Zevia Pbc Class A ((ZVIA)) has held its Q1 earnings call. Read on for the main highlights of the call.
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Zevia PBC Strikes an Optimistic but Cautious Tone on Costs
Zevia’s latest earnings call balanced upbeat growth narratives with a sober view on profitability. Management highlighted record revenue growth, a swing back to positive adjusted EBITDA, and strong consumer traction from innovation and marketing. However, persistent cost inflation in aluminum and fuel, along with higher legal expenses, kept the tone grounded, with leaders stressing discipline and liquidity over near-term margin expansion.
Record Sales Growth Marks Strong Top-Line Momentum
Net sales rose 21.2% year over year to $46.1 million in Q1 2026, the fastest pace since Zevia went public. Management framed this as a record sales performance, underscoring broad-based demand across channels and reinforcing the brand’s ability to grow despite a challenging macro backdrop.
Adjusted EBITDA Swings Back Into the Black
Adjusted EBITDA improved to roughly $0.9 million from a loss of $3.3 million a year earlier, marking a return to positive territory. The turnaround signals early success from cost controls and smarter spending, even as structural cost pressures continue to weigh on full-year profitability.
Operating Efficiency Gains Drive Leaner Cost Structure
Selling and marketing expenses fell sharply to 31.5% of net sales from 40.3%, aided by warehousing automation and better timing of campaigns. Selling costs dropped to 20.4% of sales and marketing to 11.2%, hinting at a more scalable model as volume grows.
Cardi B Partnership Supercharges Brand Visibility
Zevia unveiled a high-profile marketing partnership with Cardi B tied to refreshed packaging and innovation launches. The announcement generated about 152 million editorial impressions in the first week and delivered the brand’s highest-ever organic social reach and engagement.
New Flavors Deliver Strong Early Velocity and Incrementality
New fruit-forward flavors like Orange Creamsicle, Fruit Punch, and Peaches and Cream hit shelves in spring resets with strong initial reads. Management cited above-median velocities and incremental sales contributions of 38% and 53% at two major national retailers, signaling genuine category expansion rather than cannibalization.
Distribution Gains and Channel Mix Fuel Growth
The company executed a national rotation at Costco, entered Canadian Walmart, and expanded in-store presence at Kroger, while also benefiting from strong DSD and club activity. E-commerce also showed notable growth, with club and Costco dynamics described as key contributors to Q1’s top-line outperformance.
Liquidity Strength Supports Investment and Flexibility
Zevia ended the quarter with about $26.6 million in cash and equivalents, plus a fully undrawn $20 million revolving credit facility. Management emphasized this liquidity, along with $20 million of cost reductions over two years and further savings identified, as a buffer to manage volatility while funding growth.
Gross Margin Squeezed by Aluminum and Channel Mix
Gross margin declined 170 basis points year over year to 48.4% from 50.1%, largely due to higher aluminum costs. A greater mix of club sales also weighed on margins, highlighting the trade-off between volume growth in price-sensitive channels and unit profitability.
Cost Headwinds Create an $11 Million Profitability Drag
Management quantified a combined $11 million headwind from aluminum and fuel-related costs, up from a prior $5 million estimate with an additional $6 million layered in. These pressures forced a reset of full-year adjusted EBITDA expectations, despite underlying operational improvements.
Fuel and Freight Inflation Adds Ongoing Uncertainty
A spike in diesel and fuel prices late in the quarter pushed freight costs higher and is expected to persist through the year. The company noted a 90–120 day lag before any easing in fuel prices fully flows through, adding timing risk to near-term margin recovery.
Litigation Costs Inflate G&A Spending
General and administrative expense rose to $9.1 million, or 19.7% of net sales, compared with $7.0 million and 18.4% a year ago. About $2.3 million of this, equivalent to 490 basis points of sales, was tied to litigation expense, creating another non-operational drag on profitability.
Full-Year Profitability Outlook Turns Negative Again
Despite the Q1 positive adjusted EBITDA, Zevia now expects full-year adjusted EBITDA between negative $2 million and negative $4 million. The company also guided to a Q2 adjusted EBITDA loss of $0.5 million to $1.0 million, reflecting the cumulative effect of cost inflation and restructuring actions.
Portfolio Rationalization Weighs Slightly on Growth
Zevia plans to discontinue its tea line, which management expects will trim roughly 1.0 to 1.5 percentage points from growth. This adjustment is already baked into the full-year sales outlook and is framed as part of focusing resources on higher-return core products.
Cautious Stance Amid Macro and Execution Risk
Executives flagged macro uncertainty and execution risk around items like additional club rotations and broader distribution wins. They deliberately left some potential upside out of guidance, opting for a conservative approach despite Q1’s strong performance.
Guidance: Higher Sales, Pressured Margins, and Delayed Upside
For 2026, Zevia raised its net sales outlook to $170–$175 million, implying about 7% growth at the midpoint, with Q1 and Q3 expected to be the strongest quarters. However, full-year adjusted EBITDA is now projected at negative $2 million to negative $4 million, incorporating the $11 million aluminum and fuel hit and assuming gross margins around Q1’s 48.4% level.
Zevia also guided Q2 sales to $43–$45 million and an adjusted EBITDA loss that includes about $1 million of restructuring tied to a distribution center move. Management noted that excluding the fuel and aluminum cost shock, adjusted EBITDA would be positive in the mid-single-digit margin range, and they expect another $3–$5 million of cost savings to materialize late in the year or early next year.
Zevia’s earnings call painted a picture of a fast-growing brand finding its footing on profitability in a tough cost environment. Investors heard a mix of strong demand, disciplined spending, and strategic marketing weighed against commodity and freight inflation, litigation, and portfolio pruning, leaving the story one of solid growth with deferred earnings leverage.