ZVIA - NYSE

Good day, everyone, and welcome to today's

Thank you, and welcome to

Thank you, Jean. Good afternoon, everyone, and thank you for joining our second quarter 2025 earnings conference call. We are very pleased with our performance in the second quarter. Net sales and adjusted EBITDA exceeded our outlook, and we made notable progress across our strategic initiatives. Over the last year, we've executed against our 3 strategic growth pillars to sharpen the

Thank you, Amy. Good afternoon, everyone, and thanks for joining our call today. Our second quarter results clearly demonstrate the significant progress we've made over the past year. Fueled by strong execution, we delivered meaningful advancements across each of our strategic growth pillars. In addition to delivering double-digit top line growth, we've taken important steps to drive enhanced and enduring profitability. In addition to the $15 million in annual cost savings we have discussed, we have identified an incremental $5 million in cost savings in COGS and selling expenses, which we expect to begin realizing in 2026, bringing the total to $20 million. Turning now to our second quarter results. During the second quarter, we delivered net sales of $44.5 million, an increase of 10.1% as compared to the second quarter of last year. This strong growth was primarily driven by our expanded breadth and depth of distribution across channels, partially offset by increased promotional activity. As we continue to monitor the consumer and competitive environment, we remain agile in our promotional programming. Gross margin was 48.7%, which reflects an increase of 680 basis points compared to 41.9% in the second quarter of last year. This improvement reflects lower product costs and improved inventory management, partially offset by higher promotional activity and channel mix. The impact of tariffs were below where we expected and had an insignificant impact in the second quarter due to timing. Selling and marketing expenses were $13.4 million or 30% of net sales in the second quarter of 2025 compared to $13.6 million or 33.7% of net sales in the second quarter of 2024. Selling expense was $8.7 million or 19.4% of net sales compared to $9.3 million or 23% of net sales in the second quarter of 2024, a decrease of 7.1% while maintaining best-in-class customer fulfillment rates during the quarter. Marketing expense was $4.7 million or 10.6% compared to $4.3 million or 10.7% of net sales in the second quarter of 2024. The increase was primarily due to investments to drive brand awareness. We did shift some of these marketing dollars from the second quarter to the back half of the year, which contributed to our better-than-expected adjusted EBITDA performance. General and administrative expenses were $8.1 million or 18.2% of net sales in the second quarter of 2025 compared to $7.7 million or 19% of net sales in the second quarter of 2024. The increase was primarily due to higher variable compensation expenses and outside services, partially offset by our efforts to right-size the business and focus on growth-driving initiatives. As a result of the aforementioned factors, net loss was $0.7 million compared to a net loss of $7 million last year, an improvement of $6.3 million over the prior year. Adjusted EBITDA was $0.2 million compared to an adjusted EBITDA loss of $4.4 million in the prior year period. The $4.6 million improvement reflects accelerated savings from our productivity initiatives and a shift in the timing of marketing investments. As Amy noted, this was the first positive adjusted EBITDA quarter since we IPO-ed. Turning to our balance sheet. We ended the quarter with approximately $26.3 million in cash and cash equivalents and have an undrawn revolving credit line of $20 million. Now turning to our outlook. We continue to execute our strategic initiatives and feel good about the momentum in our business. That said, we are operating in an uncertain macro environment and remain prudent in our outlook. In addition, this outlook assumes that the current tariffs of 50% on aluminum remain unchanged. However, should tariff costs rise, this would potentially impact our COGS in 2026. As such, we are maintaining our full year net sales guidance in the range of $158 million to $163 million. Based on the additional benefit of cost savings in our productivity initiative, we now expect our adjusted EBITDA loss to range from $7 million to $9 million versus prior guidance of $8 million to $11 million. Turning to the third quarter. We expect net sales between $38 million and $40 million. We expect Q3 adjusted EBITDA loss to be between $3.4 million and $3.9 million, reflective of increased marketing investments and higher promotions in addition to the higher tariff-related costs. Note that our third quarter adjusted EBITDA guidance includes a $500,000 onetime charge within COGS related to the package redesign that Amy mentioned earlier. The cost of the repackaging design will largely be realized in the third quarter. We believe this packaging is more reflective of our new flavors and taste profile as well as our brand narrative and we're very pleased with the positive response to the new design. In closing, with a more efficient operating structure resulting from our productivity initiatives, we are enabling reinvestment into growth. Echoing Amy's comments, we believe the work we have done over the last year sets us up to capitalize on the growing better- for-you beverage category and deliver long-term profitable growth. I will now turn it over to the operator to begin Q&A. Operator?

[Operator Instructions] And we'll take our first question from Sarang Vora with Telsey Group.

Congratulations on a great quarter. Good to see positive EBITDA as well. My first question is on the sales driver. Can you give a little bit more color? There were a lot of positives in the quarter. Can you give a little bit more color on what drove the strong sales like channel fill-in versus existing channel, growth across existing channel? And also can you share the contribution of like new flavors that played in the sales growth?

Yes. Happy to, Sarang. Thank you. So we had a really nice balanced quarter, meaning growth came from several places. We grew both in dollars and in units. And of course, our new distribution at Walmart is contributing to that, but so did positive momentum in grocery, meaning that

And Girish, I had a question about the productivity initiative. Can you share more color on where you are seeing this incremental $5 million of productivity gains?

