Greetings, and welcome to the Zevia PBC Q3 2022 earnings call. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. If anyone should require operator assistance during the call, please signal for an operator by pressing star and then zero on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce Reed Anderson with ICR. Thank you, and you may proceed. Thank you, and welcome to Zevia's third quarter 2022 earnings conference call and webcast. On today's call are Amy Taylor, President and Chief Executive Officer, and Denise Beckles, Chief Financial Officer. By now, everyone should have access to the company's third quarter 2022 earnings press release and investor presentation filed this morning. This information is available on the investor relations section of Zevia's website at www.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 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 reconciliations of the Non-GAAP financial measures to the most directly comparable GAAP financial measures are all available on our website at www.investors.zevia.com. Now, I'd like to turn the call over to Amy Taylor. Thanks, Reed, and good morning, everyone. Welcome to the Q3 2022 earnings call for Zevia PBC. Zevia continues to experience strong category-leading consumer demand, adding well over one million new households, growing consumption, and delivering dollar and volume growth well ahead of the category, even in the midst of a challenging macroeconomic environment. We are realizing price in the market and materially reducing costs in our business, resulting in recovery of gross margin. Further, we see positive contributions to profitability in our mix shift, reallocation of promotional spend, and our initial supply chain adjustments, and finally, our company-wide cost reductions. We continue to realize the Zevia mission with a focus on global health for people and planet, removing another 3,500 metric tons of sugar from the diets of our communities and replacing 52 million plastic bottles in our markets in the quarter. In Q3, we delivered net sales of just over $44 million, 14% over prior year in revenue growth and 2.3% in volume growth. This falls short of our guidance as we've experienced short-term headwinds in shipments as retailers and e-commerce operators manage inventory down. We saw a divergence between shipments and scanned sales in the quarter. Scanned sales or sell-through to the consumer remained very strong and ahead of category growth, as is true in recent October reads as well. I will speak to the drivers of this with some channel detail in a moment. Gross margins are returning to historical levels, and we are paving a path to profitability with a strong run rate of improvement on the EBITDA line. Cost controls, a disciplined promotional approach, and a strong price increase implementation show new precedent set for Zevia with a focus on quality growth. I'll go into more detail now with a focus on consumer-based evolution and our learnings from syndicated data. Zevia's household penetration for the 12 months ending Q3 grew again on a sequential basis to 6.3% from 6.1% for the 12 months ending Q2 2022, adding 1.3 million more households to the brand versus last year. Brand spend per household also increased in the last 12 months by 10% versus last year, driven by increases in dollars per trip and consistent purchase frequency rates. Total Zevia grew 19.8% in measured scanned dollar sales for the quarter, continuing to outpace total non-alcoholic beverage, growing at 12%, and total carbonated soft drinks at 14%. Zevia grew EQ volume 14% in scanned data in a period where non-alcoholic and carbonated soft drinks are declining at 2% and 3% respectively. Zevia's brand is very healthy, and same-store sales remain robust, driven by volume and price, as scanned data demonstrates. The Zevia shopper is a highly desirable shopper, less price sensitive at all income levels, who demonstrates resilience in a fluctuating economy. We remain a home stocking brand, which continues to fare well from a consumer and brand health perspective, winning new consumers and sustaining household spending levels. The Zevia shopper spent 31% more and made 24% more frequent trips for total beverages than the average U.S. soda category shopper in the quarter. Consumer retail spending in Q3 was driven by a mix of organic velocity growth and continued increases in new store and new item distribution growth, paired with the accelerating consumer household base expansion. Velocity was the primary driver. Retail sales growth was split between 67% from velocity and 33% from new distribution and new items. New packages are driving growth in large part from new distribution. The warehouse club channel drove growth in the quarter and continues to deliver incremental households to the brand and incremental shoppers to the channel. 