Good afternoon, and thank you for joining the Laird Superfood First Quarter 2024 Financial Results. My name is Kate, and I will be the moderator for today's call. I would now like to turn the call over to Trevor Rousseau. You may proceed, Trevor.

Thank you, and good afternoon. Welcome to Laird Superfood's first quarter 2024 earnings conference call and webcast. On today's call are Jason Vieth, Laird Superfood's President and Chief Executive Officer; and Anya Hamill, our Chief Financial Officer. By now, everyone should have access to the company's first quarter earnings release filed today after market close. It is available on the Investor Relations section of Laird Superfood's website at www.lairdsuperfood.com. Before we begin, please note that during the course of this call, management may make forward-looking statements within the context of federal securities laws. 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 these risks and uncertainties. With that, I'll turn the call over to Jason.

Thanks, Trevor. Good afternoon and another big thank you to everyone who has joined us again. Today, I am excited to share that the Laird Superfood turnaround story has officially become a growth story once again. During the first quarter, we grew the net sales of our business by an impressive 22% versus the same period one year ago. Our sales growth during this period was led by our e-commerce segment, which grew 33% year-over-year despite another sizable decrease in marketing spend across those periods. Amazon led the way this quarter with an astounding 48% growth rate driven by our continued improvement in product availability, marketing effectiveness, and inventory management. We have continued to hone our execution, driving out unauthorized resellers of our products and winning the buy box to ensure that our brand sales on the Amazon platform are being filled by our Laird Superfood team. Perhaps the biggest surprise to direct-to-consumer industry observers will be our impressive 25% growth in our own DTC business, where we continue to demonstrate our ability to convert viewers into buyers, buyers into repeat buyers and repeat buyers into subscribers. Approximately half of our DTC business is now made up of subscription sales. Over the past months, our team has focused on creating a website and email platform where we can share health and wellness, nutrition, and lifestyle tips and stories with our consumer base, thereby giving them a reason to continually interact with our branded website. By continuing to leverage Laird Hamilton and his wife Gabby Reece, we have been able to create highly relevant, authentic, and original content that provides a competitive advantage for our brand. Further, our customer service and Net Promoter Scores remain best-in-class, and our consumers clearly recognize and appreciate the care with which we handle their orders from their website interaction to arrival at their door. On the wholesale side of our business, we grew net sales by 10% year-over-year during Q1, which is even more impressive since it was done without the benefit of a price increase during the last 12 months. Even more encouraging is that retail scanner sales for our Laird Superfood brand were up significantly more than our net sales during this quarter, reported as plus 30% across U.S. food for the 12-week period ending March 2024. Given the growth rate discrepancy between retailer scanner data and our internal sales, there was clearly a deloading of inventory across our two large distribution partners. So, we expect to see continued strength in this channel of business as we move forward. Within wholesale, our business grew during Q1 across all our measured categories in terms of both units and dollars led by our coffee and instant latte products, which now combined to be our largest category at retail. Our club business also remains extremely healthy, and we continue to see growth in our sales velocities behind our improved product following last year's quality event. On the operations side, our team continues to demonstrate strong results driven by supply chain execution across procurement, production, and distribution, as well as favorability in our trade spend. Our gross margin was 40% during Q1, which was several points ahead of our own internal projections despite a planned write-down in the value of our coconut milk powder. That planned write-down was actually a positive result for us as it was driven by the recognition that we are now able to procure our largest commodity ingredient at a significantly better rate than we had previously been able to. With our supply chain team executing at a high level, we have been able to effectively offset various cost increases and at this point, expect to be able to do so throughout 2024. As we shared previously, the first quarter is a strategic investment quarter for us, as the marketing activities that we fund early in the year are able to be leveraged during subsequent quarters. That said, we were able to once again reduce our year-over-year marketing expense during Q1 behind better execution and more efficient activations. Our marketing expense for the quarter was just over 20% of net sales, which represents a dramatic decrease from prior years. As we move forward, our midterm goal is to continue to press this down into the low-teens and eventually into the high single digits. But with the opportunities in front of us and a return to solid brand growth in the first quarter, we are quite pleased with where this currently stands. In fact, we are very pleased with the first quarter results where we over executed our internal plan and are now on pace to exceed our stated goals for 2024. With this in mind, I think it's time to change the storyline on Laird Superfood from a turnaround project to a growth story, one in which we are growing our consumer base across our various sales channels and preparing ourselves for the next chapter of expansion. With that, I will now turn it over to Anya to discuss our first quarter 2024 results in more detail.

