Good day, welcome to the Zevia's second quarter 2023 earnings conference call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then one on your telephone keypad. To withdraw your question, please press star then two. In the interest of time, we do ask that you limit yourselves to one question and a single follow-up. Please also note today's event is being recorded. I would now like to turn the conference over to Reed Anderson with ICR. Please go ahead. Thank you. Welcome to Zevia's second quarter 2023 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 second quarter 2023 earnings press release and investor presentation filed 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 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 and presentation slides that accompany today's comments in 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 Amy Taylor. Thanks, Reed, good morning, everyone. Welcome to the Q2 2023 earnings call for Zevia PBC. Before we address the supply chain disruptions, I'd like to provide an update on the fundamentals of the Zevia business. Zevia's brand remains healthy. Demand is strong and accelerating as the brand refresh rolls out, and velocity continues to grow at double-digit rates. Our price increase has been well-received, reinforcing our premium but accessible positioning and supporting our gross margin improvement. We remain in a strong cash position, even while investing in initiatives to strengthen the brand and the operations for the future. Consumer spending on the brand is up for household and for trip, and our order book reflects demand in keeping with our expectations. As we pre-announced, our net sales for Q2 were materially impacted by interruptions to our customer fulfillment. These interruptions are short-term in nature and are the result of missteps in our supply chain transformation efforts. The transformation of Zevia's supply chain is a critical initiative to support our continued growth, enhance our customer service and drive efficiency, and ultimately, materially reduce costs as we scale. That said, we experienced some pain points in the transition from old to new, which I will detail here today, with a focus on the actions we are taking to course-correct them and the expectations going forward. The main message I would like for you to take away from today's call is that Zevia has significant long-term potential, and the broader value proposition remains one of the most relevant in all of beverage, a very exciting category. Zevia's demand, reflected in velocity data via scan, which measured over 21% for the quarter, demonstrates that the brand and the product portfolio meet the needs of today's and tomorrow's consumers. The steps we are taking continue to bolster margins and improve profitability, reflecting the exciting potential in the years to come. Customer fulfillment challenge is a short term, and the supply chain will be stabilized by year-end and optimized for 2024. Zevia's mission focuses on global health for people on the planet, and in Q2, we removed another 3,100 metric tons of sugar from consumers' diets and never having sold a plastic bottle. Zevia is more affordable than 65% of non-alcoholic beverages in North America, even as we realize price in keeping with the market. Our continued focus is taking better for you beverages mainstream, making them available and affordable for consumers across all income levels. I will walk us through second quarter results and then speak to our focus now and going forward. We delivered net sales of $42.2 million below expectations for the quarter. Velocities were strong and bolstered by the brand refresh, and double-digit retail sales growth was sustained where service levels were not interrupted, as is clear in select customers and across the market in our scan data. Our order book was at or above expectations across the quarter. Gross margins continue to improve. We've demonstrated strong cash management, disciplined adaptations to our promotional strategy, and price increase implementation with a strengthened key accounts team as we've moved from a field sales model to a national account focus this year. We've realized immediate benefits from the strong brand refresh, and we believe collectively, these initiatives will reinforce our foundation and position us to deliver on our ambition of sustainable, profitable growth. I'll speak to our consumer base evolution and retail indicators via panel and scan data insights, and then I'll walk us through the measures we are putting in place to address customer fulfillment. Zevia's household penetration remains above 6%, and Zevia's households increased their brand spend by 6% once again, driven by another 9% increase in spend per trip, with consistent purchase frequency rates. These are strong indicators of the health of our brand and our user base. We also saw strong new item performance in the form of Vanilla Cola, single can soda sales, and 12 packs. The most important scan metric of the quarter is velocity, sales per point of distribution. Zevia grew velocity 21.3% in the quarter, demonstrating that when in stock, Zevia remains a double-digit growth brand. The Zevia shopper is a highly