Q2 2024 Splash Beverage Group Inc Earnings Call
Please continue to hold ladies and gentlemen, your conference will begin momentarily. Please continue to hold your conference will begin shortly thank you.
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Yes.
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Greetings.
Welcome to the Splash beverage group second quarter conference call. At this time, all participants are in a listen only mode.
Robert mystical: Question and answer session will follow the formal presentation I will now turn the conference over to your host Robert mystical Chairman and CEO of Splash beverage group you may begin.
Robert mystical: Thank you very much hi, everybody. Thank you for joining us. This is Robert Nistico CEO Splash beverage group also with US today, we have Julian Ivan <unk> our CFO.
Of course, Bill Meissner, our president and Chief Marketing Officer.
Speaker Change: On the call as well and each will be.
Robert mystical: Speaking.
Speaker Change: With respect to their individual responsibilities.
Robert mystical: Honestly.
A lot of you haven't had a lot of exposure to Julius because he's only been with us for about four months now, but we're thrilled to have them. It's been a tremendous addition to the team and Bill of course has been with US for a number of years, who is really truly a one of the best President's and marketing people I've ever worked with so you'll have a chance to.
Speaker Change: So now I'm going to ask questions as we get into this.
Speaker Change: They will be discussing today is the company's financial performance.
Speaker Change: Key developments excuse me, providing insights to what these result means for the future future being the key word.
Speaker Change: Yeah, we have a formal dialogue we have to follow here, but let me try and keep it as informal as possible.
Speaker Change: And then of course, we'll open up the web portal up for questions. When we're done.
Speaker Change: Six basic topics today.
Speaker Change: Briefly on Q2 and H H one results, we all know what they are.
Speaker Change: So we really more interested in how we're moving forward now, which we're pretty excited about by the way distribution and brand strategy Super important stuff as we move forward into the back half of the year and into next year capital structure and financing updates are really.
Speaker Change: Key subject as we're moving into the back half of the year again of.
Speaker Change: Of course financial outlook for the next 18 months, we also want to talk about mergers and acquisitions.
Speaker Change: Key part of our narrative. If you will of course will have a Q&A Q&A session Alright, just really brief.
Super high level on the quarter.
Speaker Change: We reported revenue of 1.15 million for the quarter, which is very light.
Speaker Change: Impaired to one five in the first quarter and of course 5 million last quarter, you had a sales decline it was really attributed to 100% of limited liquidity.
Speaker Change: It prevented us from procuring inventory for Q, Plash and frankly.
Speaker Change: Supporting.
Speaker Change: Supporting the chat authorizations that we've gotten recently so.
Speaker Change: Well, we're gonna dress all this in great detail here in a little bit net loss came in at 5.3, basically what that's for sure compared with 13%.
Speaker Change: In Q2.
Speaker Change: Last year Oh.
Speaker Change: Slide 23.
Speaker Change: So that's kind of our look in the rearview mirror.
Speaker Change: We're going to talk a lot about financing liquidity here as we move forward. So now I'm going to turn it over to Julian.
Speaker Change: A little bit more detailed review.
Julian Ivan: The financial performance.
Julian Ivan: And Julia failures, Okay. Thank you Robert I, just wanted to dive a little bit briefer instead of financials for revenue as Robert noted revenue was getting a little hair over $1 million for the quarter and that was down compared with two driven by the nominal sales accu slashed.
Speaker Change: It's important to note that our sales performance wasn't only impacted at Q slash due to liquidity, but was also on our Cobra to Dino.
Speaker Change: Brand as well liquidity prevented us from procuring enough wine to get all of our orders out the door and carry a $250000 of backlog from June into July. So the demand was strong for the brand in and Bill will dive deeper.
Speaker Change: And to that.
Speaker Change: On the gross margin side, you know the margins actually did improve from the prior quarter, we made about $244000 and gross profit compare to $1 64 in the prior quarter and we did expand our gross margins by 12% from 11% in Q1 to 23% in Q3.
Speaker Change: This can really be attributable to lower raw material costs versus the prior period, given our liquidity challenges, we really did focus on our SG&A spending which was $2 $6 million in the quarter that was 9% lower than in Q1, and 52% lower than Q2.
Speaker Change: Two of last year, so given the look through it.
Speaker Change: The business has had was very diligent on managing our spending across the board from everything from travel and entertainment to sales and marketing and then back selling individuals who last through natural attrition.
Speaker Change: Just kind of going a couple further or was a couple of other points here EBITDA for the period was a loss of $2 $6 million. This is actually an improvement of $300000 through Q2.
Speaker Change: And half of what the loss was in Q2 2023.
Speaker Change: Robert kind of noted previously on the left it off net losses for the period. One thing is if you're a scorecard for stock based compensation.
Speaker Change: In Q2 versus Q1.
Net loss was actually Scott at $4 million from the prior quarter and a 600000 dollar improvements from prior year.
Speaker Change: Last thing just in terms of the financials is you know.
Speaker Change: We've kind of said this a couple times now liquidity was tight for the period end, we had nominal cash at the end of the quarter, but if you back it up a little bit you know collections were solid for the period.
Speaker Change: Actively managing that inventory levels were down $100000 from the prior quarter as anything that we procured was effectively immediately.
Speaker Change: Consumed and even with our light liquidity situation current liabilities were effectively unchanged from Q1 to Q2. So we really just working where everything is.
Speaker Change: As effectively as we could with the liquidity challenges that we had so I'll turn it over now to bill and he can discuss some of the commercial trends distribution lanes brand strategies and an update on our product development.
Bill: Thanks Julia.
Bill: Indeed, while inventory shortages hindered our commercial results for the quarter, we had numerous successes to build sales momentum into the balance of 'twenty 'twenty four and 'twenty five.
Bill: So I'll just take you through some of those.
Bill: Yeah.
Bill: One key thing is the demand for our products was measured by orders coming into the system and that was 21% higher than Q2 2023.
Inventory funding challenges were simply the reason the orders didn't get out but order demand was significantly.
Bill: Greater year over year, and that has only grown in size and intensity.
Bill: Local was expanded to all Seaworld parks and entertainment venues across California, Florida, Pennsylvania, and Virginia, Texas Corporate Davita with local received an authorization from chevron's extra mile convenient stores.
Bill: Authorization is across 650 stores across six states.
Speaker Change: Corporate Divina, we're hopeful they'll go received an expansion into 300 Murphy oil USA stores in seven states.
Speaker Change: Corporate Avino received an authorization from a M P M convenient stores.
Speaker Change: And that is up to 1100 stores across several states one of the larger chains in the United States.
Speaker Change: We executed a successful launch of Coca Divina, its new four pack and a test in 28, Walmart stores in Tampa, Florida, which we're very excited about and performing well, it's certainly our hope to be expanded in Walmart as we go and perform in that test we executed a successful launch of a test and Walgreens.
Speaker Change: This is 59 stores and lost.
Speaker Change: Greater Las Vegas area.
Speaker Change: And similarly are performing there and expect to continue to grow with Walgreens following to test.
Speaker Change: We were able to expand covered for all brands into a state that we were previously not in Colorado with a group called legacy distribution.
Speaker Change: Salt received an authorization for our first foray into control states and that was in Iowa and Pennsylvania.
Speaker Change: Pulp logo was expanded into 59 locations of giant Eagle, that's a grocery chain in Virginia.
Speaker Change: We developed a new salt Tequila, which we're super excited about this as a jalapeno flavor to take advantage of the spices spicy Margarita Keeler cocktail trend.
Speaker Change: And with that will also be a silver tequila. So the bulk of the categories really in straight Blanco tequila.
Speaker Change: And we have been the go to flavor to <unk>. This really puts us in debate need of that market with barco to Cuba.
Speaker Change: And then from a momentum perspective.
Speaker Change: Just a very successful quarter that will buttress our results for the second half of the year. Despite the headwinds that we faced on liquidity and inventory our sales team remains focused at our ever growing national distribution network of high quality distributors and retailers remains enthusiastic for our brands and the innovation to come.
Speaker Change: I'll now turn it back to Robert who will provide an update on our capital structure.
Speaker Change: Thanks, Bill that's great stuff good work.
Speaker Change: Everybody that the message. There is you know there are even though in the face of serious liquidity issues.
Speaker Change: This group didn't sit on their hands and we achieved all of these things with virtually very little money.
Robert: So while we are organizing ourselves with a financing group that we'll talk about here in a minute.
Speaker Change: We were able to achieve quite a bit staging ourselves. So when money starts to come in as it is as of yesterday, we can actually capitalize on that and really start building out revenue as we roll into.
Speaker Change: December and into next year. These are a ton of authorizations for the amazing job the sales and marketing team has done we applaud them and thank you for.
Speaker Change: For really digging in and and doing what we can do with limited resources.
Speaker Change: So that also just so it's clear I want to make sure people understand really how how we got into this position maybe it happens sometimes companies face cash crunches liquidity issues for us.
Speaker Change: We had a signed deal we had documents signed we even had a.
Speaker Change: Level of fund proof of funds from a group out of Europe.
Speaker Change: For reasons outside of Splash that deal never came to fruition and we waited and we waited Fortunately.
Speaker Change: We're not the type of group to only count on one horse, though we had some redundancy. Unfortunately.
Speaker Change: That group out of Florida.
Got their funding so we had the hustle and of course, you guys know that we took on.
Speaker Change: Some capital from from some investment banks.
Speaker Change: You know those those those can be.
Speaker Change: Considered expensive from a dilution standpoint are the really good news there, though is we have retired the one of them.
Speaker Change: And it was a significant amount of money that was originally $2 4 million.
Speaker Change: And all of that I guess, we can call. It overhang is now behind us.
Speaker Change: No God love them, we needed the money you know sometimes you just have to do it.
Speaker Change: But it was.
Speaker Change: You know it was it was it was difficult and it put alone put a lot of downward pressure on the stock. There's no surprise there no secret the really good news, though is that that group is behind us and God bless them for helping us but.
Speaker Change: Glad glad it's behind Us I'll say it that way.
Speaker Change: Moving forward, we announced.
Speaker Change: Loosely that or in a superficial way that we had an agreement with a group out of upstate New York.
Speaker Change: Uh huh.
Speaker Change: Rochester, specifically, our high net worth individuals managed by capital Securities in Rochester wealth management, a really good group of people up there we of course have a formal agreement.
Speaker Change: The agreement with them for a private placement. This morning that press release was sort of the very early results of that of those efforts. It's been a lot of work, but also a lot of fun.
Speaker Change: We have.
Speaker Change: The first tranche about half the money in for the first tranche in hand.
Speaker Change: It will be obviously required to put an 8-K out with that here shortly.
Speaker Change: Money is still flowing in in fact.
It's actually kind of there's some amusing pieces to it some folks you know mail checks on post some folks that AC ages.
Speaker Change: But you know there's a lot of the money comes we're happy.
Speaker Change: But the message here is that that effort.
Speaker Change: Is well underway.
Speaker Change: We have signed documents as I mentioned in the press as we mentioned in the press release this morning.
Speaker Change: The money continues to flow in we will be doing it in two tranches there may be a third but I'm not going to say that for sure. The second tranche. We have we have signed documents as well.
Speaker Change: To the tune of about about half little more than half two thirds of it.
Speaker Change: So we're very very very confident and excited that money is flowing in and with all the work that the sales and marketing team is done we'll be able to really really a.
Leverage that and convert that into revenue.
Speaker Change:
Speaker Change: Additionally, Julia has worked hard on our ABL or revolver. If you will a lot of credit as this money comes in that triggers that which will allow us to have extra liquidity from a from.
Speaker Change: From a credit based standpoint, Julian will talk about that in a little bit.
<unk>.
Speaker Change: Let's see okay.
Speaker Change: Yeah, so basically.
Speaker Change: It's been a difficult couple of quarters.
Speaker Change: It's it's you know I personally put more money in the business, because I know where we're going.
Speaker Change: And we've had some of our legacy investors help out we finance things through.
Speaker Change: Through our accounts receivable and whatnot. So we're we're we're past that point now and it's time to get out of first gear and move forward. So we're very excited about that.
Julia will now discuss outlook for the balance of 'twenty four and then into 'twenty five okay. Thank you Robert I wanted to pivot to what has occurred and just really looking ahead at a promising future and splash that projections I'm, referring to excludes any acquisitions and then are based upon the financing that we received yesterday and there will be coming.
Speaker Change: Over the next couple of weeks.
Speaker Change: So from a revenue guidance standpoint management, we expect revenue to be in the range of $9 million to $10 million for full year, 2024, and 38% to $42 million for 2025. This will be driven by organic growth and cooperative you know our postal local brands along with the reboot d'orsay better word.
Speaker Change: Restart of our Qs slash was their ecommerce platform. So I know, we will get to the M&A side, a little bit later, but M&A any M&A would be accretive to the figures that I just noted.
Speaker Change: On a gross margin perspective I.
Speaker Change: I do expect gross margins to land in the high Twenty's for full year, 2024, and moving up about 10 percentage points to the highest <unk> in 2025, and this will be driven by operational efficiencies and procurement savings. So if I jumped to EBITDA is EBITDA.
Speaker Change: It's projected to be a loss of around $9 million for 2024, and given the programs that we have underway. We expect that we're going to be EBITDA positive by late Q2 2025 early Q3 2025 based upon our current footprint.
Speaker Change: Tonnage to take this a little bit deeper these financial projections will be driven by our strategic initiatives. So this is the first time.
Speaker Change: We've kind of gone public this project White Hot we have five strategic pillars. The first one focused on sustainable and profitable growth. The second operational excellence. The third our E Commerce platform Q slash bolt on acquisitions, and then finally, our capital structure. So project White houses they expect the mood of the company.
Speaker Change: <unk> two positive cash flow from operations and positive EBITDA as I previously noted without any M&A.
Please continue to hold ladies and gentlemen.
Operator: Please continue to hold ladies and gentlemen. Your conference will begin momentarily. Please continue to hold.
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Speaker Change: And then the cost reductions and expect the organic growth will get US there. It is strategic imperative for slash beverage group to strengthen its capitalization and restructure of the company's operations to ensure a path to achieving positive cash flow from operations project Whitehorse provided the organization a strategic plan to ensure laser.
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Operator: Your conference will begin shortly. Thank you.
Speaker Change: Like focus on optimizing our operating footprint that need to support our next our growth cycle and have the organization ready for pending M&A.
Speaker Change: M&A.
To go a little bit deeper on the strategic pillars.
Well I was just had success in expanding its production I'm, sorry, it's distribution and product offerings, a lot of it which bill just noted which will create great momentum.
Speaker Change: And in the rest of this year going into next year.
Speaker Change: And you know as the liquidity challenges are lifted we were making strategic marketing investments and our tequila lines, along with focusing additional advertising and promotion spending on cope davita on our polo local brands I noted previously on the gross margin expansion, we expect to exceed significantly.
Speaker Change: Cost savings.
Speaker Change: Many of these gross margins and this will be a combination of contract manufacturing strategic raw material procurement and saved and freight savings programs. These initiatives would step up sales will allow flash to deliver on its procurement savings targets and gross margin expansion.
Operator: Greetings. Welcome to the Splash Beverage Group second quarter conference call. At this time, all participants are in a listen only mode.
Thank you.
Speaker Change: A bit more just on Q splash with our balance sheet being recapitalized. This provides liquidity to procure inventory for our ecommerce platform year to date sales in 2024 for Q Slash has been nominal and we will re launch in the coming weeks, where we expect sales for Q slash.
Operator: A question and answer session will follow the formal presentation.
Greetings.
Robert Nistico: I will now turn the conference over to your host, Robert Nistico, Chairman and CEO of Splash Beverage Group. You may begin. Thank you very much. Hi, everybody. Thank you for joining us. This is Robert Nistico, CEO, Splash Beverage Group. Also with us today, we have Julian Ivancits, our CFO and of course Bill Meissner, our president and chief marketing officer on the call as well and each will be speaking with respect to their individual responsibilities.
Speaker Change: Welcome to the Splash Beverage Group second quarter conference call.
Robert Nistico: You know, honestly, a lot of you haven't had a lot of exposure to Julius because he's only deal with us for about four months now, but we're thrilled to have him. He's been a tremendous addition to the team and Bill of course has been with us for a number of years, who is really truly one of the best presidents and marketing people I've ever worked with. So you'll have a chance to hear from them and ask questions as we get into this.
Speaker Change: In the low to mid Twenty's in 2025.
Speaker Change: At this time, all participants are in a listen only mode.
Speaker Change: And Thats, just coming from our E Commerce platform.
Again, just a couple more things here on the bolt on acquisitions I do want to remind everybody that splash was created on the concept of a diversified portfolio of beverage brands and our strategic pillar for bolt on acquisitions is to execute our M&A strategy Robert will go a little bit deeper on the.
Robert: M&A side onto the developments there.
The last thing I'd, just kind of want to focus on <unk> capital structure.
Robert: We have successfully executed part of our strategic pillar through the security securitization of our syndicated financing and then Robert did note on the ABL revolver from an equity partner that will provide us additional liquidity.
Speaker Change: A question and answer session will follow the formal presentation.
Robert Nistico: Today we'll be discussing today's the company's financial performance key developments, excuse me, providing insights to what these results means for the future future being the key word. You know, we have a formal dialogue. We have to follow here, but we're going to try and keep it as informal as possible. And then of course, we'll open the web portal up for questions when we're done. Six basic topics today, you know, briefly on Q2 and H1 results.
Robert: Future and the future M&A.
Speaker Change: I will now turn the conference over to your host, Robert Nistico, Chairman and CEO of Splash Beverage Group.
Speaker Change: Deals will.
Speaker Change: Either come from debt equity or a combination of that but that's kind of really our outlook on project White Hot and then let me just turn it back over to Robert on the M&A side, Yeah. Thanks, Hey, Julian would you buy and go a little deeper into how Q Slash award because.
Speaker Change: You may begin.
Speaker Change: Thank you very much.
Speaker Change: Hi, everybody.
Robert Nistico: We all know what they are. So we're really more interested in how we're moving forward now, which we're very excited about by the way. Distribution and brand strategy, super important stuff as we move forward into the back half of the year. And in the next year capital structure and financing update. Really key subject as we're moving into the back half of the years again. Of course, financial outlook outlook for the next 18 months. We also want to talk about merchants in the acquisition, is a key part of our narrative, if you will.
Robert: It sounds like a big jump in numbers I want to make sure people understand why that's not only realistic that it will happen yeah sure. So basically youre selling pretty much through Amazon as a retailer. So it's a really fantastic business that you're effectively buying inventory and selling it on a cost plus model.
Speaker Change: Thank you for joining us.
Speaker Change: This is Robert Nistico, CEO, Splash Beverage Group.
