REED - Earnings call transcript Q2 2020

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Operator

Good afternoon, and welcome to Reed's Second Quarter Fiscal 2020 Earnings Conference Call for the period ending on June 30, 2020. My name is Laura, and I'll be your conference call operator today. Today's call is limited to one hour, and we will have prepared remarks from Mr. Norm Snyder, Reed's Chief Executive Officer; and Mr. Tom Spisak, Reed's Chief Financial Officer.

will questions. they remarks, management's take your Following

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

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

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

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

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

Norman Snyder

We this Thank us in safe to time our hope appreciate I'm our you you discuss key and that afternoon, and pleased four and history. good are quarter you We unprecedented messages. adjusting well second begin we'll to and today. everyone. results with joining very

seeing demand core strong First, brands product each our are our of we and of across lines. all

Second, real production last operate of the the chain, enhancements the driver to pandemic. the especially the nine out we our challenges our redundancies the build are ability of and COVID-XX of over network, co-packer have supply amid to made months our effectively

we opportunities roll continue commenced our have new out product portfolio have to across distribution launches to significant only recent retail. and Third,

cash system, our Finally, team's flow to tightly pandemic. from removing and by driving controlling focus proud challenges we build are profitability. our Reed enhanced significant optimize improving on the global quickly broader costs from adapting the I effort entire while to and am profile remaining spending of

which the Virgil's most growth incremental the strong volume brand. net discuss XX% of including We're new Reed will quarter across all the a launches volume X% the innovation, at growth demand syndicated data. growth as recent well from as recent retail, seeing evident of is in with driven strong Now second I had brand, growth our demand delivering We XX% sales strong Reed’s reflecting quarter. by SKUs,

increased made be which down improvements our are XX% was July XX.X% by the Virgil's up running For production invaluable supply margins demands prior redundancies and dollar COVID-XX. supply chain most channel industry supply and basis partially initiatives, challenges. year chain impact increasing strong margin XXX co-packer to across impacted points directly sales faced negatively the our lower growth been on offset recent industry sales, This gross has versus up while year, XX.X%. four XX, related weeks COVID-XX proved with over by non-measure Reed’s reflecting in the of as this capacities ended to and was is the the We

pace drink meal the last Most four notably years. which late the Real to but Extra new begins a and But by the Wellness new Shots and retail Reed’s was the result from our allowed and a many In which place us positive the have ultimate launches rate challenges ready Ale, efforts to has distribution. Ginger second authorizations as of last $X.X normalize. with a reset, in to category to quarter. build the Ale right our COVID-XX. as X% that plans growth a co-packer demand response with help response providing of Reed’s encouraging only out ensure execute of the combat to real launch to to solid an not product costs saw well Ginger an challenges that compound of of quarter entry COVID-XX new as staging over overcome the in Reed’s products saw the we elevated Zero billion significant for delayed new network Real retailer’s environment we Additionally, including retail space the improved into has initial to retailers annual with we materialize ginger affiliate also right Sugar, impacted presented environment, Ginger will can, shipping inventory to handling The

on Reed’s Shots well, enhanced product a positive Reed’s Amazon. offering We with branded accelerated growth saw and Our on well the significant launched the as can Candy. focus is as including included also websites, cream and channel beverages, response cauldron a throughout sales both and Ginger select quarter. soda, We girls Ginger our e-commerce very flying on butterscotch, performing

the grow copacker the on more volumes a faced the ago, one in increased of moment end contributed by the keep and to But the higher touched our capacity process the certainly overcome to with fulfillment and our rates, demand especially chain as to ability the to online bringing due of network increasingly ample the pandemic. in more We're copacker proven redundancies was this order to if demand industry As challenges. year. continue has have online built labor COVID-XX we up sixth to briefly and This third valuable. I we and case bring become and then quarter, in and the on quarter, inflexibility supply have network constraints

