Q3 2023 Laird Superfood Inc Earnings Call

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Speaker 1: Good afternoon. Thank you for attending today's Laird Superfood 3rd quarter 2023 Financial Results Conference call. My name is Cole and I'll be the moderator for today's call. All lines will be muted during the presentation portion of the call with an opportunity for questions and answers at the end. If you'd like to ask a question, please press star followed by one on your telephone keypad. I'd now like to pass the conference over to our host, Trevor Russo. Please go ahead.

Good afternoon. Thank you for attending today's layered Super Foods third quarter 2023 financial results Conference call. My name is cole and I'll be the moderator for todays call all lines will be muted during the presentation portion of the call with an opportunity for questions.

So as at the end if you'd like to ask a question. Please press star followed by one on your telephone keypad.

I'd now like to pass the conference over to our host Trevor Russo. Please go ahead.

Thank you and good afternoon.

Speaker 2: Welcome to Laird Superfoods third quarter 2023 earnings conference call on Webcast.

Welcome to <unk> third quarter, 2023 earnings conference call and webcast.

Speaker 2: On today's call are Jason Veeff, Weather Superfood's President and Chief Executive Officer, and Anya Hamil, our Chief Financial Officer.

On today's call are Jason beef, Cupric, Foods', President and Chief Executive Officer, and Arnie handle our Chief Financial Officer.

Speaker 2: By now, everyone should have access to the company's third quarter 2023 earnings release filed today after market close.

By now everyone should have access to the company's third quarter 2023 earnings release filed today after market close.

Speaker 2: It is available on the investor relations section of Layered Superfood's website at www.layeredsuperfood.com.

It is available on the Investor Relations section of <unk> website at Www Dot layered CPC dot com.

Speaker 2: Before we begin, please note that during the course of this call, management may make forward-looking statements within the context of federal securities laws.

Before we begin please note that during the course of this call management may make forward looking statements within the context of federal Securities laws.

Speaker 2: These statements 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.

Statements 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.

Speaker 2: Please refer to today's press release and other filings with the SEC for a detailed discussion of these risks and uncertainties. With that, I'll turn the call over to Jason.

Please refer to today's press release and other filings with the SEC for a detailed discussion of these risks and uncertainties.

With that I'll turn the call over to Jason.

Speaker 3: Thanks, Trevor. Hello to everyone and thank you all for joining us again today. I am proud to be able to report that our Q3 results represent a fundamental step change in the performance of our business.

Thanks Trevor.

Hello to everyone and thank you all for joining us again today.

I am proud to be able to report that our Q3 results represent a fundamental step change in the performance of our business.

Speaker 3: For the first time since Q3 of 2021, we are reporting net sales growth against both the prior period and the prior year same quarter.

For the first time since Q3 of 2021, we are reporting net sales growth against both the prior period and the prior year same quarter.

Speaker 3: At the same time, we achieved our 2023 goal to exceed 30% gross margin by the back half of the year. An improvement of more than 750 basis points versus this time just 1 year ago.

At the same time, we achieved our 2023 goal to exceed 30% gross margin by the back half of the year, an improvement of more than 750 basis points versus this time, just one year ago.

Speaker 3: And we executed these improvements with just a fraction of the marketing and SG&A costs that we utilized in the business during the last years, as we will discuss shortly.

And we executed these improvements with just a fraction of the marketing and SG&A costs that we utilized in the business during the last years as we will discuss shortly.

First let's dive into net sales.

Speaker 3: First, let's dive into net sales. During 2022, I shared that we would need to reshape our sales algorithm in order to create a growing profitable business.

During 2022, I shared that we would need to reshape our sales algorithm in order to create a growing profitable business.

Speaker 3: I'm pleased to announce that our Q3 results were the result of this effort. As a wholesale channel grew by more than 42% year over year to become nearly one half of our total business during this court.

I am pleased to announce that our Q3 results were the result of this effort as the wholesale channel grew by more than 42% year over year to become nearly one half of our total business during this quarter.

Speaker 3: Natural channel consumption data, as reported by spins for the last 12 weeks ending October 8, 2023, showed a 61% growth for the layered superfood brand with positive sales growth in every category in which we...

Natural channel consumption data as reported by spins for the last 12 weeks ending October eight 2023.

<unk> to 61% growth for the layered superfood brand with positive sales growth in every category in which we compete.

Speaker 3: This growth is being driven by a healthy combination of unit velocity growth, price increases taken in previous quarters, and distribution expansion.

This growth is being driven by a healthy combination of unit velocity growth price increases taken in previous quarters and distribution expansion.

