Yahoo Finance Laird Superfood, Inc. (AMEX:LSF) Q1 2024 Earnings Call Transcript
Laird Superfood, Inc. (AMEX:LSF) Q1 2024 Earnings Call Transcript May 12, 2024
Laird Superfood, Inc. isn't one of the 30 most popular stocks among hedge funds at the end of the third quarter (see the details here).
Operator: Good afternoon and thank you for joining the Laird Superfood First Quarter 2024 Financial Results. My name is Kate and I will be the moderator for today's call. [Operator Instructions] I would now like to turn the call over to Trevor Rousseau. You may proceed, Trevor.
Trevor Rousseau: Thank you and good afternoon. Welcome to Laird Superfood's first quarter 2024 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 first quarter earnings release 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 the course of 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 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 these risks and uncertainties. With that, I'll turn the call over to Jason.
Jason Vieth: Thanks, Trevor. Good afternoon and another big thank you to everyone who has joined us again. Today, I am excited to share that the Laird Superfood turnaround story has officially become a growth story once again. During the first quarter, we grew the net sales of our business by an impressive 22% versus the same period 1 year ago. Our sales growth during this period was led by our e-commerce segment which grew 33% year-over-year despite another sizable decrease in marketing spend across those periods. Amazon led the way this quarter with an astounding 48% growth rate driven by our continued improvement in product availability, marketing effectiveness and inventory management. We have continued to hone our execution, driving out unauthorized resellers of our products and winning the buy box to ensure that our brand sales on the Amazon platform are being filled by our Laird Superfood team.
Perhaps the biggest surprise to DTC industry observers will be our impressive 25% growth in our own DTC business, where we continue to demonstrate our ability to convert viewers into buyers, buyers into repeat buyers and repeat buyers into subscribers. Approximately half of our DTC business is now made up of subscription sales. Over the past months, our team is focused on creating a website and e-mail platform where we can share health and wellness, nutrition and lifestyle tips and stories with our consumer base, thereby giving them a reason to continually interact with our branded website. And by continuing to leverage Laird Hamilton and his wife Gabby Reece, we have been able to create highly relevant, authentic and original content that provides a competitive advantage for our brand.
Further, our customer service and Net Promoter Scores remain best-in-class and our consumers clearly recognize and appreciate the care with which we handle their orders from their website interaction to arrival at their door. On the wholesale side of our business, we grew net sales by 10% year-over-year during Q1 which is even more impressive since it was done without the benefit of a price increase during the last 12 months. Even more encouraging is that retail scanner sales for our Laird Superfood brand were up significantly more than our net sales during this quarter, reported as plus 30% across U.S. food for the 12-week period ending March '24. Given the growth rate discrepancy between retailer scanner data and our LSF' internal sales, there was clearly a deloading of inventory across our 2 large distribution partners.
And so, we expect to see continued strength in this channel of business as we move forward. Within wholesale, our business grew during Q1 across all our measured categories in terms of both units and dollars led by our coffee and instant latte products which now combined to be our largest category at retail. Our club business also remains extremely healthy and we continue to see growth in our sales velocities behind our improved product following last year's quality event. On the operations side, our team continues to demonstrate strong results driven by supply chain execution across procurement, production and distribution, as well as favorability in our trade spend. Our gross margin was 40% during Q1 which was several points ahead of our own internal projections despite a planned write-down in the value of our coconut milk powder.
That planned write-down was actually a positive result for us as it was driven by the recognition that we are now able to procure our largest commodity ingredient at a significantly better rate than we had previously been able to. With our supply chain team executing at a high level, we have been able to effectively offset various cost increases and at this point, expect to be able to do so throughout 2024. As we shared previously, the first quarter is a strategic investment quarter for us as the marketing activities that we fund early in the year are able to be leveraged during subsequent quarters. That said, we were able to once again reduce our year-over-year marketing expense during Q1 behind better execution and more efficient activations.
