Sow Good (SOWG), a burgeoning player in the food industry, has disclosed its financial results for the first quarter ending March 31, 2024, showcasing significant growth. The company reported $11.4 million in revenue, marking a substantial year-over-year increase and a 20% sequential rise.
Adjusted EBITDA stood at $2.45 million, with a healthy margin of 21.5%. Following its recent NASDAQ uplisting and successful public offering, Sow Good is poised to enhance production capacity, forge stronger distribution partnerships, and amplify marketing efforts.
Key Takeaways
- Sow Good achieved $11.4 million in revenue with a 21.5% adjusted EBITDA margin.
- The company successfully uplisted to NASDAQ and completed a public offering, raising $13.8 million.
- Plans are set to expand production capacity, diversify the customer base, and launch a comprehensive marketing strategy.
- Sow Good has secured retail partnerships with several major chains and expects to double its door count by year-end.
- The company anticipates a gross margin in the mid to high 30% range despite potential sales mix changes and increased shipping costs.
Company Outlook
- Sow Good is focused on expanding production capacity, expecting to bring six freeze dryers online by Q3 and ordering three additional units.
- They plan to ramp up international co-manufacturing and diversify their SKU portfolio, including holiday and seasonal offerings.
- The company aims to increase its SKU count to around 20 by the end of the year and is investing in marketing to support customer demand.
Bearish Highlights
- Gross margin may fluctuate due to the sales mix and rising shipping costs.
- There may be a delay between the introduction of new production capacity and the realization of potential sales.
- Increased SG&A expenses are anticipated due to various factors, including facility expansion and marketing investments.
Bullish Highlights
- Sow Good surpassed its production capacity projections for Q1 and is resuming new customer onboarding.
- Positive consumer reception has been noted on social media, indicating strong market acceptance.
- The company is confident in its quality and production excellence, which it believes sets it apart from competitors.
Misses
- Specific guidance on revenue or unit pricing was not provided for competitive reasons.
Q&A Highlights
- The company currently offers 14 SKUs, with expectations to expand to around 20 by year-end.
- Sow Good has historically not invested in marketing but plans to increase marketing expenses in the third quarter to bolster retailer support and brand awareness.
- Production capacity is projected to increase steadily throughout the year, contributing to an anticipated $30 million in annual revenue.
Sow Good's first quarter performance indicates a company on the rise, with strategic investments in production and marketing poised to catalyze further growth. The company's uplisting to NASDAQ and the completion of a public offering have fortified its financial standing, enabling it to pursue ambitious expansion plans.
Despite not providing specific revenue guidance, Sow Good's transparent production targets and partnership developments offer a clear view of its growth trajectory. The company's commitment to innovation and quality, coupled with its strategic expansion initiatives, suggests a strong potential for continued success in the competitive food industry.
InvestingPro Insights
Sow Good's first quarter results have painted a picture of a company experiencing rapid growth, and the InvestingPro data and tips provide additional context to this trajectory. With a market capitalization of $157 million and a staggering revenue growth of over 3653.73% in the last twelve months as of Q1 2023, Sow Good is making significant strides in the food industry.
The company's stock has also seen a significant return over the last week with a 10.55% price total return, indicating strong recent performance which aligns with the company's reported financial success.
InvestingPro Tips suggest that analysts are optimistic about Sow Good's sales growth in the current year, which complements the company's own expansion plans. Moreover, with a high return over the last year of 93.22%, investors may find Sow Good's stock to be an attractive option for potential growth. However, the stock is noted to trade with high price volatility, which could be a point of consideration for risk-averse investors.
For those interested in deeper analysis, InvestingPro offers additional tips on Sow Good, including insights on stock performance over various timeframes and valuation multiples. There are currently 16 additional InvestingPro Tips available, which can be accessed by visiting the InvestingPro platform. For readers looking to take advantage of this resource, use the coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription.
InvestingPro Data also highlights a Price / Book ratio of 15.2 and a negative P/E ratio of -25.76, reflecting the company's current lack of profitability over the last twelve months. This data point may be of particular interest to investors considering the company's valuation and long-term earning potential.