Speaker 3: As expected, our online business, which is comprised of the DTC and Amazon channels, contracted by 16.6%.

As expected our online business, which is comprised of the DTC and Amazon channels contracted by 16, 6%.

Speaker 3: As we continue to scale back media spend in support of our profitability goal.

As we continued to scale back media spend in support of our profitability goals.

Speaker 3: For the past 18 months, we have been managing this business towards profitability through significant reductions in media spend and I actively converting existing customers to subscription.

For the past 18 months, we have been managing this business towards profitability through significant reductions in media spend and by actively converting existing customers to subscriptions.

Speaker 3: The result of this is we have now moved from an inefficient, unproductive, and unprofitable paid social media marketing model to top of funnel, awareness driving marketing activations that employ podcasts, PR, and organic media.

The result of this is we have now moved from an inefficient unproductive and unprofitable paid social media marketing model to top of funnel awareness driving marketing activations that employ podcasts.

And organic media.

Speaker 3: In Q3 alone, we garnered more than 1.1 billion media impressions. We are just getting started.

In Q3 alone we garnered more than $1 1 billion media impressions and we are just getting started.

Speaker 3: I am also pleased to report that our Amazon inventory challenges are now behind us, as we were able to get our products restacked across their platform during Q3.

I'm also pleased to report that our Amazon inventory challenges are now behind us.

We were able to get our products restocked across their platform during Q3.

Speaker 3: While this channel has been constrained during 2023, due to the lack of inventory stemming for our Q1 quality event, we are now looking at a significant opportunity and expect to have a tailwind from that channel over the next year.

While this channel has been constrained during 2023 due to the lack of inventory stemming from our Q1 quality of that we're now looking at a significant opportunity and expect to have a tailwind from that channel over the next year.

Speaker 3: Next, I want to tip my hat to our supply chain organization. It was managed to achieve the aggressive cost savings target that we set out for them in 2020.

Next I want to tip my hat to our supply chain organization. It was managed to achieve the aggressive cost savings target that we set out for them in 2023.

Speaker 3: Remember that it was only a year ago that we determined that we were going to shut down our manufacturing and distribution facilities in Sisters Oregon and transition to an asset light model to improve our efficiencies increase our flexibility and lower our costs.

Remember that it was only a year ago that we determined that we were going to shut down our manufacturing and distribution facilities and sisters, Oregon and transition to an asset light model to improve our efficiencies and increase our flexibility and lower our cost.

Speaker 3: Our results in Q3 were the realization that vision as we decreased our landed product cost as a percent of gross sales from 74.6 to 54.8% in this most recent quarter.

Our results in Q3 were the realization of that vision as we decreased our landed product cost as a percent of gross sales of 74.6 to 54, 8% in this most recent quarter.

Speaker 3: During this time, we have developed strong and mutually beneficial relationships with our co-manufacturer and logistics partners and are proud to have both of them in our supply.

During this time, we have developed strong and mutually beneficial relationships with our co manufacturer and logistics partners and are proud to have both of them in our supply chain at the same time, our G&A expense was 50% lower than during Q3 of last year as the organization has continued to do more with less.

Speaker 3: At the same time, our DNA expense was 50% lower than during Q3 of last year, as the organization has continued to do more with less.

Speaker 3: While other companies are just announcing cost savings programs to match the current state of economy and its impact on their business, I am proud to report that we have largely and successfully completed that work, including head count downsizing and discretionary expense reduction.

While other companies are just announcing cost savings programs to match the current state of economy and its impact on their business I am proud to report that we have largely and successfully completed that work, including head count downsizing and discretionary expense reduction.

Speaker 3: We were also able to recently close all outstanding mitigation against us. And we successfully renegotiated our insurance to save more than $500,000 versus last year's policy, which will begin to be fully recognized during Q4.

We were also able to recently close all outstanding litigation against US and we successfully renegotiated our insurance to save more than $500000 versus last year's policy, which will begin to be fully recognized during Q4.

Speaker 3: While these savings have begun to flow into our earnings results, we still have a solid amount of reduction that will materialize in Q4 of this year and during 2024, which will help us to drive toward what has now become our short to midterm goal of break even profitability and becoming cash flow positive.

While these savings have begun to flow into our earnings results.

A solid amount of reduction that will materialize in Q4 of this year and during 2024, which will help us to drive toward what has now become our short to mid term goal of breakeven profitability and becoming cash flow positive.

Speaker 3: I am extremely proud by how far we have come during the past two years, and I am grateful to our leadership team and our entire LSF organization for what they have accomplished. But I'm even more excited for...

