Splash Beverage Group, Inc. (SBEV) on Q2 2024 Results - Earnings Call Transcript
Operator: Greetings. Welcome to the Splash Beverage Group Second Quarter Conference Call. [Operator Instructions]. I will now turn the conference over to your host, Robert Nistico, Chairman and CEO of Splash Beverage Group. You may begin.
Robert Nistico: Thank you very much. Hi, everybody. Thank you for joining us. This is Robert Nistico, CEO Splash Beverage Group. Also with us today, we have Julius Ivancsits, our CFO; and of course, Bill Meissner, our President and Chief Marketing Officer, on the call as well, and each will be speaking with respect to their individual responsibilities. Honestly, a lot of you haven't had a lot of exposure to Julius because he's only been with us for about 4 months now, but we're thrilled to have him. It's been a tremendous addition to the team. And Bill, of course, has been with us for a number of years, who is really truly one of the best presidents and marketing people I've ever worked with. So you'll have a chance to hear from them and ask questions as we get into this. Today, we'll be discussing today's -- the company's financial performance, key developments providing insights to what the result means for the future, future being the key word. We have a formal dialogue we have to follow here, but we're going to try and keep it as informal as possible. And then, of course, we'll open the web portal up for questions when we're done. 6 basic topics today briefly on Q2 and H1 results. We all know what they are. So we're really more interested in how we're moving forward now, which we're very excited about, by the way. Distribution and brand strategy, super important stuff as we move forward into the back half of the year and into next year. Capital structure and financing update, really a key subject as we're moving into the back half of the year again. Of course, financial outlook for the next 18 months. We also want to talk about mergers and acquisitions. Key part of our narrative, if you will. And of course, we'll have a Q&A session. Alright, just really brief, super high level on the quarter, we reported revenue of $1.05 million for the quarter, which is very light compared to 1.5% in the first quarter and, of course, $5 million last quarter. The sales decline was really attributed to 100% to limited liquidity. It prevented us from procuring inventory for Qplash and frankly supporting the chain authorizations that we've gotten recently. So we're going to address all this in great detail here in a little bit. Net loss came in at $5.3 million, basically $0.11 per share and compared with 13% in Q2 last year 2023. So that's kind of our look in the rearview mirror. We're going to talk a lot about financing and liquidity here as we move forward. So now I'm going to turn it over to Julius a little bit more detailed review of the financial performance and Julius it’s all yours.
Julius Ivancsits: Okay. Thank you, Robert. I just want to dive a little bit briefer into the financials. For revenue, as Robert denoted, revenue was a little hair over $1 million for the quarter, and that was down compared -- driven by the nominal sales at Qplash. It's important to note that our sales performance wasn't only impacted at Qplash due to liquidity, but was also on our Copa di Vino brand as well. The liquidity prevented us from procuring enough wine to get all of our orders out the door and carry $250,000 of backlog from June into July. So the demand was strong for the brand and Bill will dive deeper into that. On the gross margin side, the margins actually did improve from the prior quarter. We made about $244,000 in gross profit compared to $164,000 in the prior quarter. And we did expand our gross margins by 12% from 11% in Q1 to 23% in Q3. And this can really be attributable to just lower raw material cost versus the prior period. And given our liquidity challenges, we really did focus in on our SG&A spending, which was $2.6 million in the quarter, that was 9% lower than in Q1 and 52% lower than Q2 of last year. So given the limited liquidity, the business, as I said, was very diligent on managing our spending across the board from everything from travel and entertainment to sales and marketing and then backfilling individuals who left through natural attrition. Just kind of going a couple further with a couple of other points here. EBITDA for the period was a loss of $2.6 million. This is actually an improvement of $300,000 from Q2 and half of what the loss was in Q2 2023. So Robert kind of noted previously on the net losses for the period. One thing is if you score card for stock-based compensation in Q2 versus Q1, net loss was actually flat at $4 million from the prior quarter and a $600,000 improvement from prior year. The last thing just in terms of the financials is we've kind of said this a couple of times now, liquidity was tight for the period, and we had nominal cash at the end of the quarter. But if you back it up a little bit, collections were solid for the period, actively just managing that. Inventory levels were down $100,000 from the prior quarter as anything that we procured was effectively immediately consumed. And even with our light liquidity situation, current liabilities were effectively unchanged from Q1 to Q2. So we really just worked everything as effectively as we could with the liquidity challenges that we had. So I'll turn it over now to Bill and he can discuss some of the commercial trends, distribution wins, brand strategies and update on product development.
