Q4 2024 Reed's Inc Earnings Call
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Operator: Good morning and welcome to Reed's fourth quarter and full year 2024 earnings conference call for the three and 12 months ended December 31st, 2024.
Joelle: Good morning, and welcome to reeds fourth quarter and full year 2024 earnings conference call for the three and 12 months ended December 31, 2024. My name is Joelle and I will be your conference call operator for today.
Joelle: My name is Joelle and I will be your conference call operator for today. We will have prepared remarks from Norman E. Snyder. Chief Executive Officer, and Doug McCurdy, Reed's Chief Financial Officer. following their remarks, they will take your questions.
Speaker Change: We will have prepared remarks from Norman is Snyder.
Speaker Change: Reed's Chief Executive Officer, and Doug Mccurdy, Reed's Chief Financial Officer, following their remarks, they will take your questions.
Operator: Before we begin, please take note of the Company's Cautionary Statement. Today's call will include forward-looking statements, including statements about Reed's business plans. Forward-looking statements inherently involve risks and uncertainties, and only reflect management's view as of today, March 26, 2025, and the Company is under no obligation to update them.
Speaker Change: Before we begin please take note of the company's cautionary statement today's call will include forward looking statements, including statements about <unk> business plans forward looking statements inherently involves risks and uncertainties and only reflect management's view as of today March 26, 2025, and the company is under no obligation.
Speaker Change: To update them.
Operator: When discussing results, the presenters may refer to non-GAP measures, which exclude certain items from reported results. Please refer to Reed's fourth quarter 2024 earnings release on Reed's investor website at investor.reedsinc.com, and its annual report on Form 10-K for the 2024 fiscal year expected to be available on the website. for definitions and reconciliations of non-GAAP measures, and additional information regarding results including a discussion of factors that could cause actual results to materially differ from forward-looking statements.
Speaker Change: When discussing results the presenters may refer to non-GAAP measures, which exclude certain items from imported results. Please refer to REIT fourth quarter 2024 earnings release, Unreached Investor website at Investor Dot Reeds, Inc. Dot com and its annual report on Form 10-K for the 'twenty 'twenty four fiscal year.
Speaker Change: We expect it to be available on the website so for.
Speaker Change: For definitions and reconciliations of non-GAAP measures and additional information regarding results, including a discussion of factors that could cause actual results to materially differ from forward looking statements I will now turn the call over to Mr. Snyder.
Norman Snyder: I will now turn the call over to Mr. Snyder. Thank you, operator, and good morning, everyone. We appreciate you joining us today to discuss our fourth quarter and full year 2024 results. Throughout this past year, we implemented strategic initiatives to strengthen our financial and operational foundation to position Reed's for long-term success. We reinforce our balance sheet, streamline operations, and enhanced efficiencies, laying the groundwork for sustained growth and profitability. While net sales declined in 2024 due to inventory production constraints, vendor credit limits, and short order shipments, our disciplined approach to operations, new product launches, and targeted investments have set the stage for a return to growth, gross margin enhancements, and shareholder value creation in 2025.
Mr. Snyder: Thank you operator, and good morning, everyone.
Mr. Snyder: We appreciate you joining us today to discuss our fourth quarter and full year 2020 for resolve.
Mr. Snyder: Throughout this past year, we implemented strategic initiatives to strengthen our financial and operational foundation to position <unk> for long term success.
Mr. Snyder: We reinforced our balance sheet streamlining operations and enhanced efficiencies laying the groundwork for sustained growth and profitability.
Mr. Snyder: While net sales declined in 2024 due to inventory production constraints vendor credit credit limits and short order shipments our discipline disciplined approach to operations and new product launches and targeted investments have set the stage for a return to growth gross margin enhancements and shareholder value creation in 2025.
Norman Snyder: Turning to the fourth quarter, a key milestone for us was the completion of a $10 million private placement, which closed on December 30, 2024. We have begun to deploy the funds this year to both build inventory levels, enhance personnel, and sales and marketing resources. As previously discussed, inventory constraints have posed challenges in fully meeting customer demand, particularly during the second half of 2024. However, with the completion of our private placement and strategic debt restructuring, we now have a delevered balance sheet and enhanced financial flexibility. This capital infusion will enable us to maintain inventory at optimal levels, ensuring consistent order fulfillment rates and reducing the short order shipments that previously hindered our growth.
Mr. Snyder: Turning to the fourth quarter, a key milestone for US was the completion of a $10 million private placement, which closed on December 32024.
Mr. Snyder: We have begun to deploy the funds this year to both build inventory levels enhanced personnel and sales and marketing resources.
Mr. Snyder: As previously discussed inventory constraints have posed challenges and fully meeting customer demand, particularly during the second half of 2024, however, with the completion of a private placement and strategic debt restructuring, we now have a de levered balance sheet and enhance financial flexibility.
Mr. Snyder: This capital infusion will enable us to maintain inventory at optimal levels, ensuring consistent order fulfillment rates and reducing the short order shipments.
Mr. Snyder: Previously hindered our growth.
Norman Snyder: As we move into 2025, although the process to rebuild inventory can take approximately 60 to 90 days, today I am pleased to share that we are well positioned to capitalize on increased retail demand, drive greater operational efficiency, and expand our presence across key distribution channels to build sales momentum as we progress throughout the year.
Mr. Snyder: As we move into 2025, although the process to rebuild inventory could take approximately 60 to 90 days today.
Mr. Snyder: Pleased to share that we are well positioned to capitalize on increased retail demand drive greater operational efficiency.
Mr. Snyder: Spanned our presence across key distribution channels to build sales momentum as we progress throughout the year.
Norman Snyder: Another important development, which took place after year-end, was the appointment of Douglas McCurdy as Chief Financial Officer and Salvatore Vassallo as Vice President of Operations. Doug brings extensive experience in finance, corporate strategy, and capital markets, having served as both the Chief Financial Officer and Chief Operating Officer for multiple early stage growth companies. expertise in financial management, operational scaling, and strategic capital allocation will be invaluable in optimizing our cost structure and driving sustained profitability.
