Zevia PBC

Previous wording

Key Events During the First Quarter of 2025

Current wording

Key Events During the First Half of 2025

Previous 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.

Current wording

Costs associated with the Productivity Initiative, including restructuring costs, were $31 thousand and $2.2 million during the three and six months ended June 30, 2025, respectively, primarily consisting of employee related severance costs.

Previous 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.

Current wording

The Productivity Initiative is expected to result in estimated annualized benefits of approximately $20.0 million, and we began seeing these benefits in the second half of 2024 and expect the savings to continue to be realized in 2025 and through 2026. 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

We continue to monitor macroeconomic trends and uncertainties such as key ingredient inflation, the effects of recently implemented tariffs, and the potential imposition of modified or additional tariffs, which may adversely affect our net sales and profitability. As a result of the rapid changes in global trade policies, including the tariffs announced by the U.S. presidential administration on April 2, 2025, and potential tariff modifications or the imposition of tariffs, export controls or other retaliatory actions by other countries, we anticipate increased supply chain challenges, commodity cost volatility, and consumer and economic uncertainty. This has also created a complex and challenging retail environment for us as consumers reduce discretionary spending. A decline in consumer spending may have an adverse effect on our revenues, margins, and operating results. We, along with our competitors, have increased pricing on a number of products in response to widespread inflation, which could be exacerbated as a result of the tariffs. These pricing increases may result in future reductions in volume.

Current wording

We continue to monitor macroeconomic trends and uncertainties such as key ingredient inflation, the effects of tariffs, and the potential imposition of modified or additional tariffs, which may adversely affect our net sales and profitability. As a result of the rapid changes in global trade policies, including tariffs, and potential tariff modifications or the imposition of tariffs, export controls or other retaliatory actions by other countries, we have experienced and anticipate continuing to experience increased supply chain challenges, commodity cost volatility, and consumer and economic uncertainty. This has also created a complex and challenging retail environment for us as consumers reduce discretionary spending. A decline in consumer spending may have an adverse effect on our revenues, margins, and operating results. We, along with our competitors, have increased pricing on a number of products in response to widespread inflation, which could be exacerbated as a result of the tariffs. These pricing increases may result in future reductions in volume.

Previous wording

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

Current wording

The following summarizes the components of our results of operations for the three and six months ended June 30, 2025 and 2024, respectively.

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 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.

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.

Previous wording

We 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 throughout 2025. 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 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 throughout 2025.

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. 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.

Current wording

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

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.

Current wording

Excluding the 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

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.

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 half 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

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.

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. Restructuring charges related to the Productivity Initiative were substantially complete as of June 30, 2025.

Previous 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.

Current wording

Net sales were $44.5 million for the three months ended June 30, 2025 as compared to $40.4 million for the three months ended June 30, 2024. Equivalized cases sold were 3.5 million during the three months ended June 30, 2025 as compared to 3.1 million during the three months ended June 30, 2024. The increase in net sales was primarily due to a 14.3% increase in the number of equivalized cases sold, which resulted in $5.8 million higher net sales largely the result of expanded distribution at one customer in the mass channel and one customer in the drug channel, and pricing increases of $0.3 million, partially offset by higher allowance for incentives and discounts of $2.0 million resulting from greater promotional levels at retailers. We define an equivalized case as a 288 fluid ounce case.

Previous 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.

Current wording

Cost of goods sold was $22.8 million for the three months ended June 30, 2025 as compared to $23.5 million for the three months ended June 30, 2024. The decrease of $0.7 million, or 2.8%, was largely due to lower write-downs related to excess and obsolete inventory of $2.0 million, and favorable unit costs of $1.7 million driven by the Productivity Initiative, which was partially offset by increased volumes which resulted in $3.1 million higher cost of goods sold.

Previous 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.

Current wording

Gross profit was $21.7 million for the three months ended June 30, 2025 as compared to $16.9 million for the three months ended June 30, 2024. The increase in gross profit of $4.7 million, or 6.8%, was primarily due to higher volumes, favorable unit costs, selling price increases and lower inventory write-downs, partially offset by increased spend on promotional activity and channel mix.

Previous 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.

Current wording

Gross margin for the three months ended June 30, 2025 improved to 48.7% from 41.9% in the prior-year period. The increase was primarily due to lower inventory write-downs, favorable unit costs, and selling price increases, partially offset by increased spend on promotional activity and channel mix.

