Q4 2021 Better Choice Company Inc Earnings Call

Good morning, My name is Daryl and I will be your conference operator today at this time I would like to welcome everyone to the better choice company fourth quarter and full year 2021 earnings conference call.

Good morning, my name is Darryl and I will be your conference operator today. At this time, I would like to welcome everyone to the Better Choice Company 4th quarter in full year 2021 earnings conference call.

A question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference. Please press star zero on your telephone keypad.

Darrell: The question and answer session will follow the formal presentation. If anyone wants to require operator assistance during the conference, please press star zero on your telephone keypad.

As a reminder, today's call is being recorded I would now like to turn the call over to Mr. Rob <unk> Executive Vice President strategy.

Darrell: I would now like to turn the call over to Mr. Rob Sowerman, Executive Vice President, Strategy. Thank you.

You may begin.

Rob Sourman: Thank you, operator. Welcome, everyone, to better choices. Fourth quarter and four year earnings conference calls.

Thank you operator, welcome everyone to better choices fourth quarter and full year earnings conference call.

This morning, we issued our fourth quarter and full year 2021 financial results press release and posted our updated earnings presentation under the IR section of our website, which we'll be discussing today.

Rob Sourman: This morning, we issued our fourth quarter in full year 2021 financial results press release and posted our updated earnings presentation under the IR section of our website, which we'll be discussing today.

I'm joined by Scott Lerner, our CEO Charlotte Cook, our CFO Donald Young our executive Vice President of sales.

Rob Sourman: I'm joined by Scott Lerner, RCEO, Charlotte Cook, or CFO , and Donald Young, our Executive Vice President of SAIL.

Before we begin please remember that during the course of this call. We may make forward looking statements within the meaning of the federal Securities laws.

Rob Sourman: Before we begin, please remember that during the course of this call, we may make forward booking statements within the meeting of the Federal Security's Law.

Rob Sourman: These statements are based on management's current expectations and beliefs, and involve risks and uncertainties because actual results are different materially, and as described in this forward look.

These statements are based on management's current expectations and beliefs and involve risks and uncertainties that could cause actual results to differ materially.

As described in these forward looking statements.

Please refer to the company's annual report on Form 10-K filed with the Securities and Exchange Commission and the company's press release issued on Tuesday March 29, 2022 for a detailed discussion of the risks that could cause actual results to differ materially from those expressed or implied in any forward looking statements made today.

Rob Sourman: Please refer to the company's annual report on Form 10K about the Security and Exchange Commission and the company's press release issued on Tuesday, March 29, 2022 for a detailed discussion of the risks that could cause actual results to different materially from those expressed or implied in any forward-looking statements made today.

Rob Sourman: Please note that on today's call, management, or refer to certain non- GAAP financial measures such as gross revenue, EBITDA, and adjusted EBITDA.

Please note that on today's call management will refer to certain non-GAAP financial measures such as gross revenue EBITDA and adjusted EBITDA.

Although the company believes these non-GAAP financial measures provide useful information for investors.

Rob Sourman: Although the company believes these non-GAAP financial measures provide useful information for investors, the presentation of this information is not intended to be considered an isolation, or the substitute for the financial information presented in accordance with GAAP.

Presentation of this information is not intended to be considered in isolation.

Or as a substitute for the financial information presented in accordance with GAAP.

Rob Sourman: Please refer to our press release and presentation issue on March 29, 2022, for reconciliation with the non- GAAP financial measures to the most comparable measures prepared in the court and secure. With that, let me hand it over to you.

Please refer to our press release and presentation issued on March 29, 2022 for a reconciliation of the non-GAAP financial measures to the most comparable measures prepared in accordance with GAAP.

With that let me hand, it over to Scott.

2021 was my first full year as CEO of better choice and I'm incredibly proud of the progress we have made.

Rob Sourman: 2021 was my first full year as CEO of Better Choice, and I'm incredibly proud of the progress we have made. This past year, our focus was all about positioning us for a breakout year in 2022, and we set three goals to get there. Building a best-in-class team, creating a...

This past year, our focus was all about positioning us for a breakout year in 2022, and we set three goals to get there.

Building a best in class team.

Creating an industry leading innovation pipeline.

Rob Sourman: and developing a go-to-market approach anchored by leading channel partners.

In developing our go to market approach anchored by leading channel partnerships.

Since I joined we've brought Halo elevate from initial concept to the store shelf in under 12 months.

Rob Sourman: Since I joined, we brought Halo Elevate from initial concept to the store shelf in under 12 months.

Rob Sourman: Developed a robust three year innovation pipeline, which includes the rebranding of our existing halo holistic products and the integration of the true dog brand underneath the halo umbrella.

Developed a robust three year innovation pipeline, which includes the rebranding of our existing Halo holistic products and the integration of the true dog brand underneath the Halo umbrella.

On boarded two new co manufacturing partners to secure significant incremental production capacity.

Rob Sourman: onboarded two new co-manufacturing partners to secure significant incremental production capacity and raise $40 million of proceeds with the goal of achieving $100 million of growth sales in 2023.

And raised $40 million of proceeds with the goal of achieving $100 million of gross sales in 2023.

On the sales side, we secured anchor partnerships with petco pet supplies, plus and Phillips for the National launch of Halo, elevate which gives us distribution in more than 2000 pet specialty stores by mid 2022.

Rob Sourman: On the sales side, we secured anchor partnerships with Petco, PetSupplies Plus and Phillips for the national launch of Halo Elevator.

