Q1 2024 Reed’s Inc Earnings Call
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Chris: Good afternoon, and welcome to Reed's first quarter 2024 earnings conference call for the three months ended March 31st, 2024. My name is Chris, and I will be your conference operator for today.
Chris: Good afternoon, and welcome to Reed's first quarter 2024 earnings conference call for the three months ended March 31, 2024. My name is Chris and I will be your conference operator for today.
Chris: We will have prepared remarks from Norman Snyder, Reed's Chief Executive Officer, and Joanne Tenley, Reed's Chief Financial Officer. Following their remarks, they will take your questions. Before we begin, please take note of the company's cautionary statement. Today's call will include forward-looking statements, including statements about Reed's business plans and 2024 guidance. Forward-looking statements inherently involve risks and uncertainties and only reflect management's view as of today, May 14, 2024, and the company is under no obligation to update them.
Chris: We will have prepared remarks from Norman Snyder, Chief Executive Officer, and Joanne <unk> Chief Financial Officer. Following their remarks, they will take your questions Bill.
Chris: Before we begin please take note of the company's cautionary statement.
Speaker Change: Today's call will include forward looking statements, including statements about <unk> business plans and 2024 guidance.
Speaker Change: Forward looking statements inherently involve risks and uncertainties and only reflect management's view as of today may 14th 2024, and the company is under no obligation to update them when discussing results to presenters may refer to non-GAAP measures, which exclude certain items from reported results.
Speaker Change: Please refer to Reed's first quarter 2024 earnings release on REIT Investor website at Investor Dot rethink dot com and its first quarter 2020 form.
Speaker Change: 10-Q expected to be available on the website on March 14th 2024 for definitions and reconciliations of non-GAAP measures and additional information regarding results, including a discussion of factors that could cause actual results to materially differ from forward looking statements.
Chris: When discussing results, the presenters may refer to non-GAAP measures which exclude certain items from reported results. Please refer to REIT's first quarter 2024 earnings release on its investor website at investor.reitsinc.com and its first quarter 2020 form. 10-Q is expected to be available on the website on March 14, 2024 for definitions and reconciliations of non-GAAP measures and additional information regarding results, including a discussion of factors that could cause actual results to materially differ from forward-looking statements. I will now turn the call over to Mr. Snyder. Please go ahead.
Speaker Change: I will now turn the call over to Mr. Sneider. Please go ahead.
Norman Snyder: Thank you, operator, and good afternoon, everyone. We appreciate you joining us today to discuss our first quarter 2024 results. We continue to execute on our cost-cutting and optimization initiatives in the first quarter, leading to material improvements in gross margin, operating expenses, and modified EBITDA. I'm proud of our team's hard work to consistently drive savings across our business, enabling us to achieve our seventh consecutive quarter of year-over-year operating expense and profitability improvement. As we mentioned during our earnings call in March, sales in Q1 were impacted by short orders reducing shipments.
Mr. Sneider: Thank you operator, and good afternoon, everyone.
Mr. Sneider: We appreciate you joining us today to discuss our first quarter 2020 for our results.
Mr. Sneider: We continue to execute on our cost cutting and optimization initiatives in the first quarter, leading to material improvements in gross margin operating expenses and modified EBITDA.
Mr. Sneider: I'm proud of our team's hard work to consistently drive savings across our business, enabling us to achieve our seventh consecutive quarter of year over year operating expense and profitability improvements.
Speaker Change: As we mentioned during our earnings call in March sales in Q1 were impacted by short orders, reducing shipments we have taken the appropriate steps to build our inventory levels and to add capacity through a new co packing partnerships.
Norman Snyder: We have taken the appropriate steps to build our inventory levels and to add capacity through a new co-packing partner. As a result, we exited the quarter with healthier inventory levels and have seen a significant month-over-month reduction in the number of short shipments since January, which we expect to decline further moving forward. I would also like to add that during the four-week period ending April 21, 2024, IRI unit sales increased 9% in the grocery segment, reflecting the impact of reduced short shipment orders. Further, retailers who experienced a lower level of short shipments saw strong double-digit growth during that same period.
Speaker Change: As a result, we exited the quarter with healthier inventory levels <unk> seen a significant month over month reduction in a number of short shipments in January which we expect to decline further moving forward.
IRI: I would also like to add that during the four week period, ending April 21, 2024, IRI unit sales increased 9% in the grocery segment, reflecting the impact of reduced short shipment orders further retailers, who experienced a lower level of short shipments saw strong double digit growth during that same period.
Norman Snyder: By maintaining appropriate levels of inventory, we remain confident in our ability to deliver on our growth and profitability targets for 2024. Turning to a few recent updates on our key product categories, based on unit sales from IRI, we will scan data for the four-week period ending April 21st, 2024, which is defined as multi-outlet and convenience in the food, grocery, drug, mass, Walmart, club, dollar stores, and military channels, as well as VIP data, which is tracking software for a distributor-based ship. Reed's extra ginger beer generates 8% year-over-year growth. Ginger ale grew 9% during the four weeks ended April 21st compared to the year-ago period.
IRI: By maintaining appropriate levels of inventory, we remain confident in our ability to deliver on our growth and profitability targets for 2024.
IRI: Turning to a few recent updates on our key product categories based on unit sales from IRI scan.
Speaker Change: Scan data for the forward period, ending April 21 2024.
Speaker Change: <unk> is defined as multi outlet and convenience in the food grocery drug mass Walmart club dollar stores and military channels.
Speaker Change: VIP data, which is a tracking software for a distributor based shipments Reed's extra ginger bear generated 8% year over year.
Speaker Change: Growth.
Speaker Change: Ginger Ale grew 9% during the four weeks ended April 21, compared to the year ago period, and our virtual craft soda portfolio will gear solid 13% year over year increase in unit sales.
