Zevia(US:ZVIA)2023-08-12 17:53Financial Data and Key Metrics Changes - In Q2 2023, net sales were $42.2 million, down 7.2% year-over-year, impacted by a 16.8% decline in volumes due to supply chain disruptions [26][31] - Gross margins improved to 46.6%, up 4.2 percentage points from the same quarter last year, primarily due to price increases and lower aluminum costs [27][31] - Net loss was $3.9 million, an improvement of 64.6% compared to a net loss of $11.1 million in Q2 2022 [31] Business Line Data and Key Metrics Changes - The brand refresh and strong velocity growth were noted, with a 21.3% increase in velocity for the quarter, indicating strong demand when in stock [10][15] - Household penetration remained above 6%, with a 6% increase in brand spend per household [14] Market Data and Key Metrics Changes - Zevia's shoppers spent 40% more on beverages compared to total nonalcoholic beverage shoppers, indicating a strong consumer base [16] - The company experienced strong performance in legacy natural channel retailers and expanded in mainstream channels, with new distribution in various regions [18] Company Strategy and Development Direction - The company is focused on stabilizing its supply chain and returning to best-in-class service levels, with a long-term goal of sustainable profitable growth [23][32] - The brand's mission emphasizes global health, aiming to make better-for-you beverages accessible to consumers across all income levels [11] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the brand's long-term potential, with expectations for demand to stabilize and improve by year-end [10][40] - The company anticipates continued challenges in Q3 due to supply chain issues but expects a return to growth in Q4 [32][38] Other Important Information - The company has a healthy balance sheet with $47 million in cash and no outstanding debt as of the end of Q2 2023 [31] - The supply chain transformation is a critical initiative, with plans to consolidate warehouses from 27 to 7 locations [20] Q&A Session Summary Question: Did demand accelerate month-to-month in Q2? - Management confirmed strong demand growth year-over-year, with acceleration noted in July, particularly in top retailers [34][37] Question: What is the visibility and confidence for Q4 improvement? - Management expressed bullishness for Q4, expecting to realize the impact of consumer demand as supply chain issues are resolved [35][40] Question: What is the expected impact of supply chain transition on gross margins? - Management expects gross margins to remain in the mid-40s but acknowledges some pressure due to supply chain costs [44] Question: What are the early reads from the brand refresh? - Early indicators show positive retailer engagement and improved in-store visibility, with anecdotal evidence of increased sales [46][47] Question: How will the supply chain reorientation impact sales? - Management indicated that improved fill rates and display execution will drive sales growth once supply chain issues are resolved [49][50] Question: What are the implications of the brand refresh for long-term growth? - The brand refresh is expected to enhance in-store visibility and drive awareness, supporting long-term growth through expanded distribution [68]