Rob Sourman: which gives us distribution in more than 2000 pet specialty stores by mid 2022.

In addition, Halo holistic has continued to see strong growth in Amazon point of sale.

Rob Sourman: In addition, Halo-Helistic has continued to see strong growth in Amazon corner sales.

Rob Sourman: Up 15% in Q4 2021 for reference.

Up 15% in Q4 2021 for reference and.

Rob Sourman: And we're very excited to expand our partnership with Chewy this year in a big way.

And we're very excited to expand our partnership with chewy this year in a big way.

Internationally, we continue to over deliver against our $100 million in contracted minimum revenues from 2021 to 'twenty 'twenty five and expect rapid growth in this channel to continue.

Rob Sourman: Internationally, we continue to over-deliver against $100 million in contracted minimum revenues from 2021 to 2025 and expect rapid growth in this channel to continue.

Rob Sourman: I am also proud to announce the official launch of our new Halo Direct to Consumer website, which went live last Tuesday and showcases the new look and feel of the Halo brand. The fourth quarter.

I am also proud to announce the official launch of our new Halo direct to consumer website, which went live last Tuesday, and showcases the new look and feel of the Halo brand.

The fourth quarter of 2021 was this was strong for better choice and represent the last quarter before launch of Halo elevate.

Rob Sourman: was strong for better choice and represent the last quarter before launch of Halo Elevator.

Despite unprecedented supply chain disruption felt across the consumer packaged goods industry, we were able to deliver 18% quarterly net sales growth.

Rob Sourman: Despite unprecedented supply chain disruptions felt across the consumer package goods industry, we were able to deliver 18% quarterly net sales growth driven by record international sales and continued growth in our eco.

And by record International sales and continued growth in our E Commerce channel.

For the full year 2021 we generated approximately 56 million and gross sales an increase of roughly 7% relative to 2020.

Rob Sourman: For the full year 2021, we generated approximately 56 million in gross sales, an increase of roughly 7% relative to 2020.

Rob Sourman: That said, we estimate supply constraints and out-of-stocks negatively impacted our four-year sales figure by about six million predominantly felt in e-commerce.

That said, we estimate supply constraints in out of stocks. Nevertheless, negatively impacted our full year sales figure by about 6 million predominantly felt in e-commerce .

Even with the out of stocks in mind, our supply chain and logistics team did a fantastic job navigating macro economic pressures.

Rob Sourman: Even with the out of stocked in mind, our supply chain in a logistics team did a fantastic job navigating macroeconomic pressures to satisfy our growing customer demand and pivoted when needed with one goal in mind to keep our product on the shelf for our loyal and growing and consumer base.

<unk> by our growing customer demand and pivoted when needed with one goal in mind to keep our product on the shelf for our loyal and growing and consumer base.

Rob Sourman: Although safety stocks held by our customers, particularly Amazon and QE, we're reducing Q4 2021 and are reflected in our net sales, we were still able to satisfy most of the end consumer demand, which we view as critical to maintaining repeat purchase behavior and driving sales in 2022.

Although safety stocks held by our customers, particularly Amazon and chewy, we reduced in Q4, 2021 and are reflected in internet sales.

We're still able to satisfy most of the end consumer demand, which we view as critical to maintaining repeat purchase behavior and driving sales in 2022.

Rob Sourman: All of these achievements wouldn't be possible without our incredible

All of these achievements wouldn't be possible without our incredible team.

Rob Sourman: This year we added nearly 20 new team members with a wealth of experience from both inside and outside the pet food industry.

This year, we added nearly 20, new team members with a wealth of experience from both inside and outside the pet food industry.

With the individuals' from Amazon Crate and barrel Mars, Petcare, Nestle Purina, click bar and solid golf joining our team.

Rob Sourman: With individuals from Amazon, Creighton, Barrel, Mars, Petcare, Nestle, Purina, Clickbar, and Solid Gold joining our team.

Not only is this evidenced that our wind from anywhere culture is working.

Rob Sourman: Not only is this evidence that our win from anywhere culture is working, but I also think serves as validation that we're building something special at better choice.

But I also think serves as validation that we're building something special that better choice.

Rob Sourman: With everyday passes, I grow even more excited about the opportunity we have to become the most innovative premium pet food company in the world. With high-quality brands poised for rapid growth led by subject matter experts who can deliver results.

With everyday that passes I grow even more excited about the opportunity we have to become the most innovative premium pet food company in the world with high quality brands poised for rapid growth led by subject matter experts, who can deliver results.

Our business is rooted in the Halo brand, where we plan to leverage our global omni channel strategy to treat rapid growth and exceed $100 million of gross sales by 2023.

Rob Sourman: Our business is rooted in the Halo brand where we plan to leverage our global Omni Channel strategy to retrieve rapid growth and exceed $100 million of growth sales by 2023. Our target consumers.

Our target consumer is the millennial pet parents and our goal is enabling the purchase of halo products wherever whenever and however, they choose.

Rob Sourman: And our goal is enabling the purchase of halo products wherever, whenever, and however they choose. This is how many can

This is how many consumers now shop and it doesn't matter if they're in the United States Asia or any other part of the world.

Rob Sourman: It doesn't matter if they're in the United States, Asia, or any other part of the world.

Rob Sourman: One day they might be in a pet co the next day on chewy and the next day browsing our website so we really have to have a strong presence in our four main channels pet specialty e commerce directed consumer and international to drive customer loyal.

