Stryve Foods, Inc.

Good afternoon and welcome to the Strive Foods third quarter 2022 earnings call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing star then zero on your telephone keypad. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then one on your telephone keypad. To withdraw your question, please press star then two. Please note this event is being recorded. I would now like to turn the conference over to Sandy Martin, three-part advisors. Please go ahead.

Thank you, Operator, and welcome to the Strive Foods Third Quarter Earnings Conference Call. With me today are Strive's Chief Executive Officer, Chris Beaver, and Chief Financial Officer, Alex Hawkins. Before we begin, I would like to remind everyone that part of our discussion today will include forward-looking statements that are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements, by their nature, are uncertain and outside of the company's control. Actual results could differ materially from these expectations. These statements are not guarantees of future performance, and therefore, undue reliance should not be placed upon them. We do not undertake to update these forward-looking statements at a later date, and they only refer to today, November 14, 2022. In addition, today's call will include a discussion of non-GAAP financial measures, including adjusted EBITDA and adjusted EPS. Non-GAAP financial measures should be considered as a supplement to and not substitute for GAAP financial measures. We refer you to the reconciliation of non-GAAP to the nearest GAAP measure included in today's earnings press release for further detail. This call is being webcast and can be accessed through the audio link on the news and events page of the investors section at ir.strive.com. Also, the earnings press release is posted on our website and a copy of the release has been included in the form 8K submitted to the SEC. With that, I would now like to turn the call over to Chris Beaver. Chris?

