Q1 2021 Tattooed Chef Inc Earnings Call
Ladies and gentlemen, this is the conference operator, the conference will begin momentarily. Thank you for your patience.
[music].
Thank you for standing by and this is the conference operator, welcome to tattooed chefs first quarter 2021 earnings conference call.
As a reminder, all participants are in listen only mode and the conference is being recorded.
After the presentation, there will be and opportunity to ask questions. The joined the question queue. You May Press Star then one on your telephone keypad should you need assistance during the conference call and you may signal, an operator of by pressing star and zero out.
I'd now like to turn the conference over to Rachel Perkins Investor Relations. Please go ahead.
Yeah.
Thank you good afternoon, and welcome to tattooed shafts. The first quarter 2021 earnings conference call on the call today are Sam Galletti, President and Chief Executive Officer, Sarah Gulati, Chief Creative Officer, and the tattooed shop, and Stephanie Dykeman, Chief operating Officer, and Chief Financial Officer, Matt Williams, Tattooed chefs Chief growth Officer.
We will also be available for questions.
I know everyone should have access to the earnings release, which went out at approximately four of five P. M. Eastern time today, if you've not had the chance to review the release, it's available and that investors portion of our website at www dot tattooed checked out.
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 filings with the securities and.
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.
And in addition, within our earnings release and in today's prepared remarks, adjusted EBITDA and adjusted EBITDA margin of reference and it's important to note that these are non-GAAP financial measures that we believe are useful metrics that better reflect the performance of Airbus and it's on an ongoing basis of.
A reconciliation of these non-GAAP financial measures and their most directly comparable GAAP financial measures are included in today's press release, which has also been and posted on our website and with that it's my pleasure to turn the call over to tattooed shops, President and CEO Sam Goody.
Thank you Rachel and good afternoon.
We appreciate everyone, taking the time to join us on today's call.
It's an exciting time and statute chef.
I'll begin today's discussion with key business and.
New distribution wins, and our recent acquisition of foods and New Mexico.
And then Sarah will discuss our marketing and innovation and Stephanie will provide further detail on the financials.
We are off to a great start for 2021.
First quarter revenue increased 15, 9% to 53 million compared to the first quarter last year, driven by our tattooed chef branded products are branded sales product sales for the first quarter of 2021 were a record 36 million or 16, 9%.
Of total revenue, that's an increase of 105 per cent compared to $18 billion in the first quarter last year.
We had originally anticipated it would take two to three years to reach 75% to 80% branded sales and we are proud that we are nearing that goal within six months of being public.
When we launched the brand and 2017, we recognized and opportunity to revolutionize the way consumers think about plant based food.
The tattooed chef brand is for everyone and we attract consumers of all ages and demographics, it really resonates with both consumers and retailers and that has been the parents, who are sales velocities and product launches to date.
The club channel requires much higher volume just stay on shelf compared to conventional retail and we continue to exceed retailer expectation.
It gives us confidence as we enter new channels like grocery and meet the sales thresholds are.
Our portfolio of products from single serve balls, the vegetable blends to plant based peaches and offers retailers of variety of breakfast lunch and dinner or snacking products.
With our acquisition of new Mexico, good distributor zinc and Carsten Torchy of factory L. L. C collectively referred to as foods and New Mexico, We plan to expand further into the 20 billion dollar Hispanic southwest food sector and beyond we.
We acquired fields, and new Mexico for 35 million of cash and are incredibly excited about the growth opportunity we.
And we'll be immediately addressing the 1 billion dollar frozen Mexican food category and will also be launching our first ever refrigerated and ambient products.
We believe the Mexican food space is lacking and alternative plant based options and this is exactly the type of acquisition we were looking for.
The two facilities total of 118000 square feet, allowing us not only expand production capacity, but also diversify our manufacturing capabilities and grow our product portfolio and an accelerated rate the.
Of course, and the facility is brand new with extensive tortilla manufacturing capabilities and since it was never completed we now have the ability to customize and tailor the existing footprint to our needs.
Given our business is vertically integrated already we're very comfortable manufacturing and plan to introduce more innovative products like alternative tortilla and plant based items and.
True to three years, we believe Fuji new Mexico can contribute up to 200 million of revenue annually the.
Focus going forward will continue to be on tattooed chip granted plant based products.