One day, they might be in a petco.

Next day on QE and the next day browsing our website. So we really have to have a strong presence in our four main channels pet specialty e-commerce direct to consumer and international to drive customer loyalty.

On the flip side, our omni channel strategy turns every consumer touch point into a dynamic opportunity to connect convert and retain customers with a consistent and immersive brand experience, which we believe is a key to increasing the lifetime value of our customers.

Rob Sourman: On the flip side, our on the channel strategy turns every consumer touch point into a dynamic opportunity to connect, convert and retain customers with a consistent and immersive brand experience, which we believe is a key to increasing the lifetime value of our customers.

This strategy also lets us develop and sell channel specific products designed to maximize conversion and gross margin to avoid channel conflict.

Rob Sourman: This strategy also lets us develop and sell channel-specific products designed to maximize conversion and gross margin to avoid channel conflicts.

Rob Sourman: One of the issues you'll find in the pet category if you try to play in every channel at once is that you see a lot of pricing competition.

One of the issues you'll find in the pet category. If you try to play in every channel of one is that you see a lot of pricing competition.

It can really affect both the brand as well as the retailer. So we're avoiding that and looking to launch products built to succeed in specific channels to prevent margin erosion across our portfolio and most importantly speed up growth.

Rob Sourman: It can really affect both the brand as well as the retailer, so we're avoiding that and looking to launch products built to succeed in specific channels to prevent margin erosion across our portfolio and most importantly, speed up growth.

Rob Sourman: For example, Halo Elevate is sold exclusively within the pet specialty channel. While you won't find Elevate on Chewy or Amazon, Halo Holistic will continue to drive growth on these third-party e-commerce sites while maintaining an existing foothold in pet specialty, particularly in the cat category.

For example, Halo elevated sold exclusively within the pet specialty channel, while you won't find elevate on chewy or Amazon Halo holistic will continue to drive growth on these third party e-commerce sites, while maintaining an existing foothold in pet specialty, particularly in the cat.

Category.

R. J E T site will carry all of our Halo products from elevate and holistic cable in wet food as well as a complete line of freeze dried raw offerings that were historically sold under the true dog Grant.

Rob Sourman: Our GTC site will carry all our HALO products from Elevate and Holistic Kibble and Wet Food, as well as a complete line of freeze-dried raw offerings that were historically sold under the True Dog brand.

Rob Sourman: Today, our international sales are driven by Halo Holistic, but we are excited to begin to introduce Halo Elevate to new geographies later this year.

Today, our international sales were driven by Halo holistic, but we're excited to begin to introduce halo elevate to new geographies later this year.

Last week, our sales teams spent three days a global pet one of the largest annual pet industry trade shows and then officially.

Rob Sourman: Last week, our sales team spent three days at Global Pet, one of the largest annual pet industry trade shows and officially unveiled the new look and feel of the Halo brand for the industry.

Unveiled the new look and feel of the Halo brand for the industry.

Rob Sourman: Although it is still early, the response from customers, distributors, and suppliers have been overwhelmingly positive.

Although it is still early the response from customers distributors and suppliers have been overwhelmingly positive.

Which is great momentum for us.

As our key launch partners made significant initial purchases of Halo elevate in Q1, 2022 and are currently in the process of stocking their shelf.

Rob Sourman: as our key launch partners made significant initial purchases of Halo Elevate in Q1 2022 and are currently in the process of stocking their shelves.

While these positive developments were not reflected in our 2021 financials, we've already begun to see their impact in the first quarter of 2022.

Rob Sourman: While these positive developments were not reflected in our 2021 financials, we've already begun to see their impact in the first quarter of 2022.

We estimate that Q1 2022 gross sales will exceed 40% growth relative to Q1 2021, where.

Rob Sourman: We estimate that Q1 2022 growth sales will exceed 40% growth relative to Q1 2021.

Where are we delivered $13.4 million of gross sales.

Rob Sourman: where we delivered 13.4 million dollars gross sale.

To date, our growth in 2022 has been driven by initial sales of Halo elevate as well as strong Halo holistic sales in our E Commerce International channels.

Rob Sourman: To date, our growth in 2022 has been driven by initial sales of Halo Elevate as well as strong Halo holistic sales in our e-commerce international channels.

I'll, let Donald Charlotte, Rob provide a bit more information regarding the initial progress we've made but we've certainly come out of the gate strong this year.

Speaker Change: I'll let Donald, Sharla, and Rob provide a bit more information regarding the initial progress we've made, but we've certainly come out the gates strong this year.

For you for those of you that have been following our story since our uplift to the New York Stock exchange back in June IRA.

Speaker Change: For you, for those of you that have been following our story since our uplist to the New York Stock Exchange back in June , I recommend you check out some of the new social and digital content now available on the Better Choice and HALO website.

I recommend you check out some of the new social and digital content now available on the better choice and Halo websites.

Speaker Change: as those will be dynamic sources of information as our launch progresses this year.

Those will be dynamic sources of information has our launch progresses this year.

In addition, I'd also encourage you to visit their local pet specialty store to see hail elevate on shelf and hear directly from our store associates about the brand we're building.

Speaker Change: In addition, I'd also encourage you to visit your local pet specialty store to see Hale Elevate on shelf and hear directly from a store associate about the brand we are building.

Speaker Change: So far, my golden doodle Leo has only told me good things about his lunch and dinner.

