ZVIA

Business Context and Reporting Period

Company: Zevia PBC (Ticker: ZVIA)
Filing Type: Form 10-K (Annual Report)
Reporting Period: Fiscal year ended December 31, 2025
Business Overview: Zevia is a public benefit corporation and Certified B Corporation developing, marketing, and distributing zero-sugar, naturally sweetened beverages (Soda, Energy, Tea). The company operates as a holding company with its primary asset being a controlling interest in Zevia LLC. Products are sold primarily in the U.S. and Canada through major retail channels.

Key Financial Metrics

Liquidity: The company maintains a $20 million secured revolving line of credit with Bank of America, with no borrowings outstanding as of December 31, 2025. The company is in compliance with its financial covenants.

Material Changes vs. Prior Period

• Revenue Growth: Net sales increased 4.0% to $161.3 million, driven by a 5.0% increase in equivalized cases sold (12.7 million vs. 12.1 million) and pricing increases. This was partially offset by higher promotional allowances ($2.8 million increase).
• Margin Expansion: Gross margin improved by 160 basis points to 48.0%, attributed to favorable unit costs, pricing increases, and lower inventory write-downs, partially offset by tariff impacts and channel mix.
• Cost Reductions: Selling and marketing expenses decreased 8.3% to $52.4 million, primarily due to reduced warehousing, repackaging, and freight costs driven by the "Productivity Initiative." However, marketing spend specifically increased 14.2% to $19.5 million to drive brand awareness.
• Loss Reduction: Net loss attributable to Zevia PBC decreased significantly by 50.4% year-over-year, narrowing from $(20.0) million to $(9.9) million.
• Product Portfolio: The company announced plans to discontinue its Tea product line in 2026 to focus resources on Soda and Energy drinks.

Guidance, Outlook, and Risks

Management Commentary & Outlook:

• Productivity Initiative: The company completed restructuring charges related to a multi-year Productivity Initiative, with estimated annualized benefits of $20.0 million. Savings are being reinvested into brand marketing and promotional activities.
• Tariff Impact: The company faces increased costs of goods sold due to U.S. import tariffs on steel and aluminum (25% from March to June 2025, rising to 50% thereafter). Management expects these cost increases to continue.
• Strategic Focus: Future growth is expected to be driven by new distribution, organic sales growth, and innovation, with a continued shift in marketing spend to amplify brand differentiation.

Key Risks and Contingencies:

• Profitability: The company has a history of losses and may be unable to achieve or maintain profitability.
• Tax Receivable Agreement (TRA): The company has a contingent liability under a TRA to pay 85% of tax savings realized from basis step-ups to pre-IPO investors. If tax benefits were fully realizable, the liability would be approximately $58.9 million. Currently, a full valuation allowance is recorded against deferred tax assets, so no TRA liability is recognized on the balance sheet.
• Customer Concentration: The top 10 customers represented 75% of net sales in 2025. The largest single customer accounted for 14% of sales.
• Supply Chain: Reliance on third-party contract manufacturers and limited suppliers for key ingredients (stevia) and packaging (aluminum) creates vulnerability to disruptions and price volatility.
• Listing Compliance: The company previously received notice of non-compliance with NYSE listing standards due to low stock price but has regained compliance. Continued listing remains a risk.

Investor Verification Checklist

• Tariff Exposure: Verify the specific pass-through of aluminum and steel tariff costs to consumers and the impact on future gross margins.
• TRA Liability Trigger: Monitor the company's ability to generate taxable income, which would trigger the recognition of the ~$58.9 million TRA liability and associated cash outflows.
• Customer Concentration: Assess the stability of relationships with the top 10 customers, which drive 75% of revenue.
• Product Discontinuation: Evaluate the impact of discontinuing the Tea line in 2026 on total revenue and channel relationships.
• Cash Burn Rate: Review the trajectory of operating cash flows, which were negative $4.7 million in 2025, against the $25.4 million cash balance to determine runway without additional financing.