Reed’s Inc. Sees Liquidity Improvements Amid Q3 Struggles

Reed’s Inc. Reports Financial Results and Strategic Updates

Strengthened liquidity position with a new $10 million credit facility.

REED’s, Inc. (OTCQX: REED) is the proud owner of the nation’s leading portfolio of handcrafted, natural ginger beverages. The company has recently announced its financial results for the third quarter and also provided a comprehensive update on recent strategic initiatives. After facing difficulties in inventory management and fluctuating production capabilities, management is optimistic about the future following a series of strategic transactions.

Q3 2024 Financial Overview

Financial Highlights

For the three months ended September 30, 2024, Reed’s reported net sales of $6.8 million, down from $11.9 million during the same period last year. The decline in sales can primarily be attributed to tightened credit terms from suppliers and a challenging inventory environment. Gross profit for this period was $1.2 million, indicating a gross margin of 18%, compared to 34% the year prior. Delivery costs, however, saw a significant reduction of 33%, bringing expenses down to $2.99 per case.

Operational Challenges

Despite strong order momentum from retail partners, production challenges led to net sales falling short of expectations by over $4 million. CEO Norman E. Snyder, Jr. described the liquidity challenges faced by the company, noting that these issues were primarily due to restricted working capital. Snyder emphasized that the recent $10 million credit facility from Whitebox Advisors reflects confidence from their majority stockholder, D&D Source of Life Holding, LTD.

Strategic Moves and Future Outlook

New Credit Facility

On October 23, 2024, D&D acquired all secured notes held by funds managed by Whitebox, allowing Reed's to close on a secured one-year revolving credit facility of $10 million. This facility will bear an attractive interest rate and is designed to stabilize operations, pay down existing credit lines, and increase finished goods inventory levels. With favorable extended repayment terms and collateral release from D&D, management believes this action bolsters their ability to meet customer demand.

Management's Take

Snyder expressed pride in the decisive steps the company has taken to improve liquidity, stating, “This commitment from our majority stockholder, combined with new capital, positions us well to resume growth and profitability.” The leadership team is also focused on addressing the challenges of inventory shortages with action plans now in effect for building up stock levels to fulfill customer needs effectively.

Insights into the Market Landscape

Craft Beverage Sector Growth

In a vibrant and competitive craft beverage market, Reed’s faces ongoing challenges but maintains a commitment to quality and innovation. The brand is known for its portfolio of natural ginger beers, formed with real ginger and premium ingredients, aiming to appeal to a health-conscious consumer base. Additionally, Reed’s has successfully ventured into the zero-sugar market segment, further enhancing its competitive stance.

Looking Ahead for the Company

As the company manages its resources and implements the newly acquired funding strategically, Reed’s aims to rebuild its operational strength. While the current financial outlook remains cautious, the focus is directly placed on balancing operations with demand responsiveness. This includes refining internal processes to minimize the risks incurred due to fluctuating supplier relationships and credit terms.

Frequently Asked Questions

What were the main drivers behind Reed’s decline in net sales?

The main drivers included tightened credit terms from suppliers and production limitations which adversely affected inventory levels.

How has the new credit facility impacted Reed’s financial health?

The new credit facility enhances liquidity, allowing Reed’s to stabilize operations and better manage inventory levels in response to customer demand.

What strategies is Reed’s implementing to overcome these challenges?

Reed’s is focusing on building inventory, improving supplier relationships, and refining operational processes to enhance efficiency and meet consumer demand more effectively.

How does Reed’s plan to sustain growth moving forward?

By leveraging new capital for inventory management, refining operational processes, and expanding product offerings, including efforts into the zero-sugar segment.

Who can be contacted for investor relations related inquiries?

For investor relations, Sean Mansouri, CFA, or Aaron D’Souza can be contacted via email at ir@reedsinc.com or by phone at (720) 330-2829.

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