So far my Golden due to Leo It's only told me good things about his lunch and dinner.

Speaker Change: Please visit our store locator on halopets.com to find a location near you. With that.

Please visit our store locator on Halo pets dot com to find a location near you.

With that I'll turn it over to Donald.

Thank you Scott in 2020 , one we secured three critically important anchor partnerships for the national launch of Halo elevate.

Speaker Change: Thank you, Scott. In 2021, we secured three critically important anchor partnerships for the national launch of Halo 11.

Speaker Change: PetSupplies Plus, Petco, and now Philips Pet Food and...

That's five plus petco, and now Phillips pet food and supplies.

Speaker Change: As Scott mentioned, this gives us distribution in more than 2,000 pet specialty stores by mid-2022, with a launch occurring slightly earlier than we anticipated.

Scott mentioned this gives us distribution in more than 2000 pet specialty stores by mid 2022.

With the launch occurred slightly earlier than we expected last year.

Thanks for this newly formed partnership and strong initial feedback from retailers and we anticipate that Halo elevate will now be available in more than 1500 pet stores by the end of April .

Speaker Change: Thanks to this newly formed partnership and strong initial feedback from retailers, we anticipate that Halo Elevate will now be available in more than 1,500 pet stores by the end of April .

Speaker Change: and in more than 2,000 pet specialty stores by the end of July , with incremental linear feed also secured in certain locations.

And then more than 10000 pet specialty stores by the end of July with incremental linear feet also secure in certain locations.

Relative to the expectations that we shared in November 2021.

Speaker Change: Relative to the expectations that we shared in November 2021, this represents a 37% increase in the number of cases in the U.S.

This represents a 37% increase in the total number of on shelf distribution points.

Speaker Change: a total number of on-shelf distribution points.

Which accounts for both the number of total pet specialty doors.

Speaker Change: which accounts for both the number of total pet specialty doors and the amount of linear feet secure.

And the amount of linear feet secured in each location.

This increase in shelf space has been driven by four key events.

Speaker Change: This increase in shelf space has been driven by four key events.

One page.

Take those decision to increase the number of stores that carry hail elevate to more than a thousand locations.

Speaker Change: PICO's decision to increase the number of stores that carry hail elevate to more than a thousand local

Speaker Change: with approximately 600 of these locations allocated for 8 feet of shelf space and the remaining stores with

With approximately 600 of these locations allocated for eight feet of shelf space.

And the remaining starts with four feet of shelf space.

Speaker Change: In addition, Petco has classified Halo Elevate as a best choice.

In addition, petco, that's classified Halo elevate I think best choice brand.

Previously we anticipated we secured placement in 900 locations with 450 dislocations had eight feet of space.

Speaker Change: Previously, we anticipated we secured placement in 900 locations with 450 of these locations at 8 feet of space and 450 at 4 feet.

458, four feet of space.

Never to an increase in the total number of pet supplies plus store locations from 560 in 2020 one.

Speaker Change: Number two, an increase in the total number of petabytes plus store locations from 560 in 2021 to more than 600 in 2022.

More than 602022.

I'd say preferred brand, we expect to secure five feet of shelf space in all pet supplies plus locations.

Speaker Change: As a preferred brand, we expect to secure five feet of shelf space in all Pet Supplies Plus locations.

Clarifying our independent distribution with Phillips pet food and supplies gives us access to the largest number of independent pet food stores in the United States.

Speaker Change: Clarifying our independent distribution with Phillips Pet Food and Supplies gives us access to the largest number of independent pet food stores in the United States. The size of the location

The size of their location service lifestyle apps can vary but these stores often come with a fiercely loyal and dependable consumer base.

Speaker Change: But these stores often come with a fiercely loyal and dependable consumer base.

Speaker Change: And number four, securing significant dry kibble and canned wet food supplies.

And number four.

Carrying significant dry kibble and.

Can what good supply.

Speaker Change: This has allowed us to achieve a 100% fill rate for Halo Elevator.

This has allowed us to achieve a 100% fill rate for Halo element. This is a huge advantage in our industry with significant out of stocks.

Speaker Change: This is a huge advantage in our industry with significant.

As I discussed on our Q3 call. Our goal remains by the end of the first launch here June 'twenty 'twenty, three we will be generating a little over $200 in sales per store per week and over 2000 locations currently and growing well.

Speaker Change: As I discussed on our 2-3 call, our goal remains by the end of the first launch year June 2023. We will be generating a little over $200 in sales per store per week and over 2,000 locations currently and grow.

With any new product launch there was a significant quarter over quarter ramp that occurs as customers try new products.

Speaker Change: With any new product launch, there's a significant quarter over quarter ramp that occurs as customers try new products.

Speaker Change: marketing efforts begin to take effect and the in-store education of retail associates start to pay off.

Marketing efforts begin to take effect and the in store education retail associates start to pay off.

Speaker Change: In the first year, we will also run special promotions to incentivize consumer trials.

In the first year, we will also run special promotions to incentivize consumer trial what.

With the goal of attracting high value long term purchaser of our product.

Speaker Change: with the goal of attracting a high value long-term purchaser of our product.

It's simple we created hadal elevate deliver best in class nutrition for pet parents.

Speaker Change: It's simple. We created Hale Elevate deliver best in class nutrition for pet parents. Our recipes are transparent.

Our recipes are transparent and.

And we proudly showed that on the front of our bank.

