LSF - Earnings call transcript Q3 2021

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Operator

Thank you for standing by, and welcome to the Third Quarter 2021 Earnings Conference Call and Webcast for Laird Superfood, Inc. I would now like to turn the call over to Mr. Reed Anderson of ICR to begin.

Reed Anderson

Thank you. Good afternoon, and welcome to Laird Superfood's Third Quarter 2021 Earnings Conference Call and Webcast. Paul and Executive Officer. Scott are Chief Valerie call Officer; Financial McGuire, today's Hodge, Officer; Chief Ells, On Chief Operating now, today access earnings have everyone company's By quarter third to press market after the filed close. release should Relations This of website Laird section is the www.lairdsuperfood.com. Superfood's on available Investor at

federal filings information risks meaning made with Executive make of now expressed SEC during and laws. detailed we of Laird the expectations securities from to forward-looking Before discussion financial could this please of from differ forward-looking call any those a based today's Chief call, current actual uncertainties that materially forward-looking the in that statements note to of today. Paul on to today's begin, may results refer described statements these other involve that statements. for course the actual the within Please implied Superfood. Hodge, in is the the management Officer those materially are turn differ management's over statements And all and presented unaudited. and results cause or the to call These cause risks like to And could on press beliefs I'd release and

Paul Hodge

Laird grocery manufacturer, in among be the our a high-growth brands everybody. of our to leader Scott the And overall our your the you McGuire, additional in up then positioning, is third detail. Valerie Thank Financial better-for-you growth It's regards $XXX quarter. a we mission-driven you, summary Officer; be and key Reed. follow and to questions. a open our will with food call quarter. Aloha, a positioned pleasure billion speaking with from natural highlights Ells, brief will industry. for with plant-based to Chief Chief I'll Operating drivers start Officer, Superfood

when best-in-class leads but and people with a better business omnichannel At better they because food make better a world to we feel decisions. believe good, native that platform. Our are online is Laird, healthier

hydration that products daily down from Our as up sun ritual. provide to our of the perform to need energy, we and nutrition sun sustained part

great the phases practices for In rate, acceleration million, sales an Picky. supply to growth our of incorporating our XX% led quarter easy platform, addition million farm up continued by increasing quarter chain second affordable, were strength all third digital ethical with through to E-commerce the including sustainable fork. net from of taste, are increased to last $X.X growth versus XXX%. convenient, of and use sales Total $XX.X our products delivering DTC native year, XX% and to from

represent 'XX. while grocery, repeat strong an in revenue retention over year-over-year club on strong was subscription year. orders reflecting of gains increased QX XX% X/X 'XX in by rate third to last the flat to we quarter third our $X.X As million, Recurring Wholesale a improved and of based quarter versus cycled of in organic growth compared compared third key May. strong, our the revenue percent quarter quarter remains first for our to and the including all-time of XXXX accounts the Picky improvement XXXX. e-commerce in a Moreover, year AOV ago, in XX% in All a DXC of acquisition metrics to business Bars reflecting XX% second the total, continues on as in and business. of third XX% basis DXC quarter XX% a equally

Door in from a rise XX% lumpiness up strong previous nearly our sequential reflecting versus with basis, count an XXX% and of QX, early last this of QX. was comments club momentum increase to continue on sharply around rising Importantly, about the business year.

wholesale of creamers and a at and XX% liquid revenue. year-over-year and XX% for coffee SKUs seasonal adding doors, HAV dollar Safeway existing on accounted in basis in increase sales approximately placement shelf expanded Gross also Sprouts. We in increased the

continue operational improvements spoils, the a maintaining benefit reduction rates We XX% product, around in from average XX%. including fill DC our while refrigerated in to

Coffee, solid exclusive related and Category timing business club to a and XX% by driven year's due strength Rest with sales, to shelf-stable year-over-year Prebiotic remains XX% Greens channel. Hot a and enhancing club the gains Activate Recover, our one Tea another Renew Finally, on of XX% quarter. refrigerant increased initial growth club during quarter trial delivered third to compared with broad-based quarter. during creamers beverage liquid was last in year's Cholate of basis on down on products, club QX to and exception XX%, including our growth Hydration Creamers business, and last new third supplements last Immune. year. up Daily overall the large in trial & increased

continued business to hot healthy our non-club coffees functional and new attributable mostly functional exhibit to our However, chocolate. growth, our

