Jones Soda Co

Good morning, everyone. Thank you for participating in today's conference call to discuss Jones Soda's financial results for the fourth quarter and full year ended December 31st, 2024. 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 forward-looking statements for the purposes of of the Safe Harbor provisions under the Private Securities Litigation Reform Act of 1995. Forward-looking 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 in similar words or expressions. Forward-looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially from those indicated by the forward-looking statements. Factors that could affect our actual results include, among others, those that are discussed under the headings Risk Factors in our most recently filed reports with the SEC, including our annual report 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. A telco replay will be available after the call through April 15, 2025, and a webcast replay of today's webinar will will also be available for one year via the link provided in today's press release, as well as the company's website. Now, I would like to turn the call over to Jones Soda CEO, Scott Harvey.

Thank you, Christine. Good morning, everyone, and thank you for joining. Before jumping into the full year 2024 results and progress of our strategic growth objectives, I want to take a moment to introduce myself. I'm Scott Harvey, and I'm incredibly excited to step into the role of CEO at Jones Soda. and lead the company through this evolution from a pure play craft soda brand to a high growth beverage company. My 40 plus year career in CPG restaurants and manufacturing world has led me to top executive positions at renowned companies such as Black Rifle Coffee Company, Nathan's Famous, Einstein Noah Restaurant Group, Golden Crust Caribbean Bakery, and most recently as president of Dunn Brothers Coffee. What excites me most about Jones Soda is not just the company's rich legacy, but its incredible potential to grow and innovate with dynamic and multi-billion dollar beverage industry. With such passionate customer base and brand that speaks to creativity and authenticity, I see countless opportunities for Jones to expand and elevate its impact, and I look forward to being part of its journey and working alongside the team to take the company to new heights. Now shifting to the business. While Jones Soda started the year on a strong note, several operational challenges, along with poor financial discipline in the back half of the year, hindered our growth and tested the company's resilience. As our Chairman Paul Norman discussed at length during the last quarterly update, immediate action has been taken to correct the company's trajectory and get us back on track towards capitalizing on the immense growth opportunities at hand. While Paul and the board have brought me and our CFO, Brian Meadows, on board to lead this next chapter of growth, we're not deviating from the overarching strategy that Paul laid out a few months ago. In addition to the operational refinements that Brian will walk through in a few minutes, we have been hard at work putting in place to accelerate growth behind our focused strategy and capitalize on our three major channels of focus, core soda, modern soda, and adult beverage. While the beverage industry provides immense growth potential, It takes strong operational rigor combined with leading product innovation and marketing tactics to keep up with the constantly evolving consumer habits and preferences. We believe within each of our three key areas of strategic focus, we will lead the way with an authentic brand that has stood the test of time and best-in-class flavor profiles that consistently outperform our competitors. I firmly believe that Jones Soda has not even come close to unlocking its true potential, and I look forward to delivering predictable and profitable growth while providing durable shareholder value for the years to come. I'll dive into our strategic growth objectives and recent progress later during this call, but first I'd like to pass our call to our new CFO, Brian Meadows, to introduce himself and to speak on some of the operational and financial initiatives that we've been working on. Brian, over to you.

