Earnings call transcript Q2 2023

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Operator

Good afternoon, and welcome to Reed's Second Quarter 2023 Earnings Conference Call for the three months ending June 30, 2023. My name is Colin, and I'll be your conference operator for today.

We have prepared remarks from Norman Snyder, Reed's Chief Executive Officer; and Joann Tinnelly, Reed's Interim Chief Financial Officer.

Following their remarks, they'll take your questions. I would like to remind listeners that this conference call will include forward-looking statements.

performance current uncertainties are may anticipated and results, or only and to cause by are be levels risks, to unknown other activity, such statements statements. predictions from subject and known actual materially Forward-looking different achievements those or factors that

capital growth of freight time the in These Reed's but chain caused competitive needs environment; ability company's to limited finance its supply are Commission. and to, other to war disruption company's company's United ability working the costs and the factors to time States impact growth, development economic manage and and from the the dependence elevated cost goals; manufacturers light impediments; on detailed include, with third-party Exchange in by of capital manage of the debt not availability in filings in the and the and changes Securities other meet distributors; Ukraine; plans; information protect and to

These assumptions, achievement statements the the actual statements, finance, involve company's materially risk, forecast, risks company's such that include covered the from or the by are which and to guidance uncertainties involve or that materials future trends results uncertainties beyond forward-looking finance success differ many of guidance or of including may cause factors involves and circumstances control.

and Reed's XXXX guidance pressure chain supply trends continue expectation year-to-date will XXXX. and inflation reflects your that throughout our

access could transportation and materially needs. are that could XXXX develop However, ability These not fiscal may production, current and/or exasperate cannot our new into guidance. be impact materials, logistic supply challenges chain estimated to factored factors inflation other necessarily and that raw risks

substitute to which could pricing knowledge production for packaging GAAP. full and margin prepared accordance a statements be guidance with costs, continue each Financial assumes has in of Gross impacted. as not should ingredients, financial viewed guidance of and be our

to the discussed please risk in information, GAAP. with For factors more refer accordance

Form discussed report XX-K, the with risk XXXX. Reed's SEC please which For XX, in on the on filed more refer to May annual factors information, was

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

the In today, addition, speaks management's August or their to information, respective as obligation update performance any assumes represent forward-looking projections any estimates company's dates. as Reed's as which future XX, to statements no XXXX. of of

the and filings measure, as information them press measures can non-GAAP be presented of morning's in Modified well considered be EBITDA measures it to SEC is of GAAP Reed's. in different by or the excluding GAAP Reed's other our measures in assessed and for their a consistent reporting believes by this on or in our represented as isolation in intended performance of information substitute investors accordance because not The measures found on from items not release comparing and do management as that companies. prepared and core financial be presentation limitations is Reconciliations Reed's periods a non-GAAP non-GAAP posted analysts non-GAAP to performance. of are this operating superior we indicative with basis may each and rationale believe to used definition using across financial for

over to go turn now Mr. call will Please I the ahead. Snyder.

Norman Snyder

Thank to today quarter us second appreciate XXXX everyone. you, afternoon, our results. you and good discuss We joining

We operating order in QX, retail of volume We to consecutive expense on experienced channels. optimization year-over-year all our continue quarter cost-cutting to across and fourth modified strong quarter another and execute initiatives of our which improvements. led EBITDA

single In with surpassed fact, in week million previous our $X.X we order record orders. recently

approximately $X.X offset net demand QX sales due the estimate the during unable million to quarter million an We order lower in shipments. levels fulfill all inventory $X.X to rate and of were and by inflated however, We, short year-to-date. this

of back from net later further on our to inventory our utilized beginning funds shipments, first levels quarter-to-date volumes order a Early order this decline last normalized to and shipping July the the volumes to the with return compared we in August in showing reduce and build expect short a encouraging short same have mitigate we June in signs have been experienced period increase financing month. XX% year. and part sales impact shipments, recent To strategic and

