Black Rifle's $11.7M write-down widens loss; plant sale set to trim debt

BRC Inc. sells Black Rifle Coffee, a brand founded in 2014 by Army veteran Evan Hafer.¹ Most of its sales go through stores such as grocery chains, which it calls wholesale: $72.5 million of the third quarter's $108.0 million, up 8.1%. Growth came from entering dollar stores, gains in grocery, and price increases.² Direct-to-consumer sales rose 8.5% to $30.2 million, the fourth straight quarter of growth, though lower subscription revenue and a brand sale held them back. The company also runs coffee shops it calls Outposts, some its own and some franchised.³ One customer and its affiliate supplied 28% of quarterly sales, and the largest wholesale partner was 30% of 2025 sales. Most beans come from Colombia, Brazil and Nicaragua, and all bagged coffee is roasted in America, until now partly at the company's own plant in Manchester, Tennessee.⁴

2025 was a hard year. Revenue was $398.3 million and adjusted EBITDA was $21.4 million.¹ EBITDA means earnings before interest, taxes, depreciation and amortization. The company's adjusted version also adds back stock pay, write-downs, lease and legal costs, and restructuring fees.² In the third quarter of 2025 the company sold new shares for $40.3 million before fees. A cost plan cut about 84 jobs and cost about $7.0 million.³ Management expects that plan to save more than $12.7 million a year, and about $11.7 million of savings had been realized by September 30. In May 2026 it raised its 2026 goal to at least 35% adjusted EBITDA growth.⁴ A 1-for-10 reverse stock split took effect on August 21, 2026, and brought the stock back above the New York Stock Exchange's $1.00 minimum price, though the company says it cannot promise to stay in compliance. Every price in this report is after the split.⁵

Coffee makers live with swings in bean prices and tariffs. In August the company said it expected cheaper green, or unroasted, coffee to lift margins in the second half.¹ In this quarter it still named higher green coffee costs, more trade spending and higher marketplace fees as drags on margin. Tariff refunds reached the wider industry too: Keurig Dr Pepper booked a $99 million benefit from them in the same quarter.²

Founder Evan Hafer held about 51% of the votes as of the 2025 annual report. BRC Inc. owns 38.3% of its operating subsidiary, so only $3.3 million of the $8.7 million loss was attributed to it, or $0.28 per Class A share.

Gross profit rose 8.0% to $40.1 million. Gross margin, the share of sales left after product costs, edged up to 37.1% from 36.9%.¹ Packaged coffee distribution, a measure of how widely stores carry it, rose 4.6 points to 58.7%, while ready-to-drink coffee slipped to 52.8% from 53.3%. Marketing spending rose 18.1% to $10.3 million.² Other operating expenses rose to $9.3 million from $0.6 million, driven by the $11.7 million Outpost write-down and a legal accrual and partly offset by gains on lease changes, which turned operating income of $0.5 million a year earlier into an operating loss of $7.5 million.³

The profit gain leans on a one-time item. Gross margin included about $3.5 million of refunds of tariffs paid earlier. Without them, gross profit would have been about $36.6 million, below last year's $37.1 million.¹ The refunds are not among the items the company's adjusted EBITDA definition adds back or removes, so they stay inside the $9.5 million. Without them it was about $6.0 million, below the $8.4 million of a year earlier.² The adjusted figure also adds back the $11.7 million write-down and $2.8 million of stock pay. Before those add-backs, plain EBITDA was a loss of $5.7 million for the quarter and a profit of only $0.9 million so far this year.³

Project Core is the company's multi-year plan to focus on its core coffee business and brand. Its first bill came in the third quarter.¹ The $11.7 million non-cash write-down was on Outpost locations and split into $9.0 million of equipment and $2.7 million of lease rights.² The company also shortened leases on eight locations. That cost $3.5 million of fees, partly offset by a $3.2 million non-cash accounting gain. The unpaid fees will be paid over the next twelve months from cash and the revolving credit line.³

It plans to close 12 of its 17 company-run Outposts by the end of the first quarter of 2027, about 70% of them.¹ Outposts were about 5% of third-quarter sales and shrank 8.0%. Management expects the closures to cut both Outpost revenue and costs.² It also sold a small non-core online brand at a $0.4 million loss. The company expects about $3 million of fourth-quarter revenue headwinds from the brand sale and the shop closures.³ It says it cannot yet estimate Project Core's total cost, and it warns the benefits may come late or not at all.⁴

The biggest step is the plant. After the quarter ended, the company agreed to sell its Manchester plant to Cascade Coffee, a longtime manufacturing partner, for a base price of $17.0 million.¹ The price is $10.0 million in cash and a $7.0 million note that Cascade pays a year after closing. The credit agreement requires about $8.6 million of the cash to repay the term loan, leaving roughly $1.4 million.² For that note, the company becomes Cascade's lender for a year.³

What the company gives up is the plant where it roasted its own beans. It carried the plant at $17.1 million as held for sale and booked no gain or loss.¹ The company's release says the sale secures a long-term production relationship with the buyer. That leans harder on outside roasters, a risk the company lists itself.² It is already in court with one co-manufacturer, which sued in Riley County, Kansas, in 2024. The company won partial summary judgment on September 11, 2026, but has accrued $3.6 million for the case.³ Its supplier deals also carry $107.8 million of minimum purchase commitments, with take-or-pay terms.⁴

