Zevia PBC - Ordinary Shares - Class A Aktie

Greetings. Welcome to the ZVIPBC Second Quarter 2026 Earnings Conference Call. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance conference, please press star zero on your telephone keypad. Please note this conference is being recorded. I will now turn the conference over to Jean Fontana of Investor Relations. Thank you, Jean. You may begin.

Thank you and welcome to Xebia's second quarter 2026 earnings conference call. On today's call are Alessandre Ruberti, President and Chief Executive Officer, and Girish Satya, Chief Financial Officer and Principal Accounting Officer. By now, everyone should have access to the company's second quarter 2026 press release and investor presentation made available this afternoon. This information is available on the investor relations section of ZVIA's website at investors.zvia.com. Before we begin, please note that all financial information presented on today's call is unaudited. Certain comments made on this call include forward-looking statements which are subject to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. These forward-looking statements are based on management's current expectations and beliefs concerning future events. that are subject to a number of risks and uncertainties that could cause actual results to differ materially from those described in these forward-looking statements.

Please refer to today's press release and other filings with the SEC for a detailed discussion of the risks that could cause actual results to differ materially from those expressed or implied in any forward-looking statements made today. During the call, we will reference certain non-GAAP financial measures as we describe business performance. The SEC filings, as well as the earnings press release presentation slides that accompany today's comments and reconciliations of the non-GAAP financial measures to the most directly comparable GAAP financial measures are all available on our website at investors.ziva.com. And now I'd like to turn the call over to Alessandra.

Good afternoon everyone and thank you for joining us today. It's a privilege to speak with you on my first earnings call as CEO. Before I begin, I would like to thank Amy Taylor for her leadership and her support during this transition. I am excited to lead Xevia as I believe that we have a truly distinct product within the the better for you beverage category. As a member of the board of directors, I have gained valuable insights into the transformation that has taken place over the last two years. And I'm grateful for the opportunity to lead the company into the next chapter. My objective is to build on the work that has strengthened the foundation of our business business drawing from my beverage industry experience to accelerate growth and drive profitability.

While reinvesting in the future, we believe that serious truly distinct market position presents a tremendous opportunity that we have yet to capture. We are working aggressively to build a strategic plan that we believe believe will deliver breakthrough growth, sustainable performance for the business, and drive long-term value for all stakeholders. Before sharing my initial observations, let me briefly highlight our results, which Dheersh will speak to in more detail. For the second quarter, we delivered net sales of $45 million at the high end of our guidance and adjusted EBITDA of $0.5 million above our expectations. We are encouraged by our progress year to date and the momentum going into the third quarter. We continue to make progress in driving awareness and trials through distribution and completed the rollout of our new packaging and flavors. That said, we have a significant opportunity to drive improvement in our go-to-market execution, shall we speak to shortly.

Turning to marketing, we launched the anticipated 360 campaign of Refreshingly Real, starring Cardi B as our real talk interpreter. The campaign generates tremendous engagement with nearly 29.5 billion social campaign video views, over 1.7 million engagements on cards and video posts, 1.8 billion PR earned media impressions, and 473 media placements. We plan to build on this momentum with additional campaign, including upcoming refreshing in real context. I look forward to keeping you posted on more upcoming events with the Zivia and Card B. Now turning to my observations and priorities. For the last month and a half, I have spent much of my time meeting with our executive team and employees, as well as our customers, suppliers, and investors. Following my listening tour and a deep dive into the business, my belief in Xevia's potential is greater than ever.

I also recognize that there are measures that need to be taken to convert our strength into sustained momentum in our business. To accomplish this, we need to make Zivia easier to find with a target strategic distribution expansion, easier to buy through an in-store execution, and easier to choose by amplifying awareness and brand relevance. And we shall do so with urgency. As we develop a strategic plan for our platform, and going from my broad experience, I will be focused on four key areas. First, evolving our go-to-market strategy. Second, sharpening and scaling our brand identity. Third, maintain strong financial discipline and operational efficiency to support our services. sustainable growth initiatives. And fourth, establishing a performance-driven culture.

I'd like to expand on each of these areas and provide some additional context. Starting with evolving our go-to-market strategy, we see a significant opportunity to expand the reach and productivity of Azivia brand through three verticals, optimizing our singles platform, expanding distribution, and improving in-store execution. The first and most meaningful value creation opportunity is unlocking the full potential of the singles in store. We view singles as the most effective vehicle for driving consumer discovery, trial, and ultimately household penetration. Over the past year, we have a focus on refining the product format, optimizing our flavor assortment with the right balance of the classic, favorites, and emerging trends, and improving taste. As consumers increasingly seeking healthy beverage alternatives without sacrificing taste, Symbols represent a pulse entry point into the brand and a catalyst for driving trial and long-term customer acquisition. Second, with improved product portfolio, we see substantial opportunities to expand distribution and increase brand availability. our good position with within the zero sugar soda category, Ziva remains under penetrated across several attractive channels including mass, club, food sales, value chain, retail, and e-commerce.

We believe our enhanced single-spot platform improves our ability to secure new distribution gains while increasingly visibility and accessibility for consumers. Expanding our presence where consumers stop remains a critical lever for driving both awareness and trial. The third component of our go-to-market strategy is improving productivity within existing doors through a stronger approach to in-store execution, merchandising, and category management. And to be frank, we need to do a better job of activating Zeev in-store. believe improved execution can increase velocity, support retailer economics, and strength our position as a key growth driver within the beverage category. This leads to our second strategic focus area, sharpening and scaling our brand identity. Over the past several years, we have made meaningful progress in defining what ZIVI stands for, where we believe there is opportunity to further increase the precision and relevance of our positioning. We are moving beyond the broad concept of the health-involved consumer and developing a more focused understanding of our core customers.

We see our target consumer as wellness aspirational, younger, digital engaged families who enjoy beverages and flavors they love, but are increasingly unwilling to compromise on ingredient quality or health considerations. They want the enjoyment of soda without the trade-off. As we continue to refine our positioning around this consumer, we intend to support it with a disciplined ROI-driven marketing strategy designed to increase awareness, strengthen brand affinity, and improve customer acquisition efficiency. By pairing a more clear defined brand identity with a broader distribution and stronger execution, We believe we can meaningfully expand Zivio's addressable market and accelerate sustainable, profitable growth over time. Our third areas of focus, financial discipline and operational efficiency. We aim to build on the success of our positive financial momentum and drive profitable innovation across functions. This will be achieved through maximizing or redirecting resource to align with strategic priorities as we reinvest savings from continuing efficiency gains.

Our final area of focus is to establish a performance-driven culture within the organization, delivering results not just for today, but over the mid and long term. We will challenge each other to improve, take ownership, make confident decisions, and learn quickly from setbacks so we can keep raising the bar together about losing the essentials of a trust, empowerment, and accountability. Before I turn it over to Girish, I want to thank everyone for the warm welcome I have received since stepping into this role. I believe we are operating from a better financial position as shown by improved cashflow and positive EBITDA over the last few quarters. We will share our strategic plan in the coming months with further details on our four key focus areas. As part of this plan, we will outline clear, measurable milestones and provide regular updates on our progress. I look forward to working with our talented team as we realize Xevia's great potential.

We have an exciting future.

in front of us. With that, I will turn it over to Girish. Thank you, Alexandre. Good afternoon, everyone, and thanks for joining our call today. Before we get into the quarter, I'd just like to take a moment to welcome Alexandre to the Xevia team. It's been a pleasure working more closely with him since he transitioned into the CEO role, and I look forward to the partnership. Echoing his remarks with our vastly improved financial profile, coupled with our increased supply chain efficiencies and cost disciplines, we have a strong foundation from which to build the next phase of growth for the brand. Now turning to our results. For the second quarter, net sales increased 1.1% to 45 million, primarily driven by successful pricing actions. Our results also reflect the lapping of load-ins to Walgreens and Albertsons in the second quarter of last year, as well as the shift in cadence with higher volumes anticipated in the first and third quarters versus last year.

Notably, net sales in the first half of 2026 increased 10.4% to 91.1 million, including the discontinuation of our T offering, which began in Q2. Gross margin was 48.9%, a 20 basis point increase from 48.7% in the prior year quarter. The improvement reflects strong price realization, partially offset by increases in aluminum costs, from which we expect to see a bigger impact in the back half of the year. Selling and marketing expenses were 13.1 million or 29% of net sales in the second quarter of 2026 compared to 13.4 million or 30% of net sales in the second quarter of 2025. Breaking it down, selling expense was 8.1 million, or 17.9% of net sales in the second quarter of 2026, compared to 8.7 million, or 19.4% of net sales in the second quarter of 2025. 150 basis point improvement reflects savings in warehousing and repackaging costs, partially offset by increased fuel costs. Marketing expense was $5 million or 11.1% of net sales in the second quarter of 2026, compared to $4.7 million or 10.6% of net sales in the second quarter of 2025. The increase in marketing expense as a percentage of sales as compared to last year was due to higher planned investment system in the second quarter to support our new product rollout, package redesign, and Cardi B partnership.

General and administrative expenses were 8.6 million, or 19% of net sales in the second quarter of 2026, compared to 8.1 million, or 18.2% of net sales in the second quarter of 2025. The increase was primarily due to higher personnel-related costs and outside services expenses. partially offset by lower accrued variable compensation. For the second quarter, adjusted EBITDA was approximately 0.5 million compared to an adjusted EBITDA of 0.2 million in the prior year period. Year-to-date, adjusted EBITDA increased $4.5 million versus the prior year period, despite significant cost pressures. Turning to our balance sheet, we end the quarter with approximately $28.5 million in cash and cash equivalents and have an undrawn revolving credit line of $20 million. Now, turning to our outlook. Starting with the third quarter of 2026, we expect net sales of between $44 million to $46 million, reflecting 10% growth at the midpoint of the range. This guidance incorporates increased club distribution, ongoing strength in digital, and the benefit of incremental promotional support for the national rollout of our packaging refresh, partially offset by the discontinuation of our T offering.

We expect third quarter adjusted EBITDA loss to be between negative 3 million and negative 3.5 million. This assumes a reduction in gross margin to approximately 46% due primarily to the impact of elevated aluminum costs and higher promotions and channel mix. Additionally, this reflects pressure on selling expense related to higher fuel costs, as well as higher marketing investment associated with the CAR-DB campaign launch and the rollout of the new product packaging nationwide. Looking at the full year, we are maintaining our 2026 net sales guidance of $170 to $175 million, reflecting 7% growth at the midpoint of the range. In addition, this incorporates an approximately 1.5 percentage point impact from the discontinuation of T. As Alexandre outlined in his discussion, we are amplifying efforts to drive materially accelerated growth across our business, but predominantly through an improved go-to-market strategy. We have identified a number of opportunities across our distribution channels.

However, realize that it will take time to bear fruit. Turning to profitability, we are maintaining our full year 2026 adjusted EBITDA range of negative two to negative four million. As a reminder, due to ongoing macro volatility, this range continues to incorporate approximately 11 million related to the surge in fuel prices and higher aluminum related costs. While we expect these elevated costs to come down over time, we are on track to achieve $3 to $5 million in additional cost savings beginning in Q1 of 2027. In closing, we believe that we have a distinct market position which presents a tremendous opportunity that we have yet to capture. We remain confident in our path forward and our focus on executing a strategic plan to improve profitability through enhanced commercial execution. financial discipline, and targeted investments to strengthen our capabilities and create sustainable long-term value for all shareholders.

I'll now turn it over to the operator to begin Q&A. Operator? Thank you. We will now be conducting a question and answer session. If you would like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star 2 if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment please while we poll for questions.

Our first question is from Andrew Strelzyk with BMO Capital Markets. Please proceed with your question.

Hey, good afternoon. Thanks for taking the questions. You know, I appreciate all the detail on some of the opportunities that that that you discussed this already, but and you mentioned. kind of that it's going to take some time for that to play out. But I'm just curious, you know, how you think about which of the priorities you think we could see the benefits from the fastest, what maybe takes the longest, kind of how we should think about the cadence of those opportunities flowing through to performance.

Sure. Hey, Andrew. Good to talk to you again. I think if you try to prioritize priorities in here, prioritize priority is good, but prioritize priority in here, it is, first of all, everything to do with the singles. I think this is a bit urgent and more. more meaningful priority that we have, because if you want to measure that, nowadays we have a 10% of share and we have a zero share in singles. And singles opportunity for us in our, if we keep the same multi-pack share that we have nowadays, it will be around $80 million, right? So our business nowadays, is based on multi-tags and we don't have singles. I think everything that we are doing in terms of activating singles, we are on the streets now in the selling season talking to the customers in order to prioritize this, ahead of any other. But this one is the main opportunity for us.

Okay, okay, that's helpful. And if I could just ask about the guidance, you know, the second quarter came in at the higher end of the revenue guidance above on EBITDA, the three Q guidance, at least ahead of consensus. I know that's not your internal expectation, but I guess in holding the year, it implies Q kind of flatted down, which is not entirely inconsistent with what you had communicated previously, but it's maybe a little weaker than I would have thought. So I guess, you know, just in the context of the 2Q performance, just holding the annual guidance, and is there anything in the fourth quarter that we should be aware of incrementally?.

as a potential headwind. Thanks. Yes, no, thanks, Andrew. And look, you're right. We said earlier in the year that Q1 and Q3 would be the biggest quarters. Our Q4 growth is consistent with what we had outlined earlier in the year and And I think this is largely a reflection of the timing shift in marketing spend and innovation launches. Separately, it's also a remnant of our club business. And as club becomes a more consistent channel, we should see less competition. less fluctuations in growth rates going forward. I'd say that generally speaking at this point, we're in the really early days of our marketing and innovation initiatives, which we recently launched as we alluded to with Cardi B just a couple of weeks ago. We're encouraged by the early reads and think that this could.

You know, this could be a opportunity for us, but there isn't necessarily any headwind that we're calling out for for Q4. As I, Chandra noted, you know, we do believe we have a lot of opportunities to accelerate growth. But those initiatives are going to take a little bit of time.

Great. Okay. Thank you very much. Okay. Our next question is from Jim Solera with Stevens, Inc. Please proceed with your question.

Hi, guys. Good afternoon. Thanks for taking our question. Thank you. Alessandro, I wanted to ask a little bit around, you know, kind of why now for singles and if you could maybe walk through some of the operational infrastructure that gives you the confidence that you can execute on that, such that it'll be incremental. I know the West Coast DSD expansion. has kind of been key, but is single is going to be something we see kind of nationwide is going to be more of a regional rollout. Can you kind of walk us through the cadence there and how quickly we should expect to see that business ramp?.

