Reborn Coffee: Provides Q1-2024 Corporate Update

Brea / CA. (reb) Reborn Coffee Inc., a California-based retailer of specialty coffee, has reported its financial and operational results for the first quarter ended March 31, 2024.

Key Financial and Operational Highlights

• Revenue increased 35 percent to USD 1.5 million in Q1-2024 from USD 1.1 million in Q1-2023.
• Ended Q1-2024 with 11 open locations, with one location in development.
• Company-operated store sales increased to USD 1.5 million, or 33 percent, in Q1-2024, compared to the same period in 2023.
• Company-operated store gross profit was USD 1.2 million in Q1-2024, compared to USD 0.7 million for the same period in 2023.

Q1-2024 and Subsequent Events

• Signed Memorandum of Understanding (MOU) to acquire Bbang Ssaem Bakery, one of Korea’s most iconic bakery brands to upgrade footprint into the coffee and bakery sector, enhance offerings and solidify position as a premier coffee + bakery franchise in the US and South Korea.
• Closed a master licensing deal that will facilitate Reborn Coffee’s dynamic entry into the vibrant United Arab Emirates (UAE) market, with its first flagship location set to open in Dubai.
• Launched on Amazon, expanding omni-channel strategy for e-commerce growth, aiming to drive substantial revenue growth and capture a wider online customer base.
• Closed a Master License Agreement (MLA) with IAID Co., Ltd., a visionary architectural and interior design consulting firm, and unveiled a major global expansion for premium brand growth in China and southeast Asia, including in-depth plan for opening first flagship store in the Historic Art Museum Building in Guangzhou, China.
• Signed a Letter of Intent (LOI) to acquire a 55 percent majority stake in Derin Lezzetler, a leading artisan snack and frozen bakery producer based in Istanbul, Turkey, a strategic move in Reborn Coffee’s expansion into the health-conscious food market and its plans to further penetrate the US, Europe, Middle East, and Asia Pacific regions.
• Partnered with pet fashion brand Sgt. Puppa to offer pet attire and accessories at pet social café set to open in Pasadena, CA in May 2024.
• Partnered with Tous les Jours, a franchise French-Asian bakery café chain, to bring an exclusive Valentine’s Day coffee blend to Tous les Jours’ Cerritos, California flagship location and through ecommerce.
• Closed a USD 1.0 million private placement equity investment from accredited investor, allowing Reborn Coffee to continue expanding its footprint both in the U.S. and internationally.
• Closed a USD 1.0 million private placement equity investment from Chairman Farooq Arjomand to further enhance product offerings and expand market reach.

Management Commentary

«The first quarter of 2024 was highlighted by ongoing efforts to diversify and expand our global operations, supported by strong revenue growth and improving margins,» said Jay Kim, Chief Executive Officer of Reborn. «At our US company-operated retail locations, we continued to drive sales and improve gross profit. Building on the strength of new products and strategic marketing initiatives, store margins were up 1,200 basis points during the first quarter to 79.2 percent. This operational execution has enabled us to focus on strategic expansion into new online and geographic channels, as well as acquisitions and investments to broaden our portfolio.

«Recently we closed two MLA’s to expand our brand into international markets. The MLA in partnership with Reborn UAE, led by CEO Mahmood Arjomand, will facilitate our dynamic entry into the vibrant UAE market. Under this agreement, we will collaborate to establish Reborn Coffee outlets, a distribution center for the Middle East, and roasting and warehouse facilities. The aim is to establish flagship stores within one year, with Jumeirah, Dubai, as the first location. Additionally, the plan includes opening 20 more stores across the UAE to solidify our presence in the region. An MLA with IAID combines our experience in retail coffee operations with their expertise in lifestyle design to introduce a flagship location in Guangzhou #73, China, situated in a central, historic district bustling with tourists. The site will feature a comprehensive brand center, setting the stage for future expansions into major cities like Shanghai and Shenzhen.

