Q3 2025 Reed's Inc Earnings Call

Good morning and welcome to Reed's. Third quarter 2025 earnings conference call.

for the tea and 9 months, ended September 30th 2025

My name is Lily and I will be your conference call operator for today.

We will have the prepared remarks from cereal Wallace. Reed, stiff, executive officer and Douglas Curry. Each shift Financial Officer following the remarks.

We will take your questions.

Before we begin, please take note of the company's cautionary statements.

Today's call will include forward-looking statements including statements about Reed's, business plan.

Involve risk and uncertainties.

and only reflect management view as of today, November 4th, 2025,

And the company is no on is not.

Not under obligation to update them.

When discussing results, the presenter May refer to nannup measures.

Please refer.

Please refer to reads. Reads investors website at investors reads inc.com.

In its quarterly report on form, 10 Q.

For the period. Ended September 30 2025.

This should be expected to be available on the website soon.

For the clinicians and reconciliations of mango measures and additional information regarding your tools.

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. Wallace.

Thank you, operator, and good morning, everyone. We appreciate you joining us today to discuss our third quarter of 2025 results.

Q3 marked another period of steady operational progress, as we continue to executing our plan to strengthen our foundation for sustainable long-term growth and profitability, we Advanced our manufacturing initiatives to better, align production capacity and capabilities. With current demand enabling us to meet customer needs more efficiently. While maintaining a strong focus on quality and operational discipline. At the same time, we're identifying additional opportunities to streamline processes, enhance scalability and drive further improvements in overall performance.

During this quarter, we saw higher than anticipated trade spin as we leaned on 2, large Distributors to help fulfill order volume and ensure, on-time delivery to keep customers following prior supply chain challenges. This approach enabled us to maintain strong, customer relationship and service levels. However it did not yield the expected efficiencies, and we have since begun, redefining our approach. With these Distributors, we're evaluating our strategies to move away from short-term 3-month promotions to a fully integrated 52-week strategy, that aligns more closely with retail or planning cycles, and support stronger year round. Execution, with the more disciplined approach. We expect greater predictability and control over trade spend. We're already seeing early signs of improvement, in Q4. And as we transition away from Legacy distributor Arrangements, we believe these actions will support continued. Growth, margin expansion going forward.

From a production standpoint, we are working to drive greater efficiency and cost reduction through enhanced manufacturing processes.

Tighter operational controls and improved sourcing discipline. We are actively identifying new opportunities to lower unit costs and enhance overall performance across the supply chain.

Turning to our core product sales.

During the quarter. During the third quarter, our sales team continue to execute against our refined commercial strategy, driving meaningful winds across both new and existing Retail Partners. These successes reflect stronger alignment between our sales marketing and operation teams and demonstrate the progress, we're making and rebuilding placements, and expanding distribution, within key National and Regional accounts.

We achieved notable retail gains this quarter highlighted by our partnership with Costco to develop a winner. Ginger ale variety pack expanding seasonal Innovation opportunities.

Court distribution group, 4% year-over-year across top accounts including Kroger Sprouts. AO Del Hayes reinforcing. Momentum within our core Ginger rail, ginger beer and Virgil's portfolio. A successful Walgreens test further validated consumer, demand, and Merchandising performance. Paving the way to broader expansion discussions and priorities small format channels such as drug and convenience. Additionally, we remain focused on regaining, lost distribution with key Regional wins at harman's bases.

And Festival Foods.

Looking ahead, we're focused on expanding our presence and under represented channels, and particularly food service and convenience which represent meaningful long-term opportunities to expand the reach and visibility of Reed's brand.

I'd like to share a few updates on our product portfolio starting with our core categories.

We're reinvigorating the ginger core with full packaging and brand re-stage across Reed's. Ginger beer and ginger ale launching July 2026.

Shelf presents and strengthens Reed's leadership and authentic craft Ginger beverages across retail and on-premise channels.

A complete re-stage of our functional soda. Line also slated for July 2026 will reestablish reads as a category, disruptor designed to LeapFrog the modern sort of space, the new platform delivers Wellness, for proposition with purposeful ingredients elevated design and a bold Innovation pipeline targeting incremental, consumption occasions.

We're optimizing Virgil's and flying cauldron transitioning from glass to cans. With full reset is slated for 2027 and reformulating, our RTD range reads, mules, and hydrogen derail to enhance, quality flavor and consistency. Internationally reads, launches its Ginger core and greater China and Japan followed by broader Asia in 2026.

To support our next phase of growth and brand Evolution. We've strengthened our leadership, team with several key additions, who bring deep expertise, across marketing commercial, execution and governance in early September, we appointed Tina Reed, sangani as Chief marketing officer Tina brings over 2 Decades of Global Marketing leadership across lifestyle spirits and consumer packaged Goods. She has built a scaled iconic brands at uni, uni lever pinard, Ricard and Remy Cointreau, delivering double digit, growth award-winning campaigns across multiple categories, her expertise in brand storytelling innovation.

