Sow Good Inc. Q1 FY2025 earnings call

Cost Savings and Cash Conservation

• Reduced overhead by ~$400k in Q1, targeting additional $100k savings in Q2.
• Revised executive compensation to pay part in stock under 2024 stock incentive plan.
• Entered into note exchange agreements with noteholders to extend maturities by 5 years.

Sales Expansion

• Q1 saw retail momentum with launches in Albertsons, Kroger, ACE hardware, Orgill, KeHe, Winn-Dixie, Five Below; saw 124% increase in orders vs Q4.
• In-house production of caramel products advanced; international launch in Middle East; planning to launch yogurt melts and beef jerky in H2 2025.

Innovation

• Focus on clean label, better-for-you products; freeze-dried candy line regaining consumer enthusiasm; new product launches and retail promotions driving orders.

Revenue in Q1 2025 was $2.5 million (down from $11.4 million in Q1 2024). Gross profit was $1.1 million (down from $4.6 million in Q1 2024) with gross margin at 45% (up from 41% in Q1 2024). Operating expenses were $3.5 million (down from $3.7 million in Q1 2024). Net loss was $2.6 million or $0.23 per diluted share (vs. net income of $511,000 or $0.06 per diluted share in Q1 2024). Adjusted EBITDA was negative $0.8 million (vs. $2.5 million in Q1 2024). Ended Q1 with $1.6 million in cash and cash equivalents, total debt (excluding operating losses) was $2.7 million, and entered into note exchange agreements to extend maturities.

Guidance

• Q2 expected to show modest improvement over Q1 as new partnerships take hold.
• Anticipate more meaningful growth in H2 2025 with continued innovation, quality, and cost discipline.

Risks

• Competitive Pressure: Global CPG giants entering the category, cheap China product affecting trial.
• Inventory Management: Need to work through heat-affected inventory (sweet worms, peach perfect) and focus on better-for-you products.
• Cash Position: Still tenuous, need to continue evaluating strategies to improve cash position.

Q: Renewed consumer enthusiasm, weekly velocities, retail inventory position A: Weekly velocities increasing (from 12-13 to 16 units per door); working through excess inventory with targeted promotions, seeing reorders from retailers.

Q: Spare capacity plans A: Analyzing opportunities for private labeling, home manufacturing, and utilizing capacity for yogurt melts.

Q: Cash position improvement A: Converting salaries to stock, evaluating strategies to improve cash position, focusing on converting inventory to cash.