As a reminder, this conference is being recorded. It is now my pleasure to introduce Jean Fontana with Investor Relations. Thank you. You may begin.
Thank you, and welcome to Zevia's third quarter 2026 earnings conference call. On today's call are Alexandre Ruberti, President and Chief Executive Officer, and Girish Satya, Chief Financial Officer and Principal Accounting Officer. By now, everyone should have received access to the company's third quarter 2026 earnings press release and investor presentation made available this afternoon 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 reference certain Non-GAAP financial measures as we describe business performance. The SEC filings, as well as the earnings release and 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. Now, I'd like to turn the call over to Alexandre.
Thank you for joining us today for our third quarter 2026 earnings conference call. I will begin with a brief overview of our third quarter results, followed by update on the key focus areas we outlined last quarter, and a discussion on the GP equity investment funding the strategic reset we outlined in our recent press release. Our third quarter results mark an important step forward for Zevia. We delivered strong top-line growth, meaningfully outperformed our expectations on adjusted EBITDA, and saw encouraging proof points across the key focus areas we believe set us up to unlock the next phase of growth for the company. Net sales increased 18% to $48 million, while our adjusted EBITDA loss of $900,000 was considerably better than our expectations.
Our strong year-to-date performance, reflecting net sales growth of 13% and adjusted EBITDA of $600,000, combined with approximately $30 million of cash on the balance sheet in addition to $20 million in funding from GP Investments, reinforce our confidence in our outlook and ability to accelerate the trajectory of the business. Our robust top-line growth reflects solid performance within the club channel following another national rotation, as well as strengths in both Amazon and walmart.com. During the quarter, we saw encouraged early signs that our better-for-you soda portfolio is resonating. Our enhanced classic and new more fruity flavors, along with our packaging refresh, have received positive feedback from both retailers and consumers. In addition, the 4% increase in dollar velocity in the food channel suggests acceptance of our recent price actions.
Flavors such as Fruit Punch, Peaches & Cream, or Cream Soda are hitting the mark, with improved sales ranks within natural channel, our most material distribution channel. Cherry Lime has emerged as another proof point of our success. Initially launched as a walmart.com exclusive, the limited-time offering sold out within four weeks and became the number one Zevia product at walmart.com. This success has generated strong retailer interest, which we believe opens the door to incremental placements and broader innovation opportunities as we build our 2027 pipeline. Now, turning to highlights from the key focus areas we shared on our last call, including enhancing our go-to-market strategy and sharpening our identity. First, our go-to-market strategy, which remains our largest opportunity to create long-term value.
As we discussed on our last call, we see three primary levers to improve reach and productivity: building on singles platform, expanding distribution, and driving strong in-store execution. Starting with singles, a top priority and representing one of the most compelling growth opportunities in our business to drive trial and household penetration. With improved singles offering across formats, price points, and flavor assortment, we see an opportunity to accelerate trial, attract new consumers, and expand use occasions. During the quarter, we worked closely with the retail partners on plans to meaningfully expand singles distribution over the next several quarters, including additional grocery doors across the U.S. and Canada, while increasing visibility within the natural channel. We plan to support this expansion with improved merchandising, strategic promotions, and cold placement. Our objective is clear: make Zevia easier to find, easier to buy, and easier to choose.
We believe this can accelerate consumer trial and use occasions, as well as drive higher conversion into larger multi-packs purchases. The second component of our go-to-market strategy is distribution expansion. We continue to see meaningful white space opportunities across mass, club, value, food service, and e-commerce channels. We are re-entering both Target and Sam's Club with the test programs. At Target, we will launch a national limited edition offer that will include end cap placement in more than 900 stores beginning in February. At Sam's Club, we will participate in a three-month rotation beginning in March across 80 locations. Beyond the traditional retail, we recently partnered with Dot Foods to expand Zevia's reach into non-traditional channels, including food service. We believe that increasing availability to whatever consumers shop and consume beverage with the food creates additional opportunities to build awareness and drive trial.
