Zevia PBC (NYSE:ZVIA), a company dedicated to providing better-for-you beverages, has reported its financial results for the second quarter of 2024. While the company has experienced a decrease in net sales and an increase in net loss, amounting to $7 million for the quarter, it remains confident in its brand health and growth potential. Zevia's efforts have led to the removal of 2,900 metric tons of sugar from consumers' diets and a growth in retail sales, particularly in the food channel. Despite challenges in club distribution and competitive pressures, the company is focused on expanding its user base, increasing distribution, and investing in product innovation and marketing. Zevia has also launched a direct-store delivery initiative and increased prices on soda multipacks. Looking ahead, the company is committed to achieving cost savings and improving margins, with a plan to save $12 million annually through productivity initiatives.
Key Takeaways
- Zevia reported a net loss of $7 million for Q2 2024, a $2 million increase from the previous year.
- The company has removed 2,900 metric tons of sugar from consumers' diets, emphasizing its commitment to healthier options.
- Retail sales have grown, especially in the food channel, despite a decrease in net sales and challenges in club distribution.
- Zevia plans to save $12 million annually through productivity initiatives, focusing on automation, consolidation, and technology solutions.
- Gross margins have decreased due to inventory charges and increased investments in visuals and promotions.
- The company reaffirmed its net sales guidance for 2024 but expects to finish at the lower end of the range, with projected Q3 net sales of $37 million to $40 million.
- Zevia aims to improve profitability by balancing reinvestment with cost savings and is optimistic about future breakout growth.
Company Outlook
- Zevia expects to reduce its losses in the coming quarters and is confident in its retail sales growth.
- The company is focused on regaining distribution in certain club regions and expects new distribution gains.
- Zevia aims to return to mid-40s gross margins and improve adjusted EBITDA throughout the year.
Bearish Highlights
- Club distribution faced challenges, impacting overall performance.
- Gross margin decreased due to inventory charges and increased promotional investments.
Bullish Highlights
- The company saw growth in retail sales and is optimistic about its brand health and growth potential.
- Zevia is investing in marketing campaigns and product innovation to scale efforts and drive distribution.
Misses
- Net sales decreased, and Zevia expects to finish the year at the lower end of its net sales guidance range.
Q&A Highlights
- Zevia discussed plans to increase investment in promotions, given the competitive environment in the carbonated soft drink category.
- The company addressed its strategy to maintain inventory levels and manage the business close to working capital neutral.
- Zevia expressed excitement over changing consumer preferences and is focusing on building the brand for future growth.
Full transcript - Zevia Pbc (ZVIA) Q2 2024:
Operator: Good morning, and welcome to the Zevia PBC Second Quarter 2024 Earnings Call. All participants will be in a listen-only mode. [Operator Instructions] After today’s remarks, there will be an opportunity to ask questions. [Operator Instructions] Please note that this event is being recorded. I would now like to turn the conference over to Reed Anderson with ICR. Please go ahead.
Reed Anderson: Thank you and welcome to Zevia’s second quarter 2024 earnings conference call and webcast. On today’s call are Amy Taylor, President and Chief Executive Officer; and Girish Satya, Chief Financial Officer. By now, everyone should have access to the company’s second quarter 2024 earnings press release and investor presentation made available this morning. This information is available on the Investor Relations section of Zevia’s website at investors.zevia.com. Before we begin, please note that all the 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 the 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 reconciliations 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.
