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Yahoo
16-05-2025
- Business
- Yahoo
Q1 2025 Bitcoin Depot Inc Earnings Call
Cody Slach; IR Contact Officer; Bitcoin Depot Inc Brandon Mintz; Chairman of the Board, President, Chief Executive Officer; Bitcoin Depot Inc David Gray; Chief Financial Officer; Bitcoin Depot Inc Scott Buchanan; Chief Operating Officer, Director and Principal Financial Officer; Bitcoin Depot Inc Mike Grondahl; Analyst; Northland Securities Mike Colonnese; Analyst; H.C. Wainwright & Co., LLC Hal Goetsch; Analyst; B. Riley Securities Pat McCann; Analyst; Noble Financial Capital Markets Operator Thank you for standing by. My name is Janice, and I will be your conference operator today. At this time, I would like to welcome everyone to the Bitcoin Depot first-quarter 2025 earnings conference call. (Operator Instructions) I would now like to turn the call over to Mr. Cody Slach, Senior Managing Director. Please go ahead. Cody Slach Thank you, operator. Good morning, everyone. Before management begins their formal remarks, we'd like to remind everyone that some statements we're making today may be considered forward-looking statements under securities laws and involve a number of risks and uncertainties. As a result, we caution you that there are a few factors, many of which are beyond our control, which could cause actual results and events to differ materially from those described in the forward-looking statements. For more detailed risks, uncertainties and assumptions relating to our forward-looking statements, please see the disclosures in our earnings release and public filings with the SEC. We disclaim any obligation or undertaking to update forward-looking statements to reflect circumstances or events that occur after the date the forward-looking statements are made, except as required by law. We will also discuss non-GAAP financial measures. I encourage you to read our disclosures and the reconciliations to applicable GAAP measures in our earnings release carefully as you consider these metrics. We refer you to our filings with the SEC for detailed disclosures and descriptions of our business as well as uncertainties and other variable circumstances, including, but not limited to, risks and uncertainties identified under the caption Risk Factors in our recent filings. You may get Bitcoin Depot's SEC filings for free by visiting the SEC website at I'd like to remind everyone this call is being recorded, and will be available for replay via a link in the Investor Relations section of Bitcoin Depot's website. A supplemental earnings presentation highlighting our performance has also been made available on our IR website. Now, I will turn the call over to Bitcoin Depot's CEO, Brandon Mintz. Brandon? Brandon Mintz Thanks, Cody, and good morning, everyone. Thank you for attending our first quarter conference call. Bitcoin Depot delivered a remarkable first quarter with 19% year-over-year revenue growth and record net income of $12.2 million. Consumer demand was quite strong with median transaction size up 46% year over year to $300 and total transaction volume moving steadily higher to $163.8 million. These results produced strong free cash flow, which we used to build cash and purchase more Bitcoin. This performance demonstrates the strength of our operating model, the success of our kiosk optimization strategy and the powerful cash flow we can generate once fixed costs are covered. Let me provide more details on this performance. Our kiosk growth and optimization plan are showing the intended results. Q1 adjusted gross profit was up 92% year-over-year and adjusted EBITDA was up over threefold to a record $20.3 million. These results should continue as this strategy unfolds. We ended Q1 with approximately 8,483 active machines and expect to see continued growth in kiosks for the remainder of the year. Now on to our BTM relocation strategy. Today, 3,200 of our kiosks have been installed for less than one year. As these machines ramp up, we expect to drive further cash flow as our Bitcoin ATMs typically see payback periods of less than eight months, regardless of Bitcoin price. As the largest BTM operator in North America, our scale, compliance-first approach and long-standing retail partnerships continue to set us apart in a highly fragmented market. We remain focused on expanding market share and growing profitability. Now turning to an update on our growth strategy. First, international expansion. We have now deployed over 100 kiosks to support our ongoing launch in Australia this year. Australia is quickly emerging as a global hotspot for Bitcoin adoption currently ranking third worldwide and total Bitcoin ATMs. We believe this represents a significant opportunity to establish a strong presence outside North America. While it's still early, we are encouraged by the retail partnerships and expansion opportunities we have identified so far. Beyond Australia, we are actively evaluating entry into at least two additional countries in 2025. Second, scaling our domestic footprint. We continue to deploy kiosk from the large inventory we secured last year. Once fully deployed, these units could bring our total active fleet to approximately 10,000 kiosks. This will enhance our reach and support further efficiencies across the business. Third, regulatory expansion into new markets. New York State remains one of the largest untapped markets for Bitcoin ATMs. We are in ongoing discussions with regulators and remain optimistic about obtaining a license to operate in the state