Our third priority is improving productivity within existing doors. We have ample opportunity to drive improved productivity through better and more consistent in-store execution. This includes strengthening our approach to merchandising, category management, and retail oversight. First, we are building upon our DSD initiatives with a deeper internal team and more robust engagement with our Western DSD network. Second, we have entered into new partnership with the merchandise agencies to strengthen shelf placement and display execution across most important regions outside of our DSD network. We believe that through enhancements to our DSD strategy, paired with these new partnerships, we can drive higher velocity over time. Moving to our second strategic focus areas, sharpening our brand identity and scaling our brand. We have made meaningful progress in executing a disciplined ROI-driven marketing strategy, using a full-funnel scorecard to connect brand-building activity with the consumer engagement and sales.
Looking ahead, we plan to place greater emphasis on retailer activation and engagement, with more investment in digital platforms such as Amazon, Walmart, and Instacart, and the launch of our new flavor in collaboration with Cardi B in January. Building on that, we are pleased with our partnership with Cardi B. Although the campaign is still in its early stage, its initial awareness-focused phase delivers strong top-of-funnel results, including more than 1.8 billion impressions, 63% increase in daily active zevia.com users, a 13% increase in net new social followers, and more than 70,000 email signups. We are encouraged to see the improved brand awareness metrics with a five-point increase to 25% as of September 2026. Post-Cardi B campaign versus the same period last year within the 18 and 34-year-old age group. Our efforts to appeal to our young consumers are bearing fruit.
While it is too soon to quantify conversion and retail velocities, retailers respond positively and believe the campaign will help support a successful 2027 reset. Future phase will shift toward the launch of a flavor collaboration with Cardi B to excite fans, to try Zevia, and support distribution growth. Now turning to our long-term strategic objectives. Over the last several quarters, we have strengthened our product portfolio, started to sharpen our brand positioning, improved our go-to-market capabilities, and enhanced our financial flexibility. While we still see a long runway ahead within our core better-for-you soda business, we also see significant opportunity to expand into larger, faster-growing categories across the better-for-you beverage market. With that opportunity in mind, over the last year, we evaluated a range of strategic options and ultimately closed a $20 million growth equity investment with the GP Investments.
The partnership brings not only capital, but also access to strategic resource and operational expertise at the board level that can help accelerate our growth agenda over the coming years. Our strategic plan is centered on three growth levers. First, accelerate product innovation. We see a meaningful opportunity to build upon our core better-for-you soda business to reach more consumers, more usage occasions, and new channels. With additional capital, we believe we have the potential to triple the size of our business over time. Going forward, we intend to be more proactive and faster in bringing complementary products and brands to market, leveraging the learnings from Zevia Reboot, our existing distribution network, and scalable supply chain infrastructure. At the same time, we will continue to strengthen our core better-for-you soda offering.
Taken together, we believe these initiatives can meaningfully broaden our addressable market, diversify our growth drivers, and position us to respond more quickly to evolving consumer demand. Second, scale a digital-first consumer ecosystem. Supplementing brand-level investments and new product offerings, we will build a targeted digital marketing plan to drive consumer engagement and demand creation across the portfolio. We plan to prioritize spend in lower and mid-funnel digital channels where we believe we can bring greater efficiencies and a strong ROI. This includes increased use of creators and micro-influencers to reach target audience. Through deeper cultural relevance and expanding our share of conversation, we believe we can drive engagement across a broader consumer set, particularly among younger consumers. By pairing our strong innovation pipeline with a more effective demand generation, we believe we can accelerate awareness and trial, deepen engagement, and create a more powerful platform for long-term growth.
Third, execute a hybrid go-to-market model. We believe sustainable growth requires greater visibility, broader distribution, and easier purchase occasions. Building on my comments earlier, we will leverage our distribution network to build our market presence in new products. This includes continued investment in our proven West Coast DSD infrastructure, strategic merchandise support in all DSD markets, expanded e-commerce and food service capabilities, and a scaled singles strategy designed to drive discovery, trial, and repeat purchase. In closing, we believe Zevia is entering an exciting new chapter. We have strengthened our foundation, begun to see encouraging early proof points across our focus areas, and now have additional capital and strategic support to accelerate our ambitions. Our vision is simple: to make our portfolio the most relevant and accessible better-for-you beverage brand for the next generation of consumers and maximize value to shareholders.
