REED - Earnings call transcript Q1 2024

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Operator

Good afternoon, and welcome to Reed's First Quarter 2024 Earnings Conference Call for the 3 months ended March 31, 2024. My name is Chris, and I will be your conference operator for today.

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

Following their remarks, they will take your questions.

Before we begin, please take note of the company's cautionary statement. forward-looking guidance. statements include plans Reed's will XXXX and call statements, about including business Today's

investor inherently release quarter risks its XXXX, results. now materially from be of statements of them. to discussion regarding in from as first differ is the definitions XX, XX-Q Forward-looking available non-GAAP involve Reed's information no Please on XXXX When I a to of on management's only under XXXX to website exclude presenters over call reconciliations first Form quarter today, XXXX, factors refer view Please forward-looking statements. expected discussing reflect that measures, results, at to May the Mr. non-GAAP may and to which investor.reedsinc.com turn reported XX, March obligation additional and Reed's Snyder. the company including and to measures the could earnings and website update uncertainties will go cause refer on results, and results items for ahead. certain actual

Norman Snyder

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

operating operating to cost-cutting improvements continue quarter, achieve seventh drive consistently execute business, first and us initiatives in our I'm improvements. enabling expense leading year-over-year of modified profitability and consecutive We to in our hard to gross the optimization and work to EBITDA. our on quarter margin, proud expenses team's material our savings of across

short March, reducing in As shipments. during we QX were call mentioned orders, impacted by earnings sales our in

partnerships. capacity to to through co-packing build new We our have inventory add steps taken and the a appropriate levels

also same Further, orders. shipments deliver significant seen we short XX, double-digit to growth level period. maintaining a of and add to a our April during the remain number XXXX. targets of reduction retailers inventory X-week result, Grocery saw further By for we lower I impact we a the that exited segment, to that As which January, shipment sales in our in healthier of would of reflecting increased ending quarter forward. with the levels moving month-over-month short IRI during ability since period decline on XXXX, who expect like levels unit have and appropriate X% a the strong reduced in shipments experienced profitability confident growth inventory, short

Walmart, is on a Turning and from food, updates IRI, on which X military and distributor-based X% the shipments. And to data, Virgil's forward few a compared stores year-over-year to data growth. channels ended is multi-outlet as mass, in ending Ginger key grew unit April the which for Milkoscan unit tracking XX% based Dollar our root seller April XX, portfolio, categories increase convenience product year-over-year club, recent Ale and period Craft XXXX, software VIP ago the beer Reed's X% generated defined in drug, grocery, weeks our XX Ale for the sales. year Ginger Inc period. beer sales during

For period. a to alcohol we our XX% compared portfolio, increase ago the ready-to-drink experienced year

offerings. the a new taste. while quality with to portfolio We ginger customers look premium these ingredients better-for-you the to ourselves progress road our a of making commitment a year leveraging providing the create product We're later in products are our bold fresh organic We by using always to on excited our catalog natural map to category. unveil highest forward new in beverages innovative our delivering of at prided and

year to initiatives compared basis to increase earlier, our solid than I in we in QX, gross and cutting point X,XXX expenses XX% leading more in period. ago a reduction margin and in made cost As the mentioned progress a optimization operating

pricing to by applications driven implement of mix cans the and was margin materially gross in lower consistent versus bottles increase improvement strong our more Our ability across cost, channels.

We possible. a which production freight We lean that for and saw to we're kicked of XX% both or capabilities by we compared Battle renegotiating and during to co-package delivery bottles Copacking. We off savings expenses touching quarter, improving heavily in on ensure lead our to throughput running Quickly distribution than partner, XXXX. anticipate case the enhanced reduction as million our efficiently renegotiated new to and Southeast our generating new thus our QX pleased delivered these partnership. per just partnership savings model handling and expenses, savings. We're as in more quarter continue co-packing from rates $X.XX few to freight evaluate a and we've from our drove in cost partnership For case contracts efficiencies our $X We'll streamlined operating and forward the traffic building In a annualized in region. look with and per cans long-standing $X.XX progress far cost handling our lanes, with efficiencies partnership. Battle. this weeks, already to realized to the

to We go-to-market in also efficient sales to create efforts saw a our and to streamline XX% a more year-over-year due marketing strategy process. our selling expenses reduction

product tomorrow soda to and Turning recent cherry, vanilla cream cola, flavors our we Sprouts operational black kick and cans To are single and and first first highlights. in off and with start, on launch beer market to full Virgil's sales set May quarter our and cans multipacks XX. sugar beginning root handcrafted

Ale. June the authorization during we And received starting program, strong year's Sprouts June alcohol our of assortment second with our Foods last our -- performance for assortment Whole in off-shelf national after XXXX. alcohol a expanded also Ginger a We addition at national

