AMASS Brands Inc. Common Stock 2026 Q2 Earnings Call

Good morning, everyone. Thank you all for participating in today's conference call. On the call with us today are Mark Thomas Lynn, founder and Chief Executive Officer of AMASS Brands, and Zach Ament, Chief Financial Officer. Earlier today, the company issued a press release announcing its financial results for the three and six-month periods ended June 30, 2026. The release is available on the company's website, and our quarterly report on Form 10-Q can be found both there and at www.sec.gov. We will begin with management's prepared remarks and then open the call to analyst questions. Before we begin, I want to remind everyone that today's call may include forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995.

These statements include, among other things, statements regarding our expected business performance, brand and category strategy, distribution and channel plans, revenue outlook, gross margin, liquidity and capital resources, and our plans to obtain additional financing. Forward-looking statements are based on current expectations and assumptions and are subject to risks and uncertainties that could cause actual results to differ materially from those expressed or implied by these statements. Important factors that could cause actual results to differ materially are described in today's earnings release and in the company's filing with the SEC, including the risk factors described in our prospectus dated May 18, 2026, our quarterly report on Form 10-Q for the quarter ended June 30, 2026, and our subsequent filings.

Those filings include disclosures regarding substantial doubt about the company's ability to continue as a going concern, our need to raise additional capital, and the notifications we received from Nasdaq on July 22, 2026 regarding continuing listing requirements. We encourage you to review those disclosures in full. Forward-looking statements made on this call speak only as of today, and AMASS undertakes no obligation to update them except as required by law. We may also disclose non-GAAP financial measures on today's call, including gross profit by segment, by channel, and by brand grouping, and adjusted EBITDA. Reconciliations to the most directly comparable GAAP measures are included in today's earnings release and our Form 10-Q. I would now like to turn the call over to Mark Thomas Lynn, founder and Chief Executive Officer of AMASS Brands.

Mark? Thank you, and thank you, everybody, for joining us.

This is AMASS Brands' first earnings call as a public company. I want to start by stepping back from the quarterly numbers and explain what we believe is happening inside the business. Q2 was an inflection quarter for AMASS. During the quarter, we became a Nasdaq-listed company. Our core brands grew double digits. Our non-alcoholic and functional business more than doubled. Our direct-to-consumer business expanded significantly. We continued simplifying AMASS around the brands and categories we believe have the greatest opportunity to create long-term shareholder value. However, there is considerable noise in the reported financial results this quarter. We absorbed substantial costs associated with becoming a public company. We experienced short-term margin compression and continued winding down or deprioritizing some of our legacy products. These factors affected both reported profitability and growth margin.

But underneath them, we believe the shape of the future of AMASS is becoming significantly clearer. There are five numbers I want investors to keep in mind throughout today's discussion. 132%. That's the year-over-year growth of our non-alcoholic and functional segment. 480%. That's the approximate year-over-year increase in our direct-to-consumer and e-commerce revenue. 12%. That's the year-over-year growth of our core brands in Q2. 67%. That's the percentage of brand-level revenue represented by our core brands in Q2 compared to 62% a year ago. Finally, 43.7%. That's the Q2 product margin generated by those core brands. These numbers illustrate the business we are working to build, which is a more focused AMASS that concentrates capital behind the brands with the strongest growth and unit economics while leveraging the beverage infrastructure we've already built across sales, distribution, supply chain, and retail.

Rather than maintaining that infrastructure around every historical brand, we are becoming much more disciplined about where we invest, using our shared platform to scale fewer, higher potential brands more efficiently, and all while trying to reduce costs and working capital elsewhere in the business. We believe this combination of greater focus and shared infrastructure can drive stronger growth, better margins, and more capital efficient business over time. To speak more on how we're refocusing the business. A more focused AMASS. Our four priority core brands today are Summer Water, Pizzolato MUSE, Good Twin, and AMASS Electrolytes. Together, these brands generated approximately $3.9 million of brand-level revenue during the second quarter, which is an increase of 12%. For the first six months of 2026, core brand revenue grew 11%.