in 2025. While there is no definitive timeline yet, we are encouraged by the progress and engagement so far. On a broader note, we continue to closely monitor the evolving regulatory environment at both the federal and state levels. Our strong compliance infrastructure, including rigorous KYC and AML protocols continues to serve as a competitive advantage. We are actively engaging with regulators, including [Vincent] and various state agencies to help shape a responsible future for the industry. More broadly, the recent establishment of a US strategic Bitcoin reserve highlights the growing institutional recognition of Bitcoin's role in the financial system. As a national leader in Bitcoin ATM deployment, we are prepared to support the shift by expanding access to digital assets for everyday consumers. We have also strengthened our leadership team with the appointment of David Gray as our Chief Financial Officer; and Chris Ryan as our Chief Legal Officer. David brings more than 20 years of financial leadership experience, Chris brings deep expertise in legal and regulatory matters within Fintech. Their combined experience will be essential as we continue to grow. With that, I will turn it over to our CFO, David Gray, who will walk through our financial results in more detail. David? David Gray Thanks, Brandon, and good morning, everyone. It's great to be here, and I look forward to meeting many of our shareholders over the coming months. Jumping right into our first-quarter performance. Revenue was $164.2 million compared to $138.5 million for last year's first quarter, an increase of 19% driven by growth in deployed kiosks and higher median transaction size. Sequentially, revenue was up 20% as compared to Q4 2024 as a result of strong consumer demand underpinned by growing median transaction size, along with our continued process of relocating underperforming kiosks to optimize fleet profitability. Adjusted gross margin in the first quarter of 2025 increased 92% to $33.1 million compared to $17.3 million in the first quarter of 2024. Adjusted gross margin in the first quarter of 2025 increased 770 basis points to 20.2% compared to 12.5% in the first quarter of 2024. This margin increase was largely driven by leverage on the significant revenue outperformance and the continued pricing strength. Total operating expenses declined 7% to $15.3 million compared to $16.6 million in last year's first quarter. The improvement was attributable to lower depreciation expense and our company moving farther away from the DSBAC transaction to optimize expenses for life as a public company. Specifically, we have saved multiple million dollars on an annual basis by reducing costs related to our third-party legal costs, audit services and insurance. GAAP net income for the first quarter of 2025 increased significantly to $12.2 million compared to a net loss of $4.2 million for the first quarter of 2025. GAAP net income attributable to common shareholders increased to $4.2 million or $0.20 per share compared to a net loss of $1.5 million in last year's first quarter. The significant increase was due to higher revenue and gross profit and to a lesser extent, lower expenses. Adjusted EBITDA, a non-GAAP measure, increased 315% to $20.3 million in the first quarter of 2025, compared to $4.9 million in the first quarter of 2024. This increase was primarily due to revenue outperformance and margin expansion. Now turning to our balance sheet and cash flow. Cash and cash equivalents in cryptocurrencies as of March 31, 2025, increased to $43.3 million compared to $31.0 million at the end of 2024. The company acquired 83 more Bitcoin in the quarter, bringing our investment holdings up to 94.4 BTC valued at approximately $7.8 million as of March 31. We generated a record $16.3 million of cash from operating activities in the first quarter, up significantly from $1.3 million in the year ago quarter. Debt at quarter end was $60 million compared to $60.9 million at the end of 2024. This balance includes term loans, finance leases and profit share arrangements. Of the total debt balance, $30 million is our term loan on which we paid down $6 million during the quarter, and we plan to pay down at least an additional $3.5 million by year-end. The paydown of the term loan balance was largely offset by the expansion of our profit share franchise agreements in the quarter. These agreements entail an upfront lump sum payments to the company by our partners in exchange for a portion of the future profits generated from a specified group of kiosks for a specified period of time. Because we continue to operate and typically retain title to the kiosks, you must account for the upfront payments as debt under US GAAP. As we think about our capital allocation strategy going forward, we will focus our attention on other ways of driving shareholder value, including paying down our term loan or potential dividends as we do not expect significant CapEx in 2025. Now turning to our outlook. Given the improved visibility we have in our business that Brandon mentioned, we are continuing with near-term financial guidance. We anticipate Q2 revenues to grow in the low to mid-single digits both sequentially and as compared to Q2 of 2024. This growth, while modest, is against very strong comps of $164 million and $163 million for Q1 of 2025 and Q2 of 2024, respectively. We remain committed to additional operational enhancements to drive profitable growth going forward, including improved vendor pricing, lowering professional service costs and