Thank you for standing by and welcome to the First Quarter 2021 Earnings Conference Call and Webcast for Laird Superfood. 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 first 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 first quarter earnings press release filed today after market closed. 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, and aloha everybody. It's a pleasure to be speaking with you in regards to our first quarter 2021 earnings report. Let me again start by giving you a brief summary of who we are and what we do as well as provide a review of Q1 highlights and our key growth drivers. I'll then hand over to Scott McGuire, our COO, followed by Valerie Ells, our CFO leaving plenty of time for Q&A. 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 omni-channel, but with a best-in-class native online platform. In the first quarter, online accounted for 59% of our net sales with the balance spread across wholesale, grocery, mass, drug and foodservice accounts. At Laird, we believe better food leads to a better world because when people are healthier and feel good, they make better decisions. Our product provides sustained energy and nutrition migration that we need to perform from sun-up to sun-down as part of our daily ritual starting with our Superfood coffee and creamer and recently added whole food breakfast products. In addition to delivering great taste and great quality, 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. Now let me hit on some of the Q1 highlights. Improving margins were a key takeaway from Q1 results as our gross margin reached 25.1% a 480 basis point sequential increase from the fourth quarter. Margins benefited from several factors, including liquid improvements, strong shelf velocities, shipping and manufacturing efficiencies. Laird has a growth story and driving top-line is a primary focus. But we are equally committed to improving profitability. Results in the…

Thanks, Paul. You will hear me refer back to several topics I outlined in the fourth quarter earnings announcement, which highlighted areas of notable progress as well as priorities for the first quarter. As it should be during the pandemic, our top priorities remain keeping people safe, keeping our customers' orders filled and positioning ourselves to handle greater, but welcome complexity that comes with exciting new products and greater revenues. We did it. People safety every way you measure was a home run. Customer service was excellent. We greatly reduced out of stock challenges in 2020 and Q1 only had one out of stock of our greens product for 13 days. And we procured planned and project managed every facet of the supply chain to set up our multiyear strategy of growing revenues and our margins. This was driven by our simple but effective priorities I spoke to last quarter, the 3Ms, manufacture more ourselves, make it more efficiently, move it smarter and faster. So for manufacturing more ourselves, I want to stress that we don't do this blindly, we evaluate our costs including capital, labor and transportation. However, we have a strong bent towards our amazing team being able to produce better than anyone. We also value being valuable and having ability to call scheduling and fulfillment audibles as customer needs and supply chains demand. This was just demonstrated when we received a very large order with short lead time. We had 100% control of every aspect of the process and we've got the job done and done very well and frankly, done faster than requested. So like the fourth quarter, we converted more co-pack items to in-house and one of our largest most exciting new products was successful during in-house trial lines. Make it more efficiently, this can…

Thanks, Scott. From a financial performance perspective, as you've been hearing, solid year-over-year top line growth, as well as better-than-expected gross margins were the big story in Q1. Net sales grew 35% year-over-year to $7.4 million, fueled by 135% growth in our lairdsuperfood.com platform. So the first half of Q1 is historically a softer sales period for our business coming out of the holiday season. We exited the first quarter with a very strong run rate across channels, fueling our confidence in achieving our annual targets, which is a good reminder on why we look at our business and why we encourage others to look at our business in terms of the annual period and not quarter-to-quarter. Given our size and our stage of growth, quarter-to-quarter can be lumpy especially related to the timing of significant wholesale orders. In terms of channel performance, online we saw continued improvement in our AOV and retention metrics. And our repeat and subscription business continued its strong performance, delivering 69% of DTC sales. In wholesale, despite lower club sales compared to the prior year which included COVID-related pantry loading, our grocery business showed solid growth given our nearly doubled door count and the launch of our refrigerated liquid creamer products, expanding our reach to the previously untapped 90% of the creamer TAM. Additionally, our first Canadian door showed solid early results, paving the way for potential expansion in that country moving forward. Our gross margin for the quarter was 25.1% up 480 basis points from the fourth quarter, and our highest quarterly margin in the past 12 months. Key factors contributing to sequential improvement in gross margin included, improving liquid creamer spoiled rates, shelf life and waste, optimizing our DTC shipping expenses while also driving AOV improvements, and driving efficiencies in our manufacturing processes.…

Thanks Val. Q1 was a solid quarter with year-over-year growth with major operational improvements which were reflected in the gross margin increase and the successful close of our first M&A deal which is so well aligned with our brand that we expect to be highly accretive to shareholders. Looking from the outside, it's easy to say, wow, Laird Superfood there's a lot going on. But let me assure you, with the benefit of being well capitalized and our capability of attracting top talent, we have an incredible team, highly capable of managing all the moving pieces, which will continue to enable and drive the rapid growth of our brand platform strategy. As we have said, we guide annually not quarterly. The timing of significant wholesale orders can greatly influence quarterly results. And having said that, we fully expect to meet or exceed the annual guidance, which means we should expect strong revenue growth for the rest of the year ahead. We appreciate the support of all our shareholders. Now to Q&A.