Our products are formulated to directly address the top five pet's health concerns that pet parents have.

Speaker Change: Our products are formulated to directly address the top five pet health concerns that pet parents have.

Hello, elevate allows pet parents that confidently upgrade the quality of their pet food without any compromises.

Speaker Change: Halo Elevator allows pet parents to confidently upgrade the quality of their pet food without

Speaker Change: And our industry leading traceability gives pet parents confidence in what they are feeding their

Our industry, leading traceability gifts pet parents confidence in what they're feeding their pets.

Hello, elevate includes 39 skus of dry and wet foods for dogs of all ages and green.

Speaker Change: ale elevate includes 39 skews of dry and wet foods for dogs of all ages.

Speaker Change: formulated by prominent veterinarian and nutrition.

Formulated by prominent veterinary and nutrition experts with a variety of recipes that are available, including grain free and healthy grain choices as well as chicken red meat salmon and land options.

Speaker Change: with a variety of recipes that are available, including grain-free and healthy grain choices, as well as chicken, resmeat, salmon, and lamb hot pot.

Speaker Change: With regards to our kin, what products we offer a variety of bone-in, barbecue, and chunky stews.

With regard to our Ken what products, we offer a variety of bone in barbecue and chunky students.

Speaker Change: designed for the highest levels of palatability and...

Signed for the highest levels of palatability and nutrition.

I've said, it before and I'll say it again in my 30 years in the pet food industry I have never been this excited about the product.

Speaker Change: I've said it before, and I'll say it again, in my 30 years in the pet food and

Speaker Change: I have never been this excited about a product and the opportunity that lies ahead of us for growth.

The opportunity that lies ahead of us for growth.

That said, we won't stop here.

Hello, elevate what's the first new launch, but we will continue to innovate next up is our Halo holistic line then the expansion of elevate into cat and finally, it's the wind out of our portfolio in terms of treats and other products.

Speaker Change: HALO Elevate was the first new launch, but we will continue to innovate. Next up is our HALO Holistic line, then the expansion of Elevate into CAT, and finally filling out our portfolio in terms of treats and other products.

With that I now would like to turn the call over to Rob to discuss our international channel in more detail.

Speaker Change: With that, I now would like to turn the call over to Rob to discuss our international channel and more details.

Thanks, Donald as Scott mentioned earlier on the call International was a key growth driver for us in 2020 one.

Rob Sourman: Thanks, Donald. As Scott mentioned earlier on the call, International was a key growth driver for us in 2021. Year-over-year, international revenue for 2021 totaled $14.8 million, and increased the more than 70% relative to 2020.

Year over year International revenue for 2021 totaled $14 8 million, an increase of more than 70% relative to 2020.

Rob Sourman: In Q4, we generate 3.9 million, an increase of over 227 percent year-over-year. We set a strong performance

In Q4, we generated $3 9 billion an increase of over 227%.

Yeah.

We saw strong performance across our existing market of China.

Rob Sourman: China representing 52% of our total international sales. In part, growth in the Chinese market was driven by our ability to secure additional orders following Halo's strong performance during single day for November 11th, the largest online shopping event.

Representing 52% of our total international sales.

Part growth in the Chinese market was driven by our ability to secure additional orders all of them. He was strong performance during Singles' day for November 11th the largest online shopping event in the world.

Rob Sourman: and consumer purchases of halo products during this period increase more than 4-fold developed into the prior year, driven by significant new customer acquisition. And we anticipate that we will to continue to see incremental new customers join our brand in 2020.

And consumer purchases of Halo products. During this period increased more than four fold relative to the prior year driven by significant new customer acquisition and we anticipate they will continue to see incremental new customers join our brand in 2022.

Our international go to market strategy is tailored for these regions. Our target audience is the same as in the United States. The young educated urban dwelling women through in Asia in particular often of the cat.

Rob Sourman: While our international go-to-market strategy is tailored for these regions, our target audience is the same as in the United States, a young, educated, urban-dwelling woman who in Asia in particular often owns a cat.

Put that in perspective more than 50% of our consumers that purchase Halo were born after 19 1990.

Rob Sourman: put that in perspective more than 50% of our consumers that purchase HALA were born after 1990 and roughly 80% of those consumers purchase our products online.

80% of those consumers purchase our products online.

Rob Sourman: Demographics are also working on a favor, as the number of households who own a pet has doubled in the last five years, with younger pet owners leading growth.

Graphics are also working in our favor as the number of households own a pet has doubled in the last five years with younger pet owners leading growth.

As we've discussed previously successfully executing upon our existing customer contracts should enable us to build an annually recurring Asian business north of $25 million.

Rob Sourman: As we've discussed previously, successfully executing upon our existing customer contracts should enable us to build an annual recurring Asian business north of 25 million and halo holistic sales alone with incremental upside possible as we look to introduce elevate and other product lines in future.

Halo lipstick sales along with incremental upside possible as we look to introduce elevate.

Other product lines in future.

Rob Sourman: In addition, with your near-term opportunities to diversify our international sales in Australia and Latin America, we have an opportunity to introduce both Halo-Atlantic and Alibaba Office.

In addition, we see near term opportunities to diversify our international sales in Australia, and Latin America, where we have an opportunity to introduce both halo holistic and elevate offerings.

Although there has been significant global uncertainty in the first quarter of 2022, we've continued to see strong international sales in our core geographies and constantly work for distribution partners to mitigate potential risk.

