meetings of stockholders and delay changes in our Board and also may inhibit the ability of an acquirer to effect such amendments to facilitate an unsolicited takeover attempt; • the ability of our Board to amend the Bylaws, which may allow our Board to take additional actions to prevent an unsolicited takeover and inhibit the ability of an acquirer to amend the Bylaws to facilitate an unsolicited takeover attempt; and • advance notice procedures with which stockholders must comply to nominate candidates to our Board or to propose matters to be acted upon at a stockholders’ meeting, which could preclude stockholders from bringing matters before annual or special meetings of stockholders and delay changes in our Board and also may discourage or deter a potential acquirer from conducting a solicitation of proxies to elect the acquirer’s own slate of directors or otherwise attempting to obtain control of the Company.
We believe there are a limited number of high-quality co-manufacturers that can meet our pricing requirements and quality control standards. As we seek to obtain additional or alternative co-manufacturing arrangements in the future, there can be no assurance that we would be able to do so on satisfactory terms, in a timely manner, or at all.
We believe there are a limited number of high-quality co-manufacturers and suppliers that can meet our pricing requirements and quality control standards. As we seek to obtain additional or alternative co-manufacturing arrangements in the future, there can be no assurance that we would be able to do so on satisfactory terms, in a timely manner, or at all.
If we are not able to provide this report in a timely or at all, or if the report is not viewed favorably by parties doing business with us or regulators or others reviewing our credentials, our reputation and status as a public benefit corporation may be harmed and the value of our stock could decrease as a result.
If we are not able to provide this report in a timely manner or at all, or if the report is not viewed favorably by parties doing business with us or regulators or others reviewing our credentials, our reputation and status as a public benefit corporation may be harmed and the value of our stock could decrease as a result.
Our co-manufacturers have been integral in the development of these products, and we have recently in-housed the sales and marketing efforts concerning these products. Failure by us to maintain our relationship with these co-manufacturers or failure to successfully in-house our sales and marketing efforts for these products could adversely affect our operating results.
Our co-manufacturers have been integral in the development of our products, and we have recently in-housed the sales and marketing efforts concerning RTD products. Failure by us to maintain our relationship with our co-manufacturers or failure to successfully in-house our sales and marketing efforts for these products could adversely affect our operating results.
Disruptions at the regional bank in which we deposit our funds could have an adverse impact on our business and financial condition. We hold substantially all of our deposits with a single regional bank and the bank also serves as the lender under our senior credit facility.
Disruptions at the bank in which we deposit our funds could have an adverse impact on our business and financial condition. We hold substantially all of our deposits with a single bank and the bank also serves as the lender under our senior credit facility.
We and our franchise partners are subject to extensive government regulations that could result in claims leading to increased costs and restrict our ability to operate franchises. We and our franchise partners are subject to extensive government regulation at the federal, state, and local government levels, including by the FTC and FDA.
We and our franchise partners are subject to extensive government regulations that could result in claims leading to increased costs and restrict our ability to operate franchises. We and our franchise partners are subject to extensive government regulation at the federal, state, and local government levels, including by the FTC, FDA, and state authorities.
The CCPA, which among other things, establishes a privacy framework for covered businesses, including an expansive definition of personal data and data privacy rights. The CCPA provides individual privacy rights for California residents and places increased privacy and security obligations on covered businesses processing personal data.
The CCPA, among other things, establishes a privacy framework for covered businesses, including an expansive definition of personal data and data privacy rights. The CCPA provides individual privacy rights for California residents and places increased privacy and security obligations on covered businesses Processing personal data.
Generally accepted accounting principles in the United States (“GAAP”) are subject to interpretation by the Financial Accounting Standards Board, the American Institute of Certified Public Accountants, the SEC, and various bodies formed to promulgate and interpret appropriate accounting principles.
Generally accepted accounting principles in the United States (“GAAP”) are subject to interpretation by the Financial Accounting Standards Board (”FASB”), the American Institute of Certified Public Accountants, the SEC, and various bodies formed to promulgate and interpret appropriate accounting principles.
Our success depends partly upon the continued services of our founder and co-founders, chief executive officer and co-chief executive officer, and other executive officers. We rely on our leadership team in the areas of marketing, sales, customer experience, and administration.
Our success depends partly upon the continued services of our founder and executive chairman, co-founders, chief executive officer, and other executive officers. We rely on our leadership team in the areas of marketing, sales, customer experience, and administration.
The Charter provides that, unless we consent in writing to the selection of an alternative forum, (i) any derivative action or proceeding brought on behalf of the Company, (ii) any action asserting a claim of breach of a fiduciary duty owed by any of our current or former directors, officers, other employees, agents or stockholders to the Company or our stockholders, or any claim for aiding and abetting such alleged breach, (iii) any action asserting a claim against the Company or any of our current or former directors, officers, other employees, agents or stockholders (a) arising pursuant to 40 Table of Content s any provision of the DGCL, the Charter (as it may be amended or restated) or the Bylaws or (b) as to which the DGCL confers jurisdiction on the Delaware Court of Chancery or (iv) any action asserting a claim against the Company or any of our current or former directors, officers, other employees, agents or stockholders governed by the internal affairs doctrine of the law of the State of Delaware shall, as to any action in the foregoing clauses (i) through (iv), to the fullest extent permitted by law, be solely and exclusively brought in the Delaware Court of Chancery; provided, however, that the foregoing shall not apply to any claim (a) as to which the Delaware Court of Chancery determines that there is an indispensable party not subject to the jurisdiction of the Delaware Court of Chancery (and the indispensable party does not consent to the personal jurisdiction of the Court of Chancery within ten days following such determination), (b) which is vested in the exclusive jurisdiction of a court or forum other than the Delaware Court of Chancery, or (c) arising under federal securities laws, including the Securities Act as to which the federal district courts of the United States of America shall, to the fullest extent permitted by law, be the sole and exclusive forum.
The Charter provides that, unless we consent in writing to the selection of an alternative forum, (i) any derivative action or proceeding brought on behalf of the Company, (ii) any action asserting a claim of breach of a fiduciary duty owed by any of our current or former directors, officers, other employees, agents or stockholders to the Company or our stockholders, or any claim for aiding and abetting such alleged breach, (iii) any action asserting a claim against the Company or any of our current or former directors, officers, other employees, agents or stockholders (a) arising pursuant to any provision of the DGCL, the Charter (as it may be amended or restated) or the Bylaws or (b) as to which the DGCL confers jurisdiction on the Delaware Court of Chancery or (iv) any action asserting a claim against the Company or any of our current or former directors, officers, other employees, agents or stockholders governed by the internal affairs doctrine of the law of the State of Delaware shall, as to any action in the foregoing clauses (i) through (iv), to the fullest extent permitted by law, be solely and exclusively brought in the Delaware Court of Chancery; provided, however, that the foregoing shall not apply to any claim (a) as to which the Delaware Court of Chancery determines that there is an indispensable party not subject to the jurisdiction of the Delaware Court of Chancery (and the indispensable party does not consent to the personal jurisdiction of the Court of Chancery within ten days following such determination), (b) which is vested in the exclusive jurisdiction of a court or forum other than the Delaware Court of Chancery, or (c) arising under federal securities laws, including the Securities Act as to which the federal district courts of the United States of America shall, to the fullest extent permitted by law, be the sole and exclusive forum.
Our ability to open new Outposts is dependent upon a number of factors, many of which are beyond our control, including ou r and our franchise partners’ ability to: • identify available and suitable sites, specifically for drive-thru locations; • compete for such sites; • reach acceptable agreements regarding the lease of locations; • obtain or have available the financing required to acquire and operate an Outpost, including construction and opening costs, which includes access to build-to-suit leases and ground lease construction arrangements; • respond to unforeseen engineering or environmental problems with leased premises; • avoid the impact of inclement weather, natural disasters and other calamities; • hire, train and retain the skilled management and other employees necessary to meet staffing needs; 22 Table of Content s • obtain, in a timely manner and for an acceptable cost, required licenses, permits and regulatory approvals and respond effectively to any changes in local, state or federal law and regulations that adversely affect our and our franchise partners’ costs or ability to open new Outposts; and • control construction and equipment cost increases for new Outposts and secure the services of qualified contractors and subcontractors in an increasingly competitive environment.
Our ability to open new Outposts is dependent upon a number of factors, many of which are beyond our control, including ou r and our franchise partners’ ability to: • identify available and suitable sites, specifically for drive-thru locations; • compete for such sites; • reach acceptable agreements regarding the lease of locations; • obtain or have available the financing required to acquire and operate an Outpost, including construction and opening costs, which includes access to build-to-suit leases and ground lease construction arrangements; • respond to unforeseen engineering or environmental problems with leased premises; • avoid the impact of inclement weather, natural disasters and other calamities; • hire, train and retain the skilled management and other employees necessary to meet staffing needs; • obtain, in a timely manner and for an acceptable cost, required licenses, permits and regulatory approvals and respond effectively to any changes in local, state or federal law and regulations that adversely affect our and our franchise partners’ costs or ability to open new Outposts; and • control construction and equipment cost increases for new Outposts and secure the services of qualified contractors and subcontractors in an increasingly competitive environment.
Our actual or perceived failure to comply with Data Protection Laws, Privacy Policies, and Data Protection Obligations could also subject us to litigation, claims, proceedings, actions, or investigations by governmental entities, authorities, or regulators, which could result in an Adverse Data Protection Impact, including required changes to our business practices, the diversion of resources and the attention of management from our business, regulatory oversights and audits, discontinuance of necessary Processing, or other remedies that adversely affect our business.
Our actual or perceived failure to comply with Data Protection Laws, Privacy Policies, and Data Protection Obligations could also subject us to litigation, claims, proceedings, actions, or investigations by governmental entities, authorities, or regulators, which could result in an Adverse Data Protection Impact, including required changes to our business practices, the diversion of resources and the attention of management from our business, regulatory oversights and audits, discontinuance of strategic Processing, or other remedies that adversely affect our business.
Our franchise partners may from time to time disagree with us and our strategies and objectives regarding the business or our interpretation of our respective rights and obligations under the franchise agreement and the terms and conditions of the franchise partner relationship.
Our franchise partners may and do, from time to time disagree with us and our strategies and objectives regarding the business or our interpretation of our respective rights and obligations under the franchise agreement and the terms and conditions of the franchise partner relationship.
Any one or more of the factors listed below or described elsewhere in this section could harm our business: • fluctuations in the cost and availability of real estate, labor, raw materials, equipment, shipping; • pricing pressure; 21 Table of Content s • consumer preferences, including those described above; • money available to consumers for discretionary purchases, which may be affected by job losses, inflation, higher taxes, changes in federal economic policy, or other macroeconomic or political factors; • severe weather or other natural or man-made disasters affecting a large market or several closely located markets that may temporarily but significantly affect our business in such markets; • especially in our large markets, labor discord or disruption, geopolitical events, social unrest, war, terrorism, political instability, acts of public violence, boycotts, hostilities and social unrest and other health pandemics that lead to avoidance of public places or cause people to stay at home; and • adverse outcomes of litigation.
Any one or more of the factors listed below or described elsewhere in this section could harm our business: • fluctuations in the cost and availability of real estate, labor, raw materials, equipment, shipping; • pricing pressure; • consumer preferences, including those described above; • money available to consumers for discretionary purchases, which may be affected by job losses, inflation, higher taxes, changes in federal economic policy, or other macroeconomic or political factors; • severe weather or other natural or man-made disasters affecting a large market or several closely located markets that may temporarily but significantly affect our business in such markets; • especially in our large markets, labor discord or disruption, geopolitical events, social unrest, war, terrorism, political instability, acts of public violence, boycotts, hostilities and social unrest and other health pandemics that lead to avoidance of public places or cause people to stay at home; and • adverse outcomes of litigation.
Shop leases provide for a specified annual rent, with agreed increases (typically a 10.0% base rent increase per 5-year time period). Generally, our leases are “net” leases, which require us to pay all the cost of insurance, taxes, maintenance and utilities, which costs tend to increase each year. We generally cannot terminate these leases without incurring substantial costs.
Outpost leases provide for a specified annual rent, with agreed increases (typically a 10.0% base rent increase per 5-year time period). Generally, our leases are “net” leases, which require us to pay all the cost of insurance, taxes, maintenance and utilities, which costs tend to increase each year. We generally cannot terminate these leases without incurring substantial costs.
