Laird Superfood, Inc. (LSF) Earnings Call Transcript

Hello, everyone. Thank you for joining us, and welcome to the Laird Superfood Third Quarter 2026 Financial Results Conference Call. [Operator Instructions] I will now hand the conference over. Please go ahead.

Thank you, and good afternoon. Welcome to Laird Superfood's Third Quarter 2026 Earnings Conference Call and Webcast. On today's call are Jason Vieth, Laird Superfood's President and Chief Executive Officer; and Mark Johnson, our Chief Financial Officer. By now, everyone should have access to our earnings release, which was filed today after market close. It's available on the Investor Relations section of our website at lairdsuperfood.com. Before we begin, please note that during this call, management may make forward-looking statements within the context of federal securities laws. These statements are based on management's current expectations and involve risks and uncertainties that could cause actual results to differ materially from those described. Please refer to today's press release and other filings with the SEC for a detailed discussion of these risks and uncertainties. And with that, I'll turn the call over to Jason.

Thank you, Trevor, and good afternoon, everyone. I'm Jason Vieth, President and CEO of Laird Superfood, and I'm joined today by Mark Johnson, our Chief Financial Officer. Mark joined us on October 1. He was most recently Vice President of Finance, North America at Tropicana Brands Group. He brings more than 25 years of finance leadership across public consumer packaged goods and private equity-backed companies in beverage, food and premium pet food. Prior to Tropicana, Mark was Vice President of Commercial and Supply Chain Finance at Champion Petfoods, where he helped drive significant profit and sales growth. Mark previously held multiple senior finance leadership roles at Danone and WhiteWave Foods and spent a decade at the Pepsi Bottling Group in corporate planning and finance roles. We're pleased to have him on the team as we continue integrating the platform and focusing on sustainable, profitable growth. I'm also pleased to introduce Matt Kuusinen, our new Senior Vice President of Supply Chain. Matt joins us from Horizon Organic, where he served as Chief Procurement Officer. Prior to that, Matt spent nearly 2 decades in Danone in senior supply chain roles, including VP of Supply Chain for Beverages and VP of Supply Chain for plant-based and premium dairy. Along with earlier leadership positions in sales and operations planning, procurement, plant operations and continuous improvement. His deep experience scaling supply chains in plant-based and premium food and beverage will be a strong asset as we continue to integrate our brands, drive synergies and support the growth of the platform. I've had the privilege of working with both Matt and Mark in the past, and I expect it will be a smooth transition as we add them to our management team. Q3 was another important quarter in the build-out of our superfood platform. Net sales increased 225% to $42 million, driven primarily by the full quarter contributions of Navitas and Terrasoul, along with continued distribution expansion in the retail channel. We delivered net income of $1.7 million, or $0.10 per basic and diluted share, and adjusted EBITDA of $2.1 million. Integration continues to progress. As we discussed last quarter, Navitas is fully integrated into our processes, organization and ERP system. Across Navitas and Laird, we are operating as one team with shared processes and accountability and are presenting a unified face to customers, distributors and partners. We are now applying the same disciplined approach to Terrasoul. Accounting and finance are furthest along, while systems and operational integration are now getting underway. We are also expanding the Laird brand platform with several new launches designed to meet continued consumer demand for convenient, functional and high protein options. These include a functional instant coffee line, electrolyte coffee powders and coffee protein bars. These innovations leverage our core coffee and superfood strengths, broaden our relevance across more occasions and support both retail and e-commerce growth. We are also progressing an updated portfolio of concepts for Navitas and Terrasoul, which will result in robust 2027 launch platforms across the combined business. The early synergies from bringing these 3 business platforms together are visible in the results. Adjusted EBITDA of $2.1 million reflects the contribution of the acquired brands and the cost and operational synergies we are beginning to capture in the supply chain, shared overhead and marketing. We expect those benefits to continue building and for continued benefits from our combined go-to-market structure to pay dividends in driving future sales. Like many of our peers in the food and beverage industry, we are experiencing elevated cost headwinds. Fuel and freight charges are up significantly, and consumers remain cautious with their wallets. We are countering these pressures through a combination of selective pricing actions in certain channels, active mix management, tighter cost containment, continued supply chain productivity work and disciplined trade and promotional spend. These steps, along with the integration synergies we are capturing, are helping protect margins while we continue to invest in growth. As I indicated on our Q2 call, we are choosing to meaningfully step up marketing and commercial investment to build our brands and drive sales growth. Consumer behaviors are shifting in ways that play directly to our strengths, and we want to capitalize on that. For example, there is a clear movement from traditional coffee pots towards convenient powder-based coffee products, and we want to ensure that we can capture a strong share of that with our powder instant latte and other coffee products. At the same time, eating patterns are being disrupted by GLP-1 users who are seeking to maximize every bite with nutritionally dense calories, and our superfood platform, with its focus on clean, functional high-quality nutrition, is perfectly poised for that demand. In the fourth quarter, we are investing incrementally nearly $2 million of marketing versus last year, and we plan to similarly increase spending in 2027. We are making this investment behind a meaningfully stronger commercial capability than we had just a year ago, and we are laying the foundation to drive continued growth from here. With the platform now at meaningful scale, this is a strategic choice to invest behind brand awareness, velocity and new distribution so that we can capture these evolving occasions and continue to grow even in a more cautious consumer environment. Commercially, we are seeing solid momentum in key areas. Amazon and other online marketplaces remain strong growth drivers across our brands. We are actively leveraging Terrasoul's deep expertise and proven best practices in marketplace operations, content, advertising and fulfillment to operationalize and scale Laird and Navitas on these platforms, accelerating their performance and capturing more of the available demand. Retail expansion also continues, building on the Walmart coffee and creamer launches and the expanded Navitas assortment at Target that we highlighted last quarter. Cacao and coffee products continue to perform well and are helping to drive category momentum. Softness in the direct-to-consumer and club channels offset some of the organic gains, but the overall platform is scaling as planned. We ended the quarter with $17.3 million in cash and no outstanding debt. This strong unlevered balance sheet supports continued integration work, selective growth investments and provides meaningful flexibility as we navigate the current environment and build the platform. In Q4, we will remain focused on executing the integration, driving growth across retail, e-commerce and Amazon and realizing the cost and revenue synergies of the platform. With the capital and strategic support of our partners at Nexus, we are well positioned to continue building what we believe can become a leading scale platform in positive nutrition and superfoods. I'll now turn the call over to Mark for more details on the numbers.

