Executive Summary

Q1 2025 net sales rose 4.5% to $10.0M, with gross margin at 33.9% (down 170 bps YoY), reflecting improved fulfillment but higher COGS from capacity and inventory build; operating loss narrowed to $1.7M and net loss to $2.0M .
Versus S&P Global consensus, revenue modestly beat, while EPS and EBITDA missed due to elevated SG&A and delivery costs tied to growth investments; management expects seasonal gross margin compression in Q2 from promotions/trade spend .
Operational execution improved materially: short shipments reduced from ~20% in early Q1 to ~2% by April; production now keeping pace with demand, enabling distribution gains at Albertsons, Sprouts, Costco, and Trader Joe’s .
No formal revenue guidance provided; near-term focus on growth and efficiency with continued investment in inventory and marketing to support new functional beverage line and broader retail resets .

What Went Well and What Went Wrong

What Went Well

Fulfillment and supply chain execution improved: short shipments reduced from ~20% at quarter start to ~2% by April; “for the first time in years, production is keeping pace with demand” .
Distribution wins across major retailers: +1,100 new points for Reed’s Ginger Ale at Albertsons/Safeway; national off-shelf program for Flying Cauldron; Sprouts and Costco resets; Trader Joe’s state additions .
Functional beverage launch underway (SodaSmarter)—national availability at Sprouts (with functional ingredients, 5g sugar, 30–45 calories), positioning the brand in the growing better-for-you category .

What Went Wrong

Gross margin fell to 33.9% (35.6% prior year), driven by higher COGS as capacity and inventory were ramped; delivery/handling costs per case increased to $3.13 ($3.01 prior year) .
Operating expenses rose: SG&A increased to $3.5M ($2.6M prior year) as the company invested in personnel and marketing to support growth, widening modified EBITDA loss to $(1.6)M (vs. $(0.4)M) .
Cash used in operations increased to $(5.4)M (vs. $(2.4)M), largely due to inventory purchases to improve service levels ahead of demand .

Financial Results

Metric	Q3 2024	Q4 2024	Q1 2025
Revenue ($USD Millions)	$6.752	$9.733	$10.029
Gross Profit ($USD Millions)	$1.215	$2.917	$3.402
Gross Margin (%)	18.0%	30.0%	33.9%
Operating Loss ($USD Millions)	$(3.138)	$(2.909)	$(1.742)
Net Loss ($USD Millions)	$(4.150)	$(3.367)	$(2.031)
Diluted EPS ($USD)	$(0.82)	$(0.23)	$(0.04)
Modified EBITDA ($USD Millions)	$(2.998)	$(0.748)	$(1.634)
Delivery & Handling per Case ($USD)	$2.99	$3.00	$3.13
SG&A ($USD Millions)	$3.1	$4.1	$3.5

Note: The Q4 2024 earnings call referenced operating loss and SG&A figures that differ from the press release totals (call: op loss $(3.7)M and SG&A $4.8M) vs press release $(2.9)M and $4.1M. We anchor to the press release and flag the discrepancy from call commentary .

Segment breakdown: Not disclosed as formal segments in Q1 2025 materials .

KPIs

KPI	Q3 2024	Q4 2024	Q1 2025
Short shipments (%)	N/A	N/A	~20% at start → ~2% by April
New points of distribution (select highlights)	Post-Q2 constraints re-emerged; liquidity fixes announced	>8,000 functional points secured for launch (expected Apr–Aug)	+1,100 Albertsons/Safeway (Ginger Ale); Sprouts programs; Costco CA/HI; Trader Joe’s multi-state
Packaging transition (glass→cans)	In progress; targeted to reduce costs	Transition accelerating (Whole Foods, HEB)	Ongoing; well-received by retailers/consumers

Guidance Changes

Metric	Period	Previous Guidance	Current Guidance	Change
Revenue	FY 2025	Company historically does not provide guidance	No guidance provided	Maintained “no guidance”
Gross Margin	Q2 2025	N/A	Expect modest seasonal compression due to promotions/trade spend	Lower (qualitative)
Operating Efficiency / OpEx	FY 2025	Focus on growth and efficiency reiterated	Continued discipline; upfront SG&A investments to support growth	Maintained focus; near-term investment
Inventory / Fulfillment	FY 2025	Capital raised in Dec’24 to rebuild inventory	Short shipments reduced; production keeping pace with demand	Positive operational shift

