Zevia PBC Q1 FY2025 earnings call

• Financial results: First quarter net sales $38M, gross margin over 50%, adjusted EBITDA negative $3.3M. - Strategic growth pillars: 1. Marketing: Sharpening brand identity with campaigns like 'Get The Fake Outta Here' featuring Jelly Roll, achieving 2.4B earned impressions. 2. Product innovation: Raising taste profile with new flavors like Strawberry Lemon Burst and expansions into legacy sodas. 3. Distribution: Expanding through Walmart, Albertsons, Walgreens, and convenience stores with single-serve cans via DSD strategy.

First quarter net sales were $38 million. Gross margin hit a record of over 50% and adjusted EBITDA improved by $2.2 million to negative $3.3 million. Net sales for the first quarter were $38 million, a 2% decrease compared to the first quarter of the prior year. Gross margin reached a record high of 50.1%, an increase of 440 basis points from the prior year. Selling and marketing expenses were $15.3 million or 40.3% of net sales in Q1 2025. General and administrative expenses were $7 million or 18.4% of net sales. Net loss was $6.4 million, an improvement of $0.8 million from the prior year. Adjusted EBITDA loss was $3.3 million, an improvement of $2.2 million from the prior year.

• Maintaining full-year net sales guidance in the range of $158 million to $163 million. - Maintaining adjusted EBITDA loss range of $8 million to $11 million. - Q2 net sales expected between $40.5 million to $42.5 million. - Q2 adjusted EBITDA loss expected between $2.2 million and $2.9 million.

• Macro environment uncertainties. - Highly competitive category. - Tariff costs as a headwind that need to be offset with cost savings.

Q: Bonnie Herzog from Goldman Sachs asked about guidance and drivers behind it.

A: Amy Taylor mentioned progress from productivity initiative, brand marketing, product innovation, and distribution momentum.

Q: Bonnie Herzog asked about Walmart business performance.

A: Amy Taylor said past initial channel fill, performance encouraging with variety pack as top seller and continued innovation with Walmart.

Q: Jim Salera from Stephens asked about gross margin sustainability and tariffs.

A: Girish Satya said gross margins in upper 40s are sustainable, tariffs a 200 basis point headwind offset by product portfolio and sourcing changes.

Q: Jim Salera asked about convenience expansion.

A: Amy Taylor said convenience expansion with single cans via DSD, testing with regional players.

Q: Eric Serotta from Morgan Stanley asked about tariff composition and household penetration.

A: Girish Satya said tariff primarily on aluminum, Amy Taylor said Walmart distribution additive to household penetration with better-for-you category growth.

Q: Andrew Strelzik from Morgan Stanley asked about back half phasing.

A: Girish Satya said Q2 and Q3 are peak quarters, Q4 lapping Walmart pipeline fill.

Q: Sarang Vora from Telsey Advisory Group asked about Walgreens distribution timing and lapping mass losses.

A: Girish Satya said Walgreens impact in 2Q and 3Q, lapping of club and mass losses behind in Q3 forward.

Q: Sarang Vora asked about pricing strategy.

A: Amy Taylor and Girish Satya said working on price pack architecture with productivity and tariff considerations.

Q: Eric Des Lauriers from Craig-Hallum asked about consumer behavior in better-for-you category.

A: Amy Taylor said well-positioned with affordable, great-tasting, clean-label product but no immediate consumer behavior changes seen yet.