NBEV NewAge Inc

NewAge, Inc. (Nasdaq: NBEV), the Colorado-based direct-to-consumer (D2C) organic and healthy products company, today announced financial results for the third quarter of 2021.

Third Quarter 2021 Highlights
	-	Net revenue increased 59% to $100 million compared to $63 million in the third quarter of 2020
	-	Gross profit was $66 million compared to $37 million in the prior year third quarter, an increase of $29 million
	-	Gross margin reached 66.3% of net revenue compared to 59.8% of revenue in the prior year third quarter, up 6.5 points
	-	Net income improved $11.4 million to ($2.7) million, or ($0.02) per basic share
	-	Adjusted EBITDA1 improved $4.0 million to ($4.4) million versus ($8.4) million in the prior year third quarter

Management CommentaryBrent Willis, Chief Executive Officer of NewAge, commented, “We continue to build NewAge into a leading social selling machine, and I am encouraged by the operational progress we made during the quarter, setting us up well for the rest of the year and beyond. This quarter we made investments in our systems, launched new products, and unveiled new social selling tools and technology, all of which are critical foundational components and will act as a springboard for growth. Our results in the third quarter for revenue, gross margin, net income and adjusted EBITDA all improved year over year, and we expect our future results to benefit substantially from all the actions we have taken in the quarter and earlier in the year.

“Our healthy products portfolio is on trend and we continue to strengthen our offerings and our systems around the world, supported by a robust supply chain. Our inventory levels and our D2C route to market help to alleviate many of the supply chain concerns plaguing the wider consumer goods market. We have a lot of confidence in our direct-to-consumer and social selling business model, and are excited as our proposition and financial results begin to unfold,” concluded Mr. Willis.

Third Quarter 2021 Financial Results Net revenue was $100 million for the three months ending September 30, 2021, versus $63 million for the third quarter of the prior year, an increase of 59%. The year-over-year growth in net revenue was driven by the acquisitions of ARIIX and Aliven. Sequentially, net revenue decreased versus the previous quarter, due in part to the impact of COVID-19 in a number of markets around the world, and a planned systems consolidation which caused disruptions in the selling cycle.

Gross profit for the third quarter of 2021 was $66 million, or 66.3% of net revenue, compared with $37 million, or 59.8% of net revenue, for the prior-year period, representing a 76% increase of $29 million and an increase of 6.5 gross margin percentage points. The gross margin percentage increase was driven by a higher mix of net revenue from the Direct/Social Selling segment, which has a higher margin than the Direct Store segment.

Selling, general and administrative (SG&A) expense for the third quarter totaled $39 million, or 39.2% of revenue, compared to $28 million, or 44.6% of revenue, for the prior-year period. The year-over-year improvement in SG&A expense as a percentage of net revenue primarily reflects the benefits of a growing business and elimination of redundant positions and offices.

Operating loss was $30.4 million for the third quarter of 2021 compared to a loss of $13.1 million for the prior-year period. Net loss was $2.7 million, or $0.02 per basic share, compared to a net loss of $14.1 million, or $0.14 per basic share, in the prior-year period. Adjusted EBITDA improved $4.0 million to a loss of $4.4 million, compared to a loss of $8.4 million in the prior-year period.

Balance Sheet and LiquidityThe Company ended the quarter with a strong balance sheet, with total cash and cash equivalents of $62.3 million and debt of $17.6 million, exclusive of operating lease liabilities.

Conference Call InformationA conference call and audio webcast with analysts and investors will be held today at 5:00 p.m. Eastern Time/3:00 p.m. Mountain Time to discuss the results and answer questions.

• Live conference call: 1-800-926-9801 (domestic) or 1-303-223-0113 (international) with conference ID: 21998666.
• Conference call replay available through November 16, 2021: 1-844-512-2921 (domestic) or 1-412-317-6671 (international) with replay access code: 21998666.
• Live and archived webcast will be available on the Conference Calls page of NewAge’s investor relations website at https://newage.com/investors.

1EBITDA and Adjusted EBITDA are non-GAAP financial measures with reconciliations provided in the accompanying financial tables.

