Home Beverage News Wire

Jones Soda (JSDA) Conference Call.

SHARE

5 YEAR CHART

$JSDA

SEATTLE Nov 19, 2017 (Thomson StreetEvents) — Edited Transcript of Jones Soda Co earnings conference call or presentation Thursday, November 9, 2017 at 9:30:00pm GMT

Corporate Participants

================================================================================

* Jennifer L. Cue

Jones Soda Co. – President, CEO & Director

* Max Schroedl

Jones Soda Co. – CFO

================================================================================

Presentation

——————————————————————————–

Operator [1]

——————————————————————————–

Good day, and welcome to the Jones Soda Co. Third Quarter 2017 Earnings Conference Call. Today’s conference is being recorded. At this time, I’d like to turn the conference over to Max Schroedl, Chief Financial Officer. Please go ahead.

——————————————————————————–

Max Schroedl, Jones Soda Co. – CFO [2]

——————————————————————————–

Thank you, and good afternoon, ladies and gentlemen. 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 for the purposes of the safe harbor provisions 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 and negatives of these words and similar words or expressions.

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 on Form 10-K and our quarterly reports on Form 10-Q and current reports on Form 8-K.

Listeners are cautioned not to place undue reliance upon these forward-looking statements that speak only as to the date of this earnings call. Except as required by law, we do not assume any obligation to update the forward-looking statements we make today.

I will now turn the call over to Jennifer Cue, Chief Executive Officer of Jones Soda.

——————————————————————————–

Jennifer L. Cue, Jones Soda Co. – President, CEO & Director [3]

——————————————————————————–

Thanks, Max, and good afternoon, everyone. During our third quarter 2017, we continued to have some exciting movement forward on our growth and higher-margin initiatives such as Lemoncocco and Fountain, while also dealing with the delisting of our Jones 12-ounce can business at a national retailer. Revenues were down 11% due to a combination of the delisting as well as some softness in our glass bottles in a few regions. The growth of Lemoncocco Fountain in our 7-Eleven business helped offset the loss of the Jones can listing. While we had challenge in this quarter and this year, we have managed well through this and are looking forward to the future. Our disciplined operations have allowed us to power through the can delisting while still building upon our growth initiatives. We are at a critical juncture now with some new and exciting initiatives, and our legacy brand in the ever-evolving craft soda segment of the industry.

With all of this in mind, we went out and hired a new strong Head of Sales in Steve Gress, who has built brands from (inaudible) and into great thriving and exciting brands. Steve’s hometown is New York City, and we are planning to have Steve really create some exciting business from Lemoncocco there as well as strategically build this brand in other focus markets. Steve will also be integrating our Lemoncocco and Jones sales teams, and driving these brands each of them in parallel with their own unique strategies. I am confident in what someone of the caliber of Steve will be able to do with our portfolio. Our most recent initiatives, Spiked Jones, led by long-standing Pacific Northwest Jones distributor, Columbia Distributing, officially started being sold in market in September. We are focused on building on-premise accounts followed by grocery retail, similar to our launch strategy of Lemoncocco. I will now let Max go over the numbers and I will return with some more detail on our growth initiatives and plans for 2018.

 9 YEAR CHART
$JSDA

——————————————————————————–

Max Schroedl, Jones Soda Co. – CFO [4]

——————————————————————————–

Thanks, Jennifer. For the comparative quarters, revenue in the third quarter of 2017 was down 10.7% at $3.6 million compared to $4.1 million in Q3 ’16. As a reminder, during the second quarter, a major retailer delisted our Jones 12-ounce cans in favor of their own private labeled product. During the quarter, 22% of our total revenues were generated from Canada sales. Promotional allowances decreased $34,000 or 7.5% to $420,000 for the quarter, due primarily to timing differences in the 2016 comparable period. As a reminder, the accounting impact of these promotional allowances is a direct offset to gross revenues. Gross profit margin in the third quarter of 2017 decreased to 24.6% from 27% in Q3 ’16, primarily due to margin changes in the 7-Select glass bottle compared to PET package. Efficiencies achieved in the prior period due to higher sales volumes and, to a lesser extent, the onetime private label program in Q3 ’16. Operating expenses in the third quarter increased by $48,000 to $1,062,000 compared to $1,014,000 in the prior year periods. The increase is primarily related to sampling and supporting our Lemoncocco initiative. Operating expenses including noncash expenses, depreciation and amortization and stock-based compensation totaled $47,000 compared to $75,000 last year. Operating expenses as a percentage of revenue increased to 29.1% for the quarter from 24.8% in 2016. Net loss for the quarter ended September 30, 2017, was $211,000 or $0.01 per share compared to net income of $69,000 or $0.00 per share a year ago.