optimizing customer markups. We are focused on optimizing the business for profitability and positive cash flow ahead. With that, we are happy now to take your questions. Operator? Operator Thank you. We will now begin the question and answer session at this time. (Operator Instructions) Mike Grondahl, Northland Capital Markets. Mike Grondahl Hey guys. Congrats on a solid quarter, couple of questions. One, do you have a year-end '25, year-end '26 rough kiosk goal and then what would you think of, I don't know, rough CapEx for '25 and '26? Brandon Mintz Mike, it's Brandon. No, we haven't announced to the public kiosk in terms of our total installed fleet. You can see we're moving a little bit slower in terms of additional net new installations than last year. But our goal is still to get the remainder installed as soon as possible. We mentioned in the earnings script that we're expanding, hopefully into an additional country or two this year, and we definitely want to reserve some of the kiosks that we used for that international expansion effort. One thing to note is we have about 150 kiosks installed in Australia today, but we shipped about 350 there. So there will be some installation expansion just as Australia ramps up, not even including the US. And then in terms of CapEx for 2025 and 2026, with close to 2,000 kiosks still available for us to deploy. There's not a need to purchase additional kiosks this year at least. Obviously, things could change very quickly, if all of a sudden, we signed a large retail chain, then maybe we don't have enough kiosks. But for now, I couldn't really say that you should anticipate CapEx this year beyond just small things like parts costs and such, but nothing significant. Mike Grondahl Got it. Got it. That's kind of what I thought, but I wanted to make sure for '25. You have roughly 3,200 kiosks that have been in place less than a year is those 3,200 ramp to be average kiosks. What incremental lift to revenue would that be? Brandon Mintz Let me think about that for a second. I don't have ability to calculate an exact number right now. But what I can say is we're always going to have probably 1000 kiosk minimum within that one-year installed bucket just from deploying new kiosks and relocating existing kiosks. And the kiosks in year two versus year one, typically see at least 50% growth in terms of revenue versus year one. Maybe just look at year-over-year, but we can evaluate that a little bit further and get back to you. Mike Grondahl Cool. I mean, clearly, those are still ramping and they're not mature yet. Just trying to kind of understand how much is there. But, thank you. Operator Mike Colonnese, H.C. Wainwright. Mike Colonnese Hey, good morning guys, and congrats on a really strong quarter here. First one for me, obviously, Bitcoin Depot is generating really strong cash flows. So it'd be great to get some more color around your capital management priorities for the rest of the year. I can appreciate some of the debt repayment comments. But how are you thinking about balancing maybe M&A, Bitcoin purchases? And again, this potential quarter dividend? Brandon Mintz Good question, Mike. It's Brandon again. So when we look at uses of cash with the Bitcoin purchases, we would like to be opportunistic with us getting back close to all-time highs right now. I don't anticipate much buying. In terms of paying down debt, we did sign an amendment to our term loan agreement that requires us to have a little bit quicker amortization schedule. And with our strong balance sheet right now, the preferred dividend being paid off and without a drag on potential cash uses like the preferred dividend had, I could see us potentially paying down debt maybe even quicker than what's in the schedule. In terms of M&A, there's still not a lot of opportunities that make sense for us, at least in the US or Canada or Australia, primarily because we've just been able to purchase kiosks prices that are less expensive than brand-new kiosks. And when we run the numbers, it's hard to justify those M&A opportunities when we can just grow organically ourselves and have higher returns there. However, we're evaluating M&A opportunities internationally because if someone can speed up our time line to deployment, whether they have a license or some strategic vendor relationships or a strategic retailer relationship that has really additional value than just us buying more kiosks in finding locations. And we're evaluating if there's an opportunity that makes sense. But I don't think at this time we're in a place where that's a very near-term situation. Mike Colonnese Very helpful, Brandon. I appreciate the color there. And regarding the 2Q revenue guide, I can appreciate the tough comp from the year ago quarter. But are there any other factors causing such a significant deceleration in revenue growth for this quarter here? Brandon Mintz I think just as time has gone on, we've noticed the seasonality in the business we've talked about previously and how this business seems to be somewhat correlated with the seasonality with tax return season. And I think as there are more and more tools for people to get refunds earlier that some of that volume is starting to shift more into Q1. Mike Colonnese Right. Thank you for taking my questions. Brandon Mintz And that's just a theory. Operator Hal Goetsch, B. Riley Securities. Hal Goetsch Hey there, hey, Congrats on a great quarter. Just wanted to get your thoughts on the reason for maybe the extremely steep increase over the last four quarters in median