About NewAge, Inc.NewAge is a purpose-driven firm dedicated to inspiring the planet to Live Healthy™. Colorado-based NewAge commercializes a portfolio of organic and healthy products worldwide through primarily a direct-to-consumer (D2C) route to market distribution system across more than 50 countries. The company competes in three major category platforms including health and wellness, inner and outer beauty, and nutritional performance and weight management — through a network of exclusive independent Brand Partners, empowered with the leading social selling tools and technology available worldwide. More information on the Company can be found at NewAge.com.

Forward Looking StatementsThis press release contains forward-looking statements that are made under the safe harbor provisions within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Forward-looking statements are any statement reflecting management's expectations regarding future results of operations, economic performance, and financial condition, including statements related to operating margins, the acquisitions and integrations of ARIIX and Aliven and cost synergies and operational efficiencies related thereto, the acquisition of additional businesses, the impact of the coronavirus (“COVID-19”) pandemic, and plans for company growth. Forward-looking statements, specifically those concerning future performance, are subject to certain risks and uncertainties, and actual results may differ materially. NewAge competes in a rapidly growing and transforming industry, and risk factors, including those disclosed in the company's filings with the Securities and Exchange Commission, might affect the company's operations. Unless required by applicable law, the company undertakes no obligation to update or revise any forward-looking statements.

Non-GAAP Financial Measures

The primary purpose of using non-GAAP financial measures is to provide supplemental information that we believe may be useful to investors and to enable investors to evaluate our results in the same way we do. We also present non-GAAP financial measures because we believe they assist investors in comparing our performance across reporting periods on a consistent basis, as well as comparing our results against the results of other companies, by excluding items that we do not believe are indicative of our core operating performance. Specifically, we use these non-GAAP measures as measures of operating performance; to prepare our annual operating budget; to allocate resources to enhance the financial performance of our business; to evaluate the effectiveness of our business strategies; to provide consistency and comparability with past financial performance; to facilitate a comparison of our results with those of other companies, many of which use similar non-GAAP financial measures to supplement their GAAP results; and in communications with our board of directors concerning our financial performance. Investors should be aware, however, that not all companies define these non-GAAP measures consistently.

EBITDAEBITDA is defined as net income (loss) adjusted to exclude amounts recorded under GAAP for interest expense, income tax expense, and depreciation and amortization expense. For the calculation of Adjusted EBITDA, we also exclude the following items for the periods presented:

Loss (gain) from change in fair value of derivatives: We have excluded derivative gains and losses since they can be highly volatile from period to period based on factors that are outside the control of our core business activities. Specifically, the variations that impact fair value heavily depend on the trading price of our Common Stock and global interest rates. As a result, gains and losses from changes in the fair value of derivatives vary for reasons that are generally unrelated to operational decisions and performance in any particular period.

Gain from forgiveness of PPP Loans and accrued interest: We have excluded the gain from forgiveness of PPP Loans and accrued interest due to the unique terms of this U.S. governmental assistance which is unrelated to operational performance.

Impairment of long-lived assets: We have excluded charges for impairment of long-lived assets that were primarily triggered by an amendment to our business combination agreement that is unrelated to ongoing operational decisions and performance.

Stock-based compensation expense: Our compensation strategy includes the use of stock-based compensation to attract and retain employees, directors and consultants. This strategy is principally aimed at aligning the employee interests with those of our shareholders and to achieve long-term employee retention, rather than to motivate or reward operational performance for any particular period. As a result, stock-based compensation expense varies for reasons that are generally unrelated to operational decisions and performance in any particular period.

Employee severance and office closure expenses: We have excluded charges for employee severance and office closure expenses that are typically incurred to enable us to realize synergies in merger and divestiture transactions, and to execute our other strategies designed to improve performance.

Loss on disposal of Divested Business: We have excluded losses related to our disposal of the Divested Business since those losses are unrelated to current operational decisions and performance.

