Reed's (REED) 9 Nov 202020 Q3 Earnings call transcript

Good afternoon, and welcome to Reed's Third Quarter Fiscal 2020 Earnings Conference Call for the period ending on September 30, 2020. My name is Doug, and I will be your conference call operator today. Today's call is limited to one hour and will have prepared remarks from Norm Snyder, Reed's Chief Executive Officer; and Tom Spisak, Reed's Chief Financial Officer.

Following management's remarks, they will take your questions.

Before we begin today's call, I have a Safe Harbor statement to read to our listeners. response remind contain that management forward-looking additional statements to management's this may like forward-looking may questions. remarks statements in would our during listeners call, make I your to and that

are company's anticipated manage Commission. statements factors achievements with unknown uncertainties limited reduction detailed distributors; our to information different to and not to actual be United only the third-party to may of products; growth, ability access include, meet manage and levels other those factors risks, filings and development predictions are materially and in and Forward-looking subject dependence by are from the States activity, These Securities debt known time goals; results, changes that but manufacturers our environment; and other such and statements. in to competitive demand cause Exchange current to, performance time from for capital; our on or in

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

any projections as of the performance as as in estimate XXXX. these change. addition, November conditions update company's the market X, to management's assume today, represents We future future projections no to obligation In

over on of performance. our not Mr. that investors Snyder. go present performance sir. because believe by excluding do call and information as are and non-GAAP posted referenced comparing items note with for and on to Please in not informational turn release I included financial results solely measures website it a as Additionally, is please are but We in believe press basis meant for EBITDA SEC assists GAAP their during and our reconciled investor.reedsinc.com. purposes. indicative the now operating modified this consistent measures comparable comparative call across ahead, would to core the financial a filed financial reporting periods is Non-GAAP GAAP supplemental the we substitute analysts we at materials

have good you be achieve with hope plans The to and to everyone. Reed’s and and quarter begin joining we guidance. today. excited team you highlights. results We very you, our continue pleased the out our with and point transparent Thank consecutive and exceeded like met discuss third us quarter future. well are I'm and afternoon, we you third appreciate senior I for to if profitability will quarter We growth safe. I key or goals management about third will would

for quarter seeing portfolio. our First, Reed’s growth net And sales third the growth brand across demand core is growth not adding across only brands. the new during the innovation strong we entire are also of the Reed our accelerated both lifting but to

Tom now As we us continued will address. as November outline that October our led will in sales in increase guidance experienced sales strength shortly, we and to has

broadening and Second, partnership driving we are distribution significant are expansion nationally. our DSD distribution

Our best the points October seven up year-to-date. ending points ACB the measure X, for over and four-week of XX XXXX was over distribution period

Reed’s Really new launch Ale opportunities. is distribution Our Ginger providing

successfully year flow navigate over gross and And our enhanced our spending profile. and to the to network We service improvements margin with in we improving driving continue exceeding our or costs results control to ability our confident COVID-XX to ability our deliver profitability. our remain providing We while while and guidance last removed significant the Fourth, on driving line achieve this remain market in continue supply-chain enhancements the to on customers. have we finally, system future focused from to and cash guidance. to our to focus flexibility allowing capacity, co-packer support our Third, continue quarter pandemic. growth another further the added us third year during tightly

challenges Our driving that our overcoming inherent and performance the with is excellence to effectively commitment has entire team today's demonstrated a environment.

drive to growth, continue well our are and enhance to build profitability We brand. positioned

Turning strong generated innovation, in has of up contributed growth Reed’s volume Despite the net the comparing stronger quarter. across XX% brand growth second Virgil's At strong all as indicates products. quarter, accelerated to The XX% low-low of an syndicated new launches reflecting growth Reed’s X%. significant growth new recent also from as branded volume sales year’s XX% in to of retail data performance to well trend. third sales the quarter, innovation. even last

in dollar IRI For and the was XX% XX% as impact been the up weeks, directly lower up This related offset which Reed’s channel four to and sales was be by continues COVID-XX. of sales have partially to sales in most recent data. non-measured sales, Virgil reflected

gross is continued by momentum sales spending. controlling tightly strong being margin our augmented improving Our and focus on

are in We are accelerated making net progress by G&A only XXX as improvements have generated with and of and as and sales. gross positive remains sales focus cash delivery year-over-year, margin the marketing of result, sales improved a momentum. evident flow we quarter which improvement expenses Achieving the a be handling, key third basis in percentage points is

We our future fund ability growth. are in confident current to and

the of As capacity co-packing to partner, during by the on our I year. noted pace they're one-third, sixth approximately we added our third expand quarter, just beginning

have and redundancies the COVID-XX challenges. proved encounter been negatively have chain to to co-packer continues significant increase production while be industry demand the supply impacted supply assets Our as capacities by

transportation only network and is which the amid not we with capabilities supports We but offset to adding have capacity the built on each heightened both reducing costs current demand coast, cost pandemic. are confident

of in Rich growth chain quarter, our as trajectory. Vice Operations. operational to Rich we Rich and Additionally, supply end-to-end adds our key in management driving this team our team strategic a in operational practices. proven Hubli adding time success has strength enhanced President

opportunity Reed’s authorizations many strong quarter, a deadline retail our COVID-XX. the been out across fill of to noted has Ginger we the delayed third by Real demand we The rollout of considerable Reed’s product shipping distribution. was our and of to opening, Really during offerings have list the our brand. still and With reset, saw contributes I which strong led Ale significantly in the by As growth