Yes, sure. Let me get to you, Ajin. Let me get to you some kind of high-level view, and then I go into singles. I think first of all, when I say that we have to increase and or focus on our go-to-market, and then imagine that the go-to-market will have the most expensive way how to go or more effective ways. And we are evaluating a couple of options, but the main objective for us is to make sure make sure that we guarantee distribution across the nation as well as in-store execution, both. And, you know, we can go DSD network, we can go brokers, broadliners to sales, merchandising agencies, this kind of stuff. But at the end of the day, the mix of those ways to go to market will be the secret. We are creating this plan right now. we are willing to aiming to start execution in the beginning of 2027.

This is one way to support singles. When talking about singles, the idea here was very rational concept because nowadays we have a 10% of share. If you just segment mother soda within the multi-pack, we have a 20%. share. If you have the same 20% of share within singles, we're talking about $80 million opportunity. So in the end of the day, why now? Because I think that now we have the right product because we improve taste. Second, the right size of the can, not flea can anymore, it's going to be the regular can. And third, we're going to have the right price and value equation.

I think this combination of power of execution and the right format of the product will be a huge difference moving forward. But as you said, we need to have a structure in place in order to execute that. That's why I think it's going to take some time.

after implementing the new go-to-market. Okay, great. And then Girish, if I could ask a follow-up on, you talked about aluminum pricing, and I know that's been a headwind across the industry for the year, but recently we've heard folks talking about stepped up transport costs, freight and diesel. walk us through how that flows through on your gross margin and maybe just any thoughts around price offset. I think you guys are just shy of 5% price if I did the math right in the quarter. Is that like a fair kind of cadence to carry forward to the end of the year? Is there an opportunity for any incremental price?.

No, thanks, Jim. And yes, as you alluded to, everybody has been facing these increased aluminum costs and fuel costs. And as a reminder, we've taken $20 million out of the business. We've identified an incremental $3 to $5 million that we're currently working on taking out of the business, which will primarily primarily impact COGS and selling expenses beginning in Q1 of 2027. As you alluded to, we recently took a price increase, which in some ways was preemptive knowing that we were going to be seeing or continuing to see these aluminum costs. You know, given the broader macroeconomic outlook. consumers flight to value, it's unlikely that we're going to pull the pricing lever again this year. But we do believe that we will continue to find opportunities to drive efficiencies through the P&L. highlighted a bit of a dip in Q3 with regard to gross margin. Some of that will be recovered in Q4, partly because we are going a little bit deeper from a price point, from a promotional price perspective in Q3 to support not only the new packaging and new flavors, but also the the Cardi B brand awareness campaign as well.

And so that will kind of reverse itself, a little bit reverse itself out in Q4. So long-winded way of saying we're managing it as closely as we can and continue to find opportunities to maintain our margins. And as you saw from our first half performance, you know, we continue to sort of balance the two between reinvesting in the business and dropping dollars to the bottom line.

Great. I appreciate your thoughts. I'll hop back into the queue. Thanks, Jim.

Our next question is from Eric DeLaurier from Craig Hellam. Please proceed with your question.

Great, thanks for taking my questions. It seems like we've touched a good amount on singles and some of the expanded distribution opportunities. I wonder if we could just focus a little bit on some of the opportunities kind of right in front of us, starting with the new packaging and new flavors. Just any sort of early insight into how that national rollout works? that is proceeding. Are you guys continuing to see any velocity pickups from this new packaging or new flavors and just any sort of commentary on the early performance.

It will be great, thanks. Sure, I think thanks for the question, because I still I think a very, very early to make any kind of comments on that because just one month and and we still don't have 100% rollout, but I would say 90%. It's going to take a couple of months in order to be able to evaluate and as well as to evaluate Uh. Segment the effects of sales in terms of the new packaging and flavors. The first readings we have some weeks, of course, and the first reading readings, mainly in terms of the natural channel, the velocities are higher, but still everything is due to too early, but we are looking for the next month to understand how solid we'll be. But we are very, very excited because the first readings are positive so far.

That's great to hear. Then just switching to the Cardi B marketing campaign, you guys gave a lot of detail on just how viral, This went certainly, I mean, caught me by surprise. Are you seeing I mean, I know this is obviously even sort of even earlier than this new packaging rollout, but I mean, Are you seeing any sort of increased web traffic or any higher engagement with the Xebia brand as a result of this? Anything to call out just initially?.

No question on that. I think the first numbers that we showed during the conversation was huge, right? In the last two weeks, we had almost 30 million social video views. We had 1.8 billion in earned media impressions. It's huge. It went viral just because of who she is and how we are engaging with her. and the brand. So, said that, in the end of the day, what we are looking for until the end of the year is going to be a track from the top of the funnel to the bottom of the funnel, the marketing funnel, right? Because we're going to have one more ad coming in the next few weeks. We're going to have a one consumer context that consumers going to submit some stories and then she's going to perform a new ad in real life to them. And also we are planning to have a launch of a new product signature product with the card being the beginning of January. So at the end of the day, the strategy here is the full funnel.

We're talking about awareness. We're talking about consideration with the consumer in terms of the context of the better story. And then we're going to make available a product with a flavor that was developed together with her in the beginning of January. I think that's what we are focused in this campaign.

Well, sounds like lots of very exciting things to come. Congrats again on the great quarter and good luck going forward.

Thank you. Thanks, Eric. Our next question is from Eric Serrata with Morgan Stanley. Please proceed with your question.

Hi, good afternoon. I'm hoping you give a little bit of color in terms of the sort of the priorities that you laid out, Sandra. Do you see these as involving, you know, sort of meaningful levels of increased investment or step up of investment in order to kind of achieve your ambitions, you know, across these initiatives, or do you think you could sort of do it within in the existing, you know, P&L and Pulse envelope that you have.

Thanks, Eric. From my side, still it's very early to say we are cooking the plan and of course we're going to make the dollars working harder for us moving forward. I believe that when we talk about first in terms of improving the go to market, there's many ways how to go. As I said, the most expensive and the more efficient way we're going after the most efficient and making the mix of that. I think that's the 1 point the 2nd point when we say in terms of the how to. better shape the brand is much more a conceptual shape and how to communicate and when to communicate i think that's going to be a part and then the third one uh in general it is uh as i said the the high level is how to make xevia Easier to find in terms of expanding distribution in and be more available and how to make Zivia easier to buy in terms of execution right? And then this one is going to take some investment because we have to have food on the street. And the third one, how to make Zivia easier easier to choose in terms of a market awareness and brand relevance, this is the first test that we are doing with with a Cardi B, which is working. I think this is a combination of, we don't have precisely the amount of investment yet, but we are planning as we.

Great. And then, you know, just in terms of the modern soda category, you know, We've seen some of the brands of the past few years on the probiotic and functional side, flow a bit lately. Wondering how you look at that. Is that headwind in terms of broader less interest in modern soda? Is that opportunity to make Zivia more relevant? when some of these other broader competitors have sort of gotten a lot of mind.

share and kind of free air time over the past few years? Yes, sure. I think in terms of making Zivia more relevant, this is what we call in terms of sharpening the brand a little bit. And for sure, in terms of the molders on the category, the cake or the size of the prize is growing as a whole. We have a couple couple of new entrants coming and exchanging share among them. But if you take a look in Ziva, we are holding very, very steady our share, independently on what's happening with the functional ones. But I think that this is the future because consumers are still looking for a more healthy way and how to consume. and we're going to be ready to fulfill this need.

Great. Thanks so much. I'll pass it on. Thank you. Thanks, Eric.

We have reached the end of the question and answer session. I would like to turn the floor back over to Alessandra Ruberty for closing comments.

Super, thank you. Thanks you all for joining our call today and for sure we look forward to update you in the progress we are main areas and sharing our strategic plan and accelerate growth, improving profitability and build long-term shareholder value in the coming months. Thanks a lot.

This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.

This live transcript is auto-generated without human intervention or review.

[Call has ended.]

Welcome Zevia to our Global Staples Conference this year. Joining us on stage today is Amy Taylor, President and CEO; and Girish Satya, CFO. As many of you know, Zevia is an emerging nonalcoholic beverage company that went public about 4 years ago. Zevia's portfolio of products include a variety of flavors that are zero sugar, zero calorie and naturally sweetened with stevia club soda, energy drinks and organic tea beverages.

Zevia just reported strong Q1 results, and we're very excited to hear more about the company's recent initiatives today, including the rollout of packaging, refreshed new on-trend foodie flavors. I see some, I think, expanding distribution and a significant marketing push. So thank you both for joining me again this year. Nice to see you.

Yes. Thanks.

All right. So I'd like to kick things off with your results last week. So your Q1 top line was robust, and I think ended up coming in much better than I would say my expectations, broad Street expectations. And it was enough that you felt comfortable and confident to raise your top line guidance. So first, can you highlight what drove the better top line results? And then second, hoping you could highlight growth drivers as I think about for the rest of the year, would be helpful.

Yes. So in simplest terms, Q1 overdelivered both on volume and price. When we look at what drove that, we did have a softer Q1 from a promotional investment perspective because we prioritized the summer for promo dollars as our new packaging is rolling out. So we wanted to align the two. And yet retail sales came in stronger than expected despite less promotional effect. So think of that as base business health. So that was a key driver.

Second one, there was a little bit of help from new distribution. So we gained new distribution last year. And then we're lapping Q1 prior to that change of last year as well as some new distribution at Costco. We had a national rotation there. Thirdly, we did see some acceleration in velocity from existing distribution. And then finally, in Q1, we realized our price increase both a little bit faster and more completely than anticipated. So those are really the key drivers.

Looking ahead, while last year was a big step change in distribution, getting national distribution at Walmart, this year, we'll see growth a little more normalized from a mix of distribution gains -- continued distribution gains and velocity acceleration. And we have an eye on velocity acceleration in particular, because we are rolling out new packaging with clear communication of why Zevia, an improved taste profile across the portfolio, innovation and then a step change in marketing, which I'm sure we'll talk about later today. So those are some of the drivers.

And then in the context of that, taking into account your Q2 guidance, your full year implies healthy growth, I would say. I think my math, 5% in the second half. So I know you're investing in the brand, new packaging and marketing. But maybe talk through a little bit more about the confidence you have in being able to kind of execute on that 5% growth in the back half.

So I think ultimately, we talked -- we touched on sort of the first quarter. But in the second quarter, we knew there were going to be some shifts. We're obviously -- as a reminder, we had talked about discontinuing our tea line, which will impact the second quarter. We had some load-ins from the prior year that we're lapping with Walgreens and Albertsons in the second quarter. So we knew there'd be a little bit of pressure because of that in Q2. But separately, we had also shifted a lot of our promotional spend and marketing dollars into Q3 to leverage not only the Cardi B relationship, but also the new packaging, the rollout of our new sort of on-trend fruity flavors more broadly and then separately just the enhanced flavor profile.

So we sort of have all of those things coming together in Q3 as the new packaging as a reminder, is rolling out as we speak. And so that really gives us not only confidence that we can sort of accelerate growth in the back half because the early -- the very, very early reads on enhanced packaging are positive. And so it gives us a lot of confidence that we can continue. Despite some of the headwinds for the consumer, we can continue to sort of drive growth.

And speaking of the new packaging, so you just -- it's rolling out as we speak. When is it expected to be finished rolling out? Is it in a couple of months? Or how long does that process take?

Yes. it's really a Q2 rollout such that it will be complete or materially complete at the start of Q3, which aligns then with increased promotional support and some of our new marketing campaigns.

And then you touched on Cardi B. So I'd love to hear a little bit more about that relationship and what she can do for the brand ultimately.

Yes. So the first thing we love about Cardi B is that she is a radically real character. We talk about our brand as being the radically real people's champion, and she certainly keeps it real by every definition. Importantly, though, what she does for the brand in addition to like representing it very well is step change reach. So she has 280 million total social media followers. She has the 25th most followed account on all of Instagram with super high engagement. So when you invest in Cardi B as a partner or a mutual investment as she also is a shareholder in the company, you get high engagement.

She really, really works hard for the brands with whom she partners. She has, like I said, strong reach, but then also what that manifests in a strong engagement for the consumer. So ultimately, we're hoping to speak to a new consumer set, step change the top of funnel or the top-of-mind awareness and then drive trial for our product.

And when does all of that start? It just started...

Sure. So we just announced the partnership with Cardi B, and there's been a couple of social posts on her side and ours. She did a spontaneous and super authentic, no makeup post from Whole Foods in the beverage aisle the other day, and that's the kind of organic incredible communication we see from her. But that's really just the announcement. What you'll see is a full campaign, including mainstream television and digital advertising this summer, concurrent with the other initiatives Girish was mentioning earlier. Always on social media, a couple of appearances, some editorial support, some retail activation. And then eventually, at the right time, some product innovation that we work on together is definitely at least in the ideation stages, yes.

So she came to you with some ideas or collaborating already?

She definitely has a point of view. She's awesome. And so we're able to leverage some of her ideas as well as her personal preferences so she can work on something she's really passionate about.

And then while we're on the topic of this, to some extent, thinking about marketing spend as a percentage of sales, what is the right level? And as I ask that thinking about the ability to accelerate top line growth, whether it's from the brand, new channel, new innovation, et cetera, what level of spend do you think is right?

Yes. I think as a reminder, we've doubled marketing spend as a percentage of revenue over the last 2 years. And so I think we're starting to approach the appropriate amount of marketing spend that's sort of we'll call loaded into the P&L. I think we're happy with the -- we're happy with what we're seeing right now in terms of investment. And so we could see certainly incremental investment as warranted. But right now, I think we're happy with kind of where it is today as a percentage of revenue.

Is there a particular area of focus that you're, I don't know, channeling more of that dollar spend, whether it's channels, brand, social, et cetera?

The critical thing for us is the right mix of brand spend. So establishing distinction from a brand identity perspective as well as reach. So think of that as top of funnel investments, advertising, et cetera. And then closer to the point of purchase, those kind of accountable dollars that drive velocity for which we can have some form of attribution and metrics, right? So retail, digital advertising. So it's a mix for us.

And then I think what we've added in new is also some grassroots marketing. It's a page out of my old book, from my Red Bull days, but we're doing a lot more sampling. We're showing up kind of on the ground close to the consumer, whether it's the Diplo Run Club or South by Southwest or a sampling tour that we're executing this summer. We were also a part of Cardi B's first-ever sold-out Arena tour. So we had brand presence in every stop. And this way, we're getting cans in hand. Our product tastes better than ever. Taste is the #1 driver of this category, hands down. And while better-for-you positioning keeps people coming back, it's taste that gets in the door. So sampling becomes really a big priority for us.

Speaking of that because you just mentioned it. Talk to me about how you have evolved the taste profile because I think that's something you've been working on for the last few years.

Yes. We're really focused on -- as Girish briefly mentioned earlier, we have pruned the portfolio to get focused on soda and our nascent energy drink business opportunity over time. In the soda portfolio, we've made a couple of fundamental changes. So first of all, recall that we have a core business of soda that is kind of classic soda flavors, cola, ginger ale, root beer, et cetera. And then we have a lot of innovation in the fruity and fruity creamy spaces. But across the baseline, we've improved taste for about just over half of our core existing SKUs with a more sugar-like taste experience as we continue to learn best use of the components of the stevia leaf and our blend of natural flavors. So we've improved the core taste profile across the portfolio.

