Q2 2025 Zevia PBC Earnings Call
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Thank you and welcome to the <unk> second quarter 2025 earnings Conference call on today's call are Amy Taylor, President and Chief Executive Officer, and Garett Sofia.
Chief Financial Officer, and principal accounting officer by now everyone should have access to the company's second quarter 2025 earnings press release and Investor presentation made available. This afternoon. This information is available on the Investor Relations section of <unk> website at investors that DVA Dot com before we begin please note that all financial information.
Speaker #1: Good day,
Speaker #1: yone, and welcome to today's
Speaker #1: Zevia second quarter
Speaker #1: 2025 earnings
Speaker #1: call. At this time,
Speaker #1: all participants are in a
Speaker #1: listen-only mode.
Speaker #1: Later, you will have the opportunity to
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Presenting on today's call is unaudited 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 1095. 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.
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Speaker #1: Jean Fontana of Addo
Speaker #1: Investor
Speaker #1: Relations. company's second quarter
That could cause actual results to differ materially from those described in 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.
Speaker #2: Thank you and welcome to
Speaker #2: Zevia's second quarter
Speaker #2: On today's call, our Amy Taylor, President
Speaker #2: and Chief Executive
Speaker #2: Officer and Girish Satya, Chief Financial
Speaker #2: Officer and Principal
Speaker #2: Accounting Officer. By
Speaker #2: now, everyone should have
Speaker #2: access to the company's second
Speaker #2: quarter 2025
Speaker #2: earnings press release and
Speaker #2: investor presentation made
Speaker #2: available this afternoon.
non-GAAP financial measures as we describe business performance, the SEC filings as well as the earnings press release.
Speaker #2: This information is available
Speaker #2: on the Investor Relations
Speaker #2: section of Zevia's website
Speaker #2: at
Speaker #2: investors.zevia.com.
Speaker #2: Before we begin, please note
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 that would be a dot com and now I'd like to turn the call over to Amy Taylor.
Speaker #2: that all financial
Speaker #2: information presented on today's call
Speaker #2: is
Speaker #2: this call include forward-looking statements, which are subject
Speaker #2: to the Safe Harbor provisions of
Speaker #2: the Private Securities
Speaker #2: of 1995.
Speaker #2: These forward-looking statements
Speaker #2: are based on management's
Thank you Jamie good afternoon, everyone and thank you for joining our second quarter 2025 earnings call.
Speaker #2: current expectations and beliefs concerning future events and are subject
Speaker #2: uncertainties that could
We are very pleased with our performance in the second quarter net sales and adjusted EBITDA exceeded our outlook and we made notable progress across our strategic initiatives over the last year, we've executed against our three strategic growth pillars to sharpen the zebra brand and lay the foundation for growth.
Speaker #2: cause actual results to
Speaker #2: differ materially from those
Speaker #2: described in these forward-looking
Speaker #2: statements. Please
Speaker #2: refer to today's press
Speaker #2: release and other
Speaker #2: filings with the SEC
Speaker #2: for a detailed discussion
Speaker #2: of the risks that could
Speaker #2: 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.
<unk> position as a radically real option is clear we are certainly better.
Marketing is driving engagement product innovation is resonating, both with new and existing consumers and we are expanding our distribution with strong sell through across channels.
Speaker #2: 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.zevia.com.
All of this is in part fueled by our productivity initiatives that yielded $15 million in annualized savings with more to come I'm incredibly proud of what the team has accomplished over the last year. We are energized by our strong start to the summer and I'm more excited than ever about our future.
Speaker #2: And now I'd like turn the call over to Amy Taylor.
Speaker #3: Thank you, Jean. Good afternoon, everyone, and thank you for joining our second quarter 2025 earnings conference call. We are very pleased with our performance in the second quarter.
So briefly highlighting our financial results.
Speaker #3: Net sales and adjusted EBITDA exceeded our outlook, and we made notable progress across our strategic initiatives. Over the last year, we've executed against our three strategic growth pillars to sharpen the Zevia brand and lay the foundation for growth.
For the second quarter net sales grew 10, 1% to $44 5 million.
The EBITDA improved by $4 6 million to $2 million, marking our first profitable quarter as a public company.
Speaker #3: Zevia's position as the radically real option is clear. We are so to make better. Our distinctive marketing is driving engagement. Product innovation is resonating, both with new and existing consumers, and we are expanding our distribution with strong sell-through across channels.
Turning to highlights on our progress across each of our strategic growth pillars from a quarter, let's start with our first one marketing.
Our distinctive brand and brought to life through our national campaign that the phase out of here and seek to featuring household name crossover artist Daly Mall.
Speaker #3: All of this is in part fueled by our productivity initiative. It yielded $15 million in annualized savings with more to come. I'm incredibly proud of what the team has accomplished over the last year.
The campaign delivered record earnings impressions, and the most shared and engaging content and videos history, which contributed to double digit growth in the quarter.
Speaker #3: We are energized by a strong start to the summer, and I'm more excited than ever about our future. So briefly highlighting our financial results.
And then over Memorial day weekend, we launched get the big out of summer showcasing one of our newest flavor Strawberry 11 birth, and our playful summer break.
Speaker #3: For the second quarter, net sales grew 10.1% to $44.5 million. Adjusted EBITDA improved by 4.6 million dollars, to 0.2 million dollars, marking our first profitable quarter as a public company.
The summertime refreshment campaign features social and media activation in conjunction with Mega Influencer, posting and consumer context.
February 11th birthday here, a flavor of the summer and a great demonstration of the more sugar like taste experience the media is delivering and our new flavors.