desirable one, less price sensitive at all income levels. We remain a home stocking brand, which remains a competitive advantage as we simultaneously build our singles business and grow cold availability, which are key to driving brand trial. Zevia shoppers spend 40% more on beverage versus total non-alcoholic beverage shoppers. Our shoppers also make 32% more trips to stores to purchase beverages. Zevia shoppers continue to differentiate themselves even further from average beverage shoppers as they continue to spend more on the brand and overall. Our promotional effectiveness continues to increase, which supports profitability, also informs our retail strategies going forward. We had 25% fewer dollars sold on promotion in the second quarter versus prior year, and continued to improve lift. In other words, we sell more Zevia on the merits of the brand to new and existing consumers. We continue to grow in legacy natural channel retailers and expand in mainstream channels. We've established incremental cold distribution with our single sodas across natural, now our fastest-growing pack format there, growing trial with new shoppers. We're gaining single soda distribution in conventional grocery as well, and we have new energy drink distribution in West, Midwest, and East regional chains. One of the country's top three drug chains is moving Zevia to the carbonated soft drink aisle nationwide, starting in September. Finally, we have very strong performance in the carbonated soft drink aisle in test stores in the world's largest retailer, and we anticipate continued expansion in that chain with resets in 2024. Zevia has performed at or above expectations with each expansion into mainstream channels, which bodes well for future customer and channel expansion. I will now direct our attention to our broader operational efforts and address customer fulfillment. In the past year, we have redefined the Zevia brand through new positioning and packaging. We've entered the new singles business, expanded distribution, launched top-performing flavors and formats, built a professionalized key accounts team, successfully taken three price increases in keeping with the category, and have step changed cost management and cash management. At the end of Q1, we also endeavored a supply chain transformation to deliver a streamlined, efficient, and effective supply chain built for scale. This is the right initiative for Zevia and will deliver strong results when complete. We have experienced short-term missteps in its execution, however, with material impact on net sales for Q2, that we expect to continue in Q3. As we consolidate our warehouse network from 27 locations to seven, partnering with two capable and proven partners, we encountered challenges which impacted inventory management at a SKU level, inventory transfers, and then accuracy and timeliness of customer deliveries. We have taken the following steps to course correct. Firstly, we have hired a new SVP of Operations and Chief Supply Chain Officer in Bill Williamson, who joined us in July from Monster Energy. Bill has also hired already three new experienced supply chain manager-level contributors to step change in-house operations. Secondly, we rephased transition plans for our warehouse network, leveraging legacy providers for support through the transition, with ample days of supply across all SKUs. Thirdly, we established new practices for customer mapping and customer ordering to support fulfillment, effectiveness, and efficiency. Fourthly, we changed our approach to freight to improve service levels and reduce costs. Finally, we sold our company-owned warehouse to the best of the mixed model and embraced our efficient third-party network. This transaction closed in early Q3. As evidenced in our velocity data via scan, demand remains strong. Our raw materials and finished goods supply and forecasting capabilities are strong. The short-term issue is centered around logistics and customer fulfillment, and the steps required to fix it are clear and are in place. We have a long history of strong customer fulfillment with our retail partners and are providing a high level of transparency through this transition to them, protect distribution, and support future expansion with our retail partners. I'll wrap with the big picture and turn it over to Denise. Zevia has a very healthy brand and business model and continues to experience strong consumer demand, increasing spending per household on the brand. We are realizing price in the market with strong consumer acceptance, and we continue to grow velocity in legacy retail partners and in new distribution, and we are delivering strong and improving gross margins. Our number one priority in the meantime is to stabilize our supply chain, returning to our best-in-class service levels and putting the network transformation back on track so that it delivers our long-term objectives of driving sustainable, profitable growth. Thank you, and I'll hand it over to Denise. Thank you, Amy. Good morning, everyone. I will begin with an overview of our second quarter financial results, discuss guidance, then open the call for your questions. In the second quarter of 