Laird Superfood, Inc. (LSF) Earnings Call Transcript & Summary

Thanks, and good afternoon everyone. I'd like to welcome all of you to the Laird Superfood conference call and webcast covering our second quarter 2025 earnings. Joining us today are Jason Vieth, who serves as President and Chief Executive Officer of Laird Superfood, along with Anya Hamill, our Chief Financial Officer. At this point, everybody ought to be able to access the earnings release we issued following the close of the market earlier today. You can find it in the Investor Relations area of Laird Superfood's site, www.lairdsuperfood.com. Prior to getting started, I want to remind everyone that management might share forward-looking statements during this call as contemplated under federal securities laws; such statements reflect management's present expectations and carry risks and uncertainties that may lead actual outcomes to differ materially from what has been described. For a thorough review of those risks and uncertainties, kindly consult today's press release as well as our other SEC filings. With all of that said, I'll now hand things over to Jason.

Thanks, Trevor, and good afternoon to all of you. It's a pleasure to welcome everyone to the Laird Superfood Second Quarter 2025 Earnings Conference Call. My name is Jason Vieth, and I serve as CEO of Laird Superfood; with me today is our CFO, Anya Hamill. First, I want to express how proud our team's performance this quarter makes me. Despite a tough backdrop featuring persistent economic strain, inflation in commodities and evolving consumer tastes, we delivered another set of strong financial results, which highlight both the durability and the attraction of the Laird Superfood brand. Net sales rose 20% compared with the same period last year, reaching $12 million in Q2, which represents yet another quarter of powerful top line growth. This expansion came from our deliberate emphasis on wholesale, which jumped 47% and accounts for slightly less than half of our overall net sales, propelled by added distribution and higher velocity in grocery and club channels. Meanwhile, our e-commerce channel remained stable, posting positive 2% growth in a highly difficult digital marketplace and delivering 52% of total sales, supported by ongoing strength on Amazon. Clearly, this quarter brought an acceleration in the strategy we have articulated of purposely expanding wholesale so it becomes the biggest percentage of our overall business, and I take pride in the fact that we are succeeding at that transition. Turning to our product categories, coffee creamers performed best, with 44% growth, accounting for 56% of gross sales in Q2 as more and more consumers look for our plant-based functional creamer choices. Coffee, tea and hot chocolate products also rose 44%, lifted by robust growth in our coffee products. That aligns with our goal of becoming a powerhouse in functional coffee solutions, and it reflects consumers' desire to transform their morning ritual into a healthy and nutritious way to begin the day. Regarding profitability, we posted a gross margin of 39.9%, and although that is somewhat lower than last year because of increased trade spend, commodity costs and a minor tariff effect, our margin remains among the strongest in the industry. On the operational side, we have shown agility in running our supply chain even under tariff pressure, which let us produce positive adjusted EBITDA of almost $150,000 this quarter, a significant gain over the small loss in the prior year. This reflects our ongoing advancement toward sustainable profitability, with adjusted EBITDA for the year to date at slightly more than $500,000. Our balance sheet stays strong, with $4.2 million in cash and no debt, even though we made a strategic investment in inventory this quarter to support demand and lessen tariff costs and supply chain risks, resulting in $4.1 million of cash used from operations year-to-date; we anticipate returning this to normal in the quarters ahead as our inventory is converted into cash. These results place us among the fastest-growing food companies in the public markets, ahead of many peers in the healthy nutrition space. As context, we have observed mixed results throughout the industry this quarter, and these announcements show a sector that is dealing with inflation and weaker demand in some channels, while still rewarding brands that offer innovation and execution, brands such as ours. For the latter half of this year and past it, we anticipate tariffs will stay unpredictable, yet our organization keeps gaining ground on expenses by way of important approaches like buying materials straight from the source and making freight more efficient; we take pride in having implemented zero price hikes tied to tariffs while still hitting our gross margin objectives, thus providing consumers our finest health and wellness food items at the greatest value achievable; we think this grants us an edge over numerous rivals and simultaneously preserves the chance to raise our price afterward should circumstances require it. The economy might appear broadly unsteady at present, however we are capitalizing on enormous traction and feel careful optimism as we enter the second half. The consumer scene shifts constantly, yet our dedication to clean plant-based Superfood supported by Laird Hamilton's heritage plus our pledge to quality puts us in position to gain share. Moving ahead, we will keep putting money into brand growth, new ideas and operational effectiveness to generate value over the long term; with that, I'll hand things over to Anya for additional financial information. Anya?

