What impact does the $1.0 million non‑cash equity‑based compensation expense have on the firm’s cash‑flow outlook?

Short answer:

Because the $1.0 million equity‑based compensation is a non‑cash charge, it does not drain cash from the business. Instead, it is added back to net loss when the company prepares its cash‑flow statement, so the firm’s operating cash‑flow for the quarter is roughly $1 million higher than the GAAP net loss would suggest. In other words, the expense improves the cash‑flow picture (and therefore the cash‑burn outlook) by about $1 million for the quarter.

Why the $1 M non‑cash charge improves cash‑flow outlook

Thus, while the headline “net loss of $0.7 million” may look negative, the underlying cash flow is actually $1 million better because the loss includes a charge that did not require cash.

How this affects the firm’s cash‑flow outlook

1. Reduced cash burn for the quarter

   • The $1 M non‑cash expense means that the company’s actual cash consumption for Q2 2025 is approximately $1 M lower than the GAAP net loss would imply. If the company’s cash burn trend continues, the quarterly cash‑burn rate is effectively trimmed by that amount.

2. Improved liquidity cushion

   • With a lower cash outflow, the existing cash balances and any revolving credit facilities stretch further, giving the firm a modestly larger buffer to fund working‑capital needs, marketing, and growth initiatives (e.g., expanding distribution of its zero‑sugar, clean‑label beverages).

3. No impact on cash‑generating capacity

   • Because the expense is equity‑based, it does not generate cash inflows (the company does not receive cash from issuing the equity in the short term). The benefit is purely in cash‑flow accounting – not in actual cash receipts.

4. Potential dilution considerations

   • While cash‑flow improves, shareholders should be aware that the expense reflects the issuance of stock or options, which could dilute existing equity holders. This is a non‑cash but equity‑impact consideration that does not affect cash‑flow directly.

5. Guidance and future cash‑flow expectations

   • The press release does not provide a forward‑looking cash‑flow forecast, but the mention of a $1 M non‑cash expense signals that the company expects to continue using equity‑based compensation as part of its cost structure. As long as similar non‑cash items recur, future reported net losses will continue to overstate cash consumption, giving analysts a clearer view of actual cash needs.

Bottom‑line takeaways

• Cash‑flow impact: The $1 M non‑cash equity‑based compensation expense adds back $1 M to operating cash flow, effectively reducing the quarter’s cash burn by that amount.
• Outlook: By lowering the cash‑burn rate, the expense modestly strengthens the company’s short‑term cash‑flow outlook and liquidity position, though it does not generate cash and carries dilution implications for shareholders.
• Analyst note: When evaluating Zevia’s cash‑flow health, analysts should start with the GAAP net loss and then add back the $1 M (plus any other non‑cash items) to arrive at a more accurate picture of cash consumption. This adjustment is standard practice in cash‑flow analysis.