Greetings, and welcome to the Zevia PBC Fourth Quarter and Full Year 2025 Earnings Call. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Jean Fontana, Investor Relations. Thank you. You may begin.

Thank you, and welcome to Zevia's Fourth Quarter and Full Year 2025 Earnings Conference Call. On today's call are Amy Taylor, President and Chief Executive Officer; and Girish Satya, Chief Financial Officer and Principal Accounting Officer. By now, everyone should have access to the company's fourth quarter 2025 earnings press release, and investor presentation made available this afternoon. This information is available on the Investor Relations section of Zevia's website at investors.zevia.com. Before we begin, please note that all financial information presented on today's call is unaudited. Certain comments made on this call include forward-looking statements, which are subject to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. These forward-looking statements are based on management's current expectations and beliefs concerning future events and are subject to a number of risks and uncertainties that could cause actual results to differ materially from those described in these forward-looking statements. Please refer to today's press release and other filings with the SEC for a detailed discussion of the risks that could cause actual results to differ materially from those expressed or implied in any forward-looking statements made today. During the call, we will use some non-GAAP financial measures as we describe business performance. The SEC filings as well as the earnings press release, presentation slides that accompany today's comments and reconciliation of the non-GAAP financial measures to the most directly comparable GAAP financial measures are all available on our website at investors.zevia.com. And now I'd like to turn the call over to Amy Taylor.

Thank you, Jean. Good afternoon, everyone, and thank you for joining our fourth quarter and full year 2025 earnings conference call. We are proud of the transformation progress we delivered in 2025. Through a series of high-impact initiatives spanning product innovation, marketing, distribution and supply chain, we not only significantly improved our financial performance, but also strengthened Zevia's competitive positioning within the better-for-you soda category. But before I speak to strategy, I'll briefly highlight our performance. For 2025, we delivered net sales growth of 4% and improved adjusted EBITDA threefold to negative $4.7 million. For the fourth quarter, net sales decreased 4% to $37.9 million as we lapped the pipeline fill to Walmart from last November and December. Net sales for the quarter were impacted by a shift of our Costco rotation into January. Importantly, this program was a national one with premium in-store positioning reaching beyond our regional footprint and driving trial and awareness in underdeveloped and fast-growing markets. Adjusted EBITDA for the fourth quarter reached breakeven and was ahead of our expectations. So turning to the 3 strategic pillars that enabled this progress. I'll start with amplified marketing. Our improved performance for the year was supported by powerful marketing that clearly differentiated Zevia as the antidote to the artificial, and as a product with no fake ingredients and no fake claims. Key campaigns showcase Zevia's use of creative culturally relevant content and high-profile brand fans to boost brand awareness, reinforce our positioning and appeal to consumers that are just trying to do a little bit better with healthier choices. For our second growth pillar, product innovation, 2025 was a breakthrough year. We introduced on-trend fruity flavors such as Strawberry Lemon Burst and retailer exclusive Orange Creamsicle, both of which strongly resonated with consumers. We also began to elevate…

Thank you, Amy. Good afternoon, everyone, and thanks for joining our call today. 2025 marked a year of transformation for Zevia. The strategic initiatives we deployed across the business enabled us to return to growth and vastly improve our financial profile. Beyond the strengthening of our financial position, we've also elevated our competitive positioning, which sets the foundation to drive future growth and profitability. Turning to our results. Net sales in the fourth quarter decreased 4% to $37.9 million. The decrease versus the prior year was primarily due to lapping of the expanded distribution at Walmart in Q4 2024 as well as a reduction in promotional activity versus the prior year. Also, as Amy noted, our fourth quarter was impacted by the trade-up of our existing regional Costco rotation to a new national rotation program launched in January. This new program entails front of store placement, raising visibility for the brand as our new 30k variety pack becomes available nationwide. Gross margin was 47.7%, a 150 basis points decline from 49.2% in the fourth quarter of last year, reflecting channel mix associated with the return to the club channel and higher tariff costs, which was offset by lower promotional activity. Selling and marketing expenses were $11 million or 29.1% of net sales in the fourth quarter of 2025 compared to $16.5 million or 41.7% of net sales in the fourth quarter of 2024. Breaking it down, selling expense was $7.4 million or 19.5% of net sales in the fourth quarter of 2025 compared to $10 million or 25.3% of net sales in the fourth quarter of 2024. The improvement was largely a result of lower warehousing and freight transfer costs as we continue to benefit from our productivity initiatives. Marketing expense was $3.6 million or 9.6% of net sales in…

[Operator Instructions] Our first question comes from Sarang Vora with Telsey Advisory Group.

