REED - Earnings call transcript Q2 2018

Due to licensing restrictions, you must log in to view earnings call transcripts.

Operator

Good afternoon, and welcome to Reed's Second Quarter 2018 Earnings Conference Call for the period ending on June 30, 2018. My name is Jeremy, and I will be your conference call operator today. Today's call is limited to one-hour, and we'll have prepared remarks of Val Stalowir, Reed's Chief Executive Officer; and Iris Snyder, Reed's Chief Financial Officer.

Following management remarks, they will take your questions.

Before we begin today's call, I have a safe harbor statement to read to our listeners. response remind contain that management forward-looking additional statements to managements this may like forward-looking may questions. remarks statements in would our during listeners call, make I your to and that

are anticipated statements our ability factors achievements to unknown environment, uncertainties limited goals, our to Securities different States and and not actual our on manage and be to growth, and only Commission. to may of filings Exchange competitive include, level those factors reach risks, predictions are and materially and in and detailed Forward-looking company’s manufacturers to subject access manage by products, are the with production development debt, activity, These information known the distributors, third-party the results, time that but other other such statements. for United cause and in capital, current to performance from changes demand from or dependence time

expectations in statements performance Although we levels future reflected activity, forward-looking we believe are cannot or of achievements. results, guarantee the that reasonable,

change. the management's as projections to any represent future update performance no August as projections We of the today, these in company's addition, as XX, conditions obligation to market XXXX. In estimates assume future

call periods indicative operating do to sir. comparing items assists Mr. Please EBITDA our ahead, believe not basis by we the in financial excluding and Additionally, SEC, to as please call filed solely investors Stalowir. posted release is for press over performance. now is GAAP analysts included We financial our financial meant information during believe on measures results, the not purposes. substitute Modified the consistent are present for informational it referenced comparative on their at we this note, non-GAAP turn will core are a and measures performance reconciled in go GAAP I of across as reporting materials Non-GAAP but www.reedsinc.com. comparable that and and with a website supplemental because

Val Stalowir

saw you, with We is gross It discuss We pleasure my our speak on this of launch. plan. quarter update good Thank make aspect to our solid XX% to response Sugar I’ll beyond milestones margins performance. and quarter. of target. financial most excellent Snyder, Stoli expanded a CFO improve Virgil’s as brands. and moment, near-term company continue on we progress delivered growth for each Group, to but with to today second forward as Iris provide you sales let performance, And and to afternoon, brings transformation our the good key Iris retailer everyone. accelerated our our our me accomplishments look I and Financial in across consumer an We industry, capabilities, continue including beverage experience her category us Iris, and working and position company’s food Chief North as of we leading introduce first who joined to Officer. the to you the leadership significant to growth has role Reed’s recent America. Zero

let financial over discuss results. me the to to turn Iris quarter the Now, floor second

Iris Snyder

you with good very It’s a opportunity Reed’s. a there significant Val, afternoon at you, speak to I today. Thank everyone. and much believe privilege is

leading and leadership on-trend the of strong have group. a I’m all performance in to We with has Val for and improved future. assembled the join and growth meeting developed speaking you team financial forward and products, excited have to strategy look the

rationalization The significant increase sales compared and to price per $X.X the while came goods per price and last launch driver year's million, decline the in of core primary million. average case. X% volume increase the higher Gross X% price a in growth, XX%, selling XXXX. XX% both growth volume we sales of Sugar revenue Zero per higher case was sales growth. brands a Net $X.X of and case. cost was XX% better. increase drove to a included margin near-term delivered of Virgil's core of period net our The of in points X% the basis case. second occurred of an a in basis on mentioned, SKU achieving increased grew XX%, over driven prior the as contributed XX% Growth driven despite third case and gross This of by prior increased year Val per quarter to that price Gross strong growth the As quarter to sold volume year X,XXX sales of profit. brands target percentage our or by per combination higher our

gross XXXX. The consistent rate. new investments $X.X Selling prior marketing million, is personnel reaccelerate in as was of by driven broker reduced to sales million due the basis to XXX-basis compared basis, partners to expansion. investment and and sales increase net marketing as warehouse percentage as relationships. average and primarily first in marketing glass the second support percentage points a costs of quarter. in year company's a selling higher the This refresh sequential compared Delivery a net generated of The new point industry-wide XX% the our benefits to increase to and to General idle also increased to growth margin charges increased in the costs the We XXX with versus and in handling strategy increased $X.X higher gross agencies $X.X well of of million during contributed expenses combination million compared the administrative $X.X costs or in is quarter, margin increased basis and expansion freight period. the and plant sales contract, of to on to core of XXX prior new increased the XX% as quarter transition year. to points prior an the and increase sales, The prices, brand.

