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. All lines will be muted during the presentation portion of the call with an opportunity for questions and answers at the end. If you would like to ask a question, please press star 1 on your telephone keypad. I'll now have to pass the conference over to our host, Trevor Russo, Head of Investor Trevor, please go ahead.

Thank you and good afternoon. Welcome to Laird Superfood's first quarter 2025 earnings conference call and webcast. On today's call are Jason Bieth, Layered Superfood's President and Chief Executive Officer, and Anya Hamill, our Chief Financial Officer. By now, everyone should have access to the company's earnings release, which was about the day after market close. It is available on the Investor Relations section of Layered Superfood's website at www.layeredsuperfood.com. Before we begin, please note that during 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 involve risks and uncertainties that could cause actual results to differ materially from those described. Please refer to today's press release and other filings of the SEC for a detailed discussion of these risks and uncertainties. With that, I'll turn the call over to Jason.

Thank you, Trevor. And hello, everyone. I'm delighted to share with you the results for Laird Superfoods' first quarter of 2025, which mark another strong period as a high-growth premium brand for robust margins and significant market potential. During Q1 2025, we achieved an 18% year-over-year increase in net sales to $11.7 million, up from $9.9 million in the same period last year. This marks our fifth consecutive quarter of double-digit sales growth, which is even more impressive in what has recently become an inflationary and uncertain economic environment. Our profitability metrics remain a highlight. In Q1 of 2025, we delivered 41.9% gross margin, a 1.9-point improvement versus Q1 of last year. This margin strength, despite significant commodity price pressures in ingredients such as coffee and coconut milk powder positions us well above the industry average for food companies. And our ability to sustain margins in the high 30 to low 40% while driving nearly 20% sales growth underscores the resilience and exceptional execution of our omnichannel business model, driven by strategic sourcing, a variable cost manufacturing approach and discipline trade spend management 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 our e-commerce channel grew by six percent during q1 led by our performance on amazon which delivered strong performance driven by improved inventory management and targeted marketing execution that drove platform demand for our layered superfood products. In 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 the brand. 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. This growth was driven by distribution gains in grocery and club stores, including key partners across both natural and conventional groceries, coupled with improved dollar sales velocity at existing accounts. Our efficient promotional strategies and strong consumer demand for our products fueled this momentum. As we noted on our previous calls, we expected our Q1 sales growth would be tempered by out-of-stock issues with our creamer and instant latte products, stemming from unexpectedly high demand during Q4 2024. Indeed, we did feel that impact, yet 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 milk products, which we expect will allow us to drive accelerated growth on these products in the second half of 2025. Focusing on our supply chain, Q1 was another testament to the agility that we have built in this function. Despite persistent commodity de-inflation in coffee, cacao, and coconut milk powder, we were largely able to mitigate these cost impacts through strong supplier relationships and operational efficiencies, and by beginning to make moves that will mitigate the impact of tariffs on our business. Our 41.9% gross margin in Q1 includes a 3.3-point benefit from a timing change in capitalization of inbound freight, but even without this our margin resilience is notable 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 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 normalized. Speaking of tariffs, let's address the elephant in your room. As you'd expect, much of our raw materials, such as our coconut products and our coffee, are imported from farms overseas. While 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. Should significant additional tariffs be levied on our ingredients, we would likely need to take price to accommodate that impact. Before I hand it 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 in Q1 2024. We also achieved a positive adjusted EBITDA of $0.4 million compared to a negative of $0.8 million in the prior year. This result demonstrates the operating leverage we're unlocking as we scale our business, reinforcing our path towards sustainable profitability. And our balance 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. Now, let me turn it over to Anya to dive into the financial details for the quarter.

