Zevia PBC

Greetings and welcome to ZVF, BBC, both quarter 2022 earnings call. At this time, all participants are in a listen-only mode. A brief question and answer session will follow the formal presentation. If anyone should require operator assistance during a conference, please press star zero on the telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Reed Anderson, Managing Director of ICR. Thank you. You may begin.

Thank you and welcome to Xebia's fourth quarter and full year 2022 earnings conference call and webcast. On today's call are Amy Taylor, President and Chief Executive Officer, and Denise Beckles, Chief Financial Officer. By now, everyone should have access to the company's fourth quarter and full year 2022 earnings press release and investor presentation filed this morning. This information is available on the investor relations section of Xebia's website at investors.xebia.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 reconciliation of the non-GAAP financial measures to the most directly comparable GAAP financial measures are also available on our website at investors.xebia.com. And now I would like to turn the call over to Amy Taylor.

Thanks, Reed, and good morning, everyone. Welcome to the Q4 and full year 2022 earnings call for XebiaPVC. Xebia continues to expand our user base and demonstrate strong brand momentum across channels. adding 1.4 million new households in 2022 on a 12-month rolling basis with equivalent momentum in Q4 and yet continues to increase average house sold spend. We are realizing price in the market and materially reducing costs in our business, resulting in continued recovery of our gross margin. Q4 saw the highest gross margin of the year. And critically, we continue to manage cash effectively and drive improvement on the adjusted EBITDA line, indicating a more rapid path to profitability. The strategic shifts we made at the halfway mark in 2022 are paying off, and the evolved, more efficient team is executing with excellence, and the brand continues to demonstrate exciting momentum. We continue to advance the ZVM mission with a focus on global health for people and planet, removing another 2.6 thousand metric tons of sugar from the diets of the communities we serve, and replacing 39 million plastic bottles in our markets in a quarter. DVR remains more affordable than 63% of non-alcoholic beverages in America, even as we realize price in keeping with the market. And we continue to focus on taking better-for-you beverages mainstream, making them available and affordable for consumers across income levels. In Q4, we delivered net sales of just over $35 million ahead of guidance, resulting in 3.5% revenue growth over prior year and an 8.7% decline in volume as we cycled the one-time pipeline sale to the warehouse club channel from Q4 of 21. Looking at growth through syndicated data as a measure of sell-through, volume grew 13.5% for the fourth quarter, according to IRI. And sales remained strong through the ups and downs of retailer and e-commerce operator inventory management fluctuations. Xebia posted double-digit growth year over year for all months in 2022. First margins are returning to historical mid-40s levels and we are paving the path to profitability with a very strong run rate of improvement on the adjusted EBITDA line. Cost controls, disciplined adaptations of our promotional strategy, strong price increase implementation, and a demonstrated ability to improve cost containment show new precedents set for ZVIA with a focus on quality growth. I'll go into more detail now with a focus on our consumer-based evolution and our learnings from syndicated and panel data. ZVIA's household penetration For 2022, with 6.4% for the full year, adding 1.4 million more households to the brand versus last year, CVIA households increased their brand spend annually 12% in 2022 versus 2021, driven by increases in spend per trip with consistent purchase frequency rates across the larger brand buying base. It's noteworthy that we're maintaining purchase frequency and increasing average spend per household, even as we add new consumers to the brand. Following the material price increase, these are very strong indicators of the health of our brand and of our user base across heavy, medium, or even new and light users. As mentioned, Total Zevia grew 13.5% in measured scan dollar sales for the quarter and grew EQ case volume in the same period while non-alcoholic and carbonated soft drinks declined at 2%. Zane Store sales remain robust, driven by a healthy mix of volume and price. Zevia Shopper is a highly desirable shopper, less price sensitive at all income levels, who demonstrates resilience in a fluctuating economy. We remain a home stocking brand, which continues to fare well from a consumer and brand health perspective. Zevia consumers prove valuable to retail partners with 65% higher overall basket spend versus non-alcoholic beverage consumers, and Zevia consumers spend 29% more and make 26% more trips to stores to purchase total beverages in 2022 versus the average beverage shopper. In the quarter, consumer retail spending was driven by a mix of organic velocity growth and continued increases in new store and new item distribution growth, paired with the accelerating consumer household base expansion. Velocity was the primary driver in the quarter. Retail sales growth was split between 63% from velocity and 37% from new distribution and new items. Speaking of distribution, distribution growth in the quarter was rooted in new packages. Our 12 ounce sleek single soda can, our eight packs in mass and our 12 packs of food. The sleek can is delivering impressive units per store per week, doubled when merchandise cold. Cold singles will be a key strategic driver going forward as they are now 16% of our business and a major national chain in the natural channel as an example. New stores also bolstered distribution growth as we closed distribution gaps in food and gained new store selling in the warehouse club. Now with a full year of sales in the channel, 75% of buyers of Zevia and Club in 2022 were new to the Zevia brand. Club proved to be a major driver of step change household penetration growth and scan data sales in its first year of selling the Zevia brand. Moving on to Velocity, the consumer shift to larger packages continues. Stock-up options are driving growth category-wide and also for Zevia, as 8-packs and larger now account for more than 50% of our business in measured channels. Velocity growth is driven in part by consumer trade-outs from 6-pack to 8-pack, and as retailers switch from 10-pack to the more profitable 12-pack, but also by the broader trend of home stocking and consumption at home and non-house beverages, a competitive strength for the Zevia brand through food, warehouse club, and in e-commerce, which is, of course, outside of measured channels, and where we remain the number one carbonated soft drink brand. I'll wrap up the big picture and then turn it over to Denise. Cydia has a very healthy business and continues to experience strong consumer demand, growing the consumer base in every period and simultaneously increasing spend per household on the brand. We are realizing price in the market and we are materially reducing costs in our business. We deliver the highest gross margin of the year in the fourth quarter, reflective of sequential improvement in each quarter in 2022. Critically, we continue to manage our cash position and drive improvement on the adjusted EBITDA line. The team is operating well under new leadership and continues to set expectations we aim to beat. Cedia demonstrated brand strength and executional excellence in the back half of 2022 as our new leadership team shifted to an evolved strategy focused on quality growth and a speedier path to profitability. We have our sights set on these same things going into 2023. bolstered by an exciting brand refresh, which brings a sharp new logo, new brand identity, brand new modernized and differentiated pack designs, and radically improved on-shelf visibility. We look forward to sharing this at trade shows in the coming weeks and with the consumer in peak beverage season in store this summer. Thank you, and I'll hand it over to Denise.