REED'S, INC. Q3 2023 Financial Highlights (vs. Q3 2022):
- Net sales were
$11.9 million compared to$12.1 million . - Gross profit increased 66% to
$4.0 million compared to$2.4 million , with gross margin up 1,390 basis points to 34.0% compared to 20.1%. - Delivery and handling costs were reduced by 15% to
$2.98 per case. - Selling, general and administrative expenses were reduced by 14% to
$2.3 million . - Operating loss improved to
$0.1 million compared to$2.5 million . - Modified EBITDA improved to
$0.2 million compared to$(2.2) million .
Management Commentary
“I am pleased with the progress we made in the third quarter as we continued to lower input costs and freight expenses, enabling us to materially expand gross margin and reach our guidance of turning modified EBITDA profitable,” said
“Given the inventory challenges, we are revising our net sales guidance for 2023 to range between
Third Quarter 2023 Financial Results
During the third quarter of 2023, net sales were
Gross profit for the third quarter of 2023 increased 66% to
Delivery and handling costs were reduced by 15% to
Selling, general and administrative costs declined by 14% to
Operating loss during the third quarter of 2023 improved to
Modified EBITDA improved to
Liquidity and Cash Flow
For the third quarter of 2023, cash used in operations was
As of
FY 2023 Financial Outlook
Based on the inventory shortage faced year-to-date, the Company is revising its net sales guidance to range between
Conference Call
The Company will conduct a conference call tomorrow,
Reed’s management will host the conference call, followed by a question-and-answer period.
Date:
Time:
Toll-free dial-in number: (844) 850-0544
International dial-in number: (412) 542-4115
Conference ID: 10184105
Webcast: Reed’s Q3 2023 Conference Call
Please dial into the conference call 5-10 minutes prior to the start time. An operator will register your name and organization. If you have any difficulty connecting with the conference call, please contact the company’s investor relations team at (720) 330-2829.
The conference call will also be broadcast live and available for replay on the investor relations section of the Company’s website at https://investor.reedsinc.com.
About
Reed’s is an innovative company and category leader that provides the world with high quality, premium and naturally bold™ better-for-you beverages. Established in 1989, Reed's is a leader in craft beverages under the Reed’s®, Virgil’s® and Flying Cauldron® brand names. The Company’s beverages are now sold in over 45,000 stores nationwide.
Reed’s is known as America's #1 name in natural, ginger-based beverages. Crafted using real ginger and premium ingredients, Reed’s portfolio includes ginger beers, ginger ales, ready-to-drink ginger mules and hard ginger ales. The brand has recently successfully expanded into the zero-sugar segment with its proprietary, natural sweetener system.
Virgil's® is an award-winning line of craft sodas, made with the finest natural ingredients and without GMOs or artificial preservatives. The brand offers an array of great tasting, bold flavored sodas including Root Beer,
Flying Cauldron® is a non-alcoholic butterscotch beer prized for its creamy vanilla and butterscotch flavors. Sought after by beverage aficionados, Flying Cauldron is made with natural ingredients and no artificial flavors, sweeteners, preservatives, gluten, caffeine, or GMOs.
For more information, visit drinkreeds.com, virgils.com and flyingcauldron.com. To receive exclusive perks for Reed’s investors, please visit the Company’s page on the Stockperks app here.
Forward-Looking Statements
Statements in this release that are not historical are forward-looking statements made pursuant to the safe harbor provisions of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. These forward-looking statements are typically identified by terms such as "estimate," "expect,” “intend,” "project," "will," “plan,” and similar expressions. These forward-looking statements are based on current expectations and include our management’s expectations and guidance for fiscal year 2023 under the heading “FY 2023 Financial Outlook”. The achievement or success of the matters covered by such forward-looking statements involves risks, uncertainties, and assumptions, many of which involve factors or circumstances that are beyond our control. Reed‘s 2023 guidance reflects year-to-date and expected future business trends and includes impacts of the inventory shortage as of the date hereof. New supply chain challenges that may develop and further potential inflation cannot be reasonably estimated and are not factored into current fiscal 2023 guidance. These risks could materially impact our ability to access raw materials, production, transportation and/or other logistics needs.
Financial guidance should not be viewed as a substitute for full financial statements prepared in accordance with GAAP.