Thank you, Sandy. Welcome, everyone, and thank you for joining us for our third quarter earnings call. I want to start by addressing our release earlier today and officially welcome Chris Whitehair to Strive's Board of Directors. Chris is a great addition to our board. He brings deep experience and expertise inside consumer packaged goods. He currently serves as Senior Vice President of Supply Chain for Sonopta, and prior to this, he led supply chain teams at ConAgra, Quaker Oats, and General Mills. We are excited to strengthen our board with the addition of Chris. I also want to recognize my Strive teammates for their efforts and commitment to our change agenda since I joined the company in late May. Thank you to that Strive squad. 2002 has been a transitional year. I am pleased with the progress we have made, which can be seen in the improvement in margins, operating expenses, and performance in measured channels. We have improved Q3 gross margins to a respectable 22.4% versus negative gross margins in Q2. And we delivered the best quarter in the company's history in terms of adjusted EBITDA. Our productivity initiatives are underway, just getting started across the organization to further drive positive financial outcomes. While I am pleased with our progress on the cost and margin side, I am more excited about the tremendous growth potential of our brands. To that end, I have been working with our sales and marketing team on demand generation. We are leveraging consumer, shopper, and retailer insights to better focus and prioritize resources against our core portfolio. Together, we have identified several renovation opportunities that we are executing right now. The customer response has been positive, which raises my confidence. These initiatives will help us accelerate our distribution and ensure our brands are more available in the market. In addition, we are developing a robust, market-creative innovation agenda, further supporting our commitment to growth. The fact-based, disciplined approach will ensure that our growth agenda is focused, intentional, and mindful of enterprise resources, including capital planning. We are encouraged by the performance and measure channels where growth is higher than the category and the response to our pricing actions has been more inelastic than our competition. We are executing our pricing strategy and building distribution, driving more availability in the market of our highly differentiated, great tasting, healthier brands to our expanding consumer base. The meat snack category offers a large assortment of options, which can create challenges for shoppers to locate their favorite product and or locate new innovative brands. We, as a newer brand with a differentiated offering, It is crucial that we express the features and benefits in an impactful way, appealing and structured manner. We have gained valuable customer and consumer insights on how we can address what our known barriers are for distribution gains and consumer trial. I have some very exciting developments to share in this area, which I'll discuss in a few moments. As we shared last quarter, we have embarked on a skew rationalization initiative that simplifies and streamlines the portfolio. directing resources away from lower priorities that have less potential to ones that deliver higher value with greater potential. We are progressing, expanding, and now accelerating the execution. We have identified and rationalized over 180 SKUs and are currently working with our customers to collaboratively implement an orderly transition. This action allows the organization to better focus on growing the core while executing on the fundamentals as we strategically innovate and build off a strong foundation. This is our promise to grow quality revenue and prune away product sizes and skews that are either unprofitable or do not contribute enough to support our hurdle rates. I have successfully accomplished similar initiatives multiple times in my career, and while this is not easy, it has proven to be extremely successful. The acceleration of this program will impact revenues in the current year. As those items sell through in December and into Q1, we will experience noise from this process that could impact quarterly revenues in the short term. This right sizing of our offerings was and is necessary. As I shared, we are parallel pathing renovation of our core portfolio while building a funnel of platforms of innovation. It is too early to share the full details. Suffice it to say that we are doubling down on our core products and around a platform of innovation whereby protein snacks utilizing high quality, great tasting, nutritional steak is front and center. Our strategic pricing has to be supported by optimal packaging architecture. As we are sharing our renovated packaging designs with our retail partners, we are receiving positive feedback, adding further promise about our future. I am confident that we will expand distribution, improve velocities, and help consumers locate our brand in more places. I feel it is important to share this example with you because we will drive higher demand and we will deliver a more consistent quality at a lower cost, positively impacting free cash flow. The packaging footprint will be uniform across the portfolio, offering improved retailer shelf presence, better supplier partnerships, and a more efficient and effective manufacturing and transportation environment. This is one example of how we are identifying and prioritizing our agenda. working cross-functionally, executing as one team, delivering both productivity and demand. Recently, we've seen meat prices increase this fall, and as we mentioned in the Q3 call, we previously developed a strategic pricing process, where we routinely evaluate all levers in order to price net of commodities. To date, our elasticities from our previous actions have been moderate. Not dissimilar to the total industry, but at a lower rate than our category that we compete in. We continuously review all pricing levers, adjust and take action in a fact-based manner. This will continue. We have always been a tremendous value for our consumers, and I expect that value will continue to rise in importance with the consumer. We will begin to better market and inform the consumer on the value of our products. They're a direct result of our minimally processed, clean ingredient position that we enjoy. The consumer gets just lean and clean protein. There are no preservatives or fillers. Therefore, we deliver more protein per ounce. Most consumers are not aware of that value that we deliver. Keep in mind, our bag is 2.25 ounces for our largest skews of delicious, thinly sliced steak. which delivers protein equal to approximately six ounces of filet mignon. Think about that. And given that the raw meat portion of consumers' grocery bill has experienced rising prices as well, it presents us with an additional opportunity to inform consumers of the tremendous value we deliver in an extremely convenient manner. This is a complex environment. Our strategies are more sophisticated today than they were a year ago, and we continue to institutionalize our processes and procedures and we will remain agile to compete effectively. Since joining, I have directed our strategic initiatives to focus on sustainable growth with a zero waste mindset in everything we do. As part of our renovation and innovation projects that I spoke about moments ago, we are building a circular economy into everything we do. This circular economy reduces materials use, redesigns materials, products and services to be less resource intensive and recaptures byproduct as a resource to manufacture new materials and products. Much more to share on this, but this is how we are thinking about our productivity agenda. With that, I will turn the call over to Alex to discuss Q3 financial results and liquidity, and then I'll come back to share the progress on key initiatives around growth, productivity, and execution.

