BRC Inc. 10-K

Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations Unless the context otherwise requires, references to “we”, “us”, “our”, “Black Rifle Coffee”, “Black Rifle Coffee Company”, “BRCC” and the “Company” in this section are to the business and operations of BRC Inc. and its consolidated subsidiaries. The following discussion and analysis should be read in conjunction with the audited annual consolidated financial statements and related notes thereto included in Part II, Item 8, Financial Statements and Supplementary Data in this Annual Report. In addition to historical information, this discussion contains forward-looking statements that involve risks, uncertainties, and assumptions that could cause BRCC’s actual results to differ materially from management’s expectations. Factors which could cause such differences are discussed herein and set forth in Part I, Item 1A, Risk Factors in this Annual Report. 47 Table of Contents Overview Black Rifle Coffee Company is a Veteran-founded and led premium coffee, energy drink, and media company operating through one reportable segment that comprises three primary channels: Wholesale, DTC, and Outposts. Founded in 2014 by U.S. Army Veteran Evan Hafer, Black Rifle Coffee began with a one-pound coffee roaster in a garage, where Hafer personally roasted, packaged, and shipped coffee directly to consumers. Today, the company has grown into a widely recognized and nationally distributed brand steadfast in its commitment to supporting active-duty military, Veterans, first responders, and all who love America. In February 2022, we completed the Business Combination and as a result of the consummation of a series of mergers in connection therewith, Authentic Brands became a subsidiary of BRC Inc., with BRC Inc. acting as the sole managing member thereof as a public benefit corporation. The Business Combination was accounted for as a reverse acquisition and a recapitalization of Authentic Brands. Accordingly, the Business Combination was reflected as the equivalent of Authentic Brands issuing stock for the net assets of SilverBox, accompanied by a recapitalization. Under this method of accounting, SilverBox is treated as the “acquired” company for financial reporting purposes. The net assets of SilverBox are stated at historical cost, with no goodwill or other intangible assets recorded. This accounting treatment was determined by the individual controlling Authentic Brands prior to the Business Combination, who also controls the combined company post Business Combination. Trends Certain trends affecting our business within the respective sales channels are as follows: • Wholesale channel revenue increased as we added new customers and continued to expand our presence in the FDM market. We expect further revenue growth in this channel as we invest in customer acquisition, new product launches, and distribution expansion in the FDM market. • DTC channel revenue growth declined due to both a channel level decline in the DTC category and our strategic decision to redirect investments into higher-growth areas of the business amid elevated DTC customer acquisition costs. In addition, we have limited our promotional offerings to focus on profitability. • Outpost channel revenue decreased due to lower transaction volumes at existing Outpost retail locations. In 2025, we anticipate limited growth in this channel as we reallocate investments to other channels while we work to improve profitability through operational and strategic changes, which may include closing underperforming Outposts. We expect accelerated growth in future years as we resume investment in this part of the business. Key Factors Affecting Our Performance Our Ability to Increase Brand Awareness Maintaining and growing brand awareness and loyalty is critical to our success. We believe we have developed an efficient marketing strategy that enhances brand awareness and drives consumer engagement. Consumer appreciation of our brands is primarily reflected in the increase of our sales across our three channels over the last few years. We expect to continue to refine and develop our brand strategy utilizing reach-based formats such as national television, streaming advertising, and other select avenues. In addition, we will leverage our social media presence and employ targeted digital advertising to expand the reach of our brand. Our Ability to Grow Our Customer Base in Our Outposts and Wholesale Channels We continue to expand our customer base through our Wholesale channel, with our products now available in a growing number of physical retail locations. Wholesale customers include large national retailers, regional retailers, distributors, and dealers, reflecting our increases in market presence and distribution reach. 