Thank you, Speakers. [Operator Instructions] Your first question comes from the line of Bobby Burleson from Canaccord. Your line is open.

Hi. Thanks for taking the question, and congratulations on the gross margins. Fantastic performance.

Thank you Bobby.

So just curious maybe sticking with the gross margins. Can we -- I know you're not changing your guidance this year, but kind of curious since we're already in May, what you think the additional expansion of gross margin is going to be driven by if you can break it down as what the major contributors are for the balance of the year to get into that target?

Do you want?

Yes. No, of course, Bobby happy to talk through it.

You're welcome.

So I think looking at what changed. Hi Bobby. What I think might be helpful looking at what changed from the fourth quarter and it's very similar to what we've been talking about. We have -- on the DTC side, the lost shipping revenue and coupling that with optimizing our parcel cost. So from Q4 to Q1, optimizing our DTC shipping expense improved our margins by about 110 basis points. That was really the AOV improving, that was getting more dollar into every package, that was making sure we're using the right price or cost, working with carriers, reducing single item orders, a laundry list of initiatives that are proving to be very successful. I don't think we're done there. I think there's still more room there. And as we look to bridge the gap to where we're hoping to finish the year, as well as looking to get back to those 40% margins that we're targeting long-term, we have more room to improve there and that we're going to keep the focus there and that's something that Scott is working really diligently on. The other part I think is we still have a lot of room to continue to improve the liquid creamer product. That in the fourth quarter improved 140 basis points from Q4 to Q1. But we still have long ways to go. We're still working on optimizing the shelf life. We still do have some distribution center charge backs, and our goal is to get that way down from where we are today. The shelf life will help there as are some distribution changes that we're putting into place. And then looking even longer term, a really big driver is going to be to continue leveraging the factory that fixed cost that we put into our factory here that's able to support really three to four times, what we're running through our sister facilities today. So it's going to be the combination of those. Each one of those will contribute to the rest of the year and each one will continue to contribute as we move forward in the next couple of years to get to that 40% and beyond.

That's great. Thank you for that. And then just one more from me, obviously, with your multi-omnichannel approach you guys have a pretty good sense of what's happening dynamically with demand and your wholesale partners and kind of what they're planning. This was a big year last year for plant-based milk and plant-based dairy. And I think it surprised a lot of people in terms of the growth in some categories actually accelerated quite a bit over the previous year. And so I'm wondering just what are your partners telling you in terms of what they think the stickiness is of that elevated growth rate? Is this something that feels like it's sustainable like it's going to last? Is there some permanence to it? Just curious any insights on how much you think those elevated growth rates can you linger that we saw because of COVID.

Well, we think there's just going to be continued demand for plant-based products. I mean, we've been eating plant-based foods for eternity. Nothing has really changed. People are coming back around. There's more products available. And the -- it's not just the plant based aspect of it. It's really the functional food aspect of it. So you may be seeing a lot of reports coming around now like, oh, mushrooms are going to be really a big play for us this year. We've been -- we've had mushroom products for years. And so we've been ahead of that curve and our liquid creamer was really the first to come out with mushrooms in the creamer. So we're already a step ahead. And as we look to the future, it's just going to be continued focus on functional food products, which is really what consumers are starting to demand. They're eating something, they -- to get a functional benefit from that is really the trend that we see that we don't think is going to go away.

Great. I know that foodservice is just a tiny contributor at this point, but things are reopening nicely where I live, but it just seems like across the country. Are partners and customers there reengaging? Are there some things that could happen this year maybe that could take things to step function higher in terms of the revenue you guys are collecting there?

Yes. We still believe food service is just a major opportunity with our products in particular. And so, we are doing some things. We're testing with a bunch of corporate office environments that are opening back up. We've been working with a coffee retail partner and playing with various different recipes that has been proving to be very successful. And so we're now looking to start to expand that and that's definitely going to be something that we're going to keep pressure on and look for those opportunities. The food service space is very relationship-driven. It takes a while to build the business, but we have been working on building relationships and we do think it's going to continue to grow, especially as things come back here post COVID.

Great. Thanks for taking my questions.

You bet.

Thank you. Your next question is from George Kelly of ROTH Capital Partners. Your line is open.

Hey, everybody. Thanks for taking my questions. So just a couple for you. On -- I'll start with the liquid creamer business. So curious, just what the status is of the repackaging? Not sure if I missed it in your prepared remarks, but is that still planned for kind of middle of this year? And then, do you plan to launch an oat liquid product as well?

