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"NBEV Deal ?, definitive agreement to purchase Brands (BWR) has been reach now for undisclosed Amount, but believed to be paid 1 x less than revenues with a portion stock . "
Actually they paid about 1/3 of revenues.
And they guided EBITDA 0f $15M in 2019, backloaded in the second half.
I think that the current headwinds are of a temporary nature; therefore, overdone from a risk reward perspective. These headwinds are the likely delay of FDA CBD approval, at least compared to perceptions a week ago, and uncertainty for Morinda in China. But CBD beverages, at least in the US, were not part of guidance, and they did announce $600K of noni + collagen sales in three days in China, so that headwind is at least mitigated, maybe over.
Their Q3 guidance will be very telling. I think they are trying to under promise and over deliver -- versus a history of the opposite. Unfortunately, the $320M may be difficult, unless national distribution (Walmart. 7- Eleven, Hudson, others they said were "big" and would be announced shortly after the last conference call) really show up in the top lines in the second half.
On the positive side, the latest acquisition should add $10M +/- in revenue in the second half, depending on when it closes. And it will add distribution channels to their "omni-channel plan, presumably adding revenue synergy. Also, CBD products can likely begin sales in Japan in the not too distant future; likewise, some states are ahead of the FDA, including New York.
Sorry, should have made a new post; didn't mean to imply you meant NBEV was acquiring brands.
This acquisition is small. NBEV is not acquiring Illy brands or any other. That is a ridiculous interpretation.
It is acquiring Brands Within Reach, which has licensing and distribution rights to Illy Ready to Drink Coffee (not all Illy products) and a lot of other companies' brands. We don't know how extensive these rights are, nor what incremental revenue is being added. In any case, it is basically an addition to New Age's distribution business and does add diversity and strength, as well as a breadth to New Age's "omni-channel" approach, as they can add their own products to existing new distribution over time (presumably).
I imagine there will be a filing shortly explaining the terms.
If it does indeed "add to (NBEV's) bottom line profitability." it is a good thing. Even if it isn't accretive immediately, it's probably still a modest positive, because likely there are cost and revenue synergies to be worked into the combined distribution, as they say.
It's a good thing. But it feels to me that when NBEV issues press releases that are easily misinterpreted (albeit by overly optimistic retail investors), it fosters more selling than buying because it winds up promoting a pump image, something the company no longer needs to do. It is similar to announcing national distribution at Walmart without saying the number of stores or SKUs or projected path.
You do not have to produce profits for the share price to increase. Witness Tesla or Amazon, and more relevantly, pretty much all early stage companies.
NBEV is a completely different company than before Morinda. They are now bankable; their revenue is about 5x what it was; they are now producing positive EBITDA; they have new channels to sell products through, including and beyond Morinda; they have quite ample cash balances and liquidity; they have$60M of incremental CBD business, once regulatory hurdles abate (foreign markets beforehand).
I agree that they do have to produce profits at some point, but if revenue and market shares are increasing throughout 2019 and into 2020, I think the share price can easily move up without profits.
It can really move up in 2020 and 2021 I think, if/when they are producing increasing net income.
Connecting some dots, seems the company wants to go big or go home.
They have unprecedented liquidity in cash, bolstered by the recent building sale. They have a new credit line with a reputable bank. And still they filed the shelf offering for $200M.
They announced relationships with 7-11 and Walmart, mentioning "national," but also "participating stores' and no mention of number of outlets nor potential revenue. They also pointed out that both deals will be supported by NBEV marketing.
They bought Morinda, and subsequently lowered the 2019 EBITDA guidance from $20M to $15M.
They established relationships with bigger players and have orders for $60M in CBD beverages and shots, while also launching CBD cosmetics through Morinda,
They almost doubled the size of their Denver facility.
Net, net, I think they want to establish true national chain distribution by testing products at no profit in order to gain share and credibility as a means to launch other beverages and CBD products with greater scale, potentially with enough greater scale to tap the sources of capital they opened.
