Sow Good Reports Third Quarter 2024 Results

IRVING, Texas, Nov. 14, 2024 (GLOBE NEWSWIRE) -- Sow Good Inc. (Nasdaq: SOWG) ("Sow Good" or "the Company"), a trailblazer in the freeze-dried dried candy and treat industry, is reporting financial and operating results for the third quarter ended September 30, 2024.

"We are pleased to announce that our sixth freeze dryer is operational and that we were able to resume shipments in October following a third quarter pause due to quality concerns amid extreme summer heat," said Claudia Goldfarb, CEO of Sow Good. "Unfortunately, some melted products reached shelves, impacting short-term sales velocity. We are working closely with our retail partners to remove these items and restore the growth we saw earlier in the year. Moving forward, we are implementing temperature-controlled distribution to prevent similar issues next summer.

"As we look ahead, we've expanded our sales team to pursue the opportunities we have in the over 100,000 U.S. stores that could carry our treats but currently do not. According to IRI data, we are only in about 10% of locations that traditionally carry candy, giving us significant room for growth. While large CPG companies are entering the freeze-dried candy space, leveraging their significant market power and budgets to minimize competition, we see this as a validation of the category that we helped establish and a testament to our product's strength. Although we anticipate some short-term impact on certain customer relationships and sales, we remain confident in our brand's position."

Third Quarter 2024 Highlights

   -- Revenue in the third quarter of 2024 was $3.6 million compared to $5.0 
      million for the same period in 2023. The decrease was largely due to the 
      Company's decision to delay the majority of product shipments as the 
      extreme heat during the period was negatively impacting product quality. 
      In addition, revenue was affected by an increase in promotional activity 
      and customer allowances. 
   -- Gross profit in the third quarter of 2024 was $0.6 million compared to 
      $1.3 million for the same period in 2023. Gross margin was 16.0% in the 
      third quarter of 2024 compared to 27.0% in the prior year period. The 
      decline in margin was primarily due to higher costs of goods sold as a 
      percentage of revenue due to higher costs related to the company's new 
      facility and a lower production yield. 
   -- Operating expenses in the third quarter of 2024 were $3.8 million 
      compared to $1.0 million for the same period in 2023, primarily due to 
      strategic investments in brand expansion and infrastructure growth as 
      well as higher salaries and benefits expense. The Company allocated more 
      resources toward trade shows and branding and marketing efforts, aiming 
      to strengthen its market presence and support the expansion into new 
      retail and distribution channels. Occupancy costs also increased as the 
      Company transitioned to a 320,000-square-foot facility to accommodate 
      rising demand. 
   -- Net loss in the third quarter of 2024 was $3.4 million, or $(0.33) per 
      diluted share, compared to net income of $0.3 million, or $0.04 per 
      diluted share, for the same period in 2023. The decline reflects the 
      lower level of gross profit generated during the quarter and increased 
      operating expenses during the 2024 period. 
   -- Adjusted EBITDA (a non-GAAP financial measure defined and reconciled 
      herein) in the third quarter of 2024 was ($1.9) million compared to $0.6 
      million for the same period in 2023. For a reconciliation of Adjusted 
      EBITDA to the nearest comparable GAAP metric, net income, please see the 
      tables below. 
   -- Cash and cash equivalents were $6.9 million at September 30, 2024, 
      compared to $2.4 million at December 31, 2023. 

Year to Date 2024 Highlights

   -- Revenue for the nine months ending September 30, 2024, increased 
      significantly to $30.6 million compared to $6.5 million in 2023. The 
      substantial revenue growth underscores the effectiveness of the Company's 
      retail distribution outlet expansion strategy as well as price 
      improvements. 
   -- Gross profit for the nine months ending September 30, 2024, increased 
      significantly to $14.2 million compared to $(0.1) million in 2023. Gross 
      margin was 46.4% in the first nine months of 2024 compared to negative 
      2.0% in the prior year period. This was driven by strong revenue growth 
      combined with raw material cost improvements. 
   -- Operating expenses for the nine months ending September 30, 2024, 
      increased to $11.6 million from $2.9 million in 2023 as the Company 
      scaled operations to support the strong revenue growth referenced above. 