Our marketing expense for the quarter was just over 20% of net sales which obviously represents a dramatic decrease from prior years. As we move forward, our midterm goal is to continue to press this down into the low-teens and eventually into the high single digits. But with the opportunities in front of us and a return to solid brand growth in the first quarter, we are quite pleased with where this currently stands. In fact, we are very pleased with the first quarter results where we over executed our internal plan and are now on pace to exceed our stated goals for 2024. With this in mind, I think it's time to change the storyline on Laird Superfood from a turnaround project to a growth story, one in which we are growing our consumer base across our various sales channels and preparing ourselves for the next chapter of expansion.
With that, I will now turn it over to Anya to discuss our first quarter 2024 results in more detail.
Anya Hamill: Thank you, Jason and welcome, everyone. Our team's work over the last 18 months has transformed our financial foundation and positioned our business for growth. I am pleased to share with you that our first quarter results have exceeded our operating plan on every key metric. Net sales grew 22% to $9.9 million in the first quarter of 2024 compared to $9.2 million in the prior year period and were up by $700,000 sequentially versus the fourth quarter of 2023. As Jason indicated, both the e-commerce and wholesale channels contributed to Q1 growth. E-commerce sales increased by 33% year-over-year and accounted for 59% of our total net sales. With our Amazon and DTC platforms delivering impressive growth of 48% and 25%, respectively.
Amazon sales growth was fueled by tremendous execution on the platform where our team was able to improve our inventory positions, increase our buy box win percentage and drive efficient media spend. Q1 growth in our DTC platform was driven by a steady increase in subscribers and repeat orders, higher order value and lower discount rates due to strategic shift in promotional spend. Wholesale net sales increased by 10% year-over-year and contributed 41% of total net sales, reflecting continued growth in club, velocity improvements and distribution expansion in grocery, as well as more efficient promotional spend. Gross margin was 40% in the first quarter which is a 17-point improvement on a year-over-year basis and was driven by the continued benefit of transitioning to third-party co-manufacturing and distribution model and lapping expenses related to the product quality event in the first quarter of last year.
This is the second quarter in a row of gross margin of at least 40% which supports our expectation for sustainably achieving gross margins in or above the upper 30s in the coming quarters. Operating expense decreased $1.1 million in the first quarter compared to the same period last year. This reduction was primarily driven by lower people costs, lower marketing and a broad strategic reduction in spend. Net loss for the first quarter was $1.0 million which is 75% better versus the prior year period, driven by higher net sales and expanded gross margin, as well as continued discipline around G&A spending. Versus the fourth quarter of 2023, our Q1 net loss was $1.2 million higher due to stepped-up planned marketing investments and timing of G&A spend.
Now, turning to the balance sheet. We ended the quarter with $7.3 million of cash and no debt as we continue to conservatively manage our balance sheet. Our cash burn in Q1 was $400,000 which is obviously significantly better than our historical burn rate but higher than the last quarter due to stepped-up marketing investment and payout of our company bonus which have been fully expensed during 2023. Our cash consumption rate is steadily improving due to our continued discipline in managing operating expenses and working capital, including significant reductions in inventory. In the first quarter, inventory was reduced by $700,000 or 11% compared to the year-end of 2023, while also supporting 22% revenue growth. Also, we just entered into a credit facility agreement that allows us to access up to $2 million in cash as backed by the sale of our accounts receivables.
This will create additional liquidity source should we choose to utilize it. We continue to project that we have enough cash to fund our operations into at least 2026 as we continue to grow our business and make operating improvements that drive us towards breakeven and profitability. Overall, these results strengthen our confidence that the strategic initiatives our team has been implementing during the last 18 months are achieving our intended results. At this point, we are increasing the upper end of our guidance for full year 2024. We now expect net sales of $38 million to $42 million which represents 11 to 22 points growth versus prior year. And we are now projecting gross margin of 38% to 41%, representing a 7 to 11 point improvement versus 2023.
And now, I will turn the discussion back over to Jason for any closing remarks.
Jason Vieth: Thank you, Anya and thank you to everyone who has been listening to and supporting us during the past 2 years. I hope you'll agree that we've made good on the expectations that we outlined during those quarters. And while it's been extremely satisfying for our LSF team to achieve these results so far, we are even more excited and motivated for what is yet to come. This concludes our prepared remarks. Operator, we are now ready to open the call to questions.
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