Yes, absolutely. And as we mentioned in the prepared remarks, we continue to find efficiencies within supply chain broadly as we continue to simplify our product portfolio and our network as well. So we anticipate the incremental savings to sort of begin to be realized to a lesser degree in Q4 of this year, but really at the beginning of Q1 next year, first in COGS and then in selling and warehousing expenses in the sort of second and third quarters of 2026.

We'll take our next question from Bonnie Herzog with Goldman Sachs.

This is Ethan Huntley on for Bonnie Herzog. Maybe just one here on your guidance. So you maintained your top line guidance of $158 million to $163 million. But if you include your Q3 guidance, I think that actually implies Q4 might be flat to slightly down. I'm just curious if you had any more puts and takes there. I understand the macro environment is challenging. But I guess anything else that might be driving that more cautious outlook towards the back end of the year, that would be great.

Yes, of course. Thanks, Ethan. I think it's really 2 things. One, as we alluded to in the earlier remarks, we continue to see -- although we continue to see strength in our distribution gains and strength in some of our trends, we are a little bit cautious about the overall consumer. And as we think about Q4 of this year, we are lapping a very substantial Walmart pipeline fill, which is -- which we've addressed in previous calls as well. And so I think really, as we think about Q4, being relatively flattish would make sense given that the substantial nature of that pipeline fill.

And then maybe just as a follow-up one here on tariffs. I think you mentioned that the tariff impact was maybe below expectations in the quarter, but that seems timing related. So I guess just curious how we should be thinking about tariffs moving forward. I think you mentioned previously they could be a 200 basis point impact to gross margins. Is that still a fair way to think about things? And then, I guess, any sort of color on gross margins for the rest of the year would be helpful.

Yes. No, great question. And so yes, we continue to see or we continue to estimate that it will be about a 200-basis points impact. As you noted, it is timing related, just the way that our co-manufacturing partners operate. There's a little bit of a delay in terms of when we see the increased pricing. So starting in Q3, we will begin to see more material impacts related to tariffs. And we do anticipate that plus the onetime charge that we're taking in the quarter related to the packaging refresh will have a sort of dilutive impact on gross margin in the short run. But as noted, as we sort of flip the calendar, we'll be able to really offset a lot of the tariff vis-a-vis the incremental savings that we found. So although we may see some pressure on gross margins in the short run, i.e., in Q3 and Q4, we expect to get back to that sort of mid to high 40s and eventually in the 50s in the long run.

We'll take our next question from Jim Salera with Stephens.

I wanted to ask some questions just around the consumer panel metrics because it looks like we saw a sequential step-up both in household penetration as well as purchase frequency from 1Q to 2Q. I was hoping you could just give some color around, is that primarily attributable to some of the new flavor launches and bringing new people to the brand? Or is it easier to find

Yes. Thanks, Jim. Your assessment is correct, actually. So we have increased visibility in the marketplace. That means both increased store selling, if you think about our distribution expansion in Walmart or increased visibility or space dedicated to the brand in traditional grocery. And then what supports that, of course, is innovation. And so we see an uptick in household penetration as well as a really healthy cut of panel data across the board in terms of spend levels with our existing user base, in part because of new-to-brand users and in part because of strong repeat. And as we have our eye to the future and think about our priorities around building brands through marketing, continuing to innovate and strengthen the portfolio and then continuing to drive distribution, this all ladders up to growing the user base for

And then maybe just drilling down a little on club. Can you give us any details on what the product rotation looks like there? And maybe there's opportunity to -- if it's multipacks, if there's an opportunity to get some straight flavors in there? Or just any details around how we should be thinking about that going forward?

Sure. So club is increasingly a discovery channel, a little bit of a treasure hunt. So variety for us is really important there as we win new users in that channel. We are seeing on the same-store basis, record level of same-store sales from

[Operator Instructions] Our next question will come from Daniel Gold with BMO Capital Markets.

I'm on for Andrew Strelzik. How are you weighing whether to let the EBITDA -- the better EBITDA and cost saves flow to the bottom line versus reinvesting those in marketing?

Yes, sure. How are we -- can you ask the question again? How are we balancing the improved adjusted EBITDA?

Yes, how are you -- whether -- how are you deciding whether to let the incremental EBITDA flow through to the bottom line or to reinvest in marketing?

Sure.

Yes. So I mean, look, we're obviously focused on the long run and trying to build a sustainable brand. And in this category, we feel that brand is a real differentiator and something that we want to build a sort of a competitive moat. And so as we think about the year, we're sort of focused both on long-term brand building, but also on short-term velocity driving tactics. And so we will look to balance both driving long-term brand building or brand equity and then in the short run, really be focused on short-term velocity driving activities, and that's probably where we can continue to adjust our playbook as the environment shifts. But we continue to point to 2026 as the sort of inflection point to turn positive adjusted EBITDA. And so in the short run, we're going to continue to bias towards investing to drive top line.

And Dan, within the year, you've seen us both kind of find our voice in brand marketing and thus invest more on a percentage of net sales basis in marketing relative to the past and yet deliver our first quarter of profitability as a public company. So I think we've got, since Girish has been with us now a year, a good track record of moving toward profitability while still being able to invest in brand. And that's in large part, thanks to the productivity work that we've done behind the scenes.

And this does conclude our question-and-answer session. I would like to now turn it back to Amy Taylor for any additional or closing remarks.

Thanks very much, and thanks, everyone, for joining today. As I mentioned earlier, I'm really proud of what the team has accomplished over the last year, and I'm energized by a strong start to the summer. We are laser-focused on expanding the