10-Q: Zevia PBC Reports Q3 2025 Results, 9-Month Profitability Improves

Zevia PBC announced its third-quarter and nine-month results for 2025, showing increased net sales and significant improvement in nine-month profitability, despite a slight dip in Q3 net loss and gross margin.

Summary

• Net sales increased by 12.3% to $40.8 million for the three months ended September 30, 2025, compared to $36.4 million in the prior-year period.
• For the nine months ended September 30, 2025, net sales grew by 6.7% to $123.4 million, up from $115.6 million in the same period of 2024.
• Equivalized cases sold rose by 13.8% to 3.3 million in Q3 2025 and by 8.9% to 9.7 million for the nine months ended September 30, 2025.
• Gross profit increased by 4.3% to $18.6 million in Q3 2025, but gross margin decreased to 45.6% from 49.1% due to higher inventory write-downs, unfavorable unit costs from tariffs, and channel mix.
• For the nine-month period, gross profit increased by 13.0% to $59.3 million, and gross margin improved to 48.1% from 45.4%.
• Net loss attributable to Zevia PBC for Q3 2025 was $(2.7) million, a 6.3% worsening from $(2.5) million in Q3 2024.
• Net loss attributable to Zevia PBC for the nine months ended September 30, 2025, significantly improved by 39.5% to $(8.6) million, compared to $(14.2) million in the prior-year period.
• Adjusted EBITDA for Q3 2025 was $(1.7) million, a 14.1% decline from $(1.5) million in Q3 2024.
• Adjusted EBITDA for the nine months ended September 30, 2025, improved by 58.1% to $(4.8) million, compared to $(11.3) million in the prior-year period.
• The Productivity Initiative, which included a workforce reduction in Q1 2025, incurred $2.2 million in restructuring costs for the nine months ended September 30, 2025, and is expected to generate approximately $20.0 million in annualized benefits.
• Cash and cash equivalents decreased to $26.0 million as of September 30, 2025, from $30.7 million at December 31, 2024.
• The company entered into an Equity Distribution Agreement on August 12, 2025, to sell up to $20 million of Class A common stock through an at-the-market offering, but no shares were issued under this agreement during Q3 2025.
• No amount was outstanding on the $20 million Secured Revolving Line of Credit as of September 30, 2025, and the company was in compliance with its financial covenant.

Sentiment

Score: 6

Explanation: The filing presents a mixed but generally positive outlook, with strong nine-month improvements in key profitability metrics and sales growth, driven by strategic initiatives. However, the most recent quarter showed a slight worsening of net loss and gross margin, coupled with ongoing macroeconomic headwinds like tariffs and inflation, and a decrease in cash reserves. The potential for future capital raise via ATM offering and significant customer/vendor concentration also add elements of caution.

Positives

• Net sales increased by 12.3% in Q3 2025 and 6.7% for the nine months ended September 30, 2025, demonstrating continued revenue growth.
• Equivalized cases sold increased by 13.8% in Q3 2025 and 8.9% for the nine months, indicating strong volume growth.
• Gross profit increased by 4.3% in Q3 2025 and 13.0% for the nine months, reflecting overall growth in product sales.
• Gross margin for the nine months ended September 30, 2025, improved to 48.1% from 45.4%, driven by favorable unit costs and selling price increases.
• Loss from operations significantly improved by 40.6% for the nine months ended September 30, 2025, to $(10.3) million.
• Net loss attributable to Zevia PBC improved by 39.5% for the nine months ended September 30, 2025, to $(8.6) million.
• Adjusted EBITDA showed a substantial improvement of 58.1% for the nine months ended September 30, 2025, reaching $(4.8) million.
• The Productivity Initiative is expected to result in estimated annualized benefits of approximately $20.0 million, with restructuring charges completed as of September 30, 2025.
• The company is in compliance with its financial covenant under the Secured Revolving Line of Credit, which has no outstanding balance.