XXXX, successful after subsequently the product of test to core Ginger added Ale in a Additionally, Whole Foods been summer has launch or sets.

our plans cans all Costco's, nationwide. mini locations in Zero business Next, in Texas we Beer with launched launch Sugar Ginger locations new X.X-ounce to packs

multiple working and we product as enhance extend to regions partnership also channel with look offerings our expand assortment Costco. are to club We with our

Price points adding distribution for expanded the X,XXX SRS right, operating than we Additionally, Reed's Shoprite, Group distribution Fairway with portfolio. the and under by product banners more of of our Wakefern

new Ginger and Beer sells Zero Virgil's ginger cans, have We currently cans beer our the stores cans. also X with over that Giant handcrafted of added X,XXX Sugar Eagle all

been we geographic increase opportunities, We the channel customer specific into and awareness date will broader of has which this untapped channel. at products. at for identified have and reach initial targets channel, our rollout our Looking brand believe trial on-premise

We launch have our of progress, our this channels resources In launching our ale cans today, business, continue This efforts ginger additional channel see but experienced promising it year. mini Amazon process the to Virgil invest our we'll as to continue future. cans the e-commerce We're of business with on X.X-ounce plans small the since in of as to the year. a our its are expand optimistic the in revenue a also we month-over-month becomes contributor plans and both this with online new growth summer. later over on-premise results of portion we've we Shopify to week add sales larger represents the and beginning about

modified expect year. Looking continue gross from and ahead, we are sales margin as outlook our expansion to net profitability generating reiterating growth, the flow positive we XXXX cash while EBITDA financial full for operations

to several as have promotional fulfillment new order authorizations, key We improve better-for-you product targeting increased rates, growth we activity initiatives category. the expand drive launch innovative products and

we these year levels efficient ensure and discipline we're our cost are a maintain and structure, a poised Between ahead. quarter model. operating an lean second our inventory for strong initiatives, We to improved running optimized will

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

Joann Tinnelly

and net during in of as generated partnership. XXXX. to $X.XX traffic costs of that during otherwise or chain first to per shipments. order primarily $X.XX decrease Net to from suppliers handling last million basis Delivery or commentary $X.X in same renegotiated per in sales were model points tightened increased million variance quarter ago were $X.X quarter the the for million quarter. were materials, period XXXX reduced during to ago by in into net streamlined profit as our quarter well terms decreased of XXXX of reduced results, quarter Diving quarter. from improved million million is and XX.X% caps year. noted. and compared costs to Delivery short sales all XX% quarter. of of purchase of input and basis to our in driven case co-packing the and Gross a costs. credit on period distribution XX% Norm. lower the sales compared year-over-year to increased XX% an XX% same heavily for The administrative XXXX. select case $XX.X handling the primarily rates Gross by $X.X QX the of first increase compared The by the first in to decrease XX.X% million compared X,XXX Thanks, of million raw driven primarily The was year-ago XXXX throughput XXXX year first $X.X rate unless $X.X freight new inflated efficiencies driven million general was compared compared the for lanes, $X.X resulting margin to year to to the by $X.X Selling, supply XX% was our

As reduced a share of Modified selling, reflects million during reduced XX% in in of $X.XX compared million $X.X period. to operating the to ago $X.X $X.X and to first million $X.X the general our first net EBITDA loss to in improved to $X.X loss and million XX% sales administrative per quarter net the Operating $X.X of optimize loss $X.XX XXXX. XX% were improved improve million tireless our percentage to a or quarter or or expenses our to costs of XXXX compared of compared share year efforts margins. XXXX This sales, of per XX%. quarter quarter first in XXXX. Altogether, the structure compared to or of million net the first cost to of operating sales

used million compared shipments cash $X.X the quarter the XXXX. we as flow improve moving flow primarily driven to The of order first in look operating forward. to operations cash cash to the year from compared ago by of same purchases rate higher the inventory decrease was period For in $X.X million operations was in XXXX, short in period of

million of line As of debt, capitalized $X.X Norm financing of the million fees. convertible call had and additional of back borrowing and million from credit, $X of which has remarks. we I included for $X.X net March over now cash closing approximately our of total $XX a to turn note million million $XX.X will revolving from This XXXX, capacity. XX,

Norman Snyder

to solid the optimize their lay I'd business efforts and Joann. like for our and my entire XXXX. of a team for you, the foundation consistent to remainder REIT appreciation Thank convey

inventory healthy XX%, while We our initiatives, fixed cost in to position and answers. coupled growth questions will bolster intently will the above in returning growth to to now drive business. goals leverage operational focused Operator, and our on ahead. margins call lean base enable us a year efforts for profitability we ongoing and are on with our and the preserving maintaining our gross deliver open These

Operator

now will [Operator Instructions] McGowan, from question-and-answer the Roth. we gentlemen, Sean begin Thank session. and question you. comes Ladies Your first one.