Alex? Thanks, Chris. We've made considerable progress on our restructuring plan by implementing changes at all levels of the organization, including our approach to market. We see retail distribution as our best, most productive, and sustainable path to profitability. We are keenly focused on the quality of our revenue base, seeking to grow our core, which consists of valuable retail distribution sustainably profitable levels of e-commerce and select private label. As we've previously discussed, we've reduced spending and cut operating expenses in sales and marketing versus prior year that were closely associated with driving the unsustainable volumes in DTC e-commerce given the changed digital landscape. We focused our efforts on assessing the quality of our revenues and identified certain skews, channels, customers, and selling behaviors present in Q3 2021 that weren't supportive of our improvement plans, and thus, we weren't willing to repeat. As Chris mentioned, we are focused on expanding distribution of our core products that supports our gross margins with better net contribution margins and cash conversion than our base in 2021. Looking forward, this rationalization which includes an acceleration of a meaningful number of skew reductions, added top line pressure during the last half of 2022 as products and accounts in our forecasts have been or are being discontinued. Accordingly, we are revising 2022 full year revenue estimates to a range of $29 million to $32 million, which is a wider range than you might expect but that's to account for unexpected timing differences on liquidating certain rationalized inventory associated with the skew rationalization. Also, we want to share with investors that we have already reserved for most of the skew rationalization, so we may see a net sales benefit from the liquidation without undue pressure

Excuse me this is a conference operator. The speaker location has disconnected. We will rejoin them just as soon as possible. Thank you for your patience. © transcript Emily Beynon Excuse me, this is the conference operator. I have reconnected to Strive Foods. Please go ahead.

