SALT LAKE CITY, USA – BRC Inc., a rapidly growing and mission-driven premium coffee company founded to support veterans, active-duty military, first responders and serve a broad customer base by connecting consumers with great coffee and a unique brand experience, today announced financial results for the third quarter of fiscal year 2023.
Third quarter 2023 revenue increased 33.2% to $100.5 million from $75.5 million in the third quarter of 2022. Wholesale revenue increased 90.8% to $61.5 million in the third quarter of 2023 from $32.2 million in the third quarter of 2022.
Direct-to-Consumer (“DTC”) revenue decreased 13.9% to $32.8 million in the third quarter of 2023 from $38.1 million during the third quarter of 2022. Outpost revenue increased 20.3% to $6.2 million in the third quarter of 2023 from $5.2 million in the third quarter of 2022.
The Wholesale channel performance was primarily driven by entry into FDM and growth in the RTD product. In addition, RTD product sales increased through national distributors and retail accounts as the All Commodity Volume percentage increased 465 basis points to 41.9% and the total doors increased 21.4% versus the third quarter of 2022.
The DTC performance was primarily due to decreased marketing spend and the decision to redirect investments to other faster growing areas of the business as we continue to experience elevated DTC customer acquisition costs. The Outpost channel performance was driven by an increase in the company-owned store count, which increased to seventeen in the third quarter of 2023 from eleven company-owned outposts in the third quarter of 2022.
Gross profit increased to $34.1 million in the third quarter of 2023 from $23.9 million in the third quarter of 2022, an increase of 42.2% year to year, with gross margin increasing 220 basis points to 33.9% from 31.7% for the third quarter of 2022, driven by higher sales volume and favorable product mix shift, as coffee and rounds sold to FDM customers has higher gross margin as compared to other channels.
Marketing expenses increased 11.4% to $8.3 million in the third quarter of 2023 from $7.4 million in the third quarter of 2022. As a percentage of revenue, marketing expenses decreased 160 basis points to 8.2% in the third quarter of 2023 as compared to 9.8% in the third quarter of 2022 as marketing and advertising spend has been favorably impacted by channel mix with revenue growth primarily coming from the Wholesale channel, which requires lower marketing spend than DTC, partly offset by an increase in marketing fees related to a strategic partnership.
Salaries, wages and benefits expenses decreased 12.2% to $13.9 million in the third quarter of 2023 from $15.8 million in the third quarter of 2022, as part of an ongoing effort to increase the operating efficiency. As a percentage of revenue, salaries, wages and benefits expenses decreased 720 basis points to 13.8% in the third quarter of 2023 as compared to 21.0% for the third quarter of 2022. The decrease in salaries, wages and benefits expenses was driven by a reduction in headcount as well as a result of a change in estimate for a discretionary payroll accrual and a decrease in stock compensation expense, partially offset by severance expense incurred during the quarter.
General and administrative (“G&A”) expenses increased 19.5% to $19.5 million in the third quarter of 2023 from $16.3 million in the third quarter of 2022. As a percentage of revenue, G&A decreased 220 basis points to 19.4% in the third quarter of 2023 as compared to 21.6% in the third quarter of 2022, benefiting from the continued revenue growth and scale efficiencies. The increase in G&A expenses included $3.1 million of legal fees related to non-routine legal matters arising from the Business Combination in 2022, which continued from the previous quarter.
Net loss for the third quarter of 2023 was $10.7 million and Adjusted EBITDA was $6.2 million. This compares to net loss of $16.1 million and Adjusted EBITDA of $(5.8) million in the third quarter of 2022.
BRC Inc.: Financial Outlook
BRC Inc. provides annual guidance based on current market conditions and expectations for revenue, gross margin and Adjusted EBITDA, which is a non-GAAP financial measure. BRC Inc. expects 2023 results to be within the previously issued guidance range for revenue and adjusted EBITDA.
However, while they expect to see sequential improvements in Gross Margins and Adjusted EBITDA in Q4 they will not be within the previously issued guidance range for Gross Margin as a result of nonrecurring non-cash losses incurred in connection with the plan to right-size the RTD inventory. While the impact of new FDM distribution will be minimal on 2023 results due to timing and reset cadence, they expect these launches and additional planned launches to continue to propel strong growth and improving profitability throughout 2024.