Norman Snyder: In our virtual craft soda portfolio, root beer saw a 13% year-over-year increase in unit sales. For our ready-to-drink alcohol portfolio, we experienced a 10% increase compared to the year-ago period. We are making progress on our new product roadmap by leveraging our fresh organic ginger to create a catalog of beverages in the Better For You category. We have always prided ourselves on our commitment to using the highest quality natural ingredients while delivering a bold premium taste.
Speaker Change: For our ready to drink alcohol portfolio, where we experienced a 10% increase compared to the year ago period.
Speaker Change: We are making progress on our new product roadmap by leveraging our fresh organic ginger to create a catalog of beverages and the better for you category.
Speaker Change: We have always prided ourselves on our commitment to using the highest quality natural ingredients way of delivering a bolt premium taste. We're excited to unveil. These products later in the year I look forward to providing our customers with a new innovative portfolio of offerings.
Norman Snyder: We're excited to unveil these products later in the year and look forward to providing our customers with a new, innovative portfolio of offers. As I mentioned earlier, we made solid progress in our cost-cutting and optimization initiatives in Q1, leading to a more than 1,000 basis points increase in gross margin and a 23% reduction in operating expenses compared to the year-ago period. Our strong improvement in gross margin was driven by our ability to materially lower costs, increase the mix of cans versus bottles, and implement more consistent pricing applications across channels.
Speaker Change: As I mentioned earlier, we made solid progress in our cost cutting and optimization initiatives in Q1, leading to a more than 1000 basis point increase in gross margin and a 23% reduction in operating expenses compared to the year ago period.
Speaker Change: Our strong improvement in gross margin was driven by our ability to materially lower cost increase the mix of cans versus bottles and implement more consistent pricing applications across channels.
Norman Snyder: For delivery and handling expenses, we saw a 29% reduction in the quarter to $3.01 per case compared to $3.46 per case in Q1 of 2023. We drove these savings by renegotiating freight rates for heavily trafficked lanes, improving throughput, and generating efficiencies from our streamlined distribution model and new co-packing partners. We anticipate our renegotiated freight contracts to lead to more than $1 million in annualized cost savings.
Speaker Change: For delivery and handling expenses, we saw 29% reduction during the quarter to a $3 <unk> per case compared to $3 46.
Speaker Change: Per case in Q1 of 2023.
Speaker Change: We drove these savings by renegotiating freight rates are heavily traffic lanes, improving throughput and generating efficiencies from our streamlined distribution model and new co packing partnership.
Speaker Change: We anticipate our renegotiated freight contracts to lead to more than $1 million of annualized cost savings.
Norman Snyder: We'll continue to evaluate our delivered handling expenses to ensure that we're running as lean and efficiently as possible. Quickly touching on our new co-packing partner, Battle Co-Packing, we kicked off our partnership during the quarter, which enabled us, enabled, and enhanced our production capabilities for both bottles and cans in the Southeast region. In just a few weeks, we've already realized operating efficiencies and cost savings. We're pleased with our progress thus far and look forward to building a long-standing partnership with BASC. We also saw a 24% year-over-year reduction in selling and marketing expenses due to our efforts to create a more efficient go-to-market strategy to streamline our sales process.
Speaker Change: We'll continue to evaluate our delivered hailing expenses to ensure that we're running as lean and efficiently as possible.
Speaker Change: Let me touch it on our new co packing partner <unk>, we kicked off our partnership during the quarter, which enabled us enable enhanced our production capabilities for both bottles and cans in the southeast region.
Speaker Change: And just a few weeks, we've already realized operating efficiencies and cost savings from this partnership.
Speaker Change: We're pleased with our progress thus far and look forward to building a long standing partnership with bad.
Speaker Change: We also saw a 24% year over year reduction in selling and marketing expenses due to our efforts to create a more efficient go to market strategy.
Speaker Change: Streamline our sales process.
Norman Snyder: Turning to our first quarter and recent sales and operational highlights. To start, we are set to kick off our first market product launch in Sprouse with Virgil's full sugar handcrafted soda cans in black cherry, cola, vanilla cream, and root beer flavors in both multi-packs and single cans beginning tomorrow, May 15. We also expanded our alcohol assortment at Sprouts with the addition of hard ginger ale. And Whole Foods, after a strong performance during last year's National Off-Shelf Program, received a second national authorization for our alcohol assortments starting in June 2024.
Speaker Change: Turning to our first quarter and recent sales and operational highlights to start we are set to kick off our first market product launch and sprouts with virtual full sugar handcrafted soda cans and <unk>.
Speaker Change: <unk> Cherry Cola, vanilla cream and root beer flavors and multi packs of single cans, beginning tomorrow may 15.
Speaker Change: We also expanded our alcohol assortment at sprouts with the addition of our Ginger ale.
Speaker Change: And whole foods after a strong performance during last year's National off shelf program. We received a second national authorization for our alcohol Assortments starting June in June 2024.
Norman Snyder: Additionally, after a successful test launch in the summer of 2023, hard ginger ale has been subsequently added to Whole Foods' core product set. Next, we launched Virgil Zero Sugar packs at Costco's Texas locations with plans to launch our new 7.5 ounce ginger beer mini cans in all business locations nationwide. We're also working with multiple multiple regions to extend our club channel offerings as we look to expand product assortment and enhance our partnership with Cost.
Speaker Change: Additionally, after a successful test launch in the summer of 2023, our Ginger Ale has been subsequently added to whole foods core product sets.
Speaker Change: Next we launched Virgil zero sugar packaging, Costco with Texas locations with plans to launch our new seven five ounce Ginger beer mini cans and all business locations nationwide.
Speaker Change: We're also working with multiple multiple regions to extend our club channel offerings as we look to expand product assortment and enhance our partnership with Costco.
