Newage Inc (NBEV) 2017 Q4 法說會逐字稿

Greetings, and welcome to the New Age Beverage 2017 Results Conference Call.

(Operator Instructions) As a reminder, this conference is being recorded.

I would now like to turn the conference over to your host, Sean Mansouri of Liolios.

Please proceed.

Good afternoon, and thank you for joining New Age Beverage Corporation's Fourth Quarter and Full Year 2017 Investor Conference Call.

I'm Sean Mansouri with Liolios Group, the Investor Relations counsel for New Age.

I'd like to welcome you all to the call today and thank you all for joining.

On today's call, we will have Brent Willis, Chief Executive Officer of New Age Beverages; and Chuck Ence, Chief Financial and Administrative Officer.

I'd like to remind everyone that this conference call may contain certain forward-looking statements reflecting management's current expectations regarding future results of operations, economic performance, financial condition and achievements of the company.

Forward-looking statements, specifically those concerning future performance, are subject to certain risks and uncertainties.

And the transcript of today's conference call will be available on the company's website within the Investors section at www.newagebev.com.

I'd now like to turn the call over to Chuck.

For the 12 months ending December 31, 2017, the company delivered consolidated gross revenue of $56.7 million versus $27.3 million in 2016, more than double the prior year and more than 25x the revenue of the firm exactly 2 years ago.

Subtracting discounts and bill backs at the net revenue level, the company achieved $52.2 million versus $25.3 million in the prior year, an increase of 106%.

Net sales as a percent of gross revenue was 92%, and we expect it to be 90% to 92% of gross sales for the foreseeable future.

Within our segments, the DSD Division delivered its ninth consecutive year of growth, with organic growth up 6% versus prior year.

The division continues to be a positive cash generator as a stand-alone entity, facilitating New Age's growth and diversification.

Within the U.S. division, the Búcha brand led all brand growth, including sales growth in its largest national retailer, 38%.

That growth, which led the category for the retailer, contributed to the change to expand Búcha to all its banners nationally.

Búcha has more than tripled since we brought it into our system 18 months ago and recently has expanded to virtually all major grocery and convenience retailers throughout Canada, expanded to other markets internationally and is now rapidly expanding to other convenience and grocery retailers throughout the U.S. Now with a 43% gross margin versus the 16% when we started, the brand materially contributes to the overall results of the company.

In gross profit, the firm delivered $12.4 million for the year versus $5.8 million in the prior year, up 114%.

Gross profit as a percent of sales, excluding shipping, was 29% versus 20% -- 27% in the prior year.

The 200 basis points of continued gross margin improvement versus prior year is a result of concerted efforts on mix enhancements and overall cost of goods sold reduction.

Importantly, however, the increase in the gross margin is before any of the impact of the shift in Coco-Libre sourcing, which started in Q1 of 2018 and is driving more than 30% improvement of cost of goods sold.

The shipping costs for the period ending December 31, 2017, were $2.7 million or 5.1% of net sales versus $1.1 million in the prior year or 4.3%.

The increase in shipping costs was a result of the onetime transfers of products resulting from the acquisitions and the charge -- and the change to 3 consolidated warehouses nationally.

From a miles standpoint, going forward, 4.5% of net sales is a good number for 2018.

Total operating expenses for the year were $18.4 million versus $9.4 million in the prior year, an improvement of 200 basis points as a percent of net sales.

Of the total OpEx, marketing investment more than doubled, evidence of our commitment to invest in and build brands while still reducing overall OpEx.

Importantly, of the $18.4 million in total OpEx, $1.6 million was associated with noncash stock expense impact associated with the acquisitions.

In addition -- excuse me, there was an additional $5.2 million in onetime expenses incurred throughout the year associated with the acquisitions, uplisting and integration.

Those onetime impacts were validated by an independent third-party as part of our quality of earnings analysis done to gain approval on the PNC credit facility.