If any such risks or uncertainties materialize or if any of the assumptions prove incorrect, Reed’s actual results could differ materially from the results expressed or implied by the forward-looking statements we make, including our ability to achieve our targets for the fiscal year ending
Investor Relations Contact
Elevate IR
ir@reedsinc.com
(720) 330-2829
| REED’S, INC. | ||||||||||||||||
| CONDENSED STATEMENTS OF OPERATIONS | ||||||||||||||||
| For the Three and Nine Months Ended | ||||||||||||||||
| (Unaudited) | ||||||||||||||||
| (Amounts in thousands, except share and per share amounts) | ||||||||||||||||
| Three Months Ended | Nine Months Ended | |||||||||||||||
| 2023 | 2022 | 2023 | 2022 | |||||||||||||
| $ | 11,856 | $ | 12,094 | $ | 33,018 | $ | 38,001 | |||||||||
| Cost of goods sold | 7,823 | 9,659 | 23,778 | 29,335 | ||||||||||||
| Gross profit | 4,033 | 2,435 | 9,240 | 8,666 | ||||||||||||
| Operating expenses: | ||||||||||||||||
| Delivery and handling expense | 1,908 | 2,249 | 5,714 | 8,893 | ||||||||||||
| Selling and marketing expense | 861 | 1,220 | 3,567 | 5,623 | ||||||||||||
| General and administrative expense | 1,407 | 1,420 | 4,427 | 5,319 | ||||||||||||
| Total operating expenses | 4,176 | 4,889 | 13,708 | 19,835 | ||||||||||||
| Loss from operations | (143 | ) | (2,454 | ) | (4,468 | ) | (11,169 | ) | ||||||||
| Interest expense | (1,293 | ) | (777 | ) | (4,459 | ) | (2,119 | ) | ||||||||
| Net loss | (1,436 | ) | (3,231 | ) | (8,927 | ) | (13,288 | ) | ||||||||
| Dividends on Series A Convertible Preferred Stock | - | - | (5 | ) | (5 | ) | ||||||||||
| Net Loss Attributable to Common Stockholders | $ | (1,436 | ) | $ | (3,231 | ) | $ | (8,932 | ) | $ | (13,293 | ) | ||||
| Loss per share – basic and diluted | $ | (0.34 | ) | $ | (1.43 | ) | $ | (2.69 | ) | $ | (6.54 | ) | ||||
| Weighted average number of shares outstanding – basic and diluted | 4,169,131 | 2,254,356 | 3,322,959 | 2,030,503 | ||||||||||||
| REED’S, INC. | ||||||||
| CONDENSED BALANCE SHEETS | ||||||||
| (Amounts in thousands, except share amounts) | ||||||||
| 2023 | 2022 | |||||||
| (Unaudited) | ||||||||
| ASSETS | ||||||||
| Current assets: | ||||||||
| Cash | $ | 1,004 | $ | 533 | ||||
| Accounts receivable, net of allowance of | 5,267 | 5,671 | ||||||
| Inventory, net | 15,964 | 16,175 | ||||||
| Receivable from former related party | 777 | 777 | ||||||
| Prepaid expenses and other current assets | 489 | 939 | ||||||
| Total current assets | 23,501 | 24,095 | ||||||
| Property and equipment, net of accumulated depreciation of | 559 | 766 | ||||||
| Intangible assets | 627 | 626 | ||||||
| Total assets | $ | 24,687 | $ | 25,487 | ||||
| LIABILITIES AND STOCKHOLDERS’ DEFICIT | ||||||||
| Current liabilities: | ||||||||
| Accounts payable | $ | 9,067 | $ | 9,805 | ||||
| Accrued expenses | 873 | 233 | ||||||
| Revolving line of credit, net of capitalized financing costs of | 9,697 | 10,974 | ||||||
| Convertible notes payable, current portion, net of debt discount of | 7,380 | 2,434 | ||||||
| Payable to former related party | 452 | 2,025 | ||||||
| Current portion of lease liabilities | 209 | 187 | ||||||
| Total current liabilities | 27,678 | 25,658 | ||||||
| Convertible note payable, net of debt discount of | 9,721 | 8,092 | ||||||
| Lease liabilities, less current portion | 48 | 207 | ||||||
| Total liabilities | 37,447 | 33,957 | ||||||
| Stockholders’ deficit: | ||||||||
| Series A Convertible Preferred stock, | 94 | 94 | ||||||
| Common stock, | - | - | ||||||
| Additional paid in capital | 119,277 | 114,635 | ||||||
| Accumulated deficit | (132,131 | ) | (123,199 | ) | ||||
| Total stockholders’ deficit | (12,760 | ) | (8,470 | ) | ||||
| Total liabilities and stockholders’ deficit | $ | 24,687 | $ | 25,487 | ||||
| REED’S, INC. | ||||||||
| CONDENSED STATEMENTS OF CASH FLOWS | ||||||||
| For the Nine Months Ended | ||||||||
| (Unaudited) | ||||||||
| (Amounts in thousands) | ||||||||
| 2023 | 2022 | |||||||
| Cash flows from operating activities: | ||||||||
| Net loss | $ | (8,927 | ) | $ | (13,288 | ) | ||
| Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||
| Depreciation | 112 | 79 | ||||||
| Loss on disposal of property and equipment | 9 | - | ||||||
| Amortization of debt discount | 958 | 307 | ||||||
| Amortization of prepaid financing costs | - | 431 | ||||||
| Fair value of vested options | 351 | 448 | ||||||
| Fair value of vested restricted shares granted to officers | 3 | 137 | ||||||
| Fair value of common shares issued as financing costs | - | 37 | ||||||
| Change in allowance for doubtful accounts | 262 | (152 | ) | |||||
| Inventory write-downs | (205 | ) | 35 | |||||
| Accrued interest | 2,483 | 386 | ||||||
| Changes in operating assets and liabilities: | ||||||||
| Accounts receivable | 142 | (673 | ) | |||||
| Inventory | 417 | (2,901 | ) | |||||
| Prepaid expenses and other assets | 450 | (399 | ) | |||||
| Decrease in right of use assets | 102 | 86 | ||||||