and key a stores grocery, based to a which updates club, product dollar mass, defined Turning few on scan as food, and data, channels. on is and drug, our MULO categories Walmart, VIP in multi-outlet military convenience

same XX%. July July X Year-to-date, mostly Ginger and Hard through last have grew XX% period Ale. our Extra compared by increased Beer grew Ginger cans while ready-to-drink portfolio to Ale sales grew same our the Ginger classic the XXX% year. period compared through year, XX% driven year-to-date to X, cans Zero last beer

present to and given X, sale swing-lid Cracker through the in nearly exciting Year-to-date outlets our market. continues bottles across Barrel. Woodman's recognition, Food of consistent strong larger Reed's, for total for July are brand category ready-to-drink accessible country, bottles XX%. The an Wegmans, and segment opportunity now were Swing-lid Sprouts, Lion, including up Kroger, growth authorized the

to Turning a Virgil's inventory We rate categories, lower levels. to other shipments a short order our the compared soda. and for higher aforementioned, craft product as Virgil's experienced of result of

order mid-August. short and levels we expect normal declining, shipments to to by are However, return

reflected cutting as fourth optimization in second in reduction As the mentioned a we I year-over-year on quarter improvement. our operating year-over-year before, cost of initiatives our have progressed period briefly by XX% expense costs and consecutive operating various during

In throughput $X.XX renegotiated the handling we was orbit second costs by model. which than and driven quarter, our per streamlined improved XX%, to contracts, case, by distribution reduced freight and down more delivery

forward. emphasize we with we further will transportation Although to cost transportation drive savings have peaked to have costs as trending going appeared practices freight and are and lean downward, continue

cost-effective cut the expenses during campaigns quarter we our on selling almost marketing focused marketing XX% as efficiently sales. and We drive to by also

recognize half will we spend year. the additional to the ahead, Looking to approach savings maintain our in marketing back and of expect prudent

quarter second our operational and highlights. to sales recent Turning and

active. and Hard Zero Ginger secured Mule secondary now On Ale call, Sugar on the Foods, Whole last national and we August our variety in pack mentioned which is distribution classic

traction in portfolio, secondary nationally. non-alcohol have secured placement stores our having we majority also across the Whole of Additionally, Foods gained

Meijer. We expanded during distribution ready-to-drink Roundy's with and beverage quarter of our line the

access gained we to - gained across Ohio doors Wisconsin, Kentucky, have over Indiana. XXX We have and over

We into alongside fan launch products and are Reed's Craft to Ale favorite Stormy our deliver Hard Classic Ginger brand to the Mule future. our new in Mule, additional excited markets

lowering We and from consumers. have levels successfully transitioned to our to for route transportation with our change direct network This improve costs, gross Publix, DSD margin, benefit market our model. our migrating service a while prices reduce will

our create for and retail also all to across of structure channels. of retail favorable our pricing consistent consumers. frontline recently We more will pricing completed pricing This realignment our more

and efficiently. leverage trade to impact more positively spend will it enable addition, revenue us In

Ginger products into U.S. and ultra-premium entered alongside their spirits recently joint selection of This our Ginger with a Beer We partnership program a marketing sales an Reed's company. products. Ale and ultra-premium includes

and next marketing detail look kicking key or will holiday effort. from the to collaborate season. October - to collaboratively broaden creative nontrade to the this spirits of forward buyers sometime We our leverage use for into off to on operators would press going we upcoming program the And partnership release this Reed's more one awareness another manage excited country. around and ahead a introduce look and leverage week, events joint retail mixer potential I of assets We're the

near market to new We cost-effective manufacturer produce enables us will in expansion Virgil capabilities plan With quarter a to us and much term model, to to price Somerset in be Bristol. more EU announced export beverage this efficient, manufacturing Solutions, to U.K. later a U.K. we the further allow brand for partnership This close sodas and Asia the model in with new much the production in our competitive leverage end, more leading be partnership in position in in Subsequent the later go-to-market XXXX. this manner. Cider a

