Stryve Foods, Inc.

Good afternoon, everyone, and welcome to the Strive Foods third quarter fiscal 2024 financial results conference call. At this time, all participant lines are in listen-only mode. Following the presentation, we will conduct a question and answer session. If at any time during this call you require immediate assistance, please press zero for the operator. This call is being recorded on Wednesday, November 13, 2024. Now I would like to turn the call over to Will Pugh. Senior Vice President of Accounting at Strive Foods, to make introductions and read a Safe Harbor Statement. Please go ahead.

Thank you, operator, and welcome to the Strive Foods fiscal year 2024 third quarter earnings 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 pursuant to the Safe Harbor provisions of the Private Securities and Litigation Reform Act of 1985. Forward-looking statements, by their nature, are uncertain and outside of the company's control. Active 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. In addition, today's call would 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 a 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 details. This call is being webcast and can be accessed through the audio link on the news and events page of the investor section at ir.strives.com. Also, the earnings press release is posted on our website, and a copy of the release has been included in the form AK submitted to the SEC. With that, I would now like to turn the call over to Chris Beaver. Chris.

Thank you, Will, and welcome to everyone, and thank you for joining us today. I'm excited to share that Strive Foods continues to make meaningful progress on our transformation, driven by our commitment to delivering differentiated, premium, high-protein, low-sugar, no-preservative snacks for today's growing health-conscious consumers. The third quarter has been a period where proof points are emerging and accumulating, supported by increasing consumer demand primarily from accelerating retail velocity. Our focus on top-line growth, operational improvements, and productivity will continue to enable margin expansion. The recently announced capital raise better positions us to support the increasing velocities and growing demand. We will begin to build appropriate inventories to scale and execute on known and expected retail distribution gains in the coming quarters. We are a very different company today with a much improved foundation. We have dramatically improved the food quality, unveiled upgraded packaging, created new brand positioning based on shopper preferences, upgraded the talent and capabilities within the organization, and streamlined the processes across the enterprise. I firmly believe that we will delight our consumers, we will execute with our retail partners, we will gain market share, and we will achieve profitability. Our strategic initiatives are focused on delivering higher rates of velocity at retail. Our improved food quality and brand positioning is achieving that vision. With velocities growing, we will expand our retail distribution, focused on our prioritized and streamlined portfolio. In addition, we see opportunities to grow through innovation, responsibly phasing in relevant new on-trend products, such as our recently announced launch of High Stakes, our high-protein, human-grade pet treat brand, which allows us to leverage our core expertise in another attractive category, with a highly differentiated offering. These efforts reflect our broader goal to create a diverse, sustainable growth engine for Strive, one that resonates across different segments and channels. In Q3 2024, we delivered strong financial and operational results, with net sales increasing by 36.4% year-over-year. This growth was seen across all of our brands, primarily driven by the significantly increased sell-through at retail and promotional efficiencies supported by our strategic pricing initiatives. Additionally, our gross margins improved to 21.7% from 13.3% in the prior year period, underscoring our focus on product mix, pricing, and operational efficiencies. The demand for our brands has exceeded our current ability to supply, not our capacity. This challenge is being addressed with the recent capital raise. Combined with the numerous operational improvements, we expect to see our service levels improve significantly on the current business. Within our supply chain, progress continues. Our productivity initiatives are generating as expected. and we are unlocking efficiency and effectiveness in our logistics network. One significant development recently announced is our partnership with DOT Foods, the largest food redistributor in North America. This partnership, set to begin in Q4 of 2024, enables us to leverage DOT's extensive distribution network and logistics expertise to streamline our supply chain, improve service levels, and ensure timely product availability for a growing footprint. Scott Foods has an unmatched infrastructure that will enhance our fulfillment operations, allowing us to efficiently reach thousands of retailers and food service operators nationwide. I am confident this collaboration will further strengthen our foundation for the upcoming year, supporting our growth and reinforcing our ability to meet rising consumer demand. Overall, the industry response to our initiatives has been encouraging and promising. Retailers are excited about Strive's continued evolution, and we are seeing solid traction across multiple channels. We deliver something different to the category, a contemporized and modernized set of brands that deliver shelf productivity and a highly expandable, consumable, attractive category. The combined impact of our strategic initiatives positions strive to not only drive top-line growth, but also to build a scalable, efficient model that supports and delivers long-term profitability. We remain committed to these core pillars. Number one, grow the core, increase velocity, increase distribution, and drive household penetration. Number two, add more. Through responsible innovation, of relevant flavors, forms, and extending day parts and occasions. Number three, flawless execution on how we serve our customers in the most efficient and effective manner. Number four, lower our cost to serve, ultimately executing on our productivity agenda. Number five, manage cash from procurement, conversion costs, utilization, inventory management, all the way to the strategic management of the balance sheet. There is no doubt we have a clear path to profitability, and we are better and more uniquely positioned than ever before. With our self-manufacturing footprint, our highly differentiated brand portfolio, which closely aligns us, like no other, to the list of on-trend consumer behaviors, more protein, ultra-convenience, elimination or reduction of preservatives and sugar, and the emergence of the GLP-1 craze. These important consumer dynamics provide us tailwinds to outperform the categories in which we compete. We will build consumer awareness. We will create greater availability in the marketplace by expanding distribution. And as new consumers try our brand for the first time, we will build on our established high level of repeat purchase behavior. As we look to close 2024 and prepare for an ambitious 2025, I am encouraged by the momentum we've achieved and the solid foundation we have built. Our strategic approach is delivering improved results and at an accelerated rate. And I believe the initiatives we have implemented will continue to produce strong growth well into the future.