Rob Sourman: Although there has been significant global uncertainty in the first quarter of 2022, we've continued to see strong international sales in our core geographies and constantly work with our distribution partners to mitigate potential risk. With that, I'll hand it over to Charlotte to walk you this evening.

With that I'll hand, it over to Charlotte to walk through the financials in more detail.

Thanks, Rob.

Net sales for the fourth quarter were in line with expectations at $11 million, an increase of one 7 million or 18% compared to Q4 of 2020.

Charlotte Walker: Next sales for the fourth quarter were in line with expectations at 11 million, an increase of 1.7 million or 18% compared to Q4 of 2020 gross sales for the fourth quarter of 2021 total 13.6 million an increase of 20% as compared to 11.4 million for the same period last year.

Gross downspin in fourth quarter of 2021 totaled $13 6 million, an increase of 20% compared to 11 4 million for the same period last year.

Charlotte Walker: Consistent with what we've seen throughout the year, the increase was driven by yet another record quarter over quarter revenue growth in international whose Q4 net sales more than doubled versus Q4 of last

Consistent with what we've seen throughout the year. The increase was driven by yet another record quarter over quarter revenue growth in international whose Q4 net sales more than doubled versus Q4 of last year.

Charlotte Walker: Additionally, e-commerce net sales were up over 5% into 4 of 2021 versus the same period last year.

Additionally, E Commerce net sales were up over 5% in Q4 of 2021 versus the same period last year.

Net sales for full year 2021 were $46 million, an 8% increase versus 'twenty 'twenty.

Charlotte Walker: Netsale for full year 2021 were 46 million and 8% increased versus 2020.

Gross sales increased 7% to 56 million credit full year, 2021 compared to $52 1 million in 2020.

Charlotte Walker: Growth sales increased 7% to 56 million for the full year 2021 compared to 52.1 million in 2020.

International sales flat year over year growth delivering $14 8 million of gross sales in 2020 one.

Charlotte Walker: International sales led year over year growth, delivering 14.8 million of growth sales in 2021, representing a more than 70 percent increase as compared to 2020.

Presenting on more than 70% increase as compared to 2020.

Charlotte Walker: And despite significant out of stocks across our canned wet portfolio, e-commerce growth sales grew 7% year over year, including double digit growth with Amazon.

And despite significant out of stocks across our canned wine portfolio E. Commerce gross sales grew 7% year over year, including double digit growth like Amazon.

As we've discussed on prior calls our topline revenue was impacted throughout 2021 by the supply shortages and labor constraints that are still being felt globally.

Charlotte Walker: As we've discussed on prior calls, our top line revenue was impacted throughout 2021 by the supply shortages and labor constraints that are still being felt globally.

Production delays for archaean wet food and shortages in certain key ingredients used in our dry kibble stretched our safety stock.

Charlotte Walker: production delays for our canned wet food and shortages in certain key ingredients used in our dry kibble stretched our safety stocks. And while our total inventory has increased from two three and majority of that build is related to the launch of Halo elevate this year.

Meanwhile, our total inventory increased from Q3, the majority of that is related to the launch if you will elevated this year.

We estimate the quarter today impacts to revenue from out of stocks, resulting from these headwinds with four to four and a half million as our fill rates in Q4 were significantly below normal.

Charlotte Walker: We estimate the quarter to date impacts to revenue from out of stocks resulting from these headwinds was four to four and a half million as our fill raising you for were significantly below normal.

For the full year 2021 the estimated impact from cross sells is six to six and a half million dollars.

Charlotte Walker: For the full year 2021, the estimated impact to grow sales is six to six and a half million.

During the first few months of 2022 we've seen significant improvement in our fill rates as we began to return to normal production levels on our candidate products, which we expect to reach by the end of Q2.

Charlotte Walker: During the first few months of 2022, we've seen significant improvement in our fill rate as we began a return to normal production level on our canned web products, which we expect to reach by the end of Q2.

Additionally, consumer demand for our products remains very strong domestically and internationally.

Charlotte Walker: Additionally, consumer demand for our products remains very strong domestically and internationally.

While we're early in the launch of Halo elevate we're very pleased with the results. Thus far and are confident we can deliver on our growth both this year.

Charlotte Walker: And while we're early in the launch of Halo Elevate, we're very pleased with the results thus far and are confident we can deliver on our growth goals this year.

Gross margin for the fourth quarter of 2021 with 25%.

Charlotte Walker: Growth margin for the fourth quarter of 2021 was 25 percent, a decline from 30% per 6% in Q4 2020.

Clients and 36% in Q4, 'twenty 'twenty did.

Charlotte Walker: The decline reflects the impact of continued broad scale inflation, which significantly burden margins on our dry kibble portfolio, representing over half of our total gross sales volume during the year.

The decline reflects the impact of continued broad scale inflation, which significantly burdened margins on our dry kibble portfolio representing over half of our total gross sales volume during the year.

Gross margin for full year, 'twenty, and 'twenty, one with 33% compared to 38% in 'twenty 'twenty, we estimate the inflation related price increases from our co manufacturers impacted Q4 margin by roughly four to five percentage points.

Charlotte Walker: Growth margin for full year 2021 was 33% compared to 38% in 2020. We estimate the inflation-related pricing increases from our co-manufacturers impacted Q4 margin by roughly four to five percentage points.

[noise] offset inflationary impacts and increased future production capacity, we completed the transition of our domestic dry kibble production to a Minnesota based co manufacturer in January and have already begun to realize double digit margin improvement on these skus.