Ms. corporate XX late to Deng legal capital of Source Deng Zaltzman We value Deng which the a goals. alliance Directors, a shareholder Ms. we July, Shufen Board the experience its of our with sole bring we shareholder, forward is to Reed's in the of continue Observer to in At immense on Holding, level, of brings largest organization of D&D with will as than our more execute our to and look and and perspective Board transition our May. to years replacing formed Life to markets strategic back appointed Director Leon we position.

with collaboration unique Beer platform. to this Ms. after announced premier a and appointment, between of strengthen engagement. rewards into the enthusiasts Deng's we offer Stockperks partnership marketplace through Ginger our a Stockperks, the Reed's investors community for Shortly who and benefits entered relationship retail We investor dedicated and

year-round. our the and you're we section Relations Investor our Stockperks memorable to interested meaningful about with to website. look forward provide a page rewards as on in shareholders dedicated them We the learning and valuable in program, please more If the of new ways engaging go

adjusting the faced guidance and the the we From Given year, our $XX inventory sales million to we half $XX expected for and challenges now XXXX profitability first net million. range in are a targets half second of between and as reiterating XXXX. gross continue well margin EBITDA surpass as standpoint, and in to XX% the modified expect flow we of turn to positive cash our are

July XX%. margin gross our fact, In increased to

objectives to XXXX. our $X target track gross strong With expense operating recognized optimize are for structure level in normalized million million continued reduction demand Our our back deliver nearly of of the year-to-date. products, on savings in Reed's and equipped inventory half as to $X back cost we we've already well well on financial over and is

Before closing you. Joann highlights Joann, remarks, with the quarter detail. over for up wrapping more to financial our in cover will

Joann Tinnelly

Norm. Thanks,

into year-over-year million commentary is $XX.X noted. were for our Jumping Net otherwise unless XXXX the results. year various All basis compared right ago QX a quarter. million to $XX in on sales

second net suppliers our purchase was the earlier, mentioned sales order offset to of tightened from in increased impacted in period margin which was ability $X.X XX% credit Norm quarter. terms volume, profit ago Gross As $X.X basis quarter to by the to Gross compared XXX year fulfill and for XXXX. select due approximately inventory to primarily XX.X% the million decrease XXXX million million. in compared same to $X.X the that points

sales were $X.X less to XX% XXXX last of decrease was improved and $X.XX period reduced XXXX. Delivery driven second compared orders. quarter as to case implementing renegotiated handling truckload during sales throughput net quarter full case Delivery of The during net of or per decreased per million the in a streamlined by XX% or well freight - $X of distribution sales to increased partially of year. the to $X.X XX% as million surcharge by primarily by model for to XX% second the than and contracts, orbit net and handling our offset same costs compared costs

administrative of $X million during quarter the and general costs decreased XXXX in to the second million compared quarter. to year Selling, XX% $X.X ago

administrative selling, percentage reduced and of sales, XX% to costs general net As XX%. to were compared a

of XX% or period. work together, expenses sales to find $X.X these operating in of consistently net our sales ways business. optimize to reflects cost and and XX% ago structure all to million net by XX% year our rightsize the Taking or compared our improved to $X.X million This

loss of compared $X.X or million of Operating a in the loss during of share second loss loss a quarter operating in improved second EBITDA XXXX of second loss of the per million or of $X.X $X.X quarter as to XXXX. also a to $X.XX loss of $X.X to $X.XX the million per million in second the to quarter XXXX, of the XXXX. share Modified quarter significantly improved compared

driven million For was the primarily the period. same operating activities to year approximately $X.X lower used we purchases period inventory XXXX, of compared for from compared cash million by in second The XXXX. $XX.X ago to quarter the decrease of

approximately As $XX.X revolving line million of capacity. build timing million from to of has debt, financing in produced of million $X.X and of from our The inventory, was $X.X we quarter capitalized financing and had balance XXXX, a from credit, This total fees. which previously million function additional convertible utilize cash million of of a our XX, cash includes $XX.X closed the is not which June $X.X net as we until borrowing after strategic lower funds of end. May note