Sean McGowan

I the of have I a if on couple gross margin questions, there. job One, nice may. recovery

degree curious that? Was the kind is that Just is a offering sustainable be might other to that in of come In the of kind anything affect by of margin how a helped rate shipping mix? words, what to expect more lower might as product? we complete coming this that wasn't at this there Or might quarters?

Norman Snyder

cost The we've we in a More take see a the only and we in our favorable shift believe savings. to aspect taken further bottles is slowing of don't been on down. that's product the of can elements trend and mix COGS, has cans, we'll latter. continue lot to Look,

converted by been we've the In our consumers how really product pace both and in at retailers cans. fact, we've surprised offerings which been received and I've have --

Sean McGowan

your generally favorable? you going be to talk are slowdown quite like RTD of been the well, category? sales I has in know overall you the are category the Can there it about trends like alcohol, sounds continue any in category but seeing

Norman Snyder

but I the sales, some that in think and well seen more of offerings, think think we're players strong seeing Look, for competition growth. out pullback that's bigger really I bodes why I because a have been us and which there's of came their obviously

really continues to -- I So think category overall I'm grow. the not

something that's better believe I are premium growth. looking offer we that And I products. consumers you, for and more think we'll see continue to think for

Sean McGowan

sort couple the on then housekeeping of of a sheet. And balance questions

that So paying of this the sheet then? just is assume the complete that as I additional balance of a becomes equity that safe quarter, on that so -- as second offering capital sale that's kind is --

Norman Snyder

to Yes, the that quarter, that second yes. we be expect convert and completed will equity, during to

Sean McGowan

first second kind is this least And I or would of multiple raised? of way additional that's remember quarter be amount I there cash the in bids the quarter? the to in some cash there the was some in built and seem that model. came raised at Like

Norman Snyder

Yes, still during quarter, of and part complete was quarter. it in will be split. interest The there's the this first that majority latter but the

Sean McGowan

Yes.

have the Okay, model. into built that's what we

And I of right outstanding shares like appreciate as like that. now? So are many how there

Norman Snyder

that out In that the outstanding. not shares offering. -- safe does are Q, there's the X, XXX,XXX -- reflect that

Sean McGowan

Well, out right. whenwill in the couple cue All a guess, of Okay. I be days.

Norman Snyder

will tomorrow. out Q be

haven't realize we -- that out Sean. I that filed so Okay. yet, tomorrow.Â that's

Operator

Your next Gary from Gates. question comes

Gary Gates

With the price Safe what converted? know will be do you offering, the at shares

Norman Snyder

determined. be to that's No,

I there's a provision mean in better but obviously, be -- think -- set off. be to -- there, the price will I floor, there's a the it we will

So to that's -- again, finalized. and be

Gary Gates

floor is? Do you know what the

Norman Snyder

think I at. to it we set want at say, I set $X.XX, it, -- I We we like believe

Good. Good. Okay.

Gary Gates

very cash to a there's leads to positive and my being of and have which Then give more cash credit big lot Right books the being for operations, -- here's okay, from we more I also we're entire outstanding. ultimately shares debt the but little and interest being headed company, trying. now, interested more on question. flow slowly shares expense, you

you do an what investor. where this speaking headed So I'm to of see as time? and period over

Norman Snyder

-- debt can they percentage we It's X.X%. can't blocker on own. there's what at -- has Well, a capped the

a it's issued be shares half of So pick. remember, go of to to of cash, can of And that the lot debt. pay half down there's its not the additional a interest that lot

So not all pay and for. immediately it's due

product our a So burning the And to that's and flow. situation continue really are shift generate an we and up us look bring and debt cash work to think load effort our at business inventory to out -- favorable lenders we've to from ship will longer will more write work all perspective operations. Catching a I allow from with cash no parties down. with that positive to fundamental

Gary Gates

that only you getting the recognize see not is from I from being debt a Reed operations, but cash But positive, of when a picked. point standpoint? of Okay. part flow to do also debt

Norman Snyder

I'd latter debt the cash requirements. our that. And our focus. margin. gross enough current made like the to with we're the progress made year, our say and operations our towards progress our generating we're transportation with cover service both is That where We've part Obviously, tremendous of not to cost, tremendous we've -- with and done

more continue our bring down grow costs top cash. into -- our We as into to translates just SG&A we which translates generating line

Gary Gates

talk do Earlier, Deng into company? feedback she from products wants to year's on about introduce last Shufen trying her any And the U.S. Asian what the investor to with there was

Norman Snyder

to think stabilizing into domestically Actually, U.S. is market. the products the not way. No. I opposite Asian utilizing into it's market, focus then the Asian The and really business products our contacts and growing Asian their export bringing the

to willing of markets leverage equity contacts marketplace they continue understand foreign So to and in that. and lot support where are Reeds build and brand our have to a the to

