Q4 2024 Sow Good Inc Earnings Call
Unknown Executive: And thank you for participating in today's conference call to discuss Sow Good's financial results for fourth quarter and the full year ended December joining us today are Sow Good's co-founder and CEO, CEO, Chief Financial Officer, Brendon Fischer. Following their remarks will open the call for analyst questions.
Good morning, everyone and thank you for participating in today's conference call to discuss so good financial results for fourth quarter and before year end at this time.
Joining us today are so goods cofounder M C.
Brendan Fisher: Oh, Chief Financial Officer, Brendan Fisher.
Speaker Change: Following their remarks, we will open the call for analyst questions.
Cody Slach: Before we go further, I would like to turn the call over to Mr. Slach as he reads the company's safe harbor statement within the meeting of the Private Securities Litigation Reform Act of 1995 that provides important cautions regarding forward-looking statements. Cody, please go ahead.
Speaker Change: We go further I would like to turn the call over to Mr. Slaw.
Speaker Change: He reads the company's safe Harbor statement within the meaning of the private Securities Litigation Reform Act of 1995 that provides important cautions regarding forward looking statements Cody. Please go ahead.
Cody Slach: Hello, everyone, and thank you for joining us in today's conference call to discuss Sow Good's financial results for the fourth quarter and full year ended December 31st, 2024. Certain statements made during this call are forward-looking statements, including those concerning our financial outlook, competitive landscape, market opportunities, and the impact of the global economic environment on our business. These statements are based on currently available information and assumptions, and we undertake no duty to update this information except as required by law. These statements are also subject to a number of risks and uncertainties, including those highlighted in today's earnings release and our filings with the SEC.
Speaker Change: Hello, everyone and thank you for joining us on today's conference call to discuss so good financial results for the fourth quarter and full year ended December 31, 2020 for certain statements made during this call are forward looking statements, including those concerning our financial outlook competitive landscape market opportunities and the impact of the global economic.
Speaker Change: Environment on our business. These statements are based on currently available information and assumptions and we undertake no duty to update this information except as required by law. These statements are also subject.
Speaker Change: To a number of risks and uncertainties, including those highlighted in today's earnings release, and our filings with the SEC and additional information concerning these statements and the risks and uncertainties associated with them is highlighted in today's earnings release and in our filings with the SEC.
Cody Slach: Additional information concerning these statements and the risks and uncertainties associated with them is highlighted in today's earnings release and in our filings with the SEC. Copies are available on the SEC's website or on our investor relations website.
Speaker Change: Copies are available on the Sec's website or on our Investor Relations website. Furthermore, we will discuss adjusted EBITDA and non-GAAP financial measure on today's call a reconciliation of adjusted EBITDA.
Cody Slach: Furthermore, we will discuss adjusted EBITDA, a non-gap financial measure on today's call. The reconciliation of adjusted EBITDA to Net Income or Loss, the nearest comparable non-gap financial measure discussed on today's call is available in our earnings press release at our investor relations website.
Speaker Change: Net income or loss the nearest comparable non-GAAP financial measures discussed on today's call is available in our earnings press release at our Investor Relations website.
Claudia Goldfarb: With that, I will turn the call over to Claudia. Thank you, Cody. Good afternoon, everyone. We appreciate you joining us today.
Claudia: With that I will turn the call over to Claudia.
Claudia: Thank you Cody good afternoon, everyone. We appreciate you joining us today.
Claudia Goldfarb: 2024 was a defining year for Sow Good. We experienced explosive growth in the first half, followed by a sharp slowdown in the second. Building an entirely new category and product line from the ground up comes with inherent challenges and like many entrepreneurial, innovation driven companies, we had to navigate the growing pains of bringing something truly new to market. The two most significant challenges we faced, which heavily impacted the second half of the year, were product melting issues and increased competitive pressure. We have addressed the melting issue by enhancing our packaging to improve product integrity and implementing temperature controlled shipping where necessary.
Speaker Change: 24, it was a defining year for so good we experienced explosive growth in the first half followed by a sharp slowdown in the second building.
Speaker Change: Building, an entirely new category of product line from the ground up comes with inherent challenges and like many entrepreneurial innovation driven companies, we had to navigate the growing pains of bringing something truly new to market.
Speaker Change: Two most significant challenges, we faced which heavily impacted the second half of the year, where product 19 issues and increased competitive pressures.
Speaker Change: We have addressed the melting issue by enhancing our packaging to improve product integrity and implementing temperature controlled shipping where necessary.
Claudia Goldfarb: As for the competitive landscape, the market saw an influx of low quality, cheap imports from China, which negatively impacted consumer trial and slowed adoption. At the same time competition escalated with the entry of major global candy companies as Mars entered the category in Q4 and Hershey followed in Q1 of this year. We are tackling this new reality head on with a proactive and aggressive strategy. Expanding our retail footprint, opening new doors, strengthening our presence in key markets, and continuously innovating and expanding our product portfolio to keep our assortment fresh and exciting. Despite these obstacles, our team remains incredibly proud of what we've built in such a short time.
