Good afternoon. Thank you for attending today’s Laird Superfood, Inc. Fourth Quarter 2024 Financial Results Conference Call. My name is Tamia, and I will be your moderator 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. [Operator Instructions] I would now to pass the conference over to your host, Trevor with Laird Superfood. You may proceed.

Thank you, and good afternoon. Welcome to Laird Superfood’s fourth quarter and fiscal year 2024 earnings conference call and webcast. On today’s call are Jason Vieth, Laird Superfood’s President and Chief Executive Officer; and Anya Hamil, our Chief Financial Officer. By now, everyone should have access to the company’s earnings release, which was 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 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 with the SEC for a detailed discussion of these risks and uncertainties. And with that, I’ll turn it over to Jason.

Thank you, Trevor, and hello to everyone on the call. I’m thrilled to share with you today what has been an exceptional close to 2024 for Laird Superfood, a year that truly underscores our transformation into a high-growth premium brand with strong margins and unlimited potential. For the full year 2024, we achieved a remarkable 27% top-line growth, with net sales reaching $43.3 million, up from $34.2 million in 2023. In the fourth quarter alone, net sales grew to $11.6 million, a 26% increase over Q4 2023. This growth rate isn’t just impressive in isolation. It significantly outpaces the consumer goods and food industry averages, where top-line growth typically hovers around 3% to 5% annually according to industry benchmarks. We’re not just keeping up; we’re leading the pack. Equally exciting is our improvement in profitability metrics. For the full year, we maintained gross margins at nearly 41%. This is a roughly 11-point leap from the 30.1% that we reported for 2023, driven by strategic sourcing, a shift to a variable cost manufacturing model, and disciplined trade spend management. To put this in perspective, the average gross margin for food companies often sits in the mid-20s to low30s, and at 25% to 35% from any of our most premium peers. Our ability to sustain these margins while growing at nearly 30% demonstrates the strength of our business model and our strategic focus on operational efficiency and premium positioning. This success has been driven by two key strategic pillars that we outlined in previous calls, rapid growth in e-commerce, particularly on Amazon, and significant strides in expanding our wholesale distribution. Let’s start with e-commerce. In 2024, our e-commerce channel grew by 32% year-over-year, led by our Amazon platform that not only recovered lost ground from our 2022 quality event, but exceeded our…

Thank you, Jason, and good afternoon, everyone. Today, I am pleased to share our fourth quarter and full year 2024 financial results. Coming off a record high net sales in the third quarter, we delivered another nearly equal strong quarter of top-line growth in Q4. Net sales grew 26% to $11.6 million, compared to $9.2 million in the prior year period. This quarter, our wholesale channel led the company’s growth, increasing by 52% year-over-year and accounting for 42% of our total net sales. This growth was driven by distribution expansion in grocery and velocity acceleration at shelf in both retail and club. E-commerce sales increased by 12% year-over-year and contributed 58% of total net sales with significant improvements in media efficiency in this channel. The growth was driven by strong sales on Amazon.com, building on the momentum over the previous 3 quarters and due to an outstanding commercial execution. Full year 2024 net sales grew 27% to $43.3 million, compared to $34.2 million in prior year period, posting strong growth across all channels. E-commerce sales increased by 32% year-over-year, and contributed 59% of total net sales. Sales on both Amazon.com and the DTC platform contributed to this outstanding result, driven by growth in subscription revenue and repeat customer purchases as well as higher order values. Beginning with this reporting period, we will be reporting net sales from Amazon and DTC platforms under a combined e-commerce channel to reflect the fact that this is how we manage our business internally. As we have structured ourselves to be agnostic to consumer shopping on whatever digital platform they prefer. Wholesale sales increased by 19% year-over-year and contributed 41% of total net sales, driven by velocity improvements in retail and distribution expansion in grocery, as well as more efficient promotional spend. Gross margin for…

