Q3 2022 Laird Superfood Inc Earnings Call
After market close this is available on the Investor Relations section of <unk> website at Www Dot <unk> Dot com before we begin. Please note that all the financial information presented on today's call is unaudited and during the course of this call management may make forward looking statements within the meaning of the federal Securities laws. These stay.
<unk> are based on management's current expectations and beliefs and involve 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.
<unk> made today and now I'd like to turn the call over to Jason <unk>, Chief Executive Officer of <unk> chips.
Thanks Reed.
Welcome everyone and thank you for joining us today.
As usual I will start today with an overview of our third quarter results and an update on our key strategic initiatives and then I'll turn it over to Andy <unk>, Our chief commercial officer for a deeper dive into sales products and channels.
And Anya Hamill, our CFO will cover the third quarter financials in detail and will finish by opening up the call to your questions.
This is now my third time, providing you with a quarterly update on our business.
On my first call as CEO .
We're still coming to understand alerts Super food brand and business at that time, I was intently listening to our analysts and investor communities.
In assessing various options for our path forward.
On my second call I reaffirmed our focus on getting our cost under control and fixing the middle of our P&L.
This was the period in which it became clear to me that we were giving away our cash too inefficient marketing spend and weak gross margin and that we were not on a path to achieve scale benefits before we would run out of cash.
During that call I reiterated that a key area of focus for us going forward will be to improve our gross margin.
Since that time, our leadership team has been focused on making the pivotal and strategic changes required to stabilize operations.
And put us on a path to profitability.
The scope of the actions necessary to transform layered super food has turned out to be much broader than was expected when I came onboard touching.
Touching nearly every aspect of the business.
Today I'm pleased to be able to report that we've been making significant progress and I wanted to take a few minutes to recap and talk about the positive changes underway on this business and why our team is energized as we look to next year and beyond.
On the commercial side, we have been actively reshaping our portfolio aligning the core focus by channel and discontinuing items that do not fit.
We took a nearly 10% price increase on our business across all channels, which just recently ripples into the wholesale channel.
Our DTC marketing engine and ecosystem has been completely overhauled reducing our tax by more than $20 versus the last three quarters run rate and on pace for further reduction as we go forward.
In our DTC business, we removed free shipping and have in fact increased the price of our shipping to pass through holiday cost imposed by our carriers.
We are actively shifting our business to our most profitable channels and attacking the cost challenges that particular parts of our business such as our liquid creamers.
And we have completed our brand redesign.
Reformulated, nearly 25% of our portfolio to improve taste <unk> increase our functional benefits.
On the supply chain side, we recently announced that we have made the decision to close our sisters, Oregon manufacturing facility.
While this was not an easy decision is one that will provide a significant lift to our gross margin. Once we have worked through the transition.
We've entered into a partnership with a co manufacturer to produce the entire line of powder products, replacing everything that was previously made in our own facility.
In doing so we've added new capabilities and flexibility to our business, including the ability to produce single serve products for the first time.
I am also excited to announce that we've just completed an agreement with a third party logistics provider that will handle all of our distribution and logistics related to Super Bowl.
This was the final step in enabling our variable costs supply chain model, which is a small CPG business will allow us to scale up and down without being burdened by high levels of overhead that clouded, our financial visibility and decision making in the past.
We have also created and tested a new liquid creamer formulation that can be run at scale, which will allow us to transform that from a significantly unprofitable piece of business to a product that we can beneficially expand in the future.
And finally on the people in the organization side, we have completely rebuilt our teams, including nearly the entire executive team, adding decades of experience and expertise in consumer goods and food across all disciplines.
As you can see we have made a lot of progress over the past quarters and expect to complete this turnaround in the middle of 2023, after which Larry Super Food will look like a completely different business.
Meanwhile, the demand for healthy and nutritious hopefully products like Larry Super Food has never been greater and we are excited to be putting ourselves into position to be able to capitalize on these trends.
Now lets talk some of the specifics from our third quarter.
During prior calls we outlined margin improvement at the top initiative for this team and I am happy to report that we continued to make headway on cost reduction initiatives during the third quarter, particularly as it relates to consumers in the macro environment.
In our online business, we reduced our Q3 DTC marketing spend by nearly 60% versus last year and these changes are driving lower and more efficient marketing spend and lower customer acquisition costs.
We've repurposed a portion of that spend to the Amazon platform driving 27% growth in that business during the quarter.