transaction it was like rock solid around 200. And then for the last four quarters, it's really -- it's really moved up. And I wanted to get your thoughts. And then because it's up about 50%. (inaudible) Brandon Mintz I didn't hear the second question. Scott Buchanan I got it, this is Scott. So it's just a function of where the transaction tiers are for KYC. So we've had a tier at $200 for a long time. And that means customers will frequently do $200 transactions. And so when you look at the median, even as the average has been going up every month, every quarter, every year, when you take the median, $200 just has a lot of transactions that are at exactly that level. So even if we're moving up to higher points within that $200 median, it was still $200. And once we cross that level, we're seeing move up appears a more quick pace because it hasn't hit another tier or is it just a ton of common transactions at that specific size, if that makes sense. Just a function of like where we see a lot of exact size transactions. Hal Goetsch Okay. Okay. And could you comment on just like overall transaction count growth by economic cohort. I mean what are like some of the machines that are like in place over two years that having been moved in a year? Like what kind of transaction counts are they doing per month sort of KPIs you could share with us if it's a more qualitative basis? Scott Buchanan Yeah. See, trying to do some quick math for you. So I mean a kiosk that's ramped up. I mean, we still see a lot of variability even after the two years of what transaction sizes mixed with transaction counts. But we're seeing transaction counts that mature kiosks in the mid-double-digit range. So in the, let's say, 10 to 20 transactions a month at a mature kiosk. Hal Goetsch Okay. And are those mature kiosks? Are they trending towards like the median transaction size? Is it kind of -- that's a fair then because they've been there a while, people know they're frequent users? Scott Buchanan Well, they would -- it would trend more toward the average transaction size, which is higher than the median. But yes -- Hal Goetsch The average is higher than the median. Scott Buchanan For sure. Yes, because outlier large transactions pull off the average more than you can pull up the median. Hal Goetsch Okay. And last from me before I can get back in the queue. You've lapped California's impact of their change. What have you seen in California a year later with what is -- how is that either bounce back or not bounce back or what's happened in California? Scott Buchanan So California, can you ask that again, you ask a California has bounced back? Hal Goetsch No, it's like California made a rule change impact at all of 2024, right? And you've now lapped give us some comment -- could you please share some commentary on what California looks like a full almost five quarters after that change? How are trends in California? Scott Buchanan Yeah. I mean California is still lower than other states because of the rural changes that happened there. It just has less of an impact on the business now that we've got many, many fewer kiosks in the state. We've probably reduced our count of kiosks in California by about 80% from where we were when the rule first went into effect. Hal Goetsch Okay. So usually one of your top states, it's your moving our kiosks and you're growing double digit right now, Q1 I mean, that's pretty. That's helpful. Thank you. Operator Pat McCann, Noble Capital Markets. Pat McCann Hey guys, thanks for taking my questions, and congrats on the quarter. I would like, if you don't mind talking a little bit more about the spreads of the machines this quarter and the gross margins and the drivers behind that. And what maybe we should expect moving forward there? David Gray Yeah, I'll take that one. It's David. Yeah, the gross margin expansion really was attributable to pricing strength. We did increase our margins on Bitcoin transactions through the kiosks as well as leveraging higher revenue across kind of the fixed and semi-fixed costs that we have in our cost structure. So those were two key drivers of the margin expansion, and we expect that to continue to be strong going forward. Pat McCann And then the other question was regarding additional kiosk acquisition. I know that's not a need right now, but I was just wondering what the landscape looks like as far as opportunities to pick up more kiosks on the cheap kind of like you did recently in the last year or so? Brandon Mintz Brandon, I'll take that one. If you look at data from which have the listings of all the Bitcoins ATMs around the world, for the most part, it looks like competition, at least in the US is shrinking if you remove our kiosk growth over the past year and just looking at their data, it looks like maybe there's over 3,000 competitor kiosks that have disappeared from the market. So I think as some of the smaller operators struggle to survive in this environment that requires more sophistication and more resources from operators that there could be additional kiosks that pop up on the market per sale. Pat McCann Thanks. That's all I had. Congrats again. Brandon Mintz Thank you. Operator I will now turn the call back over to Brandon Mintz, CEO for closing remarks. Please go ahead. Brandon Mintz Thank you, everyone for joining the call today. We're very happy about the results we delivered, and we plan to continue to perform next quarter. Operator Ladies and gentlemen, that concludes today's call. Thank you all for joining. You may now disconnect.
