Jones Soda Q1 2025 Earnings Call Transcript

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May 15, 2025

There are 3 speakers on the call.

Operator

Good afternoon, everyone. Thank you for participating in today's conference call to discuss Jones Soda's financial results for the first quarter ended 03/31/2025. Before we begin, let me remind everyone of the company's Safe Harbor disclaimer. Certain portions of our comments today will concern future expectations, plans and prospects of the company that constitute forward looking statements and for the purpose of the Safe Harbor provision under the Private Securities Litigation Reform Act of 1995. Forward looking statements include all statements containing verbs such as aims, anticipates, estimates, expects, believes, intends, plans, predicts, will, may, continue, projects, or targets a negative of these words and similar words or expressions.

Operator

Forward looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially from those indicated by the forward looking statements. Factors that could affect our actual results include, among others, those that are discussed under the heading Risk Factors in our most recently filed reports with the SEC, including our annual report under Form 10 ks, our quarterly report under Form 10 Q, and our current reports on Form eight ks. In addition, this call concludes discussions of certain non GAAP measures, including adjusted EBITDA. The most directly comparable GAAP measures and reconciliations for non GAAP measures are available in the earnings release and other documents posted on the company's website under Investor Relations. A telco replay will be available after the call through 05/29/2025, and a webcast replay of today's webinar will also be available for one year via the link provided in today's press release as well as on the company's website.

Operator

Now I'd like to turn the call over to Joan Sodas' CEO, Scott Harvey. Thank you. You may begin.

Speaker 1

Thank you, Latanya. Good afternoon, everyone, and thank you for joining our first quarter earnings call. First quarter twenty twenty five was a pivotal and transitional period for Jones, marking the beginning of a strategic turnaround under our new leadership. I'm pleased to say that it's been off to a good start. Overall, the quarter reflected the dedication discipline of our team whose efforts have laid strong foundation for the future of Jones and our shareholders.

Speaker 1

In the first quarter, we were able to address a number of cost causing initiatives that are already beginning to pay off. First and foremost, we saw a 20% reduction in our SG and A expenses, driven by the implementation of targeted cost cutting, enable us to optimize spending, improve operational efficiencies and prioritizing high ROI marketing channels. Secondly, we continue to expand our distributor network and optimize our supply chain positioning us for a long term organic and accretive growth. In the first quarter alone, we signed 22 new distributors in all trade classes and convenience including convenience channels and our THC business. Thirdly, we continue to innovate to match the needs of our growing consumer base through strategic partnerships such as with Bethesda and continued investment into growing categories such as modern soda and adult beverages.

Speaker 1

We have positioned Jones at the forefront of trends that are hitting the beverage industry. Following just a couple of months of focus efforts, Jones is now nimbler and leaner enabling us to quickly meet the needs of the evolving consumer. This focus is part of an overarching strategy to drive sustainable revenue growth, not through one time pipeline orders, but through consistent consumer driven demand. Looking ahead, we remain sharply focused on our three core categories, which are core soda, modern soda and the adult beverage, which will continue to serve as the pillars of Jones. Backed by a strong and trusted brand, rigorous cost discipline and a loyal and growing consumer base, we are confident that the groundwork we've laid in Q1 will translate into sustainable growth and value creation in the quarters to come.

Speaker 1

Before I dive into a more strategic growth objectives and recent progress, I'd like to pass the call over to Brian, our CFO, and speak and have him speak on our Q1 financial results. Brian, over to you.

Speaker 2

Thank you, Scott, and good afternoon, everybody. Looking at our first quarter results of '25, our net revenue in the first quarter was $4,600,000 compared to $5,000,000 compared to prior year. The decrease in revenue was primarily driven by a one time pipeline fill we had in the first quarter of twenty four Canada. Q1 '20 '20 '5 included approximately $4,200,000 in revenue from the company's beverage segment compared to approximately $4,600,000 in the prior period. Beverages segment did however see strong growth in its hemp derived HD9 products during the first quarter 'twenty five.

Speaker 2

As such products generate $900,000 in revenues. This represents our fourth consecutive quarter of a sequential sales expansion in the HD-nine segment, which is why we remain excited about the future of

Speaker 1

our HD-nine products for Jones.

