Release Date: August 13, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Reed's Inc (REED, Financial) reported a 19% increase in net sales for Q2 2024, reaching $11.9 million compared to $10 million in the same period last year.
- Gross profit increased by 53% to $3.8 million, with a gross margin expansion of 720 basis points to 32.3%.
- The company achieved a 60% reduction in delivery and handling expenses, bringing costs down to $2.18 per case from $3.05 per case in Q2 2023.
- Reed's ginger beer sales surged by 70% year-over-year in the second quarter.
- The company successfully completed several promotions with major retail partners like Whole Foods, Sprouts, Publix, and Kroger, enhancing product visibility and sales.
Negative Points
- Reed's alcohol sales were flat for the quarter compared to Q2 2023, indicating a lack of growth in this category.
- Selling, general, and administrative costs increased to $3.1 million from $2.6 million in the year-ago quarter, remaining flat as a percentage of net sales.
- The company reported an operating loss of $0.7 million for Q2 2024, although this was an improvement from a loss of $1.7 million in Q2 2023.
- Cash used in operations was $0.9 million, although this was a decrease from $3.4 million in the same period last year.
- Reed's Inc (REED) has a significant debt load, with $27.4 million in total debt as of June 30, 2024, including $18.4 million from a convertible note and $9 million from a revolving line of credit.
Q & A Highlights
Q: Did the gross margin for this quarter come in as expected, and is there room for improvement?
A: It came in as expected, and we believe there's room for additional improvements. We continually search for ways to reduce costs and are implementing additional measures during the current quarter. (Norman Snyder, CEO)
Q: Have we seen the full benefit of the freight lane reductions yet?
A: We are seeing part of it. We negotiate freight rates in six-month increments. The addition of Battle co-packing in the Southeast has also helped reduce costs, and we expect more benefits in the latter half of the year. (Norman Snyder, CEO)
Q: G&A was higher than expected. Is there anything unusual driving this, or should we expect it to sustain at this level?
A: There were a couple of non-recurring items that drove it up, including severance and legal costs. Removing these, G&A would be where we expected. (Norman Snyder, CEO)
Q: Can you provide more details on the products launching in early 2025?
A: We are focusing on ginger-based products with lower sugar and calorie levels, which align with current trends. We've received positive feedback from key retailers on our positioning and taste. (Norman Snyder, CEO)
Q: What drove the 19% increase in net sales for Q2 2024?
A: The increase was driven by strong demand for Reed's products, increased promotional activity, expanded product authorizations, and a reduction in short-order shipments. (Joann Tinnelly, CFO)
Q: What contributed to the 53% increase in gross profit for Q2 2024?
A: The increase was primarily driven by higher net sales and lower supply chain and input costs. (Joann Tinnelly, CFO)
Q: How did delivery and handling costs change in Q2 2024?
A: Delivery and handling costs were reduced by 16% due to renegotiated freight rates, improved throughput, and efficiencies from our streamlined distribution model and new co-packing partnership. (Joann Tinnelly, CFO)
Q: What are the financial targets for 2024?
A: We are reaffirming our targets for net sales growth, gross margin expansion, modified EBITDA profitability, and positive cash flow from operations for the full year. (Norman Snyder, CEO)
Q: What are the recent updates on product distribution?
A: We added over 900 new points of distribution with Stop and Shop, launched our 12-ounce ready-to-drink classic mule in Walmart locations across California, and added over 1,000 new points of distribution to Cracker Barrel. (Norman Snyder, CEO)
Q: How is the e-commerce business performing?
A: We launched new virtual cans on Shopify and Amazon in June, seeing consistent month-over-month volume and sales growth. While currently a small part of our business, we plan to invest more resources as it grows. (Norman Snyder, CEO)
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
