BRC (NYSE:BRCC) reported second-quarter financial results on Tuesday. The transcript from the company's second-quarter earnings call has been provided below.

Benzinga APIs provide real-time access to earnings call transcripts and financial data. Visit https://www.benzinga.com/apis/ to learn more.

View the webcast at https://event.choruscall.com/mediaframe/webcast.html?webcastid=aNmGv9Lo

Summary

Black Rifle Coffee Company reported a 13% increase in net revenue for Q2 2026, driven by strong growth in both wholesale and direct-to-consumer segments.

Packaged coffee sales grew 28.2% in the last quarter, outpacing the category's 9.9% growth rate, with retail sales increasing by 32.5% over the last 52 weeks.

Direct-to-consumer revenue rose by 13.6%, marking the strongest quarterly year-over-year performance in over four years, supported by a successful transition to a new e-commerce platform.

Gross margin expanded slightly to 34.1%, with improvements in inventory management and supply chain productivity expected to drive further margin gains in the second half.

Adjusted EBITDA increased by over 160% to $6.3 million, with operating expenses declining by 21% year over year.

The company maintained its 2026 outlook of at least 8% revenue growth and 35% adjusted EBITDA growth, despite potential headwinds in the convenience channel and non-recurring revenue factors from 2025.

Operational highlights included expanded retail distribution and strong performance in third-party marketplaces, along with strategic investments in community support initiatives.

Management emphasized a disciplined approach to resource allocation, focusing on the most profitable opportunities and maintaining a super premium brand positioning.

Full Transcript

OPERATOR

To the Black Rifle Coffee second quarter 2026 earnings call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. If anyone should require operator assistance, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Matt McGinley, Vice President, Investor Relations. Thank you. You may begin.

Matt McGinley, Vice President of Investor Relations & Strategy

Good morning everyone and thank you for joining BRC's second quarter 2026 financial results conference call. We released our results yesterday and the earnings release and related materials are available on our investor relations website at ir.blackriflecoffee.com. Before we begin, I would like to remind you of the Company's safe harbor provisions regarding forward-looking statements. During today's call, management may make forward-looking statements including guidance and the underlying assumptions.

These statements are based on expectations that involve risks and uncertainties and could cause actual results to differ materially. For a discussion of these risks, please refer to our filings with the SEC. Additionally, this call will include non-GAAP financial measures such as adjusted EBITDA. Whenever we refer to EBITDA, we mean adjusted EBITDA unless otherwise noted. Reconciliations of non-GAAP financial measures to the most directly comparable GAAP measures are included in our earnings release, which was furnished to the SEC and is available on our investor relations website, as well as in the investor presentation available there now.

Please refer to the presentation and turn to slide four. I would now like to turn the call over to Chris Mondzelewski, CEO of BRC.

Chris Mondzelewski, Chief Executive Officer

Thanks, Matt. Good morning everyone. Joining me today are Evan Hafer, our Executive Chairman, Matt Amy, our Chief Financial Officer, and Matt McGinley, our head of investor relations. Through the first half of 2026 we delivered solid growth, strong profitability, and clear evidence that greater discipline across the business is translating into results. We are allocating resources more deliberately and concentrating our efforts on the customers, channels, and products with the greatest potential to create value.

That sharper focus is helping us make decisions faster, direct investment toward the strongest opportunities, and eliminate activity that does not support our most important objectives. We are seeing the impact most clearly in packaged coffee, where expanded retail distribution and strong direct-to-consumer performance are driving growth. At the same time, tighter cost management, process improvements, and greater accountability are improving the conversion of revenue into earnings and allowing us to operate with greater consistency and control.

Our first half results reinforce our confidence in this approach, and we will remain focused on the highest return opportunities and on translating strong commercial execution into sustainable, profitable growth. Moving to slide 6, in packaged coffee, retail performance remained strong in the second quarter, driven by continued distribution gains, pricing taken in 2025, and broad-based strength across customers and channels. According to Nielsen, BRC packaged coffee sales grew 28.2% in the last quarter, nearly three times the category's 9.9% growth rate.

Over the latest 52 weeks, our retail sales increased 32.5% compared with 12.3% growth for the broader category. Importantly, bagged coffee velocity reached category-level performance in 2025 and has remained there year to date despite continued distribution expansion and our price premium. That is an important proof point because newly added stores and items typically take time to mature, with distribution and productivity both improving. Our bagged coffee share increased 60 basis points year over year to 3.3%, while pod share increased 30 basis points to 2.2% across the total market.

