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

Thanks, and good afternoon, everyone. I'd like to welcome all of you to the conference call and webcast for Laird Superfood's earnings in the third quarter of 2025. 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, you should all have the earnings release, which was filed the day following market close, and 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 you that Management might present forward looking statements under the framework of Federal Securities Laws. Such statements reflect Management's present expectations and carry risks and uncertainties that may lead to actual results differing materially from what has been described. For a thorough review of those risks and uncertainties, please see today's press release as well as other documents filed with the SEC. With that said, I'll hand things over to Jason.

Thanks, Trevor, and good afternoon, everybody. We appreciate you being with us today for the call covering our Third Quarter 2025 Earnings. I'm happy to share that we delivered yet another quarter of strong top line growth, reflecting our ongoing work to carry out the plan of establishing Laird Superfood as a top-tier participant in the premium plant-based functional food category. During the third quarter, net sales rose 10% compared with the same period a year earlier, reaching $12.9 million, mostly fueled by excellent results in our Wholesale channel. Across the first nine months of 2025, net sales climbed 15%, totaling $36.5 million. Our Wholesale channel remains a clear standout, with net sales climbing 39% during the quarter and 40% on a year-to-date basis. That expansion demonstrates the concentrated push we've made to broaden distribution, especially within grocery and club stores, where we've enjoyed strong velocity improvements and more shelf space. Consumer demand is robust for our flagship items such as Coffee Creamers, Hydration Enhancers, and Functional Beverages, as buyers increasingly look for clean, functional ingredients that fit with healthier lifestyles. The Wholesale channel accounted for 53% of net sales in Q3, and across the first three quarters of 2025 it made up 49% of our total net sales. That aligns nicely with our strategic aim of shifting Laird Superfood into a Wholesale-led organization. Within our e-commerce channel, which made up 47% of net sales in the quarter, we saw an 11% decrease versus the prior year, mainly because of weakness in our direct-to-consumer platform and reduced new customer acquisition. Still, that was partly offset by ongoing growth on Amazon.com. On a year-to-date basis, e-commerce was roughly flat, and we stay optimistic regarding this channel's potential as we sharpen our digital marketing approach and capitalize on our devoted repeat customer base, which represented roughly 88% of DTC sales in the quarter. Gross profit in the quarter came to $4.7 million, a 7% decline from the prior year, while gross margin narrowed to 36.5% from 43% a year ago. This was entirely anticipated and mostly attributable to commodity cost inflation and channel mix shifts toward Wholesale, along with the absence of a one-time supplier settlement benefit recorded in Q3 of last year, which affected margin by roughly 3 percentage points. Year-to-date gross profit grew 9%, reaching $14.4 million, as we succeeded in offsetting a substantial share of the commodity and tariff pressures that have dominated national headlines. Anya will walk through more specifics on our financials shortly, but on the whole these results show the advancement we're achieving in scaling our business while steering through a dynamic market environment. Moving to business highlights, we're enthusiastic about the momentum behind our Wholesale expansion; we've kept adding distribution points at major retailers, and our velocities in core categories such as shelf stable creamers keep exceeding our expectations. That confirms our emphasis on premium functional ingredients that connect with consumers, moving away from sugar laden and artificial options. When it comes to innovation, we're continuing to put investment into product development so we can diversify our portfolio and encourage repeat usage. We're thrilled to announce that our new Protein Coffee will be hitting the market in the coming month, and shipments of our new Liquid Creamer items are already underway. Regarding the Liquid Creamers, this represents a massive upgrade over what we had before. Coconut oil has been swapped out for organic coconut cream, we've boosted the amount of adaptogenic mushrooms, and cane sugar has been replaced by coconut sugar, which has a lower glycemic index. The taste and texture that come out of this are much better than what our earlier products offered, and I'd go so far as to call them the best tasting and h ealthiest options available anywhere; we're bringing these creamers back out as organic formulations and putting them in a post-consumer recycled plastic bottle that's going to look really appealing on retailer shelves. Turning back to Protein Coffee, our expectations for this launch are high. This is Laird Superfood's first entry into the Dairy category, a market roughly 10x bigger than the plant-based space we've been competing in up until now. The item we're bringing out is dynamite. It's a premium freeze-dried coffee with 10 g of dairy protein per serving blended in, ideal for anybody wanting more protein in their diet, and it has low calories with no sugar. It also aligns perfectly with current health and wellness trends and offers great support for those taking GLP-1s. As part of our plan to streamline operations and direct resources toward our highest growth opportunities and the Laird Superfood brand, we've decided to sunset the Picky Bars brand during the second quarter of 2026. This lets us shift investments toward the core Laird Superfood brand, which we see as having the greatest potential for scale. Tied to this, we took a $661,000 impairment charge this quarter on Picky Bars intangible assets. Operationally, we managed to bring our inventory down by over $1 million during the third quarter. You'll remember we had deliberately grown our inventory across the first half of 2025 so we could satisfy growing demand without the out of stocks we dealt with last year, and to lessen the effect of tariffs on imported raw materials, especially those from Southeast Asia. As we keep selling through that inventory over the next several quarters, we anticipate cash flows improving because of it. On the subject of tariffs, I'm glad to share that we were recently told our coconut milk products won't face additional tariffs, which lowers the impact on our go forward costs and boosts our 2026 financials by over $1 million. For the rest of 2025, our attention is on optimizing our supply chain, controlling costs and driving efficiencies so margins expand over time; we'll keep watching macroeconomic factors such as commodity inflation and possible trade policies, but we're in a strong position to handle them as we wrap up this year and move into 2026. The third quarter represented yet another advance as we work toward creating a business that can scale and generate profit. Our plan is being put into action, and the possibilities in front of us have me enthusiastic. Having said that, I'll hand things over to Anya, who will walk through our financials in greater detail.