Bill Meissner: Thanks, Julius. Indeed, while inventory shortages hindered our commercial results for the quarter we had numerous successes to build sales momentum into the balance of 2024 and '25. So I'll just take you through some of those. One key thing is the demand for our products was measured by orders coming into the system, and that was 20.1% higher than Q2 2023. The inventory funding challenges were simply the reason the orders didn't get out, but order demand was significantly greater year-over-year. And that has only grown in size and intensity. Pulpoloco was expanded to all Sea World Parks & Entertainment venues across California, Florida, Pennsylvania, Virginia and Texas. Copa di Vino and Pulpoloco received an authorization from Chevron's ExtraMile convenience stores. This authorization is across 650 stores across 6 states. Copa di Vino and Pulpoloco received an expansion into 300 Murphy Oil USA stores in 7 states. Copa di Vino received an authorization from ampm convenience stores, and that is up to 1,100 stores across several states, one of the larger chains in the United States. We executed a successful launch of Copa di Vino's new four-pack and a test in 28 Walmart stores in Tampa, Florida, which we're very excited about and performing well. It's certainly our hope to be expanded in Walmart as we go and perform in that test. We executed a successful launch of a test in Walgreens. This is in 59 stores in the greater Las Vegas area. And similarly are performing there and expect to continue to grow with Walgreens following the test. We were able to expand coverage for all brands into a state that we were previously not in, Colorado, with a group called Legacy Distribution. Salt received an authorization. [Technical Difficulty]. So the bulk of the category is really in straight Blanco tequilas. And we have been the go-to flavor tequila brand. This really puts us into the meat of that market with Blanco tequila. And then from a momentum perspective, it was just a very successful quarter that will buttress our results for the second half of the year despite the headwinds that we faced on liquidity and inventory. Our sales team remains focused on our ever-growing national distribution network of high-quality distributors and retailers remain enthusiastic for our brands and the innovation to come. I'll now turn it back to Robert, who will provide an update on our capital structure.
Robert Nistico: Thanks, Bill. That's great stuff. Good work. Everybody -- the message there is there are -- even though in the face of serious liquidity issues, this group didn't sit on their hands. So we achieved all these things with virtually very little money. So while we are organizing ourselves with the financing group that we'll talk about here in a minute, we were able to achieve quite a bit staging ourselves. So when money starts to come in as it is as of yesterday, we can actually capitalize on that and really start building out revenue as we roll into December and into next year. These are a ton of authorization. It's an amazing job, the sales and marketing team has done. We applaud them and thank you for really digging in and doing what we could do with limited resources. So also, just so it's clear, I want to make sure people understand really how we got into this position. I mean it happens. Sometimes companies face cash crunches, liquidity issues. For us, we had a signed deal. We had documents signed. We even had a level of fund -- proof of funds from a group out of Europe, for reasons outside of Splash, that deal never came to fruition, and we waited and we waited. And fortunately, we're not the type of group to only count on one horse. So we had some redundancy. Unfortunately, that group out of Florida never got their funding. So we had to hustle. And of course, you guys know that we took on some capital from some investment banks. Those can be considered expensive from a dilution standpoint. The really good news there, though, is we have retired one of them and it was a significant amount of money. It was originally $2.4 million. And all that, I guess, I can call it, overhang is now behind us. God love him, we needed the money. Sometimes you just have to do it, but it was difficult and it put a lot of downward pressure on the stock. There's no surprise there, no secret. The really good news, though, is that group is behind us, and God bless them for helping us, but glad it's behind us, I'll say it that way. Moving forward, we announced loosely that or in a superficial way that we had an agreement with the group out of upstate New York, Rochester specifically, high net worth individuals managed by Capitol Securities and Rochester Wealth Management, a really good group of people up there. We, of course, have a formal agreement with them for a private placement. This morning, that press release was sort of the very early results of those efforts. It's been a lot of work, but also a lot of fun. We have the first tranche about half the money in for the first tranche in hand. We'll be obviously required to put an 8-K out with that here shortly. Money is still flowing in. In fact, it's actually kind of -- there's some amusing pieces to it. Some folks mail checks, some folks had ACHs, but a lot of the money comes, we're happy. But the message here is that, that effort is well underway. We have signed documents, as I mentioned in the press -- as we mentioned in the press release this morning, the money continues to flow in. We will be doing it in 2 tranches. There may be a third, but I'm not going to say that for sure. The second tranche, we have signed documents as well to the tune of about half -- a little more than half, 2/3 of it. So we're very, very, very confident and excited that money is flowing in. And with all the work that the sales and marketing team has done will be able to really, really leverage that and convert that into revenue. Additionally, Julius has worked hard on an ABL or revolver, if you will, a lot of credit. As this money comes in, that triggers that, which will allow us to have extra liquidity from a credit-based standpoint, and Julius will talk about that in a little bit. Let's see. Okay, Yes. So basically, it's been a difficult couple of quarters. It's -- I've personally put more money in the business because I know where we're going. And we've had some of our legacy investors help out. We financed things through accounts receivable and whatnot. So we're past that point now, and it's time to get out of first gear and move forward. So we're very excited about that. Julius will now discuss outlook for the balance of ‘24 and then to ‘25.