«We also worked to add capabilities in the food industry with an MOU to acquire Bbang Ssaem Bakery, one of Korea’s most iconic bakery brands. This strategic move will upgrade our footprint into the coffee and bakery sector, enhancing offerings and solidifying our position as a premier coffee and bakery franchise. Additionally, the strong Ebitda generated by Bbang Ssaem Bakery is expected to positively impact Reborn Coffee’s financial health, contributing to increased profitability and stability. Additionally, we signed an LOI to acquire a 55 percent majority stake in Derin Lezzetler, a leading artisan snack and frozen bakery producer based in Istanbul, Turkey to expand into the health-conscious food market. The company has developed a robust distribution network that includes globally recognized brands such as Starbucks, Caffe Nero, Gate Plus, Costa Coffee, Migros, Shell, Espressolab, and Coffy, making its products available worldwide. The investment will enable us to leverage Derin Lezzetler’s established relationships and expand its footprint in the global market and the US.

«Solidifying our presence in the ecommerce space, we recently officially launched on Amazon, aiming to drive substantial revenue growth and capture a wider online customer base. By launching on Amazon, we can access millions of potential customers, utilize advanced marketing tools to enhance brand presence and drive traffic, ensure prompt and reliable delivery through Fulfillment by Amazon (FBA), leverage data analytics to inform marketing strategies and product development, and enhance our OMNI-channel strategy by integrating our online and offline presence to provide a seamless customer experience.

«Operationally during the quarter, we took the opportunity to strengthen our balance sheet in anticipation of strategic milestones in 2024. Two investments totaling USD 2.0 million will allow us to continue expanding our footprint in the U.S. and internationally, as well as provide working capital and funds for general corporate purposes.

«Looking ahead, we continue to focus on operational execution at our existing retail locations as we leverage our success to prepare for new company-owned retail locations in Southern California and new flagships in states such as Texas, as well as global locations including South Korea, Austria, Dubai and China with our partners. Through acquisitions and investments in bakery and food product companies, we are diversifying our global footprint and revenue channels in complementary markets. We believe our worldwide expansion strategy will support continued revenue growth for Reborn and yield positive value for all our shareholders. I would also like to stress that, moving forward, we fully expect to file our quarterly and annual reports in a timely manner,» concluded Kim.

Anticipated Milestones

• Open 4 flagship Reborn Café locations in the U.S., targeting cities such as Miami, San Diego, Houston, and Kansas City.
• Open up to 20 company-owned retail locations.
• Open up to 20 Franchised locations nationwide.
• Open 10+ overseas locations outside the U.S., targeting countries such as South Korea, Malaysia, Dubai, China, Singapore, Thailand, and the UK.
• Open First Pet Friendly Indoor Café «Reborn N Pet Social» in city of Pasadena, California.
• Joint R+D projects with coffee farms in locations such as Hawaii, Colombia, Ethiopia, Guatemala, and Brazil.
• Expand B2B marketing to wholesale clubs and other major outlets and expand ecommerce marketing with online initiatives by launching its own Amazon marketplace.
• Launch of Reborn Mobile App services.
• Launch new Reborn-branded products such red tea bag packs and cold brew cans.

First Quarter 2024 Financial Results

• Revenues were USD 1.5 million for the three months ended March 31, 2024, compared to USD 1.1 million for the comparable period in 2023, representing an increase of 35 percent. The increase in sales for the periods was primarily driven by the opening of new locations, and the continued focus on marketing efforts to grow brand recognition.
• Company-operated store gross profit was USD 1.2 million for the three-month period ended March 31, 2024, compared to USD 0.7 million for the comparable period in 2023. Q1-2024 company-operated store gross margins improved to 79.2 percent compared to 67.2 percent for the same period in 2023.
• Total operating costs and expenses for the three-month period ended March 31, 2024, were USD 2.4 million compared to USD 2.1 million for the comparable period in 2023, representing an increase of 15 percent.
• Net loss for the first quarter of 2024 was USD 1.0 million, compared to a net loss of USD 1.0 million for the first quarter of 2023.
• Net cash used in operating activities for the three months ended March 31, 2024, was USD 1.9 million, compared to USD 1.7 million for the three months ended March 31, 2023.
• Cash and cash equivalents totaled USD 0.1 million as of March 31, 2024, compared to USD 0.2 million as of December 31, 2023.