Good afternoon. Thank you for standing by and welcome to the Fourth Quarter and Full Year 2021 Conference Call and Webcast for Stryve Foods, Inc. As a reminder, all participants are in a listen-only mode and the conference is being recorded. After the presentation, there will be an opportunity to ask questions.

[Operator Instructions] I would now like to turn the conference over to Austin Ke, General Counsel, to begin..

Thank you, operator and thank you all for joining us. With me today are Stryve Chief Executive Officer and Co-Founder, Joe Oblas; 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 which are based on our current expectations of future performance. Our actual results could differ substantially 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. We refer you to today's shareholder report and the SEC filings filed by Stryve Foods, Inc.

for a more detailed discussion of the risks that could impact future operating results and financial condition. In addition, today's call will also include a discussion of non-GAAP financial measures such as EBITDA.

Non-GAAP financial measures should be considered as a supplement to and not a substitute for GAAP financial measures such as net income and net loss. We refer you to the reconciliation of the non-GAAP measure to the nearest GAAP measure included in today's shareholder report for further detail.

I would now like to turn the call over to Stryve, Chief Executive Officer and Co-Founder, Joe Oblas..

Number one, we are the first company to establish a large scalable U.S. based air-dried meat snack manufacturing facility to be licensed by the USDA.

Two, our highly competitive nutritional profile is achieved through 100% natural ingredients, never frozen beef, natural spices and vinegar resulting in products that pack up to 16 grams of protein per ounce, and generally contain zero grams of sugar and no carbs.

Three, we're bringing in new participants to the meat snack category, including women and those who the jerky category wasn't relevant to. Four, Stryve has either begun or will begin distribution in 2022 across all top 10 grocers in the U.S. and seven of the top 10 convenience store chains.

Key thinks to focus on in the letter is our announcement launching chain wide with the world leading natural and organic foods retailer, with more than 510 stores in the U.S.

Five, Stryve product innovation with the introduction of Biltong slabs and the addition of meat snack sticks to the Vacadillos product line and the continued initial development and expansion of our Stryve nutrition brand. All of these factors are fueling impressive in-store velocities.

According to SPINs for the 12-week trailing period, as of February 20th, our Vacadillos brand experienced a 401% increase in dollar velocity within NC stores. What's particularly amazing is the broad acceptance of Stryve products across an incredibly diverse distribution ecosystem, our products can be and are sold just about everywhere.

Sports arenas, colleges, airports, harm and tractors stores, club, convenience stores, supermarkets, truck stops, et cetera. In addition to recently adding the world's leading natural and organic foods retailer, our burgeoning partnership with Costco is expanding and plays into our forecast and guidance outlined in the shareholder letter.

Our top line revenue increased by nearly 77% to $30.1 million in 2021, as we benefited from a full year of contributions from our DTC e-commerce sales platform increased sales to existing wholesale and private label accounts and generated net new sales from additional distribution wins at a number of key retailers in the club, mass, grocery and convenience channel.

Importantly, besides new and expanded distribution, we attribute the growth in the wholesale channel in part to higher sell through velocities of products supported by increased foot traffic, following an easing of pandemic related restrictions. For Q4, our net sales increased to $6.8 million, representing 71.33% growth year-over-year.

Strong wholesale gains contributed to 54.4% of net sales, increasing 254.6% year-over-year, including significant new year-over-year distribution across most channels with a particularly strong lift coming from convenience and club.

Like most businesses today, during 2021 Stryve faced pervasive industry challenges affecting supply chain, labor and transportation. These factors negatively impacted net sales performance in the second half of 2021. Throughout the second half, we experienced significant cost pressure related to both labor and commodity cost increases.

While our gross margins showed resilience through the first three quarters of 2021, our annual gross margin decreased slightly to 34.1% from 34.7%. However, due to top line sales growth, gross profiting increased $4.5 million from $5.9 million to $10.3 million.

While we expect continued volatility in the beef commodity markets, we are seeing a welcome drop in the price of beef from the highs seen in Q3 of 2021, with current prices down between 15% and 20% for some cuts. With that, I'd like to turn the call over to Alex to walk through our Q4 and full year 2021 highlights, as well as our 2022 outlook..

We anticipate net sales in the range of approximately $43 million to $48 million, an increase of 42.9% to 59.6% compared to 2021. While we anticipate modest growth quarter-over-quarter from Q4 2021 to Q1 2022, we expect that our base revenues will grow consider throughout 2022 as new distribution comes online over the course of the year.

Further, we anticipate an outsized second quarter of 2022, given the expected amount of new distribution lay-in orders for major retailers paired with the Costco MVM lay-in orders, all set to occur in the second quarter.