The second thing that we've done is started to pick up a pace of innovation. So we're innovating within that core classic soda flavors. And then we've started to introduce new on-trend fruity flavors, which is bringing a new shopper to the franchise as well. And then finally, just expanded distribution and presence is helping us to drive trial against that -- the two areas of play, right, the core soda flavors and then the innovation piece.

And as you mentioned, you're picking up the pace of innovation. Are you also discontinuing any SKUs? Or is it just continue to adding to the portfolio?

So far, distribution has been the gift that keeps giving. So our new products have demonstrated remarkable incrementality to our existing portfolio, which I think is just bodes well for the future productivity of innovation. But yes, in time, there's also some flavors that can kind of find their way out, so we make best use of every linear square foot on the shelf.

Okay. And in terms of household penetration, I think you mentioned during Q1 call that you're in the mid-single-digit range. How does that compare to last year? I was trying to remember. And then ultimately, what's a realistic goal for household penetration for your...

Sure. So we -- I would tell you, if we back up a little bit the story of the brand, we had to settle from our household penetration for -- based on a couple of initiatives first and then get back to growth. And what I mean by that is we pruned some unproductive portions of the portfolio, getting out of mixers and kids and now tea. And then we also, in the midst of a supply chain transition, lost distribution at Sam's and at Target, as Target launched a private label.

Now we expanded distribution in 2025 to 100% of Walmarts in the U.S. and about half the business in Canada and growing. And that was then a step change back for household penetration, as you mentioned, into the mid-single digits. But all the additions, both from a distribution and new consumer perspective from here forward is net additive.

So I think with some of these initiatives we've talked about in the pipeline, we expect to see continued steady growth from household penetration from here forward. We have distribution upside in Club. I mentioned Target, of course, and then just continuing to win new consumers in existing distribution as well.

Okay. And then I was thinking about the current environment, whether it's legislation, secular trends, et cetera, how do you think about your portfolio and your brand, possibly capitalizing on some of these trends? Do you think about being advantaged relative to peers? And can this ultimately drive faster growth for your business over the medium term?

I think so. So there's a macro move away from sugar. We know this especially relevant for a younger consumer, they're looking for a clean label product. We have the fewest ingredients of any soda on the market. So no artificial ingredients is certainly an advantage for us. But within our peer set, where we sit on the shelf next to modern soda, we're also the affordable player. We're the key performer when it comes to kind of core soda flavors, and we're the multipack and home stocking brand. And in an environment where folks are thinking twice with their discretionary income, we find that kind of overperforming as a home stocking brand is really to our advantage.

Another place where we spike from a strength standpoint is e-commerce as well as digital retailer.com and click-and-pick type of an environment. So all of these tend to be a little bit more resilient. We are not immune to the macroeconomic climate, of course. That's why we're a little bit cautious about how do we project. But we do think that we have a relative advantage within the category given our price points that look a little more like a soda than the rest of the category who is close to twice our price point per unit.

True. And then I think about in the context, you're positioned in the better-for-you beverage segment. But if I think about all the big players and new entrants, it's gotten quite competitive. So how are you dealing with that competitive dynamic? And what kind of pressures are you seeing? And how do you feel that you're going to be able to kind of win there?

Net-net, the excitement in the beverage category, the return to growth for CSD and then the rapid growth of what they're calling modern soda or better-for-you, those are tailwinds for us. Net-net, they're tailwinds. Because in our early stages, we were by far and away the #1 brand in a category that didn't garner a lot of attention. And now we're a top brand in one of the most exciting categories in beverage.

So when you think about the modern soda category in a Walmart or an Albertsons and increasingly in additional national and regional grocers getting set up as a true category, there's a foot traffic impact for us. We're getting trials from folks that are trying products across the category. And that's been, again, a tremendous tailwind. But the competitive environment for us just is indicative of the future opportunity.

At the end of the day, 90-plus percent of households stock soda. And people are increasingly leaving the category because of sugar or artificial ingredients, and we're literally a solution for both, and we taste great at a great price point. So all the macros point to the tailwinds for Zevia for the long run. And our job is to continue to churn out great tasting products, keep the price point accessible and drive distribution so that we're at arm's reach.

Yes. I want to ask about GLP-1s. I'm just curious because I touched on some of this. And how is that impacting your business as we see potentially more consumers going on GLP-1s, et cetera? Is that a potential opportunity, risk? Have you seen any noticeable consumer behavior changes?

No, I think we observe the same trends that others report, meaning folks that are snacking less. But for beverage, that's not necessarily the case. So we provide support for someone on a wellness journey kind of with or without GLP-1. But being able to have like a tasty hydrating treat with zero calorie, zero sugar and no impact on the glycemic index is certainly a complement to a wellness journey, a weight loss journey inclusive of GLP-1. So if I had to pick between a headwind or a tailwind, I would definitely pick the tailwind. And I think we're a great sort of treat halfway through your day, your first thing in the morning or otherwise, along with food as well for a GLP-1 user.

Yes. I want to circle back to innovation, the pipeline. You mentioned on your recent call that you have some new product launches and early signs of incrementality. Can you touch a little bit more on that? And maybe just in general because Amy, I've known you for a few years, can you speak about the evolution of your innovation pipeline just generally as well?

Sure. So the comments we made on the call were as follows. There was one retailer which our new items were delivering 38% incrementality and the second retailer where our new items were delivering 53% incrementality. Now we don't expect that to sustain. That's not -- doesn't indicate 150% growth. But what we do know is that, that's indicative that our innovation is additive to the portfolio. And that's really one of the stories of Zevia overall is that we are powerfully incremental. This is what the retailer, of course, wants to hear as well.

So as more and more functional beverages at high price points come into the category, they are stealing share from the top 2 functional brands and far less so from us. It indicates that we play a unique role in the category. So how do we innovate based on that insight? We want to continue to grow with our kind of loyal user that is drinking our cola and our root beer and our ginger ale and those classic soda flavors. And then we want to continue to surprise and delight and bring younger consumers in with this fruity and fruity creamy.

So I'll use examples, our Orange Creamsicle flavor, our Strawberry Lemon Burst which was new news from last year. An up-and-comer Strawberries & Cream, which has become the #1 Zevia SKU at Kroger, and we think has tremendous opportunity for nationwide distribution next year. So those are some examples of just continuing to diversify the portfolio, bring in new and younger shoppers to complement the loyal base that drinks our classic soda flavors.

And with some of this innovation, are you structuring it such that it staggered as you roll it out into the marketplace as I'm thinking through -- yes, through e-commerce selling?

Yes. A lot of time what we'll do is we'll bring in a limited time offer or a retailer exclusive. That is both like tactically advantaged to help us kind of get things done with a specific retailer, but it's also a great opportunity to road test a new flavor, build some proof points and then bring that with tremendous confidence to the full market the next year. So you are seeing that pattern, and that has been what we've learned has worked for us.

All right. I'm excited to try some of it.

I'll [ purchase ] you a few in the back.

Yes. All right. And then spring shelf resets. I'm curious to hear, I think your shipments were strong in Q1. But I think you suggested maybe a little bit pressure on Q2 shipments potentially. I'm just trying to think through the phasing of that. And how do I think about that in the context of spring resets or shelf space here this year?

Maybe I can share a little bit on the spring resets and Girish can talk about the phasing of our growth expectations and what pays into that. So last year, we had a big step change in distribution with National and Walmart, which I mentioned, but we also increased our space by 30% in a major grocery operator, Albertsons. But Albertsons, again, in 2026 will increase Zevia space more. In part, that's because the entire category is growing and in part, it's because our velocities are accelerating.

So the learning is when you set the shelf properly for Zevia, Zevia is incremental to your growth. And so we're continuing to take that story to other retailers, and we'll see improved spring sets across Kroger and the other ones that I mentioned in prepared remarks were H-E-B and Publix, but there are more. So we're bullish on just continuing to chip away at same-store distribution increases, both through incrementality from innovation and through insights-based selling that gets us up to that vertical brand block and eye level. So that is part of what will contribute to our growth for the balance of the year, although our eye is largely on velocity.

But Girish, maybe you could talk about the phasing of that?

Yes. I think just coming into the year, we knew Q1 and Q3 were going to be the sort of the big quarters and then Q2 and Q4, we're going to have some sort of headwinds. And I think, again, we -- the discontinuation of the tea line, the lapping of some of the onetime sort of fill -- pipeline fill from last year and then just our shifting promotional calendar and shifting club rotations are really going to drive some of that volatility quarter-over-quarter. So generally speaking, I think we're very -- we're seeing a lot of strength in the base business, as we alluded to earlier. And so I think although there are some shifts, which are normal, I don't think it's anything to -- it's not anything that we're concerned about.

Yes. It's just timing. Okay. And then on your Q1 call, you also talked about passing through a price increase, but no further plans for pricing, I believe. So maybe remind us of the pricing that you're expecting this year versus your approach in prior years and just the cadence of that?

Yes. So I think we're really laser-focused on the consumer and really trying to understand -- we all see the same things, right? We all see this K-shaped economy, and we know we have a very broad consumer base. And so we want to ensure that we're delivering as much value as we can to the consumer. And so as a reminder, we actually did not take price last year. And so we passed through a moderate price increase earlier this year, primarily to offset some of the headwinds that not only we experienced last year, but also knew we were going to experience this year as it pertains to aluminum.

So that being said, again, we're really trying to maintain that sort of affordability angle of our value proposition. And as Amy alluded to, we're priced at a slight premium to conventional soda, but at a significant discount to the rest of the modern soda sort of competitive set. And we think that's an advantage, especially today. And so given that we're also a multipack home stocking brand, which, again, all very unique and sort of can play into a sort of a long-term moat for the brand. But again, from a pricing standpoint, I think we're comfortable with sort of where we are right now. I don't know that we're going to sort of pass through a second price increase. It's probably pretty unlikely. But again, we'll reevaluate that as the year goes on and...

And what about on package innovation? I'm thinking of our GM or price pack architecture, other ways of maybe if you need that to offset some of the headwinds, which we'll talk about?

Yes. Do you want to? No, I was going to say there's still a ton of opportunity in that regard, meaning there's obviously some opportunity for us to continue to find incremental cost-out opportunities. But that being said, there's also incremental opportunity to drive a more favorable package mix as well, which can help offset some of those, whether that's mixing -- further mixing into singles. Our energy portfolio is highly accretive and then certainly playing with price -- different pack sizes will allow us to sort of offset and mitigate some of those pressures.

Okay. I wanted to switch gears a little bit, just kind of go back to the Club channel because you did talk about this on your call in terms of the national rotation program at Costco, which really has given you access to new markets, consumers. So what else have you seen with this program? And do you expect it to result in additional rotations or maybe permanent new distribution?

Those would be the two great outcomes, right? So we probably, in the early days, got into Club too early. We are now establishing a healthy and sustainable approach to Club from a pricing and flavor mix and pack size and everything. So we had a national rotation, meaning 100% of outlets in January. And what that helped to do is not only kind of confirm -- put us at the front of store and confirm strong velocities in our existing footprint, but open the door to exactly what you said, which would be incremental rotations in new regions, permanency, so new permanent item status in a number of regions and/or a national rotation. So there is some club in our presumed outlook or some club presumed in our outlook, but incremental club distribution would be upside on the current guide.

Have you quantified, I guess I could look into this, on what percentage of your portfolio is in Club?

We haven't. We haven't. It's not a major one, but Club is -- strategically, Club is a sort of a treasure hunt. It's a place to find new consumers and drive trial, and that's really why we're focused there. And of course, volume helps bring scale and profitability to the channel. But right now, it's not a major driver of the business from a mix standpoint.

To your point earlier, you see further opportunities within Club, whether it's at other retailers like Sam's?

That's right. Upside on Club for us is incremental Costco. Sam's is white space for us. BJ's, there's incrementality to be had at BJ's and then Restaurant Depot and Jetro.

Okay, food channel. You've been making some nice distribution gains and especially you mentioned Albertsons. So what percentage of your business in the food channel or is in the food channel? And how much more growth do you see there by channel?

Yes. So we haven't broken down channel splits, but food is a top channel for us and it continues to grow. And we're seeing some -- where we set the shelves properly and have a full mix of the assortment, we gain share. And so this is a great story because for the retailer, it's incremental. And for us, we continue to help support user base growth. So we have same-store distribution growth opportunities. We have ACV or SKU distribution growth opportunities in Club. And then we really believe that the marketing, packaging and taste improvements will drive velocity acceleration. So those are really the three opportunities to drive further growth out of food. So we're pretty bullish on food, actually.

All right. Anything else that I didn't ask about as it relates to channel mix because -- food service?

Yes. I think the next frontier is singles for us. Most beverages are built through singles driving trial and then you move people up to multipacks. Zevia did it backwards. We're a multipack brand, we're a home stocking brand. So we sort of super serve our super fan. And now our opportunity with this new packaging is to finally really drive singles, right? And so that's -- that can be in grocery and it can be in natural, which often operates a bit like a deli. But to your point, the white space is food service and convenience. When the category is broadly ready for convenience, then -- or rather when the convenience channel is ready for the category, we will be there, and we'll build that in a steady way. But in the meantime, foodservice is a great place to drive trial.

And you've made progress within the C-store channel. It was there.

Yes. We have some regional pilots, we're there. We have some learnings. It's just really a matter of change that fits the brand, meaning who is their shopper and are they looking yet for a better-for-you product. We think that over time, kind of next generation, that will be 100% of convenience stores, but it will take some time to get there.

Yes. All right. Now I want to pivot to the fun topic, on gross margins and costs. Look, your gross margins were down in Q1. You expect margins to be under some pressure this year as most do, given some higher costs from whether it's aluminum, fuel increases. So can you talk a little bit about some of the levers you have to pull in the near term to offset the impact? And then also curious, as we're talking about this, where do you source aluminum from? And have you broken out what percentage of COGS?

Yes. So I guess there's a few questions in there, so I'll try to unpack them. But we haven't -- like everyone else, we're seeing tremendous sort of inflationary input cost environment. And so as a reminder, we've taken $20 million out of the cost structure. We see room to take another incremental $3 million to $5 million towards the end of the year, maybe really the beginning of 2027. We've largely found opportunities in COGS and in selling and transportation expenses is fundamentally where we've taken the majority of the expenses out. There'll continue to be opportunities there.

I think in the short run, for a business our size, it is -- there aren't a lot of levers that we have to pull. Given we have an asset-light model, we really leverage the aluminum purchasing contracts and aluminum purchasing practices of our manufacturing partners. And so we continue to work with them. But as we talked about earlier, the levers really are around price pack architecture, around penetration into singles and then driving more penetration into our energy drink business, which has very high margins. So those are some of the levers we have to play with. And I think generally speaking, we've made a lot of progress on the cost out, but some of that is just we're dealing with the same transitory headwinds that everybody else is dealing with.

