Thank you for standing by, and welcome to the Third Quarter 2021 Earnings Conference Call and Webcast for Laird Superfood, Inc. I would now like to turn the call over to Mr. Reed Anderson of ICR to begin. Thank you. Good afternoon, and welcome to Laird Superfood's Third Quarter 2021 Earnings Conference Call and Webcast. On today's call are Paul Hodge, Chief Executive Officer; Valerie Ells, Chief Financial Officer; and Scott McGuire, Chief Operating Officer. By now, everyone should have access to the company's third quarter earnings press release filed today after market close. This is available on the Investor Relations section of Laird Superfood's website at www.lairdsuperfood.com. Before we begin, please note that all the financial information presented on today's call is unaudited. And during the course of this call, management may make forward-looking statements within the meaning of the federal securities laws. These 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. Please refer to today's press release and other filings with the SEC for a detailed discussion of the risks that could cause actual results to differ materially from those expressed or implied in any forward-looking statements made today. And now I'd like to turn the call over to Paul Hodge, Chief Executive Officer of Laird Superfood.

Thank you, Reed. Aloha, everybody. It's a pleasure to be speaking with you in regards to our third quarter. I'll start with a brief summary of our overall positioning, key growth drivers and highlights from the quarter. Scott McGuire, our Chief Operating Officer; and Valerie Ells, our Chief Financial Officer, will follow with additional detail. And then we will open the call up for your questions. Laird Superfood is a mission-driven high-growth plant-based natural food manufacturer, positioned to be a leader among better-for-you brands in the $759 billion grocery industry. Our business is omnichannel but with a best-in-class native online platform. At Laird, we believe that better food leads to a better world because when people are healthier and feel good, they make better decisions. Our products provide the sustained energy, nutrition and hydration that we need to perform from sun up to sun down as part of our daily ritual. In addition to delivering great taste, our products are convenient, easy to use and affordable, incorporating sustainable and ethical practices through all phases of our supply chain from farm to fork. Total third quarter sales increased 45% to $10.9 million, led by the strength of our native digital platform, including continued growth for Picky. E-commerce net sales of $6.3 million were up 70% versus last year, an acceleration from the second quarter growth rate, with DTC increasing 108%. As a percent of the total, e-commerce accounts for 58% of revenue in the third quarter of 2021 compared to 50% a year ago, reflecting organic growth and the acquisition of Picky Bars in May. All the key metrics in our D2C business remain strong, including a 30% improvement in AOV compared to third quarter 2020. Moreover, our all-time first and second retention rate improved by 10% in the third quarter '21 versus third quarter '20. Recurring revenue based on repeat and subscription orders continues to represent over 2/3 of our D2C business. Wholesale increased 21% on a year-over-year basis to $4.4 million, reflecting strong gains in grocery, while club was flat as we cycled an equally strong quarter in Q3 of last year. Importantly, club was up sharply on a sequential basis, rising nearly 170% from Q2, reflecting the lumpiness of this business and our previous comments about strong momentum early in Q3. Door count continued to rise with an increase of around 11% versus last year. We also expanded shelf placement in existing doors, adding coffee SKUs in Safeway and HAV and seasonal creamers at Sprouts. Gross liquid sales increased 77% on a year-over-year basis and accounted for approximately 54% of the dollar increase in wholesale revenue. We continue to benefit from operational improvements around our refrigerated product, including a 53% reduction in DC spoils, while maintaining average fill rates in the 90%. Finally, our shelf-stable business delivered another solid quarter with sales, exclusive of our club business, up 11% compared to Q3 last year. Category growth remains broad-based with one exception related to timing of trial and club during last year's third quarter. Creamers increased 23% on a year-over-year basis on the strength and gains in refrigerant liquid creamers and growth in the club channel. Hydration beverage enhancing supplements increased to 28%, driven by new products, including Renew Rest and Recover, Prebiotic Daily Greens and Activate Immune. Coffee, Tea & Hot Chocolate was down 20% overall due to a large initial trial on club during last year's third quarter. However, our non-club business continued to exhibit healthy growth, mostly attributable to our new functional coffees and our functional hot cocoa. Finally, we had another solid contribution from our harvest snacks and other food items. Third quarter sales of $1.9 million in the snack category were up 39% from Q2, and we now have a new revenue from this category in the prior year period. Growth in harvest snacks was driven by our new baking mixes, additional gains of Picky and continued success in pili nuts. There are no additional updates on the expected timing of our shelf-stable liquid creamer launch. While we are making solid progress on reformulation efforts and expanding co-packer relationships, we are not anticipating any contribution from this new product in 2021. Regarding our search for a new CEO, we are well underway and honing in on final candidates. We are pleased by the caliber of potential candidates that have the specific CPG experience we are looking for to take LSF to the next level, who also live the values that drive and define our business. Let me wrap up my overview with a brief update on our ESG initiatives. On the ESG front, with explosive growth of our online business, we are still actively pursuing our carbon-neutral last mile initiatives with Eden projects. As we feel carbon neutrality is no longer a choice, the necessity in today's world is something we're committed to and constantly looking for solutions. We are also committed to our partnerships with Feeding America and ID.me, to both help solve the food and security issues in our own country as well as supporting our critical care frontline workers. ESG efforts are part of our DNA and something we are constantly working on internally as well as looking for good external opportunities where we can play a part. In summary, our third quarter results were consistent with our growth algorithm, which leverages product innovation and customer engagement across a powerful, unique omnichannel platform. We have an enormous growing total addressable market opportunity, and our brand is well positioned for significant growth and share gains for the foreseeable future. With that, I'll turn the call over to Scott to talk about operations.