As I mentioned earlier, we also raised our shipping costs during Q3, and we did so without seeing a significant loss of consumer acquisition or conversion.
This means that during 2022, we've been able to increase the price of most of our online portfolio by around 10%.
And to pass on many of the shipping costs that had previously burdened us.
The decline in wholesale revenue during the third quarter was largely attributable to the club channel, where we did not repeat a reasonable rotational program from the prior year.
As Andy will share in a moment, we also experienced some unexpected challenges in the grocery channel during Q3.
Stemming from product moving from distributor warehouses to the retailer shelf.
We have largely fixed these issues and are working with our customers to ensure a smoother path from distributor warehouses to their shelves, including examining order patterns and auditing to ensure that the product makes it to the shelf.
In the third quarter gross margin showed solid sequential improvement, reaching 23, 4% or 520 basis point increase versus the second quarter, driven by lower discounts and labor costs.
However, on a year over year basis gross margin was down five nine points as our highlighted focused on drawing down inventories continued to deleverage of our fixed manufacturing costs.
But as I mentioned a moment ago.
Subsequent to the end of Q3, we announced a co packing partnership that will quickly alleviate these pressures during 2023.
This strategic pivot to an outsourced manufacturing model will significantly improve our financial profile by reducing fixed overhead and simplifying our business, enabling us to focus on maximizing our commercial growth potential.
This is an important step towards our committed long term target of 35% gross margin.
In 2023 will also incorporate product and ingredient optimization and harmonization.
The new co packing partnership covers all of our powder, Creamers and hydration products, which represent nearly half of our overall product sales mix today.
We expect that moving these products to a co packing model will add between six and eight points to our gross margins.
We expect to realize over the next several quarters as the transition is fully implemented.
It is worth noting that we expect to see certain onetime charges in Q4 related to the co Packer transition.
Typically impairment of fixed assets lease hold improvements and inventories as well as cash charges for the sisters lease exit and restructuring costs.
I am pleased to be able to share that we have agreed in principle to our exit from the sisters facility and we're working through those estimates now.
The shift to third party manufacturing will also enable us to be more responsive to our customer demand while fully aligning our cost structure with the current state of the business.
While the operating environment remains very challenging the changes we are making to our business model are significantly improving the underlying economics and.
And strengthening our competitive position, creating a more experienced and more nimble organization focused on maximizing our most profitable commercial growth opportunities.
As we go forward, we will maintain a strict focus on improving our profitability and maintaining our cash position to support our future operations and other opportunities that may emerge.
With that I will hand, it over to our Chief commercial officer, Andy Chad.
Thanks, Jason.
Layered superfood mission to help the consumer optimize their everyday performance by harvesting the natural and functional benefits of plants is building momentum.
We are making significant progress towards building a sustainable long term profitable growth agenda across multiple platforms from our own direct to consumer model to Amazon to all channels of retail trade.
While overall online business in Q3 was down 8%, we did see quarter over quarter improvement of five points sequentially for the channel and a composition of the improvement is consistent with our strategic plan.
We saw significant growth in Amazon up 27% year over year as we brought on a fantastic new partner to help us manage and deploy media.
Since that transition we have already seen an 11% increase sequentially and return on AD spend for the platform and we achieved our most successful prime day results to date.
We expect this performance on the Amazon platform to continue to improve as we see additional opportunities to turn continued consumer acquisition and two more subscribing safe purchases, we are significantly underdeveloped versus our peer set.
Have room for further investment in upper funnel awareness media and are implementing new replenishment and inventory management approaches.
For our direct to consumer business, we continue to reset our platform for long term profitability and.
In order to do this we have to make sure our investment levels and return to sustainable and while it continues to be a tough marketplace for consumer acquisition and our acquisition cost was still up 32% versus year ago.
We reduced media by 60% versus year ago, with only a 19% reduction in sessions, reflecting both the loyal organic traffic we have.
In the previous inefficiency in our media.
As a result, we realized an 80% increase in return on AD spend on the remaining investment in the quarter.
The price increase that we took in June has had minimal effect on volume and website conversion is still running in excess of 6%, which is an increase of 13% versus a year ago and well above industry benchmarks.
Despite the challenges to acquire new consumers and DTC, we continue to see consumer loyalty to lead Super food at all time highs with a 4% increase in subscriptions and 5% growth in our lifetime value, which grew two points sequentially versus Q2.
In addition, we saw 25% growth in average order value versus year ago, and we're seeing growth in on trend portions of our portfolio as we expand our leadership in functional plant based coffees and creamers with items like our coffees with functional mushrooms are super food, coconut kremer with functional mushrooms and our.