Norwalk, bonus includes accruals relocate the offices expense, expense one-time noncash and to The significant second Connecticut. with stock and G&A severance corporate announced associated quarter option plan recently our accruals, to

$X.XX second the was year, year same to was warrant of compared the reconciliation to expense million warrant liability. in in net compared This million benefit significant of million, $X.X loss second liability, million, costs $X.X XXXX. quarter second related a a the million of the gain fair million financing period. the which net million year the benefit is XXXX, of share period $X.X second to offset second $X.X was the of in This modification in press operating of to decreased of quarter loss loss a of period. change in other of in quarter in $X.X liability. compared quarter, partially loss related to $X.X of is gain the of net $X.X quarter income per $X.X items EBITDA to year. $X of million Modified reflected the in in second A million financing value value related financing change today's by Other value last million in to warrant due to warrant to costs. to compares were $X.XX a Net change the million XXXX, the prior of to in or and per quarter last share the The or million Interest fair $X the compared $X.X in included loss Modified of EBITDA $X.X release. fair prior from income

release www.reedsinc.com. can the in access the press our Investors website You on section at

million million capital cash and for equivalents quarter terms that with existing line availability. sheet undrawn $X pleased we is annual reduced executed term am credit in cash to announce improved with have flexibility second sheet needed. ended and Moving to flows, sufficient if credit we cash service of and a of and all new balance $X.X credit in agreements I the line to the at additional our revolving working that to provide the repay debt

credit in into on the near-term. this a and new We to facility agreement expect enter close definitive

of the investments increase had payables operations of prior During to Zero in our of the manufacturing inventory primarily and the million The to Sugar. operating we support support the planned place half activities payment inventory LA to million, year of Virgil’s the cash during and period. transition $XX.X early first of relates added is year second to the quarter. XXXX, in launch $X.X in in and stretched compared The

Additionally, XXXX. end saw at we given the of quarter, shipments receivable also second June accounts the sugar strong late the in of zero higher

Now, let discuss transformation the to plan. to call the and recent the Val? developments Val business back me turn

Val Stalowir

Thank you, Iris.

we’re As very second the see, pleased with results. you can quarter

for We’re growth from brands, delivering the first dollar two growth, despite XXXX. years, the five eliminating in XX% for quarter sales, generated both over up XXX revenue core SKUs and top year. XX% SKUs last the of in We last accounted for our during time

new broker beginning Our enhanced club natural, our marketing the category sales ramp our leading in up. continue of distribution specialty, brands efforts positive terms on our to I’m report footprint focus positions a driving to to and to growth We're us our that and brands. from of impact grocery see pleased starting our expanding are relationships core channels. in

a over strong the both The that very response May store doors generally whitespace new partnership with has been in launch which for This has U.S., currently positive the line quarter broker gone in we of anticipate Zero retailers company. serves X,XXX launching Sugar Virgil's well the a convenience and from consumers.

taken doors. The we carries retailer product presented and X,XXX line, to line are we now on the retail So far, distributor KeHE. and the majority including our that authorizing have and has UNFI sampled now every over network of

San kicked this across roadshow We and off Kroger are at the effort in month currently stores Diego. we’ve in select Target and Costco our country,

landed and brand brand first social name Rogers add & our Market We to website have And now such Stop H-E-B, Virgil's. are grocery and Basket, as running. strong few. regional we’re Giant-Landover, for The Shop, a refresh up is Harris champion excited also Wegmans as to The complete. banners ambassador genius jeopardy platforms and Austin media Teeter, Virgil's

campaign news, for will refresh, later fun portion for Zero continue increased brand. nearly distribution the the to marketing drive launch a build and is well of new sales The Austin and and brand brand also The events and slated and have underway flagship design of upcoming process is We momentum product refresh complete. digital some Reed's to Virgil's the the this support quarter. the planned initiatives

