Zevia PBC (ZVIA) 6 Nov 242024 Q3 Earnings call transcript

Greetings, and welcome to Zevia PBC Q3 2024 Earnings Call. [Operator Instructions] As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Reed Anderson from ICR. Please go ahead, sir.

Thank you, and welcome to Zevia's third quarter 2024 earnings conference call and webcast. On today's call are Amy Taylor, President and Chief Executive Officer; and Girish Satya, Chief Financial Officer. have release the available and should XXXX third this everyone press earnings investor now, access company's to quarter morning. By presentation made of is website information available the Relations This on at section investors.zevia.com. Investor Zevia's

please and are begin, Litigation call provisions include statements of Safe These on today's forward-looking Certain presented unaudited. which Reform are number differ filings current for SEC XXXX. detailed uncertainties materially expectations we the subject those forward-looking financial note a Before forward-looking is this to with on Harbor that Securities discussion Act to information described management's made a of the risks implied comments that from beliefs made and materially based statements of Private on all those results future concerning actual call expressed are the release that today. in to any actual to these subject results or and to and could events in other risks from statements differ refer cause statements. the could of Please the cause press forward-looking today's

investors.zevia.com. well today's During are the presentation the some available we will as measures press all measures to comparable financial we earnings non-GAAP at business comments on the accompany and call, measures performance. reconciliations SEC slides financial financial filings non-GAAP that describe release, The our directly GAAP the as use as of website most

the call to to turn I'd Now, Taylor. like over Amy

highly Thank election. you on call, particularly the morning for our anticipated after the conference joining third quarter

execution strong we pleased QX with EBITDA, in of illustrating productivity are vast our improvement initiatives. delivered We the adjusted

we zero anticipate great our excited confident long-term in a value. the fourth were the Walmart expansion sales quarter, that rollout and products slightly largely and remain traditional blend We of sugar demand exceptional nationwide. We're we positioned potential. a to on offer soda. We return growth we by net distinctive alternatives the the growing Walmart, capitalize stores our QX healthier clean believe in X,XXX in driven about below taste, label uniquely our to are While for to in expectations,

seize to strategy, brand so and expand innovation. will a robust And execute drive opportunity, unparalleled our marketing this product distribution we

reinvest while will long-term Additionally, our enable profitability. to and enhancing savings our growth cost initiatives us in progress

I on strategic highlights from third I'll Before share plan, provide update an our some the quarter.

which made EBITDA year. As million, last loss adjusted in down mentioned, the I $X.X in initiatives, our we've marks million significant improving also to productivity $X.X strides quarter from third our savings half improvement of This from product better XXXX. We costing, to XX%. deliver of a gross record and enhanced achieved a allowed the efficiencies, substantial first us of cost this through margin

to came cost our As we progress, QX in we of slightly strategic of quarter, annual was expect sales our the lesser year an our our versus of in expected categories function million. estimate last XX% focus and customers, net a largely expectations a decline decision the a of increase savings sales degree, of one on Kids third and $XX at $XX.X million. With million, club now the distribution mass from to respect result to $XX soda. below our The exit at previous in to Mixers and of reduction net

plan forward, very way. to distribution in intentional expand we As look a we

strong sell-through in underpinned channels quarter. the is confidence during strategic third the Our by we saw key

X%. growth data quarter, third of growth and scan For grocery dollar in the of the unit channel X% indicated

promotional our scan accelerating showed and For October data positive impact dollar XX%, schedules. to weeks of growth X, adapted at X reflecting ending the XX% unit the growth

enhanced Pac versus stronger we merchandising. scan in markets, service making levels to We Northwest. performance attribute are direct our strong our the Pacific market Northwest increased in which also in store data store delivery, or DSD and progress the focused initiative, reflected Grocery other

the continue convenience an sugar, upcoming where zero have to stage message channel, the key chain of We of to set weeks. across average insights, artificial. with we leverage fake begun number a presence markets convenience expand perspective, we These independent and in in the recent yielded great XX campaigns label our were position brand to in clean are flavor a distribution will ran into we XX through to a the of the with and with soda the world also sharpened the underway tasting, where X pleased marketing taste spring of tested resets. From that percentage points differentiated and these summer elevated brand. control in new in we brand breakthroughs reinforced campaigns, The our in our markets We higher reflecting outlets fall. as resonating In metros select a a along building our and building consumers. than innovation campaign XXXX, our awash see growth character

turn attention that, And let's to the our so with product portfolio.