Finally, another snacks solid our harvest we from other food had items. contribution and

category harvest by gains in nuts. were snacks in baking mixes, period. quarter category of updates year pili shelf-stable the revenue timing are the additional snack continued expected prior in have our of $X.X creamer and and was Third sales liquid now Growth of success XX% in up a new driven the Picky million on from additional our this we from no new There launch. QX,

in are product this making on expanding we solid not reformulation While new anticipating are efforts from co-packer progress any XXXX. we and relationships, contribution

final CEO, in candidates. on our and we search a are new well honing Regarding for underway

have We specific that who potential values candidates are define level, also live experience next to our to the caliber LSF looking the the that drive and pleased of the we for by business. take CPG are

up a with me initiatives. Let my wrap update on ESG brief our overview

actively projects. we Eden On pursuing the with ESG front, our last with carbon-neutral our business, explosive still growth of online initiatives mile are

solutions. in committed to world carbon is necessity constantly and looking a choice, no longer is the we for today's something feel neutrality we're As

issues unique committed are to care as we something solve In well quarter workers. part our results our to frontline a well looking customer our as with omnichannel supporting DNA we are play consistent ESG as for ID.me, also own powerful, America internally summary, and good our a the where third on We platform. opportunities with growth in partnerships product as our security algorithm, working constantly help and innovation Feeding our food external engagement were which and leverages of and efforts both country are critical part. across can

enormous market gains call well and total opportunity, our the for to Scott foreseeable an future. talk over for the operations. is significant addressable have growth that, We turn growing positioned and about share brand With to I'll

Scott McGuire

Thanks, Paul.

approach: are our velocities and gave complementary and it As the while Xx equally improve make did previous the efficiently, of quarters I've in existing more lines more improvements we shared plus ourselves, our quarter, implementing more units company. and again, and to selling Laird, X it the Summarizing new during on move faster smarter largest highlights we and to at my my here, made us first XMs it one installing and throughput others. notable SKUs and technology our manufacture

in we Our team made smarter. more it progress on moving didn't it efficiently, also just work making

liquid improved doubled growing freight this to pellet month our First, of inflation. sizes, fuel revenue our position, the DC we quarter, drop in our and which In converted efficient production and of capacity the world is business. in last constraints per cycle, a more essential

enhanced occupancy process at the and is center. Secondly, my most have reduces This new PIC puts we've much terms seen executing our customer our and thinking for right like new inventory a company, additional fulfillment may announcement storage, so owners in only to we capability achieved our accomplished. got allows third-party fingertips, and the serve importantly, customers the everyone at cost. provides way of And in you

trucking congestion and our Given unique the Largely, what impacted dividends. inventory shortage? inventory mind everyone's strategy from of against input chain and bypass inflation. That so inflation when the provided the many continued us But ingredients about the at driven safety security most some the implementing importantly, question edge supply ports pay overseas, most at is year come by ports. of most and we the last we to has front balance began the COVID the recent stock started

sitting celebrating However, and great addressed and being and decisions are made and actions. very we through Freight, last our material real our long-term are are year. labor back pressures, we're facing short- suppliers cost not

efforts sales. combined a and help very impact, with using strategic to are pricing provide we prioritizes that and productivity little balanced any, if revenue approach unit efforts, that Specifically, margins

let our the Now Valerie turn to CFO. me call Ells, over

Valerie Ells

Scott. Thanks,

processes we $XX.X points We the shelf against comparable million, equally and contributor, further retention. costs, improvement margin last and and line was demonstrating Gross XX% metrics, refrigerated over improving XX% our strong with wholesale, production given were including as improved operation pleased liquid we was elevated costs. year. well partially on also in on went a given in mentioned, of DTC club top the wholesale a improvements efficiency essentially Paul flat These increase business AOV disposals, life and an growth strong parcel in the improvements a period basis leading optimization key year by our logistics sales prior XXX inventory as a and XX.X% As of quarter. that to costs. net DTC largely basis as quarter with up reflecting improvements had were XXX%, creamer and in offset fulfillment-related optimized continued year-over-year up

materially scale-related drive XX% Total the notable the levels quarter. with X the future efforts are other expenses when ongoing prolonged that significant or quarters have margin gross efficiencies. at from processes, million looking quarter. net were from control relative issues. freight efficiencies changed this made expense trend, lowest we and the the will and and inflationary to we expenses, And operating during believe our quarter strengthening to production you'll costs not continue see of encounter third expense past and improving Related we during reflecting headwinds improvement drive included had While second very pleased we've expectations sales operating in rising ratio $X.X the third our in quarter as quarter, expect rates to to progress sequential

predominant only maximize to to sacrificing for build-out our sales area efficiency a moving to the $X.X public After continue net business finding the the shifted in will required operating not to to and required an incremental now quarter. opportunities be compared have us as third we leverage focus of it Specifically, completing million quarter to expense drive support This of in increase company, forward. our growth. while second $XX,XXX a