Charlotte Walker: To offset inflationary impacts and increase future production capacity, we completed the transition of our domestic dry kibble production to a Minnesota-based co-manufacturer in January and have already begun to realize double-digit margin improvements on these SKUs.

Charlotte Walker: We are also in track to receive approval from the Chinese Ministry of Agriculture at this new facility, which will enable us to transition the manufacturing of dry kibble bound for China by the end of Q2 and realize the same margin.

We are also on track to receive approval from the Chinese Ministry of Agriculture at this new facility, which will enable us to transition the manufacturing of dry kibble bound for China by the end of Q2 and realize the same margin.

We continue to closely monitor pricing and in addition to the pricing action. We took in Q3 of last year, we have announced a second price increase that will take effect. The first week of April .

Charlotte Walker: We continue to closely monitor pricing and in addition to the pricing action we took in Q3 of last year, we have announced a second price increase that will take effect the first week of April .

Yeah.

Charlotte Walker: As it relates to our GTC channel, fourth quarter net sales declined 13% versus Q4 of 2020, driven by declines in repeat purchasers and software customer acquisition and retention.

As it relates to our DTC channel fourth quarter net sales declined 13% versus Q4 of 'twenty 'twenty driven by declines in repeat purchasers and softer customer acquisition and retention.

We've made strong progress towards the migration of our DTC brand through that into Halo and successfully launched our new Halo DTC website last week.

Charlotte Walker: We've made strong progress towards the migration of our DTC brand true dogs into Halo and successfully launched our new Halo DTC website last week.

As we complete the brand migration, we will continue to offer the remaining two days of inventory on the legacy D. T P platform.

Charlotte Walker: As we complete the brand migration, we will continue to offer the remaining true dog inventory on the legacy DGP platform.

Additionally, we continue to focus marketing investments on our longer term DTC strategy, rather than chasing short term revenue gain.

Charlotte Walker: Additionally, we continue to focus marketing investments on our longer-term DTC strategy rather than chasing short-term revenue.

Brick and mortar net sales for the fourth quarter declined around 40% versus Q4 of 2020.

Charlotte Walker: brick-and-mortar net sales for the fourth quarter declined around 40% versus 24 of 2020.

This decline was expected and strategic because we continue to shift away from food drug mass and execute the halo elevate launch on a large scale within pet specialty.

Charlotte Walker: Mr. Klein was expected and strategic as we continue to shift away from food drug mass and execute the Halo Elevate launch on a large scale within pet specialty.

Net loss for the fourth quarter was $5 1 million after adjusting for noncash and nonrecurring charges adjusted EBITDA for the fourth quarter was negative $3 million and reflects the inflationary impacts we just discussed along with incremental investment upfront marketing cost to ensure a successful halo elevate lunch Inc.

Charlotte Walker: Net loss for the fourth quarter was $5.1 million. After adjusting for non-cash and non-recurring charges, adjusted EBITDA for the fourth quarter was negative $3 million, and reflects the inflationary impact we just discussed, along with incremental investment in upfront marketing costs to ensure a successful halo elevate launch. Incremental investment in our international business and the addition of new team members to support growth.

Your mental investment in our international business.

The addition of new team members to support growth.

Net income for full year, 2021 with $3 4 million and adjusted EBITDA for 2021 was negative $7 1 million.

Charlotte Walker: Net income for a full year 2021 was 3.4 million and adjusted even up for 2021 was negative 7.1 million.

As we close out the first quarter of 2022 we anticipate topline sales growth will exceed 40% compared to Q1 of 2021 well above expectations for the quarter.

Charlotte Walker: As we close out the first quarter of 2022, we anticipate top line sales growth will exceed 40% compared to Q1 of 2021, well above expectations for the quarter.

We have already begun to see meaningful improvement in our gross margin as we realize the benefits of our new co manufacturer relationships and pricing strategy.

Charlotte Walker: We have already begun to see meaningful improvement in our growth margin as we realize the benefits of our new co-manufactured relationships and pricing strategy.

Charlotte Walker: The macroeconomic environment has remained volatile and could impact costs in the future, however, we will continuously monitor and adjust our pricing strategy as necessary, as well as leverage our innovation pipeline for future margin expansion.

The macroeconomic environment has remained volatile and could impact cost in the future. However, we will continuously monitor and adjust our pricing strategy as necessary as well as leverage our innovation pipeline for future margin expansion.

Charlotte Walker: And as reference, we've also provided a detailed reconciliation of Q4 and Fuller Ipisa and Adjusted Ipisa.

As referenced we've also provided a detailed reconciliation of Q4 and full year EBITDA and adjusted EBITDA.

On the balance sheet, we ended the year with 28 9 million in cash and cash equivalents and restricted cash.

Charlotte Walker: On the balance sheet, we ended the year with 28.9 million in cash and cash equivalence and restricting cash reflecting an increase in inventory ahead of our pet special p launch. With that, I will turn it back over to Scott.

Reflecting an increase in inventory ahead of our pet specialty launch with that I will turn it back over to Scott.

Thank you Charlotte and thank you again to everyone that has joined our earnings call today.

Cot: Thank you, Sharla, and thank you again to everyone that has joined our earnings call today. Now that we have officially put a bow on 2021, I'm incredibly excited for what we hope will be a breakout year in 2022 for the new and improved Halo brand. Our goal remains $100 million of gross sales by 2023, and we feel strongly that we have the team, strategy, and retail partnerships to get us there. Now I'd like to open up the call for questions.

