Zevia's Q1 Earnings Call: Growth and Challenges Ahead

Zevia reported a mixed bag of growth and challenges in its Q1 earnings call, with record gross margins, strong brand engagement, and distribution channel expansion, but also a decline in net sales and ongoing financial losses due to promotional activities and tariff costs. Despite these challenges, the company remains cautiously optimistic, with robust financial guidance for the year and plans to increase brand awareness and distribution.

Title: Zevia's Q1 2025 Earnings: Mixed Performance with Record Gross Margins

Zevia PBC (NYSE: ZVIA) reported its first quarter 2025 financial results on May 7, revealing a mixed performance characterized by declining revenue but significantly improved profitability metrics. The zero-sugar beverage maker's stock responded positively, surging 8.87% in after-hours trading to $2.21, despite missing revenue expectations [1].

The company’s presentation highlighted its strategic focus on margin expansion and cost management while maintaining investments in marketing, product innovation, and distribution – a balancing act that appears to be gaining traction with investors despite ongoing sales challenges in a competitive beverage market.

Zevia reported net sales of $38.0 million for Q1 2025, representing a 2.0% decrease compared to the prior year. However, the company achieved a record gross margin of 50.1%, a substantial improvement of 440 basis points year-over-year. Net loss improved to $6.4 million from $7.2 million in Q1 2024, while adjusted EBITDA loss narrowed to $3.3 million, a $2.2 million improvement from the prior year [1].

Zevia's strategic initiatives include amplifying marketing, driving product innovation, expanding distribution, and delivering profitability. The company's "Get The Fake Outta Here" marketing campaign generated significant consumer engagement, with 2.4 billion positive press impressions and record social media engagement [1].

On the product innovation front, Zevia introduced several new offerings, including a variety pack that has become the company’s #1 SKU at Walmart (NYSE: WMT), an Orange Creamsicle flavor exclusive to Sprouts, and a Strawberry Lemon Burst flavor that achieved the highest purchase intent score in company history [1].

Zevia has also made significant strides in expanding its retail presence, securing prominent placement in 4,300 Walmart stores’ "Modern Soda" sections and expanded shelf space with vertical brand blocks at Albertsons (NYSE: ACI) nationwide [1].

Despite these cost management successes, Zevia faces challenges in consumer metrics. Household penetration decreased from 5.4% to 5.0% year-over-year, though the company saw increases in dollar sales per household (from $35.81 to $37.60), purchase frequency (from 3.5 to 3.6), and dollar sales per trip (from $10.26 to $10.33) [1].

CEO Amy Taylor expressed optimism during the earnings call, stating, "We are gaining traction despite the uncertain macro environment." CFO Girish Satya emphasized the sustainability of the company’s margin improvements, noting that "Gross margins in the upper forties are sustainable" [1].

Looking ahead, Zevia projects full-year net sales between $158 million and $163 million, with an adjusted EBITDA loss guidance of $8 million to $11 million. For Q2 2025, the company expects net sales of $40.5 million to $42.5 million and an adjusted EBITDA loss of $2.2 million to $2.9 million [1].

The company remains committed to its environmental mission, highlighting that in Q1 2025 it eliminated 2.8K metric tons of sugar and kept 42 million plastic bottles from littering the environment. Zevia also emphasized its affordability, noting that its products remain more affordable than 69% of all non-alcoholic beverages in North America [1].

Potential challenges ahead include supply chain disruptions, particularly related to aluminum tariffs affecting packaging costs. During the earnings call, management discussed exploring price pack architecture adjustments to mitigate these impacts while maintaining their competitive positioning in the better-for-you beverage category [1].

With analyst price targets ranging from $2.75 to $6.00 per share and the stock trading near $2.21 after hours, investors appear cautiously optimistic about Zevia’s ability to balance profitability improvements with renewed revenue growth in the coming quarters [1].

References
[1] https://www.investing.com/news/company-news/zevia-q1-2025-slides-record-gross-margins-amid-sales-challenges-93CH-4030209
[2] https://www.indexbox.io/blog/zevias-q1-cy2025-financial-performance-surpasses-expectations/