Q4 2023 Reed's Inc Earnings Call

Participants

Norman Snyder; CEO & Director; Reed's, Inc.

Joann Tinnelly; CFO; Reed's, Inc.

Sean McGowan; Analyst; ROTH MKM Partners, LLC

Will Bendigo

Gary Goetz

Jack Higher

John Fann; Analyst; Downtown Family Office

Presentation

Operator

Good afternoon. And welcome to Reed's Fourth Quarter and Full Year 2023 earnings conference call for the three and 12 months ended December 31, 2023. My name is Gary and I will be your conference call operator for today. We will have prepared remarks from Norman Snyder, Reed's Chief Executive Officer, and Joann Tinnelly, Reed's Chief Financial Officer. Following their remarks they will take your questions.
I would like to remind listeners that this conference call will include forward looking statements. Forward looking statements are only current predictions and are subject to known and unknown risks, uncertainties and other factors that may cause actual results, levels or activity, performance or achievements to be materially different from those anticipated by such statements.
These factors include, but are not limited to the Company's ability to manage growth, manage debt and meet development goals. The Company's ability to protect its supply chain in light of disruption caused by elevated freight costs and other impediments, the availability and cost of capital to finance, working capital needs and growth plans, the Company's dependence on third party manufacturers and distributors changes in the competitive environment and the economic impact of the wars in Ukraine and Israel and other information detailed from time to time in Reed's filings with the United States Securities and Exchange Commission.
These statements including financial guidance involve risks and uncertainties that may cause actual results or trends to differ materially from the Company's forecast. The achievement or success of the matters covered by such forward-looking statements, including future financial guidance involve risks, uncertainties and assumptions, many of which involve factors or circumstances that are beyond the Company's control. Reed's 2024 guidance reflects year to date and our expectation that inflationary trends and supply chain pressure will continue throughout 2024.
However, new supply chain challenges that may develop and factors that could exacerbate inflation cannot be reasonably estimated and are not factored into current fiscal 2024 guidance. These risks could materially impact our ability to access raw material production, transportation and or other logistics needs.
Gross margin guidance assumes our known pricing for ingredients, packaging and production costs, each of which has been and could continue to be impacted. Financial guidance should not be viewed as a substitute for full financial statements prepared in accordance with GAAP.
For more information, please refer to the risk factors discussed in Reed's annual report on Form 10 K for the 2023 fiscal year to be filed with the SEC on or before April first, 2024. Although management believes that the expectations reflected in forward-looking statements are reasonable, management cannot guarantee future results levels of activity, performance or achievement. In addition, any projections as to the
Company's future performance represent management's estimates as of today, March 28, 2024. Reed's assumes no obligation to update any forward-looking statements or information which speak as of their respective dates. Modified EBITDA is presented because management believes it assists investors and analysts in comparing our performance across reporting periods on a consistent basis by excluding items that we do not believe are indeed indicative of core operating performance.
The presentation of this non-GAAP financial information is not intended to be considered in isolation or as a substitute for or superior to the financial information prepared and presented in accordance with GAAP and Reed's non-GAAP measures may be different from non-GAAP measures used by other companies. Reconciliations of non-GAAP measures to GAAP measures as well as a definition of each measure, their limitations and our rationale for using them can be found in this morning's press release, inwards Reed's SEC filings and posted on our investor website at investor dot rediff.com. As a reminder, this conference is being recorded.
I will now turn the call over to Mr. Schneider. Please go ahead.

