Thank you for standing by and welcome to the Fourth Quarter 2021 Earnings Conference Call and Webcast for Laird Superfood, Inc. I would now turn the call over to Mr. Reed Anderson of ICR. Please go ahead.

Thank you. Good afternoon, and welcome to Laird Superfood's fourth quarter 2021 earnings conference call and webcast. On today's call are Jason Vieth, Chief Executive Officer; Valerie Ells, Chief Financial Officer; and Scott McGuire Chief Operating Officer. By now, everyone should have access to the company's fourth quarter earnings press release filed today after market close. This is available on the Investor Relations section of Laird Superfood's website at www.lairdsuperfood.com. Before we begin, please note that all financial information presented on today's call is unaudited. And during the course of this call, management may make forward-looking statements within the meaning of the federal securities laws. These statements are based on management's current expectations and beliefs and involve risks and uncertainties that could cause actual results to differ materially from those described in these forward-looking statements. Please refer to today's press release and other filings with the SEC for a detailed discussion of the risks that could cause actual results to differ materially from those expressed or implied in any forward-looking statements made today. And now I'd like to turn the call over to Jason Vieth, Chief Executive Officer of Laird Superfood.

Thank you, Reed. Welcome everyone and thank you for joining us today. I'm going to begin with a brief summary of our overall positioning, key growth drivers and highlights from the quarter. Scott McGuire, our Chief Operating Officer; and Valerie Ells, our Chief Financial Officer will follow with additional detail and we will briefly discuss our 2022 outlook before opening up the call for your questions. Let me start by saying that after spending the last five weeks diving into the business, I can attest that we are making real progress against our long-term vision to become one of the leading players in the natural food and beverage space. Our brand is strong and the products resonate with consumers on every major purchase driver including quality, taste, functionality, sustainability and price. Our customers feel deeply connected to our brand and want to engage with us as evidenced by our strong repeat rate and 76% Net Promoter Score. And perhaps most importantly the Laird Superfood brand is incredibly unique among food brands and that it has proven that it can span multiple dayparts and usage occasions providing consumers with a portfolio of products to activate and power their morning, hydrate and nourish their day and wind down their evenings. Strategically, we have already begun to make two major pivots in our business. First, we are moving from an organization that was built to grow at all costs to one that will be fundamentally more strategic and measured and analytically driven. This will become apparent in our marketing investments during 2022. Like other businesses that rely heavily on the Internet and social media for promoting and selling their products, our digital marketing costs to acquire new customers have increased over the past year in part reflecting structural changes to the largest digital…

Thanks, Jason and greetings, everyone. I will speak to three key highlights in the fourth quarter and provide an update on the supply chain and the current impact on our business. First off, we achieved record production output both in units and in overall efficiency. This was the result of multiple engineering projects and the collective efforts of our strong team always focused on driving excellence. Secondly, last quarter we mentioned that we had moved our new customer fulfillment center. This move has enabled us to consolidate critical raw and finished goods inventory on campus. Most importantly, it was a key step in attaining the planned synergies between Laird Superfood and the Picky Bars acquisition. And finally, the design of this facility enables a faster, more efficient fulfillment process for direct and retail customers. All of this was put in place in time for a successful Black Friday promotion where we hit our velocity and service goals. Third, in our growing refrigerated creamer channel, we had our first full quarter of a new production and supply plan that led to a continued reduction in spoils and therefore improved margins. Our supply to distributor distribution centers was strong. And while we encountered some store level in-stock issues on the initial distribution of our two new flavors, we believe those are now resolved. Now speaking to supply, in recent quarters we have discussed the common concern regarding our unique internationally sourced ingredients and the supply chain delays dominating the headlines. Because we bypass the largest ports and have positioned ourselves well with safety stock, we saw very little impact and we're able to fill orders at 98% in fourth quarter. We realized there was ongoing risk to shipment delays and unavailable ingredients, but we continue to carefully plan ahead and stay very close to the most recent supply chain developments in the areas of inflation and availability. And finally, stepping back to Jason's comments on our go-forward approach to gross margin improvement opportunities, while we expect that Q1 will be at a lower margin due to seasonally lower volumes increased shipping expenses and product mix, we should see our gross margin rise through the year as we implement and leverage technology, and automation projects, expand our in-house SKU production, further improve our fulfillment process, and leverage increased volumes during the back half of the year. Now, let me turn the call over to Valerie Ells, our CFO to further discuss fourth quarter results.