Speaker #3: Turning to highlights on our progress across each of our strategic growth pillars from the quarter, let's start with our first one, marketing. Our distinctive brand was brought to life through our national campaign, "Get the Fake Out of Here," in Q2.
So this is a good segue into our second strategic growth pillar product innovation.
Our new flavor launches featuring our enhanced taste profile are generating excitement and engagement and are delivering top performing velocity.
Speaker #3: Featuring household name crossover artist DeliVol, the campaign delivered record earnings impressions, and the most shared and engaging content in Zevia's history, which contributed to double-digit growth in the quarter.
We are complementing our legacy classic soda flavors and more in the stalls it launches with new on trend food and flavors Strawberry Lemon birth, and Orange cream people have been our most successful launches to date on.
Speaker #3: Then, over Memorial Day weekend, we launched "Get the Fake Out of Summer," showcasing one of our newest flavors, Strawberry Lemon Burst, and our playful Summer Break Sweepstakes.
On the heels of these best ever innovation launches for our brand we have expanded our pipeline with the launches of peaches and cream online.
Speaker #3: The summertime refreshment campaign featured social and editorial media activations, in conjunction with mega-influencer postings, and consumer contest. Strawberry lemon burst is a hero flavor of summer, and a great demonstration of the more sugar-like taste experience that Zevia is delivering in our new flavors.
And our second exclusive at retail plus.
The return of our highly popular salted caramel flavor across channels.
Our prettier and on trend flavor provide an opportunity to appeal to a broader audience.
We continue to focus on driving.
Speaker #3: So this is a good segue into our second strategic growth pillar, product innovation. Our new flavor launches, featuring our enhanced taste profile, are generating excitement and engagement, and are delivering top-performing velocities.
With the launch of these new products, we have refreshed.
Where do you think the flavor that great taste to life.
And to communicate our better for you positioning.
So to me better as communicated on pack.
Speaker #3: We are complementing our legacy classic soda flavors and more nostalgic launches with new on-trend fruity flavors, strawberry lemon burst, and orange creamsicle, have been our most successful launches to date.
Along with several of the reasons to believe Nvidia is a unique position in the category.
Aro sugar Euro based colors and zero based sweeteners.
And finally regarding our portfolio, we rolled out a 12 count variety pack across the majority of our grocery and natural channels stores over the second quarter spring reset period, which is off to a great start in the very early stage and in July we introduced the new Moody variety pack.
Speaker #3: On the heels of these best-ever innovation launches for our brand, we have expanded our pipeline with the launches of Peaches & Cream Online, and a second exclusive at retail.
Speaker #3: Plus, the return of our highly popular salted caramel flavor across channels. Our fruitier and on-trend flavors provide an opportunity to appeal to a broader audience as we continue to focus on driving child.
<unk> medias knee punch flavor among others at Walmart.
We continue to surprise and delight, new modern and so the shopper and more media consumers alike.
Speaker #3: With the launch of these new products, we have refreshed Zevia's packaging to bring distinctive flavors and great tastes to life. And to communicate our better-for-you positioning.
This accelerated pace of innovation.
And lastly, our third strategic growth pillars.
I mentioned.
Speaker #3: Soda made better is communicated on pack. Along with several of the reasons to believe in Zevia's unique position in the category. Zero sugar, zero fake colors, and zero fake sweeteners.
We surpassed our historical peak distribution levels at retail are significant milestone that underscores the impact of our efforts over the past year.
We are pleased with the results of the spring retail resets and top accounts are performing at or above expectation.
Speaker #3: And finally, regarding the portfolio, we rolled out a 12-count variety pack across the majority of our groceries and natural channel stores over the second quarter spring reset period, which is also a great start and a very early stage.
Improved shelf oven.
The new product will sell through will be double digit blocking with on the quarter.
And as we gain distribution and supports our top priority broadening our use of it.
Turning to channel specific update we continue to perform well at Walmart.
Speaker #3: In July, we introduced the new Fruity Variety Pack, featuring Zevia's new Fruit Punch flavor, among others at Walmart. We continue to surprise and delight new modern soda shoppers and loyal Zevia consumers alike with this accelerated taste of innovation.
Our first variety pack is the top selling media SKU and the new Rudy variety pack is off to a great start in the first few weeks of summer.
In the grocery channel, we're encouraged by strong scan data and positive indicators across key retailers in terms of spacing and new ski performance.
Speaker #3: And lastly, our third strategic growth pillar is distribution. We've surpassed our historical peak distribution levels at retail, a significant milestone that underscores the impact of our efforts over the past year.
In club, we're back on rotation in key Costco region and performance has exceeded expectations.
Media generated record same store sales in every region on an apples to apples basis during the quarter.
Speaker #3: We are pleased with the results of the spring retail reset, and top accounts are performing at or above expectations. Improved shelf presence and new products drove sell-through, nearly double-digit velocities on the quarter.
Which we attribute in part to the positive response to our new more dynamic packaging design, which stands out in store and better communicate previous positioning.
Speaker #3: And as we gained distribution, it supports our top priority: broadening our user base. Turning to channel-specific updates, we continue to perform well at Walmart.
In the drug channel recent distribution gains exceed your available in all three national chain with one partner testing cold singles and 750 stores.
Speaker #3: Our first variety pack is the top-selling Zevia kew, and the new fruity variety pack is off to a great start in its first few weeks of summer.
And convenience.
We're pleased with the initial response across a growing network of regional chains.
And with regional tests at National players.
Speaker #3: In the grocery channel, we're encouraged by strong scan data and positive indicators across key retailers in terms of space gain, and new skew performance.
Still very early but recent scan data indicate that our performance is on par with larger and more established kids, which is encouraging and also an indicator of immediate potential and impulse channels. We.
