Zevia PBC Q2 FY2025 earnings call

• Marketing: National campaign 'Get the Fake Outta Here' featuring Jelly Roll delivered record earnings impressions and engaging content. Memorial Day weekend launch of 'Get the Fake Out of Summer' with Strawberry Lemon Burst and summer food date activations.
• Product Innovation: New flavors like Strawberry Lemon Burst and Orange Creamsicle performed well, refreshed packaging to communicate better-for-you positioning, expanded pipeline with Peaches and Cream launch, salted caramel return.
• Distribution: Surpassed historical peak distribution, strong performance at Walmart, grocery (positive scan data), club (back on rotation with exceeded expectations), drug (available in all 3 national chains), and convenience (growing network with encouraging scan data).

For the second quarter, net sales grew 10.1% to $44.5 million. Adjusted EBITDA improved by $4.6 million to $0.2 million, marking the first profitable quarter as a public company. Net sales growth was driven by expanded distribution across channels, with new flavor launches also contributing. Revenue contribution details weren't broken down by specific product segments beyond general performance mentions.

• Full year net sales guidance remains in the range of $158 million to $163 million. Adjusted EBITDA loss is now expected to range from $7 million to $9 million versus prior guidance of $8 million to $11 million.
• Q3 net sales expected between $38 million and $40 million. Q3 adjusted EBITDA loss expected between $3.4 million and $3.9 million, including a $500,000 one-time charge within COGS related to packaging redesign.

• Uncertain macro environment which could impact results. - Tariff costs of 50% on aluminum could potentially impact COGS in 2026 if unchanged.

Q: Can you give more color on sales drivers, including channel fill-in, existing channel growth, and contribution of new flavors?

A: Growth came from expanded distribution, spring resets in grocery, new items like Strawberry Lemon Burst contributing, and increased club business. New items are early contributors but expected to continue driving growth.

Q: Can you share more color on the incremental $5 million of productivity gains?

A: Incremental savings will be realized starting in Q4 2025 with more significant impact in Q1 2026, first in COGS and then in selling and warehousing expenses in 2026.

Q: On guidance, why the more cautious outlook towards back end of year?

A: Cautious due to macro environment and lapping substantial Walmart pipeline fill in Q4. Also, tariff impacts and increased marketing investments in Q3 contribute.

Q: Color on consumer panel metrics step-up?

A: Incremental visibility from distribution expansion and innovation leading to uptick in household penetration and purchase frequency, driven by new-to-brand users and strong repeat.

Q: Details on club product rotation and future?

A: Club is a discovery channel with 6-flavor variety pack currently, seasonal rotations for newness, and potential for package evolution in 2026 with everyday and seasonal ideas.

Q: Balancing EBITDA flow to bottom line vs reinvesting in marketing?

A: Focused on long-term brand building and short-term velocity driving, balancing brand investment with short-term growth tactics, with 2026 as inflection point for positive adjusted EBITDA.