Speaker Change: Another important development, which took place after year end with the appointment of Douglas, but courteous Chief Financial Officer, and Salvador are a fellow as vice president of operations.
Speaker Change: Doug brings extensive experience in finance corporate strategy and capital markets, having served as both the Chief Financial Officer, and Chief operating officer for multiple early stage growth companies.
Speaker Change: His expertise in financial management operational scaling and strategic capital allocation will be invaluable in optimizing our cost structure and driving sustained profitability.
Norman Snyder: Sal joins us with a deep background in inventory management, strategic sourcing, and supply chain optimization with leadership experience at Boiling and Bottling Company, Ferraro, Snapple Beverages, and Henkel. His proven ability to enhance procurement strategies and strengthen distribution networks will be an asset to Reed. Together, Doug and Sal will play instrumental roles in driving operational excellence, maximizing profitability, and advancing the company's growth objectives.
Speaker Change: Sell joins us with a deep background in inventory management strategic sourcing and supply chain optimization with leadership experience at boiler bottling company burrow Snapple beverages and henkel.
Speaker Change: His proven ability to enhanced procurement strategies and strengthen distribution networks will be an asset to reed's.
Speaker Change: Together, Doug and Sal will play an instrumental role in driving operational excellence maximizing profitability and advancing the company's growth objectives.
Norman Snyder: In addition to reinforcing our leadership team this year, This innovative lineup is formulated with organic ginger, complex adaptogen mushroom extracts, and prebiotic fibers. Each serving contains only 5 grams of sugar, approximately 30 to 45 calories, 500 milligrams of adaptogens, and 2,000 to 5,000 milligrams of organic ginger. The flavor profile includes Berry Bubly, Strawberry Vanilla, Lemongrass Ginger, and Root Beer.
Speaker Change: In addition to reinforcing our leadership team. This year, we're also expanding our product portfolio with the launch of our new multi functional soda line.
Speaker Change: This innovative lineup is formulated with organic ginger complex adaptogen mushroom extracts and prebiotic fibers.
Speaker Change: Each serving contains only five grams of sugar approximately 30% to 45 calories 500 milligrams of adapt agenda at 2000 to 5000 milligrams of organic Ginger.
Speaker Change: The flavor profile includes very bubbly, strawberry, vanilla lemon grass, ginger and root beer.
Norman Snyder: These beverages cater to the rising demand for health-conscious, functional refreshment options and position us at the forefront of the evolving beverage market. This launch is a natural extension of our legacy, leveraging Reed's expertise in natural plant-based ingredients to create better-for-you beverages that deliver both great taste and functional benefits. The early response from retailers has been overwhelmingly positive, reinforced by their expansion of shelf space dedicated to the functional and better-for-you beverage category. We have already secured over 8000 points of distribution for this new product line, which is expected to hit the shelves between April and August 2025 across key national retailers, including Sprouts, Kroger, Walgreens, Duane Reade, Hannaford, Stop and Shop, and National Co-op Grocery.
Speaker Change: These beverages cater to the rising demand for health conscious functional refreshment options and position us at the forefront of the evolving beverage market.
Speaker Change: This launch is a natural extension of our legacy leveraging <unk> expertise in natural plant based ingredients to create better for you beverages that deliver both great taste and functional benefits.
Speaker Change: The early response from retailers has been overwhelmingly positive reinforced by their expansion of shelf space dedicated to the functional and better for you beverage category.
Speaker Change: We have already secured over 8000 points of distribution for this new product line, which is expected to hit the shelves between April and August 2025 across key national retailers, including Sprouts, Kroger, Walgreens, Duane Reade, Hannaford, and stop and shop and National Co Op grocers.
Norman Snyder: Looking ahead, we expect strong momentum as we roll out this product line throughout 2025.
Speaker Change: Looking ahead, we expect strong momentum as we roll out this product line throughout 2025.
Norman Snyder: Now turning to our fourth quarter sales and operational highlights. We experienced solid retail gains during the fourth quarter, with new points of distribution secured across major retail areas. We gained over 1,100 new placements across Albertsons Safeway for Reed's Ginger Ale, Virgil's Root Beer, and Vanilla Cream cans. Additionally, Flying Cauldron is now part of the National Display Program where sales have exceeded expectations. As we head into the summer selling season, we anticipate continued momentum. Our four-pack Reed's Ginger Ale is now the number one ranked SKU in dollar sales within the Expanded Natural Channel over the latest 52 weeks ending February 23rd, 2025, generating $1.9 million in sales.
Speaker Change: Now turning to our fourth quarter sales and operational highlights.
Speaker Change: We experienced solid retail gains during the fourth quarter with new points of distribution secured across major retailers. We gained over 100, new placements across albertson Safeway for Reed's Ginger ale, Virgil root beer and vanilla cream cats. Additionally, flying cauldron is now part of the National display program, where sales have exceeded expectations.
Speaker Change: Spectation.
Speaker Change: As we head into the summer selling season, we anticipate continued momentum.
Speaker Change: Our fourth pack Reed's Ginger Ale is now the number one ranked SKU and dollar sales within the expanded natural channel or the latest 52 weeks ending February 23, 2025, generating $1 9 million in sales.
Norman Snyder: With a 6% market share in this category, we see substantial opportunities for further growth. Virgil's handcrafted cans have been added to NCG, Infra, Smart and Final, Harris Teeter, Giant Eagles, Stop and Shop, with an expanded sort bit launching in Sprouts after a strong 2024. This expansion brings an additional 3,000 points of distribution in 2025. We continue to transition from glass bottles to cans at key retail partners, including Whole Foods and H-E-B. The strategic shift underscores our efforts to improve delivery and handling costs on a per case basis and lower price points for consumers. Our team successfully rotated our winter variety pack at Costco in Q4 2024 and secured commitments to expand our assortment into 2025.