70% of buyers of Zevia in club over the last 12 months were new to the Zevia brand. Additionally, 68% were new to purchasing the carbonated soft drinks category at warehouse club. In grocery, 12-pack drove much of the growth. The first time new item on top of six-packs in some chains and replacing 10-pack in others with greater profitability and continued consumer trade-up. Our Kids product continued to perform in new outlets, including grocery and mass channels. Our single-can soda sales have started to drive incremental presence, contributing growth, and drive trial. Zevia Kids buyers spent 52% more and made 17% more trips versus the average brand buyer in the last 12 months. The role for Kids is clear and driving distribution will be the key. Our new single-can soda gained 2,400 new stores in the quarter and is driving impressive units per store per week, doubled when merchandised cold. This will be a key strategic initiative to drive trials going forward. Single can sodas in a sleek can has strong potential for the business, still in single digits in terms of percentages of units sold for Zevia at this stage. Moving on to velocity, the consumer shift to larger packages continues as do improved lifts from more efficient promotional executions at retail for Zevia. Dollars sold on promotions were 5 points lower than a year ago in the latest read. Yet lift from promotions was 6 points higher, driving both velocity and profitability. Stock-up options are driving growth category-wide and also for Zevia, as eight-packs and larger now account for more than 50% of our business in measured channels. We discussed the impact of the warehouse club channel pack, but eight-packs in the mass channel and 12-packs in grocery are also contributing to velocity growth as consumers trade up from 6-packs and as retailers switch from the 10-pack to a more profitable and standard 12-pack. We've experienced short-term disruption in volume moving from 10-pack to 12-pack with one major retailer, a transitory impact on volume in favor of quality growth. In the most recent scan data as of October fourth, Zevia dollars grew at an impressive 19% versus year ago on a four-week read, consistent with growth through the summer. Volume in this period shifted from 15%- 10% on a four-week read versus prior year, slowing by 5 points month-to-month. This remains strong growth following a 10% price increase, which went into effect at the end of Q3, and in comparison, the flat volume growth for the category. Zevia remains an outlier with double-digit volume growth at the register in retail. Similarly in e-commerce, we saw record sell-through for Zevia in the quarter. Shipments show, however, that we are not entirely immune to the current economic climate. A few customers managed inventory down in the quarter, yielding a transitory impact on our net sales. We expect this to continue through the balance of the year. I'll wrap with the big picture and turn it over to Denise, our Chief Financial Officer now since May. We are a new leadership team establishing several fundamentals to drive profitable, sustainable growth at Zevia. The right packs in the right channels, stronger pricing to support our model and our premium but accessible positioning, and better cost controls organization-wide. Consumer health metrics and our strong scan sales across channels demonstrate we're on the right track. We are further evolving strategic channel management with recent changes under our new Chief Commercial Officer, and we'll further drive costs down through a full supply chain network optimization to be implemented in the coming months. These changes are disruptive, especially to the top line in the midst of economic headwinds, but they are right for the brand long term and in advance of a 2023 brand refresh. While we will not be providing guidance on profitability, we note that our return toward historical growth margins and sequential improvement in EBITDA are an indication of our improved outlook and our path to profitability. 2022 is a transitional year for us, and 2023 will be a critical one as we refresh the brand, build on a foundation of quality growth, and reap the benefits of increased organizational capability. I'll turn it over to Denise to walk us through our financial results and speak to our Q4 outlook. Thank you, Amy, and good morning, everyone. I will begin with an overview of our third quarter financial results and then speak to guidance for the year. We will then open the call for your questions. In the third quarter of 2022, we delivered net sales of $44.2 million, growing 13.6% versus prior year same time. Volume growth was up 2.3% on an equivalized case basis to 3.6 million in the period, and we also benefited from higher price realization. You may recall that our price increase of 10% on average was taken across the soda category effective August 1st, 2022. Our price increase contributed $2.2 million to our net sales growth in the quarter. Our gross margin continued to show sequential improvement in the year with our strongest margins yet this year at 43.3% for the third quarter. Our first return to margins above the 40% mark. Gross margins of 43.3% was down from 45.6% a year earlier, primarily due to the impact of inflation on manufacturing costs, partially offset by pricing. On a