REED'S (REED) Q2 FY26 earnings call: guidance and Q&A

Earnings call· Jun 2026 (Q2 FY26)· Consumer Staples· Aug 12, 2026

Source: earnings call transcript

Executive summary

Reed's Q2 FY26 — Sequential Improvement in Sales, Margins, and Operations

Reed's Q2 FY26 demonstrated sequential progress in sales, gross margin, and operational efficiency, driven by inventory rationalization and cost structure alignment. While the company is focused on achieving profitable growth and exploring financing options, year-over-year net sales declined due to reduced volumes with key national customers. Management emphasized continued efforts in commercial execution and margin improvement.

Highlights

Net sales increased 5% sequentially from Q1 FY26, reflecting early progress with profitable growth initiatives.
Gross margin expanded to 24% in Q2 FY26, up from 8% in the prior year period, primarily due to lower inventory write-offs ($0.1 million vs. $1.6 million).
Selling, general, and administrative expenses decreased 18% sequentially from Q1 FY26 and 6% year-over-year to $4.7 million.
Net loss decreased 29% to $4.3 million (negative $0.36 per share) compared to $6.0 million (negative $0.78 per share) in the prior year period.
Cash used in operations decreased to $2.2 million in Q2 FY26 from $5.0 million in the year-ago period.

Concerns

Net sales for Q2 FY26 were $7.5 million, a decrease from $9.5 million in the prior year period, primarily driven by lower volumes with recurring national customers.
The company is evaluating financing alternatives to support its growth going forward.
Still operating at a net loss of $4.3 million for the quarter.

Guidance & targets

Category	Target	Timeline	Confidence
Gross margin	mid-30% area and above high materiality	over time	High
National inventory levels	down further medium materiality	Q3 · FY26	Medium
Ginger ale in glass bottles SKU success	one of the most successful SKUs in our portfolio low materiality	future	High

Product announcements

Product	Type	Timeline
New mixer line (tonic, club, grapefruit mini cans)	launch	soon
Ginger ale in glass bottles	launch	soon
Premium ginger beer line	roadmap	in development

Risks & headwinds

Lower volumes with recurring national customers Q2 FY26

Net sales decreased to $7.5 million from $9.5 million YoY

Mitigation:Re-engaging national and regional retail accounts, restoring heritage glass bottle packaging, investing in national broker partner.

Need for financing alternatives Ongoing

Cash balance of $2.4 million as of June 30, 2026, compared to $10.4 million at December 31, 2025.

Mitigation:Evaluating financing alternatives to support growth going forward.

What to watch in Q3 FY26

Gross margin expansion

next quarter and beyond

Current 24%

Target Continued expansion towards mid-30s

Why it matters

Gross margin improvement is a key focus for achieving profitability and sustainable growth.

Gross margin expanded as well, and we expect continued expansion in the mid-30% area over time.

Find out whether REED delivers this. Inve re-checks your case every morning.

Q&A highlights

How are vendor relationships standing after recent changes, and what is the progress on regaining shelf space with key partners?

Neil Cohen stated that vendor relationships are intact, and they have re-engaged major customers like Food Lion, Publix, Kroger, and Whole Foods. The return of glass bottle packaging, a legacy product, is crucial for regaining shelf space, particularly with Whole Foods, where a meeting is scheduled for October.

“Yes, our relationships are very much intact and our business is only going to get better. And we're seeing the results right now. we're getting commitments now we'll start seeing those commitments come to fruition sometime around the end of this third mid third to going into first quarter of next year.”

asked by Aaron Gray · answered by Unknown Speaker

2 min read 5 chapters

Detailed narrative

Operational Improvements and Inventory Management

Reed's has made significant progress in operational efficiency, particularly in inventory control and supply chain management. The company completed a portfolio rationalization, liquidating underperforming SKUs, which led to a material decline in inventory write-offs from $1.6 million to $0.1 million. Overall inventory was reduced to $7 million, improving the cash conversion cycle. New operations software has been deployed to strengthen forecasting and raw material purchasing, enabling leaner operations and reduced aggregate inventory.

Commercial Execution and Retail Relationships

The company focused on re-engaging national and regional retail accounts, successfully regaining shelf space and growing doors. A key initiative was restoring the heritage glass bottle packaging, which was well-received by retailers and is expected to boost sales, particularly at stores like Whole Foods. Investment in a national broker partner, now with over 75 sales professionals, aims to increase retail coverage and improve in-market execution.

Cost Structure Optimization

Reed's took actions to better align Selling, General & Administrative (SG&A) expenses with the current business size, resulting in an 18% sequential decrease from Q1 FY26. Trade spend efficiency was improved, contributing to higher gross margins. The company also rationalized two co-manufacturers whose production and logistics costs were above benchmarks, tightening the cost structure and reinforcing the foundation for scaling.

Product Pipeline and Innovation

Several new product initiatives are underway for the second half of the year. A new mixer line, including tonic, club, and grapefruit mini cans with a hint of ginger, is launching soon. The top-selling ginger ale in cans will also be available in glass bottles, expected to be a highly successful SKU. Additionally, the company is developing a unique line of premium ginger beer in several exotic flavors.

Strategic Planning and Financing

Reed's developed an in-house proprietary sales and demand planning tool to optimize inventory across the network and improve working capital. The company is also actively evaluating financing alternatives to support future growth and ensure the business has adequate capital to execute its strategies.

Summary of the company's earnings call; see how call summaries are prepared. Not investment advice.