Speaker Change: Also with us today, we have Julian Ivancits, our CFO and of course Bill Meissner, our president and chief marketing officer on the call as well and each will be speaking with respect to their individual responsibilities.
Speaker Change: And for folks as they don't know we only have four individuals that are supporting that business. So the overhead is very low so the turnaround time on that is fairly quickly and we used to do around four to four and a half million dollars a quarter in Q slash when there weren't liquidity challenges. So this isn't a very.
Robert Nistico: Of course, we'll have a Q&A session.
Robert Nistico: All right, just really brief, super high level on the quarter. We reported revenue of 1.05 million for the quarter, which is very light, compared to 1.5 in the first quarter and of course 5 million last quarter. The sales decline was really attributed to 100% to limited liquidity. It prevented us from procuring inventory for Q-plash, and frankly supporting the chain authorizations that we've gotten recently. So we're going to address all this in great detail here in a little bit.
Speaker Change: Large stretch to kind of get back there, we will need a couple of months.
Speaker Change: Get there, but it's a it's a pretty well developed business model that we've used previously and the beauty of that business is the cash conversion cycle is fantastic you buy the inventory and you're effectively getting immediate paper.
Speaker Change: <unk> payment.
Speaker Change: So youre looking at procuring something and getting monies back in five years to 10 business days yeah. Okay. Great. Thank you yeah, it's a really great platform for us and basically virtually cash flow neutral if not positive by certainly by the middle of next year.
Robert Nistico: Met loss came in at 5.3, basically a lot of cents for share, and compared with 13% in Q2 to last year, 2023. So, you know, that's kind of our look in the rear view mirror. We're going to talk a lot about financing liquidity here as we move forward.
Speaker Change: Thanks for that alright.
Speaker Change: M&A update.
Speaker Change: Yeah, we've been working on Western Sun vodka for some time.
It's Ben.
Speaker Change: But actually a great exercise because it's a really good group of people.
Speaker Change: You know, honestly, a lot of you haven't had a lot of exposure to Julius because he's only deal with us for about four months now, but we're thrilled to have him.
Julius Ivancits: So now I'm going to turn it over to Julius, a little bit more detailed review of the financial performance and Julius Sawyers. Okay, thank you, Robert. I just want to dive a little bit, briefly, into the financials. For revenue as Robert noted, revenue was, you know, a little hair over 1 million dollars for the quarter, and that was down, compared to driven by the nominal sales at Q-plash. You know, it's important to note that our sales performance wasn't only impacted at Q-slash due to liquidity, but was also on our Copa de Bino brand as well. The liquidity prevented us from procuring enough line to get all of our orders out the door and carry $250,000 of backlog from June into July.
We'll work very well together, assuming we close our intention is is to close this thing hopefully by the end of the year, but it will probably roll into January.
We structured the raise like this.
It's a blend of debt and logged the long term debt and equity basically the numbers are right around $75 million.
Speaker Change: Three quarters of that or $50 million of it if you will as long term debt.
Speaker Change: And then the $25 million being with an equity partner.
Speaker Change: We have to be careful can't talk about too many names openly yet, but we do have.
Speaker Change: Some some numbers that are hard circled and now a new player came in and you have to leave the name out.
Julius Ivancits: So the demand was strong for the brand and bill will dive deeper into that. You know, on the gross margin side, you know, the margins actually did improve from the prior quarter. We made about $244,000 in gross profit, compared to $164 in the prior quarter. And we did expand our gross margins by 12% from 11% in Q-1 to 23% in Q-3. And this can really be attributable to just lower the raw material cost versus the prior period.
Speaker Change: It's actually very interested and from the space.
Speaker Change: That.
Speaker Change: I was interested in both sides, both the debt and the equity side and I'll tell you. This it's about a $3 billion players. So they can certainly do it.
Speaker Change: It's not done it's not even close to done but they have requested to go to deeper due diligence, which is a great sign because they are from the space.
Which is a really ideal because as we execute on our.
Speaker Change: Our strategic plan with that group.
Speaker Change: <unk>.
Julius Ivancits: And given our liquidity challenge, as we really did focus in on our SG&A spending, which was $2.6 million in the quarter, that was 9% lower than in Q-1 and 52% lower than Q-2 of last year. So given the liquidity, the limited liquidity, the business of the set was very diligent on managing a spending across the board from everything from, you know, travel and entertainment to sales and marketing and then backfilling individuals who left through natural attrition.
Speaker Change: You know, they're a perfect you know exit partner as well and they know that we know that so that's the ideal situation. If it comes to fruition. It's early but we will keep you posted on that.
Speaker Change: We'll see how that goes so the M&A piece.
Speaker Change: Is important but I also want to.
Speaker Change: Talk a little bit about.
Speaker Change: Why.
Speaker Change: The platform of Splash was the visit the vision for it was always to be a.
Speaker Change: Merry go round, if you will of acquisition and exit.
Julius Ivancits: Just kind of going a couple further with a couple other points here. Even after the period was a loss of $2.6 million. This is actually an improvement of $300,000 from Q-2 and half of what the loss was in Q-2, 2023. So Robert kind of noted previously on the net losses for the period. One thing is if you score card for stock-based compensation in Q-2 versus Q-1, net loss was actually $5 million at $4 million from the prior quarter and a $600,000 improvement from prior here.
Speaker Change: We never intended to make it an incubation platform is always supposed to have been an acceleration platform. So we have another potential acquisition in the Hopper, we haven't announced it I'm not going to reveal that today.
Speaker Change: Not ready to do so but it is a great example, because it's a regional brand and that regional brand has proven itself right. They did it right. It's an inch wide and a mile deep in a certain geography in the country. So then because were a distribution experts I mean, we really hard I'd hate to complement it like we are good at it.
Speaker Change: And we have you know.
Speaker Change: The vendor numbers, our distribution relationships with every major distributor in the country and everybody knows we have a relationship with Budweiser a b one inbev now.
Julius Ivancits: You know, the last thing just in terms of the financials is, you know, we've kind of said this a couple of times now, liquidity was tight for the period and we had nominal cash at the end of the quarter. But you know, if you back it up a little bit, you know, collections were solid for the period actively just managing that inventory levels were down $100,000 from the prior quarter. As anything that we've procured was effectively immediately consumed. And even with our light liquidity situation, current liabilities were effectively unchanged from Q-1 to Q-2. So, you know, we really just worked everything as effectively as we could with the liquidity challenges that we had.
Speaker Change: So go to group, but we also have Miller Coors and Republic nationale in southern pleasures.
Speaker Change: <unk> Youngs market whomever.
Speaker Change: But but to take that brand that has already achieved a certain level not massive numbers, but certain level of repeat purchase and then accelerating that in our system because we have that distribution network and the retail support cross country. Now we spent enormous amount of time, putting that together.
Speaker Change: Right before we had a liquidity problem, we were absolutely perfect exactly where we wanted to be so we had to hit the pause button for a couple of quarters.
Bill Meissner: He's been a tremendous addition to the team and Bill of course has been with us for a number of years, who is really truly one of the best presidents and marketing people I've ever worked with.
William Meissner: So I'll turn it over now to Bill and we can discuss some of the commercial trends, distribution, wind, branch strategies, and update on product development. Thanks, Julius. Indeed, while inventory shortages hindered our commercial results for the quarter, we had numerous successes to build sales on that amendment to the balance of 2024 and 25. So I'll just take you through some of those. One key thing is the demand for our products was measured by orders coming into the system and that was 20.1% higher than Q2-2023.
Speaker Change: Or.
Speaker Change: We're sorry, and it's just not at all anybody wanted to happen, but now we're powering through that.
Speaker Change: This proposed potential unnamed acquisition is a great example of why we do it. So now we can take adjacent markets.
Bill Meissner: So you'll have a chance to hear from them and ask questions as we get into this.
Bill Meissner: Today we'll be discussing today's the company's financial performance key developments, excuse me, providing insights to what these results means for the future future being the key word.
Speaker Change: Target the ones that make sense for that brand based on their geography, there the time of year.
Speaker Change: You know, we have a formal dialogue.
Speaker Change: Temperature et cetera, and and hire Influencers really go market by market by market and the distribution piece, which most people fall down on is really our easy button. If you will.
Speaker Change: We have to follow here, but we're going to try and keep it as informal as possible.
Speaker Change: And then of course, we'll open the web portal up for questions when we're done.
William Meissner: The inventory funding challenges were simply the reason the orders didn't get out, but ordered demand was significantly greater year over year. And that has only grown in size and intensity. Populoco was expanded to all SeaWorld Parks and Entertainment venues across California, Florida, Pennsylvania, Virginia, and Texas. Copa Divino and Populoco received an authorization from Chevron's extra mile convenience stores. This authorization is across 650 stores across six states. Copa Divino and Populoco received an expansion into 300 market oil, USA stores and seven states.
Speaker Change: So we're very excited about M&A as we move forward.
Speaker Change: I want to make this clear too we're not trying to be the next the Aussie Oh, we just want to be the most efficient and the most profitable and wherever that number falls out it falls out.
Speaker Change: And you know obviously by doing that we add shareholder value. So we're super excited about the potential of the western side and this potential possibly this other this other one.
Speaker Change: But that's that.
Speaker Change: I'm going to leave you can turn it over for questions I should say I want to make sure. This is crystal clear in everybody's minds are three key platforms to achieve for this company and we've tattooed on each other's foreheads is.
William Meissner: Copa Divino received an authorization from AMPM convenience stores and that is up to 1,100 stores across several states, one of the larger chains in the United States. We executed a successful watch of Copa Divino's new four pack and a test in 28 Walmart stores in Tampa, Florida, which we're very excited about and performing well. It's certainly our hope to be expanded in Walmart as we go and perform in that test. We executed a successful watch of a test in Walgreens.
Speaker Change: First of all.
Speaker Change: Finishing out the raise that we're in the middle of right now.
Speaker Change: Yeah, like I said money's coming in and you saw the press release.
Speaker Change: The second tranche will we believe will go even easier first is always the most difficult.
Speaker Change: We actually have like I said signed documents and second tranche already.
Speaker Change: From people, we know so we're very confident in that so we close this out and it's on our base of operations. If you heard Julius this raise on our current base of operations will bring us to revenue neutral profitability by next summer some time, whether it's the end of Q2 or beginning of Q3, that's without any.
William Meissner: This is in 59 stores in the greater Las Vegas area and similarly are performing there and expect to continue to grow with Walgreens following the test. We were able to expand covered for all brands into a state that we were previously not in Colorado with a group called Legacy Distribution. Salt received an authorization for our first foray into control states and that was in Iowa and Pennsylvania. Populoco was expanded into 59 locations of giant eagle that's a grocery chain in Virginia.
Speaker Change: Any acquisitions, so that's a really great thing to be able to say.
Speaker Change: All of that work was being done while we're sitting here trying to put the financing or getting the financing put together. The second thing is executing on our narrative of larger acquisition, well that would be western side and potentially this other one that I'm not naming.
Speaker Change: And there are others, you know bill Meissner and I the good Lord we almost three.
Speaker Change: Three a week come across our desk summer summer.
Speaker Change: Some art.
But the fact that there is deal flow out there and it comes to US that's a really valuable thing for us in the future.
William Meissner: We developed a new salt tequila which we're super excited about. This is a jalapeno flavor to take advantage of the spicy margarita and tequila cocktail trend and with that will also be a silver tequila. So the bulk of the categories really in straight blanco tequila and we have been the go-to flavored tequila brand. This really puts us into the meat of that market with blanco tequila. And then from a momentum perspective, it was just a very successful quarter that will buttress our results for the second half of the year despite the headwinds that we faced on liquidity and inventory. Our sales team remains focused and are ever growing national distribution network of high quality distributors and retailers remains enthusiastic for our brands and the innovation to come.
Speaker Change: And then the third and final thing is actually reaching profitability. So completing this raise so people know that we're not going to go do something where we have to do something that would.
Speaker Change: It would be considered less desirable from a financing standpoint.
Speaker Change: Can never say never but we.
Speaker Change: We believe we're past that the second thing being executing on our narrative of larger acquisitions. The third thing being reaching profitability. These all three of these things are within reach between now and in the second quarter of 2025, which is basically a blink of the eye.
Speaker Change: Six basic topics today, you know, briefly on Q2 and H1 results.
Speaker Change: We all know what they are.
Speaker Change: Right.
Speaker Change: Thank you for your attention a lot of words.
Speaker Change: Like to open it up for questions now.
Speaker Change:
Speaker Change: And operator, please explain how to load your questions in the portal. Please.
Speaker Change: So we're really more interested in how we're moving forward now, which we're very excited about by the way.
Robert Nistico: I'll now turn it back to Robert who will provide an update on our capital structure. Thanks Bill and that's great stuff. Good work.
Speaker Change: Distribution and brand strategy, super important stuff as we move forward into the back half of the year.
Speaker Change: And in the next year capital structure and financing update.
Speaker Change: Yeah.
Speaker Change: Absolutely at this time, we will be conducting a question and answer session. You can submit a question at this time by clicking the ask a question button on the left of your screen type your question into the box and hit the send button to submit your question.
Speaker Change: Really key subject as we're moving into the back half of the years again.
Robert Nistico: You know everybody the message there is there are even though in the face of serious liquidity issues, this group didn't sit on their hands. We achieved all these things with virtually very little money. So while we were organizing ourselves with the financing group that we'll talk about here in a minute, we were able to achieve quite a bit staging ourselves. So when money starts to come in as it is as of yesterday, we can actually capitalize on that and really start building out revenue as we roll into December and into next year. These are a ton of authorizations. It's an amazing job. The sales marketing team has done.
Speaker Change: Of course, financial outlook outlook for the next 18 months.
Speaker Change: We also want to talk about merchants in the acquisition, is a key part of our narrative, if you will.
Speaker Change: Sure.
Speaker Change: Alright, it looks like we got.
Speaker Change: Of course, we'll have a Q&A session.
Speaker Change: Our first question already.
Speaker Change: It's for Jude for Julia can you can you sorry can I put my glasses on.
Speaker Change: Can you please explain a little bit further.
Speaker Change: All right, just really brief, super high level on the quarter.
Jude: On the operational excellence I believe you called it of how we get to profitability with this current raise by the middle of next year.
Robert Nistico: We applaud them and thank you for for really digging in and doing what we could do with limited resources, and also just so it's clear, I want to make sure people understand really how we got into this position. Maybe that happens, you know, sometimes companies face cash crunches, liquidity issues. For us, we had a signed deal, we had documents signed, we even had a level of proof of funds from a group out of Europe, for reasons outside of Splash, that deal never came to fruition and we waited and we waited.
Julia: Sure. So the raise in it of itself gives us liquidity to actually procure raw materials and so the things that we're looking at is one of our highest cost items are for is freight and so we're looking at various adding three pls.
Speaker Change: We reported revenue of 1.05 million for the quarter, which is very light, compared to 1.5 in the first quarter and of course 5 million last quarter. The sales decline was really attributed to 100% to limited liquidity.
Speaker Change: It prevented us from procuring inventory for Q-plash, and frankly supporting the chain authorizations that we've gotten recently.
Julia: To our to our to our locations to actually have better freight lanes to get products and that will not only basically take costs down that will actually reduce our cash conversion cycle as well.
Speaker Change: Uh huh.
Speaker Change: As we have various initiatives out there where were the liquidity allows us to buy more efficiently by wine that we'll be buying that at anywhere between the tenant and a 20% discount from where we are currently procuring why because if you're a hand to mouth, you're buying was ever out there and you're not getting any type of volte.
Speaker Change: So we're going to address all this in great detail here in a little bit.
Robert Nistico: Fortunately, we're not the type of group to only count on one horse, so we had some redundancy. Unfortunately, that group out of Florida never got their funding. So we had to hustle. Of course, you guys know that we took on some capital from some investment banks. You know, those can be considered expensive from a dilution standpoint. The really good news there though is we have retired one of them and it was significant amount of money.
Speaker Change: Volume discounts everything is on the table as well for them.
Speaker Change: Comps in labels and so forth, where we're continuously looking at where we can take cost out of the business carry lower inventory levels, and then be more efficient hopefully that answers the question.
Robert Nistico: It was originally $2.4 million and all that I guess I can call it overhang is now behind us. You know, God love them, we needed the money. You know, sometimes you just have to do it, but it was difficult and it put a lot of downward pressure on the stock. There's no surprise, there are no secret. The really good news though is that that group is behind us and God bless them for helping us, but glad it's behind us. I'll say it that way.
Speaker Change: Yeah.
Speaker Change #100: Alright, thank you.
Speaker Change #100: Here's a question for me on Western son, and I think I'll start and maybe Bill Myers and I will jump in as well.
Speaker Change #101: The question is what's taken so long as the deal at risk.
Speaker Change #101: The.
Speaker Change #101: The.
Speaker Change #102: Excuse me I'm trying to read the screen.
Speaker Change #103: Okay and as the deal at risk.
Robert Nistico: Moving forward, we announced loosely that or in a superficial way that we had an agreement with the group out of upstate New York Rochester specifically. High net worth individuals managed by capital securities and Rochester wealth management really good group of people up there. We of course have a formal agreement with them for a private placement this morning that press release was sort of the very early results of that of those efforts.
Speaker Change #102: So.
Speaker Change #102: Going back to my statement about us.
Speaker Change #102: Acquiring brands that have regional success already.
Speaker Change #102: Generally what that means is it's going to be in a revenue level that is too low for the strategics to be interested in and that's the beauty of the vision for our platform.
Speaker Change #102: We want to grab those brands in that.
Speaker Change #102: <unk> 15, 20 $30 million range and accelerate them you know I mentioned the word incubation before incubation is a very difficult thing to do unless you get really lucky it costs a lot of money.
Robert Nistico: It's been a lot of work, but also a lot of fun. We have the first tranche about half the money in for the first tranche in hand will be obviously required to put an 8K out with that here shortly. Money is still flowing in, in fact, it's actually kind of, there's some amusing pieces to it. Some folks, you know, mail check, some folks, some folks at ACH's, but you know, as long as the money comes, we're happy.
Speaker Change #102: A lot of time and it takes away from your core business and your legacy brands as well, but so finding brands and acquiring brands in that in that I'll call. It $20 million to $30 million range is ideal for us we accelerate them to 40 50 60, depending on the segment beverage whether it's not outgrow out is absolutely.
Perfect and then that's where the strategics come in.
Robert Nistico: But the message here is that that effort is well underway. We have signed documents, as I mentioned in the press, as we mentioned in the press release this morning, and the money continues to flow in. We will be doing it in two tranches. There may be a third, but I'm not going to say that for sure. The second tranche, we have signed documents as well to the tune of about half, a little more than half two thirds of it.
Speaker Change #102: Why it's taken so long.
Speaker Change #102: It's not easy.
Speaker Change #102: Because we also operate in sort of no man's land from a revenue standpoint.