Amy Taylor: Thanks, Reed, and good morning, everyone. Welcome to the Q2 2024 earnings call for Zevia PBC. I’ll start out by grounding us in our mission and position, and then cover second quarter results at a high level before turning it over to Girish. As a pioneer in natural soda, the fastest growing subset within the soda category, Zevia’s focus remains taking better-for-you beverages mainstream. Our mission focuses on global health for people in the planet. In Q2, we removed another 2,900 metric tons of sugar from consumers’ diets, never having sold a plastic bottle. Zevia is more affordable now than 66% of non-alcoholic beverages in North America, and more accessible than recent functional entrants into the Carbonated Soft Drinks category. Now, [we call it] [ph] in May, we discussed a new productivity initiative, announced the launch of our first regional direct-store delivery distribution partners, and launched new marketing investments rooted in an evolved brand positioning. We started to see the impact of these three strategic initiatives, as we are making progress against reducing costs, strengthening the balance sheet, Zevia working capital management, improving unit economics, and accelerating retail sales. We’ve increased the effectiveness of our retail promotions, as well as up-leveling marketing, and specifically brand building. Our focus is now on accelerating growth in a competitive environment and improving profitability. In Q2, net sales finished at the top of guidance driven by investment in promotion and brand marketing. Volume and revenue in the first half of the year were impacted by SKU distribution setbacks, following challenges we encountered with our supply chain transition in 2023, following rotational distribution losses in clubs, and following portfolio rationalization as we focus on our top performing categories. We have promising results to share in our most strategic channels, positive indicators around marketing efficacy, and ambitious plans for increased distribution and accelerated product innovation. Creamy Root Beer and Vanilla Cola continued outperform as new SKUs still with distribution upside, and we have successfully launched a new flavor in Cran-Raspberry this year. We have an exciting and surprising seasonal limited time offer flavor coming in the next few months, and ambitious plans for flavor and variety pack innovation in 2025, which should help drive incrementality in terms of distribution, volume, and household. Consumer demand has remained strong. Across retail channels, Zevia soda scan dollars were up 6% for the 12 weeks ending July 14, and units were up 2%. Growth accelerated sequentially over each 4-week period across the quarter, with dollars closing plus 10%, and units closing at plus 11% in the latest read across 4 weeks ending July 14, which was the highest retail sales month in Zevia history. Growth was led by food, which is our largest channel, at 16% growth over 12 weeks, and up 20% over the last 4-week period, outpacing the Carbonated Soft Drinks and diet in zero soda categories endeavored and unit growth for the quarter and even with a greater gap in the latest 4-week period. We intend to build on this momentum to close the gap between strong scan results and our shipments and, thus, net sales results and have a number of drivers to do so. In our most strategic channels, we’ll continue elevated promotion and marketing support in an increasingly competitive environment. We implemented a 4.5% price increase in Q2 on soda multipacks with strong retailer and consumer acceptance. Note, Zevia is priced a few cents per ounce above conventional soda, a price we continue to see consumers will pay for great tasting clean label product, but often half the price per ounce and per can of other new natural sodas. A key competitive advantage within natural soda as this category continues to grow. And finally, we have exciting new retail distribution news coming in the next few months, supporting visibility and availability for households across North America and across income levels. We believe we are well positioned for breakout growth as we invest in marketing, introduce trial packages and expand distribution. Speaking of which, we launched our initial direct store delivery rollout in the Pacific Northwest this quarter. Recall that Zevia has grown for over a decade featuring only multipacks and selling to a loyal base in the natural channel and in natural sections in grocery. The launch of DSD will enable single distribution and channel expansion, plus improve in-store presence and promotional effectiveness in our existing distribution footprint. This move to broad availability for trial package supported by brand marketing is key to accelerating market penetration. While it’s still in its early stages, we have seen pressing signs of adoption in the convenience channel as we activate plans to expand geographically. I’ll turn it over to Girish to step through our productivity initiative to provide an overview of Q2 financial results and to speak to guidance, and I’ll be back to share closing thoughts.