Speaker #3: In club, we're back on rotation in key Costco regions, and performance has exceeded expectations. Zevia generated record-setting store sales in every region on an apples-to-apples basis during the quarter.
We will continue to be measured in our approach to convenience working towards sustained success as we build our brand and our distribution network. There remains considerable opportunity to expand in store distribution through legacy channels and of course, new store distribution across mass club and impulse channels.
Speaker #3: Which we attribute in part to positive response to our new, more dynamic packaging design, which stands out in store and better communicates Zevia's positioning.
In closing.
Speaker #3: In the drug channel, recent distribution gains make Zevia available in all three national chains, with one partner testing cold singles in 750 stores. In convenience, we're pleased with the al response across a growing network of regional chains.
We're energized by the strong momentum across our branded and.
I'm pleased to share that we are executing with focus and precision.
Our marketing and product innovation efforts are delivering meaningful result, amplifying brand awareness winning on tape.
Driving trial and repeat and support the accelerated distribution gains.
Speaker #3: And with regional tests at national players. It's still very early, but recent scan data indicates our performance is on par with larger and more established peers, which is encouraging and also an indicator of Zevia's potential and impulse channels.
With clear growth drivers in place and solid execution across the board. We believe we are well positioned to capitalize on the strong momentum in the better for you soda category and so with that I'll turn the call over to Girish.
Speaker #3: We will continue to be measured in our approach to convenience, working towards sustained success as we build our brand and our distribution network. There remains considerable opportunity to expand in-store distribution through legacy channels and, of course, new store distribution across mass, club, and impulse channels.
Thank you Amy.
Good afternoon, everyone and thanks for joining our call today.
Our second quarter results clearly demonstrate the significant progress we've made over the past year.
Fueled by strong execution, we delivered meaningful advancements across each of our strategic growth pillars.
Speaker #3: In closing, we're energized by the strong momentum across our brand and business, and pleased to share that we are executing the focus and precision.
In addition to delivering double digit top line growth, we've taken important steps to drive enhanced and enduring profitability.
Speaker #3: Our marketing and product innovation efforts are delivering meaningful results, amplifying brand awareness, winning on taste, driving trial and repeat, and supporting the accelerated distribution gains.
In addition to the $15 million in annual cost savings we have discussed.
We have identified an incremental $5 million in cost savings in Cogs, and Sony expenses, which we expect to begin realizing in 2026, bringing the total to $20 million.
Speaker #3: With clear growth drivers in place and solid execution across the board, we believe we're well-positioned to capitalize on the strong momentum in the better-for-you soda category.
Turning now to our second quarter result.
Speaker #3: And so with that, I'll turn the call over to Girish.
During the second quarter, we delivered net sales of $44 5 million, an increase of 10, 1% as compared to the second quarter of last year.
Speaker #4: Thank you, Amy. Good afternoon, everyone, and thanks for joining our call today. Our second quarter results clearly demonstrate the significant progress we've made over the past year.
This strong growth was primarily driven by our extended breadth and depth of distribution across channels.
Speaker #4: Fueled by strong execution, we delivered meaningful advancements across each of our strategic growth pillars. In addition to delivering double-digit top-line growth, we've taken important steps to drive enhanced and enduring profitability.
Partially offset by increased promotional activity.
As we continue to monitor the consumer and competitive environment, we remain agile either promotional programming.
Gross margin was 48, 7%, which reflects an increase of 680 basis points compared to 41, 9% in the second quarter of last year.
Speaker #4: In addition to the $15 million in annual cost savings we have discussed, we have identified an incremental $5 million in cost savings in cogs and selling expenses.
This improvement reflects lower product costs, and improved inventory management, partially offset by higher promotional activity and channel mix.
Speaker #4: Which we expect to begin realizing in 2026. Bringing a total to $20 million. Turning now to our second quarter results. During the second quarter, we delivered net sales of $44.5 million, an increase of 10.1% as compared to the second quarter of last year.
The impacts of tariffs were below where we expected and had an insignificant impact in the second quarter due to timing.
Selling and marketing expenses were $13 4 million or 30% of net sales in the second quarter of 2025.
Speaker #4: This strong growth was primarily driven by our expanded breadth and depth of distribution across channels. Partially offset by increased promotional activity. As we continue to monitor the consumer and competitive vironment, we remain agile in our promotional programming.
Compared to $13 6 billion or 33, 7% of net sales in the second quarter of 2024.
Selling expense was $8 7 million or 19, 4% of net sales compared to $9 3 million or 23% of net sales in the second quarter of 2024, a decrease of seven 1%, while maintaining best in class customer fulfillment rates during the quarter.
Speaker #4: Gross margin was 48.7%. Which reflects an increase of $680 basis points compared to $41.9% in the second quarter of last year. This improvement reflects lower product costs and improved inventory management.
Marketing expense was $4 7 million or 10, 6% compared to $4 3 million or 10, 7% of net sales in the second quarter of 2024.
Speaker #4: Partially offset by higher promotional activity and channel mix. The impacts of tariffs were below where we expected and had an insignificant impact in the second quarter due to timing.
The increase was primarily due to investments to drive brand awareness.
We did shift some of these marketing dollars in the second quarter to the back half of the year, which contributed to our better than expected adjusted EBITDA performance.
Speaker #4: Selling and marketing expenses were 13.4 million, or 30% of net sales in the second quarter of 2025. Compared to 13.6 million, or 33.7% of net sales in the second quarter of 2024.
General and administrative expenses were $8 1 million or 18, 2% of net sales in the second quarter of 2025 compared to $7 7 million or 19% of net sales in the second quarter of 2024.