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

Norman Snyder

Thanks, you call. joining for for everyone thank Joann, and the

to and delays of some in availability the our time tighter briefly inventory outlook. line timing due fund progress summarize building raise. and experienced credit To our terms, We

we Demand company of However, highest results couple and now through and our in had are the strong, ago. our the the track encouraging. third of halfway we orders back been week very a of quarter is history weeks on have

XX% year our our highest full forward was we achieve for year, the remain gross guidance. expect we margin with outlook above margin the XX%, gross look and Overall, mark to progress going July's we and of future. are to as pleased our

all on momentum objectives. We execution continued and forward to are of building look our

Q&A. for call will open now we Operator, the

Operator

Thank Instructions] from And ROTH Sean ahead. first MKM. you. please [Operator McGowan your from Sean, question comes go

Sean McGowan

And hi that volume, placement assume, questions. but fully make result orders? Norm, of you of couple any A any if lost that or of a that. phasings correct Hi. those I'm not I around, Joann. up that Norm, me of like can't feel you fill kind wrong flipping you. you being Thank lost on to able do permanent as

Norman Snyder

hi. Sean, Yes,

lost. to think done not route in to the there's I that be we some the think recover can are we'll authorizations, not shipping not up. make to I in but it. hard we've and we're an going days of some up but Obviously, beverage our we're up think product of some things they're that widgets market pricing lost, opportunity, that make backordered all I will terms of when space, everything But make

Sean McGowan

has too. inventory No, retailers' but assume the depleted, gotten I would

of So replenishment? could a bit little there be

Norman Snyder

a of been Yes, velocities there'll up we're starting inventories. pick see bit And levels. pipeline to maintain replenish little we've where a to be to more inventory fill able

think things So contribute. those of I will both

terms we In no, any placements, have of placements. lost not

Sean McGowan

actually would to each Okay. you do Like even to continues any fill therefore back have inventory that level Or there the you higher? any you this couldn't be had if if the feel seen sales looking I you have I higher? spending these had have hear. ask, might and orders? Good simply the these And categories spending cut excellent because the to of spending where been progress, on guess like you sales at is of the of a did categories, spending been in

Norman Snyder

gone sales been expenses would only variable - our aspect we transportation. little bit of SG&A, I think have be The up, wouldn't a increased - the not have uptick our spending believe I - our that's minimally. of there would that, some. up that all an But would if mean, only in I were might

Sean McGowan

Okay.

have variable selling but same? and yes, expense marketing So shipping been would and like delivery the would of higher, been have the

Norman Snyder

Yes. Yes.

Sean McGowan

into right, All not you like that? have I the have quarter? you happened the that to cool. needed were question credit other in earlier what changes And line order balance into that Okay. in tap now to last then is to the sheet for in Is able tap

Norman Snyder

Well, the it the And we - wasn't to all is wherewithal arrange, what or the supplies the to when cash and it do line it. our really in much the chicken comes line really - raise time. mean you timing it's or which have closed I getting of so first, so vendors of need all the the have time egg? - line capital to the get there to

So it targeted line our back AR against takes And time inventory. is to credit build up. and that

down - selling So down rapidly. much start your once really how pretty on up you obviously puts ceiling once that are, sales is we level start it borrow. you comes are inventory and like Conversely, and inventory can a building you more,

Sean McGowan

Yes.

Okay. Thanks right. All makes That a sense. lot.

