# Vita Coco Company, Inc.: Form 10-Q for the period ended Jun 30, 2024

- Company: [Vita Coco Company, Inc.](/companies/coco.md) (CIK 1482981)
- Form: 10-Q
- Filed: 2024-08-01
- Accepted by EDGAR: Aug 1, 2024, 13:02 ET
- Period: 2024-06-30
- Accession: 0001482981-24-000102
- Inline XBRL: yes
- Main document: https://www.sec.gov/Archives/edgar/data/1482981/000148298124000102/coco-20240630.htm
- All documents and exhibits: https://www.sec.gov/Archives/edgar/data/1482981/000148298124000102/

## Figures reported in this filing

Standardized XBRL line items for the period ended 2024-06-30.

| Line item | Period | Value | XBRL concept |
| --- | --- | ---: | --- |
| Revenue | 3 months, 2024-04-01 to 2024-06-30 | $144.1m | us-gaap:RevenueFromContractWithCustomerIncludingAssessedTax |
| Revenue | 6 months, 2024-01-01 to 2024-06-30 | $255.8m | us-gaap:RevenueFromContractWithCustomerIncludingAssessedTax |
| Cost of revenue | 3 months, 2024-04-01 to 2024-06-30 | $85.4m | us-gaap:CostOfGoodsAndServicesSold |
| Cost of revenue | 6 months, 2024-01-01 to 2024-06-30 | $149.9m | us-gaap:CostOfGoodsAndServicesSold |
| Gross profit | 3 months, 2024-04-01 to 2024-06-30 | $58.7m | us-gaap:GrossProfit |
| Gross profit | 6 months, 2024-01-01 to 2024-06-30 | $105.9m | us-gaap:GrossProfit |
| Selling, general and administrative | 3 months, 2024-04-01 to 2024-06-30 | $28.8m | us-gaap:SellingGeneralAndAdministrativeExpense |
| Selling, general and administrative | 6 months, 2024-01-01 to 2024-06-30 | $57.0m | us-gaap:SellingGeneralAndAdministrativeExpense |
| Operating income | 3 months, 2024-04-01 to 2024-06-30 | $30.0m | us-gaap:OperatingIncomeLoss |
| Operating income | 6 months, 2024-01-01 to 2024-06-30 | $48.9m | us-gaap:OperatingIncomeLoss |
| Interest expense | 3 months, 2024-04-01 to 2024-06-30 | $0 | us-gaap:InterestExpense |
| Interest expense | 6 months, 2024-01-01 to 2024-06-30 | $0 | us-gaap:InterestExpense |
| Income tax | 3 months, 2024-04-01 to 2024-06-30 | $6.4m | us-gaap:IncomeTaxExpenseBenefit |
| Income tax | 6 months, 2024-01-01 to 2024-06-30 | $10.2m | us-gaap:IncomeTaxExpenseBenefit |
| Net income | 3 months, 2024-04-01 to 2024-06-30 | $19.1m | us-gaap:NetIncomeLoss |
| Net income | 6 months, 2024-01-01 to 2024-06-30 | $33.3m | us-gaap:NetIncomeLoss |
| Diluted EPS | 3 months, 2024-04-01 to 2024-06-30 | $0.32 | us-gaap:EarningsPerShareDiluted |
| Diluted EPS | 6 months, 2024-01-01 to 2024-06-30 | $0.57 | us-gaap:EarningsPerShareDiluted |
| Basic EPS | 3 months, 2024-04-01 to 2024-06-30 | $0.34 | us-gaap:EarningsPerShareBasic |
| Basic EPS | 6 months, 2024-01-01 to 2024-06-30 | $0.59 | us-gaap:EarningsPerShareBasic |
| Diluted shares (weighted) | 3 months, 2024-04-01 to 2024-06-30 | 59,235,211 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Diluted shares (weighted) | 6 months, 2024-01-01 to 2024-06-30 | 58,990,921 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Operating cash flow | 6 months, 2024-01-01 to 2024-06-30 | $26.7m | us-gaap:NetCashProvidedByUsedInOperatingActivities |
| Capital expenditure | 6 months, 2024-01-01 to 2024-06-30 | $414.0k | us-gaap:PaymentsToAcquirePropertyPlantAndEquipment |
| Share repurchases | 6 months, 2024-01-01 to 2024-06-30 | $9.2m | us-gaap:PaymentsForRepurchaseOfCommonStock |
| Cash and equivalents | at 2024-06-30 | $150.1m | us-gaap:CashAndCashEquivalentsAtCarryingValue |
| Current assets | at 2024-06-30 | $300.6m | us-gaap:AssetsCurrent |
| Total assets | at 2024-06-30 | $323.0m | us-gaap:Assets |
| Current liabilities | at 2024-06-30 | $90.8m | us-gaap:LiabilitiesCurrent |
| Total liabilities | at 2024-06-30 | $91.0m | us-gaap:Liabilities |
| Shareholders' equity | at 2024-06-30 | $232.0m | us-gaap:StockholdersEquity |

## Management's discussion and analysis

As filed, 39,423 characters.

