Zevia PBC Q1 2025 Earnings Call Transcript

Quartr
Provided by Quartr
May 7, 2025

There are 10 speakers on the call.

Operator

Greetings, and welcome to the ZBF PBC First Quarter twenty twenty five Earnings Call. At this time, all participants are in a listen only mode. A brief question and answer session will follow the formal presentation. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Jean Fontana, Senior Managing Director with ADDO Investor Relations.

Operator

Thank you. You may begin.

Speaker 1

Thank you, and welcome to Xevia's first quarter twenty twenty five earnings conference call. On today's call are Amy Taylor, President and Chief Executive Officer and Girish Satya, Chief Financial Officer and Principal Accounting Officer. By now, everyone should have access to the company's first quarter twenty twenty five earnings press release and investor presentation made available this afternoon. This information is available on the Investor Relations section of Xevia's website at investors.xevia.com. Before we begin, please note that all financial information presented on today's call is unaudited.

Speaker 1

Certain comments made on this call include forward looking statements, which are subject to the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995. These forward looking statements are based on management's current expectations and beliefs concerning future events and are subject to a number of risks and uncertainties that could cause actual results to differ materially from those described on these forward looking statements. Please refer to today's press release and other filings with the SEC for a detailed discussion of the risks that could cause actual results to differ materially from those expressed or implied in any forward looking statements made today. During the call, we will use some non GAAP financial measures as we describe business performance. The SEC filings as well as the earnings press release, presentation slides that accompany today's comments and reconciliations of the non GAAP financial measures to the most directly comparable GAAP financial measures are all available on our website at investors.zvia.com.

Speaker 1

And now I'd like to turn the call over to Amy Taylor.

Speaker 2

Thank you, Jean. Good afternoon, everyone, and thank you for joining us for our first quarter twenty twenty five earnings conference call. I'm incredibly proud of the strong execution demonstrated by our team in the first quarter. We delivered net sales at the high end of our guidance range and meaningfully exceeded our adjusted EBITDA expectations. Our productivity initiative continues to deliver cost savings that fuel investment into building our brand while moving us closer to profitability.

Speaker 2

We are gaining traction despite the uncertain macro environment and highly competitive category. So briefly highlighting our financial results, first quarter net sales were $38,000,000 Gross margin hit a record of over 50%, and adjusted EBITDA improved by 2,200,000.0 to negative $3,300,000. We also made great progress in advancing our strategic growth pillars. First, we sharpened our brand identity and strengthened our marketing approach to drive engagement with lighthearted campaigns that highlight Zevia as a naturally sweetened affordable alternative to sugary soda. Second, we raised the bar on product innovation with a more sugar like taste experience that we are rolling out in exciting new flavors as well as in some of our legacy sodas.

Speaker 2

And third, we expanded distribution through existing and new retail partners, building on shelf visibility and inviting trial through new packaging options. Building brand awareness takes time, but we remain optimistic about our future for three reasons. First, the robust growth outlook for the better for you beverage category. Second, our unique market positioning with great tasting, clean label, zero sugar soda at an affordable price. And then third, the green shoots we are seeing in our business.

Speaker 2

Turning to our first growth pillar, marketing, we are focused on raising brand awareness with a sharper brand identity. We are bringing the Zevia brand to life through fun and engaging campaigns that we believe have broad relevance and cultural appeal. In March, we launched a new campaign featuring the highly popular crossover artist, Jelly Roll, who has been actively sharing his journey toward living a healthier lifestyle. The advertising campaign, entitled Get the Fake Out of Here, was another lighthearted parody of artificiality, building on our holiday campaign, but this time, hooking a little fun at celebrity endorsements. The campaign extended its reach way beyond paid media with social and editorial impact proving that the creative was compelling to a broad audience.

Speaker 2

The campaign was also covered by People Magazine and several other broad reaching mainstream digital media channels. The ad is currently running on broadcast and streaming channels, including spots on American Idol for a twelve week period and is activated across TikTok, Instagram, and other social channels. And finally, we activated on the ground with a Zevia pit stop reminiscent of the ads gas station setting at events like South by Southwest in March and at various five k and other events with Jelly Roll over the last few months. The campaign delivered a record of 2,400,000,000 earned impressions and the most shared and most engaging content in VBS history. We will build on this momentum and look forward to sharing more details on our summer campaign as we continue to pulse new creatives, inviting consumers to take a break from artificial.