Girish Satya: Thank you, Amy. Good morning, everyone, and thanks for joining the call today. I first wanted to provide an update on our productivity initiative. Last quarter, we announced a broad-based plan intended to advance our long-term growth and profitability ambitions. We had initially targeted annualized savings between $8 million and $12 million in order to improve margins to fund the evolution of our route-to-market strategy and increase our investments in marketing and promotion. As a reminder, the initiative encompasses three pillars: brand maximization; margin enhancement; and improving operational discipline. We’ve made meaningful progress against our productivity targets and have begun to see the early signs of the impact in the second quarter as we continue to realign our costs across the P&L and strengthen our balance sheet. There is still work to be done, but we continue to find significant opportunities to reduce the cost of our product, while maintaining or increasing its quality as well as decreasing the cost of fulfillment in order to fund greater investments in the brand in the changes in route-to-market. In total, we now believe that the productivity initiative should deliver $12 million of annualized savings, the high-end of our initial estimate, some of which we began to see in Q2, but anticipate the savings to be more fully realized over the next 3 to 5 quarters. From a brand maximization standpoint, we launched our first DSD partners in the Pacific Northwest during Q2, and while still in the early stages, we are seeing positive indicators with improved in-store execution and promising signs of adoption in the convenience channel. We will continue to hone and refine our playbook as we simultaneously look to accelerate our rollout of new DSD partners and expand into other geographic regions in late 2024 and early 2025. In conjunction with the launch in the Pacific Northwest, we increased our marketing spend levels in Q2, investing in brand awareness and building the marketing flywheel to more clearly communicate our consumer value proposition and bring the brand to life for consumers. As Amy mentioned, early results from the markets where we have invested in digital marketing have shown promising improvements in revenue versus control markets, and we will look to accelerate those investments in the back half of the year. We have also accelerated our soda innovation pipeline, successfully launching Cran-Raspberry, which is the first of a series of new flavor that will be hitting the shelves over the next 6 months, some of which will be retailer exclusive. Second, from a margin enhancement standpoint, we are starting to see improvements specifically around the optimization of our contract manufacturing strategies, reduced shipping and logistic costs, and improved product costs. Gross margins were negatively impacted during the quarter by a €1.8 million charge, primarily club specific excess inventory as a result of loss distribution. This was part of a broader effort to more stringently manage working capital, which resulted in a reduction of inventory of over $12 million since year-end and improving our cash position. These actions help set the foundation for margin improvement in future quarters, and we expect gross margins in Q3 to return to the mid-40s and show sequential improvement in subsequent quarters. Importantly, our expectations for margin expansion are inclusive of greater promotional activity at retailers to drive velocity. Lastly, we continue to work on building a culture that emphasizes returns across growth initiatives, while also enhancing our focus on working capital management. Cash improved from the prior quarter as a result of changes in working capital, primarily inventory, reflecting a right-size inventory levels and improved working capital management practices in order to strengthen the balance sheet. The combination of a right-size working capital base and sequentially lower cash burn is expected to provide us with the flexibility to invest as needed to drive growth in the future. I will now discuss our second quarter financial results. In the second quarter of 2024, we delivered net sales of $40.4 million, just above the top-end of our guidance range, versus prior year, net sales were down 4.3%. We saw a decrease in volumes of 5.9%, or $4.3 million, reflecting a mixed recovery in on-shelf distribution by channel, including some temporary challenges in club. This was partially offset by a positive effect from our price increase, which contributed $2.4 million. Gross margin was 41.9%, down 4.7 percentage points versus last year, which reflects the $1.8 million inventory charge related to club specific excess inventory previously discussed. The decrease from prior year was also partially driven by investments in enhanced visual to improve on-shelf visibility and increased promotional activities. This was partially offset by favorable channel mix as well as some initial cost savings recognized related to the productivity initiatives. Net loss was $7 million compared to a net loss of $5 million last year, an increase of $2 million. Adjusted EBITDA loss was $4.4 million compared to an adjusted EBITDA loss of $2.6 million versus prior year. However, the prior year’s adjusted EBITDA reflects the benefit of an expense reversal of $2.1 million. We anticipate that we will continue to shrink our quarterly losses as we balance between investing in the business, while bolstering our profitability. We ended the quarter with approximately $29 million of cash and cash equivalents on our balance sheet, and we also have an undrawn revolving credit line of an additional $20 million. We continue to execute against the various initiatives to reinvigorate the brand and expect to continue to make progress over the coming quarters in terms of reducing our losses, while balancing the need to reinvest and improve profitability. Turning to guidance. We are reaffirming our net sales guidance for the full year of 2024 in the range of $158 million to $166 million. However, we expect to finish the year at the low end of the range. Net sales for Q3 2024 are expected to be in the range of $37 million to $40 million, which reflects both the loss of club distribution in Q3 and Q4, but also a shift in timing as a result of some new distribution we secured starting in Q4. While we do not provide formal guidance on gross margins and adjusted EBITDA, as mentioned previously, we expect gross margins to return to the mid-40s in Q3 and begin to show incremental improvement sequentially for the balance of the year. While we continue to work to balance reinvestment and dropping savings to the bottom-line, we do anticipate increasing our investment behind brand marketing to drive consumer awareness. We expect to show further sequential improvement in adjusted EBITDA through the balance of the year as we begin to realize savings from the productivity initiative. I’ll turn it back to Amy.
