Jones Soda Co. (OTC:JSDA) Q2 2025 Earnings Call Transcript

Jones Soda Co. (OTC:JSDA) Q2 2025 Earnings Call Transcript August 15, 2025

Operator: Good morning, everyone, and thank you for participating in today’s conference call to discuss Jones Soda financial Results for the second quarter ended June 30, 2025. Before we begin, let me remind everybody of the company’s safe harbor disclaimer. Certain portions of our comments today will concern future expectations, plans, prospects of the company that will constitute forward-looking statements for the 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 actual results include, among others, those that are discussed under the heading of the 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, 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 August 29, 2025. A webcast replay of today’s webinar will also be available for 1 year via the link provided in today’s press release as well as on the company’s website. Now I would like to turn the call over to Jones Soda CEO, Scott Harvey. Please go ahead, sir.

Scott F. Harvey: Thank you, Sherry. Good morning, everyone, and thank you for joining the second quarter 2025 earnings call. In the second quarter of 2025, we built upon the strong foundation established in the first quarter. With disciplined cost management, operational rigor, we continue to reduce expenses, streamline processes and reinforce our operational focus. We’re advancing a resilient and sustainable supply chain through top-tier manufacturing partners and a disciplined continuity plan designed to ensure uninterrupted on-time delivery. While an HD9 THC supply issue temporarily impacted Q2 sales, that matter has been fully resolved. Looking forward, we will continue to hold our partners to the highest standards, upgrading or replacing manufacturers when performance expectations are not met.

With demand and pipeline orders strong, we remain well positioned for a solid second half of the year. These efforts have allowed us to direct resources toward the highest impact areas of the business, ensuring that every dollar invested supports sustainable growth and shareholder value. Through our focus on operational excellence, innovation and targeted growth initiatives, we have positioned the company for stronger performance in the quarters ahead. Most significantly, during the second quarter, we completed the divestiture of the cannabis business generating $3 million in proceeds. This strategic exit marks a deliberate step in sharpening our focus on our core beverage operations, while fully to be clear, this transaction did not include our HD9 THC category.

Q&A Session

We remain highly confident in the long-term potential of HD9 THC and see it as a key contributor to the future growth and innovation of the Jones brand. Brian will discuss more regarding the sale in a couple of minutes. Looking ahead, we remain focused on driving top line growth. This starts with deepening our relationships across our expanding distribution networks. Strengthening these partnerships has been a key priority this quarter and will continue to be a major focus moving forward, which will enable our growth in distribution. While the full impact of these efforts is yet to materialize, we are already seeing encouraging momentum with the continued expansion of our presence across distribution channels. In the second quarter, we signed 15 new distributors and expanded our presence into an additional 800 innovation is beginning to pay off with strong traction and growth in our core Zero sodas and sustained interest in our HD9 THC zero-sugar products.

This momentum shows we are effectively reading the market and adapting to consumer needs. In the remainder of the year, we expect growth driven by core soda, HD9 THC, including the launch of HD9 Zero, Spiked Jones, 100-calorie Spiked Jones and modern soda format, along with expansion into direct-to-consumer, club, foodservice and convenience store channels. As we continue to receive strong validation from both customers and suppliers, we are confident about what lies ahead in the remainder of 2025. We have a well-positioned product portfolio that resonates in market, streamline operations with unnecessary costs removed and a talented experienced team ready to execute. With these pieces in place, we are poised to accelerate our momentum and take the business to the next level.

With that, I’d like to pass this over to Brian for him to speak to the Q2 financial results.

Brian R. Meadows: Brian? Thank you, Scott, and good morning, everyone. Net revenue in the second quarter was $4.9 million compared to $6.7 million in the year ago period. The decrease in revenue was primarily driven by the onetime pipeline fill we had in the first half of 2024 in Canada and the U.S. as well as the loss of a discount market customer. The Beverage segment once again saw growth from its hemp-derived HD9 products during the second quarter of 2025 as such products generated $0.8 million in revenues during the second quarter of ’25 compared to $0.6 million in the second quarter of ’24. 2024 sales were skewed to the first half of the year with the large pipeline fills. This was drawn down over the balance of 2024, where we saw lower average quarterly net sales in the back half of 2024.