and the the targeting the refresh new We’re of year. by to launch cans bottles end

line the Ginger Sugar on natural transform all-natural completed category transforming a Zero Beer we Sugar have now category. are the which zero category Soda craft Reed's Zero of Ginger Craft we just soda the will sugar formulation Additionally, Beer, work as

a to only Line true We’re offering breakthrough and key Beer in The are targeting launch expected packages represent brand category Sugar zero by will The the by driver new organic to Reed's XXXX. Line all-natural sugar ginger the fresh growth a made Sugar with Zero Zero be Ginger root. launch year-end. also of

you the update five on to key our milestones accomplishments of plan. components our like and I’d transformation related Now, to

new capital structure. leadership our improving model, and first focus, includes The phase our and strategic business new optimizing

on model is of which and in brands I progress The report value. each second gave growth transformation accelerated increase a that sales plan we’ve update and phase investing drive component, of optimization to made the and the the to fifth business key second during brief order quarter. aspect point good just happy plan you in brand on I’m the

across of significant several organizational already announced positive recently new terms by additions to a that management In I’m the the the having team improvements are We company. organization. impact senior leadership, pleased on happening our

is across to to systems, and capabilities new effectiveness company overall goal add Our leadership and efficiency area each processes new drive and and improve increased functional performance. develop

a the in to Logistics. the Iris, advertising Director as to industry and of leader CPG to supported Dan take years welcome continuous recently at I a Henckels, Director Marketing; this then management to was for smaller all and special to and Senior brings I Procurement. improvement. Phil appointments of her and growth brands at most and a of really of multiple Beverage of in process and hard Children's transformational at transition. Company, And America great recently announce The for career with Miles Director contributions appointments the would announced as want and on important food Phil for his we was leadership like in and to opportunity effort. Chain the several addition Supply Place his Director we experience really, during served new at as an of appreciate and and and Brown Transportation of large Manager practice positions from support and the also this Reed’s Chain most our CFO marketing and Diageo asset beverage ZWILLING thanks at Tilde Dan chain Trotman brands added Phil USA. considerable and focus experience Heineken work continued give in to [Tilde we dedication smooth having Beth supply been high-growth Supply logistics his managed to Reed’s He at our of Dannon brands. commitment a Diadem Beth systems blue-chip Zimmerman], management PepsiCo, positions [ph] considerable Company Partners. now spent – Colgate-Palmolive beverage Pepsi has and In operational has as for addition consumer also partner development industry recently the the

In results sales a terms the delivered strategic improvement core from quarter reacceleration beverage of growth. on company's second of core margin focus the and brands, benefits new brand continued gross the

of innovation All top make This now selling deployed marketing brands, to returns are focused achieve more sales number from and core our will investments us we our two allow on against of support. SKUs. greater higher to the resources velocity to a

manufacturing CapEx L.A. improving investments, plant to an marketing business year-end, optimizing committed of our profitability asset-light and transition need exiting our company. sales terms completing model by to lowering our and our and we’re for margins In and our

the process transitioning preparation relocate access bicoastal exiting exiting Norwalk, to talent Connecticut. sales based, leadership in Concurrent We’re relationships by Coast resources and an for transition model have with East plan, we to marketing adding of and and evident as manufacturing, are is building to to including support operations and corporate is significant the next additional a preparation asset-light location provides along evolution the our the focus well and team recent is to with inventory plan. of agency co-packing new high-level our our additions. base The the us

We new as term revolving for service line reduce all improved structure, agreements, executed of our sufficient and a mentioned, sheet provide capital if we additional working is that a our needed. at our refinance us financial performance. of went improved credit growth outstanding credit at to through annual terms efforts a In debt service potential terms these broad Iris lenders improved fund in structures debt reduced will and terms driving near-term. are The incremental and the numerous and wrapping sales financing looking investments to allow and be and up pleased process in to capital marketing