Not Including those nonrecurring expenses, OpEx was 25% of net sales, a reduction of 1,200 basis points versus prior year.

25% of net sales OpEx is also a good working model assumption for 2018.

Adjusted EBITDA for the year ending December 31, 2017, was $5.04 million, an 1,824% increase versus the prior year.

Included in that number was a onetime gain on the sale-leaseback of our warehouse of $2.5 million.

In summary, here is what is happening.

Number one, we are gaining scale on the top line.

Number two, we are adding more than 5 points a year in gross margin improvement.

And number three, we are reducing our OpEx as a percent of net sales to below 25%.

Yes, we had some onetime impacts in 2017 as we were building our platform, but as the business model normalizes in 2018, we're focused on organic top- and bottom-line growth, we expect a 35% gross margin, OpEx below 25% in net sales and achieve a 10% EBITDA margin.

Turning to the balance sheet and cash flow statements.

We continue to operate with very healthy current assets over current liabilities.

Current assets for the period ending December 31, 2017, increased 62% to $16.2 million as compared to $10.3 million in current liabilities, not including contingent and lease considerations.

That equates to a working capital ratio of 1.6:1.

We believe the total debt of $3.5 million on a business at this scale is de minimis.

Total shareholder equity reached $52.7 million versus only $4.9 million in the year prior.

That represents a 981% increase in equity for our shareholders.

Looking at the cash flow.

We finished the year with $285,000 in the bank.

In Q3 of '16, we finished with $591,000, and in Q2 of '16, we finished with $279,000.

Put in another way, we have not had any excess cash to invest in the business outside of what we have internally generated from operations for more than a year.

To address that issue, we went to put in place a credit facility with a new bigger bank in PNC.

We started on this back in 2017, because we knew we had incremental working capital requirements in Q1 and we expected the line to close in the beginning of February.

As you can imagine, with the major financial institutions, it takes time.

In March, we indeed gained formal approval of a $15 million credit facility from them, but we have still not yet closed.

Since we haven't closed yet, we needed the cash for inventory really at the end of January.

As Brent will discuss, we have more than doubled our traditional retail distribution and expanded through all these new channels.

And they all need inventory, and we do not have the cash for it.

So we had to solve the problem.

Did we expect to have the problem?

Yes, that's why we started on it last year.

Did we expect to be delayed as much as we were in closing?

No, of course not.

So what do you do?

You either alienate your major retailers and major distributors with no product and lose them forever and also miss your 2018 business plan target, or you go and get the cash to fund inventory.

So we had to put in an interim and immediate capital solution as we did with an ATM, another equity vehicle.

Neither were intended, neither were planned.

And because we hate any dilution as much as our shareholders with whom we were in the same boat, by the way, we put an offer as long as possible, 12 months, in fact.

So let me repeat that.

Management is in the same boat as the shareholders and we have as much disdain for dilution as you all do.

Our interests are 100% aligned.

So we had to obtain the capital to run the business and did so right at $3.5 million, which we believe was all we needed in the interim.

And we limited that amount to just what we needed until our line with PNC goes in place.

It is that basic and that simple.

And obviously, we raised the cash via private placement and canceled our ATM vehicle.

Why not communicate the above over the past few weeks?

Well, as all of our investors know, we were in a quiet period right before the filing of our 10-K.

There was nothing we could say.

So we just had to bite our tongue (inaudible) until today.

Had we filed our K on time, for which we earnestly apologize, we would not have had these unknowns and would have continued with what I know all our investors can consistently play back to us that the company and management are very transparent, forthcoming and accessible.

Speaking of the K, the primary reason it was delayed was the valuation of the 3 acquisitions completed during the year, one of which was extremely complex.

The new rules for compliance required 2 separate and independent valuations from certified valuation experts, which takes an inordinate amount of time.

Ultimately, we communicated a purchase price allocation in the 10-K, which allocates purchase price across brand value, customers, intellectual property, hard assets, inventory or receivables.