Julius Ivancsits: Okay. Thank you, Robert. I want to pivot to what has occurred and just really looking ahead at a promising future at Splash. The projections I'm referring to exclude any acquisitions and then are based upon the financing that we received yesterday, and they will be coming over the next couple of weeks. So from a revenue guidance standpoint, management, we expect revenue to be in the range of $9 million to $10 million for full year 2024 and $38 million to $42 million for 2025. This will be driven by organic growth in Copa di Vino, our Pulpoloco brands, along with the reboot or, say, better word restart of our Qplash, which is our e-commerce platform. So I know we'll get to the M&A side a little bit later, but any M&A would be accretive to the figures that I just noted. On a gross margin perspective, I do expect gross margins to land in the high 20s for full year 2024 and moving up about 10 percentage points to the high 30s in 2025, and this will be driven by operational efficiencies and procurement savings. So if I jump to EBITDA. EBITDA is projected to be a loss of around $9 million for 2024. And given the programs that we have on the way we expect that we're going to be EBITDA positive by late Q2 2025, early Q3 2025 based upon our current footprint. So kind of just to take this a little bit deeper, these financial projections will be driven by our strategic initiatives. So this is the first time we've kind of gone public this project white hot. We have 5 strategic pillars: the first one focused on sustainable and profitable growth. The second, operational excellence; the third, our e-commerce platform Qplash, bolt-on acquisitions and then finally, our capital structure. So Project [indiscernible] is expected to move the company to positive cash flow from operations and positive EBITDA, as I previously noted, without any M&A and then the cost reductions and expected organic growth will get us there. It is a strategic imperative for Splash Beverage Group to strengthen its capital position and restructure the company's operations to ensure a path to achieving positive cash flow from operations. Project White Hat provides the organization a strategic plan to ensure laser-like focus on optimizing our operating footprint and the need to support our next -- our growth cycle and have the organization ready for pending M&A. To go a little bit deeper on the strategic pillars. Splash has had success in expanding its production -- I'm sorry, its distribution and product offerings, a lot of it which Bill just noted, which will create momentum in the rest of this year going into next year. And as the liquidity challenges are lifted, we would make some strategic marketing investments in our tequila lines, along with focusing additional advertising and promotion spending on Copa di Vino and our Pulpoloco brands. I noted previously on the gross margin expansion, we expect to exceed significant cost to savings, expanding these gross margins and this will be a combination of contract manufacturing, strategic raw material procurement and freight savings programs. these initiatives with step-up sales will allow slash to deliver on its procurement savings targets and gross margin expansion. A bit more just on Splash with our balance sheet being recapitalized, this provides liquidity to procure inventory for our e-commerce platform. year-to-date sales in 2024 for Qplash has been nominal, and we will relaunch in the coming weeks where we expect sales for Qplash in the low to mid-20s in 2025. And that's just coming from our e-commerce platform. Again, just a couple more things here on the bolt-on acquisitions. I do want to remind everybody that splash was created on the concept of a diversified portfolio beverage brands. And our strategic pillar for bolt-on acquisitions is to execute our M&A strategy. Robert will go a little bit deeper on the M&A side onto the developments there. The last thing I just kind of want to focus in on is capital structure. We have successfully executed part of our strategic pillar through the securitization of our syndicated financing. And then Robert did note on the ABL revolver from an equity partner that will provide us additional liquidity. Future M&A deals will be either come from debt, equity or a combination of that. But that's kind of really our outlook on Project White Hot. And then let me just turn it back over to Robert on the M&A side.
Robert Nistico: Julia, would you be and go a little deeper into how Qplash will work? Because it sounds like a big jump in numbers, and I want to make sure people understand why that's not only realistic that it will happen.
Julius Ivancsits: Yes, sure. So basically, you're selling pretty much through Amazon as a reseller. So it's a really fantastic business that you're effectively buying inventory and selling it on a cost-plus model. And for folks as they don't know, we only have 4 individuals that are supporting that business. So the overhead is very low. So the turnaround time on that is fairly quickly. And we used to do around $4 million to $4.5 million a quarter in slash when there weren't liquidity challenges. So this isn't a very large stretch to kind of get back there. We'll need a couple of months to kind of get there. but it's a pretty well-developed business model that we've used previously. And the beauty of that business is the cash conversion cycle is fantastic. You buy the inventory and you're effectively getting immediate payment. So you're looking at procuring something and getting monies back in 5 to 10 business days.
