Black Rifle Coffee Company Annual report [Section 13 and 15(d), not S-K Item 405]

Annual report [Section 13 and 15(d), not S-K Item 405]

Equity-Based Compensation

Equity-Based Compensation

12 Months Ended

Dec. 31, 2024

Incentive Units

Authentic Brands maintains an equity incentive plan (the “2018 Equity Incentive Plan”) under which it granted Incentive Units (as defined in the 2018 Equity Incentive Plan) to employees or non-employee directors prior to the Business Combination. As of December 31, 2024, 8,472 Incentive Units remain outstanding under the 2018 Equity Incentive Plan, and no new Incentive Units have been granted under the 2018 Equity Incentive Plan since the completion of the Business Combination. The Board of Directors has the authority to determine the terms and conditions of each grant under the 2018 Equity Incentive Plan, and 200,000 non-voting units have been authorized thereunder. These units may contain certain service and performance related vesting provisions. The Incentive Units were awarded to eligible employees and non-employee directors and entitle each grantee to receive non-voting member units upon vesting, subject solely to the employee’s continuing employment or the non-employee director’s continuing service on the Board of Directors.

In May 2021, the Board of Directors approved a decrease in the participation threshold for equity Incentive Unit holders. The decrease was intended to offset the dilutive effect of the issuance of the Series A Redeemable Preferred Equity and related redemption of common units. The decrease in the participation threshold was accounted for as a modification and resulted in $2,749 of incremental compensation cost, of which $1,988 was recognized during the year ended December 31, 2021 including a cumulative adjustment at the time of the modification. The remaining incremental compensation will be recognized over the remaining service period of the awards.

In September 2021, the Company amended and restated the Plan to expand the definition of “Change in Control.” The Company concluded that the vesting conditions of awards had changed and that a modification had occurred for all awards under the Plan. As the awards were expected to vest under their original terms as well as under their modified terms, no additional incremental compensation expense was recognized.

The grant date estimated fair value of the Incentive Units was based upon an option pricing model valuation of the awards at the grant date. The Company did not change pricing models during the year, however, began to incorporate and consider the probability-weighted expected return method. The Incentive Units have no strike price; however, participation thresholds, as defined in the Plan were established at grant date that must be exceeded for the holder of the unit to participate in any distributions of the Company. The following assumptions were utilized in determining the fair value of the units at the grant date for the years ended December 31, 2024, 2023 and 2022:


Expected dividend			—
Expected volatility			60% to 85%
Risk-free interest rate			0.13% to 2.53%
Expected life of incentive awards (in years)			1 to 5 years
Grant date performance and market threshold			$35,000 to $1,250,000

The computation of expected volatility is based on a weighted average of comparable public companies within the Company’s industry. Expected life is based on the estimated liquidity event timing. The risk-free interest rate is based on the yield of zero-coupon U.S. Treasury securities of comparable terms. The Company does not anticipate paying dividends in the foreseeable future. The Company recognizes pre-vesting forfeitures as they occur rather than estimate the forfeiture rate at the grant date.

The following table summarizes the changes in the number of Incentive Units for the years ended December 31, 2024, 2023 and 2022:


	Incentive Units	Weighted Average Grant Date Fair Value
Granted and outstanding at January 1, 2022	175,992	$	38.09
Granted	850	215.31
Forfeited	(2,989)	174.19
Repurchased	(1,832)	97.57
Business Combination	(157,811)	56.54
Granted and outstanding at December 31, 2022	14,210	$	192.52
Granted	—	—
Forfeited	(5,625)	215.31
Granted and outstanding at December 31, 2023	8,585	$	213.81
Granted	—	—
Forfeited	(113)	215.31
Granted and outstanding at December 31, 2024	8,472	$	213.79
Vested at December 31, 2024	7,435	$	213.57

As of December 31, 2024, 2023 and 2022, total unrecognized equity compensation expense related to nonvested Incentive Units to be recognized was $134, $421 and $2,268, respectively, over a weighted average period of approximately one year for 2024, two years for 2023 and three years for 2022.

In connection with the Business Combination, 28,990 Incentive Units under the Plan fully vested and converted into Common Units in Authentic Brands that allow for their exchange into Class A Common Stock of BRC Inc. The Company recognized $1,856 of compensation costs as a result of the accelerated vesting of Incentive Units under the "Change in Control" provision of the Plan. The Company accounted for the accelerated vesting of the Incentive Units as a modification. However, because the fair value of the modified awards was the same immediately before and after the modification, no incremental compensation expense was recognized.

In connection with the Business Combination, the Company adopted the 2022 Omnibus Incentive Plan (the “Omnibus Plan”), which replaced the 2018 Equity Incentive Plan, and the 2022 Employee Stock Purchase Plan (the “ESPP”) (see disclosed below).

