Jones Soda Co

Good afternoon, 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 31, 2025. 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 purposes 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 and 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 actions include, among others, those that are discussed under the heading 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 gap measures and reconciliations for non-gap measures are available in the earnings release and other documents posted on the company's website under Investing Relations. A telephone replay will be available after the call through April 14, 2026, and a webcast replay of today's webinar will also be available for one year via the link provided in today's press release, as well as on the company's website. Now, I'd like to turn the call over to Jones over to CEO Scott Harvey.

Thank you, Shamali. Good afternoon, everyone, and thank you for joining our fourth quarter and full year 2025 earnings call. 2025 was a transformational year for Jones Soda, culminating in a strong fourth quarter that underscores the progress we've made both operationally and strategically. For the full year, we generated more than $25.3 million in revenue, representing significant growth over the prior year and reflecting the impact of our expanded distribution, product innovation, and operational execution. Throughout the year, channel focus along with operational improvements reinforced the company's foundation. We centralized our warehousing, optimized logistics, and implemented just-in-time inventory practices, making the organization leaner and more efficient organization. These actions also reduced cost, enabling us to reinvest in areas of the business that we had the highest impact potential. Strategic divestitures, including the sale of our cannabis business, enabled us to fully focus on scalable beverage operations. and sale proceeds reinforce our balance sheet. Partnerships with Bethesda and or Fallout, Crayola, Folds of Honor, alongside our expansion in the Club Channel, further enhanced the brand's visibility and drove record purchase orders, demonstrating the combined power of operational discipline and strategic growth initiatives. As we closed out the year, we began shipping Fallout the Vault-Tec packs to club stores nationwide, dramatically increasing the availability of our Fallout-inspired beverages. We completed the first of multiple shipments to select locations across Canada as well. Fourth quarter revenues reached 11.7 million, the highest gross sales Jones Soda has ever delivered in its history, underscoring the strong consumer demand and the effectiveness of our strategic initiatives. The operational and strategic foundation we built in 2025 positions Jones Soda to leverage growth opportunities, scale efficiently, and drive sustained value across its key business areas in the year ahead. Core Soda remains the backbone of our business. Over the course of 2025, we expanded our distribution network, adding new partners, and extending our reach in both the U.S. and Canada. Direct store delivery partners serving major national retailers strengthen our presence in key markets. Culturally relevant and collectible product launches drove strong engagement and expanded the Jones brand to reach millions of consumers across North America. Crayola inspired packs sold out within hours, generating approximately $275,000. Our D2C channel further accelerated momentum with the launch of the Fallout-inspired rocket bottles, which sold out within days, creating a meaningful online excitement, reinforcing the value of our partnerships with iconic brands and gaming platforms. As a result of our success of these launches, retailer demand and interest continue to grow with each subsequent release. These results highlight the impact of culturally relevant collectible products while underscoring our focus on discipline execution within Core SOTA. Operational improvements, including enhanced forecasting, centralized logistics, and multi-school shipping capabilities enabled us to meet strong demand efficiently, maintain product quality, and support continued growth. Modern SOTA Delivered limited growth in 2025, despite operating in an increasingly crowded and competitive category. Demand for better for you beverage remains strong, particularly among consumers seeking functional benefits without compromising on taste. Top Jones, a functional soda, expanded into 1500 retail doors, including national chains, and consistently performed well in consumer taste evaluations versus comparable offerings. Our work in this category is far from complete. In 2026, we'll introduce new flavors anchored in high-demand core profiles, such as root beer and cream soda, while evolving our go-to-market approach. We'll increase localized support for retailers through a focused four-walls, four-blocks, four-mile strategy designed to drive awareness, trial, and sustained velocity at the store level. Overall, modern soda's performance reinforces that while the category is highly competitive, Consumer demand for healthier functional beverages continues to support steady growth and long-term opportunity. In adult beverage, regulatory changes were a key consideration. Federal legislation enacted in 2025 alters the framework for hemp-derived products, including certain intoxicating cannabinoids. While the law is not expected to take effect until late 2026, and