*You should read the following discussion and analysis of our financial condition and results of operations together with our condensed consolidated financial statements and related notes included elsewhere in this Quarterly Report on Form 10-Q, as well as our audited consolidated financial statements and related notes as disclosed in our Annual Report on Form 10-K for the fiscal year ended December 31, 2023 and filed with the Securities and Exchange Commission ("SEC") on February 29, 2024 (the “Form 10-K”). This discussion contains forward-looking statements based upon current plans, expectations and beliefs involving risks and uncertainties. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of various factors, including those set forth in Part I, Item 1A, “Risk Factors” of the Form 10-K and other factors set forth in the Form 10-K and Quarterly Reports on Form 10-Q.*

### Overview

The Vita Coco Company is a leading platform for brands in the functional beverage category. We pioneered packaged coconut water in 2004 and have extended our business into other categories. Our mission is to deliver great tasting, natural and nutritious products that we believe are better for consumers and better for the world. We are one of the largest brands globally in the coconut and other plant waters category, and a large supplier of private label coconut water.

Our branded portfolio is led by our *Vita Coco* brand, which is the leader in the coconut water category in the United States, and also includes coconut oil, juice, and milk offerings. Our other brands include *Ever & Ever*, a sustainably packaged water, and *PWR LIFT*, a protein-infused fitness drink. We also offered *Runa*, a plant-based energy drink inspired by the guayusa plant native to Ecuador, which we ceased selling in December 2023. We supply private label products to key retailers in both the coconut water and coconut oil categories. Additionally, we generate revenue from bulk product sales to beverage and food companies.

As of June 30, 2024, we source our coconut water from a diversified global network of 15 factories across six countries supported by thousands of coconut farmers. As we do not own any of these factories, our supply chain is a fixed asset-lite model designed to better react to changes in the market or consumer preferences. We also work with co-packers in America and Europe to support local packaging and repacking of our products to better service our customers’ needs.

*Vita Coco* is available in over 30 countries, with our primary markets in North America, the United Kingdom and China. Our primary markets for private label are North America and Europe. Our products are distributed primarily through club, food, drug, mass, convenience, e-commerce and food service channels. We are also available in a variety of on-premise locations such as corporate offices, fitness clubs, airports and educational institutions.

### Key Factors Affecting Our Performance

We believe that our performance and future success depend on a number of factors that present significant opportunities for us. There have been no material changes to such factors from those described in the Form 10-K under the heading “Key Factors Affecting our Performance” and the changes noted below in "Impact of Global Events Causing Macroeconomic Uncertainty." Those factors also pose risks and challenges, including those discussed in Part I, Item 1A. “Risk Factors” of the Form 10-K.

### Impact of Global Events Causing Macroeconomic Uncertainty

Uncertainty in the macroeconomic environment resulting from geopolitical and economic instability (including the effects of current wars and other international conflicts) and variability in interest rates, foreign exchange rates and inflationary cost environments may affect our global supply chain. It is not currently possible to ascertain the overall impact of these macroeconomic uncertainties on the Company’s business, results of operations, financial condition or liquidity. Future events and effects related to these macroeconomic uncertainties cannot be determined with precision and actual results could significantly differ from estimates or forecasts. For a further discussion of the risks and challenges posed by these events, please see Part I, Item 1A. “Risk Factors” of the Form 10-K.

### Components of Our Results of Operations

### Net Sales

We generate revenue through the sale of our *Vita Coco* branded coconut water, private label and Other products in the Americas and International segments. Our sales are predominantly made to distributors or to retailers for final sale to consumers through retail channels, which includes sales to traditional brick and mortar retailers, who may also resell our products through their own online platforms. Our revenue is recognized net of allowances for returns, discounts, credits, and any taxes collected from consumers.

The Company provides trade promotions and sales discounts to its customers and distributors. Since these sales promotions and sales discounts do not meet the criteria for a distinct good or service, they are primarily accounted for as a reduction of revenue and include payments to customers and distributors for performing activities on our behalf, such as payments for in-store displays, payments to gain distribution of new products, payments for shelf space and discounts to promote lower retail prices. These condensed consolidated financial statements include accruals for these promotion and discounts. The accruals are made for invoices that have not yet been received as of the end of the reporting period and are recorded as a reduction of sales, and are based on contract terms and our historical experience with similar programs and require management judgment with respect to estimating customer and consumer participation and performance levels.

### Cost of Goods Sold

Cost of goods sold includes the costs of the products sold to customers, inbound and outbound shipping and handling costs, freight and duties, shipping and packaging supplies, and warehouse fulfillment costs.

### Gross Profit and Gross Margin

Gross profit is net sales less cost of goods sold, and gross margin is gross profit as a percentage of net sales. Gross profit has been, and will continue to be, affected by various factors, including the mix of products we sell, the channels through which we sell our products, the promotional environment in the marketplace, manufacturing costs, commodity prices, warehouse costs, and transportation rates. We expect that our gross margin will fluctuate from period to period depending on the interplay of these variables.

Management believes gross margin provides investors with useful information related to the profitability of our business prior to considering the operating costs incurred. Management uses gross profit and gross margin as key measures in making financial, operating, and planning decisions and in evaluating our performance.

### Operating Expenses

### Selling, General and Administrative Expenses

Selling, general and administrative expenses ("SG&A") include marketing expenses, promotional expenses, and general and administrative expenses. Marketing and promotional expenses consist primarily of costs incurred promoting and marketing our products and are primarily driven by investments to grow our business and retain customers. General and administrative expenses include payroll, employee benefits, stock-based compensation, broker commissions and other headcount-related expenses associated with supply chain & operations, finance, information technology, human resources and other administrative-related personnel, as well as general overhead costs of the business, including research and development for new innovations, rent and related facilities and maintenance costs, depreciation and amortization, and legal, accounting, and professional fees. We expense all SG&A as incurred.

