Zevia PBC

Previous wording

The following discussion contains forward-looking statements that involve risks and uncertainties. The following discussion of our financial condition and results of operations should be read in conjunction with our accompanying unaudited condensed consolidated financial statements and the related notes and other financial information included elsewhere in this Quarterly Report. Our actual results may differ materially from those discussed in the forward-looking statements as a result of various factors, including those set forth in Part II, Item 1A. “Risk Factors” and other sections of this Quarterly Report and our consolidated financial statements and notes thereto included in our Annual Report. The financial data discussed below reflects the historical results of operations and financial position of the Company. References in this Quarterly Report to “Zevia,” the “Company,” “we,” “us,” and “our” refer (1) prior to the consummation of the Reorganization Transactions, to Zevia LLC, and (2) after the consummation of the Reorganization Transactions, to Zevia PBC and its consolidated subsidiaries unless the context indicates otherwise. Our historical results are not necessarily indicative of the results that may be expected for any period in the future.

Current wording

The following discussion contains forward-looking statements that involve risks and uncertainties. The following discussion of our financial condition and results of operations should be read in conjunction with our unaudited condensed accompanying consolidated financial statements and the related notes and other financial information included elsewhere in this Quarterly Report. Our actual results may differ materially from those discussed in the forward-looking statements as a result of various factors, including those set forth in Part II, Item 1A. “Risk Factors” and other sections of this Quarterly Report and our consolidated financial statements and notes thereto included in our Annual Report. The financial data discussed below reflects the historical results of operations and financial position of the Company. References in this Quarterly Report to “Zevia,” the “Company,” “we,” “us,” and “our” refer (1) prior to the consummation of the Reorganization Transactions, to Zevia LLC, and (2) after the consummation of the Reorganization Transactions, to Zevia PBC and its consolidated subsidiaries unless the context indicates otherwise. Our historical results are not necessarily indicative of the results that may be expected for any period in the future.

Previous wording

We are a better-for-you beverage company that develops, markets, sells, and distributes great tasting, zero sugar beverages made with simple, plant-based ingredients. We are a Delaware public benefit corporation and have been designated as a “Certified B Corporation,” and are focused on addressing the global health challenges resulting from excess sugar consumption by offering a broad portfolio of zero sugar, zero calorie, naturally sweetened beverages. All Zevia® beverages are Non-GMO Project verified, gluten-free, Kosher, and vegan and include a variety of flavors across Soda, Energy Drinks, Organic Tea, and Kids drinks. Our products are distributed and sold principally across the U.S. and Canada through a diverse network of major retailers in the grocery, drug, warehouse club, mass, natural, convenience and e-commerce channels and in grocery and natural product stores and specialty outlets. The Company’s products are manufactured and maintained at third-party beverage production and warehousing facilities located in both the U.S. and Canada. We believe that consumers increasingly select beverage products based on taste, ingredients and fit with today’s consumer preferences, which has benefited the Zevia® brand and resulted in over 2.1 billion cans of Zevia sold to date.

Current wording

We are a better-for-you beverage company that develops, markets, sells, and distributes naturally delicious, zero sugar beverages. We are a Delaware public benefit corporation and have been designated as a “Certified B Corporation,” and are focused on addressing the global health challenges resulting from excess sugar consumption by offering a broad portfolio of zero sugar, zero calorie, naturally sweetened beverages. All Zevia® beverages are made with a handful of simple, plant-based ingredients, contain no artificial sweeteners, and are Non-GMO Project verified, gluten-free, Kosher, and vegan, and include a variety of flavors across Soda, Energy Drinks, and Organic Tea drinks. Our products are distributed and sold principally across the U.S. and Canada through a wide-ranging network of major retailers in the grocery, drug, warehouse club, mass, natural, convenience and e-commerce channels and in natural product stores and specialty outlets. The Company’s products are manufactured and maintained at third-party beverage production and warehousing facilities located in both the U.S. and Canada.

Previous wording

Key Events During the Third Quarter of 2024

Current wording

Key Events During the First Quarter of 2025

Previous wording

The Productivity Initiative has resulted in the following:

Current wording

The Productivity Initiative, which included a reduction in workforce in the first quarter of 2025, has resulted in the following:

Previous wording

Costs associated with the Productivity Initiative, including restructuring costs, were $0.1 and $1.0 million during the three and nine months ended September 30, 2024, which primarily includes employee related severance costs as well as costs related to exiting two of our third-party warehouse and distribution facilities.

