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01/11 03:18
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Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
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.
Net Sales $44.5 million, an increase of 10.1% year-over-year. This growth was primarily driven by expanded breadth and depth of distribution across channels, partially offset by increased promotional activity.
Gross Margin 48.7%, 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, partially offset by higher promotional activity and channel mix.
Selling and Marketing Expenses $13.4 million or 30% of net sales, compared to $13.6 million or 33.7% of net sales in the second quarter of 2024. This represents a decrease of 7.1%, attributed to maintaining best-in-class customer fulfillment rates while reducing costs.
Marketing Expense $4.7 million or 10.6% of net sales, compared to $4.3 million or 10.7% of net sales in the second quarter of 2024. The increase was primarily due to investments to drive brand awareness.
General and Administrative Expenses $8.1 million or 18.2% of net sales, compared to $7.7 million or 19% of net sales in the second quarter of 2024. The increase was primarily due to higher variable compensation expenses and outside services, partially offset by efforts to right-size the business.
Net Loss $0.7 million, compared to a net loss of $7 million last year, an improvement of $6.3 million year-over-year. This improvement reflects accelerated savings from productivity initiatives and a shift in the timing of marketing investments.
Adjusted EBITDA $0.2 million, compared to an adjusted EBITDA loss of $4.4 million in the prior year period. This $4.6 million improvement reflects accelerated savings from productivity initiatives and a shift in the timing of marketing investments.
Cash and Cash Equivalents $26.3 million at the end of the quarter, with an undrawn revolving credit line of $20 million.
New Product Launches: Introduced new flavors such as Strawberry Lemon Burst, Orange Creamsicle, Peaches and Cream, and the return of Salted Caramel. These flavors are designed to appeal to a broader audience and enhance the taste profile.
Packaging Refresh: Updated packaging to better communicate Zevia's positioning as a better-for-you soda with zero sugar, fake colors, and sweeteners.
Variety Packs: Launched a 12-count variety pack in grocery and natural channels and a new foodie variety pack at Walmart, featuring new flavors like Fruit Punch.
Retail Distribution Expansion: Surpassed historical peak distribution levels at retail, with improved shelf presence and new products driving nearly double-digit velocity.
Channel-Specific Growth: Strong performance in Walmart, grocery, club (Costco), drug, and convenience channels. Notable gains include record same-store sales in Costco regions and new distribution in all three national drug chains.
Cost Savings: Achieved $15 million in annualized savings with an additional $5 million identified for 2026, totaling $20 million.
Profitability Milestone: Reported first profitable quarter as a public company with adjusted EBITDA of $0.2 million.
Marketing Campaigns: Launched 'Get the Fake Outta Here' and 'Get the Fake Out of Summer' campaigns, driving record engagement and double-digit growth.
Strategic Growth Pillars: Focused on marketing, product innovation, and distribution to amplify brand awareness, drive trial, and expand user base.
Tariff Costs on Aluminum: The company is operating under the assumption that current tariffs of 50% on aluminum will remain unchanged. However, if tariff costs rise, this could potentially impact the cost of goods sold (COGS) in 2026.
Increased Promotional Activity: While expanded distribution drove sales growth, it was partially offset by increased promotional activity, which could pressure margins.
Uncertain Macro Environment: The company acknowledges operating in an uncertain macroeconomic environment, which could impact consumer behavior and overall business performance.
Higher Marketing Investments: The company plans to increase marketing investments in the second half of the year, which could impact short-term profitability.
Repackaging Costs: A $500,000 one-time charge related to packaging redesign will impact Q3 adjusted EBITDA.
Full Year Net Sales Guidance: Maintaining full year net sales guidance in the range of $158 million to $163 million.
Adjusted EBITDA Loss Guidance: Expecting adjusted EBITDA loss to range from $7 million to $9 million for the full year, improved from prior guidance of $8 million to $11 million.
Third Quarter Net Sales Guidance: Expecting net sales between $38 million and $40 million for Q3.
Third Quarter Adjusted EBITDA Loss Guidance: Expecting Q3 adjusted EBITDA loss to be between $3.4 million and $3.9 million, reflecting increased marketing investments, higher promotions, and higher tariff-related costs.
Cost Savings Realization: Identified an incremental $5 million in cost savings in COGS and selling expenses, expected to begin realizing in 2026, bringing the total to $20 million.
Tariff Impact on COGS: Current tariffs of 50% on aluminum are assumed to remain unchanged, but potential increases could impact COGS in 2026.
The selected topic was not discussed during the call.
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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