Good afternoon and welcome to Reed’s Third Quarter Fiscal 2021 Earnings Conference Call for the period ending on September 30, 2021. My name is Antony, and I will be your conference call operator for today. Today’s call is limited to one hour, and will have prepared remarks from Norman Snyder, Reed’s Chief Executive Officer; and Tom Spisak, Reed’s Chief Financial Officer. Following management remarks, they will take your questions. Before we begin today’s call, I have a Safe Harbor statement to read to our listeners. I would also like to remind you that this conference call will include forward-looking statements. Forward-looking statements are only current predictions and are subject to known and unknown risks, uncertainties and other factors that may cause our actual results, levels or activity, performance, or achievements to be materially different from those anticipated by such statements. These factors include but are not limited to Reed’s ability to protect its supply chain in light of disruption caused by elevated freight costs and other impediments, the availability and cost of capital to finance our working capital needs and growth plans, reduction in demand for products, dependence on third party manufacturers, and distributors changes in the competitive environment, future business outlook, including the potential impact of COVID-19 on Reed’s business and results of operation and other information detailed from time to time in Reed’s filings with the United States Securities and Exchange Commission. These statements including financial guidance involve risks and uncertainties that may cause actual results or trends to differ materially from the company’s forecast. The achievement or success of the matters covered by such forward-looking statements, including future financial guidance, involves risks, uncertainties and assumptions, many of which involve factors or circumstances that are beyond Reed’s control. Fiscal 2021 guidance reflects year-to-date business trends, including the ongoing…

Thank you, and good afternoon, everyone. We appreciate you joining us today to discuss our third quarter 2021 results. Before I begin, I would like to thank Scott Grossman for serving on our board for the past four years. He has been a valued advisor and I wish him the best. I’m also pleased of Rhonda Kallman’s nomination to the Reed’s board. I have known her for close to two decades and admire her knowledge of the industry or tenacity and the success that she has experienced throughout her career. Her beverage experience in council will be invaluable in joining the Reed’s board. We are in an exciting time as we continue to expand our presence in the RTD alcohol segment with our Reed’s ginger mule. I’ll now highlight the key takeaways from the third quarter and then move on to a more detailed discussion although results before turning the call over to Tom to cover our financials. For the seventh consecutive quarter, we delivered growth in net sales, reflecting continued consumer poll as a result of on-trend innovation and distribution expansion. Third quarter sales of $13.4 million were the highest in the company history with our second highest quarter being the first quarter of this year. During the third quarter, net sales increased to 27% compared with the prior year period, as we continue to capitalize on strong demand for our products and we’re able to recover most of the orders from the second quarter that were pushed out due to supplier delays related to labor, aluminum cans, and swing-lid glass. The recognition and authenticity of our brands and strong position relative better for you offering, consumers taste and natural ingredient preferences is clear based on our recent growth as well as other sales category data. Supply chain challenges…

Thank you very much Norm, and it’s a pleasure to speak with everyone today. As Norm discussed during the third quarter, we continue to see strong demand for consumer – from consumers and retailers across both the Reed’s and Virgil’s portfolios. We continue to seek and implement cost savings initiatives to offset the rising raw material costs and high freight costs, which put pressure on our margins and net income. Third quarter net sales increased 27% to $13.4 million compared with $10.6 million in the prior year period. As Norm mentioned, core brand sales were up 22%, including a 25% increase in volume, reflecting 34% case growth for the Reed’s brand and 16% case growth for the Virgil’s brands. Gross profit increased 14% to $3.9 million compared to $3.4 million in the prior year due to increased sales, as well as lower discounts. Gross margin was 29% in the third quarter of 2021, a decrease of 320 basis points versus the prior year period. Supply chain pressures with a primary factor affecting Q3 gross margin. Delivery and handling costs totaled $3.1 million in the second quarter, an increase of 40% compared to last year due to volume growth, e-commerce fulfillment costs and higher freight rates. Delivery and handling costs were 23% of net sales, and $3.89 per case compared to 21% of net sales and $3.46 per case during the same period last year. As Norm mentioned earlier, we have retained a distribution consulting firm that works with several of the large multinational beverage companies to perform a freight study to optimize freight costs. Selling and marketing costs were $2.6 million during the third quarter, compared to the $1.9 million in the last quarter – last year’s third quarter, the increase was primarily driven by headcount growth and our sales…

Thanks Tom. Before I turn the call back to the operator for questions, I’d like to reiterate that we believe there’ll be constant challenges throughout the balance of this year and during 2022, but we are continuing and will continue to show strong sales growth and we will successfully offset the pressure on gross margin and transportation costs are entering into the larger ginger ale category with our Reed’s Real Ginger Ale, that’s contributing to our growth and we still have considerable opportunity to fill up distribution. We are excited about our new and rebranded products that will enter the market during 2022. We have built an extensive national co-packer network to support our growth and have significant opportunity to improve margin. We were focused on controlling costs, improving gross margin and enhancing our supply chain. We remain flexible and prudent as we navigate the current environment and we will continue to adapt and keep our employees and partners safe and our inventory on the shelf and available for our valued customers. Moving forward, we were focused on advancing our growth opportunity and defending our margins and are excited for the path that lies ahead. I will now hand the call over to the operator to begin the question-and-answer session.