Turning to slide 7, our Land and Expand strategy continues to increase both the reach of the brand and our presence on shelf. During the second quarter, packaged coffee distribution increased by more than 2.5 points of ACV year over year to 56.5%, reflecting expanded availability across new and existing retail accounts. We are also earning greater shelf presence within the stores that already carry BRC coffee. In grocery, the average retail account now carries about 1.3 more BRC coffee items than it did a year ago, demonstrating our ability to build beyond the initial placements as the brand becomes more established within an account.

Together, these results demonstrate the scalability of our Land and Expand strategy, with growth coming from both broader distribution and deeper assortment within existing customers. Slide 8, BRC's packaged coffee growth reflects strong underlying consumer demand with meaningful unit growth alongside pricing. Over the latest 52-week period, retail sales increased 32.5%, including 16.6% unit growth, placing BRC among the strongest unit growth performers in the category.

That distinction is important because many larger competitors generated most or all of their dollar growth through price increases while units declined. BRC is delivering a more balanced contribution from volume and pricing. That unit performance demonstrates sustained consumer demand and strengthens our value proposition to retailers by driving category productivity as distribution expands. Turning to slide 9, our direct-to-consumer business delivered another quarter of solid growth, with revenue increasing 13.6% year over year.

This marked the third consecutive quarter of growth and our strongest quarterly year-over-year performance in the segment in more than four years. In May, we successfully transitioned blackriflecoffee.com to a more scalable and flexible e-commerce platform. Early results are encouraging, including greater product visibility in online shopping results, improved organic search rankings, and stabilization of our subscriber base in the nearly three months since the conversion.

The new platform provides a stronger technology foundation to improve the customer experience and support future growth in our owned channel. Blackriflecoffee.com remains an important part of our DTC model, serving as the core platform for subscriptions, repeat purchases, exclusive offerings, and deeper engagement with our most loyal customers. At the same time, third-party marketplace sales increased 90% as we continued to expand our reach and capture demand on the platforms where consumers increasingly choose to shop.

We view marketplaces as an incremental customer acquisition channel that complements rather than replaces blackriflecoffee.com. Slide 10, we showed that online marketplaces, mass retail, and grocery are all large channels, but consumers shop them differently. The largest online marketplace and the largest mass retailer are similar in size, each generating about $4 billion in annual packaged coffee sales. Both skew heavily toward pods, but their preferred pack sizes differ meaningfully.

The larger packs purchased online suggest a more planned stock-up or pantry-loading mission, while mass retail appears to serve a more routine household replenishment occasion. Grocery is large at $6.8 billion in annual sales with a more balanced mix of bags and pods. Within grocery, smaller pod counts suggest more frequent replenishment and greater trial or variety seeking. These differences reinforce the importance of tailoring our assortment and pack architecture to how consumers shop within each channel.

At our largest customer, where the brand is most established, sales continue to grow both in store and online. Combined with our low single-digit share in the largest online marketplace and grocery, that performance highlights the long runway ahead both within established customers and across large channels where our presence remains underdeveloped. Moving to slide 11, in ready-to-drink coffee, market conditions remain challenging, with the weakness most pronounced in the convenience channel.

Performance has been comparatively stronger in grocery, where we continue to outpace the category. We are directing resources towards the channels, customers, and occasions where consumer takeaway is more resilient, and using innovation selectively to support the strongest opportunities. The objective is to improve the quality and economics of the business rather than pursue distribution for its own sake. In energy, we exited the quarter at approximately 21% ACV across more than 22,000 doors, reflecting the distribution build since last year's launch, with the footprint remaining broadly consistent with the first quarter.

Our priority is to build productivity within existing doors while expanding selectively where performance supports additional investment. Before I turn it over to Matt, I want to briefly highlight some of the meaningful ways we supported our community during the second quarter. From April through June, we supported 11 mission-focused events, contributed more than $400,000 to organizations serving veterans, active duty military personnel, first responders and their families, and delivered more than 3,000 bags of coffee to military units deployed around the world.