With a 6% market share in this category, we see a substantial opportunities for further growth.
Speaker Change: Virtual handcrafted cans have been added to N C J and froth Smart and final Harris Teeter Janey your golf stop and shop with an expanded assortment launching its routes after a strong 2000 2024.
Speaker Change: This expansion brings an additional 3000 points of distribution in 2025.
Speaker Change: We can we continue to transition from glass bottles to Catholic key retail partners, including whole foods and HEB.
Speaker Change: Strategic shift underscores our efforts to improve delivery and handling costs on a per case basis and lower price points for consumers.
Speaker Change: Our team successfully rotated our winter variety pack at Costco in Q4 of 2024 and secured commitments to expand our assortment into 2025.
Norman Snyder: The winter variety pack includes ginger ale, cranberry ginger ale, and our new blackberry ginger ale. This expanded lineup features our ready-to-drink classic mule set to launch in Costco clubs across Los Angeles and Hawaii starting in late April 2025. We secured placement at Walmart for our new 7.5-ounce mini 8-pack cans for both Ginger Bear and Ginger Ale, marking the first major retailer to take our new mini can format. In early 2025, secondary placement surged with a successful off-shelf completed at Sprouts, an upcoming shipper program with Kroger, and a BOGO promotion at Publix, both set to launch in the second quarter of 2025.
Speaker Change: The winter variety pack includes Egencia rail cranberry Ginger ale at our new Blackberry Ginger ale.
Speaker Change: This expanded lineup features our ready to drink classically all set to launch in Costco clubs across Los Angeles, and Hawaii started in late April 2025.
Speaker Change: We secured placement at Walmart for a new seven five ounce mini APAC cans for both Ginger beer and Ginger ale, marking the first major retailer take our new mini our new mini can format.
Speaker Change: In early 2025 secondary placement surge with a successful off shelf completed at sprouts and upcoming shipper program with Kroger and a bogo promotion at Publix, both set to launch in the second quarter of 2025.
Norman Snyder: These placements are a testament to the strength of our brand and the growing demand for our premium craft beverages. As we continue to expand our distribution footprint, we are focused on ensuring that we can meet demand with improved inventory management and production efficiency. Throughout the year, we continue to take proactive measures to streamline our distribution network, reduce input costs, and improve our supply chain. These efforts have resulted in continued gross margin improvement that is currently in the low to mid 30% range quarter to date, driven by the optimization of our ginger beer formulation, better pricing on key materials, and supply chain improvement.
Speaker Change: These placements are a testament to the strength of our brand and the growing demand for our premium craft beverages.
Speaker Change: As we continue to expand our distribution footprint. We are focused on ensuring that we can meet demand with improved inventory management and production efficiency.
Speaker Change: Out the year, we continue to take proactive measures to streamline our distribution network reduce input cost and improve our supply chain.
Speaker Change: These efforts have resulted in continued gross margin improvement is currently in the low to mid 30% range quarter to date.
Speaker Change: Driven by the optimization of our Ginger beer formulation.
Speaker Change: Pricing on key materials and supply chain improvements.
Norman Snyder: Our co-packing partnerships with Battle Co-Packing and DrinkPak have strengthened our production capabilities for both bottles and cans, ensuring consistent supply and mitigating freight inefficiencies. With these improvements in place, we expect to generate meaningful savings in delivering handling costs, which have already been reduced by 10% in Q4. Additionally, our transition from glass bottles to cans across Reed's and Virgil's portfolio has been well received by both our retail partners and consumers, enabling us to offer more cost-effective formats. We have successfully built our finished goods inventory during the current quarter and will be in a position to drive sales growth beginning in the second quarter.
Speaker Change: Our co packing partnerships with battle co packing a drink pack have strengthened our production capabilities for both bottles and cans, ensuring consistent supply and mitigating freight inefficiencies.
Speaker Change: With these improvements in place, we expect to generate meaningful savings in delivery and handling costs, which have already been reduced by 10% in Q4.
Speaker Change: Additionally, our transition from glass bottles to cans across reeds and <unk> portfolio has been well received by both our retail partners and consumers, enabling us to offer more cost effective format.
Speaker Change: We have successfully built our finished goods inventory during the quarter during the current quarter and will be in a position to drive sales growth beginning in the second quarter. This increase in inventory will also contribute to improved service levels and to lower freight and logistic costs.
Norman Snyder: This increase in inventory will also contribute to improved service levels and to lower freight logistic costs, improved gross margin, sales velocity, and promotional sales performance. Q1 customer orders are steady and are trending ahead of last year.
Speaker Change: <unk> gross margin sales velocity and promotional sales performance.
Speaker Change: Q1 customer customer orders are steady and are trending ahead of last year. During the four weeks ending February 23, 2025, the U S. Natural expanded channel as reported by Spence contain 8% dollar sales and 13% unit sales growth, while IRI move all data, which is defined as multi outlet including <unk>.
Norman Snyder: During the four weeks ending February 23rd, 2025, the U.S. natural expanded channel, as reported by Spins, contained 8% dollar sales and 13% unit sales growth, while IRI Moolow data, which is defined as multi-outlet, including grocery, convenience, drug, mass, club, dollar stores, military, and Walmart, had mixed results, although there were several positive trends as we continue to see momentum in ginger ale, as well as benefits from our continued transition from glass to cans with ginger beer. The sales philosophy for Virgil's is lagging as we are still working through the glass-to-can transition for our full sugar line.
Speaker Change: Grocery convenience drug mass club dollar stores military and Walmart had mixed results. There were several positive trends as we continue to see momentum and ginger ale as well as benefits from our continued transition from glass to cans with Ginger beer.
Speaker Change: The sales philosophy for virtual is lagging as we are still working through the glass can transition for our full sugar line.
Norman Snyder: Looking ahead, our continued execution of strategic initiatives, enhancing distribution, refining our cost structure, and launching innovative functional products provides a solid framework for success in the evolving beverage market. We remain committed to delivering premium, better-for-you beverages that resonate with consumers while driving value to our shareholders.