In summary, Sow Good's robust revenue growth and recent stock performance, as indicated by InvestingPro data, underscore the company's upward momentum, which is further supported by the positive outlook from analysts. Still, the high volatility of the stock and the current lack of profitability are factors that investors should weigh carefully.
Full transcript - Sow Good Inc (SOWG) Q1 2024:
Operator: Hello and welcome to Sow Good First Quarter 2024 Earnings Conference call. At this time, all participants are in a listen only mode. After the speaker’s presentation, there will be a question-and-answer session. [Operator Instructions] I will now like to turn the call over to Jackie Keshner, Director of Investor Relations. You may begin.
Jackie Keshner: Good morning, everyone, and thank you for participating in today’s conference call to discuss Sow Good’s financial results for the first quarter ended March 31, 2024. Joining us today are Sow Good’s Co-founder and CEO, Claudia Goldfarb and Interim Chief Financial Officer, Brendon Fischer. Certain statements made during this call are forward looking statements, including those concerning our financial outlook or market opportunities and the impact of the global economic environment on our business. These 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 risk and uncertainties, including those highlighted in today’s earnings release and our filings with the SEC, additional information concerning these statements and the risks and uncertainties associated with them highlighted in today’s earnings release and in our filings with the SEC. Copies are available on SEC’s website or on our investor relations website. Furthermore, we will discuss adjusted EBITDA, a non-GAAP financial measure on today’s call, a reconciliation of adjusted EBITDA to net loss the nearest comparable non-GAAP financial measure discussed on today’s call is available in our earnings press release at our investor relations website. With that, I will turn the call over to Claudia.
Claudia Goldfarb: Thank you, Jackie, and good morning, everyone. We appreciate you joining us today to discuss our first quarter 2024 financial results. I want to start by thanking our Sow Good team for their unwavering commitment to Sow Good and our vision in creating one of the most innovative and disruptive companies in the candy industry. We are just beginning to scratch the surface of the innovative and disruptive power of freeze dry technology and are excited to continue to shake up the candy industry. We achieved quite a few milestones since our year end call and are on track to deliver an exceptional 2024. We delivered $11.4 million in revenue in the first quarter of 2024, representing substantial year over year growth and a 20% sequential increase relative to the fourth quarter of 2023, as well as $2.45 million in adjusted EBITDA with an adjusted EBITDA margin of 21.5%. Our strong first quarter financial results demonstrate that freeze dried candy continues to grow as a category, and that our strategies of expanding internal production and co-manufacturer capacity, growing and strengthening our distribution networks and continuing product innovation are working. But before I delve deeper into our operational strides in the first quarter, I want to highlight a key corporate milestone we recently achieved. As we announced a few weeks ago, we have now uplisted our stock to NASDAQ with our shares trading on the NASDAQ capital markets as of May 2, 2024. Along with the uplist, we completed a public offering of 1.38 million shares of common stock raising approximately $13.8 million in aggregate gross proceeds. Our interim CFO, Brendan Fisher will provide additional detail on the offering later in the call. We believe our NASDAQ listing allows us to expand our investor base and market visibility while driving improvements in liquidity and long-term shareholder value. We really look forward to leveraging the advantages of NASDAQ’s platform in support of our ongoing growth strategy. The proceeds from the public offering place us in an excellent position to help us achieve our strategic objectives for 2024. Our key objectives are to continue increasing our in-house and co-manufactured production capacity, strengthening and diversifying our distribution partnerships, laying the groundwork for a strong marketing and branding strategy for the second half of this year, and further disrupting the candy category with innovative treats. For our Q1 production capacity, we surpassed our projections of 4.25 million units to over 4.5 million units. We accomplished this milestone by building a strong culture within Sow Good, that prioritizes manufacturing excellence and efficiency, as well as investing strongly in increasing our in-house production capabilities and strengthening our co-manufacturing relationships in China and Columbia. We completed the installation of our fifth freeze dryer, which is now operational and our sixth freeze dryer on track to becoming operational by the third quarter of this year. In addition, we recently placed deposits on three additional freeze dryers, which are expected to be operational within the next nine months. As discussed on