Zevia Pbc Class A ((ZVIA)) has held its Q4 earnings call. Read on for the main highlights of the call.
Zevia PBC’s latest earnings call painted a picture of cautious optimism, as the company showcased a promising return to growth alongside significant improvements in gross margin and consumer engagement. While marketing campaigns have been notably successful and the financial position remains strong, challenges such as ongoing operating losses, a full-year sales decline, and anticipated distribution losses loom large. Nonetheless, strategic initiatives and financial improvements suggest a cautiously optimistic outlook for the future.
Return to Growth
Zevia PBC marked a return to growth in Q4 2024, achieving a sales increase of over 4%. This growth was primarily driven by increased volumes and expanded distribution, notably expanding from 800 to over 4,300 Walmart locations. This expansion reflects the company’s efforts to enhance its market presence and reach more consumers.
Record Gross Margin
The company achieved a record high gross margin of 49.2%, an impressive increase of 850 basis points from the previous year. This improvement is attributed to better inventory management and productivity initiatives, showcasing Zevia’s ability to optimize operations and enhance profitability.
Positive Consumer Engagement
Consumer engagement remains strong for Zevia PBC, with a repeat rate of over 40% and an average brand spend per household 38 percentage points higher than the average beverage shopper. This indicates a loyal customer base and effective brand positioning in the competitive beverage market.
Significant Marketing Campaign Success
The ‘Break from the Artificial’ campaign was a standout success, going viral and significantly boosting brand visibility. This success led to increased marketing investments, underscoring the importance of strategic marketing in driving brand growth and consumer awareness.
Strong Financial Position
Zevia PBC ended the quarter with approximately $30.7 million in cash and cash equivalents, alongside an undrawn revolving credit line of $20 million. This strong liquidity position provides the company with financial flexibility to navigate challenges and invest in growth opportunities.
Continued Operating Losses
Despite improvements, Zevia PBC reported a net loss of $6.8 million for Q4 2024, with an adjusted EBITDA loss of $3.9 million. While these figures represent an improvement from the previous year, they highlight the ongoing challenge of achieving profitability.
Full Year Sales Decline
For the full fiscal year 2024, net sales decreased by 6.8%, driven by lost distribution in select channels and increased promotional spend. This decline underscores the competitive pressures and challenges faced by the company in maintaining sales momentum.
Distribution Losses
The company anticipates distribution losses at one mass-market customer and in the club channel, along with the discontinuation of kids and mixers lines. These factors are expected to impact the first half of 2025, posing a challenge to maintaining growth.
Increased Selling and Marketing Expenses
Selling and marketing expenses rose to 41.7% of net sales in Q4 2024, up from 36.6% the previous year. This increase is primarily due to heightened advertising investment, reflecting the company’s commitment to bolstering brand presence and consumer engagement.
Forward-Looking Guidance
Looking ahead to fiscal 2025, Zevia PBC provided guidance with net sales expected to range from $158 million to $163 million, despite anticipated distribution losses. The company aims to maintain a gross margin in the high 40% range, supported by productivity initiatives yielding $15 million in annualized savings. Zevia forecasts an adjusted EBITDA loss between $8 million and $11 million, focusing on balancing cost savings with reinvestment in growth. Marketing spend is set to increase, particularly in the first and third quarters, to leverage the momentum in the better-for-you soda category.
In summary, Zevia PBC’s earnings call reflects a cautiously optimistic outlook, with notable achievements in growth, gross margin, and consumer engagement. While challenges such as operating losses and sales decline persist, strategic initiatives and financial improvements provide a foundation for potential future success.