Jones Soda Co

Good afternoon, everyone. Thank you for participating in today's conference call to discuss John Soda financial results for the second quarter ended June 30, 2023. Before we begin, let me remind everyone of the company's safe harbor disclaimer. Certain portions of our comments today will concern future expectations, plans, and prospects, of the company that constitute forelooking statements for purpose of the safe harbor provisions under the Private Securities Litigation Reform Act of 1995. Forelooking statements include all statements containing verbs such as aims, anticipates, estimates, expects, believes, intends, plans, predicts, will, may, continue, projects or targets, and negatives of these words and similar words or expressions. Forelooking statements are subject to certain risks and uncertainties that could cause actual results to differ materially from those indicated by the forelooking statements. Factors that could affect our actual results include, among others, those that are discussed under the heading risk factors in our most recently five reports with the SEC, including our annual reports on Form 10-K, our quarterly reports on Form 10-Q, and our current reports on Form 8-K. In addition, this call includes discussions of certain non-GAAP financial measures, including adjusted EBITDA, the most directly comparable GAAP measures, and reconciliations for non-GAAP measures are available in the earnings release and other documents posted on the company's website under Investor Relations. I would like to remind everyone also that this call will be available for replay through August 16th, starting at 7.30 p.m. Eastern tonight. A webcast replay will also be available via the link provided in today's press release, as well as on the company's website. Now, I would like to turn the call over to the President and CEO of John Soda, David Knight.

Thank you, Operator, and thank you, everyone, for tuning in. You have a new voice at Jones Soda today and hope you can understand my Australian accent. It is a very exciting time for me to be joining Jones Soda as the new president and CEO. I believe my 38 years of CPG experience, with 28 years at PepsiCo Quaker Oats on snack foods and functional beverages such as Gatorade, with more recent roles in the alcoholic beverage space, as well as the fast-growing cannabis and hemp beverage categories with brands such as James and James and Cheech and Chong should serve me well to lead Jones Soda into the next phase of growth. With a vast array of experience from working for both some of the largest established brands in the industry, the nimble startups with innovative new offerings, I believe my successful track record will enable me to unlock more potential from the Jones Soda team as we plan to continue capitalizing on our brand power while also bringing new innovations to our product portfolio. Before we go any further, I would like to thank Mark Murray for his accomplishments over the past three years. Mark spearheaded the company's return to revenue growth and margin improvement and was instrumental in launching the company's new cannabis business entry, Mary Jones. Through Mark's leadership, Jones Soda currently has a strong foundation, which I am excited about the opportunity to build on. Although I've only been at Jones Soda for less than two months, I have so far been very impressed by the people and processes in place. I can confidently tell you the people that make up our organization are nimble, ambitious, and willing to do whatever it takes to ensure that we successfully grow our brand and ultimately deliver value to our shareholders. There is an infectious appetite for success throughout the organization, and I can't wait to see what we will accomplish together. My two key areas of focus going forward are delivering great taste and growth through innovation and marketing. With that, I'd like to give you a brief recap of the quarter. Overall, I'm generally pleased with the performance of Jones Soda in Q2. Although it was a difficult revenue comparison over the prior year, we still managed to meet our internal expectations and continue to improve our gross margin and bottom line. What's even more promising is our team has been hard at work with a number of key initiatives with key accounts in order to hopefully put us in a better position to increase sales velocity and drive a stronger revenue performance in the back half of the year. Through an effective pricing strategy along with proactively improving cost of goods by better managing our raw material costs, we're able to expand our gross margin by another 440 basis points year over year and are achieving our three-year goal of delivering an approximate 35% gross margin for our core bottled soda products. In context, that is up 1,300 basis points from a low of 22% gross profit margin in 2020. While our entire product portfolio isn't quite at 35% margin yet, that is what we are striving for and we are starting to see these targets being hit. We believe the organization is set up nicely to see continuing financial improvement to close out 2023, which I believe will give us a solid base on which to further build our momentum with potential growth opportunities planned across all brands and channels. Thank you, Mark and the Jones team. Job well done. Before I go into greater detail on these initiatives and the progress we're making across our organization, I'd like to pass the call over to Joe to discuss our second quarter financial results in greater detail. Joe?

Thank you, David, and good afternoon, everyone. Net revenue in the second quarter was $4.8 million compared to $6 million in the second quarter of 2022. The decrease was due to strong sales revenue performance in the first half of 2022 primarily as a result of an inventory stocking event from one of Jones' largest retailers. The decrease in net revenue was partially offset by the continued expansion of our cannabis brand which generated approximately $400,000 in revenue during the second quarter of 2023 compared to no revenue generated in the second quarter of 2022. Gross profit as a percentage of revenue increased 440 basis points to 32.4% compared to 28% in the prior year period. The increase was primarily due to proactive pricing adjustments as well as our operations team working hard to find ways to lower freight costs and raw material costs. Operating expenses in the second quarter improved to $2.3 million compared to $2.8 million in the same year-ago quarter. The decrease was due to our lower marketing and G&A costs, mostly as a result of less general business startup costs associated with the development of our Mary Jones brand in the second quarter of 2023 compared to the same quarter of 2022. Net loss in the second quarter improved to $1 million or negative 1 cent per share compared to a net loss of $1.4 million or negative 2 cents per share for the same quarter of 2022. Adjusted EBITDA in the second quarter improved to negative $729,000 compared to a negative $1.1 million in the year-ago quarter. The improvement to our bottom line was primarily driven by the aforementioned expansion in gross profit margin and decreased in total operating expenses. Now moving on to the balance sheet. As of June 30th, 2023, cash and cash equivalents were $5.1 million compared to $8 million at December 31st, 2022. Working capital was 9.7 million at June 30th, 2023, compared to $11.6 million on December 31st, 2022. Now, I'll turn the call back over to David, who will provide further insights into various growth initiatives we have planned and overall progress being made throughout the organization. David, back to you.