Speaker #4: Selling expense was 8.7 million, or 19.4% of net sales, compared to 9.3 million, or 23% of net sales in the second quarter 2024, a decrease of 7.1%, while maintaining best-in-class customer fulfillment rates during the quarter.
The increase was primarily due to higher variable compensation expenses and outside services, partially offset by our efforts to right size the business and focus on growth driving initiatives.
As a result of the aforementioned factors net loss was <unk> 7 million compared to a net loss of $7 million last year, an improvement of $6 $3 million over the prior year.
Speaker #4: Marketing expense was 4.7 million, or 10.6% compared to 4.3 million, or 10.7% of net sales in the second quarter 2024. The increase was primarily due to investments to drive brand awareness.
Adjusted EBITDA was <unk> 2 million compared to an adjusted EBITDA loss of $4 4 million in the prior year period.
Speaker #4: We did shift some of these marketing dollars in second quarter to the back half of the year, which contributed to our better-than-expected adjusted EBITDA performance.
The $4 6 million improvement reflects accelerated savings from our productivity initiatives and a shift in the timing of marketing investments.
Speaker #4: General and administrative expenses were 8.1 million, or 18.2% of net sales in the second quarter 2025, compared to 7.7 million, or 19% of net sales in the second quarter of 2024.
As he noted this was the first positive adjusted EBITDA quarter since we IPO Ed.
Yeah.
Turning to our balance sheet, we ended the quarter with approximately $26 3 million in cash and cash equivalents and have an undrawn revolving credit line of $20 million.
Speaker #4: The increase was primarily due to higher variable compensation expenses and outside services, partially offset by our efforts to right-size the business and focus on growth-driving initiatives.
Now turning to our outlook.
We continue to execute our strategic initiatives and feel good about the momentum in our business that said, we are operating in an uncertain macro environment and remain prudent in our outlook.
Speaker #4: As a result of the aforementioned factors, net loss was 0.7 million, compared to a net loss of $7 million last year. An improvement of 6.3 million over the prior year.
In addition, this outlook assumes that the current tariffs of 50% on aluminum remain unchanged.
Speaker #4: Adjusted EBITDA was 0.2 million, compared to an adjusted EBITDA loss of 4.4 million in the prior year period. The 4.6 million improvement reflects accelerated savings from our productivity initiative and a shift in the timing of marketing investments.
However, should tariff cost rise that would potentially impact our cogs in 2026.
As such we are maintaining our full year net sales guidance in the range of $158 million to a $163 million.
Based on the additional benefit of cost savings and productivity initiatives. We now expect our adjusted EBITDA loss to range from 7 million to $9 million versus prior guidance of $8 million to $11 million.
Speaker #4: As Amy noted, this was the first positive adjusted EBITDA quarter since we IPO'd. Turning to our balance sheet, we ended the quarter with approximately $26.3 million in cash and cash equivalents, and have an undrawn revolving credit line of $20 million.
Turning to the third quarter, we expect net sales between 38% and $40 million. We expect Q3, adjusted EBITDA loss to be between three four and $3 9 million reflective of increased marketing investments and higher promotions. In addition to the higher tariff related costs.
Speaker #4: Now turning to our outlook. We continue to execute our strategic initiatives and feel good about the momentum in our business. That said, we're operating in an uncertain macro environment and remain prudent in our outlook.
Note that our third quarter adjusted EBITDA guidance include the $500000, one time charge within Cogs related to package redesign that Amy mentioned earlier.
Speaker #4: In addition, this outlook assumes that the current tariffs of 50% on aluminum remain unchanged. However, should tariff costs rise, this would potentially impact our cogs in 2026.
The cost of the repackaging design.
Will largely be realized in the third quarter we.
Speaker #4: As such, we are maintaining our full-year net sales guidance in the range of $158 million to $163 million. Based on the additional benefit of cost savings in our tivity initiative, we now expect our adjusted EBITDA loss to range from $7 million to $9 million versus prior guidance of $8 million to $11 million.
We believe this packaging is more reflective of our new flavors and taste profile as well as our brand narrative.
Very pleased with the positive response to the new design.
In closing with a more efficient operating structure, resulting from our productivity initiatives, we are enabling reinvestment into growth.
Speaker #4: Turning to the third quarter, we expect net sales between $38 and $40 million. We expect Q3 adjusted EBITDA loss to be between $3.4 and $3.9 million, reflective of increased marketing investments and higher promotions in addition to the higher tariff-related costs.
Echoing <unk> comments, we believe the work we have done over the last year sets us up to capitalize on a growing but a few beverage category and deliver long term profitable growth.
I will now turn it over the operator to begin Q&A.
Operator.
Speaker #2: Good day, everyone, and welcome to today's Zevia second quarter 2025 earnings call. At this time, all participants are in a listen-only mode. Later, you will have the portunity to ask questions during the question and answer session.
Thank you at this time, we will open the floor for questions if you'd like to ask a question you May press star one on your Touchtone phone, if you would like to remove yourself from the queue. You May Press Star two again that is star one to ask a question.
Speaker #4: Note that our third quarter adjusted EBITDA guidance includes a $500,000 one-time charge within cogs related to package redesign that Amy mentioned earlier. The cost of the repackaging design will largely be realized in the third quarter.
Speaker #2: You may register to ask a estion at any time by pressing star one on your
And we will take our first question from surround with Telsey group.
Speaker #2: touchstone phone.
Speaker #4: We believe this packaging is more reflective of our new flavors and taste profile, as well as our brand narrative at the very please with positive response to the new design.
Speaker #2: You may withdraw yourself from the call at any time.
Great Congratulations on a great quarter, good to see positive EBITDA as well.
