Zevia’s Earnings Call: A Mixed Bag of Growth and Challenges

Zevia Pbc Class A ((ZVIA)) has held its Q1 earnings call. Read on for the main highlights of the call.

Zevia’s recent earnings call painted a mixed picture for the company, with significant strides in expanding distribution channels and achieving record gross margins. However, these positive developments were overshadowed by a decline in net sales and ongoing financial losses, partly due to increased promotional activities and tariff costs. Despite these challenges, the company remains cautiously optimistic, buoyed by strong brand engagement and strategic initiatives.

Record Gross Margin Achievement

Zevia celebrated a notable milestone by reaching a record gross margin of 50.1%, marking an impressive increase of 440 basis points from the previous year’s first quarter. This achievement underscores the company’s ability to manage its cost structure effectively, even amidst external pressures.

Successful Marketing Campaign

The ‘Get The Fake Outta Here’ campaign proved to be a major success, generating a record 2.4 billion earned impressions and capturing the attention of major media outlets. This campaign highlights Zevia’s strong brand engagement and its ability to resonate with a broad audience.

Expansion of Distribution Channels

Zevia’s distribution network saw significant growth, with the brand gaining new distribution across nearly 8,000 Walgreens stores and expanding its presence in Albertsons and Walmart. This expansion demonstrates Zevia’s strategic efforts to increase its market reach and accessibility.

Improved Adjusted EBITDA

The company reported an improvement in its adjusted EBITDA, with a loss of $3.3 million, an enhancement of $2.2 million compared to the previous year. This improvement indicates progress in Zevia’s financial management and operational efficiency.

Net Sales Decline

Despite these positive developments, Zevia experienced a 2% decline in net sales, totaling $38 million. This decrease was primarily attributed to increased promotional activity, which, while boosting brand visibility, impacted overall sales figures.

Increased Tariff Costs Impact

Tariff costs are anticipated to pose a 200 basis point headwind on gross margin, necessitating cost-saving measures to mitigate their impact. This challenge underscores the external economic pressures facing Zevia.

Continued Adjusted EBITDA Loss

Despite improvements in adjusted EBITDA, Zevia still reported a loss of $3.3 million. This ongoing loss highlights the financial challenges the company continues to face, even as it makes strides in other areas.

Forward-Looking Guidance

Zevia has provided robust financial guidance for the year, maintaining its full-year net sales expectation between $158 million and $163 million. Despite a challenging macroeconomic environment and impending tariff costs, the company remains focused on increasing brand awareness, product innovation, and expanding distribution. For the second quarter, Zevia anticipates net sales between $40.5 million and $42.5 million, with an adjusted EBITDA loss ranging from $2.2 million to $2.9 million. The company is optimistic about its growth prospects, driven by the rising demand for better-for-you beverages and its unique market positioning.

In conclusion, Zevia’s earnings call reflects a company navigating a complex landscape with both challenges and opportunities. While financial losses and tariff costs present hurdles, the company’s record gross margins, successful marketing campaigns, and expanded distribution channels offer a promising outlook. Zevia’s strategic initiatives and focus on brand engagement position it well for future growth, even as it remains cautious in its optimism.