And premium positioning will be instrumental as we modernize and Elevate reads in portfolio on its path to becoming a high growth beverage Powerhouse.

Next we welcome Kay Johnson as Reed's, Chief go to market and customer officer. Keith has almost 30 years of cpg, Beverage experience, spanning sales, distributor operations, marketing, and revenue growth. He spent 21 years in leadership positions at Coca-Cola building, high-performing collaborative teams over the past 10 years, Keith LED National and Regional customer teams at mostyn cores and most recently served as VP of strategic Regional accounts in military at the AIO. Driving channel strategy, joint customer Supply growth and talent development we believe he is well positioned to lead our Channel development strategy and go to market execution.

Lastly, we appointed Michael to our board of directors, Michael brings nearly 3 Decades of experience in corporate governance and Securities Law. Advising and representing boards committees and Executives at numerous public and private companies. His deep understanding of regulatory framework compliance and board governance will help guide our long-term strategy and ensure. We continue to build a strong transparent Foundation of sustainable value creation,

Now, let's dive into our third quarter operational highlights. Similar to Q2, we completed another review of our finished goods, inventory and wrote down the proximately 114,000 of obsolete product. This initiative is part of our broader effort to rationalize skus and sharpen. Our focus on high velocity items that align with current demand and support a more efficient profitable portfolio. By streamlining, our product mix, we can better concentrate resources on core skus that drive volume and margin expansion.

On the logistics and supply chain front, we continue to executing the rebalancing plan. Initiated last quarter to optimize inventory placement across regions.

These actions are designed to improve delivery efficiency. Reduce Freight distances and minimize out of stocks and key markets. We're beginning to see tangible benefits delivering and handling expenses declined 14% year-over-year in Q3 reflecting early progress from these operational. Improvements we remain focused on refining. Our logistic Network to further Drive, efficiency and reduce costs over time,

we are advancing our transition from glass to cans across both reads and Virgil's portfolio and initiative aimed at improving cost, efficiency, sustainability and operational flexibility. We expect this transition to strengthen margins. While supporting continued consumer and Retail adoption across our core brands.

We also continue to strengthen our balance sheet through our recent, financing repayment of approximately, 650,000 of debt and the refinancing of our credit facility. These actions improved, our liquidity and provided additional flexibility to execute on our core growth plan.

From a capital markets perspective, we're preparing for an up list to a major exchange. We view this as an important Milestone that will enhance visibility improve liquidity and broaden our access to institutional Capital as we enter our next phase of growth.

As part of this process, we implemented a 1 for 6 re stock split effective October 31st.

Drive sales growth within our core reads and virtual portfolios.

The Investments we're making today. Coupled with our recently, fortified balance sheet will accelerate our progress towards sustainable profitable growth ahead.

Before wrapping up and closing remarks, our CFO Doug will cover financial. Highlights for the third quarter in more detail, Doug, over to you.

Thank you, Cheryl.

To our results.

All variants commentaries on a year-over-year basis. Unless otherwise noted

As cereal mentioned, we affected a 1 for 66 reverse stock, split and all per share data is on a post split basis.

Net sales for the third quarter of 2025 increased 4% to 7.0 million compared to 6.8 million in the year ago quarter.

The increase was primarily driven by higher volumes of reeds. Branded products with recurring National customers,

Gross profit for Q3 2025 remained flat at 1.2 million.

Gross margin was 17% compared to 18% in the year ago quarter.

The year-over-year decrease in gross margin was primarily driven by 0.1 million of inventory, write-offs related to product portfolio optimization

Excluding these inventory write-offs, gross profit for the third quarter of 2025 was $1.3 million, or 19% of net sales.

Delivery and handling costs were reduced by 14% to 1.1 million during a third quarter of 2025 compared to 1.3 million in the third quarter of 2024.

Primarily driven by lower Transportation costs.

Delivery and handling costs were 16% of net sales or 2 dollars per case. Compared to 9 19% of net sales or $2.99 per case during the same period last year.

Selling General and administrative costs were 4.2 million during the third quarter of 2025 compared to 3.1 million in the year ago quarter.

The increase in sgna was primarily driven by investments in Personnel marketing and related services to support growth initiatives.

Total operating expenses were 5.3 million compared to 4.4 million in the year ago. Period.

Net lost during the third quarter of 2025 improved to 4.0 million or negative 48 cents per share.

Compared to 4.2 million or -4.91 cents per share in the third quarter of 2024.

Modified ebit. Dial loss, was 3.9 million in the third quarter of 2025

Compared to 3.0 million in the third quarter of 2024.