Through that process, we have added an incremental $19 million in intangible assets in 2017.

And we believe, as we commercialize these businesses and brands and convert our patents into products, that the value for shareholders will be even greater, substantially greater.

To summarize, we had a great transformative year in 2017.

We know all of our investors want more and they want it faster.

But short-term hit is just not our business model or way of working.

That's why we have not established any guidance until this year in 2018.

We knew we had a lot to integrate and build in 2017.

With all that building and integration, top line revenue went from $2.1 million 2 years ago to $27 million at the end of '16 to now $56.2 million at the end of '17, all in less than 2 years.

In gross margin, we have gone from 16% margin in June of '16 to now 29% at the end of 2017.

In OpEx, on an apples-to-apples basis, we have gone from 51% of net sales 2 years ago to 37% at the end of last year to 25% for the period ending December 31, 2017, whilst increasing marketing investment to 18% of net sales.

And in EBITDA, we have grown to just over $5 million.

Those were the facts and financial results from 2017.

And it leads us at the 58th largest nonalcoholic brand beverage company and one of the largest healthy beverage companies and the fastest growing.

And with that, I'll pass it over to Brent.

Those are the tangible numbers and most -- any company would be proud of that performance.

Are we?

No.

We want more and we want more faster.

And frankly, we expected more faster.

Here are some of the negatives.

We came from a $2 million significant loss-making $0.19 OTC company with no liquidity.

Now we have an unfettered and unobstructed runway.

But are we unsullied with what we've done so far?

No.

Our brands that we acquired, every one of them has needed rework and more lifting than we thought.

We have not yet rebuilt them to the levels they were 2 to 3 years ago, which was significant, even though it appears that the expectation was that we would do it right away after the acquisitions.

We did take out $14 million of net income loss on these businesses from when they were stand-alone entities, but that is not why we acquired them.

In addition to the timing of our brand and sales execution being a source of frustration, our margins are not yet there also, nor is our true net income from operations, without taking out onetime impacts, including the sale of the building that benefited us to the tune of $2.5 million in '17.

In addition, we -- I should have funded basic working capital needs last year instead of now.

And I also think I've done a pretty poor job of managing down short-term expectations to give the company time to get the job done that we need to get done.

Those are some of my frustrations and I believe the negative assessments on our company and on me personally, on which we are working to improve.

Now on the positive side, beyond the tangible numbers that Chuck discussed, we did a lot of things.

We uplisted under the NASDAQ exchange.

We emplaced an entire new Board of Directors.

We acquired and integrated 3 major companies.

We reduced over 70 headcount from those acquisitions and gained a significant portfolio of intellectual property.

We integrated and changed outsourcing structures, integrated supply chain and took more than $14 million in cost out of these acquisitions from when they were stand-alone loss-making enterprises.

On the commercial marketing side of the business, we developed and launched the new Marley Mate and Marley Cold Brew; developed and launched Coco-Libre Sparkling, the first sparkling coconut water; and Aspen Pure Probiotic, PediaAde and Enhanced Recovery.

On our core brands, I think or believe I should base or maybe rebase everyone's timing expectations.

At the time we took these brands over, we paid consideration of less than 1x revenue versus an average acquisition multiple over the past 2 years in the industry of 2.4x.

That translates to: there is some real work to do on these brands, which takes some time.

Now rebuilding or relaunching any one brand in a year would be a lot for a company.

But we have done it with every one of our brands, all in 2017, and are now launching innovative new products within those core brand franchises.

Take Búcha, for example.

In 2017, we made it shelf-stable with 12 months of shelf life, and we did a whole litany of things to increase its gross margin from 16% to 43%.

Since taking it over, we've more than tripled the brand.

Take Marley Mate as another example.

We launched it in November of '17, exclusively with a major convenience store operator.