We continue to successfully execute on our growth strategy to grow the tattooed chip brand and the categories and which we compete.
At the end of 2020 branded products were nearly.
And 4300 stores and had 23000 points of distribution and at the end of Q1, we were at 6065 stores with 31000 points of distribution.
By the end of Q2, we expect it to be an additional 1162 stores.
With 8000, new points of distribution, including a number of larger grocery chains, which will expand upon in the moment.
Our new total store count by the end of the second quarter is 7477 stores and 40275 points of distribution.
Based on where we are today and the additional retailer commitments that we will realize and the back half of the 2021. We are confident we can achieve our 2021 objective of 10000 stores and 65000 points of distribution for tattooed chef by year end.
And the club channel, we saw exceptional growth our Costco M. B M and March with Doctor you Bowls was very successful the off the Ebola was featured on the and cabinets and placed and their AD that is mailed to each member of Port for week promotion. This gives the tattooed share grant exposure to over 105 million Costco members across the country.
Free.
And the dance club, we had for limited time offers in Q1, and addition to our for everyday items. In Q2, we have limited time offers including improved green beans would begin wasabi rash and our rice cauliflower burrito blend.
According to spins for the latest 12 weeks ending March 'twenty, one and 2021 tattooed chef continues to experience double digit growth of 10, 8% of Sam's clubs significantly outpacing the frozen categories, we compete in.
For the 52 weeks ending March 21, 2021 tap to check was up 128% and is one of the fastest growing brands and the frozen category.
And the mass channel latest 12 weeks through March 21, 2021, we saw a 477% growth primarily driven by growth by our launch of six new bowls of target in mid March our average ACB and the channel is 57.1 and it's <unk>.
Grown five times since the same time last year, we continue to see T. D piece increase in the mass channel, which are up over 800% versus the same time last year.
Our launch and target exceeded both ours and targets expectations. We saw we saw extraordinary demand for the tattooed chef Entre gold line and beat our launch plan velocity expectations.
Since launch the tattooed chef entre bold white is averaging over $32 per SKU per store targets debt. It was the most successful frozen food lodge and the history of target and collectively we have exciting plans to continue to drive trial and sales with the target guest.
And last 52 weeks, we have grown 149% and mass channel and we expect this momentum to continue as our products are introduced the consumers throughout the year.
In the grocery and natural channel, we continue to gain distribution with both national and regional retailers in the U S. In addition to our distribution wins in Q1, we announced in March by the end of Q2 tattooed chef products will be on shelf at whole foods.
Harris, Teeter, jewel smart and final and nougat markets and norcal as well as a growing list of independent retailers.
And in Q3, we already have commitments for multiple albertsons divisions, including southwest.
Socal.
Nor Cal.
And Intermountain.
As well as H E B.
Price shopper and sprouts farmers market.
Additionally, we are also seeing our early retailers expand our line and two additional categories based on the success of the brand, which will increase the breadth of our distribution.
We have strong momentum and expect our growth to continue given the white space opportunities with new and existing customers and grocery and club mass as well as our innovation pipeline and recent acquisition.
In 2021, we expect revenue between $235 million to $242 million.
Which definitely will expand upon and a few minutes and 2022, we now expect at least $300 million of revenue based on our distribution of that success and grocery this year and our innovation pipeline, including the launch of our first family of products, which we expect at the end of this year or early next year.
We are building tattooed chef to be a generational brand. It is important and we invest back into the business now to lay the foundation for future success as.
As we previously announced we have partnered with nitrous the National marketing agency and are spending 15 million of this year to increase tattooed chip brand awareness share will provide more details momentarily, but we're pleased with the early success and launch of our first commercial of last month.
Regarding production capacity, we are ramping up production and increasing capacity in both of our facilities in California in Italy and in order to meet our guidance for the sales volume the acquisition of foods and New Mexico now adds another two facilities, giving us a total of over 275000 square feet.
And now I'd like to turn the call over to Sarah to discuss our innovation and our marketing efforts.
Thank you and good afternoon, everyone.
Tattooed chef is a brand committed to creating high quality delicious plant based meals that connect with the next generation of consumers.
Innovation is woven into the culture of the company and we are passionate about every product we make.
We create food, we want to eat and as consumers' preferences change and so do ours.
That'd be food does not have to be boring and with tattooed chat it's not.