sequential basis, our gross margin continued to improve and its strongest yet this year up to 158 basis points and 90 basis points versus Q1 and Q2 2022 respectively. Note we have reclassified our third-party logistics costs from cost of goods sold to selling and marketing expenses to better align with standard industry practice. Our margin before the reclassification of third-party logistics repacking costs to selling expenses was 40.8% for the third quarter as compared to 43.6% same time last year. Gross profit delivered in the period was $19.2 million, up $1.4 million or 7.9% versus a year ago, reflecting growth in net sales partially offset by higher cost of goods sold. Selling and marketing expenses decreased 5% to $12.9 million, reflecting lower freight and warehousing costs of $200,000 driven by pricing and efficiencies and a reduction of non-working marketing costs of $500,000. G&A expense was $8.3 million or 18.8% of net sales in the third quarter of 2022, compared to $7.7 million or 19.8% of net sales in the third quarter of 2021. A one-point improvement as a percent of net sales. The year-on-year dollar increase was attributable to higher employee headcount costs to support our growth, partially offset by decreases in public company costs due to expense optimization initiatives. Stock-based compensation and non-cash expense was $6.8 million in the third quarter of 2022, of which $3.8 million represents accelerated restricted stock unit awards related to the retirement of a legacy senior management employee. Net loss was $9.2 million, compared to a net loss of $49.8 million in the third quarter of 2021 and a net loss of $14.8 million in the second quarter of 2022. This is an improvement of $40.6 million or 81.5% as compared to the third quarter of last year, and a sequential improvement of $5.6 million or 37.8% as compared to the second quarter of 2022. Loss per share was $0.17 per diluted share of Zevia Class A common stockholders compared to loss per share of $0.75 in the third quarter of 2021. Adjusted EBITDA loss was $2.1 million compared to an adjusted EBITDA loss of $3.5 million in the third quarter of 2021. A year-over-year improvement of $1.5 million or 41.7%, showing progress managing towards profitability. On a sequential basis, Adjusted EBITDA improved by $6.2 million or 75.2% and $4.3 million or 67.7% compared to the first and second quarter of this year, respectively. Our balance sheet remains strong with $49.2 million in cash and cash equivalents and no outstanding debt, as well as an unused credit line of $20 million. We effectively managed our cash burn rate in the period, though facing top-line headwinds, maintaining a healthy working capital for the period of $75.1 million. Our cash flow from operating activities for the nine months ended September 30th, 2022 was a use of cash of $19.3 million compared to $13.1 million same time last year. During the third quarter of 2022, cash provided by operating activities was $200,000 compared to cash used in operating activity of $8.2 million and $11.4 million in the second and first quarter of 2022 respectively, representing sequential improvement. Turning to guidance. Based on our results, outlook and the current macroeconomic trends, we are taking this opportunity to reforecast our business and as an outcome, are resetting expectations for the year. We are lowering our 2022 annual net sales guidance to the range of $158 million-$160 million, an increase of 14.2%-15.7% over 2021, including net sales expectation for Q4 in the range of $30 million-$32 million. We are resetting expectations amid macroeconomic uncertainty, offset by excitement around continued strong brand pull as shown in scan data and as we realign our business strategy and launch our brand refresh for continued success in 2023. This concludes our prepared remarks. We will now open up the call for your questions. Operator? Thank you very much. We will now begin the question and answer session. If you would like to ask a question, please press star and then one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star and then two if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary for you to pick up your handset before pressing the star keys. One moment please while we poll for. The first question comes from Bonnie Herzog from Goldman Sachs. Please proceed with your question, Bonnie. Good morning. Amy, I guess I was hoping you could give us a sense of, you know, maybe how many customers are managing their inventory differently or, you know, what percentage or of your business is impacted and, you know, maybe a little more color on the channel or channels this is impacting. You know, you called out, you know, e-com. Maybe remind us of, you know, what percentage of your sales e-com represents. Then I guess I wanna understand how confident you are that this really will be transitory, you know. Is there something else going on with, you know, possibly the underlying health or demand for your brands? I mean, you know, is there a possibility that, you know, some of these retailers are