| Accounts payable | (738 | ) | (860 | ) | ||||
| Accrued expenses | 639 | (62 | ) | |||||
| Accrued dividend | (5 | ) | - | |||||
| Lease liabilities | (137 | ) | (118 | ) | ||||
| Net cash used in operating activities | (4,084 | ) | (16,507 | ) | ||||
| Cash flows from investing activities: | ||||||||
| Trademark costs | (1 | ) | (2 | ) | ||||
| Purchase of property and equipment | (84 | ) | ||||||
| Proceeds from sale of property and equipment | 68 | - | ||||||
| Net cash used in investing activities | (17 | ) | (2 | ) | ||||
| Cash flows from financing activities: | ||||||||
| Proceeds from line of credit | 32,686 | 40,576 | ||||||
| Payments on line of credit | (34,085 | ) | (41,299 | ) | ||||
| Payments of debt issuance costs | - | (483 | ) | |||||
| Proceeds from sale of common stock | 4,016 | 5,034 | ||||||
| Proceeds from convertible note payable, net of expenses | 3,797 | 12,430 | ||||||
| Payment of convertible note payable | (268 | ) | (400 | ) | ||||
| Repurchase of common stock | (1 | ) | (2 | ) | ||||
| Amounts from former related party, net | (1,573 | ) | 629 | |||||
| Net cash provided by financing activities | 4,572 | 16,485 | ||||||
| Net increase (decrease) in cash | 471 | (24 | ) | |||||
| Cash at beginning of period | 533 | 49 | ||||||
| Cash at end of period | $ | 1,004 | $ | 25 | ||||
| Supplemental disclosures of cash flow information: | ||||||||
| Cash paid for interest | $ | 548 | $ | 1,051 | ||||
| Non -cash investing and financing activities | ||||||||
| Dividends on Series A Convertible Preferred Stock | $ | 5 | $ | 5 | ||||
Modified EBITDA
In addition to our GAAP results, we present Modified EBITDA as a supplemental measure of our performance. However, Modified EBITDA is not a recognized measurement under GAAP and should not be considered as an alternative to net income, income from operations or any other performance measure derived in accordance with GAAP, or as an alternative to cash flow from operating activities as a measure of liquidity. We define Modified EBITDA as net income (loss), plus, interest expense, depreciation and amortization, stock-based compensation, changes in fair value of warrant expense, and one-time restructuring-related costs including employee severance and asset impairment.
Management considers our core operating performance to be that which our managers can affect in any particular period through their management of the resources that affect our underlying revenue and profit generating operations during that period. Non-GAAP adjustments to our results prepared in accordance with GAAP are itemized below. You are encouraged to evaluate these adjustments and the reasons we consider them appropriate for supplemental analysis. In evaluating Modified EBITDA, you should be aware that in the future we may incur expenses that are the same as or similar to some of the adjustments in this presentation. Our presentation of Modified EBITDA should not be construed as an inference that our future results will be unaffected by unusual or non-recurring items.
Set forth below is a reconciliation of net loss to Modified EBITDA for the three months ended
| Three Months Ended | ||||||||
| 2023 | 2022 | |||||||
| Net loss | $ | (1,436 | ) | $ | (3,231 | ) | ||
| Modified EBITDA adjustments: | ||||||||
| Depreciation and amortization | 68 | 58 | ||||||
| Interest expense | 1,293 | 777 | ||||||
| Stock option and other noncash compensation | 139 | 214 | ||||||
| Severance | 85 | - | ||||||
| Legal settlements | 12 | - | ||||||
| Total EBITDA adjustments | $ | 1,597 | $ | 1,049 | ||||
| Modified EBITDA | $ | 161 | $ | (2,182 | ) | |||
We present Modified EBITDA because we believe it assists investors and analysts in comparing our performance across reporting periods on a consistent basis by excluding items that we do not believe are indicative of our core operating performance. In addition, we use Modified EBITDA in developing our internal budgets, forecasts, and strategic plan; in analyzing the effectiveness of our business strategies in evaluating potential acquisitions; making compensation decisions; and in communications with our board of directors concerning our financial performance. Modified EBITDA has limitations as an analytical tool, which includes, among others, the following:
- Modified EBITDA does not reflect our cash expenditures, or future requirements, for capital expenditures or contractual commitments;
- Modified EBITDA does not reflect changes in, or cash requirements for, our working capital needs;
- Modified EBITDA does not reflect future interest expense, or the cash requirements necessary to service interest or principal payments, on our debts; and
- Although depreciation and amortization are non-cash charges, the assets being depreciated and amortized will often have to be replaced in the future, and Modified EBITDA does not reflect any cash requirements for such replacements.
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