Norman Snyder

Thank you, Gary, and good afternoon, everyone. We appreciate you joining us today to discuss our fourth quarter and full year 2023 results. I'm proud of our team's hard work this past year as they successfully executed our strategic initiatives to optimize our cost structure.
Our combined efforts materialize and our bottom line as we turned a $3.9 million modified EBITDA loss during the first half of the year into a $200,000 modified EBITDA gain in the second half of the year, a $4.1 million turnaround.
Our ability to turn modified EBITDA profitable was a result of our efforts in the back half of 2023 to reduce cost of goods, driving higher gross profit, lower delivery and handling cost and to decrease SG&A costs compared with the first half of the year.
Further with respect to gross margin in the fourth quarter, we implemented a one-time change to our policy for discounts related to trade spend, which lowered NetSpend net sales by approximately $800,000 for the quarter and we also recognized noncash inventory adjustments that further impacted gross margin in the fourth quarter as we utilize the updated trade spend discount policy throughout the year rather than recognizing the full year adjustment in the fourth quarter, our second half 2023 adjusted gross margin would have been approximately 1,000 basis points higher than the first half of 2023 This improvement reflects the work we have put in to reduce our input cost, implement consistent pricing applications across all channels and increased the mix of cans versus bottles. We expect to utilize this new discount policy for trade spend each quarter moving forward.
Looking at our top line, sales were softer than anticipated in 2023. However, we have implemented a sales strategy to return to growth in 2024 for both Reed's and Virgil's. Our challenges from last year were almost entirely supply, driven as we experienced solid order volumes across our retail channels.
Throughout the year, we recently added two new co-packers to increase capacity, and we are actively building finished goods inventory to reduce short order shipments, which offset net sales by approximately $5 million 2023.
Our inventory levels are improving, and we are back on track to dramatically reduce our rate of short shipments in 2024 fourth quarter sales were also adversely affected by the timing of customer orders that impacted volume and packaging challenges with our seasonal swing with program products which have since been addressed, we expect a more robust and timely our seasonal program in 2024 and have initiated the program much earlier this year. Although there is much work to be done, we believe we have built a solid foundation to move the Company forward on a profitable basis. We are on track to eliminate the cash burn.
As I touched on earlier, we have consistently reduced input costs and optimize our operations. Our combined efforts resulted in more than$6 million in expense reductions in 2023 and a material improvement to our bottom line. The fourth quarter marked our sixth consecutive period of year-over-year operating expense and profitability improvements leading to our second quarter of modified EBITDA profitability since 2016.
Turning to a few updates on our key product categories. Reed's Ginger Ale sales for the full year 2023 through three grew 15% year over year with our Zero Sugar ginger ale increasing 19% for the same period. The overall ginger ale category experienced 7% growth for 2023 compared to the prior year. Ginger beer cans sales grew over 170% compared to the full year 2022, with zero sugar cans increasing nearly four times in 2023.
The growth was offset by lower bottle sales in both categories as we work to transition from bottles to cans. The overall ginger beer category decline approximately 3% during the same period within our Virgil's craft soda portfolio. Full sugar cans gained strong momentum over the past year and continue to become a larger contributed contributor to our top line for our ready to drink alcohol portfolio, we experienced a 35% increase in close to 20% increase in our Ginger Ale and Ginger Mule in 2023, respectively.
The ready-to-drink category continues to be a compelling growth opportunity for Reed's, and we look forward to launching our new products, increasing our distribution within this growing category.
On the topic of new product launches, we're in the process of formulating new products that leverage fresh organic, Ginger to create a portfolio of beverages targeting the better-for-you lifestyle category. Ginger, which is plant-based, has been an ingredient used for centuries throughout the world for its many benefits, and we intend to leverage this aspect in our retail portfolio. We are excited to continue growing our reach in this segment and look forward to unveiling these products in the back half of the year.
With a soft launch during Q4. As a reminder, we do not utilize any preservatives in our products nor any other artificial ingredients. Our full sugar beverages are sweetened with cane sugar while our zero sugar beverages are sweetened with Stevia and monk fruit, we believe this is a major point of differentiation for our brand and look forward to adding additional sales channels and points of distribution to our fan favorite product catalog throughout the quarter, we continue to make solid progress in our cost cutting and optimization initiatives.
