Newage Inc (NBEV) 2018 Q3 法說會逐字稿

Greetings, and welcome to the New Age Beverages Corporation Third Quarter Conference Call.

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

It is now my pleasure to introduce your host, Cody Slach, with Liolios Group.

Thank you.

Cody, you may begin.

Good afternoon, and thank you for joining New Age Beverage Corporation's Third Quarter 2018 Investor Conference Call.

I'm Cody Slach with Liolios, the Investor Relations counsel for New Age.

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

On today's call, we will have Brent Willis, CEO of New Age Beverages; and Greg Gould, CFO.

I'd like to remind everyone that this 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.

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

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

Greg?

Thank you, Cody.

I will go to the financial results and then hand the call back over to Brent.

For the 3 months ended September 30, 2018, the company delivered consolidated gross revenues of $15.3 million, a subsequent increase of 1% but down 9% versus prior year due to working capital constraints that affected New Age's ability to meet demand.

Subtracting discounts and buybacks, at the net revenue level, the company achieved $13.2 million versus $15 million in the prior year.

We believe sales were negatively impacted by approximately $5.8 million to $6.2 million due to working capital constraints, which severely constricted inventory levels and the company's ability to meet the demands of major distributors and retailers.

Without the inventory impact, we estimate that revenues would have been up more than 25% versus prior year.

In gross profit, net of shipping costs, the company delivered $2.2 million for the quarter, flat sequentially and down versus $5 million in the prior year.

Gross margin as a percentage of sales, excluding shipping, was 16% versus 33% in the prior year, reflective of the significant reduction in other logistic costs associated with the inventory issues.

Retail pricing is the same and actually slightly higher than prior year, and cost inputs are also in line.

So we believe the gross margin impact is short-term in nature and nothing fundamental has changed in our mix or pricing.

Total operating expenses for Q3 were $5.1 million, the same as Q2 2018 and up versus $4.4 million in the prior year.

The increase was driven by a number of noncash items, including increased amortization on the almost $20 million of intangible assets added to the balance sheet from our acquisitions and 11 patents added during the last 2 years.

It was also up due to our employee stock compensation plan, which helps us align our employees with shareholders and due to the rent expense following our sale leaseback executed last year.

Adjusted EBITDA for the quarter ending September 30, 2018, was negative $2.5 million, almost all attributed to the inventory shortfall, which affects all aspects of our operations, not just revenue, as one could see at the COGS and OpEx levels most notably.

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 [while] 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 3 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 that I want to make is that in our new business and our new channels, our short-term prospects were very promising.

And point three, I want to discuss some of our strategic growth opportunities that are becoming clearer and becoming more imminent, and we are focused on a few potentials that should just be fantastic and highly accretive for our shareholders.

So point one, what's the real health of our core brands?

Looking back, it is very hard to get a very clear picture because of the inventory situation.

Looking around, however, we have a lot of confidence in the core brands, and that confidence is supported by the increasing consumer pull-through.

If our brands, our core brands: Xing, Búcha, Marley and Coco-Libre were not doing so well, we would not be getting incremental merchandising, we would not be getting incremental displays, we would not be getting the new distribution on these brands that we're getting.

And to give you some insight from the front line, I'd like to ask Michael Cunningham, our Senior Vice President of Sales to give you some insight.

Mike?

Thanks, Brent.

Good afternoon, everyone.

I'm happy to review the brand performance in the quarter and throughout the year but more valuable is to provide all our investors with the real insight on the health of our brands.

What's going on at retail?

Well, where we have been in stock, our brands are growing, all of them, from a sales point, distribution standpoint and consumer offtake.

Our major merchandising initiatives, which we know has about a 450% incremental impact, were delayed in the year for financial reason and have just gone in across all Ahold Delhaize accounts on the East Coast and in Safeway on the West Coast.

So this would give us a nice life heading into the close of the year.

Just to give you some insight, retailers don't keep brands on the shelves if they don't pull through or sell.

In New Age's case, we keep getting new distribution.

It's because the brands are pulling through.