Speaker 2

The company generated $400,000 in revenue from the cannabis THC segment, which is down 8.3% compared to Q1 twenty four. Looking at gross profit as a percentage of revenue, net revenue was 37.3% compared to 37.8% in the prior period. The decrease is primarily driven by higher trade spend in Q1 twenty five compared to the prior period. When we look at COGS as a percentage of gross revenue, we see that it was 54% in the first quarter of twenty five compared to 57% in the first quarter of twenty twenty four. So we had an improvement on COGS.

Speaker 2

The sole reason for the decline in gross profit margin was due to the higher trade spend in the first quarter, which drove the lower gross profit margin on net revenue. Looking at total operating expenses, they decreased 21 to $2,400,000 in the first quarter of twenty twenty five compared to $3,000,000 in the year ago period. Decrease was driven by strong cost management and supply chain efficiency initiatives implemented by Scott and myself during the initial month of leadership. Our efforts to reduce SG and A and optimize the supply chain have been highly effective. While we are pleased with the progress so far, we see room for additional SG and A reductions.

Speaker 2

And our focus remains on continuing to unlock additional efficiencies in the quarters ahead. Our next area of focus will be on our cost of goods sold, including freight and warehousing. The net loss for the quarter decreased to $2,900,000 or $01 a share compared to a net loss of $1,100,000 or $01

Speaker 1

a share in the prior period.

Speaker 2

The decrease in net loss was primarily driven by the reductions in SG and A expenses, which was partially offset by the lower net sales. Lastly, we look at adjusted EBITDA, it improved to $600,000 loss compared to a $1,000,000 loss in the prior period or 39% improvement. Scott and I are targeting further improvements to this metric in the second quarter and the balance of the year. That will require improvements to our quarterly revenues and margins in addition to continued focus on further reductions in SG and A. In our first few months at the helm, we followed through on our commitment to operational discipline, cash management and ROI focused investment high impact channels.

Speaker 2

We've already begun to see positive impact of these decisions flow to our bottom line. I very much appreciate the support and hard work from all the Jones team members who have supported these efforts, as well as their supply chain partners. Although there's still much work to be done, the early progress gives us confidence that there's more improvement ahead. With a solid operational foundation and a dedication to accountability, we're setting ourselves up to scale effectively. As we gain traction with key distributors and continue to stabilize our core operations, we're in a strong position to drive revenue growth.

Speaker 2

Before handing the call back to Scott, I wanted to touch briefly on our balance sheet. Our cash position at the end of quarter totaled $700,000 with working capital of 1,000,000 In the first quarter, we invested our cash into accounts receivable and inventory as we strategically built up inventories for both the Pop Jones and Fiesta Jones launches, as well as the preparation for our seasonal increase in our craft soda business. We continue to work with our credits facility provider and our core suppliers to finance this growth in accounts receivable and inventory. We expect the second quarter to allow us to reduce investment in our inventory with the expected seasonal increase in sales and pipeline sale of our new products. Overall, I'm very proud of the progress we've made in these early months and remain focused on continuing to strengthen our position and create long term value for our shareholders in the quarters ahead.

Speaker 2

With that, I'll turn the call over to Scott to share an update on our key initiatives and growth strategy. Scott?

Speaker 1

Thanks, Brian. As we look forward to the future of Jones, we maintain a key focus on driving growth across the key focus areas, as I mentioned before, which are core soda, modern soda and the adult beverage. Within the core soda category, we continue to expand and grow our distribution partners. In the first quarter of twenty twenty five, we secured six new direct store delivery partners that serve major national and regional retailers, which allows us to expand our distribution footprint and penetration into key geographic areas. Building on this momentum, we're evolving to meet the customer preferences in the core soda category with the introduction of our Zero and Mini Cola lines.

Speaker 1

Our Zero Colas offer a healthier option without sacrificing flavor and have already beat our expectations. Our Zero Colas are now available in approximately 10,000 national and regional grocery stores. We're planning to expand our Zero Calorie lineup with new flavors, including the Jones Zero Root Beer, which actually lands this month, and Zero Doctor. Jones launching later this year. In addition to our mini cans, it provides our customers with a convenient portion conscious option that aligns with the growing demand for smaller servings.