These efforts would have led to gross margin expansion in the fourth quarter. However, the quarter was impacted by onetime noncash inventory adjustments of $3.1 million. In addition to the trade spend discount policy that I referenced earlier. Excluding these adjustments, gross margin would have increased by 1,200 basis points to 34.9% in the fourth quarter.
These savings were driven by consistent effort to lower input cost, implement consistent pricing applications across all channels and increase the mix of cans versus bottles. We have also worked through most of our higher-cost inventory that resulted from prior elevated supply chain costs. In the fourth quarter, we reduced delivery and handling costs by 32% year over year to $2.82 per case compared to $3.44 per case previously. Consistent with prior quarters, we made further improvements to our freight contracts, throughput and efficiencies related to our streamlined distribution model. We've effectively brought down delivery and handling costs were approximately 16% of net sales as of Q4, and we'll continue to identify aspects to reduce cost on a per case basis building on this, we finalized an agreement with Battelle co-packing, our new co-packing partner in the Southeast and kicked off operations in the first quarter.
This new relationship expands our product, our production for both bottles and cans and will allow us to better serve our Southeast and South Central customers. We expect to generate further freight and handling savings from this engagement and are excited to build a mutually beneficial partnership with battles as we grow our sales in the region.
And lastly, with respect to cost cutting, we reduced selling and marketing expenses in Q4 by 23% compared to the year ago period by creating a more focused marketing strategy and streamlined our sales process.
Turning to our fourth quarter and recent channel sales and operational highlights. To start, we secured major secondary promotions within the Whole Foods network in 2023 due to our performance and brand strength. Whole Foods has opted to authorize additional secondary promotions across our portfolio in 2024. They have also decided to add over 100 new points of distribution for our hard ginger ale since converting Publix to a direct customer in July of 2023.
Unit volumes have increased 80% year over year as a result of the growth, we have partnered with Publix to increase our promotional activity and have finalized several seasonal secondary placements for 2024 and Sprouts, we received authorizations for Virgil's Zero Sugar cans, which will launch in May of 2024 and be followed by timely off-shelf off-shelf promotions. Additionally, our hard Ginger Ale and classic real were added to 82 additional points of distribution, bringing the total Sprouts store count to 370 across our alcohol portfolio. We are thrilled with the relationship we have with Sprouts, and I look forward to building on our partnership in the future.
Walmart has authorized our ready to drink classic build to 240 stores in California. I believe we believe that our ongoing relationship with our wholesale partners, RNDC. and breakthrough beverage as well as our unique brand proposition will enable us to grow our points of distribution and expand our alcohol portfolio within the Wal-Mart system.
In Costco, we have finalized rotations for our 7.5 ounce ginger beer cans, Virgil's Zero Sugar Virgil's Zero Sugar cans variety pack and are working towards finalizing our virtual full sugarcane variety pack in multiple regions. We are actively working to add additional regions to these rotations to expand the distribution of these exciting beverages.
In November, we relaunched our e-commerce platform to include a recurring subscription model. As we mentioned before, e-commerce sales represent a small portion of our business today, but we are taking the appropriate steps to build this channel and will invest more resources as it grows.
As I mentioned earlier, we have added two new co-packers and favorable geographic locations to us to increase capacity while driving further reductions in our cost of goods sold. As well as transportation costs. We will continue to evaluate all aspects of our logistics and supply chain to ensure we are running as efficiently as possible in Krakow across our nationwide network Lastly, we have continued to build our customer base in the UK and Europe as a result of adding local production capabilities, which enables us to deliver products more efficiently with lower cost with lower associated costs. We kicked off with one customer in May and now have five active customers with four additional pending.
We are excited with the early momentum and look forward to expanding our reach in the European region. Over the past year, we've built a solid foundation and efficient operating model, which we believe will enable us to generate net sales growth gross margin expansion and to achieve modified EBITDA profitability for the full year 2024, we are we also expect to generate positive cash flow from operations for the full year 2024.
Looking ahead, I want to reiterate that we have several key initiatives to drive this growth and profitability as we reduced short order shipments. We expect to return to growth through all our key product categories. We'll also continue to seek out additional cost saving opportunities to ensure we are running as efficiently as possible. These initiatives, coupled with our optimized cost structure and strong demand for its products will enable us to deliver on our growth and profitability in 2024.
Before wrapping up with closing remarks, John will cover our financial highlights for the quarter in more detail. Joanne, over to you.