As very I elevate beverage. craft business to route disrupt categories take same eager of the we're to at execution past excited and entire and belief to and I'm change also our our here through pleasure Soda team to the say, grow amount short Sam a that it’s been to becoming I the enhance and support, time. of their plan. drive and an the like natural this to their hope want Craft the tireless honor significant very we’ve dedication continued successful At our mission time, you for of the improvement at I’d to been of can and this we’re in leading what their value accomplish optimization very proud to shareholder thank able opportunity tell, Reed’s by Reed's ginger beverage year, en Adams and a company. passionate our in mission,

each to we lines there We have us With date updating We are shareholder to good to forward open forward. you would look progress and for results and continuing questions. and deliver significant value. moving financial capture on quarter that, improved like to for the to Operator? progress made opportunities our

Operator

Bain from [Operator of your proceed Instructions] question. line with the comes Our from Capital. Roth first question David Please

David Bain

thank on the Great, congratulations you, and quarter.

are I off, just was the negotiations, guess going the could timing material those of I about sale believe are items? at question those or timing, in ask you is, these the and specifics, First are remain plant less said, you it that I to sale regarding hurdles with risk, believe the put you negotiations

Val Stalowir

terms as parties a terms. is – fairly Yes. the of of and in well with still negotiations different as in documentation, parts contracts, deal in the we’re negotiations lot of complex

wrapping of terms position of the sale definitive the So, I the I exiting in one more a following the up having committed a and year. process least, in kind the L.A. very another by or we’re no-go way the of end go, plant few mean At to anticipate weeks. of

the to but are by that any also strategy case, Dave, execute doesn't absolutely exiting we’re In the we're hard So, to end materialize. sale, plant prepared a different of on land year. planning against the sale the working we if

David Bain

Q or you there any, anecdotes XQ customers intra-quarter give of to are Virgil’s can I and and trends sell-through kind us Iris, for a with Val then then, from gauge And was see like volume at hoping didn’t get out and for it. to feedback XQ, Virgil’s this Virgil’s, any color breakout respect and that yet, Got case Reed's to the the to particular case volume come I point, XQ? in on relative

Iris Snyder

is will The by about will QX sales and coming in have Virgil's This Iris. past there cost QX price quarter been goods we Q and And be case will minutes. table out at of the XXXX volumes. XX the Reed's in o'clock, that’s updating per and and and be X

So noted in that be there. will

David Bain

Okay.

Val Stalowir

it of yes July, has see And let’s shelves too at I the so started hitting are of been repeat at to just probably half velocities of yes, response, shelves in June, orders, measuring figuring Kroger what are. and – terms we early lot of end Ralphs retails at the say shopped start out it’s Target. a and really Anecdotally beginning

is. is, cycles metrics matters try pattern, as The hooked magic loyal really mean, what on repeat a them of I would of a to first see lot new. something through the So, and really to you've you a we purchase so early sort getting on seeing field acceptance give if the can't from we’re metrics, and the really we're percentage to call, it’s good shelf, I sell-through, happy see and in very just even with too but you what of we the specific user. if far go of it rate of give the couple people

is positive. hundreds far been we it faces tell, story the we get, sampled lot has very we feedback a launched but of we smiling at that people just a came I to in and anecdotally and will a a of we with feel stable provide there Costco, from products. sold once as roadshow that So, lot and of so

far good line. and Sugar sort a so Zero acceptance So on the consumer of of retailer

David Bain

one would of so And more that when to expect similar the new cadence change do from rollout this good. for ginger Very beer seeing mean with you just I or in new modeling look product any on of at, adoption terms you that I a then launch, Virgil’s product are just reason there could, standpoint, is at sort we the product that if point, a this far the rollout? believe

Val Stalowir

That’s think, and a a footprint good market, question. selling Zero in I mean, bit better and has the we I glass the cans. product will a offering be Reed’s general little in in glass, in Sugar

So, Virgil’s was widely a Sugar are have of is of trying carve it cans; we really version distributed, bit full complex time that and a Zero we bit in, is the first more there pretty that in sort of it's got less new Virgil’s, a terms to story little a given little was a sell in closed territory you’ve were version, sugar and it with less out. we

should that Sugar would very the the Reed's little same think definitely I the momentum. follow least, So, bit not better, of Zero at sort cadence, the if same a but

David Bain

you Thank very great. Okay, much.

