Reed’s Inc. Earnings Call: Growth Amid Rising Costs

Reed’s ((REED)) has held its Q1 earnings call. Read on for the main highlights of the call.

Reed’s Inc. Earnings Call: A Balanced Outlook Amid Operational Gains and Rising Costs

The recent earnings call for Reed’s Inc. painted a picture of both progress and challenges. The company reported significant operational improvements, including a new product launch and expanded distribution, which contributed to a moderate increase in net sales. However, these positive developments were tempered by a decrease in gross margin, increased operating expenses, and higher cash usage, resulting in a balanced outlook for the company.

Improved Fulfillment Rates

Reed’s Inc. has made notable strides in its operational efficiency, as evidenced by the reduction in short shipments from approximately 20% at the start of the quarter to under 2% by April. This improvement reflects the company’s enhanced inventory management and operational efficiency, setting a strong foundation for future growth.

New Product Launch and Distribution Expansion

The company launched a new multifunctional soda line, securing national distribution through Sprouts Farmers Market. Additionally, Reed’s expanded its distribution network to include major retailers such as Albertsons, Safeway, and Costco. These strategic moves are expected to bolster the company’s market presence and drive sales growth.

Operational Improvements and Leadership Changes

Reed’s Inc. has initiated several operational improvements, including supply chain optimizations and packaging transitions aimed at improving cost efficiency. The appointment of Ruud Bakker to the Board of Directors, with over 25 years of industry experience, is expected to further strengthen the company’s leadership and strategic direction.

4.5% Increase in Net Sales

The first quarter of 2025 saw Reed’s Inc. achieve a 4.5% increase in net sales, reaching $10 million compared to $9.6 million in the previous year. This growth was primarily driven by higher volumes with recurring national customers, highlighting the company’s successful customer retention strategies.

Decreased Gross Margin

Despite the increase in net sales, Reed’s Inc. experienced a decrease in gross margin from 35.6% to 33.9% in the first quarter of 2025. This decline was mainly due to higher costs of goods sold, as the company ramped up its operating capacity and inventory levels.

Increased Operating Expenses

Operating expenses rose significantly to $5.1 million from $4.1 million in the previous year. The increase was largely attributed to investments in personnel and marketing, as the company seeks to strengthen its market position and drive future growth.

Increased Cash Usage

Reed’s Inc. reported a substantial increase in cash usage, with $5.4 million used in operating activities compared to $2.4 million in the previous year. This rise was primarily due to higher inventory purchases, reflecting the company’s efforts to support its expanded distribution network.

Forward-Looking Guidance

Looking ahead, Reed’s Inc. anticipates continued growth driven by strategic supply chain optimizations, improved inventory management, and expanded distribution. However, the company expects some pressure on gross margins in the second quarter due to seasonal promotions and the launch of a new functional beverage line. Despite these challenges, Reed’s remains focused on leveraging its operational improvements to drive future success.

In conclusion, Reed’s Inc.’s earnings call highlighted a balanced outlook, with operational improvements and strategic expansions offset by rising costs and decreased margins. The company’s focus on enhancing efficiency and expanding its market presence positions it well for future growth, despite the challenges it faces in maintaining profitability.