Monday, March 10, 2008

Psychology of the Call for Jones Soda (Q4 2007)

Jones Soda (JSDA) just reported earnings after closing at $4.34, their lowest close since August 2005. JSDA reported sales of $5.9M vs $10M Quarter over Quarter (Q/Q), and a loss per share of $.39 compared to a gain of $.08(Q/Q). Soon after JSDA reported these numbers the stock slid down to a bid of $3.40. While acknowledging the arrival of a new and supposedly more experienced CEO in January, we offer you our Psychology of this Call.

CFO Natha began the call at 40 seconds by reading the Safe Harbor statement. Interim CEO Jones at took over at 10 minutes, his delivery monotone and very dull. He mentioned at the 4 minute 10 second (4:10) mark that JSDA was in "transition which could take 18 months". We hate excuses and the word "transition" raises a definite red flag.

At 6:30 he mentioned the Seattle Seahawks NFL team, a non-issue as far as POTC is concerned. "Problems" were mentioned at 8:10. "Selling was incomplete, write offs resulting, sales down". "Inventory write downs" were mentioned.

At 9:50 Natha tried to change the negative tone, or so we hoped, but failed with a very flat delivery of results. Natha mentioned "severance costs" at 12:20 and “slotting fees" at 13:30. It seems these fees are a great burden to JSDA. At this point we were hoping Natha would mention slotting fees in conjunction with International Game Technology (IGT), but it turned out to be wishful thinking.

At 16:20, "decreased licensing revenues" were mentioned, followed by "increased legal fees" at 17:10. It felt like our ears were starting to bleed in the 18th minute with every further word Natha uttered. More and more negatives! A "decrease in cash position" at 19:20 and then at 21:20 the year 2008 was described as a "year of transition and expect losses”. We cannot believe how horrid and hokey the Jones Sodas' Executives were in their presentation. There were no positives to be taken away; not a one. And at 25:30 a "three year transition" was mentioned. Oh my, oh my, JSDA needs a miracle.

Analyst Questions/Management Answers
35:40: Nicole Miller from Piper sounded as confused as JSDA's management. She wanted to tweak a new model for JSDA? Maybe she needs to drop coverage?

37:30: Mark from Stifel Nicolaus asked about "slotting fees" and after management stumbled through the painful truth, Mark answered "great". We were shocked by how this CC was developing. Both analysts seemed happy with the answers, but our ears bled more.

41:50: Alton Stump with Longbow asked whether retail space was at risk. “You will see us sort out the mix" was management’s answer at 42:30. We didn’t feel any conviction at all in that delivery.

45:10: Jaclyn from Lazard asked for any bench marks/mile stones for "success" and management said selling 7M cases in 2008 would be a goal. Management actually laughed at 46:25; they LAUGHED. A comedy developed and investors must rewind to this point and witness the incompetence of JSDA management. We don't ever tolerate management laughing at bad results.

At 51:58 "we are anticipating a loss in 2008" was reiterated by managment.
52:48 analyst Bill asked whether there ever was a real search for a CEO and management said "the four of us assessed we were working well together". The comedy continued. The only analyst we liked so far was Bill, as he seems to get it. Bill asked a relevant question and received a terrible answer.

The last analyst wanted clarity given to the numbers.. unbelievable. At 58:48 the same analyst asked whether management will buy stock. When they answered with a very tepid "yes", the analyst suggested "it would be helpful" in an upset tone. Okay, he scored some points there!

The Conference Call ended at 59:55. We can summarize our feelings as follows: One of JSDA's brands is "Whoopass". After hearing nothing but excuses on this soda Call, we advise our readers to hy-phe-nate that Jones brand to "Whoo--PASS", and not consider a single share.

No fizzle, no fun at Jones Soda. We give JSDA a score of 58% and a letter grade of F.

Thanks for your continued support, the Psychology of the Call team.

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