Reed’s Inc. (Nasdaq:REED), owner of the nation’s leading portfolio
of handcrafted, all-natural beverages, today announced financial
results for the fiscal fourth quarter and full year ended December
31, 2020.
Highlights for the Fourth Quarter of
2020
- Net sales
increased 49% to $10.7 million in the fourth quarter compared to
$7.2 million in the prior year. The increase compared to the prior
year reflects healthy volume growth of both the Reed’s® and
Virgil’s® brands, including the impact from recent launches of new
product innovation;
- Core brand gross
sales increased 38% versus prior year period primarily driven by
49% volume growth of the Reed’s® brand and 38% growth of the
Virgil’s® brand;
- Gross profit
increased 490% to $3.5 million compared to $0.6 million in the
prior year period, reflecting discreet charges for inventory
write-downs and year end true-ups to inventory reserves in the
fourth quarter of 2019. Gross margin increased to 33% from 8% for
the fourth quarter. Excluding the discrete items in the fourth
quarter of 2019, gross margin increased approximately 700 basis
points on a normalized basis compared to 26% in the prior year
period;
- Operating loss
narrowed to $2.7 million compared to $3.5 million in the fourth
quarter of 2019;
- Net loss
improved to $3.3 million, or $0.05 per share, compared to $3.8
million, or $0.09 per share, in the prior year period; and
- Non-GAAP
Modified EBITDA loss improved to $2.0 million in the fourth quarter
of 2020 compared to a Modified EBITDA loss of $3.8 million in the
prior year.
Highlights for the Full Year of
2020
- Net Sales were
$41.6 million in 2020 compared to $33.8 million in the prior year,
reflecting a 23% increase.
- Core brand gross
sales increased 20% versus prior year period primarily driven by
29% volume growth of the Reed’s® brand and 11% growth of the
Virgil’s® brand;
- Gross profit
increased 62% to $12.8 million from $7.9 million in the prior year
period. Gross margin increased 740 basis points to 31% from 23% in
the prior year period;
- Operating loss
decreased to $8.6 million from $14.9 million in the prior year
period;
- Net loss was
$10.2 million or $0.17 per share compared to $16.1 million or $0.46
per share in the prior year period; and
- Non-GAAP
Modified EBITDA loss improved to $6.8 million in 2020 compared to a
Modified EBITDA loss of $12.8 million in the prior year.
Management Commentary
“Sales accelerated sharply in the fourth quarter
driven by robust underlying demand across our product portfolio
coupled with expanded distribution. Net sales for the fourth
quarter increased 49% reflecting volume gains and reduced
discounting. In addition, we continued to make progress
improving profitability as gross margin reached 33% in the fourth
quarter. Given the ongoing momentum, we are expecting net sales to
increase 14% to 16% in the full year 2021. The improvements to our
supply chain have been critical factors supporting our fourth
quarter results and position us very well for the future. Our
expanded footprint encompassing six co-packers ensures adequate
capacity to support our growth trajectory for the next few years
while also mitigating risk through diversification,” stated Norman
E. Snyder, Chief Executive Officer of Reed’s, Inc. “We also remain
focused on driving operational efficiencies and expect
profitability trends to improve further as sales growth continues
to outpace expenses. We remain confident with our brands and
growth opportunity, and are proud of the entire Reed’s team and our
valued partners who are working diligently to make sure we can
deliver on the significant opportunity ahead of us amidst the
challenging time of COVID-19.”
Financial Overview for the Fourth
Quarter of 2020 Compared to the Fourth Quarter of 2019
During the fourth quarter of 2020, net sales
increased 49% to $10.7 million compared with $7.2 million in the
prior year. Core brand gross sales increased 38% compared to the
same period in 2019, driven by 43% volume growth as the Reed’s®
brand grew 49% and the Virgil’s® brand grew 38%. Growth was broad
based across SKUs, and recent innovation also a strong contributing
factor.
Gross profit during the fourth quarter of 2020
increased 490% to $3.5 million compared to the same period in 2019.
The increase in gross profit reflects increased revenue during the
quarter driven by sales growth across Reed’s® and Virgil’s® brands
and the benefits of aggressive expense controls as well as the
impact of several discreet items during the year ago period. Gross
margin increased approximately 700 basis points to 33% versus the
normalized results in the fourth quarter of 2019 and on a reported
basis gross margin in the fourth quarter of 2019 was 8%.