Thank you, Jason, and welcome, everyone. Our team's work over the last 18 months has transformed our financial foundation and positioned our business for growth. I am pleased to share with you that our first quarter results have exceeded our operating plan on every key metric. Net sales grew 22% to $9.9 million in the first quarter of 2024 compared to $9.2 million in the prior year period and were up by $700,000 sequentially versus the fourth quarter of 2023. As Jason indicated, both the e-commerce and wholesale channels contributed to Q1 growth. E-commerce sales increased by 33% year-over-year and accounted for 59% of our total net sales, with our Amazon and DTC platforms delivering impressive growth of 48% and 25%, respectively. Amazon sales growth was fueled by tremendous execution on the platform, where our team was able to improve our inventory positions, increase our buy box win percentage, and drive efficient media spend. Q1 growth in our DTC platform was driven by a steady increase in subscribers and repeat orders, higher order value, and lower discount rates due to a strategic shift in promotional spend. Wholesale net sales increased by 10% year-over-year and contributed 41% of total net sales, reflecting continued growth in club, velocity improvements, and distribution expansion in grocery, as well as more efficient promotional spend. Gross margin was 40% in the first quarter, which is a 17-point improvement on a year-over-year basis and was driven by the continued benefit of transitioning to a third-party co-manufacturing and distribution model and lapping expenses related to the product quality event in the first quarter of last year. This is the second quarter in a row of gross margin of at least 40%, which supports our expectation for sustainably achieving gross margins in or above the upper 30s in the coming quarters. Operating expense decreased $1.1 million in the first quarter compared to the same period last year. This reduction was primarily driven by lower people costs, lower marketing, and a broad strategic reduction in spend. Net loss for the first quarter was $1.0 million, which is 75% better versus the prior year period, driven by higher net sales and expanded gross margin, as well as continued discipline around G&A spending. Versus the fourth quarter of 2023, our Q1 net loss was $1.2 million higher due to stepped-up planned marketing investments and timing of G&A spend. Now, turning to the balance sheet. We ended the quarter with $7.3 million of cash and no debt as we continue to conservatively manage our balance sheet. Our cash burn in Q1 was $400,000, which is obviously significantly better than our historical burn rate but higher than the last quarter due to stepped-up marketing investment and payout of our company bonus, which have been fully expensed during 2023. Our cash consumption rate is steadily improving due to our continued discipline in managing operating expenses and working capital, including significant reductions in inventory. In the first quarter, inventory was reduced by $700,000 or 11% compared to the year-end of 2023, while also supporting 22% revenue growth. We just entered into a credit facility agreement that allows us to access up to $2 million in cash as backed by the sale of our accounts receivables. This will create an additional liquidity source should we choose to utilize it. We continue to project that we have enough cash to fund our operations into at least 2026 as we continue to grow our business and make operating improvements that drive us towards breakeven and profitability. Overall, these results strengthen our confidence that the strategic initiatives our team has been implementing during the last 18 months are achieving our intended results. At this point, we are increasing the upper end of our guidance for full-year 2024. We now expect net sales of $38 million to $42 million, which represents 11 to 22 points growth versus the prior year. And we are now projecting gross margin of 38% to 41%, representing a 7 to 11 point improvement versus 2023. And now, I will turn the discussion back over to Jason for any closing remarks.

Thank you, Anya, and thank you to everyone who has been listening to and supporting us during the past two years. I hope you'll agree that we've made good on the expectations that we outlined during those quarters. And while it's been extremely satisfying for our LSF team to achieve these results so far, we are even more excited and motivated for what is yet to come. This concludes our prepared remarks. Operator, we are now ready to open the call to questions.