Hi there. Sorry about the technical difficulty. Let me continue. Accordingly, we are revising full year revenue estimates to a range of 29 million to 32 million, which is a wider range than you might expect to account for unexpected timing differences on liquidating certain rationalized inventory. We also want to share with investors that we have already reserved for most of the skew rationalization. So we may see a net sales benefit from the liquidation without undue pressure on margins. In addition to our revenue guidance shared today, we also expect modest sequential improvements in our Q4 on our adjusted EBITDA loss, namely from the benefit of a full quarter of our cost reductions in the period. Let me now walk you through the financial results for Q3. Net sales were 6.2 million compared to 9.1 million in the year-ago quarter. A significant portion of last year's revenue came from products that were eliminated from our product mix or from changes in our go-to-market strategy. Additionally, as we shared on our last call, executional issues in the second quarter of this year led to out-of-stocks at many of our retail partners. Our overall business at retail in the third quarter was negatively impacted by this dynamic as it took time to refill the pipeline to generate reorders. We have worked closely with our retail partners throughout this short-term supply issue and don't believe we will see any longer-term drawbacks other than the missed revenue opportunities within the quarter. Our major focus is on increasing distribution with our core business gaining momentum as evidenced by strong consumption at retail. Our gross profit for the quarter was $1.4 million or 22.4% of net sales. compared to gross profit of $3.3 million, or 35.9% of revenue in the year-ago quarter. Compared to a year ago, gross margin changes were largely affected by an intentional pullback of our DTC e-commerce investment. Although gross margins benefited from our outsized direct-to-consumer business in 2021, the net contribution was negative after sales, marketing, and fulfillment cost. Compared to the second quarter of this year, gross margins improved meaningfully, turning from a highly negative in Q2 to 22.4% in the third quarter of this year. Recall that second quarter results this year included a large, limited time promotional event at a major nationwide retailer. Not only did this promotion put pressure on Topline, but the capacity requirements to stay in stock for this program stretched our product assorts and retail fulfillment capabilities. We expect business to continue to normalize through Q4, however, Last year's 2021 gross margins were supported by strong Q4 e-commerce revenues that will not repeat this year. Operating expenses for the third quarter were $6.1 million, which compared favorably to the prior year Q3 of $11.4 million and sequentially from Q2 this year of $11.5 million. We told you in August that our restructuring plan was intended to reduce expenses by 50% relative to the back half of last year. And we are well on our way to that number with just over a 46% year over year reduction in the third quarter operating expenses. The improvements primarily included lower selling general and administrative run rate cash costs. The third quarter net loss decreased to 4.97 million or 16 cents per share, which represents our lowest gap net loss number in the history of our company. This favorably compares to a net loss of $8.7 million or $0.48 per share in the prior year quarter. Sequentially, net losses improved by $11.4 million from Q2's net loss of $16.4 million. This is a tremendous improvement and we are proud of our team's commitment to this transformational change. As I mentioned earlier, our GAAP financial results have been significantly bolstered by a reduction of cash operating expenses as part of the restructuring plan that we discussed in August. This rapid decrease in our cash expenses will continue to support our path to profitability that we discussed last quarter. Also, recall that our loss per share amounts were impacted by the change in weighted average shares outstanding from 18.3 million shares for the 2021 third quarter to 31 million shares this year at Q3. Share count increases were due to the full quarter benefit of the D-SPAC transaction, as well as the capital raise in January of 2022. The adjusted loss per share was 15 cents for the third quarter, which compares favorably to the adjusted loss per share of 44 cents in the year-ago quarter. Finally, our adjusted EBITDA loss for the third quarter was 3.9 million, which we are pleased to report that this is our lowest adjusted EBITDA in the history of the company. Q3's 3.9 million compares favorably to the adjusted EBITDA loss of 6.9 million a year ago. This year's second quarter adjusted EBITDA loss was 11.4 million. So on a sequential basis, our Q3 performance compares very favorably at almost three times better than the second quarter results. While we acknowledge Q2's results are influenced by some non-normal activity, which we've previously discussed, This rapid improvement should nonetheless be evidence of our significantly improved operating model. You can find the GAAP to non-GAAP reconciliations at the end of today's press release. Turning to our balance sheet and financial position, at the end of the third quarter, we had approximately $4.4 million of cash and cash equivalents with positive networking capital of $10.9 million. In Q3, we announced that we had closed and secured $21 million in non-dilutive committed borrowing capacity through a combination of facilities to further support our liquidity position as the company executes on its initiatives. We continue to be focused on reducing the company's losses while growing our valuable core, carefully managing cash and working capital, and improving our cash conversion. and planning to continue to strictly manage cash and liquidity. Our inventory balance at the end of Q3 was $8.9 million and the accounts receivable balance was $2.1 million. These inventory levels are high relative to our Q3 volumes. This was an intentional action taken to buy ahead in a rising meat price environment. We anticipate that we will draw down on those inventory levels throughout Q4 to more normalized levels. We plan to maintain a reasonable amount of liquidity to operate the business for sustainable growth and the achievement of our goals. Despite our top line being down year over year, we believe our third quarter results are a testament to the progress we've made in growing our core, improving margins, and following through with cost mitigation strategies and simplification of our organization. We have examined every area of spending throughout our business and are executing new ways to drive efficiencies, eliminate unnecessary expenses, and focus on the highest and best use of each dollar. The result so far has been a 46% reduction in operating expenses that resulted in an improvement in operating losses of $3.4 million, notwithstanding a lower sales base this year for the quarter. I think this fact, more than most, speaks to the relative improved quality of revenues year over year. Moving forward, we believe our optimized financial plan will begin to materially benefit from our price actions as well as productivity initiatives throughout our supply chain. While we intend to continue to invest to drive meaningful growth in net sales, we are doing so in a more disciplined manner that acknowledges changes in our channels to market. By monitoring our unit economics closely, maintaining an optimized cost structure, and meaningfully growing net sales, we expect to take material steps in the right direction in furtherance of our profitability goals. We previously shared our goals of reaching an inflection point of profitability on an adjusted EBITDA basis by the end of the first half of 2023, subject to a continuation of market conditions then prevailing. While this remains our goal, we acknowledge the rising meat price environment. And though we recently took price ahead of this trend, Should it continue, it may necessitate another round of pricing. Our achievement of this goal will be in part affected by the continuation of these trends, the timing of an additional price action, and the consumer's acceptance of such an increase. With that said, we remain optimistic in our ability to deliver against what we've set out and are marching towards that goal with focused execution with each day that goes by. Our optimism is bolstered by the fact that we continue to see sustained velocity with our target consumers despite our previous pricing actions and lower elasticity than the category, which gives us great confidence in the broad appeal and consumer attractiveness of our Strive family of brands. With that, I'd like to turn it back to Chris.

