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01/11 03:19
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Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
Despite improved gross margins and distribution expansion, Zevia's financial performance shows a net loss and declining sales, with no share repurchase program. Competitive pressures and regulatory issues pose risks, while management's lack of clear guidance on tariffs and pricing strategy adds uncertainty. The positive outlook on distribution expansion and product innovation balances these concerns, resulting in a neutral sentiment.
Net Sales $38 million, a decrease of 2% year-over-year due to increased promotional activity, partially offset by pricing and improved volumes from expanded distribution at Walmart.
Gross Margin 50.1%, an increase of 440 basis points from 45.7% year-over-year, reflecting lower product costs and improved inventory management, partially offset by higher promotional activity.
Selling and Marketing Expenses $15.3 million or 40.3% of net sales, compared to $15.1 million or 38.8% year-over-year, with marketing expenses increasing due to higher investments fueled by cost savings in freight and warehousing.
General and Administrative Expenses $7 million or 18.4% of net sales, down from $8.1 million or 20.9% year-over-year, largely due to cost savings measures including employee reductions.
Net Loss $6.4 million, improved by $0.8 million from a net loss of $7.2 million year-over-year.
Adjusted EBITDA Negative $3.3 million, an improvement of $2.2 million from a loss of $5.5 million year-over-year.
Cash and Cash Equivalents Approximately $28 million at the end of the quarter.
Revolving Credit Line $20 million undrawn revolving credit line.
New Product Launches: Zevia is rolling out new flavors with a more sugar-like taste experience, including Strawberry Lemon Burst and Orange Creamsicle, which have received strong initial sales performance.
Product Innovation: The company is enhancing the taste profile of its zero sugar sodas, with new flavors like Creamy Root Beer and Salted Caramel performing well in taste tests.
Market Expansion: Zevia has expanded distribution through existing and new retail partners, including nearly 8,000 Walgreens stores and a new variety pack at Walmart.
Brand Awareness Campaign: The 'Get The Fake Outta Here' campaign featuring Jelly Roll has generated 2.4 billion earned impressions, significantly raising brand awareness.
Operational Efficiencies: Zevia's productivity initiative has led to annualized cost savings of $15 million, contributing to a record gross margin of over 50%.
Cost Management: The company achieved a reduction in selling expenses and general administrative costs through cost-saving measures.
Strategic Growth Pillars: Zevia is focusing on brand identity, product innovation, and distribution expansion as key strategic growth pillars.
Restructuring Initiatives: The company has completed planned restructuring initiatives, resulting in a net loss improvement from $7.2 million to $6.4 million.
Competitive Pressures: Zevia operates in a highly competitive beverage category, which poses challenges in maintaining market share and brand visibility.
Regulatory Issues: The company is facing impending tariff costs that could impact profitability, which they are working to offset with cost savings.
Supply Chain Challenges: Increased promotional activity has affected net sales, indicating potential supply chain or distribution challenges.
Economic Factors: The uncertain macro environment is a risk factor that could affect overall business performance and growth.
Net Sales: First quarter net sales were $38 million, at the high end of guidance.
Gross Margin: Gross margin hit a record of over 50%.
Adjusted EBITDA: Adjusted EBITDA improved by $2.2 million to negative $3.3 million.
Productivity Initiative: The productivity initiative continues to deliver cost savings that fuel investment into building the brand.
Marketing Campaigns: Launched a new campaign featuring Jelly Roll, achieving 2.4 billion earned impressions.
Product Innovation: New flavors like Strawberry Lemon Burst and Orange Creamsicle are being introduced.
Distribution Expansion: Expanded distribution through Walmart and Walgreens, with new variety packs.
Full Year Net Sales Guidance: Maintaining full year net sales guidance in the range of $158 million to $163 million.
Adjusted EBITDA Loss Guidance: Maintaining adjusted EBITDA loss range of $8 million to $11 million.
Q2 Net Sales Expectation: Expecting net sales of between $40.5 million to $42.5 million.
Q2 Adjusted EBITDA Loss Expectation: Expecting adjusted EBITDA loss to be between $2.2 million and $2.9 million.
Share Repurchase Program: None
The earnings call presented mixed signals: a 12% YoY increase in net sales and expanded distribution at Walmart are positives, but declining gross margins and unchanged net loss are concerns. The Q&A revealed optimism about future growth and profitability, but management's vague responses on brand awareness and 2026 profitability raise uncertainties. The market may react neutrally due to these offsetting factors.
The earnings report shows strong financial performance with a 10.1% increase in net sales and improved margins. The company has made significant progress in reducing its net loss and achieving a positive adjusted EBITDA. While there are concerns about tariffs and increased marketing expenses, the overall sentiment is positive due to strong sales growth, successful product launches, and productivity gains. The Q&A section highlights positive analyst sentiment, despite some unclear responses from management. Given these factors, the stock is likely to see a positive movement over the next two weeks.
Despite improved gross margins and distribution expansion, Zevia's financial performance shows a net loss and declining sales, with no share repurchase program. Competitive pressures and regulatory issues pose risks, while management's lack of clear guidance on tariffs and pricing strategy adds uncertainty. The positive outlook on distribution expansion and product innovation balances these concerns, resulting in a neutral sentiment.
The earnings call highlights positive developments such as a significant Walmart expansion, improved EBITDA losses, and increased gross margins. Despite a drop in full-year sales, Q4 showed growth, and the company is optimistic about future distribution gains. The Q&A reinforced positive sentiment, with management confident in maintaining gross margins and expanding customer engagement. However, the lack of shareholder return plans and potential risks like supply chain challenges and increased promotional spending are concerns. Overall, the positive aspects outweigh the negatives, suggesting a positive stock price movement.
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