At the same time, discontinued brand revenue declined 27% in Q2 and 52% during the first six months. That's very intentional. We want a smaller number of brands accounting for an increasingly large percentage of our revenue, our marketing investment, and our management's attention. We believe that we can make AMASS simpler to operate, more capital efficient, and ultimately more scalable. Rather than trying to maximize the number of brands we own, we're focusing on maximizing the returns on the capital we deploy within those brands. As our core brands become a larger percentage of the business, we believe that should translate into stronger organic growth, improved margins, and more capital efficient operating model. Our goal is to concentrate around these brands that we believe have the greatest potential to become substantially larger businesses.

Within that, I'd like to speak about the non-alcoholic and functional part of the business. The second major development in this quarter was the continued emergence of this category. Beginning in Q2, we began reporting wine and spirits and non-alcoholic and functional as two operate and distinct segments. We made the change because it increasingly reflects how we actually manage the company and allocate resources, and the early growth profile is noticeable. NA and functional revenue increased to approximately $409,000 in Q2. That's growth of 132%. For the first 6 months, revenue increased approximately 133% to roughly $933,000. That growth reflects continued expansion of Good Twin, together with the Q2 launch of AMASS Electrolytes. I want to speak a little bit more about AMASS Electrolytes.

This was the first quarter the brand generated revenue, so we remain very early in the process. That said, the preliminary feedback from our distribution and retail partners, together with early e-commerce performance, has increased our conviction in the opportunity massively. We believe the model can be particularly attractive at scale, with potential for strong gross margins, fast working capital terms, and a scalable e-commerce business. We have now opened or have received commitments to open distribution in California, Colorado, Illinois, Michigan, Georgia and finally, New York. While it is still very early, we believe that initial performance is encouraging and supports our view that AMASS Electrolytes can become a meaningful growth driver for the company. Now we're not providing brand level guidance today, but this has quickly become one of our highest conviction incubation opportunities. Good Twin. Good Twin is another important part of our non-alcoholic and functional strategy.

The brand continued to grow in Q2 across wholesale and direct to consumer, and has become one of the fastest and best-selling organic non-alcoholic wine brands in the U.S. That growth created some short-term margin pressure as faster sell-through required expedited freight to maintain availability at certain retailers. We expect that pressure to ease as inventory planning, replenishment cadence, and freight start to normalize. The focus is on supporting continued demand with better availability and improving unit economics. On to direct to consumer. This is another area where we saw meaningful progress in the last quarter. DTC and e-commerce revenue increased to approximately $178,000 in Q2 from approximately $31,000 a year ago.

For the first 6 months, revenue increased to approximately $328,000 from approximately $78,000 previously. All of our DTC and e-commerce revenue during the current quarter came from non-alcoholic products, Good Twin and AMASS Electrolytes. It remains a small portion of consolidated AMASS revenue today, but strategically, we think the channels matter. Our traditional wholesale business gives us reach and distribution, and DTC gives us direct consumer relationships, a faster feedback loop, and greater control over demand generation and ability to learn quickly, as we launch these new products. As such, we plan to make meaningful investment behind this channel to facilitate that continued growth. We think over time, the combination of DTC demand generation and traditional beverage distribution to become an important competitive advantage. On to wine and spirits.

Revenue declined approximately 3% in Q2 and 5% for the first six months as we continue to rationalize the portfolio and reduce investment behind lower priority brands. At the same time, we are seeing meaningful strength within our core portfolio there. MUSE reached the number one position in the U.S. organic sparkling wine category by dollar share, and distribution is now expanding across Whole Foods Market nationwide. Our approach to wine and spirits is increasingly selective. Manage certain legacy brands for cash flow while concentrating capital behind the brands where we see the strongest growth margins and return potential. Before I hand things over to Zach, I want to reiterate the financials this quarter reflect a business that's in transition, but they also reflect a portfolio that's becoming much more focused, higher quality and better positioned for long-term growth.