<unk>, we are excited about the formation of a new go to market approach that includes the combination would be more focused and profitable spending profile with better utilization of our CRM tools to acquire new and lapsed consumers.
When combined with the high level of loyalty against the on trend products. We believe that our DTC business is on a solid path forward.
Overall, our retail sales in Q3 had mixed results.
The largest driver of change year over year, the loss of a regional rotation of our club business compared to a year ago, which accounts for 70% of the decline in our wholesale net sales for the quarter. We have modified our full offering to the club channel and we'll be launching new packaging to improve performance in the channel in Q1 of <unk>.
'twenty three.
And we've also brought on new channel sales leadership to better execute against these opportunities.
We are seeing positive trends in our core coffee and creamer categories as consumers continue to increase in home consumption and our liquid Creamers business. We saw our retail dollar velocities increase plus 11% and plus 21% and natural new low respectively for the 12 weeks ending tend to 2022.
No.
Our dollar sales growth is outpacing the overall category and the plant based Creamers segment.
In the natural channel, we rank as a top five dollar and unit share brand and plant based creamers improving unit share by nearly three points, while still having a significant opportunity to match the distribution levels of our plant based peers.
We have reached our share position with 15 less points of ACB versus the other top plant base share leaders. We're excited about this continued growth in liquid creamers.
<unk> to further enhance our productivity on new packaging in Q1, a new aseptic format in Q2.
This success in refrigerated Creamers was offset by challenges in our shelf stable powdered creamer business.
Where we experienced distribution losses as a result of retailer in store assortment changes on lower performing items as well as replenishment challenges between distributors and retail customers.
We have initiated efforts to improve replenishment through better collaboration with key wholesale partners and increased support in Q4 through key digital platforms to improve the velocity trend.
Despite the headwinds in the quarter, our consumer loyalty metrics reached an all time high with our net promoter score, reaching 82 in Q3 and our customer satisfaction was at $4 nine on a five point scale in.
In the quarter, we completed new research that indicated that over 43% of the U S is actively using functional food and beverages.
Clear indicator that the addressable market is reaching significant scale as consumers continue to see cleaner and more functional foods.
In Q4, we will start to see our redesigned packaging rollout, which will significantly improve our shop ability and breakthrough at the first moment of truth at shelf.
And further highlight our functional benefits that make our value proposition truly unique.
Our new protein bars are now in retail and we are readying more exciting innovation launching in Q4 and into 2023, we.
We will be introducing renovated product line that improved taste and functionality as well as expanded single serve offerings across our creamers instant long days and daily Prebiotic Greens.
I want to note that we have executed all of this while also substantially reducing our overall spending on marketing and sales and marketing G&A versus last year, we are more focused than ever on spending against the right strategic priority.
Building, a true omni channel growth agenda, and driving future growth and a significantly more efficient manner.
I am so grateful to the entire <unk> team for their diligence to push harder and find new opportunities to improve our business now.
Now, let me turn the call over to Anya handle our CFO to further discuss third quarter results.
Thanks, Danzy net sales decreased 19% to $8 8 million in the third quarter of 2022.
Compared to $10 9 million in the third quarter of 2021, driven.
Driven by lower volume in the wholesale business and DTC channel.
And partially offset by strong growth at Amazon Dot com.
The decline in wholesale was mostly driven by reduced volumes in club, where we did not think the original rotation from the prior year.
In addition to the continued pressure on consumer spending due to inflationary concern the decline in <unk> was driven by lower new customer orders that were a result of planned initiatives to improve our gross margin including.
Reductions in marketing and price increases implemented at the end of the second quarter and changes to our free shipping threshold.
The decline.
Was partially offset by double digit growth and now Amazon Dot Com channel driven by continued adoption and momentum built from optimized marketing strategy.
Gross margin declined 590 basis points to 28, 4% versus Q3 of 2021, but improved 520 basis points sequentially versus Q2.
The margin compression versus prior year period was driven primarily by fixed manufacturing cost deleverage as we strategically youre down inventory balances by writing lower production volumes.
Gross margin was also negatively impacted by higher freight costs, partially offset by lower labor cost stemming from cost reduction initiatives.
Operating expenses totaled $7 8 million.
A decrease of 0.7.
$7 million compared to $8 5 million in the year ago period.
