Jones Soda Co. Q1 FY2026 Earnings Call

Thank you for participating in today's conference call to discuss Jones-Soda's financial results for the first quarter ended March 31, 2026. 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 actual results 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 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. Telephone replay will be available after the call through May 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 would like to turn the call over to Joan Soda, CEO, Scott Harvey.

Thank you, David. Good afternoon, and thank you for joining our first quarter 2026 earnings call. The momentum we established exiting 2025 continued into the first quarter as we delivered first quarter revenue of $12.4 million, up 194% and exceeding our guidance, and achieved a net income profitability on a gap basis. This marks a meaningful inflection point for Joan Soda and reflects the strength of the operational and strategic foundation that we have built over the past year. Our first quarter's performance was primarily driven by the continued success of our partnership and branded collaboration platform along with strong execution within the club channel. Consumer demand for the fallout branded offerings significantly exceeded expectations and reinforced the power of combining culturally relevant partnerships with broad retail distribution. Since launching the Vault-Tec packs into club stores across North America, we've seen a strong sell-through and continued retail interest in future branded collaborations and expanded programs. Beyond Fallout, our broader partnership and branded collaboration platform continues to create meaningful awareness and engagements for the Jones brand. Through collaborations, including Fallout, Crayola, Folds of Honor, we're able to connect with consumers across multiple demographics, occasions, and retail channels while generating incremental sales opportunities and strengthening retailer relationships. Importantly, we believe the performance we are seeing validates that this is not a one-time promotional event, but rather a repeatable commercialization platform capable of driving future retailer programs, consumer engagement, and incremental growth opportunities. The continued expansion with key retail partners reflects increasing confidence in Jones' platform and our ability to execute at a larger scale. Operationally, the improvements we implemented throughout 2025 continue to benefit the business during the quarter. Our centralized logistics model, enhanced forecasting capabilities, and disciplined inventory management enable us to support significantly higher sales value while maintaining operational efficiencies. At the same time, we continue to leverage our existing infrastructure more effectively, which contributed to improved operating leverage and profitability. Within our core soda business, we continue to expand distribution and deepen relationships with key retail partners. Subsequent to the quarter end, we significantly expanded our retail program with the introduction of new Jones Soda four-packs in 650 top-volume Walmart locations across the United States. Built in our existing presence with the retailer, these convenience multi-packs featured three established Jones soda flavors, root beer, green soda, and berry lemonade, and substantially increased the accessibility and visibility of the Jones brand with mainstream consumers. In conjunction with this rollout, we also expanded our partnerships with Folds of Honor as part of the Nationwide America 250 Celebration. Beginning this month, the Walmart floor packs began featuring special Folds of Honor packaging, while individual bottles inside the pack showcased photographs of military service members and first responders, continuing the Jones longstanding tradition of highlighting real people on our labels. As part of this initiative, Jones Foto will fund educational scholarships for Folds of Honor recipients. We believe programs like this not only strengthen our relationship with key retail partners, but also reinforce the authenticity of the community-driven identity that has always been differentiated to Jones brand. Within our modern soda category, Pop Jones continues to expand consumer awareness and retail presence and demand for functional, better-for-you beverages remain strong. While the category remains highly competitive, we are continuing to optimize our retail activation strategy with increased focus on improving velocities, refining retail placement, and driving stronger account productivity. We remain encouraged by consumer response and believe category continues to represent a meaningful long-term opportunity for the company. Within adult beverage, HC9 sales declined during the quarter as we continue to navigate regulatory uncertainty surrounding the hemp and rye products. While we expect the category to remain challenged near term, we have adjusted our expectations accordingly and continue to manage the business prudently while supporting key distribution relationships. At the same time, we continue to evaluate longer-term adult beverage opportunities that align with evolving consumer preferences and regulatory frameworks, while leveraging relationships, infrastructure, and category expertise we have already established within the space. Looking ahead, we remain highly encouraged by the momentum in the business and continue to expect strong revenue growth for the full year 2026, even though quarterly performance may fluctuate based on timing of customer orders and promotional activities. Our focus remains on scaling the areas of the business where we see the greatest opportunity to generate sustainable profit growth. With that as a background, I'll turn the call over to Brian, our CFO, to review our first quarter financial results in more detail.

One moment. Brian has disconnected. Ladies and gentlemen, please stand by as we reject our speaker. Ladies and gentlemen thank you for standing by joining Brian Meadows.