Robert Nistico: Yes. Okay. Great. Thank you. Yes, it's a really great platform for us. And basically, virtually cash flow neutral, if not positive, by -- certainly by the middle of next year. Thanks for that. All right. M&A update. There's been -- we've been working on Western Son Vodka for some time. It's been actually a great exercise because it's a really good group of people. We will work very well together, assuming we close. Our intention is to close this thing hopefully by the end of the year, but it will probably roll into January. We structured the raise like this. It's a blend of debt and -- the long-term debt and equity. Basically, the numbers are right around $75 million. Three quarters of that or $50 million of it, if you will, is long-term debt and then the $25 million being with an equity partner. We have to be careful. We can't talk about too many names openly yet, but we do have some numbers that are hard circled. And now a new player came in, I have to leave the name out, who is actually very interested, and from the space that I was interested in both sides, both the debt and the equity side. And I'll tell you this, it's about a $3 billion player, so they can certainly do it. It's not done, signing close to done. But they have requested to go to deeper due diligence, which is a great sign because they're from the space, which is really ideal because as we execute on our strategic plan, with that group. They're a perfect exit partner as well, and they know that. We know that. So that's an ideal situation if it comes to fruition. It's early, but we'll keep you posted on that. We'll see how that goes. So the M&A piece is important, but I also want to talk a little bit about why? The platform of Splash was -- the vision for it was always to be a merry-go-round, if you will, of acquisition and exit. We never intended to make it an incubation platform. It's always supposed to have been an acceleration platform. So we have another potential acquisition in the hopper. We haven't announced it. I'm not going to reveal that today. We're not ready to do so. But it's a great example because it's a regional brand, and that regional brand has proven itself, right? They did it right. That's an wide and a mile deep in a certain geography in the country. So then because we're distribution experts, I mean, we really are -- I hate to complement it, but we are good at it. And we have either vendor numbers or distribution relationships with every major distributor in the country, and everybody knows we have a relationship with Budweiser ABN InBev, that's our go to group, but we also have MillerCoors and very public national and Southern Glazers Young's Market, whomever. But to take that brand that has already achieved a certain level, not massive numbers, but a certain level of repeat purchase and then accelerating that in our system because we have that distribution network and the retail support across country now. We spent enormous amount of time putting that together. Right before we had a liquidity problem, we were -- I mean, it was absolutely perfect, exactly where we wanted to be. we had to hit the pause button for a couple of quarters, and we're sorry, and it's just not at all anybody wanted to happen. But now that we're powering through that this proposed potential unnamed acquisition is a great example of why we do it. So now we can take adjacent markets. Geo target the ones that make sense for that brand based on their geography, their -- the time of year, temperature, et cetera, and higher influencers really go market by market by market. And the distribution piece, which most people fall down on is really our easy button, if you will. So we're very excited about M&A as we move forward. I want to make this clear, too. We're not trying to be the next DIAGEO. We just want to be the most efficient and the most profitable. And wherever that number falls out, it falls out. And obviously, by doing that, we add shareholder value. So we're super excited about the potential of Western Son and possibly this other one. But that's that. And I'm going to leave you -- we'll turn it over for questions, I should say. I want to make sure this is crystal clear in everybody's minds. Our 3 key platforms to achieve for this company, and we've tattooed it on each other's for heads is, first of all, finishing out the rates that we're in the middle of right now. Like I said, money is coming in, you saw the press release. Second tranche, we believe, will go even easier, first is always the most difficult. We actually have, like I said, signed documents in second tranche already from people we know. So we're very confident in that. So we closed this out, and it's on our base of operations. If you heard Julius, this raise on our current base of operations will bring us to revenue-neutral profitability by next summer sometime, whether it's the end of Q2 or beginning of Q3. That's without any acquisitions. So that's a really great thing to be able to say. And all that work was being done while we're sitting here trying to put the financing or getting the financing put together. The second thing is executing on our narrative of larger acquisitions. Well, that would be Western Son and potentially this other 1 that I'm not naming and there are others. Bill Meissner and I have a good word. We almost 3 a week come across our desk, some are gem, some aren't. But the fact that there's deal flow out there and it comes to us, that's a really valuable thing for us in the future. And then the third and final thing is actually reaching profitability. So completing this raise, so people know that we're not going to go do something, we have to do something that would be considered less desirable from a financing standpoint. You can never say never, but we believe we're past that. The second thing being executing on our narrative of larger acquisitions, the third thing being reaching profitability. These -- all 3 of these things are within reach between now and the second quarter of 2025, which is basically a blink of the eye. All right. Thank you for your attention. A lot of words. We'd like to open it up for questions now. And operator, please explain how to load your questions in the portal, please.
Operator: [Operator Instructions].
Robert Nistico: All right. It looks like we got our first question already. It's for Julius. Can you -- sorry, I got my glasses on. Can you please explain a little bit further on the operational excellence, I believe you called it, of how we get to profitability with this current raise by the middle of next year?
Julius Ivancsits: Sure. So the raise in and of itself gives us liquidity to actually procure raw materials. And so the things that we're looking at is, one of our highest cost items are for [indiscernible] freight. And so we're looking at adding 3 PLs to our locations to actually have better freight lanes to get products. And that will not only basically take costs down, that will actually reduce our cash conversion cycle as well. is we have various initiatives out there where the liquidity allows us to buy more efficiently by wine that we'll be buying that anywhere between a 10% and a 20% discount from where we're currently procuring. Why, because if you're hand-to-mouth you're buying what's ever out there and you're not getting any type of volume discounts. Everything is on the table as well for -- cups and labels and so forth, where we're continuously looking at where we can take cost out of the business, carry lower inventory levels and then be more efficient. Hopefully, that answers the question.
Robert Nistico: All right. Here's a question for me or on Western Son. And I think I'll start and maybe Bill Meissner will jump in as well. The question is what's taken so long is the deal at risk, the -- excuse me, I'm trying to read the screen -- okay, as a deal at risk. So going back to my statement about us acquiring brands that have regional success already. Generally, what that means is it's going to be in a revenue level that is too low for the strategics to be interested in. And that's the beauty of the vision for our platform. We want to grab those brands in that $15 million, $20 million, $30 million range and accelerate them. I mentioned the word incubation before. Incubation is a very difficult thing to do. Unless you get really lucky, it costs a lot of money. It takes a lot of time, and it takes away from your core business and your legacy brands as well. But -- so finding brands and acquiring brands in that, I'll call it, $20 million to $30 million range is ideal for us, we accelerate them to 40, 50, 60 depending on the segment beverage, whether it's non-Accor ALK, is absolutely perfect, and then that's where the strategics come in. Why it's taken so long, it's not easy. It's because we also operate in sort of no man's land from a revenue standpoint. We worked very hard against it. I think we finally found the right blend of debt and equity. And now we're getting tremendous response. And we also brought on a gentleman to help us with that raise. And he was a top director at Drexel. So that's going to help as well. Bill, anything I'm missing there?