Speaker Change: Looking ahead, our continued execution of strategic initiatives enhancing distribution refining our cost structure and launch an innovative functional products provides a solid framework for success and the evolving beverage market.
Speaker Change: We remain committed to delivering premium better for you beverages that resonate with consumers, while driving value to our shareholders.
Norman Snyder: Before wrapping up, closing remarks, our new CFO Doug McCurdy will cover the financial highlights for the quarter in more detail. Doug, over to you. Thank you, Norman.
Speaker Change: Before wrapping up closing remarks, our new CFO, Doug Mccurdy will cover the financial highlights for the quarter in more detail.
Doug McCurdy: Doug over to you.
Doug McCurdy: I'm pleased to address our shareholders and prospective investors for the first time as Reed's new CFO. I was drawn to Reed's for its incredible brand heritage and the opportunity to return the company to sustainable growth and profitability. I'm very much looking forward to partnering with Norman and the entire Reed team in the journey ahead.
Doug McCurdy: I am pleased to address our shareholders and prospective investors for the first time as reads do CFO.
Doug McCurdy: I was drawn to Reed's, where it's incredible brand heritage and the opportunity to return the company to sustainable growth and profitability.
Speaker Change: Very much looking forward to partnering with Norman and the entire <unk> team and the journey ahead.
Doug McCurdy: Turning to our results, all variants commentaries on a year-over-year basis unless otherwise noted. Net sales for the fourth quarter. 2024 were $9.7 million compared to $11.7 million in the year-ago quarter. This decrease was primarily driven by short-order shipments due to prior inventory constraints. Gross profit for Q4 2024 increased to $2.9 million compared to $0.5 million for the same period in 2023. Gross margin was 30% compared to 4% in the year-ago quarter. The increase was driven by one-time charges. in the prior year period, including a $1.8 million non-cash packaging inventory valuation adjustment and a $1.3 million provision for product holds related to the company's swing lid program.
Speaker Change: Turning to our results all variance commentary is on a year over year basis, unless otherwise noted.
Speaker Change: Net sales for the fourth quarter.
Speaker Change: 2024 were $9 7 million compared to $11 7 million in the year ago quarter.
Speaker Change: This decrease was primarily driven by short order shipments due to prior inventory constraints.
Speaker Change: Gross profit for Q4 2024.
Speaker Change: Increased to $2 9 million compared to <unk> 5 million for the same period in 2023.
Speaker Change: Gross margin was 30% compared to 4% in the year ago quarter.
Speaker Change: The increase was driven by one time charges in.
Speaker Change: In the prior year period, including a $1 8 million noncash packaging inventory valuation adjustment and a $1 3 million provision for product holds related to the company's swing lid program.
Doug McCurdy: Delivery and handling costs were reduced by 10% to $1.7 million during the fourth quarter of 2024, compared to $1.8 million in the fourth quarter of 2023. Delivery and handling costs were 17% of net sales, or $3 per case, compared to 16% of net sales, or $2.82 per case, during the same period last year. Selling General and Administrative costs were $4.8 million during the fourth quarter of 2024. compared to 3.0 million in the year-ago quarter. All together, operating expenses were $6.6 million compared to $5.4 million in the year-ago period.
Speaker Change: Delivery and handling costs were reduced by 10% to $1 7 million during the fourth quarter of 2024 compared to $1 8 million in the fourth quarter of 2023.
Speaker Change: Delivering delivery and handling costs were 17% of net sales were $3 per case compared to 16% of net sales or $2 82 per case during the same period last year.
Speaker Change: Selling general and administrative costs were $4 8 million during the fourth quarter of 2024.
Speaker Change: Compared to 3.0 million in the year ago quarter.
Speaker Change: Altogether operating expenses were $6 6 million.
Speaker Change: Compared to $5 4 million a year ago period.
Doug McCurdy: operating loss during the fourth quarter improved to $3.7 million or negative $0.25 per share compared to a loss of $5.0 million or negative $1.55 per share in the fourth quarter of 2023. Modified EBITDA was negative $0.7 million in Q4 2024, compared to positive $43,000 in the year ago period. The fourth quarter of 2024, the company used approximately $3.9 million of cash from operating activities compared to cash use of $0.2 million for the same period in 2023. This was primarily driven by higher inventory purchases compared to the year-ago period. As of December 31, 2024, the company had approximately $10.4 million of cash and $9.6 million of total debt net of capitalized financing fees.
Speaker Change: Operating loss during the fourth quarter improved to $3 7 million or negative <unk> 25 per share compared to a loss of 5.0 million or negative $1 55 per share in the fourth quarter of 2023.
Speaker Change: Modified EBITDA was negative zero point $7 million in Q4 2024.
Speaker Change: Compared to positive 43000 in the year ago period.
Speaker Change: For the fourth quarter of 2024, the company used approximately $3 9 million of cash from operating activities compared to cash used of 0.2 million for the same period in 2023.
Speaker Change: This was primarily driven by higher inventory purchases compared to the year ago period.
Speaker Change: As of December 31, 2024, the company had approximately $10 4 million of cash and $9 6 million of total debt net of capitalized financing fees.
Doug McCurdy: This compares to $0.6 million of cash and $27.4 million of total debt net of capitalized financing fees at December 31, 2023.
Speaker Change: This compares to zero point $6 million of cash and $27 4 million of total debt net of capitalized financing fees at December 31, 2023.
Norman Snyder: I will now turn the call back to Norman for closing remarks. As I reflect on our journey over the past several years, I can't help but feel incredibly proud of what this team has accomplished. navigated through both challenges and opportunities with resilience, creativity, and a deep commitment to our mission. The foundation we've built, financially, operationally, and culturally, is one I believe will support the company for years to come. With a revitalized product pipeline and meaningful growth initiatives underway, Reed's is poised for an exciting future.
Speaker Change: I will now turn the call back to normal for closing remarks.