Thank you, Anya, and thank you once again to all of you who are supporting our journey. In a crowded food market, Laird Superfood is carving out a unique space with our whole food functional ingredient portfolio. Our 27% sales growth outpaces nearly all of the household names in our industry and our 40% gross margin surpasses even long established players. What’s more, our dual channel success across retail and Amazon gives us the versatility that many competitors lack. We’re not just a DTC darling or a brick-and-mortar relic. We’re thriving in both worlds and meeting consumers where they prefer to shop. It has been an exceptional couple of years for our brand and our business, but we really do believe that we are just getting started. I couldn’t be more proud of our team for what we have already accomplished or more excited for our continued expansion as we go forward. Operator, this concludes our prepared remarks and we’re now ready to open the call to questions.

Thank you. [Operator Instructions] The first comes from Alex Fuhrman with Craig-Hallum Capital Group. You may proceed.

Hey, guys, thanks very much for taking my question. You mentioned having some stock-outs that you’ve been dealing with lately. Did those impact Q4 at all, or is that really more of a Q1 issue? And then, can you give us a timeline of when you think that will be resolved and what exactly the inventory investments you’re making this year to help to alleviate that?

Hey, Alex, it’s Jason. Thanks for that question. It’s one that we want to make sure that we address really clearly here. Yeah, I mean, the reality is what happened last year as we were rolling into Q4, I think a number of folks on this call probably saw we started to have products that were out-of-stock in DTC, in particular, and sometimes at retail as well. And the reality is we started moving through at a pace even faster than we expected on, especially on the coconut milk related products. And so, what we did is we started to prioritize where we put that product. We took care of our subscribers ahead of any new customers and then slowed down some of our marketing as a result. And then at the same time, we make sure that we were able to keep our main customers in stock as much as possible, which was mostly in stock. In total, yeah, I mean, it ended up probably costing us, I would guess, based on our estimates, somewhere close to $1 million of sales to the top-line, which is a two-edged sword, A, we would have loved to have reported it and had those sales. But on the flip side, it just demonstrates the demand and even growing almost 30%, we still had another $1 million or so that we could have been stocked, so – sorry, that we could have sold if we had been in stock. And so, this is a top priority for us. The reality though is, you have to remember, unlike a lot of our peers who can simply throw more ingredients and chemicals, et cetera, into pots and spit out new “food”, our food is all just a couple of ingredients. So, when we’re short on…

Great. That’s really helpful. Thanks for that explanation, Jason. And then, I guess, talking about some of your products that don’t have the coconut in them is impressed to see, it looks like the coffee category, the beans, grew something like 40% this year and more than 50% in the fourth quarter. Can you talk a little bit about what’s driving that looks like you’ve been having a lot of success with the functional coffees that that you have a lot of differentiation within the marketplace? Has that been the biggest driver of your wholesale growth? I know you’ve had a really strong business in some key retailers with coffee beans.

Yeah, that’s right, Alex. We’ve had really what we call our coffee solutions, which is our coffees ground and whole bean coffees as well as our creamers plus our instant lattes have all been doing exceptionally well over the last couple of years and we’re seeing a lot of uptake with retailers. Coffee for us has been a bit surprisingly strong, again, areas that we’ve been pleasantly surprised by demand wise and we’ve just had some really strong uptake in the – not only in the wholesale segment, but also online, Amazon and DTC as well. So, it’s an area obviously with escalating costs that we’ve been watching closely. We bought. I would say, in an advantaged position a lot of our coffee up until now and watching carefully and making choices I think that are very strong relative to our P&L. We did take pricing recently on our coffee we announced a small price increase of $1 per bag in online channels and then pass through commensurately to the retail trade. We’ve taken a position on price, as I mentioned, we’re really more interesting gross margin dollars than we are in gross margin percentages and we still very much intend to keep our gross margin in the high-30s, but we’re willing to trade away a couple of points in order to gain a couple of dollars of incremental sales. Because remember versus our expectation, we have opportunity to sell products that we didn’t expect to gain additional revenue and, thereby, additional gross profit dollars, which is very meaningful to our business and our cash position. So that’s the way we’re managing it. I think we’re managing it very smartly. We’ve got eyes on all of this. Trackers that we’re reviewing daily, we saw some relief in the coffee market recently and taking advantage of that. And so, I think, we’re in a really strong position to continue to grow that business, and consumers want it. It’s the functional coffee, as you said, it’s the functional lattes as well, where we put our performance mushrooms into these coffees. We have some innovation in both of those areas with new products that have been doing well. And we’re really excited about that entire category of the business for us.