Speaker 2

With respect to our second strategic growth pillar, product innovation, we are raising the taste profile of our zero sugar sodas. Creamy root beer and our unique limited edition offering, salted caramel, have garnered strong responses and consistently outperforming taste tests. In conjunction with these successes, we are expanding this more sugar like taste experience into new flavors as well as into some of our legacy sodas. In time for the important summer season, we are very encouraged by the better than planned initial sales performance of our newest flavor, strawberry lemon butter, which in testing received the highest purchase intent score in Zevia's history. This highly anticipated launch will be at the center of our summer campaign.

Speaker 2

And then exclusive to Sprouts, orange creamsicle is also available now. And there's more to come as a part of Xevia's rapid innovation efforts to support expanding user base. And then finally, we plan to build on the success we saw at Walmart with variety packs. We are now rolling out a 12 count variety pack across approximately 80% of our grocery and natural channel stores through q two during spring reset. So turning now to our final strategic growth pillar, distribution.

Speaker 2

We remain optimistic about our strong performance at Walmart with the launch of the modern soda set across all US stores. We believe that Walmart's better for you soda initiative will help to raise awareness and increase the consumer base both for the category and for the Zevia brand. Our new variety pack, supportive of driving trial, has been and continues to be the top selling Zevia skew since its launch. We'll be introducing an additional variety pack and new flavors at Walmart in the coming months as innovation remains key in this fast growing competitive category. In the food channel, Albertsons has launched its own better for you soda set with next gen bev.

Speaker 2

We believe the Xevia strong brand block at eye level in a vertical shelf position sets us up well to capitalize on this expansion. Very early reads, including the same store sales lift and trial of new products are very encouraging. And then in the drug channel, Zevia gained new distribution across nearly 8,000 Walgreens stores. The assortment features six flavors and one variety pack and will additionally be on an end cap featuring summer beverages starting at the May. In convenience, we're executing new distribution across a number of regional players and two national banners on a regional basis.

Speaker 2

Each of these represents an opportunity to test and learn with our sleek single serve soda offering and with variable merchandising approaches. This small footprint with top operators and regional chains can help inform a broader rollout both for the brand and the category and convenience. And then lastly, on distribution, our DSD or direct store delivery strategy continues to unlock improved in store presence and new channel distribution with a focus for now on the West Coast. We're encouraged to see that our test market in the Northwest continues to outperform outperform rest of market. And in April, we launched Crescent Crown in Arizona with neighboring states to follow in parallel with new singles distribution commitments at retail.

Speaker 2

So in closing, we remain bullish on Zevia's competitive position with an enjoyable, healthier, and more affordable offering in a moment when consumers are more focused on health and clean label products than ever. We're encouraged by the early proof points we're seeing across our strategic growth pillars as we continue to work to strengthen our foundation for future growth. And so with that, I'll turn the call over to Girish.

Speaker 3

Thank you, Amy. Good afternoon, everyone, and thanks for joining our call today. Our first quarter performance reflects great progress against our long term strategic plan. We continue to advance our productivity initiative, which not only drove record gross margin but yielded operational cost savings that enabled us to increase investments into brand building initiatives. Turning to our first quarter results.

Speaker 3

We delivered net sales of $38,000,000 a decrease of 2% as compared to the first quarter of last year. The decline was primarily due to increased promotional activity. This was partially offset by pricing and improved volumes, driven by expanded distribution at Walmart, offsetting the previously disclosed distribution losses in club and one major mass retailer last year. Gross margin reached a record high of 50.1%, an increase of four forty basis points from 45.7% in the first quarter of last year. This improvement reflects lower product costs and improved inventory management, partially offset by higher promotional activity.

Speaker 3

Selling and marketing expenses were $15,300,000 or 40.3% of net sales in the first quarter of twenty twenty five compared to $15,100,000 or 38.8% of net sales in the first quarter of twenty twenty four. Selling expense was $9,100,000 or 24.1% of net sales compared to $12,300,000 or 31.8% of net sales in the first quarter of twenty twenty four, a decrease of 25.8%. In addition to cost efficiencies, we achieved record customer fulfillment rates during the quarter. Marketing expense was $6,200,000 or 15.2% compared to $2,700,000 or 7% of net sales in the first quarter of twenty twenty four. The increase was primarily due to higher marketing investments fueled by cost savings initiatives in freight and warehousing.