I am extremely proud by how far we've come during the past two years and I am grateful to our leadership team and our entire LSF organization. So what they have accomplished but.

But I'm, even more excited for where we'll go from here.

Speaker 3: Now that our cost structure continues to come in line with best in class CPG come.

Now that our cost structure continues to come in line with best in class CPG companies, we can turn our focus to restoring LSF topline growth through wholesale expansion in 2024 and beyond.

Speaker 3: We can turn our focus to restoring LSF top line growth through whole of the expansion in 2024 and beyond.

Speaker 3: And as we continue to chip away at our least effective marketing activities, they further reduce our GNA expenses. We believe that we can now be in position to achieve a cash flow positive run rate in the next 12 to 18 months.

And as we continue to chip away at our least effective marketing activities to further reduce our G&A expenses. We believe that we can now be in position to achieve a cash flow positive run rate in the next 12 to 18 months.

Speaker 3: Now let me turn the call over to Anya to discuss the second quarter results.

Now, let me turn the call over to Anya to discuss our second quarter results.

Speaker 4: Thank you, Jason. That sales of 9.3 million in the third quarter of 2023. Increase 3.7% as compared to 8.8 million in the prior year period. And increase 19% as compared to 7.7 million in the second quarter of 2023.

Thank you, Jason and net sales of $9 3 million in the third quarter of 2023.

Increased three 7% as compared to $8 8 million in the prior year period, and increased 19% as compared to $7 7 million in the second quarter of 2023.

Speaker 4: The year-over-year growth was driven by distribution gains in the natural and conventional channels, seasonal program expansion and club, price in actions, as well as velocity improvements behind new packaging and the rebranding campaign launched earlier this year.

The year over year growth was driven by distribution gains in the natural and conventional counter seasonal program expansion and club.

Pricing actions as well as the velocity improvements behind new packaging and the rebranding campaign launched earlier this year.

Speaker 4: This was partially offset by lower sales and e-commerce channels. Given the level of pullback in our market incident, which was 19% year-over-year reduction across Amazon and DTC work in media, this decline was expected.

This was partially offset by lower sales in ecommerce channels, given the level of pullback in our marketing spend which was 19% year over year reduction across Amazon and D. G. C. Working media this decline was expected.

Speaker 4: This marketing cuts were strategic in nature in order to cut inefficient spend and reduce our customer acquisition costs to build the most sustainable e-commerce business and improve our profitability in this channel. Additionally, our Amazon sales continued to be negatively impacted by residual inventory out of stocks related to the previously discussed product quality issue, experience in Q1.

This marketing cuts were strategic in nature in order to cut inefficient spend and reduced our customer acquisition cost to build a more sustainable e-commerce business and improve our profitability in this channels. Additionally, our Amazon sales continued to be negatively impacted by residual inventory.

Out of stocks related to the previously discussed product quality issue experienced in Q1.

Speaker 4: I'm happy to say this issue was resolved at the end of the third quarter and is now fully behind it.

I'm happy to say this issue was resolved at the end of the third quarter and is now fully behind us.

Speaker 4: In the third quarter, we continue to build on the success we achieved in the first half of the year. From strategic actions implemented last.

In the third quarter, we continued to build on the success, we achieved in the first half of the year from strategic actions implemented last year.

Speaker 4: Every quarter of this year was so a consistent margin expansion versus prior year. With Q3 margin reaching 31%, which is 670 basis points, improvements sequentially over Q2, and 750 basis points, improvement versus the same period last year.

Every quarter. This year was still a consistent margin expansion versus prior year with Q3 margin, reaching 31%, which is 670 basis points improvement sequentially over Q2, and 750 basis points improvement versus the same period last year.

Speaker 4: Q3 growth margin of 31% is a milestone that puts us firmly on the way to achieving our long-term goal of growth margins in the high series. In Q3, the year-year margin extension was driven by cost of sales improvement of 21% versus the same quarter prior year.

Q3 gross margin of 31% is a milestone that puts us firmly on our way to achieving our long term goal of gross margins in the high threes in Q3. This year over year margin expansion was driven by cost of sales improvement of 21% versus the same quarter.

The prior year.

Speaker 4: due to supply chain shift to third party co-packing model. It would have been even stronger, except for the investment that we have made in trade promotions to drive incremental awareness and trial in our wholesale channels.

Do you just supply chain shift to third party co packing model. It would have been even stronger except for the investment that we have made in trade promotions to drive incremental awareness and trial in our wholesale channel.