We have entered into certain forward purchase contracts for coffee beans, which include fixed price arrangements with set time periods for market-based increases. By entering into these commercial contracts, we attempt to mitigate the adverse effects of unexpected market-price increases. For example, we agreed to rates in 2022 that are lower than the current future prices of green coffee beans.
We have entered into certain forward purchase contracts for coffee beans, which include fixed price arrangements with set time periods for market-based increases. By entering into these commercial contracts, we attempt to mitigate the adverse effects of unexpected market-price increases. For example, we agreed to rates in 2023 that are lower than the current future prices of green coffee beans.
If an existing or future shop is not profitable, and we decide to close it, we may nonetheless be committed to perform our obligations under the applicable lease including, among other things, paying the base rent for the balance of the lease term, or until the lease is either assigned by us to a third party, or the site is relet by the landlord.
If an existing or future Outpost is not profitable, and we decide to close it, we may nonetheless be committed to perform our obligations under the applicable lease including, among other things, paying the base rent for the balance of the lease term, or until the lease is either assigned by us to a third party, or the site is relet by the landlord.
Our systems and technology are vulnerable to damage, disruption, or interruption from, among other things, physical damage, natural disasters, inadequate system capacity, system issues, security breaches, cyber-security attacks, computer viruses, power outages, and other failures or disruptions outside of our control. Furthermore, the information security and privacy requirements imposed by governmental regulation are increasingly demanding.
Our systems and technology may be vulnerable to damage, disruption, or interruption from, among other things, physical damage, natural disasters, inadequate system capacity, system issues, security breaches, cyber-security attacks, computer viruses, power outages, and other failures or disruptions outside of our control. Furthermore, the information security and privacy requirements imposed by governmental regulation are increasingly demanding.
There are numerous federal, state, and local laws, orders, codes, regulations, and regulatory guidance regarding privacy, information security, and processing (“Data Protection Laws”), the number and scope of which is changing, subject to differing applications and interpretations, and which may be inconsistent among jurisdictions, or in conflict with other rules, laws, or Data Protection Obligations (defined below).
There are numerous federal, state, and local laws, orders, codes, regulations, and regulatory guidance regarding privacy, information security, and Processing, the number and scope of which is changing, subject to differing applications and interpretations, and which may be inconsistent among jurisdictions, or in conflict with other rules, laws, or Data Protection Obligations (defined below).
Similar incidents or reports occurring at coffee and convenience shops unrelated to us could likewise create negative publicity, which could negatively impact consumer behavior towards us. Our products may also be subject to food recalls or other regulatory warnings promulgated by the U.S. Food and Drug Administration (“FDA”) or other regulatory bodies.
Similar incidents or reports occurring at coffee and convenience shops unrelated to us could likewise create negative publicity, which could negatively impact consumer behavior towards us. Our products may also be subject to food recalls or other regulatory warnings promulgated by the U.S. Food and Drug Administration (“FDA”), state regulatory authorities, or other regulatory bodies.
Pursuant to the Tax Receivable Agreement, we will be required to make cash payments to such Unitholders of Authentic Brands equal to 85% of the tax benefits, if any, that we actually realize, or, in some circumstances, are deemed to realize, as a result of (1) the increase in our wholly owned subsidiary’s proportionate share of the existing tax basis of the assets of Authentic Brands and an adjustment in the tax basis of the assets of Authentic Brands reflected in that proportionate share as a result of any future exchanges of Units held by the Unitholders of Authentic Brands for shares of our Class A common stock or cash, and (2) certain other tax benefits related to payments we make under the Tax Receivable Agreement.
Pursuant to the TRA, we will be required to make cash payments to such Unitholders of Authentic Brands equal to 85% of the tax benefits, if any, that we actually realize, or, in some circumstances, are deemed to realize, as a result of (1) the increase in our wholly owned subsidiary’s proportionate share of the existing tax basis of the assets of Authentic Brands and an adjustment in the tax basis of the assets of Authentic Brands reflected in that proportionate share as a result of any future exchanges of Units held by the Unitholders of Authentic Brands for shares of our Class A Common Stock or cash, and (2) certain other tax benefits related to payments we make under the TRA.
Incidents or reports, whether true or not, of food-borne or water-borne illness or other food safety issues, food contamination or tampering, employee hygiene and cleanliness failures, or improper employee conduct at our Outposts could lead to product liability or other claims. Such incidents or reports could negatively affect our brand and reputation as well as our business, revenue, and profits.
Incidents or reports, whether true or not, of food-borne or water-borne illness or other food safety issues, food adulteration or tampering, employee hygiene and cleanliness failures, or improper employee conduct at our Outposts could lead to product liability or other claims. Such incidents or reports could negatively affect our brand and reputation as well as our business, revenue, and profits.
Best are instrumental to our marketing and publicity strategy and are closely identified with both the brand and us in general. They actively promote the brand through their large social media platforms and through various public appearances, and we believe that the unique personalities of our founders are part of our success.
Best, our founder and co-founder, are instrumental to our marketing and publicity strategy and are closely identified with both the brand and us in general. They actively promote the brand through their large social media platforms and through various public appearances, and we believe that the unique personalities of our founders are part of our success.
The loss of one or more co-manufacturers, any disruption or delay at a co-manufacturer, or any failure to identify and engage co-manufacturers to increase production capacity, could delay or postpone the production of our products or reduce our overall production capacity, either of which could have a material adverse effect on our business, operating results, and financial condition.
The loss of our co-manufacturer, any disruption or delay at our co-manufacturer, or any failure to identify and engage co-manufacturers to increase production capacity, could delay or postpone the production of our products or reduce our overall production capacity, either of which could have a material adverse effect on our business, operating results, and financial condition.
Due to our customer basis, online presence, and reputation, among other factors, our Class A Common Stock may be subject to similar market volatility in the future not necessarily related to the performance of our business. We may not be able to compete successfully with other producers and retailers of coffee.
Due to our customer base, online presence, and reputation, among other factors, our Class A Common Stock may be subject to similar market volatility in the future not necessarily related to the performance of our business. We may not be able to compete successfully with other producers and retailers of coffee.
Such mandatory disclosures are costly, could lead to negative publicity, may cause our customers to lose confidence in the effectiveness of our security measures, and require us to expend significant capital and other resources to respond to or alleviate problems caused by the actual or perceived security breach.
Such mandatory disclosures are costly, could lead to negative publicity, may cause our customers to lose confidence in the effectiveness of our security measures, and require us to expend significant capital and other resources to respond to or alleviate problems caused by the actual or perceived security incident.
If any initiatives do not succeed, we may incur expenses without the benefit of higher revenue. Additionally, some of our competitors have greater financial resources than we do, which enable them to spend significantly more on marketing and advertising and other initiatives than we can.
If any initiatives do not succeed, we may incur expenses without the benefit of higher revenue. Additionally, some of our competitors have greater financial resources than we do, which enables them to spend significantly more on marketing and advertising and other initiatives than we can.
We may be subject to liability for placing advertisements with content that is deemed inappropriate or misleading. We are subject to a number of regulations applicable to the labeling and advertising of our products. The FDA promulgates a number of restrictions and guidelines on food labeling.
We may be subject to liability for placing advertisements with content that is deemed inappropriate or misleading. We are subject to a number of regulations applicable to the labeling and advertising of our products. The FDA places a number of restrictions and guidelines on food labeling.
Any significant change to Data Protection Laws and Data Protection Obligations, including without limitation, how the express or implied consent of customers for Processing is obtained, could increase our costs and require us to modify our operations, possibly in a material manner, which we may be unable to complete and may limit our ability to store and process customer data and operate our business.
Any significant change to Data Protection Laws and Data Protection Obligations, including without limitation, how the express or implied consent of customers for Processing is obtained, 34 Table of Contents could increase our costs and require us to modify our operations, possibly in a material manner, which we may be unable to complete and may limit our ability to store and Process customer data and operate our business.
Additionally, as part of our Wholesale channel model, we rely on a network of brokers and distributors to grow and manage our sales. These networks assist in expanding our brands reach and ensuring the efficient distribution of our products to our retail partners.
Additionally, as part of our Wholesale channel model, we rely on a network of brokers and distributors to grow and manage our sales. These networks assist in expanding our brand’s reach and ensuring the efficient distribution of our products to our retail partners.
The Sarbanes-Oxley Act of 2002 (the “Sarbanes-Oxley Act”), including the requirements of Section 404, as well as rules and regulations subsequently implemented by the SEC, the Dodd-Frank Wall Street Reform and Consumer Protection Act and the rules and regulations promulgated and to be promulgated thereunder, the Public Company Accounting Oversight Board (“PCAOB”) and the securities exchanges, impose additional reporting and other obligations on public companies.
The Sarbanes-Oxley Act of 2002 (the “Sarbanes-Oxley Act”), including the requirements of Section 404, as well as rules and regulations subsequently implemented by the SEC, the 37 Table of Contents Dodd-Frank Wall Street Reform and Consumer Protection Act and the rules and regulations promulgated and to be promulgated thereunder, the Public Company Accounting Oversight Board (“PCAOB”) and the securities exchanges, impose additional reporting and other obligations on public companies.
Our industry is subject to extensive federal, state, and local laws and regulations, including those relating to the preparation and sale of food and beverages or consumption and those relating to building and zoning requirements. Such laws and regulations are subject to change from time to time.
Our industry is subject to extensive federal, state, and local laws and regulations, including those relating to the preparation, labeling, advertising, and sale of food and beverages or consumption and those relating to building and zoning requirements. Such laws and regulations are subject to change from time to time.
There is increasing consumer awareness of health risks that are attributed to caffeine and other ingredients we use, particularly in the United States, including obesity, increased blood pressure and heart rate, anxiety and insomnia, as well as increased consumer litigation based on alleged adverse health impacts of consumption of various food and beverage products.
There is increasing consumer awareness of health risks that are attributed to caffeine and other ingredients we use, 26 Table of Contents particularly in the United States, including obesity, increased blood pressure and heart rate, anxiety and insomnia, as well as increased consumer litigation based on alleged adverse health impacts of consumption of various food and beverage products.
We depend on cash generated from our operations to support our growth, and we may need to raise additional capital, which may not always be available on acceptable terms or at all. In addition, as we expand our business, it is important that we continue to maintain a high level of customer service and satisfaction.
We depend on cash generated from our operations to support our growth, and we may need to raise additional capital, which may not always be available on acceptable terms or at all. 28 Table of Contents In addition, as we expand our business, it is important that we continue to maintain a high level of customer service and satisfaction.
Our results have been, and in the future may continue to be, significantly impacted by the timing of new Outpost openings, which is subject to a number of factors, many of which are outside of our control, including: landlord delays; associated pre-opening costs and operating inefficiencies; and changes in our geographic concentration due to the opening of new Outposts.
Our results have been, and in the future may continue to be, significantly impacted by the timing of new Outpost openings, which is subject to a number of factors, many of which are outside of our control, including: landlord delays; associated pre-opening costs and operating inefficiencies; and changes in our geographic concentration due to the opening 21 Table of Contents of new Outposts.
In addition, as each of our leases expires, we may fail to negotiate renewals, either on commercially acceptable terms or at all, which could cause us to close Outposts in desirable locations.
In addition, as each of our leases expire, we may fail to negotiate renewals, either on commercially acceptable terms or at all, which could cause us to close Outposts in desirable locations.
We could be required to fundamentally change our business activities and practices in response to a security breach or related regulatory actions or litigation, which could have an adverse effect on our business. Additionally, most jurisdictions have enacted laws requiring companies to notify individuals, regulatory authorities, and others of security breaches involving certain types of data.
We could be required to fundamentally change our business activities and practices in response to a security incident or related regulatory actions or litigation, which could have an adverse effect on our business. Additionally, most jurisdictions have enacted laws requiring companies to notify individuals, regulatory authorities, and others of security incident involving certain types of data.
Also, because we sometimes purchase real property for various shop locations and for office, warehouse, and manufacturing facilities, we are subject to all the risks generally associated with owning real estate, including changes in the investment climate for real estate, demographic trends, and supply or demand for the use of the Outposts, which may result from competition from similar restaurants in the area as well as strict, joint, and several liability for environmental contamination at or from the property, regardless of fault.