Our food is exciting no longer for the one to two per cent and it chef created.
At the end of Q1, we had a total of 42 tattooed chef branded Skus and by the end of Q2, we'll have 54.
This includes five new 20 ounce of that'd be some multi serve meals cauliflower spaghetti with plant baseball and yeas, Sweet potato and Yoki with plant based butter and Sage cauliflower Gnocchi cuatro from Archie Chickpea pasta with plant based sausage ragu and rice cauliflower burrito blend and better now available for purchase of Tau.
And I get stores nationwide.
He's skillet meals feature of variety of our innovative plant based alternatives with plant based beef and sausage plenty sputter and alternative rice and pasta.
These multi serve meals are different yet familiar to consumers the air truly and of Seljuk innovation.
We created our own part of the alternative that we believe are better than anything else on the market today.
Following our fixed both launched and target and March. We also recently launched our new personal harvests Bull and of plant based a global as well as the four pack of call farmer, Mac and cheese and or plant based burrito balls at target.
This brings our total skus offered at target to 17.
Our plant based pizza launched in mid April exclusively at Myer stores, and are gaining distribution and other retailers, including United supermarket, Jewel and a T b and Q2.
We are continually bringing new ideas to the marketplace and with our acquisition of foods of New Mexico, We have a pipeline of over 250 ideas for innovation, including over 50 and the Hispanic southwest food category.
As Sam mentioned beginning in January we kicked off our marketing efforts of the help of nitrous C to increase our brand awareness as we grow our distribution. This year, we are investing $15 million across digital video connected T V digital display social media and search engine marketing on April debt.
We debuted our first six and 15 second commercials of animated ingredients with light motion and send them photography of some of our top selling products.
The commercials are now erring on the curated list of cable networks, including Bravo Food Network C N N and C N B C as well as connected TV and digital media.
We allocated the larger spend to be on cable networks and now have placements on some of the biggest shows by the end of the 16th week campaign, we expect the commercials to reach over 80 million people seeking more plant based eating options.
We are in the early innings of marketing and are excited to make tattooed chest. A household name now I'll turn it over to Stephanie to walk through our financials.
Thank you Sarah and good afternoon, everyone and.
In the first quarter of 2021 we continued on our growth trajectory.
Revenue increased $58 eight per cent to $52 7 million compared to $33 2 million for the prior year period.
As Sam mentioned the revenue increase was driven by an 18 point for million dollar increase and revenue of tattooed chef branded products and this now accounts for 69% of our total revenue.
Gross profit in the first quarter with $13 7 million or 26 per cent of revenue compared to $9 2 million or 27, 9% for the prior year period.
While the gross margin declined year over year, and the first quarter, we anticipate quarterly gross margin expansion throughout the rest of 2021 as we increase our volume.
On a sequential basis first quarter gross margin increased 860 basis points compared to $17 four per cent in the fourth quarter of 2020 due to operational efficiencies.
For our full year 2021 guidance, we expect gross margin between 20 to 25 per cent for the year.
Operating expenses increased to $20 7 million in the first quarter of 2021 compared to $2 4 million and the prior year period. The increase in operating expenses was primarily due to $3 2 million of stock compensation.
$2 6 million in marketing.
And two 6 million and public company and new employee costs.
And $1 9 million and promotional expenses to invest and customers and the brand for promotional offers.
During 2020 and into 2020, one we have invested more of our management team.
Infrastructure equipment and maintenance to support for both the production facilities here and in Italy. During our rapid growth that is expected to continue moving forward.
We have also made significant investments with our customers in the form of promotion and marketing and.
And we believe will benefit tattooed chef in years to come.
We expect operating expenses to increase and 2021 to accommodate for R&D growth invest in the tattooed chef brand and for a full year of public company costs.
Due to the increase in operating expenses net loss was $7 9 million in the first quarter of 2021 compared to net income of $5 9 million in the prior year period.
Adjusted EBITDA loss was $3 million in the first quarter of 2021 compared to adjusted EBITDA of $7 million in the prior year period the.
Decline was primarily due to the operating expenses that were previously mentioned.
And we expect adjusted EBITDA to increase sequentially throughout the remainder of the year.
As of March 31, 2021 we had cash and cash equivalents of $185 million.
Now turning to our outlook, we are reiterating our full year 2021 guidance provided in our recent M&A released which include.