Delivery and handling costs increased 17% to
$1.9 million during the fourth quarter of 2020 compared to the same
period in 2019. Delivery and handling costs were 18% of net sales
and $2.99 per case, compared to 23% of net sales and $3.55 per case
during the same period last year, reflecting improved staging of
inventory partially offset by higher transportation costs
associated with COVID-19.
Selling and marketing costs increased 44% to
$2.1 million during the fourth quarter of 2020. The increase is
driven by higher stock and compensation expense, partially offset
by reduced expenditures on trade shows and
sponsorships.
General and administrative expenses (G&A)
increased to $2.2 million during the fourth quarter of 2020
compared to $1.0 million in the prior year period. The increase is
driven by stock expense, compensation and bad debt expense,
partially offset by elimination of SOX compliance audit fees.
Operating loss during the fourth quarter of 2020
narrowed to $2.7 million from $3.5 million in the prior year
period.
Interest expense of $0.3 million during the
fourth quarter of 2020 was consistent with the fourth quarter of
2019.
Net loss during the fourth quarter of 2020 was
$3.3 million, or $0.05 per share, compared to $3.8 million, or
$0.09 per share in the fourth quarter of 2019.
Modified EBITDA loss was $2.0 million in the
fourth quarter of 2020 compared to a loss of $3.8 million in the
fourth quarter of 2019.
Financial Overview for the Full Year of
2020 Compared to the Full Year of 2019
During the full year of 2020, net sales
increased 23% to $41.6 million compared with $33.8 million in the
prior year. The increase in gross sales was 19% compared to the
same period in 2019 while core brand gross sales increased 20%
compared to the same period in 2019. The core brand growth was
driven by 29% volume growth of the Reed’s® brand and 11% volume
growth of the Virgil’s® brand, primarily a result of continued
growth of all SKUs including incremental growth from new
product launches in the year.
Gross profit during the full year of 2020
increased 62% to $12.8 million compared to the same period in 2019.
The increase in gross profit primarily relates to improved expense
controls as gross margin was 31% of net sales during the full year
of 2020 compared to 23% of net sales in the same period in
2019.
Delivery and handling costs increased 14% to
$6.9 million during the full year of 2020 compared to $6.0 million
in the same period in 2019. Delivery costs were 16% of net sales
and $2.76 per case, compared to 18% of net sales and $2.83 per case
during the same period last year, reflecting increased volumes
during the period, partially offset by elevated transportation
costs associated with COVID-19.
Selling and marketing costs decreased 18% to
$7.5 million during the full year of 2020. As a percentage of net
sales, selling and marketing costs decreased 910 basis points to
18%. The decrease was driven by marketing programs executed in the
prior year period that were not implemented in the full year of
2020, and reduced expenditures on trade shows and sponsorships,
partially offset by an increase in stock compensation and market
research.
General and administrative expenses (G&A)
decreased to $7.0 million during the full year of 2020 compared to
$7.6 million in the prior year period. The decrease in general and
administrative expenses compared to the prior year period was
largely driven by lower severance expense and professional and
consulting fees partially offset by an increase in stock option
expense.
Operating loss during the full year of 2020
decreased to $8.6 million from $14.9 million in the prior year
period.
Interest expense was consistent at $1.3 million
during the full year of 2020 and 2019.
Net loss during the full year of 2020 was $10.2
million, or $0.17 per share, compared to $16.1 million, or $0.46
per share in the full year of 2019.
Modified EBITDA loss was $6.8 million in the
full year of 2020 compared to a loss $12.8 million in the full year
of 2019.
Liquidity and Cash Flow
During the full year of 2020, the Company used
$9.5 million of cash in operating activities compared to $18.2
million of cash used in operating activities in the prior year
period. The decrease in cash used in operating activities during
the full year of 2020 relates primarily to a reduced net loss and
changes to working capital accounts. As of December 31, 2020, the
Company had $0.6 million of cash and $5.2 million of available
borrowing capacity on its revolving line of credit.
Full Year 2021 Guidance
The Company has experienced continued strong
momentum during the first quarter and expects to generate net
revenue growth in the range of 14% to 16% during the full year 2021
given the potential uncertainty arising from the recent pandemic.
The Company anticipates a gross margin range of 32% to 33% for the
full year 2021. Fiscal 2021 guidance reflects year-to-date business
trends, including the ongoing operating environment related to
COVID-19. The COVID-19 pandemic and its related impacts create many
incremental potential business risks, including potential impacts
to the Company’s ability to access raw materials, production,
transportation and/or other logistics needs, as well as potential
inflation related to all aspects of supply chain and logistics,
which cannot be reasonably estimated and are not factored into
current fiscal 2021 guidance.