Ira Goldfarb, Executive Chairman of Sow Good, added: "We remain committed to our growth strategy, driven by our proprietary technology and focus on quality. Our retail partner roster is expanding with launches at World Market, Cracker Barrel, Kroger, Albertsons, and Five Below, along with new prospects in international markets, regional and convenience stores, and non-traditional channels."

Conference Call

Sow Good will conduct a conference call today at 10:00 A.M. Eastern time to discuss its results for the third quarter ended September 30, 2024.

Date: Thursday, November 14, 2024

Time: 10:00 a.m. Eastern time

Registration Link: https://register.vevent.com/register/BI42dee1790eee4c30ae622dda21abc466

To access the call by phone, please register via the registration link above and you will be provided with dial-in instructions and details. If you have any difficulty connecting with the conference call, please contact Gateway Group at 1-949-574-3860.

The conference call will be broadcast live and available for replay here and on the Company's website at www.sowginc.com.

About Sow Good Inc.

Sow Good Inc. is a trailblazing U.S.-based freeze dried candy and snack manufacturer dedicated to providing consumers with innovative and explosively flavorful freeze dried treats. Sow Good has harnessed the power of our proprietary freeze-drying technology and product-specialized manufacturing facility to transform traditional candy into a novel and exciting everyday confectionaries subcategory that we call freeze dried candy. Sow Good is dedicated to building a company that creates good experiences for our customers and growth for our investors and employees through our core pillars: (i) innovation; (ii) scalability; (iii) manufacturing excellence; (iv) meaningful employment opportunities; and (v) food quality standards.

Non-GAAP Financial Measures

This press release contains "non-GAAP financial measures" that are financial measures that either exclude or include amounts that are not excluded or included in the most directly comparable measures calculated and presented in accordance with GAAP. Specifically, we make use of the non-GAAP financial measure "Adjusted EBITDA." Adjusted EBITDA has been presented in this press release as a supplemental measure of financial performance that is not required by, or presented in accordance with, GAAP. Adjusted EBITDA is a supplemental measure of our performance that is not required by or presented in accordance with GAAP. We define Adjusted EBITDA as net income (loss) before depreciation, interest expense, net and income tax benefit, adjusted to eliminate loss on early extinguishment of debt and stock-based compensation. The most directly comparable GAAP measure is net income (loss). Adjusted EBITDA is not recognized terms under GAAP and should not be considered as an alternative to net income (loss) as a measure of financial performance or cash provided by operating activities as a measure of liquidity, or any other performance measure derived in accordance with GAAP. In addition, in evaluating Adjusted EBITDA, you should be aware that in the future, we may incur expenses similar to the adjustments in the presentation of Adjusted EBITDA. The presentation of Adjusted EBITDA should not be construed as an inference that our future results will be unaffected by unusual or non-recurring items. Because not all companies use identical calculations, the presentations of Adjusted EBITDA may not be comparable to other similarly titled measures of other companies and can differ significantly from company to company.

We present this non-GAAP measure because we believe it assists investors and analysts in comparing our operating performance across reporting periods on a consistent basis by excluding items that we do not believe are indicative of our core operating performance. Management believes Adjusted EBITDA is useful to investors in highlighting trends in our operating performance, while other measures can differ significantly depending on long-term strategic decisions regarding capital structure, the tax jurisdictions in which we operate, and capital investments. Management uses Adjusted EBITDA to supplement GAAP measures of performance in the evaluation of the effectiveness of our business strategies, to make budgeting decisions, to establish discretionary annual incentive compensation, and to compare our performance against that of other peer companies using similar measures. Management supplements GAAP results with non-GAAP financial measures to provide a more complete understanding of the factors and trends affecting the business than GAAP results alone provide.

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November 14, 2024 08:00 ET (13:00 GMT)