Gary Gates

be one something And question of last seems health offering which Wellness care one Ginger these loss, regarding biggest Any to thought the products. the categories in of weight days? for

Norman Snyder

very, working times, beer excited the great beverages and and they're research of it, been only really interesting but one plant-based really that And ginger plant-based and leverage is big trends Really, uses real innovation, products done that food. a has I'll in to some that and center, on me of that the drinks make the looking some health some a in big, not premium future point pretty, ginger of that. we've leveraging other producing both for we said which Ale efficacy with good and continue ginger advances front leader this consumer and I've about Ginger plant-based Ginger REIT a and that resonate We're we're difference, of a some of And their again, products mass lot item. that food capitalizing products, being the point competition. a is look, and great say naturally to to very, on particularly our big in really products.Â being Well, and is our compared to think, I believe Ginger to new are and in today's really and and will category benefits and very only that

Operator

next comes Bendigo from Your Private... question Will

Will Bendejo

the On Whole the I And as what's I well? rollout caught the in Sprouts nationwide on them? June? of that nationwide then stuff, end a tail the timing RTD think And is this, is Foods,

Norman Snyder

except They're states X-tier couple alcohol, for have direct, where go of system. you both a with we nationwide, with have distribution, can't to go a distribution gaps you through

in -- it that gap been in national of Foods. locations, So Whole fill -- is -- trying their there And doing... Texas, and so we're expanding we're majority the ginger the ale adding we're we've with stores. is We're all but trying just in big the national. then a by And to

Will Bendejo

Yes, really ale... ginger coming it was on hard the

Norman Snyder

last our well. Sprouts as we successfully. promotion, national presence then expanding we're Another year which did in very And

I've done strong So rather of done just in with try leverage have kind said that I products we've recognition to think to and previously, successfully we've we that Trader reiterate, start what we've well. as and is and these high Joe's following we've be not as pretty really retailers scaled everywhere Sprouts with and only consumer that, Foods, but it done brand Whole back with

entire picked new then with and and another and that bunch the portfolio. well we're growing chains of authorizations are as weather -- we've gets we done So with warmer building the with up our

long-standing we've So retail we've it's it's get are together to support opposed entire and be the portfolio.Â not are trying really are relationships as to with and paid brand focus. and seen able and as our have and we a not -- result approach, at very deep measured with prioritize chains these had a of everywhere working that to and build our real out these far once and And that and dividends, to can behind rollout too partnerships slower focus a provide be we growth proper skis. look, And

Will Bendejo

Trader Ginger soon? That's know. Do the rolling in Hard anytime good to out Joe's you anticipate

Norman Snyder

on introduction starting that. for mean, the I as I with there, we've we an think Hard working We're make we to progress interested continue were in -- the ginger. Mule. very there And can

Will Bendejo

did number But XXXX the know Lastly, I I sales your we those of outlook? the you sales sales mean hit new to Can have of share implementation. revenue primarily a we spade what revenue you the a on guys and same of really just kind to goals. you're QX a was track XXXX. spade, cost commented rollout are that did calling of in

coming if million quarter million, So with you year? later guys a anticipate $XX the out swinging in $XX here

Norman Snyder

look, -- double-digit continued what growth. margin we said sales growth Well, that we've think margin And think we've along we expect and I I all growth. the we demonstrated is expect

will pretty but down, haven't performance handling, it and with promotional really the now didn't going And to and in build effect the off closely remaining good at solidified them know middle we kick be sort relationship as a also the as right efficiencies. the really drive we even started both that as a quarter, shipments we've lot how And second in any activity to go expect time. on I and translates quarter positions feel cans into about watch our we've coasts, boxes, at QX we've We on of quarters. short promotional it's we of quarter, in. that, in I more and activity cause our throughput shipping historically, I fast our seen first both where begun Look it was and held that. real first shortly, amount retail. where will done a in had QX improved which race and we've build we've there's inventory and hoped, And takes bottles

see in which and from kicking of going So generates second play boost being cadence, I quarter growth, stock And a we're shipments. boost the off in. get a of a kind going from reducing to and that activity in our promotional year. this things we'll and just short get think start We're to to these create really

quarter second that have clear think lot I call, when be people. our to will we a

Operator

it to are I time. for will at back There turn Mr. no Snyder closing questions now remarks. further this

Norman Snyder

thank to We and, Great. Thanks. course, as call everyone as I'd appreciate participating in today's customers earnings our well employees, for shareholders. everyone's our of like support.

We look our providing report update everyone. made when year. to an on results you, initiatives and solid QX forward this XXXX progress Thank later have we

Operator

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

Reed's (REED) 14 May 242024 Q1 Earnings call transcript