Speaker Change #102: We worked very hard against it I think we finally found the right blend of debt and equity.
Bill Myers: And now we're getting tremendous response and we also brought on a gentleman to help us with that with that raise and he was a top director at Drexel. So that's been a that's been a help as well bill anything I'm missing there.
Robert Nistico: So we're very, very, very confident and excited that money is flowing in. And with all the work that the sales and marketing team has done, we'll be able to really, really leverage that and convert that into revenue. Additionally, Julius has worked hard on a ABL or revolver, if you will, a lot of credit. As this money comes in, that triggers that, which will allow us to have extra liquidity from, you know, from a credit-based standpoint.
Bill Myers: Well just as far as the question on risk I can just to assure everyone that the western Sun team.
Very motivated.
Bill Myers: Work great together.
Bill Myers: And they want this deal just like we do they see this brand going to the next level.
Speaker Change #105: And they know that splashes the partner that can help the brand get there.
Speaker Change #105: They are very much in favor and continue to be patient and work with us.
Robert Nistico: Julius will talk about that in a little bit. Let's see. Okay. Yeah.
Speaker Change #106: Okay great.
Speaker Change: Met loss came in at 5.3, basically a lot of cents for share, and compared with 13% in Q2 to last year, 2023.
Robert Nistico: So basically, it's been a difficult couple of quarters. It's, you know, I've personally put more money in the business because I know where we're going. And we've had some of our legacy investors help out. We finance things through, you know, through accounts receivable and whatnot. So we're, we're past that point now and it's time to get out of first year and move forward. So we're very excited about that.
Speaker Change #106: Robin I think looks like technical difficulty here on this maybe maybe we should.
Speaker Change #107: Standby, one second everybody I'm sorry.
Speaker Change #106: Yeah.
Yes.
Operator: Operator, I think.
Speaker Change #109: It looks like it's the web portals isn't working very fast. So why don't we go ahead and open up the phone queue. Please.
Speaker Change #110: Absolutely. Thank you if you'd like to ask a question. Please press star one on your telephone keypad, a confirmation tone will indicate your line is in the question queue. You May press star two if you'd like to remove your question from the queue.
Julius Ivancits: Julius will now discuss outlook for the balance of 24 and into 25. Okay. Thank you, Robert.
Speaker Change: So, you know, that's kind of our look in the rear view mirror.
Julius Ivancits: You know, I want to pivot to what has occurred and just really looking ahead at a promising future at Splash. The projections I'm referring to exclude any acquisitions and then are based upon the financing that we received yesterday and they will be coming over the next couple of weeks. So from a revenue guidance standpoint, management, we expect revenue to be in the range of nine to $10 million for full year 2024 and $38 to $42 million for 2025.
Speaker Change: We're going to talk a lot about financing liquidity here as we move forward.
Okay. The first question comes from Scott Buck with H C. Wainwright. Please proceed.
Scott Buck: Hey, good afternoon, guys I appreciate the update you're throwing a lot of a lot of information at us.
Speaker Change: So now I'm going to turn it over to Julius, a little bit more detailed review of the financial performance and Julius Sawyers.
Speaker Change #110: <unk>.
Robert I'm curious the hold up on Sun, that's almost entirely driven by lining up the financing is that fair.
Julius Sawyers: Okay, thank you, Robert.
Julius Ivancits: This will be driven by organic growth and co-pettivino, our portfolio brands along with the reboot or say better word restart of our huge Splash, which is our e-commerce platform. So, you know, I know we will get to the M&A side a little bit later, but any M&A would be accretive to the figures that I just noted. You know, on a growth margin perspective, I do expect growth margins to land in the high 20s for full year 2024 and moving up about 10 percentage points to the high 30s in 2025.
Speaker Change #110: Yeah.
Speaker Change #112: That's exactly right there's also.
Robert: It's also spirits right. So you also have cola waivers and licensing and permitting you have to think about as well. So it's not a really quick down and done sort of thing, but yeah. We think we've figured out the financing blend in style now.
Julius Sawyers: I just want to dive a little bit, briefly, into the financials.
Speaker Change #112: And that's why we're getting a much better.
Robert: Uh huh.
Speaker Change #112: Much better indication that we're going to get this done we've hard circled a portion of it by the way.
Speaker Change #113: I don't want to give you the exact percentage, but it's meaningful.
Julius Ivancits: And this will be driven by operational efficiencies and procurement savings. So if I jump to, you know, EBITDA is EBITDA's projected to be a loss of around $9 million for 2024. And given the programs that we have on the way, we expect that we're going to be EBITDA positive by, you know, late Q2 2025 or early Q3 2025 based upon our current footprint. So, kind of just to take this a little bit deeper, these financial projections will be driven by our strategic initiatives.
Speaker Change #114: And then this other group that I mentioned that.
Speaker Change #114: Asked not to be mentioned the.
Speaker Change #114: The $3 billion group, they're real so, we'll see where that takes us.
Scott Buck: And Scott.
Scott Buck: That.
Scott Buck: Hey, Scott you started talking about all of these yeah, so kind of you're saving a lot of information I really wanted this call by design to really just put things out there right is we wanted to kind of really just kind of presented our vision of what we're looking in the future things that just didn't pop in the quarter in the financial.
Julius Ivancits: So this is the first time we've kind of gone public this project White Hot. We have five strategic pillars. The first one focused on sustainable and profitable growth, the second operational excellence, the third, our e-commerce platform Q-slash, both on acquisitions and then finally, our capital structure. So Project White Hot is expected to move the company to positive cash flow from operations and positive EBITDA, as I previously noted, without any MNA. And then the cost reductions and expected organic growth will get us there. It is strategic imperative for slash beverage group to strengthen its capital position and restructure the company's operations to ensure a path to receiving positive cash flow from operations.
Scott Buck: <unk> to really show the momentum and just build the confidence and the external market.
Scott Buck: How we are using these funds what the future looks like and to express our enthusiasm for the business.
Speaker Change #115: Yeah, No I think it's it's very helpful.
Speaker Change #116: In the most recent investor deck, it looks like with the closing of Western Sun that you guys will be moving some production to the Dallas area is that is that correct.
Speaker Change #116: Well I'll say it this way.
Speaker Change #117: The the Western Sun campus is located in pilot point, which is north, Texas and <unk>.
Speaker Change #118: Some of our production and not all of it but some of our production and logistics can be low relocated there which would be great.
Julius Ivancits: Project White Hot provides the organization a strategic plan to ensure laser-like focus on optimizing our operating footprint and the need to support our next growth cycle and have the organization ready for pending MNA, to go a little bit deeper on the strategic pillars. Splash has success in expanding its production, I'm sorry, its distribution and product offerings, a lot of which Bill just noted, which will create momentum, you know, in the rest of the year, going into next year.
Speaker Change #118: Just shipping lane savings alone will be tremendous so yeah, not everything necessarily.
Speaker Change #118: But yeah portion of it for sure.
Speaker Change #119: Okay. I got you I guess, that's where I was going with the question or what are the potential cost savings.
Speaker Change #120: Or margin benefit if you moved some.
Speaker Change #120: Some of that production or help them the inventory there.
Speaker Change #121: Yes, just it's just if we just focus on on the on the freight lanes is we're probably looking at a 30% savings or center of freight costs.
Julius Ivancits: And, you know, as the liquidity challenges are lifted, we will make some strategic marketing investments in our tequila lines along with focusing additional advertising and promotion spending on coped divino and our purple local brands. You know, I noted previously on the gross margin expansion, we expect to achieve significant costs to savings, expanding the gross margins, and this will be a combination of contract manufacturing, strategic raw material procurement, and freight savings programs.
Speaker Change #121: Which is material.
Speaker Change #121: Yes.
Speaker Change #121: The other area. So I mean, it's not just like it's one or two points.
Speaker Change #121: And then also it just that's a big piece of it.
Speaker Change #121: If you look at it from you know your outside Portland to looking for kind of a Dallas area and how just basically the trucker Lanesborough. That's just very just very big for us.
Julius Ivancits: These initiatives with step-up sales will allow Splash to deliver on its procurement savings targets and gross margin expansion. A bit more just on Q Splash, with our balance sheet being recapitalized, this provides the liquidity to procure inventory for our e-commerce platform. You know, year-to-date sales in 2024 for Q Splash has been nominal and we will relaunch in the coming weeks where we expect sales for Q Splash in, you know, the low to mid-20s in 2025. And that's just coming from our e-commerce platform.
Speaker Change #123: So we got below that.
Speaker Change #123: We can bring wind from the West coast.
Speaker Change #123: It's it's a good thing and I don't believe though those savings or even in your current no doubt like we have some strategic.
Speaker Change #123: Wind procurement savings and that's just buying better.
But you know again, we haven't even incorporating at geography on why that why would come from also too is if you look at our cocoa Copa Devino, it's not vintage so whether that wind is from specific you know west from California, or since we're talking about taxes I'll give you a texas why not necessarily would do that but just kind of throwing that out there that that's not.
Speaker Change: For revenue as Robert noted, revenue was, you know, a little hair over 1 million dollars for the quarter, and that was down, compared to driven by the nominal sales at Q-plash.
Speaker Change #123: Even baked into the numbers yet.
Speaker Change #124: That's the accounting you're talking not the marketing Guy.
Speaker Change #125: [laughter] yeah.
Julius Ivancits: You know, again, just a couple more things here on the bolt-on acquisitions. I do want to remind everybody that Splash was created on the concept of a diversified portfolio of beverage brands. And, you know, our strategic pillar for bolt-on acquisitions is to execute our M&A strategy.
Just to be clear guys. I know you brought your both brought it up on the call.
Speaker Change #126: But the guide for 'twenty five that does not include Western Sun right that is correct. That's correct that's correct yeah.
Robert Nistico: You know, Robert will go a little bit deeper on the M&A side onto the developments there.
Speaker Change #127: Okay Alright.
Speaker Change #127: So we're like we're really in a pretty pretty good spot here, even though it took us a while to get here.
Speaker Change #128: Right right I'm curious proceeds from this most recent raise.
Julius Ivancits: The last thing I just kind of want to, you know, focus in on is capital structure. You know, we have successfully executed part of our strategic pillar through the security-securitization of our syndicated financing. And then Robert did note on the ABL revolver from an equity partner that will provide us additional liquidity. You know, the future M&A deals will be, you know, either come from debt, equity, or a combination of that.
Speaker Change #129: What do you have to either catch up on accounts payable with refill inventory with I mean, what kind of goes into kind of cleaning things up before.
Speaker Change #129:
Speaker Change #130: You know you can think about it as growth capital.
Yeah, Yeah. So obviously, we've been hand to mouth on cash and we're behind on some of the bills and our vendors have been really quite excellent and working with us. So with the raise that we have we're not just going to write a check next week and pay everybody off there'll be an eight to 10 week pay down of anybody.
Julius Ivancits: But that's kind of really our outlook on project white hot.
Robert Nistico: And then let me just turn back over to Robert on the M&A side. Yeah, thanks.
Robert Nistico: Hey, Julius, would you mind going a little deeper into how Q Splash will work because it sounds like a big jump in numbers. I want to make sure people understand why that's not only realistic, but it will happen. You're sure. So, you know, basically, you're selling pretty much through, you know, Amazon as a reseller. So, it's a really fantastic business that you're effectively, you know, buying inventory and selling it on a cost plus model.
Speaker Change #130: That were past due and then again is on the inventory side, whether it's making investments in Q slash or.
Speaker Change #130: While we'll be buying just smartly and then just buying in higher quantities. So we can get some purchasing price leverage.
Speaker Change #131: So again and as you.
Speaker Change #131: And the one thing also I want to highlight as well is when you are so limited on liquidity you have senior leadership, just basically spending a lot of time on managing vendors right that takes away from our strategic focus and to have the cash in the bank to focus in on bigger ticket items will be a welcome relief for us.
Robert Nistico: And for folks, if they don't know, we only have four individuals that are supporting that business. So, the overhead is very low. So, the turnaround time on that is fairly quickly. And, you know, we used to do around four to four and a half million dollars a quarter in Q Splash when there weren't liquidity challenges. So, this isn't a very large stretch to kind of get back there. We'll need a couple of months to kind of get there.
Speaker Change: You know, it's important to note that our sales performance wasn't only impacted at Q-slash due to liquidity, but was also on our Copa de Bino brand as well. The liquidity prevented us from procuring enough line to get all of our orders out the door and carry $250,000 of backlog from June into July.
Speaker Change #131: Yep.
Speaker Change #132: Sure the pricing information on this raise or will that be included in the 8-K. That's filed later this afternoon or tomorrow.
Speaker Change: So the demand was strong for the brand and bill will dive deeper into that.
Speaker Change: You know, on the gross margin side, you know, the margins actually did improve from the prior quarter. We made about $244,000 in gross profit, compared to $164 in the prior quarter. And we did expand our gross margins by 12% from 11% in Q-1 to 23% in Q-3. And this can really be attributable to just lower the raw material cost versus the prior period.
Speaker Change #133: Yeah, you'll see it in the 8-K, but it's.
Speaker Change: And given our liquidity challenge, as we really did focus in on our SG&A spending, which was $2.6 million in the quarter, that was 9% lower than in Q-1 and 52% lower than Q-2 of last year.
Robert Nistico: But it's a pretty well developed business model that we've used previously. And the beauty of that business is the cash conversion cycle. It's fantastic. You buy the inventory and you're effectively getting immediate payment. So, you know, you're looking at procuring something and getting money back in five to ten minutes. Wednesdays. Yeah, okay, great. Thank you.
Speaker Change #134: It's reasonable I think people will be very comfortable it's not like.
Speaker Change: So given the liquidity, the limited liquidity, the business of the set was very diligent on managing a spending across the board from everything from, you know, travel and entertainment to sales and marketing and then backfilling individuals who left through natural attrition.
Some.
Speaker Change #135: It's very reasonable and it's 18 to 22 years down the line from a debt standpoint.
Speaker Change #135: Yeah, I think people will be comfortable with it.
Julia: Okay, Perfect and then last thing Julia can you give us a little more information on the a b L. I mean, how what is the capacity of the of the revolver I guess or whatever the yes the tour.
Robert Nistico: Yeah, it's a really great platform for us and basically virtually casual and neutral, if not positive, by, certainly by the middle next year. Thanks for that.
Speaker Change #136: But we've got a we've got a term sheet and basically it's your standard.
Speaker Change: Just kind of going a couple further with a couple other points here.
Robert Nistico: All right, M&A update. We've been working on Western Sunbaka for some time. It's been actually a great exercise because it's a really good group of people. We will work very well together, assuming we close. Our intention is to close this thing, hopefully by the end of the year, but it probably roll into January. We structured the rays like this. It's a blend of debt and long term debt and equity. Basically, the numbers are right around 75 million.
Julia: ABL, just AR and inventory and one of the things is with that it was contingent on us doing syndicated financing. So the range that I can give you a $3 million to $5 million.
Speaker Change: Even after the period was a loss of $2.6 million.
Speaker Change: This is actually an improvement of $300,000 from Q-2 and half of what the loss was in Q-2, 2023.
Speaker Change: So Robert kind of noted previously on the net losses for the period.
Speaker Change #137: And we will get more information on that in the coming weeks as this current raises finalized right. Yeah correct. It is again, it's there'll be a gradual buildup right you've got to buy inventory to finance the inventory and so being able to kind of ratchet itself out.
Speaker Change: One thing is if you score card for stock-based compensation in Q-2 versus Q-1, net loss was actually $5 million at $4 million from the prior quarter and a $600,000 improvement from prior here.
Speaker Change: You know, the last thing just in terms of the financials is, you know, we've kind of said this a couple of times now, liquidity was tight for the period and we had nominal cash at the end of the quarter. But you know, if you back it up a little bit, you know, collections were solid for the period actively just managing that inventory levels were down $100,000 from the prior quarter.
Speaker Change: As anything that we've procured was effectively immediately consumed.
Speaker Change #138: Okay, Perfect and then just the Asbury.
Speaker Change #138: By the way I mean, just to be honest like what that is Robert was actually quite a shocked that the terms that were coming through given what call it or our financial situation and the fact that we could even pull that everybody was pretty happy with yeah. It's good stuff.
Robert Nistico: Three quarters of that or 50 million of it, if you will, is long-term debt and then the 25 million being with an equity partner. We have to be careful. We can't talk about too many names openly yet, but we do have some numbers that are hard circled. Now, a new player came in, I have to leave the name out, who's actually very interested and from the space that I was interested in both sides, both the debt and the equity side.
I'm sure I'm sure.
Speaker Change #138: And then last thing Robert on the M&A front.
Speaker Change #139: Well more of the divestiture front I mean of the of the brands that you currently have.
Speaker Change #140: Anything that we could potentially not seeing the portfolio six months 12 months from now.
Speaker Change #140: Yeah.
Speaker Change #141: [laughter] there are.
Robert Nistico: I'll tell you this, it's about a $3 billion dollar player so they can certainly do it. It's not done, it's not even close to done, but they have requested to go to deeper due diligence, which is a great sign because they're from the space, which is a really ideal because as we execute our strategic plan with that group, they're a perfect exit partner as well, and they know that we know that, so that's an ideal situation if it comes to fruition. It's early, but we'll keep you posted on that. We'll see how that goes.
Speaker Change #142: Got it I'll just go there I'm just going to go there.
Speaker Change #143: Some corporate you know reasons why we've been quiet about about that so.
It's gonna be bear with me I'm answering your question when we talked about.
Speaker Change #144: Acquiring brands in excel, requiring regional brands with regional success in repeat purchase and accelerating them.
Speaker Change #145: That's great.
Speaker Change #145: Our very first brand when I came to splash.
Speaker Change #145: The company already had a licensing agreement for tap out.
Speaker Change #145: Tap out is a lot of pre existing brand awareness. So we thought well we can work with that.
Robert Nistico: The MNAP is important, but I also want to talk a little bit about why. The platform of Splash was the vision for it was always to be a merry-go-round, if you will, of acquisition and exit. We never intended to make it an incubation platform. It's always supposed to have been an acceleration platform.
Speaker Change #145: But ultimately.
Speaker Change #145: Because tap out was really a lifestyle brand associated with the UFC and MMA it wasn't.
It's really an incubation project.
Speaker Change #146: And you'll have some conversations about that this this with some folks this week and that's fine you know in fact, we had good authorizations on it and the brand was selling but just not to the level that we.
Robert Nistico: So we have another potential acquisition in the hopper. We haven't announced it.
Speaker Change #146: I don't want to say hoped but to a level that we would evaluate whether it was worth continuing or not continuing and it's not that the brand failed. It was actually a from an incubation standpoint pretty darn successful, but from a regional brand.
