Tattooed Chef, Inc.

Thank you for standing by. This is the conference operator. Welcome to the Tattooed Chef fourth quarter 2020 earnings call. As a reminder, all participants are in listen-only mode and the conference is being recorded. After the presentation, there will be an opportunity for you to ask questions. To join the question queue, you may press star then 1 on your telephone keypad. Should you need assistance during the conference call, you may signal an operator by pressing star and zero. I would now like to turn the conference over to Rachel Perkins, Investor Relations. Please go ahead.

Thank you. Good afternoon, and welcome to Tattooed Chef's fourth quarter and full year 2020 earnings conference call. On the call today are Sam Galletti, President and Chief Executive Officer, Sarah Galletti, Chief Creative Officer, and the Tattooed Chef, and Chuck Cargile, Chief Financial Officer. Stephanie Dykeman, Chief Operating Officer, and Matt Williams, Chief Growth Officer, will also be available for questions. By now, everyone should have access to the earnings release, which went out at approximately 4.05 p.m. Eastern Time today, March 10, 2021. If you've not had a chance to review the release, it's available on the investors portion of our website at www.tattooedchef.com. Before we begin, I'd like to remind everyone that the prepared remarks contain forward-looking statements. Such statements involve a number of known and unknown uncertainties, many of which are outside the company's control and can cause future results, performance or achievements to differ significantly from the results, performance or achievements expressed or implied by such forward-looking statements. Important factors and risks that could cause or contribute to such differences are detailed in the company's filing with the Securities and Exchange Commission. Except as required by law, the company undertakes no obligation to update any forward-looking or other statements herein, whether as a result of new information, future events, or otherwise. In addition, within our earnings release and in today's prepared remarks, adjusted EBITDA and adjusted EBITDA margin are referenced. It is important to note that these are non-GAAP financial measures that we believe are useful metrics that better reflect the performance on our business on an ongoing basis. A reconciliation of these non-GAAP financial measures, their most directly comparable GAAP financial measures, are included in today's press release, which has also been posted on our website. And with that, it is my pleasure to turn the call over to Tattooed Chefs President and CEO, Sam Galletti.