Thanks, Jason, and good afternoon to all of you. At this point I'll walk you through some further specifics regarding our financial results for the second quarter of 2025, along with how we see the full year shaping up. It's a pleasure to report that once again we turned in a solid quarter, with rapid top-line expansion, healthy gross margins, and careful control of spending. Net sales climbed 19.9%, reaching $12.0 million, up from $10.0 million during the equivalent period last year and from $11.7 million in the quarter just before this one. As was the case in Q1, our wholesale channel drove the company's growth during Q2, rising 47% versus a year earlier and representing 48% of our total net sales. That gain came from expanding distribution and accelerating velocity on shelf at grocery and club stores. Sales through e-commerce rose 2% compared with a year ago and made up 52% of total net sales, propelled by ongoing growth on the Amazon platform. Gross margin for Q2 came in at a healthy 39.9%, versus 41.8% during the matching period last year. Even though Q2 gross margins landed roughly 2 points beneath both the first quarter of 2025 and the comparable period 12 months ago, we feel quite good about these numbers, considering commodity inflation affecting our key raw materials, including coffee and coconut milk powder, plus higher tariff costs; they demonstrate our resilience in keeping gross margins in the high 30s, a level matching best-in-class CPGs, despite inflationary pressure and even without pulling the pricing lever. Our supply chain group keeps finding efficiencies by working directly with key raw material suppliers and co-packing partners, uncovering cost savings that offset climbing commodity costs. Operating expenses rose $0.7 million in Q2 versus the same quarter a year earlier, mainly for 2 reasons: first, higher marketing, advertising and selling expenses tied to sales volume growth; and second, a modest rise in general and administrative expenses, mostly from stock-based compensation, a noncash expense, largely offset by wide-ranging cost reduction measures. Net loss in Q2 was $0.4 million, against a $0.2 million loss a year earlier, while adjusted EBITDA was positive $0.1 million, versus a loss of $0.1 million in the same quarter last year. That $200,000 gain in adjusted EBITDA stemmed from top line growth, margin management, and disciplined cost control, putting us well along the path toward breakeven and profitability. Turning now to our balance sheet. We closed the quarter holding $4.2 million in cash with no debt. Higher cash usage in Q2 compared with Q1 resulted mainly from our choice to build up inventory so we could satisfy stronger demand for our products, resolve out-of-stocks seen early in the year, and make forward purchases of raw materials ahead of possible tariffs on imports of raw materials we source from outside the United States, especially in Southeast Asia. When that forward purchase inventory is sold through in the latter half of 2025, we anticipate our cash balance will return to normal levels and rise by the conclusion of fiscal 2025. Also, our accounts receivable balance sat higher in the second quarter because of shipment timing, which caused payments that would have come in Q2 to move into Q3. Our projection remains that we hold enough cash to support operations while we expand the business and pursue operational enhancements that move us toward breakeven and profitability. Beyond that, an asset-backed credit line stands ready if we require it. We finished the second quarter carrying strong momentum in our core categories, along with promising innovation and faith in our team and brand. Even with persistent macroeconomic uncertainty, especially in e-commerce, our confidence stays firm that we can achieve our full year growth plans. Given how strong our first half results were, the ongoing momentum in the wholesale channel, and solid execution throughout our organization, we are reaffirming our full year 2025 net sales growth guidance of 20% to 25%, gross margin holding in the upper 30s, and breakeven adjusted EBITDA. We anticipate full year operating cash usage of roughly $2 million, stemming from an added inventory investment meant to support top line growth and reduce out of stocks. I'll now hand the discussion back to Jason for any closing remarks.

Appreciate that, Anya. A 20% increase in sales puts us up with the top performers in our sector and reflects how much people want the healthy functional foods we make. I'd like to restate how much faith we have in what we're setting out to do, in the people working alongside us, and in what Laird Superfood can achieve over the long haul. Health and wellness is where our brand stands out, and our balance sheet is still in a good place, carrying no debt. Tariffs have created difficulties, and consumers are feeling less sure of things, but even so, we believe our team can steer through all of this and produce lasting value for those who hold our shares. Thanks for being with us once more today, and thanks for the ongoing attention you give Laird Superfood; that wraps up what we had ready to say about the second quarter of 2025, and now we're set to take your questions.

The first thing I want to ask about is your revenue guidance for this year. If I run that through the back half, it implies a pretty big step-up compared with how revenue performed in the first half. So I'm curious what you're seeing that makes you confident you can achieve that second-half step-up?

George, this is Jason, and I'll take that, and I'll let Anya add whatever color she'd like as well. That's a good question and clearly something we've examined pretty closely too. And the environment right now isn't one of high growth for most companies. So we feel really good that we can reaffirm that guidance and that we're still growing at a rate of 20% or more. Or expected to grow at that rate throughout this year. So keep in mind, a few things took place in the first half that we don't expect to take place in the second half. The first happened in Q1, when a major out-of-stock problem hurt sales of our powder creamer products and some other products too, though mostly our powder creamer products, to the tune of — we estimated more than $1 million in sales. Second, a very major Q2 event happened when UNFI was hacked in a cyber attack. And so we also lost shipments for a number of weeks then; so — and that's a big chunk of our business, obviously. We mainly have 2 distributors for the natural portions of our business, those being UNFI and KeHE. And when half of that goes down, it really adds up. So we don't expect events of that size in the back half. And at the same time, we've gained some additional distribution that will begin going live here over the next weeks, the next months, and we feel we're in a really strong position to grow with additional distribution gains that have been pitched but not yet awarded; so we'll obviously be watching those very closely going forward. And then last, George, I'd say the liquid business, which went through a transition at the end of last year into the beginning of this year, took a couple of months to really get fully back to where it had been. And we're just hitting our stride on that again right now. What you're noticing is that rates of movement have risen back to roughly the level they held per ounce, or on a total ounce measure, and revenue is essentially returning to its prior point too; thus there was some discomfort while we moved through that changeover, plenty of valuable insights, yet some discomfort, and our belief is that we've emerged from it now; so numerous elements are performing quite nicely as we enter the back portion of the year.