For the third quarter of 2025, we used 2.8 million of cash from operating activities compared to 1.1 million of cash, provided by operating activities for the same period in 2024.

As of September 30th 2025, we had 4.1 million of cash and 9.2 million of total debt. Net of deferred financing fees.

This compares to 10.4 million of cash and 9.6 million of total debt. Net of deferred financing fees. At December, 31st 2024.

I will now turn the call back to siril for closing remarks.

Thanks Doug.

Our third quarter, reflects continued, progress in strengthening Reed's, operational foundation and advancing the key initiatives that will drive long-term growth and profitability, while there's still work to do, I'm encouraged by our team's focus and execution, to build a strong foundation, and position reads for Accelerated, organic growth in 2026, and Beyond with that operator, we're ready to open up the line for questions.

Thank you, ladies and gentlemen, we will now begin the question and answer session.

Should you have a question please press star followed by the 1 on your touchtone phone. You will hear a prompt that your hand has been reached.

Did you wish to decline from the polling process? Please press the star followed by the 2?

If you are using a speaker phone, please lift the handset, before pressing any keys.

1 moment for the first question.

Your first question comes from Aaron Green from Alliance Global Partners.

Hi. Good morning and thank you very much for the questions.

First 1 for me, I just want to get even better color in terms of you know, expectations for distribution gains and how best to think about, you know, how shelf resets. You know might come into play and opportunities. That might differ uh between reach traditional and reads functional beverages there. Thank you.

Yeah, it's a good question. Uh, listen. I mean our within, you know, the changes that we just recently made uh within the organization. Uh, we essentially restructured our entire sales team and added key positions so that we could focus on channels, uh, and customers and retailers that we're currently not focused on today. So I, I, I think what you'll see here, you know, a couple with, you know, focusing on, uh, and and and making sure that we understand the timelines, in which recess is some of these key customers take place. We're in the process right now of, you know, building those relationships building out that Network to ensure that 1 that we're focused on the right timeline, uh, and also have the right product. Mix to go after these customers with our with our Core Business and also, you know, our modern soda line. Now as we, you know, as I discussed earlier, we are looking to take our current modern soda line, and re-stage it, reformulated, retool it and relaunch it.

Uh to be in store July of 2026. So within that, right? That that would you know constitute us to have to focus on for that particular line for fall reset. So think you know core you know ginger ale are 2. New flavors will come out in q1 of this year, the broader re-stage of our core functional reads will take place in the second half of of next year. Along with that you know is the the re stage on of our modern soda line. So most of that will come into play within our fall, resets on both our existing customers and also new customers, where it makes sense that we're targeting.

Thanks for that code, that's helpful. Um, on the switching, right? From bottles to cans across the portfolio, just help us understand and try and maybe uh are there some

Near-term. Kind of costs obviously long-term, you know, cost savings, You're Expecting. So just in as you think about the pnl potential impacts you know potentially on the near term term charges and how much benefits we should expect. And when that kind of flows through the pnl, thank you.

Yeah, sure. Uh, Aaron. Good morning.

So uh, for bottles to Cannes. Uh, it's a conversion that I think first is kind of in line with uh, the trending of the industry, as a whole. Um, I think it's an opportunity to give the consumer, uh, a packaging set that, um, they're interested in and and, you know, is is better for them in addition to better for you. Um, and then, as we think about some of the efficiencies directly to the p&l, uh, what we see is uh, simply, you know, the cost of bottles versus the cost of cans is uh, a nice shift Improvement.

And there's a benefit in margin as well. So uh, we would anticipate that as we move forward with the transition, uh, you know, the transition will happen, you know, over some period of time that's mentioned in months and quarters. Uh, but we would imagine that as we

Enter into first quarter. Uh, you know, we'll be moving along smartly, um, you know, to affect that transition. Uh, and I would imagine that by the end of the second half by the end of the first half of 2026, we should be well into it. Uh, and some of the considerations are, we want to be mindful of the customer set and making sure that we're making that transition in partnership with our customer set. And making sure that uh you know, 1 the customers

Are pleased with the approach, uh, and and invested in the approach and 2. We want to make sure that there's no disruption to, uh, you know, the Shelf space that we have. Uh, and, you know, the, the p&l benefit uh, that we're going to gain from it.