Also, because we sometimes purchase real property for certain Outpost locations and for office, warehouse, and manufacturing facilities, we are subject to all the risks generally associated with owning real estate, including changes in the investment climate for real estate, demographic trends, and supply or demand for the use of the Outposts, which may result from competition from similar restaurants in the area as well as strict, joint, and several liability for environmental contamination at or from the property, regardless of fault.
Our ability to operate new Outposts profitably and increase average Outpost revenue and comparable Outpost sales will depend on many factors, some of which are beyond our control, including: • consumer awareness and understanding of our brand; • general economic conditions, which can affect Outpost traffic, local labor costs, and prices we pay for the products and other supplies we use; • consumption patterns and beverage preferences that differ from region to region; • changes in consumer preferences and discretionary spending; • difficulties obtaining or maintaining adequate relationships with distributors or suppliers in new markets; • increases in prices for commodities, including coffee, milk, and flavored syrups; 23 Table of Content s • inefficiency in our labor costs as the staff gains experience; • competition, either from our competitors in the beverage industry or our other Outposts; • temporary and permanent site characteristics of new Outposts; • changes in government regulation; and • other unanticipated increases in costs, any of which could give rise to delays or cost overruns.
Our ability to operate new Outposts profitably and increase average Outpost revenue and comparable Outpost sales will depend on many factors, some of which are beyond our control, including: • consumer awareness and understanding of our brand; • general economic conditions, which can affect Outpost traffic, local labor costs, and prices we pay for the products and other supplies we use; • consumption patterns and beverage preferences that differ from region to region; • changes in consumer preferences and discretionary spending, including in connection with broader economic concerns; • difficulties obtaining or maintaining adequate relationships with distributors or suppliers in new markets; • increases in prices for commodities, including coffee, milk, and flavored syrups; • inefficiency in our labor costs as the staff gains experience; • competition, either from our competitors in the beverage industry or our other Outposts; • temporary and permanent site characteristics of new Outposts; • changes in government regulation; and • other unanticipated increases in costs, any of which could give rise to delays or cost overruns.
Although we target specified operating and financial metrics, new Outposts may never meet these targets or may take longer than anticipated to do so. Any new Outpost we open may never become profitable or achieve operating results similar to those of our existing Outposts, which could adversely affect our business, financial condition, or results of operations.
Although we target specified operating and financial metrics, we have experienced that new Outposts may never meet these targets or may take longer than anticipated to do so. Any new Outpost we open may never become profitable or achieve operating results similar to those of our existing Outposts, which could adversely affect our business, financial condition, or results of operations.
The amount due and payable in those circumstances is determined based on certain assumptions, including an assumption that we would have sufficient taxable income to fully utilize all potential future tax benefits that are subject to the Tax Receivable Agreement and may substantially exceed the actual tax savings that we will realize.
The amount due and payable in those circumstances is determined based on certain assumptions, including an assumption that we would have sufficient taxable income to fully utilize all potential future tax benefits that are subject to the TRA and may substantially exceed the actual tax savings that we will realize.
The terms of any credit agreements or other borrowing arrangements we or our subsidiaries enter into in the future may impose restrictions on the ability to pay us dividends.
The terms of any credit agreements or other borrowing arrangements we or our subsidiaries have entered into or may enter into in the future may impose restrictions on the ability to pay us dividends.
Further, our revenue growth rate may slow as our business matures. We have a limited history of generating revenue, in particular with respect to our RTD products and our Outpost locations. As a result of our short operating history, we have limited financial data that can be used to evaluate our current business.
Further, our revenue growth rate may slow as our business matures. We have a limited history of generating revenue, in particular with respect to our largest Wholesale partners, RTD products and our Outpost locations. As a result of our short operating history, we have limited financial data that can be used to evaluate our current business.
The results of litigation and other legal proceedings are inherently uncertain, and adverse judgments or settlements in some of these legal disputes may result in adverse monetary damages, penalties or injunctive relief against us, which could negatively impact our financial position, cash flows or results of operations.
The results of litigation and other legal proceedings are inherently uncertain, and adverse judgments or settlements in some of these legal disputes may result in adverse monetary damages, penalties or injunctive relief against us, which could negatively impact our financial position, cash 32 Table of Contents flows or results of operations.
Furthermore, the Patient Protection and Affordable Care Act of 2010 (“PPACA”) establishes a uniform federal requirement for certain restaurants to post certain nutritional information on their menus.
Furthermore, the Patient Protection and Affordable Care Act of 2010 (“PPACA”) established a uniform federal requirement for certain restaurants to post certain nutritional information on their menus.
Due to the uncertainty of various factors, we cannot estimate the likely tax benefits we will realize as a result of Unit exchanges, and the resulting amounts we are likely to pay out to Unitholders of Authentic Brands pursuant to the Tax Receivable Agreement; however, we estimate that such payments may be substantial.
Due to the uncertainty of various factors, we cannot estimate the likely tax benefits we will realize as a result of Unit exchanges, and the resulting amounts we are likely to pay out to Unitholders of Authentic Brands pursuant to the TRA; however, we estimate that such payments may be substantial.
Under these corporate governance standards, a company of which more than 50% of the voting power in the election of directors is held by an individual, group or another company is a “controlled company” and may elect not to comply with certain corporate governance requirements.
Under these corporate governance standards, a company of which more than 50% of the voting power in the election of 43 Table of Contents directors is held by an individual, group or another company is a “controlled company” and may elect not to comply with certain corporate governance requirements.
The costs to respond to a security breach or to mitigate any security vulnerabilities that may be identified could be significant, and our efforts to address these problems may not be successful.
The costs to respond to a security incident or to mitigate any security vulnerabilities that may be identified could be significant, and our efforts to address these problems may not be successful.
They also engage in outdoor recreational activities that have known risks, such as bear hunting. These activities could put our founders at risk and cause potential harm to our business. If the services of Mr. Hafer, Mr. Best, or Mr.
They also engage in outdoor recreational activities that have known risks, such as bear hunting and mountain sports. These activities could put our founders at risk and cause potential harm to our business. If the services of Mr. Hafer, Mr. Best, Mr. Mondzelewski or Mr.
The actual amount and timing of any payments under the Tax Receivable Agreement will vary depending upon a number of factors, including the timing of exchanges by the Unitholders of Authentic Brands, the amount of gain recognized by such Unitholders of Authentic Brands, the amount and timing of the taxable income we generate in the future and the federal tax rates then applicable.
The actual amount and timing of any payments under the TRA will vary depending upon a number of factors, including the timing of exchanges by the Unitholders of Authentic Brands, the amount of gain recognized by such Unitholders of Authentic Brands, the amount and timing of the taxable income we generate in the future and the federal tax rates then applicable.
Furthermore, our future obligation to make payments under the Tax Receivable Agreement could make us a less attractive target for an acquisition, particularly in the case of an acquirer that cannot use some or all of the tax benefits that may be deemed realized under the Tax Receivable Agreement.
Furthermore, our future obligation to make payments under the TRA could make us a less attractive target for an acquisition, particularly in the case of an acquirer that cannot use some or all of the tax benefits that may be deemed realized under the TRA.
Negative publicity may adversely affect us, regardless of whether the allegations are substantiated or whether we are held to be responsible. Our brand has been in the past, and may be in the future, associated with controversial actions of certain customers of ours.
Negative publicity may adversely affect us, regardless of whether the allegations are substantiated or whether we are held to be responsible. 12 Table of Contents Our brand has been in the past, and may be in the future, associated with controversial actions of certain customers of ours.
The Board may take into account general and economic conditions, our financial condition and results of operations, our available cash and current and 43 Table of Content s anticipated cash needs, capital requirements, contractual, legal, tax, and regulatory restrictions, implications on the payment of dividends by us to our stockholders or by our subsidiaries to us and such other factors as our Board may deem relevant.
The Board may take into account general and economic conditions, our financial condition and results of operations, our available cash and current and anticipated cash needs, capital requirements, contractual, legal, tax, and regulatory restrictions, implications on the payment of dividends by us to our stockholders or by our subsidiaries to us and such other factors as our Board may deem relevant.
Further, an interruption in, or the loss or reduction of operations at, one or more of our co-manufacturing facilities, which may be caused by work stoppages, contamination, disease outbreaks, terrorism, natural disasters, regulatory restrictions, or any other reason, could delay, postpone, or reduce production of our products, which could have a material adverse effect on our business until such time as such interruption is resolved or an alternate source of production is secured.
Further, an interruption in, or the loss or reduction of operations at, our co-manufacturing facility, which may be caused by work stoppages, contamination, disease outbreaks, terrorism, natural disasters, regulatory restrictions or enforcement, or any other reason, could delay, postpone, or reduce production of our products, which could have a material adverse effect on our business until such time as such interruption is resolved or an alternate source of production is secured.
We are designated as an “emerging growth company” within the meaning of the Securities Act, as modified by the JOBS Act, and we may take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not emerging growth companies including, but not limited to, not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in the periodic reports and proxy statements, and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved.
We are designated as an “emerging growth company” within the meaning of the Securities Act, as modified by the Jumpstart Our Business Startups Act (“JOBS Act”), and we may take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not emerging growth companies including, but not limited to, not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in the periodic reports and proxy statements, and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved.
Compliance with the CPRA, the CCPA, the CDPA and any newly enacted privacy and data security laws or regulations may be challenging and cost- and time-intensive, and may require us to modify our data processing practices and policies and to incur substantial costs and potential liability in an effort to comply with such legislation.
Compliance with the CPRA, the CCPA, the CDPA, similar state laws in other states, and any newly enacted privacy and data security laws or regulations may be challenging and cost- and time-intensive, and may require us to modify our data Processing practices and policies and to incur substantial costs and potential liability in an effort to comply with such legislation.
For example, we have occasionally received negative publicity from leading national media arising out of the presence of, among others, our logos and brands on apparel worn at certain publicized events, even when such individuals 14 Table of Content s were otherwise unaffiliated with us.
For example, we have occasionally received negative publicity from leading national media arising out of the presence of, among others, our logos and brands on apparel worn at certain publicized events, even when such individuals were otherwise unaffiliated with us.
These laws vary from state to state and are subject to frequent amendments and judicial interpretations that can require rapid adjustments to operations. Insurance coverage for violations of these laws is costly and sometimes is not available. Changes to these laws can adversely affect our business 32 Table of Content s by increasing labor and compliance costs.
These laws vary from state to state and are subject to frequent amendments and judicial interpretations that can require rapid adjustments to operations. Insurance coverage for violations of these laws is costly and sometimes is not available. Changes to these laws can adversely affect our business by increasing labor and compliance costs.
Specifically, the PPACA amended the Federal Food, Drug, and Cosmetic Act to require certain chain restaurants to 36 Table of Content s publish the total number of calories of standard menu items on menus and menu boards, along with a statement that puts this calorie information in the context of a total daily calorie intake.
Specifically, the PPACA amended the Federal Food, Drug, and Cosmetic Act to require certain chain restaurants to publish the total number of calories of standard menu items on menus and menu boards, along with a statement that puts this calorie information in the context of a total daily calorie intake.
We have technology security initiatives in place to mitigate our risk to these vulnerabilities and do from time to time detect and prevent attempted disruptions, but these measures may not be adequately designed or implemented to ensure that our operations are not disrupted or that data security breaches do not occur.
We have technology security initiatives in place to mitigate our risk to vulnerabilities and do from time to time detect and prevent attempted access or disruptions, but these security measures may not be adequately designed or implemented to ensure that our operations are not disrupted or that other data security incidents do not occur.
The Charter, the Bylaws and Delaware General Corporation Law (“DGCL”) contain provisions that could have the effect of rendering more difficult, delaying, or preventing an acquisition deemed undesirable by our Board and therefore 39 Table of Content s depress the trading price of our Class A Common Stock.
The Charter, the Bylaws and Delaware General Corporation Law (“DGCL”) contain provisions that could have the effect of rendering more difficult, delaying, or preventing an acquisition deemed undesirable by our Board and therefore depress the trading price of our Class A Common Stock.
Volumes produced under each of these agreements can fluctuate significantly based upon the product’s life cycle, product promotions, alternative production capacity, and other factors, none of which are under our direct control. The terms of an anticipated long-term agreement with our broker are currently being negotiated in the context of historical arrangements, about which there are certain disagreements.