2023, we delivered net sales of $42.2 million, down 7.2% versus same time prior year. We did see positive impacts from our strong implementation of our price increase in the quarter, coupled with our price increase from August 2022, which delivered a positive impact of $3.6 million, offset by decline in volumes of 16.8% or $6.9 million, due to the supply chain disruption and lower order fulfillment. The key fundamentals of our business remain strong, as shown in our gross margin, adjusted EBITDA, and cash management in the period, which I will discuss next. Our gross margins continued sequential improvement with our strongest margins yet as a public company at 46.6% for the second quarter of 2023, 4.2 points above the same quarter a year ago, primarily due to the impact of price increases and tailwinds from lower aluminum costs, offset by lower volumes and slightly higher manufacturing costs associated with higher fees as a result of inflationary pressures and labor rates. Gross margin also improved sequentially by 20 basis points versus Q1 2023. Gross profit delivered in the period was $19.7 million, up $0.4 million or 1.9% versus year ago. Selling and marketing expenses increased 1.4% to $16.1 million, reflecting increases in freight and warehousing rates of $0.69 per unit sold, a 20.8% year-on-year increase in cost, primarily due to the supply chain transformation initiative and disruption, and additional investment in marketing in the period of $0.2 million. G&A expense was $6.2 million or 14.7% of net sales in the second period of 2023, compared to $9.8 million or 21.6% of net sales in the second quarter of 2022, a decrease of 6.9 points as a percent of net sales. The year-on-year dollar decrease was attributable to lower employee costs, discretionary spend, and public company costs. Stock-based compensation and non-cash expense was $2.4 million in the second quarter of 2023, as compared to $8 million same time last year. Net loss was $3.9 million, compared to a net loss of $11.1 million in the second quarter of 2022, an improvement of $7.2 million or 64.6% as compared to the second quarter of last year. Loss per share was $0.08 per diluted share of Zevia Class A common shareholders, compared to a loss per share of $0.27 in the second quarter of 2022. Adjusted EBITDA loss was $2.6 million, compared to an adjusted EBITDA loss of $6.4 million in the second quarter of 2022, a year-on-year improvement of $3.8 million or 59%. Our balance sheet remains healthy, with $47 million in cash and cash equivalents and no outstanding debt as of the end of the second quarter of 2023, as well as an unused credit line of $20 million. Working capital at the end of the period was $70.4 million. Turning to guidance, our 2023 annual net sales guidance is $163 million-$168 million, including $38 million-$41 million in Q3 of 2023, which reflects our expectations that the supply chain logistic challenges will continue to have a material impact on Q3. While we do not provide guidance on gross margins and adjusted EBITDA, we do expect costs associated with the supply chain transformation and current supply chain disruptions to negatively impact both our gross margins and adjusted EBITDA over the remainder of the year as we invest to complete the transformation and take corrective actions to resolve the disruption. That concludes our prepared remarks. We will now open the call for your questions. Operator? Thank you. We will now begin the question and answer session. To ask a question, you may press star then one on your telephone keypad. If you are using a speakerphone, we ask that you please pick up your handset before pressing the keys. If at any time your question has been addressed and you'd like to withdraw your question, please press star then two. And once again, in the interest of time, we ask that you limit yourself to one question and a single follow-up. Today's first question comes from Bonnie Herzog with Goldman Sachs. Please go ahead. All right, thank you. Good morning, everyone. I. Good morning. I had a quick question first on the underlying demand, Amy, that you mentioned for your products. Just wanted to confirm that, you know, you saw demand actually accelerate month-to-month in Q2, or, you know, should we think about it more as just broadly remaining pretty strong or consistent? Then just curious how demand has trended, you know, in July and early days of August so far, if you could share? Sure. We saw a strong demand growth year-over-year, year-to-date throughout the first half of 2023. Then in the, in the month of July, we saw acceleration. As promotional dollar investment has reduced in part out of necessity, our lift has improved and our velocity has accelerated. Just looking at July data, scanned data through July 17th, we saw, for example, in seven out of our top 10 retailers posting improvements versus prior period in soda scan sales on materially reduced promotional dollars, and all posting accelerated dollar growth. Hopefully that answers your question, Bonnie. Yeah. No, that was helpful color. Then, you know, my second question, I guess, is, you know, on your full year guidance, which, you know, now calls for quite a bit of top line