Sow Good Inc. Q4 FY2023 earnings call

• In early 2023, Sow Good helped launch the freeze-dried candy category and became market leaders, with record quarterly revenue of $9.5 million in Q4 2023, showing substantial year-over-year growth and 89% sequential increase from Q3 2023.
• In 2024, focus is on increasing market share and capturing growth opportunities in the freeze-dried candy space. Treats are outperforming sales forecasts across the retail base with customers increasing order quantities and expanding SKU portfolios.
• Implemented strategies to grow production capacity: leased a 51,000 square foot distribution and warehousing facility in Irving, Texas; completed construction of the fourth freeze drier in February 2024, with fifth and sixth expected to be operational by Q3 2024; co-manufacturing arrangements in China and Colombia, with facilities passing rigorous approval and quality control programs; opened a low-cost shared service center in Monterrey, Mexico in January 2024 to support accounting, marketing, and sales departments.
• Paused onboarding of new customers from Q3 2023 to mid-Q1 2024 to increase production capacity to meet existing customers' demand; achieved expansions like increasing Circle K store counts to approx. 2,000, launching into 300 SESCO convenience stores, 4 SKUs in Target in March, and pending launches in various retailers; expanded SKU portfolio with products like sour and sweet spheres, Sweeter Geeks, etc.

In the fourth quarter of 2023, revenue increased significantly to $9.5 million compared to $47,100 in the same period of 2022 and $5 million in the third quarter of 2023. For the full year 2023, revenue was $16.1 million compared to $428,100 in 2022. Gross profit in the fourth quarter of 2023 was $3.4 million compared to $2,100 in the same period of 2022, with a fourth quarter gross margin of 35% compared to 4% in the prior year period. Full year gross profit was $4.9 million compared to $119,800 in 2022, and gross margin for the year was 30% compared to 28% in 2022. Operating expenses in the fourth quarter of 2023 were $1.6 million compared to $6.4 million in the same period of 2022. GAAP net income for the fourth quarter of 2023 was $1.3 million compared to a net loss of $6.8 million in the same period of 2022. For the full year 2023, GAAP net loss was $3.1 million compared to a net loss of $12.1 million in 2022. Adjusted EBITDA in the fourth quarter of 2023 was $2.3 million compared to a negative $1 million in the same period of 2022. For the full year 2023, adjusted EBITDA was $1.5 million compared to negative $4.6 million in 2022.

• Aim to produce 4.25mn units in Q1 2024, growing to 7.2 million units in Q2, 9 million units in Q3, and 9.55 million units in Q4 2024, totaling approximately 30 million units in 2024.
• Prioritize expanding production capacity, including completing construction on fifth and sixth freeze driers and bringing them online by Q3 2024, continuing to ramp international co-manufacturing agreements, diversifying customer base and SKU portfolio, and maintaining innovation as a core pillar.