We expect to see increasing net revenues in both the third and fourth quarter of 2025 compared to Q1 and Q2. Key programs that will contribute to expected growth include a cooler rollout program focused on HD9 product sales, new material customers in club and grocery stores for core soda and modern soda. We also have some key follow-up series releases occurring in the third and fourth quarters of ’25, building on the previous success we saw in 2024 and the first half of 2025. Gross profit as a percentage of revenue was 33.3% compared to 34.3% in the prior year period. Despite the decrease in revenue, the company was able to maintain similar gross profit margins due to the cost reduction efforts made throughout our first 6 months. Our team sent out in the second quarter RFIs for our freight lanes to further optimize freight, and we have been able to — we have been further rationalizing our warehousing to reduce those costs as well.

Another key to driving down COGS is product cost. As we build volume in our newer products, we see a good opportunity to reduce our product costs and improve gross margins. Total operating expenses decreased 37% to $2.4 million in the second quarter of 2025 compared to $3.8 million (sic) [ $4.0 million ] in the year ago period. The decrease was driven by our continued efforts to reduce selling, marketing and general admin expenses. We continue to look for additional opportunities to reduce G&A. However, we do expect to be spending additional marketing dollars to support our brands in the marketplace in the third and fourth quarters to drive trial and awareness, most notably for Pop Jones. Net income in the quarter was $2.6 million or $0.02 a share compared to a net loss of $1.6 million or $0.02 loss per share.

The increase in net income was primarily driven by the gain on the sale of our cannabis business as well as the continued reduction in operating costs over the quarter. Adjusted EBITDA improved to negative $571,000 compared to a loss of $1.1 million in the previous period or a 48% improvement. On a year-to-date basis, our adjusted EBITDA is negative $1.2 million compared to negative $2.1 million or 44% improvement over last year. I do want to take a moment to address the divestiture of our cannabis business. The sale of the business for $3 million plus the ongoing annual license fee in perpetuity was an important strategic decision enabling us to fully focus on our core operations by removing ongoing challenges associated with cannabis, including legal complexities, geographic limitations and supply chain issues.

With our current product portfolio, we are now well positioned to leverage a streamlined operating model with reduced variable costs. As we execute our sales growth initiatives. While we remain committed to eliminating unnecessary operational expenses and unlocking supply chain efficiencies, we have the right financial levers and operational foundation in place to successfully scale the brand and the business and capitalize on market opportunities. Lastly, before handing the call back to Scott, I want to touch briefly on our balance sheet. As of June 30, 2025, the company had approximately $0.7 million in cash. We continue to invest in inventory during this quarter, and we have ample capacity under our credit line to finance additional needs in the second half of the year.

In addition, we secured improved terms for products such as HD9 during the quarter. Overall, I am encouraged by the operational and financial improvements we’ve continued to make throughout the second quarter and focus on continued improvements as well as the expected sales growth in the 2 quarters ahead. Scott, back to you.

Scott F. Harvey: Thank you, Brian. The future of Jones remains in driving growth across our key focus areas of core soda, modern soda and adult beverages. Staying focused on these segments while driving innovation within them will keep us on a clear path to expanding market share, improving profitability and delivering on long-term shareholder value. Within core soda, we continue to expand and grow our distribution partners like McLane, Core-Mark, UNFI, KeHE in addition to the network of 35-plus distributors in U.S. and the Canadian markets. Building on this momentum, we’re evolving to meet consumer preferences in the core soda category with the introduction of our zero-sugar and mini craft lines. We experienced strong growth in our core products and expect this momentum to continue in the coming quarters.

Jones Soda launched Jones Zero Cola in March across 10,000-plus national and regional grocery stores and recently introduced an additional zero-calorie flavored Jones Zero Root Beer, which is now available across the U.S. As consumers increasingly prefer healthy alternatives without sacrificing great taste, we see a significant runway for expansion in these categories for Jones. Jones continues to deliver excitement to our strategic partners. This summer, we rolled out a custom Jones Soda pack inspired by the bold vibrant colors of Crayola’s iconic color palette, featuring our most loved core flavors. The action was incredible. We sold out within hours. Now fueled by that demand, preorders are live and shipments will be rolling out shortly perfectly timed to capture the back-to-school buzz and drive incremental sales.