the last call, we strategically paused new customer onboarding in the third quarter of 2023 to focus our efforts on growing our production capacity. Though this approach resulted in smaller sequential expansion relative to what we achieved between third and fourth quarters of 2023, we determined that laying our production groundwork now would enable us to effectively manage and support much greater growth in the second half of this year. With our capacity increasing as projected, we have begun resuming new customer onboarding as planned. We are thrilled with the progress we have made with both existing and new customers. Recent updates to our customer launches and expansions include adding five new skews in Big Lots (NYSE:BIG) in May, and launching Sow Good displays in 300 of their stores for increased exposure and brand building. Anticipated launch of our displays in 1,897 Kroger (NYSE:KR) stores beginning early summer, anticipated increases in our target store presence to nearly 2,000 stores this summer after outperforming sales forecast in our initial 200 store launch. Launching four SKUs at Dollar General (NYSE:DG) in May anticipated launch of three SKUs in the fresh market in June, anticipated launch of four SKUs in nearly 8,000 7-Eleven stores in June, and an anticipated launch of three SKUs at Ross in June. We are very proud of the milestones we continue to achieve as we ramp up production and sales. But before I discuss our goals in greater detail, I would like to introduce our Interim Chief Financial officer, Brendon Fischer, whose appointment we announced early last month. Brendon first joined our team in June, 2023, bringing over 20 years of leadership experience in financial analysis, shareholder communications and regulatory compliance with public and private companies. Before joining Sow Good, he served as the CIO, Managing Director, and Chief Compliance Officer of Fischer Capital Management, an investment advisory firm he founded in 2018. He was previously an assistant investment officer and portfolio manager at Rocky Mountain Advisors, managing a $1.3 billion publicly traded fund that was formerly known as the Boulder Growth and Income Fund. Throughout his time with the company, Brendan has been instrumental in helping us advance our strategic growth initiatives in support of the high market demand for freeze dried candy. We are beyond thrilled that he is part of the Sow Good team and will be instrumental in our future growth. I will now welcome him to the call to walk through our first quarter financial results. Brendan, over to you.
Brendon Fischer: Thank you, Claudia. It is a pleasure to join Sow Goods leadership team and continue my work with the company during this exciting chapter. Moving into our financial performance, revenue in the first quarter of 2024, increased significantly year-over-year to 11.4 million compared to approximately 198,900 in the prior year period. On a sequential basis, revenue this quarter increased approximately 20% over the 9.5 million generated in the fourth quarter of 2023. Overall, our top line growth continues to be driven by our strategic pivot to the production of Freeze dried candy and our increased ability to meet growing market demand through the expansion of our production capacity. Gross profit in the first quarter of 2024 increased significantly to 4.6 million compared to approximately 114,900 for the same period in 2023, our first quarter gross margin was 40.6% compared to 57.8% in the prior year period. Relative to the first quarter of last year our business is now operating at a much greater scale with increased labor and related production costs reflected in our year over year margin comparison. In order to meet growing demand, we will continue to invest in our operations to increase our production capacity, and we expect these investments provide a near-term headwind to quarterly gross margin. Operating expenses in the first quarter of 2024 were 3.7 million compared to 1.0 million for the same period in 2023. The year over year increase was primarily driven by higher compensation and professional services expenses as we scaled up the business and invested in systems and process improvements in anticipation of being listed on NASDAQ. Net income for the quarter was approximately 510,600 compared to a net loss of 1.4 million for the same period in 2023. The improvement reflects the higher gross profit we generated during the quarter, and we aim to drive further profitability improvements over the coming quarters of 2024. Adjusted EBITDA in the first quarter of 2024 improved to 2.45 million compared to approximately 171,300 for the same period in 2023. Moving to the balance sheet, weighted the first quarter of 2024 with cash and equivalent of 6.8 million compared to 2.4 million as of December 31, 2023. This increase in cash to cash equivalence was primarily driven by a private placement we completed in March of 2024, which raised approximately 3.7 million in proceeds from the issuance of 515,597 new shares. Subsequent to the quarter end of March 31, 2024 we took additional actions to further strengthen the company’s financial foundation. On April 15th, we completed a warrant