Release Date: May 14, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Significant improvements in packaging have led to exceptional year-over-year improvements in retail sales velocity, particularly for the Stride brand.
- Enhancements in manufacturing processes have improved product quality, which is expected to boost consumer satisfaction and brand loyalty.
- Operational efficiencies have been achieved, optimizing resources, reducing waste, and improving the overall cost structure.
- Regained distribution for the Vanke deals brand at Tesco Southeast division, showing early positive indicators and strong velocities.
- A robust innovation pipeline is in place to leverage capabilities and capacity for further brand and category expansion.
Negative Points
- Net sales slightly decreased by approximately 1% compared to the same period last year due to strategic shifts in product quality and packaging.
- Continued volatility in beef prices, which could impact cost management and profitability.
- The company's cash position is relatively low at approximately $0.4 million, reflecting stringent cash conservation amidst operational enhancements.
- Dependence on securing additional capital through convertible bridge notes or other means to support operational and growth needs.
- Challenges in aligning shipments with the unexpectedly high consumer demand due to improved product velocities, indicating potential issues in supply chain management.
Q & A Highlights
Q: Could you talk a little bit more about getting back deals back in Costco, I think you said U.S. South East division, and the reason I'm asking is a couple of years ago, you guys got into Costco and it was highly promotional from, you know, and you can argue maybe it wasn't priced appropriately. Can you just talk about bucket deals getting into that region and kind of what do you think pricing is going to look like and how you think this time around is maybe improve?
A: (Christopher Boever - CEO, Director) Yes, Mike, thanks for the question. It's been a long patient and consistent journey, but getting our unit economics actually accurate, right and positioned properly then puts us in a position to now engage with a customer such as Costco to be able to deliver a complete solution that is priced properly for all parties to win their club number. Certainly, Costco and all as well strive this time so we've designed a program to give us an opportunity to show the great attributes that the back of deals brand has today, Casco shopper in that region. We have ongoing discussions with other reasons, we have some early indicators we just went into the first week of May. So we're just basically seeing some of the early results and the velocities are very strong. So on the pricing, the proposition, the value is tremendous for all. And we feel this is a win-win-win, something that we can repeat now only in that division. But other divisions as we gain momentum.
Q: Got it. And then maybe just a follow-up question, Chris, what two things give you the most visibility on the revenue ramp, the rest of the year is it like the improved packaging, the expansion of the distribution footprint on expectations for repeat business repurchases? I mean, what are the top two things that you are looking at that gives you comfort revenues are going to are going to ramp personally?
A: (Christopher Boever - CEO, Director) Yes. Thanks again. First and foremost, it's velocity in all my 35 plus years in the industry. And I have never seen a velocity spike like I have from a package change that we're experiencing. Now, all three brands are all accelerating in velocity, but the Stride brand went through the largest renovation and on, we're seeing the largest increase in dollars per point of distribution. That's going up from a velocity standpoint on significantly higher. In fact, as a result, at some creating many opportunities, but opportunities come challenges. So we were taken a bit by surprise as to the speed and the immediacy of the velocity improvements. And therefore, we've had to pivot catch back up. So ultimately, our shipments probably are a little bit below where consumption is, and we're catching up this quarter on that.
Q: And maybe last question for Alex. Alex, can you did these bridge notes in the quarter? Um, can you finance kind of keep this going as the revenue ramps supply, the working capital that's needed, just some insight here, comfort with being able to do that.
A: (R. Alex Hawkins - CFO) It's we don't have the installed capacity installed on borrowing capacity today to fund before working capital ramp. That's going to be required for us to hit what we know is coming. Like Chris said, this has happened the velocity is happening quickly, we're catching back up. And a lot of the way that we're going to see growth is through new distribution, and that can tend to be lumpy or growth by where you have a distribution reset and all of a sudden you're shipping to a significantly more amount of stores which required a significant bump in your inventory. And so the way our our existing line of credit it works today. It doesn't tie to that exactly until we will need to bring in some amount of capital on these convertible bridge that's our example of that. And we're going to continue to look for ways to come in the most prudent way possible with the least amount of dilution possible. We fund our business to get to a self-sustaining model once we had the requisite volumes for that.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