Okay. Well, that’s great to hear that you’re seeing a lot of traction there. I certainly agree, not a lot else out there in the marketplace with the functional benefits for coffee that you guys have. So, I’m glad to see that that is doing well and appreciate the thorough explanation, Jason.

You bet. Thanks, Alex.

Thank you. Our next question comes from George Kelly with Roth Capital Partners. You may proceed.

Hey, everybody. Thanks for taking my questions. First, maybe a modeling question for Anya. I was curious, the commentary around gross margin, could you maybe be more specific about like how much you’re willing to kind of digest or give up in the early part of 2025? Do you expect gross margins to step down a little bit from what you reported in Q4? And then what happens sort of throughout the year?

Hi, George. This is Anya. Thank you for your question. Yes, we intend into hold our gross margins in our high-30s. Obviously, commodities are being inflationary and we are closely watching that dynamic. As Jason just mentioned, we have taken some pricing in our coffee business, which is breaking records in terms of cost inflation. We’ve taken that price increase on our online channel as well as in wholesale, and we’re going to continue monitoring the situation. But, again, as Jason just talked about, we are willing to trade off a couple of points of margins from where we’ve been before, which was in the 40s or above, in favor of market share and really growing the top-line. But, we don’t really give quarterly guidance, so I’m going to stick with our annual guidance of our gross margins in high-30s.

Okay. Fair enough. And then next question, with respect to the new sizing on the liquid product, I was curious, Jason, you mentioned in the prepared remarks that I think your comment was that it had seemingly – that launch had seemingly gone well. I was just curious if you could give any more specifics about velocities or really just what you’ve seen since that product has hit shelf. And maybe a secondary question on the same topic is just how are you incorporating the new liquid product in your 20% to 25% revenue growth target? It just seems like such a big category. You’ve got this product now that’s more competitive. And sort of how are you baking that in? Is it a material portion of the growth that is in that target? Or are you kind of just letting it develop and it could represent upside to that target if it’s a successful launch?

Yeah, great questions, George. Thanks, by the way, for those. I think that the way that I would think about this, it’s too early to tell them. That’s why I said it seemingly has gone well instead of outright saying it had gone well. What I know has gone well is that we managed to complete the transition with very little inventory or waste, so we’re very pleased with how that transition went. The retailers, I don’t know of any meaningful loss distribution – I don’t know of any loss distribution, but certainly nothing meaningful that happened as a result of the upsizing, which is not always easy, because you’re going with different shelf heights, et cetera, and we did not have any challenges with that, and then the production ran well. So as far as I know, it’s gone exceptionally well. Now, having said that, we don’t have any sales data yet. So back to your question, your real question here, which is, what do we know about sales? Our expectation is that there will be something less than a one-to-one translation. We’ve upsized the volume by 50%, but we’re only expecting somewhere around 80% translation of volume units where you had product on shelf, and then you have now larger product on shelf. The reality is, a lot of times in consumer goods, you don’t actually see a step down. So, we’re hopeful that that will be the case. We’re prepared to support that demand should it materialize ahead of our expectation. And then we are, of course, aggressively outselling additional volume. I agree with you, George, very big category. We’re actually holding our own nicely within a couple of key retailers in the natural channel, and we just started to make some of the expansion to the conventional channel, as we discussed on previous calls. So fingers crossed, we think that this is the most likely product to really cross the Rubicon into the conventional channel over the next couple of years. And although, quite frankly, a number of other products are starting to show real opportunity to do that as well. So we do have, I would tell you, we have high hopes for this product. We anticipate that there could be some outperformance this year, but it’s just too early to call it.

