Q1 2025 Laird Superfood Inc Earnings Call

Matt: Good afternoon. Thank you for attending the Laird Superfood First Quarter 2025 Financial Results call. My name is Matt and I'll be the operator for today's call.

Matt: All lines have been needed during the presentation portion of the call and opportunity for questions and answers at the end. If you would like to ask a question, please press star one on your telephone keypad. I'll not pass the conference over to our host, Trevor Rousseau, Head of Investor Relations. Trevor, please go ahead.

Trevor Rousseau: Thank you and good afternoon. Welcome to Laird Superfood's first quarter of 2025 earnings conference call on webcasts. On today's call, Jason Vieth, Laird Superfood's president and chief executive officer and Anya Hamill, our chief financial officer.

Speaker Change: By now, everyone should have access to the company's earnings release, which is the day after

Speaker Change: It is available on the Investur Relations section on Laird Superfoods website and www.LairdSuperfood.com.

Speaker Change: Before we begin, please note that during this call, management may make board looking statements within the context of federal security slots. These statements are based on management's current tech expectations and involve risks and uncertainties that caused actual results to differ materially from those described.

Speaker Change: 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 up with Jason.

Jason Vieth: Thank you, Trevor. And hello, everyone. I'm delighted to share with you the results of Laird Superfood's first quarter of 2025, which marked another strong period as a high growth premium brand for robust margins and significant market potential.

Jason Vieth: During Q1 2025, we achieved an 18% year-over-year increase in med sales to $11.7 million, up from $9.9 million in the same period of last year.

Jason Vieth: This marks a fifth consecutive quarter of double-digit sales growth, which is even more impressive in what has recently become an inflationary and uncertain economic environment.

Jason Vieth: Our profitability metrics we made are highlights. In Q1 of 2025, we delivered 41.9% gross margin. A 1.9 point improvement versus Q1 of last year.

Jason Vieth: This margin strength, despite significant commodity price pressures in ingredients such as coffee and coconut milk powder, positions the fall of all the industry average for food companies.

Jason Vieth: and our ability to sustain margins in the high 30 to low 40% while driving nearly 20% sales growth.

Jason Vieth: underscores the resilience and exceptional execution of our Army Channel business models, driven by strategic sourcing, a variable cost manufacturing approach, and discipline trade spend

Jason Vieth: Our Q1 results also demonstrate progress that we are making in our two primary strategic commercial initiatives to drive robust growth on Amazon and to significantly expand our wholesale distribution.

Jason Vieth: Our e-commerce channel grew by 6% during Q1, led by our performance on Amazon, which delivered strong performance driven by improved inventory management and targeted marketing execution and the true platform demand for our Laird Superfood products.

Jason Vieth: and our direct-to-consumer business, more than 75% of Q1 DTC sales, came from repeat customers and subscribers. A testament to our ability to foster long-term relationships and a demonstration of the trust and loyalty that our consumers have in the brand.

Jason Vieth: Similarly, we continue to make exceptional progress on the wholesale front, with net sales increasing 35% year over year, and now contributing nearly half of our total LSF revenue.

Jason Vieth: This growth was driven by distribution gains in grocery and club stores, including key partners across both natural and conventional grocery. Coupled with improved dollar sales velocity at existing

Jason Vieth: Our efficient professional strategies and strong consumer demand for our products feel this momentum.

Jason Vieth: As we noted on our previous calls, we expected our 21 sales group would be tempered by out-of-stock issues with our creamer and instant latte products.

Stemning from unexpectedly high demand during Q4 2024.

Jason Vieth: Indeed, we did feel that impact, that I am pleased to be able to report that we have resolved these constraints by qualifying additional raw material suppliers and enhancing our supply chain flexibility, and that we are now in a stronger inventory position on our coconut

Jason Vieth: which we expect will allow us to drive accelerated growth on these products in the second half of 2025.

Jason Vieth: Focusing on our supply chain, Q1 was another testament to the agility that we have built in this function.

Jason Vieth: Despite persistent commodity inflation in coffee, cacao, and coconut milk powder, we were largely able to mitigate these cost impacts for strong supply of relationships and operational efficiencies, and by beginning to make moves that will mitigate the impact of tariffs on

Jason Vieth: 41.9% close margin in Q1 and close at 3.3% benefit from a timing change in capitalization of inbound 3. But even without this, our margin resilience is notable.

