Matt McGinley : You had a fantastic quarter for gross margin improvement, but you kept the full-year guidance the same at 37%, 40%, despite generating 43% gross margin in the first quarter. I know you called out that DTC revenue release is a 2 point benefit that goes away. But I think you also get some benefit from your barter transactions. But I’m just wondering like what else goes away that was a benefit? Or is there some change in mix that then pushes your gross margin to the lower end of that, or below what you clearly did in the first quarter? Stephen M. Kadenacy BRC Inc. – CFO & Principal Accounting Officer Thanks, Matt. Well, we guided to the upper end of that 37% to 40% range. Right now, we’ve seen 1 quarter above 40%.
We got there quicker. I would say, most of all — with that and quite frankly, our adjusted EBITDA guidance of $32 million to $42 million, we’re being cautious. We’ve had a great quarter. We’ve really tightened the business efficiency over the last 6 months, 7 months relative to a year ago. We’re really running quite efficiently on a number of metrics. However, we recognize that we need to invest back in the business, and that’s going to take effort, particularly on the bottom line. This probably doesn’t completely directed at your gross margin question. But we’re being super cautious to make sure that we can constantly do what we say we’re going to do and exceed expectations.
Chris Mondzelewski: I think just to build on Steve’s point a little bit to illustrate kind of how that might play out, I mean, I think we have some good detail in some of the presentation slides that we released on the margin improvement that we put in place. There are, as we called out, some one-time occurrences. Steve was very clear about that. There’s also a lot of — most of it is driven by clear fundamental changes in the business, and we’re really pleased about that. To Steve’s point, we need to see that play out. But a lot of the decisions that we’ve been able to make on the RTD business and consolidating our supply chain, our planning, you may recall even 3, 4 quarters ago, we talked about putting significantly better planning resources in place for inventory control, but that’s also led to the ability to drive cost out of the supply chain.
Those things are obviously real. And as far as how that plays out in the total P&L, what that does is it gives us great opportunity. So now as we take on new customer distribution, which we’ve talked about, obviously, quite a bit already, we have additional investment we can make there. We’re still not going to be driving heavy price promotion. That’s not what we are. We’re a super premium business, but there are many other investments we can make with customers in order to be able to really get the brand off to a great start. And again, for that reason, we just want to make sure that we’re building a little bit of conservatism into what that looks like.
Matt McGinley : Got it. And for the — what will be the Keurig Dr Pepper partnership provide you that your current co-packers can’t deliver on? You know that, that will take some time for that to show up. But I guess, what channel does that give you access to? And how does that accelerate the top line over time and provide for operating efficiencies?
Chris Mondzelewski: Yes. There’s really, I think, 3 great advantages to doing this. I mean, the first is just — they’re the best in the business. There’s no other way to cut it. They’re the ones that invented this technology. Their ability to produce at the highest quality levels consistently and put the very best product on shelf is astounding. They blew us away with that. And we agreed that for a super premium brand like Black Rifle, not that we aren’t proud of the other pods we’ve distributed historically, but this puts us at an even higher level. The second piece is it gives us some great efficiency. I won’t go into all the details of that. But as I talked about, the ability to consolidate down our supply chain, keep things simpler, being able to have one scaled manufacturer like that, that has such incredible capabilities across the market from a distribution standpoint, et cetera, helps as well.
And then the third, you call out in the beginning is the ability to actually drive incremental sales. So, yes, there are a lot of opportunities. I don’t necessarily want to pin down any specific one because we’re still in the process of building that plan out with Keurig Dr Pepper, but it gives us access to all of the areas that you would find their products, right? So when you think about hotels, office, some of the channels or customers maybe that we don’t want to have to build our own sales force against, they can help us with club. And then we also mentioned this — I mentioned this earlier, their website. They have done a fantastic job of building a coffee business on keurig.com, gives us access to that as well.
Operator: There are no further questions in the queue. I would like to hand the call back over to Christopher Mondzelewski for any closing comments.
