Q2 2021 Alkaline Water Company Inc Earnings Call
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Greetings and welcome to the alkaline water company to discuss this growth 2021 second quarter results and.
This time, all participants are in a listen only mode.
Question and answer session will follow the formal presentation.
If anyone should require operator assistance during the conference. Please press star zero on your telephone keypad as a reminder, this conference is being recorded.
I would now like to turn the conference over to your host Sanjay Dowdy director of Investor Relations.
Please go ahead Sir.
Good afternoon, everyone and thank you for joining us for the alkaline water company's second quarter for spokeswoman 21 earnings conference call.
Shortly you will hear from but you're right.
Yeah, and David Green, our Chief Financial Officer.
During the call, we'll be making forward looking statements within the meaning of the safe Harbor provisions of U.S. Securities losses, and we may make additional forward looking statements are on the question and answer session.
Forward looking statements involve risks and uncertainties and undue reliance should not be placed on such a certain material factors or assumptions are applied and making forward looking statements and actual results may differ materially from those expressed or implied on such statements.
For additional information about factors that may cause actual results to differ materially from expectations and about the true factors for assumptions applied and making forward looking statements. Please consult the company's form 10-Q, which was filed today and its other reports filed with the securities and exchange commissions on that for and what Canadians.
Dirty regulators on SEDAR and addition, such forward looking statements and any projections as to the Companys future performance represent managements estimates as of today November 16, 20, Twond. The company does not undertake and update any forward looking statements for projections, except as required by applicable laws and.
Moving to the United States, and Canada security losses.
Actual results could differ materially from those contemplated by any forward looking statements.
Results for certain factors, including but not limited to general economic conditions and part of the factor is changing and business tried and true development plans and ability to attract and retain qualified professionals as well as changes and legal and regulatory required.
The company issued a press release announcing its financial results and filed on form 10-Q, but yes, it's true so but that's it from US on this call may not have already done so may wish to look at those documents for the company will provide summary of results discussed on today's call.
I will now turn the call over to our CEO, but you're right so and give an overview on the company's second quarter for spot 2021 results on.
Following <unk> comments, David free and all our Chief Financial Officer will provide an overview other companies operating results.
Ricky will follow day that Superbike closing remarks, and then we will then open up for the call for Q1.
And now I would like to turn the call on what your budget.
You saw Jud Hello, everyone and welcome to the up and water companies second quarter fiscal 2021 conference call.
Our team is doing a great job of executing and challenging cobot environment.
And our second quarter, we continued to outperform our competitors and the value added water safe and made substantial progress and growing our other 88 lifestyle brand.
For the first half from fiscal 2021, <unk> revenue grew by approximately 21 per cent compared to the same period last year on.
Quarterly growth was impacted by various distributors, reducing deliveries in July and clearing exits and maturity that they'd built from the prior quarter GAAP.
Delivery and inventory trends continue to improve throughout the quarter with a record month of sales for October the.
The pandemic has led to demand spikes and changing consumer supply and buying patterns, which we believe have finally begun to normalize.
I said in my first quarter call, we implemented aggressive promotional spending over the summer, which resulted in us increasing our market share and the value added water space.
We are clearly you're winning in the marketplace and gain share in the process. According to the total U.S. all sales channel Nielsen's report dated October Threerd, our flagship brand has been the fastest growing non flavored value out of water and the top 10 brands over the last 13, 26, and 52 week period.
Per nielsen's over the last 26 weeks, our brand has grown 17.7 per cent compared to the category growth on a negative <unk>, 0.3%.
Over the previous 13 weeks or retail sales have exceeded our quarterly average and were a robust 23.2% more than double the category growth.
And the last 26 weeks, we have also gained roughly <unk>, 0.4% market share.
This is equivalent to almost $8 million and annual retail sales during.
During the same period, our top filling a true you has become one of the top 10, and the value added water category and the entire country.
We remain the only top 10 value added water that has grown double digits and every four week period. Since January this is.
The testimony to our brand and our strong partner network and the growing base of our loyal customers.
As the Nielsen data clearly shows our store level sales had been increasing throughout the last 13 weeks. However, our second quarter GAAP sales were negatively impact is as retailers work through the excess inventory purchase during the pandemic period on.
Happy to report that as of last week inventory levels of our products at our retailers have now normalized driven by our aggressive summer marketing efforts and.