Bill Meissner: Well, just as far as the question on risk, I can just assure everyone that the Western Son team is very motivated. We work great together, and they want this deal just like we do. They see this brand going to the next level, and they know that Splash is the partner that can help the brand get there. They are very much in favor and continue to be patient and work with us.
Robert Nistico: Okay. Great. man, I think it looks like topical difficult to hear on this. Maybe we should stand by 1 second, everybody. I'm sorry. Let's -- yes. Operator, I think it looks like it's -- the web portal isn't working very fast. So why don't we go ahead and open up the phone queue, please?
Operator: Absolutely. [Operator Instructions] The first question comes from Scott Buck with H.C. Wainwright.
Scott Buck: Appreciate the update. You're throwing a lot of information at us. Robert, I'm curious, the holdup on Son, that's almost entirely driven by lining up the financing? Is that fair?
Robert Nistico: Yes. That's exactly right. There's also it's also spirits, right? So you also have COLA waivers and licensing and permitting, you have to think about as well. So it's not a really quick down and done sort of thing. But yes, we think we figured out the financing blend and style now, and that's why we're getting a much better much better indication that we're going to get this done. We've hard circled a portion of it, by the way. I don't want to give you exact percentage, but it's meaningful. And then the other group that I mentioned that asked not to be mentioned, the $3 billion group. They're real. So we'll see where that takes us.
Bill Meissner: And Scott, so kind of you're saving a lot of information. I really wanted this call by design to really just put things out there, right, is we wanted to kind of really just kind of present our vision of what we're looking in the future, things that just didn't pop in the quarter in the financials to really show the momentum and just build the confidence in the external market on how we're using these funds, what the future looks like and to express our enthusiasm for the business.
Scott Buck: Yes. No, I think it's very helpful. In the most recent investor deck, it looks like with the closing of Western Son that you guys will be moving some production to the Dallas area. Is that correct?
Robert Nistico: Well, I'll say it this way. The Western Son Campus is located in pilot point, which is North or Texas. And some of our production and not all of it, but some of our production and logistics can be relocated there, which will be great. Just shipping lane savings alone will be tremendous. So yes, not everything necessarily, but yes, a portion of it for sure.
Scott Buck: Okay. Yes, I guess that's where I was going with the question, what are the potential cost savings or margin benefit if you moved some of the production or health of the inventory there?
Robert Nistico: Yes, just -- if we just focus on the freight lens, it is we're probably looking at a 30% savings just on our freight costs.
Julius Ivancsits: Which is material.
Robert Nistico: It's very material. I mean it's not just like it's 1 or 2 points. And then also, just -- that's a big piece of it. If you look at it from your outside Portland to looking for kind of the Dallas area and how just basically the truck lanes go, that's just very big for us.
Scott Buck: So we can bring wine from the West Coast. It's a good thing. And I don't believe those savings are even in your current.
Julius Ivancsits: No, no, like we have some strategic wine procurement savings, and that's just buying better -- but again, we haven't even incorporated a geography on where that line would come from. Also too, is, if you look at Copa di Vino, it's not vintage. So whether that line is from Pacific West from California or since we're talking about Texas, it could be a excess one, not necessarily would do that, but just kind of throwing that out there that, that's not even baked into the numbers yet.
Robert Nistico: That's the accountant talking not the marketing guy.
Scott Buck: Just to be clear, guys, I know you brought you both brought it up on the call. But the guide for 25, that does not include Western Son, right?
Julius Ivancsits: That is correct. That's correct.
Bill Meissner: That's correct. So we're really in a pretty good spot here even though it took us a while to get here.
Scott Buck: Right, right. I'm curious, proceeds from this most recent raise, what do you have to either catch up on accounts payable with refill inventory with? I mean, what kind of goes into kind of cleaning things up before you can think about it as growth capital.
Julius Ivancsits: Yes. So obviously, we've been hand to mouth on cash, and we're behind on some of the bills and our vendors have been really quite excellent in working with us. So with the raise that we have, we're not just going to write a check next week and pay everybody off. There'll be an 8- to 10-week paydown of anybody that we're past due. And then again, as on the inventory side, whether it's making investments in Qplash or wine we'll be buying just smartly and then just buying in higher quantities so we can get some purchasing price leverage.
Robert Nistico: So -- and the one thing also I want to highlight as well is when you're so limited on liquidity, you have senior leadership just basically spending a lot of time on managing vendors, right? That takes away from our strategic focus and to have the cash in the bank to focus in on bigger ticket items will be a welcome relief for us.
Scott Buck: Yes. Can you share the pricing information on this raise? Or will that be included in the 8-K that's filed either this afternoon or tomorrow.
Robert Nistico: Yes, you'll see it in the 8-K, but it's reasonable. I think people will be very comfortable. It's not like some -- it's very reasonable. And it's 18 to 22 years down the line from a debt standpoint. Yes, I think people will be comfy with it.
Scott Buck: Okay. Perfect. And then last thing, Julius, can you give us a little more information on the ABL? I mean, how -- what is the capacity of the revolver, I guess, or whatever the...