Thanks, Scott. Net sales increased 29% to $9.4 million in the fourth quarter of 2021 compared to $7.3 million in the fourth quarter of 2020. The year-over-year improvement was led by 39% growth online, reflecting strong direct-to-consumer sales, and a 16% gain in wholesale. Our continued DTC growth reflected ongoing strength in conversion rate, a 40% gain in average order value, a further 6% improvement in reorder rates compared to the fourth quarter prior year, and the benefit of our Picky Bars acquisition. Our mid-teens gain in wholesale reflected continued progress in grocery, both in our refrigerated liquid creamer business, as well as our shelf-stable product assortment, partially offset by a slight retraction due to timing of club sales. Related to product categories, the current year quarter delivered strong growth in Harvest Snacks led by our acquired Picky Bar portfolio. Coffee Creamer remained stable, largely due to the offsetting impact of continued growth from refrigerated liquid creamer sales and softer club performance related to our shelf-stable creamers. Gross margins improved 350 basis points on a year-over-year basis to 23.6% of net sales in the fourth quarter of 2021, compared to 20.1% of net sales in the prior year period. This improvement stems from lower inventory costs due to operational efficiencies, continued optimization of our DTC shipping expense via an improved average order value, and improvements in both distributor chargeback's and production waste from our refrigerated liquid creamer, due to our extended shelf life and takeover of logistics discussed in previous quarters. These improvements were partially offset by wholesale fulfillment costs, timing of promotional activities, and general inflationary pressure. Operating expenses were $9.2 million compared to $6 million in the year ago period. General and administrative expenses increased $1.2 million over the fourth quarter of prior year, primarily on personnel costs,…

Thanks Val. In summary, 2021 was a strong year for Laird Superfood's, as we drove 43% net sales growth in a difficult macro environment and against challenging year-over-year comps. We have made and continue to make progress against many key initiatives that will set up our organization for continued success. As we go forward, we will continue to execute against a tight set of strategies that will help us to further drive our top line growth by expanding our distribution points and improving our customer and consumer marketing model. And while we expect some choppiness in the next couple of quarters as we stand up these initiatives and work to improve our operations, our long-term growth thesis remains intact as we continue to lead and innovate within the plant-based food industry. This concludes our prepared remarks. Operator, we are now ready to open the call to questions.

Thank you. [Operator Instructions] The first question is from the line of Bobby Burleson with Canaccord. Your line is open.

Hey guys. Thanks for taking my questions. So I guess the first one would just be it sounds like wholesale and liquid creamer in particular are a big part of your growth outlook for 2022. Curious, in terms of all the different products and segments you guys operate in, where do you think the guidance is most conservative if you had to call out a couple of things?

Yeah. Hey Bobby, how are you doing?...

Good Jason.

Thanks for the question. I think -- hi there, nice to be on with you here again. So, a great question for us the liquid creamer remains an incredible opportunity for us just given the addressable market of what that category is as well as the fact that we're still sitting at about 5% ACV in conventional. The opportunity is enormous for us. And what we've been working on is really to get our capacity in line and be ready to go. I mentioned that we have a new sales leader that's joining and he's really going to be able to take the helm here quickly and start to drive that business as we go forward. We're walking into review season. There are a number of reviews that he'll be able to jump into pretty quickly with the sales organization. So we do see an incredible opportunity to drive that business from here. And that's going to be our number one SKU as we go forward in the broader bricks-and-mortar channels. And so that will be to your question of where do we see opportunity from here. That's a big part of the opportunity for us. And I'd say the upside very much sits in that particular channel and with that product. At the same time though, we have really a tremendous opportunity on the powder creamers. The powder creamers today are again a largely untapped opportunity. I think at this point we're at about a 15% ACV on that product, and so to get that into ubiquitous distribution but also in the broader distribution with our club channel where we've made really great headways headway already. I see tremendous opportunity in that space also. So the creamer portfolio first and foremost, I would tell you too the coffee portfolio has really been requested by a number of retailers already. We're presenting that over the course of the next few months and see opportunity to take that into club as we go forward as well. And then on the DTC side, there's really a great opportunity here Bobby to continue to drive the whole portfolio. That's what the DTC channel provides us of course and the ability to take more of our products to Amazon, leverage that as -- in a stronger way as a ready-to-go platform is another space where I would tell you that we have a lot of upside opportunity versus where we are today and what we're planning in the next couple of months.

Great. And then just a quick follow-on. In terms of inflationary and supply chain concerns, you touched on having, I think, managed to avoid any significant disruptions. Are there specific ingredients or supply chain kind of channels that you could call out where maybe you're more concerned about inflation and disruptions?