exercise transaction, to provide some background; the company had issued notes payable with attached warrants during the period between December, 2021 and May of 2023. The company reached an agreement with these note holders to exercise their warrants by allowing for the partial prepayment of principal and or accrued interest in an aggregate amount equal to the exercise prices of the holder’s warrants. As a result, the company issued 2,186,250 shares of its common stock, and the company’s debt was reduced by 5.2 million, and accrued interest payable was reduced by 98,750. Additionally, as Claudia mentioned earlier, we closed an underwritten public offering of 1.38 million shares of common stock early last week. The offering was completed at a price of $10 per share, yielding approximately 13.8 million in gross proceeds before operating expenses and underwriting discounts and commissions. We intend to use the net proceeds from this offering for general corporate purposes, which may include capital expenditures for the expansion of production capacity, funding, working and growth capital, expanding our sales and marketing efforts, and reducing certain tranches of indebtedness. We would like to thank our new and existing investors for their support and look forward to further enhancing our foundation for growth. This concludes my prepared remarks and I would allow like to turn the call back to Claudia for closing remarks. Claudia,
Claudia Goldfarb: Thank you, Brendan. As we have discussed throughout this call and over the past few quarters, we have made rapid progress in launching our first nine candy SKUs in the first quarter of 2023, in just this first year of focusing on Freeze dried candy. We have meaningfully expanded our production infrastructure, our retail customer and distributor network, and our SKU and store count. This is just the beginning stages of our growth trajectory. As we look to the coming quarters, I would like to close today’s call with a quick overview of our key strategic pillars for 2024. Our first and foremost priority continues to be expanding our production capacity in support of customer demand. We expect to maintain our progress here through bringing our six freeze dryer online by Q3 of this year, placing orders for an additional three freeze dryers, and continuing to ramp our international co-manufacturing agreement. This work to grow and optimize our in-house and international capacity will allow us to continue meeting the growing demand for our current most popular SKUs while aiming to improve our ability to produce larger quantities of our other more laborious treats without compromising any of our margins or efficiencies. We continue to diversify our customer base and SKU portfolio, maintaining the advantageous breadth we have built on both of these fronts. In addition to the retail launches I mentioned earlier, we are also planning to introduce holiday and seasonal SKUs later this year. We will share updates on these and other new product innovations over the coming quarters. We have been incredibly fortunate to see the organic reviews, content creation, and general positive reception of our treats on social media by our customers. This consumer support has translated into strong organic sales velocity. But to further support this demand, develop this category, and cement our position as the category maker and leader, we will be unveiling a comprehensive marketing strategy later this calendar year. To date, we have focused on establishing our advantage in the freeze dried candy space through building a strong brand, scaling our production and distribution capabilities, and diversifying our distribution strategy across all channels. We grew this economic moat before making any significant marketing investments. And now with our operational foundation in place and primed for further growth, we are eager to strengthen these barriers to entry via our investments in marketing and branding. We have entered 2024 with significant momentum and expect to continue building upon our innovative product portfolio, our production capacity, and our customer base. We look forward to sharing more updates with you on our trajectory over the coming quarters, and thank you very much for being here with us today. Operator, we will now open up the call for Q&A.
Operator: [Operator Instructions] Our first question comes from the line of George Kelly with ROTH. Your line is open.
George Kelly: Hey, everybody. Thanks for taking my questions. And congrats on a really strong quarter. So there is a lot to go through. I’m going to ask maybe two or three questions and then I will hop back in the queue. But I was hoping to start with some of the retail - new retail partnerships that you announced. And I was hoping to, I guess; just get more context about how much growth you are going to drive this year, door growth. So I was curious if you could give us like how many doors or distribution points did you have at the end of Q1 and just using round numbers, not looking for specific guidance, but how much should that grow by year end?
Brendon Fischer: So, George, on the door count, I don’t have it off the top of my head. Claudia, you may have it.