Speaker #2: queue by pressing star
Speaker #2: two. Please note this
Speaker #2: call may be recorded and will be
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My first question is on the on the sales driver.
Speaker #2: assistance. It
Speaker #2: is now my pleasure to turn the
Speaker #2: conference over to Jean Fontana
Speaker #4: In closing, with a more efficient operating structure resulting from our productivity initiative, we are enabling reinvestment into growth. Echoing Amy's comments, we believe the work we have done over the last year sets us up to capitalize on a growing better-for-you beverage category, and deliver long-term profitable growth.
Can you give a little bit more color there, but a lot of positives in the quarter can you give a little bit more color on what drove the strong sales like channel fill in versus.
Speaker #2: of Addo Investor
Speaker #2: Relations.
Speaker #3: Thank you and
Speaker #3: welcome to Zevia second
Speaker #3: quarter 2025 earnings
Speaker #3: conference call. On
Speaker #3: today's call, our Amy
Speaker #3: Taylor, President and Chief
Existing general growth across existing channels and also can you share the contribution of like new flavors that leading the sales growth.
Speaker #3: Executive Officer, and
Speaker #3: Girish Satya,
Speaker #3: Chief Financial Officer, and
Speaker #3: Principal Accounting
Speaker #3: Officer. By now, everyone
Speaker #3: should have access to the
Speaker #4: I will now turn it over to the operator to begin Q&A. Operator?
Speaker #3: 2025 earnings press release and investor
Thank you yeah happy to Sean Thank you.
Speaker #3: presentation made available this
Speaker #1: Thank you. At this time, we will open the floor for questions. If ou'd like to ask a question, you may press star one on your touchstone phone.
Speaker #3: afternoon. This information 2025 earnings conference
So we had a really nice balanced quarter meeting growth came from several places we grow grew both in dollars and in units.
Speaker #3: is available on the Investor call.
Speaker #3: Relations section of
Speaker #3: Zevia's website at
Speaker #3: investors.zevia.com. Before we
Speaker #1: If you would like to remove yourself from the queue, you may press star two. Again, that is star one to ask a question. And we'll take our first question from Sarong Vor with Telsi Group.
Speaker #3: Begin. Please note that all financial
And of course, our new distribution at Walmart is contributing to that but so did positive momentum in grocery meeting busy they have really benefited from the spring resets. We're just two months or so into the volumetric impact of spring resets and that will continue to pay it back through the summer, but we gained.
Speaker #3: information presented on
Speaker #3: today's call is
Speaker #3: unaudited. Certain
Speaker #3: comments made on this call
Speaker #3: include forward-looking statements
Speaker #3: which are subject to the Safe
Speaker #3: Harbor provisions of the private
Speaker #5: Great. Congratulations on a great quarter. Good to see positive EBITDA as well. you know, my first question is on the on the sales driver.
Speaker #3: securities litigation
Speaker #3: reform act of
Speaker #3: 1995, these
Speaker #3: forward-looking statements are based on
Speaker #3: management's current
Speaker #3: expectations and beliefs
Speaker #3: concerning future events and
Speaker #5: can you give a little bit more color? There were a lot of positives in the quarter. Can you give a ittle bit more color on what drove the strong sales, like channel fill-in versus, you know, existing channel growth across existing channels?
Speaker #3: are subject to a number of
<unk> net net in some retailers regained 12 pack distribution and then other retailers are benefited from our brand block more eye level distribution and then to your last point new items drew drove incremental distributions. So distribution on the whole the cross major channels was a.
Speaker #3: risks and uncertainties
Speaker #3: that could cause actual unaudited.
Speaker #3: results to differ materially Certain comments made on
Speaker #3: from those described in these
Speaker #3: forward-looking
Speaker #3: statements. Please refer to
Speaker #3: today's press release and Litigation Reform Act
Speaker #3: other filings with the
Speaker #3: SEC for a
Speaker #3: detailed discussion of the risks that could cause actual results to differ materially from
Speaker #5: And also, can you share the contribution of, like, new flavors, that played in the sales growth? Thank you.
Speaker #3: those expressed or implied in any forward-looking
Speaker #3: statements made today.
Speaker #6: Yeah. Happy to, Sarong. Thank ou. So we had a really nice balanced quarter meeting growth came from several places. We grew both in dollars and in units.
Speaker #3: During the call, we will
Peter to our growth, it's good to see us back at double digit growth, our new items are certainly contributing to growth, but it's very early days as I mentioned in prepared remarks, our strawberry London burst as a top two items across the board in our sprouts exclusive is the number one item in.
Speaker #3: use some non-GAAP
Speaker #3: financial measures as we
Speaker #3: describe business
Speaker #3: performance. The SEC
Speaker #3: filings, as well as the
Speaker #3: earnings press
Speaker #3: release, presentation slides
Speaker #6: And of course, our new distribution at Walmart is contributing to that. But so did positive momentum in grocery, meaning the Zevia really benefited from the spring resets.
Speaker #3: that accompany today's comments, and reconciliations of the non-GAAP financial measures to
Sprouts and so we think that's not only contributing to some of our gross but also indicative of the flavor evolution and increased pace of innovation within our portfolio, we think that new items will continue to contribute growth.
Speaker #6: We're just, two months or so into the the volumetric impact of spring resets, and that will continue to pay us back through the summer.
Speaker #6: But we gained space, net-net, in some retailers, regained 12-pack distribution, and in other retailers, benefited from a brand block, more eye-level distribution, and then, to your last point, new items.
Have a little bit more Costco, specifically club business in the quarter than we've had in the past we've talked about that being both regional and rotational but that also contributed a little bit to the volume growth on the quarter.
Speaker #6: Drove incremental distribution. So distribution on the whole across major channels was a contributor to our growth. It's good to see us back at double-digit growth.