I was also pleased to see recently, new orders from one of our largest customers and and the all natural channel.
We believe this quarter sales number is an outlier EPS, excluding the cobot impact and we saw the second best quarter and terms appeals and the company's history and for.
Fact, and Nielsen data shows continued strength at the retail level and October as outlined 88 outperformed all but one brand on the top 10 growing 22 per cent versus the category growth of 13.2%.
We have committed to creating the premier alkaline water company and the country. According to the recent beverage marketing Corporation reported the U.S. market is estimated to grow 11% from.
Almost 900 million and retail and 2020, our flagship brand and clarity has consistently outperformed the category both growth and its firmly entrenched as the 10 largest brand and the value added category.
We're now probably the fastest growing alkaline and water company and the country.
Thank our initiatives over the next 12 to 18 months, we can continue to hold that distinction.
For two years ago to leverage off the access we have to over 70000 retail locations and the U.S. to create a national lifestyle brand and good around downplayed your age.
We have now successfully launch and continue to expand our lifestyle 88 brands, including 88, infuse flavored waters, our eco friendly aluminum bottles and our innovative and growing line of 88, CBD Ingestible topical products.
Each of these brand extensions was chosen because we believed that the category, that's pent up demand flavored water sustainable packaging and CBD, our leading health wellness and lifestyle trends.
Each of these opportunities represent potential for multi billion dollar consumer markets, our proven ability to execute during the pandemic has actually increased our opportunities to accelerate this growth.
With your paired trades and the administration and the U.S., we believed that the EPS guidance on CBD will be forthcoming soon.
BV National consumer product goods company, we feel we are positioned very well to take advantage of any changes and would allow us to sell and all this thing.
Earlier this year, we launched a comprehensive line up and CBD and fused injectable and topical products under the 88 CBD brand name.
Our direct to consumer ecommerce sites.
Our creative digital and data driven strategies are healthy monetize our traffic our cost per customer acquisition continued to decrease monthly and our reorders continue to grow.
Over this holiday season, and we will watch and aggressive on my marketing effort designed by our agency gave us Alan and you check this.
This would be the first traditional marketing effort and a company's history.
He's all natural products resonate with our current 88 consumers and many of our existing customer should be 88, CBD customers as well.
We are particularly excited about our growing line of and demand 888, CBD infused ingestible.
Our adjusted was now include 10 jurors capsules Beacon gummies, and our lemon lime flavored 88 infused water.
Prior to the new years, we also plan to bring to market sour gummies, powerpacks and fruit shoes.
These products are incubated and our research labs leveraging data insights. We believe now we have a fantastic lineup made up for some of the most sought after items and the CBD Ingestible category.
Our 88 CBD topical portfolio now includes body lotion, and and put cream lip balm muscle cell bath salts, essentially sales and our newly launched deep relieve cream and bath and our deep relieve cream became our number one selling.
And of Topicals and the first week of online sales early feedback on our tire line at 88 CBD has been overwhelmingly positive true we believe our 88 CBD products.
Some of the best and the industry and like all our products superior distribution multi sales channel and trusted products for by our consumers will allow us to continue to gain market share.
And more to presidents continues to grow and our sales pipeline remains robust with strong interest from traditional retailers and convenient stores as well.
According to the bright feel.
Field group CBD sales and convenience stores and gas stations are expected to increase 55% and 2021 with Injectables accounting for 60% of those sales based on this report and your sales and the channel remain strong and currently 15% of CBD sales gummies cash.
Sales and drinks alone are expected to drive $153 million and the category sales by 2021 on.
Gummies, and CBD infuse flavors or some of the best taste and on the market would know better after change also by using a truly water soluble CBD on our soon to be launched Powerpacks are fully dissolvable. We believe these products will be the impact our CBD sales over the next few quarters and into fiscal 2022.
We are in active discussions with over 9000 retail locations and take our products and over the next 90 days the CBD water gummies and our unique Potter packs for opening doors, both in our traditional channel and our C store channel.
During the quarter, we added two major DST and leading national distributor partners and the all natural channel to accelerate our growth.
As a result, you and your final negotiations with one of the fastest growing convenience store chains in the U.S.. They see true store chain will care CBD abuse flavor gummies and powder packs and all 400 stores located primarily in the south and southwest.
This will be and exciting win for us and give us and significant <unk> each had in the region.