Fourth Quarter 2020 Earnings Call
Details
The Company will conduct a conference call at
4:30 pm Eastern Time today, March 30, 2021 to discuss its fourth
quarter and full year 2020 results. This conference call can be
accessed via a link on Reed's investor website at
https://investor.reedsinc.com/ under the "Events &
Presentations" section or directly at
http://public.viavid.com/index.php?id=143935. To listen to the live
call over the Internet, please go to Reed's website at least
fifteen minutes early to register, download and install any
necessary audio software. Additionally, the call may be accessed
with the toll-free dial-in number, 1-(877) 425-9470 (U.S.); or
1-(201) 389-0878 (International). Please dial in at least fifteen
minutes before the start of the conference call due to increased
demand for conference calls.
A replay of the webcast will be archived on the
Company’s website at https://investor.reedsinc.com under the
"Events & Presentations" section for approximately 90 days.
About Reed’s, Inc.
Established in 1989, Reed's® is America's number
1 name in Ginger and America’s best-selling Ginger Beer brand and
innovator for decades. Virgil's® is America's best-selling
independent, full line of natural craft sodas. The Reed's®
portfolio is sold in over 40,000 retail doors nationwide. Reed's
core product line of Original, Premium, Extra and Strongest Craft
Ginger Beers, along with the Certified Ketogenic Zero Sugar Extra
Ginger Beer are unique due to the proprietary process of using
fresh ginger root combined with a Jamaican inspired recipe of
natural spices and fruit juices. The company uses this same
handcrafted approach in its Reed’s® Real Ginger Ale and
award-winning Virgil's® line of great tasting, bold flavored craft
sodas and Certified Ketogenic Zero Sugar Varieties.
For more information about Reed’s, please visit
the Company’s website at: https://drinkreeds.com/ or call
800-99-REEDS. Follow Reed’s on Twitter, Instagram, and Facebook
@drinkreeds.
For more information about Virgil’s, please
visit Virgil’s website at: https://virgils.com/. Follow Virgil’s on
Twitter and Instagram @drinkvirgils and on Facebook
@drinkvirgilssoda.
Safe Harbor Statement
Some portions of this press release,
particularly those describing Reed’s goals and strategies, contain
“forward-looking statements.” These forward-looking statements can
generally be identified as such because the context of the
statement will include words, such as “expects,” “should,”
“believes,” “anticipates” or words of similar import. Similarly,
statements that describe future plans, objectives or goals are also
forward-looking statements. While Reed’s is working to achieve
those goals and strategies, actual results could differ materially
from those projected in the forward-looking statements as a result
of a number of risks and uncertainties. These risks and
uncertainties include difficulty in marketing its products and
services, maintaining and protecting brand recognition, the need
for significant capital, dependence on third party distributors,
dependence on third party brewers, increasing costs of fuel and
freight, protection of intellectual property, competition and other
factors, any of which could have an adverse effect on the business
plans of Reed’s, its reputation in the industry or its expected
financial return from operations and results of operations. In
light of significant risks and uncertainties inherent in
forward-looking statements included herein, the inclusion of such
statements should not be regarded as a representation by Reed’s
that they will achieve such forward-looking statements. For further
details, please see our most recent reports on Form 10-K and Form
10-Q, as filed with the Securities and Exchange Commission, as they
may be amended from time to time. Reed’s undertakes no obligation
to publicly update any forward-looking statement, whether as a
result of new information, future events, or otherwise.