Thank you, Scott, and good morning, everyone. As a new CFO at Jones Soda, I'm excited to join a company with such a rich history of innovation and creativity. With over 25 years of experience as a CFO and senior financial executive across CPG, food ingredients, telecommunication, and other industries, including several small caps public companies, I've developed deep expertise in managing and financially supporting growth, managing cash flow, and driving process-driven operational efficiencies. Most recently, I served as the CFO of Simply Better Brands Corporation, where I drilled the financial and operational strategies for a high-growth brand accelerator and health-focused protein-based nutrition category. Now I look forward to contributing to Jones Soda's success, collaborating with this incredible team and ensuring we maintain strong financial discipline to create lasting value for all our stakeholders. Before diving into the priorities that Scott and I have been focusing on since stepping into our new roles, let's review our 2024 financials. Net revenue increased 15 percent to $19.1 million in 2024, compared to $16.7 million in the prior year. Full year 2024, net revenues included approximately $17.8 million from the company's beverage segment, compared to approximately $15.4 million in 2023, or 15.6 percent growth over the prior period. The beverages segment saw strong growth from its hemp-derived HD9 products here in 2024, as such products generated $1.7 million in net revenues during the year compared to nil in 2023. The company has generated $1.3 million in revenue from its cannabis THC segment compared to approximately $1.2 million in 2023, mostly driven by THC sales in Canada. First profit as a percentage of revenue was 21.3% compared to 29.1% in the prior period. The decrease was primarily driven by a $1.2 million one-time inventory impairment charge in the fourth quarter of 2024, along with the continued overhang of the distributor transition in Canada, which we now put behind us. Both of these issues were one-time in nature and we expect an improving gross margin in the coming quarters. Total operating expenses were $14 million in 2024 compared to $9.7 in 2023. The increase is primarily due to increased selling and marketing expenses in 2024. 2024's selling and marketing expenses were $6.8 million compared to $3.7 million in 2023. A $3.1 million increase was related to one-time product development innovation expenses, increases in marketing, specifically sponsorships and trade shows, and advertising and promotions. However, the marketing initiatives will not be repeated in 2025, and a careful review of our spend is underway under Scott and my watch already. We'll be looking at it for a clear ROI on the spend in 2025. Additionally, general and admin expenses increased from $5.3 million in 2023 to $5.9 million in 2024, or a $0.6 million increase. This increase is probably due to increased legal expenses totaling approximately $1 million in 2024 over the prior year. The amount of the drugless expense in 2024 has been settled in February of 2025 and is also one time in nature. Scott and I have also changed the internal process for contract review and approval, and only Scott and I are approving contracts after legal review. Our net loss for 2024 increased to $9.9 million, more than $0.09 a share, compared to a net loss of $4.9 million or $0.05 a share in 2023. The $5 million increase in net loss in 2024 was driven by three main issues, the write-down of inventory of $1.2 million, one-time litigation expenses of $1 million, increase in product innovation, advertising, and promotion, including sponsorships of $3.1 million. These issues are one time in nature, and we are razor focused on ensuring they do not repeat in 2025. Jones does have the right products now to focus on. Our contract review process is buttoned down. Marketing spend is only approved with clear ROI. Scott and I are very focused on working with the team on improved supply chain management processes and inventory management. Lastly, adjusted EBITDA was negative $8.7 million compared to negative $4.6 million. For the year 2024, adjusted EBITDA included an aggregate of approximately $2 billion in litigation costs, inventory write-downs, which are one-time expenses, along with the aforementioned sales and marketing increase of $3.1 million. For those interested in our fourth quarter financial performance, you can view a breakdown of those financials in the press release we issued earlier today. Stepping back and looking at the bigger picture, our focus is razor sharp on operational discipline, strong cash management, and ROI-driven strategic investments in high-impact growth opportunities. Through this focus, we are committed to maintaining a lean approach, avoiding over-investment inventory while strengthening our supply chain management to improve go-to-market timelines, customer responsiveness, while simultaneously focusing on reducing our cost of goods sold. Furthermore, we are reviewing all aspects of our manufacturing partner base with the focus of enhancing overall efficiency and maximizing our margins to position us for long-term sustainable growth. Lastly, I wanted to touch on our balance sheet. Our cash at the end of 2024 totaled $1.5 million. And as you may have seen, subsequent to the end of 2024, we entered into a new $5 million revolving credit facility. Overall, I believe we are making the right moves to turn our business around and position Jones for sustained growth in years ahead. for shareholder value being at the top of our priority list. With that, I'll turn the call back over to Scott to share an update on our key initiatives and growth strategy. Scott.