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01/10 16:34
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Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
The earnings call reveals liquidity challenges, declining sales, legal issues, and reliance on future capital raises. Despite improved gross margins, the company's financial health is concerning, with a significant net loss and low cash balance. The Q&A section highlights delays in acquisitions and funding, with management's responses lacking clarity. These factors, along with potential risks from legal issues and economic conditions, suggest a negative stock price reaction in the short term.
Net Sales $381,000, down from over $1 million in Q2 2024; driven by limited inventory due to liquidity challenges.
Gross Margins 30%, up from 23% in Q2 2024 and 11% in Q1 2024; improvement driven by lower wine costs at Copa DI Vino and Qplash business, which had gross margins of 59%.
Operating Expenses (OpEx) Down $1 million from Q2 2024; driven by expense controls, elimination of the TapouT license fee, and lower share-based compensation.
EBITDA Loss of $1.7 million, improved from a loss of $2.2 million in Q2 2024; driven by higher gross margins and lower SG&A spending.
Net Loss $4.6 million, a $700,000 improvement from Q2 2024 and $1 million lower than Q3 2023.
Cash Balance $457,000, compared to a very nominal amount at the end of Q2 2024.
Capital Raise Approximately $8 million since August 2024; aimed to support working capital and market expansion.
New Product Launch: The Pennsylvania Liquor Control Board has authorized the new tequila brand Chispo.
Market Expansion: Expanded distribution network in the Pacific Northwest, Massachusetts, and Texas, achieving full state coverage in Washington and West Texas.
Retail Authorization: Circle K has authorized Copa DI Vino for all franchise stores, covering four SKUs.
Operational Efficiency: Q3 gross margins increased to 30%, up from 23% in Q2 2024, driven by strategic sourcing and lower costs.
Cost Reduction: SG&A spending decreased by $500,000 from Q2 2024.
Strategic Acquisition: Secured commitments of approximately $8 million for market expansion and working capital, with plans for an acquisition in the energy drink sector.
Project White Hot: A strategic initiative aimed at achieving positive cash flow and EBITDA by Q3 2025.
Liquidity Challenges: Ongoing liquidity issues have persisted since 2023, impacting inventory and sales. The company has faced difficulties in controlling the timing of cash inflows, which has affected overall liquidity.
Legal Issues: The company is involved in a legal struggle with ABG TapouT due to the decision to discontinue the partnership, which may pose additional risks.
Sales Decline: Q3 2024 net sales were $381,000, down from over $1 million in Q2 2024, primarily due to limited inventory caused by liquidity challenges.
Funding Delays: Delays in securing funding have impacted the company's ability to manage inventory and sales effectively, creating a challenging operational environment.
Acquisition Risks: The company is in the process of securing financing for acquisitions, which may be delayed due to liquidity issues and the holiday season affecting timelines.
Market Competition: The beverage market is highly competitive, with significant players making large acquisitions, which may increase competitive pressures on Splash Beverage Group.
Operational Risks: Challenges in operational execution due to liquidity constraints may hinder the company's ability to capitalize on growth opportunities.
Strategic Initiatives: Splash Beverage Group is focused on identifying, acquiring, and building early stage or undervalued beverage brands with strong growth potential in both the US and international markets.
Project White Hot: Project White Hot serves as Splash's guiding principles for strategic decision making, focusing on sustainable and profitable growth, operational excellence, e-commerce, bolt-on acquisitions, and capital structure.
Distribution Expansion: Expanded distribution network in key territories including Washington, Massachusetts, and Texas, enhancing brand coverage.
Qplash Resale Business: Restarted Qplash, the online resale business, in August 2024, which is expected to improve liquidity due to short cash conversion cycles and high gross margins.
Mergers and Acquisitions: Pursuing acquisitions, including a pending deal in the energy drink sector, anticipated to close in early January 2025.
Revenue Expectations: Anticipate moving to positive cash flow from operations and positive EBITDA on a run rate basis by Q3 2025, excluding any M&A.
Capital Raise: Secured commitments of approximately $8 million since August 2024 to support working capital and market expansion.
Future Growth: Expect growth north of 30% via the distribution network from the pending energy drink acquisition.
Financial Projections: Targeting to complete additional capital raises between $7 million and $12 million to support ongoing operations and acquisitions.
Capital Raise: The company has secured commitments of approximately $8 million since August 2024 through private placement of convertible notes and equity.
Pending Acquisition: The company is in the process of finalizing a significant acquisition in the energy drink sector, which is expected to close in early January 2025.
Liquidity Challenges: The company has faced liquidity challenges impacting inventory and sales, but has managed to maintain a cash balance of $457,000.
Shareholder Support: The CEO expressed gratitude for the ongoing support from legacy investors during challenging times.
The earnings call reveals liquidity challenges, declining sales, legal issues, and reliance on future capital raises. Despite improved gross margins, the company's financial health is concerning, with a significant net loss and low cash balance. The Q&A section highlights delays in acquisitions and funding, with management's responses lacking clarity. These factors, along with potential risks from legal issues and economic conditions, suggest a negative stock price reaction in the short term.
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