Julius Ivancsits: Yes. We've got a term sheet. And basically, it's your standard ABL, just AR and inventory. And one of the things is with that, it was contingent on us doing syndicated financing. So the range that I can give you is $3 million to $5 million.
Scott Buck: And we'll get more information on that in the coming weeks as this current raise is finalized, right?
Julius Ivancsits: Yes, correct. Again, there'll be a gradual buildup, right? You got to buy inventory to finance the inventory, and so that will kind of should itself up. And by the way, I mean, just to be honest, like with that is Robert was actually kind of shocked at the terms that were coming through, given what, call it, our financial situation, the fact that we could even pull that everybody was pretty happy with.
Robert Nistico: Yes, it's good stuff.
Scott Buck: I'm sure . And then last thing, Robert, on the M&A front, more of the divestiture front. I mean of the brands that you currently have, anything that we could potentially not see in the portfolio 6 months, 12 months from now?
Robert Nistico: Yes. There are -- I'll just go there. Yes, I'm just going to go there. There's some corporate reasons why we've been quiet about that. So it's going to be bear with me, I'm answering your question. When we talked about acquiring brands and acquiring regional brands with regional success and repeat purchase and accelerating them, that's great. Our very first brand, when I came to Splash, the company already had a licensing agreement for TapouT. TapouT has a lot of preexisting brand awareness. So we thought, well, we can work with that. But ultimately, because TapouT was really a lifestyle brand associated with the UFC and MMA, it was really an incubation project. And I had some conversations about that this with some folks this week. And that's fine. In fact, we had good authorizations on it and the brand was selling, but just not to the level that we -- I don't want to say, hope, to a level that we would evaluate whether it was worth continuing or not continuing. And it's not that the brand failed, it was actually from an incubation standpoint, pretty darn successful. But from a regional brand success standpoint, no, it wasn't worth it. And we figured we're going to end up spending millions of dollars and to continue to incubate. And then, of course, then we still have -- we have licensing payments to consider as well. And it's -- that takes a lot of time. So sticking to our core strategy of regional success we made the hard decision, and we're walking away from the brand. We haven't talked about it because there are distribution and chain considerations, and we have to be able to work through that and get to all the chains and distributors. So it's been -- we've kind of kept that on the down a little bit just from a functional standpoint. But no, we will not be continuing with TapouT. We wish them the best we could incubate it if we had all the cash in the world, honestly, I'd like to continue with it. But my guess is, and this is just a guess, if we were to do that, it would take 2 to 3 years to get it to where we want it and cost another $20 million, $22 million. I'd rather focus on our other brands, they're really exciting and, of course, acquisition.
Scott Buck: Yes. Well, I appreciate the transparency there and I appreciate you guys taking the time to host this call.
Operator: The next question comes from Sean McGowan with ROTH Capital Partners.
Sean McGowan: Appreciate the opportunity to talk guys. Going back to your comments on guidance. Would you mind repeating the expectation for the range in '25 on revenue, did you say $30 million to $34 million.
Julius Ivancsits: No, no, no, 38% to 40%.
Sean McGowan: 38% to 40%. Okay. I'm glad I asked it. And when you talked about being EBITDA positive kind of late 2Q, Q3. Would you expect to be EBITDA positive for the year?
Julius Ivancsits: So again, it's like I'm conservative. I think for the full year, I'm expecting to be down like $2 million to $2.5 million full year, and most of that is in the first and second quarter. But again, I have upside on that, where I think we can pull out with a little sales momentum. And we've kind of noted a couple of different things that aren't built into the numbers. But I don't want to get too rosy because I am 18 months out.
Sean McGowan: Right. Right. Okay. And then the last question on that guidance is, would -- given the potential seasonality in the business and other things going on, would you expect that once you cross that threshold into positive EBITDA in the second half of '25, do you think you would stay there consistently in every quarter? Or could there be still some quarters that wind up negative?
Robert Nistico: No, no. No. Because once we cross that threshold is once you start getting into the second half of 2025 our Copa di Vino, our Pulpoloco and our tequila starts taking off and you have Qplash more of a steady state, right? And I can't -- I can only do so much on Qplash from a margin expansion standpoint because I'm in a resale model. I'm cost plus. But when I start talking about the legacy brands, I have a lot more room there on commercial momentum.
Sean McGowan: I guess what I'm asking, though, is would we then -- when the calendar turns to -- I know this is like way in the future and we'll all be retired -- if I turn the calendar to '26, am I taking a step back because I've made investments for growth, and I'm in the post-holiday first calendar quarter, do I -- or do I just -- I've crossed the threshold, and I stay positive after that.
Julius Ivancsits: Yes, you say positive. We won't go backwards on that. And then like I think Robert and Bill can maybe give a little bit of sense of seasonality, but it won't be significant from the way that I see it.
Bill Meissner: So Sean, by the way, nice talking to you. I hope you do hope you've been well. So -- but I understand this, too. On the legacy brands on the beverage side of the business, with the exception of the chain -- we had a ton of chain authorizations for TapouT, and we already talked about that. But we're now just getting the meaningful regional and national chains for Pulpoloco and for Copa di Vino and frankly, some for salt tequila where we didn't have those before. So -- and everybody on this call, I think, understands that the chains are what build brands. So once you start getting into Walmarts of the world, the Walgreens, the ampms, Circle-Ks, et cetera, you're talking about a massive increase in revenue. So no, there's no reason for those numbers to slide backwards.