Thanks, Jason, and hello everybody this afternoon. I'll walk you through some further specifics regarding our Q3 2025 financial results, along with what we expect for the full year. It's a pleasure to share that Laird Superfood delivered yet another strong quarter, marked by double-digit growth on the top line, solid gross margins, positive adjusted EBITDA, and $1.1 million in positive operating cash flow. Net sales rose 10% to $12.9 million, up from $11.9 million during the same period a year ago and from $12.0 million in the previous quarter. If you set aside Picky Bars products, net sales climbed 14% in Q3. While net sales growth landed softer than we had expected, largely because of when large wholesale customer orders fell, our underlying fundamentals stay solid and are not changing. Our wholesale channel kept up its outstanding momentum, rising 39% versus the prior year and accounting for 53% of total net sales, powered by continued distribution gains across both Grocery and Club. E-commerce sales fell 1% year-over-year, which mirrors softness in DTC, though growth on Amazon largely made up for it. In total, the e-commerce channel made up 47% of total net sales. Gross margin for Q3 came in at a strong 36.5 percentage points, versus 43.0 percentage points in the comparable period a year earlier. Keep in mind that last year's Q3 margins had gotten a lift from a one-time favorable supplier settlement, which contributed roughly 3 percentage points of gross margin. Setting that one-time benefit aside, Q3 gross margins stood about 3.5 percentage points below the comparable prior year period and 3.4 percentage points below the second quarter of 2025. These outcomes match what we had anticipated. With commodity inflation in our key raw materials, including coffee and coconut milk powder, plus higher tariff costs, we have confidence in our capacity to keep gross margins in the upper 30s for full year 2025 and beyond, which sits at the level of best in class CPGs. Even with inflationary pressure and without pulling the pricing lever, our Supply Chain Team keeps generating efficiencies by working directly with key raw material suppliers and co-packing partners to uncover cost savings that offset climbing commodity costs. Operating expenses were up $0.4 million in Q3 relative to the same quarter a year ago, pushed by greater marketing investment and advertising costs, along with higher selling costs from increased sales volume. General and Administrative expenses stayed roughly flat in Q3 of 2025, as Picky Bars impairment charges were mostly offset by lower personnel costs and professional fees. Net loss for Q3 was $1.0 million, compared with a $0.2 million loss in the prior year period. The larger net loss stemmed mainly from a $0.7 million impairment charge on long lived intangible assets tied to the Picky Bars brand, plus greater marketing and selling costs on higher top line sales. Lower personnel costs partially offset this. Adjusted EBITDA came in at + $0.2 million, versus $0.1 million in the same quarter a year earlier. Better adjusted EBITDA came about because of growth at the top line and keeping costs under control, and at this point we're well along the path toward breaking even and being profitable. Now for our balance sheet: the quarter closed with $5.3 million of cash and zero debt. As we talked about a quarter ago, earlier in the year we made deliberate advance buys of some raw materials to offset cost pressure tied to tariffs. In the third quarter, we started using up that inventory, bringing it down from roughly $11 million to $10 million, and at the same time lifting our cash balance by $1.1 million compared with the prior quarter; we anticipate continuing to rebuild cash during the fourth quarter and into early 2026 as that inventory keeps turning into cash. We came out of the third quarter carrying solid momentum in our core categories, a strong pipeline of innovation, and ongoing confidence in both our team and our brand. Although macro uncertainty—especially in the e-commerce channel and around when large customer orders land—is weighing on our top line in the near term, the fundamentals underneath us stay strong. Taking into account year-to-date trends and these timing effects, we are revising our expectation for full year 2025 net sales growth to roughly 15% growth; we still anticipate gross margin holding in the upper 30% range and reaching break even adjusted EBITDA for the full year; we're also still confident about delivering a stronger cash position, backed by disciplined execution and positive operating cash flow in the third quarter, and with that I'll hand things back to the operator and open the line for questions.