As we move into 2027, our focus will shift from simply being available to become impossible to ignore through differentiated innovation, superior taste, stronger cultural relevance, and the best-in-class retail execution. We look forward to update you on our progress in the months ahead. With that, I will turn the call over to Girish.
Thank you, Alexandre. Good afternoon, everyone, and thanks for joining our call today. Our strong third quarter results reflect growing momentum across the business and meaningful progress against our key priorities, with both net sales and adjusted EBITDA exceeding our expectations. As a result of the momentum in our business and the progress we are making on strengthening our foundation, in addition to lower-than-previously expected fuel costs, we are raising our full-year net sales and adjusted EBITDA guidance, which I will speak to in more detail shortly. This stronger foundation, combined with the equity investment in our business, is expected to help us accelerate investment behind our next phase of growth. The additional resources position us to more intentionally accelerate product innovation with a focus on the functional beverage space, scale our digital-first ecosystem, and execute a hybrid go-to-market strategy. Turning to our financial results in more detail.
Third quarter net sales increased 18.4% to $48.3 million, primarily driven by our national rotation in the club channel and strength in our e-commerce channels. We are also pleased to see higher net average selling price, reflecting acceptance of pricing actions taken last quarter. As expected, the reset of our club business created some fluctuations in growth over the past several quarters. However, with those transitions largely behind us, we expect the club channel to contribute more consistently going forward. Gross margin was 46.4%, an 80 basis point increase from 45.6% in the prior year quarter. As a reminder, in last year's third quarter, we recorded an $800,000 write-down related to obsolete inventory associated with the package redesign. In our third quarter of 2026, we were impacted by higher aluminum costs as previously expected.
Selling and marketing expenses were $15.1 million, or 31.3% of net sales in the third quarter of 2026, compared to $12.7 million, or 31% of net sales in the third quarter of 2025. Breaking it down, selling expense was $8 million, or 16.5% of net sales in the third quarter of 2026, compared to $7.7 million, or 18.9% of net sales in the third quarter of 2025. The increase was largely driven by higher freight expense related to increased volumes and elevated fuel costs, partially offset by savings from warehousing efficiencies. Fuel costs were lower than initially expected by approximately $900,000. Marketing expense was $7.2 million, or 14.8% of net sales in the third quarter of 2026, compared to $4.9 million, or 12.1% of net sales in the third quarter of 2025.
As anticipated, marketing expense as a percentage of sales increased year-over-year, reflecting targeted investments to broaden brand reach and elevate consumer awareness, particularly through the launch of our Cardi B campaign. As Alexandre mentioned, we are seeing strong engagement and an increase in brand awareness, which bodes well for our future revenue opportunity. General and administrative expenses were $8.3 million, or 17.1% of net sales in the third quarter of 2026, compared to $7.7 million, or 18.8% of net sales in the third quarter of 2025. The increase was driven largely by higher compensation-related expenses, including higher accrued variable compensation, partially offset by lower professional services costs. For the third quarter, adjusted EBITDA loss was $900,000, compared to an adjusted EBITDA loss of $1.7 million in the prior year period.
Turning to our balance sheet, we ended the quarter with approximately $29.5 million in cash and cash equivalents and have an undrawn revolving credit line of $20 million. Subsequent to the third quarter, we closed the growth equity investment and will have cash on hand of approximately $50 million. Now turning to our outlook. For the full year, we are raising our 2026 net sales guidance to a range of $177 million-$179 million, reflecting approximately 10% growth at the midpoint of the range. As a reminder, the discontinuation of tea impacted our net sales outlook by approximately 2%. Turning to profitability, we are revising our full-year 2026 adjusted EBITDA outlook to a range of break-even to negative $400,000. This outlook now reflects approximately $8.5 million in incremental costs related to the surge in fuel prices and higher aluminum-related costs versus our prior expectation of $11 million.