Most of our distribution we have gained has been through major regional retailers, independent, all within the traditional grocery and convenience segment.

New Age does not have one national account.

With our major retailers, regional retailers, we are also taking a critical mass approach in key markets.

In the beginning of the year, for example, we blanketed Boston, penetrating the Stop & Shop, Shaws, Hannaford's and Market Basket.

In Q2 we took on D.C. We gained penetration in Giant, Harris Teeter, Weis Markets and recently Safeway.

And in Q3, New York, which was brought as an opportunity on the last call, we have since penetrated Big Y, Wegmans, Hannaford, Stop & Shop, Whole Foods, and we're rolling out the King Kullen and Wakefern as we speak.

The approach gives us presence in the market, which we know supports brand preference and brand loyalty over time.

The brands performing the best are Búcha, which is leading its category in growth; Marley Mate, which is leading its segment; and Marley Cold Brew, which is also leading its segment in growth.

Now that we have history of movement and [selling] story, we're taking these insights to other retailers.

As a result, with regional retailers, we have picked up just over 10,000 new points of distribution that will be shipping in December of this year and January of next year.

We have another 40,000 points shipping in March for the late March, April resets.

And the minimum expectation on that new distribution from a revenue contribution standpoint is over $10 million for the company.

Now we're still waiting on 2 major pharmacy chains for their decision on national distribution and 3 major big-box operators for their decision, which we expect imminently.

On the major national accounts side, we do have one confirmed already, and we are -- have already started production for.

And that's Albertsons Safeway, which has a little over 3,000 stores nationally.

With one of our major product categories, we are now making their all-organics brand for them for first shipments before the end of the year.

As a result of producing this for them, creating special formulas for them and getting distribution, we've been able to get distribution as well on 2 of our core brands nationally.

A minimum expectation on that new distribution is, again, roughly over $10 million for the company.

So these are the kind of singles we're hitting.

But they all add up.

When you look at what we already know and have confirmed to our base of 2018, we know that in 2019, we won't have a fulfillment problem, which cost us around $15 million or so this year.

Right now, it looks -- things look like they're shaping up to be a pretty strong year on our core business in 2019.

Now I'm supposed to stop here as Brent didn't want me to do this because he didn't want to overshadow the focus on our core brands, but I have to bring this up.

We need to talk about CBDs.

I am personally leading the charge of all discussions on CBD for New Age.

Formally or informally, every retailer wants in.

Every retailer is talking with New Age Beverages.

Every retailer sees this as a whole new area of growth and profit in the functional health and wellness segment.

It further diversifies them away from declining carbonated soft drinks, and they see -- and I've heard this over and over again, they see New Age Beverages as one of the few and probably the only supplier that responsibly meets their need and can service them with quality, consistency and the safety they're looking for.

Now just in our first discussion over the last month, we have well overcommitments of more than well over 125,000 new points of distribution.

And this is just on the CBD-branded product, the CBD tea, CBD water and the CBD shot before even unveiling CBD in one of our core brands.

We don't know what the sales rate's going to be in the products for point of distribution because we just don't have enough history.

But as we roll this out, New Age has a tremendous opportunity to be the first on a national basis and establish our foothold and the first-mover advantage.

So with that said, I will now pass it back to Brent.

Thank you.

Thank you, Mike, and thank you for giving away our secrets on CBD.

On point two, our new channels and markets that I wanted to make on the call today.

In '18, we had to build our foundation components.

Because executionally, we have to focus on our core business and existing distribution, we just had to put those new initiatives on hold for most of the year.

So we focused on building the foundation of the teams and the systems and the products.

But now with the financial impediments out of the way, we can accelerate execution: in Foodservice, with our partner Dot Foods; in E-Commerce with our newly created site and image within New Age overall with the company and with Amazon and other major retailers on their e-tail sites, whether it's H-E-B.com, jet.com, walmart.com, target.com or others; and we can now accelerate with the health sciences division and the internationally in select focus markets.

I'd like to ask Craig Thibodeau, who leads our International business, but he's also been bringing leadership and support to our national accounts in the United States, to share some facts about what is happening in his area of responsibility.