reducing their shelf space allocation for you, for instance, as we kinda look into next year? Hello? Operator, I think we lost the management team. Hello? Hello? Hello? Hi, Amy. Are you on the line? Amy's on the line. Hello? We can- Hello? We can hear you, Amy. You may proceed. Thanks. Hi. I I hadn't been unmuted. Good morning, everyone. Apologies for that. Bonnie, thanks for your question. I will take the latter part of it first and then walk through the details, and I appreciate that. First of all, consumer demand is clear. I just wanna be really clear that at the register is sort of where the truth is told. We have really strong pull-through, and that's true in e-commerce as well as in retail. It's important to remember that scan data demonstrates super healthy growth, 20% essentially through the quarter, and even in the October read continues at a 20% growth clip and double-digit in volume as well. That leads the category, both in dollar growth as well as in volume, where the category is either flat to declining. We see that across the board, but also at each channel level and the vast majority at customer levels. From a consumer pull-through lens, we have no issues and a very healthy brand and a very healthy outlook. One of the things that I wanna kind of break down through us is that we have robust sales at a same-store level in historical channels. We're just now cracking into the mass channel, the club channel, the drug channel, and value, all of which have very healthy sales from a register perspective, and all of which are expanding space with us in literally all of them. Shipments have fallen short in large part because of a few key customers that have been managing inventory down as they leverage for cash in the midst of pressure from an economic perspective. This has had an outsized impact on our growth brand, and it's exacerbated by our route to market as a warehouse brand, shipping directly to customer warehouses. I'll just give you a quick example. For one customer with a target inventory of eight weeks, they've been currently whittling inventory down to two to four weeks at any given time while scan data shows accelerated growth and while they actually increase their Zevia assortment and space allotment going forward. This is not something we had planned for in our fast growth environment in Q3 or even the Q4 outlook. This dynamic is even more pronounced specifically as you mentioned in e-commerce. We saw as much as a 20 point-25 point swing in e-commerce from scans or from sales to the consumer versus shipments to the customer in e-commerce during the period. E-commerce, of course, not showing up in scan data, and this is an environment where we are the leading brand. In the long term, the consumer is boss. The shipments catch up with the consumer purchase behaviors, and this will be reflected in our net sales in the medium term. In the short term, we're definitely tempering our expectations based on this dynamic. Okay. That's helpful. Oh, sorry. No, I think, Bonnie, more people are buying, as you see in our household data. Uh-huh ... both in scan and consumer metrics. More people are buying Zevia than ever. They're buying more of it, and they're paying higher prices for it and the ingredients for a healthy brand and business. For us, we're managing a short-term impact of the current dynamics of both our route to market and the macroeconomic environment. Okay. You do, just to confirm, Amy, you know, based on all of that and what we're seeing in the scanner data, do you have pretty good visibility then on, you know, shelf space or cooler space allocation, you know, next year when retailers reset in the spring? We do. Okay. We do. You know, it's a seasonal business, of course. Mm-hmm. With that comes seasonal resets. The biggest opportunity for resets, as those in a beverage, including you of course, is in the spring and then again in the fall. We look forward to the spring reset seasons where we anticipate some space gains that will be concurrent with a brand refresh, which gives us an opportunity to show up to new shoppers in a big way. Then the other thing that's been a win for us, as I mentioned in prepared remarks, is expanding into new parts of the store with our first time ever single serve soda offering. Now has us penetrating open air coolers in the deli section and in two customers front-end merchandising, which for us is a small growth brand, is a really big win. These are proof points for a profitable trial-driving package and a really bright indicator for us to be able to expand once our route to market allows into single-serve and impulse business that can really bolster our reach. To be clear on that point, you've already started shipping some of these single-serve packages. We would have seen that in Q3? Yes. Okay. Yes. Single-serve, it's still just single digits in terms- Right. of mix for us. Okay. We had a dynamic in previous business where six-pack sales were being broken down by the retailer. Right. presented as a single, which of course undermines margin as a six-pack. Right. is sold at