Yahoo
15-05-2025
- Business
- Yahoo
Q1 2025 Sow Good Inc Earnings Call
Cody Slach; Investor Relations; Gateway Group, Inc. Claudia Goldfarb; Co-Founder and Chief Executive Officer; Sow Good Inc Brendon Fischer; Interim Chief Financial Officer; Sow Good Inc George Kelly; Analyst; Roth Capital Partners Igor Novyartsev; Analyst; Lairs Capital Operator Good morning, everyone, and thank you for participating in today's conference call to discuss Sow Good financial results for first quarter ended March 31, us today are Sow Good Co-Founder and CEO, Claudia Goldfarb; and Interim Chief Financial Officer, Brendon Fischer. Following their remarks, we'll open the call for analyst we go further, I would like to turn the call over to Mr. Slach as he reads the company's Safe Harbor Statement within the meaning of Private Securities Litigation Reform Act of 1995 that provides important cautions regarding forward-looking statements. Cody, please go ahead. Cody Slach Good morning, everyone, and thank you for joining us in today's conference call to discuss Sow Good's financial results for the first quarter ended March 31, 2025. Certain statements made during this call are forward-looking statements, including those concerning our financial outlook, our competitive landscape, market opportunities and the impact of the global economic environment on our statements are based on currently available information and assumptions, and we undertake no duty to update this information except as required by law. These statements are also subject to a number of risks and uncertainties, including those highlighted in today's earnings release and our filings with the information concerning these statements and the risks and uncertainties associated with them is highlighted in today's earnings release and in our filings with the SEC. Copies are available on the SEC's website or on our investor relations we will discuss adjusted EBITDA and non-GAAP financial measures on today's call. A reconciliation of adjusted EBITDA to net income or loss, the nearest comparable non-GAAP financial measures discussed on today's call is available in our earnings press release at our investor relations that, I will turn the call over to Claudia. Claudia Goldfarb Thank you, Cody, and good morning, everyone, and thank you for joining us today. We're encouraged by the continued momentum in the first quarter of 2025 with a 79% increase in revenue from the fourth quarter of 2024. This tracks closely with the expectations we laid out during our last there is still work to be done, Q1 delivered meaningful progress across key areas, particularly in operational execution and retail expansion. The strategic actions we took last year to make the business more agile and efficient are paying off, and we're seeing renewed consumer enthusiasm for our freeze-dried candy said, we continue to feel the effects of global CPG giants entering the category we pioneered. These companies have used their scale and spending power to secure shelf space often at the expense of smaller, more innovative brands like we believe the initial novelty and market impact of these launches is wearing off. As we gain momentum, it's clear that consumers are returning to our brand for our superior assortment, unmatched crunch and ongoing innovation. I'll share more on the progress we're making first, I'll turn it over to Brendon to walk us through our Q1 financials. Brendon? Brendon Fischer Thank you, Claudia. Jumping right into our financial performance. Revenue in the first quarter of 2025 was $2.5 million compared to $11.4 million for the same period in 2024. The decline was primarily driven by softening demand due in large parts to increased competitive pressure. Gross profit for the first quarter of 2025 was $1.1 million compared to $4.6 million for the same period in margin was 45% in the first quarter of 2025 compared to 41% in the year ago period. The decrease in gross profit was largely due to lower revenue, partially offset by lower cost of goods sold. The improvement in gross margin for the first quarter primarily reflects the lower cost of goods sold in the expenses in the first quarter of 2025 were $3.5 million compared to $3.7 million for the same period in 2024. The year over year reduction was largely the result of a decrease in bonus compensation and lower legal services loss in the first quarter of 2025 was $2.6 million or a loss of $0.23 per diluted share compared to net income of $511,000 or $0.06 per diluted share for the same period in 2024. The decline reflects lower gross profit, partially offset by reduced operating expenses in Q1. Adjusted EBITDA in the first quarter of 2025 was negative $0.8 million compared to $2.5 million for the same period in to the balance sheet. We ended the quarter with cash and cash equivalents of $1.6 million compared to $3.7 million as of December 31, debt, excluding operating losses was $2.7 million. However, subsequent to quarter end, we entered into exchange agreements with all of our outstanding noteholders with notes payable this year. Under the exchange agreements, existing notes were exchanged on a dollar for dollar basis for new notes maturing five years from the date of new notes are convertible at the option of the holder in whole or in part into shares of common stock based on our price per share equal to the average closing price of our common stock during the five trading days immediately prior to the execution of an entry into the new notes. With such conversion prices ranging from $0.62 to $ concludes my prepared remarks. I'll now turn the call back to Claudia. Claudia? Claudia Goldfarb Thank you, Brendon. I'll focus on our three key strategies executing cost savings and cash conservation initiatives, expanding candy distribution and pursuing new category opportunities where our team has deep we continue to carefully manage operating expenses to drive meaningful savings while maintaining our commitment to production, innovation and quality. In the first quarter, we reduced overhead by approximately $400,000 through targeted cuts related to our Mexico operations and labor reductions. We are targeting an additional $100,000 in savings during the second also enhancing operational efficiency