And some of the cost savings, was that already planned? Or was that anything that you were able to pull forward some of these initiatives? Are there other opportunities?

Yes. I mean I think it's sort of an ongoing exercise where the $20 million, as a reminder, will be completed this quarter. And so that sort of completes the sort of initial transformation journey that we talked about 2 years ago. And so there will be -- the $3 million to $5 million is probably what we pulled forward from '27 into sort of end of '26 given some of the incremental headwinds we're seeing.

And your gross margins in Q1 were 48.4%. What do you think is a realistic gross margin over the, I don't know, medium, long term?

I'd say long term -- yes, no, it's a great question. Long term, this should be a business with sort of mid-50s gross margin. We would have been in the low 50s setting aside all of the tariff and fuel impacts. And so I think we're on that path, and we're on that journey to get there. How will we get there? Again, it's mixing into singles, driving higher mix into energy. Obviously, don't we price opportunities. Over time, we see price opportunity. And then with more scale, we'll be able to drive more efficiencies. And so the path is clear, we just have to continue to sort of go down it.

I'm looking at the clock. Maybe we should -- I want to spend a couple of minutes on energy because you've touched on this. Because clearly, by background, we've seen this category growth, which has been incredible. So what is your approach to the energy?

Yes. I think every time we talked about this, I nodded and acknowledged we have a nice small energy drink business. Now we're ready to get after it. And what do I mean by that? So we have truly been through a very specific and disciplined and well-implemented transformation program. And now we stand on a really solid foundation with a path to profitability and a more efficient operation. And that gives us organizational bandwidth to turn our focus to what now I think the consumer is catching up to, which is the overlap between those that would choose to drink an energy drink and are looking for a clean label product, which that overlap did not exist before, right?

So there's a mainstream -- you know it well, the mainstream energy drink category. There's over the last 5 to 10 years, fitness energy, which has really exploded, but those are not necessarily what I'll call clean label products. So for those that are seeking to avoid artificial ingredients but want the benefit of an energy drink, we think we're proverbially skating to where the puck is going, and we're actually really excited about our energy drink business. It's profitable. It's healthy and growing in the natural channel and in e-commerce. And so with sort of concepting a marketing plan and expansion plan around that, more to come in the coming quarters to talk about '27 and beyond, but that's a material next revenue source for us that would really be complementary to our margins and to our user base.

Yes, just because you touched on that, and not only that, but top line and the margin and profit, yes.

Yes. All the way down. It's a very attractive category, as you well know.

Yes. No, exactly. And speaking of profitability, I know we've talked about this in the past, but EBITDA profitability, what is the end game? Or when do you expect to be able to kind of cross the line of becoming profitable?

Yes. I mean -- and look, I mean, ultimately, if you were to sort of strip away the fuel and aluminum impact, I mean, we would be in the mid-single digits this year. And so of course, there's some unforeseen and uncontrollable events. And so we do see those as transitory. Fuel will eventually come back in line. And so although this year will be a bit of a -- this year will be a challenge. But as a reminder, on a trailing 12-month basis, we're basically EBITDA neutral.

And so we're at that cusp, right? And so really, it's about underpinning the business are very strong unit economics. And so as we continue to prioritize investment and continue to prioritize accelerating top line growth, we will get there. And I think it's -- although we thought we'd be there. This year, it's probably just gets pushed. It gets pushed by a year. But generally speaking, we're very confident that, that will happen, and it's just going to take a little bit -- a little longer than we had anticipated.

Well, it sounds like you have a lot of green shoots this year and then really the setup for '27 sounds like just kind of heading into the year from a position of strength with everything that you just touched on.

Yes. We can say that with confidence.

Yes. Good to hear. Okay, the final minute, be ready and I think I always ask you this, but I'm curious to hear what you think investors might be missing in terms of your performance and whether it's the stock.

This is a business that answers the tension in one of the largest categories in all of CPG, which is carbonated soft drinks. And we solved the problem, which is the tension between health and taste, great tasting product that's healthy. And so with 5% household penetration, now a stable foundation, increasing distribution, really strong package communication, refresh, improved taste and a rapid pipeline of innovation. What I'm excited about demonstrating in the back half of this year is that when we're able to invest in marketing on that foundation that I just described, we're going to start accelerating velocities and step changing the user base.

And while I don't necessarily sit here and tell you that this will be an 80% or 85% household penetration brand, today, it's around 5%, and I can see it being 8% and 10% and 15% and 20%. And I really see such a massive opportunity for this brand as really the perfect solution to the problem that carbonated soft drinks has with the next generation. So it's a long-term play. Girish is demonstrating where we're going to -- how we're going to get there in the near term as well. But I think the opportunity is probably much larger than people would see at first glance.

Okay. Perfect. Cool. Thank you very much.

Thanks for having us. Have a nice day.

Thank you.

Greetings, and welcome to Zevia PBC First Quarter 2026 Earnings Conference Call. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Ms. Jean Fontana, Investor Relations. Thank you, Ms. Fontana. You may begin.

Thank you, and welcome to Zevia's First Quarter 2026 Earnings Conference Call. On today's call are Amy Taylor, President and Chief Executive Officer; and Girish Satia, Chief Financial Officer and Principal Accounting Officer.

By now, everyone should have access to the company's first quarter 2026 earnings press release and investor presentation made available this afternoon. This information is available on the Investor Relations section of Zevia's website at investors.zevia.com.

Before we begin, please note that all financial information presented on today's call is unaudited. Certain comments made on this call include forward-looking statements, which are subject to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. These forward-looking statements are based on management's current expectations and beliefs concerning future events and are subject to a number of risks and uncertainties that could cause actual results to differ materially from those described in these forward-looking statements.

Please refer to today's press release and other filings with the SEC for a detailed discussion of the risks that could cause actual results to differ materially from those expressed or implied in any forward-looking statements made today. During the call, we will have some non-GAAP financial measures as we describe business performance. The SEC filings as well as the earnings press release, presentation slides that accompany today's comments and reconciliations of the non-GAAP financial measures to the most directly comparable GAAP financial measures are all available on our website at investors.zevia.com.

And now I'd like to turn the call over to Amy Taylor.

Thank you, Jean. Good afternoon, everyone, and thanks for joining our first quarter 2026 earnings conference call. We're off to a strong start to the year with record sales growth of 21% and adjusted EBITDA of approximately $1 million, both exceeding our expectations for the quarter. This is clear evidence that our strategy is gaining meaningful traction. Across channels, we're seeing encouraging momentum spanning from consumers discovering Zevia for the first time to long-time Zevia drinkers enjoying our new flavors. Importantly, this performance reflects the deliberate actions we've taken over the past several quarters to rightsize our cost structure and reinvest in marketing, sharpening our innovation pipeline and driving new distribution.

Taken together, these efforts are translating into a strong setup for the remainder of the year. The momentum we're seeing today reinforces our confidence that we are on the path to long-term growth and profitability.

Now I'd like to walk through our progress across our core pillars, starting with marketing, continuing through product innovation and rounding out with distribution updates. On the marketing front, we delivered two engaging brand campaigns to start the year as we bring to life Zevia's distinction as the radically real people's champion.

First, our Ztox campaign in January invited consumers to detox from artificial soda with a simple swab to a Zero artificial better-for-you alternative. The campaign came to life through experiential marketing, sampling and digital and influencer activations and helped kick off a strong start to the year.

And second, our timely and shareable Real Soda for real humans campaign ran in March and April, making it clear that only robots should drink chemical cola and Zevia is the soda for humans. Paid advertising across digital platforms and live TV, including March Madness games was the primary driver of reach. Offups at high-profile events like South by Southwest, where consumers had to approve they were humans to get Zevia swag further amplified the campaign.

Sweepstakes activated on social generated thousands of entrants and engaged new consumers. We believe our mix of advertising and grassroots marketing and more than ever, our differentiated brand voice is proving efficient and effective in building awareness, trial and ultimately demand for Zevia. In March, we announced Zevia's biggest marketing news to date, a partnership with Grammy and Billboard Music award-winning artist, Cardi B. She, like Zevia, is a champion for the radically reel. Famous for her humor, honesty and openness, she has the 25th most followed Instagram account with over 200 million social media followers in total spanning across demographics and interests.

Cardi B joins us at the perfect time as we roll out our new packaging in store, our 2026 innovation with spring resets and our improved taste across most of the portfolio. This will be a step change in reach and awareness for Zevia, supporting our objective to expand the user base. Between Cardi B and other marketing programs during the month of March, Zevia saw its highest ever organic social media reach and the highest level of social media engagement of any month since the brand's launch. The partnership announcement alone generated 152 million editorial impressions in just the first week. To kick things off, Zevia was a key sponsor of the Little Miss drama tour with a super fan giveaway and a brand presence at each stop. We plan to fully activate this partnership through social media, event activations, sampling, paid media campaigns and at retail, including potential new product innovation in the future. We look forward to sharing more on our broadest reaching brand campaign plan yet, debuting in the next couple of months.

Turning to product innovation. We're pleased with the overall response to our on-trend fruit flavors as they continue to roll out nationally. While still early, initial reads show that our new items are outperforming medium velocities for our broader portfolio. At two top national retailers, for example, these items are driving incrementality of 38% and 53%, respectively. Orange Creamsicle Fruit Punch and Peaches & Cream launched its spring resets at the end of the first quarter. These flavors are on shelves now attracting new consumers and providing variety for our loyal base.

Package design is our most efficient communication vehicle and a key driver of trial. Our new, more vibrant designs look delicious and bring to life our points of difference as a clean label, great tasting soda with zero sugar and zero fake ingredients. Along with our innovation and our enhanced taste profile in stores as of Q2, this refresh has supported space gains as it bolsters retailer confidence in Zevia's ability to bring in even more new valuable shoppers and to drive repeat purchases and finally, to deliver incrementality.

Looking ahead, we'll continue to surprise and delight consumers with seasonal offerings such as the forthcoming holiday limited edition pack, but more to come on that in the future.

So now let's move to our third growth pillar, distribution. We're pleased with our results across channels, especially our same-store distribution gains in existing channels such as grocery and our new activity in the club channel. The club channel is expected to help accelerate household penetration and growth. In the first quarter, we executed a successful national Costco rotation, broadening our reach to new consumers in emerging markets where we see potential for year-round distribution or additional rotations.

In our more penetrated permanent markets, we saw strong velocities continue. In the mass channel, we saw an acceleration in velocity with notable outperformance in sales through digital platforms, a key priority for Walmart. Additionally, we are pleased with the expansion into Canadian Walmart stores and momentum in Walmart chain-wide bodes well for future opportunities with other customers in the mass channel.

In grocery, spring resets are underway, and Zevia has made some strong space gains. Kroger has expanded our in-store distribution, adding incremental flavors and boosting Zevia's visibility. The brand made similar gains through new item distribution and improved shelf sets at major regional players such as HEB and Publix. These developments helped the brand drive market penetration nationally and in underdeveloped regions such as the South and the East Coast.

And finally, Zevia's e-commerce business continues to grow at an impressive rate, outperforming expectations. The introduction of smaller packs across multiple flavors has helped to drive trial and assist the strategy of major e-commerce operators as they seek to compete with grocery and mass. We also see strong performance from our existing 24-pack and variety pack offerings with our subscription business super serving a heavy user.

As the only zero-sugar clean label offering at an accessible price point, Zevia plays a unique role in modern soda. We're positioned to win as young consumers increasingly reject conventional carbonated soft drinks and choose better-for-you options.

In closing, we've made tremendous strides in advancing our strategic growth pillars and strengthening Zevia's financial position. While we see uncertainty in the macro, we're focused on what we can control, and that is capitalizing on the opportunity to leverage Zevia's distinct market position as a great-tasting zero-sugar, clean label and affordable better-for-you option. As we continue to execute across marketing, product and distribution, we are confident in our ability to deliver sustainable profitable growth over the long term.

And so with that, I'll turn it over to Girish.

Thank you. Amy. Good afternoon, everyone, and thanks for joining our call today. Our strong first quarter performance underscores the tangible progress we're making against our strategic priorities. The reinvestments we've made across product, packaging and marketing enabled by our productivity initiatives led to a return to growth in 2025 and fueled first quarter growth of 21%, our highest growth rate since becoming a public company. In addition to accelerated top line growth, we drove vast improvement in our adjusted EBITDA. We are proud of what we've accomplished as we believe that Zevia has tremendous long-term growth opportunity.

With that, let's turn to our results and an updated outlook for 2026. For the first quarter, net sales grew 21.2% to $46.1 million. The increase versus the prior year was primarily due to expanded distribution in the club channel and higher volume gains in the mass and e-commerce channels.

Gross margin was 48.4%, a 170 basis point decline from a record high of 50.1% in the first quarter of last year. The decline reflects the impact of higher aluminum costs and to a lesser degree, the higher mix of club sales. This was partially offset by higher average selling price related to a shift in promotional timing as well as higher price realization. Selling and marketing expenses were $14.5 million or 31.5% of net sales in the first quarter of 2026 compared to $15.3 million or 40.3% of net sales in the first quarter of 2025.

Breaking it down, selling expense was $9.4 million or 20.4% of net sales in the first quarter of 2026 compared to $9.1 million or 24.1% of net sales in the first quarter of 2025. The 370 basis points improvement was due to better warehousing and efficiency gains from automation.

Marketing expense was $5.2 million or 11.2% of net sales in the first quarter of 2026 compared to $6.2 million or 16.2% of net sales in the first quarter of 2025. The lower marketing expense as a percentage of sales was due to a shift in timing of our national campaign relative to last year.

We continue to balance brand and performance marketing with the objective of driving more awareness for Zevia. General & Administrative expenses were $9.1 million or 19.7% of net sales in the first quarter of 2026 compared to $7 million or 18.4% of net sales in the first quarter of 2025. This includes $2.3 million or 490 basis points in litigation expenses in the first quarter of 2026. Adjusted EBITDA was approximately $0.9 million compared to an adjusted EBITDA loss of $3.3 million in the prior year period.

Turning to our balance sheet. We ended the quarter with approximately $26.6 million in cash and cash equivalents and have an undrawn revolving credit line of $20 million. Looking ahead, we will continue to build upon the strong progress we have made across our strategic pillars. Our revised outlook reflects the record performance in the first quarter, balanced with the ongoing uncertainty in the macro environment.

In addition, our guidance reflects significant cost pressures associated primarily with higher fuel prices as well as additional increases in aluminum costs.