a single price. Now what we have is less than 10%, so it's single digit still within our mix, but growing fast and on a same-store sales basis, very impressive. When sold cold, it doubles. Yeah. This is a great story for us to take to retailers as we continue to expand that business. Right. Especially the C-store channel, which I think is a huge priority still for you. Absolutely. Yep. Final question, and then I'll get out and pass it on. As it relates to all of this, you know, you touched on your brand refresh. I just wanted to confirm, you know, that I think it's still expected to begin in January of next year and just maybe an update on that. Just thinking about that in the context of these retailers. You know, are they gonna be selling down their existing inventory, you know, with as you kind of roll out this brand refresh? Is it gonna be a phased rollout, et cetera? You know, how do we think about that? Yes. Yeah. We have our eye on the P&L. Mm-hmm. Our eye on sustainability principles. With that, we're looking to minimize any write-offs, such destruction. We want to do a rolling launch that allows for product to show up in market fully branded by the summertime, which is of course peak beverage season. We'll start shipping in Q1, and we imagine that the summertime is the peak opportunity for us to build consumer excitement around the new brand refresh. That allows for full distribution into our key customers with the new brand look and feel by the summer, and then allows for expansion into new channels into the fall, with the single-serve business being the key opportunity. All right. Thank you. I'll pass it on. Thanks, Bonnie. Thank you. The next question comes from Ben Bienvenu from Stephens Inc. Please proceed with your question, Ben. Hey, thanks. Good morning. I wanna ask. Good morning, Ben. With respect to the inventory resets that you highlighted, you highlighted a couple of customer channels. I'm curious as to how pervasive this is across your customer portfolio. You know, if you think about kind of two-part question here, one of those that have made these inventory decision changes, kind of what the duration you think that is on the impact to your business. Then kind of secondarily, of those that haven't made that decision, but that potentially could, what the probability in your view is of kind of knock on impacts like this, albeit, you know, transitory? Sure. Ben, thanks for the question. I wanna kinda manage the perception of the impact of this. This is just a few customers. But for us, a few customers can be significant. The decision is not necessarily to manage down Zevia inventory. The top-down direction company-wide, you can see this in the press for a couple of retailers and key e-commerce operator, is to reduce inventory full stop. We are then impacted by that. We're a warehouse brand. We're not a direct store delivery, so DSD operator. We ship to the retailer's warehouse. It's more difficult for us than a DSD brand to influence, let's say, order cycles and in-store decision making. As a retailer, in order to leverage cash, takes on less inventory for a short-term period of time, they can continue to sell through strong sales at the register, which is demonstrated in our scan sales, but bleed down in inventory and thus leverage cash. We're talking about an impact of week-to-month, weeks-to-month. A transitory meaning, sort of toward the end of the year impact to a limited number of customers is very much a short-term impact. At the end of the day, as I've said, the consumer is boss, the demand remains. The very same customers, and I mean this in quite a literal sense, the very same customers who have reduced inventory in the back of the store have increased their Zevia space in the front of the store looking into 2023. We expect and plan for inventory levels to return as we look ahead. Got it. Very good. Very helpful. Thank you. My second question is related to margins and profitability. You talked about, you know, management there, improvement there. Can you talk a little bit as well about kind of what you're seeing from an input cost perspective? Are you seeing, you know, pressures abate there? How optimistic are you as you move forward? Then maybe, you know, knowing the last couple of years have been quite volatile and difficult to predict with respect to this, how would you compare kind of your level of visibility into cost today versus that of a year ago? Hi, Ben. This is Denise. I'm hoping you can hear me. I can. Loud and clear. Awesome. Good morning. I'll take the question on margin. As you've seen, we've returned to the 40s% range. We expect that to continue. We do have visibility into our cost construct, as it regards to cost of goods sold. We do see improvements in some areas when we look at that makeup. We expect to see those continued improvements through the end of the year. Of course, as you know, there are some unknowns because of inflation, but we expect to see our margins continue in the 40s% range through the rest of the year. Hopefully, that answered your question. It does. Okay. Thanks