We also partnered with Bethesda and the iconic Fallout franchise to launch Nuka Quantum, followed by Nuka Grape available now and later this fall, we’ll expand the lineup with [ Sun ] Sarsaparilla timed perfectly for the release of Fallout II. Both Nuka Quantum and Nuka Grape have already exceeded our expectations at both retail and D2C outlets. Kroger has been a key customer and partner stocking the Jones Fallout SKUs nationally. Looking forward to Q4, in coordination with Bethesda and the Fallout franchise, we have an exciting first-of-kind limited time-only product D2C launch that we believe will further and strengthen our creative portfolio and generate strong consumer buzz and demand. Shifting to modern soda. We’re seeing strong momentum in this segment, driven by 2 flagship products, Pop Jones and Fiesta Jones.

Pop Jones is available in 5 classic flavors, each with just 30 calories, 4 grams of sugar and added fiber plus immune support, all in a convenient 12-ounce sleek can. Distribution continues to expand with placement in key national and regional chains, including Safeway, Albertsons, Fred Meyer, Market Basket, HyVee and a major Midwest chain slated to launch in Q3. Fiesta Jones is a line crafted specifically for convenience stores, featuring Latin-inspired flavors like watermelon Strawberry, Mango passion fruit, coconut lime and guava berry, all in portable resealable aluminum bottles that continue to expand in our convenience channel. Circle K has been a leading retail partner in the U.S. and Canada, and McLane and Core-Mark have been key distribution partners with this effort.

Turning to our third key focus area, adult beverages. This includes our HD9 THC products under the Mary Jones line as well as our alcoholic offering, Spiked Jones. Our HD9 THC business continues to gain traction, delivering $0.8 million in revenue. Since introducing Mary Jones HD9 THC line, which includes Jones core flavors, shooters and gummies, we’ve signed 25-plus distributor partners, including 4 new partners in Q4 — Q2 2025, allowing us to expand into new states with strong initial sales, including our newest distributor, Allied Beverage Group of New Jersey. In Q3, we’re excited to launch the HD9 Zeros in which new slimline cans, which will deliver the same great taste with no compromise on flavor. In addition, we will play 850 Jones branded coolers across the retail landscape, which will drive brand awareness, trial and increased product demand.

Lastly, with Spiked Jones, our alcohol-infused beverage brand is available in both 12-ounce and 19.2-ounce slimline cans with such flavors as strawberry lime, berry lemonade, grape and orange and cream. We will be expanding our Spiked offering in Q4 with 100- calorie flavors, providing greater consumer appeal and accessible base. After a successful test market in the Northwest with Northwest beverage, Odom, Craig Stein, Walton, Point Blank and [ Delta Summit ] and Bonkins, we have recently secured a production partner in Michigan and have already have contracts for distribution with Griffin, [ Rave ], Imperial and Superior Beverage. We also have 15 more distributors in the Midwest and the Eastern U.S. we anticipate signing and shipping product to in Q3.

Overall, we’re building strong momentum with a streamlined operating model and a well-positioned product portfolio that resonates in the market. Our recent strategic decisions, including the divestiture of the cannabis business has removed distractions and unnecessary costs, allowing us to focus on scalable growth. With the right product portfolio and strengthened relationships with our distribution partners, the future is bright for Jones. Turning to the investor engagement. We will be attending the Gateway Conference next month in San Francisco. This underscores our commitment to driving value for our shareholders and rebuilding investor confidence. With the momentum we have built through streamlined P&L and expected growth in the remainder of the year, it’s a perfect opportunity for us to share our story.

Before we move on to Q&A, I want to extend my heartfelt thanks to our incredible team, our strategic partners and our loyal customers. The momentum we’re seeing today is no accident. It’s the product of hard work, creativity and commitment across every corner of this company. The Jones brand is not just gaining traction, it’s building a movement, and we are poised to turn this energy into lasting growth and category leadership. With that, we’re going to finish the call by addressing some of the questions we received from our shareholders via e-mail recently. I’ll pass the call back to Brian, and we’ll start out with the first question.