Robert Nistico: I'm not going to reveal that today. We're not ready to do so, but it's a great example because it's a regional brand, and that regional brand has proven itself. They did it right. It's an inch wide and a mile deep in a certain geography in the country. So then because we're a distribution expert, I hate to compliment it, we are good at it, and we have vendor numbers or distribution relationships with every major distributor in the country, and everybody knows we have a relationship with Budweiser AB1 in Bez.
Speaker Change #146: Success standpoint, no it wasn't worth it and we have we figured we're going to end up spending.
Speaker Change #146: The dollars.
Speaker Change #146: And to continue to incubate.
Speaker Change #146: And then of course, you know the.
Speaker Change #146: And then we still have licensing payments to consider as well.
Speaker Change #146: And it's something that takes a lot of time, so sticking to our core strategy of regional success.
Robert Nistico: That's our go-to group, but we also have Miller Coors and Republic National and Southern Clasers, Young's Market, whomever. But to take that brand that has already achieved a certain level, not massive numbers, but a certain level of repeat purchase, and then accelerating that in our system because we have that distribution network and retail support across country now, we spent enormous amount of time putting that together. Right before we had our liquidity problem, we were absolutely perfect.
Speaker Change #147: No we made the hard decision and we're walking away from the brand we haven't talked about it because there are distribution chain.
Speaker Change #147: Considerations, we have to be able to work through that and get to all the change in distributors. So so it's been we've kind of kept that on the download a little bit just just just from a functional standpoint, but no we will not be continuing with tap out.
Speaker Change #148: We wish them the best.
Speaker Change #148: We incubated if we had all the cash in the world honestly I'd like to continue with it but it's my guess is and this is just a guess if we were to do that it would take two to three years to get it to where we want it in cost another 20 $22 million I'd, rather focus on our other brands are really exciting.
Speaker Change: And even with our light liquidity situation, current liabilities were effectively unchanged from Q-1 to Q-2.
Robert Nistico: It's exactly where we wanted to be. So we had to hit the pause button for a couple quarters and we're sorry, and it's not at all anybody wanted to happen, but now that we're powering through that, this proposed potential unnamed acquisition is a great example of why we do it. So now we can take adjacent markets, geotarget the ones that make sense for that brand based on their geography, their time of year, temperature, et cetera, and higher influencers really go market by market by market, and the distribution piece, which most people fall down on, is really our easy button, if you will. So we're very excited about M&A as we move forward.
Speaker Change: So, you know, we really just worked everything as effectively as we could with the liquidity challenges that we had.
And of course acquisition.
Speaker Change #149: Yeah, well I appreciate the transparency there and I. Appreciate you guys, taking the time to host this call. Thank you.
Speaker Change: So I'll turn it over now to Bill and we can discuss some of the commercial trends, distribution, wind, branch strategies, and update on product development.
Speaker Change #149: Of course, nice talking to you Scott.
Speaker Change #150: Okay. The next question comes from Sean Mcgowan with Roth Capital Partners. Please proceed.
Sean McGowan: Thank you I appreciate the opportunity to talk to us.
Speaker Change #152: Going back to your comments on guidance.
Sean McGowan: Would you mind repeating the expectation for the range in 'twenty five on revenue did you say 30 to 34.
Julius Sawyers: Thanks, Julius.
Bill Meissner: Indeed, while inventory shortages hindered our commercial results for the quarter, we had numerous successes to build sales on that amendment to the balance of 2024 and 25. So I'll just take you through some of those.
Robert Nistico: I want to make this clear too. We're not trying to be the next viagio. We just want to be the most efficient and the most profitable, and wherever that number falls out, it falls out. And obviously by doing that, we add shareholder values. So we're super excited about the potential of Western Sun and possibly this other one, but that's that.
Speaker Change #153: No no no 38 to 40.
Speaker Change: One key thing is the demand for our products was measured by orders coming into the system and that was 20.1% higher than Q2-2023. The inventory funding challenges were simply the reason the orders didn't get out, but ordered demand was significantly greater year over year.
Speaker Change #154: Oh 38 to 40, Okay, I'm glad I asked.
Speaker Change: And that has only grown in size and intensity.
Speaker Change #155: And when you talked about.
Speaker Change #156: Are you being EBITDA positive kind of late <unk> Q3 would you expect to be EBITDA positive for the year.
Speaker Change: Populoco was expanded to all SeaWorld Parks and Entertainment venues across California, Florida, Pennsylvania, Virginia, and Texas.
Speaker Change: Copa Divino and Populoco received an authorization from Chevron's extra mile convenience stores. This authorization is across 650 stores across six states.
Speaker Change #156: So so again, it's like I'm going to I'm.
Speaker Change #157: I think for the full year I'm expecting to be down two to two and a half million full year and most of that's in the first and second quarter, but again I have upside on that where I think we can pulled out was a little sales momentum and we've kind of noted a couple of different things that arent built into the numbers, but I don't want to get.
Speaker Change: Copa Divino and Populoco received an expansion into 300 market oil, USA stores and seven states.
Robert Nistico: And I'm going to leave you, we'll turn it over for questions I should say. I want to make sure this is crystal clear in everybody's minds. Our three key platforms to achieve for this company, and we've tattooed it on each other's foreheads, is First of all, finishing out the raise that we're in the middle of right now, you know, like I said, money's coming in, you saw the press release. Second tranche, we believe we'll go even easier.
Speaker Change: Copa Divino received an authorization from AMPM convenience stores and that is up to 1,100 stores across several states, one of the larger chains in the United States.
Speaker Change: We executed a successful watch of Copa Divino's new four pack and a test in 28 Walmart stores in Tampa, Florida, which we're very excited about and performing well.
Speaker Change #157: Too rosy because I am.
Speaker Change #157: 18 months out.
Speaker Change #157: Alright.
Speaker Change #157: Okay and then the last question on that guidance as well.
Speaker Change: It's certainly our hope to be expanded in Walmart as we go and perform in that test.
Speaker Change: We executed a successful watch of a test in Walgreens.
Robert Nistico: First is always the most difficult. We actually have, like I said, fine documents in second tranche already, you know, from people we know, so we're very confident in that. So we close this out, and it's on our base of operations. If you heard Julius, this raise on our current base of operations will bring us to revenue neutral profitability by, you know, next summer sometime, whether it's the end of Q2 or beginning of Q3, that's without any acquisitions.
Speaker Change #158: Given the potentially seasonality in business and other things going on would you expect once you cross that threshold into positive EBITDA in the second half of 'twenty do you think it would stay there consistently.
Speaker Change: This is in 59 stores in the greater Las Vegas area and similarly are performing there and expect to continue to grow with Walgreens following the test.
Speaker Change: We were able to expand covered for all brands into a state that we were previously not in Colorado with a group called Legacy Distribution.
Speaker Change: Salt received an authorization for our first foray into control states and that was in Iowa and Pennsylvania.
Speaker Change #158: Every quarter or could there be still some quarters that wind up negative.
Speaker Change #159: No no no because once we cross that threshold is once you start getting into the second half of 2025 or Coppa Devino, our pulp a logo and our tequila starts taking off and you have Q slash as more of a steady state right and I can't I can only do so much on Q slash from margin expansion.
Robert Nistico: That's a really great thing to be able to say. And all that work was being done while we were sitting here trying to put the financing or getting the financing put together. The second thing is executing on our narrative of larger acquisition. Well, that would be Western Sun, and potentially this other one that I'm not naming. And there are others, you know, Bill Meissner and I, good Lord, we almost three a week come across our desk, summer, summer, jam, summer, but the fact that there's deal flow out there and it comes to us, that's a really valuable thing for us in the future.
Robert Nistico: And then the third and final thing is actually reaching profitability. So completing this raise, so people know that we're not going to go do something, that we have to do something that would be considered less desirable from the financing standpoint. You can never say never, but, you know, we believe we're past that. The second thing being executing on our narrative of larger acquisitions, the third thing being reaching profitability. All three of these things are within reach between now and the second quarter of 2025, which is basically a blink of the eye.
Speaker Change: Populoco was expanded into 59 locations of giant eagle that's a grocery chain in Virginia.
Speaker Change #159: Spansion standpoint, because I'm in a resale model I'm hospitalized, but when I start talking about the legacy brands I have a lot more room, there on commercial on commercial momentum.
Speaker Change: We developed a new salt tequila which we're super excited about. This is a jalapeno flavor to take advantage of the spicy margarita and tequila cocktail trend and with that will also be a silver tequila.
Speaker Change: So the bulk of the categories really in straight blanco tequila and we have been the go-to flavored tequila brand.
Speaker Change #160: I guess, what I'm asking though is would we then when the calendar turns to I know this is like way into future and more to retire.
Speaker Change #160: But they aren't accounted in 'twenty six am I am I, taking a step back because I've made investments for growth and you know and I'm in the post holiday first you know first calendar quarter do I.
Speaker Change: This really puts us into the meat of that market with blanco tequila.
Speaker Change: And then from a momentum perspective, it was just a very successful quarter that will buttress our results for the second half of the year despite the headwinds that we faced on liquidity and inventory.
Speaker Change #160: Or do I, just crossed the threshold I stay positive after that.
Speaker Change #160: Yeah.
Speaker Change #161: Yeah, you think a positive we won't go backwards on that and then.
Speaker Change: Our sales team remains focused and are ever growing national distribution network of high quality distributors and retailers remains enthusiastic for our brands and the innovation to come.
Speaker Change #161: I think Robert and Bill can maybe get a little bit of sense of seasonality.
But it won't be significant from the way that Ics So Sean.
By the way nice talking to you I Hope you all have you been well.
So, yes, so but understand this too on the legacy brands on the beverage side of the business.
Speaker Change: I'll now turn it back to Robert who will provide an update on our capital structure.
Robert Nistico: All right. Thank you for your attention. A lot of words.
Robert Nistico: Thanks Bill and that's great stuff.
Speaker Change: Good work.
Operator: We'd like to open it up for questions now.
Speaker Change #162: With the exception of the chain, we have a ton of chain authorizations for tap out and we already are.
Operator: And operator, please explain how to load your questions in the portal, please. Absolutely. At this time, we will be conducting a question and answer session. You can submit a question at this time by clicking the ask question button on the left of your screen. Type your question into the box and hit the send button to submit your question. All right. Looks like we got our first question already.
Speaker Change #163: You talked about that but we're now just getting the meaningful regional and national chains for pulp a logo and four.
Speaker Change #163: And for Copa Divina, and frankly, some for for Salt Tequila.
Speaker Change #163: We didn't have those before.
Speaker Change #163: And everybody on this call and I think understands that the chains are what build brands. So once you start getting into the Wal marts of the world. The Walgreens the a M. P M. The circle K's etcetera, you're talking about a massive increase in revenue.
Speaker Change #163: So no there's no reason for those numbers with slide backwards.
Julius Ivancits: It's for you. It's for Julius. Can you, can you, sorry, I got my glasses on. Can you please explain a little bit further on the operational excellence? I believe you called it of how we get the profitability with this current raise by the middle of next year. Sure. So the the reason it of itself gives us liquidity to actually procure raw materials. And so the things that we're looking at is one of our highest cost items are for is fright.
Speaker Change #164: Okay. No that's helpful without M&A just to kind of look.
Speaker Change #165: Yeah. So like again is like 18 months out or or going into 26. This is all lightens eminent.
Speaker Change #165: Understood.
Speaker Change #166: Other questions. One is you know.
Speaker Change #167: Thanks for the color on tap out.
Speaker Change: You know everybody the message there is there are even though in the face of serious liquidity issues, this group didn't sit on their hands.
Speaker Change #168: I'm hearing you say that the.
Speaker Change #169: The challenge there is that it would require to kind of be incubated, but you're not ruling out not out right.
Speaker Change: We achieved all these things with virtually very little money.
Julius Ivancits: And so we're looking at very adding three PLs to our to our to our locations to actually have better freight lanes to get products. And that will not only basically take costs down that will actually reduce our cash conversion cycle as well. Yeah, is we have various initiatives out there where the liquidity allows us to buy more efficiently by wine that will be buying that anywhere between a 10 and a 20% discount from where we're currently procuring.
Speaker Change #170: Well I don't know.
Speaker Change: So while we were organizing ourselves with the financing group that we'll talk about here in a minute, we were able to achieve quite a bit staging ourselves.
Speaker Change #171: No. We're just talking about this brand specific intact.
Bill Meisner: This bill Bill Meisner can speak to this as well because he did he did the design. He did the positioning you know he's a horrible marketer and and president.
Speaker Change: So when money starts to come in as it is as of yesterday, we can actually capitalize on that and really start building out revenue as we roll into December and into next year.
Speaker Change: These are a ton of authorizations.
Bill Meisner: We own the trade dress with the exception of the named tap out in the icon and we own the liquid.
Speaker Change: It's an amazing job.
Bill Meisner: So no we are not getting out of the non op business.
Bill Meisner: We want to do both.
Speaker Change #173: Okay. It makes sense and then my last question is on poker logo. So we've talked you and I.
Speaker Change: The sales marketing team has done.
Julius Ivancits: Why? Because if you're hand in mouth, you're buying whatever out there and you're not getting any type of volume of discounts. Everything is on the table as well for you know, cops and labels and so forth where we're continuously looking at where we can take cost out of the business, carry lower inventory levels and then be more efficient.
Speaker Change: We applaud them and thank you for for really digging in and doing what we could do with limited resources, and also just so it's clear, I want to make sure people understand really how we got into this position.
Speaker Change #173: Extensively over the years about.
Speaker Change #174: Our other kind of other applications of that type of packaging technology can you give us a little update there on what your plans might be or is that kind of back down or.
Speaker Change: Maybe that happens, you know, sometimes companies face cash crunches, liquidity issues.
No no yeah. That's outstanding question I'm glad you brought it up I should've brought up earlier.
Speaker Change #174: So part of the use of proceeds for this this capital raise.
Julius Ivancits: Hopefully that answers the question. Thank you.
Speaker Change #174: As a deposit on our first paper can roller.
Speaker Change #174: And if you don't mind I'm going to I want to talk about that a little bit because.
Speaker Change: For us, we had a signed deal, we had documents signed, we even had a level of proof of funds from a group out of Europe, for reasons outside of Splash, that deal never came to fruition and we waited and we waited.
Robert Nistico: Here's a question for me on Western Sun and I think I'll start and maybe Bill Meisner will jump in as well. The question is what's taken so long is the deal at risk. Excuse me, I'm trying to read this screen. Okay, as the deal at risk. Going back to my statement about us acquiring brands that have regional success already. Generally what that means is it's going to be in a revenue level that is too low for the strategic to be interested in and that's the beauty of the vision for our platform.
Speaker Change #174: It has.
Speaker Change #174: Multiple impact a positive impact on the on the organization.
Speaker Change: Fortunately, we're not the type of group to only count on one horse, so we had some redundancy.
Speaker Change #174: Number one.
Speaker Change #175: The reason we are we have a 711 authorization for popolo co and were loading stores you know on a daily basis.
Speaker Change: Unfortunately, that group out of Florida never got their funding.
Speaker Change: So we had to hustle.
Speaker Change #176: Is it is not just that it's a really nice liquid its a fabulous sangria, but the but the biodegrade ability of that package is unique and sustainable.
Speaker Change: Of course, you guys know that we took on some capital from some investment banks.
Speaker Change #176: And recognized by the buyers there and other chains as well so that packaging is a super important to us.
Speaker Change #176: As we as we are.
Speaker Change: You know, those can be considered expensive from a dilution standpoint.
Robert Nistico: You know, we want to grab those brands in that, you know, $15, $20, $30 million range and accelerate them. You know, I mentioned the word incubation before. Incubation is a very difficult thing to do unless you get really lucky. It costs a lot of money. It takes a lot of time and it takes away from your core business and your legacy brands as well. But so finding brands and acquiring brands in that in that I'll call it, you know, 20 to $30 million range is ideal for us.
Procure our first roller.
Speaker Change #176: Our intent will be to put it here in the states probably north Texas.
Speaker Change: The really good news there though is we have retired one of them and it was significant amount of money. It was originally $2.4 million and all that I guess I can call it overhang is now behind us.
Speaker Change #177: The cost the estimated cost of that those cans once it's here and for everybody on the call. It's an eight layered paper can the outside layers. The eighth layered. It's also the label. So the cost of that is roughly four cents domestically I think right now that that that raw material as a P.
Speaker Change: You know, God love them, we needed the money.
Robert Nistico: We accelerate them to 40, 50, 60 depending on the segment, you know, beverage, whether it's non-alcohol, or Alc, is absolutely perfect and then that's where the strategic's come in. You know, why it's taken so long. It's not easy. It's a neat, you know, because we also operate in sort of no man's land from a revenue standpoint. You know, we worked very hard against it. I think we finally found the right blend of debt and equity.
Speaker Change #177: Package is about nine cents as we imported so we cut that less than half of our current.
Current aluminum can printed is about 24 and a half cents. So.
Speaker Change #177: Mendes savings in and that has a ratcheting down cognizant increasing margin. So now we can put line extensions in that thing.
Speaker Change: You know, sometimes you just have to do it, but it was difficult and it put a lot of downward pressure on the stock.
Speaker Change: There's no surprise, there are no secret.
Speaker Change: The really good news though is that that group is behind us and God bless them for helping us, but glad it's behind us.
Speaker Change #177: We can take some of our current brands more of our current brands put it in there and I'm Gonna have bill jump on in a second and talk about the water project in that paper can as well.
Speaker Change: I'll say it that way.
Speaker Change: Moving forward, we announced loosely that or in a superficial way that we had an agreement with the group out of upstate New York Rochester specifically.
Robert Nistico: And now we're getting a tremendous response and we also brought on a gentleman to help us with that with that raise. And he was a talk director at Drexel. So that's been a, that's been a help as well, Bill.
But know that that is absolutely not back burner, we're very excited about it and we hope to get that first machine here.
Speaker Change: High net worth individuals managed by capital securities and Rochester wealth management really good group of people up there.
Speaker Change: We of course have a formal agreement with them for a private placement this morning that press release was sort of the very early results of that of those efforts.
Speaker Change #178: First quarter.
Speaker Change: It's been a lot of work, but also a lot of fun.
William Meissner: Anything on this and there? Well, just as far as the question on risk, I can just assure everyone that the Western Sun team is very motivated. We work great together and they want this deal just like we do. They see this brand going to the next level. And they know that splashes the partner that can help the brand get there. They are very much in favor and continue to be patient and work with us.
Speaker Change #177: And.
Speaker Change: We have the first tranche about half the money in for the first tranche in hand will be obviously required to put an 8K out with that here shortly.
Speaker Change #179: This is this is this is not guidance, but this is anecdotal but factual.
Speaker Change: Money is still flowing in, in fact, it's actually kind of, there's some amusing pieces to it.