Thank you, Jason, and good afternoon, everyone. I will now provide you with some additional details on the first quarter of 2025 financial results and our outlook for the full year. Coming off a record performance in 2024, we delivered equally strong results in the first quarter of 2025, despite some out-of-stock challenges that we experienced during the quarter. Net sales grew 18% to $11.7 million, compared to $9.9 million in the prior year period. This is the second quarter in a row where our wholesale channel led the company's growth, increasing by 35% year-over-year and accounting for 47% of our total net sales. This growth was driven by distribution expansion in grocery and velocity acceleration itself in both retail and club. E-commerce sales increased by 6% year-over-year and contributed 53% of total net sales, with continued significant improvements in media efficiency in this channel. The growth was driven by strong sales on Amazon, building on our sales momentum over the previous four quarters and driven by outstanding commercial execution. Gross margin for the fourth quarter came in at 41.9%, compared to 40.0% in a corresponding prior year period. 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, Q1 gross margin was 38.6%, which was flat sequentially to Q4 2024, showing resiliency in our margin, despite inflationary increases in key commodity costs, such as coffee and coconut milk powder. Our supply chain team continues to drive efficiencies by directly partnering with key raw material suppliers and co-packing partners to find cost savings to offset rising commodities costs. Operating expenses were nearly flat in the first quarter compared to the same quarter last year. As high as selling fees due to volume growth, people-related costs such as stock-based compensation, which is a non-cash expense, were 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. Net 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 prior year. This $1.2 million improvement in adjusted EBITDA was driven by top-line growth and margin expansion. 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 stock in order to minimize other stocks and capture future growth opportunities. 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 to allow supply chain flexibility required to meet expectations of increased demand during the balance of the year. 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. We also have an asset-backed line of credit available for our use, should we need it. We exited Q1 with a strong momentum in our core categories, health inventory levels, exciting innovation, and confidence in our team and our brand. We are excited about our ability to continue to deliver strong performance. Therefore, we are reaffirming our full-year guidance. We expect net sales to be between $52 and $54 million, which represents 20% to 25% growth versus prior year, and we still expect gross margins to hold in upper 30s, despite rising commodities costs and tariff pressures. As previously shared, we will target to manage our adjusted EBITDA to break-even on a full-year basis. and we'll reinvest any surplus to fuel our top-line growth. We expect full-year operating cash flow to be in the range of $1 million to $2 million negative, driven by an incremental investment in inventory to support top-line growth and minimize other stocks. And with that, I will turn the discussion back over to Jason for any closing remarks.

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. 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. 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. Despite current headwinds in our industry, as Anya indicated, we remain confident in our 2025 outlook and our ability to deliver long-term value for our shareholders. Operator, this concludes our prepared remarks, and we are now ready to open the call to questions.

If you would like to ask a question, please press star followed by one on your telephone keypad. If for any reason you would like to remove that question, please press star followed by two. Again, to ask a question, press star one. As a reminder, if you're using a speakerphone, please remember to pick up your handset before asking your question. We will pause here briefly as questions are registered. First question is from the line of JP Wollum with Roth Capital Partners. Your line's now open. Hi, Anya. Hi, Jason.

And I appreciate you guys taking my questions tonight.

So I know you touched on it a little bit, but just to kind of keep beating the dead horse with tariffs, if we could just maybe dive in a little bit deeper. The statement that you made, Jason, 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 rates? And just to follow up 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?