They will never need $200M beyond what they have for these purposes; to me, the size of the shelf provides flexibility, including for an acquisition. If you don't like the S-3, you should sell the stock, because likely it will be in effect for a long time.
Morinda allows them to "overspend" on their own beverages and still show overall positive EBITDA. I think the metric to watch for 2019 is beverage revenue, not profits. If the ramp is steep, as they are surely gunning for, and if the CBD orders come through as announced (sometime in 2019), plenty of profits will come in 2020-2021.
If they execute well, marvelous strategy; if not, not so much.
Q1 results will lend a first, relatively small glimpse of performance: whether or not they meet or beat $60M guidance, but more importantly, any traction with in-house beverages. They've just begun so it's unreasonable to expect too much. New guidance may shed more light, and Q2 results more so, hopefully with Q3 and updated full year guidance.
And exactly way is an at the market shelf offering a bad thing for a company?
NBEV is simply giving itself a mechanism -- along with announced debt facilities -- to raise capital if and when needed. The possibility that it may need $50M in the future for inventory and marketing or for an acquisition tells you how far the company's come from when they were forced to do below market share offerings for fractions of this amount.
The fear of dilution comes from forced below market offerings done from a defensive position. In that case they dilute both % of share ownership and more importantly earnings per share. When new capital is deployed well -- and that's the only reason to raise new capital, if not vitally needed -- then eps is improved; it is accretive to value.
This is how all small companies that become large companies become large companies.
"no more inability to fill orders that had plagued them in the past due to insufficient funding."
And they may well be in the opposite position. Instead of single digit millions in cash and getting turned down by PNC -- forcing dreadful share issuance -- now they have $69M in cash, including a $15M loan plus a $10M credit line from an equal or superior lender at a better interest rate. And they've filed a shelf offering,
The shelf offering gives them the option to raise more capital quickly if and when they need it. They can choose an opportune time., meaning when the share price is higher, because it on't be forced. An acquisition may be one reason for the shelf.
But another may be that they are making sure they don't have inventory shortfalls in the future, even if their most optimistic projected order volume comes through. They have $60M in CBD orders that they don't know when inventory will need to be accumulated. And they have Hudson and Walmart, who may take longer to pay than they are used to. They may simply be preparing the ability to fulfill orders and reorders of dramatically increased volume, should they take off even beyond what we (or they) can surmise based on information to date.
Good post.
What also gets less credit than is do, imo, is the synergies between products, platforms, geographies, and dramatically boosted balance sheet.
The registration statement doesn't do anything. Using it, if they do, will indeed dilute existing shareholders' % interest in the company. This is most how all small companies grow, especially silicon valley companies. This does not mean that issuing shares will be dilutive to earnings.
I suppose days like today are predictable when a board's biggest short uses the handle, "run4cover."
A shelf offering does not have to be bad. It can simply gain flexibility. Or it can signal an acquisition coming,. It does not necessarily mean dilution to price to book nor earnings per share. Morinda was highly accretive.
The conference call is coming more into focus. The imminent news is out with four positive announcements: loan and credit line from a major institution at competitive rates, $12+M cash from building sale, Hudson, and Walmart, and a fifth that looks to prove positive as well (shelf offering).
Can only assume there is more to come.
The 2019 EBITDA guidance allowed for leeway for marketing OpEx, which was reinforced in today's announcement. This makes perfect sense, as Marley Mate's successful introduction is likely crucial to Walmart taking on more products.
Too bad we can't get the short interest figure more frequently, because with days like today, the days to cover is <1. Action appears that while a whole mess of shorts have covered, other haters may have taken new positions.
In the longer term, I think the shares will act inversely to the CEO's over exuberance, which was toned down on the last call, imo, for him. Next up is beating guidance. I felt that guidance was conservative, a 180 degree departure for the CEO. We'll see. Q1 will be reported in just one month, and if like the last call, Q2 guidance will be given, this time including Walmart and Hudson.