Speaker 4: Starting in Q4 this year, I expect to begin to pull back the elevator iterate spend, which will allow margin expansion to ramp up even more, as we see the full benefit of the supply change transformation, as well as other plant margin driving initiatives take hold.

Starting in Q4 of this year I expect to begin to pull back.

<unk> spent which will allow margin expansion to ramp up even more as we see the full benefit of the supply chain transformation as well as other plant margin driving initiatives take hold.

Speaker 4: Upper and expenses for the third quarter of 2023 total 5.6 million a decrease of 2.2 million compared to 7.9 million in the year go period.

Operating expenses for the third quarter of 2023 totaled $5 6 million a decrease of $2 2 million compared to $7 9 million in the year ago period.

Speaker 4: This reduction was driven by lower marketing costs, resulting from strategic cuts of inefficient spend, and lower people costs, and other general and administrative expenses, following the restructuring activities in 2020.

This reduction was driven by lower marketing costs, resulting from strategic cuts of inefficient spend and lower people costs and other general and administrative expenses following our restructuring activities in 2022.

Speaker 4: NAPLOTS, as reported, was 2.7 million for the third quarter of 2023. A decrease of 3.1 million versus the prior year period.

Net loss as reported was $2 7 million for the third quarter of 2023, a decrease of $3 1 million versus the prior year period.

Speaker 4: Q3 net loss was the lowest in the company's post IPO history driven by growth margin expansion and strategic pullback in spending across the board. Our Q3 as GNA was 1.8 million lower than the same quarter last year.

Q3, net loss was the lowest in the company's post IPO history.

Driven by gross margin expansion and strategic pullback in spending across the board.

Our Q3, SG&A was $1 8 million lower than the same quarter last year.

Speaker 4: Demonstrate industry from progress. We have made in managing costs and pushing the business towards break given and profitability in future quarters.

Demonstrating the strong progress we have made in managing costs and pushing the business towards breakeven and profitability in future quarters.

Speaker 4: Turn it to all balance sheet and cash flow. We ended the quarter with 7.4 million in cash and no debt as we continue to conservatively manage our balance.

Turning to our balance sheet and cash flow, we ended the quarter with seven 4 million in cash and no debt as we continue to conservatively manage our balance sheet.

Speaker 4: Cash burn in the third quarter of 3.5 million was elevated as compared to sequentially from 1.4 million in Q2 due to plant inventory build to meet step-up demand as we communicated on the school last quarter.

Cash burn in the third quarter of $3 5 million with elevated as compared to sequentially from $1 4 million in Q2 due to planned inventory build to meet stepped up demand as we communicated on this call last quarter.

Speaker 4: Our year end cash forecast, use on track without operating plans.

Our year end cash forecast he is on track with our operating plans.

Speaker 4: Moving on to our outlook. With one more quarter left in the year, we expect fourth quarter net sales to be in a range of 0.5 to 9 million. And growth margins in mid to high 30s, excluding any one time extraordinary chart.

Moving onto our outlook with one quarter left in the year, we expect fourth quarter net sales to be in the range of eight five to 9 million and gross margins and mid to high thirty's, excluding any onetime extraordinary charges.

Speaker 4: This concludes our prepared remarks. Operator, we are now ready to open the call to question.

This concludes our prepared remarks, operator, we are now ready to open the call to questions.

Yeah.

Speaker 1: Thank you. We will now begin the Q&A session. If you would like to ask a question, please press star, followed by one on your telephone keypad. If for any reason you'd like to remove that question, please press star, followed by two. Again, thank you for a question. Press star one. We will pause here briefly as questions are registered.

Thank you we will now begin the Q&A session. If you would like to ask a question. Please press star followed by one on your telephone keypad.

If for any reason you'd like to remove that question. Please press star followed by two again to queue for a question Press Star One we will pause briefly as questions are registered.

Speaker 1: Our first question is from Bobby Burlison with Canacor Junuity. Your line is now open.

Our first question is from Bobby Burleson with Canaccord Genuity. Your line is now open.

Sorry can you hear me.

I'm sorry can you guys hear me Bobby.

Speaker 5: Okay, great. I thought I hung up on you guys for a second. So I just wanted to, you know, first of all, congratulations on, you know, making so much progress and kind of turning the corner here. I wanted to just understand the medium, pressions, comment made, you know, what type of in your experience lag is there between?

Yes, we can hear you okay great.

I thought I hung up on you guys for a second.

So I just wanted to first of all congratulations on.

Making so much progress.

Turning the corner here.