Speaker Change #180: You know when I was in Bentonville of last time with Aida Aragon, our national account VP. The Walmart buyer. The wind buyer asked me is ask the straight up can we have an exclusive on that for some of our private label wine and and I smiled and Giggled and said that maybe you know that inside them going no not yet.
Speaker Change: Some folks, you know, mail check, some folks, some folks at ACH's, but you know, as long as the money comes, we're happy.
Speaker Change: But the message here is that that effort is well underway.
Speaker Change: We have signed documents, as I mentioned in the press, as we mentioned in the press release this morning, and the money continues to flow in.
Speaker Change #181: But we can sell excess capacity and if you do the math, we could sell somewhere between 14, and 16 sensor can and Youre an analyst.
Speaker Change: We will be doing it in two tranches.
Speaker Change: There may be a third, but I'm not going to say that for sure.
Speaker Change: The second tranche, we have signed documents as well to the tune of about half, a little more than half two thirds of it.
Operator: Okay, great. Right. I think it looks like tough, difficult here on this. Maybe, maybe we should stand by one second, everybody. I'm sorry. All right. Yeah, Operator, I think it looks like the web portal isn't working very fast.
Speaker Change #182: 380 cans a minute yeah.
Speaker Change #183: Add that up right. So there's a there's an opportunity to sell excess capacity here as well. So this is a tremendous project for US no nothing has slowed down on that it takes a long time to build these machines Bill Mike do you want to talk for a second about your water project in this package.
Operator: So why don't we go ahead and open up the phone Q please? Absolutely.
Mike: Yeah, we see tremendous opportunity to replace a fair amount of <unk> T. In the market with the card a cam and a natural spring water.
Operator: Thank you. If you would like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate your line is in the question Q. You may press star two if you'd like to remove your question from the Q.
Mike: The.
Speaker Change #185: Amount of retailers and venues who made.
Speaker Change #186: Perfect three P ours on sustainability.
Speaker Change: So we're very, very, very confident and excited that money is flowing in. And with all the work that the sales and marketing team has done, we'll be able to really, really leverage that and convert that into revenue.
Scott Buck: Okay, the first question comes from Scott Buck with H.C.
Speaker Change #186: We're really love.
Scott Buck: Wayne Wright. Please proceed. Hey, good afternoon guys. Appreciate the update. You're throwing a lot of a lot of information at us. Robert, I'm curious to hold up on Sun. That's almost entirely driven by lining up the financing. Is that fair? Yeah. That's a great question. That's, that's exactly right. There's also, you know, it's also spirits, right? So you also have, you know, cola waivers and licensing and permitting you have to think about as well.
Speaker Change: Additionally, Julius has worked hard on a ABL or revolver, if you will, a lot of credit.
Speaker Change #186: Water and our Carter Cam we are limited by that pay down size. So that's a smaller segment of the overall water category.
Speaker Change #188: Absolutely huge in relative terms.
Speaker Change: As this money comes in, that triggers that, which will allow us to have extra liquidity from, you know, from a credit-based standpoint.
From a case volume perspective.
Speaker Change #188: We think very highly of the future of water and Carter can if you think about these little kind of an eight ounce P E T bottles and the waste that goes along with them and criminal.
Speaker Change: Julius will talk about that in a little bit.
Speaker Change: Let's see.
Speaker Change: Okay.
Speaker Change: Yeah.
Speaker Change: So basically, it's been a difficult couple of quarters.
Speaker Change: It's, you know, I've personally put more money in the business because I know where we're going.
Speaker Change: And we've had some of our legacy investors help out.
Scott Buck: So it's not a really quick, you know, down and done sort of thing. But yeah, we think we figured out the financing blend and style now. And that's why we're getting a much better. Much better indication that we're going to get this done. We've we've hard circled a portion of it, by the way. I don't want to give you the exact percentage, but it's it's meaningful. And then this other group that I mentioned that asked not to be mentioned the $3 billion group. They're real. So we'll see where that takes us. And it's got to be that. It's got just to your role. Yeah, so kind of you're saving a lot of information.
It's all in.
Speaker Change: We finance things through, you know, through accounts receivable and whatnot.
Here you have a overwhelmingly biodegradable package.
Speaker Change #188: Theres also recyclable and breaks.
Speaker Change: So we're, we're past that point now and it's time to get out of first year and move forward.
Speaker Change: So we're very excited about that.
Speaker Change #188: Breaks down overtime is just perfect for water.
Speaker Change #189: And I think there were some.
Speaker Change #188: Industry.
Speaker Change #190: Probably by guys like us that have been around awhile or well water has to be in a P T or <unk>.
Speaker Change #190: In glass, but liquid death kind of proved out is.
Speaker Change #190: Definitely not the case, Andrew absolutely blowing up in the aluminum can which can't hold a candle to the sustainability of the card again.
Speaker Change #190: Further on the innovation front, we have qualified that package for wine, which you might think what was great for sangria why wouldn't it be for one it was actually.
Speaker Change: Julius will now discuss outlook for the balance of 24 and into 25.
Scott Buck: I really wanted this call by design to really just, you know, put things out there, right? Is we wanted to kind of really just kind of present, you know, our vision of what we're looking in the future of things that just didn't pop in the quarter in the financials to really show the momentum and just build the confidence in the external market. And, you know, how we're using these funds, what the future looks like and to express our enthusiasm for the business.
Speaker Change: Okay.
Speaker Change #191: It took some time.
Speaker Change #191: To to figure out so we will be able to.
Speaker Change #191: B the first wine in card account.
Speaker Change #191: So that is a right there for us both of those two renovations in that platform.
Speaker Change: Thank you, Robert.
Speaker Change #192: And just by the way not just into the numbers that were quoted I've built none of that and yet right.
Julius Sawyers: You know, I want to pivot to what has occurred and just really looking ahead at a promising future at Splash. The projections I'm referring to exclude any acquisitions and then are based upon the financing that we received yesterday and they will be coming over the next couple of weeks. So from a revenue guidance standpoint, management, we expect revenue to be in the range of nine to $10 million for full year 2024 and $38 to $42 million for 2025.
Scott Buck: Yeah, no, I think it's very helpful. In the most recent investor deck, it looks like with the closing of Western Sun that you guys will be moving some production to the Dallas area. Is that, is that correct? Well, I'll say it this way. The Western Sun campus is located in and pilot point, which is North North Texas. And some of our production and not all of it, but some of our production and logistics can be relocated there, which will be great.
Speaker Change: This will be driven by organic growth and co-pettivino, our portfolio brands along with the reboot or say better word restart of our huge Splash, which is our e-commerce platform.
Speaker Change #193: Too early to really put a monetary value on what that would mean to us, but it is upside to our figures and as a CEO I called out a sandbag.
Speaker Change #194: [laughter] well I'm glad you brought that up because the question that I would have is okay. There's a revenue number is not in there, but as some of these initiatives.
Speaker Change: So, you know, I know we will get to the M&A side a little bit later, but any M&A would be accretive to the figures that I just noted.
Speaker Change: You know, on a growth margin perspective, I do expect growth margins to land in the high 20s for full year 2024 and moving up about 10 percentage points to the high 30s in 2025. And this will be driven by operational efficiencies and procurement savings.
Speaker Change: So if I jump to, you know, EBITDA is EBITDA's projected to be a loss of around $9 million for 2024.
Speaker Change #195: Take you some costs are they in there for in your EBITDA guidance.
Speaker Change #196: Well I kind of like almost like the way that I would almost characterize this as you've kind of got like a tolling arrangement for lack of a better word I don't have that they don't have that baked in.
Speaker Change: And given the programs that we have on the way, we expect that we're going to be EBITDA positive by, you know, late Q2 2025 or early Q3 2025 based upon our current footprint.
Speaker Change: So, kind of just to take this a little bit deeper, these financial projections will be driven by our strategic initiatives.
Scott Buck: Just shipping lanes, savings alone will be tremendous. So, yeah, not everything necessarily, but yeah, portion of it for sure. Okay, I guess that's where I was going with the questioner. What are the potential cost savings or margin benefits if you moved some of the production or help them the image or are there? Yeah, just if we just focus on the on the freight lines is we're probably looking at a 30% save.
Okay.
Speaker Change: So this is the first time we've kind of gone public this project White Hot.
Speaker Change #196: But yeah, but it's instantly instantly profitable right the way that I approached it just you know again, its like putting down the timing of this right with everything that's going on it's hard to put a finger to kind of put this in an operating plan but.
Speaker Change: We have five strategic pillars.
Speaker Change: The first one focused on sustainable and profitable growth, the second operational excellence, the third, our e-commerce platform Q-slash, both on acquisitions and then finally, our capital structure.
Speaker Change #196: But obviously, it's something that we're looking into and the market has a strong need for that and you know.
Speaker Change: So Project White Hot is expected to move the company to positive cash flow from operations and positive EBITDA, as I previously noted, without any MNA. And then the cost reductions and expected organic growth will get us there.
Speaker Change #196: And that will help our business tremendously.
Speaker Change: It is strategic imperative for slash beverage group to strengthen its capital position and restructure the company's operations to ensure a path to receiving positive cash flow from operations.
Scott Buck: Major Center Freight Costs, which is material. So, I mean, it's not just like it's one or two points. And then, you know, also, it just that's a big piece of it. You know, if you look at it from, you know, your outside Portland to looking for, you know, kind of a Dallas area and how just basically the truck lanes go. That's just very, just very big for us. So we can bring wine.
Sean think of it this way.
Sean: The reason it'll probably go in our favor versus against us.
Speaker Change: Project White Hot provides the organization a strategic plan to ensure laser-like focus on optimizing our operating footprint and the need to support our next growth cycle and have the organization ready for pending MNA, to go a little bit deeper on the strategic pillars.
Sean: Assuming our numbers are correct that for sensor can.
Speaker Change: Splash has success in expanding its production, I'm sorry, its distribution and product offerings, a lot of which Bill just noted, which will create momentum, you know, in the rest of the year, going into next year.
Sean: And then you put water in it.
Speaker Change: And, you know, as the liquidity challenges are lifted, we will make some strategic marketing investments in our tequila lines along with focusing additional advertising and promotion spending on coped divino and our purple local brands.
Sean: So it's purified, but so do the math.
Sean: Yes, it was instantly profitable.
Speaker Change #198: Okay, alright, thanks, a lot appreciate it.
Speaker Change #199: You bet no problem.
Scott Buck: We can bring wine from the West Coast. You know, you know, it's, it's, it's a good thing. And, and I don't believe though, those savings are even in your current. No, no, like we have some strategic wine procurement savings. And that's just buying better. But, you know, again, we haven't even incorporated yet geography on why that wine would come from. Also, too, is if you look at a copo copo, to be known, it's not vintage.
Speaker Change #200: I know, we got a million questions out there, let's try and answer a few more or will be here until midnight.
Scott Buck: So whether that wine is from Pacific, you know, West from California, or since we're talking about Texas, you know, maybe a Texas wine, not necessarily would do that, but just kind of throwing that out there that that's not even baked into the numbers yet. That's the account talking, not the marketing guy.
Speaker Change #201: Who's next okay.
Speaker Change: You know, I noted previously on the gross margin expansion, we expect to achieve significant costs to savings, expanding the gross margins, and this will be a combination of contract manufacturing, strategic raw material procurement, and freight savings programs. These initiatives with step-up sales will allow Splash to deliver on its procurement savings targets and gross margin expansion.
David Cigarroa: Okay up next we have David cigarette O with CCU investment Inc. Please proceed.
David Sigaretti: Hi, Robert can you hear me.
Robert: Yeah, Yeah Gotcha.
Dave Figueredo: Dave figure Ido I've talked to you a couple of times in the past I've been here for a while and stuck with it through thick and thin I just first of all I want to thank you and your team for the tenacity to get through this really tough part.
Speaker Change #205: And in the growth of your business. That's why I just wanted to really thank you guys there.
Dave Figueredo: And.
Speaker Change #206: I use Q plaque.
Speaker Change #207: And I really really I'm, you know I turned 56 in June its still pretty athletic trying to be anyway.
Speaker Change #207: I really enjoy sipping on one of those energy drinks or once a day. So I wanted to see how people are liking that but that's.
Scott Buck: Just to be clear guys, I know you brought you both brought it up on the call, but the guide for 25 that does not include western sun, right? That is correct. That's correct. Yeah. Okay. All right. So we're really in a pretty, pretty good spot here, even though it took us a while to get here. Right, right. I'm curious proceeds from this most recent raise. What do you have to either catch up on accounts payable with refill inventory with?
Speaker Change #207: Thats, what I really like that and.
Speaker Change #208: Your tequila I get the citrus ni.
Speaker Change #208: As possible, we'll have a drink before dinner you know three hours of training.
Speaker Change #208: But a breath.
Hi, Brendan here.
Speaker Change #209: Your drink recipe from synchrony awhile, So I'd go one fresh orange.
Speaker Change: A bit more just on Q Splash, with our balance sheet being recapitalized, this provides the liquidity to procure inventory for our e-commerce platform.
Speaker Change #209: And one line of squeezing their all fresh good and it's just I thoroughly enjoy it and my wife does in all my friends that I make it four in children and they love it.
Scott Buck: I mean, what kind of goes into kind of cleaning things up before. You know, you can think about it as growth capital. Yeah. So, you know, obviously, you know, we've been hand them out on cash and we're behind on some of the bills and our vendors. Have been really quite excellent in working with us. So with the raise that we have, we're not just going to write a check next week and pay everybody off.
Glenn: And the pulp of local we don't we're not big drinkers on it Glenn.
Scott Buck: They'll be, you know, an eight to ten week, you know, pay down of anybody that we're past to. And then again, it's on the inventory side, whether it's making investments in Q splash or, you know, wine will be buying just smartly and then just buying in higher quantity so we can get some purchasing price leverage. So again, the one thing also I want to highlight as well is when you're so limited on liquidity, you have senior leadership just basically spending a lot of time on managing vendors, right?
Speaker Change #209: But we have it.
Speaker Change #209: We've drank in my wife loves it but I have to tell you. The paper just feels so good in your hand, and I'm not exaggerating it.
Speaker Change #209: It's not like when you get a paper straw or something you know the restaurant you can't stand drinking drink well. This is not the case.
Speaker Change #209: To say, it really fills perfecting or hand, it sits well.
Speaker Change: You know, year-to-date sales in 2024 for Q Splash has been nominal and we will relaunch in the coming weeks where we expect sales for Q Splash in, you know, the low to mid-20s in 2025.
But just how housing energy drink or there are people like me that just loved the darn thing and the <unk>.
Yeah.
Speaker Change #211: Yeah first of all thanks for your comments, we appreciate you calling in and we appreciate you as a consumer.
Speaker Change #212: Also so a couple of things yeah. The hand feel the we call hand feel on that paper cans amazing.
Speaker Change: And that's just coming from our e-commerce platform.
Speaker Change #212: And yeah, we're quite proud of the liquid I don't know if you heard bill mizen or talk about.
Speaker Change #212: We're launching.
Speaker Change: You know, again, just a couple more things here on the bolt-on acquisitions.
Scott Buck: That takes away from our strategic focus and to have the cash and the bank to focus in on bigger ticket items will be a welcome relief for us. Yeah. Can you share the price of information on this raise or will that be included in the AK that's by all leader this afternoon or tomorrow? Yeah, you'll see it in the AK, but it's reasonable. I think people will be very comfortable. It's not like. It's very reasonable and it's 18 to 22 years down the line, you know, from a debt standpoint. Yeah, I think people will be comfy with it. Okay. Perfect.
Speaker Change #213: With respect to the Salt Tequila.
Speaker Change #214: Straight silver so we can actually be the only real reason for that is we can be the only tequila them the exclusive tequila and an on premise account or bar or a restaurant.
Because you're right. So now because we had three now coming for flavors on the back bar, but we didn't have anything for straight tequila. So now that we have that ability to be exclusive. So that's an important can't wait.
Speaker Change #214: Strategic strategic move forward and by the way the silver is fantastic the set.
Speaker Change #214: Okay.
Speaker Change #215: Yeah Yeah.
Yeah. So we were talking about the energy drinks. So remember we own the liquid we own the what's called the trade dress basically the label with the exception of tap out.
Julius Ivancits: And then last thing, Julius, can you give us a little more information on the ABL? I mean, how, what is the capacity of the revolver, I guess, or whatever, though? Yes. The tour you've got. But we've got a term sheet, and basically it's your standard, you know, ABL, just, you know, AR and inventory, and one of the things with that, it was contingent on us doing syndicated financing. So the range that I can give you is 3 to 5 million.
Speaker Change #215: So yeah, it's not going to go away forever, but we will be transitioning that at.
Speaker Change #215: At some point in the near future.
Speaker Change #215: Also along those lines.
Speaker Change #216: Theres a written question that came through.
Speaker Change #216: I want to address it because it's important.
Speaker Change #216: We're talking about this potential second acquisition that thing as quick.
Julius Ivancits: And we'll get more information on that in the coming weeks as this current raise is finalized, right? Yeah, correct. Again, there'll be a gradual buildup, right? You've got to buy inventory to finance the inventory, and so it will kind of chill itself out of. Okay.
Speaker Change #218: It's not done.
Speaker Change #218: But it's very close to time and we'll announce the details of that when it is done.
Speaker Change #218: But it's it's eminent and then western Sun, we're being kind of.
Speaker Change #218: Cautious about that but our objective would be to close that.
Julius Ivancits: Perfect. And then just, by the way, I mean, just to be honest, like what that is, Robert was actually kind of shocked that the terms that were coming through, given what called our financial situation, the fact that we could even pull that everybody was pretty happy with. Yeah, it's good stuff. I'm sure.
Speaker Change #218: By December 15th So we can capture that revenue for the year on.
Speaker Change #218: On a reporting basis so.
Speaker Change #218: Those are two important points I didn't want or didn't want to miss but your comments are great and we love the tap out liquid.
Speaker Change #219: It's excellent.
Robert Nistico: And then last thing, Robert, on the M&A front, more of the divestiture front, I mean, of the brands that you currently have anything that we could potentially not see in the portfolio six months, 12 months from now? Yeah. There are, you know, I'll just go there. Yeah, I'm just going to go there. There's some corporate, you know, reasons why we've been quiet about that. So it's going to be bare with me.
Speaker Change #220: It's efficacious, it's clean natural.
Speaker Change #219: So yeah, we're not going to we're not going to.
Speaker Change #219: Walk away from that.
Speaker Change #219: The work we've done we're just going to walk away from the named tap out.
Speaker Change #221: Got you.
Speaker Change #221: Our people like in the energy drink as much as I do.
Yeah, Yeah people love It I love it drinking one right now.
Speaker Change #221: I guess I got another half to go into the sparkling Sherry women.
[laughter].
Speaker Change #222: Alright, thanks, very much I really appreciate you guys didn't entity.