### Other Income (Expense), Net

### Unrealized Gain/(Loss) on Derivative Instruments

We are subject to foreign currency risks as a result of our inventory purchases and intercompany transactions. In order to mitigate the foreign currency risks, we and our subsidiaries enter into foreign currency exchange contracts which are recorded at fair value. Unrealized gain/(loss) on derivative instruments consists of gains or losses on such foreign currency exchange contracts which are unsettled as of period end. See Part I, Item 3 “Quantitative and Qualitative Disclosures about Market Risk—Foreign Currency Exchange Risk” for further information.

### Foreign Currency Gain/(Loss)

Our reporting currency is the U.S. dollar. We maintain the financial statements of each entity within the group in its local currency, which is also the entity’s functional currency. Foreign currency gain/(loss) represents the transaction gains and losses that arise from exchange rate fluctuations on transactions denominated in a currency other than the functional currency. See “—Quantitative and Qualitative Disclosures about Market Risk—Foreign Currency Exchange Risk” for further information.

### Interest Income

Interest income consists of interest income earned on our cash and cash equivalents, and money market funds.

### Interest Expense

Interest expense consists of interest payable on our credit facilities and vehicle loans.

### Income Tax Expense

We are subject to federal and state income taxes in the United States and taxes in foreign jurisdictions in which we operate. We recognize deferred tax assets and liabilities based on temporary differences between the financial reporting and income tax bases of assets and liabilities using statutory rates. We regularly assess the need to record a valuation allowance against net deferred tax assets if, based upon the available evidence, it is more likely than not that some or all of the deferred tax assets will not be realized.

### Operating Segments

We operate in two reporting segments:

- ***Americas—***The Americas segment is comprised of our operations in the Americas region, primarily in the United States and Canada.
- ***International—***The International segment is comprised of our operations primarily in Europe, the Middle East, and the Asia Pacific regions, which includes the Company’s procurement arm.

Each segment derives its revenues from the following product categories:

- ***Vita Coco Coconut Water—***This product category consists of all branded coconut water product offerings under the *Vita Coco* labels, where the majority ingredient is coconut water. For these products, control is transferred upon customer receipt, at which point the Company recognizes the transaction price for the product as revenue.
- ***Private Label —***This product category consists of all private label product offerings, which includes coconut water and oil. The Company determined the production and distribution of private label products represents a distinct performance obligation. Since there is no alternative use for these products and the Company has the right to payment for performance completed to date, the Company recognizes the revenue for the production of these private label products over time as the production for open purchase orders occurs, which may be prior to any shipment.
- ***Other—***This product category consists of all other products, which includes *Runa* (until we ceased selling it in December 2023)*, Ever & Ever* and *PWR LIFT* product offerings, *Vita Coco* product extensions beyond coconut water, coconut milk products, and other revenue transactions (e.g., bulk product sales). For these products, control is transferred upon customer receipt, at which point the Company recognizes the transaction price for the product as revenue.

### Results of Operations

### Comparison of the Three and Six Months Ended June 30, 2024 and 2023

The following table summarizes our results of operations for the three and six months ended June 30, 2024 and 2023, respectively:

*(in thousands)*

| 2024 | Three Months Ended June 30, 2023 | 2024 | Six Months Ended June 30, 2023 |  |
| --- | ---: | ---: | ---: | ---: |
| Net sales | $144,116 | $139,645 | $255,814 | $249,404 |
| Cost of goods sold | 85,379 | 88,551 | 149,900 | 164,649 |
| Gross profit | 58,737 | 51,094 | 105,914 | 84,755 |
| Operating expenses |  |  |  |  |
| Selling, general, and administrative | 28,756 | 30,249 | 56,974 | 57,206 |
| Income (loss) from operations | 29,981 | 20,845 | 48,940 | 27,549 |
| Other income (expense) |  |  |  |  |
| Unrealized gain/(loss) on derivative instrument | (5,963) | 988 | (8,488) | 2,201 |
| Foreign currency gain/(loss) | (136) | 170 | (78) | 781 |
| Interest income | 1,627 | 268 | 3,150 | 281 |
| Interest expense | — | (15) | — | (30) |
| Total other income (expense) | (4,472) | 1,411 | (5,416) | 3,233 |
| Income before income taxes | 25,509 | 22,256 | 43,524 | 30,782 |
| Income tax expense | (6,416) | (4,269) | (10,193) | (6,090) |
| Net income | $19,093 | $17,987 | $33,331 | $24,692 |

### Net Sales

The following table provides a comparative summary of net sales by operating segment and product category:

*(in thousands)*

| 2024 Americas segment | Three Months Ended June 30, 2023 | Amount | Change Percentage | 2024 | Six Months Ended June 30, 2023 | Amount | Change Percentage |  |
| --- | ---: | ---: | ---: | ---: | ---: | ---: | ---: | ---: |
| Vita Coco Coconut Water | $98,494 | $95,004 | $3,490 | 3.7% | $168,016 | $164,142 | $3,874 | 2.4% |
| Private Label | 23,135 | 24,059 | (924) | (3.8)% | 47,408 | 49,109 | (1,701) | (3.5)% |
| Other | 2,873 | 2,200 | 673 | 30.6% | 5,169 | 4,784 | 385 | 8.0% |
| Subtotal | 124,502 | 121,263 | 3,239 | 2.7% | 220,593 | 218,035 | 2,558 | 1.2% |
| **International segment** |  |  |  |  |  |  |  |  |
| Vita Coco Coconut Water | 13,952 | 12,720 | $1,233 | 9.7% | 23,617 | 22,278 | $1,339 | 6.0% |
| Private Label | 4,816 | 5,053 | (236) | (4.7)% | 9,968 | 7,719 | 2,249 | 29.1% |
| Other | 846 | 609 | 237 | 38.9% | 1,636 | 1,372 | 264 | 19.2% |
| Subtotal | $19,614 | $18,382 | $1,232 | 6.7% | $35,221 | $31,369 | $3,852 | 12.3% |
| Total net sales | $144,116 | $139,645 | $4,471 | 3.2% | $255,814 | $249,404 | $6,410 | 2.6% |