Volumes produced under these agreements can fluctuate significantly based upon the product’s life cycle, product promotions, alternative production capacity, and other factors, none of which are under our direct control. The terms of an expired agreement with our broker are currently being negotiated in the context of historical arrangements, about which there are certain disagreements.
If we need to replace a co-manufacturer, there can be no assurance that additional capacity will be available in a timely manner and in the quantities required, that our quality control requirements will be met, that we will be able to utilize the product formulas or other intellectual property developed with the co-manufacturer, or that the commercial terms of a replacement will be favorable.
If we need to replace a co-manufacturer or supplier of goods for co-manufactured products, there can be no assurance that additional capacity will be available in a timely manner and in the quantities required, that our quality control requirements will be met, that we will be able to utilize the product formulas or other intellectual property developed with the co-manufacturer, or that the commercial terms of a replacement will be favorable.
Such holders may potentially make a significant profit with the sale of their shares of common stock depending on the trading price of the Company’s common stock at the time of a sale and the purchase price of such common stock by such holders.
Such holders may potentially make a significant profit with the sale of their shares of common stock depending on the trading price of the Company’s common stock at the time of a sale and the purchase price of such 42 Table of Contents common stock by such holders.
Other such incidents that could adversely affect our business include actual or perceived breaches of privacy, contaminated products, employees or customers infected with communicable 15 Table of Content s diseases such as COVID-19, product recalls, controversial actions of persons identified with the brand, or other potential incidents discussed in this risk factors section.
Other such incidents that could adversely affect our business 13 Table of Contents include actual or perceived breaches of privacy, contaminated products, employees or customers infected with communicable diseases such as COVID-19, product recalls, controversial actions of persons identified with the brand, or other potential incidents discussed in this risk factors section.
Risks Related to an Investment in Our Securities. 41 Table of Content s We may issue additional shares of our Class A Common Stock or other equity securities without your approval, which would dilute your ownership interests and may depress the market price of your shares.
Risks Related to an Investment in Our Securities We may issue additional shares of our Class A Common Stock or other equity securities without your approval, which would dilute your ownership interests and may depress the market price of your shares.
For example, over the last few years we 16 Table of Content s have added a significant number of Wholesale doors, including through our entry into the FDM market in collaboration with Walmart, and a portion of our customer base that previously purchased our products through our DTC channel now purchase our products through our retail partners.
For example, over the last few years we have added a significant number of Wholesale doors, including through our entry into the FDM market in collaboration 14 Table of Contents with Walmart, and a portion of our customer base that previously purchased our products through our DTC channel now purchase our products through our retail partners.
As federal, state, or other applicable minimum wage rates increase, we may be required to increase not only the wage rates of minimum wage employees, but also the wages paid to other hourly employees.
As federal, state, or other applicable minimum wage rates increase, we may be required to 31 Table of Contents increase not only the wage rates of minimum wage employees, but also the wages paid to other hourly employees.
We are also subject to a variety of other employee relations laws including, but not limited to, the Family and Medical Leave Act and state leave laws, employment discrimination laws, predictive scheduling laws, occupational health and safety laws and regulations, and the National Labor Relations Act.
We are also subject to a variety of other employee relations laws including, but not limited to, the Family and Medical Leave Act and state leave laws, employment discrimination laws, predictive scheduling laws, occupational health and safety laws and regulations, including regulations regarding firearms in the workplace, and the National Labor Relations Act.
Additional sites that we lease are likely to be subject to similar long-term non-cancelable leases.
Additional future Outpost sites that we lease are likely to be subject to similar long-term non-cancelable leases.
Further, breaches experienced by other companies may also be leveraged against us. For example, credential stuffing attacks are becoming increasingly common and sophisticated actors can mask their attacks, making them increasingly difficult to identify and prevent. Previously, one of our vendor’s technology systems was exploited, giving unauthorized access to certain of our customer data.
Further, incidents experienced by other companies may also be leveraged against us. For example, credential stuffing attacks are becoming increasingly common and sophisticated actors can mask their attacks, making them increasingly difficult to identify and prevent. Several years ago, one of our vendor’s technology systems was exploited, giving unauthorized access to certain of our customer data.
Increasingly, consumers are using mobile-based devices and applications to shop online with us and with our competitors, and to do comparison shopping, as well as to engage with us and our competitors through digital services and experiences that are offered on mobile platforms.
Increasingly, consumers are using mobile-based devices and applications to shop online with us and with our competitors, and to do comparison shopping, as well as to 23 Table of Contents engage with us and our competitors through digital services and experiences that are offered on mobile platforms.
Furthermore, as laws and regulations governing the use of these platforms evolve, any failure by us or third parties acting at our direction to abide by applicable laws and regulations in the use of these platforms could subject us to regulatory investigations, class action lawsuits, liability, fines, or other penalties and adversely affect our business, financial condition, and operating results.
As laws and regulations governing the use of these platforms evolve, any failure by us or third parties acting at our direction to abide by applicable laws and regulations in the use of these platforms could subject us to regulatory investigations, class action lawsuits, liability, fines, suspension or removal from such platform, or other penalties and adversely affect our business, financial condition, and operating results.

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Item 2. Properties

Properties — owned and leased real estate

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Biggest changeProperties The material properties used by the Company in connection with its roasting, manufacturing, warehousing, distribution and corporate administrative operations as follows: Property Location Approximate Size (sq. ft.) Function Owned/Leased Salt Lake City, UT 30,295 HQ, Corporate and Manufacturing Owned San Antonio, TX 33,980 Corporate Owned Manchester, TN 65,000 Corporate and Manufacturing Owned As of December 31, 2022, the Company had fifteen Company-operated stores, most of which are leased.
Biggest changeProperties The material properties used by the Company in connection with its roasting, manufacturing, warehousing, distribution and corporate administrative operations are as follows: Property Location Approximate Size (sq. ft.) Function Owned/Leased Salt Lake City, UT 30,295 HQ and Corporate Owned Manchester, TN 65,000 Corporate and Manufacturing Owned As of December 31, 2023, the Company had 18 Company-operated stores, most of which are leased.
In addition to the locations listed above, we hold inventory at various locations managed by third-party warehouses. We believe our existing facilities, both owned and leased, are in good condition and suitable for the conduct of our business.
In addition to the locations listed above, we hold inventory at various locations managed by third-party warehouses. We believe our existing facilities, both owned and leased, are in good condition and suitable for the conduct of our business. 45 Table of Contents

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeThe complaint alleges that the Tang Capital suffered damages arising from the Company’s refusal on two occasions to permit Tang Capital to exercise warrants. On March 8, 2023, the court granted the Company’s motion to dismiss a claim for declaratory judgment but denied the Company’s motion to dismiss a breach of contract claim.
Biggest changeThe complaint alleges that the Tang Capital suffered damages arising from the Company’s refusal on two alleged occasions to permit Tang Capital to exercise warrants. On March 8, 2023, the court granted the Company’s motion to dismiss a claim for declaratory judgment but denied the Company’s motion to dismiss a breach of contract claim.
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On June 22, 2023, John Brian Clark, JBC Structured Products LLC, and Marathon Capital LLC (collectively, “Clark”) filed a complaint against BRC Inc. and Black Rifle Coffee Company LLC: John Brian Clark, et al. v. BRC Inc., et al., Case 1:23-CV-5340 (RWL) (Southern District of New York). Clark alleges a breach of contract and is seeking a declaratory judgment.
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The complaint alleges that Clark suffered damages arising from the Company’s refusal to allow Clark to exercise warrants. The lawsuit seeks unspecified general and compensatory damages, attorneys’ fees, and other reasonable costs and disbursements.
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The Company believes that it has meritorious defenses to the causes of action asserted against it and will defend itself vigorously in these proceedings; however, there can be no assurances that it will be successful in its efforts.
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Currently the case is stayed through the resolution of the Tang Capital matter, but Clark has the option to end the stay at any time after the end of June 2024 or a summary judgment decision in Tang Capital, whichever comes first.
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The Company is not able at this time to determine or predict the ultimate outcome of this lawsuit or provide a reasonable estimate or range of estimates of the possible outcome or loss, if any, in this matter. On February 3, 2023, Strategy and Execution, Inc.
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("SEI") filed a lawsuit in federal district court in Texas against one of the Company's wholly owned subsidiaries: Strategy and Execution, Inc. v. Black Rifle Coffee Company LLC, Case 23-CV-00135 (FB) (Western District of Texas). The complaint alleges that SEI, a former consultant to the Company, is owed certain disputed royalties from the Company.
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On April 4, 2023, the Company filed a partial motion to dismiss several of the claims which is currently pending. The Company maintains all royalties expire upon expiration of the parties’ contract on December 31, 2023, and prior to such expiration, only SKUs manufactured at co-manufacturers SEI introduced the Company to, are subject to such royalty.
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Through December 31, 2023, the Company has expensed all royalties for co-manufacturers which SEI introduced.

Item 4. Mine Safety Disclosures

Mine Safety Disclosures — required of mining issuers

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Biggest changeInformation About Our Executive Officers The following is a list of names, ages and backgrounds of our current executive officers: Name Age Position(s) Held Roland Smith 68 Executive Chairman, Director Evan Hafer 45 Chief Executive Officer, Director Mat Best 36 Chief Branding Officer Tom Davin 65 Co-Chief Executive Officer, Director Greg Iverson 47 Chief Financial Officer Kristina Braendel (Smith) 58 Chief Accounting Officer Toby Johnson 46 Chief Operations Officer Andrew McCormick 37 General Counsel and Corporate Secretary Heath Nielsen 55 Chief Retail Officer 44 Table of Content s Roland Smith is Executive Chairman of our Board, and has been a member of our Board since February 2022.
Biggest changeInformation About Our Executive Officers The following is a list of names, ages and backgrounds of our current executive officers: Name Age Position(s) Held Evan Hafer 47 Founder, Executive Chairmen Mat Best 37 Chief Branding Officer Stephen Kadenacy 55 Chief Financial Officer Christopher Mondzelewski 50 President and CEO, Director Andrew McCormick 38 General Counsel and Corporate Secretary Evan Hafer founded the Company in 2014 and was Chief Executive Officer from its inception until Mr.
Evan Hafer founded the Company in 2014 and has been Chief Executive Officer since its inception. He is a director and served as Chairman of the Board from our inception to July 2022. Prior to founding the Company, Mr. Hafer had fifteen years of service in the U.S. military and worked as a contractor for the CIA.
Mondzelewski’s appointment on January 1, 2024. He is a director and served as Chairman of the Board from our inception to July 2022, and resumed such role as Executive Chairman on January 1, 2024. Prior to founding the Company, Mr. Hafer had fifteen years of service in the U.S. military and worked as a contractor for the CIA.
After his military service, he did contract work for the CIA for five years. Mr. Best holds a B.L.A. from Ashford University. Tom Davin has served as Co-Chief Executive Officer of the Company since January 2019 and has served as a Director since September 2018. Prior to joining the Company, Mr.
After his military service, he did contract work for the CIA for five years. Mr. Best holds a B.L.A. from Ashford University. 46 Table of Contents Christopher Mondzelewski has served as the Company’s President and Chief Executive Officer and a member of the Board since January 1, 2024. Prior to his appointment as Chief Executive Officer, Mr.
Prior to joining the Company, Mr. McCormick served as General Counsel and Corporate Secretary of Laird Superfood from February 2019 to September 2021. Mr. McCormick previously worked as a senior associate at Hogan Lovells US LLP from 2014 to 2019 and as an associate at Latham & Watkins (London), LLP from 2011 to 2013. In 2010, Mr.
McCormick previously worked as a senior associate at Hogan Lovells US LLP from 2014 to 2019 and as an associate at Latham & Watkins (London), LLP from 2011 to 2013. In 2010, Mr. McCormick completed a civilian clerkship with US Army JAG in Seoul, South Korea. Mr.
McCormick completed a civilian clerkship with US Army JAG in Seoul, South Korea. Mr. McCormick graduated from Hendrix College with a B.A. with distinction, and holds a J.D. from Columbia University and an LL.M. from the London School of Economics. Heath Nielsen joined the Company as Chief Retail Officer in March 2022. Prior to joining the Company, Mr.