That's great.
I had a question about the productivity initiative can you share more color on.
Speaker #6: our new items are certainly contributing to growth, but it's very early days. As I mentioned in prepared remarks, our strawberry lemon burst is a top two item, across the board, and our, sprouts exclusive is the number one Zevia item.
You are seeing just incremental $5 million of productivity gains.
You are possible.
Absolutely.
Mentioned in the prepared remarks is we.
We continue to find efficiencies are within the within supply chain broadly as we continue to simplify.
Speaker #6: in sprouts. And so we think that's not only contributing to some of our growth, but also indicative of the flavor evolution and increased pace of innovation within our portfolio.
Our product portfolio and our network as well so we anticipate the incremental sale.
Speaker #6: We ink that new items will continue to contribute growth. we have a little bit more Costco and specifically club business, in the quarter than we've had in the past.
Savings to sort of begin to be realized.
To a lesser degree in Q4 of this year, but really at the beginning of Q1 next year.
First in Cogs, and then in our selling and warehousing expenses.
Speaker #6: We've talked about that being both regional and rotational, but that also contributed a little bit to the volume growth in the quarter.
Uh huh.
Second and third quarters of 2026.
Speaker #5: That's that's great. you know, and Girish, I had a question about the productivity initiative. Can you share more color on, you know, where you are seeing this incremental $5 million of productivity gains?
Thank you.
Thank you we'll take our next question from Bonnie Herzog with Goldman Sachs.
Hi, Good afternoon. This is Ethan only on for Bonnie Herzog. Thank you for taking my questions.
Speaker #5: Thank ou. I'll pass it on.
Speaker #4: Yeah, absolutely. And as we mentioned in prepared remarks, it's, we continue to find deficiencies, within the, within supply chain broadly as we continue to simplify, our, product portfolio and our network as well.
Maybe just one here on your guidance. So you maintained your top line guidance of $150 million to $163 million.
But if you include your Q3 guidance I think that actually implies Q4 might be flat to slightly down.
Speaker #4: So we anticipate, the incremental, savings to sort of begin to be realized, to to a lesser degree in Q4 of this year, but really the beginning of Q1 next year, first in cogs and then in, selling and warehousing expenses, in the sort of second and third quarters of of 2026.
I'm just curious have you had any more puts and takes there I understand the macro environment is challenging, but I guess anything else that might be driving that more cautious outlook towards the back end of the year that'd be great. Thank you.
Yes of course, thank you Ben.
I think it's really two things one as we alluded to in the earlier remarks, we continue to see.
Although we continue to see strength in our distribution gains and strong.
Speaker #5: Thank you.
The trends, we are a little bit cautious about the overall consumer.
Speaker #1: Thank you. We'll take our next question from Bonnie Herzog with Goldman Sachs.
As we think about Q4 of this year, we are lapping a very substantial Walmart pipeline fill.
Speaker #7: Hi. Good afternoon. This is Ethan Onlion from Bonnie Herzog. Thank you for taking our estions. maybe just one here on your guidance, so you maintain your top-line guidance of $158 to $163 million.
Which we.
Which we've addressed in previous calls as well and so I think really as we think about Q4.
Speaker #7: but if you include your Q3 guidance, I think that actually implies Q4 might be flat to slightly down. you know, 'm just curious if you had any more puts and takes there.
Being relatively flattish.
Would make sense given that the substantial nature of that pipeline fill.
Got it and then maybe just as a follow up on here on tariffs.
Speaker #7: I understand the macro environment is challenging. but I guess anything se that might be driving that more cautious outlook towards the back end of the year?
I think you mentioned that the tariff impact was maybe below expectations in the quarter.
Speaker #7: that be great. Thank ou.
Speaker #4: Yeah, of course. Thanks, Ethan. you know, I ink it's really two things. One is we, alluded to in the earlier remarks. You know, we continue to see, although we continue to see strength in our, distribution gains and strength, in some of our trends, we are, a little bit cautious about the overall consumer, and, as we think about Q4 of this year, we are lapping a very substantial Walmart pipeline fill.
That seems timing related so.
So I guess just curious how we should be thinking about tariffs moving forward I think you mentioned previously that could be.
A 200 basis point impact to gross margins.
Is that still a fair way to think about things and then I guess any sort of color on gross on gross margins for the rest of the year. It would be helpful. Thank you.
Great Great question. So, yes, we continue to see or we continue to estimate that it'll be about a 200 basis points impact.
Speaker #4: which is, which we've, which we've addressed in previous calls as well. And so I think really as we think about Q4, you know, being relatively flattish, would make sense given that the substantial nature of that pipeline fill.
As you noted it is timing related just the way that our co manufacturing.
Partners operate a little bit of a delay in terms of when we see the increased pricing starting in Q3, we will begin to see more material impacts related to tariffs and we do.
Speaker #7: Got it. and then maybe just as a follow-up one here on tariffs. you know, I think you ioned that the tariff impact was, maybe below expectations in the quarter.
We anticipate that plus the one time charge.
That we're taking in the quarter related to packaging refresh will have.
Speaker #7: but that seems timing-related. so I guess just curious how we should be thinking tariffs moving forward. I think you mentioned previously they could be a $200 basis point impact to gross margins.
Sort of dilutive impact on gross margin in the short run but as noted.
As we sort of flip it.
Flip the calendar, we will be able to really offset a lot of the tariff seem to be the incremental savings that we've found so although we may see some pressure on gross margins in the short run in Q3 and Q4, we expect to get.
Speaker #7: is that still a fair way to think about things? And then I guess any sort of, color on gross margins the rest of the year would be helpful.