We will now begin the question-and-answer session. [Operator Instructions] Our first question comes from Chris Wakowski [ph] a Private Investor. You may go ahead.

Hello and congratulations on the great results.

Thank you.

Yes, sure. So, I’ve been asking you, or trying to get you to commit to not issuing any more shares, and I have to congratulate you also not issuing any shares throughout this last couple of quarters as well, it growing sales and inventory, but do you think you’ll be able to hold on because while results are great, the share price isn’t going up and it will be really painful to issue shares such low prices.

Yes. Thank you, Chris. Yes, we believe our share price is not appropriately reflect the value of this company if we do there. Obviously our goal is to maintain shareholder value and we will do the best we can to preserve and increase that value. And however, we’re going to remain flexible and keep as many options open. But right now there are no plans to board in that direction. Yes, one of the things to point out is we still, there is approximately $5 million, lots of availability to tap into, what are our line of credit. So, there’s still some flexibility that remains

Well, that’s good to hear. And regarding supply chain concerns do you – can you give us any kind of like directional guidance? Are they getting better or is still as bad or they’re getting worse?

It depends on the category. I think we’re ahead of it. It does remain challenging, but we believe it’s going to remain a challenge, but we are trying to work and mitigate as many things as possible. So there’ll be less disruption.

Okay. That’s good to hear. And I also want to ask about seasonality, when your sales grow so fast remain not able to rely on part seasonality. So now that it’s getting colder, do you see yourselves continuing at a strong pace? So, are you becoming kind of like a summer drink?

No. One of the, I think benefits that we have with our portfolios, we are not a seasonal traditional beverage company. We tend to have a little bit of a decline in the first quarter after the holidays, but we rebound pretty quickly. So for three of the four quarters, our sales remained pretty strong and historically they’ve been that way. And I think the products that we have really helped mitigate that seasonality.

Okay. That’s good to hear. And it’s good to hear that that’s continuing that even at your higher sales levels. Well, that’s it for me. Good luck.

Thank you.

Our next question comes from Anthony Vendetti with Maxim Group. You may go ahead.

Thank you. Yes. So, as you and others are dealing with the supply chain Norm issues and higher prices for shipping and freight and so forth warehouse and distribution. Can you talk about your ability to take some price increases? Have you tried to do that? If so has there been any resistance from your customer base?

Anthony, we just implemented a price increase and the good news is the whole world did, so we didn’t really get a lot of pushback. We’ll continue to look at that, look at, I’m a firm believer and I was, as I was reading off our ingredients, the quality ingredients that we use and where they come from and the painstaking process we do in preparation of our products at our products are undervalued. So, I think over time, there’s probably more room there. But I think, we’ve, we put out a great quality product, and unfortunately when you do that and you use the ingredients that we use, we’re going to be subject to it. But I think we’ve been really quick to make adjustments, to negotiate with our vendors and do the things that we have to do to offset those inflationary practice, but also maintain the quality of our product.

Sure. That makes sense. And then on the distribution side, I know you’ve been trying to increase your DST. How’s that been progressing and any updates on that?

Our sales team has done an excellent job and not just increase in our DST coverage, but the quality of it, and what they’ve been able to accomplish. Well, unfortunately I can’t put up a screen for everybody to see, but if you saw a distribution map, we called that the space that’s not being covered white space. And the white space on the map of the United States is really starting to shrink. So, we’re real excited. Particularly, as we get into that alcohol sector, we’ve got a great number of top tier Anheuser-Busch and Miller, Coors distributors that are really excited about our product entries, and we really think can take us to the next level.

Yes. Particularly I think you’re, spot on right with you’re talking about Reed’s Hard Ginger Ale that’s a very large category, so that’s 5% alcohol, what’s the exact, can you get a little more detail in when you exactly expect to launch it. Have you circled the date yet? And when you launch it? How do you intend to roll that out?

We’re going to launch it at the end of the first quarter, so to really start rolling in and have an impact in Q2. We’re going to we’ve several geographic areas and we have a couple that we’re going to really focus on that has executed well, and then move on from there. So, we don’t want to – and you hear this a lot with companies about going out what’s it – a mile wide and an inch deep, we’re going to go a mile deep and an inch wide, and really go from geographic to geographic territory, but where we’ve had success already with our RTD mule and some other distribution opportunities.