Robert Nistico: I'm answering your question. When we talked about, you know, acquiring brands and accepting, requiring regional brands with regional success and repeat purchase and accelerating them, that's great. Our very first brand, when I came to Splash, the company already had a licensing agreement for tap out. Tap out has a lot of pre-existing brand awareness. So we thought, well, we can work with that. But ultimately, because tap out was really a lifestyle brand associated with the UFC and M&A, it was really an incubation project.
Speaker Change #223: You bet yeah. Thanks for thanks for recognizing it we appreciate you as well as a partner you bet. Thank you.
Speaker Change #224: Okay. We have no further questions in queue I'd like to turn the floor back to management for any closing remarks.
Speaker Change: I do want to remind everybody that Splash was created on the concept of a diversified portfolio of beverage brands.
Speaker Change #225: All right well listen I think this has been a good call I hope with.
Speaker Change #226: Answered most people's questions and been as clear and transparent as possible.
Speaker Change: And, you know, our strategic pillar for bolt-on acquisitions is to execute our M&A strategy.
Speaker Change: You know, Robert will go a little bit deeper on the M&A side onto the developments there.
Speaker Change #225: <unk>.
Speaker Change #227: Incredibly excited for the future it's been a difficult road.
Speaker Change: The last thing I just kind of want to, you know, focus in on is capital structure.
You know if it was easy anybody could do it and.
Speaker Change #228: The gentleman talking about tenacity persistence and perseverance wins.
Speaker Change: You know, we have successfully executed part of our strategic pillar through the security-securitization of our syndicated financing.
Robert Nistico: And I have some conversations about that with some folks this week. And that's fine. In fact, we had good authorizations on it and the brand was selling, but just not to the level that we, I don't want to say hoped, but to a level that we would evaluate whether it was worth continuing or not continuing. And it's not that the brand failed, it was actually from an incubation standpoint, pretty darn successful, but from a regional brand success standpoint, no, it wasn't worth it.
Speaker Change #229: By that and I know Bill Myers their lives by that and Julius Baer.
Speaker Change: And then Robert did note on the ABL revolver from an equity partner that will provide us additional liquidity.
Speaker Change #229: We're excited about the future we will.
Speaker Change #229: We will be reporting more and more.
Speaker Change #229: The events in the very near future.
Speaker Change #229: We're as we close up on this.
Speaker Change #229: This round of financing.
Speaker Change #229: It really sets I'll leave you with this thought it sets so many things into motion all the work we did while we are waiting to organize this.
Speaker Change #229: Is now in front of us, it's like a master set of Domino. So.
Robert Nistico: And we figured we're going to end up spending millions of dollars to continue to incubate. And then of course, then we still have licensing payments to consider as well. And that takes a lot of time. So sticking to our core strategy of regional success, we made the hard decision.
Speaker Change #229: We're thrilled that money is starting to come in we actually haven't like I said some are in our possession now.
Speaker Change #229: A material amount and we are we look forward to the future and we hope we have.
Speaker Change #229: Everyone's long term support.
Speaker Change #229: We love this company and we value our shareholders like family remember I'm, a very large shareholder. So we're always going to have you in mind, we have to run a business, but we also.
Robert Nistico: And we're walking away from the brand. We haven't talked about it because there are distribution and chain considerations. We have to be able to work through that and get to all the chains and distributors. So it's been, we've kind of kept that on the download a little bit just just just from a functional, standpoint. But no, we will not be continuing to tap out. We wish them the best. We can incubate it.
Speaker Change #229: Equally care about share price.
Speaker Change #229: We expect our we expect great things for the future. Thank you very much for joining.
And we appreciate you guys.
Speaker Change #229: Men and women and we hope you guys have a great rest of the week and weekend.
Speaker Change #229: Okay.
Speaker Change #230: Thank you. This concludes today's conference and you may disconnect. Your lines at this time. Thank you for your participation.
Robert Nistico: If we had all the cash in the world, honestly, I'd like to continue with it, but it's my guess is, and this is just a guess. If we were to do that, it would take two to three years to get it to where we want it and cost another $22 million. I'd rather focus on our other brands. They're really exciting and a course acquisition.
Speaker Change: You know, the future M&A deals will be, you know, either come from debt, equity, or a combination of that.
Speaker Change: But that's kind of really our outlook on project white hot.
Scott Buck: Yeah, well, I appreciate the transparency there, and I appreciate you guys taking the time to host this call. Thank you. Of course. Nice talking to Scott.
Speaker Change: And then let me just turn back over to Robert on the M&A side.
Speaker Change: Yeah, thanks.
Sean McGowan: Okay, the next question comes from Sean McGowan with Roth Capital Partners. Please proceed. Thank you.
Speaker Change: Hey, Julius, would you mind going a little deeper into how Q Splash will work because it sounds like a big jump in numbers.
Sean McGowan: I appreciate the opportunity to talk to you guys. Going back to your comments on guidance. Would you mind repeating the expectation for the range in 25 on revenue? Did you say 30 to 34? No, no, no, not 38 to 40. Oh, 38 to 40. Okay, I'm glad I asked you. And when you talked about it being EBITDA positive kind of late 2QQ3, would you expect to be EBITDA positive for the year?
Julius Sawyers: I want to make sure people understand why that's not only realistic, but it will happen.
Speaker Change: You're sure.
Sean McGowan: So again, I'm conservative, I think, for the full year, I'm expecting to be down two to two and a half million full year, and most of that's in the first and second quarter. But again, I have upside on that where I think we can't pull that out with a little sales momentum, and we've kind of noted a couple different things that aren't built into the numbers. But I don't want to get too rosy because I am 18 months out.
Sean McGowan: Okay, and then the last question on that guidance is would you know given the potentially you know seasonality of business and other things going on, would you expect that once you cross that threshold into positive EBITDA on the second half of 25? Do you think you would stay there consistently? You know, in every quarter or could there be still some quarters that wind up negative? No, no, no, because once we cross that threshold as once you start getting into the second half of 2025, you know, our Copa Divino, our Popoloco, and our Tequila starts taking off, and you have Q-slash as more of a steady state, right?
Julius Sawyers: So, you know, basically, you're selling pretty much through, you know, Amazon as a reseller. So, it's a really fantastic business that you're effectively, you know, buying inventory and selling it on a cost plus model.
Sean McGowan: And I can't, I can only do so much on Q-slash from margin expansion standpoint because I'm in a resale model, I'm cost plus. But when I start talking about the legacy brands, I have a lot more room there on commercial mental. I guess what I'm asking though is would we then, when the calendar turns to, I know this is like way in the future, and we'll have to return. But if I turn to calendar to 26, am I taking a step back because I've made investments for growth?
Julius Sawyers: And for folks, if they don't know, we only have four individuals that are supporting that business.
Julius Sawyers: So, the overhead is very low.
Julius Sawyers: So, the turnaround time on that is fairly quickly.
Julius Sawyers: And, you know, we used to do around four to four and a half million dollars a quarter in Q Splash when there weren't liquidity challenges.
Sean McGowan: And you know, and I'm in the post holiday first calendar quarter or do I, or do I just, I cross the threshold and I stay positive, you know, after that? Yeah, you stay positive. We won't go backwards on that. And then I think Robert and Bill can maybe get a little bit of sense of seamstinality, but it won't be significant from the way that I see it.
Julius Sawyers: So, this isn't a very large stretch to kind of get back there.
Julius Sawyers: We'll need a couple of months to kind of get there.
Julius Sawyers: But it's a pretty well developed business model that we've used previously.
Julius Sawyers: And the beauty of that business is the cash conversion cycle.
Sean McGowan: So Sean, by the way, nice talking to you. I hope you've been well. So, yeah. So, but understand this, too, on the legacy brands, on the beverage side of the business, with the exception of the chain, we had a ton of chain authorizations, you know, for tap out. And we already, you know, we already talked about that. But we're now just getting the, the meaningful, regional and national chains for Popoloco and for, and for Copa de Vino, and frankly some for, for Salted Quilla, where we didn't have those before.
Julius Sawyers: It's fantastic.
Speaker Change: You buy the inventory and you're effectively getting immediate payment.
Speaker Change: So, you know, you're looking at procuring something and getting money back in five to ten minutes.
Speaker Change: Wednesdays.
Speaker Change: Yeah, okay, great.
Speaker Change: Thank you.
Sean McGowan: So, and everybody on this call, and I think understands that the chains are what build brands, you know. So, once you start getting into Walmart to the world, the Walgreens, the AMPM, the CircleKays, etc., you're talking about a massive increase in revenue. So, no, there's no reason for those numbers to slide backwards.
Speaker Change: Yeah, it's a really great platform for us and basically virtually casual and neutral, if not positive, by, certainly by the middle next year.
Speaker Change: Thanks for that.
Speaker Change: All right, M&A update.
Robert Nistico: I have two other questions. One is, thanks for the color on top out. I'm hearing you say that the challenge there is that it would require it to kind of be incubated, but you're not ruling out, not out, right? No, no, no, no, no, we're just talking about this brand specific. In fact, Bill Meissner can speak to this as well because he did the design, he did the positioning, he's an incredible marketer and president.
Speaker Change: We've been working on Western Sunbaka for some time. It's been actually a great exercise because it's a really good group of people.
Speaker Change: We will work very well together, assuming we close.
Speaker Change: Our intention is to close this thing, hopefully by the end of the year, but it probably roll into January.
Speaker Change: We structured the rays like this.
Speaker Change: It's a blend of debt and long term debt and equity.
Robert Nistico: We own the trade dress with the exception of the name tap out in the icon, and we own the liquid. So no, we are not getting out of the non-out business, but we want to do both.
Speaker Change: Basically, the numbers are right around 75 million.
Robert Nistico: Okay, makes sense.
William Meissner: And then my last question is on Polkoloco. So we've talked, you and I extensively over the years about other applications of that packaging technology. Can you give us an update there on what some plans might be? Or is that kind of background nerd? No, no, yeah, that's an outstanding question. I'm glad you brought it up. I should have brought it up earlier. So part of the use of proceeds for this capital raise is the deposit on our first paper can roller.
Speaker Change: Three quarters of that or 50 million of it, if you will, is long-term debt and then the 25 million being with an equity partner.
Speaker Change: We have to be careful.
William Meissner: And if you don't mind, I want to talk about that a little bit because it has multiple positive impacts on the organization. Number one, the reason we have a 7-11 authorization for Polkoloco, and we're loading stores on a daily basis, it's not just that it's a really nice liquid. It's a fabulous sangria, but the buy of the great ability of that package is unique and sustainable and recognized by the buyers there and other chains as well.
Speaker Change: We can't talk about too many names openly yet, but we do have some numbers that are hard circled.
Speaker Change: Now, a new player came in, I have to leave the name out, who's actually very interested and from the space that I was interested in both sides, both the debt and the equity side.
Speaker Change: I'll tell you this, it's about a $3 billion dollar player so they can certainly do it.
William Meissner: So that packaging is super important to us. As we procure our first roller, our intent will be to put it here in the States, probably in North Texas. The estimated cost of that, those cans, once it's here, and for everybody on the call, it's an 8-layered paper can, the outside layers, the 8-layered is also the label. So the cost of that is roughly 4 cents domestically. I think right now that raw material as a package is about 9 cents as we import it.
Speaker Change: It's not done, it's not even close to done, but they have requested to go to deeper due diligence, which is a great sign because they're from the space, which is a really ideal because as we execute our strategic plan with that group, they're a perfect exit partner as well, and they know that we know that, so that's an ideal situation if it comes to fruition.
Speaker Change: It's early, but we'll keep you posted on that.
Speaker Change: We'll see how that goes.
Speaker Change: The MNAP is important, but I also want to talk a little bit about why.
Speaker Change: The platform of Splash was the vision for it was always to be a merry-go-round, if you will, of acquisition and exit.
William Meissner: So we cut that less than half, our current aluminum can printed is about 24 and a half cents. So it's tremendous savings. And that ratcheting down cogs is increasing margin. So now we can put line extensions in that thing. We can take some of our current brands. More of our current brands put it in there. I'm going to have Bill jump on in a second and talk about the water project in that paper can as well.
Speaker Change: We never intended to make it an incubation platform.
Speaker Change: It's always supposed to have been an acceleration platform.
Speaker Change: So we have another potential acquisition in the hopper.
Speaker Change: We haven't announced it.
Speaker Change: I'm not going to reveal that today.
Speaker Change: We're not ready to do so, but it's a great example because it's a regional brand, and that regional brand has proven itself.
Speaker Change: They did it right.
William Meissner: But no, that is absolutely not backburnered. We're very excited about it. We hope to get that first machine here, first quarter. And this is not guidance, but this is anecdotal, but factual. When I was in Bentonville last time with IEDA Erdogan, our national count VP, the ballmark buyer, the wine buyer asked me, asked us straight up, can we have an exclusive on that for some of our label wine? And I smiled and giggled and said maybe inside I'm going, no, not yet.
Speaker Change: It's an inch wide and a mile deep in a certain geography in the country.
Speaker Change: So then because we're a distribution expert, I hate to compliment it, we are good at it, and we have vendor numbers or distribution relationships with every major distributor in the country, and everybody knows we have a relationship with Budweiser AB1 in Bez.
Speaker Change: That's our go-to group, but we also have Miller Coors and Republic National and Southern Clasers, Young's Market, whomever.
William Meissner: But we can sell excess capacity. And if you do the math, we can sell somewhere between 14 and 16 cents a can. And you're an analyst. I'm 380 cans a minute. Add that up. So there's an opportunity to sell excess capacity here as well. So this is a tremendous project for us. Nothing has slowed down on that. Takes a long time to build these machines.
William Meissner: Bill Meiser, do you want to talk for a sec about your water project in this pack? Yeah, we see tremendous opportunity to replace a fair amount of PET in the market with the Cardo Cam in a natural spring water. The amount of retailers and venues who have made specific KPIs on sustainability will really love the water in a Cardo Cam. We are limited by that 8-down size, so that's a smaller segment of the overall water category, but absolutely huge in relative terms from a case volume perspective.
William Meissner: So we think very highly of the future of water in Cardo Cam. If you think about these little 8-down PET bottles and the waste that goes along with them, and here you have overwhelmingly biodegradable package that is also recyclable and breaks down over time is just perfect for water. I think there are some industry probably by guys like us that have been around a while like, well water has to be in a PET or in glass, but liquid death kind of proves that is definitely not the case, and just absolutely blowing up in the aluminum can which can't hold a candle to the sustainability of the Cardo Cam.
Speaker Change: But to take that brand that has already achieved a certain level, not massive numbers, but a certain level of repeat purchase, and then accelerating that in our system because we have that distribution network and retail support across country now, we spent enormous amount of time putting that together.
William Meissner: Further, on the innovation front, we have qualified that package for wine, which you might think was great for sangria, why wouldn't it be for wine? It was actually took some time to figure out, so we will be able to be the first wine in Cardo Cam as well, so that is right there for us, both of those two innovations in that package. Just by the way, just into the numbers that were quoted, I've built none of that, and yet, it's, you know, too early to really put a monetary value on what that would mean to us, but it is upside to our figures. And as a CEO, I call that a sandbag.
Julius Ivancits: Well, I'm glad you brought that up, Julie, because the question that I would have is, okay, the revenue number is not in there, but are some of these initiatives going to take you, you know, some costs? Are they in there for, in your even dog guidance? Well, I kind of like almost like, the way that I would kind of characterize this is you kind of got like a tolling arrangement for lack of a better word.
Julius Ivancits: I don't have that, I don't have that baked in. Okay, but yeah, but it's instantly, it's instantly profitable. You know, the way that I approach it just, you know, again, is like putting down the timing of this, right, with everything that's going on, it's hard to put a finger to kind of put this in an operating plan. But obviously, it's something that we're looking into, and the market has a strong need for that.
Julius Ivancits: And, you know, and that will help our business tremendously. And Sean, think of it this way. The reason it will probably go in our favor versus against us, assuming our numbers are correct, that 4 cents a can, then you put water in, in a minute. So, it's verified, but so do the math. Yeah, it's instantly profitable.
Sean McGowan: Okay, all right. Thanks a lot. We appreciate the applications. You bet. No problem.
Operator: So we're, I know we've got a million questions out there. Let's try and answer a few more or we'll be here till midnight. Yeah, who's next?
David Figuerodo: Okay, up next we have David Figuerodo with CISU Investment Inc. Please proceed. Hi, Robert. Can you hear me? Yeah, yeah, gotcha. Hey, Dave Figuerodo, I've talked to you a couple times in the past. I've been here for a while and stuck with it through thick and thin. I just, first of all, want to thank you and your team for the tenacity to get through this really tough part in the growth of your business.
Speaker Change: Right before we had our liquidity problem, we were absolutely perfect.
Speaker Change: It's exactly where we wanted to be.
David Figuerodo: So I just want to really thank you guys there. And I use Q-plash and I really, really, I'm, you know, I turn 66 in June. It's still pretty athletic trying to be anyway. But I really enjoy sipping on one of those energy drinks well, once a day. So I want to see how people are liking that. But that's, I really like that. And you're tequila. I get the citrus and I, you know, as much as possible, have a drink before dinner, you know, three ounces for me, two and a half.
David Figuerodo: But if fresh, you know, you're going to high-bred in your, your, your drink recipe from Cinco de Lyle. So I go one fresh orange and a one lime squeeze and they're all fresh good. And it's just, I thoroughly enjoy it. And, and my wife does and all my friends that I make it for in children, they love it. And, and the, uh, Poppa loco, we don't, we're not big drinkers on it.
David Figuerodo: So, and, you know, but we have it, you know, we've drank it. My wife loves it. But I have to tell you the paper just feels so good in your hand. I'm not exaggerating. You know, it's not like when you get a paper straw or something, you know, and the restaurant you can't stand drinking your drink. Well, this is not the case. I just want to say it really feels perfect in your hand. It sifts well. Um, but I just, how's the energy drink?
Robert Nistico: Are there people like me that just love the darn thing and the tequila, that's all I ask? Yeah. First of all, thanks for your comments. We appreciate you calling in. We appreciate you as a consumer. Um, also, so a couple things. Yeah. The hand feel, the, the, we call hand feel on that paper can is amazing. Um, and yeah, we're, we're quite proud of the liquid. I don't know if you heard Bill, my husband or talk about, you know, we're launching a, and with respect to the salt tequila, uh, straight silver.
Robert Nistico: So we can actually be the, the only, the real reason for that is we can be the only tequila then the exclusive tequila in an on-premise account or bar or restaurant. Um, you know, because it's, you know, right? So now, because we had three, three, now coming four flavors on a back bar, but we didn't have anything for straight tequila. So now, now we have that ability to be exclusive. So that's an important, uh, yeah, strategic, uh, move forward.