Thank you, Rachel, and good afternoon. We appreciate everyone taking the time to join us on today's call. I'll begin today's discussion with key business highlights, including an update on our new distribution WINS, Sarah will discuss our marketing and innovation, and then Chuck will provide greater detail on the financials. First, our fourth quarter revenue highlights. We are pleased to report revenue increased 48% to $39.6 million compared to the fourth quarter last year, driven by our Tattoo Chef branded products. Our branded product sales for the quarter were a record $23.9 million, an increase of 172% compared to $8.8 million in the fourth quarter last year. Branded sales accounted for 60% of the total revenue in the fourth quarter of 2020. For the full year, revenue was $148.5 million, a 75% increase year over year. Branded sales increased 363% to $84.6 million last year. or 57% of the total revenue for 2020 compared to 22% in 2019. This is the first year in the company's history that branded exceeded private label sales, and we expect that split to reach as high as 75% to 80% branded within the next two to three years. We believe we are still in the early innings of the Tattooed Chef growth as a brand and as a company. We formed Tattooed Chef in 2017 after Sarah recognized the lack of readily available, high-quality, clean label, ready-to-cook, plant-based products in the market. Fast forward, we ended fiscal 2020 with 38 branded SKUs. Our products are sold in all 50 states, and we took the company public. The Tattoo Chef brand is for every lifestyle, and we attract consumers of all ages and demographics. We believe our historic and continued success with clubs across an array of Tattooed Chef branded products indicates that the Tattooed Chef brand resonates with consumers and will be attractive to conventional retail grocery customers. Coupled with the fact that we have spent little money on increasing brand awareness since we were historically focused on private label, we believe there is an untapped potential. We participate in the $55 billion U.S. frozen food category, a $380 billion market globally, and we are aligned with many major food trends. We have the innovative products and the vertically integrated supply chain and manufacturing capabilities to compete across multiple categories within frozen food, and little brand recognition or household penetration today. As we announced in December, we hired the national marketing firm, Nitro C, to implement a comprehensive brand marketing campaign this year, which Sarah will touch on in a few minutes. Our growth strategy is focused on expanding and increasing distribution of Tattooed Chef branded products with new and existing customers. We continue to set the foundation for broad market expansion. At the end of 2020, our Tattooed Chef branded products were nearly 4,300 stores and had 23,000 points of distribution. We have made significant progress in gaining new retail distribution at the start of 2021. Based on our new retailer partners that have committed in Q1, Tattooed Chef will be available in an additional 1,765 chain stores with 8,000 new points of distribution. This is a 41% increase in stores and a 35% increase in points of distribution over where we finished 2020 versus what we expect for the first quarter of 2021. We will further discuss the positive momentum as we expand our channel performance. Starting with the club channel, we launched our first MVM with Costco in March. With this program, Tattooed Chef's six-pack organic acibos will be available in every Costco nationwide for the entire month. This program will continue to allow us to introduce Tattooed Chef to more consumers through the Costco members. In Sam's Clubs, we continue to demonstrate our leadership position as a plant-based frozen food partner. In addition to our four tattooed chef items that are sold on an everyday basis nationally, we have had four limited time offers in Q1. Three of our limited time offers were new items, tempura cauliflower wings with buffalo and sweet chili sauce, cauliflower white pizza, and our plant-based sausage breakfast bowl. Our fourth LTO with the veggie hemp oil, which has performed so well that it will be brought back on rotation later this year. We were also able to continue to share the Tattooed Chef brand message with Sam's Club's member in Q1. Tattooed Chef was featured in two Sam's Club in-store booklets on the front page in both January and March. The January ISB focused on plant-based foods and featured the Tattooed Chef portfolio. And on the March ISB featured Sarah Galletti for Women's History Month. With a circulation of 18 million, we were honored to be part of both programs. We continue to see this momentum translate in our business performance. For the 52 weeks ended 12-27-2020, as reported in SPINS, Tattooed Chef is up 376% in Sam's Club, which is significantly outpacing the frozen categories in which we compete. Tattooed Chef is the number three brand in the combined frozen categories in which we compete, which includes frozen breakfasts, entrees, and fruits and vegetables. More specifically, in the frozen fruits and vegetables category, Tattooed Chef is the number one selling brand in both total dollar sales and dollar growth in Sam's Clubs. We are confident that our strong business performance as well as pipeline and innovation will allow us to build on this strong foundation in the future We have achieved this category leadership position in only one year of sales. Tattooed Chef's momentum in mass channel continues with 33% growth for the 52 weeks ending 12-27-2020. According to spins, Tattooed Chef grew three times faster than the category in 2020. Our ACV in mass is 59.8, which is up 300% year-over-year. TDPs, or total distribution points, are up 285%. We are also excited to share we've expanded our partnership with Target. As we announced this morning, six new SKUs will be available nationally starting next week. These new SKUs, plus our current smoothie bowl line, will now give the Target guests the opportunity to enjoy Tattooed Chef for breakfast, lunch, and dinner. In grocery natural, Tattoo Chef is currently offering 38 unique SKUs across five different frozen categories. By the end of Q1, we will have retailer and distributors selling 24 of these SKUs. We are starting to see the results of the work we did in the fourth quarter to develop our retail program to start materializing the market. Tattoo Chef products will be on shelf by the end of Q1 in key retailers across the country, such as Stop and Shop, Southeastern Grocers, and Ingles. These retailers will feature a variety of product categories including pizza, entree bowls, vegetables, and smoothie bowls. In addition to the retailer commitments that will start selling Tattooed Chef in Q1, we also have additional retailer commitments including Whole Foods, Meijer, Lowe's Foods, and United Supermarket, a division of Albertsons. Our new distributor relationships with UNFI, KE, and LaPari are showing promise as well. Tattooed Chef products are now available at these distributors' warehouses across the country, and we are encouraged by the progress that sales teams are making to introduce the full line of Tattooed Chef to local and regional grocery and natural accounts. Between the new distribution in MAP and the grocery natural commitments, along with other retailer negotiations that are underway, we are now confident that we will achieve our 2021 objective of 10,000 stores and 65,000 distribution points for Tattooed Chef at year-end. Just to recap, all the new stores that are expanding their Tattooed Chef line and carrying products for the first time are Target, Stop and Shop, Southeastern Grocers, Ingalls, Bristol Farms, Whole Foods, Meyers, Lowe's Foods, and United Supermarkets. We have also started working with Thrive Market, and we'll have product available on their online marketplace starting next week. We look forward to announcing our second quarter wins to you soon. With our retail expansion well underway, our next sales channel focus will be food service. With COVID-19 restrictions expecting to mitigate and students and employees return to campus and the workplace, we think the time is right to introduce Tattooed Chef to the business, industry, and education channel. With our existing entree and smoothie bowl portfolio, distribution network, and a new food service broker partner, we are excited about what the future holds for us in food service. We will share our progress in these channels throughout the year. We expect our growth to continue, giving the different channels for growth, including grocery, club, mass, as well as our innovation pipeline. As we outlined in our analyst day in December, we believe that given the white space within the frozen food aisle, we can achieve $300 million in revenue primarily from product expansion in current and existing retailers, new platforms like desserts and family meals, and increasing our SKU count to over 200 through innovation. We see a path to $500 million in sales as we look to expand beyond the frozen food section and into the grocery aisle with shelf-stable products, and we will consider strategic M&A to accelerate our growth in certain areas. We have approximately $200 million in cash and will invest in the business and capitalize on opportunities that we think will create long-term shareholder value. One of our key competitive advantages is that we are vertically integrated. By being the manufacturers of our own product, we can take a new idea from concept to production to shelf in as little as three months. We have two facilities today, one in the US and one in Italy. In the US facility, we have doubled our capacity in 2020 and added additional production square footage. For example, on one of the lines, we're able to manufacture around 15,000 bowls per shift. And today, through investment in equipment, we're able to manufacture over 35,000 bowls per shift on the same line using the same number of people. The Italian facility also increased production of rice cauliflower from 110,000 pounds per day to 200,000 pounds per day. And in August, we expect this increase to 400,000 pounds per day. We'll continue to increase capacity during 2021 to keep up with the expanded growth and demand of tattoo chef products. And now I'd like to turn the call over to Sarah to discuss our innovation and our marketing efforts.