CONTACTS:
Investor RelationsReed Anderson, ICR(800) 997-3337 Ext 2Or (646)
277-1260Email: ir@reedsinc.com www.reedsinc.com
REED’S, INC.CONDENSED
STATEMENTS OF OPERATIONSFor the Three Months and
Full Year Ended December 31, 2020 and 2019(Amounts
in thousands, except share and per share amounts)
|
|
|
|
|
Three Months Ended |
|
Year Ended |
|
December 31, |
|
December 31, |
|
2020 |
|
2019 |
|
2020 |
|
2019 |
Net Sales |
$ |
10,677 |
|
|
$ |
7,151 |
|
|
$ |
41,615 |
|
|
$ |
33,820 |
|
Cost of goods sold |
|
7,155 |
|
|
|
6,554 |
|
|
|
28,849 |
|
|
|
25,944 |
|
Gross
profit |
|
3,522 |
|
|
|
597 |
|
|
|
12,766 |
|
|
|
7,876 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating
expenses: |
|
|
|
|
|
|
|
|
|
|
|
Delivery and handling
expense |
|
1,906 |
|
|
|
1,624 |
|
|
|
6,856 |
|
|
|
5,993 |
|
Selling and marketing
expense |
|
2,121 |
|
|
|
1,470 |
|
|
|
7,503 |
|
|
|
9,188 |
|
General and administrative
expense |
|
2,151 |
|
|
|
994 |
|
|
|
7,023 |
|
|
|
7,551 |
|
Total operating
expenses |
|
6,178 |
|
|
|
4,088 |
|
|
|
21,382 |
|
|
|
22,732 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss from
operations |
|
(2,656 |
) |
|
|
(3,491 |
) |
|
|
(8,616 |
) |
|
|
(14,856 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
Loss on extinguishment of
debt |
|
(262 |
) |
|
|
0 |
|
|
|
(262 |
) |
|
|
- |
|
Interest expense |
|
(346 |
) |
|
|
(339 |
) |
|
|
(1,307 |
) |
|
|
(1,286 |
) |
Change in fair value of
warrant liability |
|
7 |
|
|
|
7 |
|
|
|
8 |
|
|
|
30 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss |
|
(3,257 |
) |
|
|
(3,823 |
) |
|
|
(10,177 |
) |
|
|
(16,112 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
Dividends on Series A
Convertible Preferred Stock |
|
0 |
|
|
|
0 |
|
|
|
(5 |
) |
|
|
(5 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
Net loss attributable
to common stockholders |
$ |
(3,257 |
) |
|
$ |
(3,823 |
) |
|
$ |
(10,182 |
) |
|
$ |
(16,117 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
Loss per share – basic
and diluted |
$ |
(0.05 |
) |
|
$ |
(0.09 |
) |
|
$ |
(0.17 |
) |
|
$ |
(0.46 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average number of
shares outstanding – basic and diluted |
|
72,212,998 |
|
|
|
43,597,097 |
|
|
|
60,644,842 |
|
|
|
35,058,004 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
REED’S, INC.BALANCE
SHEETSAs of December 31, 2020 and December 31,
2019(Amounts in thousands)
|
|
|
|
|
|
|
|
|
|
December 31, 2020 |
|
|
|
December 31, 2019 |
|
|
|
|
|
|
|
|
|
ASSETS |
|
|
|
|
|
|
|
Current assets: |
|
|
|
|
|
|
|
Cash |
$ |
595 |
|
|
$ |
913 |
|
Accounts receivable, net of
allowance of $234 and $375, respectively |
|
4,718 |
|
|
|
2,099 |
|
Receivable from related
party |
|
682 |
|
|
|
356 |
|
Inventory, net of reserve for
obsolescence of $194 and $646, respectively |
|
11,119 |
|
|
|
10,508 |
|
Prepaid expenses and other
current assets |
|
1,341 |
|
|
|
420 |
|
Total current assets |
|
18,455 |
|
|
|
14,296 |
|
|
|
|
|
|
|
Property and equipment, net of
accumulated depreciation of $361 and $482, respectively |
|
920 |
|
|
|
1,053 |
|
Equipment held for sale, net
of impairment reserves of $96 and $96, respectively |
|
67 |
|
|
|
67 |
|
Intangible assets |
|
615 |
|
|
|
576 |
|
Total
assets |
$ |
20,057 |
|
|
$ |
15,992 |
|
|
|
|
|
|
|
LIABILITIES AND
STOCKHOLDERS’ EQUITY |
|
|
|
|
|
Current liabilities: |
|
|
|
|
|
Accounts payable |
$ |
6,746 |
|
|
$ |
5,357 |
|
Payable to related party |
|
557 |
|
|
|
182 |
|
Accrued expenses |
|
895 |
|
|
|
646 |
|
Revolving line of credit |
|
- |
|
|
|
3,177 |
|
Current portion of note
payable |
|
599 |
|
|
|
- |
|
Current portion of lease
liabilities |
|
130 |
|
|
|
49 |
|
Total current liabilities |
|
8,927 |
|
|
|
9,411 |
|
|
|
|
|
|
|
Lease liabilities, less