Thank you, Alex. Our transformation plan is on track, and as Alex mentioned, We expect modest sequential improvement in financial performance in Q4. As I mentioned, we rolled out a renovation and innovation agenda that is consumer-focused, highlighting our points of difference, and is designed to enable growth and expansion at retail. We plan to build on the momentum and measure channels while maintaining discipline in our execution. We have built an internal three-year outlook that focuses on availability, approachability, and affordability. And our model forecast contemplates growth rates for Strive that are expected to exceed the category. We are staying vigilant around quality growth, productivity, and discipline execution that we laid out last quarter. And we have made significant progress on these initiatives since the last earnings call. First, we have optimized our assortments to meet consumers' wants and needs executing game-changing renovation while building an innovation funnel that will be introduced responsibly and phased in over time. Second, we have optimized our packaging for retail store conversion and presence. Third, we are driving cross-functional productivity and changing the culture of our entire organization. Fourth, our path to profitability includes a rapid SKU reduction that allows us to focus on design to value, price pack architecture, and an ROI based decision making process. Fifth, we will continue to be maniacal about execution with highly engaged teammates that drive accountability for themselves, for their peers, to our retail partners, and to our shareholders. With just six months with the company, I am even more encouraged today than when I started. We are fortunate to be building a company that delivers unique, high quality, great tasting products with attributes that are unmatched by our peers. We have the most on-trend brands with significant growth potential. Our plan, along with the energy and commitment from our team, continues to excite and inspire me and gives me great confidence around our ability to build an enduring franchise of great brands. As a fellow shareholder, I am fully aligned with our stakeholders as we are focused on growing our core, executing, executing, and executing, and then adding more. With that, I would now like to open the line for questions. Operator?

We will now begin the question and answer session. To ask a question, you may press star then one on your telephone keypad. If you are using a speakerphone, please pick up your handset before pressing the keys. If at any time your question has been addressed and you'd like to withdraw your question, please press star then two. At this time, we will pause momentarily to assemble our roster. The first question comes from Brian Holland with Cowan. Please go ahead. Yeah, thanks.

Good afternoon. And Chris and Alex appreciate all of the color around the progress. If I just start on the top line, could you help unpack just kind of the impact of some of the moving parts here? I know that there's skew rationalization ongoing. There are some activities that you had last year that you didn't repeat this year. I'm just wondering if we can disaggregate it all on some of those line items.

Yeah, Brian, good question. While we don't report or break down elements of those in that degree of specificity, I'll tell you they had a fairly significant impact. Because when you look at our core, just even in measured channels, that's where consumption is, things are looking fairly positive. And I think that's a good indicator where you can expect us to continue to, you know, see more and continued progress. Historically, we also reported, you know, the e-comm business separately. And, you know, within our operating expense line, you know, we were investing significantly to market and drive conversion in that segment. That was significantly down year over year on a relative basis, but so was our operating expenses on an even accelerated basis. So I think it's a really good example of that ROI mindset to make certain that we're being really mindful of the dollars that we have, investing it in the areas that offer the greatest return, and building this business in a much higher quality, sustainable way.

Yeah, I appreciate that. And Chris, I guess that's where I was going because to your point, if we look at the scanner data, you know, it looks pretty good. It's certainly growing so that I'm just, I'm looking here at some of the latest numbers, but you know, you know, again, I appreciate it moves around a little bit and I might have something that's just a month or so stale, but you're kind of on a trailing 12 week basis, give or take somewhere in that 20% range. So I guess that sort of leads into your point about e-commerce, and maybe you can just kind of flesh that out a little bit. But most of this rationalization is happening in e-commerce and other untracked channels. And I guess within that, there was a lot of talk late last year, early this year. Excuse me, sir.

I'm sorry, Mr. Holland. I'm sorry. Their location is disconnected. I'll put music back in. Just one moment, please.