In its first 3 months of being out, it is outselling the market leader in like-for-like distribution and also outsells Rockstar's Marley Mate brand that was launched around the same time by more than 60%.

In Colorado, for example, we used to distribute one of those competitive products.

It took us 3 months with Marley Mate to eclipse what took us 10 years to build with that other brand.

On all the other brands, all of the new stuff that's come out in late Q4 and then the first half of 2018; everyone that knows the CPG industry knows that retail distribution takes time.

First, the retailer must say yes.

And the major ones take about a year or so to do so.

And then you must keep the products on the shelf chain wide.

Knowing this and the brand and the sales and the organization and the retailer and the distribution and the integration and the systems and the financing work that we have to do in 2017, we knew it would take some time to get done what we were intending to accomplish.

Now, however, we are motoring.

We are taking those newly developed products within our core brands.

And on the commercial sales side of the business, we have more than doubled our retail distribution in traditional convenience and grocery channels, adding more than 81,000 new points of distribution.

In addition, we struck new distribution partnerships with major players and have begun penetration of new channels, including international, food service, alternative channels like offices and health clubs and e-commerce.

This is why we needed to fund the inventory.

Our retail throughput or sales per point of distribution is a key indicator of our success going forward and is really improving, as I shared with you on both Marley Mate and Búcha as examples.

But frankly, our inventory shortfall hurt us in Q1.

Most of the biggest new distribution, however, is coming on stream in April and May.

All the 81,000 new points of distribution did not happen in January.

It happened in April, May, June primarily when most of the national retailer resets occur.

So we were hurt, but not irrevocably.

Now to achieve our plan for the year, we need to continue to convert the distribution and fully roll out our new products.

Concurrent or right behind that, we have to drive pull-through.

To that end, we have significantly increased our influencer and digital and social media, experiential and event marketing and significantly increased our in-store merchandising, racks, shippers and cooler placement activities.

And mind you, what I just went through was only what the team accomplished in 2017.

And I almost left out our Health Sciences Division.

Don't forget about that.

And I think I'll just leave it there, so we can surprise on the upside.

It's a lot for any company, let alone a relatively small one from where we came.

Now honestly, I'm so proud of our team, their work ethic and their results.

They have really busted their behinds.

Don't forget that 18 months ago, we started with 1 person in supply chain and logistics, 0 people in marketing, 0 people in international, 0 people in food service and new channels and e-commerce, 0 ERP systems.

And we had a low 20s gross margin business with greater than $20 million in debt 18 months ago.

I want everybody to understand the key insight and inflection point on New Age's financial model and how our P&L really works that I'm not sure anyone outside of a few people inside our company really fully understand yet.

So if you start off with 85% of your mix at a gross margin of around 25% in net sales to basically comprise the XingTea sold at mostly $0.99 and a distribution and then you have an OpEx, which starts out at 37% of net sales, that is not a good profitable recipe.

Now as an aside, not that it matters, but OpEx greater than gross margin is the norm for 100% of the companies in the beverage industry under $100 million, 100% of them.

So here is the insight and inflection point on New Age.

On our 25% gross margin base where we started, we add in 45% gross margin acquired businesses and then we launch greater than 50% margin new products in existing channels and in new channels where profitability is about 30% greater.

The result, mix shift that takes gross margin to 35% and above.

And now with the increase in scale and a bit of discipline, OpEx stays at 25% or less of net sales, leaving 10 points of EBITDA margin.

That's how our P&L gears.

Then as you take further cost out of the business and add further scale, you shift into a higher gear with more direct impact on EBITDA margin.

No one seems to understand these basics of our model and that our company is just not dated yet, it's just not finished.

But the recipe and the ingredients are all there.

I must admit, though, in our defense, I, we, our whole team, in fact, just gets so excited with what we see for our company, and we see it so clearly.

2017 was foundation building, integration and development.

'18 is about leverage and execution.