so much. You're welcome. Thank you. The next question comes from Bryan Spillane from Bank of America. Please proceed with your questions, Bryan. Oh. Thanks, operator. Good morning, Amy, Denise. Hey, Bryan. I just had two questions. Good morning, Bryan. Good morning. Yeah. Two questions. Just two, follow-ups, I guess. One is, I guess, you know, what we're observing in some of the other product categories or categories we follow, that there's been a slowdown in just e-commerce sales in general. Maybe some of this is just related to, excuse me, people, you know, not being home as much and changing purchasing patterns. Can you talk a little bit about just how has that affected? Have you seen that in your business? I guess, as you think about channels going forward, you know, would there maybe be a little bit less of an emphasis on e-commerce, and more, you know, in traditional retail, you know, if that's the trend? Then I have a follow-up. Yeah. Bryan, this is a super strategic question. Thank you. We have not seen a slowdown in consumer purchase behavior in e-commerce for Zevia. We have not. However, we have seen some strategic changes from our customer in how they're managing products, specifically in beverage. This is probably a longer conversation, but at the highest level, they seem to have, and especially our largest e-commerce operator seems to have, let's say, some shifting objectives, and thus the way they manage, let's say, pricing versus competition in the market may fluctuate. We have obviously no control over that, but we seek to partner with our key e-commerce partner in order to set the right manner of competing with retail. We'll continue to think about the right packages for e-commerce as a unique offering to the e-commerce shopper versus that of retail. Our attitude toward e-commerce is not to seek to grow or shrink its mix. We're a retail brand that continues to be very focused on growing our retail presence. You know, carbonated soft drinks are ubiquitous in the world. The upside for Zevia is massive. We are focused on growing our retail distribution. Our same store sales are super healthy. Our opportunity and our success rates so far in growing in-store presence in our existing customers has been tremendous, and we need to keep that clip and then stay very focused on, for example, filling out the gap in 2,500 mass channel stores where we're not yet sold for Zevia, or filling out the third of the three drug operators that don't yet sell Zevia, or addressing food service and convenience that don't yet sell Zevia. They need to sell Zevia at the right time, at the right price, at the right route to market. These are our focus. In the meantime, e-commerce can fill in the gaps and be available to the consumer that continues to have beverages shipped to their home or to their workplace. This is the attitude that we have to e-commerce, is that we don't seek to grow or shrink the mix, but we have e-commerce is available to fill the gaps where retailer doesn't serve the need of that, either business or individual shopper. I hope that answers your question, Bryan, but feel free to follow up. Yeah. No, it does. It actually kind of tees up the second question, which is, you know, given, you know, working through, you know, retailers and managing their own inventory and, you know, the retail expansion aspirations, at what point do we start thinking about, you know, signing on with a DSD partner in order to, you know, sort of service- Yeah. Service, you know, the retailers the way they're accustomed to in carbonated soft drinks? Yeah. Thanks, Bryan. We are being really thoughtful about gaining new distribution. You didn't ask me, "Hey, how fast are you gonna expand distribution?" Right? What I will tell you is that we're being very thoughtful about the relationship between our brand refresh and the moment at which we show up in new channels where the shopper has never seen Zevia before. In related news, that will likely require an evolution of our current route to market. That's probably as much as I can say about that right now. We are really happy with our current distribution model for where we're sold today, but we've learned a lot. I'll remind all of us here today that this leadership team has been a leadership team for one quarter. I've been in my role for one quarter, and we've had tremendous change, and we've learned a lot. We're focused on healthy unit economics, on cutting costs. We're managing these transitory issues that we're speaking about. We're, by the way, cycling the full pipeline still to club. We're pacing our distribution growth with a focus on quality, and that includes a route to market. I may have answered more than you asked, but I think these are all interrelated topics as we think about sustainable, profitable growth. Yeah. That's very, very helpful. Thanks, Amy. Thanks, Bryan. Thank you. The next question comes from Andrew Strelzik from BMO. Please proceed with your question, Andrew. Hi, great. Good morning. Thanks for taking the questions. My first one, I just wanted to revisit kind of