Craig?

Thank you, Brent.

New Age -- and hi, everybody.

New Age is now in 15 countries and, in the quarter, expanded our portfolio into Korea, Argentina, Chile, Peru and, most recently, Honduras.

But I want to talk about Canada as a deep dive first though.

In the past 30 days, we have gained approval for further expansion in Loblaw's, our largest grocery retailer in Canada, across 3 of our other core brands.

So this one-stop strategy that is unique to New Age actually works.

We will now have 15 total SKUs in Loblaw's, for example, across Canada this year alone.

We have penetrated every single major grocery from Loblaw's to Sobey's to METRO and even Overwaitea on the West Coast and others.

We have penetrated every single convenience and gas outlet from Circle K, Couche-Tard to 7-Eleven to Shell and Parkland Fuel and many others.

And now major and drug pharmacy retailers are also coming into the fold.

We are now extremely well placed throughout the country with our portfolio, and now we will gain the full benefit that distribution by being fully in stock.

The other focus I want to mention is on national accounts in the U.S. that Brent has asked me to support to bring additional resources to bear on the opportunity.

He is not going to ask me to do something and me not score.

In the past 2 weeks, for example, I have met with the largest convenience store operator in the world and the largest overall retailer in the world.

First off, so you know, not every company gets an audience at these levels with these retailers, not every company and, frankly, not many companies.

So why is New Age getting these meetings and being asked to come in?

Well, like Mike mentioned, New Age brands are the ones driving category growth.

They're on trend.

We are innovating.

We're doing things that none of these retailers -- sorry, and we're doing new things.

One of these retailers even told me, and I quote, "We are not just going to work with Coke and Pepsi in these categories or in these functional healthy beverages.

They..." and I'll just omit what they said next.

As a result of the meetings for New Age with these 2 new major retailers.

Well, a big-box retailer for their April reset, they've committed to bring in 3 of New Age core brands, Búcha, Marley Mate and Marley Cold Brew, and are still considering a fourth.

That is big news.

With the convenience retailer, we have -- they have committed to bringing Marley Mate and Búcha to go in across all stores, and they've agreed to shelf our first Búcha multipack in their ambient healthy beverage set.

I talked about hitting singles with regional accounts but what -- and what he does is good.

These retailer commitments, however, are just absolute home runs in terms of impact and are just transformative for our core brands at New Age.

I'll now turn the call back to Brent.

Thanks, Craig.

Now all of our investors might ask how can you be so positive after, frankly, mixed results in the quarter?

And the answer is we can either dwell on the fact that we didn't have any money or inventory and further analyze that we didn't have any money or inventory and analyze its impact on revenue, margin and profit for the first 9 months or we can say that slowed us down and, as Greg said, is behind us now and, in my view, way behind us, in fact, with how much we have strengthened the balance sheet that Greg discussed in his portion of the call today.

And frankly, that strengthening of the balance sheet positions us well to address new opportunities.

This brings me to the last point, point three, that I want to discuss on the call today.

What specifically are those new opportunities?

So we briefly reviewed, number one opportunity, continued expansion of our DSD business in both depth and breadth of product offerings and market and channel penetration; number two, our core brands in existing retail distribution; number three, our core brands in new retail distribution; and number four, our core brands in new channels and new markets, as Craig briefly reviewed.

Number five, we also have, and can now invest in, channel expansion, including Foodservice, e-Commerce and, with our Health Sciences Division, the medical channel.

We have the whole health sciences portfolio including our Enhanced Recovery After Surgery beverage that debuted at the ERAS conference just last week now positioned for launch.

And on top of all of those things, we have the opportunity to be first in CBD with the launch of our CBD portfolio.

And finally, we have the next steps on our road map that we've made abundantly clear to those that really know the company, what we are going to do.

So not only do we have a solid base core business.

Unlike other, let's just say, Canada's positioned playing companies, we got a solid distribution, DSD Division and core brands business that, with the new accounts and new national business, that core business is looking more and more promising on a stand-alone basis.

We are just now scratching the surface of the national accounts.