through smart automation. To support scalable growth without compromising quality, we implemented two custom-designed automated packaging machines. These systems partially replace our previously manual hand packaging process, reducing labor costs and increasing speed and consistency, while being specifically engineered to handle the fragility of our freeze-dried candy and preserve our product we are evaluating opportunities to optimize our manufacturing footprint to better align with our current operational needs. As part of this strategy, we have decided to delay the deployment of freeze dryer 7 through 12 and until production demand warrant their approach allows us to maintain maximum flexibility as we explore new category and geographic expansion opportunities. Similarly, given our current priorities and the need for greater visibility into long-term demand, we have postponed the activation of our two candy making to conserve cash and strengthen our balance sheet on March 31, 2025, we revised the annual compensation for me and our Executive Chairman. Approximately 28% and 32% of our respective annual cash salaries will now be paid in company stock pursuant to the Sow Good 2024 stock incentive plan rather than we've taken steps to bolster our short-term cash position by entering into exchange agreements with existing noteholders to push out upcoming maturities by five years incorporating certain conversion and redemption features. These agreements reflect the strong confidence our management team and noteholders have in our recovery plan, long-term strategy and future to sales expansion. Q1 marked a period of meaningful reengagement and growing momentum through targeted retail promotions and key account wins. Albertsons grocery launched approximately 1,500 displays as part of their summer set with Halloween shipments also scheduled for late May. Kroger received seasonal Easter items, continuing our presence in key seasonal hardware stores saw 50 locations order full displays in Q1 and with steady category expansion and encouraging early performance. Orgill mirrored our progress at ACE with positive initial demand and continued orders supporting our entry into the hardware retail channels. KeHE one of the largest US distributors will officially launch Sow Good in May through its new brand program. Winn-Dixie received initial shipments in Q1 and has already placed reorders indicating a positive consumer Below launched our Chamoy and Cotton candy taffy in Q1 and thanks to both new product introductions and renewed velocity due to targeted retail promotions across our existing SKUs, we saw a 124% increase in orders compared to to the strong performance, they've now added our Caramel Crunch SKU, which will launch in June. Although we paused the launch of our in-house the chew candy production we have successfully advanced with in-house production of our Caramel products in both traditional and freeze-dried are handcrafted using a limited selection of high-quality ingredients, completely free from dyes, artificial colors and artificial flavors. This initiative reflects our commitment to meeting the evolving expectations of today's consumers, who are increasingly seeking clean label better for you alternatives without sacrificing demand for transparency, simplicity and ingredient integrity continues to shape purchasing decisions across the confectionery category. By prioritizing cleaner formulations, we are not only differentiating our brand but also positioning ourselves to lead within this growing see this shift as a long-term opportunity to build trust, strengthen brand loyalty and future-proof our product portfolio in a competitive and evolving marketplace. Looking ahead, we are excited to continue innovating with cleaner ingredients while expanding our assortment, ensuring Sow Good remains synonymous with quality, transparency and we're excited to share that we launched our products in the Middle East during the first week of May through our partnership with explorer investments, a leading distributor in the Middle it's still early, initial orders exceeded expectations, and we anticipate having clear visibility into performance by early July. This expansion represents a significant growth opportunity. The Middle East freeze-dried market is still in its infancy with limited competition from high-quality brands and ample space for our market leader to Europe, while we've not yet launched as we continue to navigate regulatory requirements, we were optimistic about the long-term potential of the market. Our strong reception at ISM Germany earlier this year reaffirmed growing interest in premium freeze-dried products within this emerging and relatively untapped will continue to pursue opportunities to open this market, and we'll keep you updated as progress is made. Given the volatility of the emerging freeze-dried candy category, our management team has remained focused on identifying opportunities to further leverage our manufacturing expertise and proprietary freeze-drying a result, we are planning to enter two high potential categories where we have deep expertise, beef jerky and freeze-fried yogurt snacks. Both product extensions will emphasize clean label, better for you ingredients, aligning with consumer demand for simple, high-quality formulations and supporting our long-term commitment to health conscious innovation. As previously shared, initial samples were met with very positive feedback from customers reinforcing our confidence in these on that early enthusiasm, we've advanced R&D and remain on track to potentially launch both categories in the second half of the year. Currently, we're planning for yogurt melts to debut under the Sow Good brand, while beef jerky will launch under a new brand currently in energized by the growth potential these new categories represent and encouraged by the strong early response. We look forward to keeping you updated as these initiatives progress. We're executing on multiple fronts, expanding domestically with new retail partnerships strengthening our distributor network and entering high-growth international a good pipeline and continued emphasis on innovation, quality and cost discipline, we are confident in our ability