48 Table of Contents Our Ability to Acquire and Retain Customers at a Reasonable Cost We believe that consistently acquiring and retaining customers at a reasonable cost will be a key driver of our future performance. We continue to build brand awareness and reach new consumers by investing in existing and new channels and markets. Our expertise in digital creative and engagement provides a distinct advantage in attracting, converting, and retaining our consumers. We remain focused on measuring and optimizing marketing performance to ensure that our advertising spend is both effective and efficient, while managing customer acquisition costs and maximizing returns on marketing investments. Our Ability to Drive Repeat Usage of Our Products We gain substantial economic value from repeat users of our products who consistently re-order our products. The pace of our growth rate will be affected by the repeat usage dynamics of existing and newly acquired customers. Our Ability to Expand Our Product Line Our goal is to continue to expand our product line over time to increase our growth opportunity and reduce product-specific risks through diversification into multiple products each designed around daily use. Our pace of growth will be partially affected by the cadence and magnitude of new product launches over time. Moving forward, we believe that it is important to our business that we continue innovating with new products and flavors. Our Ability to Manage Our Supply Chain Our ability to grow and meet future demand will be affected by our ability to properly plan for and source inventory from a variety of suppliers and co-manufacturers located inside and outside the United States. The majority of our green coffee beans come from Colombia, Brazil, and Nicaragua, and since 2020, we have also sourced green coffee beans from over ten countries in Latin America, Africa, and Asia to diversify our supply chain and offer our customers specialty and limited-time-only roasts. Quality control is also a critically important part of our manufacturing and supply chain operations. 100% of our coffee is roasted in the United States. Our licensed, Coffee Quality Institute-certified grader and former Green Beret, leads cupping, grading, scoring, and sourcing of our coffees. We also must effectively manage our co-manufacturers and suppliers. Components of Our Results of Operations Revenue, net We sell our products both directly and indirectly to our customers through a broad set of physical and online platforms. Our revenue, net reflects the impact of product returns as well as discounts and fees for certain sales programs, trade spend, promotions, and loyalty rewards. Cost of goods sold Cost of goods sold primarily includes raw material costs, labor costs directly related to producing our products including wages and benefits, shipping costs, and other overhead costs related to certain aspects of production, warehousing, fulfillment, shipping, and credit card fees. Operating expenses Operating expenses consist of marketing and advertising expenses related to brand marketing campaigns through various online platforms, including email, digital, website, social media, search engine optimization, as well as performance marketing efforts including retargeting, paid search and product advertisements, as well as social media advertisements and sponsorships. Operating expenses also consist of salaries, wages, and benefits of payroll and payroll related expenses for labor not directly related to producing our products. Payroll expenses include both fixed and variable compensation. Variable compensation includes bonuses and equity-based compensation. General and administration costs include other professional fees and services, and general corporate infrastructure expenses, including utilities and depreciation and amortization. Interest expense Interest expense consists of interest on our borrowing arrangements, the amortization of debt discounts, and deferred financing costs. For the year ended December 31, 2024, interest expense also included the extinguishment of debt costs. 49 Table of Contents Income tax provision The Company accounts for income taxes pursuant to the asset and liability method, which requires the recognition of deferred income tax assets and liabilities related to the expected future tax consequences arising from temporary differences between the carrying amounts and tax bases of assets and liabilities based on enacted statutory tax rates applicable to the periods in which the temporary differences are expected to reverse. Any effects of changes in income tax rates or laws are included in income tax expense in the period of enactment. The Company reduces the carrying amounts of deferred tax assets (“DTAs”) by a valuation allowance if, based on the evidence available, it is more likely than not that such assets will not be realized. In making the assessment under the more likely than not standard, appropriate consideration must be given to all positive and negative evidence related to the realization of the DTAs. The assessment considers, among other matters, the nature, frequency and severity of current and cumulative losses, forecasts of future profitability, the duration of statutory carry forward periods by jurisdiction, the Company's experience with loss carryforwards not expiring unutilized, and all tax planning alternatives that may be available. A valuation allowance is recognized if under applicable accounting standards the Company determines it is more likely than not that its deferred tax assets would not be realized. In accordance with ASC 740, Income Taxes, the Company evaluates the technical merits of its income tax positions and establishes unrecognized income tax benefits for uncertain tax positions when deemed appropriate. The Company evaluates and accounts for uncertain tax positions using a two-step approach: Step 1. Recognition – occurs when the Company concludes that a tax position, based solely on its technical merits, is more-likely-than-not to be sustainable upon examination. Step 2. Measurement – determines the amount of benefit that is greater than 50% likely to be realized upon ultimate settlement with a taxing authority that has full knowledge of all relevant information. Derecognition of a tax position that was previously recognized