Title

Presentation

Operator: Thank you for attending the Laird Superfood First Quarter 2025 Financial Results Call. My name is Matt, and I’ll be the operator for today’s call. All lines have been muted during the presentation portion of the call. [Operator Instructions]. I’d now like to pass the conference over to our host, Trevor Rousseau, Head of Investor Relations. Trevor, please go ahead.

Trevor Rousseau: Thank you, and good afternoon. Welcome to Laird Superfood’s first quarter 2025 earnings conference call and webcast. On today’s call are Jason Vieth, Laird Superfood’s President and Chief Executive Officer; and Anya Hamill, our Chief Financial Officer. By now, everyone should have access to the company’s earnings release, which was filed today after market close. It is available on the Investor Relations section of Laird Superfood’s website at www.lairdsuperfood.com. Before we begin, please note that during this call, management may make forward-looking statements within the context of federal securities laws. These statements are based on management’s current expectations and involve risks and uncertainties that could cause actual results to differ materially from those described.

Please refer to today’s press release and other filings with the SEC for a detailed discussion of these risks and uncertainties. And with that, I’ll turn the call over to Jason.

Jason Vieth: Thank you, Trevor, and hello everyone. I’m delighted to share with you the results of Laird Superfood’s first quarter of 2025, which marked another strong period as a high-growth premium brand robust margins and significant market potential. During Q1 2025, we achieved an 18% year-over-year increase in net sales to $11.7 million, up from $9.9 million in the same period last year. This marks our fifth consecutive quarter of double-digit sales growth, which is even more impressive in what has recently become an inflationary and uncertain economic environment. Our profitability metrics remain a highlight. In Q1 of 2025, we delivered 41.9% gross margin, a 1.9 point improvement versus Q1 of last year. This margin strength despite significant commodity price pressures in ingredients such as coffee and coconut milk powder, positions us well above the industry average for food companies.

And our ability to sustain margins in the high 30% to low 40% while driving nearly 20% sales growth underscores the resilience and exceptional execution of our omnichannel business model, driven by strategic sourcing, a variable cost manufacturing approach and disciplined trade spend management. Our Q1 results also demonstrate the progress that we are linking in our two primary strategic commercial initiatives to drive robust growth on Amazon and to significantly expand our wholesale distribution. Our e-commerce channel grew by 6% during Q1 led by our performance on Amazon, which delivered strong performance driven by improved inventory management and targeted marketing execution that drove platform demand for our Laird Superfood products. In our direct-to-consumer business, more than 75% of Q1 DTC sales came from repeat customers and subscribers, a testament to our ability to foster long-term relationships and a demonstration of the trust and loyalty that our consumers have in the brand.

Similarly, we continue to make exceptional progress on the wholesale front with net sales increasing 35% year-over-year and now contributing nearly half of our total LSF revenue. This growth was driven by distribution gains in grocery and club stores, including key partners across both natural and conventional grocery, coupled with improved dollar sales velocity at existing accounts. Our efficient promotional strategies and strong consumer demand for our products fueled this momentum. As we noted on our previous calls, we expected our Q1 sales growth would be tempered by out-of-stock issues with our creamer and instant latte products, stemming from unexpectedly high demand during Q4 2024. Indeed, we did feel that impact, yet I am pleased to be able to report that we have resolved these constraints by qualifying additional raw material suppliers and enhancing our supply chain flexibility and that we are now in a stronger inventory position on our coconut milk products, which we expect will allow us to drive accelerated growth on these products in the second half of 2025.

Focusing on our supply chain, Q1 was another testament to the agility that we have built in this function. Despite persistent commodity inflation in coffee, cacao and coconut milk powder, we were largely able to mitigate these cost impacts through strong supplier relationships and operational efficiencies, and by beginning to make moves that will mitigate the impact of tariffs on our business. Our 41.9% gross margin in Q1 includes a 3.3 point benefit from a timing change in capitalization of inbound freight. But even without this, our margin resilience is notable. We remain committed to our goal of sustaining annual gross margins in at least the upper 30s, and we’re cautiously optimistic about potential commodity price corrections in 2025 that could further enhance our profitability.