Negatives

• Net loss attributable to Zevia PBC worsened by 6.3% to $(2.7) million for the three months ended September 30, 2025, compared to the prior-year period.
• Gross margin decreased to 45.6% in Q3 2025 from 49.1% in Q3 2024, primarily due to higher inventory write-downs, unfavorable unit costs (tariffs), and channel mix.
• Cash and cash equivalents decreased by $4.6 million from December 31, 2024, to September 30, 2025, indicating cash usage.
• Net cash used in operating activities was $(4.2) million for the nine months ended September 30, 2025.
• Cost of goods sold increased by 20.0% in Q3 2025, partly due to higher write-downs and unfavorable unit costs driven by tariffs.
• Marketing expenses increased significantly by 40.8% in Q3 2025 and 49.9% for the nine months, reflecting higher investment in brand awareness.
• The company faces significant customer concentration, with Customer A, C, and J each accounting for more than 10% of net sales in Q3 2025, and Customer J representing 34% of accounts receivable.
• There is significant vendor concentration, with Vendor D, E, and F each accounting for more than 10% of raw material and finished goods purchases.

Risks

• Inability to compete effectively in the intensely competitive beverage industry.
• Failure to further develop, maintain, and promote the Zevia brand.
• Changes in the retail landscape or the loss of key retail customers.
• Shifts in consumer preferences, perception, and spending habits, particularly due to inflation and demand for zero-sugar products.
• Product safety and quality concerns, including those related to the sweetening system, potentially leading to lawsuits, recalls, or regulatory actions.
• Fluctuations in net sales and earnings due to price concessions, promotional activities, and chargebacks.
• Loss of any registered trademark or other intellectual property, or claims of infringement.
• History of losses and potential inability to achieve or maintain profitability.
• Failure to attract, hire, train, or retain qualified personnel, manage future growth, or maintain company culture.
• Impact of adverse global macroeconomic conditions, including high interest rates, recession fears, inflationary pressures, government shutdowns, and geopolitical events.
• Climate change, adverse weather conditions, natural disasters, and other natural conditions affecting operations.
• Difficulties and challenges associated with expansion into new markets.
• Inability to obtain raw materials (e.g., stevia, aluminum cans) on a timely basis or in sufficient quantities due to reliance on a limited number of third-party suppliers.
• Trade tensions between the U.S. and China, and changes in trade policies, including tariffs on steel, aluminum, and other imports, which increase operating costs.
• Substantial disruption within the supply chain or distribution channels, including at contract manufacturers, warehouses, and transportation providers.
• Extensive governmental regulation and enforcement, and changes in laws related to beverage containers, packaging, marketing, and labeling.
• Dependence on distributions from Zevia LLC to pay taxes and other expenses, including obligations under the Tax Receivable Agreement (TRA).
• Failure to maintain compliance with NYSE continued listing standards, potentially leading to delisting.
• Impact from status, duty, and liability exposure as a public benefit corporation.
• Inadequacy, failure, interruption, or security breaches of information technology systems and failure to comply with data privacy laws.
• The potential for substantial future payments under the Tax Receivable Agreement (TRA), estimated at $58.6 million through 2040 if tax benefits are fully realized, which could impact liquidity.
• Uncertainty regarding the exemption of Canadian production from U.S. tariffs under the United States-Mexico-Canada Agreement (USMCA).

Future Outlook

The company expects future growth to be driven by new distribution, increased organic sales from existing outlets, package and product innovation, and continued pricing strength. Seasonality is anticipated to continue, with higher net sales in the second and third fiscal quarters. Cost of goods sold is expected to increase in absolute dollars but decrease as a percentage of net sales over time due to the Productivity Initiative and efficiency improvements. Marketing investments are projected to increase to build brand awareness, partially funded by savings from the Productivity Initiative, while general and administrative expenses are expected to remain relatively flat as a percentage of net sales. The company believes its current cash and credit facility will provide adequate liquidity for operations and investments beyond the next 12 months, and anticipates funding Tax Receivable Agreement payments from cash flows generated from operations over a 15-year period.