Speaker 3

General and administrative expenses were $7,000,000 or 18.4% of net sales in the first quarter of twenty twenty five compared to $8,100,000 or 20.9% of net sales in the first quarter of twenty twenty four, largely due to cost saving measures, including employee reductions to right size the business and focus on growth driving initiatives. Restructuring expenses were $2,100,000 in the first quarter, which primarily includes employee related severance costs and largely completes our planned restructuring initiatives. As a result of the aforementioned factors, net loss was $6,400,000 compared to a net loss of $7,200,000 last year, an improvement of $800,000 Adjusted EBITDA loss of $3,300,000 compared to an adjusted EBITDA loss of $5,500,000 in the prior year period. The $2,200,000 improvement came despite the decrease in net sales as we continue to deliver on our productivity initiative and reinvest in the business. Turning to our balance sheet.

Speaker 3

We ended the quarter with approximately $28,000,000 in cash and cash equivalents and have an undrawn revolving credit line of $20,000,000 Now turning to our outlook. The success of our productivity initiative, which led to an annualized cost savings of $15,000,000 not only sets us on a strong path to profitability but enabled us to make key investments to accelerate future growth. We continue to find opportunities to streamline our operations and drive efficiencies in order to offset impending tariff costs. We are focused on what we can control in a challenging macro environment in a highly competitive category, and it's working. Based on our first quarter results and current trends in the business, we are maintaining our full year net sales guidance in the range of $158,000,000 to 163,000,000 We're also maintaining our adjusted EBITDA loss range of $8,000,000 to $11,000,000 despite the impact of higher tariffs, which we are working to offset with additional cost savings throughout the year.

Speaker 3

Turning to second quarter, we expect net sales of between $40,500,000 to 42,500,000.0 We would note that Q2 and Q3 are historically the highest volume quarters of the year due to seasonality. We expect Q2 adjusted EBITDA loss to be between $2,200,000 and $2,900,000 reflective of increased marketing investments and higher promotions in addition to the higher tariff related costs I previously mentioned. In closing, we plan to continue to reinvest savings from our productivity initiative into driving future growth while managing our business prudently in an uncertain environment. We remain confident that the work we are doing now will further strengthen our market position to capitalize on the robust growth in the better for use soda category and deliver sustainable, healthy, profitable long term growth. I will now turn it over to the operator to begin Q and A.

Speaker 3

Operator?

Operator

Thank you. We will now be conducting a question and answer session. You. Our first question comes from Bonnie Herzog with Goldman Sachs. Please proceed with your question.

Speaker 4

Thank you. Hi, everyone. I guess my first question is on your guidance. You maintained your full year guide and then provided a Q2 guide, which I guess implies your top line growth will accelerate to about 7% at the midpoint in 2H versus I guess about flat in 1H as well as EBITDA acceleration or I guess lower declines in the second half. So just hoping to hear a little bit more about the drivers behind this and, you know, maybe the visibility you have on this.

Speaker 2

Sure. Thanks, Bonnie. You know, we feel really good about the progress that we've made, and and hopefully, you see that as we reiterate the guide. There's strong execution across the board. Our productivity initiative, in particular, has really enabled important investments with the priority being driving brand awareness with a long runway for growth given the sustainability of the health and wellness trend coming from a macro perspective.

Speaker 2

And then all also related, you know, growth outlook for the better for you beverage category. And we found our voice in brown marketing. Hopefully, you can really see that in what we're putting out in our distinctive campaign. Our product innovation pipeline is stronger than ever and and innovation really hitting the shelves now, so impact q two and following. And then you as you're aware, we we have national distribution in Walmart and expansion within Albertsons in that footprint and and others that all demonstrate momentum.

Speaker 2

I think Walgreens is another example. And then, you know, our DSD strategy is show showing some early promise of impact in including launching now finally some some regional convenience activity. So while a macro backdrop keeps us, let's say, prudent, given low visibility on consumer sentiment overall, and we know the tariffs are are a headwind, we look at each of the initiatives that we are driving and the discipline with which we are executing them, it's and we know that while marketing will take time for an impact, net net, each of these strategic growth pillars will will bear fruit in the balance of the year.