with are Most new Creamy top the success which exclusive very our followed to which saw of outperform XXXX last pleased limited Caramel Zevia in Salted growth to Cola, that Vanilla natural strong we flavor, the is and to Root become We summer innovation, expectations. tracking continues response ahead contributor out Cran-Raspberry, our see to Beer recently, to well channel. has sell a of the by Zevia each the flavor e-commerce time

category There's soda, faster Xx years, than X we a grow growing ahead, which on expected the the movement optimistic to forward. path over a in is CSD are next better-for-you Looking Through and well product are distribution marketing, innovation, that soda. we believe the movement. natural we at of expansion long-run are we leader focused in to and be positioned forefront amplified the

growth improvement our speak and our Girish will will strategy, line initiatives. while to path I our top building to building expansion speak both marketing to margin The strategy evolution in of are growth We a significant muscle. reaccelerate underpinned in deliver EBITDA. adjusted is clear brand

more We have shifted focus compelling emotionally-driven a storytelling. to our

in podcasters The a XXX% our XX% TikTokers, build views. increase content and Our content Zevia a of with quarter love to versus increase and contributed the trust the more and relationships owning organic by in real to YouTubers in against relevance. sequential relatable never-ending consumers with social building the a brand engagement inspires reach second battle sake. We're relevant and overhaul than

our also marketing to broad-reaching to campaigns drive and out-of-home awareness. spanning We digital focus on plan investments

Our in sharp the be campaign across out-of-home yet. Angeles creative largest company's can new Los seen

are to they new other higher Zevia. towards And leaning introducing see XX% We spend, marketing soda all us, consumers Zevia repeat spend brand holds they shoppers XX%. Zevia once our rates of they more. we try spend better-for-you strategy and is at that than and that stay brand

give take While the on for to investments that confidence it brand quantitative path. we anticipate are support will and qualitative building indicators us we time pull-through, right

are for distribution we but know, to time step will it fuel across in expansion efforts also Our build help that marks to brand. channels, strategic week again, marketing the gains important expected distribution forward an take momentum. This

are We this XXX our stores. locations will growth. we We Walmart out the be in are Southeast, such seeing fastest initial nationwide, the to believe to X,XXX Zevia month, thanks strong the in over our regions awareness in where as increasing underpenetrated rolling presence sell-through in brand instrumental experienced Walmart we especially

Additionally, at performed Zevia Zevia Aldi X the feature singles distribution stores. at hundred we'll value channel packs new XXXX, well. several retailer of In

underserved our all in income to early or We way in the at direct to significantly who shoppers delivery penetrating been our respect have levels we are stages options. With sugar of better are store DSD execution. beverage strategy, better-for-you on affordable zero still well

of it's based help DSD in of grocery improved in velocity In look on distribution the magnifying and through our working channel to building. placements, our channel, focused singles better presence on are the the and grocery we footprint. accelerate conversion brand We convenience discovery will and the increase brand

on Arizona coming are and in Crown We our adjacent and months. Touching expanding in pursue We've into the footprint DSD in geographies board, product. made with strides taste Southwest we'll on development, innovation evolution. Crescent product the

taste a exciting we new out evident will this experience, flavors in and spring creating are be in more sugar-like are XXXX. rolling We the

Vanilla Root flavors to for the accelerated from become Caramel, and recently sugar, addition new now we've to Salted be an cola taste free segments. major most with And we recently, Creamy indulgent label we the caffeine driver. great into creamy have Cola business growth a Beer to more straight top Cola, flavor clean zero In will cola cola Cherry able famous expand to and and with

flavors, and across Walmart in a new focus at pack introducing retail on we're introducing also pack X month, variety variety to driving the can a XX with time, can addition XXXX first this for In trial. an