These efforts included veteran recovery and mental wellness programs, events honoring Gold Star families and Medal of Honor recipients, and a centennial celebration for eight World War II veterans who marked their hundredth birthday this Memorial Day. We launched Folded Flag, a new multi-year initiative dedicated to honoring fallen service members, preserving their legacies, and supporting Gold Star families. As part of America's 250th anniversary, we also introduced our Rewarding Patriotism initiative and distributed 1,000 Patriot Forward boxes, recognizing individuals who embody service, patriotism, and leadership in their communities.

Each of these efforts gave us an opportunity to honor service, preserve legacy, and provide meaningful support to the people and families who have sacrificed so much. We are proud of the impact we made during the quarter and look forward to carrying that commitment forward throughout the remainder of the year.

Matthew A., Chief Financial Officer

Thank you, Chris. I'll begin my remarks on Slide 13. Second quarter net revenue increased 13% compared to the prior year period, reflecting growth in both wholesale and direct to consumer. Wholesale revenue increased 15%, supported by pricing and distribution gains across grocery, mass, and dollar retailers. Performance remains strong across our largest customers, with mass merchant revenue increasing 20% and grocery revenue nearly doubling year over year.

The channel also benefited from new bag coffee pack sizes that enabled us to secure additional distribution in the dollar channel earlier this year, building on our existing ready-to-drink presence. Direct-to-consumer revenue increased 14%, accelerating from 7% growth in the first quarter, led by continued strength in third-party marketplaces. Turning to Slide 14, second quarter gross margin expanded approximately 15 basis points year over year to 34.1%, marking the first year-over-year improvement in more than four quarters.

Higher coffee costs flowing through inventory remained a headwind of more than 100 basis points net of pricing, but that impact was more than offset by a cleaner inventory position and benefits from productivity and mix. We fully secured our green coffee requirements for 2026 earlier this year and have purchased more than 50% of our anticipated needs for 2027. This provides strong cost visibility for the remainder of 2026 and greater clarity on our cost position for 2027.

Based on timing of inventory consumption, we expect lower contracted coffee costs to begin flowing through cost of sales more meaningfully during the second half of 2026. Although green coffee prices have experienced renewed volatility, coffee costs are only one component of our gross margin outlook. Portfolio mix, trade efficiency, and supply chain productivity remain important drivers of continued gross margin improvement, even without assuming a normalization in green coffee prices.

Moving down the P&L to Slide 15, during the second quarter we continued to reshape the cost base while selectively investing behind growth. On a reported basis, total operating expenses declined 21% year over year to $35.4 million, primarily reflecting the absence of a prior-year legal accrual and lower legal, professional, and other general and administrative costs. Marketing expense increased 8% to support key brand and growth initiatives, yet declined approximately 50 basis points as a percentage of revenue to 9.8%, reflecting improved leverage on that investment.

Gross profit increased 13% to $36.5 million, contributing approximately $4.3 million of year-over-year improvement in adjusted EBITDA. Adjusted operating expenses increased approximately $400,000, well below the rate of revenue growth. As a result, adjusted EBITDA increased more than 160% to $6.3 million from $2.4 million in the prior year period, and adjusted EBITDA margin expanded approximately 335 basis points to 5.9%. This performance demonstrates the operating leverage in our model.

Turning to the balance sheet, we ended the quarter with $35 million of debt outstanding and a net leverage of approximately three-quarters of a turn on a trailing 12-month adjusted EBITDA, or 0.8 turns based on our 2026 adjusted EBITDA guidance. We ended the quarter with $12 million of cash and approximately $50.5 million of available capacity under our revolving credit facility. Free cash flow was $5.4 million in the second quarter and $11.5 million year to date, compared to a $9.6 million use of free cash flow in the prior year period.

The approximately $21 million of year-over-year improvement was driven primarily by higher profitability and additional benefits from working capital efficiency and lower capital expenditures. Together with our available liquidity, this cash generation provides the capacity to support our operating and strategic priorities. We regained compliance with the New York Stock Exchange's minimum bid price requirement in early June. Should market conditions warrant, we retain the flexibility to execute the reverse stock split approved by our shareholders in May, subject to final approval by our board.

Moving to the outlook on Slide 17, based on our first-half performance and continued execution against our full-year plan, we are maintaining our 2026 outlook of at least 8% revenue growth, or approximately $430 million, and at least 35% adjusted EBITDA growth, or approximately $29 million. We also continue to expect 2026 gross margin in the range of 34% to 36%, compared with 34.6% in 2025. Revenue and adjusted EBITDA exceeded our expectations in the first half, driven by greater pipeline fills for new packaged coffee distribution and strong direct-to-consumer performance.