Earnings Call Themes & Trends

Topic	Q3 2024 (Prev Q-2)	Q4 2024 (Prev Q-1)	Q1 2025 (Current)	Trend
Supply chain & inventory	Inventory shortfalls re-emerged; liquidity constrained; sales impacted by ~$4.4M	Capital raise and debt restructuring to rebuild inventory; aiming for steady cadence	Fulfillment rates materially improved; short shipments from ~20% to ~2% by April	Improving execution
Packaging (glass→cans)	Efficiency gains targeted	Transition accelerating at Whole Foods/HEB; expected cost and price benefits	Transition ongoing; well received; supports scalable GTM	Structural cost tailwind
Functional beverage innovation	Announced intent to expand; constraints delayed execution	Detailed formulation and retailer commitments; 8,000+ points	Launched SodaSmarter; national at Sprouts; functional ingredients messaging	New growth vector
Tariffs/macro	Not a primary factor cited; debt burden noted	Focus on retailer resets; category dynamics	Minimal direct tariff exposure; diversified sourcing; monitoring packaging/ginger	Limited near-term impact
Distribution expansion	Orders strong but constrained by inventory	Costco rotations, Walmart mini cans, multiple chains added	Albertsons/Safeway +1,100 PDs; Sprouts national programs; Costco; Trader Joe’s	Broadening footprint
Uplisting/major exchange	Not discussed	Management outlined multi-quarter path to uplisting criteria	No comment on listing in Q1 call	Deferred until sustained performance
SG&A & delivery costs	SG&A elevated vs sales; liquidity constrained promotions	SG&A up; non-cash items in Q4 noted	SG&A up to support growth; delivery cost per case higher YoY	Near-term pressure, longer-term discipline

Management Commentary

CEO (Cyril Wallace): “We materially improved fulfillment rates, reducing short shipments from ~20% at the start of the quarter to ~2% in April… For the first time in years, production is now keeping pace with demand.”
CFO (Doug McCurdy): “Net sales… increased 4.5% to $10 million… Gross margin was 33.9% vs 35.6% last year, impacted by higher COGS as we increased capacity and inventory… SG&A was $3.5 million, driven by investment in people and marketing.”
Strategy & portfolio: Launch of multifunctional SodaSmarter line (organic ginger, prebiotic fiber, adaptogenic mushrooms; 5g sugar per can) with national availability at Sprouts and broader rollout .
Distribution: +1,100 new PDs at Albertsons/Safeway; national off-shelf program with Flying Cauldron; Costco California/Hawaii; Trader Joe’s multi-state additions .

Q&A Highlights

OpEx trajectory: SG&A elevated due to upfront investments; management expects continued discipline while supporting growth; delivery/handling and SG&A remain a focus .
Gross margin outlook: Expect seasonal compression in Q2 due to promotions/trade spend tied to functional beverage launch .
Guidance: Company did not provide revenue guidance and historically does not provide guidance .
Listing: No comment on relisting in Q1; prior quarter indicated multi-quarter operating performance needed before uplisting application .

Estimates Context

Metric	Q1 2025 Consensus*	Q1 2025 Actual	Surprise
Revenue ($USD)	$9.847M*	$10.029M	Beat (~$0.182M; +1.8%)*
Primary EPS ($USD)	$(0.18)*	$(0.04) (company-reported diluted)	Miss vs consensus Primary EPS (definitions differ)*
EBITDA ($USD)	$(0.552)M*	$(1.634)M (Modified EBITDA)	Miss (company’s Modified EBITDA vs consensus EBITDA)*

Notes: Company-reported EPS is diluted net loss per share; S&P “Primary EPS” and consensus “EBITDA” may use differing definitions and share bases versus company-reported diluted EPS and Modified EBITDA, contributing to divergence.
*Values retrieved from S&P Global.

Key Takeaways for Investors

Execution turning the corner: Fulfillment and inventory rebuild are supporting revenue stabilization and margin recovery; watch Q2 margins given planned promotions .
Growth investments: SG&A and delivery/handling costs elevated to support resets and innovation; track opex discipline and leverage as revenue scales .
New product catalyst: SodaSmarter functional line positions REED in a faster-growing category; monitor adoption beyond Sprouts and incremental points of distribution .
Distribution breadth: Stronger presence at Albertsons/Safeway, Costco, Trader Joe’s, Sprouts should aid top-line momentum if in-stock remains high .
Estimate revisions: Revenue beat may nudge top-line estimates higher, but EPS/EBITDA misses likely temper near-term profitability expectations; emphasize mix of promotional activity and opex strategy in modeling*.
Cash dynamics: Elevated operating cash use tied to inventory build; liquidity position improved with prior private placement—track working capital trends through 2H’25 .
Medium-term thesis: If operational improvements persist and innovation gains traction, REED can expand margins in 2H and demonstrate scalability; uplisting conversation returns after sustained performance .

REED'S, INC. (REED)·Q1 2025 Earnings Summary