Laird Superfood, Inc.

acquisition and gains in winning the buy box for our core products. I am also pleased to report that net sales from our wholesale business increased in Q3 by nearly 13% year over year. In the natural channel, as measured by spins, our growth rate for the 12 weeks ending October 6, 2024, was 27%, driven by double-digit top-line growth in all of the products that we measure, including powder creamers, liquid creamers, coffee, and instant lattes. This growth was driven by a nearly equal split of distribution gains and increases in our sales velocity. In MULO, we grew even faster, up by 40% in the same 12-week period, ending October 6, 2024. And while we remain strategically cautious in expanding to the conventional grocery channel, I'm going to tell you that you'll soon be able to find more of our products in new stores in several retailers across the country, including Kroger, Albertson Safeway, Wegmans, and more. Moving into operations, our supply chain team continues to do a solid job of supporting our growing business. During Q3, we expanded our gross margin to 43%, which represents a 12-point increase versus the third quarter of 2023, and marks the fourth straight quarter that we have achieved at least a 40% gross margin. This improvement was driven in large part by the strategic sourcing of our top ingredients, where we will continue to focus during 2025. Our biggest operational challenge in the third quarter, and frankly, throughout 2024, has been in keeping product on retailer shelves and available to our e-commerce consumers. Because we have consistently exceeded our growth targets during the last few quarters, our supply chain has been in a perpetual chase throughout the year. The team has done an admirable job of juggling ingredient supply and manufacturing availability, essentially playing a game of whack-a-mole as they've moved from issue to issue. And while there have been some minor out-of-stocks during 2024, we remain in a strong inventory position and expect to be back fully in stock for the important Black Friday events and holiday buying seasons. I also want to share some of the progress that we have been making in building a more environmentally sustainable business. During the past year, we have been able to introduce 30% or more post-consumer recycled material into all of our Gusseted creamer pouches, as well as our nutrition and protein bars. Impressively, we have done this without any significant incremental cost to our business. This is a meaningful ambition for our team and to our consumers. And we're in the process of outlining additional goals and creating a multi-year sustainability program. Many of you were with us during the turnaround that we executed over the past couple of years. And I'm pleased to be able to assert that we are now solidly into the transformation of Laird Superfood into a high growth premium branded business with strong gross margin. But rather than asking you to take my word for it, I want to take a moment to dimensionalize it a bit so that you can internalize it. Thus far in 2024, our net sales have grown by nearly 27%. At the same time, we've been able to increase our gross margin by 15.3 points, going from 26.4% gross margin to 41.7%, which is well ahead of our financial goal to maintain gross margin in the high 30s. Our net loss for the three quarters of this year has been shaved to less than $1.5 million. which is nearly a $9 million improvement versus the same time period last year. And during the last 12 months, our cash balance actually increased by $776,000 from $7.4 million to more than $8.2 million as of September 30th, 2024. And while Q3 and the entire 2024 financial performance has been a tremendous improvement, versus our historical performance at Laird Superfood, we are even more excited about the future opportunities for our brand and business. As we have shared before, we still have a tremendous amount of white space to expand distribution and drive sales velocity growth within the natural channel. And we have not really even begun to expand into the conventional grocery channel or into the massive on-premise channel for food consumption. We remain confident that we can continue to build our e-commerce business behind relevance and engaging content from our founders and other influencers within health, wellness, nutrition, and fitness. And as consumers increasingly seek out healthier and more natural foods, our Laird Superfood portfolio is perfectly positioned to fuel them in their journey. With that, I will now turn it over to Anya to discuss our third quarter results in more detail.

Thank you, Jason, and good afternoon, everyone. As Jason noted, in the third quarter, we have continued to make progress, executing the strategy we articulated earlier in the year, which is to return the business to growth while improving profitability. I am pleased to share with you that our third quarter results were strong on every key metric, building on the first half of the year momentum and delivering significant improvements versus the same period prior year. Net sales grew 28% to a record $11.8 million compared to $9.2 million in the prior year period and were up by $1.8 million sequentially versus the second quarter of 2024. Our e-commerce channel led the company's growth, increasing by 42% year-over-year and accounting for 58% of our total net sales. Sales on the Amazon platform had by far the best quarter in the company's history, delivering an impressive 133% growth, driven by outstanding commercial execution and a better in-stock inventory position. Director-consumer platform also grew 10%, 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 13% year-over-year and contributed 42% of total net sales, driven by 36% growth in retail channel from new distribution and velocity acceleration, as well as more efficient promotional spend. This was partially offset by timing of club channel orders. Gross margin for the third quarter came in at 43%, reaching a new high and expanding 12 points versus last year. This margin expansion was driven by supply chain cost savings initiatives, specifically from a strategic shift to direct procurement of key raw materials, settlement with a supplier to recover costs previously incurred in connection with the quality event experienced in 2023, as well as reduction in inefficient trade promotion spend. I am pleased to highlight that this is the fourth consecutive quarter where we have achieved gross margins at or above the 40% threshold. These results further support our expectations for sustainably achieving gross margins in at least the high 30s in the coming quarters. Operating expenses decreased $0.3 million in the third quarter compared to the third quarter last year, driven by lower sales and marketing costs, as we improved the efficiency of our marketing programs. This was in part offset by higher general and administrative expenses, driven by higher professional fees and stock-based compensation, which is a non-cash expense. Operating expenses as a percentage of net sales were lower by 16 points compared to the prior year quarter, as we focused on ongoing expense management in order to improve our bottom line. Net loss for the third quarter was $0.2 million, which is $2.5 million better than during the prior year period. Turning to our balance sheet, we ended the quarter with $8.2 million in cash, and I am particularly pleased to report that for the second quarter in a row, we have delivered a positive quarterly cash flow, which was $374,000 in Q3 and totaled $495,000 for the first nine months of the year, reflecting our improved performance and disciplined management of our working capital, which decreased year-over-year excluding cash, while driving year-to-date revenue growth of 27%. We also have no debt outstanding and no expected need to draw on our line of credit. We continue to project that we have enough cash to fund our operations as we grow our business and make operating improvements that drive us towards break-even and profitability. Overall, we're still confident about the remainder of 2024. We expect continued growth in our core business segments as we remain focused on executing our strategic priorities. As such, we're increasing our full-year guidance on both net sales and gross margin. We now expect net sales to be in the range of $43 to $44 million for the full year 2024, which represents 26 to 29% growth versus prior year. And gross margin is expected to expand to approximately 41 to 42%, representing 11 to 12 point improvement versus 2023. Looking ahead to 2025, we made a decision to strategically focus on growth. And in doing so, we expect to achieve 20 to 25% top line growth and to manage our P&L to positive cash flow and EBITDA. And now I will turn the discussion back over to Jason for any closing remarks.

Thank you, Anya. And thank you once again to all of you who are supporting our journey at Laird Superfood. Our last four quarters demonstrate an incredible turnaround in our business, one where we not only have shored up our finances, but have also returned our business to best-in-class growth rates in the industry. Operator, this concludes our prepared remarks. And we are now ready to open the call to questions.