As a result, we now expect revenue to be more evenly weighted between the first and second halves of the year, rather than building sequentially through the year as we originally anticipated. We remain encouraged by the underlying performance of the business. That said, second half comparisons will reflect three factors. First, the year-over-year benefit from previously implemented pricing actions will begin to moderate in the third quarter and largely roll off by year end.

Second, the fourth quarter of 2025 included approximately $5 million of non-recurring liquidation revenue. Third, we are seeing some moderation in the convenience channel, which we believe reflects a combination of higher fuel prices affecting channel traffic and continued category softness in ready-to-drink coffee. The expected moderation in reported revenue growth primarily reflects these known pricing and comparison factors, while underlying trends in packaged coffee and direct to consumer remain healthy.

For the third quarter, we expect revenue growth of at least 5% year over year. At that level, revenue would be approximately $106 million, roughly in line with the second quarter. At the floor of our full-year outlook, fourth quarter revenue would be modestly below the prior year period, largely due to the lapping of $5 million in liquidation sales in 2025. Reflecting significantly improved inventory management, we expect gross margin to approach 36% in both the third and fourth quarters, driven by productivity initiatives and lower contracted coffee costs flowing through inventory.

For the third quarter, we expect adjusted EBITDA of approximately $7 million. The benefit of higher gross profit is expected to be partially offset by a modest sequential increase in operating expenses, driven almost entirely by the timing of planned marketing investment built around America's 250th anniversary. Based on our year-to-date results and current visibility, we remain confident in our 2026 outlook. It is supported by pricing already in market and secured distribution gains.

It does not include potential upside from incremental distribution, additional pricing, or other benefits not yet realized. Our focus for the second half is clear: deliver the expected gross margin improvement, maintain cost and working capital discipline, and convert earnings growth into stronger cash generation. The progress we made in the first half demonstrates the benefits of a more efficient operating model and a more focused approach to investment.

Operator, we are now ready for the Q&A session.

OPERATOR

Thank you. We will now be conducting a question and answer session. If you would like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate a line is in the question queue. You may press star two to remove yourself from the queue. For participants using speaker equipment, it may be necessary to pick up the handset before pressing the star keys. One moment, please, while we poll for questions. Our first question comes from the line of Mike Baker with DA Davidson.

Please proceed with your question.

Mike Baker, Analyst at DA Davidson

Okay, thanks, guys. Thanks for all the color on the guidance. I did want to ask a question on that, though. Understanding, you know, all the factors you laid out to think about it in the back half, I think if my math is even close to right, it implies EBITDA even slightly down in the back half of the year. I guess you talked about some of the things you're cycling on the top line, including the $5 million in the fourth quarter. But just talk about some of the things that might impact the EBITDA in the back half of the year.

Do we really think that we're not going to grow EBITDA at all in the back half after being up 3x in the first half?

Matthew A., Chief Financial Officer

Hey, Mike, thanks, that's a great question. Let me hit that front and center on the EBITDA side. Just keep in mind—I know you know this, but I just want to say more broadly—we're taking a very disciplined approach this year. We're only looking at confirmed commercial drivers, pricing already in market as well as new distribution that has already been secured. We didn't assume any additional wins for distribution or otherwise that haven't been fully realized.

Now, the business does have a lot of momentum right now, and based on the way we see it today, there's no reason to believe that that momentum changes in the second half. Excuse me. As we continue to execute, we'll update the outlook accordingly. When it comes to EBITDA, you're spot on. Right. So we're projecting about a 35% increase in adjusted EBITDA year over year. That puts us right around $29 million in EBITDA. If you look at $13.6 million in the first half of the year, we're guiding to at least $7 million of adjusted EBITDA in Q3, and that implies at least $8.3 million of EBITDA in Q4.

So you're right, that would show a decline year over year in the back half. But keep this in mind, there's a few things happening. Last year we delivered about 85% of our total adjusted EBITDA in the back half of the year. This year it's a more predictable, stable EBITDA growth matching our sales growth. Number two, we did normalize for bonuses this year, so we injected 100% payout this year versus a very discounted payout for the management team last year.