For the three months ended June 30, 2024, the primary driver of the consolidated net sales increase of 3.2% was a 4.4% net sales increase in Vita Coco Coconut Water resulting from a case equivalents ("CE") volume increase of 1.9% coupled with net pricing benefits. For the six months ended June 30, 2024, the net sales increase of 2.6%, was driven by Vita Coco Coconut Water which had a 2.8% net sales increase due to net pricing actions and changes in promotion timing compared to prior year, partially offset by a CE volume decrease of 0.7%.

#### Volume in Case Equivalent

The following table provides a comparative summary of the percentage change in our volume in CE for the three and six months ended June 30, 2024 compared to the three and six months ended June 30, 2023, by operating segment and product category:

|  | Percentage Change - Three Months Ended June 30, 2024 vs. 2023 Americas | International | Total |
| --- | ---: | ---: | ---: |
| Vita Coco Coconut Water | 1.3% | 5.0% | 1.9% |
| Private Label | 10.6% | 13.7% | 11.2% |
| Other | 14.0% | 7.2% | 13.5% |
| Total volume (CE) | 3.4% | 7.3% | 4.0% |
|  | **Percentage Change - Six Months Ended June 30, 2024 vs. 2023** |  |  |
|  | **Americas** | **International** | **Total** |
| Vita Coco Coconut Water | (0.6)% | (1.2)% | (0.7)% |
| Private Label | 7.1% | 34.7% | 11.7% |
| Other | (7.0)% | (8.5)% | (7.1)% |
| Total volume (CE) | 1.0% | 7.5% | 2.0% |

*Note: A CE is a standard volume measure used by management, which is defined as a case of 12 bottles of 330ml liquid beverages or the same liter volume of oil.*

\* International, Other excludes minor volume that is treated as zero CE.

#### Americas Segment

Americas net sales increased $3.2 million, or 2.7%, to $124.5 million for the three months ended June 30, 2024 from $121.3 million for the three months ended June 30, 2023. The increase was primarily driven by CE volume growth of 3.4%, which was partially offset by price/mix changes in private label. Americas net sales increased $2.6 million, or 1.2%, to $220.6 million for the six months ended June 30, 2024 from $218.0 million for the six months ended June 30, 2023. The increase was primarily driven by an increase in CE volume of 1.0%.

Vita Coco Coconut Water net sales increased by $3.5 million, or 3.7%, to $98.5 million for the three months ended June 30, 2024, from $95.0 million for the three months ended June 30, 2023. The increase was the result of CE volume growth of 1.3% coupled with net pricing benefits. Vita Coco Coconut Water net sales increased by $3.9 million, or 2.4%, to $168.0 million for the six months ended June 30, 2024. The increase was primarily driven by net pricing benefits due to the timing of pricing promotions, partially offset by a CE volume decrease of 0.6%.

Private label net sales decreased by $0.9 million, or 3.8%, to $23.1 million for the three months ended June 30, 2024, from $24.1 million for the three months ended June 30, 2023, due to the expected decrease in the private label oil business, partially offset by CE volume growth of 10.6%. Private label net sales decreased by $1.7 million, or 3.5% to $47.4 million for the six months ended June 30, 2024, due to the expected private label oil decrease, partially offset by CE volume growth of 7.1%.

Net sales from Other products increased by $0.7 million, or 30.6%, to $2.9 million for the three months ended June 30, 2024 from $2.2 million for the three months ended June 30, 2023, driven by a CE volume increase of 14.0% due to innovations coupled with price/mix benefits. Net sales from Other products increased minimally by $0.4 million, or 8.0%, to $5.2 million for the six months ended June 30, 2024.

#### International Segment

International net sales increased by $1.2 million, or 6.7%, to $19.6 million for the three months ended June 30, 2024, from $18.4 million for the three months ended June 30, 2023. The increase is primarily driven by CE volume growth of

7.3%. International net sales increased by $3.9 million, or 12.3%, to $35.2 million for the six months ended June 30, 2024 from $31.4 million for the six months ended June 30, 2023. The increase is primarily driven by CE volume growth of 7.5%.

Vita Coco Coconut Water net sales increased by $1.2 million, or 9.7%, to $14.0 million for the three months ended June 30, 2024, from $12.7 million for the three months ended June 30, 2023. The increase was driven primarily by Europe, which had strong volume and net sales performance, partially offset by lower volumes in the Asia Pacific region. Vita Coco Coconut Water net sales increased by $1.3 million, or 6.0%, to $23.6 million for the six months ended June 30, 2024 from $22.3 million for the six months ended June 30, 2023. The increase was primarily driven by strong growth in Europe partially offset by lower volumes in the Asia Pacific region.

Private label net sales decreased by $0.2 million, or 4.7%, to $4.8 million for the three months ended June 30, 2024 from $5.1 million for the three months ended June 30, 2023. The decrease was driven primarily by the expected decrease in private label coconut oil which offset private label coconut water CE volume growth in Europe from new distribution. Private label net sales increased by $2.2 million, or 29.1%, to $10.0 million for the six months ended June 30, 2024 from $7.7 million for the six months ended June 30, 2023. The increase was driven primarily by Europe which had strong volume driven by new distribution, partially offset by the private label coconut oil decrease.