Now turning to our outlook. Based on our first quarter results and incorporating increasing macro uncertainty, we are raising our full year net sales guidance to between $170 million to $175 million, reflecting 7% growth at the midpoint of the range. As a reminder, our net sales outlook reflects the planned discontinuation of our tea line, which we expect to impact growth by 1-point to 1.5 points. We continue to expect the first and third quarters to deliver the biggest growth of the year due to timing of promotional and marketing investments. Turning to profitability.

We now expect full year adjusted EBITDA in the range of negative $2 million to negative $4 million. This incorporates an incremental $6 million in costs, 2/3 of which are related to the surge in fuel prices and the remainder of which are related to higher fuel-related aluminum costs. This is on top of the $5 million in incremental costs related to aluminum prices that we outlined on our previous earnings call, so combined an $11 million headwind to profitability. This guidance assumes gross margin will be roughly in line with our Q1 gross margin rate with slight pressure in the back half. The aforementioned fuel charges outside of aluminum costs will impact selling expense.

Worth mentioning that if you back out the $11 million of incremental costs, our adjusted EBITDA outlook would have been $7 million to $9 million for 2026, roughly a mid-single-digit margin rate. While we expect these elevated prices to come down over time, we're also taking proactive steps to offset these higher costs. We have already taken $20 million of costs out of the business over the last 2 years. And while we see additional savings opportunities, these will take time to realize and won't be taking at the expense of growth.

Turning to our outlook for the second quarter of 2026. We expect net sales of between $43 million to $45 million. Once again, this guidance reflects the planned discontinuation of our tea offerings, the lapping of sell-ins to Walgreens and Albertsons in the second quarter of last year as well as a shift in marketing and promotional dollar spend from Q2 to Q3.

In addition, we continue to expect to realize the impact of planned price increases. We expect adjusted EBITDA loss of between negative $0.5 million and negative $1 million, reflecting a gross margin rate similar to the first quarter. In addition to higher fuel costs, we also expect to incur approximately $1 million in restructuring costs related to the relocation of one of our distribution centers.

In closing, we are very pleased with the overall momentum of our business, which demonstrates strong execution against our strategic growth pillars. Early reads on our enhanced product portfolio, incorporating new free flavors is resonating with consumers, and we look forward to the rollout of our enhanced classic flavors and new packaging in the second quarter. This, coupled with intentional investments in marketing through which we are amplifying brand awareness and driving trial position us well to unlock future growth. As we move past these cost pressures over time, we are confident in our ability to drive healthy profitability for this business. I will now turn it over to the operator to begin Q&A. Operator?

[Operator Instructions] First question comes from the line of Sarang Vora with TAG.

Great quarter, guys. Congratulations. I wanted to start with the new brand ambassador Caridi B relationship. Can you talk a little bit about how you've figured out the brand ambassador as well as how does it change your marketing approach as you go in the second half of the year? Are we expecting a little bit -- the guidance, does it include a little bit uptick in marketing as well with all the plans that you talked about? Just a little bit on marketing and the brand evolution would be helpful.

Sure. So Cardi B came on board as a part of our broader plan for 2026, so therefore, within planned budgets. And as we -- as you may have noted in our prepared remarks, we talked a little bit about shifting promo dollars at retail out of Q1 this year to focus on the summer. And so if you think about our focus at retail, the timing of the rollout of our new packaging, the new flavors in market with spring resets, the improved taste profile across our core, all of that with the tailwind that Cardi will provide through increased awareness and through the engagement that she'll bring, it's all timed very nicely. So what you should expect from the partnership is an always-on social media approach from both sides.

Not only does Cardi have a really strong reach, but she's highly engaged in social and then her fan base is very engaged with her. So we'll find her to be very supportive of product messaging in a really organic and authentic way. But we're also going to overlay a campaign spend against the partnership right out of the gate. So you'll see a campaign, an advertising campaign this summer inclusive of traditional and over-the-top streaming television and digital that we're really excited about that will really help step change our reach and support our #1 priority, which is expanding the base.

So there's a lot more to the partnership that will be within grassroots and driving trial and at retail, but we're excited immediately out of the gate about the always-on social media nature of this partnership given her engagement and then the big summer advertising campaign that comes just at the right time for the business.

That's -- and just one quick question. I know there's a lot of cost pressures you talked about, especially tariffs and the fuel prices and stuff. Can you talk about the pricing approach to it? Is there a thought to raise prices in the back half of the year to mitigate some of these costs? Is that baked in your guidance as well?

Yes. So from a pricing perspective, as a reminder, we passed through a price increase in the first quarter. We've been pleased with the uptick and higher price realization. We are focused on ensuring we can balance value to the consumer and the P&L as well. We're unlikely to be passing through incremental pricing in the back half of the year. We do believe that the cost pressures, although are immediate in 2026. They will subside over time, and we're proactively addressing it via other levers within the business.

Next question comes from the line of Eric Des Lauriers with Craig-Hallum Capital Group.

On a very strong quarter here and very strong outlook factoring in the significant cost pressure that you guys are facing. I mean, very impressive outlook and job done.

First question, just kind of trying to level set or just understand where we are in the overall rollout of the new packaging and new flavors, certainly nice progress and some nice callouts in the prepared remarks and in the presentation. But just wondering if you could sort of give us an overall sort of standing of what inning we're in and how long we should look for the rollout of new packaging and new flavors to continue before we sort of effectively reached full nationwide distribution.

Sure. So as we sit here today in May, I would say we're in the second inning. The Q1 result was game as it relates to the rollout of new packaging. And what I mean by that is by the end of the second quarter, you should find shelves that are stocked with almost all new packaging. So we've got some early green shoots. We've got some accelerating velocities and some nice results at retail that it's too early to attribute those directly to the new packaging, but qualitatively and anecdotally, both in feedback from consumers and retailers, the new packaging performs very well for us in terms of communicating the Zevia points of distinction and being very clear about our positioning, which is a step change over the packaging in the past. as well as pops well on shelves and kind of does justice to the variety and deliciousness of all of our flavor options.

So it's early going, but we will be all the way to bright going into the back half of the year. And so that's partially baked into our presumptions of some acceleration of velocity in the back half.

Okay. Great. That's super helpful. And just to, I guess, clarify there and also, I think, informs my next question here. But did you say that you expect it to be largely complete sort of entering the back half of the year and then.

Yes.

And then I think -- okay. All right. Great. So then this I would assume is the answer to my next question here. I just -- there was comments on the sort of pace of revenue growth throughout the year. I think it was especially strong in Q1, of course. And I think you called out -- could you just kind of help close the loop there on what's driving that acceleration in Q3? Is it just kind of sting on the gas on this distribution rollout? Or is there any other forces at play, shelf resets, et cetera, that we should be aware of?

So I think there's several things that are factored into sort of the growth rates being higher in Q1 and Q3. In Q3, we are shifting not only promotional dollars, but also marketing dollars into Q3 to sort of coincide with the peak as Amy alluded to, the packaging will be fully rolled out by the end of Q2. And so we're expecting a bit of an acceleration given all those three factors in Q3, which is why we've been calling out Q1 and Q3 as the sort of higher growth quarters for the year.

Congrats again on the very strong quarter and strong outlook here, including the cost.

Next question comes from the line of Jim Salera with Stephens Inc.

I wanted to start maybe some discussion around club. You mentioned you just completed the rotation at Costco. Contemplated in your outlook for the rest of the year, is there any incremental club rotations in the back half of the year? Or anything that we should be thinking about in terms of visibility there? And maybe as a second part to that question, can you talk about the incrementality of the rotation in Costco and how many new households or maybe lapsed users that help you engage?

Sure. It's early to quantify the household penetration impact of the Costco national rotation in Q1, but it certainly was additive to the quarter incremental and reflected in our growth. The advantage of the national rotation does a couple of things. Number one is it strengthens our velocities in -- based on increased presence in store in the markets in which we have permanent distribution as well as helps to spur discussions about future rotations for the regions in which we have rotational distribution and then opens up a conversation about two things, increased permanent distribution and/or future national rotation.

So those are all on the table and represent upside to the plan. When we perform well in existing market that helps us to move from rotation to permanent and it helps to infuse what we're working on right now, the hope is that we would get another national rotation in the balance of the year. So all of that is promising and largely incremental. But as I mentioned, it does represent upside in the plan. So right now, we're not making a whole lot of assumptions in the back half of the year around incremental distribution at club on where we are today.

Great. I wanted to ask a follow-up on the DSD network. Just any updates there and how that's trending? And maybe as we have some of this new packaging that should improve on-shelf visibility, how you anticipate that impacting the kind of West Coast portion of your business that's supported by the DSD network?

Yes. I think we're really bullish on the summer window for the markets of DSD for our ability to drive incremental displays in this critical window. We're focused on getting singles in front of the consumer on display. We're focused on leveraging the new excitement around Cardi [ D ] as being part of the reason why against that as well as, as we mentioned before, we focused promotional dollars for the summer. So DSD will have a role in outperforming display execution versus the rest of market there, and we're happy with their ability to do that so far.

But in terms of an outlook on DSD, we're just really focused on execution in our, what I'll call regional pilots today, which is, as you mentioned, in the Northwest and the Southwest, so focused on the West Coast, we're a little bit more developed. And we don't have any more plans to expand DSD outside of the existing footprint, but we are bullish on their ability to help us open up new channels and specifically convenience over time. And we've talked about this before, but both the category and the brand are still in very early days in convenience. So we'll pace ourselves there and focus more on same-store penetration and growth in independent channels in the meantime.

Next question comes from the line of Andrew Strelzik with BMO Capital Markets.

First one I wanted to ask on the quarter. Obviously, a nice upside to your expectations, your guidance for sales and EBITDA in the first quarter. So I was hoping you could maybe talk about what played out more favorably than you initially expected?

Yes, I can talk about the sales side and then just quickly turn it over to Girish. But I think the key point here is that our base business is and was strong in Q1. And as mentioned, we shifted promo out of the quarter to focus on the summer and yet retail sales came back stronger than anticipated. So we saw some good velocity acceleration even as we lap new distribution, so across grocery at Whole Foods and a few other accounts where we're actually gaining share as well.

And then in some other cases, there was contribution to the Q from new distribution, be it that Costco national rotation or a few other same-store expansions within grocery. And then we're pleased to see price increase more fully realized and then realized faster than anticipated. So on the net sales side, those were the major drivers. And maybe Girish could round us out.

Yes. And I think the other 2 factors were the Costco rotation was less dilutive than we had anticipated. As Amy alluded to, we also saw higher price realization, which obviously helps flow through the rest of the P&L. And we've just continued to ratchet down expenses that are not consumer-facing and continue to drive cost discipline throughout the organization. So I think you see all of that sort of playing out in Q1 results.

Okay. Great. And maybe building on that, you guys beat your 1Q guidance by, call it, $5 million and only raised the revenue outlook for the year by $1 million to $2 million. Are you seeing anything that's making you more cautious about the outlook? Is there anything from your internal plans that's changing? Maybe it's just conservatism? I just want to take your temperature on the forward look.

Yes. No, thanks for that. And look, we're really pleased with the outperformance thus far, and there's really nothing in the business itself that makes us more cautious. As a reminder, we have a very broad demographic base, and we're simply seeing sort of the K-shaped economy that all others are and the value consumer is getting squeezed. And so really out of an abundance of caution, we didn't pass through all of it, and we're still early in the year. And we'll -- we have a lot of exciting new initiatives that are in front of us, which gives us a lot of positivity heading into the rest of the year. However, as noted, the macro continues to give us a little bit of pause. So really, we're trying to be prudent in our outlook.

Okay. If I can maybe squeeze one more in. On the $6 million of cost, is that ratable through the year across the three remaining quarters? And in the past, you guys have done a nice job finding incremental cost saves to offset that. I know you said that those will take some time to play out. I guess, how long do you think it will take before you start to maybe realize some of those potential offsets?

Absolutely. So yes, we've already begun to see the impact of the increased fuel expenses, primarily as noted in our freight expenses. We started to see that in the back half of March, more fully in April and May. And so you'll begin to see that impact in Q2. And as noted, it will be ratably throughout the year. Of course, to the extent that there is cease fire and diesel prices come down, you'll take 90 to 120 days to really see the full offset of that come back into the P&L. That being said, as a reminder, we've taken $20 million of cost out of the business. We see an incremental opportunity for $3 to $5 million that probably won't begin to flow into the P&L until Q4, but really most likely Q1 of next year. And so we'll continue to look for opportunities, but we're not going to do it at the expense of growth.

And as just a reminder, on a trailing 12-month basis, we're basically breakeven from an adjusted EBITDA standpoint despite all the cost pressures. And so we do believe in the long run, this can be a very solidly profitable business, especially as we sort of lap some of these more macro cost shocks that are out of our control.

[Operator Instructions] Ladies and gentlemen, we have reached the end of question-and-answer session. I would now like to turn the floor over to Amy Taylor for closing comments.

Sure. Thank you. Just very briefly. Thanks for joining us, everyone. I'll just reiterate, we're really encouraged about the progress we're making across our strategic growth pillars, and I'm really proud of this team, the leadership on down. And 2026 will be a pivotal year for Zevia as we introduce exciting new product innovation, powerful marketing campaigns and then package design evolutions, all of which really support our unique positioning within better-for-you beverage. And while we're, as Girish mentioned, navigating macro-related cost pressures and some uncertainty, we really believe we have laid the groundwork for long-term future growth and profitability, and Q1 seems to be a reflection of that. Excited about the future. Thanks very much.

Thank you. This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.

Greetings, and welcome to the Zevia PBC Fourth Quarter and Full Year 2025 Earnings Call. [Operator Instructions] As a reminder, this conference is being recorded.

It is now my pleasure to introduce your host, Jean Fontana, Investor Relations. Thank you. You may begin.

Thank you, and welcome to Zevia's Fourth Quarter and Full Year 2025 Earnings Conference Call. On today's call are Amy Taylor, President and Chief Executive Officer; and Girish Satya, Chief Financial Officer and Principal Accounting Officer. By now, everyone should have access to the company's fourth quarter 2025 earnings press release, and investor presentation made available this afternoon. This information is available on the Investor Relations section of Zevia's website at investors.zevia.com.

Before we begin, please note that all financial information presented on today's call is unaudited. Certain comments made on this call include forward-looking statements, which are subject to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. These forward-looking statements are based on management's current expectations and beliefs concerning future events and are subject to a number of risks and uncertainties that could cause actual results to differ materially from those described in these forward-looking statements. Please refer to today's press release and other filings with the SEC for a detailed discussion of the risks that could cause actual results to differ materially from those expressed or implied in any forward-looking statements made today.

During the call, we will use some non-GAAP financial measures as we describe business performance. The SEC filings as well as the earnings press release, presentation slides that accompany today's comments and reconciliation of the non-GAAP financial measures to the most directly comparable GAAP financial measures are all available on our website at investors.zevia.com.

And now I'd like to turn the call over to Amy Taylor.