Current wording

Costs associated with the Productivity Initiative, including restructuring costs, were $2.1 million during the three months ended March 31, 2025, which primarily includes employee related severance costs.

Previous wording

The Productivity Initiative is now expected to result in estimated annualized benefits of approximately $15.0 million, and we began seeing these benefits in the second and third fiscal quarters of 2024, and expect the savings to be more fully realized over the next 3-5 quarters. These benefits include reduction in costs of goods sold and reduction in operating expenses. We expect to reinvest the majority of these costs in brand marketing and our Direct Store Delivery strategy to drive future growth.

Current wording

The Productivity Initiative is expected to result in estimated annualized benefits of approximately $15.0 million, and we began seeing these benefits in the second half of 2024 which continued into the first quarter of 2025, and expect the savings to be more fully realized over the next year. These benefits include reduction in costs of goods sold and reduction in operating expenses. We have reinvested the majority of these costs savings thus far into brand marketing and promotional activity to drive future growth. Looking forward, we intend to balance reinvesting savings to help drive revenue growth with our plans for achieving profitability.

Previous wording

Additional restructuring charges or cash expenditures may be incurred as the Company makes further progress on this Productivity Initiative, which we expect to be substantially completed by the end of the first quarter of 2025.

Current wording

Additional restructuring charges or cash expenditures may be incurred as the Company makes further progress on this Productivity Initiative, which we expect to be substantially completed by the first half of 2025.

Previous wording

The following summarizes the components of our results of operations for the three and nine months ended September 30, 2024 and 2023, respectively.

Current wording

The following summarizes the components of our results of operations for the three months ended March 31, 2025 and 2024, respectively.

Previous wording

We generate net sales from the sales of our products, including Soda, Energy Drinks, Organic Tea, and Kids drinks, to our customers, which include grocery distributors, national retailers, convenience retailers, natural products retailers, warehouse club retailers and retailers with e-commerce channels, in the U.S. and Canada.

Current wording

We generate net sales from the sales of our products, including Soda, Energy Drinks, and Organic Tea drinks, to our customers, which include grocery distributors, national retailers, convenience retailers, natural products retailers, warehouse club retailers and retailers with e-commerce channels, in the U.S. and Canada.

Previous wording

We offer our customers sales incentives that are designed to support the distribution of our products to consumers. These incentives include discounts, trade promotions, price allowances and product placement fees. The amounts for these incentives are deducted from gross sales to arrive at our net sales.

Current wording

We offer our customers sales incentives that are designed to support the distribution of our products to consumers. These incentives and discounts include cash discounts, price allowances, volume-based rebates, product placement fees and certain other financial support for items such as trade promotions, displays, new products, consumer incentives and advertising assistance. The amounts for these incentives are deducted from gross sales to arrive at our net sales.

Previous wording

continuous innovation efforts, enhancement of existing products, and introduction of additional flavors within existing categories, as well as entering into new categories.

Current wording

continuous innovation efforts, enhancement of existing products, and introduction of additional flavors within existing categories.

Previous wording

We expect our future growth to be driven by a combination of new distribution, increased organic sales from existing outlets, package and product innovation, and continued pricing strength; however, sales levels in any given period may continue to be impacted by seasonality, increased level of competition, customers’ efforts to manage inventory, and our ability to fulfill customer demands. During 2024, we experienced reduced sales volumes, primarily due to lost distribution at certain retailers, largely in the club channel and one customer in the mass channel, and to a lesser degree as a result of a strategic decision we made to exit our Kids and Mixers product categories to focus on soda. We also increased our spend on promotional activity at key accounts, returning back to historical promotion levels, in order to drive velocity, which we expect to continue through the end of the year and in 2025. We also increased promotions in order to liquidate excess and obsolete inventory, which we expect to be temporary and complete by the end of 2024. We are focused on building distribution in our key accounts and concurrently evolving our route-to-market; however we expect it will take time to regain lost distribution in an increasingly competitive environment.