enforcement still remains uncertain, we are actively evaluating potential impacts and have developed contingent plans to address a range of outcomes. We are more cautiously moving forward with trusted partners while closely monitoring developments in Washington, D.C., and engaging with industry advocates to determine the appropriate path forward. At the same time, evolving state-by-state regulations continue to create complexity requiring ongoing vigilance to ensure our products remain compliant. While we do not expect HD9 to be a material growth product line in 2026, we will continue to support our dedicated partners. We remain focused on staying nimble, adapting quickly to regulatory changes while maintaining and supporting our distribution network and ready to enact our contingency plans as regulatory deadlines approach. Spike Jones also faced challenges in 2025 as distribution declined in certain accounts due to the product's high alcohol by volume and sugar content. In 2026, we plan to reposition the brand with a revised 4 to 5% alcohol by volume, new flavors, refreshed packaging. We also intend to support the brand through a more targeted regional strategy, as mentioned earlier, enable us to launch in a specific market, provide appropriate local marketing support, and drive consumer engagement more effectively. Across all of our areas of business, for modern adult, we built an operational discipline drove the consumer engagement, creating meaningful momentum heading into 2026. With that performance as context, I'd like to turn the call over to Brian to review our fourth quarter and full year financial results. Brian? Thank you, Scott. Good afternoon, everyone. I'll first go over our full year 2025 results, starting with revenue. Jones achieved revenues of $25.3 million for the 12 months ended December 31st, 2025, compared to $17.8 million in the prior year. or a 42% increase in revenue. Two categories stood out to drive the increase, sales of fallout licensed products to the club channel and sales of fallout products to the direct-to-consumer channels. We also saw some increases in the Pop Jones SKUs, however, this will be a focus in 2026, as Scott has previously stated, to make more material progress in the modern soda category. I'll further discuss the company's outlook for revenue in 2026 later in my comments. Focusing next on adjusted gross margin. Adjusted gross margin is a non-GAAP measure. It effectively takes GAAP gross profit and adds back one-time inventory provisions and divides that into net sales. Full year adjusted 2025 adjusted gross profit margin was 32% compared to 27% in the prior period. We incurred 1.2 million in one-time inventory write-downs associated with an HD9 business and inventory stranded with a co-man we had a legal dispute with as we previously disclosed. The majority of the write-down was due to the federal legislative changes to the HD9 business enacted in November 2025. Our outlook for the HD9 business as a result of these changes and its impact on the Jones HD9 business in general necessitated a further write-down of our year-end 2025 HD9 inventories to a level that reflects today's HD9 marketplace. The good news here is that we improved our adjusted growth profit margin by five percentage points comparing to the prior fiscal year. These were driven twofold. Firstly, the reduction in trade spend from 20% incurred in 2024 to 10% on average in 2025. The reduction was achieved through a mix of channels that have lower trade spend as a percentage of gross sales, for example, club channel and direct-to-consumer. As well as we exited a DSD relationship in Canada that had a very high trade spend negotiated in 2024. This relationship was effectively exited in Q1 2025, and we saw the impact from Q2 onwards. Secondly, we made improvements in the freight and warehousing from 17% of gross sales to 16% of gross sales in 2025. We see continued opportunities to also reduce our product COGS in 2026 based on our increased volumes. And we also see further opportunities to reduce warehousing costs in 2026. Whoever frayed out most likely will be negatively impacted by the higher oil prices we're seeing currently. SG&A. Scott and I took the reins in February 2025. We had quite a challenge in front of us to aggressively cut the burn rate and institute the necessary cash controls urgently. We shared the progress across the last three quarters. I'm pleased to update our shareholders on the full year results from our efforts. Looking at SG&A in total for the year ended December 31st, 2025, we reduced SG&A by 14%. Now, to dig a little deeper into the truly amazing reductions we achieved, some of the SG&A numbers increased in line with the 42% increase in revenues. For example, the 42% increase in revenues also drove up our broker payments and licensing costs. These two items alone increased 0.7 million for the year. If you remove the impact of those two items, our SG&A decreased 20% for the full year. More specifically, we took out $2.4 million out of SG&A compared to 2024 in consulting, travel, marketing and promotions, rent and utilities, and legal expenses, whilst at the same time driving up our revenues by over 40%. These decreases were necessary to turn around the Jones business. Scott and I instituted a variety of common sense business controls, including centralized controls over legal contract approvals, purchase orders, marketing expenditures, travel, and, of course, cash