Robert Nistico: --Without M&A. Just kind of more -- so like, again, it's like 18 months out or going into '26, this is all standard M&A Understood.
Sean McGowan: I have two other questions. One is thanks for the color on TapouT. I'm hearing you say that the challenge there is that it would require to kind of be incubated, but you're not ruling out not out, right....
Robert Nistico: No, no we're just talking about this brand specific. In fact, this -- Bill Meissner can speak to this as well because he did the design. He did the positioning. He's a incredible Marketer and President. We own the trade dress with the exception of the name TapouT and [indiscernible], and we own the liquid. So no, we are not getting out of the non-out business, we want to do both.
Sean McGowan: Okay. Makes sense. And then my last question is on Poco loco. So we've talked -- you and I extensively over the years about other kind of other applications of that type of packaging technology. Can you give us a little update there on what some plans might be? Or is that kind of back cornered?
Robert Nistico: No, no. Yes. That's an outstanding question. I'm glad you brought it up. I should have brought it up earlier. So part of the use of proceeds for this capital raise is the deposit on our first paper can roller. And if you don't mind, I want to talk about that a little bit because it has multiple positive impacts on the organization. Number one, -- the reason we're -- we have a 7-Eleven authorization for Pulpoloco and we're loading stores on a daily basis. It's not just that it's a really nice liquid. It's a fabulous sangria. But the biodegradability of that package is unique and sustainable and recognized by the buyers there and other chains as well. So that packaging is super important to us. As we procure our first roller, our intent will be to put it here in the States, probably North Texas. The cost -- the estimated cost of that those cans once it's here, and for everybody on the call, it's an 8 layered paper can. The outside layer is the eighth layer. It's also the label. So the cost of that is roughly $0.04 domestically. I think right now that raw material as a package is about $0.09 as we import it. So we cut that less than half. Our current aluminum can printed is about $0.245. So tremendous savings. And that has racketing down COGS increasing margin. So now we can put line extensions in that thing. We can take some of our current brands, more of our current brands put it in there, and I'm going to have bill jump on in a second and talk about the water project in that paper can as well. But no, that is absolutely not back [indiscernible]. We're very excited about it, and we hope to get that first machine here first quarter. And this is this is not guidance, but this is anecdotal, but factual. When I was in Bentonville the last time with Aida Aragon, our National Account VP, the Walmart buyer, the wine buyers as is straight up. Can we have an exclusive on that for some of our private label wine and I smiled and giggled and said, maybe. Inside I'm going, no, not yet. But we can sell excess capacity. And if you do the math, we could sell somewhere between $0.14 and $0.16 a can. And you're an analyst, 380 cans a minute, you add that up, right? So there's an opportunity to sell excess capacity here as well. So this is a tremendous project for us. No, nothing has slowed down on that. It takes a long time to build these machines. Bill Meissner, do you want to talk for a second about your water project in this package?
Bill Meissner: Yes. We see tremendous opportunity to replace a fair amount of [indiscernible] in the market with the CartoCan, in a natural spring water. The amount of retailers and venues who have made specific KPIs on sustainability will really love the water in a CartoCan. We are limited by that own size. So that's a smaller segment of the overall water category, but absolutely huge in relative terms from a case volume perspective. So we think very highly of the future of water in CartoCan. If you think about these little kind of 8-ounce PET bottles, and the waste that goes along with them....
Robert Nistico: It's criminal.
Bill Meissner: It's a -- and here, you have overwhelmingly biodegradable package, that is also recyclable and breaks down over time. It's just perfect for water. And I think there are some industry probably by guys like us that have been around a while like well, water has to be in a [indiscernible] or in glass, but liquid death kind of proved that as definitely not the case and just absolutely blowing up in the aluminum can, which can't hold a candle to the sustainability of the CartoCan. Further, on the innovation front, we have qualified that package for wine, which you might think, well, was great for Sangrias, why wouldn't it be for wine? It was actually took some time to figure out. So we will be able to be the first wine in CartoCan as well. So that is right there for us, both of those 2 innovations in that platform.
Julius Ivancsits: And just by the way, another -- just into the numbers that were quoted, we have built none of that and yet, right? It's too early to really put a monetary value on what that would mean to us, but it is upside to our figures.
Robert Nistico: And as a CEO, I call that a sandbag.
Sean McGowan: Well, I'm glad you brought that up because the question that I would have is, okay, the revenue number is not in there, but are some of these initiatives going to take you some costs? Are they in there for -- in your EBITDA guidance?
Julius Ivancsits: I kind of like almost like -- the way that I would almost kind of characterize this as you kind of got like a tolling arrangement for a lack of a better word. I don't have that baked in.
Sean McGowan: Okay. But yes...
Robert Nistico: But it's instantly profitable. The way that I approach it just -- again, is like putting down the timing of this, right, with everything that's going on, it's hard to put a finger to kind of put this in an operating plan. But obviously, it's something that we're looking into. And the market has a strong need for that. And that will help our business tremendously.
