Great week at New Age Beverages (NBEV) spurred on by the news that their secondary was oversubscribed (@$3.50) raising near $50 million and vague chatter about ‘business combinations.’
“We went from $90 in the bank to $90 million in 90 days.”
New Age Beverages discloses talks with major players (SeekingAlpha)
“And in the long run, if somebody comes and says, look, you guys are no longer going to be independent because we can really put you on nuclear overdrive, we have to do the right things by shareholders. So yes, the answer is yes on anybody that you ask, whether it’s Tilray, Asahi, Nestlé, Johnson & Johnson, Coca-Cola, Pepsi the answer is yes because we’re a very nice fit, and we’ve got this growth portfolio in all of these aspects, in all of these channels, in all of these markets, in all of these sectors. And it’s something that they just don’t have.”
Excerpts from the transcript via Conference call (required reading).
We believe that our brands in the existing retail distribution is good and our DSD Division has always been a fundamental pillar of the company. Through the end of the year, the DSD Division is expected to achieve its 10th year of consecutive growth. And we have excellent visibility on growth in the fourth quarter now that the division is also fully replenished with inventory across both New Age and partner brands.
In October, for example, our DSD group had its highest sales month of the year and the biggest October in our history. Also, we expect to continue this trend. On the brand side, Búcha, Marley Mate, Marley Cold Brew and Xing Craft are leading growth and new distribution for the company. All new products launched within the last 9 months.
We did not lose any distribution during the last 9 months of the year, our lean period. But we did put distribution expansion on hold. We did put merchandising and racks and coolers and shippers on hold. We put the health sciences and e-Commerce divisions on hold. And much of the greater than 125,000 new points of distribution gained in Q1 and Q2 of this year were just – we were just not able to fulfill. Now that this is behind us, we see this as an excellent test of perseverance in our culture. I have seen what the company has been able to do with virtually no working capital. Now I am excited to see what we can do with cash on hand and the ability to play offense.
The company’s greatest progress in the quarter was with the balance sheet, which is always an issue for smaller companies and was an issue for New Age. During the end of the third and the start of the fourth quarter, the company concluded 6 key initiatives. Number one, we entered into a new $12 million line of credit that went effective in the beginning of September. Number two, we completed a $11.8 million underwritten offering with Roth and Northland, on which major institutional investors participated and generated an annual return of almost 5,000%. We paid off in full a $4.8 million convertible loan, eliminating the risk of its potential convertible option. We eliminated 100% of the Series B notes that were inherited as part of the Coco-Libre acquisition, totaling $1.4 million, the last of New Age’s debt of any form.
Number five, we opened an at-the-market, or ATM, offering that during the third quarter and the beginning of the fourth quarter generated $38 million in cash for the company. And number six, we raised $51.9 million in an underwritten offering with Roth Capital and Alliance Capital that the company actually completed this morning before today’s earning call, providing the company with a total cash balance of more than $80 million to pursue transformative, organic and external growth opportunities.
As a result of these 6 key items, we increased the company’s assets to north of $150 million. These major activities were all done in the past 90 days, and the majority of them were done in my first month at New Age. I have been a CFO of 6 public companies, and even I have never seen anything like it. The execution by the company, our CEO and the board on the balance sheet actions is unbelievable in an incredibly short period of time.
In summary for the quarter, tremendous progress on the balance sheet and our cash position. On the P&L, the same situation as the first 2 quarters of 2018 with a shortfall to the opportunity due to lack of inventory and working constraints. That situation is now behind us as we focus towards the fourth quarter and 2019. We now look forward to growing our core brands in existing and new distribution, expanding our CBD portfolio globally, which we believe has extremely high potential in pursuing other major strategic growth opportunities on our road map.
Now with that, I’d like to turn the call over to Brent.
Thank you, Greg. I appreciate all the hard work and your coming up to speed so quickly. You’re already making a tremendous difference and enabling me, personally, to get back to focusing on the business and strategic opportunities. I’d like to make three points in my comments today on the quarter and our outlook. Point number one is in our core business. And my point here is that our brands are pretty good. It’s been real work, recreating them all from what we inherited. But the work is paying off, and the new products within our core brands are all growing and all driving the distribution expansion for the entire portfolio.
Point two.. read the full transcript here.