Speaker #7: Thank you.
Speaker #4: Yeah. No, great, great question. And so yes, we continue to see, or we continue to estimate that it'll be about a $200 basis points impact, as you noted.
Get back to that sort of mid to high <unk>.
And eventually in the fifties and long run.
Speaker #4: It is timing-related. just the way that our -manufacturing, partners, operate, there's a ittle bit of a delay in terms of when we see the, increased pricing.
Thank you we'll take our next question from Jim <unk> with Stephens.
Speaker #4: So starting in Q3, we will begin to see more material impacts, related to tariffs and we do, anticipate that plus the one-time charge, that we're ing, in the quarter related to the packaging refresh will have, sort of diluted impact on gross margin in the short run.
Good afternoon, Thanks for taking my question.
I want to ask some questions just around the consumer panel metrics because it looks like we saw a sequential step up both in household penetration as well as purchase frequency from one <unk> to <unk> and so maybe you could just give us some color around is that.
Speaker #4: But as noted, as we sort of flip the, flip the calendar, you know, we'll be able to really offset a lot of the tariff vis-à-vis the incremental savings that we found.
Primarily attributable to some of the new flavor launches and bringing new people to the brand or is it.
Speaker #4: So, although we may see some pressure on gross margins in the short run, i.e., in Q3 and Q4, we expect to get back to that sort of mid to high 40s and eventually in the 50s in the run.
Easier to find <unk> across a broader range of retailers and you're finding that people are kind of keeping the refrigerant stock on a more frequent basis, just any color on that stuff.
On the consumer metrics would be helpful.
Yeah. Thanks, Jim at your assessment is correct actually so we have increased visibility in the marketplace that means both increased store selling if you think about our distribution expansion of Walmart or increased visibility or space dedicated to the brand in traditional grocery and then what supports that of course is innovation.
Speaker #1: Thank ou. We'll take our next question from Jan Salera with Stevens.
Speaker #8: And good afternoon. Thanks for taking our question. I wanted to ask some questions just around the consumer panel metrics because it looks like we saw a sequential step up both in household penetration, as well as purchase frequency.
And so we see an uptick in household penetration as well as a really healthy cut panel data across the board in terms of spend levels with our existing user base in part because of new to brand users and in part because of strong repeat and you know as we have our eye to the future and think about our priorities around building.
Speaker #8: From one Q to two Q. So 'm hoping you could just give some color around it. Is that primarily attributable to some of the the new flavor launches and and bringing new people to the brand, or is it the easier to find Zevia across a broader range of retailers and ou're finding that, you ow, people are are kind keeping their fridge in stock, but a more frequent basis?
Through marketing continuing to innovate and strengthen the portfolio and then continuing to drive distribution. That's all ladders up to growing the user base for <unk>. So that's exactly what you're seeing in the panel data.
Speaker #8: Just any color on on that step up, on the consumer metrics would be helpful.
Speaker #3: Yeah. Thanks, Jim. Your assessment is correct, actually. So you know we have increased visibility in the marketplace. That means both increased store selling, if you think our distribution expansion at Walmart, or increased visibility or space dedicated to the brand in traditional grocery.
Okay, Great and then maybe just drilling down a little one club can you give us any details on what the product rotation looks like there.
Maybe there is opportunity.
Visits multi packs if there is opportunity to get some straight flavors in there or just any details around how we should be thinking about that go forward.
Speaker #3: And then what supports that, of course, is innovation. And so we see an uptick in household penetration as well as a really healthy cut of panel data across the board in terms of spend levels with our existing user base.
Sure. So you know closet is increasingly at discovery channel a little bit of a treasure hunt. So variety for US is really important area as we win new users in that channel.
Speaker #3: In part because of new-to-brand users and in part because of strong repeat. And you know as we have our eye to the future and think our priorities around building brand through marketing, continuing to innovate, strengthen the portfolio, and then continuing to drive distribution, this all ladders up to growing the user base for Zevia.
We are seeing on a same store basis record level of same store sales from Cvs in the club channel, which is really helpful. When you think about being.
Tribute it on a regional basis and being distributor distributed rotationally. So our goal of course would be to be in everyday items and velocity in recent weeks and months would support that idea in the future.
Speaker #3: So that's exactly what you're seeing in the panel data.
Speaker #8: Okay. Great. And then maybe just drilling down a little on club. Can you give us any details on what the product rotation looks like there?
Today, we feature a six flavor variety pack and we think thats really well suited for the club member today and we also have the option as we've done in the past seasonal rotations for newness, which is always really valued in that treasure hunt environment.
Speaker #8: and you know maybe there's opportunity to, if it's multi-packs, if there's an opportunity to get some straight flavors in there or just any details around how we uld be thinking about that go forward.
Speaker #3: Sure. So you know club is increasingly a discovery channel, a little bit of a treasure hunt. So variety for us is really important there as we win new users in that channel.
But given the pace of innovation and the taste and flavor profile improvements that we're driving through our portfolio. We imagine that club package could continue to involve an twenty-six that going forward both in the everyday variety pack items as well as the seasonal ideas to help continue to bolster that those regional rotation.
Speaker #3: we are seeing on the same store basis record-level of, same-store sales for Zevia in the club channel, which is really helpful when we think about being on a distributed in a regional basis.
Great I appreciate the thoughts I'll hop back in the queue.
Speaker #3: And being distributed rotationally. So our goal, of course, would be to be an everyday item, and velocity in recent weeks and months would support that idea in the future.
Thanks, Tim.
Yeah.
Thank you and again as a quick reminder.
That is star one in our next question will come from Daniel Boyd with BMO capital markets.