The first question comes from the line of Bobby Burleson with Canaccord Genuity.

Congratulations. It sounds like things are definitely shifting to this growth phase. And, I guess, my first question is just trying to understand this Ozempic kind of dynamic food is medicine and food is health and whether or not there's a bigger role for Laird to play within that growth story.

Thank you for joining the call today. Regarding the Ozempic trend that's currently popular, it hasn't had a significant impact on us. The consumers who turn to us truly believe in the concept of food as medicine. While it's a smaller niche compared to mainstream trends, we still see it as a substantial and expanding market. Our focus remains on consumers who prioritize what they put into their bodies as a determinant of their health, rather than those looking for quick fixes. We keep an eye on the developments in the market, but we are somewhat detached from them in terms of our food offerings, as our customers and our competitors approach health from a different perspective.

Yes. Fair enough. I guess, I probably asked the question in too narrow of a sense. I think what I was getting at was, is there a greater awareness on the part of consumers as a result of a lot of the things we're starting to see within CPG, where there's maybe a food is medicine dynamic where people are paying attention to ingredients, and you guys have kind of a vanguard there, where maybe you're not fixing mistakes people are making, but you can promote health outcomes to a greater degree to a more receptive audience because of these trends driving greater awareness in that connection.

Yes, Bobby, I appreciate your perspective. This is a fantastic question, and I could honestly talk about it for hours. However, I won't be as eloquent as Laird or Gabby, who have been leaders in this field for a long time. It's quite fascinating. Let me share an analogy. I transitioned from the food industry, specifically from WhiteWave Foods, which has been influential in changing how people eat for the better. When I arrived, I didn't fully grasp Laird Superfood and the limitations we face. Initially, I thought we could enhance our food's taste by using natural flavors. However, this was a misguided approach, as our food actually tastes as it should, and natural flavors are often not genuinely natural. This is one of the many overlooked issues in the food industry, especially among larger corporations and the unhealthy substances they have incorporated over decades. You're touching on an important topic for me. For instance, while natural flavors come from real products, they are usually chemically extracted, leaving behind residues that end up in the food. You might extract a tomato flavor, but because of the chemicals involved in the extraction, it carries a chemical residue. As Laird Hamilton reminded me during our early discussions, when small amounts of these chemicals are consumed daily over the years, they can lead to health problems. There’s a growing awareness surrounding natural flavors and other ingredients that consumers find perplexing. We are actively addressing this in our marketing. For example, our Greens products emphasize that we are selling food, not supplements. When you check the ingredient list, you can see that it starts with real fruits and vegetables, unlike some competitors. We're approaching this marketing with care, as people might not appreciate being lectured about their diets. However, we have noticed that more individuals are open to this dialogue and are increasingly researching their food choices. Influencers like Joe Rogan, as well as neuroscientists and nutritionists, are becoming vocal about these issues. I believe we are just at the start of a significant change in this area. Your question highlights an important shift in consumer awareness regarding the negative impacts of their food choices and the hidden truths in the food industry that they are beginning to recognize.

That's fantastic. I just wanted to ask a quick follow-up on wholesale. Obviously, you guys have a lot of momentum in e-commerce and Amazon has picked up in a big way. At what point do we see kind of the growth baton maybe get handed to conventional if they have a conventional grocery channel? I know you're doing some work there on expanding distribution and maybe growing your shelf space there, but curious like when you see a potential inflection in that particular channel.

That's a great follow-up question. The way we're approaching this strategically is to consider conventional as sort of our final destination because it's expensive to operate in. We need quick returns, and there is significant competition, along with margin challenges for smaller companies. We have gradually entered that space over the past couple of years. The natural channel has been very favorable for us, as consumers quickly recognize us and seek us out with the attributes we offer. What you're observing is substantial growth on Amazon, and our direct-to-consumer segment has posted a few strong quarters, really turning a corner with the initiatives we've launched. The natural channel continues to perform exceptionally well and is expanding rapidly. We understand there's a significant opportunity in the conventional market. However, I would estimate we're still about a year away from being fully prepared to engage there, or at least to increase our efforts significantly, because we want consumers to catch up to the trend you mentioned in your previous question. We aim to help more mainstream consumers adopt the "food as medicine" mindset you referenced. So, I would say we're still a year away from making significant progress in that particular channel.