Joann Tinnelly

Thanks, Graham. Norman into our results, all variance commentary. But on a year-over-year basis, unless otherwise noted, net sales for Q4 2023 were $11.7 million compared to $15 million in the year ago quarter. The decrease is primarily driven by shorts, short order shipments and lower sales from seasonal programs due to timing of customer orders, impacting volume added third-party manufacturing deficiencies, both related to our swing wood products. We expect to receive an insurance claim to cover the cost of these products.
As Norm mentioned earlier, we also implemented a one-time change to policy discounts related to trade spend that offset net sales by $800,000 this quarter gross gross profit for the fourth quarter 2023 was $0.5 million compared to $3.4 million in the same period of 2022.
Gross margin was 4% compared to 22.9% in the year ago quarter. The decrease was primarily driven by a onetime noncash packaging inventory valuation adjustment of $1.8 million. A one-time provision for product holds related to our swimmingly program of $1.3 million, as well as the aforementioned onetime update to policy for discounts.
Adjusted gross profit which excludes the non-cash items for the fourth quarter of 2023 was$ 4.3 million or 34.9% of revenue. Delivery and handling costs were reduced by 32% to $1.8 million during the fourth quarter of 2023 compared to $2.7 million in the fourth quarter of 2022.
The decrease was primarily driven by continued reductions in freight rates and improved throughput and efficiencies related to our streamlined distribution model. As Noah mentioned earlier, delivery and handling costs were reduced to 16% of net sales or -- to $2.82 per case compared to 18% of net sales or $3.44 per case during the same period last year.
Selling, general and administrative costs decreased 23% to $3 million during the fourth quarter of 2023 compared to $3.9 million in the year ago quarter. As a percentage of net sales, selling, general and administrative costs remained flat at 26%. Other operating expenses were $5.4 million or 46% of net sales compared to $7.1 million or 47% of net sales in the year ago period. This reflects our relentless efforts to rightsize our cost structure and consistently find ways to optimize our business.
Operating loss during the fourth quarter of 2023 was $5 million or a loss of $1.55 per share compared to a loss of $3.7 million or a loss of $1.54 per share in the fourth quarter of 2022. Modified EBITDA improved to positive $43,000 in the fourth quarter of 2023 compared to a loss of $2.8 million in the fourth quarter of 2022.
This represents our second consecutive quarter of generating positive modified EBITDA for the fourth quarter of 2023. Cash used in operations. Cash used in operations was approximately $200,000 compared to cash flow from operations of $1 million for the same period of 2022.
The decrease in operating cash flow was primarily driven by higher inventory purchases compared to the year ago period. As of December 31, 2023, we had approximately $0.6 million of cash and $27.4 million of total debt net of capitalized financing fees.
This includes $17.6 million from a convertible note and $9.8 million from our revolving line of credit, which has $3 million of additional borrowing capacity. During the first quarter of 2024, we closed on a $4.1 million sale, simple agreement for future equity agreement as part of our plan $6 million financing. We plan to utilize the funds to build our finished goods inventory reserves and to reduce short shipments in 2024. Please note the cash balance I mentioned earlier, does not include the $4.1 million of sale proceeds.
I will now turn the call back to Norm for his closing remarks.

Norman Snyder

Thank you, Joanne. I'd like to extend my gratitude to the Reed's team for their consistent hard work and determination to build a solid foundation for our business with the combination of our optimized operating model ongoing efforts to reduce short order shipments and the continued demand for our robust product portfolio, we are well positioned to deliver on our goals. Operator, we'll now open the call for questions and answers.

Question and Answer Session

Operator

(Operator Instructions) Sean McGowan, ROTH MKM.

Sean McGowan

Thank you. Good afternoon. A couple of questions to center around to the outlook and guidance. When so on sales, when you say you expect sales to increase, are you talking about increasing from the reported levels or from the levels that you might have achieved?
Had you not had those short shipments?

Norman Snyder

John, from the reported levels.

Sean McGowan

Okay.
Sorry, I figured. But then on a similar question on gross margin, because you got a couple of quarters here with an exceptionally low gross margin because of one-time issues. So when you say expanded gross margin, are you talking about off of reported levels or kind of off of adjusted levels of adjusted levels Okay, that's helpful. And then looking at the G&A number in the fourth quarter, is that's a good number to use kind of as a quarterly run rate? Or was there some things in the quarter that might not recur, could that could the actual ongoing number be lower or should we expect it to be higher than that?

Norman Snyder

I think it's going to stay the status quo for a while. We have a pretty lean but effective team here that's highly productive and efficient and works well together. And I think as we generate more cash going forward, we'd like to reinvest it towards marketing and product development and then as to grow as growth requires to add people. So I don't really see any sort of material changes other than some discretionary spending as we have the cash and the available cash spend to invest back into our brands.