Third, marketing spend more closely aligns to full-year revenue growth. So if you think about our marketing priorities for the back half of the year, it's essentially America's 250th, which is a major tentpole event that generated over 709 million impressions, as well as other key events—Pay It Forward, the Folded Flag tribute, our initiatives around Veterans Day, and so forth. So you see about $5 to $6 million more marketing investment in the back half of this year than we saw in the prior year.

So we'll continue to reinvest in the business. Comps are a little bit tougher, but the way we see it right now we have a clear line of sight to at least $7 million in Q3 of adjusted EBITDA and at least $8.3 million in adjusted EBITDA in Q4.

Mike Baker, Analyst at DA Davidson

Okay, yeah, that makes a lot of sense. If I could ask just on the pricing, you said you're fully locked in now for 2026 in coffee and I forget the percent you said for next year, but some percent. At what price are you locked in on coffee?

Matthew A., Chief Financial Officer

In 2026 we're locked in at $2.95 a pound. For 2027, we have 50% coverage right now and we're locked in at $2.65 for that 50% coverage.

Mike Baker, Analyst at DA Davidson

Okay, and just one last one. Remind us, what's the price that you paid in 2025 on average?

Matthew A., Chief Financial Officer

Just so we compare it, $2.85.

Mike Baker, Analyst at DA Davidson

Got it. Okay, thanks. I'll pass it on.

Matthew A., Chief Financial Officer

Thanks, Mike.

OPERATOR

Thank you. Our next question comes from the line of Sarang Vora with Telsey Advisory Group. Please proceed with your question.

Sarang Vora, Analyst

Great, thank you, and congrats on a good quarter. You know, a couple of questions. The first one, just following on Mike's question, Matt's question about EBITDA. So as you look out at 20—you know, we talked about back half of the year—but as you look out at 2027, is gross margin the biggest opportunity for you as you look out for the next two or three years? Seems like the operating cost structure has been streamlined and you had pressures on pricing—pressures from promotion, coffee prices, stuff like that.

So as you look out beyond the second half, is gross margin the primary driver for margin expansion in the future?

Chris Mondzelewski, Chief Executive Officer

Yeah, absolutely. I'll start, and I'm going to kick it over to Matt here who can talk to some of the specifics. Yes, I mean, I think at the end of the day we believe in building a better business before we build an aggressively bigger business. I think you've seen that in the way that we have landed now disciplined quarters sequentially, and we're going to continue that. Margin is not the only thing. I mean, having a growth model that can deliver category-level growth for our customers is always number one.

Your consumer and your customer have to be at the top of your agenda. If you're not putting a product out at a value that is competitive in the market, you don't have a good business model overall. And so what we're proudest of is really the performance that we've continued to be able to drive there—the share gains that we have driven across channel, in particular with our largest mass customer, the grocery channel. And then, as we talked about, accelerating that even now in DTC across both marketplace as well as stabilization of our own DTC channel, which we feel great about.

With that, we obviously need to be able to deliver that in a profitable way. And again, I think with our disciplined approach on pricing on top of unit growth, we've been able to do that effectively. So again, when you think about where our growth has come from, it's split close to 50/50—actually slightly more is coming from unit growth—but we are getting growth from pricing as well. So we've been disciplined about making sure that we do put the pricing in when we need to get on top of costs.

And then, as Matt has already talked about and as he can elaborate on, I think we've done an incredible job of really controlling on the cost side of the business, ensuring that we're only putting dollars against what we know we can really create value for in the market, and being disciplined about how we go out to buy—like the previous question said, our coffee, etc. But Matt, please elaborate.

Matthew A., Chief Financial Officer

Yeah, for sure. You know, outside the top-line drivers, when you get into the gross margin drivers for next year, it comes back to the floor that we talked about. As Mons mentioned, the more we sell on packaged coffee, which is our most profitable product segment, and the more we sell within the wholesale channel, which is our most profitable channel, the better we'll do as a company. So you get an organic mix impact that will create margins. Number two, we continue to focus on trade spend efficiency—big line on the P&L—driving the lifts to generate the right returns is paramount, and we're focused maniacally on that.

When it comes to supply chain productivity, we have a full list of projects that we're going after—everything from manufacturing to third-party logistics and so forth—and they're progressing very well. So I think that'll be a key player in our margin expansion next year. And then it comes down to, you know, where does green coffee end up going? Those are things we can't directly control. Now, the pace in which we achieve our long-term gross margin objective depends on that.

