Business context and reporting period
Laird Superfood, Inc. filed this Form 10-K for the fiscal year ended December 31, 2020; it is an annual report, not a standalone fourth-quarter filing. The company sells plant-based and functional foods, led by coffee creamers, through online, wholesale, and food-service channels. It completed its IPO in September 2020 and operates as one reportable segment.
Key financial metrics
| Metric | FY2020 | FY2019 |
|---|---|---|
| Net sales | $26.0 million | $13.1 million |
| Gross profit / margin | $6.8 million / 26.2% | $5.1 million / 38.8% |
| Operating loss | $12.9 million | $8.8 million |
| Net loss | $12.9 million | $8.5 million |
| Net loss attributable to common stockholders | $14.5 million | $1.1 million |
| Cash used in operating activities | $14.7 million | $9.4 million |
At December 31, 2020, cash and cash equivalents were $57.2 million, restricted cash was $0.3 million, and available-for-sale investments were $8.7 million. Current assets were $76.0 million and current liabilities were $2.7 million. Debt consisted of a $51,000 forgivable City of Sisters loan; revolving credit balances were zero, with $11 million of borrowing capacity reported as available. Total assets were $82.3 million and stockholders’ equity was $79.5 million.
Changes versus the prior year
- Net sales increased 98%, driven by higher sales volume in online and wholesale channels; products launched after 2019 contributed about $4 million of 2020 gross sales.
- Gross margin fell 12.6 percentage points. Management cited higher labor and co-packing costs, air freight for raw materials amid demand increases, liquid-creamer launch disposal costs, and outbound shipping costs, including free shipping on direct online orders.
- Operating expenses rose 43% to $19.7 million, including higher general and administrative expenses, marketing, and product development. General and administrative costs included IPO-related expenses and a $0.24 million asset impairment.
- Operating cash use increased, partly reflecting higher costs and a substantial inventory build. Financing provided $75.2 million, principally from equity issuances associated with the IPO and private placements.
Outlook, risks and unusual items
Management expects operating losses to continue for the foreseeable future, but believed year-end cash and cash equivalents would fund operations and capital requirements for at least 12 months after the report date. No specific revenue or earnings forecast was provided. A 2021 incentive plan adopted after year-end ties awards primarily to net revenue and gross-margin goals.
COVID-19 increased demand for shelf-stable products in 2020, but its future effects on demand, suppliers, production, and distribution remained uncertain. Key risks include limited operating history and continued losses; margin recovery and scaling; reliance on concentrated suppliers and international sourcing; dependence on Costco, Amazon, and other distribution partners; food safety, labeling, and regulatory compliance; commodity and freight costs; competition; and reliance on founders and key personnel. Costco represented 23% of 2020 net sales, Amazon 21%, and one supplier represented 36% of purchases. The company reported no material legal proceedings.
Unusual items include the September 2020 IPO, which generated approximately $62.0 million in net proceeds, and a $2.0 million concurrent private placement to Danone Manifesto Ventures. The 2020 common-stockholder loss includes $1.65 million of deemed dividends related to preferred-stock financing; the 2019 common-stockholder loss was reduced by a $7.45 million deemed contribution from a preferred-stock redemption. The independent auditor issued an unqualified opinion on the financial statements; the auditor did not opine on internal control effectiveness.
Important facts for investors to verify
- Whether strong sales growth can continue while gross margin recovers from 26.2% and operating losses and cash burn narrow.
- How the company’s concentrated customer and supplier exposures, including Costco and the supplier representing 36% of purchases, have changed since year-end.
- Whether inventory growth, returns and discounts, and product-launch costs affect future cash conversion and reported margins.
- Actual cash runway and capital needs against management’s 12-month liquidity assessment, including planned warehouse and capacity investments.
- Progress against the 2021 revenue and gross-margin incentive goals, and any subsequent guidance or material changes in COVID-19, supply-chain, or demand conditions.