New Age: Morinda Merger Fuels Triple Digit Q1 Growth

After spending much of last year restructuring and rebranding its beverage product portfolio — alongside a December merger with CPG wellness company Morinda — New Age Beverages Corporation reported triple-digit growth in the first quarter of this year, according to an earnings report released Friday.

Denver-based New Age ended the first quarter on March 31 with $60.5 million in gross revenues — up from just $12.8 million last year for a total increase of $47.7 million. Net revenue was up 404% from last year at $58.3 million, nearly matching the company’s full year 2018 revenue of $59 million.

New Age also reported gross profits of $38.5 million for the quarter, versus $2.6 million in the first quarter of 2018 — a 1,381% increase. As a percentage of sales, gross margin was 66% compared to 23% in 2018. Total operating expenses were $47.1 million, which the company said increased following the Morinda acquisition. Net losses were down to $1.6 million, compared to $2.7 million last year. Cash flow increased to $11.4 million, compared to a $0.1 million loss last year. Total assets increased 22% to $349.5 million, with the company reporting $110 million in cash on hand.

“I’ve always said we have never come here and we never did come here to build a $5, $10 or $20 stock, or a successful small beverage company, and in this sector anything less than $1 billion is small,” said New Age CEO Brent Willis in a call with investors and analysts on Friday. “We have very different aspirations and this is why everything we have ever done is strategic and is a building block for where we are headed first on our initial road map, and now on our new road map.”

According to Willis, the Morinda acquisition helped to improve overall profitability and cash flow for New Age in the quarter, adding that the integration gave the company “the platform and the world class people to drive all of our growth initiatives through.”

According to Chief Financial & Administrative Officer Greg Gould, kombucha brand Bucha led organic growth in New Age’s core beverage portfolio, followed by coffee, tea, and yerba mate brand Marley. Both brands recently gained nationwide distribution in 7-Eleven and Walmart stores. According to Willis, the brands are performing ahead of expectations in Walmart, where pull through is 4.7 units per week.

Willis said the company grew total points of distribution for its beverage products to about 300,000 so far this year, an increase from about 200,000 points of distribution last year. He said New Age anticipates beverage revenues will reach $20 million in 2019, noting that the portfolio — which also includes Xing Tea, Coco Libre, and WATERisLIFE — is only just receiving nationwide distribution. While the company is “still in the first mile of getting these brands out there,” Willis said that they are a “linchpin” of the company’s international growth strategy.

“I don’t really draw any conclusions between Q4 and Q1 on the New Age side of the business,” Willis told analysts during the Q&A portion of the call. “I don’t think there’s any news there aside from we’re getting the national accounts now. And it’s not just the first two that we mentioned and it’s not just on Bucha and Marley. It’s really across the board on the portfolio as we make just basic execution stuff in the brands division across national accounts.”

New Age is also expanding its direct store distribution business. Having expanded into a new distribution facility twice the size of its previous location, the company currently distributes more than 900 individual SKUs from its partner brands, up from 600 last year. Operations have also expanded in “neighboring states and in harder-to-reach distribution locations throughout Colorado,” Willis added.

In recent months, New Age has made hemp-derived cannabidiol (CBD) a centerpiece of its long-term growth strategy. In April, Morinda launched a line of CBD lotions, topicals, and creams. Willis said New Age plans to make an announcement about its anticipated CBD beverage products following scheduled FDA hearings on the use of CBD in food and beverage at the end of this month. Last year, the company previewed a line of CBD beverage brands including CBD Tea, CBD WTR, and CBD Shot by New Age during the National Association of Convenience Stores (NACS) show in October. In January, the company announced it would launch a line of CBD-infused relaxation drinks under the Marley brand.

Responding to an analyst question, Willis said that in the U.S., New Age has received more than $50 million in pre-orders for its CBD beverages. Between its beverages and its Morinda products, Willis predicted the company’s CBD business could exceed $100 million in the next 18 months.

“If I look both between 2019 and 2020, this is going to happen,” Willis said. “It’s not a question of if, it’s a question of when and how fast.”