Current wording

We expect our future growth to be driven by a combination of new distribution, increased organic sales from existing outlets, package and product innovation, and continued pricing strength; however, sales levels in any given period may continue to be impacted by seasonality, increased level of competition, customers’ efforts to manage inventory, and our ability to fulfill customer demands. During the first quarter of 2025, we experienced reduced sales volumes, primarily due to lost distribution in the club channel and one customer in the mass channel which took place in 2024, however this was offset by new distribution attained in the fourth quarter of 2024 at one customer in the mass channel.

Previous wording

Our cost of goods sold is subject to price fluctuations in the marketplace, particularly in the price of aluminum and other raw materials, as well as in the cost of production, packaging, in-bound freight and logistics. Our results of operations depend on our contract manufacturers’ ability to arrange for the purchase of raw materials and the production of our products in sufficient quantities at competitive prices. We have long-term contracts with certain suppliers of stevia and certain third-party contract manufacturers governing quality control, regulatory compliance, pricing and other terms, but these contracts generally do not guarantee any minimum purchase commitments to our third-party contract manufacturers. Our third-party contract manufacturers procure packaging and ingredient materials to manufacture our products according to our submitted rolling forecasts, with the initial three months of each forecast generally constituting our purchase commitment.

Current wording

Our cost of goods sold is subject to price fluctuations in the marketplace, particularly in the price of aluminum and other raw materials, as well as in the cost of production, packaging, in-bound freight and logistics. Due to the recent implementation of a 25% tariff on all steel and aluminum entering the U.S., and the impact of reciprocal tariff on certain countries where stevia is purchased, we expect to see an increase in our cost of goods. Our results of operations depend on our contract manufacturers’ ability to arrange for the purchase of raw materials and the production of our products in sufficient quantities at competitive prices. We have long-term contracts with certain suppliers of stevia and certain third-party contract manufacturers governing quality control, regulatory compliance, pricing and other terms, but these contracts generally do not guarantee any minimum purchase commitments to our third-party contract manufacturers. Our third-party contract manufacturers procure packaging and ingredient materials to manufacture our products according to our submitted rolling forecasts, with the initial three months of each forecast generally constituting our purchase commitment.

Previous wording

We expect our cost of goods sold to increase in absolute dollars as our volume increases, but decrease over time as a percentage of net sales as a result of the Productivity Initiative, our continued focus on cost and efficiency improvements, and as we realize the benefit of scale.

Current wording

Excluding the potential impact of tariffs discussed above, we expect our cost of goods sold to increase in absolute dollars as our volume increases, but decrease over time as a percentage of net sales as a result of the Productivity Initiative, our continued focus on cost and efficiency improvements, and as we realize the benefit of scale.

Previous wording

Our selling expenses are expected to increase in absolute dollars in the long-term as a result of increased warehousing and distribution costs driven by increased net sales, but decrease as a percentage of sales over time as a result of our Productivity Initiative and our continued focus on cost improvements in our supply chain. Our selling expenses are expected to decrease from the prior year in the short-term, largely due to a decrease in logistics expenses compared to the prior year as a result of the historical supply chain logistics challenges encountered during 2023 as well as due to the Productivity Initiative.

Current wording

Our selling expenses are expected to decrease as a percentage of sales over time as a result of our Productivity Initiative and our continued focus on cost improvements in our supply chain. Our selling expenses are expected to decrease from the prior year in the short-term, largely due the Productivity Initiative.

Previous wording

Marketing expenses are expected to increase as we invest in in brand awareness, which are expected to be partially funded by the selling expense cost savings and Productivity Initiative.

Current wording

Marketing expenses are expected to increase as we invest in brand awareness, which are expected to be partially funded by the Productivity Initiative. We significantly increased our investment in marketing in the first quarter of 2025, and expect these additional marketing costs to continue throughout 2025, in order to help build our brand, with a focus on driving trial and customer conversions.

Previous wording

General and administrative expenses include all salary and other personnel expenses (other than equity-based compensation expense) for our employees, including employees related to management, marketing, sales, product development, quality control, accounting, information technology and other functions. Our ongoing general and administrative expenses are expected to remain flat in absolute dollars in the near term and as a percentage of net sales over time.

Current wording

General and administrative expenses include all salary and other personnel expenses (other than equity-based compensation expense) for our employees, including employees related to management, marketing, sales, product development, quality control, accounting, information technology and other functions. Our ongoing general and administrative expenses are expected to remain relatively flat as a percentage of net sales over time.

