Zevia(US:ZVIA)2023-08-08 20:09Financial Performance - Net sales for Q2 2023 were $42.241 million, a decrease of 7.4% from $45.542 million in Q2 2022[105] - The net loss attributable to Zevia PBC for Q2 2023 was $3.931 million, compared to a net loss of $11.090 million in Q2 2022[105] - Net sales for the three months ended June 30, 2023, were $42.2 million, a decrease of $3.3 million or 7.2% compared to $45.5 million in the same period of 2022, primarily due to a decrease in equivalized cases sold[106] - For the six months ended June 30, 2023, net sales were $85.5 million, an increase of $1.965 million or 2.4% compared to $83.6 million in the same period of 2022[114] - The company had a net loss of $7.9 million for the six months ended June 30, 2023, compared to a net loss of $32.3 million for the same period in 2022[139] Cost and Profitability - Cost of goods sold for Q2 2023 was $22.549 million, down 14.3% from $26.221 million in Q2 2022, resulting in a gross profit of $19.692 million[105] - Gross profit margin improved to 47% in Q2 2023, compared to 42% in Q2 2022[105] - Gross profit increased by $0.4 million or 1.9% to $19.7 million for the three months ended June 30, 2023, with a gross margin improvement to 46.6% from 42.4% in the prior-year period[108][109] - Gross profit for the six months ended June 30, 2023, was $39.8 million, an increase of $4.6 million or 13.1%, with a gross margin of 46.5% compared to 42.1% in the prior-year period[116][117] Expenses - Selling and marketing expenses increased to $16.1 million in Q2 2023, representing 38% of net sales, up from 35% in Q2 2022[105] - General and administrative expenses decreased to $6.207 million in Q2 2023, down from $9.818 million in Q2 2022, reflecting a decline as a percentage of net sales[105] - Selling and marketing expenses rose by $0.2 million or 1.4% to $16.1 million for the three months ended June 30, 2023, largely due to higher freight transfers and marketing spend[110] - General and administrative expenses decreased by $3.6 million or 36.8% to $6.2 million for the three months ended June 30, 2023, primarily due to a reduction in employee costs and public company costs[111] - Equity-based compensation expenses dropped significantly by $5.7 million to $2.4 million for the three months ended June 30, 2023, mainly due to the acceleration of vesting of awards in the prior year[112] Cash Flow and Liquidity - As of June 30, 2023, the company had $47.0 million in cash and cash equivalents, which, along with operating activities and available borrowings, is expected to provide adequate liquidity for ongoing operations[123] - For the six months ended June 30, 2023, the company reported net cash provided by operating activities of $1.1 million, a significant improvement compared to a net cash used of $19.6 million for the same period in 2022[136][138] - The company utilized a revolving credit facility with a commitment of $20 million, which matures on February 22, 2027, and has not drawn any amounts under this facility as of the reporting date[132] - The company is required to maintain liquidity of $7 million until December 31, 2023, and as of June 30, 2023, it was in compliance with this liquidity covenant[134] Future Outlook - The company expects to resolve supply chain challenges by the end of 2023, which have impacted net sales[88] - The company anticipates continued inflationary pressures and increased operating costs throughout 2023[90] - Future capital requirements will depend on revenue growth and expenditures, with potential needs for additional financing if existing resources are insufficient[125] - The company anticipates that a significant portion of potential future payments under the TRA will be payable over 15 years, contingent on generating sufficient income to utilize tax deductions[130] Supply Chain and Commodity Risks - The company has a two-year agreement for stevia extract supply that expired on May 30, 2023, and was extended through September 15, 2023, with ongoing negotiations for a new agreement[156] - The company is actively seeking to diversify its sources of supply and intends to enter into additional long-term contracts to stabilize raw material prices[158] - The majority of sales and costs are in U.S. dollars, minimizing foreign exchange risk, but sourcing from international suppliers could increase exposure to exchange rate fluctuations[159] - Inflation has materially affected the company's business, and prolonged significant inflationary pressures could harm financial performance if costs cannot be offset by price increases[160] - The company faces commodity risks related to aluminum, diesel fuel, cartons, and corrugate, with limited ability to recover increased costs through higher pricing due to competitive pressures[161]