Claudia Goldfarb: So at the end of Q1, George, I don’t have the numbers in front of me, but somewhere around 6,500 and the growth in the second half of this year is going to be significantly more than that.
George Kelly: So more than doubling of your door count?
Claudia Goldfarb: That that is what we are anticipating.
George Kelly: Okay. And then could you fill us in with a little more detail just on a couple of your announced partners, Dollar General and 7-Eleven? How much I know you are in some 7-Elevens, I believe, like how much I think you said 8,000 doors, if I heard that right. How many SKUs will be in 7-Eleven? And then if we could if you could do a kind of similar discussion on Dollar General?
Claudia Goldfarb: Yes. So for 7-Eleven, we are anticipating four SKUs in all 8,000. As you know, some of them are franchise versus non-franchise. So for the non-franchise, for the franchise stores, it is up to the independent operator, but that is what we are anticipating. On dollar general, we are looking to start with two SKUs. They are going to be a smaller, bag size, so they are going to be somewhere between 0.8 to 1.2 ounces. We are still solidifying what the final weight count is going to be, and it is going to be a sour bite and a sweet bite.
George Kelly: Okay. And then the full list that you gave is that all signed contracts or, I guess, how much confidence or visibility do you have on those ones?
Claudia Goldfarb: They are all signed contracts.
George Kelly: Okay. That is excellent. And then one other question for me -.
Claudia Goldfarb: We have POs and we have the onboarding documents.
George Kelly: Okay. Understood. And then other topic I wanted to cover is gross margin and EBITDA margin. There was language in the press release about investments in capacity and infrastructure and everything. And gross margin though in the quarter was well above my estimate. So I guess the question is, where do you expect gross margin to trend over the next couple of quarters? And if there is a dip anticipated, how long do you think it will take to get back to a kind of high 30s range for gross margin?
Brendon Fischer: Yes. That is a great question, George. Couple of things happened. We were surprised by the strength of the gross margin this quarter as well. So you weren’t the only one. And really what drove that was, we had very strong sales mix during the quarter, which helped boost margins, and we also did a really good job of managing labor costs. Whether or not, we are growing business. There is a lot of things that are variable, especially with the market we are in is in distancing. So we will expect some variability on those two factors especially on sales mix as we add new customers that is going to kind of tweak things on sales mix side. So we do expect some variability on margin related to that. We expect some additional margin from where we were this quarter, driven by the fact that. We had some increased costs that we experienced in recent months primarily on the shipping cost side. And we all know the shipping freight situation, how that market gotten more expensive over the last several months. Those costs that we experienced really haven’t flown through the income statement yet, and we expect that start to catch up in Q2. So we do expect some pressure there. And then combine that with, the fact that we are in the growth phase of the business. We are going to be investing in labor. We are going to be investing in production capacity. As those things come online, we are obviously not going to be utilizing them at a 100% efficiency. We are going to have to kind of grow into them and scale into them. So that is going to lead to a little bit near-term margin pressure. Now where that all ends out? We are probably looking somewhere in the mid to high 30% range for the near-term on gross margin.
Operator: Our next question comes from the line of Eric Des Lauriers with Craig-Hallum. Your line is open.
Eric Des Lauriers: My first question, is just overall about capacity to add additional freeze dryers, so four at the beginning of the year and now guidance for nine by, I guess, within the next nine months here. How much space do you have to continue adding freeze dryers in your Irving, Texas facility?
Brendon Fischer: So in the Irving facility, we are running out of space, but we are I guess, the best way to put it is, you know, we are growing business. We are look we are going to have space for those freeze dryers. We are looking part of the project, the capacity expansion, on the production side includes increase in square footage.
Eric Des Lauriers: I guess that kind of leads into my next question here of just overall facilities. So in the 10-Q, you mentioned you are looking for additional packaging facilities. Maybe you could just give us a high-level on your overall facility plans, where are you looking to increase capacity or get into new facilities? And I guess, for any potential new facilities, is this sort of all coming through the sort of viewpoint of adding capacity or is there any near-term plans for like geographic diversification at all? Just kind of wondering how you are thinking about your facility footprint overall in the near-term?