Sure. That makes sense. And then just, can you talk about the different channels the progress you’re making in the convenience channel, any update on 7/11 or any of the other channels that you’re trying to increase penetration?

Well, obviously we’ve done really well at Walmart, Target, and then adding Costco, which was a big pickup for us. We’re excited. We’re focusing on on-premise. We’re focusing in liquor stores. We’re focusing drug. Right now our team is meeting with convenience store buyers, and the reaction has actually been a lot more favorable than I thought in terms of the variety of products that we have and the interest. So, it’s a multi-pronged approach going through several channels that initially we’ve been really excited about both authorizations, but also our products have performed in market. So, I think there’s more coming Q1 of next year.

Okay, great. And then just on the gross margin side, for example, Reed’s Real Ginger Ale some of the new products that you’re launching the Virgil’s new product, are these going to be higher margin products, then your current corporate gross margin or in line with your current corporate gross margin?

Higher. I have a – I made a secret pact with Tom that we have a certain threshold that we’re above. We’re not going to go ahead and do it. So, we’re motivated to make it work. And these are all accretive in terms of gross margin. And in fact, all of our new product entries from ginger ale till the mocktails have all been margin accretive. So, we looked at that’s going to really propel that number higher.

Okay, excellent. That’s it for me right now. I’ll hop back in the queue. Appreciate it.

[Operator Instructions] Our next question comes from Jack Kaya, Retail [ph]. You may not go ahead.

Hey, how are you doing guys? Wanted to touch on Rhonda’s nomination to the Board and kind of maybe doing a little bit of a reading between the lines here is, are there any sort of plans to have a possible strategic shift to focus on skews that might perform better in particular kind of in the line of alcoholic beverages? I think, in recent months we’ve seen, that’s kind of like the hot topic in consumer beverages is who is putting out things that contain alcohol in them. I know you just announced the new Hard Ginger Ale, but can we expect maybe more stuff in the pipeline related to alcohol specific drinks?

Well, I think we have to get the Hard Ginger Ale first before we really entertain any additional items. We’re excited about that. We’re excited about assuming a majority of the distribution for our mule this year. So really want to get those things off the ground and going before, we think about other items downstream, obviously, we’re trying to really leverage. I think the key is, we’re trying to leverage everything ginger, right? And that’s been our mantra. And if you look what we’ve done is, we’ve graduated from the $100 million ginger beer category to the $1.3 billion ginger ale category to the over $4 billion flavored malt beverage category. And there’s no real big players. And there that has a ginger ale base drink, and who represents ginger better than Reed’s. So, I think we’re going to start there and we believe we can drive significant growth, obviously, Rhonda has great beverage experience in it, and it’s not just related to the alcohol beverage category or the beer distribution network. I mean, she knows the business well. She knows the landscape. So, we’re going to leverage her beverage experience across all portfolios, but obviously lean on her as we grow that distribution. And I think we’ll start there first before we decide what other opportunities. But I think the key thing that’s consistent here is that we’re leveraging our strengths, ginger, what we do well and what we’re known for and feel really comfortable about it. And we’re not going into new territory that we don’t have any experience in.

Sure, sure. I think that’s a pretty logical and I appreciate the insights and kind of break down on it. And the only other question I was kind of curious about is, I’d be remiss if I didn’t ask. But as you see compliance and with our stock price where it’s at I think, primarily most people was called so no, and wish it was higher. But are there any lingering concerns with maintaining compliance going forward? I know it’s pretty much asked every time we have one of these calls and we’re blow bucks, but I figured I’d throw it out there.

Yes. I mean, if you go back in time, we were as low as $0.375, and we were able to get it over the dollar threshold. We were trading around $0.70 before this call. I’m optimistic with the progress that we’ve made. I mean, look, seven consecutive quarters of really sustained growth. Right. And we’re feeling good about the future and about our opportunities, obviously the impacts of COVID has had some downward pressure on our margin, but we bought back we are addressing transportation and one of the things I didn’t talk about is a lot of these new products, including our Hard Ginger Ale are migrating to cans. We can get more cans on a truck that you can bottle, so that will bring those costs down on a per case basis. So, we believe, if we continue to execute and grow this business, the way we are that the stock price will move up. And as I said earlier, I think it’s incredibly undervalued and a great opportunity to come in and buy restock.

Cool. Thanks. I appreciate it as always keep up the good work and, hang in there. I think it’s going to get better.

Thanks, Jack.

This concludes our question-and-answer session. I’d like to turn the conference back over to Norm Snyder for any closing remarks.

Thank you. Thank you again for your continued support and participating in today’s call. A replay of the webcast will be archived other company’s website under the investor section at drinkreeds.com for approximately 90 days. We look forward to sharing our progress over the coming quarters and years. Have a great day. Thank you.

The conference is now concluded. Thank you for attending today’s presentation. You may now disconnect.