Revenue in the range of 235 million to 242 million and increase of 58 to 63 per cent compared to 'twenty 'twenty.
This guidance implies 49% year over year of growth on the base business to 222 million and 13 to 20 million contribution from one of the two facilities in the foods of New Mexico acquisition.
This revenue guidance excludes any revenue contribution from the second facility that we referred to as Carsten.
Does it is not currently in operation, we expect to update guidance again once production begins at that facility in the coming months.
We expect gross margin to be and the range of 20 to 25 per cent as we increase scale and leverage operational efficiencies and.
Of our California, and Italy facilities and.
And integrate foods of new Mexico.
We expect adjusted EBITDA in the range of 2 million to $4 million as we continue to invest in and promote the tattooed chef Brad we invest in people and labor equipment and public company costs.
Despite inflationary pressures, we expect sequential improvement and adjusted EBITDA as we progress throughout the year.
Lastly, we expect capital expenditures in the range of 15 to 20 million.
With that we are now available to take your question of.
Operator.
Thank you.
We will now begin the question and answer session. The joined the question queue. You May Press Star then one on your telephone keypad and you will hear of tone and acknowledging your request if youre using a speakerphone. Please pick up your handset before pressing any keys to withdraw. Your question. Please press Star then two we'll pause for a moment as callers join the queue.
The first question comes from George Kelly of Roth Capital Partners. Please go ahead.
Hi, everyone. Thanks for taking my questions.
So I have a few for you I'll start with the with the New Mexico acquisitions that you just made so I was curious if you could help us.
Understand the progression and you gave the two to three year targets, if I forget exactly a couple of hundred million dollars and so I was just curious if you could help us understand that progression.
And when Youre going to start introducing your own branded items to that facility and then the second part of the question is just about sizing the opportunity and tortillas.
And.
How big is that market, what's the penetration with alternative kind of plant based.
The product et cetera.
Yeah.
Thank you George this is Sam.
Oh.
So the first part the first part is of the.
And the way that we're looking at the is that the immediate opportunity. Obviously is with plant based burritos enchilada of case ideas the facility is.
The live it's running and tortillas are being manufactured today within the facility also so the immediate opportunity and you know if we're fortunate and we could get some distribution quickly will be you know third or most likely fourth quarter I can see.
Frozen food products being the first items that we hit the market with our tattooed chef brand.
And it could be.
And B you know Sarah is looking at a full line of of Entre entrees also to to be able to increase the retail area of what that are our entre bowls are going and so there's there's tons of opportunity that is pretty immediate.
It's a function of just.
And really getting all the all the pieces of the items and packaging and production and place, but I think that within the four five months, we definitely could be hopefully getting some distribution out there. The next part of it would be.
The the tortilla opportunity, which is actually just as quickly and it would be as the same as the the frozen items. Because there is equipment already that has very large capacity that we could be entering that opportunity of.
The plant based tortillas into the market pretty quickly.
And then the third part of it is the snack concept that we're looking more towards the.
The fourth quarter or actually even the first quarter next year.
And that is and additional home another potential revenue stream of of sales for tattooed chef products. So there's three different areas of the.
Potential revenue growth within this and that's why we're so excited about this opportunity because of the of the diversification not only in the <unk>.
Extending and our frozen categories, but also now getting into EMEA and into snacks as far as the second part of your question on the tortillas.
So immediately.
We want to be utilized we wanted the utilizing our grain free concepts and plant based tortillas.
Right out of the gate with our with our frozen line. So it would be very unique to the market and and so besides selling of plant based.
The alternative tortilla as the commodity which per se at the commodity although there's very limited of that product and the market today.
We would we would take advantage of that same those that the same opportunity for those tortillas to be able to utilize it and the in our existing and the existing <unk>.
Products that have created out there, but how does the house, they're always called it.
You know.
And Estelle Jake innovation. So it's just lines of perfect for what tattooed chef is and the opportunity.
Okay, that's really helpful.
And then different topic for the next question. So the branded sales in the quarter jumped quite a bit from where you ended last year and I was hoping you could.
The sort of.
Help bridge you know I think it was a 13 million dollar improvement and this year's for first quarter. So what if you could sort of break it down between.
The biggest club customers between new growth for us between Matt could you help us understand where that jumped came from.