Net sales from Other products was relatively flat on a dollar basis for the three and six months ended June 30, 2024 compared to the prior year period.

### Gross Profit

*(in thousands)*

| 2024 Cost of goods sold | Three Months Ended June 30, 2023 | Amount | Change Percentage | 2024 | Six Months Ended June 30, 2023 | Amount | Change Percentage |  |
| --- | ---: | ---: | ---: | ---: | ---: | ---: | ---: | ---: |
| Americas segment | $72,295 | $76,155 | $(3,860) | (5.1)% | $127,514 | $143,777 | $(16,263) | (11.3)% |
| International segment | 13,084 | 12,396 | 688 | 5.6% | 22,386 | 20,872 | 1,514 | 7.3% |
| Total cost of goods sold | $85,379 | $88,551 | $(3,172) | (3.6)% | $149,900 | $164,649 | $(14,749) | (9.0)% |
| **Gross profit** |  |  |  |  |  |  |  |  |
| Americas segment | $52,208 | $45,109 | $7,099 | 15.7% | $93,080 | $74,258 | $18,822 | 25.3% |
| International segment | 6,529 | 5,985 | 544 | 9.1% | 12,834 | 10,497 | 2,337 | 22.3% |
| Total gross profit | $58,737 | $51,094 | $7,643 | 15.0% | $105,914 | $84,755 | $21,159 | 25.0% |
| **Gross margin** |  |  |  |  |  |  |  |  |
| Americas segment | 41.9% | 37.2% |  | 4.7% | 42.2% | 34.1% |  | 8.1% |
| International segment | 33.3% | 32.6% |  | 0.7% | 36.4% | 33.5% |  | 2.9% |
| Consolidated | 40.8% | 36.6% |  | 4.2% | 41.4% | 34.0% |  | 7.4% |

On a consolidated basis, cost of goods sold decreased by $3.2 million, or 3.6%, to $85.4 million for the three months ended June 30, 2024, from $88.6 million for the three months ended June 30, 2023. On a consolidated and segment basis, the decrease was primarily related to lower finished goods and transportation costs and mix impacts from Private Label, which were partially offset by volume CE growth. Cost of goods sold decreased by $14.7 million, or 9.0%, to $149.9 million for the six months ended June 30, 2024. On a consolidated basis, the decrease was primarily related to lower finished goods and transportation costs, and mix impacts from Private Label, which were partially offset by volume CE growth.

On a consolidated basis, gross profit increased by $7.6 million, or 15.0%, to $58.7 million for the three months ended June 30, 2024, from $51.1 million for the three months ended June 30, 2023. Gross margin increased approximately 4.2% percentage points to 40.8% for the three months ended June 30, 2024, as compared to 36.6% for the three months ended June 30, 2023. The increase in gross profit resulted from lower finished goods and domestic transportation costs, and improvements primarily in Vita Coco Coconut Water pricing along with mix effects of private label products. Gross profit increased by $21.2 million, or 25.0%, to $105.9 million for the six months ended June 30, 2024. This increase resulted from lower finished goods and transportation costs, improvements in Vita Coco Coconut Water pricing, volume CE growth, cost of goods mix benefits, partly offset by Private Label net sales mix impacts.

### Operating Expenses

*(in thousands)*

| 2024 | Three Months Ended June 30, 2023 | Amount | Change Percentage | 2024 | Six Months Ended June 30, 2023 | Amount | Change Percentage |  |
| --- | ---: | ---: | ---: | ---: | ---: | ---: | ---: | ---: |
| Selling, general, and administrative | $28,756 | $30,249 | $(1,493) | (4.9)% | 56,974 | 57,206 | (232) | (0.4)% |

#### Selling, General and Administrative Expenses

During the three months ended June 30, 2024, SG&A decreased by $1.5 million, or 4.9%, versus the three months ended June 30, 2023. The decrease was primarily driven by reduced marketing expense of $2.7 million largely timing related, partially offset by an increase of $1.1 million in personnel related expenses for the three months ended June 30, 2024 versus the prior year comparable period. During the six months ended June 30, 2024, SG&A decreased by $0.2 million, or 0.4%, versus the six months ended June 30, 2023. The decrease was primarily driven lower marketing expense of $2.8 million and reduced bad debt expense of $0.4 million, partially offset by increased personnel related expenses of $3.0 million.

#### Other Income (Expense), Net

*(in thousands)*

| 2024 | Three Months Ended June 30, 2023 | Amount | Change Percentage | 2024 | Six Months Ended June 30, 2023 | Amount | Change Percentage |  |
| --- | ---: | ---: | ---: | ---: | ---: | ---: | ---: | ---: |
| Unrealized gain/(loss) on derivative instruments | $(5,963) | $988 | $(6,951) | n/m | $(8,488) | $2,201 | $(10,689) | n/m |
| Foreign currency gain/(loss) | (136) | 170 | (306) | 180.0% | $(78) | 781 | (859) | (110.0%) |
| Interest income | 1,627 | 268 | 1,359 | n/m | $3,150 | 281 | 2,869 | n/m |
| Interest expense | — | (15) | 15 | 100.0% | $0 | (30) | 30 | (100.0%) |
|  | $(4,472) | $1,411 | $(5,883) | 416.9% | $(5,416) | $3,233 | $(8,649) | (267.5%) |

n/m—represents percentage calculated not being meaningful

#### Unrealized Gain/(Loss) on Derivative Instruments

For the three months ended June 30, 2024 and 2023, we recorded losses of $6.0 million and gains of $1.0 million, respectively, for the mark-to-market changes in fair value on the outstanding derivative instruments for forward foreign currency exchange contracts, with the largest loss for the three months ended June 30, 2024 related to the contracts hedging the BRL. For the six months ended June 30, 2024 and 2023, we recorded losses of $8.5 million and gains of $2.2 million, respectively, for the mark-to-market changes in fair value on the outstanding derivative instruments for forward foreign currency exchange contracts, with the largest loss for the six months ended June 30, 2024 related to the contracts hedging the BRL and THB, partially offset by gains on GBP, CAD and EUR hedges.