McCormick graduated from Hendrix College with a B.A. with distinction, and holds a J.D. from Columbia University and an LL.M. from the London School of Economics. Part II
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Mr. Smith is currently Chairman of the Board of Jack’s Family Restaurants, Inc. and Director of Caliber Inc. He pr eviously served as Chairman and Chief Executive Officer of Office Depot, Inc., a leading global provider of products, services, and solutions for every workplace, from November 2013 until February 2017. Prior to joining Office Depot, Mr.
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Mondzelewski has served as the President of the Company from June 28, 2023 and began his time with the Company on May 1, 2023, when he was appointed to the position of Chief Marketing Officer. Mr.
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Smith served as the President and Chief Executive Officer of Delhaize America, LLC, the U.S. division of Delhaize Group, and Executive Vice President of Delhaize Group, an international food retailer, from October 2012 to September 2013. Mr.
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Mondzelewski brings over 20 years of consumer marketing, business and leadership experience, most recently serving as the Chief Growth Officer of Mars’ $12B+ Global Petcare business. Throughout Mr. Mondzelewski’s almost 12-year tenure at Mars, he consistently grew his responsibilities, holding multiple marketing and business development leadership roles in which he led transformative growth and operational improvement strategies across numerous brands.
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Smith was a Special Advisor to The Wendy’s Company, a restaurant owner, operator and franchisor, from September 2011 to December 2011 and served as President and Chief Executive Officer from July 2011 to September 2011. Mr.
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Prior to joining Mars, Mr. Mondzelewski held marketing roles at Kraft Foods, where he launched several successful campaigns. Before his business career, Mr. Mondzelewski was a Marine for five years, deploying in support of Operation Desert Freedom. Stephen Kadenacy , has served as the Company’s Chief Financial Officer since September 18, 2023.
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Smith served as President and Chief Executive Officer of Wendy’s/Arby’s Group, Inc. and Chief Executive Officer of Wendy’s International, Inc. from September 2008 to July 2011. Mr.
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Mr Kadenacy, who is the former Chief Financial Officer of AECOM, is a significant shareholder and has deep familiarity with BRCC’s operations and financial profile, having played an integral role in the business combination of BRCC and SilverBox, including serving as Chief Executive Officer of SilverBox Engaged Merger Corp until its merger with BRCC in February 2022. Mr.
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Smith also served as Chief Executive Officer of Triarc Companies, Inc. from June 2007 to September 2008, and the Chief Executive Officer of Arby’s Restaurant Group, Inc., a restaurant owner, operator and franchisor, from April 2006 to July 2011.
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Kadenacy is a seasoned investment professional and former Fortune 200 operating executive with expertise in managing, building and growing global public organizations, most recently serving as Co-Managing Member of SilverBox Capital, an investment firm which he co-founded in 2017. With experience spanning over three decades, Mr.
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He previously served as Chairman of the Board of 24 Hour Fitness USA, Inc. and Big Jack Holdings Corp., Director and Chairman of the Board of Carmike Cinemas, Inc., Director of The Wendy’s Company, Director of Wendy’s/Arby’s Group, Inc., and Director of Dunkin’ Brands Group, Inc.
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Kadenacy was also the CEO of Boxwood Merger Corp until its merger with Atlas Technical Consulting and then remained on the Board. Previously, Mr. Kadenacy held leadership roles at AECOM, a global engineering and technical services company, including serving as President, Chief Operating Officer, and Chief Financial Officer. Prior to his corporate career, Mr.
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Davin was the Chief Executive Officer of 5.11 Tactical from 2011 to 2018 and Chief Executive Officer of Panda Restaurant Group from 2004 to 2009. He was the Chief Operating Officer of Taco Bell from 1997 to 2000. Mr. Davin began his business career in the merger and acquisition groups at Goldman Sachs and PepsiCo.
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Kadenacy was a Partner at KPMG in the Economic Consulting Practice and served as a member of the Board of Directors of ABM Industries, a provider of facility management services. Mr. Kadenacy also served on the Board of the YMCA of Greater Los Angeles and the Board of Trustees for UCLA’s Anderson School of Business. Mr.
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He is presently on the board of directors of Backcountry.com, Pear Sports, LLC, and was previously a member of the boards of Oakley and Zumiez. Mr. Davin served as a U.S. Marine Corps infantry officer and Recon Marine, obtaining the rank of Captain. Mr. Davin graduated from Duke University and earned a MBA from Harvard Business School.
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Kadenacy holds a bachelor’s degree in economics from UCLA and an MBA from USC. Andrew McCormick joined the Company as General Counsel and Corporate Secretary in September 2021. Prior to joining the Company, Mr. McCormick served as General Counsel and Corporate Secretary of Laird Superfood from February 2019 to September 2021. Mr.
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G reg Iverson has served as Chief Financial Officer of the Company since April 2020. Prior to that, Mr. Iverson was Chief Financial Officer of Overstock.com, Inc. from April 2018 to September 2019.
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Prior to joining Overstock, he served as Chief Financial Officer of Apollo Education Group, Inc. from October 2015 to March 2018 and as the Chief Accounting Officer and Treasurer from April 2007 to October 2015. He also served as the Director of Financial Reporting at US Airways Group, Inc.
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(subsequently acquired by American Airlines), and began his career in the audit and advisory practices of Arthur Andersen, LLP and Deloitte & Touche, LLP, in Phoenix, Arizona. Mr. Iverson graduated summa cum laude with a B.S. in accounting from the University of Idaho and is a certified public accountant.
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Kristina Braendel (Smith) joined the Company in January 2023 as our Chief Accounting Officer. Prior to joining the Company, Ms. Braendel served as Chief Accounting Officer of Nexeo Solutions, LLC, which she joined in January 2012. Prior to that, she served as Global Controller at Belkin International, Inc. from April 2009 to November 2011.
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Prior to her time at Belkin, she served in multiple finance positions from 1995 to 2008 at The Walt Disney Company. Ms. Braendel graduated from Loyola University Maryland. Toby Johnson has served as Chief Operating Officer of the Company since August 2021 after having served as a director on the Company’s Board from August 2020 to July 2021.
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Prior to joining the Company, Ms. Johnson served as Senior Vice President of Sales for the $4 billion Snacks Division of the Campbell Soup Company from July 2020 to August 2021. She began her business career in 2007 as a manufacturing director at a Frito-Lay plant for PepsiCo. Ms.
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Johnson spent thirteen years at PepsiCo holding various key leadership positions in sales, marketing, supply chain, and procurement, culminating as a Region Vice President of Frito-Lay from 2018 to 2020. Ms.
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Johnson is currently a member of the board of directors for Team Red, White & Blue and previously served on the Board of the USO Metropolitan NY for almost a decade. She also served for seven years as an officer in the U.S. Army, where she was an AH-64D Apache Longbow pilot.
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She deployed with the 3rd Infantry Division as part of the initial invasion in support of Operation Iraqi Freedom. Ms. Johnson graduated from the U.S. Military Academy at West Point and holds an MBA from Harvard Business School. 45 Table of Content s Andrew McCormick joined the Company as General Counsel and Corporate Secretary in September 2021.
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Nielsen served as Chief Executive Officer of JustFoodForDogs from July 2020 to May 2021. Mr. Nielsen previously worked as a Senior Vice President of US Divisions Branded Solutions at Starbucks from 2010 to 2020 and as a Vice President of Operations and Corporate Officer for Northstar at Tahoe Booth Creek Resorts from 2004 to 2010. Prior to that, Mr.
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Nielsen worked as a Director of Store's US Business Operations for Sony from 1998 to 2004, as a Regional Director for Vail Resorts from 1995 to 1998, and as a General Manager and Market Manager for Old Navy from 1992 to 1995. Mr.
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Nielsen is a US Army veteran who served as a Sergeant with 10th Mountain Division from 1988 to 1994. Part II

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeHolders As of March 8, 2023, there were 100 holders of record of our Class A Common Stock, 68 holders of record of our Class B Common Sto ck and no holders of record of our Class C Common Stock and Preferred Stock.
Biggest changeHolders As of February 29, 2024, there were 60 holders of record of our Class A Common Stock, 63 holders of record of our Class B Common Stock and no holders of record of our Class C Common Stock and Preferred Stock.
The number of record holders does not include persons who held our securities in nominee or “street name” form, whose shares of record are held by banks, brokers, and other financial institutions.
T he number of record holders does not include persons who held our securities in nominee or “street name” form, whose shares of record are held by banks, brokers, and other financial institutions.
The payment of cash dividends in the future will be dependent upon the Company’s revenues and earnings, if any, capital requirements and general financial condition. The payment of any cash dividends is within the discretion of the Board.
The payment of cash 47 Table of Contents dividends in the future will be dependent upon the Company’s revenues and earnings, if any, capital requirements and general financial condition. The payment of any cash dividends is within the discretion of the Board.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

63 edited+24 added−28 removed43 unchanged
Biggest changeFiscal Year December 31, ($ in thousands) 2022 2021 Revenue, net $ 301,313 $ 233,101 Cost of goods sold 202,134 143,414 Gross profit 99,179 89,687 Operating expenses Marketing and advertising 38,169 36,358 Salaries, wages and benefits 64,286 38,746 General and administrative 64,486 26,162 Total operating expenses 166,941 101,266 Income (loss) from operations (67,762) (11,579) Other income (expense) Interest expense (1,593) (2,033) Other income (expense), net 339 (55) Change in fair value of earn-out liabilities (209,651) — Change in fair value of warrant liabilities (56,675) — Change in fair value of derivative liabilities (2,335) — Total other expense, net (269,915) (2,088) Earnings (loss) before income taxes (337,677) (13,667) State income tax expense 367 178 Net income (loss) $ (338,044) $ (13,845) Components of Our Operating Income (Expense) Comparison of the year ended December 31, 2022 to the year ended December 31, 2021 Fiscal Year December 31, ($ in thousands) 2022 2021 Change % Revenue, net $ 301,313 $ 233,101 $ 68,212 29 % Cost of goods sold 202,134 143,414 58,720 41 % Gross profit 99,179 89,687 9,492 11 % Gross margin (gross profit as % of revenue, net) 32.9 % 38.5 % Total operating (expenses) $ (166,941) $ (101,266) 65,675 65 % Revenue, net Net revenue for the year ended December 31, 2022 increased $68.2 million, or 29.3%, to $301.3 million as compared to $233.1 million for the corresponding period in 2021.
Biggest changeThe following table represents the selected results of operations for BRCC for the periods indicated ( amounts in thousands ): Year Ended December 31, 2023 2022 Revenue, net $ 395,623 $ 301,313 Cost of goods sold 270,175 202,134 Gross profit 125,448 99,179 Operating expenses Marketing and advertising 30,794 38,169 Salaries, wages and benefits 71,054 64,286 General and administrative 71,613 64,486 Other operating expense, net 2,198 — Total operating expenses 175,659 166,941 Operating loss (50,211) (67,762) Non-operating income (expenses) Interest expense, net (6,330) (1,593) Other income, net 10 339 Change in fair value of earn-out liability — (209,651) Change in fair value of warrant liability — (56,675) Change in fair value of derivative liability — (2,335) Total non-operating expenses (6,320) (269,915) Loss before income taxes (56,531) (337,677) Income tax expense 185 367 Net loss $ (56,716) $ (338,044) 51 Table of Contents Comparison of the year ended December 31, 2023 to the year ended December 31, 2022 ( dollars in thousands): Year Ended December 31, 2023 2022 $ Change % Change Revenue, net $ 395,623 $ 301,313 $ 94,310 31 % Cost of goods sold 270,175 202,134 68,041 34 % Gross profit 125,448 99,179 26,269 26 % Gross margin (1) 31.7 % 32.9 % Total operating expenses $ (175,659) $ (166,941) 8,718 5 % (1) Gross margin is calculated as gross profit as a percentage of revenue, net Revenue, net We sell our products both directly and indirectly to our customers through a broad set of physical and online platforms.
We also sell Black Rifle Coffee-brand apparel, coffee brewing equipment, and outdoor and lifestyle gear that our consumers proudly wear and use to showcase our brand. At the heart of everything we do is our commitment to supporting active military, veterans, first responders, and those who love America.