Norman Snyder: Additionally, we expanded distribution with the Wake Farm Group, operating under the banners of ShopRite, PriceRite, Fairway, and SRS by adding more than 2,600 points of distribution for our REIT product portfolio. We've also added over a thousand stores with Giant Eagle that currently sells our ginger beer cans, zero sugar ginger beer cans, and all four of the new Virgil's handcrafted beers. Looking at broader channel opportunities, we have identified specific customer and geographic targets for our initial rollout into the on-premise channel.
Speaker Change: Additionally, we expanded distribution with the wake from group operating under the banners of shop right price right fairway at Srs by adding more than 2600 points of distribution for our <unk> product portfolio.
Speaker Change: We've also added over 1000 stores with giant Eagle that currently sells our ginger beer cans zero sugar Ginger beer cans at all for the new virtual handcrafted cans.
Srs: Looking at broader channel opportunities, we have identified specific customer and geographic targets for our initial rollout into the unprocessed prime.
Srs: Premise channel, we believe this channel, which has been untapped to date increased trial and brand awareness are each product we.
Norman Snyder: We believe this channel, which has been untapped to date, will increase trial and brand awareness for each product. We have plans to expand our on-premise efforts with the launch of our 7.5 ounce ginger ale mini cans later this year. In our e-commerce business, we continue to see promising results as we've experienced month-over-month growth since the beginning of the year. We're also in the process of launching our new Virgil's Cans on both Shopify and Amazon this week, with plans to add additional online sales channels over the summer.
Speaker Change: We have plans to expand our on premise efforts with the launch of our seven five ounce Ginger how many cans later this year.
Speaker Change: And our E Commerce business, we continue to see promising results as we've experienced month over month growth since the beginning of the year.
Speaker Change: We're also in the process of launching our new virtual scans on both Shopify Amazon This week with plans to add additional online sales channels over the summer.
Joanne Tenley: This channel represents a small portion of our business today, but we are optimistic about its progress and will continue to invest resources as it becomes a larger revenue contributor in the future. Looking ahead, we are reiterating our 2024 financial outlook as we continue to expect net sales growth, gross margin expansion, and modified EBITDA profitability while generating positive cash flow from operations for the full year. We have several key initiatives to drive growth as we improve order fulfillment rates, expand product authorizations, increase promotional activity, and launch new innovative products targeting the better for you category.
Speaker Change: This channel represents a small portion of our business today, but we are optimistic about its progress and will continue to invest resources as it becomes a larger revenue contributor in the future.
Speaker Change: Looking ahead, we are reiterating our 2020 financial outlook as we continue to expect net sales growth gross margin expansion and modified EBITDA profitability, while generating positive cash flow from operations for the full year.
Speaker Change: We have several key initiatives to drive growth as we improve our order fulfillment rates expand product authorizations increase increased promotional activity and launch new innovative products targeting the better for you category.
Joanne Tenley: We will maintain a lean discipline to ensure we're running an efficient operating model. Between these initiatives, our improved inventory levels, and our optimized cost structure, we are poised for a strong second quarter and year ahead. Before wrapping up with closing remarks, Joanne will cover our financial highlights for the quarter in more detail. Joanne, over to you.
Speaker Change: We will maintain a lean discipline to ensure we're running an efficient operating model.
Speaker Change: Between these initiatives, our improved inventory levels and our optimized cost structure, we are poised for a strong second quarter and year ahead.
Joanna: Before wrapping up with closing remarks, Joanne will cover our financial highlights for the quarter in more detail Joanna over to you. Thanks norm.
Joanne Tenley: Thanks, Norm. Diving into our results, all variance commentary is on a year-over-year basis unless otherwise noted. Net sales for Q1 2024 were $9.6 million compared to $11.2 million in the year-ago quarter. The decrease was primarily driven by tightened credit terms from select suppliers that capped our purchase of raw materials, resulting in an inflated rate of short order shifts. Gross profit for the first quarter of 2024 increased 26% to $3.4 million, compared to $2.7 million in the same period of 2023.
Joanne: Diving into our results all berries commentary is on a year over year basis, unless otherwise noted net sales for Q1, 2024 were $9 6 million compared to $11 $2 million in the year ago quarter.
Joanne: The decrease was primarily driven by tightened credit terms with select suppliers and kept our purchase of raw materials.
Joanne: Materials, resulting in an inflated rate of short order shipments.
Joanne: Gross profit for the first quarter of 2024 increased 26% to $3 4 million compared to $2 7 million in the same period of 2023 gross.
Joanne Tenley: Gross margin increased 1,140 basis points to 35.6%, compared to 24.2% in the year-ago quarter. The increase is primarily driven by lower supply chain and input costs. Delivery and handling were reduced by 29% to 1.5 million during the first quarter of 2024 compared to 2.1 million in the first quarter of 2023. The decrease was primarily driven by renegotiated freight rates for heavily trafficked lanes, improved throughput, as well as efficiencies generated from our streamlined distribution model and new co-packing partnerships.
Joanne: Gross margin increased 1140 basis points to 35, 6% compared to 24, 2% in the year ago quarter.
Speaker Change: The increase was primarily driven by lower supply chain and input costs.
Speaker Change: Delivery and handling were reduced by 29% to $1 5 million during the first quarter of 2024 compared to $2 1 million in the first quarter of 2023.
Speaker Change: The decrease was primarily driven by renegotiated freight rates for heavily traffic lanes improved throughput as well as efficiencies generated from our streamlined distribution model and new co packing partnership.
Joanne Tenley: Delivery and handling costs were reduced to 16% of net sales, or $3.01 per case, compared to 19% of net sales, or $3.46 per case, during the same period last year. Selling General and Administrative Costs decreased 19% to $2.6 million during the first quarter of 2024, compared to $3.2 million in the year-ago quarter. As a percentage of net sales, selling, general, and administrative costs were reduced to 27 percent compared to 28 percent.