Thank you Scott good afternoon everyone sorry about that technical difficulties. Talking about the Q1 results for the quarter ended March 31st 2026 revenue increased by approximately 8.2 million or 194 percent to approximately 12.4 million compared to approximately 4.2 million for the quarter ended March 31 2025. The increase in sales revenue is primarily the result of follow-up branded products sold through our club channel. HD9 sales declined during the same period from 0.9 million to 0.2 million in 2026. The HD9 sales decline was expected as per our previous disclosure that regulations that will come in effect in November of this year prohibit the sale of HD9 products containing in excess of one milligram of THC. Our net revenue guidance for 2026 does not contain any material expectation from HD9 revenues. For the quarter ended March 31st, 2026 trade spend and promotional allowances which reduces the amount of revenue from the sales of our products totaled 1.4 million an increase of 0.6 million or 97 percent compared to 0.7 million for the quarter ended March 31st, 2025. This is primarily driven by the increase in sales while total trade spending increased uh the percentage of gross revenue declined from 13.5 to 9.5 percent in the first quarter of 2026. The quarter ended March 31, 2026 gross profit increased by approximately 2.5 million or 179 percent compared to 3.9 million to approximately 3.9 million compared to approximately 1.3 for the prior quarter. This is a result of higher sales revenue in the current quarter. For the quarter ended March 31, 2026 gross margin decreased slightly to 31.3 versus 32.9 in the quarter ended 2025. The 1.6 percentage point decrease in gross profit was primarily driven by declining sales revenue from HD9 products which generally has had higher margins than our other products. We do believe there are additional opportunities to reduce our product cogs in 2026 based on our increased volumes. Scott and I have held discussions with all our major suppliers to work on better pricing given our significantly higher volumes in 2026. We continue to make progress in this area and do expect to see increased gross profit margins later in 2026. We also see further opportunities to reduce warehousing costs in 2026. We work with our ops team to identify opportunities to reduce ongoing monthly storage charges. We expect to see those reductions starting in the second quarter. We have instilled a real discipline in inventory management since we joined Jones. This includes weekly purchase order reviews to ensure no overordering or in some cases underordering of product. We have monthly inventory reviews to then identify early any slow-moving goods so we can take actions before they expire. Additionally, we have real pricing discipline where P&L reviews are done on any new products and promotional campaigns to ensure we are generating sufficient margins. In some cases, the market pricing dictates that we have, but we need to sell, what we need to sell for and then we attack the product costs holistically from bottles, cans to packaging to command fees. The one area of challenge that I will highlight is with freight expenses we do expect higher freight surcharges in the latter part of 2026 due to the negative impact of higher oil prices compared to last year. For the SG&A it increased the first quarter by 1.2 million or 53 percent compared the first quarter up last year. This increase is primarily attributed to higher broker and loyalty payments related to the higher sales. As a percentage of revenue however, SG&A decreased to 16.4 percent compared to 26.3 percent in the prior year. This is solid progress on improving this KPI to a level Scott and I are targeting. It continues with clear return on investments from our sales selling and marketing expenses to drive profitable sales. Moving to net income and we're pleased to say we're talking about net income this quarter. Net income was positive um moving improving by one million dollars to $150,000 or zero cents per share from net loss of $8,052,000 the prior year which does include $240,000 of income from discontinued operations. This is a major milestone for Scott and Ikes as we joined Jones in the first quarter of 2025. In terms of profitability we also report adjusted EBITDA a non-GAAP measure that we believe provides a better view into the ongoing performance of the business to cash share or loss in continuing operations. For the quarter ended March 31st, 2026 adjusted EBITDA was $0.6 million compared to an adjusted EBITDA loss in the prior period of 1.1 million or improvement of 1.6 million dollars. This also marks the second sequential quarter of positive adjusted EBITDA. As I previously stated our break-even adjusted EBITDA level is based on 10 million of net sales per quarter. Turning to the balance sheet we entered 2026 in a significantly stronger financial position. Since March 31, 2026 we had cash and cash equivalence of $4.4 million up from up from $3.6 million year-end 25. Subsequent to quarter in we announced a $2.5 million private placement priced at 33 cents per share. I'm pleased to update everybody today that we have had tremendous interest in this private placement and as of today we have firm commitments for the $2.5 million on offer. I would note that this is priced at premiums to market close today. Additionally there is interest over November 2.5 million. We expect this private placement will be completed by the end of May as we complete the paperwork and we'll announce the final closing amounts at that time and also to note Scott and I will both be participating in this private placement. These funds further enhance our equity and financial flexibility complying with our expanded 10 million dollar credit facilities with two shores capital we believe we are well positioned to support anticipated to grow throughout 2026 and indebted key strategic growth and operational initiatives. Jones also plans to focus on an Uplist during the second quarter and a portion of the funds will support our Uplist project. Turning to our guidance for the full year 2026, the following forward-looking statements reflect these expectations as of March 14, 2026. They are subject to substantial uncertainty and may be materially affected by many factors, many of which are outside the company's control. Today we reconfirmed that we expected the growth rate in our 2025 full-year revenues to exceed 60% for fiscal 2026. What we'd like to add a little more color to that is yes, there is potential upside from that number. There are a number of organic product innovations we are looking at, other partnerships that could land in 2026 and help us improve beating that 60%. With that, I will turn it back to Scott.