#### Foreign Currency Gain/(Loss)

For the three months ended June 30, 2024, the change in foreign currency loss was $0.3 million as compared to June 30, 2023. For the six months ended June 30, 2024, the change in foreign currency loss was $0.9 million as compared to June 30, 2023. The change in all periods was a result of movements in various foreign currency exchange rates related to transactions denominated in currencies other than the functional currency.

#### Interest Income

For the three months ended June 30, 2024, the increase in interest income was $1.4 million as compared to June 30, 2023. The increase was primarily due to higher levels of cash invested with financial institutions during the second quarter of 2024 compared to the second quarter of 2023. For the six months ended June 30, 2024, the change in interest income was $2.9 million as compared to the same period ending June 30, 2023. The increase in interest income period over period was due to the cash investment program that began in April 2023, in addition to higher levels of cash invested with financial institutions compared to prior year.

#### Interest Expense

The change in interest expense is immaterial.

#### Income Tax Expense

*(in thousands)*

| 2024 | Three Months Ended June 30, 2023 | Amount | Change Percentage | 2024 | Six Months Ended June 30, 2023 | Amount | Change Percentage |  |
| --- | ---: | ---: | ---: | ---: | ---: | ---: | ---: | ---: |
| Income tax expense | (6,416) | (4,269) | $(2,147) | 50.3% | $(10,193) | $(6,090) | $(4,103) | 67.4% |
| Tax rate | 25.2% | 19.2% |  |  | 23.4% | 19.8% |  |  |

Our quarterly income tax provision is based on an estimated annual effective tax rate applied to our consolidated year-to-date pre-tax income or loss. The effective income tax rate is based upon the estimated income for the year, the composition of that income in different countries, and adjustments, if any, in the applicable quarterly periods for the potential tax consequences, benefits, resolutions of tax audits or other tax contingencies.

For the six months ended June 30, 2024 and 2023 our effective tax rate was 23.4% and 19.8% respectively. The effective tax rate for the current period is higher than the US statutory rate of 21% primarily as a result of state income taxes for the US company and other nondeductible expenses for tax purposes, and is partially offset by lower statutory tax rates in countries outside the US that we operate in. The change in effective tax rates between the periods is primarily driven by the jurisdictional mix of our pre-tax profits and the impact of higher non-deductible expense this year related to covered employees' compensation in relation to the pre-tax profits.

### Non-GAAP Financial Measures

EBITDA and Adjusted EBITDA are supplemental non-GAAP financial measures that are used by management and external users of our financial statements, such as industry analysts, investors and lenders. These non-GAAP measures should not be considered as alternatives to net income as a measure of financial performance or cash flows from operations as a measure of liquidity, or any other performance measure derived in accordance with GAAP and should not be construed as an inference that our future results will be unaffected by unusual or non-recurring items.

These non-GAAP measures are a key metric used by management and our Board of Directors to assess our financial performance. We present these non-GAAP measures because we believe they assist investors in comparing our performance across reporting periods on a consistent basis by excluding items that we do not believe are indicative of our core operating performance and because we believe it is useful for investors to see the measures that management uses to evaluate the Company.

We define EBITDA as net income before interest, taxes, depreciation, and amortization. Adjusted EBITDA is defined as EBITDA with adjustments to eliminate the impact of certain items, including certain non-cash and other items, that we do not consider representative of our ongoing operating performance.

A reconciliation from net income to EBITDA and Adjusted EBITDA is set forth below:

*(in thousands)*

*(in thousands)*

|  | Three Months Ended June 30, 2024 | 2023 | Six Months Ended June 30, 2024 | 2023 |
| --- | ---: | ---: | ---: | ---: |
| Net income | 19,093 | 17,987 | 33,331 | 24,692 |
| Depreciation and amortization | 182 | 175 | 344 | 340 |
| Interest income | (1,627) | (268) | (3,150) | (281) |
| Interest expense | — | 15 | — | 30 |
| Income tax expense | 6,416 | 4,269 | 10,193 | 6,090 |
| **EBITDA** | 24,064 | 22,178 | 40,718 | 30,871 |
| Stock-based compensation (a) | 2,399 | 2,102 | 4,508 | 4,264 |
| Unrealized (gain)/loss on derivative instruments (b) | 5,963 | (988) | 8,488 | (2,201) |
| Foreign currency (gain)/loss (b) | 136 | (170) | 78 | (781) |
| Secondary Offering Costs (c) | (324) | 856 | (324) | 856 |
| **Adjusted EBITDA** | $32,238 | $23,978 | 53,468 | $33,009 |

(a) Non-cash charges related to stock-based compensation, which vary from period to period depending on volume and vesting timing of awards. We adjusted for these charges to facilitate comparison from period to period.

