Stryve Foods, Inc. isn’t one of the 30 most popular stocks among hedge funds at the end of the third quarter (see the details here).

Operator: Good afternoon, ladies and gentlemen, and welcome to Stryve Foods, Inc. Fourth Quarter and Year-End 2023 Earnings Call. At this time, all lines are in a listen-only mode. Following the presentation, we will conduct a question-and-answer session. [Operator Instructions] I would now like to turn the conference over to, Luke Weil. Please go ahead.

Luke Weil: Thank you, operator, and welcome to the Stryve Foods fiscal year 2023 earnings conference call. With me today are Stryve’s Chief Executive Officer, Chris Boever; 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.

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 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 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 Also, the earnings press release is posted on our website and a copy of the release has been included in the Form 8-K submitted to the SEC. With that, I would now like to turn the call over to Chris Boever. Chris?

Christopher Boever: Thanks, Weil. Good afternoon. I want to start by acknowledging the incredible journey Stryve Food has embarked on throughout the last 18 months and recognize the incredible efforts and progress by the team. Reflecting on our fiscal 2023 year, we have navigated through a transformation that now has our Company on a solid foundation, one that has been right-sized with structural improvements across the enterprise, a foundation that is positioned and energized to deliver against the enormous potential in front of us. This year has been pivotal for our long-term strategy, designed to position and prepare us for our next phase, which is delivering profitable growth. Our team’s dedication has translated into tangible achievements, which underscore our potential and the strength of our business model.

I am encouraged by the progress and highly confident in our future. We simplified our organization and portfolio. We implemented pricing actions and now have our unit economics in position to accelerate profitable growth. We completed an important project focused on product quality, addressing the entire process, including packaging. We are focused on delivering the very best consumer experience, ensuring high confidence in repeat purchases and consumer loyalty. As a reminder, we are the first to market USDA certified manufacturer of air-dried beef, a truly innovative manufacturing process that delivers game changing consumer benefits. Our products deliver 50% more protein than the leading brand of Beef Jerky and nearly triple the protein of the leading brand of Meat Sticks.

These are important product attributes, considering the number one reason consumers purchase in the category is protein. I’m very pleased with the new and improved product quality and the consistency that we deliver each and every time. In parallel path, we developed and are now executing our new brand positioning expressed by our packaging. We are utilizing food photography, simplifying our message, ensuring the shopper can quickly and clearly identify our superior and delicious steak quality, along with the product attributes of higher protein, zero preservatives and low-to-no sugar. The early indicators are extremely encouraging, as evidenced by our increasing velocity improvements of nearly 40% as reported by SPINS. In addition, we introduced several innovative products such as new flavors of Vacadillos and formats for the Stryve and Vacadillos brand.

These incremental products deliver margin accretive revenue stream and further establish us as leaders in the healthy protein snacking segment. Our operational transformation has been crucial to our overall strategy. Our MVP program, Maximizing Value through Productivity, is delivering across all fronts, yielding efficiencies in what and how we manufacture. We have improved our conversion costs, developed a strategic and collaborative approach to procurement, lowering our unit economics and improving free cash flow. Investments in technology and process improvements have led to significant cost savings and product quality. We are now a lean, agile operation with efficiencies gained up and down the enterprise as evidenced by the reduction in operating expenses and adjusted EBITDA improvements over the last 18 months.

Do not underestimate how important it was to address quality, cost, process and capacity in our transformation. We now have the operational foundation prepared and ready to respond to the growing consumer demand. The strategic initiatives we have implemented this year are just the beginning of our journey toward becoming a profitable, innovative consumer-centric company. Our commitment to operational excellence, combined with our focus on strategic market opportunities, position us well to capitalize on the growth we expect ahead. I am incredibly proud of what we’ve accomplished this year and grateful for the hard work and dedication of the entire Stryve team. Our achievements in 2023 are a testament to our collective effort, and we have built the foundation.

2024 is the start of a multi-year growth agenda that will leverage the operational footprint created in a manner that delivers increased velocity, increased distribution and increased market share. Each of our brands, while unified under the Stryve Foods umbrella, caters to distinct consumer preferences and occasion. The packaging redesign have been instrumental in differentiating our brand in a crowded marketplace, enabling consumers to easily identify and connect with the unique value proposition each brand offers. Stryve, it emphasizes leadership in providing premium high protein, low fat snacking options that fuel an active lifestyle. Eat steak, don’t be a jerky! Kalahari celebrates its roots with flavors and textures inspired by traditional South African Biltong, appealing to the adventure seeker.

