Zevia PBC

and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star and zero on your telephone keypad. As a reminder, this conference has been recorded. It is now my pleasure to introduce your host, Alex Liskin from ICR. Please go ahead.

Thank you, and welcome to Xebia's fourth 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 and Principal Accounting Officer. By now, everyone should have access to the company's fourth quarter 2024 earnings press release and investor presentation made available 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 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. And now I'd like to turn the call over to Amy Taylor.

Thanks for joining us for our fourth quarter and full year 2024 conference call. We are pleased to have ended the year on a strong note with a return to top-line growth and progress toward our goal of achieving profitability. We elevated our brand identity, advanced our three strategic growth pillars, and continued to lay the foundation for our plans for sustainable long-term growth and profitability. I want to thank the Zevia team for their commitment and dedication to executing on these priorities. I am as confident as I have been since joining Zevia about our long-term opportunities. Our optimism in the future is based on three factors. First, the better-for-you soda category is in the nascent stages, and we believe there's tremendous growth opportunity as more consumers move toward healthier-for-you options. Natural soda is growing six times faster than conventional soda, which comprises 25% of all soda growth. And Mintel projects natural soda will more than double the growth of conventional diet and zero soda in the next five years. This shift is further evidenced by the fact that large retailers are dedicating prime real estate to this emerging category. Walmart's launch of the modern soda set and Albertson's recent launch of a renovated better-for-you soda set are great examples of the speed and scale of this change. Second, we believe we are uniquely positioned within this fast-growing and dynamic category as the only brand that combines great taste, zero sugar, and naturally sweetened soda at an accessible price point. We have seen that once consumers try Zevia, they are highly engaged. So our focus is on amplifying our brand and our clear points of differentiation on taste and ingredients to drive trial and continue to grow the base. And finally, we believe that the foundation for long-term success lies in creating a brand that consumers love and delivering great products along with an exciting pipeline of innovation. The work we have done to sharpen CVS brand identity, as well as to elevate our products, are setting us up to deliver on both. While we recognize that discovery and trial happen over time, we're excited about the green shoots we're seeing and our positioning for the future. We have advanced our strategic growth pillars of amplified marketing, product innovation, and focused distribution expansion while maintaining agility within this rapidly changing category. So briefly highlighting our results, which we pre-announced in mid-January, we returned to growth in the fourth quarter with sales increase of over 4%. We grew in volume and in dollars, which is also reflected in our scan data, and adjusted EBITDA improved by $3 million as compared to the fourth quarter of last year to negative $3.9 million, Through the savings we achieved from our productivity initiative, we invested in brand building initiatives weighted in the back half of 2024, while also flowing a portion of the savings to the bottom line. We see additional cost savings opportunities, and we remain confident that we will achieve positive adjusted EBITDA within 2026. Girish will speak to this in more detail shortly. Now I'd like to provide an update on the progress we've made across our strategic growth pillars, starting with marketing, We believe that the work we have done to sharpen our brand voice is cutting through and resonating with the consumer. We made strides in elevating our brand identity across mediums as reflected in our Break from the Artificial Holiday campaign, which delivered a lighthearted parody of the artificiality content and in beverages. This campaign went viral in December and served the brand very well to communicate our positioning as the real zero sugar soda in a world of Washington's fakes. Its performance merited incremental investments and we took it from digital to linear TV. We will scale the success of our break from the artificial campaign into a comprehensive brand platform with additional campaigns that engage a broader audience with compelling content that clearly communicates the benefits of Xevia in a fun and memorable way. As we said, our marketing spend is largely focused on driving awareness and trial. Xevia's consumer is highly engaged in the brand exemplified by a repeat rate of over 40% and an average brand spend per household, which is an impressive 38 percentage points higher than the average beverage shopper. However, with household penetration and only the mid single digit range, we have a lot of room to grow. And so as such, we're increasing our marketing investments in 2025, leveraging the learnings of last year. We are still in the early stages of this journey and we expect these actions to build momentum over time. Turning now to product innovation, our second pillar, we have two key drivers of growth in the 2025 pipeline. One is a breakthrough we've had in a more sugar-like taste experience, which will be introduced in our new flavor launch, Strawberry Lemon Burst, this spring. This enhanced flavor profile will also be applied to other key underleveraged flavors within our portfolio. And then secondly, we have a more robust product innovation pipeline coming into 2025. So in addition to Strawberry Lemon Burst, which will be nationally distributed across channels, we're also launching retailer exclusives, such as Orange Creamsicle at Sprout. And then finally, we'll launch limited edition seasonal flavors, building on the success of the outperforming salted caramel flavor in 2024. In addition to flavors, we'll be scaling multiple variety pack offerings for the first time at retail to support efforts in driving trial and expanding the base. We recently launched our first retail variety pack at Walmart as an eight pack, which is our top velocity skew within that set. Building on our success there, we are rolling out 12 pack variety packs across the grocery and natural channels currently, and we will continue to test additional configurations. Not only can these variety packs drive incremental velocity, but they can also convert shoppers to their favorite higher margin straight flavor pack. So moving us along to our third pillar, distribution expansion. In parallel to top of funnel marketing investments, we're also focused on growing awareness, accessibility, trial and repeat through expanded distribution. We recently expanded our presence from 800 to more than 4,300 Walmart doors in the U.S. In a precedent-setting move within the category, Walmart recently introduced a new set called Modern Soda, featuring a selection of leading low and no-sugar brands with better-for-you positioning. This should raise awareness both for better-for-you soda and for the Zevia brand, and it helps to drive market penetration, particularly in fast-growing geographies like the Southeast. In grocery, we continue to see strong results, as evidenced by scan data. and we believe that there remains ample opportunity to increase penetration. Albertsons, one of our key partners, has created its own Better For You set, where Zevia will have a strong brand block at eye level in a vertical shelf set. Lastly, we continue to see progress in our direct store delivery, or DSD, regional pilot. Grocery is outperforming rest of market in the Northwest, where our DSD initiative has been deployed for several months. And now we plan to expand into the Southwest, starting with Crescent Crown in Arizona, with neighboring states to follow. We believe our DSD initiative will improve in-store presence and enable singles distribution across key channels over time. Big picture, Vivia remains focused on being the better-for-you soda with an authentic brand connection with great-tasting products at accessible price points with nothing artificial in our ingredients or in our claims. We are more excited than ever about our future. We have a clear brand voice and are making increased investments in marketing to drive growth. We're also gaining distribution with recent and with upcoming shelf reset. And then lastly, we have strong innovation in the pipeline with a clear path forward and strong momentum behind the category Better For You Soda. We expect these initiatives to pay off in the back half of this year and going forward. And so with that, I'll turn the call over to Girish.