BUDA Q2 Earnings Call Highlights

BUDA NYSEAMERICAN: BUDA reported second-quarter revenue growth of 26.4% as its core beverage business expanded organically and the company began selling products in 246 Walmart stores across nine states.

The company also introduced its Ultra Fresh dressings line, although startup costs associated with that business weighed on gross margin.

Revenue for the quarter totaled $4.5 million, compared with $3.6 million in the prior-year period.

Chief Executive Officer Horatio Lonsdale-Hands said the acceleration arrived earlier than management had anticipated, after the company had previously expected stronger growth during the second half of the year.

Management said preliminary, unaudited net sales for the first six weeks of the third quarter were up more than 40% from the corresponding period last year.

According to Lonsdale-Hands, roughly half of that growth came from same-store sales, with the remainder primarily tied to Walmart and restaurant business.

The CEO described Buda’s strategy as focused on “Ultra Fresh” juice products distributed through its Fresh35° cold chain and sold in produce sections.

He said the company’s Buda Fresh single-serve and multi-serve products at Walmart are priced from $1.47 to $5.99.

Lonsdale-Hands said the company believes consumer demand is shifting toward fresh, clean-label juice products that are refrigerated and sold near produce.

He cautioned, however, that an early observation from one new store at a large national retailer should not be viewed as conclusive, even though the company believes its fresh juice section may be outselling the adjacent pasteurized juice selection at that location.

During the question-and-answer session, Lonsdale-Hands said the company is seeing substantial interest in the Ultra Fresh category from retailers, but did not provide details on potential new customer wins.

He added that Buda is also seeking to expand business with existing customers.

Gross margin declined to 36.6% in the second quarter from 46.7% a year earlier, a decrease of 1,010 basis points.

Chief Financial Officer Clint Bowers attributed the pressure to several identifiable items, including third-party co-packing costs for the new dressing line, elevated inbound freight expenses, labor investments, product mix and higher produce costs.

About 320 basis points of margin pressure came from third-party co-packing of Ultra Fresh dressings.

Approximately 270 basis points came from higher inbound freight costs, which Bowers said were tied to elevated fuel prices.

About 100 basis points...