Our to robust network to us place allowing strategic as right products, of reducing plan right expenses, time, delivering handling placement allowing and the to also forecast. helps products as ability with the us enhance well in at have the

supply have In this year. addition, to earlier ample ingredient we as continue long-term a we agreement secured supply

me of COVID-XX. financial the Tom impact over the comment on I call through Before turn let to the to run results,

pandemic. remains mandates. to employees quick comply with partners our we our work priority want of all as new all the constantly with for Safety as continued I navigate First, support thank normal the continue their and action this we top changing regulatory and environment to towards and

with chain is operating distancing place. supply and remains in secure Our social measures

see retailer We diligently volume the delays segment to promotion demand. impact keep natural given reductions offset in with and sales mass up work partially our store to continue to positive merchandising grocery as by stores on trends, the strong retailers and trade resetting and

of the start As our awaiting new reset are authorizations activity. of a distribution many result,

in that, me environment the With to to and detail, We to Spisak call over evolves. the continue financial more turn this monitor we'll Tom? discuss Tom nimble let will results situation as be our

Tom Spisak

to Norm. with Thank speak everybody today. much It's pleasure you a very

with second in our As very Norm progress we're discussed, the pleased quarter.

continued COVID-XX core build from as have by pandemic. to We our very led to our growth innovation, well skews and all new the a momentum as of response brands effective

simplify sell, and of We save on financials. in our are our are strategy executing the results seeing

growth, prior with gross brand profits million sales by for $XX.X year, the dollars quarter $X.X net the growth Second case volume in and Virgil’s market forces handling over X% increased $X.X XX% prior COVID-XX. year, X% brands and margin significant sales XX% million short Virgil’s XX.X%. in the growth quarter our growth most increased compared compared XX% mix costs and year. higher including volume on the XXXX Delivery basis increased efforts XX% the increased impacted in driven the $X cost Core the the and Gross by Reed's core prior to the million million margin Reed's to prior XX% increased quarter. driven were for $X.X million compared with as growth to associated term XXX year, points case during second was Margin the enhancement throws to brand to of Gross advanced by and negatively to brand. brand, gross the

second during $X.X million reflects and ongoing the the from XX.X XXXX of The decrease prior to quarter percentage XXXX. General million marketing elevated in quarter $X.X second but in compared However, to for costs The XX% XX.X year the decreased and executed net the million improved to expenses in period. not decreased in inventory non-cash as administrative decreased to costs impacted travel our well the quarter. of a by forces a on temporary marketing and and fell year. the the of of related staffing, control decrease as production market of cost reduction result year-over-year in prior as that in XXX the offset reduced Los costs Angeles compensation, the stock-based programs sales were reflects largely exit quarter the basis points spending facility as COVID-XX. and expenses partially $X.X second by Selling staging XX% of year-over-year of

loss prior Interest narrows $X.X million $X.X of share The year. second the prior year. Modified improves operating of million or with then to consistent million $X.X from loss million million loss per last $X.X the that year loss million XXX,XXX. compared per same in in quarter $X.XX second to includes $X.XX $X.X XXXX, or share to the compared the $X.X a to EBITDA And as prior of the quarter year. loss period in to was expense in the

ended sheet the our availability flows, quarter through and credit. revolving $X.X cash Moving of line balance on of million we was the second

using $X quarter in in to a second decrease a spending million in compared loss The of quarter in used in a use and net in cash the activities the quarter. during prior of operating to second period. XXXX reduction the lower During $XX.X year we operating million activities primarily cash relates the

we Turning $XX.X over anticipate XXXX year fiscal sales -- generating to net growth core outlook guidance. or XX% our million. We approximately as fiscal to maintained brand XXXX continue

to continue anticipate XX.X% also the approximately We compared of full to margin year. year XX% in prior for a gross the

be impacted assumes guidance enhancements. margin which ingredients pricing and margin packaging, by thus COVID-XX of and continue the been environment to gross Our gross costs our production [indiscernible] and normalized pace has for a

some me back to let Norman? call turn remarks. Norman Now, the for concluding

Norman Snyder

Tom. Thanks,

reiterate the long the to I business turn for to continue I for position our questions, call operator growth. company term Before to want my confidence the in back we as

growth We are momentum. focused controlling margins on brands valued costs, leveraging and our improving building

innovation. recent the For

will true of and will we over yet partners necessary Ginger and And to market Ale large our environment. coming our have current the our keep to navigate months distribution of impact make Ale to we inventory the build employees We as any continue safe and Real prudent Ginger and flexible quarters. see and shelf. the into entry remain We really changes the on

enhanced forward. have I now our the network and the over an in our session. financial amazing chain the We the current supply begin driving challenges, company answer and flexibility and operators place while the improved have significantly to on call to to question take team will hand co-packer