Now onto the year-to-date results. For the first 9 months of 2017, revenue was down 12.2% at approximately $11.1 million compared to approximately $12.7 million in the prior year. Revenue declines were due to the previously mentioned factors. During the first 9 months of 2017, 22% of our total revenues were generated from Canada sales. Promotional allowances decreased $296,000 to approximately $1.2 million from the 9-month period, primarily due to one-time items associated with the 2016 launch of 7-Select. Gross profit margin remained relatively flat for the first 9 months at 25.3% in 2017 compared to 26.5% in 2016. There are many factors compared — making comparing this period difficult, including different year-over-year pricing from the initial 7-Select launch in 2016, different packaging for the 7-Select product, a large load-in for the 7-Select product in 2016, all offset by a price increase on our Jones (inaudible) midway through the period. Operating expenses for the 9 months ended September 30, 2017, decreased to $3,185,000 from $3,212,000 in the prior year. However, they are now 28.7% of revenue, up from 25.4% in the comparable period. We believe our core discipline around operating expenditures is the primary reason for our relative stability in operating costs. Operating expenses, including noncash expenses, totaling $131,000 compared to $160,000 last year. Net loss for the 9 months ended September 30, 2017, was $463,000 or $0.01 per share compared to net income of $53,000 or $0.00 per share a year ago.

Turning now to our balance sheet. As of September 30, 2017, we had working capital of $1.6 million and cash and cash equivalents of $745,000. At this time, we believe that our current cash and cash equivalents, combined with our loan facility and cash from operations, will be sufficient to meet our current anticipated cash needs. Certain initiatives could require additional outside capital based on landing a large QSR account for hitting certain benchmarks for other initiatives. Cash provided by operations for the 9 months ended September 30, 2017, was $234,000 compared to $420,000 used by operations in the primary — in the prior year, primarily due to timing of payables and receivables and the seasonality of the inventory levels. We have a loan facility available for working capital needs, which allows us to borrow up to $3.2 million. Our eligibility for borrowing as of September 30 was approximately $1.7 million, of which we had drawn down $925,000 compared to a line downs of approximately $1.2 million at December 31, 2016.

I’ll now turn the call back to Jennifer to give an update on our sales and marketing highlights.

——————————————————————————–

Jennifer L. Cue, Jones Soda Co. – President, CEO & Director [5]

——————————————————————————–

Thanks, Max. To remind everyone on the call again, our plans for the future is based on 3 key initiatives: Jones, Lemoncocco and innovation. Our Jones can business was focused on 1 retailer that decided to switch its focus on Jones glass bottles instead and in line with the trends in the craft soda industry. This delisting took effect in May of this year and the full effect of this delisting was most noticed in our third quarter. Our Fountain business year-to-date is up 200%, and we see growth in a combination of small QSRs, corporate accounts and convenience chains. We launched the first-ever Cane Sugar Fountain for 7-Eleven at 400 of their Pacific Northwest locations with our Green Apple SKU, and this has gone very well. We are excited to learn we will maintain our Fountain head here, and are working with 7-Eleven to consider new flavors to change up for 2018 and beyond. In addition to our Fountain businesses at 7-Eleven, we had great success with the Fufu Berry Slurpee in the 400 locations at 7-Eleven. And with this, we will be able to locate additional Slurpee opportunities in the Pacific Northwest as well as outside of our home market. In other Fountain news, we were just awarded a great QSR account called Sizzle Pie. Sizzle Pie has 8 locations from Portland to Brooklyn, New York, and we couldn’t be more in line in terms of values with Sizzle Pie. We will get this chain up and running over the next 4 weeks.