XX% to becoming of continued continue year, a to in attributable largely the ago quarter. was expense Compared fees quarter G&A intangibles. sequential in in sales a of professional XX% linear progress and marketing areas manner. the including in the versus expense our the of factors. XX% to relative to coming factors and a personnel sales compensation increase, third company the the a and always of XX% year XX% business, company XXXX, several in stemmed the costs pressured versus the increases Noncash sequential quarter. to other made for the perfectly offset levels third not increase as in XX% in similar net the and up the improvement QX public public spend. make expense comparable from to factors combination here Insurance though XX% expect last of amortization prior were in ago stock-based quarter. by period of marketing of in G&A be majority We quarters, and expenses stock-based advertising was quarter the net G&A compensation also costs costs, Sales third lower and of partially were year in personnel from to to quarter and The

while driving $XX remains on continue essentially will to and noted, very maximizing debt. Our remain strong forward we across toward of you. focused million investments the back Paul, no nearly with and leverage as it pass balance business profitability growth sheet rates. And I strong to maintaining our cash

Paul Hodge

for everybody, time Thanks, today. your

see our as in become take ready player industry and leading we natural on your latest to for food the we beverage you now leveraging are your results, powerful to Superfood Operator? track remains our As omnichannel from Thanks platform. a can questions. continue Laird and support,

Operator

[Operator Instructions].

Burleson question comes of the Bobby from First line from Canaccord.

Robert Burleson

-- can you just me? guess, hear I So

Paul Hodge

yes. Yes,

Robert Burleson

Okay.

I doesn't just for on the mean quarter. prepared Has didn't the that outlook that see versus last remarks. balance guys the year anything What anything changed? missed. curious necessarily So anything It I what is? said the you of in

Valerie Ells

So nothing's changed.

our in like I are on early XXXX still annual will cycle March. reporting providing But feel be We targets. point, for track for at this likely year-end guidance our on we

Robert Burleson

There there? QX? QX Great. club acceleration downtick of there's the terms a obviously, season? last there, And in Okay. ahead stores, happening Curious happening noted what's Or some if holiday of with anything there in versus year. was

Paul Hodge

for club. Actually, QX of exceptionally was it was was, over flat QX. with QX last an which quarter then year, XXX-and-something percent much big pretty And what,

It's business of to offering still is nature of that a we're some So year can strong of end SKUs great of But that our just the into very playing significant over the that years a cycles. But been business. growth be can for QX. down has It's a just fill Costco club X QX. of -- the rolls that's lumpy. the right couple There of a for business kind expand with the of come year better-for-you got up with We next and now, and at very, the the them end from factory. with with the Costco. SKU tool very them to year. relationship exploring We've for series now customer acquisition other Superfood creamer, a sort

the it but business, lumpy. So we're is excited about

Robert Burleson

Okay.

takeaway you mean I again, nice year, delivered I guys tough last QX. guess, sales So compare a the club versus for

Paul Hodge

Yes, yes.

Robert Burleson

the How is is to co-manufacturing capacity have there or process Okay. co-packing guys you support, look from able How alternatives? parties to third been out going? And terms then of tight find as that out XXXX? you just in aseptic

Paul Hodge

Yes. in we've it there's and bit to same, that our adhering hard little now. co-packing industry. easier to functional and industry bit a on of Certainly, multiple label, clean the work value We've with relationships pretty clean We've to is unique working but a to our little enough. expanding aseptic guidelines of capacity demand product co-packers our problems a still strict while to our also the is it lot which changed ingredients, formula been the very little make produce been

we've And Certainly, any be revenue headway. great it been from for XXXX. so making won't

all this say specific that the at making is have and at getting back -- I making we're We're a date. progress, can great formula. looking we're don't So up suppliers we progress But XXXX. on point,

Robert Burleson

expect definitely freight costs And for headwinds are other year the But a Great. positives of Okay. we comment happening intact, given there? so Val, it are some margin about lift, you margin there's your where like gross overall made there. should gross on maybe if that this sounds some some targets

Valerie Ells

we're going And to to Well, that room team where progress. with inflationary we leverage they're more there's there happy believe that for lucky as but base. well. definitely labor even in But out. for the gains, had of a great making strong real the enough defer We've to are further in are his been our going XQ, overhead and pressures real. shook do and and factory some business We future, be efficiency Scott the as be those, for

make and last to very targets something realistic to expectations bar not we unrealistic did want or putting So of just being we forward. the the in sure that again, moving unachievable we're QX. with But call those still confident set in

Robert Burleson

revenue And that's obviously gross margin targets. and

So...