improvement in Q4, just based on what you kind of shared regarding Q3. You know, I was hoping to better understand the visibility and confidence you have, you know, that you'll see this type of improvement in Q4. Then, you know, I recognize it's early, but just any thoughts on, you know, your top line growth, you know, the acceleration next year and beyond? You know, just thinking about what's, you know, what do you think is a realistic growth outlook for your business, you know, in light of everything you've, you've been working on, whether it's the brand refresh, the investments you've made, et cetera. Thanks. Sure. The fundamentals are obviously in place, and we can see in velocity that the brand health is strong and that the brand refresh is already having an impact, with or without incremental marketing dollars spent, by simply driving on-shelf visibility and trial, so new consumer trial. Demand throughout the year has remained strong, and we haven't experienced any loss of space at retail with our recent customer fulfillment challenges. Our return to growth is simply a matter of how quickly we can return to normal customer fulfillment levels. I think that explains our bullishness on, on Q4, just being able to actually realize the impact in net sales of consumer demand. Our, our outlook for the future remains bullish, so we are a double-digit growth brand. You can see that in our velocity. We expect it to return in scan sales and, of course, in our shipments and net sales. We also expect distribution expansion to support in 2024, such that we're growing based on a balance between velocity and distribution growth. We've also had a strong response to price increases that we've put into the market, and so that indicates that we have further room in price as well. In 2024, we would expect growth from price and then a nice mix between velocity and distribution expansion. Okay, just maybe wanna confirm something, and then I'll pass it on. To be clear, that's super helpful, and then just thinking about the supply chain disruption and the work you're doing to resolve it, we should assume that will be fixed throughout Q3, and that's really where you're gonna face, you know, still some impact. Then by the time we hit Q4, things will accelerate, you know, given the, the underlying demand, et cetera. You're definitely right about the acceleration in Q4. Just to clarify, with regard to the timeline on recovery of supply chain back to the fully optimal and really best-in-class fulfillment levels that we've sustained in the past, including through COVID and through the aluminum can crisis, we've always been quite competitive and reliable there. We expect the timeline there, as we've said, to be by or before year-end, so definitely impacting Q3. It'll take months and not weeks to fix. Right. We do expect to be in good shape by or before year-end, Bonnie. Okay. Very helpful. Thanks so much. Thank you. Thank you. Thank you, our next question comes from Christian Junquera with Bank of America. Please go ahead. Good morning. You have Christian on for Brian. Thanks for taking our question. Denise, I believe at the end- Hi, Christian. of your prepared remarks, you mentioned how the supply chain transition will negatively impact gross margins and operating expenses for the third quarter. Can you share the magnitude of that impact? Should we expect gross margins to decelerate this upcoming quarter? They've been trending in that, mid 40%. Just, you know, the magnitude of the impact on selling and marketing expenses. For instance, it came in higher than we anticipated this quarter. I don't know if there was, you know, a one-time cost this quarter that you could share with us. Thank you. Sure. Good morning. In gross margins, we expect it to continue to be in the mid-forties. Though we expect to see pressure, we expect it to remain in the mid-forties. On adjusted EBITDA, we expect it to be lumpy. Costs are going to accelerate, selling costs primarily in the third and fourth quarter. We anticipate that will happen through the rest of the year, primarily related to what's happening with supply chain. You know, we don't expect it to be at the level you see in Q1 and Q2. However, we do expect that we will see some normalization late in the fourth quarter. Does that give you, Does that answer your question? Perfect. Yeah, that, that's very helpful. Then just one quick follow-up from me. Just any early reads from the brand refresh, what are retailers and consumers saying? Just know, what are some of the internal metrics you guys use that you guys are using to gauge the success of the brand refresh? Thanks. Sure. Yep. Over time, the brand refresh's job is to expand our household penetration, is to win new consumers, and to build brand health through the lens of image, and then, and brand love and loyalty. So obviously, far too early to measure success based on this, but early indicators would be, are retailers engaging? Are retailers seeing that the in-store visibility improvement that comes from the brand refresh merits increased space, merits increased frequency of display, and merits engagement in a category where we, we're still fairly new in the game, such as