Speaker 1

We also remain committed in increasing to our customer base through the rollout of limited edition products with our partners such as Bethesda. The May launch Nuka Cola Quantum was introduced, created in collaboration with Amazon Prime series Fallout, has already delivered strong top line results and gained significant early tractions, already selling about $275,000 of product in less than two weeks of the launch date. Looking ahead, we're excited to continue special limited edition rollouts with Bethesda as part of our newly signed three year deal. Shifting to modern soda, we're excited about the growth in this segment led by our two products, Pop Jones and Fiesta Jones. Pop Jones is now available in five original flavors with just 30 calories, four grams of sugar, and added fiber and immune support, all in a 12 ounce can.

Speaker 1

Blind taste test consistently outperforms comparable products. In April, we announced that Pop Jones is now featured in modern beverage aisles across several national and regional chain stores, making it available in over 2,000 retail doors. This milestone marks a significant achievement as Pop Jones is emerging as a key player in the booming functional beverage market. Its expanding preference on store shelves reflects our commitment to innovation, flavor, functionality, offering a healthier soda option without sacrificing taste. Fiesta Jones is crafted specifically for convenience stores featuring Latin flavors like watermelon strawberry, mango passion fruit, coconut lime, and guava berry, all in resealable aluminum bottles.

Speaker 1

Each flavor contains just 80 calories and 19 grams of sugar per bottle with no artificial colors or caffeine. Fiesta Jones is also now available in over approximately 2,000 convenience stores. Our early success with Pop Jones and Fiesta Jones reflects our commitment to meet consumers' needs and capitalize on the billion dollar functional beverage industry. Turning to our third key area of focus adult beverage, this includes our hemp derived products under the Mary Jones lines, as well as our alcoholic offering Spike Jones. Our HD9 business continues traction, delivering $946,000 worth of revenue in Q1.

Speaker 1

This segment has posted sequential growth every quarter since the launch in January 2024, which reinforces our confidence its long term potential. Since the introduction of Mary Jones Hemp Delta nine line, we've signed 32 distribution partners, including 16 in Q1 of twenty twenty five. With this momentum, we're very optimistic about where the segment is headed and remain focused on scaling it even further with our launch of our zero sugar HC9 products in Q2. Lastly, with Spike Jones, our alcohol beverage plan, it's available in both 12 ounce and 19.2 ounce cans with flavors such as strawberry, berry lemonade, grape and orange and cream. We're excited to announce that Spike Jones has launched a pilot with a major nationally recognized convenience store chain.

Speaker 1

Taking a step back, Brian and I have now been in this strategic turnaround for a few months and the progress has both been meaningful and measurable. We successfully reduced SG and A, increased operational efficiencies across our distribution network, and instilled a culture of accountability around managing our P and L. These improvements have already started to show in our early results, and we believe there's a lot of runway to grow as we work towards realizing our full potential. To capitalize on this momentum, we're aligning the organization around clear and focused mission to execute a strategic and measurable plan of scaling the business while preserving the brand's authenticity of Jones. We've already begun taking these right steps by one prioritizing high growth channels such as modern and adult beverage categories, expanding product lines to meet the evolving needs of our consumers, three, optimizing our supply chain and strengthening our relationship with distributors, instilling a culture of accountability and efficiency and managing our E and L, and finally, leveraging the beloved brand that Jones has to drive sustained revenue growth.

Speaker 1

After selling the ship for a couple of months now, Brian and I are proud of the progress we've made so far, but we're even more energized for the work and the growth that lies ahead. Before moving on to the Q and A, I really want to recognize and thank every member of our Jones team for their dedication and commitment, not just to the company, but to each other. Your efforts are driving this transformation and we're just getting started. With that, I'm going to finish the call by addressing some of the questions we've received from our shareholders via email recently. We selected what we believe to be the most important and relevant questions to answer.

Speaker 1

At this point, I'll pass this call back to Brian and we'll just start it up by answering the first question. Brian?

Speaker 2

Thank you, Scott. First question, under the previous CEO, the company previewed innovative packaging as the product is consumed. Are similar brand refresh or package innovation initiatives still underway? Scott?