The decline was driven by lowest sales and marketing expenses as well as lower research and development costs, while general and administrative expense was consistent with the prior year period.
Sales and marketing expenses decreased approximately 16%.
$3 4 million due to lower advertising expenses and personnel costs.
Net loss as reported was $5 7 million, an increase of 7% versus prior year period.
On an adjusted basis net loss was also $5 7 million and approximately 6% increase from a year ago period.
Improving sequentially about 10% compared to our results in Q2, demonstrating continued progress in our cost savings initiatives.
A detailed reconciliation of non-GAAP adjusted net loss is included in our earnings release.
Now turning to our balance sheet and cash flow. We ended the quarter with just over $21 million of cash and no debt as we continue to conservatively manage our balance sheet cash.
Cash used in operations was $3 6 million an improvement of over 300000 from Q2.
Now moving to our outlook. Despite the fact that we anticipate a challenging economic environment.
Continuing in the fourth quarter, we reaffirmed our guidance estimate of net sales for 2022 will be at the lower end of our stated range of 36 million to $38 million.
<unk> gross margin is forecasted to be approximately 20% for the full year.
Note that the gross margin guidance excludes any one time charges associated with the closure of our manufacturing operations and sisters, Oregon and other one time action.
With that I'll turn the call back to Jason.
Thanks Tanya.
Let me start by taking a moment to share a hearty and public congratulations to <unk> for her promotion to Chief financial officer of large Super food.
While the U S economic outlook and its impact on the consumer remains uncertain, if not outright challenging.
We in turn remain optimistic about the opportunity for health and wellness brands like ours to continue to grow and take a larger share of the market.
In the first three quarters of this year, we managed to significantly improve the fundamentals of the layered superfood branded business and are now poised to expand in the next year and beyond behind our new brand platform with improved products.
<unk> retail placement across the country.
And while we still have work to do to complete this turnaround we are optimistic about the flexible variable cost manufacturing and distribution model that we will put in place during Q4 and excited to close this year on a strong note and carry that momentum into 2023.
This concludes our prepared remarks.
Operator, we are now ready to open the call to questions.
Lee if you would like to ask a question. Please press star followed by one on your telephone keypad. If for any reason you would like to remove that question. Please press star followed by two again to ask a question press Star one.
As a reminder, if you are using a speaker phone. Please remember that pick up your handset before asking a question we will pause briefly as questions are registered.
The first question is from Bobby Burleson with Canaccord. Please proceed.
Great. Thanks for taking my questions.
So I guess, who Jason and team.
Yes.
I'm wondering like.
The liquid creamer.
Aseptic version that.
Delayed without.
<unk> support.
<unk>.
It seems like that's something that took you guys up here before you came on board.
Pivoting to entirely outsourced model what is it that we're giving up.
For what you're gaining share it seems like you can kind of get the margins maybe.
Closer to where they used to be but does that cap some of the ceiling.
Are you guys, there does that lower the ceiling for margins.
And do you lose some control.
Just wondering kind of what are the.
Puts and takes of the shift.
Okay.
Hey, Bobby Thanks, Thanks for that question.
It's a great question and one that we really kicked around a lot as we were working our way through what we wanted to do here.
The reality is for our food business our size, it's really challenging to try to operate your own manufacturing facility, especially when you consider how many different types of packages some products we produce.
The result of US having done that is that we had a facility that was running under 30% utilization with specific no specific line that was running really over 10% utilization. So.
We have a great team and that such as facility. They operationalized it as far as we could and we spent this year really trying to see how far we can push down costs and in the end. What we found is we really couldnt be.
<unk> with the market.
That's a little bit of the background as to how we ended up where we did as we make this pivot into a co packer, we've got a lot of flexibility we pick up the ability to make different sizes, including single serves we pick up the ability to make different packages, including canisters, if we choose to do that within retail in particular.
So beyond cost, there's a lot of flexibility benefit.
On the cost side to your point it immediately gets us back to our high watermark on margins at least recent high watermark.
We expect this conservatively to push more than six points of margin.
Back to the P&L.
I suspect there'll be stronger benefit and that is we really operationalize. It we are a good partner, that's really able to leverage our volume against other volumes within their network.
And is willing to share back costs pretty aggressively so I don't think that it really does catalysts.
If we were running a facility at 80% utilization.
Everything perfectly operationalized we.
We'd probably be in a better position, but we don't see that coming for the next number of years. So the reality is for us to gain flexibility and to gain that cost benefit and advantage that we can get from a co packer. This makes a ton of sense.