Jason Vieth: We remain committed to our goal of sustaining annual gross margins in at least the upper 30s. And we're cautiously optimistic about potential commodity price corrections in 2025 that could further enhance our profitability.

Jason Vieth: As we have previously discussed, our strategy remains to maintain sharp pricing to prioritize volume growth, positioning us to build a larger, more profitable business from commodity cost normalization.

Speaking of tariffs, let's address the elephant in the room.

Jason Vieth: As you expect, much of our raw materials, such as our coconut products and our coffee, are imported from farms overseas.

Jason Vieth: Well, we continue to watch this situation very carefully. We feel that we are in position to manage the impact of the tariffs that have thus far been levied within the guidance that we have previously provided.

Jason Vieth: Should significant additional tariffs be levied on our ingredients, we would likely need to take price to a comedy study impact.

Jason Vieth: Before I head over to Anya, I want to highlight our continued progress on profitability. In Q1 2025, we narrowed our net loss to $0.2 million, compared to a $1 million loss to Q1 2024.

Jason Vieth: We also achieved a positive adjusted EBITDA of $0.4 million, compared to a negative $0.8 million in the prior year.

Anya Hamill: This result demonstrates the operating letters we're unlocking as we scale our business reinforcing our path towards sustainable profitability.

Anya Hamill: and our college sheet remains strong, with no debt and ample cash to operate our business as we continue to grow our revenues and push beyond breakeven profitability.

Anya Hamill: Now, let me turn it over to Anya to dive into the financial details for the quarter.

Anya Hamill: Thank you Jason, and good afternoon everyone. I will now provide you with some additional details on the first quarter of 2025 financial results, an outlook for the full year.

Anya Hamill: Kaminov, a record performance in 2024. We delivered equal-estrone results in the first quarter of 2025 despite some out-of-stock challenges that we experienced during the quarter.

Anya Hamill: Next sales grew 18% to 11.7 million compared to 9.9 million in the prior year periods. This is the second quarter in a row where our wholesale channel led the company's growth.

Anya Hamill: Increased by 35% over here and accounting for 47% of our total net sales.

Anya Hamill: This growth was driven by distribution expansion in glossary and velocity acceleration at shelf in both retail and club.

Anya Hamill: Ecommerce sales increased by 6% over year and contributed 53% of total net sales, with continued significant improvements in media efficiency in this channel.

Anya Hamill: The gross was driven by strong sales on Amazon, built in on our sales momentum over the previous four quarters, and driven by outstanding commercial execution.

Anya Hamill: Gross Margin for the fourth quarter came in at 41.9% compared to 40.0% in a corresponding prior year period.

Anya Hamill: A timing change in capitalization of inbound freight accounted for 3.3 points of gross margin in Q1 2025.

as Jason mentioned, even excluding that change.

Anya Hamill: Q-1 gross margin was 38.6 percent, which was flat sequentially to Q-4 2024.

Anya Hamill: Showing resiliency in our margins, despite inflationary increases in key commodity costs, such as coffee and coconut milk powder.

Anya Hamill: Our supply chain team continues to drive efficiencies by directly partnering with key role material suppliers and co-packing partners to find cost savings to offset right-and-commodities costs.

Anya Hamill: author and expenses were nearly flat in the first quarter compared to the same quarter last year as high as seven C's due to volume growth.

Anya Hamill: People related costs, such as stock-based compensation, which is a non-cash expense, or nearly offset by lower-general and administrative expenses and lower-marketing spend as we continue finding ways to improve media efficiencies and cut non-working spend.

Anya Hamill: Nat Loss for the quarter was 0.2 million compared to 1.0 million loss in the prior year period and adjusted EBITDA was positive 0.4 million compared to 0.8 million loss in the same quarter

Anya Hamill: This $1.2 million improvement in adjusted EBDA was driven by top line growth and margin expansion.

Anya Hamill: Now, turning to our balance sheet, we ended the quarter with $7.2 million in cash and no debt. This quarter, we invested in building our inventory safety stocks in order to minimize other stocks and capture future growth opportunities.

Anya Hamill: This initiative resulted in $1.3 million cash usage in the quarter, compared to $0.4 million of cash used in operating activities in the same period last year. We believe that now our inventory is appropriately sized.

Anya Hamill: to allow supply chain flexibility required to meet expectations of increased demand during the

Anya Hamill: We continue to project that we have sufficient cash to fund our operations as we grow our business and make operating improvements that drive us towards break even and profitability.

Anya Hamill: We also have an effort back line of credit available for our use. Should we need it?