Contact:

InvestorsNewAge, Inc.Lisa MuellerVP, Investor Relationsir@newage.com

NewAge, Inc.
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except per share amounts)
	September 30,				December 31,
ASSETS	2021				2020
Current assets:
Cash and cash equivalents	$	46,829			$	43,711
Trade accounts receivable, net of allowance of $918 and $582, respectively		8,873				12,341
Inventories		48,876				48,051
Prepaid expenses and other		15,123				13,032
Current portion of restricted cash		12,000				10,000
Assets held for sale		6,884				-
Total current assets		138,585				127,135
Long-term assets:
Identifiable intangible assets, net of accumulated amortization		144,539				169,611
Goodwill		54,621				54,993
Right-of-use lease assets		29,580				38,764
Property and equipment, net of accumulated depreciation		22,786				28,076
Deferred income taxes		7,404				7,782
Deposits and other		4,621				5,297
Restricted cash, net of current portion		3,514				11,524
Total assets	$	405,650			$	443,182
LIABILITIES, REDEEMABLE COMMON STOCK, AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	17,997			$	22,774
Accrued liabilities		56,533				70,007
Current maturities of long-term debt		17,636				18,016
Operating lease liability related to right-of-use assets held for sale		4,503				-
Current portion of business combination liabilities		1,140				11,750
Total current liabilities		97,809				122,547
Long-term liabilities:
Business combination liabilities, net of current portion		28,222				95,826
Long-term debt, net of current maturities		-				16,181
Operating lease liabilities, net of current portion:
Lease liability		27,054				34,788
Deferred lease financing obligation		15,372				15,882
Deferred income taxes		5,019				5,391
Warrant derivative liability		1,782				-
Other		8,284				8,313
Total liabilities		183,542				298,928
Redeemable Common Stock, 800 shares as of December 31, 2020		-				2,101
Stockholders’ equity:
Preferred stock, $0.001 par value per share. Authorized 1,000 shares; no shares issued		-				-
Common Stock, $0.001 par value per share. Authorized 400,000 and 200,000 shares as
of September 30, 2021 and December 31, 2020, respectively; issued and outstanding 146,816 and		147				99
99,146 shares as of September 30, 2021 and December 31, 2020, respectively
Additional paid-in capital		363,205				236,732
Obligation to issue 4,551 and 19,704 shares of Common Stock as of September 30, 2021
and December 31, 2020, respectively		9,464				54,186
Note receivable for stock subscription		-				(1,250	)
Accumulated other comprehensive income		4,204				4,201
Accumulated deficit		(154,912	)			(151,815	)
Total stockholders' equity		222,108				142,153
Total liabilities, redeemable Common Stock, and stockholders' equity	$	405,650			$	443,182

NewAge, Inc.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share amounts)
	Three Months Ended								Nine Months Ended
	September 30,								September 30,
	2021				2020				2021				2020
Net revenue	$	99,553			$	62,719			$	349,111			$	189,049
Cost of goods sold		33,567				25,224				111,925				71,952
Gross profit		65,986				37,495				237,186				117,097
Operating expenses:
Commissions		36,823				17,458				127,540				55,378
Selling, general and administrative		39,027				27,983				118,928				84,868
Impairment of long-lived assets		16,186				-				16,186				400
Depreciation and amortization expense		4,385				1,751				13,783				5,293
Loss on disposal of Divested Business		-				3,446				4,339				3,446
Total operating expenses		96,421				50,638				280,776				149,385
Operating loss		(30,435	)			(13,143	)			(43,590	)			(32,288	)
Non-operating income (expense):
Gain (loss) from change in fair value of derivatives		19,498				(86	)			40,714				(392	)
Gain from forgiveness of PPP Loans and accrued interest		9,751				-				9,751				-
Interest and other income, net		1,397				229				992				954
Interest expense		(2,526	)			(521	)			(8,689	)			(1,693	)
Loss before income taxes		(2,315	)			(13,521	)			(822	)			(33,419	)
Income tax expense		(385	)			(612	)			(2,275	)			(1,886	)
Net loss	$	(2,700	)		$	(14,133	)		$	(3,097	)		$	(35,305	)
Net loss per share of Common Stock:
Basic	$	(0.02	)		$	(0.14	)		$	(0.02	)		$	(0.38	)
Diluted	$	(0.11	)		$	(0.14	)		$	(0.19	)		$	(0.38	)
Weighted average number of shares of Common Stock outstanding:
Basic		151,411				97,819				140,894				92,087
Diluted		170,251				97,819				167,657				92,087