Operator

Our At Instructions] question Bain Capital. [Operator time, be will of this ROTH David line from we comes conducting the question-and-answer session. a first

You question. with your may proceed

David Bain

consistently are thank with. doing strong structure you. momentum you product basically the guys on Great, that and Congratulations that

give delve in anything I'm of factors out will It's a bit to us for were sense way Can our indicates certainly give more also as guidance first also us into or line seems of we stronger quarters momentum. for can conservative, you like checks products higher given than a can a than new but First, us guidance. more you top-line And used guidance I let just terms net and that top year hoping delve little know continued little you. credit includes the maybe were margin what to little Thank little deeply and stock two the expected. categories. the in bit deeply loss somewhat guess, some a in

Norman Snyder

afternoon, the Norm Dave. asked question. question. Good here. same myself I Good

for answer an here. So I think got you I've

our various you to components of then and business, So the on. going look when really you the what's look dynamics into at need

did So, was what I with okay. said I

and category, If at a MULO showing dollar XX% you growth. IRI the the like look most recent in data it's

a granular. components business, very further taking here. are back down then aren't the really bit on strong, by significantly high? why went number ask? IRI to few measured, which services was unmeasured I sales, you and I there's really things And One, all segment numbers you is a there's and off obviously the going up down I but your more measured little aren't into our guidance high of and I So Why so almost measured It's and the I the sales our impacted to was can why a as which And into sales your break measured are said, not unfortunately sales, COVID-XX. XX%. get break going sales

our delis, going to a to And earnings. you'd been into that's expect obviously, have what's for accounts sales of on serve on. premise amount quick independent So restaurants, that's drag going And on reduced that's a by translate like markets, impacted going the significantly to us. all

So I is which data, very at looked when the measure strongly. up

couldn't very it. things very said of There's stocked. shelves well any because on of was retailers just going the handle we and little price keeping quarter activity, on One stocks last that of been sort focus they their promotional little promotion

and stronger incredibly sales So their been strong have more much ours. kind dollar than of

looked back so and retail volume, had stronger greater. match went at magnified has we've we're this case been tracking But up pricing is case at pricing too, I and on even And obviously, So up. volume. our

that So occur. when because we of going this look at budgeted obviously, activity type didn't for did, we come to we higher in that, than they're

to pricing has impact on stronger. down And negative went then been where you So the really It non-measured their the in channel. we're lot growing. a gets

to So while want to the take say the to know what this the good second out we than which We're happen mean, predicted, put hasn't there? year of enough of are what's stronger I economy, We we still growth off. half let's to not numbers the out feel us. what I still US the we in -- about yet. not rates going impacted don't

if So results, the to from the But comfortable numbers, there's still we've scan to uncertainty. a lot that with of make reconciled and you're our data reasons us. down sense

to to just guidance, to stay, our outperform that to navigate premature up got best think really we're I obviously, do and bit a I going foolish I couldn’t think another point, we're going going we're for going that reason, to to have at So be think that, and to phase but would because it to do stay this we're just hitting take we're it through.

David Bain

it. Got

And enough. that big I sort these Can point? this Reed is at thoughts ginger growth. And as just bifurcating overall ale a category at in us if understand fair a how volume then, any around you of look Okay, that to of help percentage driver the general?