(b) Unrealized gains or losses on derivative instruments and foreign currency gains or losses are not considered in our evaluation of our ongoing performance.

(c) Reflects other non-recurring expenses related to costs associated with two secondary offerings in which Verlinvest Beverages SA sold shares of the Company in an underwritten public offering that closed on May 26, 2023 and a block trade that was executed on November 9, 2023. The amounts for the three and six months ended June 30, 2023 relate to costs for the May 26, 2023 offering. The amounts for the three and six months ended June 30, 2024 relate to an expense waiver of certain costs incurred during the November 9, 2023 block trade. The Company did not receive any proceeds from the sale of the shares. For additional information regarding the expense waiver for the three and six months ended June 30, 2024, see Note 14, *Related Party Transactions*, in our condensed consolidated financial statements included in this Quarterly Report on Form 10-Q.

### Liquidity and Capital Resources

Since our inception, we have financed our operations primarily through cash generated from our business operations and proceeds on borrowings through our credit facilities and term loans. We had $150.1 million and $132.5 million of cash and cash equivalents as of June 30, 2024 and December 31, 2023, respectively. From time to time, we may supplement our liquidity needs with incremental borrowing capacity under the 2020 Credit Facility.

Considering recent market conditions and our business assumptions, we have reevaluated our operating cash flows and cash requirements and believe that current cash, cash equivalents, future cash flows from operating activities and cash available under our 2020 Credit Facility will be sufficient to meet our anticipated cash needs, including working capital needs, capital expenditures and contractual obligations for at least 12 months from the issuance date of the condensed consolidated financial statements included herein and the foreseeable future.

Our future capital requirements will depend on many factors, including our revenue growth rate, our working capital needs primarily for inventory build, our global footprint, the expansion of our marketing activities, the timing and extent of spending to support product development efforts, the introduction of new and enhanced products and the continued market consumption of our products, as well as any shareholder distribution either through equity buybacks or dividends. Our asset-lite operating model has historically provided us with a low cost, nimble, and scalable supply chain, which allows us to adapt to changes in the market or consumer preferences while also efficiently introducing new products across our platform. We may seek additional equity or debt financing in the future in order to acquire or invest in complementary businesses, products and/or new IT infrastructures. In the event that we require additional financing, we may not be able to raise such financing on terms acceptable to us or at all. If we are unable to raise additional capital or generate cash flows necessary to expand our operations and invest in continued product innovation, we may not be able to compete successfully, which would harm our business, operations and financial condition.

### Cash Flows

The following tables summarize our sources and uses of cash:

*(in thousands)*

| Cash flows provided by (used in): | Six Months Ended June 30, 2024 | 2023 | Change Amount | Percentage |
| --- | ---: | ---: | ---: | ---: |
| Operating activities | $26,652 | $26,071 | $581 | (2.2%) |
| Investing activities | (414) | (482) | 68 | 14.1% |
| Financing activities | (8,562) | 2,705 | (11,267) | (416.5%) |
| Effects of exchange rate changes on cash and cash equivalents | (106) | 371 | (477) | (128.6%) |
| Net (decrease)/increase in cash and cash equivalents | $17,570 | $28,665 | $(11,095) | 38.7% |

### Operating Activities

Our main source of operating cash is payments received from our customers. Our primary use of cash in operating activities are for cost of goods sold and SG&A expenses.

During the six months ended June 30, 2024, $0.6 million more net cash was generated by operating activities compared to the six months ended June 30, 2023. The higher cash generation was due to increase in net income after any non-cash adjustments, partially offset by increases in working capital.

### Investing Activities

During the six months ended June 30, 2024, cash used in investing activities was $0.4 million as compared to $0.5 million for the six months ended June 30, 2023, due to a minor increase in capital expenditures.

### Financing Activities

During the six months ended June 30, 2024 compared to the six months ended June 30, 2023, net cash used by financing activities was $11.3 million higher primarily driven by share repurchases that occurred in January 2024 and lower proceeds from stock award exercises. See Note 10, *Stockholders' Equity,* for further discussion on share repurchases.

### Debt

We had an immaterial amount of debt outstanding as of June 30, 2024 and December 31, 2023, which was related to vehicle loans.

### Revolving Credit Facility

In May 2020, the Company entered into the 2020 Credit Facility, which currently provides for committed borrowings of $60 million. The maturity date on the 2020 Credit Facility is May 12, 2026.

Starting in December 2022, borrowings on the 2020 Credit Facility bear interest at rates based on either: 1) a fluctuating rate per annum determined to be the sum of Daily Simple SOFR plus the Spread; or 2) a fixed rate per annum determined to be the sum of the Term SOFR plus the Spread. The Spread ranges from 1.00% to 1.75%, which is based on the Company’s leverage ratio (as defined in the credit agreement) for the immediately preceding fiscal quarter as defined in the credit agreement. In addition, the Company is currently subject to an unused commitment fee ranging from 0.10% and 0.20% on the unused amount of the line of credit, with the rate being based on the Company’s leverage ratio (as defined in the credit agreement).

The outstanding balance on the Revolving Facility was zero as of June 30, 2024 and December 31, 2023, respectively. As of June 30, 2024, we were compliant with all financial covenants.

### Vehicle Loans

We periodically enter into vehicle loans. Interest rates on these vehicle loans range from 4.56% to 5.68%. The outstanding balance on the vehicle loans as of June 30, 2024 was less than $0.1 million.

For additional information, see Note 6, *Debt*, in our condensed consolidated financial statements included in this Quarterly Report on Form 10-Q.