On the liquids suggest at all that is all.
I'll just mentioned to you the liquid will not be going into this accurate that is co packed product today as you know.
But we were excited to announce that we've reworked our formulation, we werent able to get to in a septic producer in the past, which really limited.
The availability of co Packers to us and as we go forward, we now have an <unk> product.
That we can choose to implement at the right time and so we're taking a look at the implications of that back in the marketplace. What it can mean, how it can be sold asos.
This uptick chronic how it can be sold into a DTC and Amazon.
Type of platform as well and it just creates new opportunities.
We don't have today.
Not having to be in a cold chain all the time, so we see a lot of cost benefit from that as well as as I mentioned, a lot of commercial flexibility as well.
Okay, Great and then just maybe.
A couple more I don't know how many people are asking questions here, but let me just ask on the guidance.
Narrow range.
To begin with.
For revenue this year.
We've got now.
The long left for the year, but we still have kind of the big holiday season push so I'm wondering what you might be seeing that prompts you guys to go to the low end of such a narrow range.
Yes.
For us for the rest of the year, Bob what we're seeing is that we believe we have a very strong online program in place as we head into Black Friday and holiday Indian team has been and I'll, let him comment a bit more but.
They put a lot of focus obviously against this time of the year and we feel like we have the product portfolio and a great place.
And then we have the right marketing programs to be able to deliver against those.
Those objectives.
For us the biggest challenge, especially in a business of our size. It's just the lumpiness of retail we're selling primarily through a couple of distributors and one club partner in particular and the result of that is that a single order doesn't come in it creates challenges or.
Or it feels here if it does so.
I would tell you is we were still guiding in that range, where we're looking at the lower end of that range at this point.
We expect to be able to bring it in but we're watching that lumpiness of retail really closely.
Sure.
Okay, and then just one more quick one.
But kind of higher level, there's a lot of we went to a food Tech Expo in New York, a couple months back and a lot of small kind of natively digital brands were complaining and kind of struggling in terms of.
Customer acquisition costs, and just a lot of that.
A lot of the headwinds there.
Everybody is talking about and I'm wondering how do you.
Kind of explain the layered value.
In an environment, where there is a lot of.
Maybe subscale brands that seem interesting or what is it thats kind of different about what you built that makes it attractive potentially as part of our.
Our portfolio of brands.
We're thinking about it that way at some point.
Yeah, Great question, Bob I'm going to lead this off and then hand to Andy as well because.
As the head of marketing and commercial for Us I'd be remiss, if I didn't get a kick at this one as well it's a great question.
And we get excited about this I mean, the reality is this is that what you're asking is exactly why I joined this company I would say.
The folks around the table did as well.
<unk> represents where it brings is a halo of health and wellness and nutrition whole food nutrition that really stands alone you can see that in our NPS scores, which are consistently hovering in that 80, plus mark at this point our customer satisfaction scores.
Which recently were $4 nine out of five consumers really.
Really value, what we bring and its differentiation versus the.
The other quote unquote Super Foods, and other health foods that they can buy there is recognition.
Strong rich among.
Amongst our shame.
Shameless plug, but I saw.
Pretty interesting influence or basically.
Discarding all the other creamers that they were looking at.
Pretty popular store and just.
Focusing on yours is the only one grid recommend so.
You guys have won some mind share out there. It seems like there is still an opportunity to capitalize on that.
Yes.
100% agree with your comments there.
As I mentioned in the prepared remarks, there is a building sentiment.
And <unk>.
Affinity towards clean and functional value proposition that we have and to your direct question around the challenges for consumer acquisition. It is a tough marketplace no doubt about it we still in kind of the same challenges in consumer acquisition I think what the variance that we have is a.
A couple of things one we are largely historically been focused primarily on our DTC business.
And we have not really fully.
Utilized other platforms like an Amazon to really drive significant consumer acquisition and were seeing that at a significantly lower tax than what we've seen our tea business. Both in the recent quarters as well as just generally historically.
You have new consumers on Amazon was up 46% year over year and up sequentially versus Q2, and then the second piece I would say is that.
Consistent with that loyalty.
Have a really strong database.
Because of <unk>.
Hi.
It's been acting in go to market in Nebraska.
Almost 450000 people in our database, that's up 26% versus a year ago. So we have a lot of things kind of in our organic and owned tools that can help offset some of that Joe.
Thank you.
Thank you Bonnie.
Thank you Mr. Barry <unk>.