Norman Snyder

recess. what we that's It's largely because pretty anticipated. smaller delayed than And of had

recess The it up more quarter, little of picking accounted activity. to Obviously, going for numbers than X% back. second overall We're a pace. and scheduled our see we see that being starting

we're So going back been has huge, the note, very we commentary reaction year consumer that think a the we're because to fan positive. strong the on receiving folks really the in from end

promotional consumers. with and been program. So in as tough It's are we're other recess it's when to shelves still ask but you've for occur store dials confident, grocery as to a you just crowded again, and workers, see, for restocking store

fan if the quarter, for we piece. starting fourth much we bit, see third significant do just to better. up, slowed strongest be probably market, even the think think it's So is the which in we'll more ginger we're the a down pick back it'll quarter, little ale But a

on So what we highly response pandemic remain but in had an delayed we're the there's, not, was ale. competent on ginger impact if it,

David Bain

that before know should don't this, line of of stage. if be was known credit higher or I I if to one, just then could well there the you going receivable my I augmentation is Okay, at another buying the given it of the an when And on credits you and I Tom, And just it kind known final year, we stayed if end expected could. new then this product mentioned be up in continuing. has, think question momentum launch also category and or

Tom Spisak

we've of we for working keep doing, additional there, on, you a Yeah, on to we're segments, that open particularly -- convenience to channel, that in by things, you so channel. attention? expand clear eyes keep want made into it lot I We end friendly into that's that this we're the was we're working think obviously our I paying channels, don't keeping of that something doing year,

of we, done we -- done not we've to you've that good that are it, things working on too we're on rather intentionally trying the one So be that to one is at what if much. trying David, take or things two I'd satisfies.

to I we've apologize. one going So for into slowed be and entry main were think and focus I juggling Same is we're down rather really Tom. balls, category you sorry, a time real multiple so than an like -- on at issue that I'm our thing if could be question I focused the

Tom Spisak

your you Or flavor? mean

David Bain

Yeah, bad. my I'm it's

Norman Snyder

doing back we're at new looking new, to mall, some Well, is bringing we're and of a new. is bringing Okay. combination which which

be part right into augmentation to going we're things that testing there. And is segment that So entry of some now.

David Bain

Fantastic.

Tom Spisak

the I think Is capacity. volume that asked question you your about expanded question? the

Norman Snyder

of on of from improved gain asset done we've reconciliation So borrowing and inventory lot internal additional our off inventory through our process a that, capacity base. properties work

David Bain

Okay. now capacity? and what about

Norman Snyder

we Did million. David? $X.X lose you,

David Bain

right. thank Perfect. right. you. All All said sorry. you I much. very I'm Thank

Operator

Instructions] next question comes Our from of Tacos]. the [Operator line [Matt

You question. may with proceed your

Unidentified Analyst

Hi, everybody.

And ginger these I'm ginger and their the then shot, the John First, them. investor to the really been change I've thank applying here. for sips and want for mule, sphere, to I craft trying a enjoying support just wellness Bello with butterscotch real around Neil asset and few

on you about expect without So when to regular to you. my profit a thank is have question a basis, net the pathway ado, further profitability. And

Norman Snyder

what Well, this year we planned. we've done than better

strategically. the about doesn't that just top much and to Improving growth. drive with said, And that. line we're change more So continuing pleased spending strategy margins

And working been to our as the year this three expected. insight narrow consumers gained to some has year new new strategic we've gap our what in on behaviors. continue to And, going and Obviously, a brands and not we're we're think plan. anybody I XXXX.

but but expected go think bit goal And a than be little exercise what the normal, back to is we in not closer we year. And to very that burn, take I was that. it's I want be going to up So, be opinion, we're all more XXXX called by we're position really to today. going go to save next with to and margin planning in managing at be sell, we through of we'll very, think cash even going to come to I better best obviously, get us new because a my point, really the thought top the strategy and our really fundamentally, what down brought We've think we're our from detail of moving quicker confident what not sound plan, but world want and we advantage we'll really a that's stray the simplify I than growth line earlier. expenses. enhancement to And I'm going there

Unidentified Analyst

Okay. Thank you.

Operator

it Ladies session, for would Norman question-and-answer to this back remarks. today's and turn like Mr. gentlemen, concludes to Snyder I closing

Norman Snyder

with are years. execution. the to Thank participating coming you We strong brands continued Have over months call. look operational seen our and on and sharing and positioning for We support a opportunity your again day. forward progress today's our and remain confident great

Operator

This concludes today's conference.

this may participation disconnect have and your lines You for day. great Thank you at your time. a

Reed's (REED) 10 Aug 202020 Q2 Earnings call transcript