Thank you, Jason, and good afternoon, everyone. Third quarter was our first full quarter with all 3 brands under 1 roof. I will walk you through what drove our quarter 3 results and then spend some time on how we're thinking about the full year. Net sales for the third quarter of 2026 were $42 million, up 225% compared to $12.9 million in the third quarter of 2025 and up 2% from $41.3 million last quarter. The increase was primarily due to the Navitas and Terrasoul acquisitions, as well as distribution expansion in our retail channel. E-commerce was our largest channel at this quarter, growing more than 3.5x year-over-year to $22.5 million and representing 54% of our total net sales. Growth was led by the addition of Navitas and Terrasoul and strong growth on Amazon.com. Wholesale grew nearly 3x year-over-year to $19.4 million and made up 46% of total net sales, driven by the addition of Navitas and Terrasoul. For the first 9 months of the year, net sales were $97.2 million, up 166% compared to $36.5 million in the prior year period, with wholesale contributing 51% of the total net sales and e-commerce contributing 49%. Gross profit in the third quarter was $12.4 million or 29.6% of net sales compared to $4.7 million or 36.5% of net sales in the prior year period, a contraction of roughly 7 percentage points. The margin compression was primarily due to inflationary commodity costs and lower margins associated with the Terrasoul brand and its lower brand investment business model. On a year-to-date basis, gross profit was $29.6 million or 30.4% of net sales compared to $14.4 million and 39.3% of net sales in the prior year period, reflecting the same underlying drivers. Total operating expenses were $10.2 million in quarter 3 of 2026 compared to $5.7 million in the prior year period, an increase of 79%. Sales and marketing expenses increased 158% to $7.7 million, reflecting the larger scale of the business following the acquisitions, variable selling costs on higher sales volume, increased people costs as we build out the team to support the broad organization and higher marketing investment across both online and retail channels. General and administrative expenses decreased 9% to $2.4 million. That decrease was driven by a $4.1 million noncash gain from the change in fair value of contingent consideration related to the acquisitions. Excluding that gain, G&A would have been $6.6 million. That figure includes $0.7 million of business combination and integration costs, $1.1 million of amortization of acquired intangible assets and $1.5 million of stock-based compensation. These items are either onetime or noncash in nature. Net income for the third quarter of 2026 was $1.7 million compared to a net loss of $1 million in the prior year period. Adjusted EBITDA was $2.1 million in the third quarter of 2026 compared to $0.2 million in the prior year period. We view adjusted EBITDA as a more representative measure of our underlying operating performance because it excludes items that do not reflect the ongoing cash economics of the business. The increase in adjusted EBITDA was driven primarily by the addition of Navitas and Terrasoul and early synergy realization, partially offset by inflationary commodity costs and higher marketing and selling expenses. On a year-to-date basis, net income was $1.7 million compared to a net loss of $1.5 million for the first 9 months of 2025. Year-to-date, adjusted EBITDA was $3.9 million compared to $0.7 million in the prior year period. Now turning to our balance sheet. As of September 30, 2026, we had $17.3 million of cash compared to $23.2 million at the end of the last quarter. In quarter 3, we did see cash utilization increase as both inventory and receivables increased due to timing of sales and the seasonal purchase of raw materials. We expect to end the year with over $20 million in cash. Now turning to our 2026 financial outlook. We are updating our full year 2026 guidance. For fiscal 2026, we expect consolidated net sales to be in the range of $135 million to $140 million, reflecting a full year of Laird Superfood and the post acquisition contributions of Navitas and Terrasoul. We expect adjusted EBITDA to be in the range of $5 million to $6 million, reflecting our strategic decision to further invest in marketing activities to drive incremental consumer demand. With that, I'll turn the call back to Jason for closing remarks, and then we will open it up for questions.