Before expectations. revenue I our turn the call over address to Girish, near-term I to want briefly

strategy stated distribution have in distribution, dynamic, is emerging the and we past, that challenges focus sales portfolio our strength on a marketing, natural performance. As sustainable on channel-specific our early with soda business recognition, signs. faced encouraging realigned quality highly the we we impacted have With that on have and

the the profitability. And call sustainable path be growth at gradual with first I We to will that, turn our and expect that momentum Girish. will strong to pave as we over build path

our Thank Amy. for and you, everyone, thanks morning, joining today. Good call

to Zevia we our costs discussed, below about excited while realigning are we've made positioned across significantly soda we balance brands. great to P&L, price the progress are that is able By sheet. win at strengthening with sugar the on As zero other within label and clean natural growth taste, reinvest productivity category the in uniquely a our points fast-growing meaningful products of initiatives. Amy our

the and capitalize to that this sets We long-term on work doing are profitable foundational opportunity are up growth. us we confident tremendous deliver now

our while our product have commenced in operational and our discipline. the even quarter and against encompasses quality. initiative productivity initiative continue XXXX, product targets. With improved opportunities focus find driving enhancing X to we pillars: second substantial we maximization, to significant sustainable improvements meaningful maintaining or reduce made progress economics, a reminder, brand of As unit on margin a in our we enhancement Since costs this

implemented via We and have cost consolidation also optimization. network warehouse savings

in From basis XX.X% sales. standpoint, eliminating selling gross to progress made as a as we've on point percentage improvement of enhancement reduced Lastly, well and spend. a these warehousing margin efforts expenses yielded a margin as SG&A XXX unproductive

target our progress be also have of from these the to flow XXXX. provided. quarter we savings us enabled $XX million year-end QX, increase $XX began have implemented. these more prior made realized cost to a as cash fully expect changes have from The savings the improvement previously in expected but We we annual to million through cost we the seen see We to savings result

the club associated lines. inventory, well Southeast. Gross to shipping expected XX% which of aforementioned reflects our hurricanes our This of in and of end of exit of is attributable well reflects to loss our miss third turnkey Mixers ASP well was obsolete declined the our manufacturing at customer as sales an by mix The of basis, and $XX.X initiatives Kids last completed On liquidate the low Versus a to transitory previously points lower returns in challenges net was our as promotional mass on-shelf promotional case equivalized to our prior third slight be our capital. I of increased efforts and we to volumes reflecting quarter graphics initiatives impact to investments results. the discuss margin lower delivered sales the improvement of versus end a were losses by just the of discipline one and levels. basis in working tests will sales productivity net net related shy a the of our historical employ activities, to emphasizes XXXX. quarter of continue the Lastly, prior now year to as XX.X%, model. philosophy decrease as around across as down guidance. and of visibility This year, which reflecting and that We channel offset X a to net impact than the X.X%, we XX.X%, million, XXX lap year. in and distribution versus with the financial partially was an excess as inventory in increase shift growth return expected enhanced improve discussed response as transition

in over In versus the new excess lift several signs also point spend with increase of tests. quarters. to inventory, last temporary promotional effectiveness increase of we addition We've new strategies been testing grocery in select the this year customer and in a obsolete a of liquidate prior variety seen approach have encouraging to percentage promotional XX

XX.X% the a driven chain of decreases as in returns third see $XX.X were our the the was $XX a compared the the are in XX.X% of We million sales $X.X we marketing the the the third strategies in million third We The freight expenses of net transfers of driven compared period. business $X.X was the quarter to were decrease EBITDA sales decrease quarterly warehouses loss to in of our as drive a we an in will are of of million $X.X automation, result by impact XXXX lapping administrative warehousing million expenses of impact $X.X million our loss result promotional our in by of year $XX.X new in inventory quarter we bolstering was levels. the of in consolidation due repackaging or improvement $X.X a XX.X% were XXXX. and profitability. transition as initiatives. Net offset The related XXXX million decline logistics of of refine or and supply million by prior decline beginning in number costs to last and quarter from million and by due lower reinvestment achieve or to a a continue of of the sales adjusted supply compared to the million. Adjusted continue third of awareness. General net reduction in made costs approach. Selling or to to sales partially was will a as primarily a decrease loss XXXX. in to improvement net improvement due in marketing to of to $X.X was challenges primarily an of EBITDA initiatives. and favorable to XX.X% costs chain productivity loss of encouraged quarter in year in that These freight primarily net freight reduction This of and compared year, brand balance investments as due net and last spot anticipate costs prior to well year, lanes rates to optimization losses expenses productivity

ended an our We have with balance $XX the of to sheet. cash million. revolving in and credit approximately equivalents undrawn cash million quarter and line $XX Turning

Turning to guidance.