Okay. That’s helpful context. Thank you. And then maybe just one last one.

Sure.

Back to the out-of-stocks. I guess the question is, is there sort of a ceiling on these products that you’re bumping into? How much more supply out there is there for coconut milk powder? And I mean, as you look out over the next 2 to 3 years, is there just like, is this going to be an ongoing challenge or is it really just sort of a timing issue?

Yeah, great question, George. I would tell you, we barely dent the overall supply of coconut with what we utilize. And the reality is, coconuts get used in a variety of ways. You have coconut milk, you have coconut sugar, you have coconut oil. And as you have additional demand that comes up for one of those products, they can shift. You can only produce one of those three with the coconuts as they mature, so you have to make a choice. But, if we were to ramp up demand and require more, there would be opportunity to shift from some of the lower value products over to the coconut milk powder anyhow. But, we’re barely scratching the surface, so we’re not worried about that. The issue for us that a little bit idiosyncratic to us is the level of quality that we demand from our coconut milk supply just means that we need to go over and we need to qualify the suppliers, we need to take the products, we need to understand how they make their product. And so, we’re a little bit of a slower process. We thought we had all of our demand captured by a single supplier for this year and then for next as well. They were adding additional facilities specifically for us, which ended up getting delayed and we just weren’t able to pivot as quickly as we needed to. And it was the perfect storm, because demand also ramped up on those particular products at the same time. And so, put us into an out-of-stock situation, which as you know just takes some time to recover from, we’re filling everything hand to mouth and, I think, keeping everybody in pretty decent stock, but certainly there’s additional opportunity and once we are able to get all of this supply fully online, we anticipate being able to fulfill that demand as well. And that, as I mentioned in the prepared remarks, we anticipate that happening sometime right around the end of Q1. So we’re not far away from it right now. It’s not like we’re out-of-stock. We certainly are, it’s just a little bit of whack-a-mole where you’re out of sweet and creamy and then you might be out of sweet and creamy with adaptogens and then you’re out of turmeric and so you produce those as they come up as the additional coconut milk powder is received and that’s what we’ve been doing. It’s just tough game to be in and certainly there are some lost sales, but we feel confident that we can recapture those and that we’ll have the supply to do so over the course of the next, call it, 4 to 6 weeks.

Okay. Understood. Thank you.

Yeah.

Thank you. There are currently no other questions queued. [Operator Instructions] No more questions have queued at this time. I’ll turn it back over for any closing remarks.

Thank you. Yeah, I just, the only thing I want to add really beyond the discussion that we’ve had is 2024 was a really exciting year for us at Laird Superfood. It’s the year that we proved that we came through the transition, the turnaround that we had been talking about, and were able to establish gross margins, even in excess of what our target was. So, there was a little bit of an extra bounty that was there for us. And we really anticipate, as we go forward, that we’ll be a high-growth company with high-30% gross margins, which really puts us in a class with very few in there. And we’re really excited about that, excited about where we go. These challenges that we have right now are going to pass with the out-of-stocks. I do believe the commodity pressures are going to pass as well. As I mentioned, I believe that these truly are transitory inflationary costs, especially if we treat them as such. I do believe that we will see them back down from where they are right now. And even where they are right now, as we mentioned, our P&L can handle it. So very exciting time for us. And, I think, we’re in great position to really be able to take advantage of the healthy food trends that are sweeping America right now. Our products are an incredible fit for those trends, and the demand increase that we’re seeing is really proof of that. So we’re excited. We’ll be back in that long, just a few more weeks to be able to talk about Q1 and look forward to giving an update then. Thank you all.

This concludes today’s conference call. Thank you for your participation. You may now disconnect your line.