Previous wording

Restructuring expenses include employee severance and benefit costs to terminate a specified number of employees as well as costs to exit two of our third-party warehouse and distribution facilities designed to reduce costs and improve efficiency while continuing to invest in our brand and related initiatives. Additional restructuring charges or cash expenditures may be incurred as the Company makes further progress on the Productivity Initiative, which we expect to be substantially completed by the end of the first fiscal quarter of 2025.

Current wording

Restructuring expenses include employee severance and benefit costs to terminate a specified number of employees as well as costs for restructuring consulting services, impairment loss of certain assets, contract termination costs and other related charges designed to reduce costs and improve efficiency while continuing to invest in our brand and related initiatives. Additional restructuring charges or cash expenditures may be incurred as the Company makes further progress on the Productivity Initiative, which we expect to be substantially completed by the first half of 2025.

Previous wording

Net sales were $36.4 million for the three months ended September 30, 2024 as compared to $43.1 million for the three months ended September 30, 2023. Equivalized cases sold were 2.9 million during the three months ended September 30, 2024 as compared to 3.3 million during the three months ended September 30, 2023. The decrease in net sales was primarily due to a decrease in the number of equivalized cases sold, which resulted in $6.3 million lower net sales and was largely caused by the expected lost distribution in our club channel and one customer in our mass channel, and a decrease in net sales of $0.4 million resulting from greater promotional levels at retailers as well as increased promotions in order to liquidate excess and obsolete inventory. We define an equivalized case as a 288 fluid ounce case.

Current wording

Net sales were $38.0 million for the three months ended March 31, 2025 as compared to $38.8 million for the three months ended March 31, 2024. Equivalized cases sold were 3.0 million during the three months ended March 31, 2025 as compared to 3.0 million during the three months ended March 31, 2024. The decrease in net sales was primarily due higher allowance for incentives and discounts of $2.5 million resulting from greater promotional levels at retailers, partially offset by pricing increases of $1.6 million and an increase in the number of equivalized cases sold, which resulted in $0.1 million higher net sales. The increase in the number of equivalized cases sold was largely the result of expanded distribution at one customer in the mass channel partially offset by lost distribution in the club channel and one customer in the mass channel. We define an equivalized case as a 288 fluid ounce case.

Previous wording

Cost of goods sold was $18.5 million for the three months ended September 30, 2024 as compared to $23.5 million for the three months ended September 30, 2023. The decrease of $5.0 million, or 21.3%, was largely due to a 12.2% decrease in the shipment of equivalized cases, resulting in $2.6 million lower costs of goods sold, lower write-downs related to excess and obsolete inventory of $2.3 million, and favorable unit costs of $0.1 million driven by the Productivity Initiative.

Current wording

Cost of goods sold was $19.0 million for the three months ended March 31, 2025 as compared to $21.1 million for the three months ended March 31, 2024. The decrease of $2.1 million, or 9.9%, was largely due to favorable unit costs of $1.7 million driven by the Productivity Initiative and lower write-downs related to excess and obsolete inventory of $0.4 million.

Previous wording

Gross profit was $17.9 million for the three months ended September 30, 2024 as compared to $19.6 million for the three months ended September 30, 2023. The decrease in gross profit of $1.7 million, or 8.8%, was primarily due to lower volumes and increased spend on promotional activity, partially offset by lower inventory write-downs.

Current wording

Gross profit was $19.0 million for the three months ended March 31, 2025 as compared to $17.7 million for the three months ended March 31, 2024. The increase in gross profit of $1.3 million, or 7.4%, was primarily due to favorable unit costs, selling price increases and lower inventory write-downs, partially offset by increased spend on promotional activity.

Previous wording

Gross margin for the three months ended September 30, 2024 improved to 49.1% from 45.4% in the prior-year period. The increase was primarily due to lower inventory write-downs and favorable unit costs, partially offset by increased spend on promotional activity.

Current wording

Gross margin for the three months ended March 31, 2025 improved to 50.1% from 45.7% in the prior-year period. The increase was primarily due to favorable unit costs, selling price increases and lower inventory write-downs, partially offset by increased spend on promotional activity.