Our the net outlook quarter largely slight our performance. revised sales XXXX reflects miss in third

adjusted will greater our given forward, going addition, EBITDA we providing In business. into be guidance, visibility

compared impact X% of of For key to promotional of approximately midpoint net the well the customers. the the year. at Walmart This reflecting fill the pipeline last expect $XX as fourth effective our million between more as fourth quarter, the to quarter $XX million, at sales we as growth range programming grocery reflects

to from million adjusted to the in QX. of EBITDA quarter EBITDA compares $X.X the adjusted XXXX. million reflective marketing negative range fourth QX to a QX expect be $X.X of negative of to shift We in This $X.X in of million, spend negative

the an million For million. EBITDA to loss this to range net outlook of of $XXX a year, $XXX million sales and $XX full translates in adjusted the approximately

on gross to as benefits as in do we we the the of the to While mentioned remain cost not mid- provide previously, formal made we've over guidance several upper-XXs margins, to structure. expect next quarters our the we improvements realize

gross We DSD based expect that mix. will also fluctuate margins on our

this building momentum modest we growth expanding will XXXX distribution channels, in focus recognize take across which time. as beyond we brand year, expect and on Looking we

opportunity the to will natural Operator? will in within now begin achieving it capitalize that we operator We as growth to turn positions with balance of believe the continue our EBITDA the to work I are enormous us to we investing doing goal on growth that adjusted Q&A. XXXX. In sustainable, positive over deliver profitable in closing, long-term we soda.

[Operator The we comes that have Herzog question of Sachs. Instructions] Goldman Bonnie first from

the bottom hoping I a top the into morning of was line. you you're could distribution distribution in I mentioned club sense X is, then out you distribution maybe a you your that little distribution expanded highlighted, that expanded the this expanding if for and I And lost maybe on this this your on, mass wondering impact you lost in channel. and from color month. us then Walmart, was more give your the called channel guess, customer

to your modest So to I I'm X% with quarter. trying growth I X% sales guess this guess, for, that outlook reconcile

Bonnie. Thanks, Yes.

retail then bottom top the the on talk And side. comments. to and and me to bit it comes a impact a when to I'm going Let make Girish outlook, to line the turn over little few about that

for softness that the like most I'll variances. weeks, came grocery, down and to just a store of can and to or business. brands, to the it we've with selling club impact note which growth strong. And So the emerging last accelerated mentioned across and the in in and region-by-region especially key quarter club, timing in rotation-by-rotation especially That's and remains return in volume growth channels, reduced the in promotional expectations few be X for our channels velocity QX. Specific the really past consistent a is as

stores, club. and will also with national variety throughout remain seeing rolling that e-commerce. we so sold month the into include what's strong you And in sustainable a for engaged be both Walmart X,XXX pack. of we're meantime, at XXXX. pack growth we're operators, club as in optimistic we'll and Variety make And mentioned, that is progress in club we'll distribution But the November,

the pack So making new and to is available win targeting across for variety channels. shopper drive a sure Zevia continue trial, we're that consumers to

again, is us just velocity that that metric So is us demand remind how tells the I'll faring.

return and will performance velocity And a the And impact distribution our so think we then a bottom to to line line outlook. about top talk on bit turn little the to and over expect it we when Girish growth club in based QX. and about I

Yes.