Anya Hamill: We exited Q1 with a strong momentum in our core categories, health inventory levels, exciting innovation and confidence in our team and our brand.

Anya Hamill: We are excited about our ability to continue to deliver strong performance. Therefore, we are reaffirming our full-year guidance.

Anya Hamill: We expect net sales to be between $52 and $54 million, which represents 20-25% growth versus prior year, and we still expect growth margins to hold in upper 30s.

Anya Hamill: despite rising commodities costs and care of pressures. As previously shared, we will target to manage our adjusted EBITDA to be given on a full year piece.

Anya Hamill: and Blurian Vest in Easter Plus to fuel our top line growth. We expect full-year upper and cash flow to be in a range of 1 to 2 million negative driven by an incremental investment in inventory to support top line growth and minimize other stocks.

Jason Vieth: and with that, I will turn the discussion back over to Jason for any closing remarks.

Jason Vieth: Thank you, Anya, and thank you to everyone for joining us today. Laird Superfood continues to carve out a unique position in the food and beverage markets, with our portfolio of minimally processed products and clean ingredients.

Jason Vieth: Our 18% sales growth in Q1 outpaces many of our peers, and speaks to the demand for our healthy functional foods. And our dual channel success, thriving in both retail and e-commerce, gives us a versatility that sets us apart in today's retail environment.

Jason Vieth: The past few years have been transformative for Laird Superfood and yet we still believe that we're just getting started. I'm incredibly proud of our team's execution and excited about our continued growth as we build on this momentum.

Speaker Change: Operator, this concludes our prepared remarks and we're now ready to get open to and call the questions.

Speaker Change: If you would like to ask a question, please press star followed by one on your telephone keypad. If for any reason or like to remove that question, please press star followed by two.

Speaker Change: First questions from the line of J.P. Wolham with Rothkaff, it will partner and see all of that open.

J.P. Wollum: Hi, Anya. Hi, Jason. I appreciate you guys taking my questions tonight.

Speaker Change: So, I know you touched on it a little bit, but just to kind of keep beating the dead horse with Paris, if we could just maybe dive in a little bit deeper. The statement that you made, Jason.

Speaker Change: I just want to clarify, is that based on sort of the pause kind of call it 10% rates or is that regarding, you know, the original liberation day?

Speaker Change: Great, and just to follow it would be, as you think about managing tariffs and wherever they may shake out, I guess, you know, how much is it potentially inhibiting your ability to increase trade spend, as you sort of think about managing to that high 30% gross margin?

George Kelly, Robert Burleson, Alex Fuhrman, Jason Vieth,

Thank you. Thank you.

J.P. Wollum: Hey JP, thanks for your question, I think it's fun everybody's minds to appreciate getting this one out there.

Speaker Change: Yeah, I'm really overstaying this. The 10% tariff that's on the right now is I don't want to say it's

Speaker Change: The, you know, that's the bigger tariff after the 90-day pause that we're going to affect.

Speaker Change: We'll have more impact, but we still feel we can manage that within our P&L, you know, there'll be a bit of a cross margin impact, but

Speaker Change: Be within the guidance that we've given you guys. Obviously there's a little bit of, you know, it's a little bit broad. We say upper 30s. We're still very confident that we can land the year in the upper 30s. Obviously tariffs, we take a bit more of an impact, but we can manage it through the rest of the panel such that we can still.

Speaker Change: Be at that adjusted gross margin, breakeven point that we had called out previously.

Speaker Change: You know, the reality is these tariffs, you know, they'll notice really where they are. We are absolutely watching them strategically planning around them, but we also put our blinders on to keep operating and executing the best that we can, going forward in the toward purchases.

Speaker Change: while they're less expensive. I think a lot of this, frankly, I think a lot of this is going to go away just not with them. So we're trying to be as long and inventory as we reasonably can be to get through that period and

Speaker Change: At the end of the day, if we'd hit with really big tariffs as we're originally announced and the entire industry is impacted.

Speaker Change: There will be nothing left to do to take price, and we'll take price, right?

Speaker Change: We're trying to hold the line on that. I mentioned previously that we felt we could manage it and that we think that by keeping our price sharp we can take volume, we can take share and we're seeing some of that playing out in the market already, we're seeing opportunities open up.

Speaker Change: that some of which have been executed, some of which we're working on right now, that we think can be really beneficial to our business as

Speaker Change: some of the commodity prices come back down and some of the tariffs ultimately are reduced to go away.

