Splash Beverage Group, Inc. (SBEV): Navigating the Beverage Landscape with Diversified Offerings

Published on September 24, 2024 | Ticker: SBEV

Splash Beverage Group, Inc. (SBEV) is a company that seeks to identify, acquire, and build early stage or under-valued beverage brands with strong growth potential within its comprehensive distribution system. The company's diversified portfolio includes both alcoholic and non-alcoholic beverages, catering to a wide range of consumer preferences.

Business Overview

Splash Beverage Group operates in two key segments: the manufacture and distribution of non-alcoholic and alcoholic brand beverages, and the e-commerce sale of beverages. The company's distribution system is comprehensive in the US and is now expanding to select attractive international markets. Through its division Qplash, Splash's distribution reach includes e-commerce access to both business-to-business (B2B) and business-to-consumer (B2C) customers.

In the non-alcoholic and alcoholic brand beverages segment, Splash Beverage Group markets well-known brands to customers throughout the US. The company's portfolio includes the TapouT energy drink brand, which it licenses from ABG TapouT, LLC. Splash is required to pay a 6% royalty on net sales for the TapouT brand, with minimum monthly payments of $55,000 in 2024 and 2023.

The e-commerce segment, Qplash, markets Splash's beverage brands directly to customers who prefer delivery to their office, facilities, and homes. This vertically integrated B2B and B2C distribution platform has been a key focus area for the company.

Financials

For the full year 2023, Splash Beverage Group reported annual revenue of $23.2 million. The company's net loss for the year was $21.0 million, and its annual operating cash flow and free cash flow were -$10.2 million and -$10.2 million, respectively.

In the first quarter of 2024, the company's revenue decreased to $1.5 million, compared to $5.8 million in the same period of 2023. This decline was primarily due to a $0.7 million decrease in beverage sales and a $3.5 million, or 91%, decrease in e-commerce revenues due to low inventory levels. The net loss for the first quarter of 2024 was $4.7 million, compared to a net loss of $3.7 million in the same period of 2023. The increase in net loss was driven by higher debt discount and interest expenses.

Liquidity

As of March 31, 2024, Splash Beverage Group had $14,757 in cash and cash equivalents, compared to $379,978 at the end of 2023. The company's reported cash usage for operating activities during the first quarter of 2024 appears to be inconsistent with its available cash at the beginning of the quarter, and there is no mention of additional funding sources to explain this discrepancy.

To fund its operations and growth initiatives, Splash Beverage Group will need to raise additional equity or debt capital. The company's Board of Directors has approved raising up to $8.0 million to fund acquisitions, equipment purchases, and working capital. However, there can be no assurance that additional funds will be available when needed or on terms that are acceptable to the company.

Risks and Challenges

Splash Beverage Group faces several risks and challenges in its operations. The company's ability to generate sufficient cash flow to fund its operations and growth initiatives is a significant concern, as it has historically incurred losses and used cash in its operations. The company's limited liquidity and working capital deficit also raise substantial doubt about its ability to continue as a going concern.

Additionally, the company's reliance on a limited number of large customers for a significant portion of its revenue, as well as its exposure to fluctuations in commodity prices and the competitive nature of the beverage industry, pose risks to its financial performance.

Outlook

Splash Beverage Group has not provided any specific financial guidance for the upcoming year. However, the company's management has indicated that it is focused on improving its liquidity and financial position through various financing activities and cost-cutting measures.

The company's success in executing its growth strategy, managing its costs, and securing additional funding will be critical in determining its future performance and ability to continue as a going concern.

Conclusion

Splash Beverage Group operates in a highly competitive and dynamic beverage industry, with a diversified portfolio of alcoholic and non-alcoholic brands. The company's financial performance has been challenged by declining revenues, significant losses, and negative cash flows, raising concerns about its long-term viability.

To address these issues, Splash Beverage Group will need to successfully execute its growth strategy, improve its liquidity and financial position, and navigate the risks and challenges inherent in the beverage industry. Investors should closely monitor the company's progress in these areas and its ability to secure the necessary funding to support its operations and future growth.

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