We also sell Black Rifle Coffee-brand apparel, coffee brewing equipment, and outdoor and lifestyle gear that our consumers proudly wear and use to showcase our brand. At the heart of everything we do is our commitment to supporting active duty military, Veterans, first responders, and those who love America.
Liquidity and Capital Resources Our principal use of cash is to support the growth of our business including increasing working capital requirements related to inventories and, accounts receivable, and general and administrative expenses. Furthermore, we use cash to fund our debt service commitments, capital equipment acquisitions, Outpost build outs and other growth-related needs.
Liquidity and Capital Resources Liquidity Overview Our principal use of cash is to support the growth of our business including increasing working capital requirements related to inventories and, accounts receivable, and general and administrative expenses. Furthermore, we use cash to fund our debt service commitments, capital equipment acquisitions, Outpost build outs and other growth-related needs.
The majority of our green coffee beans come from Colombia, Nicaragua, and Brazil, but since 2020, we have also sourced green coffee beans from over ten countries in Latin America, Africa, and Asia to diversify our supply chain and offer our customers specialty and limited-time-only roasts.
The majority of our green coffee beans come from Colombia, Nicaragua, and Brazil, and since 2020, we have also sourced green coffee beans from over ten countries in Latin America, Africa, and Asia to diversify our supply chain and offer our customers specialty and limited-time-only roasts.
We utilize a three-pronged approach to craft a unique brand that resonates with our customer base and enhances brand loyalty: Inform, Inspire, and Entertain. We want our audience to love coffee as much as we do, so we strive to inform them on all the awesome facets to coffee.
We utilize a three-pronged approach to craft a unique brand that resonates with our customer base and enhances brand loyalty: Inform, Inspire, and Entertain. We want our audience to love coffee as much as we do, so we strive to inform them on all the awesome facets of coffee.
The losses were recorded for the year ended December 31, 2022, each representing the following: • Upon the Closing on February 9, 2022, we recognized earn-out liabilities of $218.7 million as a result of certain stockholders being entitled to receive up to 21,241,250 earn-out shares, in the form of Common Units of Authentic Brands and Class A common stock of the Company, if certain milestones were satisfied.
The losses were recorded for the year ended December 31, 2022, each representing the following: • Upon the closing of our Business Combination on February 9, 2022, we recognized earn-out liabilities of $218.7 million as a result of certain stockholders being entitled to receive up to 21,241,250 earn-out shares, in the form of Common Units of Authentic Brands and Class A Common Stock of the Company, if certain milestones were satisfied.
In addition, the tax benefit for the year ended December 31, 2022 reflects the impact of our assessment that we will not be able to record the benefit of certain current year deferred tax assets for which a valuation allowance is expected.
In addition, the tax benefit for the year ended December 31, 2023 reflects the impact of our assessment that we will not be able to record the benefit of certain current year deferred tax assets for which a valuation allowance is expected.
We recognize expense over the requisite service period for awards expected to vest using the straight-line method and recognize forfeitures as they occur. See Note 13, Equity-Based Compensation within the audited consolidated financial statements appearing elsewhere in this Annual Report on Form 10-K for additional information regarding the accounting for stock-based awards.
We recognize expense over the requisite service period for awards expected to vest using the straight-line method and recognize forfeitures as they occur. See Note 1 4 , Equity-Based Compensation within the audited consolidated financial statements appearing elsewhere in this Annual Report on Form 10-K for additional information regarding the accounting for stock-based awards.
Our Ability to Manage Our Supply Chain Our ability to grow and meet future demand will be affected by our ability to properly plan for and source inventory from a variety of suppliers located inside and outside the United States.
Our Ability to Manage Our Supply Chain Our ability to grow and meet future demand will be affected by our ability to properly plan for and source inventory from a variety of suppliers and co-manufacturers located inside and outside the United States.
The increase is due to growth of corporate infrastructure primarily in information technology software, as well as, professional services to help facilitate the expansion of new and existing sales channels and product lines.
The increase was due to growth of corporate infrastructure primarily in information technology software, as well as, professional services to help facilitate the expansion of new and existing sales channels and product lines.
Consumer appreciation of our brands is primarily reflected in the increase of our sales over the last few years. We expect to continue to develop and implement forward-looking brand strategies that leverage social media and employ targeted digital advertising to expand the reach of our brand.
Consumer appreciation of our brands is primarily reflected in the increase of our sales across our three channels over the last few years. We expect to continue to develop and implement forward-looking brand strategies that leverage social media and employ targeted digital advertising to expand the reach of our brand.
Interest Expense Interest expense consists of interest on our borrowing arrangements, the amortization of debt discounts and deferred financing costs. For the year ended December 31, 2021, interest expense also included the extinguishment of debt costs.
Interest Expense Interest expense consists of interest on our borrowing arrangements, the amortization of debt discounts and deferred financing costs. For the year ended December 31, 2023, interest expense also included the extinguishment of debt costs.
Results of Operations This discussion and analysis pertains to comparisons of material changes in the consolidated financial statements for the years ended December 31, 2022 and 2021.
Results of Operations This discussion and analysis pertains to comparisons of material changes in the consolidated financial statements for the years ended December 31, 2023 and 2022.
Derecognition of a tax position that was previously recognized would occur when the Company subsequently determines that a tax position no longer meets the more likely-than-not threshold of being sustained. See Note 15, Income Taxes for additional information.
Derecognition of a tax position that was previously recognized would occur when the Company subsequently determines that a tax position no longer meets the more likely-than-not threshold of being sustained. See Note 1 6 , Income Taxes for additional information.
The Company evaluates and accounts for uncertain tax positions using a two-step approach: Step 1. Recognition – occurs when the Company concludes that a tax position, based solely on its technical merits, is more-likely-than-not to be sustainable upon examination. Step 2.
The Company evaluates and accounts for uncertain tax positions using a two-step approach: Step 1. Recognition – occurs when the 50 Table of Contents Company concludes that a tax position, based solely on its technical merits, is more-likely-than-not to be sustainable upon examination. Step 2.
Loyalty points will expire if there is no account activity (i.e., if there is no new purchase made or order placed) in a 55 Table of Content s period of twelve months. Conversion of rewards are non-changeable after redemption, have no cash value, and are non-transferable.
Loyalty points will expire if there is no account activity (i.e., if there is no new purchase made or order placed) in a period of twelve months. Conversion of rewards are non-changeable after redemption, have no cash value, and are non-transferable.
Changes in any or all of these estimates and assumptions, or the relationships between these assumptions, impact the Company’s valuation as of each valuation date and may have a material impact on the valuation of the Company’s equity and equity awards.
Changes in any or all of these estimates and assumptions, or the relationships between these assumptions, impact the Company’s valuation as of each valuation date and may have a material impact on the 57 Table of Contents valuation of the Company’s equity and equity awards.
Recent Accounting Pronouncements See Note 2 to our consolidated financial statements included in Item 8 of Part II of this 10-K for more information about recent accounting pronouncements, the timing of their adoption, and our assessment, to the extent it has made one, of their potential impact on our consolidated financial statements.
Recent Accounting Pronouncements See Note 2 , Summary of Significa nt Accounting Pol icies to our consolidated financial statements included in Item 8 of Part II of this 10-K for more information about recent accounting pronouncements, the timing of their adoption, and our assessment, to the extent it has made one, of their potential impact on our consolidated financial statements.
While we have a strong presence in major markets, we still have the opportunity to grow brand awareness, with less than 20% estimated aided awareness in any region of the country. To accomplish this goal, we intend to grow our brand awareness through various avenues such as national television and radio advertising, and through select sponsorship and partnership opportunities.
While we have a strong presence in major markets, we still have the opportunity to grow brand awareness, with 29% estimated aided awareness in any region of the country. To accomplish this goal, we intend to grow our brand awareness through various avenues such as national television and streaming advertising, and through select sponsorship and partnership opportunities.
As a result, the consolidated financial statements may not be comparable to those of companies that comply with new or revised accounting pronouncements as of public company effective dates. 56 Table of Content s
As a result, the consolidated financial statements may not be comparable to those of companies that comply with new or revised accounting pronouncements as of public company effective dates.
The following discussion and analysis should be read in conjunction with the audited annual consolidated financial statements and related notes thereto included in Part II, Item 8, Financial Statements and 46 Table of Content s Supplementary Data in this Annual Report.
The following discussion and analysis should be read in conjunction with the audited annual consolidated financial statements and related notes thereto included in Part II, Item 8, Financial Statements and Supplementary Data in this Annual Report.
Income tax expense was $0.4 million and $0.2 million for the year ended December 31, 2022 and 2021 respectively, representing effective tax rates of 0.11% and zero.
Income tax expense was $0.2 million and $0.4 million for the year ended December 31, 2023 and 2022 respectively, representing effective tax rates of 0.33% and 0.11%.
In addition, we will strive to strengthen our social media footprint across various platforms such as Facebook, Google, and YouTube. Our digital capabilities provide a distinct advantage and enable us to form direct relationships with our customers and capture valuable customer data and insights. We utilize digital marketing tools to optimize our marketing initiatives and drive our brand reach.
In addition, we will strive to strengthen our social media footprint across various platforms such as Facebook, Google, and YouTube. Our digital capabilities provide a distinct advantage and enable us to form direct relationships with our customers and capture valuable customer data and insights.
At Black Rifle Coffee, we develop our roast profiles with the same mission focus we learned as military members serving our country. We produce creative and engaging, cause-related media content, self-produced podcasts, and digital and print journalism in-house to inform, inspire, entertain, and build our community.
At Black Rifle Coffee, we develop our roast profiles with the same mission focus we learned as military members serving our country. We produce creative and engaging cause-related media content to inform, inspire, entertain, and build our community.
Revenue Recognition We recognize revenue in accordance with Accounting Standards Codification 606. Revenue is recognized when a customer obtains control of products or services in an amount that reflects the consideration which we received, or expect to receive, in exchange for those goods or services.
Revenue is recognized when a customer obtains control of products or services in an amount that reflects the consideration which we received, or expect to receive, in exchange for those goods or services.
Financing Activities Net cash provided by financing activities was $167.3 million for the year ended December 31, 2022, compared to net cash provided by financing activities of $9.7 million for the year ended December 31, 2021.
Financing Activities Net cash provided by financing activities was $21.4 million for the year ended December 31, 2023, compared to net cash provided by financing activities of $167.3 million for the year ended December 31, 2022.
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations Unless the context otherwise requires, references to “we,” “us,” “our,” “Black Rifle Coffee,” “Black Rifle Coffee Company,” “BRCC” and the “Company” in this section are to the business and operations of BRC Inc. and its consolidated subsidiaries.
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations Unless the context otherwise requires, references to “we”, “us”, “our”, “Black Rifle Coffee”, “Black Rifle Coffee Company”, “BRCC” and the “Company” in this section are to the business and operations of BRC Inc. and its consolidated subsidiaries.
Customers can earn 1% or 3% on purchases depending on whether the purchase is a subscription or non-subscription. BRCC reserves the right in its sole discretion to modify, change, add, or remove activities which can be accomplished to earn points at any time. Under the Loyalty Program, customers may redeem rewards as they reach minimum thresholds per reward.
Customers can earn points based on the tier level. BRCC reserves the right in its sole discretion to modify, change, add, or remove activities which can be accomplished to earn points at any time. Under the Loyalty Program, customers may redeem rewards as they reach minimum thresholds per reward.
Quality control is also a critically important part of our manufacturing and supply chain operations. 68% of our bagged roasted coffee is roasted in-house and 100% is roasted in the United States. Our licensed, Coffee Quality Institute-certified grader and former Green Beret, Edwin Parnell, leads cupping, grading, scoring, and sourcing of our coffees.
Quality control is also a critically important part of our manufacturing and supply chain operations. 100% of our coffee is roasted in the United States. Our licensed, Coffee Quality Institute-certified grader and former Green Beret, leads cupping, grading, scoring, and sourcing of our coffees. We also must effectively manage our co-manufacturers and suppliers.
We own two roasting facilities, one focused on large batch roasting and the other on small batch roasting. Our coffee beans are primarily roasted in-house and 100% in the United States to ensure consistency and quality of product. Our coffee beans are sourced only from the highest quality suppliers. Our state-of-the-art equipment guarantees freshness and offers significant capacity for expansion.