Speaker Change: We're optimistic that we're going to land in a better place. I think we have a team that is very, very adept at managing strategic.

Speaker Change: opportunities and issues that, you know, you have a team here that largely worked together for a number of years back in the opioid days and went through a lot of this type of scenario planning then. So we're actually embracing some of the change and feeling like we can be winners as it all plugs out.

Speaker Change: Perfect. That's very helpful color. I appreciate that. If we could switch over just to the wholesale strength.

Speaker Change: I was just hoping maybe you could provide a little bit more detail about specifically kind of the increasing velocities, you know, we're there a couple of things that were really driving that, a couple of skews where you really noticed those improved velocities and I think in the

Pressure Leaf, there's a comment maybe about it.

Speaker Change: Revenue being offset by promotional spend. So just if you could touch was there some kind of

Speaker Change: Large promotion that really helped that wholesale businesses quarter or was it kind of just some small tweaks, maybe pricing, maybe trials, anything that you can kind of share on the wholesale strength?

Speaker Change: Yeah, for sure. And I really appreciate that question, too, because there's an area I really want to spend a little bit more time on.

Speaker Change: So, also then really, as you know, a growth driver for us in the last couple of years, we're seeing some of the best acceleration.

Speaker Change: against that strategic lever for us. That is, you know, when we think about our growth for the future, it's really Amazon and wholesale. And we intended to be right around the 50-50 split.

Speaker Change: of wholesale and e-commerce sometime in 2025 and so we're right on from pace for that I think we're just a few points off of it right now.

We believe that wholesale is likely to outpaste.

Speaker Change: Online, as we go forward, because we've had some really great distribution gain instead of

Speaker Change: and achieved over the last year, and we're reaping the benefits of that.

Speaker Change: and then, you know, specifically to your question, we're also having really great velocity increase.

Speaker Change: that even when we're gaining distribution on products, what we're saying is velocity improvements on those products and other stores. That's very rare if it happens, and I think it really speaks to the trends that are filling our sales right now.

Speaker Change: So, you know, around overall health limits. So, what we're seeing specifically, J.D. at OSTAL is really strong growth in coffee.

in our powder coffee creamers.

For instance, latte products have done really well.

Speaker Change: and so that coffee solutions set in particular has been the driver. We are also saying nice growth on our mushrooms, we've had really strong growth recently on the bars again. So it's really that the whole portfolio has worked, but I'd call out more than anything I'd call up strength of those coffee solutions sets that I mentioned.

Speaker Change: It did cause with some problems in Q4 last year, as you know, we, you know, the strength of the growth is so strong.

Speaker Change: that ran us out of supply. And as I mentioned, we're through that. I'm kind of pleased to say that I don't believe we had any out of stocks on the token of milk products.

Speaker Change: across any of the channels right now. We're back in stock with our distributors.

Speaker Change: and wholesale and is almost great and our DTC products are back. So, I'll still like to want a really great position for the balance of the year there. Better supply or confidence in our, and we are confident our ability to deliver against that.

Speaker Change: and then specifically to your question about traits and really that comment was really around sleep.

Speaker Change: We had some prior period expenses that were submitted that just exceeded what we expected. So last year, in particular in that 2, 3, 2, 4 period where we were growing, what we found is some of our promotions worked even better than we had realized, probably helped to drive some of the sound stacks, but...

Speaker Change: In doing that, we put a lot more product into consumer cans and a really additional trial.

Speaker Change: and so I think that net, while it's always a little bit painful to over-send your trade budget a bit, you know, matching that back up to the strong growth we have last year, we feel really good that that was still very efficient spend and frankly is continuing to drive the momentum that we have in retail right now.

Speaker Change: Perfect. Really appreciate all that color. And if I could just slide one last woman, just since launching the large liquid creamer on shelf, any color you can provide on how velocities are doing there, or any kind of customer feedback.

Thanks.

Yeah. Yeah, great question. Customer feedback, I think generally is good. You know, we...

Speaker Change: It was a bit more choppy than we anticipated in part because the reset windows didn't line up. You know, the biggest accounts that we have, as I'm sure you know, are sprouts and whole foods on that liquid creamer, and then we have a handful of other really nice accounts with wagons and targets, etc., etc., they're all in different timings. So, we had to have two sets of inventory in both K&W to be able to...

and so on.

