Reed’s Announces Third Quarter 2020 Financial Results

11/10/20

NORWALK, Conn., Nov. 09, 2020 (GLOBE NEWSWIRE) -- Reed’s Inc. (Nasdaq:REED), owner of the nation’s leading portfolio of handcrafted, all-natural beverages, today announced financial results for the fiscal third quarter ended September 30, 2020.

Highlights for the Third Quarter of 2020

  • Net sales increased 21% to $10.6 million in the third quarter compared to $8.7 million in the prior year. The increase compared to the prior year reflects strong volume growth of the Reed’s® brands, including impact from recent launches of new product innovation.
  • Core brand gross sales increased 18% versus prior year period primarily driven by strong 32% volume growth of the Reed’s® brand;
  • Gross profit increased 35% to $3.4 million compared to $2.5 million in the prior year period. Gross margin increased 350 basis points to 32%;
  • Operating loss narrowed to $2.3 million compared to $4.4 million in the third quarter of 2019;
  • Net loss improved to $2.6 million, or $0.04 per share, compared to $4.6 million, or $0.14 per share, in the prior year period; and
  • Non-GAAP Modified EBITDA loss improved to $2.0 million in the third quarter of 2020 compared to a Modified EBITDA loss of $3.3 million in the prior year.
  • Guidance for 2020 net sales was increased from 10% to 19%.

Management Commentary

“We generated accelerated net sales growth during the third quarter with strength across our entire portfolio of Reed’s branded products and continued strong growth of the Virgil’s brand. We believe our Reed’s innovations are resonating with consumers, including a strong response to our launch of Reed’s® Real Ginger Ale™. Net sales for the third quarter increased 21% and we continued to drive improved gross margin, which reached 32% in the quarter. Given the ongoing momentum, we are increasing our net sales guidance for 2020 and now anticipate approximately 19% growth for the full year. We are driving innovation, expanding distribution and have significantly enhanced our supply chain adding an additional co-packer during the third quarter. We believe we are well positioned to drive continued growth, and efficiently and effectively support growing demand,” stated Norman E. Snyder, Chief Executive Officer of Reed’s, Inc. “Our enhanced supply chain and co-packer network is successfully allowing us to navigate the ongoing COVID-19 pandemic. While the pandemic continues to provide pressure on production, distribution, and packaging supply, we are generating margin enhancement through both our supply chain efforts and moderating costs. We are pleased with our improving cash flow profile and are on plan with liquidity requirements. We remain confident with our brands and growth opportunity, and are proud of the entire Reed’s team and our valued partners who are working diligently to make sure we can deliver on the significant opportunity ahead of us amidst the challenging time of COVID-19.”

Financial Overview for the Third Quarter of 2020 Compared to the Third Quarter of 2019

During the third quarter of 2020, net sales increased 21% to $10.6 million compared with $8.7 million in the prior year. Core brand gross sales increased 18% compared to the same period in 2019, driven by 32% volume growth of the Reed’s® brand with 6% volume growth of the Virgil’s brand. Growth was broad based across SKUs, with growth of all Reed’s products and nearly all of Virgil’s products. Recent Reed’s innovation was also a strong contributor to growth.

Gross profit during the third quarter of 2020 increased 35% to $3.4 million compared to the same period in 2019. The increase in gross profit reflects increased revenue during the quarter driven by strong volume growth of the Reed’s® brand as well as lower costs per case during the period. Gross margin increased 350 basis points to 32% from 29% in the prior year period.

Delivery and handling costs increased 16% to $2.2 million during the third quarter of 2020 compared to the same period in 2019. As a percentage of net sales, delivery and handling costs decreased 86 basis points compared to the prior year, reflecting increased volumes in the quarter, partially offset by higher transportation costs associated with COVID-19.

Selling and marketing costs decreased 25% to $1.9 million during the third quarter of 2020. As a percentage of net sales, selling and marketing costs decreased to 18% from 29% in the prior year period. The decrease was primarily a result of marketing programs executed in the third quarter of 2019 that were not implemented in the third quarter of 2020, decreased digital advertising, event sampling and agency fees, as well as lower personnel and travel related costs as a result of COVID-19.

General and administrative expenses (G&A) decreased 36% to $1.6 million during the third quarter of 2020 compared to $2.5 million in the prior year period. The decrease in general and administrative expenses compared to the prior year period was primarily related to a decrease in severance expense, lower stock option expense, and professional and consulting fees, partially offset by an increase in other general and administrative expenses.

Operating loss during the third quarter of 2020 narrowed to $2.3 million from $4.4 million in the prior year period.

Interest expense of $0.3 million during the third quarter of 2020 was consistent with the third quarter of 2019.

Net loss during the third quarter of 2020 was $2.6 million, or $0.04 per share, compared to $4.6 million, or $0.14 per share in the third quarter of 2019.

Modified EBITDA loss was $2.0 million in the third quarter of 2020 compared to a loss of $3.3 million in the third quarter of 2019.

Liquidity and Cash Flow

During the first nine months of 2020, the Company used $6.8 million of cash in operating activities compared to $14.6 million of cash used in operating activities in the prior year period. The decrease in cash used in operating activities during the first nine months of 2020 relates primarily to a lower net loss and reduced spending during the period. As of September 30, 2020, the Company had $0.9 million of cash and $3.0 million of available borrowing capacity on its revolving line of credit.

Full Year 2020 Guidance

The Company is increasing its fiscal 2020 net sales outlook. The Company now anticipates net sales growth of approximately 19%, up from 10% previously. Given the product mix and a delay in implementing all cost savings initiatives as a result of the COVID-19 pandemic, the Company now anticipates a fiscal 2020 gross margin of approximately 30% compared to 32% previously. Fiscal 2020 guidance reflects year-to-date business trends, including the ongoing operating environment related to COVID-19. The COVID-19 pandemic and its related impacts create many incremental potential business risks, including potential impacts to the Company’s ability to access raw materials, production, transportation and/or other logistics needs, as well as potential inflation related to all aspects of supply chain and logistics, which cannot be reasonably estimated and are not factored into current fiscal 2020 guidance.

About Reed’s, Inc.

Established in 1989, Reed's® is America's number 1 name in Ginger and America’s best-selling Ginger Beer brand and innovator for decades. Virgil's™ is America's best-selling independent, full line of natural craft sodas. The Reed's® portfolio is sold in over 40,000 retail doors nationwide. Reed's core product line of Original, Extra and Strongest Craft Ginger Beers, along with the Certified Ketogenic Zero Sugar Extra Ginger Beer are unique due to the proprietary process of using fresh ginger root combined with a Jamaican inspired recipe of natural spices and fruit juices. The company uses this same handcrafted approach in its award-winning Virgil's™ line of great tasting, bold flavored craft sodas and Certified Ketogenic Zero Sugar Varieties.

For more information about Reed’s, please visit the Company’s website at: http://www.drinkreeds.com or call 800-99-REEDS. Follow Reed’s on Twitter, Instagram, and Facebook @drinkreeds.