H-E-B, SKUs Southeastern two Additional included our and Albertsons Shop, Grocers, Ale Harris of Stop Kroger resets Ginger Regions, Teeter. Select & divisions of quarter This

each the are strong We our saw from recent performing also of most with well. performance Reed-Zero innovations quarter third during

network We're further. to Ohio build currently Southeast retail by the bringing Massachusetts, Our DSD continue Cosco early the the across recent Building Publix, building in in support adding during most starting gains, Grocers country. regions see our are stages third now the are but of in out on We're on ultimate West our ready-to-drink we sales in Winn-Dixie. led we Colorado, Utah to new partners growth to our relationships and Anheuser-Busch distribution quarter. distribution, Southeast are the growth up to Mules and and DSD expanding including also

generating activities up sales and e-commerce we are quarter-over-quarter opportunity E-commerce further strong quarter, the Amazon Our second growth. for continued are including XXX% expansion. over see

QX the strength chain our our enhanced distribution in see will and you of position us activities growth. supply continued results, our drive well As to

to our sales the look improvements our pleased the confident profitability case as it. flow ability support are We to and with forward quarter. delivering further in was momentum current in very We in cash and

We our opportunities execution. and are enthusiastic confident in about

I cover impacts call to of Before me turn on the let over to COVID-XX. comment results, the Tom the financial

top we thank with normal constantly to remains as employees support as the their of all regulatory to continued action with want work new our for navigate our I we environment comply towards the changing priority and and mandates. partners pandemic. and First, all this quick Safety continue

see impact but and retail is enhanced not entire positive the continues only chain industry secure on supply volume. Our to

successfully and are of that the and to overcoming rollout freight delays We challenges pace activity impacts added costs new reset production. from including the innovation packaging has to

to any to environment monitor to Tom? leverage the continue call overcome our discuss in the turn me capabilities Tom results and will Spisak more challenges. to our financial that, let We With detail. over

you Norm. everyone today. with It's Thank speak very to a much pleasure

for another As successful Norm quarter discussed, third the was quarter Reed’s.

to building past for the been has momentum add that the few to continue quarters. We

seeing brand across of new as adoption innovation, as strong are continued well products. We core of our each growth

the $X.X Reed’s increased $XX.X the sales brand for to XX% $X.X XX% by volume X% and volume million X% XX%. to quarter lower year, driven XX% strong Third cost million to prior the year. Core increased to compared compared prior XX% million the margin was the increased per per increased prior basis and in over growth million brand. volume and margin quarter for a in price Gross and driven to in growth, XX% third costs net the dollars case. volume $X.X growth driven points by year, gross to XXX was handling growth. profit increase by Gross a compared case. during Virgil's the $X.X growth brands XXXX million case prior and to Delivery growth sales year, including of case gross increased core The XX%

XXXX year-over-year were administrative expense, decreased $X.X associated the fees improved to a partially with consulting an as reflects costs percentage staging costs in XXXX. of quarter, As marketing programs the X.X delivery increase cost offset in during to expenses. quarter decrease administrative handling option partially offset other general reflects XX increased lower a a year. decreased expense, in X% in Selling million but quarter the XX% the the distribution in by and million XX% not costs third our third million as expenses of result of decreased marketing sales sales, a ongoing that General and executed $X.X percentage third compared inventory The severance decrease of and largely of net decreased and and prior basis points and COVID-XX. in year-over-year The prior to decrease in initiatives year professional period. by to XX% and and from stock

the compared $X.X EBITDA the $X.X to compared net $X.X operating or same year. in the the in to of EBITDA Interest with share consistent in loss last of third million or quarter the $XXX,XXX million, period per share and prior year. prior to year the improved improved period. expense to an in loss $X.XX XXXX of Modified quarter million was loss at million million per $X.X loss year narrowed $X million a prior and Third $X.XX loss to $X.X

ended credit. Moving our sheet flow, balance third cash we the on revolving quarter of availability line cash of with and to of the million $XXX,XXX $X.X and

use a million $XX.X million decrease and operating the primarily activities period. in in to net first during year lower quarter. The quarter months, to of the nine a spending loss the we compared the During cash cash operating and the $X.X used in of reduction using in prior XXXX in activities relates third

plan a with formulate Raptor/Harbor to conversations Senior and improve initiated also have to flexibility. We financial our Lender our

we outlook. up sales are guidance, XX% growth. from to guidance growth core XX% increasing prior We of XXXX our core approximately our now Turning anticipate brand growth brand

product cost we XXXX margin approximately prior the result fiscal of all mix a XX% year. in a implementing a of delay XX% now As compared to anticipate gross in and savings initiatives,

assumes continue has been COVID-XX. for impacted which costs, of environment guidance gross could consistent pricing ingredients, by Our and each be margin a production and packaging, to

Norm? remarks. concluding Now let some me turn Norm call back to the for

Tom. Thanks

Before call and strong the both I for continue of to in our the my core our across for brands company consumers. reiterate I momentum the our operator as back want We're confidence position turn business innovation long-term to resonating Reed’s are with we questions, seeing to growth.

remain We focused costs, also chain. supply margin improving our on gross and controlling enhancing

national growth to to network We support strong margin. have co-packer built our significant improve have opportunity a and

safe changes We inventory environment and and entry is category Ginger contributing into have remain fill the growth, any to shelf. on continue and our for partners employees necessary Really our current keep considerable distribution navigate as Ale larger Ale Ginger to our Real to new are prudent out still Our we product. with the opportunity we promising we flexible make to will and that

long-term call the question-and-answer are confident the in I the to begin operator will We and near-term to session. our now delivering over outlook. hand

operational again and Thank look highly on participating forward coming We positioning for today's over and Have years. to execution. opportunity our and remain We day. our your brands and for progress are continued confident a with great strong seeing support the months you sharing call.

today's this your Thank Ladies and for gentlemen, teleconference. you does participation. conclude

have your lines disconnect wonderful and day. may time You a at this