the confidence that you have in the timeline of weeks or months that you spoke about. Is there anything in your conversations that's kind of given you that confidence or obviously the macro's uncertain, et cetera. I guess I'm just curious if you could provide any color on that. The number one thing, Andrew, that gives me confidence that the inventory issue will subside going into, let's call it next year, is consumer demand and the retailers' lack of stomach to sustain lost sales and lost share. We have built a laser-focused, small, scrappy insights department that is quite astute at showing the retailer when they're losing dollars to competition. We are not yet at that point, as you can see in scan sales, that retailers are actually losing money by drawing down inventory in Zevia, but we're very close. Excuse me. As retailers expand Zevia's space, meaning increasing their assortment for Zevia, increasing their in-store space for Zevia, we're gonna have to maintain stock levels to address out of stocks that are teetering at risk now. I can share with you anecdotally with individual exchanges with customers where we're starting to review SKU level stock levels. We're building plans collaboratively to get through this choppy period of time, an unexpected economic downturn. We're not the biggest player, as you can imagine, in beverage, so we don't always have the attention of the buyer to the degree of category leaders. I'm quite confident as I review anecdotally, these handful of customers that are driving this dynamic are partnering with us to round this corner. I do think it is wise to assume it will continue through the end of the year, but I'm confident that we're not going to continue on a trajectory that causes lost sales at the register. Got it. Okay. That's helpful. I wanted to ask a question on, you know, I guess pricing, but just overall spend levels and how you think about that moving forward and presenting it to consumers. I recognize that I'm asking this at a time when gross margins are sequentially improving and you know, that's kind of the backdrop. You know, just given the receptivity, I guess, that you've seen on the pricing, does it change the way you're thinking about your. The value is obviously very important. Does it change at all the way you're thinking about your price points or approaching pack sizes or anything along those lines? I guess just, you know, more directly kind of in the medium term, any thoughts around or willingness around pricing, moving forward as you work through, you know, some of the other inventory issues? Thanks. Sure. Let me share some initial thoughts, and I'd love to turn it over to Denise as well. You know, the data would suggest that we've had very strong consumer acceptance of our pricing, and pricing has been a driver of our growth, not the only driver, but a driver. We're growing in units and dollars, and we seem to have elasticity. It's early to say, but close to that of category leaders. Couple that with consumers continuing to trade up in pack size and the introduction of a brand refresh next year, and I think we have really strong pricing power going forward. Let me just turn it over to Denise and see if she'd like to add any further color. Yeah. Thank you, Amy. I think we continue to have strong pricing power. We have seen strong acceptance not only by the consumer, but first by our customers in taking the price increase and strong implementation across the board, and expect to continue to see acceptance at both levels, both with our customers and with the consumer. So you know, for us, it's positive upside and based on the strength of the brand and the health of the brand. So pricing for us, we believe our pricing power is. It It still holds. As Amy mentioned, our elasticities are showing you know very, very low compared especially to the bigger guys in the category. But we're certainly seeing really positive upside from taking price. Hopefully, I answered your question. Yep. That was great. Thank you very much. Thanks, Andrew. Thank you. The next question comes from Chris Carey from Wells Fargo Securities. Please proceed with your question, Chris. Hi. Hi, good morning. Hey, Chris. Good morning, Chris. Morning. It's actually just connected to Bryan's question around, you know, DSD. Obviously, that could be a good development from a distribution standpoint, but I suppose it also has margin implications. I just wonder how you're thinking about balancing the top line versus margins going forward. You know, certainly in light of better margin delivery this quarter, and it's not lost on me that, you know, the company is still providing its outlook based on revenues, but not profit. I just wonder how this all plays out going forward as you evolve your distribution mix and then how you think about that. Thanks. Yeah. Thanks, Chris. Astute question, and I'll apply it to Andrew's question around pricing as well. I wouldn't underestimate our pricing power and upside. I think they're one of the most important topics for us is we talk all day about profitable growth, and we