Zevia(US:ZVIA)2024-05-08 20:23Financial Performance - Net sales for the first quarter of 2024 were $38.8 million, a decrease of 10.5% compared to $43.3 million in the same period of 2023[112]. - The company reported a net loss of $7.2 million for Q1 2024, compared to a net loss of $2.9 million in Q1 2023, with a loss per share of $0.10[112]. - Net sales decreased by 10.4% to $38.8 million for the three months ended March 31, 2024, compared to $43.3 million in the same period of 2023, primarily due to a decrease in the number of equivalized cases sold[113]. - Gross profit fell by 11.9% to $17.7 million for the three months ended March 31, 2024, compared to $20.1 million in the prior year, with gross margin decreasing to 45.7% from 46.4%[116][117]. - Adjusted EBITDA for Q1 2024 was $(5,466) thousand, a significant decline from $(452) thousand in Q1 2023, with net loss increasing to $(7,199) thousand from $(2,912) thousand[146]. Cost Management - Cost of goods sold decreased to $21.1 million in Q1 2024 from $23.2 million in Q1 2023, maintaining a gross margin of 46%[112]. - Cost of goods sold decreased by 9.1% to $21.1 million for the three months ended March 31, 2024, down from $23.2 million in 2023, driven by a 10.4% decrease in shipment of equivalized cases[115]. - Selling and marketing expenses increased to $15.1 million, representing 39% of net sales, up from 28% in the prior year[112]. - Selling and marketing expenses increased by 26.5% to $15.1 million for the three months ended March 31, 2024, up from $11.9 million in 2023, primarily due to higher freight and warehousing costs[118]. - General and administrative expenses decreased by 6.1% to $8.1 million for the three months ended March 31, 2024, compared to $8.6 million in 2023, mainly due to a reduction in employee costs[119]. - Equity-based compensation expenses decreased by 37.4% to $1.5 million for the three months ended March 31, 2024, down from $2.4 million in 2023, primarily due to changes in expense recognition methods[120]. Operational Challenges - The company experienced delays in SKU level distribution recovery due to supply chain challenges from 2023, impacting sales volumes[92]. - The company anticipates continued inflationary pressures and increased operating costs throughout 2024, affecting margins and operating results[97]. - Inflation has materially affected the company's business, and further significant inflationary pressures could harm financial performance[161]. - The company is subject to commodity risks related to aluminum, diesel fuel, cartons, and corrugate, which may limit the ability to recover increased costs through pricing[162]. Strategic Initiatives - A multi-year Productivity Initiative is projected to yield annualized benefits between $8.0 million and $12.0 million, expected to begin in Q3 2024[96]. - The cash impact of the Productivity Initiative is expected to be between $0.5 million and $0.8 million for the three months ended June 30, 2024[96]. - New distribution strategies include a regional approach to direct store delivery and gaining distribution in select regional convenience chains[93]. - The company has onboarded a new global transportation management company to optimize freight procurement and management activities[91]. Cash Flow and Liquidity - Net cash used in operating activities was $3.2 million for the three months ended March 31, 2024, compared to net cash provided of $9.4 million in the same period of 2023, influenced by a net loss of $7.2 million[138][139]. - As of March 31, 2024, the company had $28.7 million in cash and cash equivalents, which is expected to provide adequate liquidity for ongoing operations and planned capital expenditures[123]. - The company drew $8 million on its Secured Revolving Line of Credit during the first quarter of 2024, which was subsequently repaid, leaving no outstanding amount as of March 31, 2024[132]. - Future capital requirements will depend on revenue growth, gross margin, and expenditure levels, with potential needs for additional financing if existing resources are insufficient[125]. - Net cash used in investing activities was $33 thousand for Q1 2024, compared to $0.9 million for Q1 2023, primarily due to purchases of property and equipment[140]. - Net cash provided by financing activities was $0.0 million for Q1 2024, with $8 million drawn from a revolving line of credit and repaid in the same period; in Q1 2023, it was $23 thousand from stock option exercises[141]. Vendor and Supply Chain Management - Three vendors accounted for approximately 93% of total raw material and finished goods purchases in Q1 2024, indicating a high vendor concentration risk[159]. - The company entered into a two-year agreement for stevia leaf extract effective October 15, 2023, with fixed pricing to mitigate supply disruptions[156]. - The company expects to satisfy inventory purchase commitments through cash on hand and cash generated from product sales[150]. Real Estate and Corporate Structure - The company has extended its corporate headquarters lease through December 31, 2026, increasing the total square footage from 17,923 to 20,185 square feet[147]. Foreign Exchange and Market Risks - Foreign exchange gains and losses were not material for Q1 2024 and 2023, as most sales and costs are in U.S. dollars[160].