current portion |
|
555 |
|
|
|
737 |
|
Note payable, less current
portion |
|
171 |
|
|
|
- |
|
Convertible note to a related
party |
|
- |
|
|
|
4,689 |
|
Warrant liability |
|
- |
|
|
|
8 |
|
Total
liabilities |
|
9,653 |
|
|
|
14,845 |
|
|
|
|
|
|
|
Stockholders’
equity: |
|
|
|
|
|
Series A Convertible Preferred
stock, $10 par value, 500,000 shares authorized, 9,411 shares
issued and outstanding |
|
94 |
|
|
|
94 |
|
Common stock, $.0001 par
value, 120,000,000 and 100,000,000 shares authorized, respectively;
86,317,096 and 47,595,206 shares issued and outstanding,
respectively |
|
9 |
|
|
|
5 |
|
Additional paid in
capital |
|
97,031 |
|
|
|
77,596 |
|
Accumulated deficit |
|
(86,730 |
) |
|
|
(76,548 |
) |
Total stockholders’
equity |
|
10,404 |
|
|
|
1,147 |
|
Total liabilities and
stockholders’ equity |
$ |
20,057 |
|
|
$ |
15,992 |
|
|
|
|
|
|
|
|
|
REED’S, INC.CONDENSED
STATEMENTS OF CASH FLOWSFor the Full Year Ended
December 31, 2020 and 2019(Amounts in
thousands)
|
|
|
|
|
|
|
December 31, 2020 |
|
December 31, 2019 |
Cash flows from operating
activities: |
|
|
|
|
|
Net loss |
$ |
(10,177 |
) |
|
$ |
(16,112 |
) |
Adjustments to reconcile net
loss to net cash used in operating activities: |
|
|
|
|
|
Depreciation |
|
88 |
|
|
|
61 |
|
Gain on sale of property & equipment |
|
- |
|
|
|
(45 |
) |
Loss on termination of leases |
|
- |
|
|
|
8 |
|
Loss on extinguishment of debt |
|
262 |
|
|
|
|
Amortization of debt discount |
|
452 |
|
|
|
323 |
|
Amortization of right of use assets |
|
116 |
|
|
|
91 |
|
Fair value of vested options |
|
1,176 |
|
|
|
790 |
|
Fair value of vested restricted shares granted to directors
and officers for service |
|
416 |
|
|
|
506 |
|
Decrease in accounts receivable allowance |
|
(141 |
) |
|
|
(248 |
) |
Increase (decrease) in inventory reserve |
|
(452 |
) |
|
|
449 |
|
Decrease in fair value of warrant liability |
|
(8 |
) |
|
|
(30 |
) |
Accrual of interest on convertible note to a related party |
|
558 |
|
|
|
528 |
|
Write off intangible asset |
|
(28 |
) |
|
|
- |
|
Changes in operating assets
and liabilities: |
|
|
|
|
|
Accounts receivable |
|
(2,478 |
) |
|
|
757 |
|
Inventory |
|
(159 |
) |
|
|
(3,575 |
) |
Prepaid expenses and other assets |
|
(759 |
) |
|
|
(645 |
) |
Accounts payable |
|
1,389 |
|
|
|
(182 |
) |
Accrued expenses |
|
249 |
|
|
|
(837 |
) |
Net cash used in
operating activities |
|
(9,496 |
) |
|
|
(18,161 |
) |
Cash flows from investing
activities: |
|
|
|
|
|
Intangible asset trademark costs |
|
(39 |
) |
|
|
|
Proceeds from sale of property and equipment |
|
- |
|
|
|
45 |
|
Purchase of property and equipment |
|
(122 |
) |
|
|
(322 |
) |
Net cash provided by
investing activities |
|
(161 |
) |
|
|
(277 |
) |
Cash flows from financing
activities: |
|
|
|
|
|
Borrowings under revolving line of credit |
|
50,975 |
|
|
|
54,831 |
|
Repayments of revolving line of credit |
|
(54,636 |
) |
|
|
(58,827 |
) |
Capitalization of financing costs |
|
(130 |
) |
|
|
(130 |
) |
Proceeds from loan payable |
|
770 |
|
|
|
- |
|
Amounts from related party |
|
49 |
|
|
|
195 |
|
Repayment of convertible note payable |
|
(4,250 |
) |
|
|
- |
|
Principal repayments on capital lease obligation |
|
(22 |
) |
|
|
(48 |
) |
Exercise of options |
|
19 |
|
|
|
- |
|
Exercise of warrants |
|
- |
|
|
|
365 |
|
Proceeds from sale of common stock |
|
16,564 |
|
|
|
22,341 |
|
Net cash provided by
financing activities |
|
9,339 |
|
|
|
18,727 |
|
|
|
|
|
|
|
Net increase (decrease) in
cash |
|
(318 |
) |
|
|
289 |
|
Cash at beginning of
period |
|
913 |
|
|
|
624 |
|
Cash at end of
period |
$ |
595 |
|
|
$ |
913 |
|
|
Modified EBITDA
In addition to our GAAP results, we present
Modified EBITDA as a supplemental measure of our performance.