Speaker Change: As for the competitive landscape the market saw an influx of low quality cheap imports from China, which negatively impacted consumer trial and slowed adoption.
Speaker Change: At the same time competition escalated with the entry of major global Candy companies as Marissa entered the category in Q4, and Hershey followed in Q1 of this year.
Speaker Change: We are tackling this new reality head on with a proactive and aggressive strategy.
Speaker Change: Spanning our retail footprint opening new doors strengthening our presence in key markets and continuously innovating and expanding our product portfolio to keep our assortment fresh and exciting.
Speaker Change: Despite these obstacles our team remains incredibly proud of what we've built in such a short time and we are fully committed to navigating these headwinds.
Claudia Goldfarb: And we are fully committed to navigating these Fortunately, we are seeing early signs of recovery in our sales pipeline for Candy in Q1 of 2025. While the rebound is gradual, we have a clear and strategic path forward in the freeze-dried candy market. The challenges of the past nine months, while difficult, have also created opportunities to think outside the box and drive innovative solutions for both sales growth and cost optimization. At Sow Good's core, we are innovators and manufacturers with deep expertise in food production.
Speaker Change: Fortunately, we are seeing early signs of recovery in our sales pipeline for candy and Q1 of 2025.
Speaker Change: While the rebound is gradual we have a clear strategic path forward in the freeze dried candy market.
Speaker Change: The challenges of the past nine months, while difficult have also created opportunities to think outside the box and driving innovative solutions for both sales growth and cost optimization.
Speaker Change: So good score we are innovators and manufacturers with deep expertise in food production.
Claudia Goldfarb: We are leveraging that experience to expand into adjacent categories with significant growth potential.
We are leveraging that experience to expand into adjacent categories with significant growth potential, which I will discuss further during my closing comments.
Claudia Goldfarb: which I will discuss further during my closing comments. We are excited to return to our innovative roots, but the next six months will require focused execution and discipline. Our priorities remain clear. Spanning Candy Distribution, Reducing Costs, Optimizing Our Manufacturing Footprint, and Successfully Launching New Product Categories. Each of these initiatives plays a crucial role in our long-term strategy. While significant challenges remain, we are confident and steadfast in our ability to navigate them successfully.
Speaker Change: We are excited to return to our innovative routes.
Speaker Change: Next six months will require focused execution and discipline.
Speaker Change: Our priorities remain clear expanding candy distribution, reducing costs, optimizing our manufacturing footprint and successfully launching new product categories.
Speaker Change: Each of these initiatives plays a crucial role in our long term strategy.
Speaker Change: While significant challenges remain we are confident and steadfast in our ability to navigate them successfully.
Brendon Fischer: I'll turn it over to Brendon to review our Q4 and year-end 2024 finances. Brendon Thank you, Claudia. Jumping right into our financial performance, revenue in the fourth quarter of 2024 was $1.4 million, compared to $9.5 million for the same period in 2023.
Speaker Change: I'll turn it over to Brendan to review, our Q4 and year end 2020 for financials Brendan.
Brendan Fisher: Thank you Claudia jumping right into our financial performance revenue in the fourth quarter of 2024 was one 4 million compared to $9 5 million for the same period in 2023.
Brendon Fischer: For the full year, revenue increased significantly to $32 million compared to $16.1 million in 2023. The decrease in the fourth quarter was largely due to increased competitive pressure and the spillover effect from product shipment pauses in the third quarter of 2024, as well as increased promotional activity and customer allowance. The full year increase primarily reflects our transition to selling freeze-dried candy in the first quarter of 2023, the growing market for freeze-dried candy, and our expanded production capacity after adding three new freeze dryers in 2024, as well as the addition of new retail customers. Gross loss for the fourth quarter of 2024 was $1.2 million compared to gross profit of $3.4 million for the same period in 2023.
Brendan Fisher: For the full year revenue increased significantly to $32 million compared to $16 1 million in 2023.
Brendan Fisher: Increase in the fourth quarter was largely due to increased competitive pressure and the spillover effects from product shipment positive in the third quarter of 2024, as well as increased promotional activity and customer allowances.
Brendan Fisher: Full year increase primarily reflects our transition to selling freeze dried sandy in the first quarter of 2023 and growing market for freeze dried candy and our expanded production capacity, adding three new res drivers in 2024 as well as the addition of new retail customers.
Brendan Fisher: Gross loss for the fourth quarter of 2024, it was $1 2 million compared to gross profit of $3 4 million for the same period in 2023.
Brendon Fischer: Gross margin was negative 88% in the fourth quarter of 2024, compared to 36% in the year-ago period. The decline was primarily due to an approximate $1.7 million inventory reserve expense taken during the quarter, as well as from higher costs related to our new facility and the impact of lower sales. Excluding this reserve, Chris Proffitt was 0.4 million representing a gross margin of roughly 31.8%.
