Zevia PBC — Q1 2024 Form 10-Q
Reporting period: Three months ended March 31, 2024; filed May 8, 2024. Zevia develops and sells zero-sugar, zero-calorie beverages, principally in the U.S. and Canada. Financial figures below are in U.S. dollars; millions unless stated otherwise.
Financial results
| Metric | Q1 2024 | Q1 2023 |
|---|---|---|
| Net sales | $38.8 million | $43.3 million |
| Gross profit / margin | $17.7 million / 45.7% | $20.1 million / 46.4% |
| Operating loss | $(7.3) million | $(3.3) million |
| Net loss, consolidated | $(7.2) million | $(2.9) million |
| Net loss attributable to Zevia PBC | $(5.8) million | $(2.1) million |
| Adjusted EBITDA (non-GAAP) | $(5.5) million | $(0.5) million |
| Operating cash flow | $(3.2) million | $9.4 million |
Sales fell 10.4%; equivalized cases declined to 3.0 million from 3.3 million. Management attributed the decrease mainly to slower recovery of retail SKU distribution after 2023 supply-chain challenges, partly offset by price increases. Retail sales were $33.9 million versus $36.9 million; online/e-commerce sales were $4.9 million versus $6.4 million.
Gross margin eased 0.8 percentage points. Lower volume and unfavorable unit costs were partly offset by favorable product mix. Operating expenses rose to $25.0 million from $23.4 million, principally as selling and marketing costs increased 26.5% to $15.1 million, including higher freight, warehousing, and marketing expenses. General and administrative expense and equity compensation declined.
Liquidity, debt and balance sheet
- Cash and equivalents were $28.7 million at March 31, 2024, down from $32.0 million at year-end 2023. Operating cash use was $3.2 million; investing cash use was $0.03 million.
- Current assets were $77.4 million and current liabilities $27.8 million, representing working capital of approximately $49.6 million. Inventories decreased to $30.6 million from $34.6 million.
- No revolver borrowings were outstanding at quarter-end. The secured facility has a $20 million commitment, subject to the borrowing base, and matures in February 2027. Zevia drew and repaid $8 million during the quarter and reported covenant compliance.
- Total liabilities were $29.0 million, including operating lease liabilities; the filing reports no other outstanding borrowings. Cash paid for interest was $26,000.
Outlook, developments and risks
- In May 2024, Zevia initiated a multi-year Productivity Initiative intended to simplify operations, realign costs, and support brand investment and route-to-market changes. It expects $0.5–$0.8 million of primarily severance-related charges and cash costs in Q2 2024, and estimates annualized benefits of $8–$12 million, with benefits expected to begin in Q3 2024. Further restructuring costs may occur.
- Management expects consumer marketing investment to continue through 2024. It is working to regain retail shelf distribution and is testing regional direct-store delivery and limited convenience-chain distribution; near-term sales impact is expected to be immaterial.
- Management believes available cash, operating activities, and revolver availability will support operations, planned capital expenditures, and other investments beyond the next 12 months. It cites inflation, interest rates, logistics, manufacturing and labor costs as pressures that may continue through 2024 and affect margins.
- Supply-chain changes shifted raw-material procurement to contract manufacturers. Three vendors represented approximately 93% of raw-material and finished-goods purchases in Q1 2024, increasing vendor concentration. The company also depends on contract manufacturers and faces exposure to ingredient, aluminum, freight and other commodity costs.
- The company has a tax receivable agreement requiring payment of 85% of certain realized tax benefits to covered holders. No TRA liability was recorded because realization of the related deferred tax assets was not considered more likely than not; the contingent liability would be $56.4 million if those benefits were fully realizable.
- Management reported no material legal proceedings or material changes to the risk factors in its latest annual report. Disclosure controls were assessed as effective.
Key facts for investors to verify
- Whether retail distribution and case volumes recover, and whether pricing and promotions support sales without further margin pressure.
- Whether the $8–$12 million estimated annualized Productivity Initiative benefits are achieved, when they materialize, and whether additional charges arise.
- How increased vendor concentration and reliance on contract manufacturers affect supply continuity, costs, and product availability.
- Cash burn and liquidity trends, including borrowing-base availability under the revolver and the potential timing and amount of TRA payments.
- The sustainability of reported non-GAAP Adjusted EBITDA; it was a loss of $5.5 million in Q1 2024 compared with a loss of $0.5 million a year earlier.