Our coffee beans are primarily roasted in-house and 100% in the United States to ensure consistency and quality of product. Our coffee beans are sourced only from the highest quality suppliers. Our state-of-the-art equipment guarantees freshness and offers significant capacity for expansion.
Key Factors Affecting Our Performance Our Ability to Increase Brand Awareness Our ability to promote and maintain brand awareness and loyalty is critical to our success. We believe we have created a highly efficient marketing strategy that provides us the ability to increase brand awareness and drive consumer 47 Table of Content s interaction.
We anticipate limited growth in this channel during 2024. Key Factors Affecting Our Performance Our Ability to Increase Brand Awareness Our ability to promote and maintain brand awareness and loyalty is critical to our success. We believe we have created a highly efficient marketing strategy that provides us the ability to increase brand awareness and drive consumer interaction.
For the comparisons of the years ended December 31, 2021 and 2020, see the Management’s Discussion and Analysis of Financial Condition and Results of Operations in Part II, Item 7 of our 2021 49 Table of Content s Annual Report on Form 10-K. The following table represents the selected results of operations for BRCC for the periods indicated.
For the comparisons of the years ended December 31, 2022 and 2021, see the Management’s Discussion and Analysis of Financial Condition and Results of Operations in Part II, Item 7 of our 2022 Annual Report on Form 10-K.
Wholesale customers include large national retailers, regional retailers, distributors, and dealers. Our Ability to Acquire and Retain Customers at a Reasonable Cost We believe our ability to consistently acquire and retain customers at a reasonable cost will be a key factor affecting our future performance.
Our Ability to Acquire and Retain Customers at a Reasonable Cost We believe our ability to consistently acquire and retain new customers at a reasonable cost will be a key factor affecting our future performance.
Our Ability to Expand Our Product Line Our goal is to substantially expand our product line over time to increase our growth opportunity and reduce product-specific risks through diversification into multiple products each designed around daily use. Our pace of growth will be partially affected by the cadence and magnitude of new product launches over time.
The pace of our growth rate will be affected by the repeat usage dynamics of existing and newly acquired customers. Our Ability to Expand Our Product Line Our goal is to continue to expand our product line over time to increase our growth opportunity and reduce product-specific risks through diversification into multiple products each designed around daily use.
Our Wholesale channel includes products sold to an intermediary such as grocery stores, who in turn sell those products to consumers, including the FDM customer set, such as Walmart, specialty retail, such as Bass Pro, and convenience stores which primarily sell our RTD products, such as 7-Eleven.
Our Wholesale channel includes products sold to an intermediary such as grocery stores, including the FDM customer set, such as Walmart, Specialty Retailers, such as Bass Pro, and convenience stores which primarily sell our RTD products, such as 7-Eleven. Our DTC channel includes our e-commerce business, through which consumers order our products online and products are shipped to them.
As an example, we launched RTD coffee products in March 2020 with two 11-ounce SKUs. We have since added three high-caffeine, boldly-flavored 15-ounce SKUs and another 11-ounce SKU.
Our pace of growth will be partially affected by the cadence and magnitude of new product launches over time. As an example, we launched RTD coffee products in March 2020 with two 11-ounce SKUs. We have since added another 11-ounce SKU and three high-caffeine, boldly-flavored 15-ounce SKUs.
DTC channel net revenue decreased in aggregate by $6.3 million, or 3.8%, to $159.0 million for the year ended December 31, 2022 as compared to $165.3 million for the corresponding period in 2021 primarily due to a decrease in the number of customers as we strategically shifted advertising spend to other channels and areas with favorable returns.
DTC channel net revenue decreased by $15.8 million, or 9.9%, to $143.2 million for the year ended December 31, 2023 as compared to $159.0 million for the corresponding period in 2022 primarily due to lower customer acquisition as we strategically shifted advertising spend to other areas with higher returns.
In addition, General and Administrative expenses increased $38.3 million, or 146.5%, to $64.5 million for the year ended December 31, 2022 as compared to $26.2 million for the same period 2021.
In addition, General and administrative expenses increased $7.1 million, or 11.1%, to $71.6 million for the year ended December 31, 2023 as compared to $64.5 million for the corresponding period in 2022.
Our significant accounting estimates are discussed in more detail in Note 2 to our consolidated financial statements included in Item 8 of Part II of this 10-K. The critical accounting estimates, assumptions, and judgments that we believe have the most significant impact on our consolidated financial statements are described below.
While we believe that our estimates, assumptions and judgements are reasonable, they are based on information available when the estimate was made. Our significant accounting estimates are discussed in more detail in Note 2 , Summary of Significant Accounting Policies to our consolidated financial statements included in Item 8 of Part II of this 10-K.
Our Ability to Grow Our Customer Base in Our Outposts and Wholesale Channels We are currently growing our customer base through our Outposts and Wholesale channels. We continue to grow our retail footprint through Company-owned and franchised Outposts. Our products are also sold through a growing number of physical retail channels.
Our Ability to Grow Our Customer Base in Our Wholesale Channel We are currently growing our customer base through our Wholesale channel. Our products are also sold through a growing number of physical retail channels. Wholesale customers include large national retailers, regional retailers, distributors, and dealers.
We are a digitally native brand with an established omnichannel business model, reaching our customers through one reportable segment that is comprised of three channels: Direct to Consumer, Wholesale, and Outposts. Our DTC channel includes our e-commerce business, through which consumers order our products online and products are shipped to them.
We are a digitally native brand with an established omnichannel business model, reaching our customers through one reportable segment that is comprised of three channels.
The increase for the year ended December 31, 2022 as compared to the prior year was due to the receipt of a credit card rebate of $0.3 million and a $0.1 million grant in 2022 which was offset by recurring bank and credit card fees.
The decrease for the year ended December 31, 2023 as compared to the prior year was due to the receipt of a credit card rebate of $0.3 million and a $0.1 million grant in 2022. For the year ended December 31, 2022, we recognized losses from the change in fair value of earn-out liabilities, warrant liabilities and derivative liabilities.
Four of these SKUs have grown to become top-30 products in the RTD coffee category on a dollar to percent average cost value basis and can be found in more than 61,000 locations across the country.
Four of these SKUs have grown to become top-35 products in the RTD coffee 49 Table of Contents category both in units and dollars in 2023 and can be found in more than 86,840 locations across the country.
Every day we work to inspire our customers; we take pride in the coffee we roast, the veterans we employ and the causes we support. We give back to the community and are committed to support those who serve. Our “Entertain” marketing strategy drives brand excitement, along with valuable customer insights and data.
Every day we work to inspire our customers; we take pride in the coffee we roast, the Veterans we employ and the causes we support. We give back to the community and are committed to support those who serve. To support our premium quality product, we own one roasting facility focused on large and small batch roasting.
Cost of Goods Sold Cost of goods sold primarily includes raw material costs, labor costs directly related to producing our products, including wages and benefits, shipping costs, and other overhead costs related to certain aspects of production, warehousing, fulfillment, shipping, and credit card fees. 48 Table of Content s Operating Expenses Operating expenses consist of marketing and advertising expenses related to brand marketing campaigns through various online platforms, including email, digital, website, social media, search engine optimization, as well as performance marketing efforts, including retargeting, paid search and product advertisements, as well as social media advertisements and sponsorships.
Operating Expenses Operating expenses consist of marketing and advertising expenses related to brand marketing campaigns through various online platforms, including email, digital, website, social media, search engine optimization, as well as performance marketing efforts, including retargeting, paid search and product advertisements, as well as social media advertisements and sponsorships.
The Business Combination In February 2022, we completed the Business Combination and as a result of the consummation of a series of mergers in connection therewith, Authentic Brands became a subsidiary of BRC Inc., with BRC Inc. acting as sole managing member thereof as a public benefit corporation.
This growth was primarily driven by our entry into the FDM market for bagged coffee and rounds products, and increases in RTD product sales, both of which are included in the Wholesale channel. 48 Table of Contents The Business Combination In February 2022, we completed the Business Combination and as a result of the consummation of a series of mergers in connection therewith, Authentic Brands became a subsidiary of BRC Inc., with BRC Inc. acting as sole managing member of Authentic Brands as a public benefit corporation.
Components of Our Non-Operating Income (Expense) Comparison of the year ended December 31, 2022 to the year ended December 31, 2021 Fiscal Year December 31, ($ in thousands) 2022 2021 $ Change % Change Non-operating income (expense) Interest expense $ (1,593) $ (2,033) $ 440 22 % Other income (expense), net 339 (55) 394 716 % Change in fair value of earn-out liability (209,651) — (209,651) — Change in fair value of warrant liability (56,675) — (56,675) — Change in fair value of derivative liability (2,335) — (2,335) — Total non-operating (expense) $ (269,915) $ (2,088) Interest expense for the year ended December 31, 2022 decreased $0.4 million, or 21.6%, to $1.6 million as compared to $2.0 million for the corresponding period in 2021 .
For further discussion around the costs incurred related to this dispute, see Note 18 , Commitments and Contingenc ie s . 53 Table of Contents Components of Our Non-Operating Income (Expenses) Comparison of the year ended December 31, 2023 to the year ended December 31, 2022 ( dollars in thousands): Year Ended December 31, 2023 2022 $ Change % Change Non-operating income (expenses) Interest expense, net $ (6,330) $ (1,593) $ 4,737 297 % Other income, net 10 339 (329) 97 % Change in fair value of earn-out liability — (209,651) 209,651 100 % Change in fair value of warrant liability — (56,675) 56,675 100 % Change in fair value of derivative liability — (2,335) 2,335 100 % Total non-operating expenses $ (6,320) $ (269,915) $ 263,595 (98) % Interest expense for the year ended December 31, 2023 increased $4.7 million, or 297.4%, to $6.3 million as compared to $1.6 million for the corresponding period in 2022.
Customer retention held steady throughout the year. Cost of goods sold For the year ended December 31, 2022, cost of goods sold increased $58.7 million, or 40.9%, to $202.1 million as compared to $143.4 million over the corresponding period prior year.
For the year ended December 31, 2023, cost of goods sold increased $68.0 million, or 33.7%, to $270.2 million as compared to $202.1 million over the corresponding period in 2022. Gross margin decreased 120 basis points to 31.7% for the year ended December 31, 2023 as compared to 32.9% for the year ended December 31, 2022.
Salaries, wages and benefits increased $25.5 million, or 65.9%, to $64.3 million for the year ended December 31, 2022, compared to $38.7 million for the corresponding period in 2021.
Operating expenses for the year ended December 31, 2023 increased $8.7 million, or 5.2%, to $175.7 million as compared to $166.9 million for the corresponding period in 2022.
Income Tax Provision Fiscal Year December 31, ($ in thousands) 2022 2021 Income tax expense 367 178 Effective income tax rate 0.11 % — For further detail of income tax matters, see Note 15, Income Taxes , within the audited consolidated financial statements appearing elsewhere in this Annual Report on Form 10-K.
The change in fair value of the derivative liability was primarily a result of the increase of the closing price of our Class A Common Stock listed on the NYSE from February 9, 2022 to May 4, 2022. 54 Table of Contents Income Tax Provision ( dollars in thousands ) Year Ended December 31, 2023 2022 Income tax expense $ 185 $ 367 Effective income tax rate 0.33 % 0.11 % For further detail of income tax matters, see Note 1 6 , Income Taxes , within the audited consolidated financial statements appearing elsewhere in this Annual Report on Form 10-K.
Our primary sources of cash are (1) cash on hand, (2) cash provided by operating activities, and (3) net borrowings from our credit facilities. As of December 31, 2022, our cash and cash equivalents were $39.0 million, our working capital 52 Table of Content s was $83.1 million, and we had $31.3 million of available borrowings under our credit facilities.
Our primary sources of cash are (1) cash on hand, (2) cash provided by operating activities, and (3) net borrowings from our credit facilities.
Overview Black Rifle Coffee Company is a rapidly growing, veteran-controlled and led coffee and media company with a loyal and quickly expanding community of more than 2 million consumers through our DTC channel since inception, more than 270,000 active Coffee Club subscribers, and 13.1 million social media followers across BRCC’s, co-founders’, and key media personalities’ accounts as of December 31, 2022.