Brendan Fisher: Gross margin was negative 88% in the fourth quarter of 2024 compared to 36% in the year ago period the.
Brendan Fisher: The decline was primarily due to an approximate 1.7 million inventory reserve expense taken during the quarter as well as from higher costs related to our new facility and the impact of lower sales.
Brendan Fisher: Excluding this reserve gross profit was.
Brendan Fisher: <unk> 4 million, representing a gross margin of roughly 31, 8%.
Brendon Fischer: Full-year gross profit increased significantly to $13 million compared to $4.5 million in 2023. Gross margin for the year was 41% compared to 20% in 2023. The increase was primarily due to the strong revenue growth. Operating expenses in the fourth quarter of 2024 were $2.9 million compared to $1.6 million for the same period in 2023. For the full year, operating expenses were $14.5 million compared to $4.5 million in 2023. The quarter and full year increases were primarily driven by higher share compensation expense related to the amortization of performance options granted in December 2023 and other operating expenses increase related to our rapid growth.
Brendan Fisher: Full year gross profit increased significantly to $13 million compared to $4 5 million in 2023 gross margin for the year was 41% compared to 20% in 2023. The increase was primarily due to the strong revenue growth.
Brendan Fisher: Operating.
Brendan Fisher: Expenses in the fourth quarter of 2024 were $2 9 million compared to $1 6 million for the same period in 2023.
Brendan Fisher: For the full year operating expenses were $14 5 million compared to $4 5 million in 2023.
Brendan Fisher: The quarter and full year increases were primarily driven by higher share compensation expense related to the amortization of performance options granted in December 2023, and other operating expenses increase related to our rapid growth.
Brendon Fischer: Net loss in the fourth quarter of 2024 was $4.2 million or negative $0.40 per diluted share compared to net income of $1.3 million or $0.26 per diluted share for the same period in 2023. For the full year, net loss was $3.7 million, or negative $0.40 compared to net loss of $3.1 million, or negative $0.59 in the prior year period. The quarterly decline reflects the lower level of gross profit and higher operating expenses in the fourth quarter of 2024. Adjusted EBITDA in the fourth quarter of 2024 was negative $2.8 million, compared to $2.3 million for the same period in 2023.
Brendan Fisher: Net loss in the fourth quarter of 2024 was $4 2 million or negative <unk> 40 per diluted share compared to net income of $1 3 million or <unk> 26 per diluted share for the same period in 2023.
Brendan Fisher: For the full year net loss was $3 7 million or negative <unk> 40, compared to net loss of $3 1 million or negative <unk> 59 in the prior year period.
Brendan Fisher: The quarterly decline reflects the lower level of gross profit and higher operating expenses in the fourth quarter of 2024 adjusted EBITDA in the fourth quarter of 2024 was negative $2 8 million compared to $2 3 million for the same period of 2023.
Brendon Fischer: For the full year, adjusted EBITDA was $4.1 million compared to $0.1 million in 2020. Moving to the balance sheet, we ended 2024 with cash and cash equivalents of $3.7 million compared to $2.4 million as of December 31, 2022. The increase was primarily driven by the public offering we completed in the second quarter, when we raised $12 million in proceeds net of underwriting. We also filed a KILF registration in the fourth quarter, which resulted in aggregate proceeds of $2.2 million. Inventory at year-end increased sequentially to $20.3 million compared to $19.4 million as of September 30, 2024.
Brendan Fisher: For the full year adjusted EBITDA was $4 1 million compared to zero point $1 million in 2023.
Brendan Fisher: Moving to the balance sheet, we ended 2024 with cash and cash equivalents of $3 7 million compared to $2 4 million as of December 31, 2023.
Brendan Fisher: This was primarily driven by the public offering we completed in the second quarter. We raised 12 billion in proceeds net of underwriting fees.
Brendan Fisher: We also filed a shelf registration in the fourth quarter, which resulted in aggregate proceeds of $2 2 million.
Brendan Fisher: Inventory at year end increased sequentially to $20 3 million compared to $19 4 million as of September 32024. The increase was driven by new finished goods production, partially offset by sales in the aforementioned inventory reserves recognized during the period.
Brendon Fischer: The increase was driven by new finished good production, partially offset by sales, and the aforementioned inventory reserves recognized during the period.
Claudia Goldfarb: This concludes my preparatory remarks. I'll now turn the call back to Claudia. Claudia.
Claudia: This concludes my prepared remarks, I'll now turn the call back to Claudia Claudia.
Claudia Goldfarb: Thank you, Brendon. I will focus on our three key strategies, our cost saving initiatives, the opportunities we are pursuing in categories where our management team has deep expertise, and our candy distribution and expansion strategy. These initiatives are fundamental to our strategy as we strengthen our market position, streamline operations and capitalize on high growth opportunities beyond our core business. We are focused on creating operational and cost efficiencies while maintaining our exceptional manufacturing capabilities and food safety standards. Notably, we achieved a 97 on our most recent SQF 2 audit awarded on December 31st, 2024. In Q4, we successfully reduced payroll expenditures by 38% from Q3 and anticipate an additional reduction of 16% by the end of Q1.