Thanks, Paul. As I've shared during my first two quarters at Laird, the 4Ms are our approach: manufacture more ourselves, make it more efficiently, move it smarter and faster and my company. Summarizing the highlights here, we made more units in the previous quarter again, and we did it while installing and implementing new complementary technology to our existing lines and improve velocities and gave us 2x plus throughput on one of our largest selling SKUs and equally notable improvements to others. Our team didn't just work on making it more efficiently, we also made progress in moving it smarter. First, in our growing liquid business. In the last month of the quarter, we converted to a more efficient production cycle, doubled our DC drop sizes, and improved our revenue per pallet position, which is essential in this world of freight capacity constraints and fuel inflation. Secondly, and you may have seen the announcement we achieved occupancy in our new customer fulfillment center. This reduces third-party storage, puts inventory at our fingertips, allows for a new enhanced PIC process and most importantly, provides additional capability to serve our customers at the right cost. And in terms of my company, everyone thinking and executing like owners is the only way we've got so much accomplished. Given so many of our unique ingredients come from overseas, the question at the front of everyone's mind is what about input inflation and the congestion at the ports driven by supply chain balance and the trucking shortage? Largely, we bypass the most impacted ports. But most importantly, the inventory safety stock strategy we started implementing last year when COVID began has continued to pay dividends. That provided us inventory security and some edge against the most recent inflation. However, we're not sitting back and celebrating great decisions we made last year. Freight, labor and material cost pressures, our suppliers are facing are very real and are being addressed through our short- and long-term actions. Specifically, we are using a balanced approach that prioritizes productivity efforts, combined with strategic pricing efforts that help revenue and margins and provide very little impact, if any, to unit sales. Now let me turn the call over to Valerie Ells, our CFO.