Speaker Change: Delivery and handling costs were reduced to 16% of net sales or $3.01 per case compared to 19% of net sales were $3 46 per case during the same period last year.
Speaker Change: Selling general and administrative costs decreased 19% to $2 6 million during the first quarter of 2024 compared to $3 2 million in the year ago quarter.
Speaker Change: As a percentage of net sales selling general and administrative costs were reduced to 27% compared to 28%.
Joanne Tenley: Altogether, operating expenses were reduced to $4.1 million, or 42% of net sales, compared to $5.3 million, or 47% of net sales in the year-ago period. This reflects our tireless efforts to optimize our cost structure and improve our operating margins. Operating loss during the first quarter of 2024 improved to $0.6 million or $0.16 per share compared to a loss of $2.6 million or $1.01 per share in the first quarter of 2023. The modified EBITDA loss improved to $0.4 million in the first quarter of 2024, compared to $2.3 million in the first quarter of 2023.
Speaker Change: Altogether operating expenses reduced to $4 1 million or 42% of net sales compared to $5 3 million or 47% of net sales in the year ago period.
Speaker Change: This reflects our tireless efforts to optimize our cost structure and improve our operating margins.
Speaker Change: Operating loss during the first quarter 2024 improved $2 6 million or <unk> 16 per share compared to a loss of $2 6 million or $1 one per share in the first quarter of 2023.
Speaker Change: Modified EBITDA loss improved to <unk> 4 million in the first quarter of 2024 compared to $2 3 million in the first quarter of 2023.
Joanne Tenley: For the first quarter of 2024, cash used in operations was $2.4 million compared to cash flow from operations of $1.1 million for the same period in 2023. The decrease in operating cash flow was primarily driven by higher inventory purchases compared to the year-ago period as we look to improve the rate of short order shipments moving forward. As of March 31, 2024, we had approximately $0.3 million of cash and $26 million of total debt, net of capitalized financing fees.
Speaker Change: For the first quarter of 2020 for cash used in operations was $2 4 million compared to cash flow from operations of $1 1 million in the same period in 2023.
Speaker Change: The decrease in operating cash flow was primarily driven by higher inventory purchases compared to the year ago period, as we look to improve the rate of short order shipments moving forward.
Speaker Change: As of March 31, 2024, we had approximately $3 million of cash and $26 million in total debt net of capitalized financing fees.
Joanne Tenley: This included $18.2 million from a convertible note and $7.8 million from our revolving line of credit, which has $5 million of additional borrowing capacity. I will now turn the call back over to Norma for closing remarks.
Speaker Change: This included $18 2 million from our convertible notes and $7 $8 million from our revolving line of credit, which has $5 million of additional borrowing capacity.
Speaker Change: Ill turn the call back over to norm for closing remarks.
Norman Snyder: Thank you, Joanne. I'd like to convey my appreciation for the entire REACH team and their consistent effort to optimize our business and lay a solid foundation for the remainder of 2024. We are intently focused on returning to growth and preserving healthy gross margins above 30% while maintaining a lean fixed cost base and driving operational leverage in our business. These initiatives, coupled with our ongoing efforts to bolster our inventory position, will enable us to deliver on our growth and profitability goals in the year ahead. Operator, we will now open the call for questions and answers.
Norm: Thank you Joanne I'd like to convey my appreciation for the entire each team and their consistent efforts to optimize our business and lay a solid foundation for the remainder of 2024.
Norm: We are intently focused on returning to growth and preserving healthy gross margins above 30%, while maintaining a lean fixed cost base and drive operational leverage in our business.
Norm: These initiatives coupled with our ongoing efforts to bolster our inventory position will enable us to deliver on our growth and profitability goals in the year ahead.
Speaker Change: Operator, we will now open the call for questions and answers.
Chris: Thank you. Ladies and gentlemen, we will now begin the question and answer session. Should you have a question, please press star followed by one on your touch-tone phone. You will hear a three-tone prompt acknowledging your request, and your questions will be answered in the order they are received. Should you wish to decline from the polling process, please press star followed by 2. If you are using a speakerphone, please lift the handset before pressing any keys.
Speaker Change: Ladies and gentlemen, we will now begin the question and answer session should you have a question. Please press star followed by one on your Touchtone phone you will hear us retail and perhaps acknowledging our requests in your questions will be pulled in the order they are received.
Speaker Change: Should you wish to decline from the polling process. Please press star followed by two.
Speaker Change: If you are using a speaker phone please lift the handset before pressing any keys one moment. Please for your first question.
Chris: One moment, please, for your first question. The first question comes from Sean McGowan Roth. Sean, please go ahead.
Speaker Change: Your first question comes from Sean Mcgowan Ross Sean. Please go ahead.
Sean McGowan Roth: Good afternoon, how are you? Good shot.
Speaker Change: Good afternoon, how are you.
Norman Snyder: How are you? Very good. Good to hear from you.
John: John how are you.
Sean McGowan Roth: I have a couple of questions, if I may. One, nice job on the gross margin recovery there. Just curious as to what degree might that be helped by the mix? You know, in other words, how sustainable is this as a more complete offering of a product? You know, was there anything in a lower margin that wasn't shipping that might affect that? Or is this kind of a rate we might come to expect in the coming quarters?
Speaker Change: Good.
Speaker Change: <unk>.
Speaker Change: Couple of questions if I may one.
Speaker Change: Nice job on the gross margin recovery, there just curious as to what degree might be.
Speaker Change: Be helped by.
Speaker Change: The mix in other words it how sustainable is this.
Speaker Change: A more complete.
Speaker Change: Offering of product was there anything kind of lower margin that wasn't shipping that might affect that or is this kind of a rate we might come to expect in the coming quarters.