Amy Taylor: Thanks, Girish. To bring us to a close, I’ll repeat what we established in last quarter’s call. While the full year 2024 guide is not reflective of the brand’s potential given the soft first half, Zevia’s brand health is clear in consumer and shopper data and in core retail performance. For numerator panel data, consumer spending on Zevia is once again up in the past 12-month period per household by 17%, and in purchase frequency by 16%, outspending average beverage shoppers by 43%. Retail is showing promising growth, especially in our most strategic channels. Scan sales growth has returned to double-digits as expected, improving sequentially each 4-week period in the quarter. Zevia outperformed the CSD category growth in food channel, in units and in dollars through Q2 and logged 20% growth there over the last 4-week period ending July 14. Some of our regional grocers grew 50% or more over that same period, demonstrating the efficacy of new promotions, also the upside of focus on underdeveloped regions such as the East Coast. Zevia soda grew 10% across all channels this past 4-week in dollars and 11% in units, again outpacing CSD and diet in zero categories. We expect these trends to continue and to support our growth, in part offset and shipments by rotational ups and downs in club distribution. Progress against our three key initiatives, which are enhanced in-store presence and expanded distribution throughout to market evolution. Building the brand and driving consumption through marketing and promotion, and finally, improved efficiency through the productivity initiative give us confidence in our ability to expand reach, grow the base, and build toward profitability going forward. Early indicators on each of these initiatives are positive, as we take cost production expectations up to $12 million on an annualized basis, while still increasing marketing, promotion, and distribution adjustments on a faster timeline. Along with improving unit economics and a strong balance sheet, we are demonstrating the business is ready to scale. We look forward to reflecting continued improvement in H2 2024, and we’re bullish on the years ahead. Thank you for the time this morning, and we are prepared to take your questions. Operator?
Operator: And we will now begin the question-and-answer. [Operator Instructions]
Amy Taylor: Operator, are you going to move to the first question?
Operator: The first question will come from Jim Salera with Stephens Inc. Please go ahead.
Jim Salera: Hi, guys. Good morning. Thanks for taking our question.
Amy Taylor: Hi, Jim.
Jim Salera: And I wanted to ask on club in particular, because I know some of the club operators have a pretty varied difference in regional assortment, and so when you talk about the loss distribution in club, is that in like certain regional pockets or is that fully out of club kind of across the national assortment?
Amy Taylor: No, Jim, you’re right. We’re experiencing double-digit growth in retail scan data in recent weeks and our results have accelerated each 4-week period over the last quarter. So, net-net, retail is very healthy, but you’re putting a circle around the right topic, which is regional losses in rotations at clubs. And so, we are still in the club game and doing business in clubs, but there are a number of regions in which we are off rotation at the moment. And that’s impacted us through the middle of this year and it impacts our guide as well for the rest of this year.
Jim Salera: Got it. And then maybe as a follow-up to that, I know in the past we’ve talked about how club is kind of a great source of incremental households, driving them into the top of the sales funnel and introducing them to the brand. How do you think about reaching those consumers that might be open to the product or open to the category, but haven’t reached [the end] [ph] and bring them into the sales funnel without the same visibility at club?