Typically, a retailer's lay-in orders are significantly greater in size than the subsequent orders that follow to support that ongoing distribution. While the impact of the Costco MVM to gross revenue is expected to be substantial in Q2 2022, its relative impact to net sales is partially offset due to the associated coupon on sales.

Accordingly, we anticipate that our quarter-to-quarter revenues during 2022 will fluctuate depending on the timing of the receipt and associated recognition of revenue of large new distribution lay-in orders.

With respect to gross margins, we anticipate continued gross margin pressure comparable to Q4 --- in Q4 2021 in the first half of the year, with recovery beginning in the second half of 2022 based on price increases among other factors.

In response to today's fundamentally changed macroeconomic supply chain and digital advertising environment, we have refocused our energy from being focused on hyper fast growth to instead accepting more sustained growth while being laser-focused on operating more profitably across the board, in particular driving efficiencies in production and throughout selling, marketing and G&A expenses.

And while the company continues to grow rapidly, enjoying impressive in-store velocities and increasingly widespread retail distribution, we are being more conservative in our management of expenses, while continuing to invest in profit enhancing, manufacturing, innovation and diversification. With that, I'll pass it back to Joe..

Thanks Alex. In summary, we begin 2022 with a foundation that we believe will enable us to significantly expand our category, creating market share, retail and DTC distribution, product innovation and manufacturing excellence.

We are well capitalized, virtually debt-free and are off to a great start and continuing add meaningful distribution across all channels. We feel that we have weathered an unprecedented time period for up and coming growth businesses and virtually all of our indicators are now pointing in the right direction.

We will continue to work tirelessly to build a high growth profitable company that should benefit our shareholders going forward. With that, I think -- believe we're ready to open it up to question..

Thank you. We will now begin the question-and-answer session. [Operator Instructions] Now our first question comes from Mike Grondahl of Northland Securities. Please go ahead..

Hey, guys.

Just looking for some thoughts on gross margins as we head through 2022, I think you said sort of the first half is consistent with the fourth quarter and then some recovery, but is 1Q and 2Q gross margins going to be around 10%, 11%, is that the right spot to be just with the cost pressures as they continue for really the first half of 2022?.

Hey, Mike. So, the way I'd characterize it is that we've experienced these pressures and they will continue to affect our business certainly in the first quarter. We might see a slight lift. As Joe mentioned, there has been some improvement in commodity beef prices that we will benefit from in the latter part of the quarter.

But overall, I think directionally speaking versus where we were a year ago, it's in the same ballpark for the first quarter.

And the second quarter, I would say it's generally the same, although we'll start seeing some of the benefits of price increases, but we will be -- that will be partially muted by the impact of the Costco MVM couponing, that'll happen.

So, there's a very substantial amount of revenue -- gross revenue associated with that, but also a substantial coupon, helping to drive trial and consumer adoption of our brand. And that'll help to keep margins around the same ballpark area.

Starting in Q3, we should see the full benefit of those price increases and hopefully a continuation of this recent trend in meat prices coming down, and then obviously no impact from the significant coupon associated with the Costco MVM..

Got it.

What's kind of your medium term goal for gross margins?.

I mean, I think that it depends on the timeline that we're talking here. I think as we look to the end of the fourth quarter, we'd like to be on the path of recovering, back to generally where we were on the full year of 2021.

But again, there's a lot of factors at play here, including the meat prices and the continued evolution of the business mix that we have..

Got it. Got it.

And then just trying to think through your revenue guidance for 2022 as you're picking up the Costco business and more Walmart business, could you maybe without naming retailers, but if you can, which ones are doing better, which ones are you more challenged at?.

Hey, Mike. It's Joe. Overall distribution velocities have been really strong.

I mean, I'm strong across the board and it's eye opening to see how well it's been received and our products have been really -- have been received in some of the channel that -- some of the -- I guess more rural retailers, I would say, have been really quite surprising that the product has been accepted so quickly.

Walmart numbers have been very strong, and natural channels been great. So, I think we're really pleased with where velocity has been even with a lot of the retailers already jumping and taking some prices well. So, I mean, we're very pleased in where we are from the velocity and retailer standpoint.

And we've got -- as we've previously announced, we have a lot of big expansions coming up here over the next few months. You got Walmart, you got Target. Obviously going to the national distribution with Costco, Speedway’s # distribution comes online.

I mean, there's a tremendous amount and the team's doing very, very well and continuing to add distribution. And a lot of it is very small, 20 stores to 100 stores, but the frequency is really impressive. So, we're super excited about that.

