NewAge Inc (fka NBEVQ) (NBEVQ)

[srg4444]

Sorry to interject, but I think bulls/bears have a tendency to look at the stock price to justify (rightly and wrongly) their thesis which leads to dangerous confirmation bias. So let's take a big step back and see where we are TODAY (not yesterday when stock was at $7, or $1 like some got in, etc) and state some facts:

1) Today, at ~$2.60/share, the market cap is ~$90MM, and EV approx the same. Based on trailing revenue, it's trading at 1.8x LTM revenue of $50MM, but last quarter only included 13 Days of Coco Libre. We all know the right comps, and what the industry trades on, but the reality is there isn't a great comparable. LTEA, REED probably closest but most forget NBEV's business is 40% DSD--which is pretty stable (but certainly not worth a high-growth multiple).

2) Using '17 Street estimates of $62MM revenue (note, only 1 quarter of Coco and 2 quarters of Marley), NBEV trades at ~1.5x. Again, facts. Based on this wk's press release where results are "expected to deliver operating performance above expectations for the year" I think it's fair $62MM is reasonable. If we normalize for Coco and Marley (excluding new products released this year, it's about $68-74 MM conservativel. This can be debated--but we have a decent triangulation to think Marley does conservatively $6MM (ex Matte) and Coco does $8+ (again conservative). We could debate the $80 MM run-rate, but I would argue at today's price it's really not worth discussing. Stock is not trading here bc people think $80MM is possible. Also worth reminding Q4 is seasonally weak (q2/q3 is 28/29% vs. Q1/Q4 of 21/22%.

3) Based on press releases and earnings calls, since Q3 end we have i) expanding distribution of Bucha in Canada including Loblaw's and 7-11 and US with Kroger, Ahold, etc; ii) Xing entered 1500 7-11's in US; iii) Marley Matte started end of August distribution; iv) Aspen Pure getting traction with 2K Ahold stores announced with more on the come (rumored and said on calls); and v) new products launched/about to be launched (i.e. Pedia which is call option, Enhanced Recovery (another long shot) and Coco products (sparkling, etc). At best case, this "stacks" onto the existing business. At worst case, this replaces lost revenue. Seems rather conservative to assume next year will better than this.

4) We can certainly debate sell-through--but the reality is that no one knows for sure. I think the bears are missing that based on the next 6-12 months, it's more about how many doors you get in, especially in short term. And the bulls are missing that after 12 months, it's about how many doors you stay in, which is definitely about creating products that consumers "pull" and love. Both bulls and bears could be proven right (and wrong) on these points.

4) Gross margin 3 year target of 40% (which is expected to be achieved sooner) is really something to watch and keep mgmt honest. The operating initiatives, cost takeouts, new products, and frankly mix (i.e. new products have much higher margins than DSD) "should" increase margins--this is clearly very important. Why important? Because it will allow company to reinvest in the brands. 10 margin points on $70MM of revenue is nearly 2-3x the marketing spend of most beverage companies <$30 MM. It matters.

5) Credibility of Brent. Here's where I disagree with many, and I've known (or of him) for a very long time and have done a ton of work on this. Yes, he's had some recent failures. I was an investor in Cott after Brent, I would tell you candidly his strategy was ultimately the right one but frankly way too early and put too much stress on the organization (and Walmart). Just look at Cott today--they literally did everything on his roadmap--just took 10 years!--including recently selling it's CSD biz to Refresco this year. I would caution the bears to figure out why the other recent startups (eCig) blew up...if anything, one needs to ask WHY he went to/started these companies which I can't argue with. I think it's very safe to say that most $50MM beverage companies don't have the bandwidth/experience of this CEO. He's made mistakes--no doubt--but show me another CEO of small bevco who hasn't (i.e. LTEA, REED, etc). This biz is hard. Is he overly promotional? At times. Is he trying to make people think NBEV is the next Tesla? Probably. But I don't think it's fair to knock a man down who has a clear vision and purpose. Ask anyone who works for him and it's clear.

6) When this relisted, bulls were screaming this should be worth $10+ based on reasonable 2-3x multiple over revenue of 2-3 years. Go back to your notes.

7) Similarly, bears (https://seekingalpha.com/article/4101733-new-age-beverages-corporation-definitely-bet-horse) seemed to imply it was worth $2-3/share. Go back to your notes. We are here obviously.

8) Insider Selling: Bears and rumor mongers are claiming the selling is from insiders who own 60% of the stock. Bears, go back to the Coco 8-K asset-sale agreement. It's very clear how much they can sell and when--and of course since they are insiders and material owners, we would surely get a filing (which we haven't). All we do know is that a recent Board Member was recently buying in mid $3s.

9) Shelf/Dilution: Bears are arguing we're going to see another capital raise. I think this is a very legitimate concern. But I think it goes without saying that mgmt "should" be smart enough to know not to do a deal at this stock price. Plus, I think mgmt and Board have heard from enough shareholders that they have to "earn" the right to acquire--and there are simply too many unanswered questions about Marley, Coco, and PMC to prove that they are good capital allocators.


These are the high-level facts from where I sit.

Of course, do your own due diligence and definitely not recommending anyone buy or sell based on above, but I think both the bears and the bulls really need to re-underwrite what they are short (bears) and own (bulls).