Claudia Goldfarb: Eric, great question. And right now, we are really focused on the Dallas area. After looking through different options that we had, you know, going international, going outside of the Dallas area, we have decided to keep everything under one roof. And so all of that production capacity is going to happen very close to where our Irving, Texas facility is currently located. Most of that footprint is going to be used for production capacity and packaging capacity expansion, with the remainder being raw material storage and all of the other things that you need to distribute the product.
Eric Des Lauriers: And then just last question from me here. So in the press release, you highlighted big lots, five new SKUs and these Sow Good displays as well. I think these displays are relatively new. Is this the first instance, of these displays is getting them in at big lots and I guess, if not, do you have any sort of early insight on the impact here? And maybe just help us understand if this is more of like a strategy to increase velocity of your SKUs or is this a way for you to increase the number of SKUs at a given retailer? Just any sort of color on the impact of these displays would be great.
Claudia Goldfarb: Yes. Definitely. Now I think, first and foremost, brand building is one of the things that we are really focused going into the second half of 2024. And so the displays are incredibly colorful and really just speak to our branding and marketing efforts. But the strategy for them being in-store is, yes, definitely SKU assortment, expanding the SKU assortment, but velocity is definitely increasing. They have been in just a few tests, Circle K, 7-Eleven, have outperformed expectations. I don’t have the exact numbers that I can share with you today. They are going into Big Lots. They are going into Five Below (NASDAQ:FIVE). And so, you know, probably by the next earnings call, we will have more color as to exactly how well they are performing. But initial test launches have them performing very well.
Operator: Our next question comes from the line of David Lavigne with Trickle Research.
David Lavigne: Hi, all. Fantastic quarter. I’m just wondering if you can tell me how many SKUs there are now and kind of where you expect that to be maybe as you exit the year? And the other thing I’m curious about is just how we should think about SG&A going forward. I know that you kind of talked about having to load the margin side of it a little bit with expenses just for growth. So I’m kind of thinking wondering how that impact may impact SG&A as well.
Claudia Goldfarb: Yes. So right now we are sitting at about 14 SKUs. We are going to end the year somewhere in the 20 range because we are launching holiday SKUs as well. Those have been, just really well received. I’m actually at a trade show in Indianapolis right now. So, we are getting to meet with retailers here. I think as we go forward, innovation is just a key cornerstone as to what we are going to be doing. What is really just resonating with customers everywhere is, we have core kind of six products and then in addition to that, new flavors, novel flavors, not novel shapes are just being incredibly well received. So that is where we are. Yes.
Brendon Fischer: Yes. And to go on the operating question, expense question on the SG&A side, a couple of things to point out in this quarter is that we did this is a quarter we usually pay bonuses. So there is about [$0.25 million] (Ph) that fell into this quarter that, obviously, we won’t see in the next three quarters. It is more of a first quarter situation for us. So I think that as well as on the other G&A side, usually when we pay the annual compensation for the board. So you will see that fall out in the next couple of quarters until next Q1. As more [Technical Difficulty] adding additional personnel as we build out our operations. So we will have some, increase from SG&A on that. And the other part of it is we will have some increased rental expenses as to as we build out facilities and take on new facilities. So those are two big things that will decrease in the near future. And one other thing I would point out - yes. Go ahead, Claudia.
Claudia Goldfarb: Yes. No. And historically, as we have mentioned, we have spent zero on marketing. Everything we have been able to do has been organic social media, word-of-mouth, and just having a really engaged customer base. Going forward, that is going to change. So you are going to see those expenses start popping up probably in the third quarter of this year. And so I don’t know that that comprehensive from supporting our retailers so that we continue to see the velocities we are seeing on shelf, some greater investments in social media and probably some small influencer involvement on a go forward basis.
David Lavigne: So that reminded me of another question I had. Are you starting to see and you talked about the moat and you talked now you are talking about accelerating marketing. Are you starting to see any sorts of competitors? I mean, the space is pretty new. It seems like some sort of competitors popping up here and there are is inevitable. I mean, obviously, that is going to require they’d be able to scale the business like you have. But I’m just curious if you have seen any sort of indications along those lines?