Okay.

Thank you. Excuse me, I have Thrive Management to rejoin. Mr. Holland, you may want to, I guess, rephrase the question that you were making again, please.

Thank you. Just where did I get cut off from the answer part?

I think it was during my question that you got cut off. I think my question was too long winded and it must have powered down the line. So let me try again and ask this just a little bit tighter. So you referenced that the scanner data looks good, excuse me, and it does. You know, depending on the period you're kind of looking at here, you know, we're kind of trending up in the let's call it 20%, give or take. I understand there's some volatility there. So I guess two questions off of that. Is most of the rationalization happening sort of in the non-track channels? And within that, there had been a lot of talk late last year, early this year, and I appreciate not from you, Chris, previous management, but around new customers and things like that. Did we lose any customers or did you proactively walk away from any customers, I guess, along the lines of unprofitable business?

Yeah. Okay. Brian. Um, yeah, it wasn't, it wasn't one of those calls that I'm going to hang up on. It's one of those questions I was going to hang up. Um, but yeah, great question. I would just tell you that most of that is in non-measured channels. Correct. Um, whether it be through some of the, um, e-commerce deep direct to consumer stuff that also, um, yielded a very significant and operating expenses in marketing in particular, um, to get to draw that conversion. Some of that stuff just is not being repeated. We are being very, very disciplined about every dollar that we have to be able to invest it for the greatest return. It's also within SKUs that are also within measured and non-measured channels. So as we prune back the SKUs and drive the complexity out of the organization, it's going to get us to be able to be far more productive and every element of what we do from planning to procuring to purchasing to having availability and servicing customers and then ultimately deliver the right mix to have more availability in all markets, whether they be measured or unmeasured, but in the right manner. So I would tell you more than 100% of the losses in exactly the non-measured areas.

Was it 180 SKUs you said you were rationalizing out?

Yes, exactly.

And you got to think of that as a... 180 SKUs on a $30 million revenue business. Wow. You've got a lot to dig out there, but I appreciate the progress there. Just to pivot on gross margin... Obviously encouraging sequential improvement there. As I understand, you're fairly tethered to beef prices. So I guess, one, if you could provide a little bit of color around that and, you know, the extent to which that may be a tailwind for you going forward.

Yeah, first part on the SKU rat, think of that not as 180 unique varieties. Sometimes that's in a pack for a private label, a small private label produced item. It could be into four or five different packs. And then some stuff was created just for direct-to-consumer. So there is not 180 different items, but it's the way it's packed and ultimately delivered and made available. And each one of those do drive complexity, but not to the same degree of complexity around each one of those. So, Alex, why don't you take the gross margin?

Sure. So with respect to gross margin, we're really encouraged by our improvement from Q2 to Q3. As you saw, we're down from year over year, but as we said, there's a significant portion of last year's revenue which is attributable to e-commerce, which is great from a gross margin standpoint, not great at those levels on a net margin standpoint. So as we're still working through the transition here, from the skew rationalization, we had certain reserves related to that. Additionally, our out-of-stocks experience in the prior period in Q2 came through and affected our Q3 as chargebacks and deductions, affecting our Q3 numbers. Additionally, with respect to B prices, they have continued to climb, and we've seen that coming for uh throughout the back half this year and next year we're hoping that they come down we don't know that the demand supply dynamics are such that we think they might be leveling off at a higher volume or higher price than they were in the current year but we're going to continue to look for ways to price net of commodities implement our continuous price action review process and maintain and improve on our margin profile which we can control not only through procurement and pricing, but also through our productivity initiatives, including yield improvements, which we are very excited about the progress we're making and will continue to make in the coming months.