Valerie Ells

correct. That's Yes.

Operator

Next on the Craig-Hallum queue is Alex Fuhrman Capital. from

Alex Fuhrman

been segment. that the just really that perhaps there's the the was or business just timing some quarter wholesale benefited your curious driving this that huge a of orders. pretty has I growth mentioned items quarter have So know recently? particular for I'm from in wholesale And you any But retailers that if

Paul Hodge

Costco the products, that, business are that kind did SKUs is The by regions. quite Costco of due customers, year really quite great And a we business. the hoped more looking any again, We a And of a wholesale the next diversify just adding business, year of did we from got stabilize customers resets lumpy pushed sort customers. resets just lumpiness are COVID on next bit -- little some a year. adding from as we'd gains of not that of the customers. category is bump Costco QX there. just It's love numbers the strong been around. still and this some But great. solid to you're and to then issues but we're a We it's very we new performing expanding business. well quarter. which growth. consistent as think with it's making steady Costco many different throws Having bit our to with little wholesale lost business a wholesale and getting the relationship, said quarter-to-quarter, -- just have it in still retail if haven't including number, some I in We're Costco large of But lumpy

Alex Fuhrman

mostly LSF.com you've products? they some about thinking course, lately really new about showing Are the And these of viable core just that of customers well? Or products made have a your just could of after? your of product Picky great. Can as trying of existing wholesale you a perhaps who these new them they then lot online that the That's and, talk channel are targeted in products new acquisition assortment, Bars. been any signs have sales launched

Paul Hodge

absolutely. Yes,

online, and is very to a quarter what products still reminder, it bigger. and from us launch hard-core as is about cost which just model, love to a them is really So bigger business little getting these which get rapidly quarter our with base, we customer take we quarter test to growing to

really And of what so part out is what filling ritual. doing we're we call our daily

morning system a is the things done day. value. up the utilize can And like products business that's from through for average driven that it's online night, So people what to different order

them strong new different adding aspect. consumers which online it exciting to also the is any that we are it thing back to tweaks, come from more we we channels bigger to to is sense trial do X consumer cart. the is or will launch we the their XX try minimum an people wholesale these top-performing new as any of see product of to products maybe those get just some benefit into acquisition, they also So But some of Subscriptions, of to customer if need to and as And we're launch. communication, tried that business kind into for products is. the kind items into another grabbing site a online doesn't test anything direct how packaging try different to products. start And if they'll the products, do then products our need going are then to necessarily other new we like require customers that push like to those it, fold. wholesale like products channels. and sometimes indications their try there's to all the wholesale. If months as mean they that. What that new and of products, for different haven't But a effort And flavor really them tweaks bigger take bringing those see

got just we're functional we've creamers we've front. really driving with a the that of products copies and shelf-stable of left focused both because far, so our liquid And on been runway our lot the and

very So especially people cautious sell just wholesale more business of that is we're into and cycle a expensive. longer with. dilute distributors to fills being and deal efforts and it's not We've free got those and and lot to brokers a the much to

test will we it's not and online, winners. of of getting great right quarters those the place we're feedback some those blockbuster but are great into couple we great a So getting had now. that. take we're sure We're and rushing to making products, true that products products, And

Operator

George on our ROTH is from Kelly Partners. queue one Next Capital

George Kelly

hear you can Paul, me?

Paul Hodge

hear can you, we Yes, George.

George Kelly

question, I first I my time. whole I'll on mute the and through was Gosh, got over. start

next and quarters? X that break a liquid down a sequential jump. the is, business. was I So over there if on then expectations between could part second and creamer of curious can big quarter, you And give the business the on that on few us you the question you improvement question the the for you Congrats saw update an segment for liquid shelf-stable.

Valerie Ells

that. take can I Yes.

Paul Hodge

Sure. Yes.