I wanted to start with the Costco rotation program. It's great to see that you guys are nationally up from regionally before. So how does the program work? Can you help us understand, is it nationally, but it is still rotational or you guys -- Zevia will be at Costco all through the year? Any color on the Costco program would be helpful.

Sure. No problem. Yes, we're excited about the fact that we are able to kick off nationally at Costco through what is a rotation that took place at the beginning of the year, stronger visibility for the brand and almost most importantly, penetration into regions where we haven't had Costco distribution before. So what we expect going forward is in a couple of regions, if you think Texas and some across the South, the Southwest, there's a number of regions where they've never carry Zevia before. We saw very strong velocities, and we expect to continue in those regions, whether through additional regional rotations or hopefully as a new permanent item, which is the case in a few other regions. And then the other opportunity is to reengage with Costco based on the success of the program to look at incremental national rotations in the future. So there's a couple of different ways forward, Song. We could gain new regions permanently or we could gain incremental rotations either regionally or nationally based on what appears to be very strong performance out of the gates in the January program.

Okay. That's great. And then second question I had was about the tariffs. Can you talk a little bit about exposure to tariff? I know you called it out about $5 million, but how are you mitigating that in some ways? It seems like there's a price increase coming up or trying to offset that. There's also some COGS initiatives you have. So walk us through how are you mitigating that tariff exposure and how long it should last in the P&L? I know we started lapping it this year, so that would be helpful.

Sure. So what we'll see in the P&L, of course, is increased exposure to increased aluminum costs, which is reflected in our guide. There's 2 things that we are doing to mitigate it. One, of course, as you mentioned, is the price increase, which we have taken and we will begin to see or have communicated rather, and we'll begin to see the impact of it in Q2. Secondly, we have the incremental $5 million, which is the last tranche of the savings from the productivity initiative, which again will also start hitting the P&L in Q2 as well. And so those 2 items, price and incremental costs are the main factors that we are leveraging to mitigate the increased aluminum exposure.

Our next question comes from Jim Salera with Stephens.

To start off, maybe just a quick housekeeping on food. Is the $1 million or so that you guys came up short of the 4Q top line guide that you provided in 3Q, is that just by virtue of the Costco timing shift? Or is there anything else in there that we should be aware of?

It's primarily due to the Costco timing shift where we had planned -- we had planned regional rotations in Q4. We moved those into a broader national rotation in Q1. So the volume shifted from Q4 to Q1.

Got it. And then on the -- as we think about better visibility, obviously, more locations in Costco and some other retailers, when is all of the new packaging going to be in market? And do you guys have any marketing programs kind of around having the kind of fully implemented new packaging to help drive some visibility and maybe call attention to that?

Absolutely. Thanks, Jim. So first of all, the packaging is starting to show up on shelf now, and it looks amazing. It really pops. It looks delicious. It screens the specific reasons to believe in Zevia. And I think that is tremendous support for our positioning in the market, especially given the advantage that we offer versus our competition, especially against which we are shelves now on a regular basis, given the way that the category has developed. So it looks great on shelf where you'll see it flow through because we are doing what we call a rolling launch is largely into Q2. And I mentioned in prepared remarks that we have a heavily digital campaign, some of which will be showing up at retail in March kind of at a brand level. But more specifically in parallel to the packaging rollout, our improved taste will be rolling out at the same time across legacy -- some of our classic flavors. And we have a spring/summer marketing campaign, which I'm going to speak about a little bit more on the next call, which will engage some pretty familiar faces and high-impact reach personalities that love Zevia. And it's just a great opportunity to drive reach, awareness, trial and then given the fantastic new taste and the rate of innovation that we've been driving lately also repeat. So we are bullish on the summer. That will start really hitting the shelves and hitting the market late Q2 and support the business through the back half of the year and going forward.

Great. And if I can just sneak one in real quick. I think you guys finished with marketing spend for 2025 at like $20 million, maybe a little shy of that. Can you just give us a sense for what overall marketing spending looks like in 2026 as we think about kind of the balance between flowing through some of the cost savings versus reinvesting in visibility for the brand?

