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REED'S, INC. (REED)·Q2 2025 Earnings Summary

Executive Summary

  • Q2 2025 was weak: net sales fell to $9.52M versus $11.87M last year and $10.03M in Q1; gross margin compressed to 8% due to $1.6M inventory write-offs, with Modified EBITDA at -$2.95M .
  • Consensus expected ~$10.29M revenue and -$0.24 EPS; actual revenue missed by ~$0.77M, while reported loss per share was -$0.13 (thin coverage: one estimate) [Values retrieved from S&P Global]* .
  • Management attributed softness to lost placements and lower volumes with recurring national customers, while highlighting foundational efforts (sales talent, marketing refinement, channel development, SKU optimization) to rebuild distribution and improve working capital .
  • Liquidity tightened: cash fell to $2.68M and total debt was ~$9.74M at quarter-end; cash used in operations was ~-$5.0M in Q2 (and -$10.41M YTD) .
  • Near-term catalysts are executional: restoring retail placements, accelerating functional beverage roll-out, and transitioning packaging to cans to reduce delivery/handling cost per case ($2.83 vs $2.18 YoY) .

What Went Well and What Went Wrong

What Went Well

  • Portfolio optimization step: management took $1.6M inventory write-offs to focus manufacturing/supply chain on high-demand SKUs—“an important step to improve inventory management and working capital efficiency” (CEO) .
  • Strategic focus and channel development: investing in sales talent, refining marketing, and accelerating channel initiatives to rebuild placements and unlock convenience/food service growth (CEO) .
  • Functional soda line momentum: continued push on multifunctional beverages (adaptogens, prebiotics, ginger) introduced in May; part of broader better-for-you strategy with points of distribution expanding into national retailers .

What Went Wrong

  • Demand and placements: net sales declined due to lower volumes with recurring national customers and lost placements, with gross margin hit by inventory write-offs (8% vs 32% YoY) .
  • Cost pressure: delivery and handling costs increased to $2.83 per case (17% of net sales) vs $2.18 last year; SG&A rose to $5.0M on contract proceedings and investments in personnel/marketing .
  • Cash burn and liquidity: Q2 operating cash outflow was ~$5.0M; cash fell to $2.68M, raising near-term financing/working capital risk if execution does not improve .

Financial Results

MetricQ4 2024Q1 2025Q2 2025
Revenue ($USD Millions)$9.73 $10.03 $9.52
Gross Profit ($USD Millions)$2.92 $3.40 $0.81
Gross Margin %30.0% 33.9% 8.0% (25% excl. write-offs)
Loss per Share (basic & diluted)$(0.28) $(0.04) $(0.13)
Modified EBITDA ($USD Millions)$(0.75) $(1.63) $(2.95)
Cash And Equivalents ($USD Millions)$10.39 $4.86 $2.68
Total Debt ($USD Millions)$9.57 $9.65 $9.74
KPIQ4 2024Q1 2025Q2 2025
Delivery & Handling Expense ($USD Millions)$1.66 $1.63 $1.57
Delivery & Handling Cost per Case ($)$3.00 $3.13 $2.83
SG&A ($USD Millions)$3.87–$4.10 (reported ranges across releases) $3.52 $5.03
Cash from Operations ($USD Millions)$(3.94) (Q4 only) $(5.36) (Q1) $(5.00) (Q2)
Inventory Write-offs ($USD Millions)Prior-year Q4 special items (packaging/product hold) $(0.03) write-down Q1 $1.61
Estimates vs Actual (Q2 2025)ConsensusActual
Revenue ($USD Millions)$10.293*$9.523
Primary EPS ($)$(0.24)*$(0.13)
# of Estimates (Revenue / EPS)1* / 1*—

Values retrieved from S&P Global*

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Company guidance (top line/earnings)FY/2H 2025Not providedNot provided (management focuses on restoring placements, margin improvement, profitability) Maintained: no quantitative guidance
Gross margin trajectoryQ2 2025Q1 call: expected modest compression due to promotions/trade spend Actual Q2 gross margin fell to 8% (25% excl. write-offs); management emphasizes margin improvement focus Lower vs expectation (write-offs amplified compression)

