Laird Superfood, Inc. — 2022 Form 10-K Summary
Business context and reporting period
The filing reports the fiscal year ended December 31, 2022, with quarterly data for the fourth quarter. Laird Superfood sells plant-based and functional foods, including coffee creamers, beverages, hydration supplements, and snacks through e-commerce and wholesale channels. Its strategy includes expanding distribution and moving from in-house production to a co-manufacturing model.
Key financial metrics
| Metric | FY 2022 | FY 2021 |
|---|---|---|
| Net sales | $35.8 million | $36.8 million |
| Gross profit (margin) | $5.2 million (14.5%) | $9.4 million (25.6%) |
| Operating loss | $40.4 million | $24.0 million |
| Net loss | $40.3 million | $23.9 million |
| Operating cash flow | $(14.3) million | $(22.1) million |
| Cash, cash equivalents and restricted cash at year-end | $17.8 million | $23.0 million |
| Available revolving credit | $5.0 million | $12.7 million |
There was no outstanding debt under the revolving lines of credit at year-end. The company reported accumulated losses of $96.1 million. Management expects further operating losses, but believes available cash, expected operating cash flow and financing activities will meet requirements for at least 12 months from the filing date. Cash declined by $5.2 million during 2022.
In Q4 2022, net sales were $9.0 million, gross loss was $0.4 million, operating loss was $15.7 million and net loss was $15.6 million. The Q4 loss included substantial impairment and exit-related charges.
Material changes versus the prior comparable period
- Annual net sales fell 3%, with weaker direct-to-consumer sales and lower wholesale sales, partly offset by Amazon growth and retail-channel gains. E-commerce remained 62% of net sales and wholesale 38%.
- Gross margin declined to 14.5% from 25.6%. The filing attributes the deterioration to promotions, inflation in materials, packaging and freight, lower production-volume absorption, and one-time transition and inventory charges.
- Operating loss increased by $16.4 million. General and administrative expense rose 86%, primarily due to goodwill and other asset impairments and costs of exiting in-house production and facilities.
- Cash used in operations improved to $14.3 million from $22.1 million, partly reflecting lower inventory. Investing activities provided $9.0 million in 2022, mainly from asset and investment-security sales; 2021 investing cash use included the Picky Bars acquisition.
- Goodwill was fully impaired, and acquired customer relationships and trade names were also impaired. Total goodwill and long-lived asset impairment recorded in 2022 was $12.8 million.
Outlook, commentary, risks and unusual items
- The company ceased in-house manufacturing and fulfillment at year-end 2022, closed its Sisters, Oregon facilities, and shifted production and logistics to third parties. Management expects the variable-cost model to reduce overhead and strengthen margins; execution and third-party performance remain important uncertainties.
- Management provided no specific revenue, earnings or margin guidance. It expects continued operating losses and says it will continue to optimize spending and gross margins.
- A product quality issue traced to a coconut milk powder supplier led to a product withdrawal. The company recorded $0.6 million of inventory obsolescence in 2022 and expected less than $0.5 million of related costs in Q1 2023.
- The filing identifies supplier and geographic concentration, commodity and freight inflation, competition, customer acquisition costs, consumer demand, food safety and labeling regulation, and reliance on key brand figures as material risks. One supplier accounted for 48% of product purchases in both 2022 and 2021; Vietnam represented approximately 48% of 2022 raw-material and packaging purchases.
- The company accrued $0.1 million for an ongoing product-labeling class action. It stated that it did not expect the matter to materially affect financial position, while noting litigation outcomes are uncertain. No other material legal proceedings were reported.
- Management said disclosure controls and internal control over financial reporting were effective at year-end. A material weakness related to a Q1 2022 earnings-per-share calculation error was corrected and management reported remediation. The auditor did not provide an internal-control attestation, consistent with the company’s emerging-growth-company exemption.
Important facts for investors to verify
- Whether outsourcing delivers improved gross margins and lower operating costs, and whether the company can maintain product quality and reliable supply.
- Cash burn, liquidity and access to the reduced $5.0 million revolving facility, including its renewal and collateral terms.
- Trends in DTC customer acquisition and retention, promotions, Amazon and wholesale sales, and product-level performance.
- The financial and operational effects of the coconut milk powder withdrawal, including follow-on costs, and developments in the labeling litigation.
- Whether impairments, inventory reserves and other exit-related charges are complete, and the potential for further asset impairments or shareholder dilution.