Hum.
So he's still driven by our club and <unk>.
Accepted.
The the it's been very minimal still and the opportunity of of of conventional retail except target. We started to pick up some of those sales and the first quarter, but it was minimal and and that's why you know everybody always says about you know.
And the question will come up about you know what's up with guidance you know why aren't you increasing guidance is because is the you have to you know by the time that you get things approved and they get on shelf and they get distributed to target 18, hundreds of stores or whatever store counts that youre dealing with so before you get you know of for.
Years' worth of of those sales and it takes it takes time to really start hitting that number so the first quarter.
Except for maybe a little bit of a conventional the target business. There was really so exciting has really been still driven by our basic of accounts.
Accounts of club and some Walmart business.
Okay. Okay helpful. And then last question for me is just about gross margin. So maybe this is for for Stephanie but.
It's it's been.
It's such a volatile.
The margin just jumps around quarter to quarter is it kind of is your <unk>.
Gross margin going to be more consistent this year or can you help at all there.
Yes, gross profit margin will start to stabilize it is a little high for Q1, but as we start to flow into Q2, Q3 Q4, it will be within guidance of 20% to 25% even with the acquisition of foods and the new Mexico. We will continue to see that across the board. There are some changes within foods of nomex.
Nicole and we will make within their product line since they are really a co packer and as we sell tattooed chef out of there and we expect everything to fall in line with our current guidance.
Okay. Thank you.
Thank you, thank you, Josh and Georgia.
The next question comes from Rob Dickerson of Jefferies. Please go ahead.
Great. Thank you so much.
And.
Couple of questions.
So the.
I guess for for the team.
You kind of went through a number of the retailers and sounds like and maybe getting some distributions Q2 end of Q3.
And you said of kind of quickly.
And as I was trying to write it down and I kind of missed it could you maybe just kind of go through you know how that works and I know maybe in the Q4 and Q1 right. There were some products. You said you had and like a lot of retailer or a lot of grocers sooner for trial, so what youre, saying today it sounds like.
And maybe you're past some of the trial phase and then it sounds like maybe you're getting some distribution.
And it sounds like part of that for some of that starts.
And Q2 of the inflows into Q3, so maybe you just spend a couple of minutes just kind of walk us through those retailers of Dan.
Obviously, just because it's such a big piece here to your plan.
Thanks.
Hey, Rob this is Matt.
So you know obviously the build is taking place as where does for following the category reset cycle and so what we'd like to share.
Because theres still a lot of moving parts on the retailer side is theyre coming out of COVID-19 in terms of actually when theyre actually getting back into this process of doing full category reviews.
And so what we like to show is kind of where we're seeing traction and where were getting commitments.
The quarter by quarter. So so clearly the first big win that we had in Q1 was target right and so we came out of the gate with six new Skus of Entre bowls with target.
We actually did and emergency revision and that was because there was another supplier that they were doing business with that had some.
Kind of some hanging on of COVID-19 related issues in.
In terms of production and so we actually accelerated our launch with them that was the rich that was initially going to take place and may.
And the March and so that pulled forward that launch and so.
That was really the first big hit the we had we took on one of the other regional grocers and stop and shop and the northeast with a couple of Skus.
And so.
We're really doing two things, we're obviously, gaining new customers and so we have a list of those that we've kind of shared and I'll walk you through more of those but then its not only once we gain of customer once we're gaining the customers, we're able to go back and resell or sell into other categories that maybe that we're not being reviewed when we started and so.
As an example with target.
They saw the success of the brand.
With the with the Entre bowls.
And that now is leading into kind of the them.
Launching this line of family meal products as well and so not only of just a and.
And <unk> kind of a gain for us, but it also becomes a strategy around building distribution points through added Skus and so what youre seeing and our build is not just new retailers coming on its existing retailers, adding more skus because of the success of the brand and how the brand is.
Performing and so that's.
And that's kind of what youre starting to see as we shared with what we have and Q2.
We're seeing retailers coming on like Juul, We mentioned, obviously mire, we've got the smart and final coming on.
Whole foods, we communicated is obviously hitting and so we're seeing that flow through and and as the reset cycles take place.
And we're sharing with you is <unk>.
Significant new gains that we're getting in specific categories, but we know that that's going to lead to future gains as well and other categories of.