Norman Snyder

welcome. You're

Operator

please ], comes Goetz Gary, Your Private ahead. go next from Investor. question [Gary

Unidentified Analyst

for Thanks Joann. the and taking Norman afternoon, Good question.

what about like transformational As entire of team looking business. a the talk Reed's I'd an at to and investor, you are I the doing. way appreciate

to inventory quarter. per per quarter. Specifically, to inventory quarter. over Reed's cash Pepsi this X.Xx turning cash is doing multiple X.Xx to this doing per is times

level? So it's on for a seen to turnover do X.X inventory What level multiple inventory from turning a matter over times. shelves improve the can to of multiple weeks. a go you I've stock

Norman Snyder

priming demand it's from it's inventory and it service to there. And more available cliché, mean building the seeing pump. seeing like actually inventory retailers. We're orders. is - use having to I We're consumers. the more your from We're it

with to starts momentum itself that. and it build on And creates

will inventory what manner, that, on from that we've more back it in inventory, solution has cycle just been cash. see the up simple can So replenishing to which cash, get incremental which and been inventory And organically pick is replenishing cash, profitable said And that through to your you'll create you process. inventory obviously. focused to to number start generate a we but in

Unidentified Analyst

Good. Good.

I'd it from investor, an turn X.X business X, As I around. example. that go would the really mean for to to like see

Norman Snyder

things, just as to flow to the Yes. gross operating being demand we've to and lower margin flow offshoot Cash on lot fall of does. just our the of bottom builds itself, strong and and kept costs And improved that mean, transportation is a positive low, it take obviously. I it inventory, costs line. particularly more advantage replenish able the cash

Unidentified Analyst

Great. Great.

forward Looking and again, it. everybody team you the doing. for And to thanks both to entire of Reed's what is

Norman Snyder

Thank you, Gary.

Operator

ahead. a go question Investor. next Private from comes Bendigo], please [Will Your Will,

Unidentified Analyst

of quick afternoon. Hi A couple Norm. questions. Good

And to nationwide? guys could fully shed you been Foods. on First, if has can expansion wanted consumer thus I see that you shed Ginger the response Whole do becoming any then on anticipate light the you light When far? with what Hard

Norman Snyder

of in is it Foods, Whole the Well, program terms nationwide. is -

that you'll every in Foods So see now. Whole right

Unidentified Analyst

Texas months, stores? like, being coming in those actively Dallas, that's Right. the Ginger When Is it a Hard Or is months products three out? going of something six you do shipped instance, I'm for anticipate all take year? to and to that

Norman Snyder

are It Well, the for has we state right third-party because to laws. gaps and there certain - federal a liquor ship under distributor through now go can't direct.

So cover right we on now, to looking sign that gaps, distributors where have to we're obviously, territory.

close. doing we're actively that, we're very So and

the one there. Florida, I other have. York, think California, But we're larger New Texas that be states, in remaining one we the gap might of covered

spots So up. we're working actively fill to those all

presence in have consumer Trader Whole like - and done in a mean, recognition, products terms brand Now has Sprouts of Reed's where strong I well. very where Foods, reception, Joe's the places we in very

of I but mentioned as presence like strong pretty as that continue the expanded actually well in a we our nonalcoholic there, ones stores there. very previously. done to We've and we've to then believe not we we've Meijer, So And had good other products do Roundy's that.

who I And people products. the advantage. real we have quality know our that a advantage of think big we So of are, do that provides know the

far, so the And been has reaction positive. very

Unidentified Analyst

touching Okay. forecasting big What you guys guys be seems And know and for a a for base big if it. like revenue light of maybe partnerships. jump, Great. risk-reward, revenue U.K. little are 'XX? what on shed the doing, of a can it Asia what Appreciate but may Obviously, kind you you're forecast then bit you there? any