If prices moderate, as they may with the Brazil crop coming in as a bumper crop, it could happen sooner. If it doesn't, it could take longer to achieve that 40%. So at the end of the day, we still see a good path to our long-term gross margin targets. Again, we talked about what the key drivers are, but I don't want to leave out operating expenses. That's where the leverage will continue to go forward. So everything from just driving the operating leverage of the business, maintaining OPEX and decreasing it where we can, and looking at marketing efficiencies—we're driving every decision that we make in marketing based upon reach and target rating points, as well as what kind of net revenue generation comes from it. So with that, we'll drive the top line at a faster rate than we'll drive marketing investment. So the combination of what Mons mentioned on the top line as well as the mix, the productivity savings, trade promotion efficiency, and operating leverage at the bottom of the P&L will drive the margin—gross margin as well as EBITDA margin.

Sarang Vora, Analyst

That's great. I just had a follow-up on the marketplace business. Seems like in the last two, three quarters it's really stepping up for you guys. Can you talk a little bit more about what kind of customer are you attracting? How is the fulfillment—are you using third-party fulfillment, or are you fulfilling it? Any color on the margin profile? Because in the slide there is a pretty big opportunity on the marketplace side. So where are you in terms of achieving that opportunity?

Just curious how fast it is ramping as well. So any color on that business would be helpful. Thank you.

Chris Mondzelewski, Chief Executive Officer

Yeah, thanks, Sarang. We are proud of the progress there. And again, I think we think of our online business as one holistic piece, and that's why we refer to it as total marketplace. And so again, customers have the option—they can purchase off our site, blackriflecoffee.com. We've made some incredible improvements to the site. We have re-architected it. We are seeing great results from that from an efficiency standpoint. We've talked in the past about how much less we spend on our own site, and that has continued.

But even with that lower spend, we're seeing greater stabilization and greater overall efficiency in the takeaway off of our site, which allows us to then put additional investment against other components of marketplace that we've talked about. So third parties that we work with, and we maintain our own business. We maintain our own subscription profiles there as well, which allows us to still have that closeness with our customers, gives them the option to be able to buy in the most convenient way that they would like to.

And the overall driver is really fundamentals. We continue to manage our fundamentals, ensure that we're putting our money in the most efficient places, making sure we're putting the right product offerings. So we're excited, and we think that we can continue that growth going forward.

Matthew A., Chief Financial Officer

And I'd like to add to that. If you think about the two different components, we have blackriflecoffee.com. On that business, it was all about shoring up our subscription business as well as changing the platform to give us something that's more scalable over time at a lower cost. And so far that platform has yielded great results in terms of organic search and response times—a very, very effective project that will drive value going forward. When it comes to marketplaces—trying to answer your question—we do use third-party fulfillment, so we use the marketplace fulfillment.

It's a little bit more pricey, but the consumer gets it in less than two days. So there's an added benefit in terms of convenience. But both of those channels are working very well together. Our most loyal consumer is going to blackriflecoffee.com, and when it comes to Amazon, that's about loyalty as well. There's a $4 billion category out there for our largest marketplace, and we need to partake in that. And as you can see from the materials that Mons presented earlier, we feel like we're underpenetrated when it comes to third-party marketplaces, and that's an area we have to develop, and we see a good amount of opportunity there.

Sarang Vora, Analyst

That's great. And one final question on Black Rifle Energy. Can you update us on the plans for this year, next year—like, how is the ACV ramping? Any color you can share on the selective growth in key markets? Thank you.

Chris Mondzelewski, Chief Executive Officer

Yeah, absolutely, Sarang. So, you know, nothing has changed in our plans for energy. We've talked in the previous couple quarters about having a very focused approach in a couple ways. Number one, we want to be very focused on investment. We are a hot coffee business, and we are driving our hot coffee engine with a great deal of success. As we've talked about in the opening comments, the majority of our spending will continue to go against ensuring that we can further build out that highly profitable component of our business.

And then, like any great growth-oriented business, we need to be constantly innovating and figuring out where are those growth angles for the future. And that's really where energy plays for us. We continue to be excited about the category. We continue to be excited about the overlap with our consumers who are already buying that category. And from a store standpoint, we're going to continue to stay focused. We're in 22,000 doors. We're going to stay focused on the doors that we know are most productive for us.