However, Modified EBITDA is not a recognized measurement under GAAP
and should not be considered as an alternative to net income,
income from operations or any other performance measure derived in
accordance with GAAP, or as an alternative to cash flow from
operating activities as a measure of liquidity. We define Modified
EBITDA as net income (loss), plus interest expense, depreciation
and amortization, stock-based compensation, changes in fair value
of warrant expense, and one-time restructuring-related costs
including employee severance and asset impairment.
Management considers our core operating
performance to be that which our managers can affect in any
particular period through their management of the resources that
affect our underlying revenue and profit generating operations that
period. Non-GAAP adjustments to our results prepared in accordance
with GAAP are itemized below. You are encouraged to evaluate these
adjustments and the reasons we consider them appropriate for
supplemental analysis. In evaluating Modified EBITDA, you should be
aware that in the future we may incur expenses that are the same as
or similar to some of the adjustments in this presentation. Our
presentation of Modified EBITDA should not be construed as an
inference that our future results will be unaffected by unusual or
non-recurring items.
Set forth below is a reconciliation of net loss
to Modified EBITDA for the three months ended December 31, 2020 and
2019 (unaudited; in thousands):
|
|
Three Months Ended December 31, |
|
2020 |
|
2019 |
Net loss |
$ |
(3,257 |
) |
|
$ |
(3,823 |
) |
|
|
|
|
|
|
Modified EBITDA
adjustments: |
|
|
|
|
|
Depreciation and
amortization |
|
59 |
|
|
|
44 |
|
Interest expense |
|
346 |
|
|
|
339 |
|
Stock option and other noncash
compensation |
|
585 |
|
|
|
(301 |
) |
Loss on extinguishment of
debt |
|
262 |
|
|
|
- |
|
Change in fair value of
warrant liability |
|
(7 |
) |
|
|
(7 |
) |
Severance |
|
5 |
|
|
|
(39 |
) |
Total EBITDA adjustments |
$ |
1,250 |
|
|
$ |
36 |
|
|
|
|
|
|
|
Modified EBITDA |
$ |
(2,007 |
) |
|
$ |
(3,787 |
) |
|
We present Modified EBITDA because we believe it
assists investors and analysts in comparing our performance across
reporting periods on a consistent basis by excluding items that we
do not believe are indicative of our core operating performance. In
addition, we use Modified EBITDA in developing our internal
budgets, forecasts and strategic plan; in analyzing the
effectiveness of our business strategies in evaluating potential
acquisitions; and in making compensation decisions and in
communications with our board of directors concerning our financial
performance. Modified EBITDA has limitations as an analytical tool,
which includes, among others, the following:
- Modified EBITDA does not reflect
our cash expenditures, or future requirements, for capital
expenditures or contractual commitments;
- Modified EBITDA does not reflect
changes in, or cash requirements for, our working capital
needs;
- Modified EBITDA does not reflect
future interest expense, or the cash requirements necessary to
service interest or principal payments, on our debts; and
- Although depreciation and
amortization are non-cash charges, the assets being depreciated and
amortized will often have to be replaced in the future, and
Modified EBITDA does not reflect any cash requirements for such
replacements.
Set forth below is a reconciliation of net income (loss) to
Modified EBITDA for the 12 months ended December 31, 2020 and 2019
(unaudited; in thousands):
|
|
Year Ended December 31, |
|
2020 |
|
2019 |
Net loss |
$ |
(10,177 |
) |
|
$ |
(16,112 |
) |
|
|
|
|
|
|
Modified EBITDA
adjustments: |
|
|
|
|
|
Depreciation and
amortization |
|
204 |
|
|
|
152 |
|
Interest expense |
|
1,307 |
|
|
|
1,286 |
|
Stock option and other noncash
compensation |
|
1,592 |
|
|
|
1,296 |
|
Loss on extinguishment of
debt |
|
262 |
|
|
|
|
Change in fair value of
warrant liability |
|
(8 |
) |
|
|
(30 |
) |
Impairment and severance
costs |
|
5 |
|
|
|
643 |
|
Total EBITDA adjustments |
$ |
3,362 |
|
|
$ |
3,347 |
|
|
|
|
|
|
|
Modified EBITDA |
$ |
(6,815 |
) |
|
$ |
(12,765 |
) |
|
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