to deliver sustainable long-term growth. While visibility into our revenue path is improving, it remains dynamic as is typical in emerging product previously shared, we expect Q2 to show modest improvement over Q1 as new partnerships begin to take hold. These early steps are laying the foundation for more meaningful growth in the second half of the remain focused on building a scalable, sustainable business with disciplined cost management in a fast-moving environment. While challenges still persist, we believe we're positioning ourselves to emerge stronger, more agile and ready to reassert our leadership through continued manufacturing excellence, innovation and thoughtful category we'll now open the call for Q&A. Operator (Operator Instructions)George Kelly, Roth Capital. George Kelly Hey everyone, thanks for taking my questions. Maybe one for you, Claudia, just to start. You talked about in your prepared remarks seeing renewed consumer enthusiasm. So I guess the question is, could you share what you're seeing just in weekly or monthly how has that trended maybe over the last, I don't know, six weeks or longer. And then secondarily, how is your retail inventory position right now? Are you still kind of working through excess retail inventory with certain of your large partners? Claudia Goldfarb George. Yeah. No, great questions. So what we're seeing is a slow increase in sell-through data in retailers. We were kind of at about 12, 13 units per door. Over the last few weeks, we've increased to 14. This past week, we increased to 16 units per just like our revenue recovery, which has been slow and steady, we're seeing that same kind of trend in retail environments. What we're hearing is that customers were really excited about the large CPG launches, and they wanted to try them. As they've tried them, the novelty has worn off, and they're returning to our brand because of our superior assortment and the quality of our week over week, we're starting to see that improvement in Circana data. I'll give you a great anecdote. Five Below, when we did the cotton candy, it was supposed to be a one and done order, was a limited edition run and it performed so well that they just placed a reorder for an additional 46,000 bags. And we're seeing that throughout retailers, ACE, Orgill where it was just going to be limited displays are now placing reorders for additional displays. So that's what we're seeing on the retailer regards to retailer excess inventory, Five Below was working through quite a bit of inventory. That has slowly gone away. We did some very targeted promotions at Five Below at HEB to get rid of the excess inventory. Those were successful, and so we're now returning to a normal reorder cadence with those we're excited. There are still challenges, we're still working through reopening doors, but in our existing retailers with our existing customers, we're seeing a return to normal reorder cadences and excitement for the brand, especially our relaunches and I'm probably giving you more information than you want, but like the Caramel Crunch going into Five Below and other retailers, our innovation, our new product launches are being accepted incredibly I think that part of that is, a, they trust us as one of the pioneers in the category. So what we're coming out with these new products, they understand that it's coming in with a really quality freeze-drying process. And we're really focused on cleaner ingredients, which is also being received incredibly well. Like our Caramel Crunch, it's got six ingredients completely free of artificial dyes and flavors. And I do think that, that is going to be a really strong important component of our go-forward strategy. George Kelly That's all helpful information. And a few questions left for you. How many doors are you in currently? Claudia Goldfarb So that is changing, especially right now. We just did the Winn-Dixie launch. We did -- we're increasing in Orgill and ACE. So that's a very dynamic number. But -- George Kelly Maybe at quarter end would be the better question? Claudia Goldfarb Yeah. So somewhere around 1,900, somewhere between 1,900 and 2,000 doors. George Kelly Okay. And then a separate topic. Your inventory grew again sequentially. And so A, how do you feel about the quality of that inventory? Is any of it heat affected or just generally thoughts there? And then what are your expectations for the next couple of quarters? How quickly can you work inventory down. Claudia Goldfarb So in regards to heat-affected inventory, that's really contained to two SKUs, the sweet worms and some of the peach perfect, I feel like we've identified and gotten rid of most of that inventory, there might be some stragglers here and there. In regards to the quality of the inventory or the salability of the inventory that we have remaining, we've got a two year shelf life on most of our products. So we've got time to work through of the things that we're trying to be really strategic about is like the sweet worms, the peach perfect that we want to work through at a quicker cadence looking for opportunities that we can do that overseas and focusing on new inventory that we bring in being those better for you ingredients, cleaner ingredients and kind of restocking with those product that's where we are on inventory. It's going to take us a little bit of time to work through specifically the sweet worms, some of the peach product and those things, but we're actively working on it. George Kelly Okay. And then one last question for me is just about the competitive dynamics. Has any of the big guys that entered the space, do you feel that they're committed? Have you seen them pull back at any retailers? Or is the industry perhaps just not big enough for them to kind of stay interested? Or anything you've observed there? And then also, the smaller competitors that have been around for longer, have you seen any of those exit the space? And that's all I had. Thank you. Claudia Goldfarb No, thank you. Yeah, a lot of the small guys have exited the space. None of them were real competitors. And we've seen a huge inundation of the China product in especially like discount retailers and some of kind of the lower price point retailers, which has