energy. Based on those anecdotals, we're very happy with the brand refresh. It's driven a lot of engagement as both retailers and consumers consider the new look and feel to present a premium but accessible brand, and most of all, a relevant brand. Anecdotally, from consumers, be it on social media, or reposts, or influencers posting Zevia saying, "Zevia fits my vibe now," we are seeing a lot of positive feedback. Again, it's early days, and this is very anecdotal. I think one of the more important anecdotes to share is from one particular top retailer, where we have been able to maintain in-stock levels through the period because of ample shelf, sort of holding power, off-shelf displays, and strong execution. In this particular retailer, growth has been consistent since the beginning of the year, but accelerated to 22% in the period ending July 16th, with the brand refresh in store. In the same period of time, we're reducing our promotional spend by 20%. I highlight this just to say, it is our belief that we are selling more Zevia on the merits of the brand, post-brand refresh, and that, that will continue. We're very bullish on the brand refresh, delivering trial, expanding consumer base, expanding in-store presence, and ultimately helping to improve lift efficiency and growth on the merits of the very brand. Thanks for the question, Christian. Thank you. I'll pass it along. Thank you. Our next question today comes from Jim Salera with Stephens. Please go ahead. Hi, good morning, guys. Thanks for taking our question. Amy, I wanted to ask on the acceleration, you know, once the supply chain is, is kind of reoriented, is that gonna come just from better kind of in-aisle fill rates and having all the products on the shelf and having, you know, several SKUs deep? Or is that gonna allow floor displays, end cap displays, you know, more visible to consumers outside of the kind of traditional in-aisle product offering? Jim, you're doing a great job of breaking down both reasons. Effectively, we know the demand is there. In fact, if I can give you a little bit more color, if we had filled our on-shelf and display gaps for the quarter, that fill rate would have bolstered our scan sales at about $4 million, it would have reflected growth rates from a scan perspective of 17%, so meeting our expectations. To answer your question, the return to growth, in other words, to have our net sales reflect what our actual demand is, it will be a product of both things that you mentioned, which is filling depths of shelf to avoid individual flavor and SKU out-of-stocks on shelf, as well as returning to the ability to execute display activity and to drive incremental promotions and to interrupt new shoppers at multiple parts of the store. We're currently having to back off of that to a degree, based on our customer fulfillment issues. As soon as we're able to fulfill the demand, we're able to then also drive in-store presence. Yes, both shelf and display return to sort of doing their job at Zevia when customer fulfillment comes back online. Both of those, executional considerations help to fulfill that underlying demand, and we expect that to further accelerate, given the brand refresh, positive early indicators. Does that help, Jim? Yeah. Yeah, that's great. And then maybe if I can ask you a question on club, too. I know at least in my area. Sure We have the tea offering in club, along with the, the 30-pack for the soda SKU. Is, is there any opportunity for energy in club, like multi-pack for energy, or to get tea more broadly distributed? I'm not sure how representative my area is relevant to kind of the broader club distribution, but do you think that you could run with a soft drink SKU, an energy SKU, and a tea SKU across club? We absolutely believe that we can, Jim, and that is our intent. Soda has positively surprised every regional buyer in club that has chosen to double down on Zevia Soda. We're in the early days of Tea rotations, as you've observed, and again, sometimes doubling expectations, so minimum hurdle rates with Tea. We're very early in the energy drinks business. We're seeking to drive energy drinks starting now, based upon the brand refresh, because we wanted to put the new look and feel Zevia Energy in front of the consumer in broader brush visibility versus the old look and feel. We feel that the new design materially better represents our position, which is a clean and pure energy option at a premium, but accessible price, with awesome taste. This is the feedback that we're getting, so we believe that club distribution could be an exciting way to continue to reach more consumers with the energy proposition as well. Yes, to the future of tea in club, and yes, to the future of energy in club as upsides. Okay, great. Thanks. I'll pass it along. Thank you. Thank you. Our next question comes from Sarang Vora with Telsey Advisory Group. Please go ahead. Great. Thank you, guys. Sarang Vora for Dana Telsey. You know, my first question is on the supply chain. Seems like, you know, based on your comments, certain customers had strong sales, certain did not. Can you provide, taking a deeper step in, can you provide color on, was this supply chain