Zevia(US:ZVIA)2021-11-12 22:00Financial Data and Key Metrics Changes - In Q3 2021, Zevia achieved record net sales of $39 million, representing a 22% increase compared to Q3 2020, driven by 26% volume growth and a 4% investment in price mix [15][51] - The company expects Q4 2021 net sales to be between $36 million and $38 million, reflecting a growth of 30% to 37% compared to Q4 2020, leading to a full-year net sales expectation of $140 million to $142 million, or 27% to 29% growth versus fiscal 2020 [14][61] - Adjusted EBITDA for Q3 was negative $3.5 million, compared to a profit of $3 million in Q3 2020, primarily due to increased sales promotion and marketing costs [17][57] Business Line Data and Key Metrics Changes - Zevia's household penetration increased from 2.4% to 2.6%, an 8% increase year-over-year, indicating growth in consumer reach [17] - The buying rate for households purchasing Zevia grew from $33.40 to $38.80, a 14% increase, demonstrating increased purchasing among current consumers [18] Market Data and Key Metrics Changes - Zevia is expanding into the warehouse club channel, with 58% of buyers in this channel being new to the brand, indicating significant growth potential [22] - The e-commerce channel remains strong, with Zevia's Rainbow Pack being the number one selling soft drink item on Amazon [20] Company Strategy and Development Direction - The company is focused on channel expansion and innovation as key growth levers, with significant progress in Q3 [19][23] - Zevia aims to enhance its marketing mix and invest in brand refresh initiatives to improve consumer awareness and trial [41][49] Management's Comments on Operating Environment and Future Outlook - Management acknowledges cost pressures from input costs but remains confident in mitigating these through operational efficiencies and strategic investments [13][35] - The company maintains a long-term growth algorithm of 30% net sales growth, supported by strong brand loyalty and repeat purchasing metrics [14][61] Other Important Information - Zevia eliminated over 3,000 metric tonnes of sugar from consumers' diets in Q3 2021, contributing to its mission of improving public health [27] - The company has a strong focus on sustainability, having eliminated over 50 million plastic bottles from the environment [28] Q&A Session Summary Question: Sales growth deceleration in Q3 - Management explained that Q3 typically does not see significant new distribution gains, focusing instead on velocity gains, and expressed confidence in ongoing expansion opportunities [68][70] Question: Pricing strategy and promotional activity - Management clarified that while they do not plan a broad price increase in 2021, they have the ability to adjust pricing by channel and geography, and are currently focused on promotional activities to drive trial and repeat purchasing [81][82] Question: Execution risks in new channels - Management expressed confidence in their execution capabilities, highlighting their strong service levels and the favorable supply chain characteristics of the club channel [106][109] Question: Gross margin compression - Management attributed gross margin compression to increased promotional investments and cost pressures, indicating a strategic approach to promotional activity moving forward [114][116] Question: Marketing effectiveness and strategy - Management discussed a shift towards a more sophisticated marketing strategy that includes both push and pull tactics to drive consumer awareness and trial [100][102]