I wanted to just understand the media impressions comment made.

What type of in your experience a lag is there between.

Speaker 5: you know that type of activity and maybe a pickup and maybe a move towards growth again in your DTC. And then I just want to add on to that, you know, how long do you say?

That type of activity and maybe a pickup.

And maybe a move towards growth again hitting their DTC.

And then I just wanted to add on to that how long do you think.

Speaker 5: The tailwind from Amazon could persist in 2024.

The tailwind from Amazon could persist into 2024.

Speaker 3: Yeah, everybody could do, could hear your voice and be back here again. And thanks, we certainly appreciate the recognition of the...

Yeah, Hey, Bob good.

Good to hear your voice and.

Thank you again.

We certainly appreciate the recognition of the.

Speaker 3: You know, all of the progress has been made by this team. It's been a nice long run here for two years to get to this point. And it's really great now to see the culmination of a lot of those efforts. And we still have a lot in front of us. You know, two of the points that you're hitting on here are really important. One, on the DTC impressions, it's really media impressions that will benefit all of our business, of course. In the case of DTC, as you're asking, you know, I think that

All of the progress that's been made by the team at band.

Nice long run here for two years to get to this point and it's really great now to see the culmination of a lot of those efforts.

We still have a lot in front of us two of the points that you're hitting on here are really important one.

The DTC impressions display media impression media impressions that will benefit all of our business of course in the case of DTC.

You're asking I think that.

Speaker 3: It's important to understand we are shifting our marketing strategy right now and certainly as we move into 2024 as well. More top of funnel awareness and that really started to take place through this year, but but I would say it was heightened in Q3 and will be again in Q4. And so we're spending more of our marketing dollars.

It's important to understand we are shifting our marketing strategy right now and certainly as we move into 2024 as well, it's more top of funnel awareness and that really started to take place through this year, but but I would say it was heightened in Q3 and will be again in Q4, and so we're spending more of our marketing dollars.

Speaker 3: in podcasts that we're supporting and a partnership that we have already established with the Sean Ryan Show and another one that we're working on right now that we're excited about closing hopefully very soon. And we're working as well with our PR agency to really make a heightened and concerted effort to generate these impressions, both paid and unpaid. And they're doing phenomenal work for us right now.

In podcast that we're supporting and a partnership that we have already established with the Sean Ryan show and another one that we're working on right now.

We're excited about.

Closing hopefully very soon and we're working as well.

With our PR agency.

To really make a heightened.

<unk> effort to generate these impressions, both paid and unpaid and theyre doing phenomenal work for us right now.

And so some of this as just as Youre alluding to is going to be longer term benefit for us and we won't see the immediate impact and that's why these results were so excited about these results because we got back to growth here in Q3, and we did it without the same level of that pay to play one to one social media type of Mark.

Speaker 3: Some of this, as just as you're alluding to, is going to be longer term benefit for us and we won't see the immediate impact. And that's why these results, we're so excited about these results because we got back to growth here in Q3 and we did it without the same level of that pay to play, one to one, social media type of marketing that we had been doing in the past that we all know is...

Getting that we had been doing in the past, we all know has become very inefficient.

Speaker 3: become very inefficient after a certain level of spend. So we're flipping the model on its end. We're seeing better results than we anticipated right out of the gate. And we do believe just as you're alluding to that over time, as that awareness builds.

After a certain level of spend so we're flipping the model on it on a band we're seeing better results than we anticipated right out of the gate and we do believe just as you're alluding to that over time as that awareness builds we start to get to a more I would say more conventional marketing model and one that bears fruit for multiple quarters and years to come.

Speaker 3: We started to get to a more, I would say, a more conventional margin model of one that bears fruit for multiple quarters of years to come.

Some.

Speaker 3: And then with regards to Amazon, we actually right now, I would tell you, even in Q3, we had a bit of a headwind going with Amazon while we were able to get inventory back in position.

And then with regards to Amazon.

We actually right now I would tell you even in Q3, we had a bit of a headwind so with Amazon, while we were able to get inventory back in position.

Speaker 3: in, I would say, probably two-thirds of the way through the quarter. We continue to have some challenges winning back buy boxes and with some other

And I would say probably two thirds of the way through the quarter.

We continue to have some challenges winning back buy boxes and with some other.

Speaker 3: Executions that were the result of that out of stock that we had throughout this year and we're knocking down all of those in lack of mold fashion

Executions that were the result of that how the stock that we had throughout this year and we're knocking down all of those when the whack a mole fashion and I would say getting to the cleanest look at Amazon that we've had really some.