As we have previously discussed, our strategy remains to maintain sharp pricing to prioritize volume growth, positioning us to build a larger, more profitable business from commodity cost normalization. Speaking of tariffs, let’s address the elephant in the room. As you expect, much of our raw materials, such as our coconut products and our coffee are imported from farms overseas. While we continue to watch this situation very carefully, we feel that we are in position to manage the impact of the tariffs that have thus far been levied within the guidance that we have previously provided. Should significant additional tariffs be levied on our ingredients, we would likely need to take price to accommodate that impact. Before I hand it over to Anya, I want to highlight our continued progress on profitability.

In Q1 2025, we narrowed our net loss to $0.2 million compared to a $1 million loss in Q1 2024. We also achieved a positive adjusted EBITDA of $0.4 million compared to a negative $0.8 million in the prior year. This result demonstrates the operating leverage we’re unlocking as we scale our business, reinforcing our path towards sustainable profitability. And our balance sheet remains strong with no debt and ample cash to operate our business as we continue to grow our revenues and push beyond breakeven profitability. Now let me turn it over to Anya to dive into the financial details for the quarter.

Anya Hamill: Thank you, Jason and good afternoon, everyone. I will now provide you with some additional details on the first quarter of 2025 financial results and our outlook for the full year. Coming off a record performance in 2024, we delivered equally strong results in the first quarter of 2025. Despite some out-of-stock challenges that we experienced during the quarter, net sales grew 18% to $11.7 million compared to $9.9 million in the prior year period. This is the second quarter in a row where our wholesale channel led the company’s growth increasing by 35% year-over-year and accounting for 47% of our total net sales. This growth was driven by distribution expansion in grocery and velocity acceleration at shelf in both retail and club.

E-commerce sales increased by 6% year-over-year and contributed 53% of total net sales with continued significant improvements in media efficiency in this channel. The growth was driven by strong sales in Amazon, building on our sales momentum over the previous four quarters and driven by outstanding commercial execution. Gross margin for the fourth quarter came in at 41.9% compared to 40.0% in the corresponding prior year period. A timing change in capitalization of inbound freight accounted for 3.3 points of gross margin in Q1 2025. As Jason mentioned, even excluding that change, Q1 gross margin was 38.6%, which was flat sequentially to Q4 2024, showing resiliency in our margin despite inflationary increases in key commodity costs such as coffee and coconut milk powder.

Our supply chain team continues to drive efficiencies by directly partnering with key raw material suppliers and co-packing partners to find cost savings to offset rising commodities costs. Operating expenses were nearly flat in the first quarter compared to the same quarter last year as higher selling fees due to volume growth, people-related costs such as stock-based compensation, which is a noncash expense, were nearly offset by lower general and administrative expenses and lower marketing spend as we continue finding ways to improve media efficiencies and cut nonworking spend. Net loss for the quarter was $0.2 million compared to $1.0 million loss in the prior year period. And adjusted EBITDA was positive $0.4 million compared to $0.8 million loss in the same quarter prior year.

This $1.2 million improvement in adjusted EBITDA was driven by top line growth and margin expansion. Now turning to our balance sheet. We ended the quarter with $7.2 million in cash and no debt. This quarter, we invested in building our inventory safety stock in order to minimize other stocks and capture future growth opportunities. This initiative resulted in $1.3 million cash usage in the quarter compared to $0.4 million of cash used in operating activities in the same period last year. We believe that now our inventory is appropriately sized to allow supply chain flexibility required to meet expectations of increased demand during the balance of the year. We continue to project that we have sufficient cash to fund our operations as we grow our business and make operating improvements that drive us towards breakeven and profitability.

We also have an asset-backed line of credit available for our use should we need it. We exited Q1 with a strong momentum in our core categories, health inventory levels, exciting innovation and confidence in our team and our brands. We are excited about our ability to continue to deliver strong performance. Therefore, we are reaffirming our full-year guidance. We expect net sales to be between $52 million and $54 million, which represents 20% to 25% growth versus prior year, and we still expect gross margins to hold in upper 30s, despite rising commodities costs and tariff pressures. As previously shared, we will target to manage our adjusted EBITDA to breakeven on a full-year basis, and we’ll reinvest in the surplus to fuel our top line growth.