We continue to see interest from larger Fountain accounts and made through the normal course of business beyond test for various opportunities. Landing a larger QSR account could be material to our revenues and business and require additional capital to acquire equipment to support the account. I would like to also mention that based on various requests from new food service customers, we have now expanded our portfolio of products offered on our Fountain machines to include our Jones Cane Sugar skews and also new items and brands that are lower in calories and on trend and work well as part of the entire Jones Fountain offering. These product include juices, teas and sparkling waters. We can now offer a chain of complete range of products that complement our Jones lineup. We are, in fact, testing these different products and brands in some unique QSR locations and are seeing some great response to them. Jones Cane Sugar soda represents a classic soda on Fountain, but obviously, cane sugar, not high fructose corn syrup. And we offer completely new and unique brands to round out our Fountain portfolio. Our other growth initiative, Lemoncocco, also continues to expand. By the end of the third quarter, we added 2 divisions of Whole Foods, New York, New Jersey and on the South Pacific division. Whilst small, we also just landed the Western Canada division at Whole Foods, which will represent our third division of the Whole Foods chain. Other notable chains and doors added in the in the third quarter were approximately 200 Safeways and 150 Raleys, both in the Northern California market. All totaled, we have added approximately 1,300 new chain retail doors to Lemoncocco in 2017, which goes to show the clear acceptance of this brand at retail. With Steve Gress now on board full-time, we are looking to focus new sales effort of Lemoncocco by bringing on added feet on the street to 3 focus regions. One, obviously — obvious one being New York City, where we will leverage this knowledge and presence in this great market. When I reconnected with Steve almost 1 year ago, it was over his excitement and love of Lemoncocco. He is very excited to lead our efforts in building Lemoncocco, a brand that he immediately connected with when he saw it and tasted it almost 1 year ago. We look forward to the continued growth at Lemoncocco under the guidance of a great strategic brand builder such as Steve. We also look forward to seeing his impact on Jones Soda, a brand that he has always respected.

Finally, our business and partnership with 7-Eleven remains strong. We have already refreshed the lineup of our bottle business of 4 skew to maintain berry lemonade, the sour patch watermelon and now to include newly created mango lemonade and blood orange. We are working with 7-Eleven to create new flavors for 2018, and I could not be more proud of how this relationship in pieces business has evolved under the very strong and articulate oversight of Eric Chastain, our COO. We look forward to expanding this partnership even more. We have a strong leadership team that will propel our newly diversified and exciting portfolio of beverages into the future.

I will now open the call up for questions.

================================================================================

Questions and Answers

——————————————————————————–

Operator [1]

——————————————————————————–

(Operator Instructions) We’ll take our first question from (inaudible).

——————————————————————————–

Unidentified Analyst, [2]

——————————————————————————–

What about Spiked Jones? I don’t head any mention of it.

——————————————————————————–

Jennifer L. Cue, Jones Soda Co. – President, CEO & Director [3]

——————————————————————————–

Oh, yes, I mentioned it a few times. We just — with our partner here in the Pacific Northwest, we just launch it and started selling it in September, it came off the line, I believe, it was in the end of August, and they received it in September and started selling it. Again, I mentioned on-premise followed by retail grocery is the strategy. And it’s just in the Pacific Northwest at this time.

——————————————————————————–

Unidentified Shareholder, [4]

——————————————————————————–

Okay. A follow up — I must have missed that, sorry. A follow-up question on that. Could you take us through sort of, like, the production consumption cycle? And by that, I mean, I know a lot of apple-related beverages are produced around apple harvest time in the fall, yet consumption might take place throughout the year, particularly in the peak of spring and summer seasons. So are you able to produce that year-round for the spring and summer? Or do you have to carry an inventory that’s produced in the fall and winter?

——————————————————————————–

Jennifer L. Cue, Jones Soda Co. – President, CEO & Director [5]

——————————————————————————–

No, we are able to sell this product year-round, Gary. We’re not limited to certain times of the year.

——————————————————————————–

Unidentified Analyst, [6]

——————————————————————————–

Okay. You’re able to sell it, but in terms of production, are you able to make it year-round?

——————————————————————————–

Jennifer L. Cue, Jones Soda Co. – President, CEO & Director [7]

——————————————————————————–

Yes, we are.

——————————————————————————–

Max Schroedl, Jones Soda Co. – CFO [8]

——————————————————————————–

Actually, we’ve partnered with a local cider maker with this product who has a facility up and running year-round. So there’s no issues there.

——————————————————————————–

Unidentified Analyst, [9]

——————————————————————————–

Okay, good. I’m glad to hear that. And it’s good to hear that you’re focusing on sales with the hiring of Steve Gress. I look forward to a lot of things from him and the company. And again…

——————————————————————————–

Jennifer L. Cue, Jones Soda Co. – President, CEO & Director [10]

——————————————————————————–

Okay, yes. We definitely — I’m very confident. We’re going to see a lot of great things from now with Steve on board.

——————————————————————————–

Operator [11]

——————————————————————————–

(Operator Instructions) And it appears there are no further questions. I’d like to turn the conference back over to Jennifer for any additional remarks.

——————————————————————————–

Jennifer L. Cue, Jones Soda Co. – President, CEO & Director [12]

——————————————————————————–

Okay, well, I just would like to thank everyone again for your interest in Jones Soda and all of our brands. And we will speak next with you in early March, when we report our fourth quarter results.

——————————————————————————–

Operator [13]

——————————————————————————–

And that concludes today’s presentation. We thank you all for your participation. And you may now disconnect.

LEAVE A REPLY

Please enter your comment!
Please enter your name here