Doug McCurdy: Thanks, Doug.
Speaker Change: As I reflect on our journey over the past several years I can't help but feel incredibly proud of what this team has accomplished.
Speaker Change: Resist navigated through both challenges and opportunities with resilience creativity and a deep commitment to our mission.
Speaker Change: Today should we built financially operationally and culturally is what I believe will support the company for years to come.
Speaker Change: With a revamped vitalize product pipeline and meaningful growth initiatives underway reeds is poised for an exciting future. Thank you to our employees partners and shareholders for your continued belief in this company with that operator, we're ready to open the line for questions.
Norman Snyder: Thank you to our employees, partners, and shareholders for your continued belief in this company.
Operator: With that, operator, we're ready to open the line for questions. Thank you.
Operator: Ladies and gentlemen, we will now begin the question and answer session. Should you have a question, please press star followed by the one on your touchtone phone. You will hear a prompt that your hand has been raised.
Speaker Change: Thank you, ladies and gentlemen, I was allowed to begin the question and answer session should you have a question. Please press star followed by the one on you touched on phone you'll hear a prompt that your hand has been raised should you wish to decline from the polling process. Please press star followed by the Q.
Sean McGowan: Should you wish to decline from the polling process, please press star followed by the If you are using a speakerphone, please lift the handset before pressing any Your first question comes from Sean McGowan with Roth Capital Partners. Your line is now open. Good morning, thanks. Norman, I was wondering if you could give us a little bit more color on some of the new products that you were describing. It sounded pretty exciting. Welcome, where do they fit? grander scheme of what's happening. Gravitating, so it's almost probiotic or Sean, great question. I think it addresses From my perspective, there's three key aspects.
Speaker Change: If you are using a speaker phone please lift the handset before pressing any keys.
Speaker Change: Your first question comes from Sean Mcgowan with Roth Capital Partners. Your line is now open.
Sean McGowan: Good morning. Thanks.
Sean McGowan: I was wondering if you could give us a little bit more color on some of the new products that you were describing sound pretty exciting that had been received pretty well so far.
Sean McGowan: Where do they fit in.
Sean McGowan: What kind of a grander scheme of what's happening in non alcohol beverage right now in the industry or are these are gravitating towards almost probe probiotic or what's the plan there.
Sean: Sean Great question I think it addresses.
Sean McGowan:
Sean McGowan: From my perspective, there are three key aspects.
Norman Snyder: One is that.
Sean McGowan: One is that.
Norman Snyder: Obviously, my position with what Reed's is, it's been plant-based, it's been a forefront leader in the category, premium, better for you, and it seems like we just haven't received that recognition across the board, particularly from the millennial and Gen Z consumers. So to me, this was a perfect opportunity to really introduce Reed's and the benefits of our products to those consumers. While at the same time. Retailers are just creating more and more space for this functional or modern beverage category. It's really amazing how much they've cut back from both the traditional and the premium and craft segments.
Sean McGowan: Obviously my position with what reads as has been plant base.
Speaker Change: Been a forefront leader in the category premium better for you and it seems like we just haven't received that recognition across the board, particularly from the millennial and Gen Z consumers.
Speaker Change: So to me this was a perfect opportunity to really introduce reads and the benefits of our products to those consumers.
Speaker Change: While at the same time.
Speaker Change: Retailers are just creating more and more space for this functional or modern beverage category.
Speaker Change: It's really amazing how much they've cut back from.
Speaker Change: Both the traditional and the premium and craft segments. So there's a lot of space opening up.
Norman Snyder: So there's a lot of space opening up that obviously we want to play in. And if you look at where the growth is in the category, everything else is staying fairly stagnant and this is really the fastest growing category. So it was a natural extension for us. I don't think it's a forced creation, but it really is an extension of who we are. And rather be a prebiotic, a one-dimensional prebiotic, as you recall in my earlier comments I called multifunctional. So we have the impact and the efficacy of ginger, which by the way we did a lot of research and that really resonated with this consumer group, which quite frankly surprised me but made me very happy.
Speaker Change: That obviously, we want to plan.
Speaker Change: And if you look at where the growth is in the category.
Speaker Change: Everything else is staying fairly stagnant and this is this is really.
Speaker Change: A fast the fastest growing category. So it was a natural extension for us I don't think it.
Speaker Change: Its a forced creation, but it really is an extension of who we are and rather be a prebiotic one dimensional prebiotic.
As you recall.
Speaker Change: My earlier comments I called multi functional so we have you know.
Speaker Change: The impact and the efficacy of Ginger, which by the way we did a lot of research that really resonated with the consumer group, which quite frankly surprised me, but made me very happy So it's ginger based which is a big point of difference we have the adaptogen based which is a big point of difference with functionality in bulk.
Norman Snyder: So it's ginger-based, which is a big point of difference. We have the adaptogen-based, which is a big point of difference with functionality in both gut health and cognitive energy. And then obviously we have the prebiotic fiber. So we're not just single-dimensional but multi-dimensional and really playing as to who we are and we think we have a big point of difference with that. And last but not least, these products taste great. They fit with all the current key attributes, low sugar. a low calorie range, and all the other key attributes that you're seeing. So I think we have a best-in-class entry into this category.
Speaker Change: Got health and cognitive energy and then obviously, we have the prebiotic fibers. So we're not just single dimensional about multi dimensional and really plan as to who we are and we think we have a big point of difference with that.
Speaker Change: Last but at least these products taste great.
Speaker Change: They fit with all the current key attributes low sugar.
Speaker Change: Our low calorie range and.
Speaker Change: Key attributes that you are seeing so I think we have a best in class entry into this category.
Sean McGowan: Thank you. That helps.
Speaker Change: Thank you.
Speaker Change: Thank you.