NewAge, Inc.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
NINE MONTHS ENDED SEPTEMBER 2021 AND 2020
(In thousands)
	2021				2020
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss	$	(3,097	)		$	(35,305	)
Adjustments to reconcile net loss to net cash used in operating activities:
Loss (gain) from change in fair value of derivatives, net		(40,714	)			392
Gain from forgiveness of PPP Loans and accrued interest		(9,751	)			-
Impairment of long-lived assets		16,186				400
Depreciation and amortization		14,077				5,607
Non-cash lease expense		7,381				3,913
Accretion of debt discount		6,171				414
Stock-based compensation expense		5,624				3,415
Allowance for uncollectible note receivable and accrued interest from Divested Business		2,701				-
Deferred income tax expense (benefit)		490				(442	)
Loss from sale of property and equipment		332				128
Other		118				73
Loss on disposal of Divested Business		-				3,446
Changes in operating assets and liabilities, net of effects of business combination:
Trade accounts receivable		240				(932	)
Inventories		(87	)			2,741
Prepaid expenses, deposits and other		117				519
Accounts payable		(4,915	)			(484	)
Other accrued liabilities		(20,486	)			(13,738	)
Net cash used in operating activities		(25,613	)			(29,853	)
CASH FLOWS FROM INVESTING ACTIVITIES:
Cash payments for Ariix business combination		(10,000	)			-
Capital expenditures for property and equipment		(1,267	)			(2,108	)
Cash advance under unsecured promissory note		-				(1,250	)
Proceeds from sale of equipment		4				231
Proceeds received from buyer of Divested Businesses, net of cash conveyed of $209		-				381
Net cash used in investing activities		(11,263	)			(2,746	)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from private placement of Units, net of placement fee:
Fair value of warrants to purchase 7,318 shares of Common Stock		14,128				-
Residual fair value of 14,636 shares of Common Stock		39,673				-
Proceeds from exercise of stock options		530				34
Proceeds from issuance of common stock		-				25,122
Proceeds from borrowings		-				6,868
Principal payments on borrowings		(12,000	)			(10,825	)
Principal payments on business combination obligations		(9,702	)			(5,761	)
Payments under deferred lease financing obligation		(495	)			(480	)
Debt issuance costs paid		(21	)			(95	)
Payments for deferred offering costs		(24	)			(164	)
Purchase and retirement of 780 shares of Common Stock		-				(1,193	)
Net cash provided by financing activities		32,089				13,506
Effect of foreign currency translation changes		1,895				(247	)
Net change in cash, cash equivalents and restricted cash		(2,892	)			(19,340	)
Cash, cash equivalents and restricted cash at beginning of period		65,235				64,571
Cash, cash equivalents and restricted cash at end of period	$	62,343			$	45,231

NewAge, Inc.
ADJUSTED EBITDA CALCULATION
(In thousands)
	Three Months Ended								Nine Months Ended
	September 30,								September 30,
	2021				2020				2021				2020
Net loss	$	(2,700	)		$	(14,133	)		$	(3,097	)		$	(35,305	)
EBITDA Non-GAAP adjustments:
Interest expense		2,526				521				8,689				1,693
Income tax expense		385				612				2,275				1,886
Depreciation and amortization expense		4,481				1,855				14,077				5,607
EBITDA		4,692				(11,145	)			21,944				(26,119	)
Adjusted EBITDA Non-GAAP adjustments:
Loss (gain) from change in fair value of derivatives		(19,498	)			86				(40,714	)			392
Gain from forgiveness of PPP Loans and accrued interest		(9,751	)			-				(9,751	)			-
Impairment of long-lived assets		16,186				-				16,186				400
Employee severance and office closure expenses		2,520				1,658				4,217				2,543
Stock-based compensation expense		1,475				966				5,624				3,415
Loss on disposal of Divested Business		-				-				4,339				3,446
Adjusted EBITDA	$	(4,376	)		$	(8,435	)		$	1,845			$	(15,923	)