We expect full year operating cash flow to be in the range of $1 million to $2 million negative, driven by an incremental investment in inventory to support top line growth and minimize out of stocks. And with that, I will turn the discussion back over to Jason for any closing remarks.

Jason Vieth: Thank you, Anya, and thank you to everyone for joining us today. Laird Superfood continues to carve out a unique position in the food and beverage markets with our portfolio of minimally processed products and clean ingredients. Our 18% sales growth in Q1 outpaces many of our peers and speaks to the demand for our healthy functional foods. And our dual-channel success, thriving in both retail and e-commerce, gives us the versatility that sets us apart in today’s retail environment. The past few years have been transformative for Laird Superfood, and yet we still believe that we’re just getting started. I’m incredibly proud of our team’s execution and excited about our continued growth as we build on this momentum.

Despite current headwinds in our industry, as Anya indicated, we remain confident in our 2025 outlook and our ability to deliver long-term value for our shareholders. Operator, this concludes our prepared remarks, and we are now ready to open the call to questions.

Operator: [Operator Instructions]. First question is from the line of JP Wollam with ROTH Capital Partners. Your line is now open.

John-Paul Wollam: Hi, Anya, hi Jason. I appreciate you guys taking my questions tonight. So I know you touched on it a little bit, but just to kind of keep beating the dead horse with tariffs, if we could just maybe dive in a little bit deeper, the statement that you made, Jason, I just want to clarify, is that based on sort of the pause kind of, call it, 10% rates? Or is that regarding the original Liberation Day rates? And just a follow-up would be, as you think about managing tariffs and wherever they may shake out, I guess, how much is it potentially inhibiting your ability to increase trade spend as you sort of think about managing to that high 30% gross margin?

Jason Vieth: Hey JP, thanks for the question. I think it’s on everybody’s mind, so I appreciate getting this one out there. Yes, I mean really what we’re saying is this, the 10% tariff that’s on there right now is — I don’t want to say it’s de minimis, but we’re able to handle that without a problem. The bigger tariff after the 90-day pause that will go into effect will have more impact, but we still feel we can manage that within our P&L. There will be a bit of a gross margin impact. But we have other levers, other spend levers that we can execute in order to accommodate that and still be within the guidance that we’ve given you guys. Obviously, there’s a little bit of a — it’s a little bit broad when we say upper 30s. We’re still very confident that we can land the year in the upper 30s.

Obviously, tariffs would take a bit more of an impact, but we can manage it through the rest of the P&L such that we can still be at that adjusted gross margin breakeven point that we had called out previously. So the reality is these tariffs, no one knows really where they are. We are absolutely watching them, strategically planning around them, but we also put our blinders on to keep operating and executing the best that we can, pulling forward inventory purchases while they’re less expensive. I think a lot of this — frankly, I think a lot of this is going to go away. It’s just a matter of when. So we’re trying to be as long on inventory as reasonably we can be to get through that period. And at the end of the day, if we did hit with really big tariffs as were originally announced and the entire industry is impacted, there will be nothing left to do to take price, and we’ll take price.

We’re trying to hold the line on that. I mentioned previously that we felt we could manage it. And we think that by keeping our price sharp, we can take volume, we can take share, and we’re seeing some of that playing out in the market already. We’re seeing opportunities open up. That some of which have been executed, some of which are — we’re working on right now that we think can be really beneficial to our business as some of the commodity prices come back down and some of the tariffs ultimately are reduced or go away. So we’re optimistic that we’re going to land in a better place. I think we have a team that is very, very adept at managing strategic opportunities and issues that you have a team here that largely worked together for a number of years back in the WhiteWave days and went through a lot of this type of scenario planning then.

So we’re actually embracing some of the change and feeling like we can be winners as it all plays out.