And it's taken time, but this takes our core business to a very different level.

And that's before we're even talking about the impact of Foodservice, the Health Sciences Division and the CBD portfolio expanding through that national network.

So this is why we're genuinely fired up, enthusiastic, positive on all the prospects.

It's for the fact we can do math and we can count what these businesses represent in terms of revenue and distribution.

It is for a good and substantive reason.

In terms of other opportunities, look, here's the round numbers that we did on the balance sheet.

We went from $90 in the bank to $90 million in 90 days.

We targeted precision raises of specific amounts for specific purposes, and we believe we did so achieving the lowest cost of capital for our impending efforts.

Do we believe those actions will be accretive for shareholders?

Absolutely and significantly.

Are they transformative for the company or just incremental?

And we believe they are a step function, to a standard deviation change for the company.

Maybe the last question is, are they probable or are they possible?

And of course, the only answer to that is they are possible.

Because until they are done, signed, sealed and delivered, they are not probable or not done.

But we are focused on a few key opportunities and excited about what they will do for all of our shareholders and the value creation that we think that they represent.

And with that, I'd like to open it up to questions and pass it back to the operator.

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

I just want to start with the breakdown between brands and DSD.

What was the approximate split this quarter in terms of net revenues?

We have it.

It is in the Q, Anthony, in terms of the specifics with the guidance that I would say as part of that is -- it's fairly consistent and traditional with the previous quarters.

So there's no big movement.

The reason for no big movement is the inventory impact had the biggest piece on the brands business.

That's where we really had to slow down expansion and expand the growth of that business.

We don't have a choice because we're fulfilling existing, both our brands and partner brands, in our distribution division.

So there's really not much of a choice there.

That's where you have to prioritize the investment.

Greg, you have the specifics of the breakdown?

Yes.

The specifics with that is that the brands were $2.9 million in revenue for the quarter.

That's on a net basis.

And DSD were $10.4 million.

Okay.

And sort of following along on that, Brent, now that you have, obviously, the strong balance sheet, how -- where are you, I guess, in the process of rebuilding the inventory for the brands?

Should that be reflected partially in the fourth quarter, completely in the fourth quarter?

Or is it going to take a couple of quarters to completely rebuild that and rebuild some of the relationships with the customers?

Yes, it's a great question, Anthony.

The truth is, I mean, we got our money in the last week of August.

We ordered inventory right then to replenish what we needed to replenish.

And most of that inventory in the short term came in, in the last week of September.

So that's really why the quarter, if you're managing on a quarter-to-quarter basis, looks like what it does.

But in October, I -- our commitment was, look, let's just get back to growth and let's get back to cash flow profitability.

And that's why in October, it wasn't pipeline fill at all, but we had a fantastic October across the business, are generating cash now when we look at that.

And our total inventory and receivables are $16 million, $17 million going into October, and that number has only increased there.

So I, frankly, believe that we're fully replenished now.

But it would just be imprudent, we think, to make a determination of, all right, what's -- is it going to be another $15 million quarter or a $16 million quarter, a $20 million quarter in Q4?

So we just don't want to predict that because we're just, on the core brands, getting our feet back underneath us honestly.

But from an inventory standpoint, which was the short part of your question, we believe we're about fully replenished and getting back in the good graces with all of our retailers and suppliers.

Okay.

And then lastly on the brands, I know you've gone through a major repackaging, repositioning and marketing of all the brands.

Is that largely done, completely done?

And now that you have that mostly done with the inventory situation being resolved, is this the -- is this sort of the kickoff to move forward?

Or is there still some more repackaging positioning that needs to be done with some of the brands?

Yes.

So I never believed at repackaging works because I've done it 50 times in my career and never had an impact on sales.

But it's always what marketing people want to do, and it never works.

So in our view, you have to completely redo the brands we architected.

And which is why in Marley, for example, we didn't just repackage One Drop and Mellow Mood, we launched a brand-new organic Marley Mate product.

And that is actually, for the first time, because of that and Cold Brew, turned around that entire business after 5 years of decline.

Those -- that brand now, Marley, is now growing.