Yes. Thanks. Great question Bobby. I would say that just like you heard from everybody anything coming over ocean container has risk whether you can get it on a ship, whether it's going to make it to the port. That's all worked out pretty good for us up to this point. And as I've said, we've been at a really good spot in inventory levels. And so we haven't had quite the same issues that others have had, but we have to keep an eye on it too, because even though we largely bypassed the major ports, there are still challenges in some countries getting products onto the ship.

Great. Understood. Thank you.

Thanks, Bobby.

Thank you, Mr. Burleson. The next question is from the line of Alex Fuhrman with Craig-Hallum Capital Group. Your line is open.

Hey, guys. Thanks for taking my question. I wanted to ask about, first of all, I guess, about the online channel showed really strong growth in 2021. It looks like you're expecting that growth to moderate pretty significantly in 2022. Can you talk about what's driving that? Is that mostly the planned reduction of some of the underperforming SKUs that you have, or just a different approach to digital marketing? If you could give us a little bit more color on that that would be helpful.

Hey, Alex, you bet. This is Jason. So look, I would tell you that there is -- that is a strategic decision first and foremost. As we went into Q4 of last year, we started to see challenges with regards to the cost to acquire new customers. And we did start to see a bit of a slowdown in that quarter. But moreover what we saw was quite an increase in the acquisition cost. So as we enter into this year and really in this first half of the year, what we're going to be doing is shoring up our DTC spend, making sure that we're putting it to the highest ROI vehicles. There's been a shift, you guys I'm sure have read about with Apple and Facebook and iOS. And as a result a number of other companies, including ours, flooded to the same tactics and the same media and the costs really accelerated. So we're taking a step back really reviewing the spend in those areas. And as a result, we have intentionally moderated some of that growth. I do believe that there will be as all the water rushes one direction at a time, I do believe that the same thing will happen here and we'll see some moderation in those costs. And as a result, we'll be able to reemploy some of the same tactics that we have been utilizing efficiently. But we're in discussions now with various agency partners to find the best ways for us to allocate our marketing dollars the most effective way, most efficient ways for us to allocate those dollars to drive the most online growth. And at the same time while we do that that's really an acquisition cost issue. At the same time, we're very fortunate in that we're well ahead of our competitors with a very large CRM database of customers that we can go back and tap again. And so we're going to be working very diligently in our marketing organization to convert orders into repeat orders and repeat orders into subscriptions. And we've had a lot of success with that in the past without really putting a concerted effort against it. So I mentioned this new white glove treatment will be driving outreach to customers based on their purchasing habits and getting them cross-sell suggestions based on what their interests are and what they've purchased and presenting targeted personalized messages both in terms of what we're offering as well as thanking those customers to make sure that they feel valued. And I think as we make that transition to -- with some of the digital tactics that I mentioned and really look for better performing opportunities we have this incredible database of consumers that will continue to work with to offer them the best products in terms of what they're looking for based on what we know about them.

Great. That's really helpful. And then if I could ask on the wholesale side. You've had nice slow and steady growth there over the last couple of years without a shelf stable liquid creamer. How should we think about how you're planning to grow that channel this year and next year? Is it kind of continued growth with your existing products and then, layer in the shelf stable liquid creamer or are you similarly going to be reducing some of the SKUs that you have out there for wholesale just like you are on the e-commerce side?

Yeah. That's a good question. So Alex, what I would tell you on that is, we have already a terrific offering in the shelf-stable space with our powder and in the refrigerated space with our liquid creamer. I mentioned coffee as well. That's another area where in retail we are getting inbound interest and have had some early success. And so, we'll be pressing all of those much more aggressively as we go forward. We started digitally native. That's really where our focus was over the last couple of years and we had great efficiencies in growing that business and during COVID, we're able to leverage the fact that shoppers were going online rather than the stores. But now, we recognize that as we go forward that is going to be the big growth driver for us getting our products out into those stores. The aseptic creamer, I would think about is gravy on top, because as I mentioned, our maximum ACV item is the shelf-stable creamer and conventional. And that's a 15% ACV. So, we have incredible upside in both natural and in conventional across the creamer category including both our powders and our refrigerated and then that aseptic product that we're still working on right now and haven't yet launched. When we get that launched that will present us with a great DTC opportunity as well as another shelf-stable opportunity to compete with a few liquid shelf-stable creamers that are at market today.

Great. That’s really helpful. Thank you very much.

You bet.

Thank you, Mr. Fuhrman. The last question is from George Kelly with ROTH Capital Partners. Your line is now open.