John-Paul Wollam: Perfect. That’s very helpful color. I appreciate that. If we could kind of switch over just to the wholesale strength. I was just hoping maybe you could provide a little bit more detail about specifically kind of the increasing velocities. Were there a couple of things that were really driving that, a couple of SKUs where you really noticed those improved velocities? And I think in the press release, there was a comment maybe about revenue being offset by promotional spend. So just if you could touch, was there some kind of large promotion that really helped that wholesale business this quarter? Or was it kind of just some small tweaks, maybe pricing, maybe trials? Anything that you can kind of share on the wholesale strength?

Jason Vieth: Yes, for sure. And I really appreciate that question, too, because this is an area I really wanted to spend a little bit more time on. So wholesale has been really, as you know, a growth driver for us in the last couple of years. We’re seeing some of the best acceleration against that strategic lever for us. That is — when we think about our growth for the future, it’s really Amazon and wholesale. And we intended to be right around the 50-50 split of wholesale and e-comm sometime in 2025. And so we’re right on pace for that. I think we’re just a few points off of it right now. And we believe that wholesale is likely to outpace online as we go forward because we’ve had some really great distribution gains that have been achieved over the last year, and we’re reaping the benefits of that.

And then specifically to your question, we’re also having really great velocity improvement. Even where we’re gaining distribution on products, what we’re seeing is velocity improvements on those products in other stores. And that’s very rare if that happens. And I think it really speaks to the trends that are filling our sales right now. So around — just around overall health movements. So what we’re seeing specifically, JP, at wholesale is really strong growth in coffee, in our powdered coffee creamers. Our instant latte products have done really well. And so that coffee solution set, in particular, has been the driver. We’re also seeing nice growth on our mushrooms. We’ve had really strong growth recently on the bars again. So it’s really that the whole portfolio is working, but I’d call out — more than anything I’d call out the strength of those — that coffee solution set that I mentioned.

It did cause us some problems in Q4 of last year, as you know, the strength — the growth was so strong that it ran us out of supply. And as I mentioned, we’re through that. I’m pleased to say that I don’t believe we had any out of stocks on the coconut milk products across any of the channels right now. We’re back in stock with our distributors in wholesale. Amazon looks great. And our DTC products are back. So I feel like we’re in a really great position for the balance of the year there, better supply arrangements and we are confident in our ability to deliver against that this year. And then specifically to your question about trade spend, really, that comment was really around — we had some prior period expenses that were submitted that just exceeded what we expected.

So last year, in particular, in that Q3, Q4 period where we were growing, what we found is some of our promotions worked even better than we had realized, probably helped to drive some of those out of stocks. But in doing that, we put a lot more product into consumer hands and really drove additional trial. And so I think net-net, while it’s always a little bit painful to overspend your trade budget a bit, matching that back up to the strong growth we had last year, we feel really good that, that was still very efficient spend and frankly, is continuing to drive the momentum that we have in retail right now.

John-Paul Wollam: Perfect. Really appreciate all that color. And if I could just slide one last one in. Just since launching the large liquid creamer on shelf, any color you can provide on how velocities are doing there or any kind of customer feedback? Thanks.

Jason Vieth: Yes. Yes, great question. Customer feedback, I think, generally is good. It was a bit more choppy than we anticipated in part because the reset windows didn’t line up. The biggest accounts that we have, as I’m sure you know, are Sprouts and Whole Foods on that liquid creamer. And then we have a handful of other really nice accounts with Wegmans and Target, et cetera. They’re all at different timing. And so we had to have two sets of inventory in both KeHE and UNFI to be able to fulfill that. So I’d tell you they’re great learnings that the teams had out of that, that will help us in the future. But it was more challenging and took longer than we anticipated. And in fact, we’re still going through some of those executions.

I think Natural Grocers is just now coming back online after a little bit of about — a little bit of being out of stock through that transition, the codes got mixed up. And a couple of other smaller retailers are in the same position. So I think what we’re seeing is largely velocities coming in where we had planned. We expected not to get a full 1:1 pickup out of the gates because you’re not — you’re upsizing by 50%. So there should be some volume — or some unit attrition to the volume. And we’re coming in right about where we expected, which I think we modeled around 0.8 conversion. So it’s still — I keep saying it’s early days. It is still early days with a couple of those retailers. Those that have transitioned like Sprouts that transitioned earlier, I think are looking quite good.