Hello Biltong, Goodbye Jerky! And Vacadillos captures the essence of authentic carne seca, offering a bold taste of Latin inspired flavors with its vibrant and culturally rich packaging. Adios, Jerky, Hola Steak! The implementation of these packaging redesigns is supported by our commitment to operational excellence. We streamlined our processes to ensure a seamless transition, minimizing disruption and optimizing our supply chain to meet the anticipated increase in demand. We have fully transitioned and shipping 100% of current orders in the new packaging. We estimate to be transitioned at approximately 50% at shelf, where we have fully transitioned at specific customers. Those customers, we have indications and data that show increases of velocity on the Stryve brand of over 80%.

The new packaging clearly is working, improving our shelf appeal and significantly boosting our consumer trial rates. Initial feedback indicates a marked increase in unit velocity, affirming the effectiveness of our strategic focus on packaging as a key driver for an acceleration of distribution leading to brand growth and market share gain. As we look to the future, the packaging redesign combined with our operational improvement form the cornerstone for accelerated growth, margin expansion and ultimately delivering a profitable business model. We are poised to build on momentum generated and more confident than ever in our future outlook. As we pivot to operational highlights, I’m excited to share the progress and milestones we’ve achieved, underscoring our commitment to operational excellence and innovation.

This past year has been marked by significant achievements that reflect our dedication to operational excellence and our strategic vision. We’re successfully optimizing our production process, resulting in increased efficiencies and reduced costs. Our focus on supply chain optimization has certainly improved all of our fundamentals, while simultaneously unlocking more capacity. We are more agile and connected cross functionally, providing us the ability to respond more effectively to the increasing customer and consumer demand. Our market expansion efforts are starting to reflect, as expressed by our accelerating consumption data, we have made significant inroads into new customers, channels and geographies, further establishing Stryve Foods as a leader in the healthy protein snacking segment.

Consumer preferences and trends continue to guide our innovation pipeline, ensuring that our product offerings meet and exceed their expectations. The operational efficiencies we’ve achieved this year are testament to our team’s hard work and dedication. Through targeted initiatives aimed at reducing waste and improving production line speeds, we’ve enhanced our overall operational efficiency. These improvements will contribute to increased gross margin as we scale the business and leverage our fixed assets. We remain focused on driving continuous improvement across all aspects of our operations. Our strategic investments in technology process and capabilities are key pillars of our strategy. These initiatives are designed to further enhance our operational efficiencies, reduce costs and support our growth trajectory, further expanding gross margin and EBITDA.

In summary, the progress we’ve made through our strategic initiatives in 2023 underscores the resilience and potential of Stryve Foods. I am incredibly optimistic about our future and remain committed to delivering the best tasting, better-for-you better products the category has ever seen. We have invested a tremendous amount of resources since our inception, refined the business model and have improved every element of our organization. It is our time to bring customers a complete category solution to our shared consumers and locate our brands in more stores to expand and grow the category and deliver exceptional value for our shareholders. With that, I’ll turn it over to our CFO, Alex Hawkins.

Alex Hawkins: Thanks, Chris. As we turn our attention to the financial results for the year, fiscal year 2023, I want to underscore the pivotal efforts and strategic decisions that have shaped our performance during this period. We closed the year with net sales of $17.7 million reflecting the strategic recalibration of our topline to focus on our core product offerings generating through long-term value enhancing quality revenue streams. While this represents a decrease of 40.9% from the $29.9 million reported in 2022, as we’ve discussed on several occasions, a key part of our transformation strategy was the strategic rationalization of low quality revenue. The benefits of those rationalization efforts are seen throughout the business, but simply put we were able to reduce our adjusted EBITDA loss this year by $13.3 million.

It’s not often you see a company take out over 40% of its annual sales and still improve its bottom line results with adjusted EBITDA loss dropping by 52.9%. That just speaks to the low quality nature of the rationalized sales as well as to the ingenuity and resilience of the organization to transform into a profit-focused business. Net sales in the fourth quarter of 2023 came in at $2.9 million. But the quarter isn’t perfectly comparable to the prior year period, nor to the prior quarters. Not only did we see continuing effects of our rationalization efforts, we also increased our trade accruals, executed liquidation sales of our slow moving and obsolete inventories, both of which affected net realized price in the quarter. Additionally, as we’ve seen great success with our new packaging on shelf, we worked closely with several of our key partners to phase out the legacy items and to transition fully to the new packaged items.

This resulted in some irregular flows in the quarter as the retailers and distributors sold through legacy SKUs in their inventory ahead of January 2024 launches of the new items in many places. Now, in 2024 since that transition, we are seeing significantly improved retail velocities at these retailers that have exceeded even our expectations. Back to the full-year results, our gross profit turned positive at $2.4 million a notable improvement from a gross profit loss of $0.7 million in 2022. This improvement stems from the strides we made in pricing year-over-year as well as strategic enhancements to our supply chain and manufacturing processes, which reduced our per unit costs. Now, given that we are vertically integrated, our plant labor and overhead carry a certain amount of fixed cost that can impact our gross margin performance.