impact regional? Did it impact certain customers, any particular brands like tea or cola? Just curious to know a little bit more on, you know, how it impacted, you know, the current trends. Yes, Sarang, thank you for the question. I would say unfortunately, the customer fulfillment dynamic was pretty even across the country from a geographic perspective. While it did not have an outsized impact on individual customers more than others, in some instances, when customers have ordered higher level stocks in the past, they've remained in stock further into our challenge period than others, and thus had better performance. In some instances, we're able to force promotion, so make sure that, that retailers with promotions remained largely in stock, but that was challenging across the country. I think the simplest way to answer your question is that through the lens of customer, category, and geography, the impact was relatively equal across the country. So we're taking swift action, as I've mentioned in the prepared remarks, to fix that. Bill Williamson, who started with us in mid-July and then, full-time at the end of July, has brought on three new people in key functional areas to drive improvement. He stood up tools and processes necessary to support the team function during the transition. He's demonstrated the ability to drive swift decisions with confidence, leading the team, understanding their daily tasks, and then is slowing our exit from some legacy warehouse providers to support our service levels during these changeovers. Then, is just operating with tremendous energy and impact, with our team, and then with our third-party partners out of the gate. We're bullish on returning across geography, customer, and category to best-in-class service levels. That's great. you know, just, just on the brand refresh, you know, at this point of, you know, packaging, labeling, has that been done across all of your profiles? Like the everybody has been rebranded, now the next step is just marketing and distribution. Is that a fair way to think about the brand refresh, steps? That's right, Sarang. Everything coming off the line now is new brand Zevia. Everything we're producing now, we've fully worked through, from a production perspective, the old look and feel. At retail, that will vary in how quickly that sells through, 'cause as you know, we're taking a rolling approach to, to the launch. Some customers for the next several months will feature, for example, new and old Zevia Tea on shelf at the same time as old sells through. We don't have any shelf life issues, and we can handle that transition through year-end. I think by the end of the year, we'll be fully to right. In many individual customers and in some geographies with faster volumes, we already are fully brand blocked with new look and feel on shelf. That's great. Thank you. Thank you. Thank you. Our next question today comes from Chris Carey at Wells Fargo Securities. Please go ahead. Hey, everyone. Hey, Chris. Morning. I, I guess it sounds like the supply chain issues are not impacting the support you're getting at retail. You know, typically, when you have such situations, you can be put in the penalty box for a certain amount of time, and, and you work your way back in. I, I guess what I'm hearing is, you know, a lot of bullishness that once the supply chain headwinds ease, that, you know, none of that really will be, you know, a dynamic for Zevia and that, you know, you're, you're actually getting even more support. Is that, like, a fair way to characterize the situation? You know, I, I guess, if so, why do you think that is? Is it just that the brand performs so well once it's on shelf? Any perspective there would be helpful. Yeah. Thanks, Chris. I really understand your question, and it wouldn't be accurate to say this misstep is without impact, right? There are two factors I think that help us sustain relationships, and drive initiatives in retailer with minimal interruptions. One is that we stand on a legacy of best-in-class service, and as I mentioned before, kind of all through COVID and all through the aluminum can crisis, our, our fulfillment rates were, were virtually uninterrupted. I think we have some credibility in sort of calling the ball on that and, and charting a course to sustain best-in-class service as soon as we stabilize. Secondly, we've just been very transparent. You know, coming to our retailers, regularly updating them on our outlook, getting at sort of a PO level, giving them, to the best of our ability, expectations on when and how we can deliver for them. We're doing our best to be a good partner and work together with retailers on mitigation plans in the short-term disruption, but also standing on credibility from the past. I don't think it would be fair to say we're without impact, but I don't anticipate that we're losing space, and that's the most important thing, is that we protect our space during this period of time, and then we return to expansion and display activity and in-store activation once we're stabilized. Hopefully that answers your question, Chris. Yeah. No, that's, that's good perspective. The, the only other one would just be, Yeah, it, it