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    REED
    Earnings call· Jun 2026(Q2 FY26)

    REED'S Q2 FY26 earnings call REED

    Aug 12, 2026 Source

    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

    5

    • 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

    3

    • 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

    3
    CategoryTargetConfidence
    Gross margin
    mid-30% area and above
    high materiality
    High
    National inventory levels
    down further
    medium materiality
    Medium
    Ginger ale in glass bottles SKU success
    one of the most successful SKUs in our portfolio
    low materiality
    High

    Operational metrics

    17
    Net sales sequential growth
    5%vs Q1 FY26
    Q2 FY26

    Net sales increased sequentially from the first quarter of 2026.

    Gross profit
    $1.8 millionvs $0.8 million in Q2 FY25
    Q2 FY26

    Gross profit increased significantly year-over-year.

    Inventory write-offs
    $0.1 millionvs $1.6 million in Q2 FY25
    Q2 FY26

    Write-offs declined materially due to portfolio rationalization.

    Delivery and handling costs
    $1.1 millionvs $1.6 million in Q2 FY25
    Q2 FY26

    Decreased primarily due to continued improvements in logistics efficiency and freight optimization.

    Delivery and handling costs as % of net sales
    15%vs 17% in Q2 FY25
    Q2 FY26

    Improved efficiency led to a lower percentage of net sales.

    Delivery and handling costs per case
    $2.54vs $2.95 in Q2 FY25
    Q2 FY26

    Per case costs decreased year-over-year.

    Selling, general and administrative expenses sequential decrease
    18%vs Q1 FY26
    Q2 FY26

    SG&A decreased sequentially compared to the first quarter.

    Selling, general and administrative expenses
    $4.7 millionvs $5.0 million in Q2 FY25
    Q2 FY26

    Decrease driven by lower legal settlements and optimization efforts, partially offset by investment in personnel for Asia Growth Initiative.

    Net loss decrease
    29%YoY
    Q2 FY26

    Net loss decreased significantly year-over-year.

    EBITDA loss
    $4.0 millionvs $5.7 million in Q2 FY25
    Q2 FY26

    EBITDA loss decreased 30% year-over-year.

    Cash used in operations
    $2.2 millionvs $5.0 million in Q2 FY25
    Q2 FY26

    Cash used in operations decreased year-over-year.

    Inventory level
    $7 million
    Q2 FY26

    Overall inventory reduced to $7 million, improving cash conversion cycle.

    Cash balance
    $2.4 millionvs $10.4 million as of Dec 31, 2025
    as of June 30, 2026

    Cash balance significantly lower compared to year-end 2025.

    Total debt (net of deferred financing fees)
    $9.2 millionvs $9.2 million as of Dec 31, 2025
    as of June 30, 2026

    Total debt remained flat compared to year-end 2025.

    Sales team size
    reduced
    Q2 FY26

    Sales team size was reduced due to the engagement of a broker partner.

    New SKU minimum order quantities
    reduced
    ongoing

    Ability to reduce MOQs for new SKUs, preserving cash and allowing strategic market seeding.

    Strategic price increases
    planned
    future

    Strategic price increases are planned for specific SKUs to improve margins.

    Industry KPIs

    7
    MetricValueDetails
    EPS organic EPS growth-$0.36USD per share
    Gross operating margin24%%
    Organic revenue growth5%%
    Unit case volume growth—
    Freight logistics cost pressure15%% of net sales
    Pack architecture pricing actions—
    Bottler franchise system economics—

    Product announcements

    3
    ProductTypeDetails
    New mixer line (tonic, club, grapefruit mini cans)launch
    Ginger ale in glass bottleslaunch
    Premium ginger beer lineroadmap

    Risks & headwinds

    2
    Lower volumes with recurring national customersQ2 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 alternativesOngoing

    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

    5

    Gross margin expansion

    next quarter and beyond
    Current24%
    TargetContinued 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⏳.

    Q&A highlights

    3

    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 read5 chapters

    Detailed Narrative

    01

    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.

    02

    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.

    03

    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.

    04

    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.

    05

    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.

    AI-generated summary of the company’s earnings call. Not investment advice.