Sow Good Inc. Q3 FY2024 earnings call

• Revenue growth in first nine months of 2024 was $30.6 million vs $6.5 million prior year. - Paused shipments in Q3 and early Oct due to extreme heat, but resumed in Oct; working with retailers to remove affected items. - Implemented temperature-controlled distribution for future. - Resolving melted products with targeted promotions, e.g., campaigns with Five Below, HEB, replacing SKUs at Cracker Barrel. - Strengthened sales team, launched marketing campaign, expanded production with 6 freeze driers operating, 7th arriving, and more freeze driers and packaging machines on the way. - Private label expansion and international expansion plans in Europe, Middle East, and U.S. ethnic markets.

In the third quarter of 2024, revenue was $3.6 million compared to $5 million in the prior year period. Gross profit was $0.6 million compared to $1.3 million in the same period last year, with gross margin at 16% versus 27% in the prior year. Operating expenses in Q3 2024 were $3.8 million compared to $0.3 million in the prior year. Net loss was $3.4 million ($0.33 per diluted share) compared to net income of $0.3 million ($0.04 per diluted share) in the prior year. Adjusted EBITDA was negative $1.9 million compared to $0.6 million in the prior year. Cash and cash equivalents ended the quarter at $6.9 million compared to $2.4 million as of December 31, 2023. Inventory was $19.4 million, a $9.1 million sequential increase.

• Expect full resolution of melted products on shelves in coming weeks with targeted promotions. - Launch focused campaigns with retailers in Nov-Dec. - Replace SKUs at Cracker Barrel, launch Mint to Be SKU. - Intensify sales team to secure shelf space. - Expand into private label markets and international markets. - Focus on cost efficiency and operational resilience.

• Extreme heat causing product melt and impact on sales velocity. - Competition from large CPG companies entering the freeze-dried candy space. - Inventory management challenges with $19.4 million in inventory. - Fluctuating gross margins due to production yield variances and fulfill variances.

Q: Impact of melted products on specific customers like Five Below, Cracker Barrel, HEB and broader customer base?

A: Primarily seeing impact in Three customers, working on promotions to resolve. Broader, aggressively going after shelf space, some key accounts growing with them, large CPG competitors entering, but focusing on best product and assortment.

Q: Retail inventory levels, category velocity, and private labeling?

A: Reorders seen for non-heat affected products. Category entering steady state post-frenzy. Focused on private label opportunities to utilize production capacity without affecting branded strategy.