Reed's (NASDAQ: REED) reported Q3 EPS of ($0.04), $0.02 worse than the analyst estimate of ($0.02). Revenue for the quarter came in at $10.6 million versus the consensus estimate of $10.36 million.

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.”

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