Speaker 1

Yeah, great question. So absolutely. I mean, we remain committed to really just pushing the boundaries of consumer demand with innovative and entertaining and immersive brand experiences. We continue to explore packaging initiatives designed not only to really just enhance the overall visual appeal, but really deepen the connection with our consumers. We're always exploring brand new ways to bring the brand to life, because one, that's who we are, and that's what we've been known for.

Speaker 2

Thanks, Scott. Next question. What is your vision for future marketing efforts? Do you anticipate collaborations with major influencers, celebrities, or strategic partners? Scott, I can answer that one as well.

Speaker 2

Well, connecting with our

Speaker 1

consumers really, again, is still at the heart of everything that we do. Again, we're constantly exploring innovative ways and entertaining ways to engage and create that, really, that brand experience. It's all about who we are. We're bold. We're interacting.

Speaker 1

We're always trying to push that boundary. When we address about the influencers, celebrities, and strategic partners, I think the perfect example is of what we're doing now with Bethesda and the Fallout series. By launching that, I mean, we're seeing a phenomenal feedback and purchase with the product that we've launched, Nuka Cola Quantum. I think on an ongoing basis where it makes sense for us, we'll continue to explore those kind of partnerships.

Speaker 2

Thanks, Scott. Next question, will the company begin providing quarterly or annual financial guidance including revenue and profitability targets? Looks like I will take that one. We don't plan on doing that this year, but we will focus on providing continued keys to what we see are going to drive revenue growth for the company. I think you have seen that the news releases focusing on expanding distribution, launch of new products.

Speaker 2

To us, those are the key drivers. We get more doors that we cover our products with. We launch innovative products in high growth areas, as Scott alluded to, modern soda and adult beverages being a couple of key categories. We'll continue to provide meaningful updates on news releases to give everybody an idea that we continue to expand our distribution with the right products. And I think we do believe that's going to lead to the continued expansion of revenue.

Speaker 2

Next question. Would you consider selling your products at military bases or college campuses? Scott?

Speaker 1

Yeah. Great question. To address a couple of the answers, yes. Opportunities that present themselves, we certainly will. As a matter of fact, we're currently selling our products on GoPuff.

Speaker 1

And GoPuff really tailors towards metropolitan areas and college campuses. And currently today, through GoPuff on college campuses, you can get our Pop Jones, our HD9 and our core sodas delivered straight to them. So I think being on both of those locations is a great way for us to develop future consumers for us and really continue to build out the brand on a go forward basis. So yeah, the opportunities that we have to get into these two types, like the military bases and the college campus, absolutely. It's a great venue for us.

Speaker 1

And we're super interested and excited about the opportunities forthcoming.

Speaker 2

Thanks, Scott. The last question is, what initiatives are underway to improve gross margins? And which cost or pricing leaders are proving most effective? I'll take this one. We touched on this earlier in the call.

Speaker 2

We started looking at SG and A first, but now we are turning our attention to the gross margin line with a review with our supply chain. Scott and I both experienced our previous roles. A lot of this is about volume to get better pricing from our co mans. So as we drive up the top line, we're going increase our volumes. We'll get to lower costs and better margins that way.

Speaker 2

That's the most effective way of doing it. In terms of pricing levers, I think we'd be looking at innovative products. So we are getting into that with the Quantum program, whereas special programs allows us to have differentiated pricing for very innovative products. So that's what we see on the pricing level and volume on the cost of goods sold levels, what's going to drive down COGS and increase our margins. I will turn it back to Scott.

Speaker 1

Great. Thanks, Brian. With that, those are the questions that we're going to answer at this time. We'd like to thank everyone for taking the time to listen to us today. I would welcome further questions and would be happy to take your one on one calls later this week.

Speaker 1

Again, please direct any of your inquiries to jsdagatewaygroupgrp dot com. I'd be happy to address accordingly. If I don't speak to you soon, I look forward to addressing you all again when we report our second quarter results. Thanks again and have a great day. And Latanya, we'll turn it back to you.

Operator

Thank you. Ladies and gentlemen, this concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation, and have a great day.

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Earnings Conference Call
Jones Soda Q1 2025
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