Norman Snyder: More on the latter, look, we've taken costs of a lot of elements in our COGS, and we can believe we'll continue to take further savings. The only aspect where product mix has been favorable is the shift from bottles to cans, and that's a trend we don't see slowing down. In fact, we've been really – I've been surprised by the pace at which we've converted and how both retailers and consumers have received our product offerings and cans.
Speaker Change: More of the latter.
Speaker Change: Look we've taken cost.
Speaker Change: A lot of elements.
Speaker Change: Our Cogs and we can believe we will continue to take further savings.
Speaker Change: The only aspect where product mix has been favorable as the ship and bottles to cans and Thats a trend we don't see slowing down.
Speaker Change: In fact, we've been really I've been surprised by the pace at which we converted and how both retailers and consumers have received.
Speaker Change: Our product offerings in cans.
Sean McGowan Roth: Okay, it's good to hear. Can you talk about the category of RTD alcoholic beverages more generally? Are you seeing overall trends in the category continuing to be favorable? I know it sounds like your sales are going quite well, but has there been any slowdown in the category?
Speaker Change: Okay good to hear.
Speaker Change: Can you talk about generally the category of RTD alcohol like are you seeing overall trends in the category continuing to be favorable I know it sounds like your sales are growing quite well, but has there been any slowdown in the category.
Norman Snyder: Look, I think some of the bigger players that came out really strong have seen a pullback in their sales, but I think that's because of competition and more offerings, which I think bodes well for us and, obviously, why we're seeing growth. So I'm not really. I think the overall category continues to grow. I think consumers are looking for better-for-you, more premium products. And I think... You know, I think that's something that we offer and believe we'll continue to see growth.
Speaker Change: Look I think there's been some of the some of the bigger players that came out really strong have seen.
Speaker Change: Back of their sales, but I think thats because of competition and more offerings.
Speaker Change: Which I think bodes well for us and obviously why we are seeing growth.
Speaker Change: Not really I think the overall category continues to grow.
Speaker Change: I think consumers are looking for better for you.
Speaker Change: More premium products and I think.
Speaker Change: I think thats something that we offer and believe we will continue to see see growth.
Sean McGowan Roth: And then a couple of sort of housekeeping questions on the balance sheet. So this equity offering that's on the balance sheet is saved for that. I assume that just that sale is complete as of the second quarter. So that becomes kind of additional paid capital then.
Great. Thank you and then a couple of sort of housekeeping questions on the balance sheet. So this.
Speaker Change: Equity offering on the balance sheet.
Speaker Change: Does that I assume that that sale is complete as of the second quarter. So that becomes kind of additional paid in capital one.
Norman Snyder: Yeah, that will convert to equity, and we expect that to be completed during the second quarter.
Speaker Change: Yes that will convert to.
Speaker Change: <unk> to equity and we expect that to be completed during the second quarter, yet, okay and would there be additional cash raise proceeds remember this kind of came in multiple yes.
Sean McGowan Roth: Okay, and would there be additional cash raised? I seem to remember this kind of came in multiple bits, or at least that's the way I built the model, like there was some amount of cash that was raised in the first quarter and some in the second quarter.
Speaker Change: So at least we have built a model like is there a similar amount of cash that was raised in the first quarter and some in the second quarter.
Norman Snyder: Yeah, it'll be split. The majority was in the latter part of the first quarter, but there's still interest to complete that during this quarter.
Speaker Change: It'll be it'll be split the majority was in the <unk>.
Speaker Change: The latter part of the first quarter, but there is still okay interest.
Speaker Change: For fleet that during this quarter.
Sean McGowan Roth: Yeah, okay, that's what we have built into the model, so I appreciate that and, like, how many shares outstanding are there, like as a
Speaker Change: Okay.
Speaker Change: We had built into the model.
Speaker Change: Appreciate that and I like how many shares outstanding are there like as of right now.
Norman Snyder: Well, I think in the queue, there are 4,187,000 shares that are outstanding. And that does not- Is the cue out? That does not reflect the safe offering.
Speaker Change: Well I think at the end.
Speaker Change: Q there is 4.187 million shares that are outstanding.
Speaker Change: That does thank you.
Speaker Change: Sure.
Speaker Change: That does not reflect the safe offering.
Sean McGowan Roth: Oh, okay. Um, all right. Well, yeah, I guess when will the cube be out in a couple of days?
Speaker Change: Oh, Okay alright.
Speaker Change: Alright, well thank you.
Speaker Change: I guess when will the Q be out in a couple of days.
Norman Snyder: You will be asked to
Speaker Change: He will be out.
Sean McGowan Roth: Okay, all right. Thanks a lot. I love that shot.
Speaker Change: Tomorrow.
Speaker Change: Okay, alright, thanks, a lot.
Speaker Change: Sean I realize we haven't filed that yet so that's good.
Speaker Change: Yes.
Speaker Change: Tomorrow.
Norman Snyder: I realize we haven't filed that yet, so that's, uh, yeah, that'll be filed tomorrow. I know. I'm trying to pull a Karnak here and figure out what the number is. Thank you.
Speaker Change: I'm trying to pull of carnac here and figure out what the numbers. Thank you okay.
Chris: Thank you. Your next question comes from Gary Gates. Gary, please go ahead.
Speaker Change: Thank you. Your next question comes from Gary Gates, Gary. Please go ahead.
Speaker Change: Yes.
Gary Gates: Yeah. Hi, Norm and Joanne. Thanks for taking the call. Always glad to hear your voice. With the safe offering, do you know at what price the shares will be converted?
Speaker Change: Hey.
Gary Gates: Thanks for taking the call always glad to hear your voice.
Gary Gates: With the safe offerings.
Speaker Change: At what price the shares will be converted.
Norman Snyder: No, that's to be determined.
Speaker Change: No that's that's to be determined.