Thank you, Mark. To summarize, the third quarter demonstrates the scale and early synergy capture of the combined platform. We are progressing the integration of Terrasoul, expanding the Laird platform with new functional and high-protein offerings while building robust 2027 launch platforms for Navitas and Terrasoul, deliberately increasing marketing and commercial investment, including an incremental nearly $2 million in Q4 and further increases in 2027 to capitalize on shifting consumer behaviors such as the move to powder-based coffee and the demand for nutritionally dense options among GLP-1 users, applying Terrasoul's marketplace best practices across the portfolio and actively managing industry cost headwinds. We look forward to updating you on continued progress. Thank you for joining us today.

[Operator Instructions] Your first question comes from the line of Eric Des Lauriers with Craig-Hallum.

First, I was wondering if you could expand on the marketing increases? Just a little bit more color on where you're investing, what channels? Should we think of this -- I think you mentioned more kind of brand awareness? So should we think of this as more kind of top of funnel type of investments? If you could just expand on the expanded marketing investment outlook overall, that would be helpful.

Eric, it's Jason. Great question, and thanks for asking that. We really wanted to take a couple of minutes to talk about that. As you know from a couple of the previous calls, we did bring Andy Judd back into the organization. Andy had been with us previously and then have left to go run marketing at Poppi. And upon Andy's return, I think there's a pretty strong assumption that we had that we would find opportunities that we could go really invest marketing dollars into that would help to build the brand for many years to come. And that's really what this is representative of, Eric. So exactly as you said, I would think of this as more top of funnel activation. It will be a mix because as much as we see opportunity to go build the brand -- and each of the brands, I should say, Laird and Navitas at this point, we see an opportunity to really bring these in as household brands over the next years, we do still see a lot of conversion opportunity on the various marketplaces as well. At this point, we're not really thinking about a lot of high kind of top of the funnel higher-level marketing for Terrasoul. It is still more of a commodity play and just a very strong brand within the various marketplaces that it plays in today. So we're going to tip toe our way into that. We do believe that's an opportunity over time as well. But right now, the focus is really on getting Laird and Navitas brands out. And I'll tell you, Eric, it really was something that we -- that surprised all of us very positively all the way up to the Board level. We ran some surveys with consumers to look at our brand equity. And what we found was very consistent. We were seen as being one of the absolute top brands that consumers recognized and trusted when they knew us. But we also found we were very much not known, whether that was Laird or Navitas or Terrasoul, amongst consumers. And so they're going in and purchasing our brands. They like our products. They see the package, but we just don't have that name recognition. And so we're setting out to change that and to really leverage those high NPS and brand affinity scores with more consumers as we go forward.

