• Adjusted EBITDA Loss: Improved to $1.5 million from $9.1 million in Q3 2023.
• Gross Margin: Achieved a record 49%.
• Net Sales: $36.4 million, a 16% decline from Q3 2023.
• Annual Cost Savings: Expected to be $15 million, up from a previous estimate of $12 million.
• Net Loss: $2.8 million, improved from a net loss of $11.2 million in Q3 2023.
• Cash and Cash Equivalents: Approximately $32 million at the end of the quarter.
• Q4 2024 Sales Guidance: Expected to be between $38 million to $40 million.
• Q4 2024 Adjusted EBITDA Guidance: Expected to be between negative $1.8 million to negative $2.2 million.
• Full Year 2024 Net Sales Outlook: Between $154 million to $156 million.
• Full Year 2024 Adjusted EBITDA Loss: Approximately $13 million.

• Warning! GuruFocus has detected 3 Warning Signs with ZVIA.

Release Date: November 06, 2024

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Zevia PBC (NYSE:ZVIA) reported a significant improvement in adjusted EBITDA loss, reducing it to $1.5 million from $9.1 million in the same quarter last year.
• The company achieved a record gross margin of 49%, driven by enhanced efficiencies, cost savings, and better product costing.
• Zevia PBC (NYSE:ZVIA) is expanding its distribution to over 4,300 Walmart stores, which is expected to drive growth in the fourth quarter.
• The company has increased its annual cost savings target to $15 million, up from the previous estimate of $12 million.
• Zevia PBC (NYSE:ZVIA) is seeing strong sales growth in key strategic channels, with grocery channel scan data indicating dollar growth of 8% and unit growth of 9%.

Negative Points

• Net sales for the third quarter were slightly below expectations at $36.4 million, representing a 16% decline compared to the same period last year.
• The decline in net sales was attributed to a reduction in club distribution and the exit from the kids and mixers categories.
• The company experienced a slight miss in net sales due to lower than expected response to promotional tests and shipping challenges related to hurricanes.
• Zevia PBC (NYSE:ZVIA) anticipates modest growth in 2025, indicating that the path to re-accelerating growth will be gradual.
• The company is still facing challenges in channel-specific distribution, which has impacted sales performance.

Q & A Highlights

Q: Can you provide more details on the lost distribution in your club channel and the impact on your financials? Also, how does this align with your expanded distribution to Walmart? A: The softness in the quarter was due to reduced store selling in club and some promotional timing variances. Despite this, velocity remains strong, especially in key channels like grocery. We are optimistic about sustainable club distribution for 2025. Meanwhile, we are rolling out to 4,300 Walmart stores, which will include a variety pack to drive trial across channels. The impact on top and bottom lines is mainly due to distribution changes and increased marketing investments to support the Walmart launch.

Q: Could you elaborate on your marketing spend as a percentage of sales and its impact on profitability? A: We are focused on building a sustainable, profitable business and aim for profitability by 2026. Our marketing investments are crucial for driving future sales growth. We are balancing cost savings with reinvestment in marketing to drive brand awareness and distribution gains, which will lead to higher profits. Our productivity initiative allows us to fund these marketing efforts effectively.

Q: The gross margins were stronger than expected. Were there any one-time factors, and how do you view the margin potential going forward? A: The improvement was largely due to better inventory management and reduced excess inventory. We've renegotiated core input costs and rationalized SKUs, setting a higher baseline for gross margins in the mid to upper 40s. While there will be some variability, we continue to focus on driving velocity and value.

Q: Can you discuss the promotional strategies you've been testing and their impact on trade spend? A: We've been testing new strategies around promotion frequency, depth, and breadth. We've seen a 15% increase in lift in grocery tests, which builds confidence in our promotional strategies. We expect to refine these strategies further with the Walmart launch and aim to settle on an effective approach by Q1 2025.

Q: How is the Salted Caramel limited-time offer (LTO) performing, and what insights do you have from digital ad spend? A: It's too early to specify if the excitement is from existing or new customers, but our influencer network has been effective in driving engagement. Our digital campaigns have shown a 5% increase in sales in targeted markets. The Salted Caramel campaign is an example of engaging our base and reaching new consumers, supported by our productivity initiative.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.