root the discussion in our opportunity around unit economics. What I mean by that is building a strong brand which has the opportunity to continue to take a responsible clip of regular price increases, which is consistent with how the category behaves. The second thing is to think about our supply chain, and we haven't talked a lot about that on this call. We have a legacy supply chain sort of grown up with an entrepreneurial company, and we have an opportunity to do a true reset there, where we optimize the entire network end to end with work that begins now. The academic work has been done in the past with the new leadership team now in place, and the implementation begins now. The impact of that is a material reduction going forward in cost. That on sort of the top and the bottom of unit economics means reduced costs and stronger pricing. With that are the margins to support changes to route to market as appropriate, either by package, by category, by channel, or by geography. I know I'm not being very specific yet, because the plan hasn't been minted entirely. We're very thoughtful about growing in areas like convenience and food service, et cetera, and making sure that we craft the right route to market and the right pricing before going there. I think often beverage brands of our size may go too quickly at pricing that doesn't support the right route to market to sustain success in a channel like convenience, where you must have the right route to market to compete and ensure the right merchandising. Your question is astute, and it ties back to the pricing and unit economics question as well. I think 2023 will be an important and exciting year for us, and I'll tie together our brand refresh, which indicates pricing power, our price pack architecture, so right price in the right channel, and then finally our route to market, in order to set the stage for profitable growth and sustainable growth. Thanks, Amy. Good luck. Thanks, Chris. Thank you. Ladies and gentlemen, just another reminder, if you'd like to ask a question, please press star and then one. The next question comes from Joseph Feldman from Telsey Advisory Group. Please proceed with your question, Joe. Great. Hi, good morning, guys. Hey, Joe. Wanted to ask about the club channel. Can you remind us when you started to roll that out and how when we'll annualize that rollout and how much of an impact maybe that had on the volume as well. I also wanted to ask if the club customer has done what you've hoped where, you know, that trial has become more sticky as they've continued to shop. Yes. Very important question. I'll take the second one first. Thank you, Joe. Yes. We are able to trace the data of the club shopper. As 70% of that business is incremental, we can also watch as that shopper spends more on a higher margin pack in grocery once they come on board with the Zevia brand. They discover their favorite flavor through a variety pack in club and then buy that straight flavor 12-pack in grocery. It's been a highly incremental and sticky channel for us and well worth the investment. It's not just a volume play, it's a strategic marketing play, and we're very pleased with that business. However, your first question, we launched that business with a pipeline fill in the fourth quarter of 2021. Zevia is a seasonal business. We have a very strong summer, and where the data is a bit muddy is in 2021, where that seasonality was less pronounced because of the pipeline fill in the fourth quarter for club. We are starting to lap that now, most significantly in the fourth quarter. It did have a material impact in shipments in the fourth quarter, and it is a part of the story of our outlook for the fourth quarter, which is a one-time effect, looking ahead. Helpful. Thank you. Kind of, I had a similar question, and I know it's still early with the single serve beverages at convenience, but same kinda question. Are you seeing? I don't know if you can track that customer as closely as in the club, but are you seeing that repeat or, you know, that same customer maybe comes in and buys a six-pack the next time instead of just the single? Hard to say. We don't have singles in convenience yet. We do have them in grocery. It's early days to say whether or not that's a new shopper. We in the fourth quarter and then in the early part of 2023 will expand to a number of front-end merchandisers, meaning we will have cold single Zevia soda, energy drinks, and tea in coolers right at the register. At that point, we'll really be able to gather more data about who is buying single serve and how often, meaning we'll be able to get a sense of trial driving there and whether or not they're repeating back to multi-pack. Let's revisit that question over the next six months. It'll be a really important one. All right. Great. Thanks. Good luck with the fourth quarter. Thank you, guys. Thanks, Joe. Thank you. There are no further questions at this time. This does conclude today's teleconference. You may disconnect your lines at this time, and thank you very much for your participation. Thank you.