Will Bendejo: Your next question comes from Will Bendejo, an investor, your line is now open. Hey, Norm. Good morning. How are you? Good morning. How are you, Will? Good, good. Two quick questions. First one, what's the deal with the alcohol portfolio? Is that really taking just kind of a backseat and maybe not taking off like you guys thought it would? Or, you know, I don't, unless I missed it, I didn't hear any mention of it. I don't know if I'd call it a backseat.
Speaker Change: Your next question comes from will band to Jill and Investor. Your line is now open.
Will Band: Hey, good morning, how are you good morning, how are you well yes.
Will Band: Two quick questions first one what's the deal with alcohol portfolio that really taken just kind of a back seat and maybe not taken off like you guys thought it would or you know I don't unless I missed it I didn't hear any mention of it.
Will Band:
Will Band: Don't know if I'd call it a back seat.
Norman Snyder: I think if you recall on earlier presentations, we decided that rather than trying to go a mile wide and an inch deep, we're going to try to go a mile deep and an inch wide and really felt back to key retailer partners like Whole Foods and Trader Joe's and others that Reed's does very well. There's a high demand recognition. So we've really focused on that. However, you know, the last half of 2024, we really struggled with building and maintaining inventory. So unfortunately, that did fall back to the back burner. But, you know, we're gathering additional interest, you know, this Costco rotation that's coming up in LA and Hawaii is going to be huge.
Will Band: If you recall.
Will Band: An earlier presentations, we decided that rather than trying to go.
Will Band: Why did an inch deep we're going to try to go home mile deepen an inch wide and really felt back to key retailer partners like whole foods and trader Joe's and others that <unk> does very well there is a high brand recognition. So we've really focused on that.
Will Band: However, the last half of 2024, we really struggled struggled with billions in maintaining inventory. So unfortunately that that did fall back to the back burner, but.
Will Band: We're gathering additional interest.
Will Band: Costco rotation, that's coming up in L. A in Hawaii is going to be huge.
Norman Snyder: And we're starting, you know, to re-ignite interest, particularly as the weather turns warmer, and then we get into a much stronger inventory position, you'll see that start to pick up, but the focus has really been on retailers where Reed's has done well, there's a high brand recognition. So we purposely slowed down, obviously the inventory situation impacted that, but now we're turning the jets back on as we build inventory, and I think you'll see more growth coming into the warmer weather and later in 2025.
Will Band: And we're starting to.
Will Band: Two two.
Will Band: Reignite interest, particularly as the weather terms warmer and then we get into a much stronger inventory position, you'll see that start to pick up but the focus is really bad.
Will Band: On retailers, where reads has done well there is a high brand recognition so.
Will Band: We purposely slowed down obviously the inventory situation is.
Will Band: Packed at that but now we're turning the jets back out as we build inventory and I think youll see more growth coming to the warmer weather and later in 2025.
Will Bendejo: Okay, thanks. And then just picking back off of that with the inventory challenges, you know, looking at revenue, we're down $16 million, call it 30% over the last two years. Do you attribute that 100% to cash constraints and lack of inventory? Or is, you know, what do you think the pull for Reed's products are? You know, outside of cash constraints and inventory, is there enough pull there to really get this company going? Like, do you see this as, you know, a $7,500 million revenue, you know, company? Or, you know, is it just been because I feel like every call, you know, we're adding 10,000 new doors here and there.
Will Band: Got it thanks.
Speaker Change: And then just piggybacking off of that with the inventory challenges you know looking at revenue were down 16 million call. It 30% over the last two years do you attribute that to 100% to cash constraints and lack of inventory.
Speaker Change: What do you think the pull for Reed's products are outside of gas constraints and inventory is there enough pull there to really get this company going like do you see this as you know about 70 $500 million revenue cut.
Speaker Change: Company or.
Speaker Change: Is it just been because I feel like every call you know, we're adding 10000, new doors here and there, but the poll just hasnt been there. So do you attribute that solely to the constraint.
Norman Snyder: But you know, the poll just hasn't been there. So do you attribute that solely to the constraints? Yeah, I do the majority of it because the orders have been there. Like I said earlier, even our Q1 orders are slightly ahead of last year. So the orders have been there, and we've really, I mean, our short shipments... You know, really got to a very dangerous level where I had to go out and spend time with a lot of key retailers, assuring them that a fix was in process, what we were doing, what were some of the causes, and, you know, my takeaway is...
Speaker Change: Yes, I do the majority of it because the orders have been there.
Speaker Change: Like I said earlier, even our Q1 orders are slightly ahead of last year. So the orders have been there.
Speaker Change: We've really I mean, our short shipments.
Speaker Change: You really got to a very dangerous level, where I had to go out and spend time with a lot of key retailers.
Speaker Change: Assuring them that the effects within process what were doing what were some of the causes.
Speaker Change: And my takeaway is what kept us going with a lot of these partners, where the strength of both reason virtual and their belief in the success they've had and I think youll see the numbers come back very strong I mean, one of the things that I watch very closely a scan data.
Norman Snyder: what kept us going with a lot of these partners were the strength of both Reed's and Virgil's and their belief in the success they've had. And I think you'll see the numbers come back very strong. I mean, one of the things that I watch very closely is scan data. And, you know, seeing when we replenished the natural category, the expanded natural category, to see strong green numbers pop up just reinforced my belief that it was a supply chain and not really a demand issue. We had probably one of the best four-week periods we've ever had with sprouts.
Speaker Change: And.
Speaker Change: Seen when when we replenished the.
Speaker Change: The natural.
Speaker Change: Category, the expanded natural category to see strong green numbers pop up just reinforced my belief that it was a supply chain and not really a demand issue.
Speaker Change: We had <unk>.
Speaker Change: <unk> one of the best four week periods, we've ever had with sprouts.
Norman Snyder: And I believe our dollar sales were up like 50 percent and our unit sales were up 100 percent. Now, granted, we had some promotional activity involved there. But when we're able to supply and keep a steady cadence It generates into so much momentum, including promotional activity, which, by the way, we had to walk away from, which, quite frankly, was a smart decision, because we would have been severely penalized if we didn't, but we walked away from a lot of promotional activity because we didn't have the ability to fulfill it, which would have been very detrimental to our relationship.