Cash was about $9.2 million at September 30, with $49.9 million more available to borrow. Borrowing depends on a borrowing base and covenants, and the 2025 annual report lists a minimum liquidity of $7.5 million and a fixed charge coverage ratio of at least 1.10 among the loan terms.¹ The company says it meets its covenants with no defaults.² Debt is a term loan of $34.9 million at a floating benchmark rate plus 6.00% to 6.50%. About $9.1 million is due in the rest of 2026, nearly all of it the $8.6 million plant-sale repayment. Another $21.8 million is due in 2029, when the loans mature on December 27.³ Nearby cash needs include the lease fees, the $3.6 million legal accrual, about $2.5 million of lease payments over twelve months, and severance due by the end of the fourth quarter.⁴

Cash flow is the better measuring stick. Operating cash flow was $10.4 million through September, against an outflow a year earlier, and equipment spending was $1.6 million. That is about $8.8 million of free cash flow by the company's own definition.¹ Net debt, the loan principal minus cash, was about $25.7 million. Trailing adjusted EBITDA, this year's results through September plus the fourth quarter of 2025, was about $32.8 million, so net debt is about 0.8 times on the company's own net leverage formula.² After the plant-sale repayment the loan would be about $26.3 million. On plain EBITDA the picture is much worse, because EBITDA through September was only $0.9 million. Adjusted EBITDA through September covered net interest of $3.6 million about 6.4 times.³

There were 12,055,408 Class A and 13,012,732 Class B shares outstanding just before the filing.¹ Stock awards add 695,240 restricted units and 1,075,938 performance units: 846,241 from an earlier key-employee grant and 229,697 granted in 2026, which can pay out from zero to twice their target. Counting those, the share count is about 26.8 million.² Another 846,545 options carry an average exercise price of $28.11, far above the stock price. The term loan is senior secured, so lenders are paid before shareholders.³ No officer or director started or ended a pre-set trading plan in the third quarter. The 10-Q also warns the company may seek more debt or equity financing.⁴

Management reaffirmed its 2026 goals: revenue growth of at least 8%, gross margin of 34% to 36%, and adjusted EBITDA growth of at least 35%. These are goals, not results.¹ On 2025's base, that means revenue of at least about $430.2 million and adjusted EBITDA of at least about $28.9 million. After $324.3 million of revenue and $23.1 million of adjusted EBITDA through September, the fourth quarter needs at least about $105.9 million and $5.8 million.² Both floors sit below last year's fourth quarter, which had $112.7 million of revenue and $9.7 million of adjusted EBITDA. The revenue floor is about 6.1% lower. A reader can take that two ways: the bar is easy to clear, or management sees a softer quarter ahead.³

The bull case: wholesale is growing, store distribution is widening, and cash flow has turned positive. Adjusted EBITDA through September nearly doubled to $23.1 million from $11.7 million.¹ The plant sale swaps a fixed asset for $10.0 million of cash and a $7.0 million one-year note, and should cut the loan by about 25%.² Closing most company shops also removes a shrinking channel. Debt is modest at about 0.8 times adjusted EBITDA, with $49.9 million of borrowing room.³

The bear case, strongest first: refunds that may not repeat carried the quarter's profit growth, and the guidance floor points to a fourth quarter well below last year's.¹ Plain EBITDA was barely positive so far this year, and the company still cannot size Project Core's total cost. After the plant sale it leans more on co-manufacturers, one of which is already suing it. One customer is 28% of sales.²

The results came out after the market closed on November 2, so the $12.67 close, up 0.5% from $12.605 on October 30, does not yet reflect them.¹ The company had said in October that it would release these results after the market closed on November 2, so our price data does not yet hold the market's reaction to them.² It had already run up. It closed at $9.07 on September 15, so it gained about 39% before the results.³ Over the same span the consumer staples sector fund rose about 6.8% and Keurig Dr Pepper about 13.8%. The high in our price file was $12.92 on October 29, and the file starts in mid-September, so a full-year price range is not shown.⁴ At $12.67, both share classes are worth about $318 million. Adding net debt gives about $343 million, about 10.5 times trailing adjusted EBITDA.⁵

Dates to watch: the results call on November 3 at 8:30 a.m. Eastern, severance payments by year-end, and the shop closures by the end of the first quarter of 2027.¹ What would prove the bull case wrong: fourth-quarter adjusted EBITDA under about $5.8 million, a cut to the full-year goal, the plant sale falling through, or a large new Project Core charge. The full-year results will tell.²

Our call, set out below, is that the stock closes above $12.19, its October 28 close, on the next Tuesday after the November 3 results call, judged on that one close alone.¹ The $12.67 close on November 2 came before the after-hours release, so the market's reaction is still unknown, and that price sits only about 3.9% above $12.19 after a 39% run-up since mid-September.² We still lean yes because the reaffirmed 2026 goals, adjusted EBITDA that nearly doubled through September and a plant sale that should cut the loan by about 25% speak to the whole year, while the refund-driven profit gain and the soft fourth-quarter floor are one quarter's issues and that floor is only a minimum.³ The risk is that investors fix on the refund-flattered quarter and give back more than that thin cushion.⁴

No filing gives a closing date or the conditions for the Manchester sale. Until it closes, the $8.6 million loan repayment and the $7.0 million note are plans, not cash.

The company's release calls the sale a long-term production relationship, but no filing gives that deal's price, volume or length.

The company says it cannot yet estimate Project Core's total cost, and the filings give no savings target for it.

The filings give the $3.5 million of refunds in the quarter but say nothing about further refunds in the fourth quarter.

No transcript of the November 3 call was found, so management's answers to analysts are not in this report.

The company says the closures will cut Outpost revenue and costs, but it gives no dollar savings.