So, the rationalization efforts which brought down our manufacturing volumes led to under absorption of those fixed manufacturing costs weighing on our margins. But despite that effect, we still showed significant year-over-year improvements. And as our volumes scale throughout the year in 2024 and beyond, we would expect to see better absorption and even more gross margin expansion. In 2023, we made tremendous progress in streamlining our operating expenses, which were reduced to $17.9 million down 43.2% from the $31.5 million in 2022. This is a testament to our transformational efforts across the organization. Not only do we find significant savings at the start of this transformation, but each quarter since we’ve been able to identify more to further streamline our operations and advance our productivity agenda.

Ultimately, the net loss for 2023 was reduced to $19 million from $33.1 million in 2022, an improvement of 42.6% year-over-year. Throughout 2023, we executed several strategic initiatives aimed at strengthening our financial position and setting the foundation for future growth. The optimization of our product portfolio, coupled with significant efforts in packaging redesigns and operational efficiencies has been central to our strategy. These initiatives not only enhance our brand appeal, but also improve our cost structure and market competitiveness. As we look ahead, we are focused on leveraging the progress we made in 2023 to drive sustainable growth and improve profitability. Our strategic investments in innovation, brand development and market expansion are designed to capitalize on the growing demand for healthy snacking options and deliver long-term value to our shareholders.

Continuing our discussion on the financial performance overview, let’s shift our focus to the balance sheet liquidity and significant financing arrangements that underscore our strategic approach to navigating the liquidity constraints typical in a transformation such as ours. Our cash and cash equivalents at year-end stand at $0.4 million reflecting our careful cash management practices and operational effectiveness and efficiencies achieved throughout the year. Our liquidity is further supported by our asset-based line of credit and other credit facilities. Furthermore, in 2023, our inventory management has been a key tool to optimize our liquidity. We significantly enhanced our ways of working, connecting supply and demand to ensure we maintain a healthy balance of stock levels aligned with demand forecasts contributing to our operational agility.

Doing so throughout the year allowed us to generate over $3 million of cash from the drawdown of our excess inventories. I am pleased to announce a development in our financing arrangements as well. We have successfully renewed our asset-based credit facility with alternate capital, extending it beyond its original maturity of September 2024 for a new two-year term. The new maturity of the facility is March 2026. This renewal is a testament to the confidence our financial partners have in our business model and our strategic direction. It provides us with continued financial flexibility to support our operational needs and strategic growth initiatives. Additionally, we have successfully negotiated a 12-month extension of the bridge notes from April 2023, which were initially set to mature at the end of last year.

We extended their maturity to December 2024. This extension reflects our financial partners’ continued support ensuring that we had the necessary runway to execute on our strategic plans without immediate financial pressures. In another strategic financial move, we have terminated the at-the-market equity facility we had in place with Craig Hallum as of March 2024. This decision aligns with our strategy to manage our equity more efficiently and reflects our commitment to utilizing our financial instruments in a manner that best supports our long-term value creation for shareholders. These developments not only reflect our ability to effectively manage our financial resources, but also the strength of our relationships with our financial partners.

They provide us with a solid foundation to pursue our strategic objectives, ensuring we have the financial stability and flexibility to adapt to market dynamics and capitalize on growth opportunities moving forward. In 2024, our focus remains on growing the business the right way, maintaining a disciplined approach to spending, ensuring we have access to attractive sources of liquidity and managing our debt responsibly. We are committed to the financial stewardship that supports our strategic goals and drive shareholder value. Now, let’s turn our attention to our forward-looking financial guidance for the upcoming fiscal year. Our guidance reflects not only the strategic progress we’ve made, but also our confidence in the trajectory of Stryve Foods as we continue to execute on our growth strategy.

For the fiscal year ahead, we are projecting net sales to be in the range of $24 million to $30 million. This guidance is based on our expectations of volumes accelerating each quarter. A significant advancement in our gross margins year-over-year this year is also anticipated. Consistent with the previous commentary, we expect this progress to be primarily driven by the anticipated volume increases projected each quarter, which will more effectively absorb our fixed cost of production. In addition to increased volumes, our ongoing efforts to enhance operational efficiencies and manage costs are central to achieving these improved gross margins. The operating leverage derived from increasing volumes each quarter coupled with advancing gross margins positions us to approach an adjusted EBITDA breakeven point in the fourth quarter of this year should we reach the higher end or exceed our net sales guidance range, absent any externalities or unforeseen fluctuations in beef prices.