Robert Nistico: And by the way, the silver is fantastic. Uh, the second category, yeah. Um, yeah. So we were talking about the energy drinks. So remember, we, we own the liquid. We own the, what's called straight dress, basically the label with the exception of tap out. Um, so yeah, it's, it's not going to go away forever. Um, but we will be transitioning that, uh, at some point in the near future.
Robert Nistico: Um, also, uh, along those lines, um, uh, there's a written question that came through, uh, I want to address it because it's important. Um, you know, we're talking about, you know, this potential second acquisition, that thing is quick. Um, it's not done, um, but it's very close to time. And we'll announce the details of that when, when it is done. Um, but it's, but it's, it's imminent. Um, and then Western Sun, you know, we're being kind of, you know, cautious about that, but our objective would be to close that, uh, by December 15th so we can capture that revenue for the year, um, you know, on a reporting basis.
Speaker Change: So we had to hit the pause button for a couple quarters and we're sorry, and it's not at all anybody wanted to happen, but now that we're powering through that, this proposed potential unnamed acquisition is a great example of why we do it.
Speaker Change: So now we can take adjacent markets, geotarget the ones that make sense for that brand based on their geography, their time of year, temperature, et cetera, and higher influencers really go market by market by market, and the distribution piece, which most people fall down on, is really our easy button, if you will.
Speaker Change: So we're very excited about M&A as we move forward.
Speaker Change: I want to make this clear too.
Speaker Change: We're not trying to be the next viagio.
Speaker Change: We just want to be the most efficient and the most profitable, and wherever that number falls out, it falls out.
Robert Nistico: So, um, those are two important points. I didn't want to, didn't want to miss, but your comments are great. And we love the tap out liquid. Uh, it's excellent. Um, it's efficacious. It's clean. It's natural. Uh, so, yeah, we're not going to, we're not going to walk away from that. That, what the work we've done, we're just going to walk away from the name chatbout. Are people liking the energy drink as much as I do? Yeah, people love it. I love it. I'm drinking one right now. I got another half to go. We've got the sparkling Sherry woman. Thank you very much.
Speaker Change #100: And obviously by doing that, we add shareholder values.
Speaker Change #100: So we're super excited about the potential of Western Sun and possibly this other one, but that's that.
Speaker Change #100: And I'm going to leave you, we'll turn it over for questions I should say.
Speaker Change #100: I want to make sure this is crystal clear in everybody's minds.
Speaker Change #101: Our three key platforms to achieve for this company, and we've tattooed it on each other's foreheads, is First of all, finishing out the raise that we're in the middle of right now, you know, like I said, money's coming in, you saw the press release.
Speaker Change #101: Second tranche, we believe we'll go even easier.
Speaker Change #102: First is always the most difficult.
Speaker Change #103: We actually have, like I said, fine documents in second tranche already, you know, from people we know, so we're very confident in that.
Speaker Change #103: So we close this out, and it's on our base of operations.
Robert Nistico: I really appreciate you guys' tenacity. Yeah, thanks for recognizing it. We appreciate you as well as a partner. You bet. Thank you.
Operator: Okay, we have no further questions in the queue.
Operator: I'd like to turn the floor back to management for any closing remarks. All right. Well, listen, I think this has been a good call. I hope we've answered most people's questions and been as clear and transparent as possible. We are incredibly excited for the future. It's been a difficult road. If it was easy, anybody could do it. And the gentleman talking about tenacity, persistence and perseverance wins. I live by that. I know Bill Meiser lives by that and Julius, we're excited about the future. We will be reporting more and more events in the very near future. And we're, as we close up on this on this round of financing, it really sets.
Speaker Change #104: If you heard Julius, this raise on our current base of operations will bring us to revenue neutral profitability by, you know, next summer sometime, whether it's the end of Q2 or beginning of Q3, that's without any acquisitions.
Speaker Change #105: That's a really great thing to be able to say.
Speaker Change #106: And all that work was being done while we were sitting here trying to put the financing or getting the financing put together.
Speaker Change #106: The second thing is executing on our narrative of larger acquisition.
Robert Nistico: I'll leave you with this thought. It sets so many things into motion. All the work we did while we're waiting to organize this is now in front of us. It's like a master set of dominoes. So we're thrilled that money started to come in. We actually have, like I said, some in our possession now, material amount. And we look forward to the future. And we hope we have everyone's long-term support. We love this company and we value our shareholders like family.
Speaker Change #107: Well, that would be Western Sun, and potentially this other one that I'm not naming.
Speaker Change #108: And there are others, you know, Bill Meissner and I, good Lord, we almost three a week come across our desk, summer, summer, jam, summer, but the fact that there's deal flow out there and it comes to us, that's a really valuable thing for us in the future.
Speaker Change #108: And then the third and final thing is actually reaching profitability.
Speaker Change #109: So completing this raise, so people know that we're not going to go do something, that we have to do something that would be considered less desirable from the financing standpoint.
Speaker Change #110: You can never say never, but, you know, we believe we're past that.
Speaker Change #111: The second thing being executing on our narrative of larger acquisitions, the third thing being reaching profitability.
Speaker Change #111: All three of these things are within reach between now and the second quarter of 2025, which is basically a blink of the eye.
Speaker Change #111: All right.
Robert Nistico: Remember, I'm a very large shareholder. So we're always going to have you in mind. We have to run a business, but we also equally care about share price. And we expect, we expect great things for the future. Thank you very much for joining. And we appreciate you guys and men and women and we hope you guys have a great rest of the week and a weekend. Thank you.
Speaker Change #111: Thank you for your attention.
Speaker Change #111: A lot of words.
Speaker Change #111: We'd like to open it up for questions now.
Operator: This concludes today's conference and you may disconnect your lines at this time.
Speaker Change #112: And operator, please explain how to load your questions in the portal, please.
Speaker Change #112: Absolutely.
Speaker Change #113: At this time, we will be conducting a question and answer session.
Operator: Thank you for your participation.
Speaker Change #114: You can submit a question at this time by clicking the ask question button on the left of your screen.
Speaker Change #114: Type your question into the box and hit the send button to submit your question.
Speaker Change #114: All right.
Speaker Change #114: Looks like we got our first question already.
Speaker Change #114: It's for you.
Julius Sawyers: It's for Julius.
Speaker Change #115: Can you, can you, sorry, I got my glasses on.
Speaker Change #116: Can you please explain a little bit further on the operational excellence?
Speaker Change #117: I believe you called it of how we get the profitability with this current raise by the middle of next year.
Speaker Change #117: Sure.
Speaker Change #118: So the the reason it of itself gives us liquidity to actually procure raw materials.
Speaker Change #118: And so the things that we're looking at is one of our highest cost items are for is fright.
Speaker Change #118: And so we're looking at very adding three PLs to our to our to our locations to actually have better freight lanes to get products.
Speaker Change #118: And that will not only basically take costs down that will actually reduce our cash conversion cycle as well.
Speaker Change #119: Yeah, is we have various initiatives out there where the liquidity allows us to buy more efficiently by wine that will be buying that anywhere between a 10 and a 20% discount from where we're currently procuring.
Speaker Change #119: Why?
Speaker Change #120: Because if you're hand in mouth, you're buying whatever out there and you're not getting any type of volume of discounts.
Speaker Change #121: Everything is on the table as well for you know, cops and labels and so forth where we're continuously looking at where we can take cost out of the business, carry lower inventory levels and then be more efficient.
Speaker Change #121: Hopefully that answers the question.
Speaker Change #121: Thank you.
Speaker Change #121: Here's a question for me on Western Sun and I think I'll start and maybe Bill Meisner will jump in as well.
Speaker Change #122: The question is what's taken so long is the deal at risk.
Speaker Change #123: Excuse me, I'm trying to read this screen.
Speaker Change #124: Okay, as the deal at risk.
Speaker Change #125: Going back to my statement about us acquiring brands that have regional success already.
Speaker Change #126: Generally what that means is it's going to be in a revenue level that is too low for the strategic to be interested in and that's the beauty of the vision for our platform.
Speaker Change #127: You know, we want to grab those brands in that, you know, $15, $20, $30 million range and accelerate them.
Speaker Change #127: You know, I mentioned the word incubation before.
Speaker Change #128: Incubation is a very difficult thing to do unless you get really lucky.
Speaker Change #128: It costs a lot of money.
Speaker Change #129: It takes a lot of time and it takes away from your core business and your legacy brands as well.
Speaker Change #129: But so finding brands and acquiring brands in that in that I'll call it, you know, 20 to $30 million range is ideal for us.
Speaker Change #129: We accelerate them to 40, 50, 60 depending on the segment, you know, beverage, whether it's non-alcohol, or Alc, is absolutely perfect and then that's where the strategic's come in.
Speaker Change #129: You know, why it's taken so long.
Speaker Change #129: It's not easy.
Speaker Change #129: It's a neat, you know, because we also operate in sort of no man's land from a revenue standpoint.
Speaker Change #130: You know, we worked very hard against it.
Speaker Change #130: I think we finally found the right blend of debt and equity.
Speaker Change #130: And now we're getting a tremendous response and we also brought on a gentleman to help us with that with that raise.
Speaker Change #130: And he was a talk director at Drexel.
Speaker Change #131: So that's been a, that's been a help as well, Bill.
Speaker Change #131: Anything on this and there?
Speaker Change #132: Well, just as far as the question on risk, I can just assure everyone that the Western Sun team is very motivated.
Speaker Change #133: We work great together and they want this deal just like we do.
Speaker Change #134: They see this brand going to the next level. And they know that splashes the partner that can help the brand get there.
Speaker Change #134: They are very much in favor and continue to be patient and work with us.
Speaker Change #134: Okay, great.
Speaker Change #134: Right.
Speaker Change #135: I think it looks like tough, difficult here on this.
Speaker Change #136: Maybe, maybe we should stand by one second, everybody.
Speaker Change #136: I'm sorry.
Speaker Change #137: All right.
Speaker Change #138: Yeah, Operator, I think it looks like the web portal isn't working very fast.
Speaker Change #138: So why don't we go ahead and open up the phone Q please?
Speaker Change #138: Absolutely.
Speaker Change #138: Thank you.
Speaker Change #139: If you would like to ask a question, please press star one on your telephone keypad.
Speaker Change #140: A confirmation tone will indicate your line is in the question Q.
Speaker Change #141: You may press star two if you'd like to remove your question from the Q.
Speaker Change #141: Okay, the first question comes from Scott Buck with H.C.
Wayne Wright: Wayne Wright.
Speaker Change #143: Please proceed.
Speaker Change #144: Hey, good afternoon guys.
Speaker Change #145: Appreciate the update.
Speaker Change #146: You're throwing a lot of a lot of information at us.
Speaker Change #147: Robert, I'm curious to hold up on Sun.
Speaker Change #148: That's almost entirely driven by lining up the financing.
Speaker Change #149: Is that fair?
Speaker Change #149: Yeah.
Speaker Change #150: That's a great question.
Speaker Change #151: That's, that's exactly right.
Speaker Change #151: There's also, you know, it's also spirits, right?
Speaker Change #151: So you also have, you know, cola waivers and licensing and permitting you have to think about as well.
Speaker Change #151: So it's not a really quick, you know, down and done sort of thing.
Speaker Change #151: But yeah, we think we figured out the financing blend and style now.
Speaker Change #151: And that's why we're getting a much better.
Speaker Change #151: Much better indication that we're going to get this done.
Speaker Change #151: We've we've hard circled a portion of it, by the way.
Speaker Change #151: I don't want to give you the exact percentage, but it's it's meaningful.
Speaker Change #151: And then this other group that I mentioned that asked not to be mentioned the $3 billion group.
Speaker Change #151: They're real.
Speaker Change #151: So we'll see where that takes us.
Speaker Change #151: And it's got to be that.
Speaker Change #151: It's got just to your role.
Speaker Change #151: Yeah, so kind of you're saving a lot of information.
Speaker Change #151: I really wanted this call by design to really just, you know, put things out there, right?
Speaker Change #152: Is we wanted to kind of really just kind of present, you know, our vision of what we're looking in the future of things that just didn't pop in the quarter in the financials to really show the momentum and just build the confidence in the external market.
Speaker Change #152: And, you know, how we're using these funds, what the future looks like and to express our enthusiasm for the business.
Speaker Change #152: Yeah, no, I think it's very helpful.
Speaker Change #153: In the most recent investor deck, it looks like with the closing of Western Sun that you guys will be moving some production to the Dallas area.
Speaker Change #153: Is that, is that correct?
Speaker Change #153: Well, I'll say it this way.
Speaker Change #154: The Western Sun campus is located in and pilot point, which is North North Texas.
Speaker Change #155: And some of our production and not all of it, but some of our production and logistics can be relocated there, which will be great.
Speaker Change #155: Just shipping lanes, savings alone will be tremendous.
Speaker Change #155: So, yeah, not everything necessarily, but yeah, portion of it for sure.
Speaker Change #155: Okay, I guess that's where I was going with the questioner.
Speaker Change #156: What are the potential cost savings or margin benefits if you moved some of the production or help them the image or are there?
Speaker Change #157: Yeah, just if we just focus on the on the freight lines is we're probably looking at a 30% save.
Speaker Change #157: Major Center Freight Costs, which is material.
Speaker Change #157: So, I mean, it's not just like it's one or two points.
Speaker Change #157: And then, you know, also, it just that's a big piece of it.
Speaker Change #157: You know, if you look at it from, you know, your outside Portland to looking for, you know, kind of a Dallas area and how just basically the truck lanes go.
Speaker Change #157: That's just very, just very big for us.
Speaker Change #157: So we can bring wine.
Speaker Change #157: We can bring wine from the West Coast.
Speaker Change #157: You know, you know, it's, it's, it's a good thing.
Speaker Change #157: And, and I don't believe though, those savings are even in your current.
Speaker Change #158: No, no, like we have some strategic wine procurement savings.
Speaker Change #158: And that's just buying better.
Speaker Change #159: But, you know, again, we haven't even incorporated yet geography on why that wine would come from.
Speaker Change #160: Also, too, is if you look at a copo copo, to be known, it's not vintage.
Speaker Change #161: So whether that wine is from Pacific, you know, West from California, or since we're talking about Texas, you know, maybe a Texas wine, not necessarily would do that, but just kind of throwing that out there that that's not even baked into the numbers yet.
Speaker Change #162: That's the account talking, not the marketing guy.
Speaker Change #163: Just to be clear guys, I know you brought you both brought it up on the call, but the guide for 25 that does not include western sun, right? That is correct.
Speaker Change #164: That's correct.
Speaker Change #164: Yeah.
Speaker Change #164: Okay.
Speaker Change #164: All right.
Speaker Change #164: So we're really in a pretty, pretty good spot here, even though it took us a while to get here.
Speaker Change #164: Right, right.
Speaker Change #164: I'm curious proceeds from this most recent raise.
Speaker Change #165: What do you have to either catch up on accounts payable with refill inventory with?
Speaker Change #165: I mean, what kind of goes into kind of cleaning things up before.
Speaker Change #165: You know, you can think about it as growth capital.
Speaker Change #165: Yeah.
Speaker Change #166: So, you know, obviously, you know, we've been hand them out on cash and we're behind on some of the bills and our vendors.
Speaker Change #167: Have been really quite excellent in working with us.
Speaker Change #168: So with the raise that we have, we're not just going to write a check next week and pay everybody off. They'll be, you know, an eight to ten week, you know, pay down of anybody that we're past to.
Speaker Change #169: And then again, it's on the inventory side, whether it's making investments in Q splash or, you know, wine will be buying just smartly and then just buying in higher quantity so we can get some purchasing price leverage.
Speaker Change #170: So again, the one thing also I want to highlight as well is when you're so limited on liquidity, you have senior leadership just basically spending a lot of time on managing vendors, right?
Speaker Change #171: That takes away from our strategic focus and to have the cash and the bank to focus in on bigger ticket items will be a welcome relief for us.
Speaker Change #171: Yeah.
Speaker Change #172: Can you share the price of information on this raise or will that be included in the AK that's by all leader this afternoon or tomorrow?
Speaker Change #173: Yeah, you'll see it in the AK, but it's reasonable.
Speaker Change #173: I think people will be very comfortable.
Speaker Change #173: It's not like.
Speaker Change #173: It's very reasonable and it's 18 to 22 years down the line, you know, from a debt standpoint.
Speaker Change #173: Yeah, I think people will be comfy with it.
Speaker Change #173: Okay.
Speaker Change #173: Perfect.
Speaker Change #174: And then last thing, Julius, can you give us a little more information on the ABL?
Speaker Change #175: I mean, how, what is the capacity of the revolver, I guess, or whatever, though?
Speaker Change #175: Yes.
Speaker Change #176: The tour you've got.
Speaker Change #177: But we've got a term sheet, and basically it's your standard, you know, ABL, just, you know, AR and inventory, and one of the things with that, it was contingent on us doing syndicated financing.
Speaker Change #178: So the range that I can give you is 3 to 5 million.
Speaker Change #178: And we'll get more information on that in the coming weeks as this current raise is finalized, right? Yeah, correct.
Speaker Change #178: Again, there'll be a gradual buildup, right?
Speaker Change #179: You've got to buy inventory to finance the inventory, and so it will kind of chill itself out of.
Speaker Change #179: Okay.
Speaker Change #179: Perfect.
Speaker Change #180: And then just, by the way, I mean, just to be honest, like what that is, Robert was actually kind of shocked that the terms that were coming through, given what called our financial situation, the fact that we could even pull that everybody was pretty happy with.
Speaker Change #180: Yeah, it's good stuff.
Speaker Change #180: I'm sure.
Speaker Change #180: And then last thing, Robert, on the M&A front, more of the divestiture front, I mean, of the brands that you currently have anything that we could potentially not see in the portfolio six months, 12 months from now?
Speaker Change #180: Yeah.
Speaker Change #181: There are, you know, I'll just go there.
Speaker Change #182: Yeah, I'm just going to go there.
Speaker Change #183: There's some corporate, you know, reasons why we've been quiet about that.
Speaker Change #184: So it's going to be bare with me.
Speaker Change #184: I'm answering your question.
Speaker Change #185: When we talked about, you know, acquiring brands and accepting, requiring regional brands with regional success and repeat purchase and accelerating them, that's great.
Speaker Change #186: Our very first brand, when I came to Splash, the company already had a licensing agreement for tap out. Tap out has a lot of pre-existing brand awareness. So we thought, well, we can work with that.
Speaker Change #187: But ultimately, because tap out was really a lifestyle brand associated with the UFC and M&A, it was really an incubation project.
Speaker Change #187: And I have some conversations about that with some folks this week.
Speaker Change #188: And that's fine. In fact, we had good authorizations on it and the brand was selling, but just not to the level that we, I don't want to say hoped, but to a level that we would evaluate whether it was worth continuing or not continuing.
