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Reed's (REED) Tops Q1 EPS by 1c, Revenues Beat; Reaffirms FY20 Growth & Gross Margin Outlook

May 11, 2020 4:51 PM EDT
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Reed's (NASDAQ: REED) reported Q1 EPS of ($0.05), $0.01 better than the analyst estimate of ($0.06). Revenue for the quarter came in at $9.5 million versus the consensus estimate of $8.66 million.

Highlights for the First Quarter of 2020

  • Net sales increased 13% to $9.5 million in the first quarter compared to $8.4 million in the prior year. The increase compared to the prior year reflects increased sales of both the Reed’s® and Virgil’s® brands, including the launch of significant new Reed’s® brand innovation;
  • Core brand gross sales increased 12% versus prior year period primarily driven by strong 21% volume growth of the Reed’s® brand;
  • Gross profit increased 15% to $2.9 million compared to $2.5 million in the prior year period. Gross margin increased 50 basis points to 30.1%;
  • Operating loss narrowed to $2.3 million compared to $2.9 million in the first quarter of 2019; and
  • Net loss was $2.6 million, or $0.05 per share, compared to $3.3 million, or $0.11 per share, in the prior year period; and
  • Non-GAAP Modified EBITDA loss improved to $1.4 million in the first quarter of 2020 compared to a Modified EBITDA loss of $2.3 million in the prior year.

Management Commentary

“We are very pleased with our results in the first quarter achieving 13% net sales growth driven by 21% volume growth of the Reed’s® brand. We are seeing strong consumer take-away of both the Reed’s® and Virgil’s® brands, with accelerating growth in March and April. According to IRI data, during the most recent 4-week period ended April 19th, dollar sales of Reed’s® increased 32% and Virgil’s® increased 25%. Our recent innovations, including Reed’s® Real Ginger Ale™, Reed’s® Extra Zero Sugar and Reed’s® Wellness Ginger Shots, are all contributing to growth and we are seeing a strong response from retailers and consumers. We are particularly excited with the broad-based retailer interest in Reed’s® Real Ginger Ale™, allowing us to capitalize on the fast growing $1.2 billion ginger ale market,” stated Norman E. Snyder, Chief Executive Officer of Reed’s, Inc. “We have strengthened our supply chain and co-packer network, are driving costs out the business and are laser focused on progressing toward cash flow break-even. We recently strengthened our balance sheet with a successful equity offering, all of our innovations are now in place and we have significantly expanded our market opportunity with the launch of Reed’s® Real Ginger Ale™. The entire Reed’s® team and partners are delivering a high level of execution supporting growth and efficiencies. We have also successfully adapted to the current environment associated with the COVID-19 pandemic, and are delivering our customers uninterrupted service. I am extremely appreciative of the efforts of all of our employees and partners amid these recent challenges.”

Full Year 2020 Guidance

The Company is reaffirming its fiscal 2020 outlook. The Company continues to expect to generate core brand growth of approximately 10% and continues to anticipate a gross margin of 32% or greater for the full year 2020. Fiscal 2020 guidance reflects year-to-date business trends, including the current 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, which cannot be reasonably estimated and are not factored into current fiscal 2020 guidance.

For earnings history and earnings-related data on Reed's (REED) click here.



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