But the only 2 things that we've done on Marley is Marley Mate and Marley Cold Brew.

So next is changing the packaging, upgrading and improving the Mellow Mood and upgrading and improving the One Drop.

So there is still a little bit more work to do there.

But in it all, it's still flowing through.

So Xing Craft, which was our real update and strengthening of our Xing brand, is just rolling out now.

And frankly, I forgot to mention, but our Coco-Libre 1 liter that historically has been the leader in the multi-serve segment, we just picked up that nationally.

Our 1 liter Coco-Libre, in new more environmentally friendly packaging, we just picked up that nationally in Whole Foods.

So we're pretty excited about that and recuperating now that we're through with a much better product on Coco-Libre, a 30% improved margin, a product that is made at the source from young coastal coconuts and the expansion of our Coco-Libre Sparkling on top of that.

So it's not all behind us because we didn't have all the money to get it all behind us.

But there still are a few more things to do.

But for the most part, the portfolio is humming, and we're getting new distribution on that stuff in key retailers.

And as Cunningham mentioned, visibility, on already 50,000 new outlets and I believe just brand-new news over the past 2 weeks in terms of 2 of those, 1 major big-box retailer and 1 major convenience retailer.

So we haven't even calculated the production requirements for that.

But I would say, as it relates to this, which would be a germane question for me, is we do believe we have not just the working capital and the cash resources for our external growth opportunities but also all of our working capital requirements for 2019.

And just a quick last financial question, then I'll pass it on.

The mix shelf, is there any availability left on that?

Or has that been fully exhausted?

Right now, the shelf has been fully exhausted.

Yes, we canceled it.

Our next question is from Gene Song with Alpine Global.

You guys had mentioned just on the CBD side and, obviously, in the press release, you're talking about sort of production before the Christmas time in terms of the launch.

And you also just mentioned that -- sort of the buzz around it, every retailer wants it and sort of the 125,000 new points of distribution potentially.

Just curious -- and I know that this is obviously something that is down the road a bit, but just curious about the rollout in terms this market, clearly, not like any other market, it's state-by-state.

Is it something where your rollouts just in the adult use rec states or just actually in the medicinal states as well?

And do you need the farm bill to do that?

Like I know Heineken's got a product out in California, Lagunitas, I believe.

That's a THC, not even a CBD-infused beverage.

So I'm just curious around just sort of how you think about that initial rollout because you have national distribution, you have global distribution, you've got Canadian distribution where it's obviously legal, right, as well.

Great questions, Gene.

The answer -- the true answer is I don't know.

But I do think it's going to be complicated, and I do think it's going to not -- I don't think it's going to be linear in terms of the expansion.

So today, there's 14 states that we could execute it in.

But even within those 14 states, to ship across state lines, it's complicated.

It's made less complicated by the fact that the DEA is no longer classifying it as a Class 1 drug and now has it classified essentially the same as classified.

So that's positive.

But even when the farm bill passes and all of our insights, even with the Democratic House, is that it it's going to be -- and Sessions moving on, is that it is positive for the industry.

So it is going to happen.

But the reason it's hard to model and the reason we haven't modeled it on top of our core business yet is we don't know exactly when the farm bill is going to happen.

We don't know -- are we going to be able to do 14 states in -- at Christmas time?

Or is it going to open up, and we're going to be able to do more on top of that?

But what we want to do, and what we're doing with all the retailers, is be first and educate them.

Where does it go on the shelf, how to do it, how to communicate it to their consumers, how to communicate it to their stores?

So it should -- and I'd tell you, if you're a retailer in Mississippi, you don't know any of those answers.

If you're a retailer in Colorado, you know about 1/4 of those answers.

So we're positioning ourselves to be first, and we're positioning ourselves to be an authority in the category with the right dosage, safety and efficacy, which is why it's coming out from our Health Sciences Division.

We think it's going to be fantastic in North America.

But the other thing I'd tell you, too, Gene, is we think the opportunity in Asia Pacific is 100x of what it is in North America, so we're getting ready for some significant moves there also.

Brent, this is Craig, can I jump in for a second?