### Contractual Obligations and Commitments

There have been no material changes to our contractual obligations from those described in the Form 10-K.

### Critical Accounting Policies and Significant Judgments and Estimates

Our consolidated financial statements are prepared in accordance with U.S. GAAP. The preparation of our consolidated financial statements and related disclosures requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, costs and expenses, and the disclosure of contingent assets and liabilities in our consolidated financial statements. We base our estimates on historical experience, known trends and events and various other factors that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. We evaluate our estimates and assumptions on an ongoing basis. Our actual results may differ from these estimates under different assumptions or conditions.

Our critical accounting policies are described under the heading “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Critical Accounting Policies and Significant Judgments and Estimates” in the Form 10-K and the notes to the unaudited condensed consolidated financial statements appearing in this Quarterly Report on Form 10-Q. During the six months ended June 30, 2024, there were no material changes to our critical accounting policies from those discussed in the Form 10-K.

### Recent Accounting Pronouncements

A description of recently adopted and issued accounting pronouncements that may potentially impact our financial position and results of operations is disclosed in Note 2, *Summary of Significant Accounting Policies*, to our condensed consolidated financial statements appearing elsewhere in this Quarterly Report on Form 10-Q.

## Market risk

As filed, 3,703 characters.

### Interest Rate Risk

We are exposed to market risks in the ordinary course of our business. These risks primarily include interest rate sensitivities.

As of June 30, 2024 and December 31, 2023, the outstanding amounts related to our 2020 Credit Facility incur interest fees at variable interest rates and are affected by changes in the general level of market interest rates. However, there was zero outstanding balance on the 2020 Credit Facility as of June 30, 2024 and December 31, 2023.

### Foreign Currency Exchange Risk

We transact business globally in multiple currencies and hence have foreign currency risks related to our net sales, cost of goods sold and operating expenses. We use derivative financial instruments to reduce our net exposure to foreign currency fluctuations. Our objective in managing exposure to foreign currency fluctuations is to reduce the volatility caused by foreign exchange rate changes on the earnings, cash flows and financial position of our international operations. We generally target to hedge a majority of our forecasted yearly foreign currency exchange exposure through a 24-month rolling layered approach and leave a portion of our currency forecast floating at spot rate. Our currency forecast and hedge positions are reviewed quarterly. The gains and losses on the forward contracts associated with our balance sheet positions are recorded in ‘‘Other income (expense), net” in the condensed consolidated statements of operations appearing elsewhere in this Quarterly Report on Form 10-Q.

The total notional values of our forward exchange contracts were $101.8 million and $121.0 million as of June 30, 2024 and December 31, 2023, respectively. The derivatives on the forward exchange contracts resulted in an unrealized loss of $(8.5) million for the six months ended June 30, 2024, and we estimate that a 10% strengthening or weakening of the U.S. dollar would have resulted in an approximately $0.3 million gain or loss.

A portion of our cash and cash equivalents are denominated in foreign currencies. As of June 30, 2024, a 1% change in the value of the U.S. dollar compared to foreign currencies would have caused our cash and cash equivalents to decrease or increase by $0.1 million. As of December 31, 2023, a 1% change in the value of the U.S. dollar compared to foreign currencies would have caused our cash and cash equivalents to decrease or increase by $0.1 million.

### Inflation Risk

Inflation generally affects us by increasing our cost of transportation, labor and manufacturing costs. In recent years, we have seen fluctuating transportation costs caused by global supply chain disruptions or geopolitical instability and general inflation effects, which may cause pressure on our costs and margins. More specifically, we source a large amount of our finished goods from international countries, which exposes us to international supply chain inflation, particularly ocean freight. In the six months ended June 30, 2024, general inflationary pressures continue to increase the other elements of our cost of goods and operating expenses.

### Credit Risk

We are exposed to concentration of credit risk from our major customers. In the six months ended June 30, 2024, sales to two customers represented approximately 49% of our consolidated net sales. We have not experienced credit issues with these customers. We maintain provisions for potential credit losses and evaluate the solvency of our customers on an ongoing basis to determine if additional allowances for doubtful accounts and customer credits need to be recorded. Significant economic disruptions or a slowdown in the economy could result in significant additional charges.

## Controls and procedures

As filed, 1,518 characters.

### Limitations on effectiveness of controls and procedures

In designing and evaluating our disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives. In addition, the design of disclosure controls and procedures must reflect the fact that there are resource constraints and that management is required to apply judgment in evaluating the benefits of possible controls and procedures relative to their costs.

### Evaluation of disclosure controls and procedures

Our management, with the participation of our Principal Executive Officer and Principal Financial Officer, evaluated, as of the end of the period covered by this Quarterly Report on Form 10-Q, the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act). Based on that evaluation, our Principal Executive Officer and Principal Financial Officer concluded that, as of June 30, 2024, our disclosure controls and procedures were effective at the reasonable assurance level.

### Changes in Internal Control over Financial Reporting

There were no changes in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the quarter ended June 30, 2024 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

## Risk factors

As filed, 334 characters.

Please refer to Part I, Item 1A. "Risk Factors" of the Form 10-K for the fiscal year ended December 31, 2023 for a description of certain significant risks and uncertainties to which our business, financial condition and results of operations are subject. There have been no material changes to these risk factors as of June 30, 2024.

Filed Aug 1, 2024.
Source: SEC EDGAR, the filing index for accession 0001482981-24-000102. Last ingested by Listed: Nov 5, 2026, 16:46 ET. No prices; not investment advice.