Zevia PBC's (NYSE:ZVIA) Q2: Beats On Revenue But Quarterly Guidance Underwhelms
Beverage company Zevia (NYSE:ZVIA) reported Q2 CY2024 results beating Wall Street analysts' expectations , with revenue down 4.3% year on year to $40.43 million. On the other hand, next quarter's revenue guidance of $38.5 million was less impressive, coming in 13.1% below analysts' estimates. It made a GAAP loss of $0.10 per share, down from its loss of $0.08 per share in the same quarter last year.
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Zevia PBC (ZVIA) Q2 CY2024 Highlights:
Revenue: $40.43 million vs analyst estimates of $38.94 million (3.8% beat)
EPS: -$0.10 vs analyst expectations of -$0.09 (6.4% miss)
Revenue Guidance for Q3 CY2024 is $38.5 million at the midpoint, below analyst estimates of $44.29 million
The company reconfirmed its revenue guidance for the full year of $162 million at the midpoint
Gross Margin (GAAP): 41.9%, down from 46.6% in the same quarter last year
EBITDA Margin: -10.8%, down from -6.2% in the same quarter last year
Free Cash Flow was -$3.01 million compared to -$3.24 million in the previous quarter
Sales Volumes rose 5.9% year on year (16.8% in the same quarter last year)
Market Capitalization: $52.36 million
“We delivered net sales above our guidance in the second quarter, and scan sales reflect accelerating retail growth trends through the quarter and into July,” said Amy Taylor, President and Chief Executive Officer.
With a primary focus on soda but also a presence in energy drinks and teas, Zevia (NYSE:ZVIA) is a better-for-you beverage company.
Beverages and Alcohol
These companies' performance is influenced by brand strength, marketing strategies, and shifts in consumer preferences. Changing consumption patterns are particularly relevant and can be seen in the explosion of alcoholic craft beer drinks or the steady decline of non-alcoholic sugary sodas. Companies that spend on innovation to meet consumers where they are with regards to trends can reap huge demand benefits while those who ignore trends can see stagnant volumes. Finally, with the advent of the social media, the cost of starting a brand from scratch is much lower, meaning that new entrants can chip away at the market shares of established players.
Sales Growth
Zevia PBC is a small consumer staples company, which sometimes brings disadvantages compared to larger competitors benefitting from better brand awareness and economies of scale.
As you can see below, the company's annualized revenue growth rate of 8.6% over the last three years was decent for a consumer staples business.
This quarter, Zevia PBC's revenue fell 4.3% year on year to $40.43 million but beat Wall Street's estimates by 3.8%. The company is guiding for a 10.7% year-on-year revenue decline next quarter to $38.5 million, a further deceleration from the 2.6% year-on-year decrease it recorded in the same quarter last year. Looking ahead, Wall Street expects sales to grow 6.9% over the next 12 months, an acceleration from this quarter.
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Volume Growth
Revenue growth can be broken down into changes in price and volume (the number of units sold). While both are important, volume is the lifeblood of a successful staples business as there’s a ceiling to what consumers will pay for everyday goods; they can always trade down to non-branded products if the branded versions are too expensive.
Zevia PBC's quarterly sales volumes have, on average, stayed about the same over the last two years. This stability is normal because the quantity demanded for consumer staples products typically doesn't see much volatility.
In Zevia PBC's Q2 2024, sales volumes jumped 5.9% year on year. By the company's standards, this result was a meaningful deceleration from the 16.8% year-on-year increase it posted 12 months ago. We'll be watching Zevia PBC closely to see if it can reaccelerate demand for its products.
Key Takeaways from Zevia PBC's Q2 Results
We enjoyed seeing Zevia PBC exceed analysts' revenue expectations this quarter. On the other hand, its revenue guidance for next quarter missed analysts' expectations and its gross margin missed Wall Street's estimates. Overall, this was a mixed quarter for Zevia PBC. The stock remained flat at $0.90 immediately after reporting.
So should you invest in Zevia PBC right now? When making that decision, it's important to consider its valuation, business qualities, as well as what has happened in the latest quarter. We cover that in our actionable full research report which you can read here, it's free.