Zevia PBC

Hello and welcome to today's Xevia Q4 2021 earnings call. My name is Elliot and I will be coordinating your call today. If you would like to register a question during the presentation, you may do so by pressing star followed by one on your telephone keypad. I'd now like to hand over to our host, Reed Anderson. Please go ahead.

Thank you and welcome to Xevia's fourth quarter and full year 2021 earnings conference call and webcast. On today's call are Patty Spence, Chair and Chief Executive Officer, Amy Taylor, President, and Bill Beach, Chief Financial Officer. By now, everyone should have access to the company's fourth quarter and full year earnings press release and investor presentations filed this morning. The information is available on the investor relations section of ZVIA's website at investors.zvia.com. Before we begin, please note that all the 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 non-GAAP financial measures to the most directly comparable GAAP financial measures are all available on our website at investors.xevia.com. And now I'd like to turn the call over to Patty Spence, Chair and Chief Executive Officer.

Thanks, Reid. Good morning and welcome to the fourth quarter and full year fiscal 2021 earnings call for Xevia PBC. I'd like to begin by discussing our performance in the fourth quarter of 2021, as well as full year 2021, in light of the extraordinary year we had completing our IPO and operating amidst the ongoing challenges of the COVID-19 pandemic. Xebia markets great-tasting, zero-sugar, zero-calorie beverages with simple plant-based ingredients. We are focused on reducing global sugar consumption by offering our products in sustainable packaging at an affordable price. In the fourth quarter of 2021, we continued to transform our organization, adding key executives, expanding our distribution into new channels, introducing value-added new additions to the Zevia line, and removing costs from our supply chain as we scale. Management's priority is executing our long-term strategic plan, and later on today's call, our President Amy Taylor will provide additional detail on our long-term initiatives. The VBIA brand continues to grow rapidly, and in 2021, we added 1 million new households to our consumer base, according to consumer panel data from Numerator. Our consumer metrics show continued progress in attracting new consumers, retaining existing Xevia consumers, and increasing per household spending, all key indicators of our brand's health. At the same time, the Xevia management team is focused on enhancing unit economics as we're experiencing inflationary pressures on input costs, like many consumer packaged goods companies. Through a combination of pricing actions, mix shifts, scale benefits, and cost optimization programs, we're confident in our ability to mitigate the impact of these cost headwinds. In the fourth quarter of 2021, Xevia continued the double-digit net sales growth we've achieved for the past decade. We delivered net sales of $34.2 million, representing 23% growth versus the fourth quarter of 2020. This was a combination of 22% volume growth and 1% growth in price mix. The pricing actions we announced to the trade in the fourth quarter of 2021, which were 6% for soda and 6% to 8% for our innovation product lines, were not reflected in these figures. We anticipate continued price realization through 2022 and believe that we have the ability to implement further pricing actions should conditions merit. Regarding the components of our 30% long-term growth algorithm, I'll break out Xebia's performance in the fourth quarter of 2021. Of our 23% net sales growth, velocity drove 6%, a shortfall of 4 percentage points versus our 10% goal. Incremental distribution in core food, drugs, mass, and natural channels accounted for 4% growth versus our target of 5%. And regarding distribution in new channels, we grew approximately 13% versus our 15% target. In terms of gross profit, we achieved $13.8 million for the fourth quarter, representing a 40.3% gross margin. The reduction from last year's 42.1% margin can be mainly explained by a cost of goods per equivalized case increase of 3.5%. we believe we have effectively managed the cost headwinds that many of our beverage peers are facing. Adjusted EBITDA loss for the fourth quarter of 2021 was $5.3 million. For full year 2021, Xevia achieved net sales of $138.2 million, an increase of 26% versus 2020. Gross margin was 44.3% versus 45.0 in 2020, and adjusted EBITDA loss was $8.7 million. Stevia's net sales momentum is continuing as we begin fiscal 2022, and we anticipate that the combination of velocity initiatives, new retail distribution, and price realization will accelerate our growth through the course of 2022. As such, we expect net sales of $36 to $38 million in the first quarter of 2022, which would reflect growth of 17 to 24% versus the first quarter of 2021. On a full year basis, we anticipate net sales of 177 to 182 million or 28 to 32% growth versus 2021. Our growth in the fourth quarter of 2021 was fueled by continued expansion in consumer purchasing metrics. Numerator consumer panel data for the 52 weeks ending 12-31-21 indicates that Zevia grew our household penetration from 4.7% in the year-ago period to 5.4%, a 15% increase. This was driven by a combination of strong retention of existing Zevia brand purchasers as well as growth in new households purchasing the brand. During this period, buying rate for households purchasing Zevia also grew. from $30.35 to $32.44, a 7% increase. The buying rate among Xebia's retained brand buyers in 2021 was even stronger at $63.67, highlighting how we are intensifying purchasing with buyers who remain with the brand year over year. Xebia's strong focus on execution gives us conviction regarding the brand's ongoing runway for growth. We believe that channel expansion and innovation, which expand accessibility and consumption of the brand, are two key levers for continued growth, and our progress in the fourth quarter on these metrics was significant. In the fourth quarter, we also made gains across a number of key ESG or social impact metrics. Zevia's primary mission is to reduce global sugar consumption. And in the fourth quarter of 2021, we estimate that we eliminated nearly 3,000 metric tons of sugar from our consumers' diets by replacing legacy sugary sodas. And in our history, we estimate that we've eliminated over 74,000 metric tons of sugar. Replacing single-use plastic beverage packaging is another key area of focus. And in the fourth quarter of 2021, we estimate that we eliminated over 40 million plastic bottles from littering our roadways, our waterways, and our communities by selling beverages exclusively in aluminum cans. Lastly, affordability is a key priority for the Zevia brand. In the fourth quarter of 2021, Zevia's products were priced at an average retail cost per ounce of $0.07, representing the 36th percentile within all non-alcoholic ready-to-drink beverages, excluding dairy and non-dairy protein. Zevia is less expensive than 64% of non-alcoholic beverage options and affordable for a broad range of income levels. Now I'd like to turn the call over to Amy Taylor, our president, to share Zevia's continued progress on key strategic initiatives.