Zevia PBC (NYSE:ZVIA) Reports Sales Below Analyst Estimates In Q1 Earnings, Stock Drops

Adam Hejl /
2024/05/08 7:38 am EDT

Beverage company Zevia (NYSE:ZVIA) fell short of analysts' expectations in Q1 CY2024, with revenue down 10.4% year on year to $38.8 million. Next quarter's revenue guidance of $39 million also underwhelmed, coming in 15.8% below analysts' estimates. It made a GAAP loss of $0.10 per share, down from its loss of $0.04 per share in the same quarter last year.

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Zevia PBC (ZVIA) Q1 CY2024 Highlights:

  • Revenue: $38.8 million vs analyst estimates of $39.43 million (1.6% miss)
  • EPS: -$0.10 vs analyst expectations of -$0.10 (in line)
  • Revenue Guidance for Q2 CY2024 is $39 million at the midpoint, below analyst estimates of $46.33 million
  • Gross Margin (GAAP): 45.7%, down from 46.4% in the same quarter last year
  • Free Cash Flow was -$3.24 million compared to -$6.67 million in the previous quarter
  • Sales Volumes were down 10.4% year on year
  • Market Capitalization: $60.51 million

“First quarter results were in line with our expectations as we continued to encounter top-line headwinds stemming from the fulfillment challenges we faced in 2023,” 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 11.1% over the last three years was decent for a consumer staples business.

Zevia PBC Total Revenue

This quarter, Zevia PBC missed Wall Street's estimates and reported a rather uninspiring 10.4% year-on-year revenue decline, generating $38.8 million in revenue. The company is guiding for a 7.7% year-on-year revenue decline next quarter to $39 million, a further deceleration from the 7.2% year-on-year decrease it recorded in the same quarter last year. Looking ahead, Wall Street expects sales to grow 11.3% 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 average quarterly volume growth was a healthy 3.5% over the last two years. This is pleasing because it shows consumers are purchasing more of its products.

Zevia PBC Year-On-Year Volume Growth

In Zevia PBC's Q1 2024, sales volumes dropped 10.4% year on year. This result was a reversal from the 2.7% year-on-year increase it posted 12 months ago. A one quarter hiccup shouldn't deter you from investing in a business. We'll be monitoring the company to see how things progress.

Key Takeaways from Zevia PBC's Q1 Results

It was good to see Zevia PBC beat analysts' gross margin expectations this quarter. On the other hand, its full-year revenue guidance missed analysts' expectations and its revenue guidance for next quarter missed Wall Street's estimates. Overall, this was a mediocre quarter for Zevia PBC. The company is down 9.1% on the results and currently trades at $0.95 per share.

Zevia PBC may have had a tough quarter, but does that actually create an opportunity to invest 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.