Please.

Gene, it's Craig Thibodeau, up in Canada.

Just wanted to clarify your point, CBD-infused beverages is not legal in Canada until October of 2019.

And THC-infused beverages won't be legal in Canada till probably about 2020.

Got you.

Okay.

I know that -- like I had mentioned, there was a brand that I was just thumbing through and bumped in -- that's obviously -- that's in -- on the shelves in California, one of your competitors.

So I think whether is Lagunitas, Gene, with their -- I think, it's like a hops-infused beverage, they actually...

Yes.

HifiHops, I believe, yes.

Similar to beer.

There's going to be thousands more out there and dozens more that will come out of the woodwork.

But what they don't have is what New Age does have, that we spent the hard work to build, which is all the distribution, all the retail relationships and, frankly, the science.

We've been studying this in our Health Sciences Division since inception.

And our doctors and our team are reputed -- are authorities in this space that have been studying even before they joined our team.

So we're taking a very medical, very serious approach.

We think we're working with some outstanding partners that also are taking a very credible approach on the cannabis supply side.

So we are enthusiastic about what it could bring.

But from a modeling standpoint, from a financial standpoint, there's just too many moving parts.

The next question comes from Kevin Barrett with Bank of England.

Brent, a couple of questions for you.

And you covered a little bit of them throughout the call.

But I think one of the things that a lot of us are curious about, at least the long-term investors that have been involved for quite a while and have taken some significant gain from the stock and are looking to rebuild our positions in the stock, how do you look at opportunities organically?

How do you handicap, I guess, the organic opportunities that the company has versus potential other opportunities, potential acquisitions or whatnot?

I mean you raised a lot of money over the last 90 days.

And the question I have is this, is this $90 million a significant number for a reason?

Or is there anything you can elaborate on regarding potential opportunities?

Kevin, those are very tricky questions.

And I want to try to evade the questions, frankly, if I could.

But -- so I'm going to try to toe the line without crossing the line, if I can.

So first on the organic stuff.

I mean we believe in the core business, we believe in the CBD on top of the core business, we believe in the Health Sciences Division.

So we got a lot of enthusiasm about what we do.

And the team is pretty good both on the marketing side, sales side and operations and support and execution side across all aspects of the business and getting stronger.

So that, on the core organic business, that -- I hate to say it, but it kind of pays for itself, we are not going to forward spend in marketing because there's just no guarantee of return from a marketing expenditure on that, and we don't see any use of the capital that we've gained for the base business.

That stuff has to pay its own way, needs to generate its own cash.

And spending on that core business at about a 10% of net sales level in marketing is what the core business generates today.

And it's got to pay its own way.

The -- and that's on the organic growth opportunities.

But I would -- just one other thing on the organic growth opportunities, aside from CBD, I mean, you're still up against $50 billion competitors, and you're competing in many of the traditional accounts and traditional retailers and channels.

And until some of these major accounts, like Craig mentioned, are starting to take positions with us and away from those companies that sell diabetes in a can, it is going to be a long slog.

But it is going to happen, and there is no leaving -- the train has left the station there.

But that's why we're pursuing all these alternative channels, all the e-Commerce stuff, all the medical channels, all the e-tail, all the foodservice.

And we think we've just got tremendous potential there.

That's on the organic side of the business.

On the external side, this is where it gets tricky because we did raise a specific amount of money, no more and no less, for 2 things.

One the working capital requirements for the foreseeable future on our core business and our CBD and health sciences businesses, so all the working capital requirements there, got plenty of wiggle room, and then also specific, targeted external growth opportunities whether those be alliances, distribution alliances or acquisitions.

So we think we've got some very accretive exciting things that are possible for the company that just don't happen the day before the earnings call.

So -- but we're geared to build value for shareholders.

Every single employee in this company, all 169 associates, are in the exact same position as shareholders trying to drive one thing, and that is equity appreciation and value for shareholders.

Every single person in the company is committed to it.

So we don't like dilution, we don't want dilution.

We've also recognized that as one component of an equation.

And market cap and value is the other component on the numerator side of that equation.