Simply put, driving core brands and new products and expanded distribution, penetrating new channels and markets and expanding growth in EBITDA margins, underpinned by a focused and committed organization capable of scaling to a very different level.

The ingredients for success are all there: the brands, the customers, the distribution, the team, the systems, the culture and the financial model.

All our ingredients and our recipe for success is coming together.

And with that, I'd like to open it up to questions.

(Operator Instructions) Our first question is with Anthony Vendetti with Maxim Group.

So I have a couple of questions.

I don't want to take up too much time.

But just, Brent, as you talked about the heavy lifting necessary with these acquisitions and it took a little longer than you thought, so I appreciate the candidness on that.

And I was just curious, do you still feel comfortable with the 2018 guidance at this point?

Or is that sort of the goal, but we have to keep in mind that even though this is a year that -- of execution, there's still some heavy lifting that might -- that may need to be accomplished in order to get there?

It's a great question.

There's still some unknowns, honestly.

And some of our new major national accounts have to execute on time, and they have to do what they have committed that they're doing.

And it would be -- I don't want to announce their names, because a lot of it comes across in April, May and even one major national big box store in June.

But we ultimately have to execute there and our brands have to pull through.

Do we have all of the pieces in place to be able to achieve our 2018 guidance?

Yes.

But we still have execution that we have to do throughout the year.

So that's the first thing.

And yes, we still are confident in the plan, both at the top and the -- at the bottom line.

For January and February, Anthony, we started off really strong and then we ran into the wall by not having the line of credit closed as we expected and basically ran out of inventory.

And we have upset some of our major food service distributors, which is all new business for us, and some of our other major retailers.

Now it's not irrevocable, as we mentioned, but that put us in a big hole for March and for the end of February.

But we've got a full year plan.

We don't communicate quarter-to-quarter guidance.

And most of our distribution is coming on April, May and some in June.

So we still need to execute.

It's not a foregone conclusion.

But in truth, we have a lot of confidence, both in terms of how we started off the year and what we're seeing in terms of throughput on the new brands.

Okay.

And then, just on some of the acquisitions, Marley, Coco-Libre, are those brands -- have they stabilized now?

And do you expect them to start picking back up in 2018?

I would say that brands have stabilized.

But for me, they're not really as differentiated as they could be.

So even though the base Marley franchise, for example, has stabilized between Mellow Mood and One Drop, we still need to relaunch that new packaging, which we'll do in the middle part of the year, behind the whole new Marley architecture.

So the strategy is to take these core brands and instead of just changing packaging or doing some price offerings, those things never work.

And I've seen marketers do that for 20, 30 years.

It's just a (expletive).

So the right thing to do is you completely re-architect them.

You -- and you completely change the messaging.

And frankly, you launch new innovative products within those core brand franchises.

That's why we launched Organic Marley Mate first, Marley Cold Brew second with some fantastic flavors; within Coco-Libre, Coco-Libre Sparkling first and now new packaging; and now bottled at the source 100% organic coconut water instead of the -- some concentrate model.

And now on Xing coming out the new Xing Craft Brew Collection, which compared to their peers at 20 grams, 21 grams of sugar or more, we have none.

So we're -- and these are in glass bottles called the Xing Craft Brew Collection and these elegant new flavors like hibiscus, honey blast and so.

Have we just changed the can on XingTea or done a little bit of sugar reduction or changed packaging?

You don't turn these businesses around or move them or stabilize in the right direction.

You have to do a lot of those things like we're doing.

So yes, those new products in the core franchises are really working and taking hold, and that is carrying along the entire franchises.

So I would say we're margining up within the individual brands.

And the new brands is what's bringing the new news and new life back into these cores.

Okay.

And then just the last question, because yes, I've seen some of the new packaging and stuff at Natural Products Expo last and it looks great.

So it looks like you're moving in the right direction there.