Claudia Claudia: Thank you Brendan I will focus on our three key strategies, our cost saving initiatives. The opportunities we are pursuing in categories, where our management team has deep expertise and our candy distribution and expansion strategy.
Claudia Claudia: These initiatives are fundamental to our strategy as we strengthen our market position streamline operations and capitalize on high growth opportunities beyond our core business.
Claudia Claudia: We are focused on creating operational and cost efficiencies, while maintaining our exceptional manufacturing capabilities and food safety standards.
Claudia Claudia: Notably we achieved a 97 on our most recent ask you have to audit awarded on December 31 2024.
In Q4, we successfully reduced payroll expenditures by 38% from Q3 and anticipate an additional reduction of 16% by the end of Q1.
Claudia Goldfarb: To ensure we continue meeting demand and can scale a sales recover, we have implemented two automated packaging machines, which were put into use on March 14. Designed by our in-house engineers, these machines automate our packaging process, previously done entirely by hand, while preserving product integrity. Unlike standard automated product packaging equipment, which often causes significant product breakage, our custom machines were designed to ensure superior product quality. This advancement represents a significant set board in both in efficiency and scalability, as it will allow us to pack more with less labor. Furthermore, we are evaluating opportunities to optimize our manufacturing footprint to better align with our current operational needs.
Claudia Claudia: To ensure we continue meeting demand and can scale as sales recover we have implemented to automated packaging machines, which were put into use on march 14th.
Speaker Change: Designed by our in House Engineers. These machines automate our packaging process previously done entirely by hand, while preserving product integrity.
Speaker Change: Unlike standard automated product packaging equipment, which often causes significant product breakage or custom machines were designed to ensure superior product quality.
Speaker Change: This advancement represents a significant step forward in both efficiency and scalability as it will allow us to pack more with less labor.
Speaker Change: Furthermore, we are evaluating opportunities to optimize our manufacturing footprint to better align with our current operational needs as part of this strategy. We have decided to delay the deployment of Freestor seven through 12 until production demand warrant their activation.
Claudia Goldfarb: As part of this strategy, we have decided to delay the deployment of FreeStars 7 through 12 until production demands warrant their activation. This approach allows us to maintain maximum flexibility as we explore new category and geographic expansion opportunities. Similarly, we are postponing the activation of our candy making machine. We firmly believe that bringing candy production in-house is the right long-term move, as it would enhance our ability to innovate, introduce cleaner ingredient formulations to reach a larger market, and improve overall product quality. However, given our current priorities and the need for greater visibility into long term demand, we believe that the most prudent course of action is to temporarily defer this investment.
Speaker Change: This approach allows us to maintain maximum flexibility as we explore new category and geographic expansion opportunities.
Speaker Change: Similarly, we are postponing the activation of our candy, making machine, we firmly believe that bringing candy production in house is the right long term is as it would enhance our ability to innovate introduce cleaner ingredient formulations to reach a larger market and improve overall product quality.
Speaker Change: However, given our current priorities and the need for greater visibility into long term demand. We believe that the most prudent course of action is to temporarily deferred this investment.
Claudia Goldfarb: What has always set our management team and company apart is our manufacturing expertise, our passion for innovation, and our ability to identify trends and opportunities in the consumer landscape. While we are encouraged by the sales recovery underway, we have used the slowdown to strategically assess new growth areas. We're excited to enter into two key categories in which our team has extensive experience. beef jerky and freeze dried yogurt snack. We have shared samples with several customers and the response has been tremendously positive. Due to this early enthusiasm, we plan to launch both categories in the second half of the year.
Speaker Change: Well it has always said our management team and company apart is our manufacturing expertise, our passion for innovation and our ability to identify trends and opportunities in the consumer landscape.
Speaker Change: While we are encouraged by the sales recovery underway, we have used the slowdown to strategically assess new growth areas.
Speaker Change: We're excited to enter into two key categories in which our team has extensive experience.
Speaker Change: With jerky and freeze dried yogurt snacks.
Speaker Change: We have shared samples with several customers and the response has been tremendously positive.
Speaker Change: Due to this early enthusiasm we plan to launch both categories in the second half of the year yogurt belts will be introduced under the so good brand while beef jerky will launch under a separate brand currently being developed we.
Claudia Goldfarb: Yogurt Melts will be introduced under the Sow Good brand, while Beef Jerky will launch under a separate brand currently being developed. We are motivated by the opportunities these expansions present and encouraged by the initial market reaction. We will continue to keep you updated on these exciting developments.
Speaker Change: We are motivated by the opportunities these expansions present and encouraged by the initial market reaction. We will continue to keep you updated on these exciting developments.