Great. Thanks for fielding my questions. To start, I'd like to focus a bit more closely on the guidance. Obviously, I get the unpredictability, magnitude, and scheduling of certain major customer orders within the Wholesale channel. What threw me off slightly is whether this hurt Q3 results, Q4, or possibly both. It would help if you could shed a little more light on where that timing moved, perhaps. Thanks.

Yeah, hey Eric, it's nice to hear from you once more, and I appreciate the question. Yeah. The truth is, you've nailed it; this stems from a timing matter involving reorders and new orders of fairly, fairly large orders, incidentally, for new regions in Club space; that's mainly what caused this comparable situation, you know, since there are only a handful of customers we ship to that then distribute to the remaining retail space; those being, naturally, UNFI and KeHE. We also saw a slight timing problem there. What we're observing is that sell-through is truly robust, and we simply ran into a timing problem that somewhat took us by surprise. I believe we, you know, are being somewhat, as we head into Q4, we're additionally being somewhat careful regarding timing there as well. Everything is, it's progressing well and the results appear excellent. It's merely advancing somewhat more slowly than anticipated concerning when replenishment schedules arrive and the inventories being held. I believe some inventory rebalancing occurred as well, particularly among the retail distributors. We're keeping a careful watch on that. As for us, it's affecting Q3, Q4, yet we don't think there's any long-term effect from, in any of those on the, you know, on the long-term health of the business. We believe the business remains precisely as it was. Actually, we keep building momentum, particularly in that Club space. We believe we're precisely where we expected to be, just off by, generally precisely where we expected to be, just off with a bit of timing.

Yeah, yeah, that definitely tracks for me. Yeah, I mean given your size and the scale of those orders, you know, this pattern isn't something only you folks are dealing with. I was just hoping to focus specifically on Q3 against Q4, but I've got what I came for at this point. Appreciate it. The next question, I guess, ties in somewhat. During the prior quarter, the 750 ml product refresh, you know, delivered a solid lift when it came to shelf space and velocities. I simply wanted to circle back and ask how those sales are shaping up and, you know, whatever initial signals you might have regarding how you're viewing this protein beverage too. Clearly it isn't on shelves yet, but I'm just curious how you're approaching that one as well.