Amy Taylor: Yeah, Jim, far and away, it’s a number one most important strategic priority for us. And, therefore, also the answer to your question is singles distribution. We must drive expansion of our user base by selling a trial package. And the amazing thing about this business is that we have grown all of these years on the back of multipacks, very limited trial package sales and trial package distribution. So I’m pleased to share that, for example, in the natural channel singles is our fastest growing package, which shows that even in the channel where we are the most developed, there are new households to gain through trial with a singles package. But the real upside there as we evolve route-to-market and marketing to support it is to drive singles distribution at the deli through mainstream grocery, in drug, and then, of course, in convenience and in food service. So we have a big healthy robust business with a loyal user base with strong repeat rates, all of that without a trial package. And that is our very clear top priority to gain new users.
Jim Salera: Okay. Great. And maybe if I could just sneak in one last one on the singles piece. Can you just share any thoughts from early learnings from the DSD in the Pacific Northwest, and particularly as that impacts cold availability, or if you have any branded fridges in any of those routes, and how the response has been with those?
Amy Taylor: So we are really bullish on the impact DSD for our business. We just know that in order to compete in these channels, it’s necessary. It’s very early for us to draw from the Northwest any conclusions other than to say that we are outperforming rest of market in same-store sales in the accounts where the DSD operators have been focused and that is largely in grocery our most – our largest channel. And one that we felt, well, we should have a lot of upside in terms of closing out of stocks and driving display. It’s too early really to report back on performance inconvenience. We are pleased with the number of convenience stores that we’ve gained initial distribution, but really with just weeks in market, it’s too early to speak to consumer pull-through or any learnings on execution in that channel.
Jim Salera: Right. Thanks for the color. And I’ll hop back in the queue.
Amy Taylor: Great. Talk soon.
Operator: And our next question will come from Dara Mohsenian with Morgan Stanley. Please go ahead.
Dara Mohsenian: Hey, good morning.
Amy Taylor: Hi, Dara.
Dara Mohsenian: So, I just wanted to unpack the Q3 revenue guidance a bit more. You sound optimistic about retail sales and you’ve mentioned some of the efforts around marketing distribution, et cetera. But the guidance is pretty far below what we in consensus expected and still down year-over-year. So I know that’s more some of the shelf space distribution issues, but I guess, can you unpack that in a little more detail for us? Is that something that’s more temporary in Q3 and, to some extent Q4? And you’re optimistic that that comes back, is that something that could be more enduring? Basically, how do you think about the underlying shipment growth and shelf space relative to underlying demand as we think about revenues on a go forward basis? And then the second separate topic, maybe you can just touch on the promotional environment in general, what you’re seeing in terms of depth and frequency and magnitude of promotion, and how that might impact the way you think about promotion or your forward plans going looking ahead over the next few quarters here? Thanks.