Yeah, I think we're going to really be focused on the things we can control, Brian. One thing that also encourages me in the data, and while it's early, the near-end data where our last price increase that we recently put into the marketplace and are executing is starting to reflect in Some of the data and our elasticities are significantly better than the category and our competitors, albeit shorter time period, some new information, but the trends look encouraging. I think we have a lot of pricing power and a lot of brand strength. As we begin to roll out some of this renovated packaging, I think you're going to see the power of our brand get expressed in a more meaningful way, which I think is going to drive a lot more awareness. It's going to get a lot more conversions. We'll get a lot more trial, and we know repeat numbers are great when we get trial. So to unlock that value that we have, it's really about getting that distribution, making it more available, and then really managing and monitoring the price pack architecture so we're conscious of threshold, we're mindful of the trade investment and making certain that we're watching our frequency in depth because that can really move the pricing needle, as you know, as the consumer is shifting, and then re-expressing what value means and how important value is in these more unknown forward fast current waters of inflation and potential recession. So we're all over it. That's not a controllable of ours, but we're getting better at procuring. We're getting smarter about planning. We're getting better at utilization and yield. And all those things go into our productivity agenda, which helps absorb and or allows us the ability to compete based on how our competitors act and react to it.

Great. I'll leave it there. Best of luck.

The next question comes from Alex Furman with Craig Hallam Capital Group. Please go ahead.

Hey, guys. Thanks for taking my question. Can you help to size up that 180 SKUs for us a little bit more? For example, how many SKUs do you now currently sell and, you know, any kind of rough ballpark of what kind of revenue those 180s might have been generating. I imagine that 180, it sounds like that had a lot of custom configurations and sizes and things like that in there. Are there any retail relationships that are important that you have to walk away from as a result of not having their unique configuration anymore?

Great question. You know, we're going to be very mindful, and we are being mindful, in part and parcel. We haven't communicated some of that degree of specificity because we're working with customers on an orderly transition to make certain that we're swapping out and or ensuring that we're, you know, working with them in a collaborative manner. So every customer is extremely important, so we're reaching out and working with them on exactly that. It's not as much revenue as you think. While we're not being specific to what that is, we are very confident that what we have in our portfolio, which is upwards of how many SKUs remaining then, Alex?

Just over 80 SKUs.

About 80 SKUs. But you can see in the data, on average, in measured channels, we have less than two SKUs on 20% ACV. So if you can press that forward and think of four SKUs and 20% ACV or two SKUs and 40% ACV, with considerably high-velocity customers to continue to expand into, we've got a tremendous amount of upside by focusing on our core and executing against that. And that's exactly what we're organizationally doing. We're stripping out the complexity, which is destroying value, destroying resources and absorbing us away from really doing what matters most and working collaboratively with our customers against the things that do matter most and being a lot simpler to do business with, a lot simpler to run the business here, which will absolutely drive better execution and much more focus. So we can also, in parallel paths, start to build out and execute beyond the renovation and get into the innovation because as we look at concentric circles on our areas we can continue to compete and expand in, it's pretty broad just by staying focused within our core. There's multiple years of ideas and multiple brands and forms involved day parts, and benefits that we can bring to the category that doesn't even exist today, that we also have well within our own capabilities to execute today. So we're being mindful about size, the opportunity, the timing, because we've got to get our distribution and our core up first, and then bring more. That's what's going to continue to drive excitement and category expansions.

Great. That's really helpful. Thank you. And then it sounds like the e-commerce business continues to be under pressure. Is that something you envision being a part of your growth next year in Beyond, or is it more about just kind of defending the current level you have with your core customer there?

Look, I think we've got a lot of opportunities in direct-to-consumer on our own site and with Brick and Click as well as straight e-commerce. I think we've found different ways to be far more nimble, smart, and pragmatic about what and how we invest to be able to ensure we get maximum ROI on it. I will tell you that we tested some things that were pretty eye-opening to the crew here that actually showed the strength of our most loyal consumers and shoppers online. And we potentially had been over-rewarding and not marketing as precisely and cleanly as we potentially could. So there's a lot of learnings there about how we can grow that business and do it in a way, I think, that makes it easier for the consumers to buy our product. I'll give you one example. Today we have a website or a landing spot for each of the brands. We are going to consolidate those into one brand and we can be able to encourage shoppers to purchase up to get to the free shipping threshold, leveraging the entire portfolio across brands. and being a lot simpler to buy products from. It's more normal for the shopper to do that today versus one that has to independently go to each brand website to be able to find or discover and then execute a purchase or a transaction. We see a lot of value in that direct-to-consumer business, but it's got to love us as much as we love it, and therefore it's got to return on that investment at the same time.