Additionally, too so that's how it plays out and just like the add Rob that there has been no product that was launched and the first quarter of it has been discontinued the product isn't even getting started yet as of.
On the shelves. So it is and what will the little information that we have already as Matt mentioned, there is a real buzz and excitement that's happening with the brand and obviously, we have real numbers and the data would target debt was.
Really just blew everybody out of the out of the water. So we're very excited about the success of what's happening with our product and conventional retail as quick as it is.
Okay good enough.
Mhm.
And it's something of a I guess total like for your your comment earlier, Sam you know and people ask like.
What's the I'm, a guy and it's not and the guide I mean, I guess, what kind of being communicated is.
And there's a reiteration of the of the guide this year right on the base the 222.
And then I guess like we should be thinking that there would be potential upside to that guide right depending on maybe when some of these new business wins occur I'm, just trying to kind of.
Yeah and through the timing of them.
And I understand I do my math.
And so I.
I do understand and again, we had you know it was really a function of debt. When we came out with our guidance. It was really based.
Based on.
Our our our assumption that because of the momentum and success that we had and these preliminary.
Confirmations that we were verbally getting but still by the time these items get distributed nationally and they get the momentum behind them. It really it's really would take you know you really will take some time. So maybe later on this year, we'll have a better snapshot of.
And just how the distribution is going to where we could revisit it but again, we'd like to stick with the guidance that we have.
Okay.
And if that clarifies it gets people of apps right. It's just a matter of for sure.
At the salaries of the main question of the other getting new business why is the revenue stayed the same but it's essentially like you have your own internal projections, you're comfortable with those relative to the guide and then hey, yeah like other stuff and that's hit in Q4, the hits in Q4, but they've got bumped that you won and okay I got it.
And.
And then I had.
The other question is just kind of on the EBITDA lives more mechanical is you know there's a loss in Q1.
Driven by this SG&A expenses.
Sounds like you know gross margin might not be as high but still high.
And as high as of Q1 of them is so high you know and a year over year basis, you've got for the year ebitdas for sort of improve sequentially off of Q1.
So I guess kind of the core question is so what does that the the SG&A expenses kind of.
And essentially stayed the same and may be part of that sequential improvement and EBITDA is really being driven by revenue.
It makes sense.
Yes, So let me answer that Roger.
So we don't book at the EBITDA and the adjusted EBITDA and more importantly, and the operating expenses I think it's important for us to note that there were some items and net adjusted EBITDA of that are not recurring and.
Won't happen every quarter, but we did accelerate some things over the time line and into first quarter to take advantage of some promotional opportunities that we felt were important to help build the hitachi chef brand with new and existing customer.
And those won't exist every quarter and they were planned throughout the year. Some of those expenses just hit in the first quarter. So you will not the operational cash ROE with revenue and operational cost kind of are where they're at right now and.
And so you'll see some consistency within those as we digest foods and new Mexico.
We know where adjusted EBITDA is going to land for the end of the here, but remember that we still need to get in there and we still need to look at cost segregation studies and things like that so there's some depreciation and amortization and those types of things, but those won't affect adjusted EBITDA.
Okay Cool makes sense and then I guess lastly, I had somebody asked me I thought are.
It's a good question.
And my last question.
Sam I think you said on the call quickly you said.
The other kind of gives US you have even more conviction and comfort and really true you know at least 300 million and revenue and 22.
Right I know I'm pretty sure you you threw out of 300 million dollar of revenue number.
The suite, but then you know you've made the acquisition, which obviously helps that that rep.
The new number.
And feel like and kind of have to ask you that had the had two people actually asked me about that.
And I feel like you've kind of circles back to your prior comment around 'twenty, one right and like you have your own internal projections for 'twenty one true.
Obviously that also have your own internal projections for 'twenty, two and I, just kind of maybe some of the business flow through when you're speaking with the grocers, yes, actually just sort of feel better about those internal projections does that does that kind of.
Seltzer.
It's Hugh Yeah, absolutely.
Absolutely you nailed it I mean.
It's like you know the tie what you were saying and it's like.
And we.
It was always a function of like our facilities, because we're producing our products that we sell and so we look at our production facilities and we say Hey, you know where are we and but and so based on our assumptions we came out with the $2 22 and.