just a the we really launch driven really and change mentioned, primarily change support incremental driven at lost distribution look the would as noted, X most is trial distribution at line customer. and perspective, as bottom was Amy in really EBITDA the investments by add, mass the the of to incremental by I So in Walmart. the outlook From the drive level, as club at in marketing

balancing for the bottom dropping growth well growth as reinvesting the So long-term into long-term -- to sustainable it line as business. continues to -- our savings approach really mixing by

through a your talk on also you then And I because I have a marketing if second spend. right. maybe question that, just as may, All question, did

of not the will realistic could different us been next what I'm of I and for And that you've I sales percentage you've out the for of understand a how implemented sense this the guess recognizing asking maybe to be And focus of over of has us you I'm of going of year. provide for that few know couple So you're a context efforts this us? I a all hoping be to profitability kind as you But help in guidance years, might the years. could a given profitability. initiatives. mean it give you in next you, next key lot generate laid

the and Yes. Yes, appreciate of course, question.

As noted, are the consistent about really long-term we and sustainable, on and profitable opportunities building bullish we're the grower a future, for really focused growth ahead.

think sales to standpoint, continued profitability building so I as really And we to marketing really and we're future from growth. our XXXX driving drive in focused be brand on invest as in

And future to -- more we're line, the but continue higher sales drive a really savings can the and from profit. but I drive our which turn, in so going will, with so distribution of future perspective, on gains, to -- we dropping focus think really balance to bottom that reinvesting

really the alluded So in as investment I we business. but losses on of in reduction XXXX, think profitability well hitting continuing until as in to -- as marker between continued that then to, sort balance focused we're building this

put Bonnie, where take just to There our to room us in invest I building. productivity more operating on say invest it and we initiative is of closing, cost out in our is marketing, ability brand critical in to into for marketing. expenses would marketing

that awareness we to continue we enter And brand invest once circle. strong the and very consumers drive virtuous have spend brand have repeat funnel. must rates, and We high very in

our expectation, accordingly. a our to us in that execute the confidence lot and that's initiative ability productivity of So gives

Markets. of have Andrew question comes next we Strelzik The Capital BMO from

one-time margin made? of there? based what any we to deviation stronger as ask the way were of I anticipated kind was zoom margins, wanted thought or the given know is change of some you improvements those non-recurring much I for you've in Was about well. quarter? of believe relative I that out, guess as things. potential we maybe the structural about kind kind and there anything there And biggest to kind some had which business, I what variability DSD the you thinking of the the you And talked types But to of gross than you're about the on of and

a obsolete inventory Thanks it I significant And Yes. inventory. And drivers the really biggest driver comes the question. reduction in is one really for think excess the on biggest down the year-over-year basis is what to management. was improved and of

the see that at can on you inventory sheet. input a we've rationalizing of in But when lot progress renegotiating costs, SKUs. unproductive You look made balances core balance

kind And we margin. And DSD gross here be opportunity upper-XXs. of as clip perspective so going a on mid- And I noted, bar margin some add upper in think at sort a will reset forward, we that -- there do to from partners. higher quickly continues of to to new gross we've the enhance be variability depending how believe there

I with we've which driving driving spend, historical to similarly, higher inclusive incremental think balanced we've of margins. levels, returned G&A also margin gross

this and across the So value. again, we're we velocity do act P&L creating balanced. how with a balancing drive we drive We're really to on how focus -- really do

the promotional remarks. then look then trade in the of go-forward working been timing the That's Okay. helpful. and which means to referenced for a about some you on to and kind you've what what's prepared wanted revisit that promotional settle been exactly kind release I and press that's time talk strategies of going on spend that to what what discussion Can of you basis? activity, you how is in might the testing, over And

absolutely. Yes,

spend So dramatically. I company think G&A we historically reduced the or pretty years, last has over several the

really we've frequency, strategies of so a really testing and variety of breadth new depth And been around promotion.

mix of we've frequency. several of ROI continued tests hone the I quarters, and what last think refine that depth to sort these dialed spend we've really and highest the in as and over is so And

-- think few past. and tried we the learn I'd XXXX, well will as nationwide strategies a that And the yet the testing so we of quarter we really say, as in promotional settling in, first that launch Walmart in with to be new we have haven't I particularly

of and settled by from appropriate a perspective in we really be able dial believe the kind that we've think of on will the so I quarter -- year. amount, to next first And we'll we dollar

we And in in percentage mentioned point Andrew, grocery significant and period, just saw, of increase a as note improvements in across that margin. XX we concurrently lift for all the that did prepared with remarks,

we're in So and the efficacy of builds is our the it hand-in-hand what strategies profitability. described learning driving what with just our Girish promotional confidence on path based to improving