Claudia Goldfarb: Transitioning to our sales update, we are seeing encouraging momentum in the US, particularly in the hardware store channel, alongside key retail partnerships and seasonal initiatives that are expanding our brand presence. World Market is launching three SKUs next month, increasing our footprint in specialty retail. Albertson's Grocery is launching 1468 of our displays for their summer set, positioning us for peak seasonal sales. At Five Below, we're introducing a new summer SKU, Summer Taffy, along with two additional new items, Caramel Crunch and Meant to Be During Q2. At Ace Hardware Stores, we've begun the onboarding process with their distribution warehouse, following a tremendously positive reception at their recent trade show.
Speaker Change: Transitioning to our sales update we are seeing encouraging momentum in the U S, particularly in the hardware store channel alongside key retail partnerships and seasonal initiatives that are expanding our Brad brand presence.
Speaker Change: Well Mark it is launching three skus next month, increasing our footprint in specialty retail.
Speaker Change: Britain's grocery is launching 1468 of our displays for their Somerset positioning us for peak seasonal sales.
Speaker Change: At five below we're introducing a new summer SKU summer Kathy along with two additional new items caramel crunch and meant to be during Q2.
Speaker Change: <unk> hardware stores, we began the on boarding process, where it with their distribution warehouse following a tremendously positive reception at a recent trade show <unk>.
Claudia Goldfarb: Due to the excitement surrounding our products, 50 stores have already placed orders for full displays, which will ship within the next two weeks. We expect further expansion when the onboarding process is completed and our products are available in their distribution center. Similar to our success with ACE, we saw strong demand at Orville, a hardware store distributor. A hundred new stores have placed display orders, with one larger store ordering five displays to create a significant brand presence at launch. Additional orders continue to roll in, strengthening our entry in the hardware retail.
Speaker Change: The excitement surrounding our product 50 stores have already placed orders for full displays which will ship within the next two weeks. We expect further expansion on the Onboarding process is completed and our products are available in their distribution center.
Speaker Change: Similar to our success with Ace we saw strong demand at Oracle a hardware store distributor.
Speaker Change: 100, new stores have placed display orders with one larger store ordering five displays to create a significant brand presence at launch.
Speaker Change: Additional orders continue to role in strengthening our entry in the hardware retail space.
Claudia Goldfarb: Kehi, one of the largest distributors in the U.S., will officially launch us through its New Brands program in May. However, due to early demand, we've already received an initial $25,000 order from one of their customers. Positioning us for continued growth in the second half of the year.
Speaker Change: <unk> one of the largest distributors in the U S well fiscally launches through its new brands program in May However, due to early demand. We've already received an initial $25000 order from one of their customers positioning us for continued growth in the second half of the year.
Claudia Goldfarb: Our international efforts continue with encouraging growth opportunities in the Middle East and Europe.
Speaker Change: Our international efforts continue with encouraging growth opportunities in the middle East and Europe during.
Claudia Goldfarb: During a recent trip in Dubai, we secured a contract with Explore Ambassador. a leading distributor in the UAE. We are now preparing to ship our first orders for four UAE compliance queues, which include a container for Qatar and an initial test order for Dubai, Saudi Arabia, and Bahrain. To support this expansion, Arabic language packaging is currently being printed and shipments are scheduled to leave in the next three to four weeks.
Speaker Change: During the recent trip in Dubai, we secured a contract with explore investments.
Speaker Change: A leading distributor in the UAE.
Speaker Change: We are now preparing to ship our first orders for for UAE compliant Skus, which include a container for Qatar and an initial task order for Dubai, Saudi Arabia and Bahrain.
Speaker Change: To support this expansion Arabic language packaging is currently being printed and shipments are scheduled to leave in the next three to four weeks.
Claudia Goldfarb: In Europe, we received a very positive reception at ISM Germany, one of the largest European snack trade The European freeze dried market is an emerging category with limited competition from high quality brands and room for a market leader to establish dominance. We are in the final stages of securing compliance approvals for seven SKUs. We adjusted our launch timeline to the second half of the year to allow us to develop five SKUs that fully comply with EU ingredient regulation. ensuring that we launch with seven SKUs, giving us a diverse and competitive product lineup. With final formulations now complete, we are moving through the last regulatory steps.
Speaker Change: In Europe, we received a very positive reception ISF in Germany, one of the largest European snack tradeshows.
Speaker Change: The European freeze dried market is an emerging category with limited competition from high quality brands and room for a market leader to establish dominance.
Speaker Change: We are in the final stages of securing compliance approvals for seven Skus, we adjusted our launch timelines to the second half of the year to allow us to develop five skus that fully comply with the EU ingredient regulations, ensuring that we launch with seven skus, giving us a diverse and competitive product lineup.
Speaker Change: With final formulations now complete we are moving through the last regulatory steps.
Claudia Goldfarb: Once approved, our European distribution partner, who's one of the largest in the region, will actively pursue retail and wholesale placements, giving us a strong foundation in a market with minimal high-quality competition.
Speaker Change: Once approved our European distribution partner Who's one of the largest in the regions. We will actively pursue retail and wholesale placement, giving us a strong foundation and a market with minimal high quality competition.