Amy Taylor: Sure, Dara. Thanks. Yeah, fundamental questions. I appreciate it. Regarding Q3, let me clarify. So you’ve heard that we’re bullish on our retail sales just based on scan, and our most strategic and our largest channels are growing. So why the softer guide on Q3? You point to a timing variance, which I’ll double down on, and then I’ll speak to the channel dynamics. So with some backward steps in regional club distribution that impacts us in the full year, so Q3 and Q4. As I alluded to in the prepared remarks, we do have some new distribution that’s pretty exciting, that hits in Q4. So the timing of that would indicate a softer Q3 and then improvement in Q4, but then, of course, momentum going into the next year given the new distribution gains. We’re also bullish on regaining some club regions, while we don’t count on it. We believe that based on history this rotational kind of in and out will continue. Another thing that I’ll mention just to help understand the Q3 guide, it’s two things. Number one, we’ve talked in the past that one of the two mass operators in the mass channel took a decision to introduce some private label in part at the sacrifice of some of Zevia’s space that has impacted us in the full year 2024. And then I’ll also just point some decisions that we’ve made around optimization of our portfolio to focus on top categories. So with the elimination of a few long-tail items, which we think will drive, which we’re quite confident will drive focus and growth in our most competitive categories, that does impact our volume in the near-term. So to break that down, some backward steps in one of the two mass operators, some club regions off rotation, and then some long-tail item rationalization are the drivers of short-term softness in Q3. What builds our confidence for the future, new distribution that we’ll be able to talk about soon that hits in Q4, and then double-digit retail sales. So this idea of focusing within our portfolio on top categories appears to be working as does our increased promotional levels and more effective promotion strategies and our new focused marketing strategies. So those are some of the things that give us confidence that we return to accelerated growth and we start to see this double-digit growth in retail reflected in our shipments in the go forward. I’ll answer the second part of your question around the promotional environment, and then I’ll turn it over to Girish, if he has anything to add. You want to go on this first? Okay. So on promo, the environment is increasingly competitive, and we know that and when I say that I’m referring to the broader CSD category where promotions are deep and often, and then we are also seeing a lot of activity from new entrants that are growing really, really fast. Now, they are nearing the lap of their launch in much of their distribution, so we expect some of that to slow down, but it’s a heavily competitive environment. And I would argue that over the last couple of years, Zevia has been under supported in promotion to drive in-store activity, thus display and thus trial, and consumption intensification from our existing base. So I’d say really with Girish’s leadership and the optimization up and down the P&L, we are aimed at continuing to improve profitability, while still increasing our investment in growth drivers of the brand, including promotion. And we have a thoughtful eye on promotion effectiveness and will continue to make those investments, while still improving the path to profitability. So any other comments on macro or promo?
Girish Satya: No, I think you hit it, Amy. The only thing I’d add just as sort of an interesting data point, quarter-over-quarter Q1 versus Q2, we increase promotional spend by 200 basis points, and so which we believe to be a more healthy level to support the business. And so, I think, what we’re seeing is, and again, it’s just one quarter, of course. But, I think, we’re at more healthy level of promotion, and we’ll be maintaining those going forward.
Dara Mohsenian: Okay. That’s helpful. And then just one follow-up, it sounds like as we think about next year, it’s reasonable to assume that distribution shelf space up as net next year. Obviously, some of that is to be determined, but it sounds like some of the recent losses are more temporary or seasonal. And some of the additions that are coming are more permanent in nature. Is that a fair way to think about next year?
Amy Taylor: Yeah, I mean, while the selling season is upon us, and we don’t know every retailer’s 2025 decision, I think directionally, yes. That is what we expect. Is that our strategic long-term distribution gains, which put us at arm’s reach of more American households at affordable prices are more sustainable, and a more sustainable contributor to the business than some of the seasonal losses that we’ve experienced. So I would expect the net positive, while many of those retailer decisions are still in motion, of course.
Dara Mohsenian: Great. Thanks.
Amy Taylor: Thanks, Dara.
Operator: And our next question will come from Andrew Strelzik with BMO. Please go ahead.
Andrew Strelzik: Hey, good morning. Thanks for taking the questions. My first one, I was hoping you could give a little more texture to your comments around marketing efficacy and metro outperformance. Any way to frame kind of that, that degree of outperformance, how many markets you were in? And then you talked about accelerating that, so where are we going? What are the plans from here?
Amy Taylor: Sure. So we ran and are running omni-channel campaigns across 8 to 10 markets depending on which month of the year we’re talking about. And we track that versus like control markets, and then we track it versus rest of market. And we’re pleased to see that 3 percentage point improvement in the markets where we have invested marketing at a very high ROI level if we’re willing to attribute all of that growth back to the marketing versus the control markets, and even more so versus rest of market. So what’s the learning? We believe that the strategic planning behind our marketing, so media buy and targeting is effective, and we believe that our new creative is starting to resonate. So when I say we seek to scale that, that could be a number of things that can be increased spend in the same cities, that can be a number of incremental markets that we want to target or it can be national campaigns and some of those are plans that are in the works for next year based upon those learnings. For the rest of this year, we intend to continue to run the play, because it appears to be working. Does that answer your question?