Speaker 3: And I would say getting to the cleanest look at Amazon that we've had really since last year at this time.

Last year at this time, so we're starting to spend back into the channel we pulled back spend significantly so again, despite despite that pullback.

Speaker 3: We're starting to spend back into the channel. We pull back spend significantly. So again, despite that pullback, we're able to report close to this quarter. And that's why it feels so good to be in that position.

The report growth this quarter and that's why I feel so good to be in that position because we know as we go to spend back in an efficient manner from here we.

Speaker 3: Because we know as we go to spend back in in an efficient manner from here, we have a chance to supercharge some of the growth in these channels right now.

Had a chance to supercharge some of the growth in these channels right now.

Speaker 5: Okay, great. And then just a quick follow on, um, you know, it sounds like you're pulling back on the, uh, elevated trade spend. In key 4 should help with gross margins and the burn is going to slow, I guess, from. What it did in Q3, but you talked about a cash flow positive goal of, you know.

Okay, Great and then just a quick follow on.

It sounds like Youre pulling back on the elevated trade spend in Q4 should help with gross margins in the burn is going to slow I guess from what it did in Q3, but it talks about our cash flow positive goal.

12 to 18 months from I guess is that from October and then.

Speaker 5: from, I guess, is that from October ? And then what swings you to either end of that range? Are there particular things you're watching that you think could really affect how soon that outcome is?

What swings due to either end of that range or are there particular things youre watching that you think could really affect <unk>.

Soon that outcome is reached.

Speaker 3: Yeah, good question. You know, I tell you, Bobby, our gross margin, as we had planned at the beginning of the year, gross margin exceeded 30.

Yes, Great question I would tell you Bobby or our gross margin as we had planned at the beginning of the year, our gross margin exceeded 30.

We have like.

Speaker 3: yet to add on my plus points to the course of the next year. And as we do that, obviously we'll start to close in towards.

Yeah to add on plus.

Plus points to <unk>.

The next year and as we do that.

Obviously, we will start to close in towards.

Speaker 3: in a torsant-break even profit that we mentioned. The big driver on top of that, the big driver for us, as we go forward, the really two, one is.

Towards the breakeven profit that we mentioned.

The big driver.

On top of that the big driver for US as we go forward there really two one is.

Speaker 3: The continued skinning of our GNA, we've made a number of moves that are only now starting to trickle into the GNA line and we'll get the full benefit of over the course of the next year. And then similarly on the marketing side, I mentioned the strategy that we've moved to. And as part of that move, we are...

The continued scaling of our G&A, we've made a number of moves that are only now starting to trickle into the G&A line and we'll get the full benefit of over the course of the next year and then similarly on the marketing side I mentioned the strategy that we've moved to and as part of that move we are compressing marketing spend down towards a more traditional.

Speaker 3: pressing marketing spend down towards a more traditional CPG model. So.

As shown all CPG model, so you'll see marketing come down next year, and obviously, making a few bets on that with regards to our ability to market better and more efficiently, but we have a great team here that I think has generated some insights that will allow us to do that so it's really the combination of the increased gross margin and.

Speaker 3: You'll see marketing come down next year and obviously making a few best on that with regards to our ability to market better and more efficiently, but we have a great team here that I think is...

Speaker 3: generated some insights that will allow us to do that. So it's really the combination of that increased gross margin and the lower G&A and marketing costs, coupled with what we believe will become an increasingly positive story on top line because.

And that the the lower G&A and marketing costs, coupled with what we believe will become an increasingly positive story on top line because you know for the.

Speaker 3: You know, for the last two years, we have had a bigger online business.

The last two years, we have had a bigger online business declining faster than we were able to grow our smaller wholesale business and that is just about flipped as we mentioned it's about a 50 50 business now wholesale to online and our wholesale business is currently growing faster than our online.

Speaker 3: declining faster than we were able to grow our smaller wholesale.

Speaker 3: And that is just about swift as we mentioned it's about a 50 50 business now wholesale online and our wholesale business is currently growing faster than our online businesses declining

Business is declining and so that obviously becomes a.

Speaker 4: And so that obviously becomes a flywheel. It starts to work in our favor. We're really excited about what that can mean for us next year. And I just want to add one more thing. So that's how Bobbi is on your cell. I'm working capital.

A flywheel it starts to work in our favor and we're really excited about what that can mean for us next year.

And I just wanted to add one more thing to that and hi, Bobby This honor.

Now high working capital.