Thanks, Scott. As Paul mentioned, we had a strong top line quarter with net sales of $10.9 million, a 45% increase over the comparable period last year. DTC was a leading contributor, up 108%, reflecting further improvement in key metrics, including AOV and retention. We were also pleased with the 21% growth in wholesale, given that the club business was essentially flat as we went up against an equally strong prior year quarter. Gross margin improved 600 basis points on a year-over-year basis to 29.4% and largely on and improving inventory costs, demonstrating efficiency improvements in our production and operation processes as well as continued improvements in refrigerated liquid creamer disposals, given our optimized logistics and shelf life and optimization of DTC parcel costs. These improvements were partially offset by elevated wholesale fulfillment-related costs. While we are very pleased with the strengthening gross margin this quarter and believe we will continue to drive efficiencies in our production processes, our future expectations have not materially changed as we expect to encounter prolonged headwinds from rising freight rates and other inflationary issues. Related to operating expenses, we've made notable progress improving relative expense levels during the quarter, reflecting ongoing efforts to control costs and drive scale-related efficiencies. Total operating expenses were $8.5 million or 78% of net sales during the third quarter. And when looking at the sequential trend, you'll see that the third quarter had the lowest expense ratio in the past four quarters and included significant improvement from the second quarter. Specifically, it required only $52,000 of incremental operating expense in the third quarter to drive a $1.7 million increase in net sales compared to the second quarter. This will continue to be an area of focus for us moving forward. After completing the predominant build-out required to support our business as a public company, we have now shifted to finding opportunities to maximize our efficiency and leverage while not sacrificing growth. We expect to continue to make progress here in the coming quarters, though similar to other areas of our business, not always in a perfectly linear manner. G&A expense was 39% of net sales in the third quarter versus 30% in the comparable period last year, largely prior to becoming a public company and 45% in the sequential quarter. Compared to Q3 of 2020, the majority of the increase in G&A continued to be attributable to public company factors. Noncash expenses made up 37% of the increase, including stock-based compensation and amortization of intangibles. Insurance costs, professional fees and personnel costs were also factors to the pressured G&A in the third quarter. Sales and marketing expense was 37% of net sales in the third quarter versus 38% a year ago and 43% in the sequential quarter. The improvement from the year ago quarter stemmed from a combination of several factors as lower expense levels for stock-based compensation and personnel costs were partially offset by relative increases in advertising and marketing spend. Our balance sheet remains strong with nearly $40 million of cash and investments and essentially no debt. And as noted, we remain very focused on maximizing the leverage across our business to continue driving forward toward profitability while maintaining strong growth rates. Paul, I will pass it back to you.

Thanks, everybody, for your time today. As you can see from our latest results, Laird Superfood remains on track to become a leading player in the natural food and beverage industry as we continue leveraging our powerful omnichannel platform. Thanks for your support, and we are now ready to take your questions. Operator?

First question comes from the line of Bobby Burleson from Canaccord.

So I guess, can you hear me?

Yes, yes.

Okay. So just curious on the outlook for the balance of the year versus what you guys said last quarter. I didn't see anything in the prepared remarks. It doesn't necessarily mean anything that I missed. What that is? Has anything changed?

So nothing's changed. We will be providing guidance for 2022 on our year-end reporting cycle likely in early March. But at this point, I still feel like we are on track for our annual targets.

Okay. Great. And with club stores, anything happening there in terms of Q4? There was a noted downtick there, obviously, in Q3 versus last year. Curious if there's some acceleration ahead of the holiday season? Or what's happening there?

Q3 was nearly the same as Q3 of last year, which was a very strong quarter for the club. It showed over 100 percent growth compared to Q2, reflecting significant improvement. However, that's typical for the club business, which tends to have unpredictable patterns. There may be some seasonal increases in better-for-you products from Costco toward the end of the year that could carry into Q1. The business experiences ups and downs. We maintain a solid partnership with Costco, which is a valuable channel for customer acquisition and factory fill. We've been working with our Superfood creamer SKU for a couple of years and are now looking to introduce additional SKUs to broaden our offering with them for next year. We're enthusiastic about the business despite its fluctuations.

Okay. So I mean you guys delivered nice club sales again, I guess, versus a tough compare last year, the takeaway for Q3.

Yes, yes.

Okay. And then just in terms of aseptic co-manufacturing or co-packing support, have you guys been able to find alternatives? How is that process going? How tight is the capacity out there from third parties as you look out to 2022?

Yes, the issues in the aseptic co-packing industry remain the same; there is significant demand but limited capacity. We have been working diligently to expand our relationships with multiple co-packers. We adjusted our formula slightly to simplify production while maintaining our strict guidelines for clean labeling and functional ingredients, which is unique in this industry. We have made considerable progress, although we do not expect any revenue from this in 2021, so we are focused on 2022. At this time, we do not have a specific date, but we are making strides in securing suppliers and advancing our formula.