Andrew Strelzik: Yeah. That was great. Thank you. And my other question on the gross margin side, you’ve been talking about kind of mid-40s for a while. I’m going to get back there in the third quarter and then sequentially improve. I guess as you’re talking about sequential improvement, how are you thinking about with the cost saves et cetera., where – the gross margin potential I guess over the next year or two or where that could be headed? Thanks.
Girish Satya: Yeah. No, I mean, as we noted this quarter was impacted by the inventory write-off, but we’re pretty confident that we’ll be able to return to the mid-40s and, as noted, that’s inclusive of greater promotional investment. I think there’s going to be a little bit of a trade-off as we begin to scale DSD and build out a broader DSD network. And so, I think, we’ll continue to sort of maintain that sort of mid-40s, it’s maybe upper mid-40s as we reinvest not only in promotion, but also in building out the DSD network.
Andrew Strelzik: Great. Thank you very much.
Operator: And our next question will come from Sarang Vora with Telsey Advisory Group. Please go ahead.
Sarang Vora: Okay. Thank you. Yeah, good morning. You know what, question is on inventory, was down a lot, I think good job in managing it. How should we think about it going forward? I mean, it was a great source of working capital. So curious, does it balance out at this level or given more distribution towards fourth quarter next year, we see a ramp up again inventory levels?
Girish Satya: Yeah, that’s a good question. And, I think, we are trying to maintain inventory at effectively this level, and manage the business as close to working capital neutral as we can. I think we’re sort of targeting kind of a 90 days DIO, and that’s what we’re marching towards.
Sarang Vora: That’s great. I have a broader question on the cost savings plan. I mean you raised the plan towards the upper end to about $12 million of cost savings over the next few quarters. Can you provide color on which areas gave you greater confidence as you looked into over the few weeks that helped you raise the guidance to 12?
Girish Satya: Yeah, I think it’s a combination of various factors, but as we’ve continued or as we continue to dig into the cost structure, there’s just a lot of opportunity to whether it’s driving automation consolidation around the supply chain network or various technology solves for automating back office processes. There’s just a wide variety of opportunities that we’re targeting right now. And so, I’m pretty confident that we’ll continue to find those, but that being said we’ll continue to – I think, I’d previously mentioned it’d be sort of a third in COGS, a third in selling and warehousing, and a third in G&A, and I think we’ll continue to sort of see that going forward. Initially, we’ve seen a lot of it in G&A. But in Q3 and Q4, you’ll begin to see a lot more of that impact in COGS and selling and warehousing.
Sarang Vora: That’s great. Thank you.
Operator: And this will conclude our question-and-answer session. I’d like to turn the conference back over to Amy Taylor for any closing remarks.
Amy Taylor: Yeah, I’ll just close this out with a little bit of a spontaneous comment, because we didn’t talk a lot about this on the call today. This is a very exciting time in the soda category and the consumer spoken right preferences are changing. And Zevia as the original zero sugar clean label product, so the original better-for-you soda. We’re focused on building our brand and building our brand as the central driver of our future growth. So put that together with our two other strategic initiatives that set us up for long-term results. So the productivity initiatives that Girish is navigating for us so well that allows us to take money out of the back and put it into the front to drive growth. And then also evolving our route-to-market, which is critical for our competitiveness. Coupled that with double-digit scan growth to validate our hypothesis with category tailwinds, a successful price increase in market, continued strong consumer metrics and several exciting new products in the pipeline were well positioned for breakout growth in the years ahead to fully realize Zevia’s potential and to answer the call as the delicious and affordable zero sugar clean label soda for households across America. So thank you for spending time with us this morning and we look forward to staying in touch, and speaking again in the next quarter.
Operator: The conference is now concluded. Thank you for attending today’s presentation, and you may now disconnect your lines at this time
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