They just had a PR.
Maybe you can elaborate on the other "goodies" in the 10-K that you think might generate another.
During the call, he CEO did imply an "imminent" announcement. Then again, historically, he can get a bit out over his skies. I don't recall the reference point, but I have the impression it might concern a new national account.
There was also no discussion on the call of the new surgery recovery product.
Please share the goodies.
I read the report, and thought it was fine, pretty much as expected with the $12M cash boost a definite positive. I do wonder why they've taken out a loan now, given they seem to have ample cash, although perhaps they are readying the ability to carry significantly higher inventories with a true launch of CBD products.
You're right.
"In connection with this transaction, we repaid the $2.9 million mortgage on the building, cancelled the related interest rate swap agreement, and we are obligated to pay $25.0 million to the former stockholders of Morinda to eliminate the contingent financing liability incurred under the business combination. After these payments, income taxes, post-closing repair obligations, and transaction costs, the net proceeds from the sale leaseback are expected to be between $9.0 million and $12.0 million."
During the call, they presented this as a possibility. The company is really enhancing its liquidity. $42M cash, + another $15M in today's announced loan + this $10M +/-, and another $10M credit line.
They are willing to take on expense in the form of interest payments and rent in exchange for cash. Another acquisition coming???
"PLUS.$NBEV.Will.Net.An.Additional.$9.To.$12.Mil.From.Selling.Japan.Building.EOM "
Where.did,you.get that?, Was.not.on.the.call.EOM.
My impression was that the CEO was more cautious on the call than he has been in the past, though not to be confused with dropping his promotional nature entirely. I see this as a promising sign.
Confidence is good; coming through is better.
The guidance called for revenue of $60M in Q1, which means an average of $86.67M in each of the next 3 quarters, likely meaning >$100M in Q4.
I don't know about profitability in Q1 which will be reported relatively soon, but I'd at least expect guiding Q2 profitability at that time. If they fall short in Q1., I'd expect a relatively narrow miss.
He mentioned that the core NBEV brands need to scale to $50M to contribute positively to earnings. They are almost surely not going to reach that run rate in Q1. He did also mention an imminent announcement; guessing that may name a tier one national customer, which still likely would not derive new revenue until Q2.
The reported EBIDTA loss you cite was for the full year, not Q4.
The currently profitable business, Morinda, was included in Q4 for only one week, For the first quarter, it will be included for all 13 weeks. In addition, the acquisition costs in the Q5 numbers will not be present, and we'll see how the core NBEV beverage brands fare without the inventory problems.
In no universe does NBEV have a cash concern, as you falsely claim.
This is no longer a company that faces equity raises; at least not ones forced by cash levels and cash flow. Like they stress, NBEV is a VERY different company in 2019 than 2018: 6x revenue, positive EBITDA, global, new distribution and distribution modalities, national accounts, many new products, the most promising of which have $60M in advance contracts not counted in 2019 guidance.
"I assume there will be earnings on Wednesday..."
No. Due by April 1.
"If so, and if they are, in my opinion good?"
NBEV will report annual earnings, before any meaningful revenue from CBD or Morinda. Conference call and any possible discussion of Q1 performance or guidance will be much more important. They generally aren't shy about such discussion; also, generally aren't exactly right.
The filing deadline for the annual 10-K is 90 days after the end of the period. NBEV fiscal year ended 12/31, so the deadline to report is 4/1.
https://www.securexfilings.com/sec-deadlines/#EDGAR_Filing_Deadlines_for_Quarterly_and_Annual_Reports
This report will have little to no revenue from CBD products, nor any from Morinda products.
The conference call is anther story.
You're right; I'll listen to the replay when it's on the web site. All I was saying is that announcing an announcement isn't a very good way to break news.
