Splash Beverage Group Pursues $69 Million NYSE American Uplisting

Summary

• Splash Beverage Group has filed to raise $69 million in an uplisting to the NYSE American stock exchange.
• The firm distributes alcoholic and non-alcoholic beverages in the U.S.
• Splash has grown revenue recently but doesn't have a significant track record to prove out its business model.
• Looking for more investing ideas like this one? Get them exclusively at IPO Edge. Learn More »

Photo by Thomas Barwick/DigitalVision via Getty Images

Quick Take

Splash Beverage Group (NYSE:SBEV) has filed to raise $69 million in an uplisting to the NYSE American stock exchange, according to an S-1 registration statement.

The firm distributes beverage brands primarily in the United States.

SBEV appears to be a promising beverage startup but has a significant way to go before it has demonstrated a growth track record worthy of public investment.

I’ll provide an update when we learn more about the IPO from management.

Company

Fort Lauderdale, Florida-based Splash was founded to develop in-house beverage brands as well as acquire and work with other brands to sell products direct-to-consumer as well as through retailers.

Management is headed by Chief Executive Officer Robert Nistico, who has been with the firm since 2012 and was previously president of Viva Beverages and was the fifth employee at Red Bull North America.

Below is an interview of CEO Nistico:

(Source)

The company’s current primary offerings include:

• TapouT Performance - non alcoholic sport drinks

• SALT Naturally Flavored Tequila - 100% agave 80-proof tequilas

Splash has received at least $52 million in equity investment from investors including WesBev, JMW Fund, San Gabriel LLC and Richland Fund.

Customer Acquisition

The firm seeks to sell its products through offline and online retailers as well as direct-to-consumer through its website www.qplash.com.

Splash is pursuing relationships with emerging brands that have limited distribution and are willing to trade equity ownership for greater distribution and other services.

Sales and Marketing expenses as a percentage of total revenue have dropped sharply as revenues have increased, as the figures below indicate:

Sales & Marketing	Expenses vs. Revenue
Period	Percentage
2020	4.9%
2019	330.9%

Click to enlarge

(Source)

The Sales and Marketing efficiency rate, defined as how many dollars of additional new revenue are generated by each dollar of Sales and Marketing spend, was 20.2x in the most recent reporting period. (Source)

Market & Competition

According to a 2019 market research report by Grand View Research, the global sports drink market was an estimated $22.4 billion in 2018.

The U.S. sports drink market is expected to expand at a CAGR of 7.8% from 2019 to 2025.

The main drivers for this expected growth are a growing athlete and health-conscious consumer population is expected to increase demand, along with greater investment by brands into new formulations.

Also, below is a chart showing the historical and future forecast of the U.S. sports drink market trajectory by product type:

(Source)

Major competitive or other industry participants include:

• Gatorade

• PowerAde

• BodyArmor

• Sportade

• Pocari

• 100Plus

• Lucozade

The global tequila market was valued at an estimated $10.8 billion in 2020, according to a report by imarc.

The market is expected to reach $25.4 billion by 2026, growing at a CAGR of 14.4% from 2021 to 2026.

This growth is expected due to a rise in cocktail consumption as well as an increase in ultra-premium and handcrafted tequila brand options.

Below is a chart showing various aspects of the global tequila market:

(Source)

Financial Performance

Splash’s recent financial results can be summarized as follows:

• Growing topline revenue, but from a tiny base

• A swing to gross profit and positive gross margin

• High and increasing operating loss and net loss

• Increasing cash used in operations

Below are relevant financial results derived from the firm’s registration statement:

Total Revenue
Period	Total Revenue	% Variance vs. Prior
2020	$ 2,975,939	14497.2%
2019	$ 20,387
Gross Profit (Loss)
Period	Gross Profit (Loss)
2020	$ 724,123
2019	$ (225,113)
Gross Margin
Period	Gross Margin
2020	24.33%
2019	-1104.20%
Operating Profit (Loss)
Period	Operating Profit (Loss)	Operating Margin
2020	$ (17,301,236)	-581.4%
2019	$ (4,487,059)	-22009.4%
Net Income (Loss)
Period	Net Income (Loss)
2020	$ (28,674,556)
2019	$ (5,135,731)
Cash Flow From Operations
Period	Cash Flow From Operations
2020	$ (21,326,350)
2019	$ (2,658,328)
(Glossary Of Terms)

Click to enlarge

(Source)

As of December 31, 2020, Splash had $380,000 in cash and $9.3 million in total liabilities.

Free cash flow during the twelve months ended December 31, 2020, was negative ($21.4 million).

IPO Details

Splash intends to raise $69 million in gross proceeds in an uplisting to the NYSE American stock exchange, although the final figure may vary.

The NYSE American was formerly the American Stock Exchange and is the NYSE's 'small cap' exchange offering.

The firm’s common stock is quoted on the OTCQB under the symbol “SBEV” and its last trade price as of the writing of this report on May 6, 2021 was $1.65 per share.

Management says it will use the net proceeds from the IPO as follows:

We intend to use net proceeds from this offering for working capital and general corporate purposes, including operating expenses and capital expenditures. Additionally, we may use a portion of the net proceeds from this offering to in-license, acquire or invest in complementary businesses, technologies, products or assets. However, we have no current plans, commitments or obligations to do so. (Source)

Management’s presentation of the company roadshow is not available.

The sole listed bookrunner of the IPO is Kingswood Capital Markets.

Commentary

Splash is seeking an uplisting to secure additional capital for its expansion initiatives, which include seeking partnerships with emerging beverage brands.

The company’s financials show promising revenue growth from a tiny base as the firm stands up its operations.

Sales and Marketing expenses as a percentage of total revenue dropped as revenue increased; its Sales and Marketing efficiency rate was a high 20.2x.

The market opportunities for sports beverages and tequila brands are large and expected to grow at a substantial rate over the coming years, so the company is positioned in fast-growing segments.

Kingswood Capital Markets is the sole underwriter and IPOs led by the firm over the last 12-month period have generated an average return of negative (19.7%) since their IPO. This is a bottom-tier performance for all major underwriters during the period.

The primary risks to the company’s outlook are ongoing disruptions across its supply chain as a result of the COVID-19 pandemic and its ability to produce significant distribution gains for its brand venture partners.

Splash appears to be a promising beverage startup but has a significant way to go before it has demonstrated a growth track record worthy of public investment.

I’ll provide a final opinion when we learn more about the IPO from management.

Expected IPO Pricing Date: To be announced.

Analyst’s Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Comments

[bazooooka]

Likely a nice grab near three bucks for those who waited post offering.