Zevia(ZVIA)2024-08-07 20:03Sales Performance - Net sales for the three months ended June 30, 2024, were 42.2 million in the same period of 2023[66]. - Net sales for the six months ended June 30, 2024, were 85.5 million in the same period of 2023[72]. - Equivalized cases sold decreased to 3.1 million for the three months ended June 30, 2024, down from 3.3 million in the same period of 2023[66]. Cost and Profitability - Cost of goods sold increased by 4.1% to 22.5 million in the prior year[67]. - Gross profit decreased by 14.0% to 19.7 million in the same period of 2023[68]. - Cost of goods sold decreased by 44.6 million for the six months ended June 30, 2024, primarily due to an 8.2% decrease in shipment of equivalized cases[73]. - Gross profit fell by 34.7 million for the six months ended June 30, 2024, with gross margin declining to 43.8% from 46.5%[74]. Expenses - Selling and marketing expenses were 16.1 million in the prior year[69]. - Selling and marketing expenses increased by 28.7 million for the six months ended June 30, 2024, driven by higher marketing and warehousing costs[75]. - General and administrative expenses increased by 24.0% to 6.2 million in the same period of 2023[70]. - General and administrative expenses rose by 15.8 million for the six months ended June 30, 2024, primarily due to increased employee compensation costs[76]. - Restructuring expenses were 0.9 million for the six months ended June 30, 2024, primarily related to employee severance costs and exiting third-party facilities[78]. Cash Flow and Financing - Cash used in operating activities was 1.1 million provided in the same period of 2023[84]. - Net cash used in operating activities for the six months ended June 30, 2024, was 14.2 million, partially offset by non-cash expenses of 7.3 million[86]. - Net cash used in investing activities for the six months ended June 30, 2024, was 1.5 million for the same period in 2023, indicating a reduction in capital expenditures[87]. - Net cash provided by financing activities for the six months ended June 30, 2024, was less than 8 million from a secured revolving line of credit, which was repaid in the same period[87]. Compliance and Risks - The company received a notice from the NYSE regarding non-compliance with the 8.0 million and 0.9 million in Q2 2024[52]. - The company has transitioned procurement of raw materials to contract manufacturers, which is expected to optimize the supply chain and improve cost management[51]. - The company is increasing its marketing spend to enhance brand awareness and drive sales velocity, particularly in key accounts[51]. - The company has entered into a two-year agreement effective October 15, 2023, for fixed pricing of stevia extract, a key ingredient, to mitigate raw material cost fluctuations[94]. Operational Insights - The company has sold over 2.0 billion cans of Zevia to date, focusing on zero sugar, zero calorie beverages made with plant-based ingredients[50]. - In the first half of 2024, the company experienced delays in SKU level distribution due to supply chain challenges and increased competition, resulting in reduced volumes[51]. - Gross profit is influenced by the mix of distribution channels and promotional activities, with a focus on leveraging an asset-light business model[57]. - Selling and marketing expenses are expected to increase in absolute dollars long-term due to higher warehousing and distribution costs, but decrease as a percentage of sales over time[59]. - General and administrative expenses are expected to remain flat in absolute dollars in the near term[60]. - The company expects continued seasonality effects, with net sales typically higher in the second and third quarters of the year[79]. - Foreign exchange gains and losses were not material for the three and six months ended June 30, 2024, indicating limited exposure to currency fluctuations[95]. - As of June 30, 2024, the company had 8 million on its Secured Revolving Line of Credit during the first quarter of 2024, which was repaid in the same period, leaving no outstanding amount as of June 30, 2024[81]. - Adjusted EBITDA for the six months ended June 30, 2024, was (3.07) million for the same period in 2023, reflecting a decline in operating performance[90].