In earlier calls, BW stated Asia will have 100x the CBD demand, not 2x.
$250 * 15,000 outlets = $3.75M. Did you mean $2,500?
I've been long and will remain long.
IMO the stock is down today for two reasons. First it closed yesterday up 15% from Friday's close.
And second, the news wasn't as good as what could be expected from yesterday's announcement that an announcement would be made today. We already knew 125,000 points of distribution. This was a typical BW bush league move, easily interpretable as unneeded hype.
I've never seen a company announce that there will be an announcement.
The company would have been better off press releasing today's news yesterday, and saying there would be a conference call with Q & A today.
That said, NBEV is moving forward nicely with its CBD initiative (as already known).
Just curious.
Has anyone seen any company officially announce that they going to announce something.
Where have they or any source said anything about Mexico?
Merry Christmas to all
Bigjohn,
What deal?
" New Age continues to secure major national retail distribution on its key brands"
Somewhat odd to put this line in the press release, instead of a separate press release. This is potentially the biggest news put out. Or, maybe not.
They continue to handle communication oddly, imo.
Thank you, Nostrdamus.
Weekly options now being traded.
Then he should take it down himself, when three people say it's drivel.
It's also outdated and ungrammatical.
It's probably a good idea to remove all stickies that are 3 months old. If you can't get a better, more relevant post in three months, might as well not have a board.
While I'm venting, how about moderators remove posts that add no value; the one that clutter the board like. "I flipped this today, yahoo."
There's a lot to look forward to if you're long, and if what Mr. Willis says or indicates bears out:
1) A partnership with a supplier.
2) Immediate cost synergies incorporating Morinda; obvious revenue synergies
3) Announcements of new points of distribution including a big box and/or other new national retailer(s)
4) Cash flow positive Q4
5) >$350M revenue in 2019, with $20M EBITDA boost from Morinda
The deal does indeed seems transformational. There will be no more equity raises, as the Company will no longer bleed cash, and it has adequate cash and inventory to support solid growth, while increasing working capital over time. If growth opportunities beyond expectations arise, they are in a much better position to use new debt.
Does anyone really see any downsides to this deal. Who cares if Morida is an MLM outfit? Characterizing it a a Dollar Shave eCommerce, subscription model is apt. It's a ready made suitable distribution channel for the CBD products, likely with quite impressive margins. And it's Asia based; a platform they could not have developed organically for years. They didn't have years, because CBD is a new product category and they are perched well to capitalize.
So, I am surprised that yesterday's gains were given back; but, assuming execution, a lot of positives appear on the horizon, with financial results lagging just a quarter for each, While adding accretive finances and growth, as compared to anytime in its history, NBEV has de-risked itself from a balance sheet perspective, and from any operational shortfalls.
NBEV is a better buy now than any time in its history; at least any time its been over $2.00, imo.
"Spending $75M cash is not maximizing capital when you have $80M"
Try to get it right.
"Merger creates the 40th largest non-alcoholic beverage company in the
world with $300 million in net revenue, $20 million in adjusted EBITDA,
$200 million in assets, no debt, and $40 million in cash and working
capital"
So they spent net $50M and bought:
1) Annual EBITDA of $20M (that's a 40% EBITDA return)
2) A very large incremental, international platform for their products; notably, CBD and Radiation Recovery in China, Japan, and Korea.
Guess the question is: if they can sell $200M in Noni juice, how much CBD can they sell?
At 4x EBITDA, and with obvious synergies, how is this not a home run???
New Age is suddenly on firm financial footing in terms of profitability, still retains adequate cash for working capital, and rocket launches distribution for the health sciences products.
Interesting how BW answered some of the questions on the last call, particularly about partnerships, acquisitions, and the amount of their cash raises.