Sean McGowan

Okay.
And exit, you mentioned in the press release that you had -- it was like $3 million of additional capacity on the credit line. Is that $3 million provided that the our assets are lined up the right way?
No inventories receivables are just $3 million open?

Norman Snyder

No, it's still at the former provided that the asset sale announcement, but we've made some subsequent year end. We've made great progress paying down that line. So there's it's created a lot more availability. And then obviously, as we grow receivables and inventory will grow, which will which will provide additional collateral to drive that number up further.

Sean McGowan

Okay and then last question for me for now on new products. When you're talking about some news stuff you're working on, should we assume that and the new products that you introduce are going to be at or above the kind of targeted gross margin levels that you have? Or are you contemplating some new introductions that might be dilutive?

Norman Snyder

No, I think they'll be accretive. They're going to be premium based products functional really, really leveraging the benefits of Ginger. Like you know, one of my one of my pet peeves is that the popularity of now of plant-based food and beverages and the functionality of it. And because Reed's was one of the first ones to be there producing and selling plant-based products with a high degree of efficacy. We don't get a lot of credit.
We are at the party first and then the party happened after week after we arrived. So we really want our we really want to go back and leverage that asset, which we think is something very unique to Reed's. Ginger is organic imported from the Amazons in Peru. It's got a it's very it's got a high degree of efficacy, which is why people throughout the world have been using Ginger for Century. So it's a more concerted effort to really broadcast that message and a product that is that resonates with today's consumer.

Sean McGowan

Great and I just remembered one other that I wanted to get some clarity on. I think you and I have talked about this before. So you mentioned that some of those are short sale impacts were in the swing line. Is it something about the swing liners, just coincidentally, that's showing that I mean, yes.
Like is there something about that particular packaging that results in problem? Or is it just a coincidence that it's that line?

Norman Snyder

No it's a coincidence on we know, there was an issue with our the on our at our closure and we're very we're very quality driven and did not want to put out inferior product or a product that potentially could be could be dangerous to consumers. So that was one part of it.
Another aspect was we that we were late with some other customers in the season which cut down the size of the program.

Sean McGowan

Right so you're not backing away from that packaging?

Norman Snyder

No, no know that I don't know.

Sean McGowan

Thank you very much.
I'll the opportunity.

Norman Snyder

Right John, nice talking to you.

Operator

(Operator Instructions) [Will Bendigo] Private Investor.

Will Bendigo

Norm, thanks for taking my questions. I'll tried to keep it quick really just regarding sales, I mean, we're already pretty much through Q1. Can you let us know how that's looking? And then you kind of have a range of what your estimate in total revenue for 2024 on?

Norman Snyder

Yes. Well, you're welcome on look at there's the short it did continue over into the first quarter. So there is some impact. But we've worked through that and we're heading into the second quarter, well positioned to really reduce those. And we also had some programs that we thought we could be ready for the first quarter, which we did, which will we be pushing in the second quarter. So there will be some continued softness that goes into that into Q1.
But we really think we'll come out strong in Q2 on in terms of the range, we're still fine-tuning that. I mean, I look at obviously, we believe we can deliver double digit growth, but we're still finalizing a couple of things to see how far that we can. We can push that number, but we'd look at we feel real confident about year over year growth.
Sean asked the question about is it reported or where we thought we would be like it's going to definitely be over reported and my goal is to have growth over where we thought we could have ended up this year.

Will Bendigo

Got it. Thanks. And then last question, kind of regarding the safe and then raise. Is there going to be any additional capital need to be raised in the interim or do you think that will carry you guys for the year?

Norman Snyder

Our belief is that will carry us through the year. I mean, the obviously the burden has been really minimized to almost eliminated, and that's the goal there. So the cash the cash needs are really exclusively to build inventory and just to have enough inventory to be able to respond and drive up our ROM on-time and in-full delivery percentage is north of 95%.

Will Bendigo

Okay. Great. Awesome. Thanks. That's all I've got. And I'll hop back in the queue.

Norman Snyder

You're welcome.

Operator

(Operator Instructions) [Gary Goetz] private investor.

Gary Goetz

Hi norm phase through taking the call and looks like we're on the right track.
Most of my questions have been answered. I just wanted to make a comment about the Ginger and I wanted to reinforce what you're doing about developing new ginger products it has great health benefits, and I commend you on doing what you're doing.