Speaker 4

Okay. Thank you. That's helpful. And maybe a second question from me, I may. Just, you know, like you mentioned, Amy, you've had some success at Walmart.

Speaker 4

So just hoping to get a little bit more color on your business there. I guess, you know, my understanding is your past initial channel fill. In. So how are things, you know, at the accounts performing maybe relative to

Speaker 3

your

Speaker 4

internal expectations? And then ultimately, you know, what are your expectations for the brand in Walmart? And maybe if you could help contextualize the space you currently have at the retailer, and then, you know, how much more runway might there be? Thank you.

Speaker 2

Sure. Understood. Yeah. Thanks, Bonnie. So we're really pleased with our performance at Walmart, and it's a great partnership.

Speaker 2

And I say that in a couple of different ways. First of all, yes, we had to answer one of your subset questions there. The initial pipeline filled in the fourth quarter of last year. So we're we're past the initial pipeline fill. So we have the first several months of the year to look at performance, which is just the consumer response to the category modern soda and Zevia's presence within it.

Speaker 2

And we're getting a combination of new consumers trialing the product as well as Zevia fans picking up their favorite flavors. I think, notably, our variety pack is the number one seller among Zevia SKUs, so a good just directional indicator that, yes, indeed, this new distribution is driving trial. Our early sell through performance has been encouraging, and, you know, it is very early. But I think there's also evidence that the partnership is quite strategic and collaborative. And what I mean by that is, you know, as I mentioned, I think, briefly in prepared remarks, we are bringing another variety pack to the shelf at Walmart.

Speaker 2

We are bringing a new flavor that will launch first at Walmart, and we're able to do that mid stride in the year. So I think that demonstrates Walmart's agility despite their size and their commitment to modern soda and kinda moving with the category as the category moves. So we're excited to be a part of what is really a a a limited number of brands featured in that set. We have a strong kind of anchoring position within the set. And while the set will be agile given the competitive and fast growing nature of the category on the whole, we're really pleased with our position within it and our opportunity to continue to innovate with Walmart, move fast with Walmart, and react to the learnings that we garner based on consumer pull through.

Speaker 4

Okay. Thank you. I'll pass it on.

Speaker 2

Thanks, Bonnie.

Operator

Our next question comes from Jim Salera with Stephens. Please proceed with your question.

Speaker 5

Hey, Amy. Hey, Girish. Good afternoon. Thanks for taking our question. Girish, actually wanted to start off on the gross margin.

Speaker 5

Is 50% plus gross margin sustainable on a go forward basis? And if you could maybe help us bridge the puts and takes between tariff headwinds, maybe you can quantify how much of that is exposing your COGS, with the potential risk there are, and then how we kind of offset that on the productivity side?

Speaker 3

Yeah. Absolutely. Thanks for the question, Jim. We do believe and I do believe that, you know, gross margins in the upper forties are sustainable. I would note that the gross margin at 50%, you know, is also inclusive of what I believe to be a right sized promotion spend, as well for, for both the company and the category.

Speaker 3

As we think about sort of the rest of the year outlook, you know, tariffs will be of about a 200 basis point headwind, that we will seek to overcome vis a vis product portfolio adaptations vis a vis continued work around price pack architecture and continued, changes in sourcing strategy. So we do have the levers to offset offset that. In the very, very short run, you know, we will we will see some, you know, we will see some of that impact hit in q two more, and be more, impactful in q three. But by then, meaning by q three, q '4, we'll begin to offset some of it. So net net, gross margins in the upper forties, are sustainable, inclusive of this, you know, 200 bps headwind that we are about to, that we're beginning to see the impact of.

Speaker 5

Okay. That's helpful. And then, Amy, I wanted to, ask a little bit on on the convenience side. If I interpreted your prepared remarks correctly, it's just going to be the single cans, the thin cans in convenience. It is that expansion kind of governed by where you have the DSD relationships, and and that's where we should expect to see the single cans distributed with regional players in those areas.

Speaker 5

And then, I guess, the, you know, national brands that operate within those regions as well. That that the right way to think about that?