We remain on track to achieve $3 million-$5 million in additional cost savings beginning in Q1 2027 that we plan to reinvest in our strategic reset. Turning to the fourth quarter, we expect net sales of between $37.5 million - $39.5 million, reflecting approximately 2% growth at the midpoint of the range. The fourth quarter is typically the seasonal low for the business, and our guidance reflects the potential impact of retailer adjustments to the timing of shipments and inventory levels. We expect fourth quarter adjusted EBITDA loss to be between $0.5 million and $0.9 million. This assumes gross margin remains approximately flat to last year. In closing, we believe this is a pivotal moment for the company. We delivered a strong quarter, raised our outlook, and announced a growth equity investment that enhances our ability to accelerate the execution of our strategic reset.
With a stronger foundation and additional liquidity, we believe we are well-positioned to capture the opportunities that lie ahead and create sustainable long-term value. I will now turn it over to the operator to begin Q&A. Operator?
Thank you. We will now be conducting a question and answer session. If you would like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate that your line is in the question queue. You may press star two if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. We ask that analysts limit themselves to one question and a follow-up so that others have the opportunity to do so as well. One moment, please, while we poll for questions. Our first question comes from Jim Salera with Stephens. Please proceed with your question.
Hey, guys. Good afternoon. Thanks for taking our question.
Of course.
Alexandre, I wanted to ask about some of the innovation you highlighted, because if I'm looking in the deck here, you guys seem like you talk to a much larger TAM than maybe the company has spoke to in the past, and maybe some hints at obviously innovation outside of traditional soda. I know in the past, obviously, you had the tea lineup, and you still have a relatively small energy business. Can you just walk us through the thoughts on how much we should anticipate the innovation to be outside of traditional CSD, and what that might look like, and just any guardrails you can give us on the timeframe? Is that a 2027 event, or is this just more setting the stage for that this is optional in the future?
Super. Thanks, Jim, for the question. Of course, I can clarify that. First of all, I think the approach of innovation for us is going to be much more consumer-led. I think developing products that can address these needs of taste, functionality, and the different occasions. In general, we do believe that consumers doesn't buy functionality, right? But they buy the occasions. That's why I think that we have to diversify a little bit more. I think taking advantage as well, in terms of our brand and the clear ingredients that we have, we are growing a digital engagement, expanding distribution, and paired with this new innovation, we can make some kind of acceleration in the growth. That's one part. In the second part, what we can expect from next year, what we are doing, it is we're bringing between two and three new products.
We are planning to launch in second half of 2027 in a digital sphere first, and then a full rollout will be in 2028.
Just to be clear, those would be not two new flavor extensions or something, but something outside of traditional CSD?
That's correct.
Okay. Great. Then just as one other follow-up, encouraging to hear about re-entering Target and the rotation at Sam's. Can you just help us size up the opportunity? You spent a lot of time talking about singles, but maybe the balance of growth between singles and what I assume at Target and Sam's would be more kind of the traditional multipack offering.
Yeah. We are not in a condition now to give any kind of a guide, but I'm going to picture what we have so far. First of all, we are going to start the rollout of the singles in the first quarter. We do have the confirmation of one more rotation in Costco. We have a test that we're going to run in Sam's Club in the first quarter as well. Also, we have a limited-time offering that we're going to launch in Target. That's in terms of expanding distribution. In terms of innovation, in the beginning of the year, we're going to have the launch of the collaboration with Cardi B, which will allow us a lot of execution and also execution of the singles.
I think if you come back to the last earnings call that we said in terms of the four priorities, we are walking the talk of what we say, and that we are creating this kind of a very, very strong foundation for 2027. In 2027, to be very transparent, we will grow the core mainly.
Got it. I appreciate the thoughts, though. I'll back in the queue.