Yes. So I'll start with the repackaging. So we've been talking repackaging with the liquid product. And where we really ended up coming out is, sticking with the fresh product, but extending the shelf life for that fresh product. So we have a very unique product and that's really the only fresh packaged plant-based creamer in the market. And we've had such incredible positive feedback from consumers. The shelf velocities are growing. I think we mentioned in the script that our Whole Foods shelf velocity for example is 3x what it was in Q4. People really love the product. And it really is a unique offering being fresh. The key is, how do we get it to extend the shelf life. And we've been making progress on that. So it has a longer shelf life than it did. And we're continually taking steps to work on that. And additionally, working on the supply chain by taking days off or even weeks off of how much time it takes to get once it's manufactured to the shelves. So we're making progress on all fronts and you saw that big improvement from Q4 to Q1 and we expect that to continue to show improvements as we go here. And so, we're really excited about that. We just have a really unique differentiated product that just tastes great. People love it and it's also differentiated, of course, with having performance mushrooms and oatmeal and other ingredients and being very clean in a recyclable fresh packaging compared to some packaging that's just not recyclable. So we are excited about that. And as far as the oat liquid creamer, that's not a product that we've announced yet. Of course, we're constantly experimenting in looking at various different formulas and being innovative and looking for functionality. And there's oat and other bases that we're constantly looking at, but nothing announced at this time.

Okay. And then you also mentioned launching into Target and Harris Teeter. Could you tell us more about what you're doing there? Is it tests, or how broadly distributed into each of those retailers are you?

Yes. So Harris Teeter and full Target, we launched into a couple of hundred stores, primarily in the West Coast, it's more of a test. We had some positive early indications that our product is doing very well. And that just happened right at the end of Q1. And so, it's still very new and something we're excited about. And so far everything is looking strong.

Okay. Very cool. And then last question for me about Picky Bars. So you mentioned hoping to get to $10 million in sales next year. I'm just curious could you bridge the $4 million to $10 million next year? How is that going to -- is that all wholesale distribution, or anything else you can point to?

Combination. So thinking about the $4 million of incremental that we are planning on generating in 2021, $3 million of that we're expecting the Picky -- kind of historical Picky business to be able to support on its own, based on how it's done in the past, what its growth rate has looked like. That incremental $1 million we'd then be looking to generate through our much larger customer base on the Laird website and deploying those new products to that new base. And really rough, probably a bad example math here, but if we were able to get 20% of our 2020 active customer list to buy two boxes of bars this year that would on its own generate that $1 million, not to give any credit to an expanding customer base or the other products that we're able to offer as well. So we feel like that's a pretty low bar to clear this year very confident in our ability to do so. When we look forward to the next year, again with a Picky historical growth and how their business has been performing on its own? They could easily have handled the $5 million of that on their own -- the $10 million total that we'd be looking to generate. So that would then take the incremental $5 million for the synergies to be developed. Again, really strong opportunity in DTC, but we would be looking at that point to have some new packaging and be ready to deploy some of the products into wholesale most likely starting with bars, but all of those products they have a lot of confidence in and we think that there's going to be a very strong reception.

And it also plays in the foodservice. So as we're looking at expanding foodservice over the next year, this is another great product for office workers and people on the go.

Okay. Great. I just plugged through about $45 worth of Picky Bars. We got a shipment a few days ago. So your strategy is already working. Thank you very much.

Thank you.

Your next question is from the line of Alex Fuhrman from Craig-Hallum Capital. Your line is open.

Great. Thanks very much for taking my question. Looks like a pretty dramatic shift in the online business in Q1 towards lairdsuperfoods.com. It certainly seems like your own website has been growing faster than the overall business for some time now, but really that's been pronounced the last couple of quarters. Can you talk a little bit about what's driving that strength? And then as the business continues to get bigger and you add more products and presumably more M&A over time like Picky Bar is there a point at which you reach an escape velocity where you don't really even need to have an online presence on other channels? Just curious how you think about that ecosystem given how quickly your own subscriptions and customer base is growing on your platform?

Yes. I mean I think all of us probably want to answer that, but I can start. I mean we just -- we believe the future is online. It's a big part of our business. It's just an area where we can actually do a good job of educating our customers. So videos of Laird and Gabby influencers talking about the unique aspects of our products. So we are really excited for the online platform as far as its capability and potential. And we just have a great team, but we've considered best-in-class team that's doing a great job working with influencers getting content out there in a very efficient organic way to really just continue to build that business. And we really see no end in sight on the online business. We still feel like we're just tapping the surface of the potential of online.

Great. That’s really helpful. Thanks, Paul.

You bet.

Thank you. At this time, I would like to turn the call over back to Mr. Paul Hodge for closing remarks.

All right. Well thanks everyone and we're excited about a lot of things our Q1 operational performance, closing our first M&A deal, which we believe will be highly accretive to shareholders, new product launches in Q2 and our ESG initiatives we're really excited about those as well. We're poised for growth rest of the year and we've got strong execution in all of our strategic priorities. The Laird Superfood brand is really on this way become a powerful CPG brand platform in the food space the first to come natively from a natural food foundation. So thanks for your support and I'm really looking forward to talking to everybody next quarter about our continued strong performance.

Thank you so much speakers. This concludes today's conference call. Thank you all for joining. You may now disconnect.