Speaker 2

Yes. Jim, frankly, nailed it on all points. So it's the 12 ounce sleek soda can that will be featuring in convenience. And the combination of both regional players as well as national banners on a regional basis gives us the ability to test and learn with pricing and merchandising strategies and combinations of featuring in the cold box, featuring cold next to the register, and and a few other options, but all with those singles. And, yes, you're also correct that we are executing that inside of our DSD footprint, which as of right now is the Northwest and the Southwest.

Speaker 2

So convenience and DSD moving together, which makes sense. It gives us a lot of opportunity to learn not only about our brand's performance and opportunity and convenience and readiness for convenience, but also the category, which is still very, very nascent within sort of the impulse environment.

Speaker 5

If I could just sneak one quick follow-up on that. Are you guys gonna have branded coolers in convenience in in across the DSD network?

Speaker 2

We do have the option to activate branded coolers and where those investments make sense. So where volumes and space requirements would, enable that type of replacement, we would certainly do that. And as you probably remember from the past, we've had strong brand performance from branded coolers inside of a natural channel with sort of an impulse, opportunity, be it near the register or near deli. You know, a a natural channel often behaves a little bit like a deli or like a convenience store in some ways. So, yes, we have that option, but I would say that would be a bit of phase two volume and space based opportunity.

Speaker 5

Got it. Thank you very much. I'll I'll hop back in the queue.

Speaker 2

Thanks, Jim.

Operator

Our next question comes from Eric Serrata with Morgan Stanley. Great.

Speaker 6

So first housekeeping question. Should we think of I guess, what composes the bulk of the tariff exposure? Is it primarily aluminum? Or are there other items in there that we should think about? And then bigger picture, I know it's early days of both some of your initiatives and the Walmart Modern Soda Set.

Speaker 6

But what are you seeing in terms of household penetration changes since the customer shelf set changes and since some of your initiatives on the product channel to market standpoint? And then sort of how does that inform your longer term thinking in terms of TAM or household penetration for, the category and brand?

Speaker 3

Thanks, Eric. So I'll address your first question, and then hand it over to Amy for the second, part of your question. So in terms of the exposure to tariffs, it is primarily primarily aluminum. There are some secondary, impacts, on, some of our sources of stevia as well as, you know, some of the cross border slash transportation costs between Canada and US or Canada Canadian, rather, and US production facilities. And so but the the real bulk of it is is aluminum.

Speaker 2

Yeah. And I'm happy to talk just a little bit about, let's say, maybe sizing the opportunity and progress against that, starting with your first literal question, I suppose, on on Walmart and household penetration. So what the Walmart distribution has been additive to our household penetration. In other words, Walmart is helping us to grow the consumer base. That is in part just by the sheer number of stores.

Speaker 2

Right? We've gone from 800 Walmart stores selling to 4,300, in other words, national distribution. And particularly in some geographies where we have slightly lower penetration and really fast growth rate like the Southeast, we're seeing, you know, support to reach new households through that new new distribution. I think bigger picture, you know, the healthier living and and specifically sugar avoidance is is not a trend, but it's really here to stay. And the better for you beverage category remains highly attractive.

Speaker 2

I'll just share that better for you beverage comprises 25% of all CSD growth. So there's a big opportunity ahead for us. We are only in single digit, household penetration at this stage. There's a lot of upside with this brand. Now we're in 40,000, outlets selling.

Speaker 2

So the the game of growing distribution is is a long term one, and and there is upside there in the mass channel, in the club channel, in the value channel, of course, with convenience, which is a more strategic and long term endeavor, and then similarly in food service. So, yes, our household penetration is now growing with especially tailwinds from Walmart. Yes. There's a lot of upside given it's in single digits at the moment, and we have opportunity to grow it further not only by penetrating existing customers further within, the shelf sets and and with in store penetration to drive trial, but also with growth over time into new channel.

Operator

Our next question comes from Andrew Strelzik with BMO. Please proceed with your question.

Speaker 7

Great. Good afternoon. Thanks for taking the questions. I wanted to start by asking about the marketing. And in particular, you mentioned the impressions, which are great to see, and the fact that you won't see the benefits in the P and L for some time.