Thank you, Jean. Good afternoon, everyone, and thank you for joining our fourth quarter and full year 2025 earnings conference call. We are proud of the transformation progress we delivered in 2025. Through a series of high-impact initiatives spanning product innovation, marketing, distribution and supply chain, we not only significantly improved our financial performance, but also strengthened Zevia's competitive positioning within the better-for-you soda category.

But before I speak to strategy, I'll briefly highlight our performance. For 2025, we delivered net sales growth of 4% and improved adjusted EBITDA threefold to negative $4.7 million. For the fourth quarter, net sales decreased 4% to $37.9 million as we lapped the pipeline fill to Walmart from last November and December. Net sales for the quarter were impacted by a shift of our Costco rotation into January.

Importantly, this program was a national one with premium in-store positioning reaching beyond our regional footprint and driving trial and awareness in underdeveloped and fast-growing markets. Adjusted EBITDA for the fourth quarter reached breakeven and was ahead of our expectations.

So turning to the 3 strategic pillars that enabled this progress. I'll start with amplified marketing. Our improved performance for the year was supported by powerful marketing that clearly differentiated Zevia as the antidote to the artificial, and as a product with no fake ingredients and no fake claims. Key campaigns showcase Zevia's use of creative culturally relevant content and high-profile brand fans to boost brand awareness, reinforce our positioning and appeal to consumers that are just trying to do a little bit better with healthier choices.

For our second growth pillar, product innovation, 2025 was a breakthrough year. We introduced on-trend fruity flavors such as Strawberry Lemon Burst and retailer exclusive Orange Creamsicle, both of which strongly resonated with consumers. We also began to elevate taste for select classic flavors, the impact of which will carry into 2026 in parallel with our package design evolution.

Our marketing and product initiatives helped to propel distribution, our third growth pillar, the historical peak levels in 2025. including a nationwide presence in Walmart as we are an anchor brand within that retailer's modern soda set and at Albertsons, where we increased our shelf space and gained eye-level placement with a vertical brand block within their next-gen beverage set. Through these initiatives, we've strengthened our foundation for growth with brand, product innovation and distribution working together to capitalize on favorable category and consumer trends that create strong tailwinds.

Now in 2026, we are building on this momentum with a focus on expanding reach and driving trial to expand the user base and ultimately to accelerate growth. So first, let's walk through our marketing initiatives. Stevia is resonating with the consumer more than ever as we continue to show up as the antidote to the artificial. We kicked off this year with a playful campaign inviting consumers to join a ZTOX, so a detox from artificial soda with one simple swap, choose zero artificial better-for-you soda instead. This month-long campaign featured influencer partnerships, an immersive activation at world-renowned DJ Diplo's Run Club, sampling at Life Time Fitness' Miami Marathon and a bold out-of-home takeover across Atlanta. Early reads of editorial and social outcomes revealed that the campaign punched above its weight.

The next brand campaign in March will continue to reinforce Zevia's unique position in personality in a digital campaign also activated at retail. And during our next call, I'm excited to update you on summer brand campaigns bolstered by new and familiar high-reach brand ambassadors, our most significant investment in reach and cultural relevance to date. More to come on this, as this and other initiatives will run in parallel with our spring and summer rollout of our dynamic new package design and will be supported by retail-driven trial driving programs focused on expanding the user base.

So next, let's talk about the portfolio and 2026 product innovation. While trust and affordability remain core differentiators for Zevia, we are winning where it matters most in the category, which is taste, unlocking a broader consumer base and strengthening long-term brand relevance. We know that new products are outperforming legacy items in velocity, creating a halo effect that boosts legacy items as well. With that distinction, combined with brand and accessible price points, we are in a strong position to expand our consumer base and continue to drive strong repeat rates.

Orange Creamsickle was a huge hit as the #1 six-pack at Sprouts immediately following its initial launch and is now being rolled out as a hero flavor of 2026. Fruit Punch and Peaches and Cream, which also saw successes in variety packs and as a limited time offer, respectively, are now rolling out nationally. And finally, after proving to be a hit and the top Zevia SKU at Walmart, the new fruity variety pack can be found across retail starting in spring resets.

We are bullish on this robust innovation pipeline overall and specifically as a complement to the legacy soda portfolio, enabling Zevia to super serve old-school soda fans and engage new modern soda consumers with a light and fruity palette. This strong portfolio with improved packaging and taste across the board should be a key driver of both new users and increased consumption this year.

Now building on the successes in our product innovation and in marketing, let's move on to our third growth pillar, distribution. We continue to make meaningful progress through our key distribution channels and step-by-step in new channels. In club, we are focused on building consumer acquisition through trial and thus volume. Earlier successes this year include a new Costco front-of-store national rotation that represents a meaningful opportunity to drive trial with new consumers in underdeveloped and fast-growing markets.

In the mass channel, we're growing our Canadian Walmart business to just over half of those stores, and our largest single retail opportunity in the U.S. is to win distribution at Walmart's top competitor. In grocery, we're leveraging the success story of Albertsons, where expanded space and eye-level placement through a vertical brand lock have yielded growth and in recent months, share gains.

We believe this performance plus the new packaging, new items and improved taste will yield more retailers to follow Walmart and Albertsons lead, though several spring sets are still forthcoming. And in e-commerce, we continue to see accelerated growth in our business overall and through subscriptions, plus the introduction of our smaller count option across flavors in this channel will continue to drive sales.

In the medium term, we see meaningful opportunity to drive new distribution across all club operators, value and dollar channels and in mass. And long term, as is true for the whole category, convenience and food service remain a big opportunity both for trial and for continued growth. As the only zero sugar clean label offering at an accessible price point, we are uniquely positioned to stand apart from a crowded competitive set in better-for-you soda in each of these key channels.

One quick note before handing it over to Girish, we are pleased to announce the appointment of Andy Rubin as Chair of the Zevia Board. Andy has made valuable contributions over the past 5 years, most recently as our Lead Independent Director. I look forward to further leveraging his strong background, including being the founder of Trove Recommerce, a practiced ECG consultant and a 10-year Walmart veteran, where he served as VP of Corporate Strategy and as Chief Sustainability Officer. Paddy Spence will remain on the Board, and we are grateful for his ongoing support.

And then finally, we're pleased to welcome Suzanne Ginestro as a Director, as previously announced. She's a seasoned marketing executive with over 25 years of experience in brand building and consumer growth. Her background and track record of success will further strengthen our Board capabilities.

In closing, I'm energized by what our team has accomplished and even more so for the future as our strategic initiatives bear fruit and accelerate momentum. While we still have a lot of work to do, we are focused on the long term, and we believe we are well positioned to capitalize on the strong better-for-you beverage tailwinds well into the future.

With that, I'll turn it over to Girish.

Thank you, Amy. Good afternoon, everyone, and thanks for joining our call today. 2025 marked a year of transformation for Zevia. The strategic initiatives we deployed across the business enabled us to return to growth and vastly improve our financial profile. Beyond the strengthening of our financial position, we've also elevated our competitive positioning, which sets the foundation to drive future growth and profitability.

Turning to our results. Net sales in the fourth quarter decreased 4% to $37.9 million. The decrease versus the prior year was primarily due to lapping of the expanded distribution at Walmart in Q4 2024 as well as a reduction in promotional activity versus the prior year. Also, as Amy noted, our fourth quarter was impacted by the trade-up of our existing regional Costco rotation to a new national rotation program launched in January. This new program entails front of store placement, raising visibility for the brand as our new 30k variety pack becomes available nationwide.

Gross margin was 47.7%, a 150 basis points decline from 49.2% in the fourth quarter of last year, reflecting channel mix associated with the return to the club channel and higher tariff costs, which was offset by lower promotional activity.

Selling and marketing expenses were $11 million or 29.1% of net sales in the fourth quarter of 2025 compared to $16.5 million or 41.7% of net sales in the fourth quarter of 2024. Breaking it down, selling expense was $7.4 million or 19.5% of net sales in the fourth quarter of 2025 compared to $10 million or 25.3% of net sales in the fourth quarter of 2024. The improvement was largely a result of lower warehousing and freight transfer costs as we continue to benefit from our productivity initiatives.

Marketing expense was $3.6 million or 9.6% of net sales in the fourth quarter of 2025 compared to $6.5 million or 16.5% of net sales in the fourth quarter of 2024. The decrease was primarily due to the timing of marketing spend as we lapped a significant investment in our holiday campaign last year. We continue to balance brand and performance marketing with the objective of driving more awareness for Zevia.

General and administrative expenses were $7.3 million or 19.3% of net sales in the fourth quarter of 2025 compared to $6.8 million or 17.3% of net sales in the fourth quarter of 2024. The increase was primarily driven by higher accrued variable compensation expense. As a result of the aforementioned factors, net loss significantly improved to $1.3 million from $6.8 million from the prior year.

Adjusted EBITDA was approximately $50,000 compared to an adjusted EBITDA loss of $3.9 million in the prior year period.

Turning to our balance sheet. We ended the quarter with approximately $25.4 million in cash and cash equivalents and have an undrawn revolving credit line of $20 million.

Moving to our full year results. For the full year 2025, Zevia achieved net sales of $161.3 million, an increase of 4%. The increase was primarily driven by higher volumes associated with the distribution expansion at Walmart. We expanded gross margins to 48% versus 46.4% in 2024 due to better product costing and more effective inventory management.

Net loss more than halved to $11.1 million as compared to a net loss of $23.8 million in 2024 and adjusted EBITDA loss vastly improved to $4.7 million for the year compared to an adjusted EBITDA loss of $15.2 million for the full year of 2024.

Now turning to our outlook. In 2026, we plan to build on our momentum, leveraging our growth initiatives to broaden our consumer base through amplified marketing, sharpened product innovation and expanded distribution presence. We are supporting these initiatives with strategic investments enabled by our improved cost structure and healthy balance sheet.

For the full year 2026, we estimate net sales in the range of $169 million to $173 million or 6% growth at the midpoint of the range versus 2025. Net sales expectations reflect the planned discontinuation of our tea line, which we expect to impact growth by 1 to 1.5 points.

Looking at cadence, I would note that the quarterly net sales volumes are expected to shift from previous years with higher volumes anticipated in the first and third quarters. There are several factors impacting this cadence, which are as follows: the Costco national program launched in the first quarter, which benefits net sales growth while having a dilutive impact on gross margin.

The second quarter is expected to be impacted by the planned discontinuation of our tea offering, the lapping of sell-ins to Walgreens and Albertsons in the second quarter of last year as well as a shift in marketing and promotional dollars spent from Q2 to Q3. This shift is to better align with our new packaging rollout. We expect to realize the impact of planned price increases beginning in Q2.

Turning to profitability. We are expecting a full year adjusted EBITDA range from a loss of $1 million to positive $0.5 million, which incorporates an incremental $5 million in tariff-related aluminum costs beginning in Q2 as well as continued reinvestment in our business. Our guidance also assumes gross margins in the high 40% range starting in Q2, barring further increases in aluminum costs. We also expect to start realizing the last tranche of $5 million in savings from our productivity initiative towards the end of Q2.

For the first quarter of 2026, we expect net sales of between $40 million to $42 million. This guidance reflects volume gains associated with our national Costco program that began in January. While the Costco program yields lower gross margins, we believe an investment in the club channel will support growth in trial and drive awareness. We expect an adjusted EBITDA loss of between $1.6 million and $1.9 million, reflecting a mid-40s gross margin range.

In closing, the progress we've made has positioned us to move confidently into the next phase of our strategic plan. With mid-single-digit household penetration and strong tailwinds in the broader better-for-you soda space, we believe we have ample runway for growth and improved profitability over the long term.

I will now turn it over to the operator to begin Q&A. Operator?

[Operator Instructions] Our first question comes from Sarang Vora with Telsey Advisory Group.

I wanted to start with the Costco rotation program. It's great to see that you guys are nationally up from regionally before. So how does the program work? Can you help us understand, is it nationally, but it is still rotational or you guys -- Zevia will be at Costco all through the year? Any color on the Costco program would be helpful.

Sure. No problem. Yes, we're excited about the fact that we are able to kick off nationally at Costco through what is a rotation that took place at the beginning of the year, stronger visibility for the brand and almost most importantly, penetration into regions where we haven't had Costco distribution before.

So what we expect going forward is in a couple of regions, if you think Texas and some across the South, the Southwest, there's a number of regions where they've never carry Zevia before. We saw very strong velocities, and we expect to continue in those regions, whether through additional regional rotations or hopefully as a new permanent item, which is the case in a few other regions.

And then the other opportunity is to reengage with Costco based on the success of the program to look at incremental national rotations in the future. So there's a couple of different ways forward, Song. We could gain new regions permanently or we could gain incremental rotations either regionally or nationally based on what appears to be very strong performance out of the gates in the January program.

Okay. That's great. And then second question I had was about the tariffs. Can you talk a little bit about exposure to tariff? I know you called it out about $5 million, but how are you mitigating that in some ways? It seems like there's a price increase coming up or trying to offset that. There's also some COGS initiatives you have. So walk us through how are you mitigating that tariff exposure and how long it should last in the P&L? I know we started lapping it this year, so that would be helpful.

Sure. So what we'll see in the P&L, of course, is increased exposure to increased aluminum costs, which is reflected in our guide. There's 2 things that we are doing to mitigate it. One, of course, as you mentioned, is the price increase, which we have taken and we will begin to see or have communicated rather, and we'll begin to see the impact of it in Q2.

Secondly, we have the incremental $5 million, which is the last tranche of the savings from the productivity initiative, which again will also start hitting the P&L in Q2 as well. And so those 2 items, price and incremental costs are the main factors that we are leveraging to mitigate the increased aluminum exposure.

Our next question comes from Jim Salera with Stephens.

To start off, maybe just a quick housekeeping on food. Is the $1 million or so that you guys came up short of the 4Q top line guide that you provided in 3Q, is that just by virtue of the Costco timing shift? Or is there anything else in there that we should be aware of?

It's primarily due to the Costco timing shift where we had planned -- we had planned regional rotations in Q4. We moved those into a broader national rotation in Q1. So the volume shifted from Q4 to Q1.

Got it. And then on the -- as we think about better visibility, obviously, more locations in Costco and some other retailers, when is all of the new packaging going to be in market? And do you guys have any marketing programs kind of around having the kind of fully implemented new packaging to help drive some visibility and maybe call attention to that?

Absolutely. Thanks, Jim. So first of all, the packaging is starting to show up on shelf now, and it looks amazing. It really pops. It looks delicious. It screens the specific reasons to believe in Zevia. And I think that is tremendous support for our positioning in the market, especially given the advantage that we offer versus our competition, especially against which we are shelves now on a regular basis, given the way that the category has developed. So it looks great on shelf where you'll see it flow through because we are doing what we call a rolling launch is largely into Q2.

And I mentioned in prepared remarks that we have a heavily digital campaign, some of which will be showing up at retail in March kind of at a brand level. But more specifically in parallel to the packaging rollout, our improved taste will be rolling out at the same time across legacy -- some of our classic flavors.