Okay. Great. And Val, you made a comment about gross margin where it sounds like maybe there's definitely some headwinds on freight costs there. But if your overall targets for this year are so intact, should we expect some gross margin lift, given some of the other positives that are happening there?

Well, we definitely had a strong 3Q, and we're happy with where that shook out. And Scott and his team there are making great progress. We do believe in the future, there's going to be room for even further efficiency gains, more leverage in the factory as for that labor and overhead base. But the inflationary pressures are real. We've been lucky enough to defer some of those, but they're going to be real for our business as well. So we want to just make sure that we're being realistic with expectations and not putting the bar to something unachievable or unrealistic moving forward. But again, still very confident in those targets we did set in the last call of Q2.

And that's obviously revenue and gross margin targets. So...

Yes. That's correct.

Next on the queue is Alex Fuhrman from Craig-Hallum Capital.

So I know that you mentioned that the wholesale business has perhaps benefited in the quarter just from the timing of some orders. But this was a pretty huge quarter for your wholesale segment. And I'm just curious if there's any particular items or retailers that have really been driving that growth recently?

I believe that if we consider Costco in the wholesale number, we had a very strong quarter with them. The wholesale business has shown steady and consistent growth. We haven't lost any major retail customers, and while we're adding more, it's not quite at the pace we hoped for this year due to some COVID-related issues and category resets being delayed until next year. Nevertheless, we're still making solid progress in the wholesale business and acquiring new customers. The performance of these customers with our products has been strong, and overall, it's a great business. Additionally, Q3 saw a boost from the variability in Costco's business, where we did significant sales. We value our relationship with Costco, but it does create fluctuations from quarter to quarter, which can affect our numbers. To address this, we plan to stabilize by expanding some of our SKUs with Costco to reduce that variability in different regions next year.

That's great. And then just thinking about your product assortment, you've launched a lot of new products online lately and, of course, made the acquisition of Picky Bars. Can you talk about who these new products are really targeted after? Are they mostly just your core existing LSF.com customers that have been trying some of these new products? Or any of them perhaps showing signs that they could have viable sales in the wholesale channel as well?

Yes, absolutely. So as a reminder, our business model, what we love about it is we get to take these products online, which cost us very little to launch and test them with a really hard-core customer base, which is rapidly growing still from quarter to quarter to quarter is just getting bigger and bigger. And so what we're really doing is filling out what we call part of our daily ritual. So it's a system from morning to night, different products that people can utilize through the day. And what that's done for the online business is driven up things like average order value. So people are adding more different items into their cart. Subscriptions, it also is just an exciting thing for consumers to come back to the site as they see new products to try the trial aspect. And also new customer acquisition, as we launch some of these different new products, we're sometimes grabbing new different customers online that haven't tried our other products, bringing them into the fold. And as they try those products and like it, then they'll start to try their products. But that doesn't necessarily mean all those products are going to wholesale. What we like to do is test it for 6 to 12 months kind of minimum to kind of really get a sense of how strong the product is. If there's any indications from that direct consumer communication, which is another benefit of that online business to see if maybe we need some packaging tweaks, if we need to do any flavor tweaks or anything like that. And then we will take those top-performing products and push them into the wholesale channels. But the wholesale channels require a bigger effort and bigger launch. And so far, we've just really been focused because we've got a lot of runway left with our creamers and our functional copies of products that we're driving on both the liquid and the shelf-stable front. So we're just very cautious to not dilute those efforts and especially being that the wholesale business is a much longer cycle to sell into and it's more expensive. We've got free fills and brokers and distributors and a lot of people to deal with. So we will take those blockbuster products, but we're not rushing into that. We're making sure that those products are true winners. And the place to test it's online, and we had a great couple of quarters of getting some great products, and we're getting great feedback right now.

Next one on our queue is George Kelly from ROTH Capital Partners.

Paul, can you hear me?

Yes, we can hear you, George.