Our team and our partners are actively engaged and penetrating this space and you can expect more announced and highly significant wins and the coming months with access to some of the largest retail banners.
And with the CBD industry expected to grow to over 20 billion by 2025, we are excited about the potential for growth and demand of our portfolio of 88, CBD injectable and topical products. Most closely following me nice stories and know that we enter into the market as a bulk water brand.
Actually knew uniquely positioned us from the grocery and Super market channel. Our flagship brand has done over $200 million and sales retail and it's available and more than 70000 retail locations nationwide.
These represent some of the largest chains and banners and the U.S., including Walmart Kroger Albertsons Safeway Publix.
We have introduced several single skew sq use in recent years, which include our flavored water sustainable aluminum bottles and our newly launched CBD infuse limb and line flavored water.
We view the single serve product line is key to our growth as it provides access to new trades and approves our attached rate with existing customers.
We're actively pursuing various opportunities and convenience stores drug stores specialty retail channel and have recently and now the hospitality and foodservice segment. These greenfields areas present tremendous opportunity for our brand, giving us access to multiple billion plus Trey.
Trade markets and the and these growing markets.
Our single serve continues to be significant part of our business and the key driver for our growth it's apparent to accelerate our growth in this category, we need to have a more sustainable presents and the convenience store channel. Our goal is to have a footprint between 20 and 25000 locations out of the C stores store.
Universe, and 155 stores nationwide.
We're currently talking to and our and negotiation with a number of major G.S. diesel and some of the country's largest metropolitan areas, we expect to be able to announce this quarter several agreements that will significantly change our penetration and the C store markets I.
From a single serve offering which includes our core brand our flavored waters and are equal our eco friendly aluminum bottles are key products in this category our.
For our flagship brand already has a growing presence and our sales and partner networks are aggressively pursuing these active pipeline.
We have received from commitments on flavor, our flavored line, but timing remains uncertain due to covert pandemics impact we expect both our flavor on aluminum bottles to do well on this channel as many Sikhs store customers are re imagining their store fronts and reevaluating their merchandising needs include healthier.
Right and to keep up with the overarching secular industry trends.
And the other significant growth area that we have identified and are actively pursuing is the hospitality and food service segment.
According to recent beverage marketing Corporation reported.
The U.S. on premise beverage market is over $14 billion and water alone and presents a compelling opportunity for our single service and CBD portfolios.
They define the challenges include for foodservice Redbend use vending machines schools airports stadiums golf courses et cetera.
Well, we identified these trades is growth segments last year, we only recently started to actively pursue opportunities and that's.
Channel this was severely hampered hampered by the impact of co but.
Today, we have added two major partners.
To help us gain share and this large segment, we're excited to be working without food for the largest free distributor in the U.S.
That will offer on tire 88 line, including our 88 and fuse and aluminum bottles to their 4300 customers nationwide.
He didn't views will be replacing a leading privately held favorite brand it did exceptionally well and their system.
And its p., the competitive and branded over a million cases within.
The hospitality channel and help for TEP propel its growth and a relatively short timeframe.
We hope to mirror that success.
We also added Ibdh foodservices and national Foodservice broker that will help us accelerate our growth and this large channel.
It has many relationships and cross this channel.
And has a stellar reputation throughout the country is a national alliance of food brokers similar to how we began alkaline 88 with the National Alliance a water brokers.
We'll provide more details on this partnership and the coming weeks.
Finally, with the apparent change in administration, we've begun to prepare for.
For another for re enter the international markets. During the last quarter, we received FDA approval for exports and do a number of different countries for our three strict from from three of our strategically located co Packers.
We believe there is a significant opportunity for us to expand our lifestyle brand overseas and the next day.
Next month.
We've begun to task for identifying and re up previous partnerships and relationships into various markets.
Most logical export opportunities currently our Mexico, China, and Canada stuff.
And if that's another catalyst for growth, we hope to realize the benefits over fiscal 2022.
We will begin strictly X for your current product based on market demand and demographics, but we would also consider licensing arrangements with respect to our brand and our technology.
For beverage marketing Corp over 58 billion gallons of water are sold each year and these three countries.
Creating a tremendous opportunity for potential sales for our growing and water brand.
Our revenue mix.
Remains concentrated and the grocery store channel and we continue to pursue large banners in this segment I'm thrilled to announce that our sustainable aluminum bottle, one and a half leader and gallons will be available at one of the premier Super market change and the Midwest and the top 20 chain and North America, starting the new year.
