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Edited Transcript of JSDA earnings conference call or presentation 7-May-20 8:30pm GMT

Q1 2020 Jones Soda Co Earnings Call

SEATTLE May 14, 2020 (Thomson StreetEvents) -- Edited Transcript of Jones Soda Co earnings conference call or presentation Thursday, May 7, 2020 at 8:30:00pm GMT

TEXT version of Transcript

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Corporate Participants

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* Jamie S. Colbourne

Jones Soda Co. - Interim CEO & Acting Principal Financial Officer

* Joe Culp

Jones Soda Co. - Controller

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Presentation

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Operator [1]

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Good afternoon, everyone, and thank you for participating in today's conference call to discuss Jones Soda financial results for the first quarter ended March 31, 2020. 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 purposes of the safe harbor provisions under the Private Securities Legislation sic [Litigation] Reform Act of 1995. Forward-looking statements include all statements containing words 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, our quarterly reports on Form 10-Q and our current reports on Form 8-K. In addition, this call includes discussions of certain non-GAAP financial measures. 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.

I'd like to remind everyone that this call will be available for replay through May 14, 2020, starting at 7:30 Eastern tonight. A webcast replay will also be available via the link provided in today's press release as well as on the company's website. I would now like to turn the call over to the controller of Jones Soda, Joe Culp.

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Joe Culp, Jones Soda Co. - Controller [2]

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Thank you, operator, and good afternoon, everyone. We are structuring our call differently this time around. I'm going to start off reviewing our results and highlighting our financial position, then I'll pass the call to our new interim CEO, Jamie Colbourne, to discuss the effects COVID-19 has had in our business and how we are positioning the company to succeed in this new operating environment. Lastly, we will open the call for Q&A.

Now for the results. Total revenue in the first quarter remained flat at $2.8 million compared to a year-ago quarter. We experienced a 3% increase in revenues on our core bottled soda product, a 51% increase in fountain soda revenue, and Lemoncocco revenue returned to growth. However, this progress was offset by the expected decrease in 7-Select revenue as a result of declining number of 7-Eleven stores carrying Jones 7-Select and limited promotions compared to the prior year. Excluding this decrease of $206,000 or 66% in the 7-Select segment, total revenue increased from $2.5 million to $2.7 million or 7%, reflecting positive momentum across the company's other product lines. Gross profit as a percentage of sales increased 70 basis points to 20.8% compared to 20.1% in the same quarter a year ago. The improvement was primarily due to the retail price increases that we implemented in 2019 for our bottled soda products.

Operating expenses in the first quarter increased slightly to $1.5 million compared to $1.3 million in the same year ago quarter. The small increase was primarily due to investments we are making in sales and marketing prior to the stay-at-home mandates being implemented due to COVID-19. We continue to monitor the evolving market dynamics very closely and are reducing expenses accordingly to optimize our cost structure. We will have more to say on this shortly.

Net loss in the first quarter was $891,000 or negative $0.01 per share compared to a net loss of $796,000 or negative $0.02 per share for the prior year period, and adjusted EBITDA was negative $815,000 compared to negative $635,000 in the year-ago quarter.

Now moving on to the balance sheet. At March 31, 2020, cash and cash equivalents totaled approximately $4.9 million compared to $6 million at December 31, 2019. Apart from an outstanding convertible debt instrument, we did not carry any substantial debt as of the end of the quarter and continue to evaluate our options for a new line of credit that we anticipate putting into place in 2021. In addition to our cash position, we received loan proceeds of approximately $335,000 subsequent to the quarter end under the Paycheck Protection program to help provide relief during these uncertain times.

Lastly, working capital was $7.4 million compared to $8.4 million at the end of 2019. Given our current balance sheet, we remain comfortable with the liquidity position and believe it will assist us in weathering upcoming challenges we may face due to the global pandemic.

I will now turn the call over to Jamie for commentary on our position in current environment, along with the steps we are taking to mitigate the impact to our business. Jamie?

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Jamie S. Colbourne, Jones Soda Co. - Interim CEO & Acting Principal Financial Officer [3]

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Thanks, Joe. Good afternoon, everyone. It's a pleasure to be joining you on my first earnings call with Jones Soda. Overall, the team made solid progress during the quarter, expanding our brand presence and driving growth across key business segments. This is evidenced by the steady demand on our core bottled soda sales, a significant improvement in our fountain business and progress returning Lemoncocco to growth. We believe the team did an excellent job generating momentum at the beginning of the year and reinvigorating sales across the majority of our product lines.

As Joe mentioned earlier, if we exclude the 7-Select impact from our results, we would have reported a 7% increase in sales with growth in all other key segments.