Val Stalowir

Dave. Thanks,

Operator

Please question Maxim proceed Anthony next from Vendetti the of your comes with Group. question. Our line from

Anthony Vendetti

evening. Good Thanks.

should factors the or I On on and forward? an be of just this industry, something the increased as things, the cost to to shipping to is expect see couple industry expense focus just side, there other increasing seems across expense any we going a wanted trends

Val Stalowir

it. in I’ll is don’t I’ll in, There Freeman, the that COO the then new limit is of Stefan and freight a try who on jump given increase definitely cover terms also our significant if certainly that as is from it driver requirement to I rates answer portion There our a driven logistics by to smooth would and our hoped provider, transition fuel. had increase and be. as wasn't transition, there new provider logistics of the old hours we have

that She anticipate to, some new we’re I we’re that process of the in terms one deep to warehousing. Zimmerman] now immediate and with coming our from in area And think entire to experience P&L and right we hopefully forward mentioned an and that say, the distributing, in Pepsi of to wrestle I comes and wring bringing on impact down. of transitioning our terms provider. out in [Tilde I portion Heineken talent speed of really I’m her up whole have and on the still is fully the I looking making things why positive impact, inefficiencies of have really selling, a to

Anthony Vendetti

of can it can’t, answer jump revenue, So, think to as a shipping moderate in to of will possible Val it percent a as but percent as And and new this Iris do is then you plateau? expense expect do logistics to in of with start as percent Stefan, can well, actually you if you when then revenue decrease? a maybe, place, the revenue

Val Stalowir

on Stefan? mute. You're probably

that historical So, of we standpoint are are move now sort current terms to over and a levels, absolutely we’re industry moderate, thinking think and to it’s going then than of time come peaking stabilize right we hit are we’re sure I from expect sales that where of or going that of our kind percentage hope Anthony, net I'm inefficiencies, as to to we lower it today. in but transition going increases. if not down. We we

Anthony Vendetti

new was this that, it then and some quarter, with, segue brought highly up severance obviously on good there then we obviously, team, think experienced move to was this think Okay, going you how we payments went primarily great. but G&A normalized And G&A but – a one out that, G&A than about as forward? about should severance should time, we new as those forward payments, taking the other possibly

Iris Snyder

That’s question. a great

a little lot that. bit talk what’s A is as me of the in about said, Let G&A you one-time. to

So, one-time about severance was the $XXX,XXX.

there. accrual bonus a had We also in

the payout. to our the perform assuming bonus meeting quarter we an not put XXX% this did make but accrual QX, a and and as starting in beginning accrual, at we on a So, year of numbers we're

catch-up. a We and quarter will evaluate that this for time over We QX was QX. accrued for really and so

go and normalize will that forward down. going So,

$X over combined right are or So, million those two items there.

Anthony Vendetti

need space talk obviously Val move space at on missed year, a then, And facility? much Connecticut, be there, many much people out have plant transitioning just you of of to bit the end how about, you Norwalk Okay. are little by LA and you the there out how the based you will can how the the

Val Stalowir

Great.

too a lease, details So, and negotiated signed sublease haven't I really the announce day it should to yet. that that. to we’ve the X-K because only approval, of and it’s many into office about an years. portion a They their – actually. get X,XXX pay once they any got a got it’s We’ve can building first that A space get can't we we negotiated But X,XXX now be landlord is need it and and an we’ve consummate space. A feet for for square three

it all our terms over of growing anticipates in needs of So, time.

people than us don't probably to less growing start. will have I beyond We XX. see XX

– I in absolutely for just see can years many, us we can come. to So, being really the space many same

the terms in It’s excited convenience want and tri-state we we’re that on everything for lines got to be there. of metro area. So, the

we definitely it’s need into our more grow to today, And but over time. so, than that plans are

Anthony Vendetti

now. Okay. All that’s right, I'll the for Thanks. jump queue. think in Well, good. back good I

Operator

currently Ladies time. and questions at gentlemen, are more this there no

Val Stalowir

you and on participating for Great. today's for support your Well, call. thank again

have on on progress you. updating day. next Thank to the look excited of a by next to you call. hesitate we’re any our Please encouraged chapter don't comments, questions additional with call great making for Reed’s. and we’re further progress or and We’re We the forward

Operator

This concludes conference. today's

lines at Thank participation. your may disconnect you time. for this You your

Reed's (REED) 13 Aug 182018 Q2 Earnings call transcript