Earnings Call Themes & Trends

TopicPrevious Mentions (Q4 2024, Q1 2025)Current Period (Q2 2025)Trend
Retail placements & distributionAdded ~1,100 placements at Albertsons/Safeway; Costco rotation; Walmart mini-can; building inventory to meet demand Softer order volumes; emphasis on rebuilding placements and underpenetrated channels (convenience, food service) Downshift near term; rebuild underway
Functional beverage launchMultifunctional soda line (ginger, adaptogens, prebiotics) announced; ~8,000+ points of distribution targeted Continued rollout; functional line as growth vector Expanding distribution
Packaging transition to cansTransition from glass to cans to lower D&H per case; retailer acceptance Ongoing; cost per case at $2.83 (still elevated YoY) Progressing; cost benefits yet to fully materialize
Supply chain/OTIF, inventoryQ1: short shipments reduced to ~2% by April; improved fulfillment Q2 write-offs tied to product portfolio optimization; working capital efficiency focus Reset after optimization
Tariffs/macroLimited tariff exposure; diversified sourcing (Q1 call) No new impacts disclosedStable
Liquidity/debtYear-end cash $10.4M; debt ~$9.6M; raised capital in Q4 2024 Cash down to $2.68M; debt ~$9.74M Weaker liquidity

Management Commentary

  • “We are in the early stages of strengthening our commercial execution and better positioning the business for long-term growth… investing in sales talent, refining our marketing approach, and accelerating channel development initiatives.” — CEO Cyril Wallace (Q2 press release) .
  • “$1.6 million of write-offs were necessary… an important step to improve inventory management and working capital efficiency, and to focus… on high-demand, actively supported SKUs.” — CEO Cyril Wallace (Q2 press release) .
  • “Looking ahead, our focus is on driving sales growth within our core Reed’s and Virgil’s portfolios, improving margins, and positioning the Company for profitability.” — CEO Cyril Wallace (Q2 press release) .
  • Q1 context: “Short shipments reduced from ~20% to ~2% in April… production is now keeping pace with demand.” — CEO Cyril Wallace (Q1 press release) .

Q&A Highlights

  • Q1 call: Analysts probed higher operating expenses; management emphasized upfront investment in personnel/marketing and discipline going forward; noted expected seasonal gross margin compression in Q2 due to promotions/trade spend .
  • Q4 call: Discussion on alcohol portfolio (focus on key retail partners; inventory constraints delayed progress) ; relisting pathway back to a major exchange (requires sustained operating performance and stock price thresholds) ; SG&A drivers included non-cash accounting items/reserves (equipment reverse amortization) .
  • Q2 call (external transcript summaries): Analysts questioned lost placements and declining orders despite improved inventory/cash, with management addressing retailer resets and rebuilding efforts .

Estimates Context

  • Q2 2025 consensus (1 estimate) expected ~$10.29M revenue and -$0.24 EPS; Reed’s reported $9.52M revenue and -$0.13 loss per share, reflecting a revenue miss and a better-than-consensus reported EPS (note definitional differences may exist between Primary EPS and reported basic/diluted loss per share) [Values retrieved from S&P Global]* .
  • With inventory write-offs, elevated delivery/handling, and SG&A investments, near-term estimate revisions may skew lower on revenue and margins; EPS modeling should reflect non-GAAP adjustments (Modified EBITDA -$2.95M) and potential continued promotional spend .

Key Takeaways for Investors

  • Execution is the narrative: Q2’s weak sales and margin reflect lost placements and SKU rationalization; near-term upside depends on restoring distribution in grocery, convenience, and food service and accelerating functional/beverage rollouts .
  • Watch liquidity and cash burn: cash down to $2.68M with ~$5.0M Q2 operating outflow; absent improved cash generation, additional financing or working capital actions may be needed .
  • Margin path requires proof: can-to-glass transition and supply chain initiatives aim to lower D&H per case and lift gross margins; Q3/Q4 prints should show directional improvement ex special items .
  • Estimates are thin (1 covering analyst); results missed revenue consensus but reported EPS was better than consensus—expect models to adjust for higher costs and non-GAAP items [Values retrieved from S&P Global]* .
  • Stock reaction catalysts: concrete wins on shelf resets, expanded points of distribution in convenience/food service, and visible sequential margin improvement; conversely, continued cash burn is a negative catalyst .
  • Management tone: committed to foundational rebuild, SKU focus, and profitability, but guidance remains qualitative; track Q3/Q4 commentary for quantitative guardrails .
  • Risk/reward hinges on operational traction vs liquidity constraints; monitor debt covenants, refinancing options, and pace of sales recovery with recurring national customers .

Sources

  • Q2 2025 8-K press release and exhibits: financials, liquidity, Modified EBITDA, D&H metrics .
  • Q2 2025 press release (same content as 8-K Exhibit 99.1) .
  • Q1 2025 8-K/press release and earnings call transcript .
  • Q4 2024 8-K/press release and earnings call transcript .
  • External Q2 2025 call summaries/transcripts .

S&P Global estimates disclaimer: Consensus values marked with an asterisk were retrieved from S&P Global.