[Operator Salera comes Instructions] The from Inc. question we Jim next of Stephens have

I insight guys to Caramel with the make do that and if just any among maybe question. wanted a And start Salted have on driving LTO maybe frequency that's see, trial I new you can existing customers? if customers X-part or

world spend more in that engagement on that's trial. more any converts and the Just that frequency this how or some new of ad advertising just to of it's have guys from whether digital, you and digital learnings

Yes.

or -- To third-party is effective we're and that to so that's Because reach to been has -- we're both. But on that engaging, for base Zevia are the past. seeing influencer not speaking very from directionally, excitement that our is we exactly have answer around through us your on than our sort directly been channels Salted too -- you what question, very now to directly so far disaggregate now thanks, people network existing able more could new extend whether of from consumers. it scaled the Jim. and to channels we the coming tell So early tell Caramel you

past, also within of But the engagement exactly initiatives that. Salted of it's I So an in driving think outperforming existing Caramel we marketing our see just base. is example and our initiatives marketing

percentage that consumers. And Salted an our some distinctive a I events drove that engage out-of-home markets So Caramel and new and initiatives increase at in period and seen of across point several through our us: XX-week a scale piloted social mentioned, digital advertising, our for identity market. channels both on and the digital the and cities. brand in really across Reminder brand does campaigns recently, new supported point brand to your be digital, expectation through other most overhauled heard those buzz-building the sales can base partnerships, complementing we we to relative highly that piloted X campaigns media of continues that to reaches our rest in is engaged new things then through ambassadors

So we the green these why to able is marketing -- been and spends and we brand. of forward. be see, fall it summer brand especially our going we a this insufficient what initiative are very way. over limited be now what in do that? have to to And in support are shoots targeted our that early there we're need to self-sufficient And confident productivity able to scale Because going fund to initiatives

would what of for in trial. I engaging an example reaching good Caramel like as Salted mark consumers Zevia campaign and So base new looks driving both as well our as

of of on That's to great. dynamic DSD And give update then the activation. the probably an maybe some Pacific Can I similar network visibility as you kind follow-up with a a in-store that. us in Northwest? And would there's imagine

placements. give guys the you any have to is what noticeable of relative can updates seen about branded kind difference I'm But like any in those If curious markets on footprint? cooler really you broader

Jim. consideration, important very Thank a that's Yes, you. Yes.

an So business impact has so been where all time Northwest. Pacific had the market where chains base impact of our in DSD so DSD DSD, rest in is footprint delivery. levels we're service on have in period store specifically, direct active. footprint The in activated, of pleased velocity of And the the grocery the with that across the outperforms

spring. rest outperforming outlined are of next DSD. convenience also grocery outlets. to of started to course, chains reset have And I independent So because, market, partners DSD penetrate independent thanks

of be which DSD for moment with ready rollout, in convenience kind big operators So would that we're partnering to spring. next be the

being distribution drive building. and core convenience, for with signed being brand the And to channels of against most hand-in-hand expand Northwest. the target result, months. take prepared And that's then and DSD up on follow the the in our remarks, in the next should our we Arizona, drives mentioned So which which start initiative, to then as again, in Crown impact geographies Crescent trial velocities of enabled expect with coming adjacent sort a in our increased to early singles Southwest. in We've base similar is important

Ladies the closing it and Taylor session ahead. the remarks. now back concludes will that gentlemen, turn for I to Please Amy go of call. question-and-answer

we Thank hear, several is positioned we're And while up as very Yes. initiative, you. we've We productivity to And that on us well call a well to on this capitalize joining path today. putting everyone which confident Zevia within times, as us the our you growing opportunity appreciate natural what can soda mentioned clear sets category. profitability. the see

call. look we on on quarter progress providing an forward our you So Thank fourth to the you update much, everyone. very

conference. you that Ladies today's for then you. and gentlemen, joining concludes Thank Thank us.

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