Hey, everybody. Thanks for taking my questions. So, just a few for you. First, I'll start with the online business. Curious you talked about how it's become more challenging to find new customers. And I think that the sort of environment is just -- it's very competitive with other online businesses. We're seeing that all over the place. But can you kind of break that down more granularly between -- is it really just -- have you seen elevated churn or is it really just a sort of a CAC issue or conversion? Anything else you can point to just as far as that growth slowing?

Yeah, you bet George. I'd say it's -- for us, as we were exiting the year, we had a big CAC issue, a relatively big CAC issue. We saw the CAC double or so, as we were going through that quarter. And that's not completely atypical, because if you think about the season that it is and the competition that there is for those advertise, advertisement opportunities certainly that played a role. But structurally that Facebook, iOS issue played a role as well. And as you alluded to others are seeing that same issue. We still look great in terms of the LTV of our -- the lifetime value of our brand with our consumers, our online consumers. We saw that that held up incredibly well and that our subscriptions also held up very well. So we feel great about what we're doing and our ability to retain our consumers. And our retention rate, when I looked at that was very much on par with what you see in CPG best-in-class. So, I would tell you that we're doing the right things with our consumers. It's just a matter of finding them and finding the efficient ways to do it. And so, this is giving us quite honestly a great opportunity to step back, really think about the messages that we're presenting to our consumers, how we're presenting them, how often we're presenting them, through which influencers, through which search terms. All of that is being, I would say, investigated at this point and analyzed by our team to make sure that as we go forward we can keep a very efficient plan in place. And I would tell you, acquiring new customers online, it's challenging for everybody as you alluded to. And again, I point us back to the fact that we're in a very fortunate position to have such an embedded bed of consumers that we've already worked with and for whom we have e-mail addresses and with whom we have ordering history and preference history. So, we're really excited about what we can do there.

Okay. Cool. That's helpful. And the next question for me on OpEx expectations for 2022. So I'm just a little bit unclear on the two big buckets being G&A and sales and marketing. It sounds like, you've said regarding sales and marketing, you're going to test more and kind of maybe pull it back a bit and see how it reacts. Is that a fair characterization of what you said in the prepared remarks, we should expect it to kind of come in before maybe it builds again? And then, can you also just talk about the opportunity, should G&A be kind of stable in 2022 or maybe just grow more moderately?

Yeah, George, great question. I'll jump in and then I'll let Val come in as well and share a little bit more detail. But yeah, I would tell you that in terms of sales and marketing spend, we anticipate growing that at a slower rate, than we're going to grow our net sales, I would say approximately half in terms of the total growth because we do believe there's some spend there that was not efficient. And that's not all accounted for. We're rebuilding our marketing plan at this point. And I think we may find additional opportunities either to more efficiently grow based off of those dollars or conversely to be able to pull back some dollars, based on our in our targets and what we can put to market effectively and efficiently, so all of that review is taking place at this point. And then in terms of G&A, I know we've expanded that rather significantly in the last couple of years. Certainly, as we went public, there were a number of costs that we had to incur as related to that overall capital situation. And as we go forward from here, we're going to be able to gain leverage out of that by really holding that to a much slower growth rate than our net sales topline. So, I feel really great about, where both of those two lines can go over the next couple of years and that's really starting in this year we're gaining that first round of leverage.

Okay. Great. Thank you.

Thank you, Mr. Kelly. There are no additional questions waiting at this time. I will now pass the call over to the Mr. Vieth for any closing remarks.

So, I think -- I think you got a good sense for where the business is as you know I've been here for six weeks. And I'll just say that in those six weeks what I've seen is that, we have an incredibly strong brand. We have a product portfolio that is so unique within the CPG space and really able to span dayparts and usage occasions and reach consumers throughout the day. And there just aren't a whole lot of other brands that I can think of if any really that are able to do that. And so, as I sit back and look at this it's incredibly exciting and we had a solid year last year. We're going to slow down growth a little bit this year as far as we can see just in a really challenging environment. But I feel like the outlook for this business as we retool our sales and marketing and really get the most effective opportunities in front of us in that space and are working with the influencers that are most effective for us, executing the tactics that really move the needle for us. It's really going to give us the chance to reenergize overall the top line growth of the brand and at the same time that we're expanding in the retail space behind the expansion that we have there with our sales organization and the opportunities that we see for the portfolio. So, incredibly excited about where we're going. We're going to do it in a smart way as I mentioned, where it's not going to be a growth at all costs, but a lot of smart growth at a lot of smart costs and that's really going to be the mantra for us as an organization and look forward to showing you guys, what we can do with this business here over the next couple of quarters. So with that, I'll thank you guys. Look forward to speaking with you all here in the near future. I appreciate your time today.

Thank you, for your participation on today's call. You may now disconnect your lines.