Gosh, I got through my first question, and I was on mute the whole time. I'll start over. So a question for you on the creamer business. Congrats on the sequential improvement there that you saw over the second quarter, a big jump. I was curious if you could break down that segment between liquid and shelf-stable. And then part 2 of the question is, can you give us an update on the liquid business and expectations for the next few quarters?

Yes. I can take that.

Sure. Yes.

In the creamer business, approximately $1 million was attributed to refrigerated liquid. The majority of the remainder is from our shelf-stable business. This quarter, our Costco business was primarily our shelf-stable powder creamer, which contributed to a nice increase. Excluding both segments, the underlying shelf-stable powdered creamer business also saw a solid sequential rise, with growth just below 10% compared to Q2.

Okay. That's great. And then what about the plans around the liquid business for the next couple of quarters? Any kind of update just around some of the changes that have been happening there?

Yes, yes. I mean, really, there's a lot of great news with our refrigerated liquid creamer. We've got our shelf life about to 60 days now, and that was a big factor limiting some of the door growth earlier in the year as many retailers just want to see a little bit longer shelf life, that sort of 68 minimum that we've now achieved. And then also, our shelf fill rates are much higher. They are from the 60% to 90%. And then also the waste numbers, which were big, big numbers, 6, 9 months ago are back down to single digits. So along the sort of industry average numbers. So we made some incredible, I guess, strides on that product. And continuously, we're seeing really strong shelf loss season in the areas that we're selling the product. Whole Foods is a big customer doing really well, and we're now expanding some flavors. So we've got some new sort of, I guess, a little bit more mainstream flavors that we're pulling into the mix that kind of appeal to a broader audience, popular flavors that we know. But it, of course, still has that unique sort of true clean label, fresh packaging and also the functional ingredients. So the liquid business is great on the refrigerated side, and that's where the bulk of the volume is in the store when you're talking refrigerated versus shelf-stable. And then on the same front, we're working on a shelf-stable liquid product to really focus on opening a lot of those doors in the conventional channels and have an opportunity to do well, sell on Amazon and other online venues with that product as well. And we're just still working with various different co-packers or formulas to dial in the product and get on schedule, hopefully sometime in 2022.

Okay. Great. That's helpful. And then separately, Picky Bars, a question for you on distribution. So is it entirely e-commerce? And are there plans to broaden distribution of those products?

The majority of our business has been through e-commerce. We are in the integration phase, which is proceeding smoothly as we work on rebranding our packaging. Next year, we plan to make a significant push with Picky in the wholesale market, as we have some interested customers. We are making minor adjustments to our wholesale product, but the main focus is to ensure the rebranding is complete with the Laird Superfood brand before entering those wholesale channels, which will happen soon. Meanwhile, the internal integration is going well, and we have been meeting or exceeding our expectations with the product. We started selling the entire Picky catalog on our website last month, October, and we expect the rebranding to be completed in Q1 so that all products will be branded Laird Superfood. On a positive note, even with the brand change, we are seeing growth in subscriptions for Picky, which is encouraging and something we did not anticipate. Overall, we are optimistic about demonstrating to the market our ability to execute M&A deals like this and enhance shareholder value in the future.

That's great, that's great. And last question for me is just around new products. So as you look to next year, are there certain categories of your portfolio of products where you think there's maybe the most exciting opportunities to launch new stuff? Like where are you most focused for new products?

We plan to slow down the introduction of new products next year and concentrate on our existing offerings. Our catalog is quite extensive, and we are witnessing early signs of exceptional products that deserve more attention. Sometimes, enhancing current products is simpler than launching new ones. We're particularly enthusiastic about the snack category and baking mixes, which have been performing well. Additionally, our primary focus will remain on the creamer and coffee business, which still holds significant potential. While we will have some new launches, they will mainly complement the categories we are already involved in next year.

And there are no further questions in our queue. I will now turn the call over back to the presenters.

Yes. Thank you, everybody, for listening in and for your support in helping Laird Superfood achieve its goals and making the world a better place through nutrition, health and wellness. As saying, we believe better food leads to happier and healthier people and ultimately, a better world. So thanks again, and aloha.

This concludes today's conference call. Thank you for participating. You may now disconnect.