Speaker 7

So I guess in the interim, how are you gauging the effectiveness of the of the marketing? Is it, brand awareness or other metrics that you're looking at? And have you seen any any changes over the last couple months as you started to step on the gas there?

Speaker 2

Yeah. Thanks, Andrew. Obviously, a topic around which I'm very passionate. So, you know, brand building remains a top priority, and and marketing as a driver of awareness and trial, therefore, remains a top priority. And you're right.

Speaker 2

It takes time for that to show up in the business. So long term, we measure success through growth of the user base. Right? In other words, that household penetration growth. And in the meantime, we measure consumer sentiment around the brand through surveys to seek out leading indicators and kind of pressure test collective marketing effectiveness.

Speaker 2

So you think about something like a brand health tracker in the market on a regular basis to give us some guideposts on how the consumer is receiving our broader brand building messages. So that's the long term. That's brand building. More near in, we can measure the impact of velocity driving investments through what I'll call a closed loop attribution model and think about that on a retailer by retailer basis. So here, we can flex investments across channels and across retail platforms, and we can lean in and learn as store conditions change, as our priorities evolve.

Speaker 2

So in the current environment, we may flex where we spend, you know, based on our learning, based on the macro here and there. But awareness and trial remain a priority, and we'll continue to invest in brand in balance in balance with, you know, investing in in the velocity drivers. So we think about this very much for the long term, but we're also leaning in and driving it for the short term with velocity support at retail and in ecommerce.

Speaker 7

Okay. Great. That that's super helpful. And my other question, I know you're only providing the 2Q and the annual guidance, but kind of as I think about the back half of the year, last year was a little bit abnormal. You talked about what year typically are bigger quarters.

Speaker 7

Is there anything else to keep in mind as we kind of think about the phasing of the growth through the back half of the year? Is it fair to think March is gonna be a bit more elevated? We take a step back in April, or just anything else to keep in mind about the back half? Thanks.

Speaker 3

Yeah. I think directionally thanks, Andrew. I think directionally, you're correct. I mean, the from a revenue standpoint, you know, q two and q three remain the the peak quarters for the year. Sorry.

Speaker 3

There's some background noise here. And q four will be lapping the pipeline fill, for Walmart. And then just from a from an EBITDA perspective, you know, q one, as you've seen in q three will be the elevated marketing spend, for the for the year. And so, you know, from a modeling standpoint, you can, factor that in, as you think about the quarterly cadence. Great.

Speaker 3

Thank you very much.

Operator

Our next question comes from Suran Dvorah with Telsey Advisory Group. Please proceed with your question.

Speaker 8

Great. Thank you so much. Question is on the distribution. So you did gain a lot of distribution, Albertsons, Walgreens. Can you share how this rolls out over the year?

Speaker 8

You know, for example, Walgreens, you have 8,000 stores. Will it be, like, second quarter, third quarter, or is it, a whole annual rollout? And then just staying on the topic of distribution, are we done with lapping the club and the mass, the loss of mass customer you had in retail at this point?

Speaker 3

Yeah. Thanks, Durang. So so two, two points on the Walgreens, specifically and and the expansion of Albertsons. Walgreens will primarily be an impact in the second and third quarter, of this year. The expansion of Albertsons is obviously rolling out or not obviously, but is rolling out now and will be, will be is factored into our q q guidance.

Speaker 3

As you think about the what? Sorry. What was that?

Speaker 2

Yeah. So timing you were you were asking us back half timing, John. It says that

Speaker 3

Oh, and then the the lapping of the, club and mass retailers. So we that was primarily in q one to a lesser degree. You'll still have that in q two, but q three forward, it'll be fairly clean. Behind us. Yep.

Speaker 8

That's great. You know, I just had a quick question on the pricing strategy. You know, tariffs have come in. You talked about it. And then, on the on the flip side, productivity is improving, but then you are also stepping up some marketing over here.

Speaker 8

So can you share your broader thought on pricing? Like, do you think you need to take pricing in the back half of the year, given these changes, or you feel more comfortable where you are right now?

Speaker 2

I you know, I think let me let Girish speak to that sort of broader pricing. He he definitely owns that, but we we see two things happen at the same time, tariffs increasing cost and then headwinds from a consumer perspective. And so we believe that there is room for price, and we have work to do on our pack price architecture immediately and over time. But we haven't, communicated anything specifically on price. Is there anything you'd clarify?