Thank you.
Our next question comes from Andrew Strelzik with BMO Capital Markets. Please proceed with your question.
Hey, thanks for taking the questions. My first one, I wanted to ask about the marketing strategy and better understand how that's evolving. The company has been pursuing some more high-profile tie-ins and things like that to grow awareness, and now you're talking about the lower to middle part of the funnel. Should we think about that in addition to what has already kind of been going on? Is that in some ways replacing it, and more broadly, how you think about the right level of marketing spend for the business over the next 12 - 24 months?
Yes, Andrew. Let me explain in terms of the strategy first. If you go back in terms of Cardi B, we said that we're going to use this project in order to generate more awareness, in which we are delivering, right, in terms of the impressions and the increasing in our user activity in zevia.com, more email signups, and everything is coming together. Now it's time to drive this kind of awareness into the funnel. For us, we'll be a little bit in terms of the new product that we're going to launch with her, and also the investment in a digital ecosystem that we are calling, because we need to involve much more creators and the influencers in order to bring new consumers into the brand. This is how we are planning in terms of 2027.
Okay. More broadly across the kind of holistic plan that is going to be funded by the strategic investment, how should we think about margin implications, kind of over the near term, but also more importantly, kind of over the medium term?
Yeah
You know, stopping short of guidance, just directionally, how should we think about that? Thanks.
Yeah, absolutely. I think, you know, if you zoom out for a second, you know, what we've really been focused on is driving improved unit economics, you know, in the business. I think as we look at innovation in the future, the new innovation will be accretive from a unit economics perspective, i.e., gross margins will be accretive to our current gross margins. But of course, you know, part of the reason we raised the capital was in order to set these new product families up for success, we need to invest behind them. So what you'll see in the short run is really more spend on marketing, and support for these product launches. In the long run, that will be accretive to margins as we'll be launching slightly more premium product families.
Okay. Thank you very much.
Our next question comes from Eric Des Lauriers with Craig-Hallum. Please proceed with your question.
Great. Thanks for taking my question. Wanted to just drill in a bit more on singles. So appreciate the call-out of launching more singles in Q1. Just wondering if you feel like you sort of have all the capabilities operationally that you need to sort of get singles to where you want them to be, or what kind of investment or sort of change in operations is required for you to get singles capabilities to where you want it? Thanks.
Oh, that's a great question. I think in terms of singles, as we mentioned before, singles is the entry point for new consumers into the brand. We were a brand that we launched products with multipacks since the beginning, and we didn't have the opportunity to have singles. We define a big number of activities in how to put this into place. One of those, it is category management, right? Showing that what the volume we are losing not having those products on the shelf. I think we are getting some very, very good strides in general. We have some confirmations already for 2027, but it still is not 100% there. 2027 is going to be the year that we're going to prove the singles in order to roll out a little bit faster.
I think I mentioned before, the size of the opportunity, when you compare a place that we have singles and multipack, we have a better share than place that we have just multipack. I think that's our main motivation, and this is the approach that we are taking in convincing retailers that we must have singles on the shelf.
All right. That's helpful. Then, just on the hybrid go-to-market strategy, so you mentioned, you know, continued investment behind the West Coast DSD operations and then utilizing some third-party merchandising partners. Just wondering if you could expand on both of those a bit. Like, what is changing here, compared to what you guys have articulated in the past? Is this essentially just, you know, more dollars behind DSD and, you know, casting a wider net with these third-party merchandising partners? Or, I guess if you could just kind of add a bit more color to that strategy and what's new, that would be helpful. Thank you.
Sure. When we say the hybrid now, it is, yes, we have to have a better capability in terms of a Western DSD network that we have, and that's going to come from within. We have to have people to manage those DSDs. I think we invest a little bit more, nothing huge, but a little bit more in terms of giving more guidance and training those teams in Western. When we say in place that we don't have distributors, it is important to have execution store because in the end of the day, we need to have more visibility in store, and then we are partnering with those third-party agencies in order to help us on that. Then this is extra investment that we're going to do in 2027. Third, I think that we cannot lose sight of that, it is in terms of e-commerce.
