Better Choice Company Inc.

The Better Choice Company, Inc., first quarter 2022 earnings call. All participants will be in listen-only mode. Should you need assistance, please signal a call from specialists by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then one on your touch-tone phone. To withdraw from the question queue, please press star then two. Please note this event is being recorded. I'd now like to turn the conference over to Rob Sauerman, Executive Vice President of Strategy. Please go ahead.

Thank you, Operator. Welcome, everyone, to Better Choice's first quarter earnings conference call. This morning, we issued our Q1 2022 financial results press release and posted our updated earnings presentation under the IR section of our website, which we will be discussing later today. I'm joined by Scott Lerner, our CEO, Sharla Cook, our CFO, and Donald Young, our Executive Vice President of Sales. Before we begin, please remember that during the course of this call, we may make forward-looking statements within the meaning of the federal securities laws. These statements are based on management's current expectations and beliefs and involve risks and uncertainties that could cause actual results to differ materially from those described in these forward-looking statements. Please refer to the company's annual report on Form 10-K filed with the Securities and Exchange Commission and the company's press release issued on Thursday, May 12, 2022, for a detailed discussion of the risks that could cause actual results to differ materially from those expressed or implied in any forward-looking statements made today. Please note that on today's call, management will refer to certain non-GAAP financial measures such as gross revenue, EBITDA, and adjusted EBITDA. Although the company believes that these non-GAAP financial measures provide useful information for investors, the presentation of this information is not intended to be considered an isolation or as a substitute for the financial information presented in accordance with GAAP. Please refer to our press release and presentation issued on May 12, 2022, for a reconciliation of the non-GAAP financial measures to the most comparable measures prepared in accordance with GAAP. With that, let me hand it over to Scott.

On our Q4 earnings call late March, we focused on the steps we had taken in 2021 to deliver growth in 2022 with a focus on building a best-in-class team, creating an industry-leading innovation pipeline, and developing a go-to-market approach anchored by leading channel partnerships. We also noted that you would start to see this foundational work drive increased sales growth beginning in the first quarter of 2022. With that said, I'm excited to report that our internal expectations are now becoming a reality. In the first quarter of 2022, we generated a record 19.7 million of gross sales, representing sequential growth of 45% relative to Q4 2021, and $3.8 million more than the previous quarterly record set in Q3 2021. Our business is firing on all cylinders as roughly 2.5 million of this growth can be attributed to initial Halo Elevate orders placed by Petco and Pet Supplies Plus, with the remaining 3.6 million driven by a more than doubling of international sales relative to Q4 and continued growth in e-commerce. After taking into account trade spend and other discounts, this translates to $17 million of net sales growth, or 57% growth relative to Q1 2021. However, we aren't only focused on the top line. Although input costs have generally risen in consumer goods over the course of the last quarter, our team has been laser focused on gross margin improvements. As a result, we were able to improve gross margin to 28% in Q1, up from 25% in Q4, without any benefit from price increases. In addition, we took a number of key actions that we believe will help us realize continued gross margin improvement, which we'll discuss in more detail later on this call. This includes the communication of meaningful price increases to our domestic and international customers in January, which became effective in April and will start to have an impact beginning in Q2. I would view Q1 as a success in any environment, but given the number of macro economic challenges and inflationary cost pressures that we have faced, I'm incredibly proud of what our team has been able to accomplish. Not only is this evidence that our win-from-anywhere culture is working, but I also think it serves as validation that we are building something special at Better Choice. We have created a strong foundation for continued growth by rallying around the broader Halo brand umbrella. Our international business is growing rapidly, and we have already launched in over 1,500 pet specialty stores, including Petco and Pet Supplies Plus. Our e-commerce and DTC platforms give us a significant online recurring revenue base. The launch of Halo Elevate this year is only the beginning, and we have paired an exciting three-year innovation pipeline with our AssetLite model to focus on growth across a variety of different types of consumable pet products. Our business is rooted in the Halo brand. where we plan to leverage our global omnichannel strategy to achieve rapid growth and exceed $100 million of gross sales by 2023. Our target is the millennial pet parent who can purchase our Halo products wherever, whenever, and however they choose. This is how the new breed of consumer shops, and it doesn't matter if they are in the United States, Asia, or any other part of the world, One day they might be in a pet co, the next day on Chewy, and the next day browsing our website. So we really have to have a strong presence in our four main channels, pet specialty, e-commerce, direct-to-consumer, and international to drive customer loyalty. On the flip side, our omni-channel strategy turns every consumer touchpoint into a dynamic opportunity to connect, convert, and retain customers with a consistent and immersive brand experience. which we believe is a key to increasing the lifetime value of our customers. This strategy also lets us develop and sell channel-specific products designed to maximize conversion and gross margin to avoid channel conflict. One of the issues you'll find in pet category if you try to play in every channel at once is that you see a lot of pricing competition. It can really affect both the brand as well as the retailer. So we're avoiding that and looking to launch products built to succeed in specific channels to prevent margin erosion across our portfolio. For example, Halo Elevate is sold exclusively within the pet specialty channel. While you won't find Elevate on Chewy or Amazon, Halo Holistic will continue to drive growth on these third-party e-commerce sites. While maintaining an existing foothold in pet specialty, particularly in the cat category. Our new DTC site, which just launched last month, carries all of our products, including a complete suite of freeze-dried raw offerings that were historically sold under the True Dog brand. Today, our international sales are driven by Halo Holistic, but we are excited to begin to introduce Halo Elevate to new geographies later this year. When we look at the pet food category more broadly, I do think it's important for investors to remember that the Halo brand is built for a new generation of pet parents. Over the last five years, we've seen a tremendous shift in our industry as millennials have become the largest cohort of pet parents in the United States. This transition has been accelerated by COVID-19, and for a growing pet food company focused on a new consumer acquisition, It's incredibly important that our brand voice resonates with these younger consumers. Our goal is to talk to pet parents about their pet's health the same way that human food and beverage brands do, with concise and transparent messaging focused on the day-to-day realities of what it means to be a pet parent and all the concerns that come with that. Given so much of our excitement this year is tied to the Halo Elevate launch, Our new marketing campaign will go live in June. If you've been paying close attention to Halo's social and digital channels, you might have noticed that we've already made a number of changes across our platforms to tie into this strategy. With that in mind, I'd like to hand it over to Donald to talk a little bit more about how the Elevate launch is going. Donald?