8-K: Jones Soda Co. Reports Mixed Q4 and Full Year 2023 Results, Focuses on Growth in 2024

Jones Soda Co. announced its fourth quarter and full year 2023 financial results, showing a decrease in revenue but improvements in net loss and adjusted EBITDA, while highlighting strategic growth initiatives for 2024.

Summary

• Jones Soda Co. reported a revenue of $3.5 million for the fourth quarter of 2023, down from $3.7 million in the same period of the previous year.
• The company's full-year revenue for 2023 was $16.7 million, compared to $19.1 million in 2022.
• The Mary Jones cannabis business contributed approximately $438,000 in revenue in Q4 2023 and $1.2 million for the full year, showing significant growth from the previous year.
• Gross profit as a percentage of revenue decreased to 19.5% in Q4 2023 from 24.8% in Q4 2022, primarily due to a one-time inventory write-off.
• However, gross profit as a percentage of revenue for the full year 2023 increased to 29.1% from 26.9% in 2022.
• The net loss improved to $1.5 million in Q4 2023 and $4.9 million for the full year 2023, compared to $1.6 million and $6.4 million respectively in the previous year.
• Adjusted EBITDA was $(1.4) million for Q4 2023 and $(4.1) million for the full year 2023, compared to $(1.3) million and $(4.6) million respectively in the previous year.
• The company's cash and cash equivalents totaled $3.9 million at the end of 2023, down from $8.0 million at the end of 2022.

Sentiment

Score: 6

Explanation: The sentiment is moderately positive due to the company's growth initiatives, new product launches, and improvements in net loss and gross profit margin. However, the decrease in revenue and cash position temper the overall optimism.

Positives

• The net loss improved both for the quarter and the full year.
• Gross profit margin increased for the full year due to supply chain enhancements and strategic pricing adjustments.
• Operating expenses decreased due to reduced non-cash stock consideration and lower start-up costs.
• The Mary Jones cannabis business is experiencing significant growth and expansion.
• The company is actively pursuing new growth opportunities in food service, convenience stores, and Canada.
• New product launches, such as Spiked Jones and Nuka Cola, are generating excitement and sales.
• The company has made key leadership changes to drive growth and innovation.

Negatives

• Revenue decreased in both the fourth quarter and the full year compared to the previous year.
• The decline in revenue was primarily due to decreased sales in the food service and grocery channels.
• Gross profit margin decreased in the fourth quarter due to a one-time inventory write-off related to the Lemoncocco product line.
• Cash and cash equivalents decreased from $8.0 million at the end of 2022 to $3.9 million at the end of 2023.

Risks

• The company faces competition from larger, well-funded beverage companies.
• Changes in consumer preferences and legislative initiatives against sweetened beverages could impact demand.
• The company needs to manage its supply chain effectively to maintain consistent and cost-effective production.
• The company's ability to access capital markets for future financing is a risk.
• The company's reliance on the OTCQB Marketplace could pose limitations.
• The company's ability to successfully execute its growth strategies and operating plans is not guaranteed.

Future Outlook

The company believes it is well-positioned for growth in 2024, with a focus on new product innovation, expansion into new channels, and the growth of the Mary Jones brand. They are transitioning from a soda company to a broader beverage company and expect to see revenue and margin upside in Canada.

Management Comments

• David Knight, President and CEO, stated that despite headwinds in foodservice and grocery channels, the company made progress towards positioning Jones Soda for long-term growth.
• He highlighted the growth of the Mary Jones cannabis products and the company's cost discipline.
• He mentioned the transition from a soda company to a beverage company and the expansion into the ready-to-drink malt beverage space with Spiked Jones.
• He expressed excitement about the new leadership team and the opportunities for growth in 2024.
• He also thanked Eric Chastain for his 22 years of service and welcomed Eric Bittner as the new COO.

Industry Context

This announcement reflects a broader trend in the beverage industry where companies are diversifying their product portfolios to include cannabis-infused and other alternative beverages. Jones Soda is attempting to capitalize on the growing cannabis beverage market while also expanding its core soda business and entering new beverage categories.

Comparison to Industry Standards

• Comparing Jones Soda to larger beverage companies like Coca-Cola or PepsiCo, their revenue is significantly smaller, but they are focusing on niche markets like craft soda and cannabis beverages.
• The company's gross profit margin of 29.1% for the full year is relatively low compared to some established beverage companies, but it is an improvement from the previous year.
• The company's adjusted EBITDA is negative, indicating that it is not yet profitable, which is not uncommon for companies in a growth phase.
• The success of Mary Jones in Washington and Canada is a positive sign, but it needs to be replicated in other markets to achieve significant growth.
• The launch of Spiked Jones is similar to other beverage companies expanding into the ready-to-drink alcohol market, but its success will depend on distribution and consumer acceptance.

Management Changes

Stakeholder Impact

• Shareholders may be encouraged by the improvements in net loss and the company's growth initiatives, but concerned about the decrease in revenue and cash position.
• Employees may be impacted by the organizational changes and the company's focus on growth and innovation.
• Customers may benefit from the new product launches and the expansion of the Mary Jones brand.
• Suppliers may see increased demand for raw materials as the company expands its production.
• Creditors may be concerned about the company's decreasing cash position.

Next Steps

• The company will continue to focus on growing its Mary Jones brands, expanding into new markets, and launching new products.
• The company will work to improve its sales results in the food service channel.
• The company will continue to develop and launch new beverage products.
• The company will focus on driving scale and margin improvement.

Key Dates

Keywords

Jones Soda, Mary Jones, cannabis beverages, beverage company, food service, craft soda, revenue, net loss, EBITDA, product innovation, distribution, Spiked Jones, Nuka Cola, Hemp Delta-9, Tilray