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 have been muted during the presentation portion of the call. [Operator Instructions]. I'd now like to pass the conference over to our host, Trevor Rousseau, Head of Investor Relations. 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 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 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 the call over to Jason.

Thank you, Trevor, and hello everyone. I'm delighted to share with you the results of Laird Superfood's first quarter of 2025, which marked another strong period as a high-growth premium brand 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 disciplined trade spend management. Our Q1 results also demonstrate the progress that we are linking 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 6% 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 Laird 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 in the brand. Similarly, we continue to make exceptional progress on the…

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 at shelf 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 in 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 the 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 higher selling fees due to volume growth, people-related costs…

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 the 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.

[Operator Instructions]. First question is from the line of JP Wollam with ROTH Capital Partners. Your line is now open.

Hi, Anya, hi Jason. 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 the original Liberation Day rates? And just a follow-up would be, as you think about managing tariffs and wherever they may shake out, I guess, 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 getting this one out there. Yes, I mean really what we're saying is this, the 10% 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 will go into effect will have more impact, but we still feel we can manage that within our P&L. There will 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 -- 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 breakeven point that we had called out previously. So the reality is these tariffs, no one knows really where they are. We are absolutely watching them, strategically planning around them, but we also put our blinders on to 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 a matter of when. So we're trying to be as long on inventory as reasonably we can be to get through that period. And at the end of the day, if we did hit with really big tariffs as…

Perfect. That's very helpful color. I appreciate that. If we could kind of switch over just to the wholesale strength. I was just hoping maybe you could provide a little bit more detail about specifically kind of the increasing velocities. 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?

Yes, for sure. And I really appreciate that question, too, because this is 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 -- 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-comm 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 year, and we're reaping the benefits of that. And then specifically to your question, we're also having really great velocity improvement. Even where we're gaining distribution on products, what we're seeing is velocity improvements on those products in other stores. And that's very rare if that happens. And I think it really speaks to the trends that are filling our sales right now. So around -- just around overall health movements. So what we're seeing specifically, JP, at wholesale is really strong growth in coffee, in our powdered 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 those -- that coffee solution set that I…

Perfect. Really appreciate all that color. And if I could just slide one last one in. Just since launching the large liquid creamer on shelf, any color you can provide on how velocities are doing there or any kind of customer feedback? Thanks.

Yes. Yes, great question. Customer feedback, I think, generally is good. It was a bit more choppy than we anticipated in part because the reset windows didn't line up. 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 Wegmans and Target, et cetera. They're all at different timing. And so we had to have two sets of inventory in both KeHE and UNFI to be able to fulfill that. So I'd tell you they're great learnings that the teams had out of that, that will help us in the future. But it was more challenging and took longer than we anticipated. And in fact, we're still going through some of those executions. I think Natural Grocers is just now coming back online after a little bit of about -- a little bit of being out of stock through that transition, the codes got mixed up. 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. We expected not to get a full 1:1 pickup out of the gates because you're not -- 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 modeled around 0.8 conversion. So it's still -- I keep saying it's early days. It is still early days with a couple of those retailers. Those that have transitioned like Sprouts 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 is doing good.

Awesome, I really appreciate all the color. Thanks for the time.

You bet, JP.

Next question is from the line of Ayden Morgenstern with Greenland Capital. Your line is 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 drop-ship based? What kind of margin and costs are involved? And how do you make sure it doesn't distract from the core product innovation?

Hey, Ayden, 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?

Yes, that you announced in March this new marketplace where you're having promotions with other smaller health companies. And so how does -- are you buying that inventory and selling out? Or is it just drop-shipping through your platform? What costs are associated with this new thing?

I got you, Ayden. Ayden, thanks. So the marketplace is right, is something that 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 nonstrategic 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 on 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 site and a hard time to bring consumers in, what we're finding is, with unique content and now the supporting marketplace, that we give consumers a reason to come in and spend time and ultimately to shop and purchase on our sites. So I think the way to think about that is just as another supportive marketing component. We're not looking to make a lot of money out of that. We're not going to sell a lot of goods. We don't drop-ship any of it. It is nothing but a pass-through to -- if you buy, for instance, a red light therapy machine, we just passed through a click, we pass you over to one of our partners to make that purchase. So 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 and wellness seeking. And so providing various products that are related to that lifestyle on our marketplace is highly engaging and really is helping to drive our DTC traffic and retention as well.

Got that. I really appreciate it. Thank you. And then just another -- the Palisade fires, there hasn't been any mention, but I know a lot of the market is in the L.A., California area, and I know you did -- there was some donations. Is there any impact in Q1 that arise from that?

Yes. Very good question. There's obviously a lot of displacement, and we view over-index in the Southern California consumer market. But we can't say that we can point to anything, Ayden, that we were negatively impacted by. We did -- as you say, we did provide support to first responders and subsequently followed up with products back to various firehouses and really did it not seeking any attention. So this is probably the first most you've 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, Ayden. Appreciate it.

Thank you for your questions. There are currently no further questions registered. [Operator Instructions]. 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. Once again, we'll just -- we'll 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. So in this case, we are pleased and proud of our fifth straight quarter of double-digit growth, especially in an environment like this, but the uncertainty, I think speaks volumes to what the team has been 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 lines.