Yeah, yeah, excellent question. I'll field that one once more and then likely try to pass everything over to Anya from this point, she can give her vocal cords a workout; so, you know, regarding the first part about the 750 ml, you know, the upsizing performed roughly the way we anticipated. You know, as I look at the numbers today, what stands out to me is a drop in units alongside a corresponding rise in dollar sales tied to that resizing. Remember, we moved from 500 ml up to 750 ml, so that's a 25% increase, and we observed units contract by roughly that same amount on a velocity basis while sales essentially stayed flat from a velocity standpoint. So it's sort of, you know, maybe give that one a pass. I'd call that, you know, a check mark at this stage. Can't really put it on an A to F scale since we're about to dive right back into it once more. So basically, that whole thing took about nine months, and like we told you, we're pulling out of that co packer completely. Instead, we're moving to an incredible formulation in a better package that's fully organic, and we think it's really going to create some buzz. We did what we had to do there — we needed to play some catch-up, as all of you know, since we had plenty of distribution in small accounts right from day one, which put a huge amount of strain on our broker to make up that ground. We're just now getting to where they've finally caught up, and then we're going through the transition all over again. We've got every one of those hard-earned lessons written all over us, and going forward we're committed to putting them to use, so we never find ourselves stuck in that same loop again. We believe we have a crystal-clear picture of the steps required. Communication with our broker is strong and nothing is ambiguous. That shift is already underway right now. As a matter of fact, a few stores have already put us on their shelves — the new bottles made from post-consumer recycled plastic, a formula that's 100% organic, and a creamer that tastes fantastic and is extremely good for you, now available at Whole Foods along with several other retailers. As far as we're concerned, though, no returns have come in from that yet. It only reached the shelf during the past 7 days, but our belief is that it will be dynamite. As far as where we anticipated being, you know, when I examine, if I examine the scanner data, we are, you know, precisely, precisely on target, actually, so credit goes to the team for its forecasting. It simply required more time for us to arrive here than we had anticipated it would require; we at last sort of caught up and hold that from here.

Great. Thanks for that context. For the next one, I've got something that's more of a big-picture question. Clearly, coffee costs are at all-time peaks at the moment. On one side, I can imagine that hurting sales volumes for products that sit next to coffee, such as Creamers. On the flip side, it might provide a boost for alternatives to coffee, like the mushroom based coffee and functional coffee you offer. I'm just wondering what sort of macro effect you're observing across your various product categories, and how we should think about what high coffee prices mean for your company.

Yeah, this is something we think about almost nonstop. Likely everyone in the category does, and we've managed our coffee buys well across 2025, which lets us keep pricing steady up to now. In all, I believe we've only passed along $0.50 at retail over the past few years. If coffee keeps rising the way it has and we're forced to buy into that pressure, we might have to adjust price. By staying put — and we did enter at a somewhat premium price — through that stretch, I believe we've picked up a great deal of volume, and we've also secured solid distribution gains by working with retailers to be a strong premium option for them that isn't absurdly expensive; that's worked well for us. On the Creamer side, we've definitely observed a deceleration. We recognize that in volume terms there has to be a decline, that's clear. There's still a tremendous amount of share in the Coffee category available for us to capture; we believe our offering is outstanding, with a high altitude Peruvian organic coffee plus functional mushrooms at the price we charge. So far, what we're seeing is that we're getting rewarded for it.

That's excellent. Congratulations on the ongoing robust expansion in Wholesale, and thank you for fielding my questions.

Appreciate it, Eric.

Hello, and thanks for fielding my questions. Could you share a bit about what you've been observing with limited time offer items? You know, I noticed the Pumpkin Spice Creamer sitting on store shelves, and I'm curious to hear what retailers and shoppers have been showing you regarding those items.

Hey there, Nicholas. Yeah, so here's the thing — from what we can tell, it's shaped up to be a fairly strong Pumpkin season, it seems, throughout the whole category; one of our major retail partners got off to a delayed start because of what was basically an odd operational hiccup. We're making up ground on that too; on our end, it will ultimately turn out to be a fairly, fairly normal year. That item isn't a major piece of our business; as a matter of fact, I believe down the road it represents a chance for us, and we're pushing sales hard as we transition out of this year in that area. We ran out of stock early at nearly every retailer. I'd say we would characterize it as a truly strong year.

All right, that's great. Shifting to a different topic, let's talk about e-commerce. For the Amazon sales, what's the plan so they begin taking the place of some of those DTC sales that were lost? Should we anticipate seeing more of that in 2026? Just take me through the strategy you're currently seeing there.