All right, that covers it. Very useful. Perhaps I could ask a couple additional questions regarding what you just described. Can the effect of the cyberattack be measured in any way? Then second, regarding the liquid product, could you elaborate a bit more? I believe you mentioned the change in sizing. And I noticed not long ago that a new and improved formula exists — at least one of the liquid products I came across carried that label. Does that fit into the change? And broadly speaking, how are the liquid products doing? Does what you're seeing make you happy? Further specifics on that would be useful.

Sure thing. Those are good questions; and regarding UNFI, we can't — clearly we can't arrive at an exact figure concerning the UNFI outage; but our estimate, George, is that it likely set us back roughly 10 points at retail, perhaps 8 to 10 points at retail across, I'd say, that quarter. So everything happened during Q2, and it has clearly been fixed by now. That said, that's our best estimate. So I'm not sure, you're likely talking about a few hundred thousand dollars in sales that would have been missed in that scenario; so less meaningful than what our out of stocks produced, mainly since it didn't persist as long. It got fixed. Most products were back within a couple of weeks; as for liquid, yes, that was a changeover. Basically, what took place is we moved from 16 ounces to 25.4 ounces in an upsizing. And we had expected that we would experience fairly, I'd say, fairly consistent TDPs with some bumpiness during that changeover. There's always a bit, and I believe we discussed that a couple of quarters back. And it simply lasted somewhat longer than we anticipated. One retailer specifically wasn't completely on board with the pack change when it launched. So getting them to bring the products in probably took an additional month. They're all in now and they're moving and performing well. But at that retailer we were out of stock for probably closer to 6 weeks in total, actually. They're among our bigger — not the biggest, but among our bigger retailers. So that definitely had an effect. As I said, plenty of good lessons came out of that. Were I able to do it again, we would have communicated the upsizing of the product to the consumer. I think initially there was a value perception as consumers watched the price rise, yet the package didn't appear all that different. You figure that consumers notice it's 50% or just about 50% or slightly above 50% more product. That isn't something everyone grasps right away. So there were some missteps we brought on ourselves, George, plus some softness in the market, and clearing that transition ended up taking a couple more months than we'd planned. Still, I'm glad to report that velocities have climbed back to the levels we'd projected, running right around the conversion rate we'd anticipated. TDPs have nearly returned to their prior marks. A handful of the smaller accounts still need attention, and they do matter once you total them all up. That said, we're quite pleased with how we closed things out across the last 6 to 8 weeks, and we expect to reach full brightness within the next couple of months.

All right, fantastic. Then here's my final question. When it comes to new products for the second half of this year and on through 2026, what areas get the most of your attention? Where do you see the biggest opening? That's everything from me.

Absolutely, happy to answer. We're genuinely thrilled because we have an amazing innovation pipeline. What's toughest at the moment is scheduling it — or pacing it — at a rhythm the group can handle, and it's a fairly lean group, so we need to pace it and release at a tempo they're able to sustain. At present, we're developing a few different items. Funny enough, we're doing yet another liquid creamer transition, so it's wonderful that we've gathered all these lessons. We managed to build a highly optimized formula that lets us eliminate the final — there's a gum in the current version that we can now take out, and we can also remove — shift everything over to coconut sugar, drop the coconut oil, and turn it into a product based entirely on coconut cream. We're converting it to organic, plus we're placing it in a plastic bottle made from post-recycled plastic, which is extremely consumer-friendly these days. The funny part is that these paper packages, which appear as though they'd be recyclable, actually aren't recyclable within the United States, since you require a 2-step system and hardly any communities offer that. So we're truly eager about where that product ends up. We're using every one of those lessons from the previous round to ensure we won't face any of those hiccups as we move ahead this time. So that's a major component of it; it'll be a highly differentiated item on the market, and the response from retailers we've talked to has been excellent, and I believe we've now spoken with essentially every one of them. We also have a coffee product with protein that has us very excited. Quite a few protein-containing iced coffees have come to market across the past year to 18 months. We came across a similar concept last summer, and we've been refining our formula; we're really enthusiastic about it. This marks our first step into dairy products. So there'll be more details to come, though you've likely heard us say before that dairy is a space we've been eager about. We think there's an outstanding food entry into dairy where we can harness what our functional mushrooms offer along with a cleaner dairy source. So we're exploring — you'll see us exploring organic and other attributes as our way in; and this category is extremely hot, no longer just online, but genuinely breaking into retail. And so we're also having some really good conversations on that front, and we believe we're truly capitalizing on that specific offering. Those represent the 2 biggest ones you'll see us focused on across the coming 2 quarters, George. And then, naturally, next year, that dairy platform is really going to begin growing through some thrilling launches we've been hinting at for quite some time.

Could you begin by describing how that promotional stretch tied to Amazon Day performed for the business?