And so we have a lot of confidence that probably next quarter when we’re fully through everything, we can come back and give you guys a good report that says that is doing good.

John-Paul Wollam: Awesome, I really appreciate all the color. Thanks for the time.

Jason Vieth: You bet, JP.

Operator: Next question is from the line of Ayden Morgenstern with Greenland Capital. Your line is now open.

Ayden Morgenstern: Hi, thank you so much for taking my call. I just had a question about the marketplace and how it fits into your overall strategy. Is it drop-ship based? What kind of margin and costs are involved? And how do you make sure it doesn’t distract from the core product innovation?

Jason Vieth: Hey, Ayden, how are you doing? I’m going to have to ask you to clarify that. I’m not sure I’m following your question exactly. Can you give me a little more color?

Ayden Morgenstern: Yes, that you announced in March this new marketplace where you’re having promotions with other smaller health companies. And so how does — are you buying that inventory and selling out? Or is it just drop-shipping through your platform? What costs are associated with this new thing?

Jason Vieth: I got you, Ayden. Ayden, thanks. So the marketplace is right, is something that I didn’t catch that piece when you asked it. The marketplace is a component of our DTC platform that was announced a couple of months ago. Another — I would say, another platform or another topic that’s early days. Just realize the intent of that is not — this is a nonstrategic launch that we did to bring in partner — kind of partner and affiliated lifestyle products that would allow the consumers to come to our DTC site to have a more robust shopping and living experience. Part of what we do with DTC is we bring content on Laird and Gabby and other influencers to our site in an exclusive manner to allow our consumers — give our consumers a reason to shop at that site.

So where other DTC operators are finding, especially in the last couple of years, a lot of attrition out of their site and a hard time to bring consumers in, what we’re finding is, with unique content and now the supporting marketplace, that we give consumers a reason to come in and spend time and ultimately to shop and purchase on our sites. So I think the way to think about that is just as another supportive marketing component. We’re not looking to make a lot of money out of that. We’re not going to sell a lot of goods. We don’t drop-ship any of it. It is nothing but a pass-through to — if you buy, for instance, a red light therapy machine, we just passed through a click, we pass you over to one of our partners to make that purchase. So it’s just — what we found is that our consumer is living a lifestyle that is very health and wellness-oriented and sometimes just health and wellness seeking.

And so providing various products that are related to that lifestyle on our marketplace is highly engaging and really is helping to drive our DTC traffic and retention as well.

Ayden Morgenstern: Got that. I really appreciate it. Thank you. And then just another — the Palisade fires, there hasn’t been any mention, but I know a lot of the market is in the L.A., California area, and I know you did — there was some donations. Is there any impact in Q1 that arise from that?

Jason Vieth: Yes. Very good question. There’s obviously a lot of displacement, and we view over-index in the Southern California consumer market. But we can’t say that we can point to anything, Ayden, that we were negatively impacted by. We did — as you say, we did provide support to first responders and subsequently followed up with products back to various firehouses and really did it not seeking any attention. So this is probably the first most you’ve heard about it, but we saw it as a great opportunity to say thanks to those pillars of the community. And so hopefully that built some goodwill, but we’ve not seen a slide in sales that’s been noticeable enough for it to make it to my desk.

Ayden Morgenstern: Got it. Well, I really appreciate you taking the time to clarify, and I’m excited to see what happens next.

Jason Vieth: Thanks, Ayden. Appreciate it.

Operator: Thank you for your questions. There are currently no further questions registered. [Operator Instructions]. There are no additional questions waiting at this time. So I’ll pass the call back to the management team for any closing remarks.

Jason Vieth: All right. Well, thank you for that. Once again, we’ll just — we’ll share a big thank you to all of you for joining us. We always appreciate the opportunity to get out and talk a little bit about our results. So in this case, we are pleased and proud of our fifth straight quarter of double-digit growth, especially in an environment like this, but the uncertainty, I think speaks volumes to what the team has been able to put together and execute. So we’re excited for the rest of this year and look forward to talking to you all in another quarter.

Operator: That concludes the conference call. Thank you for your participation. You may now disconnect your lines.