Executive Summary

Net sales grew 14.0% year over year to $16.50M, but the quarter swung to a net loss of $0.06 per share due to losses and write-offs at Generations/Steep N Brew; gross margin compressed to 12.1% amid inflation and higher input costs .
Sequentially, revenue declined modestly vs Q1 ($16.70M) and profitability deteriorated from $0.05 EPS in Q1 to a $0.06 loss in Q2, driven by $718K obsolete inventory write-downs and a ~$508K net operating loss tied to Generations/Steep N Brew .
Management signaled a strategic refocus on legacy green coffee and private label channels while restructuring Generations/Steep N Brew; no formal guidance was issued .
Wall Street consensus estimates from S&P Global were unavailable; results should prompt estimate reassessments given margin pressure and subsidiary losses (S&P Global data unavailable).

What Went Well and What Went Wrong

What Went Well

Legacy Coffee Holding and Optco divisions delivered strong sales, underpinning the 14% YoY net sales increase to $16.50M .
Management highlighted seven consecutive months of sales growth vs prior year, supported by focus on green coffee to small/medium roasters and private label to large wholesalers/retailers .
Strategic intent to “grow both our sales and profits” by concentrating on core channels and legacy brands, aiming to re-establish historical performance .

What Went Wrong

Gross margin fell sharply to 12.1% from 26.1% YoY as cost of sales rose to 87.9% of sales amid higher green coffee and packaging prices and losses at Generations/Steep N Brew .
The quarter recorded a net loss of $368,096 ($-0.06 EPS) versus net income of $357,044 ($0.06 EPS) YoY, largely due to Generations/Steep N Brew’s operating loss (~$508K net of tax) and write-offs .
Adjusted EBITDA turned negative at $(405,018), reflecting the impact of stock compensation and the weaker operating performance vs Q1 adjusted EBITDA of $804,406 .

Financial Results

Consolidated Performance (YoY and Sequential)

Metric	Q2 2021	Q1 2022	Q2 2022
Net Sales ($USD)	$14,468,558	$16,704,860	$16,498,169
Gross Profit ($USD)	$3,769,468	$4,271,608	$1,992,754
Gross Margin (%)	26.1%	25.6%	12.1%
Total Operating Expenses ($USD)	$3,315,324	$3,720,878	$3,366,223
Net Income (Loss) ($USD)	$357,044	$280,863	$(368,096)
Diluted EPS ($USD)	$0.06	$0.05	$(0.06)
Adjusted EBITDA ($USD)	N/A	$804,406	$(405,018)

Cost Structure and Key Drivers

KPI	Q2 2021	Q1 2022	Q2 2022
Cost of Sales ($USD)	$10,699,090	$12,433,252	$14,505,415
Cost of Sales (% of Sales)	74.0%	74.4%	87.9%
Obsolete Inventory Write-Off ($USD)	N/A	N/A	~$718,000
Generations/Steep N Brew Operating Loss (net of tax) ($USD)	N/A	N/A	~$(508,000)

Estimates vs Actuals

Metric	Consensus (Q2 2022)	Actual (Q2 2022)
Revenue ($USD)	Unavailable via S&P Global (data access limit)	$16,498,169
EPS ($USD)	Unavailable via S&P Global (data access limit)	$(0.06)

Guidance Changes

No formal quantitative guidance was provided for revenue, margins, OpEx, OI&E, tax rate, segment-specific KPIs, or dividends in Q2 2022 .

Metric	Period	Previous Guidance	Current Guidance	Change
Revenue	FY2022	None	None	Maintained: No formal guidance
Gross Margin	FY2022	None	None	Maintained: No formal guidance
Operating Expenses	FY2022	None	None	Maintained: No formal guidance
Tax Rate	FY2022	None	None	Maintained: No formal guidance
Segment/Division Targets	FY2022	None	Focus on legacy divisions; restructure Generations/Steep N Brew	Strategic shift, not numeric guidance
Dividend	FY2022	Special dividend announced for Feb 2022	No new update in Q2	No change noted

Earnings Call Themes & Trends

No earnings call transcript was available for Q2 2022; themes below reflect press release commentary .

