Laird Superfood, Inc. — Q1 2024 Form 10-Q
Reporting period: Three months ended March 31, 2024. Unaudited consolidated results include Laird Superfood and its wholly owned subsidiary, Picky Bars, LLC. The company sells plant-based food and beverage products through e-commerce and wholesale channels.
Key financial results
| Metric | Q1 2024 | Q1 2023 |
|---|---|---|
| Net sales | $9.91 million | $8.11 million |
| Gross profit / gross margin | $3.96 million / 40.0% | $1.87 million / 23.1% |
| Operating loss | $1.09 million | $4.30 million |
| Net loss | $1.02 million | $4.14 million |
| Net loss per share, basic and diluted | $0.11 | $0.45 |
| Net cash used in operating activities | $0.42 million | $6.05 million |
| Cash, cash equivalents and restricted cash, March 31 | $7.29 million | $11.89 million |
Gross margin and net loss margin were approximately 40.0% and negative 10.3% in Q1 2024, versus 23.1% and negative 51.1% a year earlier. Net sales grew 22% year over year. E-commerce sales increased 33% and wholesale sales increased 10%; e-commerce represented 59% of sales and wholesale 41%.
Financial position and changes
- Current assets were $16.05 million and current liabilities $4.76 million at March 31, 2024; working capital was approximately $11.3 million, as reported by management.
- Total liabilities were $4.97 million, including $0.36 million of lease liabilities. The prior Wells Fargo revolving credit line was terminated in August 2023 and was not renewed; no other outstanding borrowings are reported on the balance sheet.
- Cash declined $0.42 million from year-end 2023. Operating cash use was substantially lower than the prior-year quarter, while the company remained loss-making. Inventory fell from $6.32 million at year-end to $5.63 million; accounts receivable rose from $1.02 million to $2.06 million.
- Operating expenses declined 18% to $5.05 million. General and administrative expense fell 30%, and sales and marketing expense fell 6%. Cost of goods sold declined 5% despite higher sales.
Management commentary, outlook and risks
- Management attributed the gross-margin improvement to the variable-cost third-party manufacturing model, higher sales, and reduced trade discounts compared with elevated prior-year promotional spending associated with a quality event and out-of-stocks.
- Management said it expects additional operating losses, while continuing to optimize spending, expand gross margins, and manage inventory and working capital. It believes existing cash and anticipated operating cash flows will fund foreseeable requirements for at least 18 months; this is a forward-looking estimate, not a guarantee.
- After quarter-end, on May 7, 2024, the company entered a receivables factoring agreement providing up to $2.0 million on a revolving basis. Advances may be up to 70% of eligible receivables; the funds-usage fee is prime plus 1.5%, subject to a 10% minimum, plus a collateral monitoring fee. The agreement grants the purchaser a security interest in substantially all company personal property and fixtures and includes potential account repurchase obligations.
- Key disclosed risks include reliance on third-party manufacturers, logistics, suppliers and distributors; customer retention and acquisition costs; competition; supply-chain and product-quality issues; continued losses and capital needs; and possible dilution from future equity issuance. Three customers accounted for 42% of Q1 sales, and three customers represented 70% of period-end receivables. Suppliers accounted for 59% of Q1 purchases.
- The company reported no material pending legal proceedings, no material changes to its previously disclosed risk factors, and effective disclosure controls as of March 31, 2024.
Important facts for investors to verify
- Whether sales growth, improved gross margin and lower cash burn persist beyond this quarter, particularly given the comparison with the prior-year quality event and out-of-stocks.
- Actual cash runway and working-capital needs, including receivables collection, inventory quality reserves and the extent of future operating losses.
- Use, cost and availability of the new factoring facility, including the broad collateral grant, eligibility limits, repurchase terms and termination provisions.
- Exposure to major customers and suppliers, and the risk of customer concentration, supplier disruption or further product-quality issues.
- Potential dilution: the filing reports outstanding options, restricted stock units and market-based units; confirm current share count and award overhang against subsequent filings.