would occur when the Company subsequently determines that a tax position no longer meets the more likely-than-not threshold of being sustained. See Note 16, Income Taxes for additional information. Results of Operations This discussion and analysis pertains to comparisons of material changes in the consolidated financial statements for the years ended December 31, 2024 and 2023. For the comparisons of the years ended December 31, 2023 and 2022, see the Management’s Discussion and Analysis of Financial Condition and Results of Operations in Part II, Item 7 of our Annual Report on Form 10-K for the year ended December 31, 2023, filed with the Securities and Exchange Commission on March 6, 2024. The following table represents the selected results of operations for BRCC for the periods indicated ( amounts in thousands ): Year Ended December 31, 2024 2023 Revenue, net $ 391,490 $ 395,623 Cost of goods sold 230,316 270,175 Gross profit 161,174 125,448 Operating expenses Marketing and advertising 35,631 30,794 Salaries, wages and benefits 62,415 71,054 General and administrative 50,827 71,613 Other operating expense, net 8,453 2,198 Total operating expenses 157,326 175,659 Operating income (loss) 3,848 (50,211) Non-operating income (expenses) Interest expense, net (11,325) (6,330) Other income, net — 10 Total non-operating expenses (11,325) (6,320) Loss before income taxes (7,477) (56,531) Income tax expense 172 185 Net loss $ (7,649) $ (56,716) 50 Table of Contents Components of Our Operating Income (Loss) Comparison of the year ended December 31, 2024 to the year ended December 31, 2023 The following table summarizes our revenue, gross profit, gross margin, and total operating expenses (dollars in thousands) : Year Ended December 31, 2024 2023 $ Change % Change Revenue, net $ 391,490 $ 395,623 $ (4,133) (1) % Cost of goods sold 230,316 270,175 (39,859) (15) % Gross profit 161,174 125,448 35,726 28 % Gross margin (1) 41 % 32 % Total operating expenses $ 157,326 $ 175,659 $ (18,333) (10) % (1) Gross margin is calculated as gross profit as a percentage of revenue, net Revenue, net Net revenue for the year ended December 31, 2024 decreased $4.1 million, or 1%, to $391.5 million as compared to $395.6 million for the corresponding period in 2023. The following table summarizes net sales by channel for the periods indicated ( dollars in thousands): Year Ended December 31, 2024 2023 $ Change % Change Wholesale $ 245,040 $ 225,059 $ 19,981 9 % DTC 123,779 143,232 (19,453) (14) % Outpost 22,671 27,332 (4,661) (17) % Total net sales $ 391,490 $ 395,623 $ (4,133) (1) % Net revenue for our Wholesale channel for the year ended December 31, 2024 increased $20.0 million, or 9%, to $245.0 million as compared to $225.1 million for the corresponding period in 2023. The Wholesale channel performance was primarily driven by continued growth of packaged coffee in the FDM market and the launch of Black Rifle Energy. These increases were partially offset by a $5.0 million decrease in revenue recognized related to a barter transaction whereby we exchanged finished goods inventory for prepaid advertising credits. The prepaid advertising credits are issued by a counterparty that specializes in barter transactions. The barter transactions serve as a sales channel primarily used for selling inventory that is closer to its expiration date compared to inventory sold through non-barter transactions. Net revenue for our DTC channel for the year ended December 31, 2024 decreased $19.5 million, or 14%, to $123.8 million as compared to $143.2 million for the corresponding period in 2023. The decline was primarily driven by lower customer acquisition due to declines in the overall DTC market, a strategic reallocation of advertising spend to higher return areas, and an increase in points of distribution in the Wholesale channel, which expanded brick and mortar availability for Black Rifle Coffee consumers. This decrease was partially offset by an increase of $6.5 million as a result of the decrease in the accrual for loyalty rewards points following a change in policy on expiration of points in the first quarter of 2024. The change in policy around the expiration of loyalty rewards point increased our gross margin percentage by 1.0% for the year ended December 31, 2024. Net revenue for our Outpost channel for the year ended December 31, 2024 decreased $4.7 million, or 17%, to $22.7 million as compared to $27.3 million for the corresponding period in 2023. The decline was primarily driven by lower transaction volumes and reduced foot traffic in 2024 compared to the prior year. 51 Table of Contents Cost of goods sold Cost of goods sold for the year ended December 31, 2024 decreased $39.9 million, or 15%, to $230.3 million as compared to $270.2 million over the corresponding period in 2023. Gross margin increased to 41% for the year ended December 31, 2024 as compared to 32% for the corresponding period in 2023. The increase in gross margin was a result of product mix shift driven by an increase in the higher margin FDM market, productivity improvements, and lower warehousing costs. Operating expenses Total operating expenses for the year ended December 31, 2024 decreased $18.3 million, or 10%, to $157.3 million as compared to $175.7 million for the corresponding period in 2023. The following table summarizes operating expenses for the periods indicated ( dollars in thousands ): Year Ended December 31, 2024 2023 $ Change % Change Marketing and advertising $ 35,631 $ 30,794 $ 4,837 16 % Salaries, wages and benefits 62,415 71,054 (8,639) (12) % General and administrative 50,827 71,613 (20,786) (29) % Other operating expense, net 8,453 2,198 6,255 285 % Total operating expenses $ 157,326 $ 175,659 $ (18,333) (10) % Marketing and advertising expenses for the year ended December 31, 2024 increased $4.8 million, or 16%, to $35.6 million as compared to $30.8 million for the corresponding period in 2023. This increase was due to our expansion of partnerships, including our engagement with the UFC, higher advertising spend, incremental shopper marketing, and an increase in trade promotions. Salaries, wages and benefits expenses for the year ended December 31, 2024 decreased $8.6 million, or 12%, to $62.4 million as compared to $71.1 million for the corresponding period in 2023. This decrease was as a result of our 2023 Restructuring Plan whereby, we reduced compensation costs through headcount reductions in 2023 for which we realized the full benefit in 2024. General and administrative expenses for the year ended December 31, 2024 decreased $20.8 million, or 29%, to $50.8 million as compared to $71.6 million for the corresponding period in 2023. This decrease was as a result of our 2023 Restructuring Plan which reduced our corporate infrastructure and support that were inefficient or duplicative, including professional services, information technology, and office space. Other operating expense, net for the year ended December 31, 2024 increased $6.3 million, or 285%, to $8.5 million as compared to $2.2 million for the corresponding period in 2023. This increase was related to the impairment loss recognized in the fourth quarter of 2024 exceeding the impairment loss recognized in 2023. Components of Our Non-Operating Income (Expenses) Comparison of the year ended December 31, 2024 to the year ended December 31, 2023 The following table summarizes non-operating expenses for the periods indicated (dollars in thousands) : Year Ended December 31, 2024 2023 $ Change % Change Interest expense, net $ (11,325) $ (6,330) $ 4,995 79 % Other income, net — 10 10 (100) % Total non-operating expenses $ (11,325) $ (6,320) $ 5,005 79 % 52 Table of Contents Interest expense for the year ended December 31, 2024 increased $5.0 million, or 79%, to $11.3 million as compared to $6.3 million for the corresponding period in 2023. The increase was primarily due to an increase in average debt balances and higher interest rates. Fiscal year 2024 utilized a $75.0 million senior credit facility and a $50.0 million term loan with rates at the term Secured Overnight Financing Rate (“SOFR”) plus 2.60% to 3.10%, based on average excess availability of the borrowing base and term SOFR plus 8.50%, respectively. This agreement was entered in the third quarter 2023. In the first half of fiscal year 2023, the previous senior credit facility held a rate of Bloomberg Short-Term Bank Yield (“BSBY”) plus 2.00% to 2.25%, based on average excess availability of the borrowing base. Other expense, net consisted of miscellaneous income (expense) items such as bank fees and credit card rebates in 2023. Income Tax Provision The following table summarizes income tax provisions for the periods indicated ( dollars in thousands ): Year Ended December 31, 2024 2023 Income tax expense $ 172 $ 185 Effective income tax rate (2.3) % 0.3 % For further detail of income tax matters, see Note 16, Income Taxes , within the audited consolidated financial statements appearing elsewhere in this Annual Report on Form 10-K. Income tax expense was $0.2 million for each of the years ended December 31, 2024 and 2023, representing effective tax rates of (2.3)% and 0.3%, respectively. In addition, the tax benefit for the year ended December 31, 2024 reflects the impact of our assessment that we will not be able to record the benefit of certain current year deferred tax assets for which a valuation allowance is expected. Liquidity and Capital Resources Liquidity Overview Our principal use of cash is to support the growth of our business, including increasing working capital requirements related to inventories, accounts receivable, and general and administrative expenses. Furthermore, we use cash to fund our debt service commitments, capital equipment acquisitions, and other growth-related needs. Our primary sources of cash are (1) cash on hand, (2) cash provided by operating activities, and (3) net borrowings from our credit facilities. As of December 31, 2024, our cash and cash equivalents were $6.8 million, our working capital was $20.3 million, and under our credit facilities, we had $25.5 million of available borrowings, after the consideration of the $5.0 million reduction required before the Availability Block Release Date, the date on which we have maintained a fixed charge coverage ratio of not less than 1.10 to 1.00 based on a trailing four fiscal quarter calculation as of December 31, 2024, and no defaults or events of default are then continuing. Our ability to draw from the credit facilities is subject to a borrowing base and other covenants. There are no defaults or events of default at this time. We believe that these sources of liquidity will be sufficient to fund our working capital requirements and to meet our commitments in the ordinary course of business and under the current market conditions for at least the next twelve months. See Note 8, Long-Term Debt , to the consolidated financial statements included in Item 8 of Part II of this 10-K for information regarding the Credit Agreements. 