Zevia PBC (ZVIA)·Q4 2024 Earnings Summary

Executive Summary

• Zevia returned to top-line growth in Q4 2024 with net sales of $39.5M (+4.4% YoY) and delivered a record gross margin of 49.2%, while adjusted EBITDA loss improved to $3.9M .
• The company expanded distribution from ~800 to >4,300 Walmart stores, with strong initial velocity from variety packs; marketing momentum was reinforced by a viral holiday campaign driving 292M impressions .
• FY25 guidance: net sales $158–$163M and adjusted EBITDA loss $8–$11M; Q1 2025 net sales $36–$38M and adjusted EBITDA loss $5.6–$6.0M, reflecting lost distribution in club and one mass channel and front-loaded marketing investment .
• Narrative catalysts: nationwide Walmart “Modern Soda” set presence, high-40s gross margin outlook, increased marketing investment, and a deeper innovation pipeline (e.g., Strawberry Lemon Burst, Orange Creamsicle; expansion of variety packs) .

What Went Well and What Went Wrong

What Went Well

• Record gross margin: 49.2% in Q4 (+850 bps YoY), driven by cycling prior inventory write-downs and productivity initiatives; management expects to sustain high-40s margins in FY25 .
• Distribution expansion at Walmart: doors grew from ~800 to >4,300, creating a step‑change in household penetration; variety packs are the top‑velocity SKU and convert to higher‑margin straight flavors .
• Marketing momentum: “Break from Artificial” holiday campaign went viral with 292M impressions, validating the brand voice and supporting increased FY25 marketing investment .
  • “We are pleased to have ended the year on a strong note with a return to top line growth and significant progress towards achieving profitability.” — Amy Taylor, CEO .

What Went Wrong

• Elevated promotions partially offset volume gains, pressuring net sales realization despite 11.6% volume growth in Q4 .
• Lost distribution in club and one mass customer weighed on full-year sales (-6.8% YoY) and will impact 1H25, alongside discontinuation of kids/mixers lines .
• Adjusted EBITDA for Q4 came in above the November guidance ($1.8–$2.2M loss) after the January update ($3.9–$4.2M loss) due to incremental linear TV investment behind the viral campaign; actual adjusted EBITDA loss was $3.879M .

Financial Results

Quarterly Comparison (oldest → newest)

Year-over-Year Q4 Comparison

Segment breakdown: Not disclosed/applicable in company materials .

KPIs and Operating Metrics

Notes:

• Adjusted EBITDA excludes other income/expense, taxes, D&A, equity-based comp, and restructuring; see reconciliation .

Guidance Changes

Context: FY25 outlook assumes sustained gross margins in high-40s, reinvestment of cost savings into marketing (esp. Q1 & Q3), and offsets from lapping lost distribution and discontinuation of kids/mixers .

Earnings Call Themes & Trends

Management Commentary

• Strategic focus: “We elevated our brand identity, advanced our three strategic growth pillars and continued to lay a strong foundation for growth and profitability over the long term.” — Amy Taylor, CEO .
• Category positioning: Zevia as “great taste, zero sugar and naturally sweetened soda at an accessible price point,” with retailers creating better‑for‑you soda destinations (Walmart, Albertsons) .
• Margin outlook: “We believe we can maintain gross margins in the high 40s… while also investing appropriately to drive trial.” — Girish Satya, CFO .
• FY25 reinvestment: Increased marketing spend weighted to Q1 and Q3, funded by productivity savings; adjusted EBITDA loss outlook $(8)–$(11)M .

Q&A Highlights

• Walmart performance and consumer engagement: Variety packs are top velocity SKU; trial converts to straight higher‑margin flavors; step‑change in household penetration, especially in Southeast .
• Gross margin sustainability: CFO expects high‑40s gross margins despite increased promotions, focusing on optimizing frequency/depth/breadth .
• FY25 growth cadence: Q1 slightly down to flat due to lost distribution/discontinuations and cautious consumer; Q2/Q3 seasonally strongest; return to growth for full year .
• DSD learnings: NW pilot drives outsized grocery growth via better merchandising and singles distribution; expansion to Southwest with measured pace .
• Marketing investment: Plan for low double‑digit % of sales; strong attribution and brand health tracking; mix modeling to optimize efficacy .

Estimates Context

• We attempted to fetch S&P Global Wall Street consensus estimates for revenue and EPS for Q2–Q4 2024 but were unable to retrieve due to S&P Global daily request limits; therefore, estimate comparisons are unavailable in this recap [functions.GetEstimates error].
• Implications: Street models may need to incorporate sustained high‑40s gross margins, increased FY25 marketing investment, and distribution dynamics (Walmart expansion offsetting club/mass losses), alongside new product launches .

Key Takeaways for Investors

• Near-term trading setup: Expect volatility around Q1 given lower net sales guidance and heavier “non-working” marketing production spend; watch scan data acceleration in Q2/Q3 as resets/innovation hit shelves .
• Margin durability: High‑40s gross margin outlook appears supported by inventory discipline and productivity initiatives, though promotions are a partial offset .
• Distribution-driven growth: Walmart scale and category destination sets (Walmart, Albertsons) should drive trial and penetration; variety packs are a positive velocity and margin mix driver .
• Reinvestment strategy: ~$15M annualized savings to be balanced between growth reinvestment and EBITDA improvement; adjusted EBITDA positive targeted in 2026 .
• Innovation as a catalyst: New flavors and scaled variety packs broaden reach; singles merchandising through DSD augments trial .
• Liquidity: ~$30.7M cash and undrawn $20M revolver provides flexibility to fund marketing and innovation initiatives .
• Monitoring points: Track category competition, retailer set evolutions, scan data trends (particularly in Southeast and Walmart), and execution of DSD expansion .