I think everything that we are doing in the last quarter, we did a lot in terms of e-comm. It's working very, very well from the awareness to conversion, to have people trying, and then all the indicators are very, very positive in terms of retention and a very good ROI. So if you take those three levers, this is how we are thinking in terms of a hybrid go-to-market moving forward.
Very helpful. Thanks for taking my questions.
Yeah.
Our next question comes from Eric Serotta with Morgan Stanley. Please proceed with your question.
Great. Thanks for the question. First, Alexandre, could you talk a bit about parameters or criteria as you evaluate adjacent categories to enter? You know, better-for-you beverages can encompass a lot of different things. How are you thinking about where Zevia has the right to win from a capabilities standpoint? What are some of the characteristics of categories that you would find attractive? And then, to Girish, can you talk a bit about the sales upside in the quarter? I know you talked about strong performance from the club rotation, you know, e-comm pricing. How would you sort of rank those, the club rotation, you know, having that, you know, I presume was in the guidance. So I guess, what of those factors really was the upside surprise on the top line in the quarter? Thank you.
Yes. Sure. Let me start with the first one, and then Girish takes the second one. I think in terms of the category, how we are evaluating, I think, as I said, we are going to take the approach much more led by consumer. I think we want to develop products that can address specific needs in terms of a taste, functionality, and occasion. As we speak, we are testing one or two products already to try to understand how big will be this opportunity and how can we address everything, right? We are taking the approach much more, I would say, practical. We will test, we measure, we iterate, and we scale. Of course, if the product's not going through the gates, we are not going to launch. It's going to be much more a data-driven approach. That's what we are looking for.
In terms of the consumers, which kind of category we choose or not, I think consumers, as I said, they shop beverages by occasions, right? Not by category. We see a lot of opportunity across better-for-you in terms of a functional and a wellness beverage. Then combining all together in terms of the brand, clean ingredients, or growing digital engagement as we're doing right now, we have this platform of distribution available. Having those innovation driven by discipline can position us to deliver a real relevant and differentiated product. I think that's the approach that we are taking in terms of the innovation. But we are testing already the products.
Great. Then Eric, in terms of the fourth, or excuse me, the third quarter, if you break down the 18 points of growth, 14 points of that's related to volume, 4 points of that's related to price. As we think about what was sort of the upside surprise, I'd say two things on the volume side were, one, we actually saw stronger sell-through on the rotation than we had planned, which is a positive sign for the future. Two, we saw continued strength and more so than we thought on our digital channels. Then, of course, pricing did play a factor. We had anticipated having to get a little bit more promotional, and that did not come to pass. So, we were able to hold back some dry powder for that. So I'd say it was uniformly a strong quarter from a top-line perspective.
Terrific. I'll pass it on. Thank you.
Take care.
We have reached the end of our question-answer session. I would now like to turn the floor back over to Alexandre for closing comments.
Yeah, thanks. Thanks, operator. I think first of all, many thanks for joining us today. I think that we are trying to take you through this journey. If we step back a little bit, thinking about 2024, 2025 was the year that we set up the foundation in terms of financial and operational transformation, the way that we built with this very, very well set up foundation. I think 2026 now, we are setting up the company for the growth, the foundation for the growth. When we are talking about hybrid go-to-market strategy, we are sharpening the current Zevia brand with strong financial operation discipline as well, and then this performance-driven culture, and now the new capital. I think we are setting up this foundation. For 2027, I think in terms of pile, we are going to see a solid growth and product innovation.
Everything that we are seeding this year, we are going to harvest next year, and plus, we will test it out, those innovations, the new customer demand that we are calling generation engine in a digital, and also the go-to-market. Then I think this is going to setting us up for tripling this business, because this is what we think that is possible in the coming years. Again, thanks for joining us today. It is exciting times for us in here, and I am looking forward to update you on our progress in the next couple of months. Thank you.
This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.