Previous wording

Selling and marketing expenses were $15.3 million for the three months ended March 31, 2025 as compared to $15.1 million for the three months ended March 31, 2024. Marketing expenses were $6.2 million for the three months ended March 31, 2025 as compared to $2.7 million for the three months ended March 31, 2024, an increase of $3.5 million, or 125.6%. Selling expenses were $9.1 million for the three months ended March 31, 2025 as compared to $12.3 million for the three months ended March 31, 2024, a decrease of $3.2 million, or 25.8%.

Current wording

Selling and marketing expenses were $13.4 million for the three months ended June 30, 2025 as compared to $13.6 million for the three months ended June 30, 2024. Marketing expenses were $4.7 million for the three months ended June 30, 2025 as compared to $4.3 million for the three months ended June 30, 2024, an increase of $0.4 million, or 9.6%. Selling expenses were $8.7 million for the three months ended June 30, 2025 as compared to $9.3 million for the three months ended June 30, 2024, a decrease of $0.6 million, or 7.1%.

Previous wording

The increase in marketing expense of $3.5 million was driven by investments made to drive brand awareness, which was funded by the savings in direct selling expenses as a result of the Productivity Initiative.

Current wording

The increase in marketing expense of $0.4 million was driven by investments made to drive brand awareness, which was funded by the savings in direct selling expenses as a result of the Productivity Initiative.

Previous wording

The decrease in selling expenses of $3.2 million was primarily due to decreases in freight transfer costs of $1.3 million, warehousing costs of $1.3 million, and repackaging costs of $0.5 million, largely driven by the Productivity Initiative.

Current wording

The decrease in selling expenses of $0.6 million was primarily due to decreases in freight transfer costs of $0.7 million and warehousing costs of $0.5 million largely driven by the Productivity Initiative, partially offset by an increase in distribution fees of $0.4 million and freight out costs of $0.2 million driven by increased volumes.

Previous 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.

Current wording

Equity-based compensation expenses were $1.0 million for the three months ended June 30, 2025 as compared to $1.4 million for the three months ended June 30, 2024, primarily related to outstanding equity-based awards being recognized over the remaining service periods of the awards. The decrease of $0.4 million was primarily driven by a $0.5 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 $2.1 million for the three months ended March 31, 2025 which primarily includes employee related severance costs.

Current wording

Restructuring expenses were $31 thousand for the three months ended June 30, 2025, as compared to $0.9 million for the three months ended June 30, 2024. The restructuring expenses primarily includes employee related severance costs.

Previous 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.

Current wording

As of June 30, 2025, we had $26.3 million in cash and cash equivalents. We believe that our cash and cash equivalents as of June 30, 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, 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.

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, tariffs as well as changes in tariff or U.S. foreign trade policies, relatively high interest rates, volatility in the financial markets, recession fears, 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 $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.

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 $68.9 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 $58.6 million, through 2040.

Previous 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.

Current wording

Net cash used in operating activities of $4.3 million for the six months ended June 30, 2025 was primarily driven by a net loss of $7.0 million, partially offset by non-cash expenses of $2.5 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 $0.2 million. Changes in cash flows related to operating assets and liabilities were primarily due to a decrease in inventories of $2.9 million due to decreased production of inventory as inventory levels are managed partially offset by an increase in accounts receivable of $2.3 million largely due to the increase in net sales, a net decrease in accounts payable, accrued expenses and other current liabilities of $0.2 million due to timing of purchases and decreased production of inventory.

Previous 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.

Current wording

Net cash used in operating activities of $2.9 million for the six months ended June 30, 2024 was primarily driven by a net loss of $14.2 million, partially offset by non-cash expenses of $4.0 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 $7.3 million. Changes in cash flows related to operating assets and liabilities were primarily due to a decrease in inventories of $12.3 million due to decreased production of inventory as inventory levels are managed as well as higher inventory reserves, decreased prepaid expenses and other assets of $2.1 million largely due to a decrease in prepaid deposits related to the sale of raw materials, partially offset by a decrease in accounts payable, accrued expenses and other current liabilities of $6.6 million due to timing of purchases and decreased production of inventory, and an increase in accounts receivable of $0.2 million due to timing of payments.

Previous wording

Net cash used in investing activities of less than $0.1 million for the three months ended March 31, 2025 was primarily due to purchases of computer equipment and quality control equipment used in ongoing operations.

Current wording

Net cash used in investing activities of less than $45 thousand for the six months ended June 30, 2025 was primarily due to purchases of computer equipment and quality control equipment used in ongoing operations.

Previous 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.

Current wording

Net cash used in investing activities of $0.1 million for the six months ended June 30, 2024 was primarily due to purchases of property, equipment, and software of $0.1 million for computer equipment, marketing fixtures, and software used in ongoing operations.

Previous 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.

Current wording

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