All right. That's very helpful. And then on the recent wins with Walmart, so last quarter, you talked about the launch of new SKUs in about 1,000 Walmart doors, and then for Navitas, some expanded shelf space at Target. What's your early take on how those are performing? How should we think about potential path to continued distribution gains with those customers?

Yes, it's a great question. I mean, it's early still. We're in the first quarter, and obviously, this is a big jump for us as a natural-oriented brand in Laird to take that brand to Walmart. And even, frankly, for Navitas to be expanding into Target in a bigger way. So I'd tell you, they're both going well. We're monitoring. We're putting a lot of pressure into those stores. So we're currently running various campaigns, not only with those 2 retailers where we can, but we're running social campaigns around the local stores for those retailers where we have distribution, as well as leveraging Instacart and other vehicles that are proving to be very effective. So I'd tell you the read is still early. It's positive and it's been growing, frankly, week after week, pretty much since we launched. So we saw a little bit of headroom to where we want to get that to, but we feel really confident about where we are so far.

Okay. Great. And then just last one for me, just kind of want to take your temperature on M&A. I mean, obviously, still meaningful wood to chop on the Terrasoul integration. So I would assume we shouldn't be necessarily holding our breath for another acquisition here. It's probably a second half '27 thing, if I were to just kind of guess myself. But anyway, if you could just kind of talk about, I guess, one, your sort of appetite in the near term for continued M&A? And then just more broadly and the kind of timing aside, like how has the inflationary commodity cost environment impacted your M&A pipeline, if at all?

Yes. Well, a couple of things in there, so I'll try and hit them all, and you can tell me if I missed anything. So I think your intuition is right. We have some work to do right now as we move -- Navitas was a fairly simple integration. And we were frankly able to bring the business in and operate it within the existing Laird infrastructure across systems, processes, people, et cetera. And that went really, I think, really smoothly. Terrasoul is a different beast. We have a facility down in Fort Worth, and there is certainly going to be a lot of opportunity for us as we think about expanding additional products down into that, whether that's pulling Laird and Navitas volumes, some of those volumes down there out of existing network. We're launching new products. We have some network designed to do so that we're really thinking holistically about an in-house facility and then some really strong co-pack relationships that we may balance the entire business across. So there's a lot of work to do there in terms of getting to the best cost efficiency across now with the insource to outsource network, as well as putting in a combined ERP system. I think I've mentioned before that we have a an ERP system down in Terrasoul that really can't handle additional expansion, and we're going to have to bring them into a similar, if not the same instance of ERP that we have today. So there's quite a bit of work to do there. We're starting that work really in earnest right now. We've had to kick off. We had first discussions, but we just brought on a new supply chain leader and a new CFO. And those are really the two folks where the rubber is going to meet the road. So we'll be wrapping our arms around that here in the next couple of weeks and putting in place the plan for next year to get that up and running. And as we do that, ultimately, to put ourselves back in position, a better position for future M&A. I would tell you, we're not taking ourselves out of the market from an M&A perspective, but we would be much more cautious and careful. And it would take something pretty special right now given some of the other priorities that we have in the business. With regards to the pipeline, look, the pipeline is still robust. By virtue of Nexus being so integrated into this business from a strategy and Board governance perspective, we see a lot more opportunities than we ever used to. The level of opportunities has grown exponentially. And as a result, as you might imagine, we can be a lot more discerning with regards to what we want to do. And we're very confident that we have a coffee and, call it, coffee solutions platform, as well as a functional health and wellness ingredients platform where Navitas and Terrasoul really fit. And we'll look to build on to those 2 platforms, as well as to set up a third leg on that stool. So that's not -- certainly not going away, but probably for the next 6 months, I'd say your intuition is probably very similar to mine.

Your next question comes from the line of J.P. Wollam with ROTH Capital Partners.

Maybe just start on the sales guidance revision. Can you just maybe elaborate a little bit on kind of where the shortfall is relative to your expectations last quarter? And then just -- could you update us on sort of what the underlying growth rates are for each business that you're assuming for that new guidance level?