Just -- I know you want to believe it as upside, but the Health Science Division, I think, from my standpoint, looks like a big white space with a lot of opportunity, and PediaAde seems like a great product.

I was wondering if you could just talk a little bit about where that's at in terms of that launch and then also any comments on the n-Hanced Recovery product?

Great questions that I really don't want to answer, Anthony, but I'll give you a little bit of insight, because we'd rather talk about that once the revenue really materializes from that division.

But I would say, we just gained our first purchase order on n-Hanced Recovery last week, which we're really excited about.

n-Hanced Recovery is in the decision-making process with about 20 major hospital systems across the country.

And when I say major, I mean like Spectrum and Kaiser and Shriners and all of these major hospital systems.

And we're kind of 101 in that space.

So -- and that's particularly exciting.

And we have new things right behind that, including as you mentioned, PediaAde and the probiotics for that channel too.

So that's one thing.

But in addition to product, that's not enough.

We needed really the right distribution system to get there.

And so that's why we did the partnership with Dot Foods that has a strategic relationship with McKesson.

And they get to all the hospitals from a distribution standpoint.

So not only do we have the products that are -- that we believe will materially impact revenue, but probably not in a significant way in the first part of the year.

But we have the distribution system and the execution set that goes with what we think are going to be some breakthrough products for the firm.

Our next question is with Zack Hirsch with APG (sic) [AGP].

I was wondering, so now that you have this financing out of the way, what other hurdles do you see through the rest of the year?

Great question.

I do believe the financing is out of the way, but we've got to finish and close off the PNC credit facility.

And we spoke to those guys yesterday, so we've got a specific time line on -- in closing off that facility.

So that's the next thing we've got to do, because we really need a very serious big banking relationship.

And it's the proper kind of super-low cost of capital financing we want going forward.

So we still need to do that.

But I don't honestly see, Zack, any production, any competitor, any retail execution bottlenecks or roadblocks in front of us.

It really -- this is about execution.

And I think we have a very simple plan, and simple plans are always the easiest to execute.

But it really is execution in our own selves that is our only limiting factor.

If we execute well and we bring on the distribution, as committed by already these major distribution partners, and we get our new products out on time and we do the right things to drive the pull-through at the point of sale, which is all the in-store merchandising racks and coolers and shipper kind of activities, then we should be fine both on the top and bottom lines of the company.

So I think the only thing left on our way is, yes, let's close off the PNC loan and then let's just execute the business.

But there's nothing now stopping us, except for ourselves.

Great.

And then my next question is, you bought all these companies at really great values, most, if not all, under onetime sales.

They take some time to be integrated.

But when do you believe you'll see the true value of these brands really reflected and they'll reach their full potential?

Well, first off, from a value standpoint, the fact that we've taken out $14 million of costs from these businesses as a stand-alone and capture the real cost synergies, which some organizations do, but both InBevs that I know of, the big one and the little one, both are pretty dang good at capturing cost synergies.

So that's one measure of value.

The other measure of value in terms of really driving organic growth now on these platforms is probably what you were referring to, and I believe that we'll start to see that.

So our strategy isn't a whole bunch of innovation and new products.

Our strategy is in traditional retailers, take our existing core brands, Búcha, Xing, Marley and Coco-Libre, and innovate within those franchises.

That way you get all the awareness benefits and you get the -- already understanding trial and consideration benefits.

And you just bring new news to a brand that consumers that already know and like and are aware of.

So I think we'll start to see the real value of these brands, on the revenue side, accrue in 2018.

But I also don't think that there's any stopping thereafter.

It's why we bought these businesses.

We think Coco-Libre is a great brand.

We think Marley, with its 72 million Facebook followers, is a great brand.

Búcha, we think Kombucha is becoming a great brand.

And Xing, which actually means star in Chinese, also has the potential to become a great brand.

They just need to be marketed and connected with consumers.

With relevant propositions around these, this concept is healthier, better-for-you alternative.