Hey, JP. Thanks for the question. I think it's on everybody's mind, so I appreciate you getting this one out there. Yeah, and really what we're saying is this. The 10 percent tariff that's on there right now is, I don't want to say it's de minimis, but we're able to handle that without a problem. The bigger tariff after the 90-day pause that we're going to affect will have more impact, but we still feel we can manage that within our P&L. There'll be a bit of a gross margin impact, But we have other levers, other spend levers that we can execute in order to accommodate that and still be within the guidance that we've given you guys. Obviously, there's a little bit of a, you know, it's a little bit broad when we say upper 30s. We're still very confident that we can land the year in the upper 30s. Obviously, tariffs would take a bit more of an impact, but we can manage it through the rest of the P&L such that we can still be at that adjusted gross margin break-even point that we had called out previously. So, you know, the reality is these tariffs, you know, no one knows really where they are. We are absolutely watching them, strategically planning around them, but we also put our blinders on and just keep operating and executing the best that we can, pulling forward inventory purchases while they're less expensive. I think a lot of this, frankly, I think a lot of this is going to go away. It's just not a win. So we're trying to be as long on inventory as we reasonably can be to get through that period. And at the end of the day, if we hit with really big tariffs, as were originally announced, and the entire industry is impacted, there'll be nothing left to do but take price, and we'll take price. But we're trying to hold the line on that. You know, I mentioned previously that we felt we could manage it. And 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 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 some of the commodity prices come back down and some of the tariffs ultimately are reduced or go away. So we're optimistic that we're going to land in a better place. I think we have a team that is very very adept um at managing strategic opportunities and issues uh that uh you know you have a team here that largely worked together for a number of years back in the weight wave days and went through a lot of this type of scenario planning then so uh we're actually um uh embracing some of the change and feeling like we can be winners uh as it all plays out perfect that is that's very helpful color i appreciate that um if we could kind of switch over just to the wholesale I was just hoping maybe you could provide a little bit more detail about specifically kind of the increasing velocities.

You know, were there a couple of things that were really driving that, a couple of SKUs where you really noticed those improved velocities? And I think in the press release, there was a comment maybe about revenue being offset by promotional spend. So just if you could touch, was there some kind of large promotion that really helped that wholesale business this 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?

Yeah, for sure. And I really appreciate that question, too, because it's an area I really wanted to spend a little bit more time on. So wholesale has been really, as you know, a growth driver for us in the last couple of years. We're seeing some of the best acceleration 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 of wholesale and e-com sometime in 2025. And so we're right on pace for that. I think we're just a few points off of it right now. and we believe that wholesale is likely to outpace online as we go forward because we've had some really great distribution gains that have been achieved over the last um over the last year and we're reaping the benefits of that and then you know specifically to your question we're also having really great uh velocity improvement even where we're gaining distribution on products what we're seeing is velocity improvements on those products and other stores that that's very rare if that happens and i think it really speaks to the trends uh that are filling uh our sales right now so you know around around just around overall health movements so uh so what we're seeing specifically jp at wholesale is really strong growth in coffee in our powder coffee creamers our instant latte products have done really well and so that coffee solution set in particular has been the driver we're also seeing nice growth on our mushrooms We've had really strong growth recently on the bars again. So it's really that the whole portfolio is working, but I'd call out more than anything, I'd call out the strength of that coffee solution set that I mentioned. It did cause us some problems in Q4 of last year, as you know, the growth was so strong that it ran us out of supply. And as I mentioned, we're through that. I'm pleased to say that I don't believe we have any out-of-stocks on the coconut milk products across any of the channels right now we're back in stock with our distributors in wholesale amazon looks great and our dtc products are back so i feel like we're in a really great position for the balance of the year there uh better supply arrangements and we are confident our ability to deliver against that this year and then specifically to your question about trades and you know really that comment was really around we we had some prior period expenses that were submitted that just exceeded what we expected. So last year, in particular, in that Q3, Q4 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 those out of stocks. But in doing that, we put a lot more product into consumer hands and really drove additional trial. And so I think that while it's always a little bit painful to overspend your trade budget a bit uh you know matching that back up to the strong growth we had last year we feel really good that that was still very efficient spend and frankly is uh is continuing to drive the momentum that we have in retail right now perfect really appreciate all that color and if i could just slide one last one in um just since launching the large liquid creamer on shelf any color you can provide on on how velocities are doing there or any kind of customer feedback thanks yeah um cut yeah great question uh customer feedback i think generally is is good you know it's it was a bit more choppy than we anticipated in part because the reset windows didn't line up uh 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 target etc uh they're all in different timing and so we had to have two sets of inventory in both ke and unify to be able to fulfill that so i tell you uh they're great learning some teams had out of that that'll help us in the future but uh but it was more challenging and took longer than we anticipated and in fact we're still going through some of uh those executions i think natural grocers is just now uh coming back online um after a little bit of about a um you know a little bit of staying out of stock through that transition where codes got mixed up um and and a couple of other smaller retailers are in the same position so i think what we're seeing is largely velocities coming in where we had planned you know we expected not to get a full one-to-one uh pickup out of the gates because you're not you know you're upsizing by 50 so there should be some volume or some unit attrition to the volume and we're coming in right about where we expected which i think we're modeled around a 0.8 conversion uh so it's still you know i keep saying it's days it is still early days a couple of those retailers those that have transitioned uh like sprouts uh that transitioned 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 good report that says that liquid is something good awesome i really appreciate all the color thanks for the time you bet you thank you next question is from the line of aiden Morgan Stern with Greenland Capital.