Topic	Q4 2021 (Prior)	Q1 2022 (Prior)	Q2 2022 (Current)	Trend
Inflation & Input Costs	Packaging steel and freight costs up; passed some costs, still margin impact	Inflationary headwinds; freight, labor, legal expenses up	Higher green coffee and packaging costs; cost of sales at 87.9% of sales	Worsening margin pressure
Supply Chain	Freight cost increases of ~30–40% vs FY2020	Ongoing cost pressure (freight, labor)	Continued inflation/packaging pressures	Persisting headwinds
Division Performance (Generations/Steep N Brew)	Impairment and shutdown costs in FY2021	Sales decline; loss of customers	Operating loss (~$508K net of tax) and $718K inventory write-off; restructuring planned	Deteriorated; active restructuring
Product/Channel Strategy	Café Caribe distribution gains; private label awards	Legacy private label/branded steady; green coffee small roasters cautious	Focus on green coffee to small/medium roasters and private label; push legacy brands	Refocus on core
Legal/Regulatory	Class actions; one dismissed; costs expected lower in 2022	Higher legal expenses (~$213K) impacted Q1	No new legal update in Q2 release	Improving cost outlook vs Q1
CBD Initiatives	Initial entry disappointing; regulatory environment noted	Outlook commentary maintained	Not discussed in Q2 release	De-emphasized

Management Commentary

“We recorded a loss of $0.06 per share… primarily as a result of an operating loss at our Generations/Steep N Brew division… write offs relating to accounts receivables, inventory and packaging materials… resulting in an operating loss of approximately $508,000 (net of tax) or $0.09 per share.” — Andrew Gordon, President & CEO .
“Moving forward, I believe we have a clear direction… focusing on sales of unroasted green coffee beans to small and medium size roasters, sales of private label products to large wholesalers and retailers and a continued push on our own legacy brands.” .
“Although our gross profit margin increased… the increase in our operating expenses amounted to an additional $0.07 per share, as inflationary headwinds had a negative effect… Adjusted EBITDA for the quarter was approximately $804,000… we expect these expenses will be lower in both our second and third quarters.” (Q1 context) .
“Higher coffee prices… beneficial… but we were not immune to… supply chain and inflationary pressures… packaging supplies… steel… freight… 30–40% increases… we were able to pass off a percentage… but the net result negatively impacted our profitability.” (FY2021 context) .

Q&A Highlights

No Q2 2022 earnings call transcript or Q&A was available for review [ListDocuments: earnings-call-transcript found 0 for Q2 2022].

Estimates Context

Wall Street consensus EPS and revenue estimates via S&P Global for Q2 2022 were unavailable due to data access limits; therefore, beat/miss vs consensus cannot be determined (S&P Global data unavailable).
Given the significant gross margin compression and division write-offs, Street models likely need lower margin assumptions and incorporate subsidiary restructuring costs .

Key Takeaways for Investors

The core business is resilient with 14% YoY sales growth, but margin pressure from input costs and Generations/Steep N Brew losses drove a swing to a $0.06 EPS loss .
Gross margin fell to 12.1% from 25.6–26.1% in recent periods, highlighting acute cost inflation and the need for price/mix and cost actions to stabilize profitability .
Management is actively restructuring Generations/Steep N Brew and refocusing on green coffee and private label channels—monitor for execution milestones and cost containment progress .
Adjusted EBITDA deterioration to $(405,018) vs $804,406 in Q1 underscores near-term earnings risk; watch for normalization as write-offs abate .
Absence of formal guidance and unavailable consensus estimates raise uncertainty; traders should focus on catalysts such as restructuring updates, margin recovery, and any pricing actions .
Sequential revenue softness (Q2 vs Q1) combined with cost spikes can weigh on sentiment; any signs of freight and packaging cost relief could be a positive inflection .
Longer term, legacy channels and private label wins cited in prior periods (e.g., Café Caribe distribution, awarded private label accounts) provide a path to scale if costs stabilize .

COFFEE HOLDING CO INC (JVA)·Q2 2022 Earnings Summary