The next question comes from the line of George Kelly with ROTH Capital Partners.

Congrats on another really nice quarter. So maybe if we could start, I'm still a little confused on Amazon. I was curious if you could just maybe expand a bit on what's been driving growth there? And has inventory fill been a component of that really rapid growth that you just reported in 1Q?

Yes, thank you for the question, George. It's great to hear from you. We are very enthusiastic about Amazon and anticipated strong growth there, although our initial plan projected growth at about half the current rate. We recognized an opportunity in the first half of the year compared to the quality event we experienced last year, which required us to pull inventory. As you know, we discussed that before, so I won't elaborate too much, but we had to reduce our inventory due to slow sales of our creamer products. We anticipated better performance this year, and we've exceeded our expectations on the platform this quarter. We observed robust growth across various segments, not just in creamer products, but also in coffee, performance mushrooms, Greens, and bars; everything is performing well on Amazon right now. Several factors contributed to this success. One key factor is that we managed to restore our inventory just as you asked. I believe our team has excelled in reselling and managing inventory, especially given the increasing demand and the slight delay in restocking their micro distribution centers. They have successfully regained the buy box for our products, which is a constant challenge due to resellers. It’s like a game of whack-a-mole; as we address one reseller, another can emerge offering our products at a discount after purchasing them on sale at a local grocery store. We are effectively managing this issue, and we even hired an agency to assist us. Overall, we've been executing well operationally in this channel. Additionally, we've invested in advertising and have achieved impressive returns from our campaigns and search efforts. Our commercial and operational execution in this area has been outstanding over the last quarter.

That's helpful. I wanted to ask about the significant growth in your hydration business year-over-year. I believe this might be driven by the Greens product, but correct me if I'm mistaken. If that’s true, I’m curious about your strategy to keep pushing it forward. What are your plans for continuing the growth of that product, and how do you intend to expand it further? Any insights would be appreciated.

Yes. Your intuition is exactly right, George. It is largely the Greens product that has been providing that growth. I would say the Greens and the Reds, we launched a sister product to our Greens, called the Daily Reds, which is a kind of a heart health ancillary product. Like the Greens, both of those are made exclusively from fruits and vegetables. They are the cleanest products on the market. We're marketing them as such. What we're finding is that there has been a significant market that's been created in the country for Daily Greens product. I'll just stay with that for a moment because that's the 95 to the 5 probably of the category, if not more. What we're finding is that based on our cost structure, we can have the best tasting, best efficacy product on the market at a lower cost than or lower price than some of our competitors. That's turning out to be a tremendous opportunity for us. I think we're just getting started in this space. We have some really strong marketing that's coming behind it and some really great activations that we're doing. What we're finding is that once consumers flip over to become subscribers on that product, they really stick with us on a daily basis that turns into a great long-term relationship with them.

And is that product sold exclusively online?

It's not. It's where we started. We launched, and I would say this is generally our launch pattern is to launch first on our own website, our Laird Superfood DTC website. We take all the learnings behind that and use that also as a way of offering those early exclusivities to consumers as a reward for shopping on our site. But then we broaden it from there. So we've launched it into Amazon. In fact, we have it out now in a number of retailers, growing number of retailers in the natural food space.

Okay. Great. And then last question for me. I'm just trying to sort of map out your year when it comes to getting to your annual revenue guidance and how that should look quarterly? Is there much seasonality? The business has been kind of influx for a little while now. And so, I'm just trying to map out like what's normal seasonality? Maybe there still isn't any kind of normal seasonality now that you're sort of back in growth mode. But any help on mapping out the year would be appreciated.

Yes. George, I will pass that question to Anya. She has been eager for someone to ask a question she can respond to. So I will give that to Anya.