disbursements. That financial discipline is now entrenched in the Jones business. Further, we also implemented discipline in how we evaluate new business opportunities, product pricing, and promotions. All of P&L's statements developed for review and approval by Scott and myself. Moving to net loss, net loss for the 12 months ended December 31st, 2025 was 1.8 million compared to 9.9 million in the prior period, or an $8.1 million improvement year over year, or 82% improvement. This is driven primarily by two things, the gain on sale of our cannabis business of 3.9 million, but more importantly, the reduction operating loss of $5 million. Adjusted EBITDA. Adjusted EBITDA is a non-GAAP measure. reflects management's view of a more accurate reflection of ongoing cash flow generated or lost from its continuing operations. For the year ended December 31st, 2025, adjusted EBITDA was a loss of $2 million compared to an adjusted EBITDA loss in the prior year of $7.2 million or an improvement of $5.2 million or a 72% reduction in adjusted EBITDA loss. Turning to the fourth quarter results, revenue. Jones achieved revenues of $11.7 million for the quarter end of December 31st, 2025, compared to $2.6 million in the prior period, or a 450% increase in sales. Two channels stood out to drive the increase, sales of fallout licensed products to the club channel, as well as sale of fallout licensed products to the DTC channels. I'll further discuss the company's outlook for revenue in 2026 later in my comments. Adjusted gross margins. Again, non-GAAP measure. For the fourth quarter ended December 31st, 2025, adjusted gross margin was 32% compared to 10% in the prior period. As previously discussed, we incurred a $1.2 million one-time inventory write-down associated with our HC9 business. These improvements were also driven by a reduction in trade spend as a percentage of gross revenues and a reduction in COGS and freight and warehousing costs. Trade spend is a percentage of gross sales reduced from 33% in the fourth quarter of 2024 to 10% in the fourth quarter of 2025. COGS as a percentage of gross sales reduced from 71% in Q4 of 24 to 54% in the fourth quarter of 2025. We also made improvements in freight and warehousing from 20% of our gross sales to 18% in the fourth quarter gross sales in 2025. We see continued opportunities to reduce our product COGS in 2026 based on our increased volumes. We also see some opportunities to further reduce warehousing costs in 26. However, freight out most likely will be negatively impacted by the higher oil prices we are now seeing. SG&A. Looking at SG&A for the fourth quarter, SG&A increased by 0.9 million or 28% up. This increase is primarily attributed to licensing fees on fallout revenues and increased broker payments on increased sales in the fourth quarter. Looking at the net loss for the quarter, It was 2.1 million compared to 4.5 million loss in the prior period or a 2.4 million dollar improvement year over year or a 53% improvement. This is driven by the reduction in operating loss entirely of 2.4 million. Adjusted EBITDA for the quarter. For the quarter ended December 31st, 2025, adjusted EBITDA was a positive 0.5 million compared to an adjusted EBITDA loss in the prior year of 2.7 million. for an improvement of 3.2 million in adjusted EBITDA. Cash on hand, December 31st, 2025, we ended the year with 3.6 million in cash on hand compared to 1.3 at the end of 24. We also increased the size of the line of credit with our lending partner, Two Shores Capital, from 5 million to 10 million. As of the year end of 25, we had borrowed 3 million on this $10 million line. Subsequent to year end, we also sold a promissory note owed to Jones from our cannabis business sale, which had a base value of $2 million for $1.4 million. We look at the payments that were associated with that $2 million that would have taken place from 2026 through to 2028 to collect the $2 million. We determined that having cash in hand now would be a more prudent course of action to further give us the flexibility to finance the expected growth in 26 and help reduce some of the legacy payables. Looking at the outlook for 26, first quarter in 2026 revenue guidance, the following forward-looking statements reflect the company's expectations as of March 31st, 2026. They are subject to substantial uncertainty and may be materially affected by many factors, many of which are outside the company's control. Based on the preliminary first quarter results of revenues recognized as of March 30th, 2026, the company currently expects first quarter revenues to exceed $12 million or a 260% increase over the prior year first quarter revenues. Additionally, we expect the growth rate on our 2025 full year revenues to exceed 60% for fiscal 2026. Scott, back over to you for final remarks. Thanks, Brian. As we enter 2026, we expect our operating environment to remain dynamic, requiring continued laser focus on execution, innovation, and discipline, and strategic prioritization. Our strategy is clearly focused on our three core channels of growth, core soda, modern, and adult beverages, where we are prioritized, disciplined execution, and targeted, supported expansion. While the work is not done across these channels by any means, we are encouraged by the progress and remain optimistic given the strength of our innovation pipeline, increasing brand exposure, and continued consumer demand. Innovation with each channel is well