Speaker #3: today we feature a six-flavor variety pack. And we think that's really, well-suited for the for the club, member today. And we also have the option, as we've done in the past, of some seasonal rotations for newness, which is always ally valued in that treasure hunt environment.
Alright, Thanks for taking my question.
For Andrew Charles like.
Our new writing whether to update you broke out the better cost saves out of the bottom line versus reinvesting goes in marketing.
Speaker #3: But given the pace of innovation and the taste and flavor profile improvements that we're driving through our portfolio, we imagine that the club package could continue to evolve in 2026 and going forward, both in the everyday variety pack items, as well as with some seasonal ideas to help continue bolstering those regional rotations.
Yes sure.
Can you ask the question again, how are we balancing the improved January weather, how are you deciding whether to what the incremental EBITDA flow through to the bottom line or to reinvest in marketing.
Sure.
Speaker #8: Great. I appreciate the thoughts. I'll hop back in the queue.
Yes, so I mean look we're obviously focused on the long run you're trying to build a sustainable brand in this category, we feel that our brand is a real differentiator and something that we want to.
Speaker #3: Thanks, Jim.
Speaker #1: Thank you. And again, as a quick reminder. That is star one in our next question. We'll go from Daniel Gold with BMO Capital Markets.
Bill, it's sort of a competitive mode and so as we think about.
As we think about the year, we sort of focused both on long term brand building, but also on short term velocity driving tactics and so we.
Speaker #9: Hi. Thanks for taking my question. I'm I'm for Andrew Strelzyk. How are new way and weather to let the EBITDA the better EBITDA and cost saves float to the ottom line versus reinvesting those in marketing?
We will look to balance both driving long term brand.
Brian brand building.
Our brand equity.
Speaker #3: Yeah, sure. how are we can you ask the estion again? How are we balancing the improved adjusted EBITDA?
And then in the short run really be focused on.
Short term philosophy driving activities and that's probably where we can continue to adjust our playbook.
Speaker #9: Yeah. How do you deciding whether to let the the incremental EBITDA flow through to bottom line or to reinvest in marketing?
<unk>.
As the environment shifts.
Continue to point to 2026.
Speaker #3: Sure.
Speaker #10: Yeah. So I mean, look, we're
Speaker #4: obviously you know focused on the long run and trying to build a ustainable brand. And you know in this category, we feel that brand is a is a real differentiator.
The sort of inflection point to turn.
Positive adjusted EBITDA and so in the short run and we're going to continue to bias towards investing to drive top line.
Speaker #4: And and something that we want to you know build a sort of a competitive moat. And so as we think as we think about the year, you know we're sort of focused both on long-term brand building, but also on short-term velocity driving tactics.
And Dan within the year, you've seen us both kind of find our voice and brand marketing and invest more on a percentage of net sales basis in marketing relative to the past and yet deliver our first quarter of profitability as a public company. So I think we've got.
Speaker #4: And so we will look to balance both driving long-term brand building or brand equity and then in the short run really be focused on short-term velocity driving activities.
Since Gary has been with US now a year a good track record of moving towards profitability, while still being able to invest in brand and that's in large part thanks to the productivity work that we've done behind the scenes.
Speaker #4: that's probably where we can continue to adjust our our playbook as the you know as the environment shifts. But you know we continue to point to 2026 as you know the the sort of inflection point to turn positive adjusted EBITDA.
Got it thanks Imagers congrats on the corner.
Okay.
Thank you and this does conclude our question and answer session I would like to now turn it back to Amy Taylor for any additional or closing remarks.
Thanks, very much and thanks, everyone for joining today as I mentioned earlier I'm really proud of what the team has accomplished over the last year and I'm energized by a strong start to the summer. We are laser focused on expanding the CVA user base driving trial conversion and retention through our three strategic priorities, which are marketing innovation and distribute.
Speaker #4: And so you know in the short run, we're going to continue to buy us towards investing to drive top line.
Speaker #3: And Dan, within the year, you've you've seen us both kind find our voice in brand marketing and thus invest more on a percentage of net sales basis in marketing relative to the past.
Speaker #3: And yet deliver our first quarter profitability as a company. So I ink we've got since Girish has been with us now a year, a good track record of moving toward profitability while still being able to invest in brand.
<unk>.
So combine that with our over performing productivity initiative, which I just mentioned and demonstrated by our first half a profitable quarter, we're standing on our strong foundation and accelerating toward a future of strong double digit growth and sustainable profitability. So we're hard at work delivering the back half of the year and we have a strong plan for 2026.
Speaker #3: And and that in large part thanks to the productivity work that we've done behind the scenes.
Speaker #9: Got it. Thanks, Amy Girish. Congrats on the arter.
Speaker #3: Thanks.
And I look forward to seeing you all again in the next quarter. Thank you.
Speaker #1: Thank you. And this does conclude our question and answer session. I would like to now turn it back to Amy Taylor for any additional or closing remarks.
Yeah.
Thank you ladies and gentlemen, this does conclude today's presentation you may now disconnect.
Speaker #6: Thanks very much. And thanks, everyone, for joining today. As I mentioned earlier, I'm really proud of what the team has accomplished over the last year.
Speaker #6: And I'm energized by a strong start to the summer. We are laser-focused on expanding the Zevia user base, driving trial, conversion, and retention. Through our three strategic priorities, which are marketing, innovation, and distribution, so combine that with our overperforming productivity initiative, which I just mentioned, and demonstrated by our first ever profitable quarter, we're standing on a strong foundation and accelerating toward a future of strong double-digit growth and sustainable profitability.
Speaker #6: So we're hard at work delivering the back half of the year. And we have a strong plan for 2026. And I look forward to seeing you all again in the next quarter.
Speaker #6: Thank ou.