Valerie Ells

underlying shelf-stable that is in terms rest quarter Costco business. if was not it business, of bulk liquid. refrigerated But QX. -- the creamer so to a the was just of our believe creamer was of that. of about of this your The $X both -- related obviously sequential business those, creamer, business just I still sequentially. powdered shelf-stable predominantly, nice then the shelf-stable all, lift XX% So powder million excluding nice from our up see south we from growth

George Kelly

the what of the Any quarters? liquid couple great. some have business been the for Okay. just next That's around of happening plans changes the then around kind And update of that about there?

Paul Hodge

are shelf news now, with life of waste minimum a are sort in our are mean, there's as then the limiting big And longer XX% we've of shelf life, back liquid numbers, We've the of fill want and to to earlier retailers that They then I our yes. a X days XX%. And higher. just creamer. single lot X, Yes, that many the a the down much bit big, XX some also big little great year was from that refrigerated ago got now to achieved. XX door numbers, shelf see about to digits. which really, rates factor growth were -- months our also,

So average industry along the sort of numbers.

product. product. shelf that well, I is So customer guess, selling Whole flavors. that now really really seeing strong we're incredible, some Foods the we some And continuously, strides season and made we're doing areas in expanding a on big the loss we're

course, a broader more So true flavors mainstream label, also But that that packaging we've a of of into and ingredients. we of sort unique functional guess, bit some kind got the new the it, appeal of, fresh to clean little sort I has we're that audience, mix popular pulling that still know. flavors

the bulk And in with talking the doors really in a liquid on just side, to on have is different and the And well. and in So shelf-stable. that's sometime get channels schedule, a when the dial shelf-stable versus well, XXXX. on same working the the you're or to focus then product of product online on refrigerated front, opening various sell still and the working hopefully those Amazon we're that conventional to of as an do opportunity store with lot on the venues formulas in where and we're on product co-packers other great is liquid volume refrigerated business

George Kelly

That's Bars, distribution. Picky on for separately, then a And Okay. you question Great. helpful.

distribution those are to it plans of products? So is there entirely e-commerce? broaden And

Paul Hodge

soon. packaging. year pretty well, expect And the in big in the we still next making to got on the the some our make integration Picky of switch our a And We've selling with brand with in those channels, but mind, very of are which website, it interested started was is we're wholesale we products last And we're have QX expecting the the full been thing go the we're the the we meantime, big Superfood -- into customers front. catalog again, working e-commerce. In we're It's October. with also the business product, Superfood to been has as month, still tweaks very so that in Laird Picky a sort integration on coming We've exceeding product. internally. is side. forward. very that phase, the the all The wholesale making going bulk branding expectations or rebranded slight a And on And Laird is going before Yes. rebranding we move well. very then on meeting then keep wholesale -- we some in which we're push of sort wholesale branded the having just

the side, is Picky even change, sort of other is actually seeing expect grow definitely and pretty Picky on we brand the didn't that. on we're note the which with subscriptions good So exciting,

in we So to market future. to to really all and there, do M&A very this hope accretive the shareholder the and make like good prove that them we deals can value

George Kelly

just That's great, last great. is new question around me And that's for products.

you of products categories look most focused opportunities exciting new for products. of there you you are certain your there's to most maybe new where stuff? as So the portfolio are where to Like think year, next launch

Paul Hodge

to and new the there's we're on released what products Well, of slow off, focus I'd amount We've big say that going down -- a catalog probably have. we next right got pretty And first products year there's now. a some a cases, of more new to little product. some a we easier need bit launching And that's into. in seeing actually put some signs incredible -- some really just than early we're focus are that

#X sector So about potential. strongly. creamers. to that excited We're on The what huge, amount focus of coffee sight lot the mixes, we huge creamer to business snack the baking products with business those have been a have. never And we pretty has category, we're lose are all course, of performing going going priority really a still and in

And new have. already some products we product for categories the be some complementary so that launches, big on year. we most focus next really hone that will but will we're while in the them of to of be there in There

Operator

And there queue. to I now back turn will questions are no further presenters. the our in the over call

Paul Hodge

your goals through and Yes. Superfood a its support making place achieve the and for helping Thank nutrition, you, everybody, in and Laird better health wellness. listening for world in

As saying, we better people believe ultimately, and a better and world. the food leads happier healthier to

So thanks again, and aloha.

Operator

for This concludes call. participating. conference Thank today's you

You may disconnect. now

Laird Superfood (LSF) 11 Nov 212021 Q3 Earnings call transcript