Speaker Change: I believe our our dollar sales were up like 50% and our unit sales were up a 100% now granted we had some promotional activity involved there, but when we're able to supply and keep a steady cadence.
Speaker Change: It generates into so much momentum, including promotional activity, which by the way we had to we had to walk away from.
Speaker Change: Which quite frankly was a smart decision because we would've been severely penalized if we didn't when we walked away from a lot of promotional activity because we didnt have the ability to fulfill it which would've been.
Speaker Change: Very detrimental to our relationship. So we had to turn off a lot of things that we normally did and like I said this is like the sales cycle.
Norman Snyder: So we had to turn off a lot of things that we normally did. And like I said, this is like the sales cycle. It's like a production line. You turn it off. When you start it up, it doesn't go back to running very efficiently. You've got to get there. And we see that when we get to a steady cadence, we start picking up more momentum, our velocity numbers at retail pick up, our promotional activity picks up, and it just builds on itself. So I think you'll see that coming to fruition more in the second quarter.
Speaker Change: It's like a <unk>.
Speaker Change: Okay.
Speaker Change: Our production lines, you turn it off when you start it up it doesn't go back to running very efficiently you have got to get there and we see that when we get to a steady cadence we start picking up more momentum our velocity numbers at retail pick up our promotional activity picks up and it just builds on itself. So I think youll see that coming.
Speaker Change: To fruition more in the second quarter, but like I said, just what we were able to replenish inventory in the natural channel we saw a big boost at retail.
Norman Snyder: But like I said, just what we were able to replenish inventory in the natural channel, we saw a big boost at retail.
Will Bendejo: Gotcha. All right, thanks for the clarity.
Speaker Change: Gotcha alright, thanks for the clarity last thing real quick are you able to give any sort of guidance for this year of what you know your revenue targets are.
Norman Snyder: Last thing real quick, are you able to give any sort of guidance for this year of what, you know, your revenue targets are? You know, I think we're going to do that in the next quarter. Obviously, you know, we're believing strongly in growth, you know, returning to growth. And the key, look at the two key things that we have to do to set the foundation, which the entire company estate focused on is reducing short shipments and raising our OTIF rates, you know, on time and in full to our customers. And every individual person in this company knows about that, knows where we are, knows the progress we're making, and are focused.
Speaker Change: I think we're going to we'll do that in the next quarter.
Speaker Change: Obviously, we're believing strongly in growth.
Speaker Change: Turning to growth.
Speaker Change: The key look at the two key things that we have to do to set the foundation, which the entire company is stay focused on is reducing short shipments and raising our OTF rates on time and in full to our customers.
Speaker Change: Every individual person in this company knows about that knows where we are knows the progress we're making at our focused and that will lay the foundation to accomplish everything that we wanted to but what we expect to see as topline growth margin enhancement and reduction in freight and logistic costs and.
Operator: And that'll lay the foundation to accomplish everything we want to. But what we expect to see is top line growth, margin enhancement, and reduction in freight logistic costs. And, you know, that's, you know, something that we've been working on. We've been unable to accomplish, but I think you'll see that generate positive cashflow and, and a positive operating. Okay, awesome. Thanks. That's all I got. Appreciate your time. You're welcome. Ladies and gentlemen, as a reminder, should you have a question, please press star one.
Speaker Change: It's something that we've been working on and we've been unable to accomplish but I think youll see that generate positive cash flow.
Speaker Change: And positive operating income.
Speaker Change: Okay awesome. Thanks, that's all I got I appreciate the time Youre welcome.
Speaker Change: Okay.
Speaker Change: Ladies and gentlemen, as a reminder, should you have a question. Please press star one youre.
Jack Eyre: Your next question comes from Jack Eyre as a private investor. Your line is now open. Yeah, hey, Norm. Good morning. Good morning, Jack. I just wanted to ask about...
Speaker Change: Your next question comes from Jack <unk> with private Investor. Your line is now open.
Speaker Change: Yeah, Hey, Noah and good morning, good morning, Jeremy.
Speaker Change: Asked about.
Norman Snyder: What do you guys think the pathway might look like for getting off of OTC and back, you know, listed? on today's session. cash flow is not so much a concern, not so much a constraint having cash on hand to be able to fill the orders, you know, the whole supply chain, no half shipments, all that stuff. So with the financial metrics sounding like they're going to be significantly improving over, you know, the next three quarters, like have you guys given any thought to what your timeline is for making a move to get relisted? Yeah, trust me, that's something we think about a lot.
Speaker Change: What do you guys think the pathway might look like for getting off of OTC and back.
Speaker Change: Listed.
Speaker Change: <unk>.
Speaker Change: Absolutely.
Speaker Change: <unk> exchange I know you guys have placed the debt.
Speaker Change: And cash flow is not so much a concern not so much constrained.
Speaker Change: Having cash on hand to be able to fill the orders.
Speaker Change: Supply chain.
Speaker Change: Half shipments all of that stuff, so what's the financial metrics sounding like they're going to be significantly improving over the next three quarters like have you guys given any thought to what your timeline is for.
Speaker Change: Making a move to get realistic.
Speaker Change: Yeah.
Speaker Change: Trust me, that's something we think about a lot and I've done I've actually.
Norman Snyder: And I've done, I've actually written an internal memo and researched it. So there's, you know, obviously nobody, we don't want to remain on the OTCQX, right? We want to uplift to a major exchange. And we evaluated that before we were delisted a couple years ago and made the decision to delist because of the punitive nature of potentially raising enough equity to get to the threshold for positive net equity. Today it's a different story, obviously with the restructuring of our balance sheet, we now comply with those requirements. And I think there's like four or five other requirements, and we're either there or very, very close.
Speaker Change: <unk> had an internal memo in research debt. So there's.
Speaker Change: Obviously, nobody we don't want to remain on the OTC <unk> right, we want to uplift to a major exchange.