Previous wording

General and administrative expenses were $7.4 million for the three months ended September 30, 2024 as compared to $8.3 million for the three months ended September 30, 2023. The decrease of $0.9 million, or 10.6%, was primarily due to a decrease in costs as a result of the Productivity Initiative, primarily related to lower employee costs.

Current wording

General and administrative expenses were $7.0 million for the three months ended March 31, 2025 as compared to $8.1 million for the three months ended March 31, 2024. The decrease of $1.1 million, or 14.0%, was primarily due to a decrease in costs as a result of the Productivity Initiative, primarily related to lower employee costs.

Previous wording

Equity-based compensation expenses were $1.0 million for the three months ended September 30, 2024 as compared to $1.9 million for the three months ended September 30, 2023, primarily related to outstanding equity-based awards being recognized over the remaining service periods of the awards. The decrease of $0.8 million was primarily driven by a $0.9 million decrease related to the accelerated method of expense recognition on certain equity awards issued in connection with the Company’s IPO in 2021, partially offset by equity-based compensation expenses related to new equity awards granted.

Current wording

Equity-based compensation expenses were $0.7 million for the three months ended March 31, 2025 as compared to $1.5 million for the three months ended March 31, 2024, primarily related to outstanding equity-based awards being recognized over the remaining service periods of the awards. The decrease of $0.8 million was primarily driven by a $0.7 million decrease related to the accelerated method of expense recognition on certain equity awards issued in connection with the Company’s IPO in 2021 in which the service period was completed during the first quarter of 2025.

Previous wording

Restructuring expenses were $1.0 million for the nine months ended September 30, 2024 which primarily includes employee related severance costs as well as costs to exit two of our third-party warehouse and distribution facilities.

Current wording

Restructuring expenses were $2.1 million for the three months ended March 31, 2025 which primarily includes employee related severance costs.

Previous wording

As of September 30, 2024, we had $32.7 million in cash and cash equivalents. We believe that our cash and cash equivalents as of September 30, 2024, together with our operating activities and available borrowings under the Secured Revolving Line of Credit (as defined below), will provide adequate liquidity for ongoing operations, planned capital expenditures and other investments beyond the next 12 months.

Current wording

As of March 31, 2025, we had $27.7 million in cash and cash equivalents. We believe that our cash and cash equivalents as of March 31, 2025, together with our operating activities and available borrowings under the Secured Revolving Line of Credit (as defined below), will provide adequate liquidity for ongoing operations, planned capital expenditures and other investments beyond the next 12 months.

Previous wording

Future capital requirements will depend on many factors, including our rate of revenue growth, gross margin and the level of expenditures in all areas of the Company. In future years, we may experience an increase in operating and capital expenditures from time to time, as needed, as we expand business activities. To the extent that existing capital resources and sales growth are not sufficient to fund future activities, we may seek alternative financing through additional equity or debt financing transactions. Additional funds may not be available on terms favorable to us or at all. Also, we will continue to assess our liquidity needs in light of current and future global health emergencies, inflationary pressures, relatively high interest rates, volatility in the financial markets, recession fears, financial institution instability, any potential shutdown of the U.S. government, current and future global hostilities, and political tensions between the U.S. and China that may continue to disrupt and impact the global and national economies and global financial markets. If any disruption continues into the future, we may not be able to access the financial markets and could experience an inability to access additional capital, which could negatively affect our operations in the future. Failure to raise additional capital, if and when needed, could have a material adverse effect on our financial position, results of operations, and cash flows.

Current wording

Future capital requirements will depend on many factors, including our rate of revenue growth, gross margin and the level of expenditures in all areas of the Company. In future years, we may experience an increase in operating and capital expenditures from time to time, as needed, as we expand business activities. To the extent that existing capital resources and sales growth are not sufficient to fund future activities, we may seek alternative financing through additional equity or debt financing transactions. Additional funds may not be available on terms favorable to us or at all. Also, we will continue to assess our liquidity needs in light of current and future global health emergencies, inflationary pressures, recently announced tariffs as well as changes in tariff or U.S. foreign trade policies, relatively high interest rates, volatility in the financial markets, recession fears, financial institution instability, any potential shutdown of the U.S. government, current and future global hostilities, and political tensions between the U.S. and China that may continue to disrupt and impact the global and national economies and global financial markets. If any disruption continues into the future, we may not be able to access the financial markets and could experience an inability to access additional capital, which could negatively affect our operations in the future. Failure to raise additional capital, if and when needed, could have a material adverse effect on our financial position, results of operations, and cash flows.