Claudia Goldfarb: We are executing on multiple fronts, expanding domestically with new retail partnerships and channels, increasing our presence in the hardware space and making meaningful international inroads in the Middle East and Europe. With a strong retail pipeline, strategic distributor partnerships, and a continued emphasis on quality and innovation, we are competent in our ability to drive sustained growth in the quarters ahead.
Speaker Change: We are executing on multiple fronts, expanding domestically with new retail partnerships and channels, increasing our presence in the hardware space and making meaningful international inroads in the middle East and Europe.
Speaker Change: With the strong retail pipeline strategic distributor partnerships and a continued emphasis on quality and innovation. We are confident in our ability to drive sustained growth in the quarters ahead.
Claudia Goldfarb: However, until we have greater visibility into our sustained level of sales, we are unable to provide formal sales guidance. What I can say is that Q1 will be marginally better than Q4, and with the planned launches, Q2 will outperform Q1, setting the stage for continued growth. Our recovery this year will be steady and methodical, and we remain enthusiastic about the opportunities ahead and unyieldingly committed to providing innovative and top quality product to our consumers and long term growth to our shareholders.
Speaker Change: However, until we have greater visibility into our sustained level of sales we are unable to.
Speaker Change: Provide formal sales guidance, what I can say is that Q1 will be marginally better than Q4 and with the planned launches Q2 will outperform Q1 setting the stage for continued growth.
Speaker Change: Our recovery this year will be steady and methodical and we remain enthusiastic about the opportunities ahead.
Speaker Change: And Aneel <unk> committed to providing innovative and top quality product to our consumers and long term growth to our shareholders.
Unknown Executive: Operator will now open the call for Q&A. Thank you, ma'am. As a reminder to ask a question, you will need to press star 11 on your telephone. To remove yourself from the queue, you may press star 11. Again, please stand by while we compile the q&a roster.
Speaker Change: Operator, we'll now open the call for Q&A.
Speaker Change: Thank you ma'am as a reminder to ask a question you will need to press star one one on your telephone to remove yourself from the queue. You May Press Star one one again, please standby, while we compile the Q&A roster.
George Kelly: First, our first question comes from George Kelly of Roth Capital Partners. Your question, please, George. Hey, everybody. Thanks for taking my questions.
Speaker Change: Our first question comes from George Kelly of Roth Capital Partners. Your question. Please George.
George Kelly: Hi, everybody thanks for taking my questions.
George Kelly: First, A question on the the new product categories. I'm just curious if you could explain a little bit sort of what attracted you to to freeze-dried yogurt and beef jerky and how quickly are you able to, I think you said a two-half launch, but what like do you have a good sense of production and like have you already started sort of testing the product or how quickly do you think you can start to to offer something there?
Speaker Change: First.
Speaker Change: A question on the new product categories.
Speaker Change: I'm just curious if you could explain a little bit sort of.
Speaker Change: What attracted you to to freeze dried yogurt in beef jerky and how quickly are you able to.
Speaker Change: I think you said to have launch but what.
Speaker Change: Do you have a good sensitive.
Speaker Change: Production and like have you already started sort of testing the product or how quickly do you think you can start to offer something there.
Claudia Goldfarb: George, good to talk to you today. So, yeah, you know, Over the last six months, obviously, freeze-dried candy has provided some challenge. So during that time period, we were really looking at what are the adjacent categories that make sense for us to manufacture to launch where we have a lot of As most of you may remember, a lot of our management team has extensive expertise in jerky specifically in the pet space that translates incredibly well to traditional CPG. So that was an easy one for us to get started. As we looked at the jerky market, one of the things that we really saw was something that was very additive filled.
Hi, George.
Talk to you today.
Speaker Change: Yes.
Speaker Change: Now.
Speaker Change: Over the last six months, obviously freeze dried kandi has provided some challenges for us.
Speaker Change: So during that time period.
Speaker Change: Really looking at what are the adjacent categories that make sense for us to manufacture to launch where we have a lot of expertise as most of you may remember.
Speaker Change: A lot of our management team has extensive expertise in Turkey, specifically in the pet space that translate incredibly well to traditional CPG. So that was an easy one for us to get started.
Speaker Change: As we looked at the jerky market one of the things that we really saw was something that was.
Claudia Goldfarb: So a lot of salt, a lot of preservatives. And so, you know, our approach to that market is cleaner ingredients, a really high quality, you know, jerky production process that doesn't require a lot of capital expenditure. And so we've started to make samples for various different buyers. The response has been overwhelming. It's something that, you know, for a second half of the year launch seems very feasible again, because it doesn't require a lot of catbacks. It's something that we know incredibly well, and so that's incredibly exciting.
Speaker Change: Very additive.
Speaker Change: So a lot of saw a lot of preservatives and so our approach to that market is cleaner ingredients.
Speaker Change: A really high quality.
Speaker Change: Jerky production process that.
Speaker Change: It doesn't require a lot of capital expenditures and so we've started to make samples for various different buyers. The response has been overwhelming.
