Zevia(US:ZVIA)2025-05-07 21:30Financial Data and Key Metrics Changes - First quarter net sales were $38 million, a decrease of 2% compared to the same period last year, primarily due to increased promotional activity [19] - Gross margin reached a record high of 50.1%, an increase of 440 basis points from 45.7% in the first quarter of last year, reflecting lower product costs and improved inventory management [19] - Net loss improved to $6.4 million from $7.2 million in the prior year, while adjusted EBITDA loss improved to $3.3 million from $5.5 million [21][22] Business Line Data and Key Metrics Changes - Selling and marketing expenses were $15.3 million, or 40.3% of net sales, compared to $15.1 million, or 38.8% of net sales in the prior year [20] - Marketing expenses increased to $6.2 million, or 15.2% of net sales, from $2.7 million, or 7% of net sales in the prior year, due to higher marketing investments [20] Market Data and Key Metrics Changes - The company is seeing robust growth in the better-for-you beverage category, which comprises 25% of all carbonated soft drink growth [51] - The company has expanded its distribution significantly, now reaching 4,300 Walmart stores, up from 800, which is expected to enhance household penetration [49] Company Strategy and Development Direction - The company is focused on three strategic growth pillars: distinctive marketing, product innovation, and expanded distribution [16][82] - The marketing campaign featuring Jelly Roll has generated 2.4 billion earned impressions, indicating strong brand engagement [10] - The company plans to introduce new flavors and variety packs to drive trial and brand awareness [12][14] Management's Comments on Operating Environment and Future Outlook - Management remains optimistic about the future, citing a strong growth outlook for the better-for-you beverage category and the company's unique market positioning [7][22] - Despite macroeconomic uncertainties, the company is confident in its ability to drive growth through strategic initiatives and cost-saving measures [22][76] Other Important Information - The company ended the quarter with approximately $28 million in cash and cash equivalents and an undrawn revolving credit line of $20 million [22] - The productivity initiative has led to annualized cost savings of $15 million, which will be reinvested to accelerate future growth [22] Q&A Session Summary Question: Guidance and Top Line Growth - Management expressed confidence in maintaining full-year guidance, citing strong execution and the impact of productivity initiatives [27][28] Question: Performance at Walmart - Management reported positive early sell-through performance at Walmart, with the variety pack being the top seller among Zevia SKUs [33][34] Question: Gross Margin Sustainability - Management believes gross margins in the upper forties are sustainable, despite anticipated tariff headwinds [39] Question: Convenience Distribution - The company is testing single cans in convenience stores, leveraging DSD relationships for distribution [40][42] Question: Tariff Exposure - Tariff exposure is primarily from aluminum, with some secondary impacts from sourcing costs [48] Question: Consumer Behavior Changes - Management noted that it is too early to see significant changes in consumer behavior but believes the company is well-positioned as an affordable option [76]