Q4 could be an inflection point of a sort. They quantified the amount of lost business in Q3 due to the cash crunch/lack of inventory. They also said that problem was behind them, and they said that revenue of ~$6M/mo. is break even. So, all they have to do to break even is what they said they'd do in Q3 without the drag. And they mentioned incremental new revenue starting in Q4. So, Q4 being the first profitable quarter will surely be a milestone.
But that's really just a jumping off point, as the new products and the full distribution reach -- not to mention possible/probable new national big box retailers and international expansion should begin to show results in Q1 2019, growing thereafter with good reception. Of course talk is cheap, and money isn't. But from what they said, from so many possible opportunities, I'd expect a few to a slew of positive announcements in the coming months.
They mentioned hitting singles in the near term, representing incremental $10M in revenue. They also mentioned swinging for home runs, without mentioning financial impact. Stay tuned I suppose.
I do not think they will be bought out in 2019; quite the opposite.
Willis said they are in lots of discussions, leaving open whether about distribution deals, partnerships, or acquisitions. He was cagey enough to believe that something is brewing, as he said the $90M cash was a number selected for a reason. They are a much more viable partner now, especially if a partnership will greatly accelerate a roll out; for instance, for CBD.
I don't think they'd entertain a buy out before revenue hits ~$200M, which is very far of in beverage sales, but MAYBE not so far off in time, if things break right.
And going very well, as compared to past calls, with more detail from more executives; albeit, most all forward looking and somewhat dependent on distribution deals closings.
Thank you for a well reasoned post.
Which makes this an opportune time to get long, imo, for several reasons.
There's unlikely to be another Willis "disaster" in the near term; certainly, not another equity raise, nor financing mess up.
We knew there would be this raise coming, as it does indeed provide the company a whole lot more flexibility, especially if they are in position for large launches, supported by marketing.
The problem with this raise is that it was a low price, likely because it's premature imo. The price is not that surprising; of course it will be at a discount to market, particularly a market price that isn't (yet??) supported by its balance sheet. The "good" news is that the share price now is at the "discounted level,' which I believe provides something of a put not too far below these levels, as long as the company doesn't mess up operations.
After this dilution is absorbed and understood, which should begin next week, concentration will be on the future, the main components/catalysts of which are: fully funded balance sheet, guided profitability in Q4, and significant ramps for NHanced and CBD products in (early?) 2019, pus intermittent marijuana stock mania.
I seem to recall them saying PediaAde will be delayed to concentrate on existing core brands,and introduce NHanced plus CBD first.
However CBD products are also not on the web site, maybe because they are not available for eCommerce now.
I was surprised NHanced retails for $9 for 12 ounces. But if it works, shortens or otherwise aids recovery from surgery, no one will balk at the price, especially when hospitals charge $9 for an aspirin pill.
As far as I know, there's no competition. So, does seem like an awful lot of potential.
Noticed 'NHANCED is available:
https://newagebev.com/uncategorized/nhanced-recovery/
4 packs of 12 oz. cans are $35. Seems this a mistake? If not, and hospitals buy in ...
Agree with your post.
Of course, the Q3 results won't "deodorize" the hype, because the hype could not possibly show results in Q3, and minimal in Q4.
But there are plenty of scenarios in the results and conference call that may well be bullish:
1) Growth in the non-CBD product lines
2) Reiteration that Q4 will be profitable
3) Positive reception/launch of Enhaced Recovery line
4) Characterization of CBD partnerships, initial sales, projected ramp, etc.
They already announced 110,000 points of distribution for CBD. If this ramp were to start in March, using average beverage sell through, this would add $21M to 2019 sales. But if the reception were a reasonable expectation 50% greater than average, ad they sign deals to double the points of distribution to 220,000, then you're talking adding $63M to 2019 revenue. One could argue that those incremental sales, over time, would add the current market cap to the market cap.
Another reasonable bet is that Wilis will not be shy about his optimism. The question will be what actual names and numbers he shares.
Or, maybe an announcement is coming ... could be one of their fluff PRs, but more likely would be material, since they report in about two weeks.