Norman Snyder

Thank you, Gary. And would be I know you were, I think, unable to attend the last earnings call because you had a commitment, but I think it wouldn't be an earnings call if you didn't come on the line and ask a question. So I always I always look forward to hearing from you.

Sean McGowan

Thank you very much, and I enjoyed listening to you, Norm.

Norman Snyder

Thanks.

Operator

This concludes our question and answer session of the.

Norman Snyder

No, we have one we have one additional question.

Operator

(Operator Instructions) [Jack Higher], private investor.

Jack Higher

Yes, hey, can you guys hear me?

Norman Snyder

I can.

Jack Higher

Okay often we are sorry, not last but not least, I just wanted to touch on the two sort of one-off, have incentives, noncash packaging inventory valuation adjustments of [1.8] and then the provision and on the weather that the product hold related to the swing lead program for [1.3]. Can you add any like inside of like specifically what those what happened in under these circumstances?

Norman Snyder

Well, let me let me let me address the swing with lead issue because that's a little bit simpler. As we talked about, we had a malfunction with our closure. So we come. We pulled that product. It didn't sell it. We have we have product or packaging insurance, pension insurance. We have filed a claim on, but the auditors required us to reserve for that.
So until we collect on those insurance proceeds, we had to put a reserve up. And then conversely, when when we do receive insurance proceeds, that will be it will be a gain. So we'll have a lot of flip it, unfortunately, because the two events straddle the fiscal year, you'll have a charge in one year and then a pickup in the subsequent year.

Jack Higher

Okay.

Norman Snyder

I'm tracking right now for the inventory we have. We've had a lot of there, Fred. It's primarily packaging materials that we thought we could use for them limited time offers and special editions. And it had and we've done that on a limited basis. But two things one, since we were experiencing higher than normal level of short shipments. The reality of the matter is when are we going to have time to do these and execute on these programs?
And since there's a cost associated with storing materials, my let's just my logistics team convinced me that the benefit of holding them to do these programs later was not in our best interest on. So we decided that we would write those down. Now, some items we are going to we retain and we'll use, um and and some of this also with formulation changes in labeling requirement. So you're always labels it was it was wrapped carriers, but some items we're still going to use. So again, similar to the similar to the swing LED thing, there will be a pickup in the year that we actually use those.
And then another piece was related to our candy business where we've gone into a licensing agreement and we're in the process of transitioning that inventory over, but we had to take the auditors required us to take a reserve on that. It's still good inventory. And again, as we transition to that over just like the swing where there'll be a pickup there.

Jack Higher

Okay.

Norman Snyder

And I want to I mean, that was one thing I want to emphasize all of these are non-cash related adjustments. So maybe there was no cash. It's really it's really an accounting reserve driven, which obviously depresses results. And that's why we included in adjustments to modified EBITDA to show what things are on a normalized basis. But look, we just thought it was prudent to do it. It made sense. As I said earlier, we have a really strong team here and we're making better decisions. We're driving more efficiencies. You can see what we've done our margins a year ago, we're in the low 20s. We've driven up into the mid 30s and really believe that's sustainable with continued improvement. We brought our logistics costs down. There will continue to go down, and we've really held our SG&A in check, in fact, loaded over the prior year. And I think until we're in the position to generate more cash than we can invest from a marketing side and reinvesting in our brand. We've really accomplished a lot.

Gary Goetz

Yes. No, I That all makes perfect sense for the I guess the it's the sort of tangent that I and resulting from from what you said would be of those two items. And again, I'm not going to hold you to the number, but I would be curious, do you have any idea like it sounds like they're sort of gone but not forgotten. And if we were to retreat, whether it be from insurance or the ability to actually use some of it packaging and whatnot that was written off? Like do you guys have an estimate of like what we might be able to recoup from that or an expectation or anything along that line?