So we're doing that with each one of these brands.

And I don't think it's just '18 that we start to see the value.

I think it's '18 and unlimited thereafter.

And I believe with what we're doing to do the lifting on these brands with the new products within these core franchises is the right, and frankly, the most cost-effective way to do it.

Our next question is with, [Kevin Barrett] with Bank of America.

Brent, congratulations on 2017.

I know you had to jump through a lot of hurdles this year, but doubling revenue is certainly nothing to sneeze at.

A couple of questions for you.

You ended the year at 29% margins.

When do you think it's feasible to start to see the climb towards 35%?

And then from there, what's the upside?

And then also, what is the upside or growth prospects on the distribution side, which I think that gets missed a lot by everybody?

But is there a plan in place to continue to grow the distribution business as well?

Good questions.

Just on the first part, you didn't ask on '17.

We appreciate the positive reflection on what we've done.

And we're positive on that too, but we know we can do so much more.

So we're just -- it's not success for us, [Kevin].

It is just a solid foundation and a new demarcation point.

So we are motivated to build on this platform, which we've had -- what we have so far.

And the progress in margin is really the key that everybody should be holding the company accountable for.

But to go from 16% 2 years ago to now 29% is commendable.

And the pathway to 35% really comes as all these new products set.

So I don't think you'll see much movement in Q1, frankly, but you'll see movement to 32%, 33% and just kind of linearly up to 35% throughout the rest of the year.

It really comes from the launch of these new products at these much higher margin levels.

And then as they become a bigger part of the mix, that just changes your blended margin and gets us to the 35% target for the year.

But that is all mix enhancement.

The upside to your question and how do we get to 40%, which is our next interim target after the 35% target this year, we get there through gross margin enhancement.

So yes, we'll get there also through mix.

But if we can get that and we can take $3 million or $4 million out of the business, which of course is the target for the guide, but it's not in our plan.

If we can take that out of the business this year through -- I don't want to give anything away, but let's just say, hypothetically sourcing with multi-billion dollar players of aluminum or sugar or citric on the raw material side, more integrated production, more integrated warehousing with some of the new partnerships that we've built.

Instead of having 3 consolidated warehouses, have 8 to further reduce shipping costs.

Those kinds of things from a cost of goods sold standpoint, there's million pieces of heavy lifting you have to do, but that can get us to 40% and above kind of gross margin, which is clearly, in our view, in sight, but probably won't be in sight in 2018.

On the distribution side of the business, I mean, those guys are good.

And to grow your business 9 years consecutively, even in the face of -- you used to distribute things like Vitaminwater and you lose it to Coke.

You used to distribute Monster and you lose that.

You used to distribute this last year, CORE water and you lose that to DPSG, now JAB.

So even in the face of obstacles, these guys just say, "Fine, it's just an obstacle.

I am still going to deliver now the 10th year of consecutive growth on the distribution side." What's great and what's unique about that part of the business for us is it throws off cash, and there's also some other benefits.

But those cash benefits that it throws off, we can use to fund a lot of our own growth and diversification.

And we do that, because it's still that 25% margin base business.

And that is just not go going to deliver the ultimate EBITDA margin that we want.

That being said, it is a great vehicle to optimize and maximize to really build the kind of a mix of business that we want, of which our distribution business is a very important strategic contributor.

So we like it.

It's a machine here in Colorado and surrounding areas.

We keep building on it and expanding to adjacent markets and expanding depth and breadth of the portfolio.

And the guys just do -- just -- I can't say enough of what a great leader runs that division, but also just what a superb job they do to enable us to be profitable as -- even though we're under $100 million and have the cash to at least generate some funds to self-expand and diversify.

Ladies and gentlemen, we have reached the end of our question-and-answer session as well as the New Age Beverage conference call.

Thank you, everybody.

Thank you.

Ladies and gentlemen, you may now disconnect your lines.

Thank you for your participation.