Speaker Change: Something that for a second half of the year launch seems very feasible again, because it doesn't require a lot of capex, that's something that we know incredibly well and so that's incredibly exciting and then on the freeze dried yogurt milk, it's something that we've always planned on doing.
George Kelly: And then on the freeze dried yogurt milk, it's something that we've always planned on doing. You know, when we launched candy going into adjacent freeze dried categories was always part of the plan right now, because of the slowdown, we have the production capacity to do. So, we already had the formulations in place. We already had extensive testing in place. And so putting that into operation again, not a lot of catbacks very easy for us to do. And we already have the expertise in house. Okay, understood.
Speaker Change: When we launched Kandi going into adjacent pre strike categories was always part of the plan right now because of the slowdown we have the production capacity to do so we already had the formulations in place we already have extensive testing in place and so putting that into.
Speaker Change: Operation again, not a lot of Capex very easy for us to do and we already have the expertise in house to do so.
George Kelly: And then second question for you. Your comment that you're seeing some signs of improvement. I guess I'm curious, is it mostly that you're getting kind of in new inbounds from accounts you hadn't talked to before? Or if you look at your core customers and the velocity trends you're seeing, are you seeing stabilization there? Is that part of the improvement as well? And really, I'm just trying to get at is, what is the consumption? And how has that trended? And is there still a lot of inventory at retail that will take longer to go through? There's just not a lot of visibility into that.
Speaker Change: Okay understood.
Speaker Change: Then second question for you.
Speaker Change: Your comment that you are seeing some signs of improvement I guess I am curious is it mostly that.
Speaker Change: That you are getting kind of new inbounds from from accounts, you hadn't talked to before where if you look at your core customers.
The velocity trends youre.
Speaker Change: Seeing.
Speaker Change: Are you seeing stabilization there is that part of your improvement.
Speaker Change: As well and really what im just trying to get at is like what is the consumption.
Speaker Change: And how has that trended and is there still like a lot of.
Speaker Change: Inventory at retail that will take longer to go through you know theres, just not a lot of visibility into that.
George Kelly: So if you could give any more data points here, that would be helpful.
Speaker Change: Could give.
Speaker Change: Can you give any more data points here that would be helpful.
Claudia Goldfarb: No, great question, George. So we're seeing both. You know, we're very excited about the new launches that we detailed in the calls. We're having conversations with additional retailers for further Q2 launches that we're really excited about. But we're definitely seeing recovery in our key customers.
Speaker Change: No great question, George So we're seeing both.
Speaker Change: We're very excited about the new launches that we detailed the calls we're having conversations with additional retailers for further Q2 launches that we're really excited about.
Speaker Change: But we're definitely seeing recovery in our key customers, whether it be buy below convenient stores other grocery stores such as Albertsons.
Unknown Executive: Unknown Executive, Brendon Fischer, Claudia Goldfarb, David Lavigne, Sow Good where we ended. The last six months, you know, I think they had a lot of inventory on hand, they worked their way through it. They worked their way through it. So now we're able to refresh, refresh their assortment. We stock them with the items that we're seeing continued traction in. And that's pretty much limiting itself to six key everyday SKUs that are performing They believe very well. I don't know if that answers your question, George, or if you want a little bit more clarity.
Speaker Change: Where we ended.
Speaker Change: The last six months I think they had a lot of inventory on hand to work their way through it.
Speaker Change: They worked their way through and so now we're able to refresh refresh their assortment, we start with the items that we're seeing.
Speaker Change: Continued traction and that's pretty much limiting itself to six key everyday skews that are performing.
Speaker Change: They believe very well.
Speaker Change: Okay.
Georgia: Question, Georgia, if you want a little bit more clarity.
George Kelly: Yeah, it's well, is there anything else you can share just about velocity at retail? You know, one of the things that we're seeing, at least over the last 12 weeks, I was looking at the Circona data a few days ago, if you look at Circona, you know, we're at about 17 units per store per door. And that's pretty much what we're seeing consistently over the last 12 weeks.
Speaker Change: Well.
Speaker Change: Is there anything else you can share just about velocity at retail.
Speaker Change: You know one of the things that we're seeing at least over the last couple of weeks I was looking at the <unk> data.
Speaker Change: A few days ago. If you look at sort of comment we're at about 17 units per store per door and thats pretty much what we've seen consistently over the last 12 weeks and so I think that our sales on a per door basis have very much solidified and stable.
Claudia Goldfarb: And so I think that our sales on a per door basis have very much solidified and stabilized. And so now, you know, part of the go forward strategy is again, focusing on those everyday SKUs that are performing very well every day, day in and day out, whether it be C-store, traditional grocery, or now we're seeing a lot of Lyft and the hardware places and, you know, kind of those niche underserved categories that we haven't looked at before. And continuing to innovate, putting. Great skews forward that are a little bit different and differentiated that what's currently on shelf.
Speaker Change: And so now.