Management Comments

• We continue to monitor macroeconomic trends and uncertainties such as key ingredient inflation, the shutdown of the U.S. government, the effects of tariffs, and the potential imposition of modified or additional tariffs, which may adversely affect our net sales and profitability.
• 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.
• Looking forward, we intend to balance reinvesting savings to help drive revenue growth with our plans for achieving profitability.
• We significantly increased our investment in marketing in the first nine months of 2025, in order to help build our brand, with a focus on driving trial and customer conversions.
• We expect marketing investments in the fourth quarter of 2025 to decline compared to the fourth quarter of 2024 due to an opportunistic marketing investment made in the prior year.

Industry Context

Zevia PBC operates in an intensely competitive and rapidly changing beverage industry, focusing on the 'better-for-you' segment with zero-sugar, naturally sweetened products to address global health challenges from excess sugar consumption. The company notes a complex and challenging retail environment due to widespread inflation, high interest rates, and recession fears, which have led to consumers reducing discretionary spending. In response to these pressures, Zevia, like its competitors, has increased product pricing, which could potentially impact future sales volumes. The company's strategy involves leveraging its brand and mission to grow market share amidst these challenging conditions.

Legal Proceedings

• The company is not subject to any material legal proceedings.

Related Party Transactions

• The company entered into a Tax Receivable Agreement (TRA) with continuing members of Zevia LLC and shareholders of blocker companies, requiring payments for 85.0% of realized tax benefits from certain tax attributes and basis increases. The TRA liability that would be recognized if associated tax benefits were fully realizable totaled $58.6 million as of September 30, 2025.

Stakeholder Impact

• Shareholders: Experience continued losses but also significant improvements in nine-month profitability and sales growth. The ATM offering could lead to dilution.
• Employees: A workforce reduction was implemented in Q1 2025 as part of the Productivity Initiative.
• Customers: Benefit from expanded distribution and increased promotional activity.
• Suppliers: The company is diversifying its stevia extract suppliers to mitigate risks, but still relies on a limited number of third-party suppliers for raw materials and manufacturing.
• Creditors: The company is in compliance with its financial covenant for the Secured Revolving Line of Credit, indicating good standing with lenders.

Next Steps

• Continue to realize estimated annualized benefits of approximately $20.0 million from the Productivity Initiative through 2026.
• Balance reinvesting savings from the Productivity Initiative into brand marketing and promotional activity with plans for achieving profitability.
• Drive growth and innovation in highest margin carbonated better-for-you beverages.
• Grow brand awareness, increase velocity, and expand the consumer base.
• Retain and expand distribution amongst new and existing channels, both in-store and online.
• Continue innovation efforts and enhancement of existing products.
• Diversify sources of supply for stevia leaf extract and aluminum cans to mitigate price and supply disruptions.
• Evaluate the impact of recently issued accounting pronouncements (ASU No. 2023-09, ASU No. 2024-03, ASU No. 2025-06).

Key Dates

Recommendation

While Zevia PBC demonstrated strong sales growth and significant improvements in nine-month profitability metrics (loss from operations, net loss, Adjusted EBITDA), the most recent quarter showed a slight worsening of net loss and a decline in gross margin due to inventory write-downs and tariffs. The Productivity Initiative is a positive long-term driver, but macroeconomic headwinds, cash burn from operations, and customer/vendor concentration present ongoing challenges. The ATM offering introduces potential dilution. Given the mixed short-term performance against positive long-term strategic execution, a 'hold' recommendation is appropriate, suggesting investors monitor the continued realization of Productivity Initiative benefits and the impact of macroeconomic factors on gross margin and cash flow.

Keywords

Zevia PBC, ZVIA, Quarterly Report, 10-Q, Financial Results, Beverage Company, Zero Sugar, Naturally Sweetened, Soft Drinks, Energy Drinks, Tea, SEC Filing, Financial Performance, Gross Margin, Net Sales, Profitability, Productivity Initiative, Tariffs, Supply Chain, Macroeconomic Conditions, Equity Distribution Agreement, Capital Raise, Sarbanes-Oxley Act