I'm proud to say that our flagship brand alkalinity age is available and 48 of the top 75 retailers. According to the supermarket news top retailers and wholesalers and United States and Canada.
After adding family dollar and home goods, and especially retail channel earlier this year.
This is a major win for our core brand and validates that our products are winning channels. We serve issue. We have taken aggressive actions are confident our investments will generate strong returns as we continue to position ourselves for the trusted national brands.
We believe that we are well positioned to succeed and expected to accelerate our growth from the fourth quarter and into all of fiscal 2022.
For the Cup forthcoming here, we're continuing and discussions with change representing over 46000 retail locations.
Some of which are already doing tests.
And with others, we have from commitment.
We made to our third quarter is traditionally saw due to the holiday season, and specialty items Green bean broad and to take away shelf space and the grocery channel.
Despite continued cobot related uncertainties, we're seeing improved business trends that are accelerating into this quarter as.
As such we now expect the full year revenue of 48 million for 52 million representing growth of 17% to 27% take.
Taking the midpoint range of the guidance our estimated five year.
Compounded annual growth rate through 2020 will be approximately 48%.
This year's strategic action to effectively position us to return to pre pandemic growth rates and our fiscal 2022 and be on.
Now with that I'd now like to turn the call over to David Green, Our Chief Financial Officer, who will take you through the second quarter fiscal 2021 financial results David.
Thank you Rick and before I begin I'd like to encourage listeners to review the 10-Q that we filed with the FCC for more detailed explanation on some of the quarter result, I will be highlighting today.
As Ricky match and our growth during the quarter was favorably impacted by the reduced order other.
For the scooter driven by the Cobot Nike and pandemic.
For the three months ended September Thirtyth 2020, we reported revenue of approximately $10.8 million, which increased 3% year over year for the.
First six months of our fiscal year, we deliver growth over 21 per cent compared to the same period last year, our end market demand remains healthy and we saw improving from and throughout the quarter.
Our gross profit for themselves and the quarter and the September Thirtyth 2020 was approximately $4.43 million versus gross profit of $4.49 million on the quarter ended September Thirtyth 2019, our gross margin percentage of 41% decline compared to the prior year quarter primarily.
We do the higher cost with whole driven by raw material costs.
Total operating expenses for the three months ended September Thirtyth, 2020 was approximately $8.7 million compared to the approximately $7.3 million and the prior year quarter. This increase and poll operating profit was primarily due to an increase and general administrative expenses.
So we're going for the three months ended September Thirtyth, 2012 sales and marketing expenses were approximately $5 million compared to the Pos and $4.8 million on a bar your quarter. The increase in sales and marketing expenses resulted from higher price and promotional expenses due to increased sales.
And the same period general mass for you.
Vessels were approximately $3.5 million compared to approximately $2.2 million and the price.
For your quarter DNA expenses of approximately $3.5 million and this fiscal quarter ended September Thirtyth 2020 consisted primarily of free items, approximately $1.6 million, a professional media and legal fees, approximately $800000 and non cash stock option expense and approximately $700000.
Waves and waves related expenses.
Net loss per share on a quarter ended September Thirtyth 2020 was approximately six cents per share and group and approximately 14% for on the quarter ended September Thirtyth 2019, the net loss per share was negatively impacted by roughly $3.8 million and non cash items, including 1.6 million and prepared.
That's it for this result, a negative three cents impact on our bottom line.
Cash used by operations during the three months ended September Thirtyth 2020 was approximately $8.1 million as compared to approximately $2.7 million for the prior year quarter, primarily due to the increase in inventory related to our 80 CVD lie on the increase on that losses and an increase in accounts payable.
Importantly, our cash position and have the September closed 2000 to one wasn't positive $3.7 million specifically, we believe the cash on hand as of September for 2000 points are expected conversion about day, one and availability for our credit line, we will have sufficient cash to say and operations.
At least through September Thirtyth 2021 net.
That's how quickly cover guidance for the remainder losses here and the March 31st 2021 before trying to balance.
As noted in his prepared remarks, where and editors and for your guidance for fiscal year 2021.
We now expect to deliver revenue approximately $48 million to $52 million with an estimated gross profit for approximately $19 million to $21 million. This.