Overview Black Rifle Coffee Company is a rapidly growing Veteran-controlled and led coffee and media company that operates through three channels: Wholesale, Direct to Consumer, and our Outposts. Our business started with a loyal and quickly expanding community of consumers through our DTC channel and we now have more than 225,800 active Coffee Club subscribers as of December 31, 2023.
In addition, in 2022, we continued to strengthen our marketing and advertising capabilities, but focused our spend on areas and activities with higher returns. This resulted in increased marketing and advertising expenses of $1.8 million, or 5.0%, to $38.2 million for the year ended December 31, 2022, compared to $36.4 million for the corresponding period in 2021.
This resulted in decreased marketing and advertising expenses of $7.4 million, or 19.3%, to $30.8 million for the year ended December 31, 2023, compared to $38.2 million for the corresponding period in 2022.
The $11.1 million increase in net cash used was primarily due to continued spend on capital expenditure projects for our Outpost locations, roasting facilities, and software and other information technology investments.
The $8.9 million decrease in net cash used in investing activities was primarily due to a decrease in capital expenditure projects for our Outpost locations, roasting facilities, and software and other information technology investments, as well as proceeds of $5.7 million from the sale of the land, buildings and improvements of a Company owned Outpost and a corporate office location during 2023.
Our Ability to Drive Repeat Usage of Our Products We gain substantial economic value from repeat users of our products who consistently re-order our products. The pace of our growth rate will be affected by the repeat usage dynamics of existing and newly acquired customers.
We will continue to utilize marketing measurement to ensure our advertising is effective while expanding our brand reach. Our Ability to Drive Repeat Usage of Our Products We gain substantial economic value from repeat users of our products who consistently re-order our products.
As of December 31, 2022, we have entered into operating leases that have not yet commenced of $66.8 million, primarily related to real estate leases. These leases will commence between fiscal year 2023 and fiscal year 2024 with lease terms of 10 years to 20 years.
Liabilities relating to operating leases that have commenced as of December 31, 2023 have been reported on the balance sheet as operating lease liabilities. As of December 31, 2023, we have entered into operating leases that have not yet commenced which primarily relate to real estate leases.
Net cash used in operating activities was $116.2 million for the year ended December 31, 2022, compared to net cash used by operating activities of $7.7 million for the year ended December 31, 2021.
Cash Flows from Operating, Investing and Financing Activities The following table summarizes our cash flows from operating, investing and financing activities for the periods indicated (dollars in thousands) : Year Ended December 31, 2023 2022 Cash flows provided by (used in): Operating activities $ (24,967) $ (116,190) Investing activities $ (21,508) $ (30,404) Financing activities $ 21,398 $ 167,250 Comparison of the year ended December 31, 2023 to the year ended December 31, 2022 Operating Activities Net cash used in operating activities was $25.0 million for the year ended December 31, 2023, compared to net cash used in operating activities of $116.2 million for the year ended December 31, 2022.
The Wholesale channel performance was primarily driven by entry into the FDM market and continued growth in our RTD product from increased points of distribution and new products available for sale. 50 Table of Content s For the year ended December 31, 2022, net revenue for our Outpost channel increased $10.9 million, or 90.5%, to $22.9 million as compared to $12.0 million for the corresponding period in 2021 primarily due to increased store openings in 2022.
For the year ended December 31, 2023, net revenue for our Outpost channel increased $4.4 million, or 19.2%, to $27.3 million as compared to $22.9 million for the corresponding period in 2022 primarily due to increased store openings in 2023. We opened a total of three new Company-operated Outposts in Texas in 2023.
For the year ended December 31, 2022, the $108.5 million increase in cash used in operating activities was due to a net loss from operations of $338.0 million compared to net loss of $13.8 million for the same period in 2021.
The decrease in cash used in operating activities was due to a decrease in net loss of $281.3 million from $338.0 million in 2022 to $56.7 million in 2023 as well as cash inflows from inventory of $48.1 million as a result of inventory reductions during the current year compared to a build in inventory in the prior year, and a $27.7 million increase in cash inflows due to accounts payable.
For the year ended December 31, 2022, net revenue from our Wholesale channel increased $63.6 million, or 114.1%, to $119.4 million as compared to $55.8 million for the corresponding period in 2021.
Our revenue, net reflects the impact of product returns as well as discounts and fees for certain sales programs, trade spend, promotions, and loyalty rewards. Net revenue for the year ended December 31, 2023 increased $94.3 million, or 31.3%, to $395.6 million as compared to $301.3 million for the corresponding period in 2022.
Investing Activities Net cash used in investing activities was $30.4 million for the year ended December 31, 2022, compared to net cash used in investing activities of $19.3 million for the year ended December 31, 2021.
These decreases were offset by non-cash adjustments to net income as a result of the change in fair value of warrants, earn-outs and derivatives of $268.7 million in 2022 which did not occur in 2023. 55 Table of Contents Investing Activities Net cash used in investing activities was $21.5 million for the year ended December 31, 2023, compared to net cash used in investing activities of $30.4 million for the year ended December 31, 2022.
We have experienced strong revenue growth since inception. Revenue increased to $301.3 million for the year ended December 31, 2022, from $233.1 million for the year ended December 31, 2021, representing growth of 29.3%.
Our Outpost channel includes our Company-operated and franchised Black Rifle Coffee retail coffee shop locations. We continue to experience strong revenue growth. Revenue increased to $395.6 million and $301.3 million for the years ended December 31, 2023 and 2022, respectively, representing growth of 31.3% year over year.
The increase was primarily driven by higher sales along with product mix shift, as RTD has higher product costs and lower margins as compared to bagged coffee. Gross margin decreased 560 basis points to 32.9% for the year ended December 31, 2022 as compared to 38.5% for the year ended December 31, 2021.
The decrease in gross margin was as a result of product mix shift, as RTD has higher product costs and lower margins as compared to bagged coffee, an increase in our inventory reserve as a result of excess RTD inventory, and inflation in raw materials and finished goods.
Removed
Growth in the year ended December 31, 2022, was primarily driven b y significant increases in RTD product sales in the Wholesale channel, entry into the Food, Drug and Mass market in the Wholesale channel for bagged coffee and rounds products, and additional store openings in the Outpost channel.
Added
We are now experiencing rapid growth in our Wholesale channel as we have continued our expansion into grocery stores, specialty stores, and other intermediaries. We have also experienced growth in our Outpost channel as we opened additional company owned stores and franchises in 2023.
Removed
Our Outpost channel includes revenue from our Company-operated and franchised Black Rifle Coffee retail coffee shop locations.
Added
Trends Certain trends affecting our business within the respective sales channels are as follows: • Wholesale channel revenue has increased as we have added new customers and we continue to grow our presence in the FDM market.
Removed
We opened a total of seven new Company-operated Outposts in Texas and Arizona in 2022. In addition, we added three franchise stores.
Added
We expect to see increased revenue within this channel as we increase investment to obtain new customers and expand in the FDM market. • DTC revenue growth has slightly declined as a result of our decision to redirect investments to other growing areas of the business as we continue to experience elevated DTC customer acquisition costs. • Outpost channel revenue has increased as we continue to open additional stores during 2023.
Removed
Inflation has negatively impacted our costs for raw materials and finished goods, primarily in shipping, green coffee beans, and RTD product. Operating expenses Operating expenses for the year ended December 31, 2022 increased $65.7 million, or 64.9%, to $166.9 million as compared to $101.3 million for the corresponding period in 2021.
Added
Cost of Goods Sold Cost of goods sold primarily includes raw material costs, labor costs directly related to producing our products, including wages and benefits, shipping costs, and other overhead costs related to certain aspects of production, warehousing, fulfillment, shipping, and credit card fees.
Removed
We increased employee headcount to respond to our significant sales growth and invested in existing channels as we built additional capabilities to add incremental revenue streams and expanded products lines, which resulted in higher salaries, wages and benefits.
Added
The following table summarizes net sales by channel for the periods indicated ( dollars in thousands): Year Ended December 31, 2023 2022 $ Change % Change Wholesale $ 225,059 $ 119,360 $ 105,699 89 % Direct to Consumer 143,232 159,022 (15,790) (10) % Outpost 27,332 22,931 4,401 19 % Total net sales $ 395,623 $ 301,313 $ 94,310 31 % For the year ended December 31, 2023, net revenue from our Wholesale channel increased $105.7 million, or 88.6%, to $225.1 million as compared to $119.4 million for the corresponding period in 2022.
Removed
The decrease was related to the Company having lower interest rates on outstanding debt when compared to 2021. The Company had higher debt balances in 2022 as compared to the prior year; however the weighted average interest rate in 2022 was lower than 2021.
Added
The Wholesale channel performance was primarily driven by entry into, and growth in, the FDM market along with continued distribution and innovation in our RTD product line.
Removed
The weighted average interest rate on debt 51 Table of Content s for the year ended December 31, 2022 was 3.5% as compared to 4.9% in the corresponding period in 2021. Other income (expense), net consists of miscellaneous income (expense) items such as bank and credit card fees.
Added
In addition, we added seven franchise stores. 52 Table of Contents Cost of goods sold Cost of goods sold primarily includes raw material costs, labor costs directly related to producing our products including wages and benefits, shipping costs, and other overhead costs related to certain aspects of production, warehousing, fulfillment expense, and credit card fees.
Removed
For the year ended December 31, 2022, we recognized losses from the change in fair value of earn-out liabilities, warrant liabilities and derivative liabilities.
Added
Operating expenses Operating expenses consist of marketing and advertising expenses related to brand marketing campaigns through various online platforms, including email, digital, website, social media, search engine optimization, as well as performance marketing efforts including retargeting, paid search and product advertisements, as well as social media advertisements and sponsorships.
Removed
The change in fair value of the derivative liability was primarily a result of the increase of the closing price of our Class A Common Stock listed on the NYSE from February 9, 2022 to May 4, 2022.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

3 edited+3 added−2 removed7 unchanged
Biggest changeThe carrying value of the variable interest rate debt approximates its fair value as the borrowings are based on market interest rates. A hypothetical increase of interest rates of 5% on our outstanding variable rate borrowings would result in additional interest expense of approximately $1.7 million.
Biggest changeAs of December 31, 2023, we had $50.0 million outstanding on our Term Loan Facility and $23.9 million outstanding on our ABL Facility with available borrowings of $15.7 million. The carrying value of the variable interest rate debt approximates its fair value as the borrowings are based on market interest rates.
An increasing rate of inflation in the future may have a material adverse effect on our ability to maintain current levels of gross profit and operating expenses, if the selling prices of our products do not increase with these increased costs. 57 Table of Content s
An increasing rate of inflation in the future may have a material adverse effect on our ability to maintain current levels of gross profit and operating expenses, if the selling prices of our products do not increase with these increased costs. 58 Table of Contents
Inflation Inflationary factors such as increases in the cost of our products, overhead costs and parcel freight costs have had an impact on our operating results.
A hypothetical increase of interest rates of 5% on our outstanding variable rate borrowings would result in additional interest expense annually of approximately $3.7 million. Inflation Inflationary factors such as increases in the cost of our products, overhead costs and parcel freight costs have had an impact on our operating results.
Removed
Interest Rate Risk In order to maintain liquidity and fund certain business operations, our Senior Credit Facility bears a variable interest rate based on the BSBY plus 2.25%. The Equipment Line bears a variable interest rate based on the BSBY plus 3.50%. We seek to manage exposure to adverse interest rate changes through our normal operating and financing activities.
Added
Interest Rate Risk Our Term Loan Facility bears interest at a rate per annum equal to either (i) a base rate plus 7.50% or (ii) term SOFR plus 8.50%.
Removed
As of December 31, 2022, we had $30 million outstanding on the Senior Credit Facility with available borrowings of $21.2 million . As of December 31, 2022, we had $3.3 million outstanding on the Equipment Line with available borrowings of $5.9 million.
Added
Borrowings under our ABL Facility bear interest at a rate per annum of either (i) the Base Rate (as defined below) plus a margin ranging from 1.50% to 2.00% or (ii) term SOFR plus a margin ranging from 2.60% to 3.10%.
Added
"Base Rate" means, for any day, the base commercial lending rate of PNC as publicly announced to be in effect from time to time. We seek to manage exposure to adverse interest rate changes through our normal operating and financing activities.

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