Release Date: November 06, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Swiss Water Decaffeinated Coffee Inc (SWSSF, Financial) reported a 27% increase in total volume and a 40% rise in adjusted EBITDA compared to Q3 of the previous year.
- The consolidation of operations into a single location has resulted in significant efficiencies and cost savings, boosting gross profit by 80% in the quarter.
- Gross margin percentage improved from 10% in the first nine months of last year to 16% this year.
- The company successfully reduced its debt by $60 million, including a $15.9 million repayment to Mill Road Capital.
- Interest in chemical-free decaffeinated coffee remains high, with growing demand and a strong brand positioning Swiss Water Decaffeinated Coffee Inc (SWSSF) well for future growth.
Negative Points
- Despite improved gross margins, the company reported a net loss of $791,000 for the quarter, impacted by higher interest expenses and increased mark-to-market losses.
- The high NYC coffee futures price is negatively affecting consumer coffee consumption and roaster demand, potentially impacting volume growth.
- Persistent disruptions in the coffee supply chain, including logistics delays and labor disputes, have created challenges in meeting customer commitments.
- Operating expenses increased by $900,000 in Q3, driven by planned headcount wage increases and higher professional fees.
- The company faces macroeconomic risks such as inflation and geopolitical uncertainties, which could impact future performance.
Q & A Highlights
Q: Can you provide details on the administrative expenses excluding stock-based compensation for the third quarter?
A: The stock-based compensation impact in the quarter was about $500,000.
Q: How does your financial performance enable you to focus on reducing debt, given your current debt levels?
A: We have over $50 million of long-term construction debt, which is low-priced, and the balance is a working capital facility. We recently paid down $16 million, reducing our debt by $60 million in the last quarter. We aim to lower our debt balance further.
Q: What is the status of the California legislation regarding methylene chloride, and is there interest in developing a US trading market for your stock?
A: The California proposition has been removed for this year but may be reviewed next year. The EPA still bans methylene chloride for general use in the US. There is interest in developing a US trading market, and we've started research coverage with Zacks in the US. However, a separate offering is not currently on the table.
Q: Do you actually have $13 million of free cash flow, and what does "medium term" capacity mean?
A: Our cash flow statement clearly shows our cash generation from operations. We expect to continue growing and generating cash flow. "Medium term" refers to a timeframe of 3 to 5 years.
Q: Are you anticipating a proper OTC listing in the foreseeable future?
A: We have considered an OTC listing, but there are differing views on its value versus the additional costs of managing and reporting in the US. The debate on this continues.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