Thank you, Brian. As we move through the remainder of 2026, we're encouraged by the momentum we continue to see across the business and expanding reach of Jones' brand throughout North America. Importantly, the performance we delivered during the quarter further validates that the changes implemented across the business are translating to scalable and profitable growth. The continued success of our partnership and brand and collaboration platforms, combined with expanding retailer support reinforces our confidence and the scalability of the Jones platform and our ability to execute repeatable growth initiatives. During the quarter and subsequent to the quarter end, we significantly increased our retail footprint through several important distribution gains. This includes the expansion of Jones soda into more than 700 additional Circle K stores across Canada, bringing our total distribution within the chain to approximately 1,750 locations nationally. We also expanded a rotational presence within our club channel business following the strong performance of our brand and collaboration promotional programs. Additionally we recently expanded Walmart partnership with the introduction of the Jones Soda 4-pack into an additional 650 high volume locations across the United States further increasing accessibility and visibility of the brand with mainstream consumers heading into an important summer selling season. We believe these retail programs position Jones to reach a significantly broader consumer audience while improving the long-term visibility and accessibility of the brand. As we lead into Memorial Day, we are especially proud to launch our Folds of Honor program at Walmart and other national retailers. This initiative reflects the authentic and community-driven values that have long differentiated Jones Soda while supporting scholarship funding for military and first responder families. We believe programs like this continue to strengthen both consumer engagement and retail partnerships while reinforcing unique identity of the Jones brand. While core soda continues to lead our growth we also see substantial runway ahead with both modern adult beverage as we continue to refine execution strengthening market position and advancing initiative designed to support longer term contribution of both channels. We believe Jones Soda is increasingly well positioned with a stronger commercial foundation expanding our distribution network and improving the infrastructure and growing pipeline of innovation as we continue building out the business throughout 2026. Most importantly I want to thank the entire Jones team as I refer to our village for continued focus, adaptability, and execution. The progress we're seeing across the business is a direct result of their commitment and hard work as we continue building the next chapter of Joan Soda during our 30th anniversary year. With that, we'll wrap up the call and addressing some of the questions submitted live by shareholders through our webcast chat.

Yeah, I will offer up the first Next question here, it's regarding Crayola, will Crayola products ship onto Reshell shelves or be online only?

Great question. Last year it was literally just an online piece, but this year it will be available at both retail and as well as online. So we're certainly looking forward to that and specifically the timing of the launch of those as well.

Next question concerns Jones Zero, can you provide an update on the Jones Zero product offering?

Yeah, I'm super excited about this one. Something passionate I'm super passionate about. I believe that it's another catalyst for growth for Jones. And you will be seeing Jones zeros rolling out in this summer in a specific channel that we already have some commitments for. So super excited about it. I think it's a launching point for us. And the product is just awesome. So I think it's another one of those opportunity for us to repatriate potential consumers that swayed away from us for a time. But like I said, product's awesome. We'll see it this summer. And again, super excited about it.

Next question, which I think we are excited about. There is a picture online of a new follow-up variety pack in Costco, Canada. That includes Nuka Victory, Nuka Cherry, and Nuka Orange. Can you provide more details about a distribution footprint for these?

Yeah, another great question. So, probably saw this online through Instagram and stuff about the news that, hey, it's hitting the shelves up in Canada. And it is through one of our club partnerships as well. And it's taking off pretty rapidly. In regards to where else will you see it? Well, you'll start to see it in the U.S. here in the next several weeks. So it will be throughout Canada as well as the U.S. is one of those rotations that we secured. Awesome product, great flavors, superb, you know, packaging, and it's got a nice little add-in inside the box. So we're super excited about that as we continue these, you know, collaborations and partnerships moving forward. So stay tuned. I'm sure you'll see more about it online through social media. But, again, super excited about how the initial response has been to people seeing it, where it's being sold, and the excitement that it's being able to drive.

I'm liking it to what we saw with the Voltech facts, the kind of social media response we're seeing. Yeah, absolutely. Absolutely. Those are the questions in the queue that we have at this time, Scott.

Great. Thanks, Brian. We'd like to thank everyone for taking the time to listen today. I'd welcome further questions. We would be happy to take one-on-one calls. If you could, please direct any inquiries to this email address, james at haydenir.com. It's hayden, H-A-Y-D-E-N-I-R.com. I'd be happy to address them or have a call with you all. Look forward to speaking with you all again when we report our second quarter results in August. David, back to you. Ladies and gentlemen, this concludes today's teleconference.

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