Brian R. Meadows: Thanks, Scott. First question is, what is the company’s approach to operating today’s virality-driven marketing landscape? Is the company’s leveraging AI to produce low-cost catchy advertisements that gain significant views with minimal effort?

Scott F. Harvey: Yes. Great question. So we’re currently deploying the social media strategy around an upcoming launch, where we’re going to actually use brand influencers, which is different than just using influencers. So brand influencers are specifically around the brand that we’re actually launching into and they’re known within that category as well as that we’re also using a digital marketing targeted around the store to drive awareness of that product placement in the retailer. And I’m a firm believer is that we need to advertise within the 4 walls of the stores that we’re in, but we really need to expand that out to the 4 blocks and 4 miles around there to make sure people understand when we go into a new segment that where we are, we’re in that store and be able to communicate that out.

The other piece, the AI proposition, I think, is really an interesting path, and we’ve been exploring this option with a few select partners, and we’re actually going to be going into test. I think the economics for this really makes sense, and they can drive really vast awareness and the creation of material is really speedy. So I’m really interested in that results after we launch that test.

Brian R. Meadows: Scott. The second question is, has Jones landed any new accounts in the past 3 months?

Scott F. Harvey: Yes, we have. So we have new retailers and continue to expand. The ads have been a combination of distributors, retailers and a new club opportunity that we’re going to be rolling out at the end of this month. So we’re super excited about, again, that momentum that we’re starting to see within the brands.

Brian R. Meadows: Next question is, how has sell-through been at current retailers? Please provide specific metrics.

Scott F. Harvey: Yes. So when you look at Jones core soda single bottles that sold the majority of the Jones overall sales in the U.S., it’s about $3.23 per SKU per store per week, which is equal to about 1.98 units. Jones single bottle sales reported in multiunit was about $7.6 million in total. So this is third in the entire craft soda category, only behind like Doritos and Coke, specifically Coke that’s imported from Mexico. When we look at Pop Jones, Pop Jones is selling at a rate of about $2.09 per SKU per store per week. This ranks Pop Jones about #11 among the modern soda category. We’re pleased with the initial ranking and really all of our marketing and promotional efforts are going to be kicking in here in September, after which we anticipate Pop Jones moving into the top 5 brands in the category.

And we’re going to be doing exactly what I just spoke about in the previous question about focused targeted marketing, geofencing around stores and really bringing the brand to life to drive awareness within those categories. Mary Jones, it’s a little bit of a different situation since syndicated data for Mary Jones is not really available because the category is really sold at this time through independent liquor store operators. We do have confirmation from one of the top retailers in the countries, which is top 10 liquors out of Minnesota that Mary Jones HD9, soda ranks within the top 30 of the category. We anticipate moving into the top 10% with the launch of our Zeros in Q3, along with our shooters and gummies as well as we begin to expand that network across the country as well.

Brian R. Meadows: Scott, the next question is, can you provide an update on the product road map and priorities?

Scott F. Harvey: Sure. Yes. Our priorities remain the same and our road map remains the same, right? It’s really about staying narrow and going deep within those 3 defined categories that we spoke of earlier, which is our core, our modern and our adult and really continue to drive innovation within each of those categories. We need to stay focused. We need to be able to drive forward, and I believe distractions outside of those will lose focus on the channels that we really believe are the go-forward path for us.

Brian R. Meadows: Scott, the next question, I think you’ve touched on already. Are there plans to offer the full Jones Soda and HC9 lineup in zero-sugar variations?

Scott F. Harvey: Yes. Again, great question. We currently have those products available in Zero with our core and plan based upon the velocity to expand across other flavors. And in regards to the Zeros, as we just said, we’re rolling out this quarter, and I believe that those really will address the health-conscious individuals for that option, but also give them an option within the category that they’re looking to expand into.

Brian R. Meadows: Next question, Scott, what is the difference between HD9 THC and cannabis THC infused?