Speaker Change: Part of the go forward strategy is again focusing on those skus.
Speaker Change: Skus that are performing very well every day day in and day out whether it be C store traditional grocery or now we're seeing a lot of <unk>.
Speaker Change: And the hard work places and kind of those niche.
Speaker Change: Underserved category.
Speaker Change: We haven't looked at before.
Speaker Change: And.
Speaker Change: Continuing to innovate.
Speaker Change: Putting.
Speaker Change: Great Skus for that are a little bit different and differentiated that what's currently on shell.
George Kelly: Okay, and then just one last one for me, and then I'll hop back in the queue. What is the strategy to to get inventory down? Do you plan to get more aggressive, either discounting or doing whatever it takes and If you could just give a little sort of inventory update and is the quality of inventory like, how should we think, you know, 20 million bucks? How should we think about the quality of that? Is any heat affected? Thank you. No, of course.
Speaker Change: Okay and then just one last one for me and then I'll hop back in the queue.
Speaker Change: What is the strategy to get inventory down do.
Speaker Change: Do you plan to get more aggressive.
Speaker Change: Either discounting or doing whatever it takes.
Speaker Change: If you could just give a little sort of inventory updated and is the quality of inventory.
Speaker Change: How should we think 20 million Bucks. So how should we think about the quality of.
Speaker Change: Is there any heat affected.
Claudia Goldfarb: Thank you for the questions, George. The inventory that we have, the beautiful thing about pre-stride technology is that it really increases the shelf life of everything that we put out there. So the inventory that we have still has at a minimum a two-year shelf life. So we're not concerned about that portion of it. It's stored in a temperature controlled environment. So, you know, heat, moisture, and some of the other things that could be impacted. In regards to what we're doing to work our way through it is we're continuing to be really aggressive about the new doors that we open.
Speaker Change: Thank you.
Speaker Change: No of course, thank you for the question starts.
Speaker Change: The inventory that we have the beautiful thing about pre strike technology is that it really increases the shelf life of everything now that we put out there. So the inventory that we have at a minimum two year shelf life. So we're not concerned about that portion of it it's stored in a temperature.
<unk> controlled environment.
Speaker Change: Key moisture and some of other things that can be impactful to the inventory should not affect them.
Speaker Change: In regards to what we're doing to work our way through it is we're continuing to be really aggressive about the new doors that we opened and that really is a key strategy that we're focused on in regards to market penetration we still.
Claudia Goldfarb: And that really is a key strategy that we're In regards to market penetration, we still have, you know, we're in the low double digits in regards to number of doors that we could be in. And so, you know, we've put together a phenomenal sales team who's being very aggressive and is super excited and passionate about the traction that they're seeing in the market. And so that's really the focus. Let's get these great quality SKUs that we see that are performing very well every day. And let's get them on shelf and continue to market them, you know, aggressively in regards to, you know, social media and things of that nature to get them off.
Speaker Change: We're in the low double digits in regards to number of doors that we could be in and so we've put together a phenomenal sales team who is being very aggressive and.
Speaker Change: Super excited and passionate about the traction that they're seeing in.
In the market and so that's really the focus let's get these great quality skus that we see that are performing very well every day and let's get on shelf.
Speaker Change: And continue to market them.
Speaker Change: Aggressively in regards to.
Speaker Change: Social media and things of that nature to get them off shelf as well.
Unknown Executive: Thank you.
Claudia Goldfarb: At this time, this concludes our question and answer session.
Thank you at this time. This concludes our question and answer session I would now like to turn the call back over to Claudio for closing remarks.
Claudia Goldfarb: I would now like to turn the call back over to Claudia for closing remarks. Everyone, I just really want to thank you for your time today. We really appreciate that that you are following our story and that you've been part of our The next several months are going to continue to be challenging, but we're very excited and committed to the opportunities that we're seeing in front of us. And we look forward to updating you on all of the exciting things that we see happening over the next few months.
Claudio: Everyone I, just really want to thank you for your time today.
Really appreciate that you are following our story and that you've been part of our journey. The next several months are going to continue to be chat.
Claudio: Challenging but we're.
Claudio: Very excited and committed.
Claudio: So the opportunities that we're seeing in front of us and we look forward to updating you on all of the exciting things that we see happening over the next few months.
Unknown Executive: Thank you everyone and have a great day.
Claudio: Thank you, everyone and have a great day.
Unknown Executive: Ladies and gentlemen, this does conclude today's teleconference. You may disconnect your lines at this time. Thank you for your participation.
Speaker Change: Ladies and gentlemen, this does conclude today's teleconference. You may disconnect. Your lines at this time. Thank you for your participation.
Unknown Executive: Outro Music
Speaker Change: Okay.
Speaker Change: [music].
Speaker Change: Okay.
Speaker Change: Good.
Speaker Change: Yes.
Speaker Change: [music].
Speaker Change: Okay.
Speaker Change: [music].
Speaker Change: Yes.
Speaker Change: Thank you.
Speaker Change: [music].