We are proud of what the team was able to accomplish during the first quarter, and despite the COVID-19 global pandemic change in the market environment? We are taking all necessary steps to adapt. Although I'm stepping in during one of the most unprecedented time in history, I'm still confident in the brand that Jones Soda has built, along with the potential growth opportunities on the horizon. We are currently in a deep evaluation mode of the entire business across all product lines with the team here at Jones, and feel we have made great progress in identifying our core strengths that we can build upon, along with areas that need improvement. Although we are not in a position to introduce any new initiatives or strategies, we would like to discuss what we're doing to address the fluid environment we are currently operating in.

From an operational perspective, we continue to optimize our cost structure and reduce nonessential expenses wherever possible. As a result, and unfortunately, we laid off 9 people and furloughed 4 more. To prevent further layoffs and furloughs, we also recently received a total of $335,000 under the PPP program, to provide aid for our monthly payroll expenses and limited operating expenses. These loans are issued at incredibly favorable terms with no interest or principal payments due during the first 6 months of the term and all interest and principal under the loan may be forgivable if we use the proceeds for eligible purposes. We are thankful to the Federal government for providing this support under the SBA and believe this loan will help provide Jones with necessary employment resources moving forward. We are also prudently managing our balance sheet to remain well positioned from a liquidity perspective. Although we remain comfortable with our cash balance to fund operations, we are closely monitoring our accounts receivable and implementing initiatives to drag down inventory.

Now switching gears to the sales and marketing side of the business. The revamp strategy that we have been investing in has been put on hold, and given the current environment and despite the good progress we made at the beginning of the year. Major events across North America, like the Vans Park Series, that we were set to sponsor have either got postponed for the foreseeable future or canceled altogether. So we are pivoting our marketing strategies to focus on increasing social media activity to ensure we are still reaching a broad customer base. In addition to rethinking our marketing tactics, we've had to adjust how we approach the sales process. Demand has remained stable in our grocery channel which is where we generate the largest percentage of our revenue through bottle sales. And we were able to continue expanding with our current partners. In fact, we successfully rolled out our Strawberry Lime 12-pack in the 400 Walmart stores of the 1,174 that we are currently selling into. Food service channel continues to be the hardest hit by the COVID-related issues as most restaurants have been severely impacted by the stay-at-home mandates. Given that restaurants are just trying to stay afloat during these times, most initiatives to launch new product offerings have been put on hold across the industry, including several promising programs that we expected to get launched by now. Like this, members of the sales team are in contact with the reps for these potential partners, and we believe that we remain in a good position to meet the needs when restaurant dining returns.

Overall, we are proud of how quickly the team was able to adapt to this new environment, and it speaks volumes to members of the organization. Despite the uncertainties ahead, we will not let these circumstances hinder us from trying to do everything in our power to expand our presence across North America and introduce such a unique brand to a larger portion of the population.

Lastly and very importantly, I want to highlight the initiative that the team launched, which I'm incredibly proud of. We have such a strong base of consumers in the Pacific North West and in our home base, Seattle, that the team thought it was important to give back and provide support to our local community through Jones Soda Breaks. As a part of these initiatives, we are donating Soda kits to hospital and front line workers across the Seattle area. It was met with such incredible feedback from the local community that we are actively pursuing options to expand this initiative across U.S. and Canada. Seeing the team rally behind the products has been energizing and defined by Jones is such a special brand that's got some loyal following.

As we move forward, we believe that Jones Soda remains well positioned to navigate this complex and fluid environment. Jones has developed a reputation for unique and great tasting soda that really resonates with its passionate consumer base. Although there remains a lot of uncertainty with the COVID-19 pandemic, we are firmly committed to returning Jones to profitable growth and increasing shareholder value.

I look forward to leading this great organization through the next chapter as we enter a huge and true potential.

I'll now turn it back to the operator for questions.

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Operator [4]

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Thank you, Mr. Colbourne. (Operator Instructions) I'll pass the conference back over to Jamie Colbourne for any additional or closing remarks.

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Jamie S. Colbourne, Jones Soda Co. - Interim CEO & Acting Principal Financial Officer [5]

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I just want to thank everybody for attending. And during these COVID times, we're all living in very uncertain times, and it's critical that we all remain safe. And hopefully, this economy that we're currently living in will come back to some sense of normality over the next 60 or 90 days. And thanks again for joining us.

We'd like to thank everybody for listening to today's call, and we look forward to speaking with you either at our upcoming Annual Shareholders Meeting, which is on May 14 at 2:00 p.m. or when we report our second quarter results in August. Thanks again for joining us.

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Operator [6]

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Thank you. We would like to thank everyone for listening to today's call, and we look forward to speaking with you in our upcoming annual shareholders. Ladies and gentlemen, this does conclude today's conference call. You may disconnect your lines at this time. Thank you for your participation.