Zevia(ZVIA) - 2024 Q3 - Quarterly Report

Financial Performance - Net sales for Q3 2024 were $36.366 million, a decrease of 15.6$43.089 million in Q3 2023[66] - Cost of goods sold for Q3 2024 was $18.516 million, down from$23.517 million in Q3 2023, reflecting a 21.3% reduction[66] - Gross profit for Q3 2024 was $17.850 million, compared to$19.572 million in Q3 2023, resulting in a gross margin decline[66] - Net loss attributable to Zevia PBC for Q3 2024 was $2.527 million, compared to a loss of$8.217 million in Q3 2023[66] - Net sales for the three months ended September 30, 2024, were $36.4 million, a decrease of 15.6$43.1 million in the same period of 2023[68] - Cost of goods sold decreased by 21.3% to $18.5 million for the three months ended September 30, 2024, compared to$23.5 million for the same period in 2023[69] - Gross profit for the three months ended September 30, 2024, was $17.9 million, down 8.8$19.6 million in the prior year, with a gross margin improvement to 49.1% from 45.4%[70] - Net loss attributable to Zevia PBC for the three months ended September 30, 2024, was 7% of net sales, compared to 19% in the same period of 2023[68] - For the nine months ended September 30, 2024, net sales were $115.6 million, a decrease of 10.1$128.6 million in the same period of 2023[75] - Gross profit for the nine months ended September 30, 2024, was $52.5 million, a decrease of 11.6$59.4 million in the same period of 2023, with a gross margin decline to 45.4% from 46.2%[78] - The net loss for the nine months ended September 30, 2024, was $(17,002) thousand, a slight improvement from$(19,171) thousand in the same period of 2023[91] Expenses - Selling and marketing expenses decreased to $11.981 million in Q3 2024 from$20.455 million in Q3 2023, a reduction of 41.5%[66] - Selling and marketing expenses decreased by 41.4% to $12.0 million for the three months ended September 30, 2024, compared to$20.5 million in the same period of 2023[71] - General and administrative expenses were $7.4 million for the three months ended September 30, 2024, a decrease of 10.6$8.3 million in the prior year[72] - Selling and marketing expenses decreased to $40.7 million for the nine months ended September 30, 2024, down 16.1$48.5 million in the same period of 2023, primarily due to reduced freight transfer and warehousing costs[79] - General and administrative expenses increased slightly to $23.2 million for the nine months ended September 30, 2024, a 0.4$23.1 million in the prior year, mainly due to higher employee compensation costs[80] - Equity-based compensation expenses were $4.0 million for the nine months ended September 30, 2024, a decrease of 40.3$6.6 million in the same period of 2023, primarily due to changes in expense recognition methods[81] - Restructuring expenses for Q3 2024 were $112,000, with total operating expenses at$20.814 million, down from $30.992 million in Q3 2023[66] - The company incurred restructuring expenses of$0.1 million for the three months ended September 30, 2024, related to exiting two third-party warehouse and distribution facilities[74] - Restructuring expenses amounted to $1.0 million for the nine months ended September 30, 2024, reflecting costs related to employee severance and exiting third-party warehouse facilities[82] Cash Flow and Liquidity - As of September 30, 2024, the company had$32.7 million in cash and cash equivalents, which, along with operating activities and available borrowings, is expected to provide adequate liquidity for ongoing operations[84] - Net cash provided by operating activities was $1.0 million for the nine months ended September 30, 2024, driven by a net increase in cash related to changes in operating assets and liabilities[87] - Net cash used in investing activities was$0.2 million for the nine months ended September 30, 2024, primarily due to purchases of property and equipment[88] - The company drew $8 million from 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 September 30, 2024[85] - The company expects future capital requirements to depend on revenue growth, gross margin, and expenditure levels, with potential increases in operating and capital expenditures as business activities expand[84] Strategic Initiatives - The company expects annualized benefits of approximately$15.0 million from the Productivity Initiative, with savings expected to be fully realized over the next 3-5 quarters[53] - The company plans to reinvest the majority of cost savings from the Productivity Initiative into brand marketing and Direct Store Delivery strategies[53] - The company has sold over 2.1 billion cans of Zevia to date, indicating strong brand traction in the market[52] Compliance and Governance - The company regained compliance with NYSE listing standards on October 1, 2024, after the average closing price of Class A common stock rose above $1.00[54] - The company maintains effective disclosure controls and procedures as of September 30, 2024, ensuring timely reporting and management communication[99] - No changes in internal control over financial reporting were identified that materially affected the company's financial reporting as of September 30, 2024[100] - The company is classified as an "emerging growth company" and may take advantage of certain exemptions from reporting requirements until it no longer qualifies[95] Supply Chain and Risks - The company has entered into a two-year agreement for stevia leaf extract with a multi-national ingredient company, effective October 15, 2023, which includes fixed pricing[96] - Three vendors accounted for approximately 87% of total raw material and finished goods purchases during the nine months ended September 30, 2024[96] - The company is exposed to inflation risks, which could materially affect its business and financial condition if costs rise significantly[98] - Foreign exchange gains and losses were not material for the three and nine months ended September 30, 2024, and 2023, respectively[97]