Norman Snyder: Okay, okay, I think there's a I mean, there's a provision in there obviously to set a floor price, but it'll be the price that will be the better off. So
Speaker Change: Okay. Okay, I think I mean, there is that.
Speaker Change: There is a provision in there obviously too.
Speaker Change: We set a floor, but it'll be the prices will be better off.
Speaker Change: <unk>.
Speaker Change: And again that's.
Norman Snyder: That's to be finalized
Speaker Change: That's to be finalized.
Norman Snyder: Do you know what the floor is made of?
Speaker Change: The floor is.
Norman Snyder: We, I think we set it, I want to say like at $1.50. I believe we set it at.
Speaker Change: I think we said it.
Speaker Change: I want to say light at $1 50, I believe we said it at okay. Good. Good then okay. Here's my Big question.
Gary Gates: Okay, good, good. Then, all right, here's my big question.
Speaker Change: I give you.
Speaker Change: The entire company of lettuce credit for trying.
Gary Gates: I give you and the entire company a lot of credit for trying, uh... right now slowly headed to cash flow positive from operations, but there's very little cash on the books, and we also have interest expense, which leads to more debt and more shares, ultimately being interested in more shares being outstanding. So where do you see this headed to and over what period of time? I'm speaking as an investor. Well, we can't.
Speaker Change: Right now.
Speaker Change: Slowly headed to cash flow positive from operations.
Speaker Change: But there is very little cash on the books and we also have as interest expense.
Speaker Change: Each leads to more debt.
And the more shares ultimately being interested.
Speaker Change: More shares beings.
Speaker Change: Outstanding So where do you see this fed it too.
Speaker Change: And over what period of time speaking as an investor.
Norman Snyder: Well, we can't, there's a blocker on what percentage they can own. It's capped at 9.9 percent, so there's not a lot of additional shares that can be issued to go to pay down that debt. And remember, a lot of the interest is half of it's cash, half of it's PIC. So it's not all due and immediately paid for. So look at it. I think we've righted the ship from a fundamental business perspective and are no longer burning cash from operations.
Speaker Change: While we cant there is the debt has a blocker on what percentage they can own it.
Speaker Change: Capped at nine 9%.
Speaker Change: So theres not a lot of there's not a lot of additional shares.
Speaker Change: That can be issued.
Speaker Change: To go to pay down that debt and remember a lot of the.
Speaker Change: The interest half of it cash half of its pack. So it's not all do it immediately pay for yourself look at.
Speaker Change: I think we we've righted the ship from a fundamental business perspective.
Speaker Change: And are no longer burning cash from operations.
Norman Snyder: Catching up with our inventory will allow us to ship more products and generate positive cash flow, and we will continue to work with our lenders to work out a situation that's favorable to all parties in an effort to really bring that debt load down.
Speaker Change: Catching up with our inventory will allow us to ship more product and generate.
Speaker Change: Positive cash flow and we will continue to work with our lenders.
Speaker Change: To work out a situation thats favorable to all parties in an effort to really bring that that debt load down.
Gary Gates: Okay, I recognize that part of the debt is PIC. When do you see REIT getting to a point of being cash flow positive, not only from operations but also from a debt standpoint?
Speaker Change: Okay.
Speaker Change: Recognize that part of the debt is fixed.
Speaker Change: But.
Speaker Change: When do you see.
Speaker Change: Getting to a point.
Speaker Change: Being cash flow positive.
Speaker Change: Not only from operations, but also from a debt standpoint.
Norman Snyder: That is our, you know, current focus, and I'd like to say, you know, towards the latter part of the year when we're generating enough cash to both cover our operations and service the part that we do.
Speaker Change: That is our current focus and I'd like to say.
Speaker Change: Towards the latter part of the year, where we're generating enough cash to both cover our operations and service.
Speaker Change: Our debt requirements.
Gary Gates: Okay, good, good. That's encouraging, you know, obviously, we've made tremendous progress. With our gross margin, we've made tremendous progress on our transportation costs, and we're not done with that. We've continued to bring down our SG&A costs, which just translate into, as we grow our top line, translates into generating more cash. Okay, good. And any feedback from last year's investor, Shufen Deng, on the company. But what she wants to do, you know, with the company there earlier, there was talk about her trying to introduce Asian products into the U.S.
Speaker Change: Okay. Good good.
Obviously the.
Speaker Change: We've made tremendous progress.
Speaker Change: With our gross margin, we've made tremendous progress with our transportation cost and.
Speaker Change: And we're not done with that.
Speaker Change: We've continued to bring down our SG&A costs.
Rich: Rich just translate into.
Rich: As we grow our top line translates into generating more cash okay.
Speaker Change: Okay.
Speaker Change: Good.
Speaker Change: And.
Speaker Change: Any feedback from <unk>.
Speaker Change: Last year's Investor Shoe Fen thing on that.
Speaker Change: What she wants to do with the company. Their earlier there was talk about for trying to introduce <unk>.
Speaker Change: <unk> products into the U S.
Norman Snyder: No, actually. I think it's the opposite way. The focus is really stabilizing and growing the business domestically and then utilizing their Asian contacts to export our products into the Asian market, not bringing Asian products into the U.S. market. So to continue to build REITs and to leverage our brand equity in foreign markets where they have a lot of contacts and understand the marketplace and are willing to support them.
No actually.
Speaker Change: I think it's the.
Speaker Change: The opposite way the focus is really stabilizing and growing the business domestically.
Speaker Change: And then utilizing there.
Adrian contacts to export our products into the Asian market, not bringing Aegean products into the U S market. So to continue to build reads and to leverage.
Speaker Change: Our brand equity and foreign markets, where.
Speaker Change: They have.
Speaker Change: A lot of contacts and understand the marketplace and.
Speaker Change: Are willing to support that.