This represents growth of approximately 17 to 27 per cent for the whole year.
We expect all of our lifestyle brands to help drive the top line with strong contributions from our 80 CVD lying on the fourth quarter.
And with that I'll turn it back to Rick Thank you.
Thanks, David once again I would like to thank you all for participating on our call today.
We've done an excellent job navigating through an uncertain and unpredictable macro environment.
Despite the challenges we have made significant progress towards our strategic goals.
And our shareholder value creation and.
Actions positions us for long term success.
We remain focused on execution.
With our sites and to some large growth opportunities and access to the various sales channel.
I'm very proud of our performance during this fiscal year. Our team has received multiple accolades and we have been awarded for our ability to deliver during this unprecedented times the goodwill created bodes well for our brand extensions and we believe will pay significant dividends on the years to come.
We are excited about our future and our track record and the consistency of our delivery of and our best in class product.
Maybe just a favorite amongst both retailers and the consumers.
We could see you scale all the elements for success at present, we have sufficient capital a great management team a great business model superior products with all natural ingredients, great channels to distribute to great taste profiles, and and increasing market driven consumer demands for each of our respective lifestyle products.
Our fully executed on ecommerce platforms, our channel expansion for hospitality convenient specialty retail combined with our organic nude and new store growth and told to U.S. food channel should resolve and substantial growth over the foreseeable future and.
We'd like to thank our shareholders and our board for their continued support we are making great strides and making 80 888 infused and 88 CBD. The most trusted lifestyle brand and America.
At this time, we will be conducting and question and answer session. If you'd like to ask a question. Please press star one on your telephone keypad and confirmation tone will indicate your line is and the question Q you May press star two if you'd like to remove your question from the queue for participants.
Moving speaker equipment and may be necessary to pick up your handset before pressing the star Keith one moment, please while we poll for questions.
Your first question comes from the line other Luke and then with Canaccord Genuity. Please proceed with your question.
Thanks, Good afternoon, guys Snow on first question I had just on the cash position to take on a quarter you guys talked about between not and you expected warrant exercise do you expect to be able to operate.
Over the course of the year and I'm just curious on the warrant exercises are those are those callable at any buy and there are there any color or is it solely from the children's discretion on those.
And Scott exercise.
And at this time, there are not legally possible, but we have had discussions with the warrant holders and we believe that they will be exercised.
Yeah, not and this quarter by the end of this fiscal year.
Okay, [laughter] and the second question I had.
He is on the guidance and specifically the gross margin guidance.
I know and Mickey I think correct me, if I'm wrong, but when you've spoken in the past the CBD opportunity and believed to be products and general are higher margin and the gross margin is associated with your with your traditional alkaline water products. So included in that guidance, what should we be factoring and that's.
As far as revenue index I guess is it.
The guidance would imply that it will be less CB and expected, it's other able to think about it.
With the on the guidance it includes and CBD, but probably about two thirds of what was the expectation level.
Yeah, the resets are little slow.
But the good news is candidly that a you know two weeks ago and you talk to me about who is going to take in adjustables. This year I would have told you probably primarily the CBD specialty stores, but.
But as of two weeks ago, we have begun to get tremendous.
Activity from more standard retail locations and they seem to be going state by state.
Following our pattern for abusing day.
[noise] dietary supplements and so.
Selling and states and wish they're allowed to sell so pretty exciting in terms of our sales group relative to the adjustables for the remainder of the year.
Okay. That's it for me thanks.
Thank you.
As a reminder, if you'd like to ask a question. Please press star one on your telephone keypad as a reminder, if you'd like to ask a question. Please press star one on your telephone keypad and now one moment, please while we pull for more questions.
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Ladies and gentlemen, we have reached the end of the question and answer session and I would like to turn the call back to Mr. Mr., Richard Wright for closing remarks.
Thank you. Thank you all for attending today's conference again, I can't stress enough, how proud I am of the company and the way that we perform during the Cove it.
Vitamins is literally the toughest business environment I've been through and 43 years and yet somehow we've been managed we have managed to expand.
Not only and our current customer base, but also in our lifestyle brands, which.
It's very tough to do when you don't know who is going to be open and who's not and we've done a really really great job and getting that kids it on and getting after it and I see nothing but a blue skies and the future I want to thank you all for your patience today.
This concludes today's conference you may disconnect your lines at this time. Thank you for your participation.
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