We're going to continue to work with our partners at KDP to ensure that we're getting the most efficiency that we can out of that footprint that we have in place. I think we think the progress is good. Again, I think for us this is going to continue to be an area that we'll learn and we'll get better with every quarter. But that is exactly the progress we're seeing. There are areas where it hasn't worked as well as we'd like, but there are other areas where we're really seeing that advancement.

And that's obviously what we're going to continue to build off of as we think about that going forward. But again, I'd finish with what I started: coffee is where we're going to continue to put the majority of the investment until we feel that we've got that idea to a point where we want to drive scalability in the market, and we obviously will talk to you all about that at that point.

Sarang Vora, Analyst

Great, thank you. Good luck.

Chris Mondzelewski, Chief Executive Officer

Thanks, Sarang.

OPERATOR

Thank you. Our next question comes from the line of Eric Delorias with Craig Allen. Please proceed with your question.

Eric Delorias, Analyst at Craig Allen

Great. Thank you for taking my questions, and congrats on a nice quarter here. So my first question, referring to page 10—the channel expansion opportunity outlined there—I think it's quite helpful in understanding the white space remaining in both online marketplace and grocery. You know, both of these channels have sort of similar market share for you guys right now and are also both growing very robustly. How do you look at the white space opportunity between this online marketplace and grocery?

Where do you see the opportunity to gain share more quickly, and how does any of this—difference in category mix or consumer purchasing behavior—impact that outlook?

Chris Mondzelewski, Chief Executive Officer

Hi Eric, it's Chris. Thanks, great question. So yeah, we obviously see opportunity in both areas, right? It's a little different how we look at both of them. So with grocery, you've heard us talk about our land and expand model. We continue to drive that with great discipline. And if you think about it, our ACV is up in grocery, which we feel great about. But you know, we still sit in the mid-50s, which gives us massive amounts of opportunity just from a total breadth of, you know, the country standpoint.

Within that, if you look at our average items carried, again, very proud of the fact that we're up double digits in growth on average items carried in grocery, but we're still sitting in those mid-single digits. And we know that in our top grocery accounts, the ones that we started distribution in a couple of years ago, we're well up into the teens, right? You know, 12, 13, 14 average items on shelf. So again, even bigger opportunity potentially there to continue to expand those shelf sets.

And the way it ends up working statistically is, you know, we'll start with two to four items at a new retailer and that'll then obviously expand over the next year, and then eventually, often by the third year you're getting to a full shelf set. So when you think about the 5.6 average we have on shelf, that's a combination of scaled-out accounts and a combination of those that are just starting. And then the third element is the actual velocity of our business.

And again, we're going to be prudent about that. As we're expanding shelf, we don't necessarily expect the velocity of a particular item to grow. That being said, we've been very pleased with the fact that we've been able to hold even there. So again, we do expect share growth in the grocery channel. We have a lot of room to be able to drive that. Not only because of the relevance of our brand, which is at the end of the day what drives all of this, but all the factors that I then talked about.

As you look online at Marketplace, it's an even bigger overall opportunity potentially, depending on how you look at it. The coffee category is at least as big as what you see in mass. And on top of that we are underpenetrated. We have a lower share than we do in mass, to use that as the comparison. So similar category size with lower current penetration. Again, you know, we're going to continue to manage the fundamentals of that channel, making sure we don't overextend ourselves, but we get the right items at the right price points and we are utilizing our advertising dollars in the right way.

Within that we brought a lot of expertise in from the outside. We've got some great people in the building who really understand this model well. And so again, there's a lot of belief that we can catch up on fair share in that channel to what we have seen in our other channels. And again, just as a reminder, if you think about our share in our largest mass retailer as an example, 9.7% market share on 12-ounce bags; we're the number one player actually other than private label. 5% share in pods. We're nowhere near that. You know, we have a lower share, almost, you know, a fourth of that on bags and half of that on pods. So again, the opportunity in Marketplace is even bigger when you strip it apart. But again, for us it's always going to be about we'll put the spending where we see ourselves getting the greatest returns. And that discipline across any channel has ultimately worked well for us.

Matthew A., Chief Financial Officer

Derek, I'd add one more thing too. So when we look at the large online marketplace, that's a channel that has a very low cost to acquire consumers. So when you look at the lifetime value to CAC ratio, it's a strong performer for us to make some investments and drive consumers into the franchise. Those consumers are already there at $4 billion, are already there. We just need to capture them and bring them back. What's interesting about that particular channel is that it's concentrated in the pods.