Yes. Thanks, Jim. We will continue to increase investment in marketing. And as a percentage of revenue, it will range between, let's call it, 12% and 13% of revenue in 2026. So a slight increase over 2025 as a percentage of revenue.

Our next question comes from Eric Des Lauriers with Craig-Hallum.

First one for me, another follow-up on Costco. So wondering how many of these regions are new? And are any of these regions -- are you also underpenetrated in other channels in these regions? Or is it sort of just club or just Costco where you've been relatively underpenetrated here?

Sure, Eric. So about a little bit of each. So the regions that have never carried Zevia before, are about 35%, 40% of the regions that we showed have been in this national program. So that's net new, and that's exciting to us from a trial driving perspective, especially when you think about the fact that it's a variety pack and everybody can kind of find their favorite flavor, that trial driving mechanism often supports growth across channels and brings people into the franchise for the first time. A lot of incrementality in the club business. And then to answer the second part of your question, yes, a region like Texas, where we see accelerated velocities in the national program is exciting to think about how our business could grow across channels. If you think about Texas and go East, we have lower market penetration on the East Coast than we do, let's say, in the Midwest and across the West Coast. So these step changes really help us to expand reach and help to be a catalyst for other channels as well and other specific geographies. So excited about the Southeast, Texas and the East Coast in general as benefiting from this national program.

That's great to hear. And do any of the flavors in that variety pack contain either any of your new flavors or the new improved formulation?

New flavors as of now, yes, new as of 2025 and new taste profile for the classic flavors, not yet. And so think about the pack design, the increase in marketing spend sort of seasonally and the improved taste profile, all ramping up during peak beverage season, so late spring.

That's great to hear. And then just last one for me. Just wondering if you could expand a bit on the DSD market, Pacific Northwest, and I believe it was Arizona, just how the trends there continue.

Sure. So we are learning that time in market with a DSD operator yields some stronger results, meaning we are really starting to crack through distribution of display in grocery from our DSD partners. And so we see grocery in our DSD markets outperforming rest of market. And very new news, we're starting to see some of our singles programs perform better than they have in the past because of what we're able to execute, again, in grocery with our DSD partners help. And so we're leveraging some of those insights when we think about how do we drive trial and specifically how do we drive singles success through the spring and summer with the marketing and packaging rollout that you and I were just discussing. Convenience is more of a long-term opportunity. I believe that, that's true for the category in general as we think about the fit of the shopper in the convenience environment to the category and its promise. It will just take a little more time. But our DSD partners are able to help us to test and learn in some regional pilots, and we continue to do that with a few success stories that help us to learn what exactly sets the brand up for success at these early stages in the channel.

Our next question comes from Andrew Strelzik with BMO Capital Markets.

My first one, I think I caught this right. You made a comment about Albertsons and some of the successes there and kind of insinuated that other retailers may follow suit. Can you just maybe elaborate a little on what you were talking about there? And is the implication that there are some potential sales opportunities out there that aren't at this point included in your guidance because you don't have full visibility to them?

Let me start with your second question, then I'll go backwards into the grocery channel dynamics and specifically Albertsons. Our guide does consider in some part that we have yet to receive final spring set communication from several retailers. And this is not atypical, right? February, the resets are March, April or May, depending on the retailer. So there could be some improvements in set. And of course, we guide just thoughtfully thinking about what we know and what we don't know, AKA, just visibility into the channel. The comment on Albertsons is really a significant learning for us around assortment, planograms and innovation. And the reason I say that is in Albertsons in the spring of last year, we increased our space by 30% by way of expansion of the category and by way of exciting new flavors. Albertsons took the majority of our flavors and most importantly, built out a brand block for Zevia, which was vertical, taking our brand to eye level. And with that, we saw accelerating growth over the last 6 months close to -- over the last 6 months, we grew faster than the category, AKA grew share in our performance over the last 6 months. And that continues to accelerate in the last couple of 4-week reads where we were close to doubling the growth of the rest of the category. And I say that just to go back to when the product is properly placed on shelf, when it features all of our innovation and when we have the right assortment, we have a very strong case study to then take to other retailers and continue to expand on it. Now these big national grocery chains move slowly, but our expectation is that over time, we're able to move more national and regional grocers in the direction that Walmart and Albertsons are going, which is now 6-plus months after the resets really bearing fruit.