Speaker Change #189: And it's not that the brand failed, it was actually from an incubation standpoint, pretty darn successful, but from a regional brand success standpoint, no, it wasn't worth it. And we figured we're going to end up spending millions of dollars to continue to incubate.
Speaker Change #189: And then of course, then we still have licensing payments to consider as well.
Speaker Change #189: And that takes a lot of time.
Speaker Change #190: So sticking to our core strategy of regional success, we made the hard decision.
Speaker Change #191: And we're walking away from the brand.
Speaker Change #191: We haven't talked about it because there are distribution and chain considerations.
Speaker Change #191: We have to be able to work through that and get to all the chains and distributors.
Speaker Change #191: So it's been, we've kind of kept that on the download a little bit just just just from a functional, standpoint.
Speaker Change #191: But no, we will not be continuing to tap out.
Speaker Change #191: We wish them the best.
Speaker Change #191: We can incubate it.
Speaker Change #191: If we had all the cash in the world, honestly, I'd like to continue with it, but it's my guess is, and this is just a guess.
Speaker Change #192: If we were to do that, it would take two to three years to get it to where we want it and cost another $22 million.
Speaker Change #192: I'd rather focus on our other brands.
Speaker Change #192: They're really exciting and a course acquisition.
Speaker Change #192: Yeah, well, I appreciate the transparency there, and I appreciate you guys taking the time to host this call.
Speaker Change #192: Thank you.
Speaker Change #192: Of course.
Speaker Change #193: Nice talking to Scott.
Speaker Change #193: Okay, the next question comes from Sean McGowan with Roth Capital Partners.
Speaker Change #194: Please proceed.
Speaker Change #195: Thank you.
Speaker Change #196: I appreciate the opportunity to talk to you guys.
Speaker Change #197: Going back to your comments on guidance.
Speaker Change #198: Would you mind repeating the expectation for the range in 25 on revenue?
Speaker Change #199: Did you say 30 to 34?
Speaker Change #199: No, no, no, not 38 to 40.
Speaker Change #200: Oh, 38 to 40.
Speaker Change #201: Okay, I'm glad I asked you.
Speaker Change #202: And when you talked about it being EBITDA positive kind of late 2QQ3, would you expect to be EBITDA positive for the year?
Speaker Change #203: So again, I'm conservative, I think, for the full year, I'm expecting to be down two to two and a half million full year, and most of that's in the first and second quarter.
Speaker Change #204: But again, I have upside on that where I think we can't pull that out with a little sales momentum, and we've kind of noted a couple different things that aren't built into the numbers.
Speaker Change #204: But I don't want to get too rosy because I am 18 months out.
Speaker Change #205: Okay, and then the last question on that guidance is would you know given the potentially you know seasonality of business and other things going on, would you expect that once you cross that threshold into positive EBITDA on the second half of 25?
Speaker Change #205: Do you think you would stay there consistently?
Speaker Change #205: You know, in every quarter or could there be still some quarters that wind up negative?
Speaker Change #206: No, no, no, because once we cross that threshold as once you start getting into the second half of 2025, you know, our Copa Divino, our Popoloco, and our Tequila starts taking off, and you have Q-slash as more of a steady state, right?
Speaker Change #207: And I can't, I can only do so much on Q-slash from margin expansion standpoint because I'm in a resale model, I'm cost plus.
Speaker Change #208: But when I start talking about the legacy brands, I have a lot more room there on commercial mental.
Speaker Change #209: I guess what I'm asking though is would we then, when the calendar turns to, I know this is like way in the future, and we'll have to return.
Speaker Change #210: But if I turn to calendar to 26, am I taking a step back because I've made investments for growth?
Speaker Change #210: And you know, and I'm in the post holiday first calendar quarter or do I, or do I just, I cross the threshold and I stay positive, you know, after that?
Speaker Change #210: Yeah, you stay positive.
Speaker Change #211: We won't go backwards on that.
Speaker Change #212: And then I think Robert and Bill can maybe get a little bit of sense of seamstinality, but it won't be significant from the way that I see it.
Speaker Change #213: So Sean, by the way, nice talking to you.
Speaker Change #213: I hope you've been well.
Speaker Change #213: So, yeah.
Speaker Change #214: So, but understand this, too, on the legacy brands, on the beverage side of the business, with the exception of the chain, we had a ton of chain authorizations, you know, for tap out.
Speaker Change #214: And we already, you know, we already talked about that.
Speaker Change #215: But we're now just getting the, the meaningful, regional and national chains for Popoloco and for, and for Copa de Vino, and frankly some for, for Salted Quilla, where we didn't have those before.
Speaker Change #215: So, and everybody on this call, and I think understands that the chains are what build brands, you know.
Speaker Change #216: So, once you start getting into Walmart to the world, the Walgreens, the AMPM, the CircleKays, etc., you're talking about a massive increase in revenue.
Speaker Change #216: So, no, there's no reason for those numbers to slide backwards.
Speaker Change #216: I have two other questions.
Speaker Change #216: One is, thanks for the color on top out.
Speaker Change #216: I'm hearing you say that the challenge there is that it would require it to kind of be incubated, but you're not ruling out, not out, right?
Speaker Change #217: No, no, no, no, no, we're just talking about this brand specific.
Speaker Change #217: In fact, Bill Meissner can speak to this as well because he did the design, he did the positioning, he's an incredible marketer and president.
Speaker Change #218: We own the trade dress with the exception of the name tap out in the icon, and we own the liquid.
Speaker Change #219: So no, we are not getting out of the non-out business, but we want to do both.
Speaker Change #219: Okay, makes sense.
Speaker Change #219: And then my last question is on Polkoloco.
Speaker Change #220: So we've talked, you and I extensively over the years about other applications of that packaging technology.
Speaker Change #221: Can you give us an update there on what some plans might be?
Speaker Change #221: Or is that kind of background nerd?
Speaker Change #221: No, no, yeah, that's an outstanding question.
Speaker Change #222: I'm glad you brought it up.
Speaker Change #223: I should have brought it up earlier.
Speaker Change #224: So part of the use of proceeds for this capital raise is the deposit on our first paper can roller. And if you don't mind, I want to talk about that a little bit because it has multiple positive impacts on the organization.
Speaker Change #225: Number one, the reason we have a 7-11 authorization for Polkoloco, and we're loading stores on a daily basis, it's not just that it's a really nice liquid.
Speaker Change #226: It's a fabulous sangria, but the buy of the great ability of that package is unique and sustainable and recognized by the buyers there and other chains as well.
Speaker Change #226: So that packaging is super important to us.
Speaker Change #226: As we procure our first roller, our intent will be to put it here in the States, probably in North Texas.
Speaker Change #226: The estimated cost of that, those cans, once it's here, and for everybody on the call, it's an 8-layered paper can, the outside layers, the 8-layered is also the label.
Speaker Change #226: So the cost of that is roughly 4 cents domestically.
Speaker Change #226: I think right now that raw material as a package is about 9 cents as we import it.
Speaker Change #227: So we cut that less than half, our current aluminum can printed is about 24 and a half cents.
Speaker Change #227: So it's tremendous savings.
Speaker Change #227: And that ratcheting down cogs is increasing margin.
Speaker Change #227: So now we can put line extensions in that thing.
Speaker Change #227: We can take some of our current brands.
Speaker Change #227: More of our current brands put it in there.
Speaker Change #227: I'm going to have Bill jump on in a second and talk about the water project in that paper can as well.
Speaker Change #228: But no, that is absolutely not backburnered.
Speaker Change #228: We're very excited about it.
Speaker Change #229: We hope to get that first machine here, first quarter.
Speaker Change #230: And this is not guidance, but this is anecdotal, but factual.
Speaker Change #231: When I was in Bentonville last time with IEDA Erdogan, our national count VP, the ballmark buyer, the wine buyer asked me, asked us straight up, can we have an exclusive on that for some of our label wine?
Speaker Change #232: And I smiled and giggled and said maybe inside I'm going, no, not yet.
Speaker Change #232: But we can sell excess capacity. And if you do the math, we can sell somewhere between 14 and 16 cents a can.
Speaker Change #232: And you're an analyst.
Speaker Change #232: I'm 380 cans a minute.
Speaker Change #232: Add that up.
Speaker Change #232: So there's an opportunity to sell excess capacity here as well.
Speaker Change #232: So this is a tremendous project for us.
Speaker Change #232: Nothing has slowed down on that.
Speaker Change #232: Takes a long time to build these machines.
Speaker Change #232: Bill Meiser, do you want to talk for a sec about your water project in this pack?
Bill Meiser: Yeah, we see tremendous opportunity to replace a fair amount of PET in the market with the Cardo Cam in a natural spring water.
Speaker Change #234: The amount of retailers and venues who have made specific KPIs on sustainability will really love the water in a Cardo Cam.
Speaker Change #235: We are limited by that 8-down size, so that's a smaller segment of the overall water category, but absolutely huge in relative terms from a case volume perspective. So we think very highly of the future of water in Cardo Cam.
Speaker Change #236: If you think about these little 8-down PET bottles and the waste that goes along with them, and here you have overwhelmingly biodegradable package that is also recyclable and breaks down over time is just perfect for water.
Speaker Change #237: I think there are some industry probably by guys like us that have been around a while like, well water has to be in a PET or in glass, but liquid death kind of proves that is definitely not the case, and just absolutely blowing up in the aluminum can which can't hold a candle to the sustainability of the Cardo Cam.
Speaker Change #238: Further, on the innovation front, we have qualified that package for wine, which you might think was great for sangria, why wouldn't it be for wine?
Speaker Change #239: It was actually took some time to figure out, so we will be able to be the first wine in Cardo Cam as well, so that is right there for us, both of those two innovations in that package.
Speaker Change #240: Just by the way, just into the numbers that were quoted, I've built none of that, and yet, it's, you know, too early to really put a monetary value on what that would mean to us, but it is upside to our figures.
Speaker Change #241: And as a CEO, I call that a sandbag.
Speaker Change #242: Well, I'm glad you brought that up, Julie, because the question that I would have is, okay, the revenue number is not in there, but are some of these initiatives going to take you, you know, some costs?
Speaker Change #243: Are they in there for, in your even dog guidance?
Speaker Change #244: Well, I kind of like almost like, the way that I would kind of characterize this is you kind of got like a tolling arrangement for lack of a better word.
Speaker Change #245: I don't have that, I don't have that baked in.
Speaker Change #246: Okay, but yeah, but it's instantly, it's instantly profitable.
Speaker Change #246: You know, the way that I approach it just, you know, again, is like putting down the timing of this, right, with everything that's going on, it's hard to put a finger to kind of put this in an operating plan.
Speaker Change #246: But obviously, it's something that we're looking into, and the market has a strong need for that.
Speaker Change #246: And, you know, and that will help our business tremendously.
Speaker Change #246: And Sean, think of it this way.
Speaker Change #247: The reason it will probably go in our favor versus against us, assuming our numbers are correct, that 4 cents a can, then you put water in, in a minute.
Speaker Change #248: So, it's verified, but so do the math.
Speaker Change #249: Yeah, it's instantly profitable.
Speaker Change #250: Okay, all right.
Speaker Change #251: Thanks a lot.
Speaker Change #251: We appreciate the applications.
Speaker Change #251: You bet.
Speaker Change #252: No problem.
Speaker Change #253: So we're, I know we've got a million questions out there.
Speaker Change #254: Let's try and answer a few more or we'll be here till midnight.
Speaker Change #254: Yeah, who's next?
Speaker Change #254: Okay, up next we have David Figuerodo with CISU Investment Inc.
Speaker Change #255: Please proceed.
Speaker Change #256: Hi, Robert.
Speaker Change #257: Can you hear me?
Speaker Change #258: Yeah, yeah, gotcha.
Robert Nistico: Hey, Dave Figuerodo, I've talked to you a couple times in the past.
Speaker Change #259: I've been here for a while and stuck with it through thick and thin.
Speaker Change #260: I just, first of all, want to thank you and your team for the tenacity to get through this really tough part in the growth of your business.
Speaker Change #261: So I just want to really thank you guys there.
Speaker Change #261: And I use Q-plash and I really, really, I'm, you know, I turn 66 in June.
Speaker Change #261: It's still pretty athletic trying to be anyway.
Speaker Change #261: But I really enjoy sipping on one of those energy drinks well, once a day.
Speaker Change #261: So I want to see how people are liking that.
Speaker Change #261: But that's, I really like that.
Speaker Change #261: And you're tequila.
Speaker Change #262: I get the citrus and I, you know, as much as possible, have a drink before dinner, you know, three ounces for me, two and a half.
Speaker Change #263: But if fresh, you know, you're going to high-bred in your, your, your drink recipe from Cinco de Lyle.
Speaker Change #264: So I go one fresh orange and a one lime squeeze and they're all fresh good.
Speaker Change #264: And it's just, I thoroughly enjoy it.
Speaker Change #265: And, and my wife does and all my friends that I make it for in children, they love it.
Speaker Change #266: And, and the, uh, Poppa loco, we don't, we're not big drinkers on it.
Speaker Change #267: So, and, you know, but we have it, you know, we've drank it.
Speaker Change #268: My wife loves it.
Speaker Change #268: But I have to tell you the paper just feels so good in your hand.
Speaker Change #268: I'm not exaggerating.
Speaker Change #269: You know, it's not like when you get a paper straw or something, you know, and the restaurant you can't stand drinking your drink.
Speaker Change #269: Well, this is not the case.
Speaker Change #269: I just want to say it really feels perfect in your hand.
Speaker Change #269: It sifts well.
Speaker Change #269: Um, but I just, how's the energy drink?
Speaker Change #270: Are there people like me that just love the darn thing and the tequila, that's all I ask?
Speaker Change #270: Yeah.
Speaker Change #270: First of all, thanks for your comments.
Speaker Change #270: We appreciate you calling in.
Speaker Change #270: We appreciate you as a consumer.
Speaker Change #270: Um, also, so a couple things.
Speaker Change #270: Yeah.
Speaker Change #270: The hand feel, the, the, we call hand feel on that paper can is amazing.
Speaker Change #270: Um, and yeah, we're, we're quite proud of the liquid.
Speaker Change #271: I don't know if you heard Bill, my husband or talk about, you know, we're launching a, and with respect to the salt tequila, uh, straight silver.
Speaker Change #272: So we can actually be the, the only, the real reason for that is we can be the only tequila then the exclusive tequila in an on-premise account or bar or restaurant.
Speaker Change #273: Um, you know, because it's, you know, right?
Speaker Change #274: So now, because we had three, three, now coming four flavors on a back bar, but we didn't have anything for straight tequila.
Speaker Change #274: So now, now we have that ability to be exclusive.
Speaker Change #274: So that's an important, uh, yeah, strategic, uh, move forward.
Speaker Change #274: And by the way, the silver is fantastic.
Speaker Change #274: Uh, the second category, yeah.
Speaker Change #274: Um, yeah.
Speaker Change #274: So we were talking about the energy drinks.
Speaker Change #274: So remember, we, we own the liquid.
Speaker Change #275: We own the, what's called straight dress, basically the label with the exception of tap out.
Speaker Change #275: Um, so yeah, it's, it's not going to go away forever.
Speaker Change #275: Um, but we will be transitioning that, uh, at some point in the near future.
Speaker Change #275: Um, also, uh, along those lines, um, uh, there's a written question that came through, uh, I want to address it because it's important.
Speaker Change #275: Um, you know, we're talking about, you know, this potential second acquisition, that thing is quick.
Speaker Change #275: Um, it's not done, um, but it's very close to time.
Speaker Change #275: And we'll announce the details of that when, when it is done.
Speaker Change #275: Um, but it's, but it's, it's imminent.
Speaker Change #275: Um, and then Western Sun, you know, we're being kind of, you know, cautious about that, but our objective would be to close that, uh, by December 15th so we can capture that revenue for the year, um, you know, on a reporting basis.
Speaker Change #275: So, um, those are two important points.
Speaker Change #275: I didn't want to, didn't want to miss, but your comments are great.
Speaker Change #275: And we love the tap out liquid.
Speaker Change #275: Uh, it's excellent.
Speaker Change #275: Um, it's efficacious.
Speaker Change #275: It's clean.
Speaker Change #275: It's natural.
Speaker Change #275: Uh, so, yeah, we're not going to, we're not going to walk away from that.
Speaker Change #276: That, what the work we've done, we're just going to walk away from the name chatbout.
Speaker Change #276: Are people liking the energy drink as much as I do? Yeah, people love it.
Speaker Change #277: I love it.
Speaker Change #278: I'm drinking one right now.
Speaker Change #279: I got another half to go.
Speaker Change #280: We've got the sparkling Sherry woman.
Speaker Change #280: Thank you very much.
Speaker Change #280: I really appreciate you guys' tenacity.
Speaker Change #280: Yeah, thanks for recognizing it.
Speaker Change #280: We appreciate you as well as a partner.
Speaker Change #281: You bet.
Speaker Change #282: Thank you.
Speaker Change #282: Okay, we have no further questions in the queue.
Speaker Change #283: I'd like to turn the floor back to management for any closing remarks.
Speaker Change #284: All right.
Speaker Change #284: Well, listen, I think this has been a good call.
Speaker Change #285: I hope we've answered most people's questions and been as clear and transparent as possible.
Speaker Change #285: We are incredibly excited for the future.
Speaker Change #286: It's been a difficult road. If it was easy, anybody could do it.
Speaker Change #287: And the gentleman talking about tenacity, persistence and perseverance wins.
Speaker Change #288: I live by that.
Speaker Change #289: I know Bill Meiser lives by that and Julius, we're excited about the future.
Speaker Change #289: We will be reporting more and more events in the very near future.
Speaker Change #290: And we're, as we close up on this on this round of financing, it really sets.
Speaker Change #291: I'll leave you with this thought.
Speaker Change #292: It sets so many things into motion.
Speaker Change #293: All the work we did while we're waiting to organize this is now in front of us.
Speaker Change #294: It's like a master set of dominoes.
Speaker Change #294: So we're thrilled that money started to come in.
Speaker Change #295: We actually have, like I said, some in our possession now, material amount.
Speaker Change #295: And we look forward to the future.
Speaker Change #295: And we hope we have everyone's long-term support.
Speaker Change #296: We love this company and we value our shareholders like family.
Speaker Change #297: Remember, I'm a very large shareholder.
Speaker Change #297: So we're always going to have you in mind.
Speaker Change #298: We have to run a business, but we also equally care about share price.
Speaker Change #298: And we expect, we expect great things for the future.
Speaker Change #298: Thank you very much for joining.
Speaker Change #299: And we appreciate you guys and men and women and we hope you guys have a great rest of the week and a weekend.
Speaker Change #299: Thank you.
Speaker Change #300: This concludes today's conference and you may disconnect your lines at this time. Thank you for your participation.