Yes, there is some seasonality to our business. Fall brings pumpkin creamers, and the holiday season brings peppermint creamers, which are significant periods for us. Shipments for these products occur in advance, mainly in the third quarter, where we anticipate our seasonality to be most evident. Additionally, with events like Prime Day scheduled for the second half of the year, we expect increased seasonality as well.

The next question comes from the line of Alex Fuhrman with Craig-Hallum.

Congratulations on another really good quarter here. I wanted to ask about your promotions and discounts. I noticed for most of this year now, there has been substantially less discounting activity on your direct-to-consumer site. Really any sales you've done look like they've been pretty targeted either to specific items or very, very limited time type sales. So just wondering if you've had any meaningful customer churn as a result of this. Or if maybe some of your customers have been ordering less as these discounts have come down? Obviously, customers of yours aren't pulling back too much considering you're raising your revenue guidance for the year. But if you can just talk to us at all about how customer behavior may have changed as you've become a lot less promotional? And has it been a little bit harder to go out there and get new customers without these periodic sales?

Alex, it's great to hear from you, and that's a good question. We've been discussing this a lot lately because it's the outcome of a significant strategic change we've made on the direct-to-consumer side. When I joined a couple of years ago, our DTC site functioned mainly as a sales platform with numerous products but little content. Following the changes in iOS that impacted Facebook, we increased our promotional efforts to attract consumers. However, upon reviewing this, it became clear that we had shifted our brand downmarket. Over the past 18 months, we've been working on a strategic shift that is now visible. If you visit our DTC site or check our emails, you'll see we've developed an enhanced content strategy. We are focusing on providing news and stories related to health, wellness, fitness, nutrition, and lifestyle that we believe will be beneficial for our consumers. We incorporate content specific to Laird and Gabby along with other related links that we think will appeal to our audience. In conjunction with this, we've reduced our promotion levels and raised prices in the channel. However, we've maintained a valuable subscription benefit. As a result, we've seen a substantial increase in subscribers. I mentioned in the prerecord that we've successfully turned consumers into buyers, buyers into repeat customers, and repeat customers into subscribers. This process creates a positive cycle that promotes better health for our customers while allowing us to maintain their loyalty over time and encourage them to try more products. It's beneficial for both the consumer and us. Now, approximately 50% of our total DTC sales are subscriptions, all of which come at a discount. Our top promotion typically offers free shipping plus a 20% discount for subscribers. We hold a few significant events throughout the year, like Black Friday, but we keep these sales minimal to help preserve the premium brand image we aim to uphold.

Okay. That's really helpful. And then just one on the numbers here, your returns and discounts, as you report your sales by category. It looks like the lowest rate of returns and discounts you've had in about 1.5 years, kind of continuing on that trend moving in the right direction last quarter. Is there anything in particular that's really driven that improvement? And should we expect to see the improved results sustained throughout this year?

Yes. Alex, this is Anya. Thanks for the question. I'll take this one. Yes, so I'd say that was also the outcome of our strategic shift, and how we think about trade and promotional strategies. So DTC that you just talked about is certainly contributing to that trend, but also our wholesale business with retail and club business specifically, we have reinvented our promotional approach there to really try to cut out any inefficient trade and really focus on programs that directly impact consumers and drive our velocities at shelves. Yes. We expect this to continue throughout the rest of the year.

Thank you. At this time, there are no further questions. So I will turn the call back over for any final concluding remarks.

I just want to say thanks to all of you for once again joining us on the call. For us, this has gotten more and more exciting each quarter. This has clearly been a story that over the last six quarters has been a turnaround. It's nice to be coming through that and be able to indicate that we're on the cusp of really putting some big growth numbers against this business. In this quarter, I think it was the first to really bear that out, but it's still very much in line with the guidance that we had previously given. I feel like we're doing what we said we were aiming to do, and really excited to bring the next quarters in and continue that same story. So thanks, everybody, for joining.

That concludes today's call. Thank you all for your participation, and you may now disconnect your lines.