Okay, guys, thanks so much for the thorough answers.

The next question comes from Mike Grondahl with Northland Securities. Please go ahead.

Hi, guys. This is Owen Rickard on for Mike. I was just wondering if there's any updates to call out in terms of marketing. You did discuss the changes to the packaging, but anything else there incremental from last quarter?

Yeah. Hey, good evening, Owen. Thanks for calling. And the question was, Look, we've shifted some of our marketing spend to be much more helpful and supportive around getting that retail distribution. So historically, Alliance Share did through the direct-to-consumer e-com platform. We are shifting our investment levels to be appropriately designed and support that distribution in-store with our retail partners. all which have their own unique shopper marketing elements and ways to help us amplify our message. That isn't just through the use of price. So as we talk about affordability and we talk about nutrition, we are aiming to work with the retailers' nutritionalists to be able to provide them the content to be able to amplify and compound our message and express it in a way that's far more reaching than us to do it on our own and use their means to help us help them Because whether a retailer has the meat snack category as a destination category or one that's an image enhancer or one that's just like an assortment that they have to have because there's demand, but it's not their, you know, their, you know, I'd say destination category, health and wellness is. And we offer by far the healthiest, leanest, best option in this category with the attributes that every consumer is moving towards, high protein and convenience, with the absence of the negative. No sugar, no preservatives, no nitrates, no GMOs, all the no-nos don't exist in our portfolio. So you combine that with a great protein delivery, compounded with what's in the bag, as we unlock that visibility through unbelievable food photography, which expresses that we have the best raw material in the category, and it tastes great, and you don't have to compromise like having a better-for-you product, we are very confident that working collaboratively with our retailers will be able to get that message out in an accelerated, more meaningful way and support the distribution that we're going to earn and then earn more of it by delivering and executing and ultimately bringing innovation that will continue to expand the consumer base. So we're shifting on how we're investing. Our investment levels on a marketing basis are still pretty good, pretty high. especially relative to most consumer packaged goods companies on a percentage basis. As we get those revenues up, those dollars will go up, and they'll work a lot harder for us. So that's kind of how we're thinking about it.

Owen?

Yeah, thanks for that answer. And then secondly, do you have anything to call out in terms of the Strive Nutrition products and how those are performing relative to the core built-on products?

Well, we're not commenting on any particular part of the portfolio, other than the fact that we are doubling down on our core. As we begin to lay out a little bit more detail for you, and we're working with all of the retail partners that have supported some of these other non-core businesses, we'll shed some more light on our strategic direction within our portfolio. Today, it remains in our portfolio, and we're working hard towards maximizing what we can from everything that is in the portfolio. But you're going to see a much stronger focus and clarity around our strategic approach to our offerings and the categories and how we're going to compete in the coming weeks. Got it.

Thanks for answering my question. You bet.

This concludes our question and answer session. I would like to turn the conference back over to Chris Beaver for any closing remarks.

Hey, thank you all for your interest in our company. We'll be presenting at the upcoming Southwest Ideas Conference in Dallas on November 16th, this Wednesday. So if you'd like to schedule a one-on-one meeting with us, please reach out to three-part advisors. We'll also be participating at Craig Hallam Alpha Select Conference in New York this Thursday, November 17th. So finally, we look forward to providing an update on our progress when we report our fourth quarter and full year results in a few months. I wish everybody a very healthy, happy, and safe holiday season and a very strong fourth quarter to all. Thank you very much for your support of STRIPE.

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.