Previous wording

In connection with the IPO and the Reorganization Transactions in July 2021, the Direct Zevia Stockholders and certain continuing members of Zevia LLC received the right to receive future payments pursuant to the TRA. The amount payable under the TRA will be based on an annual calculation of the reduction in our U.S. federal, state and local taxes resulting from the utilization of certain pre-IPO tax attributes and tax benefits resulting from sales and exchanges by continuing members of Zevia LLC. See “Certain Relationships and Related Party Transactions—Tax Receivable Agreement” included in the prospectus dated July 21, 2021 and filed with the SEC on July 23, 2021. We expect that the payments that we may be required to make under the TRA may be substantial. Assuming no material changes in the relevant tax law and that we earn sufficient taxable income to realize all tax benefits that are subject to the TRA, we expect that the reduction in tax payments for us associated with the federal, state and local tax benefits described above would aggregate to approximately $66.3 million through 2037. Under such scenario we would be required to pay the Direct Zevia Stockholders and certain continuing members of Zevia LLC 85% of such amount, or $56.4 million, through 2037.

Current wording

In connection with the IPO and the Reorganization Transactions in July 2021, the Direct Zevia Stockholders and certain continuing members of Zevia LLC received the right to receive future payments pursuant to the TRA. The amount payable under the TRA will be based on an annual calculation of the reduction in our U.S. federal, state and local taxes resulting from the utilization of certain pre-IPO tax attributes and tax benefits resulting from sales and exchanges by continuing members of Zevia LLC. See “Certain Relationships and Related Party Transactions—Tax Receivable Agreement” included in the prospectus dated July 21, 2021 and filed with the SEC on July 23, 2021. We expect that the payments that we may be required to make under the TRA may be substantial. Assuming no material changes in the relevant tax law and that we earn sufficient taxable income to realize all tax benefits that are subject to the TRA, we expect that the reduction in tax payments for us associated with the federal, state and local tax benefits described above would aggregate to approximately $68.5 million through 2040. Under such scenario we would be required to pay the Direct Zevia Stockholders and certain continuing members of Zevia LLC 85% of such amount, or $58.2 million, through 2040.

Previous wording

On February 22, 2022, we obtained a revolving credit facility (the “Secured Revolving Line of Credit”) by entering into a Loan and Security Agreement with Bank of America, N.A (the “Loan and Security Agreement”). Under the Secured Revolving Line of Credit, we may draw funds up to an amount not to exceed the lesser of (i) a $20 million revolving commitment and (ii) a borrowing base which is comprised of inventory and receivables. Up to $2 million of the Secured Revolving Line of Credit may be used for letter of credit issuances with the option to increase the commitment under the Secured Revolving Line of Credit by up to $10 million, subject to certain conditions. The Secured Revolving Line of Credit matures on February 22, 2027. During the first quarter of 2024, the Company drew $8 million on the Secured Revolving Line of Credit which was subsequently repaid in the same period. As of September 30, 2024, there was no amount outstanding on the Secured Revolving Line of Credit. The Secured Revolving Line of Credit is secured by a first priority security interest in substantially all of the Company’s assets.

Current wording

On February 22, 2022, we obtained a revolving credit facility (the “Secured Revolving Line of Credit”) by entering into a Loan and Security Agreement with Bank of America, N.A (the “Loan and Security Agreement”). Under the Secured Revolving Line of Credit, we may draw funds up to an amount not to exceed the lesser of (i) a $20 million revolving commitment and (ii) a borrowing base which is comprised of inventory and receivables. Up to $2 million of the Secured Revolving Line of Credit may be used for letter of credit issuances with the option to increase the commitment under the Secured Revolving Line of Credit by up to $10 million, subject to certain conditions. The Secured Revolving Line of Credit matures on February 22, 2027. As of March 31, 2025, there was no amount outstanding on the Secured Revolving Line of Credit. The Secured Revolving Line of Credit is secured by a first priority security interest in substantially all of the Company’s assets.