Gary Gates: Okay, okay, and one last question regarding the ginger wellness product. Any thought of offering something for weight loss, which seems to be a
Speaker Change: Okay, Okay, and one last question.
Speaker Change: Regarding the Ginger wellness.
Speaker Change: Products.
Speaker Change: Any thoughts.
Speaker Change: Offering something for weight loss, which seems to be one of the biggest categories.
Speaker Change: And health care these days.
Norman Snyder: Well look it, I've said this A lot of times, and I'll continue to say it, you know, one of the big trends in both food and beverages has been health, or health-based, plant-based. Drinks and food and, Ginger is a plant-based item where the only mass ginger beer and ginger ale that uses real ginger in their products, which to me is a big, big point of difference, particularly compared to our competition, and we believe that is a great point to leverage future innovation and, We're working on some pretty, I think, interesting, new products that will really resonate with today's consumer and some of the benefits they're looking for, and really leveraging not only Ginger, but some other advances and research that we've done to make some very, very, very great products, and are excited about that, really, you know, again, front and center, the efficacy of ginger and it being plant-based and Reed's being a leader in that category and really capitalizing on that and, you know, producing premium, natural, really, really good products. Good.
Speaker Change: Well look at.
Speaker Change: I've said this.
Speaker Change: A lot of times that I'll continue to say it.
Speaker Change: The one of the big trends in both food and beverages has been health.
Speaker Change: Our healthy plant based.
Speaker Change: Drinks and food and.
Speaker Change: Ginger is a plant based.
Speaker Change: Item.
Speaker Change: We're the only math ginger beer and.
Speaker Change: Ginger ale that uses real ginger and their products, which to me is a big big pointed difference.
Speaker Change: Particularly compared to our competition and we believe that is a great point to leverage future innovation.
Speaker Change: <unk>.
Speaker Change: We're working on some pretty I think interesting.
Speaker Change: <unk>.
Speaker Change: New products that will really resonate with today's consumer and some of the benefits, they're looking for and really leveraging not only ginger, but some other.
Speaker Change: Some other advances in research that we've done to make some very very very great products and are excited about that really.
Speaker Change: Again front and center, the efficacy of Ginger and it being plant based in <unk> being a leader in that category and really capitalizing on that.
Speaker Change: Producing premium natural really really good products good.
Gary Gates: Good, good. Yeah, well, you do you do, and I wish you the best and thanks so much for the call.
Speaker Change: What will you do you do.
Speaker Change: Wish you the best.
Speaker Change: So much for the call Okay. Thank you Gary.
Chris: Thank you. Your next question comes from Will Bandejo. Private Will, please go ahead.
Speaker Change: Thank you. Your next question comes from will <unk> Hill.
Speaker Change: Private will please go ahead.
Will Bandejo: Hey Norm, thanks for taking my questions; just a few things. On the RTD stuff, I think I caught the tail end of this. Whole Foods, is that a nationwide rollout in June, and then is Sprouts nationwide as well, and what's the timing on...
Speaker Change: Hey.
Speaker Change: Thanks for taking my questions just a few things.
Speaker Change: The RTD.
Scott: Scott I think I caught the tail end of this whole foods is that a nationwide rollout in June and then as sprouts nationwide as well and what's the timing on them.
Norman Snyder: They're both nationwide, except for a couple states where we have gaps in distribution. With alcohol, you can't go direct; you have to go through a three-tier distribution system.
Speaker Change: Yeah.
Speaker Change: They are both nationwide except for a couple of states, where we have gaps with distribution.
Speaker Change: With alcohol you can't go direct you have to go through a three tier distribution system.
Norman Snyder: So we're trying, the big gap that we're trying to fill is in Texas, but in a majority of their locations, we're in all the stores, you know, so they are, it is national, and we've been national with whole foods, and we're just expanding by adding the ginger ale and then doing... Yeah, I was really commenting on the hard ginger. Yeah, another national promotion which we did last year very successfully, and then, you know, we're expanding our presence in Sproul's as well.
Speaker Change: So we're trying to big gap that we're trying to fill it in Texas, but.
Speaker Change: And majority of their locations where in all the stores and.
Speaker Change: So that is national and we've been national with with whole foods.
Speaker Change: Just expanding by adding that the Ginger ale and then Dewey yes. It was really comment on the hard ginger yet another another national promotion, which we did last year very successfully and then we're expanding our presence and sprouts as well. So I think just to reiterate as I've said previously what we have.
Norman Snyder: So I think just to reiterate, as I've said previously, what we've done is we've kind of scaled back rather than try to be everywhere with these products. Really start in retailers that we have high brand recognition and strong consumer following and leverage that, and we've done that pretty successfully with not only Sproul's and Whole Foods but we've done it with Trader Joe's as well. So yeah, and then we're building, and we've we've we've picked up another bunch of new authorizations as the weather gets warmer with the change that we've done well with and are growing with our entire portfolio.
Speaker Change: Done is we've kind of scaled back rather try to be everywhere, where these products really start in retailers that we have high brand recognition and strong consumer following and leverage that and we've done that pretty successfully with not only sprouts and whole foods, but we've done it with.
Speaker Change: With trader Joe's as well.
Speaker Change: And then we're building and we've picked up another.
Speaker Change: Bunch of new authorizations as the weather gets warmer.
Speaker Change: With the change that we've done well with and are growing with our entire portfolio. So it's a real measured rollout that we can.
Norman Snyder: So it's a real measured rollout that we can provide the proper focus and support behind and not get too far out of our skis. And we've seen that with a slower approach it's paid dividends, and we've had growth as a result, as opposed to trying to be everywhere at once and not being able to really prioritize and focus. These are retail chains that we have longstanding and very deep relationships and partnerships with and are working together to build our entire brand portfolio. Right, OK.
Speaker Change: Provide the proper focus and support behind and not get too far ahead of our skis and we have seen with a slower approach its take or pay.