53 Table of Contents Cash Flows from Operating, Investing and Financing Activities Comparison of the year ended December 31, 2024 to the year ended December 31, 2023 The following table summarizes our cash flows for the periods indicated (dollars in thousands) : Year Ended December 31, 2024 2023 $ Change % Change Cash flows provided by (used in): Operating activities $ 11,308 $ (24,967) $ 36,275 145 % Investing activities $ (7,713) $ (21,508) $ (13,795) (64) % Financing activities $ (10,698) $ 21,398 $ (32,096) (150) % Operating Activities Net cash provided by operating activities was $11.3 million for the year ended December 31, 2024, compared to net cash used in operating activities of $25.0 million for the corresponding period in 2023. The total increase of $36.3 million in net cash provided was primarily due to a net loss of $56.7 million improving to net loss of $7.6 million for 2024. Investing Activities Net cash used in investing activities was $7.7 million for the year ended December 31, 2024, compared to net cash used in investing activities of $21.5 million for the corresponding period in 2023. The $13.8 million decrease in net cash used was primarily due to reduced capital expenditure projects for our Outpost locations, roasting facilities and information technology. Financing Activities Net cash used in financing activities was $10.7 million for the year ended December 31, 2024, compared to net cash provided by financing activities of $21.4 million for the corresponding period in 2023. The $32.1 million decrease in net cash provided was primarily due to an increase in repayments of long-term debt of $93.3 million and payment of $1.0 million of debt extinguishment costs, offset by proceeds from issuance of long-term debt of $58.7 million, net of $3.6 million of debt issuance costs. 2023 Restructuring Plan During fiscal year 2023, management implemented a plan to reduce costs and improve efficiency of certain company-wide functions. We incurred a total of $6.8 million of restructuring costs of which $3.5 million related to severance costs for the reduction in workforce and $3.3 million related to advisory fees, fees for terminated leases, and costs related to our Salt Lake City production shutdown. These total costs incurred were included in the following line items in the consolidated statement of operations: (1) severance costs of $3.5 million were included in “Salaries, wages and benefits”, (2) advisory fees of $2.4 million and fees related to terminated leases of $0.4 million were included in “General and administrative” expenses, and (3) $0.5 million of costs related to our Salt Lake City production shutdown were included in “Costs of goods sold”. We incurred an additional $0.3 million of severance costs in the first quarter of 2024, which are included in the line item “Salaries, wages and benefits” in the consolidated statement of operations. Commitments The Company has entered into several manufacturing and purchase agreements to purchase coffee products from third-party suppliers. The minimum purchase amounts are based on quantity and in the aggregate will be approximately $26.1 million for 2025, $30.0 million for 2026 and $32.4 million for 2027. See Note 1 8 , Commitments and Contingencies to the consolidated financial statements included in Item 8 of Part II of this Annual Report for information regarding such manufacturing and purchase agreements. Liabilities relating to operating leases that have commenced as of December 31, 2024 have been reported on the balance sheet as operating lease liabilities. Payments on leases are expected to be approximately $3.9 million in the next twelve months, and approximately $37.3 million beyond twelve months through 2043. See Note 9 , Leases to the consolidated financial statements included in Item 8 of Part II of this Annual Report for additional information. 54 Table of Contents Capital Expenditures Future capital requirements will vary materially from period to period and will depend on factors such as adding additional roasting capacity, expansion of our corporate and information technology infrastructure relating to growth initiatives and expansion and growth by opening additional Company-operated Outposts. We currently expect to fund our material capital requirements with borrowings from our credit facilities, but we may also seek additional debt or equity financing. Critical Accounting Estimates Critical accounting estimates are those that management believes are the most important portrayal of our financial condition and results of operations and require the most difficult, subjective or complex judgments, often as a result of the need to make estimates about the effect of matters that are inherently uncertain. These estimates are developed based on historical experience and various other assumptions that we believe to be reasonable under the circumstances. Critical accounting estimates are accounting estimates where the nature of the estimates are material due to the levels of subjectivity and judgment necessary to account for highly uncertain matters or the susceptibility of such matters to change and the impact of the estimates on financial condition or operating performance is material. The methods, assumptions, and estimates that we use in applying our accounting policies may require us to apply judgments regarding matters that are inherently uncertain. We consider an accounting policy to be a critical estimate if (1) we must make assumptions that were uncertain when the judgment was made, and (2) changes in the estimate assumptions or selection of a different estimate methodology could have a significant impact on