As you can see, about 70% of the largest online marketplace is pods. Now if you look at our BRC.com site, it's about the opposite of that. So it's more on the bag coffee side. So it complements the BRC website very well.

Eric Delorias, Analyst at Craig Allen

That's great color, I appreciate that from both of you. And then just overall, so understood that guidance here does not include additional distribution wins. You know, certainly the longer-term value proposition of retailers is very strong with your brand performance. Just wondering, you know, at a high level, what is the near-term prospect for further distribution gains and how are these conversations going? Should we look for more distribution gains to come sort of next spring, is it something that you don't really expect too much more of in what remains of this year?

Just any sort of cadence on how you're thinking about potential distribution wins and how those conversations are going would be very helpful. Thank you.

Chris Mondzelewski, Chief Executive Officer

Yeah, I'll start out, Eric. I think we, we're not going to give guidance on specifically how we see our distribution growing other than we do continue, we do expect it to continue to grow. So the process for us has again been a disciplined one. We continue to negotiate customer by customer. Yes, you're right. The brand proposition right now is appealing. We have demonstrated in the customers that we've gone into that we can grow category profitably for those customers.

And that's a big part of our land and expand strategy is ensuring that that retailer is also growing profitability with us as they expand Black Rifle. And that has played itself out. So that becomes a strong selling point going forward. You know, any of the larger retailers in the US and the smaller retailers that, you know, we're not in distribution in now, I can assure you we're having conversations with and we will always continue to push to make sure that we can put a mutual model in place where both us and our customers can see profitability.

And most importantly, that we are protecting the aspects of what we have built in this brand. This is a super premium brand and we want to ensure that the execution plans against this, when you think about merchandising, et cetera, what our expectations will be, are going to allow us to continue to maintain this being a super premium brand. So all those factors play a role in how quickly we roll with any particular customer. As far as how you'd see it play out into 27.

It always depends on the reset windows. We've gotten the question in the past as to why sometimes the revenue seems to be slightly out of line with consumption. A lot of times this is because we're pipelining those customers. It doesn't come in a smooth way in the beginning. We'll tend to ship all of the stores or a significant portion of the stores all at once. Some customers reset in Q1, some customers reset in Q3. So it'll depend. But as we get closer to, and as Matt said earlier, you know, as we get to higher probability with a given customer, a negotiated deal, we'll be transparent about that.

We'll make sure you all know that. So again, just because we haven't said it doesn't mean that we aren't working it in the background. But we want to be careful not to, you know, not to talk about that publicly until we're really sure we have a deal in place.

Eric Delorias, Analyst at Craig Allen

Yeah, it certainly makes sense to me. And all that background info is encouraging. Seems like momentum continues to be strong, kind of across the board here. Congrats again on the strong results, guys, and good luck for the rest of the year.

Chris Mondzelewski, Chief Executive Officer

Thanks, Eric.

Matthew A., Chief Financial Officer

Thanks, Eric.

OPERATOR

Thank you. And ladies and gentlemen, this concludes our question and answer session. I'll turn the floor back to management for any final comments.

Chris Mondzelewski, Chief Executive Officer

Okay. We delivered a strong quarter. Revenue grew 13%. Profit increased 164%. Gross margin improved. Free cash flow has swung more than 20 million. As we talked about, Coffee has remained our growth engine, but we're proud of what we're doing across all segments. Our margin trajectory has turned, you know, this quarter, which is big, and we're going to continue to build off of that. Sharper focus is converting growth into earnings and cash, and we see that working as we enter the second half.

We're confident that we're going to remain disciplined. As Matt talked about, we're going to execute against what we can control, invest where the returns are highest and let consistent results speak for themselves. So we believe the best work and the greatest value creation is still ahead of us. Look forward to talking to you next quarter.

OPERATOR

And this concludes today's conference. You may disconnect your lines at this time. We thank you for your participation.

Disclaimer: This transcript is provided for informational purposes only. While we strive for accuracy, there may be errors or omissions in this automated transcription. For official company statements and financial information, please refer to the company's SEC filings and official press releases. Corporate participants' and analysts' statements reflect their views as of the date of this call and are subject to change without notice.