Speaker Change: Dividends and we've had growth as a result as opposed to trying to be everywhere at once and not be able to really prioritizing focus.
Speaker Change: And these aren't look at these are these are retail chain that we have long long standing and very deep.
Speaker Change: Relationships and partnerships with and are working together to build our entire brand portfolio.
Norman Snyder: Right, okay, that's good to know. Do you anticipate hard ginger rolling out in Trader Joe's anytime soon?
Speaker Change: Right. Okay. That's good to know do you anticipate the hard ginger rolling out in trader Joe's anytime soon.
Norman Snyder: We're working on that. I mean, they were very interested in starting with the mule, and I think as we continue to progress there, we can make an introduction to the hard ginger.
Speaker Change: We're working on that I mean they.
Speaker Change: They were very interested in starting with the mule.
Speaker Change: And I think as we continue to progress there we can make an introduction for them for the hard ginger.
Speaker Change: Okay.
Will Bandejo: Amen. That's good to know.
Speaker Change: And then that's.
Will Bandejo: Lastly, you guys have commented that you're, you know, on track to kind of hit your revenue and cost goals. Can you share what those are really primarily about revenue sales outlook? I know, you know, 2024 was the rollout of the new sales implementation, but, you know, calling a spade a spade, we just did the same number of sales. We didn't do it in Q1 of 2020, so, you know, do you guys anticipate? Coming out swinging with a, you know, 15, 20 million dollar quarter here later in the year.
Speaker Change: That's good to know lastly, I mean, you guys had commented that you're on track to kind of hit your revenue and cost goals can you share what those are really primarily to our revenue sales outlook. I know 2024 was the rollout of the new sales implementation, but.
Speaker Change: Calling a spade a spade we just did the same number of sales we did in Q1 of 2020 so.
Speaker Change: Do you guys anticipate.
Speaker Change: Coming out swinging with.
Speaker Change: $15 million to $20 million quarter here later in the year.
Norman Snyder: Well, look, I think what we've said all along is that we expect double-digit sales growth and continued margin growth, and I think we've demonstrated that margin growth. We expect improved performance on our shipping and handling, and we've done that. I feel good about Q2 right now and the remaining quarters. Look, Q1 was a race to bill boxes.
Speaker Change: Well look we I think what we've said all along is that we expect.
Double digit.
Speaker Change: Sales growth.
Speaker Change: And we expect continued margin growth and I think we've demonstrated the margin growth.
Speaker Change: We expected improved performance at our our shipping and handling and we've done that.
Speaker Change: I feel good about Q2 right now in the remaining quarters look at Q1 was a race to build boxes.
Norman Snyder: And we didn't build them as fast as we had hoped, but it takes time, and You know, we've really solidified our inventory positions in both bottles and cans on both coasts, which will drive a lot more efficiency. And there's a cause and effect relationship that we've seen pretty quickly. And I watch real closely as the amount of short shipments goes down, how it translates into throughput at retail. And also, with that, we haven't even really begun any, any sort of promotional activity we've held off on in the first quarter, where I know historically we've started in the first quarter, and it's going to be the middle of the second quarter where our promotional activity will kick in.
Speaker Change: And we didn't build them as fast as we had hoped but it takes time and.
Speaker Change: We've really solidified our inventory positions in both bottles and cans on both coasts.
Speaker Change: Which will drive a lot more efficiencies.
Speaker Change: And.
Speaker Change: There is a cause and effect relationship that we've seen pretty shortly and I would watch closely is the amount of short shipments go down how it translates into throughput at retail.
Speaker Change: And also with that we haven't even really begun any.
Speaker Change: Any sort of promotional activity, we've held off in the first quarter, where I know historically, we've started in the first quarter and it's going to be middle second quarter, where our promotional activity will kick in so I think we're going to get a boost from.
Norman Snyder: So I think we're going to get a boost from Just being in stock and reducing short shipments. We're going to get a boost from our promotional activity kicking in. And these things kind of play off and create a cadence, which really generates growth. And we'll start to see that in the second quarter of this year. I think when we have our second quarter call, that'll be a lot clearer to people.
Speaker Change: Just being in stock and reducing short shipments, we're going to get a boost from a promotional activity kicking in and these things kind of play off.
Speaker Change: It created cadence, which really generates growth.
Speaker Change: And we'll start to see that in the second quarter of this year.
Speaker Change: When we have our second quarter call.
Speaker Change: That will be a lot clearer to people.
Will Bandejo: Okay. Awesome. Appreciate the update. Keep up the good work. I'll hop back in the queue. Thank you.
Speaker Change: Okay.
Speaker Change: Awesome I appreciate the update keep up the good work I'll hop back in the queue. Thank you.
Chris: Thank you. There are no further questions at this time. I will now turn it back to Mr. Snyder for closing remarks.
Speaker Change: Thank you there are no further questions at this time I will now turn it back to Mr. Schneider for closing remarks.
Norman Snyder: Great. Thanks. I'd like to thank everyone for participating in today's earnings call as well as our employees, customers, and, of course, our shareholders. We appreciate everyone's support. We've made solid progress on our 2024 initiatives and look forward to providing an update when we report Q2 results later this year.
Mr. Schneider: Great. Thanks, I would like to thank everyone for participating in today's earnings call as well as our employees.
Mr. Schneider: And of course, our shareholders.
Mr. Schneider: We appreciate everyone's support we've made solid progress on our 2024 initiatives and look forward to providing an update when we report Q2 results later this year.
Mr. Schneider: Thank you everyone.
Speaker Change: Thank you ladies and gentlemen. This concludes your conference call for today, we thank you for participating and ask that you. Please disconnect your lines.
Chris: Thank you. Ladies and gentlemen, this concludes your conference call for today. We thank you for participating and ask that you please disconnect your lines.