Norman Snyder

down low is numbers doing, price was competition the started It's we've our business. look and with What basically met when down what what was this you of ourselves of because numbers are done. the a we distributor risk out were our U.K. actually really And very going and the going Yes. at were going pricing up. because

recent the became amount with Now we've of exacerbated. the problem inflation had,

my thought everything we So why sourced migrate don't was, model let a be to and concentrate locally. we'll

we're the selling So is materials. various bottler all our is product, not what selling then we're done finished purchasing to a we've concentrate who raw

we're any tying up So cash. not

So because we've me, downside more up flow cash products, very those is become competitive. and low the freed price to we for

the margin before making Now did margin - granted, or is revenue, dollars sorry, stronger. in terms I'm much per we're not case we of that the the but

I concentrate. XX% or margins the think XX% like on are our

more presents much it's profitable, very time, the very a we're little cash, same me tying which very, to while So up at low-risk scenario.

Unidentified Analyst

Certainly, yes.

kind top. much all - it of at So gravy it's on is all, it it's just revenue sounds like of if kind

Norman Snyder

to existing And build is and Exactly. the U.K. just the business, on. an EU going we're

our and them throughout Asia. partner, we'll Asia, market, knowledge Holdings develop local new investor Life D&D the to that has work a with obviously, of strong with that infrastructure going we're and to

model, will about low beverages. low a very it we're potential high is So same that be as consumption using excited cash obviously, a the cost, up sort and of tying ginger-based huge of and Asia, again,

that and with with our partners. we're new working So excited

Unidentified Analyst

question. it. Appreciate quick Last Great. Okay.

insiders been probably this at has share end sales think aren't a over hand be for price. on here be and it cap buying. it, at a theme, But positive we doing the are million think are vote insiders probably market some with I the year, don't anyone and a and million common of what guys missing next agree confidence a cash company know last to don't happy does. conference call I with buying of the think I that's not in would calls $XX the we fist? $X.X here that you flow eight sitting - I projected

So I on you the to see morale company. just want that. shed if like light of can And inside kind any what is

Norman Snyder

the day. what tremendously Well, which been myself uplifting. it inflation, question really results snafus a they've the hard you've done, Because last our the morale in chain years you knowing are the ability is operating that unless high business it The work two to I ask because - the to starting in does. for and that small very see cost company every people the makes raise outpaced supply business, of and

of see plan. and nobody fruits we that I that, And together very, months really those hope we And three And really quit, the And panic, that I'm nobody put labor. we're attention. together results high think to has fast morale in I our been we're from share our with starting heads excited now, forward a could If excited. put very everybody. gains terms to everybody's

participated Now the terms Zaltzman, has Bello Capital consistently every capital market. also Partner raise, or raise. - bought Union Lenny Park last has remind in just on John shares Square Square participated in Union want insiders, of Partners open the to Capital fund a in

back the here been and in really kind the really it's water that be of have So company. insiders carried

huge and ugly, good, what - And right? they should a of they're So bad vote be that they I think see confidence still see buying. because the the

a - should them. of price amount morale, think that that should that there's heads real I up. real get So I my And And a level and a there's view and and think on just is, of go think show I there's optimism. let's turn high real

I'm frustrated. So that. I'm will as we confident that do But just

price as profitability, really market will which frustrated us believe the our the hasn't But mission to it deterred at on just we cap. this to stock get I'm to boost and a looking like too, you, shareholder, I'm get be that moving. company

Unidentified Analyst

end at and time like Yes. work, Appreciate of the Got it. Awesome. the update. light Well, seems the keep good the your maybe and tunnel. up it thanks for

Norman Snyder

you. Thank

Operator

the no back Mr. out I'll to to at it this further There - Snyder for close questions turn time. call. are

Norman Snyder

to employees, want customers of We everyone I appreciate support. as for as afternoon's everyone's well and, participating in our shareholders. our thank this call, course,

We great made year. quarter on have the reporting later to look our results initiatives forward XXXX and progress third this

Operator

gentlemen, call please disconnect for lines. you thank your and this and We concludes conference your Ladies for that you today. participating ask

Reed's (REED) 10 Aug 232023 Q2 Earnings call transcript