So we are here to drive equity appreciation for shareholders.

We are absolutely focused on it.

And we'll deliver that if we stay true to our purpose of building the world's leading healthy beverage company and execute on our business plan and the next steps in our road map, which are abundantly clearly laid out.

So that's about as much as I can evade and dodge your question, Kevin.

But I got to tell you, we are so motivated by what we see in front of the company and just an incredible position to be able to drive real value for everybody.

So nothing's going to get in our way.

Understood.

Got it.

Appreciate that.

And then just a little follow-up on Q4 since we're knee-deep in the middle of it now.

Do you -- and this may be a good question for Greg, but do you have a ballpark number of what's the breakeven number for the company?

I feel like it used to be in that $5.5 million to $6 million a month range, and I know there's a lot of factors that go into that.

But from a breakeven standpoint, does that seem about right?

And then now that the capital situation is what it is, do you foresee margins starting to normalize?

And do you guys have the scale necessary to do what you want to do?

Yes, I can take that.

This is Greg.

So then where we currently model the company out, we think that we'd get right around breakeven once we get about $6 million a month.

We do see with the extra capital we brought in that there are some things we can do to streamline our production and to streamline the entire company that we should be able to get some cost savings from as well.

So those are all things we're looking at.

But the first big goal is to get up above $6 million a month and start consistently hitting a place where we're consistently making profit.

Perfect, okay.

Good luck in Q4 and moving forward.

And I think like most others out there, we're excited for the growth and all these other endeavors you got your hands in.

Thank you, Kevin.

Thanks.

So the next question is from John Harrell from Harrell & Associates.

I just got a question about the Marley brand.

I understand that New Age has the worldwide rights to the Marley brand for all nonalcoholic and ready-to-drink beverages but Tilray has the Marley rights to all things cannabis-related.

So wouldn't it make sense for them to seek out some sort of partnership with New Age, especially in their infancy and their light revenues in -- compared to their enormous market cap?

I'm speechless, John, because I want to evade this question also.

Yes, one could say it sure makes sense for them strategically, I could argue.

Look, they're a great company.

And I think they've got, what, $10 billion or $20 billion market cap for a reason.

And they have great leadership at that company, and they're fast but methodical and aggressive.

We really like the people, what they stand for and their approach.

And you're right, they do have the rights to Marley and all things cannabis.

And we got Marley in ready-to-drink beverages.

So what we're -- where New Age is different is we got an execution system where we can engender and drive revenues.

So on paper, it makes sense, but that is -- and we like them and respect them.

And I'll just leave it at that.

Have you had any discussions with them at all?

Well, we have discussions with lots of different people, lots of different players, even strategics on the distribution side, whether it's pharma, nonalcoholic beverages, alcoholic beverages or even spirits companies, so -- and now cannabis companies.

So we, to be fully transparent, are in lots of conversations with lots of these guys, but we're focused on executing our business plan.

We're now fully funded for the -- yes, as you would know, John, because you've been around with us even before we bought Xing.

For the first time ever in the history, the company's fully funded to be able to, as Greg mentioned, go on offense and execute our business plan and transform the company.

As you know, we didn't come here to build a $100 million firm or a $300 million market cap firm or a $10 stock.

We came here to build something special for consumers, inspiring, educating and then not selling diabetes in a can.

We came here to build the world's leading healthy beverage company, and nothing is linear in that progress.

But now with the funding that we have, there's -- we just don't see anything in our way to driving tremendous value for shareholders.

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.

So the answer is yes.

Thank you, everybody.

Appreciate the time on the call today and appreciate your allegiance to supporting what we're trying to do at New Age.

We're all in the same boat.

We are absolutely committed to driving value for everybody here.

And it's a mixed quarter, but we are really excited about what we have in front of us because all of those issues that led to a mixed quarter are fully in the rearview mirror and we believe don't even ever need to discuss or think about again because we have so many good things in front of us.

Thank you, everybody, for the time.

Thank you.

This concludes today's teleconference.

You may disconnect your lines at this time.

Thank you for your participation, and have a pleasant day.