Speaker 3

No. I I think that's that's great. I mean I mean, again, I I would just reiterate. Think we continue to find opportunities to drive, productivity, and and drive efficiencies in the supply chain. That being said, we also see, you know, ample opportunity in the short to medium term, to really improve our price back architecture.

Speaker 3

So we'll be, toggling between the two, for, you know, over the next, you know, several quarters as we try to dial that in.

Speaker 8

Great. Thank you.

Speaker 2

Thanks, Ron.

Operator

Our next question comes from Eric Deslauris with Craig Hallum. Please proceed with your question.

Speaker 9

Great. Thanks for taking my question. Just one high level question from me. So in light of the macro uncertainty, are you seeing any recent changes from a consumer behavior standpoint in the better for you beverage category as a whole and then at the everyday price point where you operate. I guess I'm wondering if you see consumers kind of trading out of the category or trading down to your everyday price point.

Speaker 9

I mean maybe growth is kind of too strong in this newer category to notice these subtleties, but just kind of broadly wondering if you see a market share opportunity, as consumers get more price conscious. Thanks.

Speaker 2

Eric, I think the points that you're making kind of through your question are exactly right. So first of all, to literally answer your question, it is too early to say. We're not seeing movement right now. You know, if we read what what what we believe is coming in the macroeconomic environment, we're not yet seeing that in consumer behavior. But what's our opportunity?

Speaker 2

Our opportunity is that we are the affordable option among great tasting, better for you products in the the in the set. And, you know, that that's something that we found has been an advantage to us over time and maybe even more now in this new era where we sit next to higher price and often functional options. So while it's too too early to set to say, we do think we are well positioned to be resilient and maybe from a market share perspective advantaged, when we continue to be worth the dollar from a value perspective because there's no compromise in taste. We're a great tasting and clean label option, and then we're significantly more competitively priced. It's a soda priced like a soda versus a a new kind of, price point from a functional beverage standpoint.

Speaker 2

So I think your observations are probably directionally astute, although it's not yet showing up in consumer purchase behavior.

Speaker 9

Alright. That's very helpful. I appreciate that color. Thank you.

Speaker 3

Thanks, Eric. Thanks, Eric.

Operator

There are no further questions at this time. I would now like to turn the floor back over to Amy Keller for closing comments.

Speaker 2

Yeah. Thanks for your attention today, everyone. We are really pleased with the strong execution by our team delivered in q one and the continued commitment that I'm seeing from them to execute against our key strategic growth pillars. And, again, those are distinctive and engaging marketing, strong flavor and pack innovation, and then our efforts against distribution. So there's strong tailwinds in our category.

Speaker 2

There's exciting green shoots in our business, and we have a clear position for our brand given our taste, clean label, zero sugar, affordable positioning. So despite the conversation around a muted macro, we're confident in and focused on a bright future for Zevia. Thanks for joining us today.

Operator

This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.

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Key Takeaways

  • Zevia delivered Q1 net sales of $38 million, hitting the high end of guidance, achieved a record gross margin of over 50%, and improved adjusted EBITDA by $2.2 million to a loss of $3.3 million.
  • The company’s productivity initiative drove $15 million in annualized cost savings, boosting margins and funding increased brand‐building investments.
  • Zevia advanced its three strategic pillars with a high‐impact "Get the Fake Out of Here" marketing campaign featuring Jelly Roll that generated 2.4 billion earned impressions, launched new flavors like strawberry lemon butter with record purchase intent, and rolled out a refreshed zero‐sugar taste across legacy sodas.
  • Distribution expanded significantly through national placement in Walmart’s Modern Soda Set, entry into Albertsons’ better‐for‐you shelf, listing in nearly 8,000 Walgreens, and DSD convenience launches in the West, driving both trial and new household penetration.
  • Despite higher tariffs and macro uncertainty, Zevia maintained its full‐year net sales guidance of $158–163 million and adjusted EBITDA loss range of $8–11 million, while projecting Q2 net sales of $40.5–42.5 million and an EBITDA loss of $2.2–2.9 million.
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Earnings Conference Call
Zevia PBC Q1 2025
00:00 / 00:00