Speaker 4: Another driver and continue optimizing our work in capital, especially as we grow and expand the business. We think that we still have room to improve in terms of our inventory efficiency. That's another area where we're looking to free up our cash.

The other driver and continue optimizing them.

Our working capital, especially as we grow and expand the business.

We think that we still have room to improve in terms of our inventory efficiency. That's been another area, where we're looking to free up our cash.

Okay.

Speaker 5: Okay, great. Thank you for that additional point and congratulations.

Okay, great. Thank you for that additional point then congratulations.

Okay.

Thank you.

Thanks, Bobby.

Speaker 1: Our next question is from Alex Furman with Craig Hallum. Your line is now open.

Our next question is from Alex Fuhrman with Craig Hallum. Your line is now open.

Speaker 6: hey guys thanks very much for taking my question you know wondering if you can talk about you know what you're seeing hearing cue for uh... from amazon and and you know when would you really expect your business uh... through that important channel to be you know more or less what we what you would expect it to be full-strained uh... following the the coconut milk powder issue that you had

Hey, guys. Thanks, very much for taking my question I'm.

I'm wondering if you can talk about what youre seeing here in Q4.

From Amazon and when would you really expect your business through that important channel to be more or less what we what you were.

Would've expect it to be full strength following the coconut milk powder issue that you had.

Yes.

Speaker 3: Yeah, hey, Alex, I'll start that and on you can jump in if she has anything to add afterwards. But, you know, I just tell you the way we're looking at Amazon right now is we're about a year behind where we plan to be. And so we were coming into as you guys may recall from Q3 and Q4 last year. We had heavy up our spend. We had built cohorts.

Yeah.

I'll start that and on you can jump in if he has anything to add afterwards, but I can tell you. The way we're looking at Amazon right. Now is we're about a year behind where we had planned to be and so we were coming in as you guys may recall from Q3 and Q4 of last year, we had heading up our spend we had built cohorts and we really felt like.

Speaker 3: And we really felt like we had Amazon in a position to be able to drive growth for the next year. Lo and behold, the quality issue Q1, Q2 basically knocked us straight back to where we had been a year before.

Amazon.

Growth for the next year.

Will it be hold the quality issue Q1, Q2, basically knocked us right back to where we had been a year before.

Speaker 3: And that's what we're just coming through now. We're getting back to where we were a year ago. We're rebuilding those cohorts. I would say we're also marketing much more efficiently than we were at the time. So our advertising spend is quite a bit reduced and yet we're seeing really strong sustenance from the existing sales. We have a tremendous opportunity still to convert a number of those.

And that's we're just coming through now we're getting back to where we were a year ago. We're rebuilding those cohorts I would say, we're also marketing much more efficiently than we were at the time. So our advertising spend is quite a bit reduced and yet we're seeing really strong.

And it's from the existing sales, we have a tremendous opportunity still to convert.

Speaker 3: large number of those current consumers over into subscribers.

A number of those large number of those.

Current consumers over into subscribers and we're working on that right now as well as the Conquesting of our competitors now that we have full inventory in place. So really excited about that channel for next year. We're excited about it you'll recall for this year that was going to be one of our big growth drivers.

Speaker 3: And we're working on that right now as well as the conquesting of our competitors now that we have stolen inventory in place. So we're really excited about that channel for next year. We're excited about it. If we call for this year, that was going to be one of our big growth drivers.

Speaker 3: Unfortunately, again, materialized with quality event that we had, but we were able to keep that product out of the hands of consumers.

Unfortunately, it didn't materialize with quality event that we had but we were able to keep that product out of the hands of consumers. So there was really no downside, except that we had basically to put a pause on or call. It seven ish.

Speaker 3: So there was really no downside except that we had basically to put a pause on for college 7 or 8 months.

Seven or eight months.

Speaker 3: when we got everything back in stock and got our buybacks one and all of our existing business put back in place. So, some here we should have a really great growth driver in front of us.

Well, we got everything back in stock and got our buybacks, one and and all of our basically all of our existing business put back in place. So from here, we should have a really great growth driver in front of us.

Speaker 6: Okay, that's really helpful. Thanks, Jason. And then just on the gross margin, I think you kind of touched on this.

Okay. That's really helpful. Thanks, Jason and then just on the on the gross margin I think you've kind of touched on this a little bit.

Speaker 6: a little bit with Bobby's question, but you know, mid to high 30s.

With Bobby's question, but mid to high <unk> gross margin in Q4, that's quite a bit more than you've done any quarter of this year or the last couple of years.

Speaker 6: Gross margin in Q4. That's quite a bit more than you've done any quarter of this year or the last couple of years.