affected trial quite a I think that consumers are smart, they're savvy and they're recognizing that the reason there's so much key product in some of those retailers is because it's cheap product. And they're returning to Five Below, an HEB and these other places and purchasing good quality regards to some of the larger -- sorry, one of the other smaller retailers that we've been kind of neck and neck, not retailers, brands that we've been neck and neck with. Looking through the Circana data, they've been affected by the large CPG companies entering the space, much more so than we have, and they aren't seeing the recovery that we again, I think that, that speaks to our assortment, our quality, the fact that we actually freeze dry our products ourselves as you may remember, we were co-manufacturing overseas last year. As of late last year, we no longer do that. Everything is now once again in our Irvine you see that quality really speaking, coming through our product line. In regards to the large CPGs, I haven't heard anything from them or from retailers. Based on what I'm hearing from buyers, consumers and what I'm seeing in the data, I'm surprised that they're not performing better. I would have expected a stronger performance from we're seeing what we would consider some pretty substantial declines in their sell-through rate. And again, I think that, that has to do with the fact that who you choose to freeze dry your product really matters. How you freeze dry, how you package really so I don't know if they're going to evaluate who their co-manufacturers are, I don't know if they're happy with what their performance is. But I think that there is definitely room for improvement on the quality of the product that's out there by some of those larger CPG companies. George Kelly Thanks. Operator (Operator Instructions)[Igor Novyartsev, Lairs Capital]. Igor Novyartsev Hello and thank you for taking my question. And I think a couple of questions already been answered. So I'm happy to hear that. One of the questions, I remember, Claudia, you mentioned that on the previous call that the Q1 will not be materially better in terms of sales of we could say that it was materially better. So revenue has recovered somewhat by more than a $1 million. So was there a lot of sales right after the call? Did you ship a lot of product after the -- at the very end of March. So I'm just curious if something has changed in that respect. Claudia Goldfarb Igor, hi, great question. And yes, we saw much quicker recovery right after that call. And so reiterating what I said to George and on this call, A lot of consumers were really excited about trying some of the new launches on the market. And as those trials kind of happened, they said, you know what we're going back to Sow Good because we love their assortment, we love their quality. And we saw that in the last half of that quarter. And we're seeing that this is still going to be slow. We recovered a little bit more than we anticipated in the first quarter. Second quarter is still going to be marginally better than the first quarter. Third quarter is still going to be marginally better than the second, but it's we're excited to see it happening. And right now, we're incredibly focused on how do we sustain that momentum through targeted partnerships with our strong retailers and with really thoughtful, methodical product launches that are speaking to consumers and what they're looking for at this time. Igor Novyartsev Okay, thank you. My other question is, I think it's fair to say that you have six units and you have a significant spare capacity until your sales recover. What are your plans for the spare capacity can it be utilized in doing some private label or subletting it to somebody? Or what are your thoughts on that? Claudia Goldfarb Yeah. No, definitely. I hate having our machines idle. We want them to be operating, we want to keep our workforce at full force and so we're analyzing and looking for opportunities in all of the areas you just mentioned, home manufacturing, private labeling, we're excited about bringing yogurt melts into our product assortment both on the branded side and a private label side because, again, that's something that will help keep the machines fully utilized. And so nothing is off the table in regards to how to bring our utilization rates back up. Igor Novyartsev My final question, and I know it's sort of a difficult question. So obviously, your cash position has improved somewhat by converting some of the compensation into equity and I'm happy to see that given the circumstances, but it's still a little bit tenuous. Do you have any discussion to improve your cash position? What are your thoughts for the next couple of quarters? What are you planning to do? Claudia Goldfarb Yeah, definitely. As a management team, cash is an important conversation that we're having on a very regular basis. And converting some of our salaries from cash to stock, talking to our noteholders to push those notes we're going to keep evaluating every strategy we can on how to improve our cash position. What our primary focus at this time is, A, being really thoughtful and methodical about evaluating what our expenses are and converting our inventory to cash because that is the easiest way for us to improve our cash have plenty of inventory sitting in our warehouse that we need to work through and convert to cash because that's going to be the most meaningful way for us to improve the cash position. Igor Novyartsev Okay. Thank you so much, and I'm glad to see some green shoots in this quarter. So hopefully, we will see more green shoots in next quarter. So that's all the questions I have. Thank you, Claudia. Claudia Goldfarb Thank you. And I'm looking forward for more green as well. Everyone, thank you very much. I greatly appreciate you being on this call and being on this journey with us. We still have challenges ahead, but we're excited as we see our recovery strategy is taking hold. So have a great day, everyone, and again much appreciated. Operator Ladies and gentlemen, this concludes today's teleconference. You may disconnect your lines at this time for your participation. Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data