Stock Options

The Company grants stock options to employees under the Omnibus Plan that vest ratably over three years and expire after seven years. The grant date estimated fair value of the stock options is based upon a Black-Scholes model valuation of the options at the grant date. The following weighted average assumptions were utilized in determining the fair value of options granted:


	Year Ended December 31,
	2024	2023	2022
Weighted average grant date fair value	$2.21	$2.58	$5.48
Expected dividend yield	—	—	—
Expected volatility	66%	65%	55%
Risk-free interest rate	4.32%	4.17%	2.40%
Options term (in years)	4.5	4.5	4.5

The Company computes expected volatility based on the annualized historical daily volatility of our stock as a publicly traded company. Prior to 2024, the date at which we had sufficient history as a public company to estimate our volatility, the computation of expected volatility was based on a weighted average of comparable public companies within the Company’s industry. The Company uses the “simplified method” prescribed by the Securities and Exchange Commission Staff Accounting Bulletin No. 107, Share-Based Payment, to calculate the expected term of options granted. The risk-free interest rate is based on the yield of zero-coupon U.S. Treasury securities of comparable terms. The Company does not anticipate paying dividends in the foreseeable future. The Company recognizes pre-vesting forfeitures as they occur rather than estimate the forfeiture rate at the grant date.

The following table summarizes information about stock options activities for the years ended December 31, 2024, 2023 and 2022:


	Stock Options	Weighted Average Exercise Price
Granted and outstanding at February 9, 2022	518,180	$	10.00
Granted	362,720	9.49
Forfeited	(88,530)	10.00
Outstanding at December 31, 2022	792,370	$	9.77
Granted	3,813,166	4.66
Forfeited	(1,192,196)	6.43
Outstanding at December 31, 2023	3,413,340	$	5.19
Granted	2,680,584	3.94
Forfeited	(666,967)	6.53
Exercised	(2,546)	$	5.05
Outstanding at December 31, 2024	5,424,411	$	4.41
Vested and exercisable at December 31, 2024	1,101,913	$	5.07

As of December 31, 2024, 2023 and 2022, total unrecognized equity compensation expense related to stock options to be recognized was $7,540, $7,228 and $3,298, respectively, over a weighted average period of approximately two years for all three years.

Restricted Stock Units

The Company grants restricted stock unit (“RSU”) awards to employees and non-employee directors under the Omnibus Plan that vest annually over approximately three years. The grant date fair values are based on the closing price of the Class A Common Stock on the date of grant.

The following table summarizes information about the RSUs under the Omnibus Plan for the years ended December 31, 2024, 2023 and 2022:


	Restricted Stock Units	Weighted Average Grant Date Fair Value
Granted and outstanding at May 2, 2022	400,775	$	13.70
Granted	484,054	8.56
Forfeited	(51,875)	13.70
Vested	(9,125)	13.70
Nonvested at December 31, 2022	823,829	$	10.68
Granted	2,008,519	4.90
Forfeited	(685,484)	6.49
Vested	(461,909)	9.70
Nonvested at December 31, 2023	1,684,955	$	5.77
Granted	1,726,212	4.02
Forfeited	(476,399)	5.16
Vested	(701,816)	5.87
Nonvested at December 31, 2024	2,232,952	$	4.51

As of December 31, 2024, 2023 and 2022, total unrecognized equity compensation expense related to RSUs to be recognized was $7,031, $7,711 and $6,788, respectively, over a weighted average period of approximately two years for all three years.

Performance-Based Restricted Stock Units

On December 29, 2022, the Company granted 8,462,412 performance-based restricted stock units (“PSUs”) to a key employee which vest if certain market capital growth rates are achieved each year through April 2027. Vested PSUs are settled in shares of the Class A Common Stock equal to the number of PSUs granted. The PSUs are forfeited upon termination of employment before the performance period ends. PSUs granted during the year ended December 31, 2022 have a weighted-average grant date fair value of $0.46 per share. All PSUs were unvested as of December 31, 2024. The Company used the Monte Carlo pricing model to estimate the fair value of PSUs utilizing the following assumptions at the grant date for December 31, 2024, 2023 and 2022:


Expected dividend			—
Expected volatility			65%
Risk-free interest rate			3.97%
Award term years			4.3
Valuation date share price			$6.21

As of December 31, 2024, 2023 and 2022, total unrecognized equity-based compensation expense related to PSUs to be recognized was $976, $1,901 and $3,863, respectively, over a weighted average period of approximately three years for 2024 and four years for 2023 and 2022.

Employee Stock Purchase Plan

In September 2022, the Company began offering shares of its Class A Common Stock under the ESPP adopted in connection with the Business Combination, whereby eligible employees may acquire an equity interest in the Company through payroll contributions. At the end of a six-month offering period, shares are purchased at 85% of the stock price at enrollment date or purchase date, whichever is lower.