Release Date: August 14, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Gross margin expanded to 27.4% in Q2 2024, up from 17.5% in Q2 2023.
- Operating expenses reduced by 11% year-over-year, reflecting strong cost discipline.
- Adjusted EBITDA improved by 35% year-over-year, indicating better operational efficiency.
- New packaging and branding initiatives have driven significant improvements in retail consumption and velocity metrics.
- Strong demand for air-dried pet treats and new market opportunities with Kocher and halal certifications.
Negative Points
- Net sales growth was modest at 3% year-over-year, reflecting the impact of rationalizing low-margin products.
- Liquidity constraints led to missed sales opportunities due to out-of-stock situations.
- The company is still reliant on external capital to support growth, indicating financial vulnerability.
- Despite improvements, the company reported a net loss of $3 million for the quarter.
- Financial constraints have limited the ability to fully capitalize on increased retail demand.
Q & A Highlights
Q: The guidance range has been lowered. What changed or what would you attribute that to?
A: (R. Alex Hawkins, CFO) The primary driver is financial constraints affecting our ability to deliver on some sales, leading to out-of-stocks due to outperformance at retail. These lost sales can't be recovered, but we are working on solving the financial constraints.
Q: How do you plan to solve the financial constraints?
A: (R. Alex Hawkins, CFO) We are exploring various financing options, including convertible promissory notes. We have been creative in financing over the past few years and will continue to do so to support business growth.
Q: What is the range of funds needed to help sales inflect?
A: (R. Alex Hawkins, CFO) We are not providing specific guidance on the amount, but the capital needed is relatively small. The focus is on working capital investment rather than burn, and we expect growth over the next several quarters.
Q: Can you provide more details on the pet food segment and its potential impact on revenue?
A: (Chris Boever, CEO) We have been conservative in our outlook for the pet food segment. We will be launching a new multi-SKU lineup under a new brand soon. The air-dried pet treat market is growing, and we are optimistic about its potential.
Q: What are the key factors driving the improvement in profitability?
A: (Chris Boever, CEO) The 90% improvement in profitability over two years is due to strategic initiatives, including cost discipline, optimizing product mix, and enhancing pricing strategies. We are close to delivering a profitable business with continued growth.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