And we have a spring/summer marketing campaign, which I'm going to speak about a little bit more on the next call, which will engage some pretty familiar faces and high-impact reach personalities that love Zevia. And it's just a great opportunity to drive reach, awareness, trial and then given the fantastic new taste and the rate of innovation that we've been driving lately also repeat. So we are bullish on the summer. That will start really hitting the shelves and hitting the market late Q2 and support the business through the back half of the year and going forward.

Great. And if I can just sneak one in real quick. I think you guys finished with marketing spend for 2025 at like $20 million, maybe a little shy of that. Can you just give us a sense for what overall marketing spending looks like in 2026 as we think about kind of the balance between flowing through some of the cost savings versus reinvesting in visibility for the brand?

Yes. Thanks, Jim. We will continue to increase investment in marketing. And as a percentage of revenue, it will range between, let's call it, 12% and 13% of revenue in 2026. So a slight increase over 2025 as a percentage of revenue.

Our next question comes from Eric Des Lauriers with Craig-Hallum.

First one for me, another follow-up on Costco. So wondering how many of these regions are new? And are any of these regions -- are you also underpenetrated in other channels in these regions? Or is it sort of just club or just Costco where you've been relatively underpenetrated here?

Sure, Eric. So about a little bit of each. So the regions that have never carried Zevia before, are about 35%, 40% of the regions that we showed have been in this national program. So that's net new, and that's exciting to us from a trial driving perspective, especially when you think about the fact that it's a variety pack and everybody can kind of find their favorite flavor, that trial driving mechanism often supports growth across channels and brings people into the franchise for the first time. A lot of incrementality in the club business.

And then to answer the second part of your question, yes, a region like Texas, where we see accelerated velocities in the national program is exciting to think about how our business could grow across channels. If you think about Texas and go East, we have lower market penetration on the East Coast than we do, let's say, in the Midwest and across the West Coast. So these step changes really help us to expand reach and help to be a catalyst for other channels as well and other specific geographies. So excited about the Southeast, Texas and the East Coast in general as benefiting from this national program.

That's great to hear. And do any of the flavors in that variety pack contain either any of your new flavors or the new improved formulation?

New flavors as of now, yes, new as of 2025 and new taste profile for the classic flavors, not yet. And so think about the pack design, the increase in marketing spend sort of seasonally and the improved taste profile, all ramping up during peak beverage season, so late spring.

That's great to hear. And then just last one for me. Just wondering if you could expand a bit on the DSD market, Pacific Northwest, and I believe it was Arizona, just how the trends there continue.

Sure. So we are learning that time in market with a DSD operator yields some stronger results, meaning we are really starting to crack through distribution of display in grocery from our DSD partners. And so we see grocery in our DSD markets outperforming rest of market. And very new news, we're starting to see some of our singles programs perform better than they have in the past because of what we're able to execute, again, in grocery with our DSD partners help. And so we're leveraging some of those insights when we think about how do we drive trial and specifically how do we drive singles success through the spring and summer with the marketing and packaging rollout that you and I were just discussing.

Convenience is more of a long-term opportunity. I believe that, that's true for the category in general as we think about the fit of the shopper in the convenience environment to the category and its promise. It will just take a little more time. But our DSD partners are able to help us to test and learn in some regional pilots, and we continue to do that with a few success stories that help us to learn what exactly sets the brand up for success at these early stages in the channel.

Our next question comes from Andrew Strelzik with BMO Capital Markets.

My first one, I think I caught this right. You made a comment about Albertsons and some of the successes there and kind of insinuated that other retailers may follow suit. Can you just maybe elaborate a little on what you were talking about there? And is the implication that there are some potential sales opportunities out there that aren't at this point included in your guidance because you don't have full visibility to them?

Let me start with your second question, then I'll go backwards into the grocery channel dynamics and specifically Albertsons. Our guide does consider in some part that we have yet to receive final spring set communication from several retailers. And this is not atypical, right? February, the resets are March, April or May, depending on the retailer. So there could be some improvements in set. And of course, we guide just thoughtfully thinking about what we know and what we don't know, AKA, just visibility into the channel.

The comment on Albertsons is really a significant learning for us around assortment, planograms and innovation. And the reason I say that is in Albertsons in the spring of last year, we increased our space by 30% by way of expansion of the category and by way of exciting new flavors. Albertsons took the majority of our flavors and most importantly, built out a brand block for Zevia, which was vertical, taking our brand to eye level.

And with that, we saw accelerating growth over the last 6 months close to -- over the last 6 months, we grew faster than the category, AKA grew share in our performance over the last 6 months. And that continues to accelerate in the last couple of 4-week reads where we were close to doubling the growth of the rest of the category. And I say that just to go back to when the product is properly placed on shelf, when it features all of our innovation and when we have the right assortment, we have a very strong case study to then take to other retailers and continue to expand on

it. Now these big national grocery chains move slowly, but our expectation is that over time, we're able to move more national and regional grocers in the direction that Walmart and Albertsons are going, which is now 6-plus months after the resets really bearing fruit.

Got it. Okay. That was very clear. And then you gave some good color on some of the puts and takes through the year on the sales growth side. And so I was wondering about gross margins through the year, what you can share on that or how we should think about gross margins for the year, it sounds like maybe 1Q is the low point with Costco and then the pricing coming through in 2Q, but any color on that would be helpful.

Sure, Andrew. So as you noted, in Q1, we'll see a bit of a downtick from Q4 in terms of gross margin, particularly related to this national rotational program at Costco. Beginning in Q2, you'll begin to see the impact not only of the price increase, but some of the incremental mitigation factors around mitigating aluminum tariffs. And so we expect to see both of those things again, starting in Q2. So we expect in Q2 and thereafter, margins to return back to the upper 40s range.

Our next question comes from Eric Serotta with Morgan Stanley.

So a quick one for Girish in terms of the price increase. Can you give us some idea of the magnitude we're talking here, low single digits, mid-single digits? Okay. That's great. And then what are you assuming in terms of elasticity impact? It seems a little different than in the past when everyone is taking pricing at the same time. Some of the CSD players have moved already, moved late last year. So just wondering your thoughts on elasticity and then a question for Amy.

Yes. As a reminder, we did not take price last year. And so we are taking price this year beginning in Q2. Elasticity, I think, generally speaking, we've evaluated at around 1.1 or so, which is what we've seen historically, and that's kind of what's baked into our guidance.

Yes. And I think one of the most important things on the price increase and on the elasticity question is that we have been a fast follower on price, which I think is appropriate for our brand and its size. We do have room on price over the next few years as we continue to build brand. And we have been, I think, most importantly, successful in projecting the impact of price increases, AKA, our elasticity assumptions have been correct. So we feel pretty confident in our ability to implement price increase as planned and largely predict its impact on the business. That, in this case, to be a very positive one.

Great. And then, Amy, we're probably, what, 15 months or so into Walmart implementing the modern soda set, I guess, it was late 2024, if I remember correctly. How are you seeing that set evolve in the -- how have you seen it evolve in the interim? How are you expecting or seeing it evolve this year heading into and coming out of the spring resets? Is the overall space for modern soda increasing? And how is your space within that set trending?

Sure. So just to start with, I think it was pretty cool to see the world's largest retailer be a first mover and calling the set modern soda, which I think is very strong positioning and others follow food or slowly are doing so, and they are pleased with the performance of the set, not only in its literal performance from a velocity and incrementality perspective, but also in the shopper that it attracts. It's a very attractive shopper. It's a younger shopper. It's generally a higher income shopper.

Now speaking to Zevia specific, we remain an anchor brand in that set. And I say that because we are the multipack player in the set. We are the take home, the stock-up brand, and we are at a more accessible price point significantly to the rest of the set. So we play a unique role. We brought some innovation to the table in July of last year, and we're seeing strong growth from those SKUs, and we're pleased with the mix.

And we've grown as much from optimizing assortment, so right packs, right flavors as we have from space. Our space has, despite tremendous pressure from competition, we've held our space, and we've made that space more productive in the form of a variety pack and bringing innovation to Walmart a little bit early. So we're bullish on Walmart even as we lap the pipeline fill, and we continue to grow there, and we've seen strong market share implications within the customer itself given our expansion through last year and our accelerating velocities.

We have reached the end of our question-and-answer session. I would now like to turn the floor back over to Amy for closing comments.

Thanks. Just briefly, I would just say that in 2025, we returned to growth. We cut adjusted EBITDA losses in half. We improved our gross margins even in the midst of a challenging macro, and we gained distribution. So we are proud of the foundation that we've set. But almost more importantly, we have in our pipeline powerful packaging changes, an accelerating pace of strong innovation and improved taste across much of our portfolio. And all of this is supported by a sharper brand, which is really resonating with the consumer.

So our position as a clean label, clear liquid zero sugar affordable option that also tastes great and increasingly tastes the best among better-for-you sodas is more relevant than ever. The fundamental changes and increased investments that we're making in the business set us up for the long term. So thanks for joining us today, and we look forward to speaking to you again next quarter.

This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.

Greetings, and welcome to the Zevia PBC Q3 2025 Earnings Call. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Anne Mcguinness, Investor Relations. Thank you. You may begin.

Thank you, and welcome to Zevia's third quarter 2025 earnings conference call. On today's call are Amy Taylor, President and Chief Executive Officer; and Girish Satya, Chief Financial Officer and Principal Accounting Officer. By now, everyone should have access to the company's third quarter 2025 earnings press release and investor presentation made available this afternoon. This information is available on the Investor Relations section of Zevia's website at investors.zevia.com.

Before we begin, please note that all financial information presented on today's call is unaudited. Certain comments made on this call include forward-looking statements, which are subject to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. These forward-looking statements are based on management's current expectations and beliefs concerning future events and are subject to a number of risks and uncertainties that could cause actual results to differ materially from those described in these forward-looking statements. Please refer to today's press release and other filings with the SEC for a detailed discussion of the risks that could cause actual results to differ materially from those expressed or implied in any forward-looking statements made today.

During the call, we will use some non-GAAP financial measures as we describe business performance. The SEC filings as well as the earnings press release, presentation slides that accompany today's comments and reconciliations of the non-GAAP financial measures to the most directly comparable GAAP financial measures are also available on our website at investors.zevia.com.

And now I'd like to turn the call over to Amy Taylor.

Good afternoon, everyone, and thank you for joining our third quarter 2025 earnings conference call. Our third quarter results reflect strong progress and provide clear signs that our strategy is taking effect. Our initiatives are positioning us for durable growth and profitability over time. Our third quarter results exceeded our expectations with net sales growth of 12% to $40.8 million and adjusted EBITDA loss of $1.7 million. Based on our better-than-expected performance and the continued progress across our strategic growth pillars, we are raising our full year net sales and adjusted EBITDA guidance, which Girish will speak to shortly. I'll share the progress we've made across our 3 strategic growth pillars of high-impact brand marketing, accelerated product innovation and expanded distribution.

Beginning with marketing, our brand-building initiatives are resonating with consumers and gaining traction against our key priority of expanding our user base. Strong third quarter results reflect in part the success of our summer campaign, the launch of Strawberry Lemon Burst and the playful summer break sweepstakes, which were activated on social and received favorable editorial media coverage, extending reach and driving engagement. Media has a great story to tell as the consumer moves away from the artificial and seeks better-for-you products from brands that they trust. We are Soda Made Better and our new brand messaging, design and tone of voice are resonating across media channels and in-store.

Based on proprietary survey data, while early, brand consideration and purchase intent have made double-digit gains this year, and social media engagement rates continue to build to levels well above channel benchmarks. As the broad cultural conversation continues to focus on health and ingredients, major food and beverage companies scramble to remove artificial ingredients and colors. Zevia has and will continue to be ahead of this movement with a clean label clear soda with natural flavors and sweeteners and is telling its story through cross-channel brand campaigns and high-reach influencer activations.

Our humorous engaging campaign supporting Amazon-exclusive Peaches & Cream is a great example, giving the flavor a hot start and the brand a strong halo via virality on Instagram and TikTok. In addition, Zevia competitions featuring UGC or user-generated content have been fruitful in driving awareness and trial, especially when activated with a focus on specific customers ranging from Albertsons, Kroger and Walmart to Costco.

On the ground, we continue in-market activations at events like gaming 100 Thieves Block Party in July; Diplo's Run Club across August, September and October; and periodic joint efforts with well-aligned partners such as Life Time Fitness at running, cycling and mountain biking events. These events are equal parts brand building and sampling opportunities focused on winning new users, which remains our top priority.

Turning to innovation. The performance of our recent product launches offer strong proof points that our portfolio evolution is driving brand momentum. New flavor profiles and a more sugar-like taste experience, along with delicious looking new packaging and dynamic marketing, continue to support velocity and drive trial. Our portfolio evolution this year is working. Exciting new flavors launched nationwide received strong consumer acceptance and retailer exclusive or limited-time-offer flavors brought brand heat.

The debut of Strawberry Lemon Burst nationwide, Orange Creamsicle in the natural channel and fruity variety pack initially at Walmart demonstrate that we are on point in flavor trends. Each are showing promising results and have been drivers of increased Zevia space at retail and of accelerating velocities. Peaches & Cream and Salted Caramel provided new news this quarter as exclusives or limited-time offers, respectively, and Strawberries & Cream is doing the same in selected retailers here in Q4. Each is off to a good start and will inform the portfolio evolution for 2026 and beyond.

Peaches & Cream has been the fastest-selling new Zevia item ever on Amazon, while Strawberries & Cream was immediately a top 3 velocity driver at Kroger. Our fruity variety pack has quickly become the #1 Zevia SKU at Walmart. We remain the only better-for-you brand offering multipacks and variety packs at accessible price points.

And finally, we're very pleased with the positive response to our refreshed packaging. Featuring Soda Made Better, our strong brand block will highlight zero sugar, no artificial colors and no artificial sweeteners. Our proprietary research indicates a meaningful increase in purchase intent versus the prior design and versus competition. We are on track to roll new packaging out to legacy flavors as well in early 2026 in parallel with the introduction of a new more sugar-like taste experience across legacy and new flavors alike.

Moving on to distribution, a key component of our strategic growth plan. We both regained and opened new points of distribution over the past 9 months. We attribute this expansion to strong product innovation as well as brand momentum delivered by marketing.

Our national Walmart distribution continues to drive new-to-brand consumers. We're also pleased to share that following a successful pilot at the start of this year, we'll be expanding into more than half of Walmart's Canadian stores going forward. Distribution gains at grocery were also a key driver of our growth year-to-date with innovation in flavor and in packs supporting increased space gains. In the club channel, increasing sales velocity drove additional regional rotations, reflecting in part the impact of our new packaging. The positive reception has exceeded our expectations. And then in convenience, we're seeing some encouraging early indicators even as the rollout in the channel for brand and for category remains in the early stages of development. Performance is tracking in line with broader natural soda category trends, providing a good selling story as we continue to thoughtfully expand our regional footprint in 2026.