The next question is from Alex Fuhrman with Craig Hallum. Please proceed.
Hey, guys. Thanks, very much for taking my question wanted to ask a little bit more about what the company is going to look like next year and going forward I know you mentioned, Jason that with the.
Co manufacturing partnership Youre anticipating a six to eight.
Point lift in gross margin what other ways is the company going to look different or pretty much all of your manufacturing cost and head count there expensive pods. It seems like a lot of your physical presence in Oregon is now going to be a lot smaller I don't know if that creates opportunities to.
Save on SG&A.
From a high level, what do you think the company is going to look like one year from now.
As opposed to how it does today.
Yeah, Hey, Alex good to hear from you.
The company did look radically different as the reality and this is we call. It it really what it is here for the first time I think on this call, which has been a turnaround for the loss.
Few quarters really started we started.
More of a transformation a little lighter didn't make a few tweaks.
And then a few tweaks, but really didn't see the depths that we would have to go through and how heavy the list would be so.
Yes, it will be 100% <unk> starting.
Before the end of this year, but certainly as we move into 2023 will have a variable cost margin it will be a real clean and easy to see what our P&L looks like we won't be beholden to manufacturing volumes that move up and down relative to some of those those orders and shipments that I mentioned from.
There are a few large customers will have a slimmer team and a much smaller G&A. We already are in the process now of reducing what was 140 person team when I when I came into at the beginning of this year or two will be under 40 people.
And we will have a significantly lower marketing spend we've already cut back on our marketing G&A pretty dramatically over the course of this year.
Not only head count, but in the discretionary expenditures as well in our marketing spend it's going to go down as we continue to get more efficient we're seeing those efficiencies now and have a lot of confidence in our ability to reduce marketing next year, even as we're growing sales more aggressively than we are this year. So.
A lot of this year has been focus organizationally on on the infrastructure really.
Building and rebuilding.
Kind of operations and.
<unk> and data infrastructure as I mentioned before we didn't have any consumer insights are really analytics to be able to work from the build of segmentation target consumers all of that work's done and as we go forward.
The ability to leverage it in a much more efficient way so you'll see a much smaller team a lot lower G&A.
I think I would tell you a bit more nimbleness as well just given the size of the company the ability to really get after some of these opportunities that we see.
Yes, that's really helpful. Jason. Thank you and then what is the co man relationship do for new product development, I mean, I imagine for most of this year. It's one thing to just kind of walked out there is around the corner and work with your product is it going to be easy to try out kind of new ideas.
Maybe the pace of new product development going to change a little bit more.
Yes, it's a great question, it really really well and the reason is the.
The same individual that's running our R&D process right now is going to be running it next year.
We will have to to get a new lab set up but that lab is lowest attached to the facility really doesn't leverage the facility in any other way that's the scale of our manufacturing equipment and such that we could run.
Test test pilot type of runs there anyhow. So there really is no change if anything it becomes it.
It comes a little bit stronger because the co man does have access to various formulas and other developments that Dave that they've been working on over the years that there that had been willing and interested in sharing with US is product ideas. So I would tell you that it really shouldn't impact us Alex we have.
A lot of work to do and expanding our current portfolio. So I don't anticipate will speed up production of new products, but we have a number of improvements that we're making to existing products today, not only to make the product tastes better but to make it less expensively with with different ingredients better ingredients in many cases.
They are less expensive as well as to get into new pack sizes. So a lot of innovation that we say, it's more like a one step adjacency, which is obviously a very higher opportunity for success very higher a much higher likelihood of success with lesser development costs.
Okay. That's really helpful. Thank you very much.
You bet. Thank you Mr. Furman.
There are no additional questions waiting at this time, so I will turn the call over to Jason Thats CEO for any further remarks.
Thanks.
I just want to thank everybody for your continued attention and support of our brand and company.
We're we're obviously extremely proud of the progress that we've made in turning around the business this year.
But we're even more excited to put the business improvements into place in Q4 and 2023.
And while these are clearly challenging economic times and that goes, especially for the DTC channel. We've never been more confident that we're taking the right and the beneficial steps to be able to refocus our omnichannel sales platform, while improving our cost position and our flexibility.
So we don't want to wish all of you and your families are safe and holiday season.
We will continue to stay in touch as we execute this transformation in the balance of Q4, and we look forward to talking with you all again really soon thanks a lot.
That concludes today's layered secret beauty third quarter 2022 financial results call. Thank you for your participation you may now disconnect your lines.