Appreciate that. Last 1 for me, if I could

I just think about marketing, obviously, beverages remains a competitive category you guys, you know, have a focus on profitability how best to think about

Very targeted and strategic around, you know, how we're spending dollars on marketing Now, understand that, you know, from where we are today to where we're headed tomorrow, it'll be an exponential shift in the strategy and also investment. In terms of how we're thinking about marketing, our core brand re-stage, um, in the mid middle part of next year, along with our functional line along with this new mixer line as well. So, you know, I I think what we're focusing on um, is Grassroots Camp marketing campaign and building from there, right? So it'll be very targeted. It'll be very specific uh, but it will be certainly, exponential in terms of what we're spending today and we feel like, you know, just giving where we are. We've got a great opportunity to kind of build out this campaign given the, you know, already our high consumer appeal, amongst consumers who have tried our product and repeat purchases as well. So,

I think there's a story that we have to tell there, but we'll be very targeted in a specific way as to how we use those dollars. It's a new area for us in terms of investing in marketing, but we'll do it grassroots, and it'll be very targeted.

Okay, great, appreciate that detail, and I'll go and jump back into the queue.

Our last question comes from Shane McGowen.

From Roth capital.

Partners.

Um, thank you. Um, actually, 2 questions 1, quick housekeeping, um, Doug, do you have a sense of what the timing could be on the up list?

And you know what are those steps need to be taken, you know, to satisfy all those requirements and then more broadly on the last call, we talked about, you know, maybe having lost some listings or, you know, some some Outlets what progress have you made on kind of re-establishing some of the existing customer base that that you had and you know, getting back some listings that you may have lost. Thank you.

Yeah. Thanks, Sean. Um, and good morning. Nice to hear your voice.

Uh, in terms of timing for, uh, you know, all things uplifting and and related. Uh, you know, I I think

You know, the first kind of Milestone uh that we were able to achieve uh to move forward with that was affecting the 1 for 6 reverse stock split.

Uh, so, you know, on Friday at 5:00 p.m., uh, we were able to get ourselves in a place where we could affect that, um, it be our stock being Trading.

Uh under the ticker r e d with an extra D 2DS. Um which signifies corporate action uh that there's a split uh but we began trading yesterday morning at the open, uh, on the split adjusted basis. So,

on, you know, we'll kind of watch that settle out, uh, you know, we'll monitor, uh, you know, the market and you know where we are in terms of some of the other preparation considerations

Uh, but, you know, in an ideal world, uh, we would be able to move forward. Prudently. Uh, but, you know, get to the point where we could uplift to the major exchange, um, you know, sooner rather than later. Uh, because we think that there's nice value for our existing investor base, and a nice opportunity for uh, potential new investors as well.

And then Sean to answer your question around, um, you know, loss distribution. Yes. We we doing some work to to build that into our aop for next year and it's it's certain a focal point for us where I'm excited about is that, you know, we are starting to see some of that business come back, uh, which I highlighted, uh, in my earlier comments around, you know, key Regional wins at Harvard,

I think will allow us to be able to, to get back in, uh, to some of these retailers. Not only that, but I would also highlight, you know, we're, we're, we're now talking and moving in a position where, you know, we're building our Innovation pipeline so that will get, you know, customers and retailers excited about leaning in as well. Um, and then, you know, this, this whole notion of this core research of our reads functional line. And also our core products is something that also that we're leaning on. So I think, you know, we could continue the course, you know, stay focused on our operational efficiency, you know, continue to maintain that, we'll be able to, you know, continue to regain, you know, some of these lost customers that we lost.

Okay, thanks. If I could follow that up, uh, you know, the risk of of selling maybe a little imp politics. Do you think that the experience that some of these guys have had with, you know, the past couple of years of of some, you know, being laid or not delivering on time and it's not going to make it harder to launch new product or are they willing to give you kind of a a fresh look?

No, I think. Um, I I mean, obviously, you know, I can't speak for retailers and put words in their mouth, but I think anytime, you know, a, a cpg company goes to a buyer with a new proposition, right? They've got to make sure that it makes sense for the category and make sure it makes sense for the set. Right? What is it? What is the Innovation? Is it a you know, and 1 type Innovation or you know, how to

Does it separate itself from anything else that we're currently selling? So I think there's always a story to tell as it relates to trying to, you know, sell Innovation or new item or even, you know, your core flavor extension in, where there may be already, uh, a flavor that exists today, so there's certain work to be done to to, to go tell that story. I don't think it makes it any easier or harder. I, I, I do believe that, you know, given our recent history, you know, building that confidence, in terms of operational stability helps us to to, to kind of tell that story and sure up that end of the equation. The other thing is just in terms of which is normal for any type of cpg that's going in talking to a buyer around Innovation. How does this, how does this Innovation work for me? How does it drive consumer engagement and appeal? And does it make sense for our sets?

Okay, thanks a lot. Thank you.

There are no further questions at this time. I will not turn over the call to Mr. Wallace. Please continue.

Thank you, operator, and thank you for joining us today. I want to express our appreciation to our employees customers and shareholders for their continued support. We're excited about the opportunities ahead and we believe we are well positioned to execute on our 2026 plan. Have a great day.

Ladies and gentlemen, this concludes today's conference call. Thank you for your participation. You may now disconnect