This outlook underscores our strategic focus on achieving profitability through disciplined growth and operational excellence. Our guidance reflects a balanced view of our growth opportunities and the operational challenges we navigate. We remain committed to executing our strategic plans, driving operational efficiencies and leveraging market opportunities to achieve sustainable growth and improve financial performance. As we move forward, we’ll continue to monitor market conditions, consumer trends and operational metrics closely, ready to adjust our strategies as needed to meet our financial goals and deliver value to our shareholders. In conclusion, as we reflect on the past year and look ahead, our financial guidance and strategic initiatives are set against the backdrop of operational improvements, market expansion and innovative packaging solutions to drive further growth.

The journey we’ve embarked on is one of transformation with clear focus on driving sustainable growth, improving profitability and enhancing shareholder value. Our projected net sales range, the anticipated advancement in gross margins and our path to an adjusted EBITDA breakeven are all testaments to the strength of our strategy and the dedication of our team. These are not just numbers. They represent the tangible outcomes of our collective efforts and strategic decisions. My commitment is to continue steering our financial strategy with prudence, agility and forward-looking perspective. We are poised to navigate the challenges and seize the opportunities that lie ahead with a solid financial foundation that supports our ambitious growth objectives.

I want to thank our shareholders, customers and especially our Stryve team for their continued support and belief in our mission. Your trust fuels our determination to achieve our goals and to drive Stryve Foods to new heights. With that, I’ll turn it back to Chris, our CEO, to share more about our strategic vision and exciting opportunities ahead. Chris?

Christopher Boever: Thank you, Alex. As we reflect on the operational milestones achieved and the solid financial foundation we’ve built, it’s crucial to look forward and articulate the strategic vision that will guide Stryve Foods into the future. Our strategy and outlook are grounded in our commitment to innovation, operational excellence and market leadership in healthy snacking. Our strategic priorities for the upcoming year are designed to accelerate growth, enhance profitability and solidify our market position. Key focus areas include: One, enhanced operational efficiencies. Operational excellence remains a cornerstone of our strategy. We will continue to invest in process improvements, technology and talent to drive efficiencies and further reduce costs.

Two, expanding market presence. Building on our existing partnerships and distribution network, we will grow the core and expand our reach both domestically and internationally, targeting new channels and segments. Three, continuing product innovation. We will persist in our effort to innovate across our product line, ensuring we meet the evolving needs of our consumers with healthy, high-quality snacking options. The healthy snacking industry is poised for growth, in particular, the protein snacking segment, driven by increasing consumer awareness and demand for nutritious and convenient snacking options. As a pioneer in this space, Stryve Foods is well-positioned to capitalize on these trends. Our commitment to quality, execution and sustainability aligns with the expectations of today’s consumers and sets us apart in a competitive market.

Our goals for the coming year are ambitious yet achievable, reflecting our confidence in our strategic plan and our team’s ability to execute. First, achieving sustainable revenue growth. We are committed to achieve accelerated and sustainable revenue growth through strategic market expansion, product innovation and enhancing our brand penetration, delivering approximately a range of 35% to 70% growth, accelerating as the year progresses. Two, continued improvement in bottom line results. With a clear path to profitability outlined, our efforts will be geared towards improving gross margin and achieving adjusted EBITDA breakeven by the end of the year, as highlighted in our financial guidance. Third, strengthening brand loyalty. We aim to deepen our connection with consumers, building brand loyalty through expanding distribution, delivering high-quality, great tasting consumer experiences, increasing engagement and advocacy.

In conclusion, the strategy and outlook for Stryve Foods are both ambitious and grounded in a realistic assessment of our opportunities. With a clear strategic direction, a dedicated team and a strong operational and financial foundation in place, I am extremely excited and confident about our future. We are committed to driving value for our shareholders, delighting our customers and making a positive impact on the communities we serve. I want to express my gratitude to each of you for joining us today. Through the course of this call, we’ve shared a comprehensive overview of the progress on our transformation, the performance in fiscal year 2023, highlighting the operational improvements made, the strategic financial management we have in place that has solidified our foundation and support the forward-looking growth strategies that will propel us into a profitable future.

Our achievements this past year reflect the resilience, creativity and dedication of our entire team. Every step we have taken has been with a clear focus on driving sustainable profitable growth and enhancing shareholder value. We are poised to capture the exciting opportunities that lie ahead with a robust yet simplified strategic plan, passionate team and a relentless focus on execution. I am confident in our ability to achieve our goals. Our journey is one of transformation, growth to profitability, and while we have made meaningful progress, in many ways, we are just getting started. As we move to the Q&A session, I want to thank our shareholders, customers, and the Stryve Foods’ team for your support and belief in our mission. Your commitment, passion and partnership fuel our ambition and raise my confidence levels.

With that, I’ll turn it over to our operator to begin the Q&A. Thank you again for your continued support and interest in Stryve Foods. Operator?

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