Zevia PBC

Good day, ladies and gentlemen, and welcome to Xevia PBC Q1 2024 Earnings Call. At this time, all participants are in listen-only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. Please note that this conference is being recorded. I'll now turn the conference over to Reed Anderson of ICR. Please go ahead.

Thank you, and welcome to Xebia's first quarter 2024 earnings conference call and webcast. On today's call are Amy Taylor, President and Chief Executive Officer, and Girish Satya, Chief Financial Officer. By now, everyone should have access to the company's first quarter 2024 earnings press release and investor presentation made available this morning. This 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 the non-GAAP financial measures to the most directly comparable GAAP financial measures are all available on our website at investors.xevia.com. Now I'd like to turn the call over to Amy Taylor.

Thanks, Reed, and good morning, everyone. Welcome to the Q1 2024 earnings call for Xevia FEC. I'll start by grounding us in our mission and position, then cover first quarter results at a high level. Most importantly, though, Today, we will cover Xebia's critical inflection point. The business is now ready and able to change its route to market, starting regionally, and to invest in marketing to build a brand and grow the base. Recall that the new brand visual ID is in market. The portfolio has evolved to focus on soda and to drive channel differentiation. Customer fulfillment is stable, and price increases, including more effective this week, have supported stronger unit economics. We are now launching regional direct store distribution here in May, and following positive indicators from early testing, we are scaling marketing through the summer and beyond. With leadership from our new CFO, Girish Satya, we will also share a critical new productivity initiative today, enabling these turning points and allowing greater visibility for the first time into Xevia's path to profitability. As a pioneer and the consumer's number one choice in natural sodas, Zevia's focus remains taking better-for-you beverages mainstream. Our mission focuses on global health for people and the planet, and in Q1, we removed another 2.8 thousand metric tons of sugar from consumers' diets, never having sold a plastic bottle. Zevia is more affordable than 64% of non-alcoholic beverages in North America, and more accessible than recent functional entrants in adjacent carbonated beverage categories. In Q1, net sales were within previously communicated expectations. Volume and revenue at the start of the year were impacted by skew distribution setbacks with two key customers following the challenges we encountered with our supply chain transition in 2023 and in transitions in our portfolio as we drive focus on the fastest growing and highest potential portions of our SOTA portfolio. Consumer demand remained strong despite revenue results. Velocity, which is a measure of sales per point of distribution, has improved every four-week period since the start of the year and grew at 9% versus prior year the past four weeks ending April 21st, and an impressive 21% in the food channel, which is our largest channel. Scan sales are also accelerating overall, leading the carbonated soft drink and the diet zero soda category in dollar and in unit growth. xevia grew at 9.4 percent in the latest read 23 percent in food and double digits across all top food accounts we expect net sales to accelerate in the back half of the year given these trends and following recent spring resets our performance in key strategic channels and customers have been strong which i will cover shortly we've communicated a four and a half percent price increase effective may 6 on soda multipax and our gross margins are strong and improving sequentially. Xevia's much-needed route-to-market evolution is underway as we launch direct-store delivery in the Pacific Northwest. Recall that Xevia has grown for over a decade, featuring only multipacks and selling to a loyal base in the natural channel and in natural sections in food. The launch of DSD will enable singles distribution and channel expansion, plus improve in-store presence and promotional effectiveness in our existing distribution footprint. This move to broad availability of a trial package supported by brand marketing is key to accelerating market penetration. The first launches in our direct store delivery network include Columbia Distributing and Hayden Beverage Company launching this week, and we are in parallel setting our first regional convenience store partners. This is a critical evolution for Xevia, building now on a stable foundation. With new brand visual IDs fully in market and our first omnichannel marketing efforts underway as of April, including new advertising campaigns in key metros across the US, we are seeing early signs of immediate positive impact in scan data performance in those markets versus the rest of markets. The Xevia product portfolio has always been a rational solution for the tension between health and taste in soda, but now it finds its personality, bringing a differentiated brand identity through digital and in-market marketing activation. We'll share more strategically and creatively after the next earnings call, but look for Xevia in the market in a new way through the summer. These marketing and DSD efforts, along with the productivity initiative that Girish will detail, are fundamental to Xevia's long-term growth plan and our vision to build an iconic brand. I'll turn it over to Girish to step through our productivity initiative to provide an overview of Q1 financial results and speak to guidance. I'll be back to speak to channel and customer performance, brand health indicators, and then to share closing thoughts.