We're just trying to be very cautious after -- one thing the last years taught us is expect the unexpected right now, because this is stuff that I've been doing this for 30 years and I haven't seen a lot of these things ever happen..

Got it.

And is there any update on the health stuff, or some of that the natural stuff you were getting into?.

Stryve Nutrition, we just recently are -- have launched onto our own Stryve website. Stryve Nutrition’s website should be up soon. But the -- we're getting nice feedback from the pre-workouts that were just recently launched. The Collagen and Bone Broth are great products, but they're more commodity type skews.

I mean, I've got a lot of history and success in this category and as does our chairman, Ted Casey. So, I think this narrative that's going to be really nice for Stryve in the future and it should be accretive to margin as we go forward as well..

Got it. Okay..

Our next question comes from Alex Fuhrman of Craig-Hallum. Please go ahead..

Great. Guys thanks for taking my question. Wanted to ask about your guidance for 2022. It certainly sounds like there's a lot of demand for your product at retail, and it sounds like the velocities have been strong and there's new accounts that are looking to add your product in more doors.

Can you talk about where then the shortfall is coming from in terms of what we'd been modeling, what you'd been kind of initially been looking for as your growth rate for this year? Is there any particular retailer, or maybe something in your manufacturing that has not met your expectations or are you just taking numbers down pretty significantly to be conservative here? It certainly -- it just sounds like there's a lot of good things happening on the retail side of the business.

Just trying to square how that then ends up at your guidance..

Well, hey, Alex. It's Joe. A, we're trying or we're trying to be -- we want to be more conservative in nature to where we're going, because uncertainty -- it's hard to predict uncertainty. So, being putting a level of conservatism on that is really number one.

Number two, as we're starting to move the business and focusing our energy to say, look, we want to be good conservative stewards of capital and cut the businesses, burned down tremendously, we've pulled back consciously a lot of our digital spending and that'll translate to some reduction in overall e-comm performance.

So that to us, with the iOS change and a bit of a fall of the return on ad spend, it's just not intelligent for us. Now, we don't see a logical reason to keep pushing heavy into that arena when we're not going to get the return. So, I would say some from the e-comm side as well.

Now, the other point to mention is the Costco MVM carries a coupon, and that coupon will fall as a net to revenue. So, we just want to be very, very cautious. We don't know what those redemptions on the coupons will look like as we've not done an MVM before.

So, we're just trying to make sure that going forward we know that what we're guiding to, we're going to go out and make sure that we're beating consistently..

Okay. That's really helpful, Joe. And then, in the past, you've talked about having the potential to manufacture to $100 million revenue run rate, and you just completed an expansion of your primary manufacturing facility.

Do you think there is a time in the near future or intermediate term when there will be enough demand that you'll need that much capacity? Can you kind of walk us through when you expect to be utilizing the entirety of your new manufacturing capacity?.

Well, we are consistently expanding our capacity at the Madill factory.

And as we've also previously announced, we are in the process of securing additional location here in the Dallas-Fort Worth area of which we will look to house our corporate office, our e-comm fulfillment center, and then our finished goods and pack-out functions out of our current factory allowing us more space for production expansion.

But as our run rate starts to run up and when -- and you see the size of, for instance, the upcoming Costco order, we have to produce and be well in advance of the need for that capacity.

So, we're being -- I think we're showing good foresight in what we're doing at the factory, but we are going to continue scaling up capacity because we know it's not a question of if, it's a question of when..

Just to elaborate on that a bit. The part of the question was when do we expect to see that kind of run rate demand, I think set a different little different way is kind of right now, right? We're working through this very substantial nationwide rollout to Costco on top of our base business.

And when you think about the run rate manufacturing capacity, you got to have to accommodate that level of production in such a short window of time. We need that run rate capacity. And so, that's part of the need here for the expansions that we've recently completed and continuing to look for additional space and capacity moving forward.

That said, it's about the run rates and not necessarily the full year of the production capacity that we have to think about when we're looking to expand our manufacturing capabilities.

It would great if we could outsource the manufacturer, the product, but we have the added benefit of being a pretty -- our manufacturing footprint is pretty unique, right? And we are dealing the people who can make this at scale. So, obviously, we have to make sure we had to build the front end ahead of time..

Okay. That's really helpful. Thanks Alex. Thanks Joe..

Thanks Alex..

This concludes the question-and-answer session. I would like to turn the conference back over to Mr. Oblas for any closing remarks..

Thanks everyone for attending our fourth quarter and full year 2021 conference call and webcast for Stryve. Hope everybody has a great week. Thanks very much..

This concludes today's conference call. You may disconnect your lines. Thank you for participating and have a pleasant day..