Claudia Goldfarb: Yes. No, definitely. At the trade show, I’m seeing competitors here. And one of the things that has been reassuring as we have been here is that those moats that we built are really effective. I will give you an anecdotal story. One of the 7-Eleven buyers walked into the booth yesterday, and we are like, hey, would you want to try the new SKU we were launching? And she said, no. I don’t like freeze dried candy. We said, okay. Which ones have you tried that you haven’t liked? And she said, oh, well, I have never tried yours. I have tried a competitor’s of yours. We said, okay. That is the issue. Come on in. Give our stuff a try. And she is like, oh, wow. Now I get why everyone keeps telling me that the only candy to carry is Sow Good. So, those modes of quality, focusing on production capacity and production excellence have really proven to be effective. The marketing spend is just so that we can continue to kind of scream that from the rooftops. There is a difference, with Sow Good Candy that is apparent at first bite. And so, I think once we really get the mental health, those modes are just going to continue to become much more effective.
Operator: [Operator Instructions] Our next question comes from the line of Steve Emerson (NYSE:EMR) with Emerson Investment Group. Your line is open.
Steve Emerson: Thank you for a great quarter and excellent call. What kind of revenue run rate does 4.5 million pieces capacity at this time represent and the 30 million year-end run rate pieces?
Brendon Fischer: Yes. So, we are not giving any specific guidance on revenue, and we don’t reveal kind of our unit pricing, for competitive reasons. But you can kind of back into that 4.5 million that we had, in capacity and kind of refer that back to our revenue to get an idea of where we are in a unit basis. It is not going to be perfect, obviously, because we don’t sales and capacity don’t always match up. But kind of what we are expecting from, I can’t talk about revenue cadence, but I can point you to our production capacity cadence that we have provided before where we expect to see that capacity ramp up to $7.2 million units in 2Q, $9 million in 3Q, and $9.6 million in Q4, which case you do that $30 million number for the full year. Now what you really need to do is adjust for the fact that there is going to be a delay between when new capacity comes online and the potential for new sales to occur. But really what we are looking for is, to see similar growth cadence for revenue with this year that we do on the production capacity line.
Operator: Our next question comes from the line of Gregg Kidd with Pinnacle Fund. Your line is open.
Gregg Kidd: Hi, Claudia and Brendan. Congratulations on a great quarter.
Brendon Fischer: Thank you, Gregg.
Gregg Kidd: Kind of following up on Steve’s question, is there a way to think about how much of the business in the first quarter was fulfilled through internal owned manufacturing versus co-man?
Brendon Fischer: Again, we are not going to be providing that type of detail. But, I mean, you can look again to the production capacity chart we had, and that should give you a general idea of where we are.
Gregg Kidd: You start to ramp with a lot of these customers, you talked about Kroger and Dollar General, 7-Eleven, Fresh Market and Ross and then expansions with some existing? Do you think that that mix could change to be slightly greater than 50% co-man while you are waiting for some of your additional freeze dryers to come online?
Brendon Fischer: Yes. That is at the end of the day, we are going to make sure we can service our customers. And whether that is going to be from domestic production or the co-man, whatever the situation in the short-term, we are just going to make sure we get product to customers. So we do expect some variability. And I think the bigger thing to kind of think about is longer term is that we want to grow the domestic side of the business to only control that type of manufacturing for us. So I would expect over the long-term, the co-manufacturing obviously is going to be a part of our business going forward, but we are going to be getting a bigger and bigger share coming from the domestic as we grow the business.
Operator: Thank you. Ladies and gentlemen, I’m showing no further questions in the queue. I would now like to turn the call back over to Claudia for closing remarks.
Claudia Goldfarb: Well, thank you everyone for being a part of this call. We greatly appreciate it. We are incredibly excited as to where we are right now and where the rest of this year is going to take us. And, we look forward to giving you another update in three months.
Operator: Ladies and gentlemen, that concludes today’s conference call. Thank you for your participation. You may now disconnect.
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