Sow Good Inc. Q4 FY2024 earnings call

• Challenges: Faced product melting issues and increased competitive pressures (low-quality imports, entry of major candy companies). Addressed melting with improved packaging and temperature-controlled shipping. Addressed competition with aggressive strategy.
• Cost-Saving Initiatives: Achieved 97 on SQF audit, reduced payroll by 38% in Q4 vs Q3, expect 16% more reduction by end of Q1. Implemented 2 automated packaging machines designed in-house.
• New Product Categories: Evaluating beef jerky and freeze-dried yogurt snacks, planning second-half launch; samples well-received.
• Retail and International Expansion: Expanding domestic retail partnerships, strong hardware store presence, international inroads in Middle East and Europe with compliance approvals ongoing.

Revenue: Fourth quarter 2024 revenue was $1.4 million, down from $9.5 million in Q4 2023. Full year 2024 revenue was $32 million, up from $16.1 million in 2023. Gross Profit/Loss: Q4 2024 gross loss was $1.2 million vs. gross profit of $3.4 million in Q4 2023. Full year 2024 gross profit was $13 million vs. $4.5 million in 2023. Operating Expenses: Q4 2024 operating expenses were $2.9 million vs. $1.6 million in Q4 2023. Full year 2024 operating expenses were $14.5 million vs. $4.5 million in 2023. Net Loss: Q4 2024 net loss was $4.2 million vs. net income of $1.3 million in Q4 2023. Full year 2024 net loss was $3.7 million vs. net loss of $3.1 million in 2023. Adjusted EBITDA: Q4 2024 adjusted EBITDA was negative $2.8 million vs. $2.3 million in Q4 2023. Full year 2024 adjusted EBITDA was $4.1 million vs. $0.1 million in 2023. Balance Sheet: Ended 2024 with cash/cash equivalents of $3.7 million vs. $2.4 million in 2023. Inventory ended 2024 at $20.3 million vs. $19.4 million in Q3 2024.

Q1 will be marginally better than Q4, Q2 will outperform Q1; recovery will be steady and methodical. No formal sales guidance but expects continued growth.

• Product melting issues impacting operations.
• Increased competitive pressures from low-quality imports and major candy companies.
• Inventory management challenges with $20.3 million in inventory at year-end.
• Regulatory compliance risks in international markets for new product launches.

Q: Explain what attracted to freeze-dried yogurt and beef jerky, and timeline for launch.

A: Management attracted to categories with deep expertise; beef jerky due to cleaner ingredient opportunity, freeze-dried yogurt part of initial plan; second-half launch with existing formulations and testing.

Q: Signs of improvement, core customers' velocity trends.

A: Seeing recovery in key customers, refreshment of assortments with stable-performing SKUs; Circana data shows ~17 units per store over last twelve weeks.

Q: Strategy to get inventory down, quality of inventory.

A: Inventory has 2-year shelf life, stored in temperature-controlled environment; focus on opening new doors and aggressive market penetration to move inventory