Previous wording

Loans under the Secured Revolving Line of Credit bear interest based on either, at our option, the Bloomberg Short-Term Bank Yield Index rate plus an applicable margin between 1.50% to 2.00% or the Base Rate (customarily defined) plus an applicable margin between 0.50% to 1.00% with margin, in each case, determined by the average daily availability under the Secured Revolving Line of Credit. The Loan and Security Agreement was amended on September 30, 2024 to replace the Bloomberg Short-Term Bank Yield Index, which will be discontinued on November 15, 2024, with the Term Secured Overnight Financing rate, effective November 20, 2024.

Current wording

Loans under the Secured Revolving Line of Credit bear interest based on either, at our option, the Term Secured Overnight Financing rate plus an applicable margin between 1.50% to 2.00% or the Base Rate (customarily defined) plus an applicable margin between 0.50% to 1.00% with margin, in each case, determined by the average daily availability under the Secured Revolving Line of Credit.

Previous wording

Net cash provided by operating activities of $1.0 million for the nine months ended September 30, 2024 was primarily driven by a net increase in cash related to changes in operating assets and liabilities of $12.4 million. Changes in cash flows related to operating assets and liabilities were primarily due to a decrease in inventories of $13.9 million due to decreased production of inventory as inventory levels are managed, decreased prepaid expenses and other assets of $2.4 million largely due to a decrease in prepaid deposits related to the sale of raw materials, and a decrease in accounts receivable of $1.1 million due to timing of payments, partially offset by a net decrease in accounts payable, accrued expenses and other current liabilities of $4.6 million due to timing of purchases and decreased production of inventory. These increases were partially offset by a decrease in cash due to a net loss of $17.0 million, partially offset by non-cash expenses of $5.6 million primarily related to equity-based compensation and depreciation and amortization expense.

Current wording

Net cash used in operating activities of $2.9 million for the three months ended March 31, 2025 was primarily driven by a net loss of $6.4 million, partially offset by non-cash expenses of $1.1 million primarily related to equity-based compensation and depreciation and amortization expense, and a net increase in cash related to changes in operating assets and liabilities of $2.3 million. Changes in cash flows related to operating assets and liabilities were primarily due to a decrease in accounts receivable of $2.0 million largely due to timing of payments and a decrease in inventories of $1.5 million due to decreased production of inventory as inventory levels are managed, partially offset by increased prepaid expenses and other assets of $0.9 million driven by timing of payments, and a net decrease in accounts payable, accrued expenses and other current liabilities of $0.3 million due to timing of purchases and decreased production of inventory.

Previous wording

Net cash used in operating activities of $9.7 million for the nine months ended September 30, 2023 was primarily due to a net loss of $19.2 million, partially offset by non-cash expenses of $8.4 million primarily related to equity-based compensation and depreciation and amortization expense and a net increase in cash related to changes in operating assets and liabilities of $1.1 million. Changes in cash flows related to operating assets and liabilities were primarily due to an increase of $29.1 million in accounts payable, accrued expenses and other current liabilities due to timing of purchases and increased production of inventory, partially offset by an increase in inventories of $21.8 million due to increased production of inventory as a result of the supply chain logistics challenges in the prior year, increase in accounts receivable of $5.3 million due to timing of invoices, and an increase in prepaid expenses and other assets of $0.5 million due to timing of prepayments.

Current wording

Net cash used in operating activities of $3.2 million for the three months ended March 31, 2024 was primarily driven by a net loss of $7.2 million, partially offset by non-cash expenses of $2.0 million primarily related to equity-based compensation and depreciation and amortization expense, and a net increase in cash related to changes in operating assets and liabilities of $2.0 million. Changes in cash flows related to operating assets and liabilities were primarily due to a decrease in inventories of $3.9 million as a result of managing inventory levels, a decrease in prepaid expenses and other assets of $1.1 million largely due to a decrease in prepaid deposits related to the sale of raw materials, and an increase of $0.1 million in accounts payable, accrued expenses and other current liabilities due to timing of purchases and increased production of inventory, partially offset by an increase in accounts receivable of $2.9 million due to timing of sales.

Previous wording

Net cash used in investing activities of $0.2 million for the nine months ended September 30, 2024 was primarily due to purchases of property, equipment, and software of $0.2 million for computer equipment, marketing fixtures, and software used in ongoing operations.