In closing, with our strategy firmly in place and with strong execution, we are reshaping the business and paving the way to capitalize on the changing consumer landscape and category tailwinds. We see evidence that we are growing market relevance and are on track to thoughtfully scale the business quarter-by-quarter and year-over-year.

And so with that, I'll turn the call over to Girish.

Thank you, Amy. Good afternoon, everyone, and thanks for joining our call today. Our third quarter results reflect strong execution of our strategic plan with both revenue and adjusted EBITDA exceeding expectations.

Over the past 18 months, the savings from our productivity initiatives have enabled us to invest meaningfully while strengthening Zevia's market position within the better-for-you soda category. Importantly, the work we have done has created a solid foundation for sustained growth and profitability. In light of our strong third quarter performance, we are raising our full year 2025 net sales and adjusted EBITDA guidance, which I'll address shortly.

Turning to our results. Net sales in the third quarter increased 12% to $40.8 million. The increase versus the prior year was primarily due to expanded distribution at Walmart and incremental regional rotations at the club channel. Gross margin reached 45.6%, a 350 basis point decline from 49.1% in the third quarter of last year, reflecting the $0.8 million in inventory obsolescence associated with the packaging refresh and the full realization of aluminum tariffs, which we discussed previously. As we mentioned earlier, we invested in a package redesign that brought to life our new flavor profile and better communicated the benefits of the Zevia value proposition.

Selling and marketing expenses were $12.7 million or 31% of net sales in the third quarter of 2025 compared to $12 million or 33% of net sales in the third quarter of 2024. Breaking it down, selling expense was $7.7 million or 18.9% of net sales in the third quarter of 2025 compared to $8.5 million or 23.3% of net sales in the third quarter of 2024. The improvement was largely a result of lower warehousing and freight transfer costs as we continue to benefit from our productivity initiative. Marketing expense was $4.9 million or 12.1% compared to $3.5 million or 9.7% of net sales in the third quarter of 2024. The increase was primarily due to increased investments in brand marketing.

General and administrative expenses were $7.7 million or 18.8% of net sales in the third quarter of 2025 compared to $7.4 million or 20.3% of net sales in the third quarter of 2024. The increase was primarily driven by higher accrued variable compensation expense. As a result of the aforementioned factors, net loss was $2.8 million, unchanged from the prior year. Adjusted EBITDA loss was $1.7 million compared to an adjusted EBITDA loss of $1.5 million in the prior year period. The decrease was due to costs associated with inventory losses related to packaging refresh and higher brand marketing spend, partially offset by strong sales growth and operating efficiencies.

Turning to our balance sheet. We ended the quarter with approximately $26 million in cash and cash equivalents and have an undrawn revolving credit line of $20 million.

Now turning to our outlook. Based on our strong third quarter results, we are raising our full year net sales guidance to the range of $162 million to $164 million versus prior guidance of $158 million to $163 million. We now expect our adjusted EBITDA loss for the full year to range from $5 million to $5.5 million versus prior guidance of $7 million to $9 million. Our 2025 adjusted EBITDA outlook represents a $9 million improvement versus prior year despite tariffs, ongoing marketing investments and a packaging refresh.

Turning to the fourth quarter, we expect net sales of between $39 million to $41 million and adjusted EBITDA loss to be between $0.25 million and $0.75 million. As a reminder, the 350 basis points impact from inventory losses associated with the packaging redesign was largely captured in the third quarter.

In closing, our third quarter results reflect the traction we are gaining towards building a solid foundation from which to deliver sustainable growth and profitability. These efforts not only reinforce our operational momentum, but also lay a strong foundation for sustained profitability as we move forward. I will now turn it over to the operator to begin Q&A. Operator?

The first question is from Jim Salera from Stephens Inc.

I wanted to start off with, obviously, the positive news around expanding distribution with Walmart in Canada. Can you just maybe help size that up for us? Is that the primary contributor of the raised sales outlook? Or should we expect that to be more kind of a '26 event? And if you could just kind of size up how many stores that would be and any other color you could provide on how we should think about that uplift.

Sure, Jim. Yes, that's -- we are excited about expanding with Walmart in Canada just because of the indicator of future opportunity for continued distribution expansion in Canada overall. It's also just a good, I think, reflection of the velocity coming out of the customer in the initial pilot. So it was fairly small out of the gate. We were less than 100 stores. And we're now in just over half of Canada's Walmart stores, which is just over 400 stores in total. So to answer your question directly, that is not the major driver of lift in growth. There are many other things driving growth through the quarter, but it is a good indicator of the health of the brand in Canada and opportunity to follow.

Great. And then I was looking through the deck you guys put out, I really like the new packaging. Can you just give us some color around how distributed is that? And maybe what type of timing we should think about between switching over from the old packaging to the new packaging until we kind of see that across all of your distribution points in the U.S.?

Sure. So we're excited about the new packaging, too. We did some -- as I said in the prepared remarks, we did some initial proprietary research that indicated a significant increase in purchase intent with the new packaging relative to our previous packaging and relative to competition. And we believe that, that is because of the insights-based changes that we made to the messaging, which very clearly state Zevia's value proposition, talking zero sugar, zero fake color, zero fake sweetener then looking delicious, carrying the line Soda Made Better.

So we're really bullish on the packaging.

We do have some early indicators of how it supports the business, both from the standpoint of driving trial to new-to-brand users and driving velocity. And that's because one of our Q4 limited-time-offer flavors in Strawberries & Cream is already in the market in the new package. The rest of the portfolio will reflect the new packaging in early 2026, so mid-Q1 or late Q1 2026, and then we'll do a rolling rollout from there, not a hard cutover, but a rolling launch of the new packaging from there into the second quarter.

The next question is from Sarang Vora from Telsey Advisory Group.

Congratulations on a great quarter and good to see the healthy momentum in the business. My question is about when you look at the underlying metrics that drive growth, which is increase in household penetration, dollars per household, increase in frequency, can you remind us who are some of the new customers that are coming to the brand that weren't there before? And just from a broader standpoint, like how is the penetration for better-for-you products in general and versus your like a little north of 5%. So how big is the runway for you to catch up from a household penetration standpoint, just so that we can size the total addressable market as you keep moving on this path of expansion?

Yes. Thanks, Sarang. That's a very good way to frame the opportunity and sort of the runway ahead. So we're really pleased to see movement in household penetration over the last 12 months. This last read being improved over the prior, and we are now back over that 5 million household -- 5% points of household penetration, excuse me. And so the major drivers of that are new consumers coming to the brand, yes, in part through marketing. So we're winning new consumers. It continues to be oftentimes a slightly higher-income millennial often with kids in the household, bringing Zevia soda home as a trusted brand stock in the fridge for all usage occasions and all family members, right? So it continues to be relevant across generations, but our sweet spot is the millennial and oftentimes the millennial household with children.

Part of what's driving our gains in household penetration, though, is increased distribution. So we get support there from the Walmart expansion where especially with the introduction of new flavors, we're seeing very high percentage of new-to-brand users buying Zevia for the first time at Walmart. And there are other examples of that, expanded same-store sales and other major grocery outlets, expansion into the drug channel, et cetera. All of those are supporting household penetration growth.

But to help you to size this, we see the category right now operating around 20 percentage points of household penetration. So there's a lot of ground to be gained for Zevia. And as we talk about very frequently, we see all of these category tailwinds as a net positive to Zevia. So there's tremendous opportunity ahead as the world continues to move away from sugar and towards clean label products, and we are the great-tasting, truly zero sugar and also affordable better-for-you products. So we see a lot of household penetration opportunities ahead.

That's awesome. I have a second question. Soda business is clearly gaining momentum as we see in all these numbers. But one thing we don't talk much about is the energy business, energy drinks business. And my understanding that -- how should we think actually about energy drinks as you look at '26 and '27? Is there a thought to revive that category as well?

We agree there's really tremendous opportunity ahead in energy. Right now, we have a really small energy drink business relative to the rest of the category. It is healthy and growing in the natural channel and in e-commerce where people know and trust the Zevia brand and continue to stock energy drink options in addition to soda. But right now, our focus is really on soda. We just talked household penetration, right? And it just outlines how much work there is still to do to realize our full opportunity in soda.

So once I believe we are famous for being Soda Made Better and under that kind of halo of brand trust, we think there's a significant opportunity to turn our attention to the energy drinks category, which is still growing and will be for a long time. And we believe there's a consumer that wants a clean label energy drink and that our brand has permission to bring that to the market. So we'll continue to focus on the healthy growth that we see out of energy drinks in natural and in e-commerce. And at the right time, we'll think about channel and thus marketing and consumer expansion on a strong foundation of a healthy soda business.

The next question is from Andrew Strelzik from BMO Capital Markets.

With all the marketing that you've been doing and some of the momentum that you cited from that, the brand buck, et cetera, do you have any kind of awareness stats, brand-level awareness statistics or anything like that, that you can share to support beyond what you've talked about from a purchase intent perspective?

Andrew, we haven't reported on awareness levels, but what I can share that kind of doubled down on the prepared remarks is that with our proprietary research, we saw double-digit increases not only in purchase intent, but also consideration. So we still have a way to go to grow brand awareness, and distribution, strong packaging design and marketing are all parts of that equation. But what I was really pleased to see this year is, again, double-digit growth in consideration. So now on that foundation, we know our messaging is working, right? Marketing and packaging is inviting trial. And then the product is satisfying the consumer, so we're getting strong repeat. That's a great formula upon or foundation upon which to now invest in expanding awareness.

So we still got a ways to go, and I think that's reflected in our small household penetration. And our #1 objective is to expand that base, which is going to be a combination of awareness, trial and then building on that strong consideration metric.

Okay. That's helpful. And my other question, if I remember correctly, just seasonally, you would normally see a bigger step down from 3Q to 4Q than the guidance suggests pretty marginal step down from what you did in 3Q from a revenue perspective to the midpoint of the guidance. And so I guess I'm curious, do you think you're seeing less seasonality in your business? Or should we read that maybe as a higher baseline from 4Q into next year? How -- what's driving that? Or how should we interpret that kind of as we think about next year?

Yes. Thanks, Andrew. So as a reminder, we were comping the Walmart load from last year this Q4. So that was a substantial amount of revenue, which was going to always be a challenging comp for the quarter. I think largely what you're seeing is a reflection of the distribution gains that we've made throughout the year as well as some incremental regional rotations in the club channel, which is really what's driving a lot of the positivity in Q4. So I think it's a little bit of both improved baseline as well as some incremental opportunistic club rotations.

The next question is from Eric Serotta from Morgan Stanley.

Great. Can you start by reflecting a bit in terms of shelf space expectations for next year? I guess with Walmart, we're just about a year -- or almost exactly a year into the rollout of their modern service set. What are you guys seeing in terms of what they're doing as the largest retailer, largest brick-and-mortar retailer as we look to next year? And then sort of outside of Walmart, what are your expectations in terms of shelf space?

Sure. Let me start with Walmart, and then I can go to the outlook as it relates to distribution. So Walmart is developing nicely, bolstered by the introduction of a number of new items. Some of those are swap-outs and some are purely incremental new items that is helping us in the back half of this year and going into next year. We are one of the primary brands in that very sort of influential modern service set in Walmart, and that continues to be the case. Strategically, Walmart works hard for us because, as I mentioned before, it drives a lot of new-to-brand users. And so I think it's a great story to say, "Hey, when we have ample brand blocks, strong visibility, right price, right flavor mix, it's working hard for the brand.: And that's a story that we can take elsewhere.

We've had other expansions, as I've mentioned on prior calls, such as a step change in shelf presence at big retailers in grocery like Albertsons in 2025. And again, that has contributed to some of our growth in the back half of the year. So when we look ahead, we -- this year, we surpassed our historical peak distribution levels at retail. And so we're not relying on new distribution for growth looking ahead. We're really focused on driving velocity, and that's why you hear us talk about the brand marketing and innovation priorities that we have. But we do see opportunity for new distribution.

In terms of new stores, that would be in club, it would be in mass and it would be in the value and dollar channel and then long term in convenience and foodservice. And then in existing stores, there is still more opportunity to expand same-store distribution and to improve shelf. So there are major operators in the grocery channel, for example, where we still have, let's say, a lesser presence on the bottom shelf and an opportunity to build up to high level to gain space through innovation and to leverage all the strong data of 2025 to make those changes. So we're bullish both on accelerating velocity as well as continuing to increase distribution next year, be it in same-store or through new channels.

Walmart should continue to perform for us next year. Costco offers opportunities for incremental rotations, and there are other green shoots in the club channel outside of Costco. As I mentioned, grocery offers opportunity in same-store distribution as well as new items and set improvements and then the long-term sort of slow but steady and strategic need to drive singles through convenience. So hopefully, that paints the picture a little bit about where we see our growth coming from, our bullishness on same-store distribution increases and then our greatest channel opportunities for next year.

Great. And then one question in terms of profitability. Any -- I know you're not going to give us 2026 guidance yet, but any color as to how you're thinking about achievability of EBITDA profitability next year, puts and takes? It seems like, well, certainly, your top line is scaling. You're seeing some nice operating leverage there. Some of the costs with the new packaging shouldn't -- and inventory obsolescence shouldn't repeat, but then things like aluminum and Midwest premium keep moving higher. So any color on how you're thinking about profitability for next year would be helpful.

Yes, of course. So I think we continue to point towards being positive adjusted EBITDA in 2026. As noted, we're going to bias towards investing in the business. So don't expect a ton of flow-through because we do believe that right now, the time to sort of invest in customer acquisition. From a puts and takes standpoint, obviously, there's a huge headwind, which is aluminum tariffs, as you've articulated earlier, and we began to see that in Q3.

As you also mentioned, we will largely see $15 million of the $20 million of our previously announced productivity initiative savings in this year, i.e., 2025. There's an incremental $5 million that we will begin to realize starting in sort of mid-Q1 of 2026. And so as we look towards flipping from negative adjusted EBITDA to positive, I think ultimately, the incremental savings along with scale and some pricing opportunities will allow us to flip that script into positive adjusted EBITDA while continuing to create opportunities for us to invest to grow the top line.

There are no further questions at this time. I would like to turn the floor back over to Amy Taylor for closing comments.

All right. Thanks so much for joining us. I am pleased with the progress this quarter, and I'm really proud of the team for the broader progress that we made across our 3 strategic growth pillars: so high-impact remarketing, accelerated product innovation and expanded distribution. Our soda portfolio is uniquely anchored by great taste, truly zero sugar and accessible price points. So the brand is starting to resonate with consumers, and all of this positions us well to capture the continued tailwinds in this better-for-you category. It's an exciting time to be at Zevia. So thanks again for your engagement, and we will see you next quarter.