And then for us, but and we know that for us to continue to grow you know unless we became a marketing company, we would need to do M&A and and and the beautiful thing about the foods and new Mexico facility.
Is that.
Is that we didn't have to pay some crazy multiple because it was a branded product because we have our brand and so it was so we get this incredible facility that is an existing facility. That's operating with over 300 people that has all the the food you know.
Licenses and just Raring to go and then now we could we could bring our brand and we can know exactly what I was trying to accomplish.
Is is to be able to increase our revenue and the guidance that I suggested based on M&A that is our model as the manufacturer to be able to control. Our destiny. So it is exactly what you just said and what what I was hoping to hit and get.
And Robert half of that I mean, I'm, sorry, if I could add I mean, one of the things that I would also share is that the space you know a $1 billion and revenue for frozen food Mexican food products, we know exactly where we can fit and and the thing that I think is great is the consumers are already gravitating towards.
All of this kind of Mr. <unk> innovation comfort food that comes from the Mexican food category two of the tattooed chef brands I mean, the package of Brent some of our best selling Skus as we've launched and the market today.
Are some of the Skus that are Mexican style of products I mean that the product is flying off of the shelves of target is our new Burrito Bowl that Sarah has created which is phenomenal and and so people are now looking for us to bring.
Great tasting.
Creative plant based Mexican foods to the marketplace and they'll be looking for us the kind of lead that charge and so it's kind of that we've been testing it and I think that we're comfortable with what's going on with that SKU, what's going on with the Sams with the brutal blend even of our original Enchilada Bowl that this is the place that people.
<unk> expect us to bring great tasting products and I think that is a really exciting.
Alright, and then if I can just sneak one quick one and for Stephanie just sort of cost inflation and I feel like I'm supposed to ask this because the assets of every food company right now.
Its just youre and growth stays right. There's obviously a lot of inflation and a lot of different commodities freight you name it.
Is there is there anything that's sticking out to you are you of that.
And could it could actually be just inflationary on the cost side on the Cogs side.
I guess, one and the two it's just as you do grow but it doesn't sound like there's any type of you know sourcing issue of certain products for ingredient. That's it. Thank you so much.
So of course, we're seeing inflation everybody's seeing inflation. We were you know it would be ridiculous for us to say that we're not and on the cost of goods sold side, yes. The.
Outfit for corn, and we saw Mexican Street corn I understand why people might think the it could be of concern.
We are contracted in with ease of on pricing. It has been confirmed and so as long as the price of corn regulate that some point in time and the next 12 months, which I am convinced that it will then we would turn around and we would see.
How things come back and line before we were due to contract for the next time and that's some of the ways that we try to combat inflation in general and when it comes to cost of goods sold but on top of that being vertically integrated and helps us because we manage.
Manage that cost within our manufacturing facility not just for the raw material. If we see an increase in raw materials, and we're making strides when it comes true direct labor by the purchase of equipment and utilizing a lower cost for direct labor per cell unit. Then we can absorb some of those costs and we have a little more control than if we were utilized.
And heiko manufacturer of co Packer.
Because we would get there inflation costs within their raw materials and their labor challenges and that would just flow up to or we are confident that if we continue to see inflation for cost against the all of it if we were to approach our customers.
Later closer to that 12 month, Mark and inflation were so high that we would be better and received at that moment in time, if there was any necessary price adjustment.
And then we would be if we turn around tomorrow and so we are bracing for the impact of that we are monitoring it closely and we're paying attention to our raw materials, we have not had any challenges and getting raw materials at this point and time.
But we make sure that we diversify our suppliers and that we're tracking that and that we're ahead of the game on that so it's very important to us as manufacturers to be able to control that ourselves and it's part of why we're so excited about in the Mexico.
Got it.
Thank you so much.
Thank you. Thank you.
Yeah.
This concludes the question and answer session I would like to turn the conference back over to the management for closing remarks.
Thank you for joining us today, and we're off to a strong start to 2021 and have an incredible opportunity to grow the tattooed Jeff brand, we've increased capacity and sales expanded gross margins and closed on the strategic acquisition, we have done.
Everything we said we would.
And we believe we're just getting started and I look forward to speaking to you again at several upcoming investor conferences, and our second quarter and earnings call in August of <unk>.
Great day.
This concludes today's conference call you may disconnect. Your lines. Thank you for participating and have a pleasant day.
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