Current wording

Net cash used in investing activities of less than $0.1 million for the three months ended March 31, 2024 was primarily due to purchases of property and equipment used in ongoing operations.

Previous wording

Net cash provided by financing activities of less than $0.1 million for the nine months ended September 30, 2024 was due to proceeds from the Secured Revolving Line of Credit of $8 million which was repaid in the same period.

Current wording

Net cash provided by financing activities of $0.0 million for the three months ended March 31, 2024 was due to proceeds from the revolving line of credit of $8 million which was repaid in the same period.

Previous wording

We calculate Adjusted EBITDA as net loss adjusted to exclude: (1) other income, net, which includes interest (income) expense and foreign currency (gains) losses, (2) (benefit) provision for income taxes, (3) depreciation and amortization, (4) equity-based compensation, and (5) restructuring expenses (for 2024, in light of our Productivity Initiative). Also, Adjusted EBITDA may in the future be adjusted for amounts impacting net income related to the TRA liability and other infrequent and unusual transactions.

Current wording

We calculate Adjusted EBITDA as net loss adjusted to exclude: (1) other income (expense), net, which includes interest (income) expense and foreign currency (gains) losses, (2) (benefit) provision for income taxes, (3) depreciation and amortization, (4) equity-based compensation, and (5) restructuring expenses. Also, Adjusted EBITDA may in the future be adjusted for amounts impacting net income related to the TRA liability and other infrequent and unusual transactions.

Previous wording

Effective March 2022, the Company entered into an amendment to the lease for its corporate headquarters offices to extend the lease term through December 31, 2023 and expand the total square footage from 17,923 square feet to 20,185 square feet which commenced on May 1, 2022. In January 2023, the Company entered into another amendment to the lease and further extended the lease term through December 31, 2026.

Current wording

Effective March 2022, the Company entered into an amendment to the lease for its corporate headquarters offices to extend the lease term through December 31, 2023 and expand the total square footage from 17,923 square feet to 20,185 square feet which commenced on May 1, 2022. In January 2023, the Company entered into another amendment to the lease and further extended the lease term through December 31, 2026. In September 2024, the Company entered into a sublease agreement related to 8,468 square feet of its corporate office, which commenced on October 8, 2024 and ends on December 31, 2026.

Previous wording

We are an “emerging growth company,” as defined in the JOBS Act, and we may take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not “emerging growth companies.” We may take advantage of these exemptions until such time we are no longer an “emerging growth company.” Section 107 of the JOBS Act provides that an “emerging growth company” can take advantage of the extended transition period afforded by the JOBS Act for the implementation of new or revised accounting standards. We have elected to use the extended transition period for complying with new or revised accounting standards and as a result of this election, our financial statements may not be comparable to companies that comply with public company effective dates. We may take advantage of these exemptions up until the last day of the fiscal year following the fifth anniversary of the IPO or such earlier time that we are no longer an emerging growth company. We would cease to be an emerging growth company if any of the following events occur: (i) we have more than $1.235 billion in annual revenue, (ii) we have more than $700.0 million in market value of our Class A common stock held by non-affiliates (and we have been a public company for at least 12 months and have filed one annual report on Form 10-K) or (iii) we issue more than $1.0 billion of non-convertible debt securities over a three-year period.

Current wording

We are an “emerging growth company,” as defined in the JOBS Act, and we may take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not “emerging growth companies.” We may take advantage of these exemptions until we are no longer an “emerging growth company.” Section 107 of the JOBS Act provides that an “emerging growth company” can take advantage of the extended transition period afforded by the JOBS Act for the implementation of new or revised accounting standards. We have elected to use the extended transition period for complying with new or revised accounting standards and as a result of this election, our financial statements may not be comparable to companies that comply with public company effective dates. We may take advantage of these exemptions up until the last day of the fiscal year following the fifth anniversary of the IPO which is December 31, 2026 or such earlier time that we are no longer an emerging growth company. We would cease to be an emerging growth company if any of the following events occur: (i) we have more than $1.235 billion in annual revenue, (ii) we have more than $700.0 million in market value of our Class A common stock held by non-affiliates (and we have been a public company for at least 12 months and have filed one annual report on Form 10-K) or (iii) we issue more than $1.0 billion of non-convertible debt securities over a three-year period.