Speaker 6: you know now that you've got your your core shell stable cream or manufacturing being being outsourced means that is that a run rate we could expect to see you know throughout next year is there any reason why you know q4 is maybe a little step up and and and maybe we should expect that to be a little bit lower in the first half of next year

Now that you've got your core shelf stable creamer manufacturing being being outsourced mean does that is that a run rate we could expect to see throughout next year or is there any reason why Q4 is maybe a little step up and maybe we should expect that to be a little bit lower in the first half of next year.

Speaker 3: Yeah, great, great question. I would tell you that your right what we are as we think about our margins through Q4. And as we go forward from here, we actually see more opportunity than we see risk. You know, there always come out of the movement to May.

Yes, great Great question, Alex I would tell you that.

You're right, but we are as we think about our margins through Q4 and as we go forward from here, we actually see more opportunity than we see risk. There's always commodity movements may go against you, but given where we bought <unk>.

Speaker 3: Go against you by giving away we thought commodities thus far and where it looks like the next year and with some of the cost savings initiatives that we have in place we actually see opportunity to further improve.

But at least thus far where it looks like it will be next year and with some of the cost savings initiatives that we have in place we actually see opportunity.

Further improve from here that being said we are also looking at investments that we can make to gain market share online and at retail and so we will be balancing that as we go forward, but I would tell you know we don't really see a spike in Q4 that we won't be able to hold on to.

Speaker 3: That being said, we are also looking at that end dust mix that we can make to gain market share online and retail. And so we'll be balancing that as we go forward. But I would tell you, no, we don't really see a spike in Q4 that we will be able to hold fun to.

Speaker 3: We really see the the started a long-term trend to be sitting in that 35 plus range as we go forward

We really see the start of a long term trend to be sitting in that 35 plus range as we go forward.

Speaker 4: And I'll just add to the dialogue that's on your cell. So I'll just, is that quarterly-wide, you know, I'm margin of sense to trip.

Yeah, and I'll just add to it.

So I'll just add.

Quarterly wide margin.

Speaker 4: to depend on the timing or the seasons, Q-on expects to be a little heavier because it's back to help season for consumers. And we want to line up our promotions.

So just depending on the timing or the season Q1, and I expect to be a little heavier because it's.

Back to health season for consumers and we want to line up our promotions.

Speaker 4: With that season to really drive the top line. And then it kind of comes down in Q3 to 4, I'm sorry, in Q2 and Q3, and then we have the Black Friday events traditionally, selectuates somewhat with trade, but as far as our cost of sale, that's gonna be pretty steady throughout the quarters next year at Q4 or better level.

Was that season to really drive.

Pipeline.

And then it kind of comes down.

Or I'm, sorry in Q2, and Q3 and then we have the Black Friday event.

Ali fluctuate.

Somewhat with trade, but as far as our cost of sale.

That's going to be pretty steady throughout the quarters next year.

Q4 or better levels.

Speaker 6: That's terrific. Well, thank you. Thank you both very much. And congratulations on the really improved results here in the third quarter.

That's terrific well. Thank you. Thank you both very much and congratulations on the really improved results here in the third quarter.

Thank you.

Speaker 1: There are no additional questions at this time, so I'll pass the conference back to the management team for any closing remarks.

There are no additional questions at this time, so I'll pass the conference back to the management team for any closing remarks.

Speaker 3: Yeah, I just want to say, I'll say thanks everyone for joining us again today. It's extremely exciting and gratifying to be able to report on our continued progress of this turnaround.

Yes, I just wanted to say thanks to everyone for joining us again today.

Extremely exciting and gratifying to be able to report on our continued progress of the turnaround and now with gross margin in line with many of the top CPG companies in the industry, we can get back to growing our business and that's obviously when when it really gets fun for us with the management team and exciting hopefully for the investors as.

Speaker 3: And now with Gross Margin in line with many of the top CBG companies in the industry, we can get back to growing our business. And that's obviously when it really gets fun for us with the management team and exciting, hopefully for the investors as well.

Well, yes.

Speaker 3: The future is not like this bright for layered superfood for quite some time and frankly, not since I've been here and I don't think you all leave this meeting. It's excited for the future as our entire team is.

The future is not like this bright for large super food for quite some time and frankly, not since I've been here and I hope that you're all leave this meeting as excited for our future as our entire team is thank.

Thank you very much.

Yeah.

Speaker 1: That concludes today's conference call. Thank you for your participation. You may now disconnect your line.

That concludes today's conference call. Thank you for your participation you may now disconnect your line.