sounds like there's not really gonna be a trade-off, you know, as sales come back, that you're gonna be, you know, investing behind, you know, the sales or, you know, get back on gross margin or, or marketing. Sending the way as, as sales come back, margins remain at this higher level. Just want to make sure I understand that piece as well. I think, so as Denise said before, we expect margins to remain in the mid-40s. I think similar to the answer to your last question, it would be inaccurate to say we're unaffected by our, our challenges in the supply chain, meaning there will be some costs on that and adjusted EBITDA as a result, reflecting matters like increased selling costs, will be lumpy in the outlook to the year. It would be inaccurate to say we're unaffected in Q3 from a cost perspective. One thing that we are doing is making some phasing adjustments to optimize our marketing spend in light of the in-stock issues, but we are driving sampling locally close to the point of purchase in four markets where stock levels have been largely intact. Then we have new creative hitting the market in the coming months in the form of geographically targeted omnichannel, channel campaigns to support top of funnel and brand building. We will make investments into the brand, and there will be a cost to stabilizing the supply chain. Let me see if you have a follow-up question there, and if Denise can provide color. I think I'm okay. I get it. Expect a little bit of lumpiness as you're gonna be adjusting some costs and you'll be facing marketing. I think I understand. Okay. Thanks, Chris. Okay. Thanks so much. Our next question today comes from Andrew Strelzik with BMO Capital Markets. Please go ahead. Hi, this is Daniel Gold on for Andrew Strelzik. Thanks for taking my question. Sure. Hey, Daniel. Hi, good morning. How are you thinking about the changes to go-to-market with the brand refresh? Is it more this year versus next year, has some of that shifted? Or is it more about depleting the products with the original packaging? Sure. I, I, the most important thing about the brand refresh is that it impacts, in-store visibility and brings brand relevance and pops for the consumer in their hand, as well as on shelf and in store. You know, dollar for dollar, this is the most efficient investment a brand can make. You can really only do it once, but that's happening right now and rolling out in store with impact in 2023. The brand refresh on its own merits is on schedule and will bring its own impact of lift, increased trial, and we expect increased distribution as well. We will start to ramp up marketing investments against it more in 2024, as I mentioned before, informed by the learnings of some forthcoming omnichannel campaigns in the next few months. These are moderate spends, but we can learn from the tactics used in these omnichannel campaigns in order to inform our marketing plan for next year. To answer your question, the brand re- refresh is rolling out now as planned. It supports the brand by driving in-store visibility, trial, and pull-through in the interim, and then we'll support it further with marketing activation. Light touch this year and more significantly next. Got it. As a follow-up to that, what are the long-term implications now that you've gotten more favorable shelf space with the brand refresh? Sure. You know, the number one driver of awareness for beverage, generally speaking, for most brands, is in-store. The biggest opportunity for Zevia is to drive awareness and trial. As we expand space, we expect that that improves awareness, trial, and then takes consumers down the funnel to support our net sales. It is the expansion of shelf space in same-store sales, as well as expansion of new store selling and new channels, that are fundamental drivers of our growth for several years to come. There's a lot of opportunity ahead to get closing distribution gaps in the mass channel, be it expanding further in club, being winning in the dollar channel, finishing out drug where we're growing quickly now, and then ultimately cracking into single can sales and impulse purchase throughout convenience and food service. you can see how expansion of space and same-store selling supports velocity, but we also have a lot of upside in distribution to be gained. Right. Thank you. That's all for me. Thank you. Thank you. Ladies and gentlemen, this concludes our question and answer session. I'd like to turn the conference back over to Amy Taylor for any closing remarks. Thanks very much, everyone. I'll just close by reminding us all that Zevia's brand is as healthy as ever. Our velocity is very strong, bolstered, as we've discussed, by an exciting brand refresh hitting the shelves now, and our gross margin expansion and strong cash position, further indicators that our fundamentals are in place. We see a clear path to returning to our best-in-class service levels in the coming months to support our sustainable and profitable growth. Thank you for spending time with us this morning. Thank you. This concludes today's conference call. We thank you all for attending today's presentation. You may now disconnect your lines and have a wonderful day.