Speaker Change: So I tell you, they're great learnings and teams had out of that, that will help us in the future but it was more challenging and took longer than we anticipated and in fact we're still going through some of

Speaker Change: Those executions, I think natural grocers, are just now coming back online after a little bit of, you know, a little bit of staying out of stock through that transition for codes that makes up.

Speaker Change: and in a couple of other smaller retailers are in the same position.

Appointee Conversion.

Speaker Change: So it's still, you know, I don't think it's going to throw it at you. It's still early days, a couple of those that have transitioned.

Speaker Change: Like Sprouts, the trends in your earlier, I think are looking quite good. And so we have a lot of confidence that probably next quarter when we're fully through everything we can come back and give you guys a different port that says that liquid is. That's what we're talking about.

Speaker Change: Awesome. I really appreciate all the color. Thanks for the time.

with that. Thank you very much.

Speaker Change: Next question is from the line of Aiden Morgan Stern with Greenland Capital. You want to know? Okay.

Speaker Change: Hi. Thank you so much for taking my call. I just had a question about the marketplace and how it fits into your overall strategy. Is it dropship base? What kind of margining costs are involved and how do you make sure it doesn't distract from the core product innovation?

Speaker Change: I hate how you're doing. I'm going to have to ask you to clarify that. I'm not sure I'm following your question exactly. Can you give me a little more color?

Speaker Change: Yeah, that you announced in March this new marketplace where you're having promotions with other smaller health companies.

Speaker Change: Yeah, and so how does, are you buying that inventory in sign hours? They just drop shipping through your platform, what I've caused our association with this new thing.

Speaker Change: Hi, I got you Aiden. Aiden, thanks for the marketplace. Is something right? Is something at an

Speaker Change: We asked it. The marketplace is a component of our DTC platform that was now a couple of months ago. I would say another platform or another topic that's early days.

Speaker Change: Just to realize the intent of that is not, this is a non-strategic launch that we did to bring in Carter, kind of, Carter in a skill-yated lifestyle.

Speaker Change: Products that would allow the consumers to come to our DTC site that has a more robust shopping and living experience. Part of what we do with DTC is that

Speaker Change: We've gained contact from Laird and Gabby and other influencers who are sites in an exclusive manner to allow our consumers to get our consumers a reason to shop at that site.

Speaker Change: So where other DTC operators are finding, especially in the last couple of years, a lot of nutrition out of their site, and a hard time to bring nutrition again, we're finding is...

Speaker Change: with unique content, and now the supporting marketplace that we give consumers a reason to come and spend time at ultimately to shop and purchase on our site. So I think the way to think about that is just as another supportive marketing component.

Speaker Change: We just passed through a click with us, you over to one of our partners to make that purchase. It's just what we found is that our consumer is living a lifestyle, it's very healthy wellness, or yet, and sometimes she's healthy wellness seeking.

Speaker Change: and so providing various products that are related to that lifestyle on our market place. It's highly engaging and really is helping to drive our DTC traffic and retention as well.

Speaker Change: I got that. I really appreciate it. Thank you. And then just another question, the Palafate.

Speaker Change: The Palisade Fires. There hasn't been any mention, but I know a lot of the market is in the LA-California area, and I know you did. There was some donations. Is there any impact in Q1 that arrived from that?

Speaker Change: Yeah, a really good question. There's obviously a lot of displacement and we view over index in the Southern California consumer market.

Speaker Change: But we can't say that we can point to anything, Aiden, that we were negatively infected by.

Speaker Change: We did, as you say, we did provide support to first responders and subsequently followed up with.

Speaker Change: with products back to various firehouses and really did it, you know, not not seeking any attention, so despite the first most you've heard about it, but we thought it was a great opportunity, just thanks to those pillars of the community.

Speaker Change: and hopefully that built some goodwill, but we've not seen slide in sales. It's been noticeable enough for it to make it to my desk.

Speaker Change: Got it. Well, I really appreciate you taking the time to clarify and I'm excited to see what happens next.

Thank you. We appreciate it.

Thank you for your question.

Speaker Change: They're currently no further questions registered, so as a reminder, it is Star 1 on your telephone keypad.

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

Speaker Change: All right, well, thank you for that. You know, once again, we'll just, we'll share a big thank you to all of you for joining us. We always appreciate the opportunity.

Speaker Change: If you get out and talk a little bit about our results, in this case, we are pleased and proud of our fifth straight quarter of double-digit growth in a special environment like this with the uncertainty and the values to what the team is aiming to put together an execute. So we're excited for the rest of the day.