Your one has now open.

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 based? What kind of margin and costs are involved? And how do you make sure it doesn't distract from core product innovation?

Hey, Aiden, how are you 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 yeah that you announced in march this new marketplace where you're having promotions with um other smaller uh health uh companies yeah and so how does are you buying that inventory and selling it out or is it just drop shipping through uh through your platform what the costs are associated with this new thing i got you aiden yeah aiden thanks uh so the marketplace is something, right, is something, I didn't catch that piece when you asked it.

The marketplace is a component of our DTC platform that was announced a couple of months ago. Another, I would say another platform or another topic that's early days. Just realize the intent of that is not, this is a non-strategic launch that we did to bring in partner, kind of partner and affiliated lifestyle products that would allow the consumers to come to our DTC site to have a more robust shopping and living experience. Part of what we do with DTC is we bring content from Laird and Gabby and other influencers to our site in an exclusive manner to allow our consumers, give our consumers a reason to shop at that site. So where other DTC operators are finding, especially in the last couple of years a lot of attrition out of their sites and a hard time to bring consumers in we're finding is with unique content and now this supporting marketplace that we give consumers a reason to come in and spend time and ultimately to shop and purchase on our site so i think the way to think about that is just as another supportive marketing component uh we're not looking to make a lot of money out of that we're not looking to sell a lot of goods we don't drop ship any of it it is nothing but a pass through to you know if you if you buy for instance a red light therapy uh machine we just pass through a click we pass you over to one of our partners to make that purchase so um it's just what we found is that our consumer is living a lifestyle that is very health and wellness oriented and sometimes just health alone seeking and so providing uh various uh products uh that are related to that lifestyle on our marketplace is just highly engaging and um and really is helping to drive our DTC uh traffic and retention as well got that I really appreciate it thank you and then just another question the Palisade the Palisade fires uh there hasn't been any mention but I know a lot of a lot of the 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 arise from that?

Yeah, good question. There's obviously a lot of displacement and we do over-index in the Southern California consumer market. But we can't say that we can point to anything, Aiden, that we were negatively affected by. We did, as you say, we did provide support to first responders and subsequently followed up with product back to various firehouses and really did it, you know, not seeking any attention. So this is probably the first most of you have heard about it. But we saw it as a great opportunity to say thanks to those pillars of the community. And so hopefully that built some goodwill, but we've not seen a slide in sales that's been noticeable enough for it to make it to my desk.

Got it. Well, I really appreciate you taking the time to clarify, and I'm excited to see what happens next. Thanks, Ed. We appreciate it.

Thank you for your question. There are currently no further questions registered, so as a reminder, it is star one on your telephone keypad. There are no additional questions waiting at this time, so I'll pass the call back to the management team for any closing remarks.

All right. Well, thank you for that. You know, once again, we'll just share a big thank you to all of you for joining us. We always appreciate the opportunity to get out and talk a little bit about our results uh you know in this case we are pleased and proud of our fifth straight quarter of double-digit growth i think especially in an environment like this with the uncertainty uh it speaks volumes to what the team is able to put together and execute so we're excited for the rest of this year and look forward to talking to you all in another quarter that concludes the conference call thank you for your participation you may now disconnect your