Bill Meissner: And Sean, think of it this way. The reason it will probably go in our favor versus against us, assuming our numbers are correct, at $0.04 a can then you put water in it. So purified, but so do the math is instantly profitable.
Sean McGowan: Okay. All right. Appreciate the update guys.
Robert Nistico: No problem. So we're -- I know we've got a million questions out there. Let's try and answer a few more or we'll be here until midnight. Who's next.
Operator: Up next, we have David Figueredo with CSU [ph] Investment, Inc.
Unidentified Analyst: Robert, can you hear me?
Robert Nistico: Yes. Yes. Got you.
Unidentified Analyst: Dave [indiscernible], I've talked to you a couple of times in the past, I've been here for a while and stuck with it through thick and thin. I just -- first of all, I want to thank you and your team for the tenacity to get through this really tough part. -- in the growth of your business. So I just want to really thank you guys there. And I use Qplash, and I really, really -- I turned 66 in June. It's still pretty athletic trying to be anyway. But I really enjoy sipping on 1 of those energy drinks once a day. So I want to see how people are liking that. But that's -- I really like that. And your tequila, I get the citrus and as much as possible, we have a drink before dinner, 3 ounces for me, 2.5. But going to hybrid your green recipe from [indiscernible]. So I go on fresh orange and 1 line I squeeze in their all fresh goods. And it's just -- I thoroughly enjoy it, and my wife does and all my friends that I make it for in children, they love it. And the pop-we're not big drinkers on it, but we have it. Move Grant, my wife loves it. But I have to tell you the paper just feels so good in your hand. And I'm not exaggerating. It's not like when you get a paper straw or something the restaurant, you can't stand drinking your drink. Well, this is not the case. I just want to say it really feels perfect in your hand. It sits well. But just -- how is the energy drink? Are there are people like me that just love the darn thing in the tequila?
Robert Nistico: Yes. First of all, thanks for your comments. We appreciate you calling in. We appreciate you as a consumer also. So a couple of things. Yes, the hand feel, the -- we call it hand feel on that paper can is amazing. And yes, we're quite proud of the liquid. I don't know if you heard Bill Meissner talk about, we're launching and with respect to the Salt tequila, a straight silver, so we can actually be the only -- the real reason for that is we can be the only tequila then, the exclusive tequila in an on-premise account or a bar or restaurant. Because, you are right. So now -- because we had 3 now coming 4 flavors on the back bar but we didn't have anything for straight tequila. So now we have that ability to be exclusive. So that's an important...
Unidentified Analyst: Cannot wait.
Robert Nistico: Yes, strategic move forward. And by the way, the silver is fantastic. The second thing....
Unidentified Analyst: Cannot wait.
Robert Nistico: Yes. Yes. So we were talking about the energy drink. So remember, we own the liquid. We own the what's called trade dress, basically the label with the exception of TapouT. So yes, it's not going to go away forever, but we will be transitioning that at some point in the near future. Also, along those lines, there's a written question that came through, and I want to address it because it's important. We're talking about this potential second acquisition. That thing is quick -- it's not done, but it's very close to time. And we'll announce the details of that when it is done, but it's imminent. And then Western Son, we're being kind of cautious about that. But our objective would be to close that by December 15, so we can capture that revenue for the year on a reporting basis. So those are 2 important points. I didn't want to miss. But your comments are great, and we love the TapouT liquid. It's excellent. It's efficacious. It's clean, natural. So yes, we're not going to walk away from that -- the work we've done, we just got to walk away from the name TapouT.
Unidentified Analyst: Got you.
Robert Nistico: Our people like in the energy drink as much as I do.
Unidentified Analyst: Yes. Yes, people love it. I love it. I'm drinking 1 right now.
Bill Meissner: [indiscernible] go into the sparkling [indiscernible] lemons.
Unidentified Analyst: All right. Thank you very much. Really appreciate your guys' tenacity.
Robert Nistico: You bet. Yes. Thanks for recognizing it. We appreciate you as well as a partner. You bet. Thank you.
Operator: Okay. We have no further questions in queue. I'd like to turn the floor back to management for any closing remarks.
Robert Nistico: All right. Well, listen, I think this has been a good call. I hope we've answered most people's questions and been as clear and transparent as possible, we are incredibly excited for the future. It's been a difficult road if it was easy, anybody could do it. And the gentleman talking about tenacity, persistence and perseverance wins. I live by that. And I know Bill Meissner lives about, and Julius. We're excited about the future. We'll be reporting more and more events in the very near future. And we're -- as we close up on this round of financing. It really sets -- I'll leave you with this thought. It sets so many things into motion. All the work we did while we're waiting to organize this is now in front of us. It's like a master set of dominoes. So we're thrilled that money is starting to come in. We actually have, like I said, some in our possession now, a material amount. And we look forward to the future, and we hope we have everyone's long-term support. We love this company, and we value our shareholders like family. Remember, I'm a very large shareholder. So we're always going to have you in mind. We have to run a business, but we also equally care about share price, and we expect great things for the future. Thank you very much for joining and we appreciate you guys and men and women, and we hope you guys have a great rest of the week and weekend.
Operator: Thank you. This concludes today's conference, and you may disconnect your lines at this time. Thank you for your participation.