Scott F. Harvey: Yes. So it really starts out is that they’re split into 2 different things, and here’s a couple of reasons why. So the HD9 THC is chemically identical to the marijuana-derived Delta 9, but it’s extracted and converted from hemp, which means it’s 0.03 THC by dry weight for the U.S. standard farm rules. What we do with the Delta — the HD9, it allows us to be able to cross state lines. We can have singular and less manufacturers so that we can go to multiple states. So that is the channel that we’re playing in today with our HD9. The cannabis infused comes from — again, still comes from marijuana but it’s got a cannabis of greater than 0.3 per THC per driveway, again, per the U.S. farm bill rules. And it’s really only sold in licensed dispensaries in these legal states, and it cannot cross state lines.

So when we were in the business, we had to establish manufacturing in each state and comply with each state’s specific rules to be able to launch that product. So again, when you look at the product in itself, the HD9 just gives us much more flexibility to have less manufacturing across state lines. Again, we still have to comply with state regulations, but it does give us that ability to do it.

Brian R. Meadows: Scott. Next question is they edibles and syrup, what camp do they fall into?

Scott F. Harvey: Yes. Again, another great question. They both fall into that cannabis-infused category. So really, the takeaway, the difference is all about the origin and the legality of the product. So our HD9 infused, again, it’s legal in noncannabis states, it’s more flexibility. That’s the channel that we’re operating in again. And again, the cannabis THC-infused is marijuana-derived THC and it’s regulated cannabis laws, and it’s only for dispensary only. So again, we remain committed to our HD9 products, which we really believe is a growth engine for us. That’s the reason why we’re still continue to play within that category.

Brian R. Meadows: The next question is the company was supposed to have introductory — to have an introductory meeting talking to Walmart for possible store trials for Pop Jones. Any update on this front?

Scott F. Harvey: Yes. So there was a meeting last year with Walmart in which the team presented the original flavors. The result of that meeting was as Walmart decided to pass on that specific opportunity. So the good news is this upcoming Wednesday, the 20th of August, the team and myself will be in Bentonville, Arkansas meeting again with the modern category buyer to present the original 5 flavors, again, with 6 newly developed flavors. And the most important piece is that we now have in-market data, which was not available at the time so that we can actually talk about how well the product is doing and how well it’s acceptance across the category. So super excited about the upcoming meeting to be able to get in front of that category. And again, the team is well prepared to be able to present.

Brian R. Meadows: Scott. The next question, it looks like it’s our last question is, is the company still engaging in alcohol-infused soda with Spiked Jones hard craft soda? Where is the product currently with distribution?

Scott F. Harvey: Yes. So again, Spiked Jones, we have 4 flavors and it’s in 2 different sizes. One set, 12-ounce and one set at 19.2 one, and they both have 8.4% alcohol by volume. The 19.2 is available in 2 flavors, which is grape and orange cream and the 12-ounce is available in orange and cream, grape, berry lemonade and strawberry and lime. Distribution is currently in liquor stores in select C-store locations and most prominent in the Pacific Northwest, but we’ll be expanding to the rest of the country due to significant distributor demand that we continue to see. Those are all the questions that we’re going to answer at this time. In closing, the past 6 months, we’ve taken bold decisive steps to strengthen the Jones Soda Company and establish a foundation for sustainable, profitable growth.

We have tackled critical challenges head on, streamlined our operations and cut unnecessary costs, partnered with top-tier manufacturers and continue to assemble a high- performing team committed to flawless execution. These actions position us for stronger results and meaningful long-term value creation. While important work remains ahead, we’re moving forward with clarity, focus and discipline, and we deeply appreciate our shareholders’ continued confidence and support. We’d like to thank everyone for taking the time to listen today. I would further welcome questions and would be happy to take your one-on calls early next week. Please direct any inquiries to JSDA@gateway-grp.com, and I’d be happy to address accordingly. I don’t speak to you soon.

I look forward to addressing you all again when we report our third quarter results. Thanks again, and have a great day. Sherry, back to you.

Operator: Thank you. Ladies and gentlemen, this concludes today’s teleconference. You may disconnect your lines at this time, and thank you for your participation.