our financial position and the results that we report in our consolidated financial statements. While we believe that our estimates, assumptions and judgments are reasonable, they are based on information available when the estimate was made. Our significant accounting estimates are discussed in more detail in Note 2, Summary of Significant Accounting Policies to our consolidated financial statements included in Item 8 of Part II of this 10-K. The critical accounting estimates, assumptions, and judgments that we believe have the most significant impact on our consolidated financial statements are described below. Revenue Recognition We recognize revenue in accordance with the provisions of Financial Accounting Standards Board ("FASB") Accounting Standards Update ("ASU") No. 2014-09, Revenue from Contracts with Customers , or Accounting Standards Codification ("ASC") 606. Revenue is recognized when a customer obtains control of products or services in an amount that reflects the consideration which we received, or expect to receive, in exchange for those goods or services. We are required to identify our contracts with customers, identify the performance obligations in a contract, determine the transaction price, allocate the transaction price to the performance obligations in the contract, and recognize revenue when (or as) the entity satisfies a performance obligation. The majority of our revenue is derived from the sale of our products. In determining the transaction price, we evaluate whether the price is subject to refund or adjustment to determine the net consideration to which we expect to be entitled. Revenue is recognized when control of the product is transferred to the customer (i.e., when our performance obligation is satisfied), which is defined by the commercial terms of each purchase but typically occurs at the date of delivery of the merchandise to the customer. As such, customer orders are recorded as deferred revenue prior to delivery of products. In determining whether control has transferred, we considered whether risks and rewards of ownership have transferred to the customer. We estimate which shipments have been delivered and recognize corresponding revenue at the end of the period. Delivery date estimates are based on average transit times calculated based on factors such as the type of carrier, the fulfillment source, the delivery destination and historical transit time experience. Actual shipping times may differ from our estimates. Equity-Based Compensation We account for stock-based compensation in accordance with ASC Topic 718, Compensation — Stock Compensation . Equity-based awards are mainly awarded to employees and members of our Board and measured at fair value at each grant date. We calculate the fair value of stock options on the date of grant using the Black-Scholes option-pricing model. We calculate the fair value of restricted stock units on the date of grant based on the closing price of our Class A Common Stock. We calculate the fair value of performance-based restricted stock units on the date of grant using the Monte Carlo pricing model. We recognize expense over the requisite service period for awards expected to vest using the straight-line method and recognize forfeitures as they occur. See Note 14, Equity-Based Compensation within the audited consolidated financial statements appearing elsewhere in this Annual Report on Form 10-K for additional information regarding the accounting for stock-based awards. 55 Table of Contents Applying these valuation and allocation approaches involves the use of estimates, judgment and assumptions that are highly complex and subjective, such as those regarding our expected future revenue, expenses, and cash flows, as well as discount rates, valuation multiples, the selection of comparable public companies and comparable transactions, and the probability of future events. Changes in any or all of these estimates and assumptions, or the relationships between these assumptions, impact our valuation as of each valuation date and may have a material impact on the valuation of our equity and equity awards. These estimates involve inherent uncertainties and, if different assumptions had been used, equity-based compensation expense could have been materially different from the amounts recorded. Recent Accounting Pronouncements See Note 2, Summary of Significant Accounting Policies to our consolidated financial statements included in Item 8 of Part II of this 10-K for more information about recent accounting pronouncements, the timing of their adoption, and our assessment, to the extent it has made one, of their potential impact on our consolidated financial statements. JOBS Act The JOBS Act contains provisions that, among other things, relax certain reporting requirements for qualifying public companies for up to five years or until we are no longer an emerging growth company. We qualify as an “emerging growth company” and under the JOBS Act are allowed to comply with new or revised accounting pronouncements based on the effective date for private (not publicly traded) companies. We are electing to delay the adoption of new or revised accounting standards, and as a result, we may not comply with new or revised accounting standards on the relevant dates on which adoption of such standards is required for non-emerging growth companies. As a result, the consolidated financial statements may not be comparable to those of companies that comply with new or revised accounting pronouncements as of public company effective dates.