underway, and we're excited about the new offerings set to roll out across North America during this year. designed to strengthen our portfolio and drive incremental growth as well. Part of our direct-to-consumer and digital expansion strategy in 2026 will be reintroducing our D2C platform with a more focused and integrated approach aimed at strengthening consumer engagement and expanding higher margin channels. Under this initiative, we're launching a new service-based offering and membership programs designed to deepen brand loyalty and increase lifetime customer value. These programs will provide consumers with exclusive access to reduce product pricing in exchange for participation helping to establish more predictable and reoccurring revenue stream. A key component of our direct to consumer and digital expansion effort is the upgrade in our digital infrastructure. We're enhancing the website to deliver a more interactive brand Experience including improved navigation, richer brand storytelling, and in addition to tools such as product locator to better connect consumer demand with the retail availability. Together these initiatives reinforce our ability to capture direct to consumer insights, drive incremental revenue, and further strengthen our brand ecosystem. Launching our technology enablement and operational integration strategy, we are investing in implementing systems that strengthen our ability to manage a business more effectively across all disciplines. These efforts include upgrading platforms and enhanced customer engagement and response time, ensuring we are more connected and responsive to consumer needs across all touchpoints. In parallel, we're implementing an integrated transportation management solution to improve logistics visibility, to optimize costs, and drive greater efficiency across our supply chain. We're also advancing the adoption of project management tools and workflows to improve execution, accountability, and cross-functional alignment. These systems provide real-time visibility into key initiatives, helping ensure that priorities are delivered on time and in line with our strategic objectives. Collectively, these technology investments are designed to improve operational discipline, enhance decision-making through better data visibility, and support the scalable growth across our organizations. In addition, we've also added and strengthened our key leadership roles across our sales group, marketing, supply chain, positioning the organization to execute more effectively against our 2026 and long-term objectives. At the same time, we continue to actively identify and attract high-impact talent across the organization to support our next phase of growth, enhance capabilities, and elevate overall execution, all the while maintaining a sharp focus on controlling SG&A costs and driving operational leverage. Our focus remains on wavering, delivering channel execution, advancing innovation with each segment, maintaining cost discipline, deepening strategic partnerships, and ultimately delivering shareholder value. Finally, and most importantly, I want to acknowledge the Joan teams. I refer to them as our village. Each individual has contributed meaningfully to our progress over the past 12 months. Our achievements would not have been possible without their focus on execution, adaptability, and commitment to the brand. And for that, I thank each and every one of them. As we operate in 2026, our 30th anniversary, we expect our success to continue as the brand evolves and progresses. With that, we'll wrap up the call by addressing some of the questions submitted live by the shareholders through our webcast chat. That first question that we have relates to, you know, the public relations website section that, you know, we didn't have the correct information for our new IR firm on there. I can update you that that was corrected this morning and you will see over the next, few weeks an actual transition from the existing company that's actually managing that site to another one. But if you go back and reference that site today, the new IR firm, which is Hayden IR, their information is listed on there. And again, you'll see further improvements as we start to transition that section over the next couple of weeks. Second question, given the global success of fallout, is there any possibility the rollout products via licensing to countries abroad great question um matter of fact we're already working down that path not necessarily trying to secure license but actually exploring what it's going to take in order for us one to be able to ship it over water what each one of these potential countries that we're interested in what the regulations are um you know how do we get in there what you know what the restrictions the timing and such so It is a work in progress. It takes time because you want to make sure everything's aligned from paperwork to what kind of pallets are shipping into these countries. So it's an exciting opportunity for us. We believe that the Fallout and Jones products will play in other countries around the world. But, you know, stay tuned. More to come on that. But we are actively pursuing that as we continue throughout the year. Question three, and Brian, I'll throw this over to you. Can you provide an update on the S-1 process and potential uplisting timeline, and how are you thinking about capital needs support the next phase of growth?

Thanks, Scott.