Norman Snyder

Well, I mean, the only thing I can really comment is the insurance claim is in the neighborhood of $1 million. So that's what we're discussing with the insurance company on the other, the candy as well, like about $250,000 range and the other items I'll look at if we if my view is we're going to be opportunistic. If we can get another [250] out of that to come. I think that's a positive thing.
Obviously, we're going to we're going to push it as far as we can, but it's going to be coupled with what opportunities are there today, keeping our current products in stock. And again, we'll be opportunistic where we can on. But I don't really want to make promises because as you know, it's really going to be almost like a game time call when we have the availability to do that. But look at there's an expectation that some of that money is going to come back in 2024 and should be impactful.
Okay. So just kind of a hope for the best expect the worst situation. And yes, if we get some back, it's good. And if not, we've already written it off. And yes, there's a push toward closure, but look at we're going to we're going to we're going to remain active, opportunistic and do as much as we can when we can do it.

Jack Higher

Okay. And my last question. So just looking at the Q4 numbers and I and I'll admit that I haven't had a chance to actually go through all of them just from a top line level, looking down 1,000 foot view, if delivery and handling costs were reduced by 32% or around like $900,000 quarter over quarter, SG&A of 23% and also in the 900 ballpark range, that's about [1 million] [1.8] in reduction.
So I was just curious like what was the main driving or a driving factor or factors. And that really hurt our operating loss Q4 in comparison to last year with those with those cost-saving measures like taking effect from what pushed us to actually have more of a law?

Norman Snyder

Well, it was primarily the write-offs. I mean, obviously, there was that that the top line impacted it from a from a gross margin standpoint. But the real the real driving factor were all those adjustments.

Jack Higher

Okay. Okay.
Yes.
So there are there in that number that makes that asset mix much more.

Norman Snyder

Yes. And if you look at it this way, what I would ask you, if you go back and look at look at look at the modified EBITDA and then you can see really the apples to apples comparison with the prior year.

Jack Higher

Okay. Okay. Aren't often. I appreciate your time and for all my questions, keep up the good work we've got you know, high expectations and we are assuming I think you guys will deliver.

Norman Snyder

Thank you, Jack.

Operator

(Operator Instructions) [John Fann, Downtown Family Office].

John Fann

Yes, thank you for taking my call.
A couple of quick questions.
First, I may ask on the cash label.

Norman Snyder

I'm sorry?

John Fann

May I ask ConEd cash may up at current cash level Yes, how much cash you have right now, plus that's we what we can disclose. We put in the press release.
Well, I mean, you do not have a term loan or some a label of your liquidity. I mean?

Norman Snyder

Well, like I like I said, what we've disclosed is post year end, we're doing we're doing a financing of up to $6 million and we've raised through I'd say, if you're growing.

John Fann

I mean at the end of the December quarter, you have have a meaning cash.

Norman Snyder

That's right.

John Fann

Yes. I mean lower interest costs in the segment itself? I mean, are you currently looking to rate or you have enough cash flow to sustain?

Norman Snyder

Well, I think I answered that question earlier with the current financing that that will be sufficient to go to hear.

John Fann

Okay. Second question, does the Company have any litigation going on right now now now?

Norman Snyder

No?

John Fann

Okay Last question, quick question. Are you have a new Board member, what does that? But two quarters before, barring any possible Chinese, it's a company a, you know, what a partner or something any follow up. Other angle?

Norman Snyder

I'm sorry, say that again.

John Fann

Okay. You have a new Board member.
Yes, I have been here a couple of quarters ago, and you mentioned about Fastenal possible partnership with that new Board member, you know, kind of a strategic partner or, you know, kind of I don't know.
Yes, no, I guess I just wonder if there's any follow on on that the the business opportunities?

Norman Snyder

I mean, yes, look at just like everything else, we've moved to a concentrate model for our exports to the UK and Europe. And obviously, our new Board member is from Hong Kong and understand the Asian markets. And we are presently evaluating opportunities there. And we would we would mimic the concentrate model that we're using in the UK and Europe. So our our cash needs would be minimal on to expand in that market, but we're really in the early stages of evaluating that.

John Fann

Thank you.

Operator

This concludes our question and answer session. I would like to turn the conference back over to Norman Snyder for any closing remarks.

Norman Snyder

I want to thank everyone for participating in this afternoon's call as well as our employees, customers and of course, our shareholders. We appreciate everyone's support. I'm pleased with the work we've accomplished over the past year and look forward to executing on our 2024 plan in the year ahead. Thank you and have a good day.

Operator

The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.