Speaker Change: And we evaluated that before we were delisted a couple of years ago and made the decision to de list because of the punitive nature of potentially raising enough equity to get to the threshold for positive net equity.
Speaker Change: Today, it's a different story, obviously with the restructuring of our balance sheet, we now comply with those requirements.
Speaker Change: And I think there's like four or five other requirements and were either there are very very close I think the last real key aspect is getting our stock price at the minimum level that the exchanges want and look at based on what has happened lately and I think with our continued performance I think we can get there.
Norman Snyder: I think the last real key aspect is getting our stock price at the minimum level that the exchanges want. And look, based on what has happened lately, and I think with our continued performance, I think we can get there organically.
Norman Snyder: So the question is how quickly. You know, we've talked to lawyers, bankers, accountants, et cetera, et cetera. Everyone has their own opinion. But I think there's just a, you know, I think the consensus that's come back has been a couple of sustained quarters of operating performance should get us pretty close to satisfying all the criteria. And once we do that, you know, we'll begin the application process to uplist. But it's a goal that we have. We're monitoring where we are. We've evaluated the criteria and what we need to do. And we've come close on a lot of them.
Speaker Change: <unk>. So the question is how quickly we've talked up lawyers bankers accountants et cetera, et cetera, everyone has their own opinion.
Speaker Change: But I think there's just.
Speaker Change: I think the consensus Thats come back has been a couple of sustained quarters of operating performance.
Speaker Change: Should get us pretty close to satisfying all the criteria and once we do that well.
Speaker Change: We'll begin the application process to uplift, but it's a goal.
Speaker Change: That we have.
Speaker Change: Yes.
Speaker Change: We're monitoring where we are we have a very red the criteria and what we need to do and.
Speaker Change: We've come close on a lot of them in.
Jack Eyre: And, you know, we believe, like I said, after some sustained positive performance, we'll be in a position to do that. Okay, understood.
Speaker Change: We believe.
Speaker Change: Like I said after after some sustained positive performance will be in a position to do that.
Speaker Change: Okay understood.
Jack Eyre: I appreciate the commentary.
Jack Eyre: I have one other quick question that I hope you might comment on. It looks like SG&A was up almost 1.1 million in comparison to last year for Q4. Do you know what the primary drivers of that was?
Speaker Change: Appreciate the commentary I have one other quick question is that I hope you might comment on it looks like SG&A was up almost $1 1 million in comparison to last year for Q4.
Speaker Change: Do you know what the primary drivers of that was yeah. Yeah. This is kind of this is kind of a burn under my saddle. Its a combination of timing with certain things and it's what we'll call.
Doug McCurdy: Yeah, yeah, this is kind of a burr under my saddle. It's a combination of timing with certain things. And it's what we'll call our typical non-cash reserves that our auditors require to record for various things. For example, we made an investment in equipment at a Copacker, and we're reverse amortizing it so we're getting a credit back on a per case basis. And when they sort of extrapolate what the time period is, I think it extended past our 36 month target. So they make us reserve against the whole thing. So going forward, when we get that reverse amortization, we'll get a credit to COGS.
Speaker Change: Our our typical noncash reserves that our auditors required.
Speaker Change: Record for various things for example.
Speaker Change: We made an investment in equipment at a co packer and where reverse amortizing. It. So we're getting a credit back on a per case basis.
Speaker Change: When they sort of extrapolate what the time period is.
Speaker Change: I think it extended past our 36 month target so they make us reserve against the whole thing so going forward when we get that reverse amortization will get a credit to Cogs. My position is we're going to recover it but they.
Doug McCurdy: My position is we're going to recover it, but they force us to take a reserve against that equipment. So there's things like that that are non-cash.
Speaker Change: They force us to take take a reserve against that.
Speaker Change: Against that equipment so.
Speaker Change: There are things like that that are noncash.
Doug McCurdy: Frustrating for me because I don't think they really, truly indicate our financial performance. And you'll see that in our modified EBITDA reconciliation, we take those things out. So that's really what's driving it. It's not like we're spending more money, there's more cash going out the door. They're really non-cash accounting adjustments. Okay, okay, that makes a lot more sense.
Speaker Change: Frustrating for me because I don't think they really truly indicate our financial performance and you'll see that in our modified EBITDA reconciliation, we take those things out so that's really what's driving it it's not like we're spending more money. There is more cash going out the door theyre really noncash accounting adjustments.
Speaker Change: Okay. Okay that makes a lot more sense will they be reflected.
Doug McCurdy: Will they be reflected in the year-end or quarter-end financial statements where we can see the cash versus non-cash? Yes, yes, they should be probably a note on it. Okay. All right. Great. Appreciate it very much.
Speaker Change: And the year end or quarter end financial statements, where we can see the cash versus noncash.
Speaker Change: Yes, yes, they should.
Speaker Change: Okay, Alright, great I appreciate it very much youre welcome.
Operator: You're welcome There are no further questions at this time.
Speaker Change: Okay.
Speaker Change: There are no further questions at this time.
Norman Snyder: I will now turn the call over to Norm for closing remarks. I'd like to thank everyone for participating in this morning's earnings call, as well as our employees, customers, and of course, our shareholders. We appreciate everyone's continued support. Have a wonderful day. Thank you.
Norm: I'll now turn the call over to norm for closing remarks.
Norm: I'd like to thank everyone for participating in this morning's earnings call as well as our employees customers and of course, our shareholders. We appreciate everyone's continued support of a wonderful day. Thank you.
Operator: Ladies and gentlemen, this concludes your conference call for today. We thank you for participating and ask that you please disconnect your
Norm: Ladies and gentlemen, this concludes your conference call for today, we thank you for participating and ask that you. Please disconnect your lines.
Norm: Yes.
Norm: Okay.
Norm: Yes.
Norm: Okay.
Norm: Okay.
Norm: Yeah.
Norm: Okay.
Norm: Yes.
Norm: Okay.
Norm: [music].