Got it. Okay. That was very clear. And then you gave some good color on some of the puts and takes through the year on the sales growth side. And so I was wondering about gross margins through the year, what you can share on that or how we should think about gross margins for the year, it sounds like maybe 1Q is the low point with Costco and then the pricing coming through in 2Q, but any color on that would be helpful.

Sure, Andrew. So as you noted, in Q1, we'll see a bit of a downtick from Q4 in terms of gross margin, particularly related to this national rotational program at Costco. Beginning in Q2, you'll begin to see the impact not only of the price increase, but some of the incremental mitigation factors around mitigating aluminum tariffs. And so we expect to see both of those things again, starting in Q2. So we expect in Q2 and thereafter, margins to return back to the upper 40s range.

Our next question comes from Eric Serotta with Morgan Stanley.

So a quick one for Girish in terms of the price increase. Can you give us some idea of the magnitude we're talking here, low single digits, mid-single digits? Okay. That's great. And then what are you assuming in terms of elasticity impact? It seems a little different than in the past when everyone is taking pricing at the same time. Some of the CSD players have moved already, moved late last year. So just wondering your thoughts on elasticity and then a question for Amy.

Yes. As a reminder, we did not take price last year. And so we are taking price this year beginning in Q2. Elasticity, I think, generally speaking, we've evaluated at around 1.1 or so, which is what we've seen historically, and that's kind of what's baked into our guidance.

Yes. And I think one of the most important things on the price increase and on the elasticity question is that we have been a fast follower on price, which I think is appropriate for our brand and its size. We do have room on price over the next few years as we continue to build brand. And we have been, I think, most importantly, successful in projecting the impact of price increases, AKA, our elasticity assumptions have been correct. So we feel pretty confident in our ability to implement price increase as planned and largely predict its impact on the business. That, in this case, to be a very positive one.

Great. And then, Amy, we're probably, what, 15 months or so into Walmart implementing the modern soda set, I guess, it was late 2024, if I remember correctly. How are you seeing that set evolve in the -- how have you seen it evolve in the interim? How are you expecting or seeing it evolve this year heading into and coming out of the spring resets? Is the overall space for modern soda increasing? And how is your space within that set trending?

Sure. So just to start with, I think it was pretty cool to see the world's largest retailer be a first mover and calling the set modern soda, which I think is very strong positioning and others follow food or slowly are doing so, and they are pleased with the performance of the set, not only in its literal performance from a velocity and incrementality perspective, but also in the shopper that it attracts. It's a very attractive shopper. It's a younger shopper. It's generally a higher income shopper. Now speaking to Zevia specific, we remain an anchor brand in that set. And I say that because we are the multipack player in the set. We are the take home, the stock-up brand, and we are at a more accessible price point significantly to the rest of the set. So we play a unique role. We brought some innovation to the table in July of last year, and we're seeing strong growth from those SKUs, and we're pleased with the mix. And we've grown as much from optimizing assortment, so right packs, right flavors as we have from space. Our space has, despite tremendous pressure from competition, we've held our space, and we've made that space more productive in the form of a variety pack and bringing innovation to Walmart a little bit early. So we're bullish on Walmart even as we lap the pipeline fill, and we continue to grow there, and we've seen strong market share implications within the customer itself given our expansion through last year and our accelerating velocities.

We have reached the end of our question-and-answer session. I would now like to turn the floor back over to Amy for closing comments.

Thanks. Just briefly, I would just say that in 2025, we returned to growth. We cut adjusted EBITDA losses in half. We improved our gross margins even in the midst of a challenging macro, and we gained distribution. So we are proud of the foundation that we've set. But almost more importantly, we have in our pipeline powerful packaging changes, an accelerating pace of strong innovation and improved taste across much of our portfolio. And all of this is supported by a sharper brand, which is really resonating with the consumer. So our position as a clean label, clear liquid zero sugar affordable option that also tastes great and increasingly tastes the best among better-for-you sodas is more relevant than ever. The fundamental changes and increased investments that we're making in the business set us up for the long term. So thanks for joining us today, and we look forward to speaking to you again next quarter.

This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.