Now that we have officially put a bow on 2020 one I'm incredibly excited for what we hope will be a breakout year in 2022.

As the new and improved Halo brand.

Our goal remains $100 million of gross sales by 2023, and we feel strongly that we have the team strategy and retail partnerships to get us there now.

Now I'd like to open up the call for questions operator. Please.

Thank you we will now be conducting a question and answer session.

Quest: Thank you. We will now be conducting the question and answer.

I would like to ask a question. Please press star one on your telephone keypad.

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Press Star two if he would like to remove your question from the queue for participants using speaker equipment. It may be necessary to pick up your handset before pressing the star keys.

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Please while we poll for your questions.

Quest: Our first questions come from the line of Mike Baker with DA Davidson, please proceed with

Our first questions come from the line of Mike Baker with D. A Davidson. Please proceed with your questions.

Okay. Thanks, guys are so encouraging that you're still planning on the $100 million in gross sales by 2023 versus I guess 50 656 million. This year you know that's a pretty big ramp over the next two years, how how should we think about that you know broken down.

D: Okay, thanks guys, so encouraging that you're still planning on that $100 million in growth sales by 2023 versus I guess $66 million this year, you know, that's a pretty big ramp over the next two years. How should we think about that, you know, broken down between growth this year and then growth next year? How does that ramp from $56 to $100 million?

Between growth this year and the growth next year, how does that ramp from $56 million to $200 million.

Yeah first Mike.

Speaker Change: Yeah, first mic. Thanks for jumping on this morning. Appreciate it.

Thanks for jumping on this morning appreciate it.

Oh, well quickly chime in here and then I'd love Bob to follow up with Q1 as you've seen in the release, we're expecting growth over 40% versus year ago. So you can imagine where we're off to a good start in 2022 in terms of all the plans that we've put in place since we IPO we're hitting on.

Speaker Change: I'll quickly chime in here and then I'd love Rob to follow up.

Speaker Change: Q-1, as you've seen in the release, we're expecting growth over 40% versus year ago, so

Speaker Change: You can imagine we're off to a good start in 2022 in terms of all the plans that we've put in place since we IPO'd, we're hitting on all the milestones. So the strategic plan in order to get to $100 million is in full effect and we haven't seen anything that swayed us from that path. I'll let Rob talk a little bit more in terms of how we look at 2022 versus bridges into 2023.

All of the milestones so the strategic plan in order to get to $100 million is in full effect and we haven't seen anything that swayed us from that path I'll, let Rob talk a little bit more in terms of how we look at 2022 versus a bridging into 2023.

Perfect. Thanks, Scott so the.

The 40% gross number that that Scott just mentioned for Q1 translates now if you look at our or the number were coughing against close to call it $19 million in in in our Q1 2022 cells just run rating that you're looking at sort of.

Rob Sourman: The 40% growth number that Scott just mentioned for Q1 translates, if you look at the number we're copying against close to call it 19 million in Q1 2022 sales, just run rating that.

Rob Sourman: You're looking at sort of the mid to high or the mid 70s, and if you look at 56 million up to 100 million, that's sort of right on the linear progression as we grow into 2023. So we feel like we're right on track, the all day launch is going well and we're seeing the numbers we're excited about.

The mid to high <unk> or the mid seventies, and if you look at $56 million up to 100 million that sort of right on a linear progression as we as we grow into 2023. So we feel like we're right on track the launch is going well and we're seeing the numbers we're excited about.

Yeah, I might mentioned I'm, Mike in terms of our Q1. This isn't just sort of pipeline fill or pulling pipelines from Q2 into Q1, we're seeing incremental growth on our e-commerce platforms with the existing Halo holistic brand, so and once we've gotten our in stocks to a better place we're seeing.

Speaker Change: Yeah, I might mention one thing, Mike, in terms of Q1, this isn't just sort of pipeline fill or pulling pipeline from Q2 into Q1. We're seeing incremental growth on our e-commerce platforms with the existing Halo Holistic brand. So and once we've gotten our in stocks to a better place, you know, we're seeing increasing sales as well.

Increasing sales as well.

Okay. It makes sense and then if I could ask on the margin side, though you know margins are obviously, a tough environment out there I think Scott you had said on the last call do you expect to get back to a 40% gross margin run rate by the end of 2022 <unk> is.

Speaker Change: Okay, make sense and then if I could ask on the margin side, you know, margins, obviously a tough environment out there. I think Scott, you said on the last call that you expected back to a 40% gross margin run rate by the end of 2022. Is that outlook changed at all with some of the inflation that we're seeing?

Has that outlook changed at all with some of the inflation that we're seeing.

No.

Scot Learner: No, and I'll let Charlotte to this, as she mentioned on the call, we have a price increase taking effect on April 1st, which is going to help us sort of readjust our margin profile. In addition, once we get our

Charlotte to this.

She mentioned on the call we have a price increase taking effect on April 1st which is going to help us sort of readjust our margin profile.

In addition, once we get.

Our.

Our China production switched over to a new manufacturer, we're going to realize.

Scot Learner: our China production switched over to our new manufacturer, we're gonna realize a pretty significant gross margin gain as well. So I'd say overall, we feel really good about getting back to that type of gross margin level. And certainly we're starting to realize that some of that in 2022. Charlotte, if you have anything to add there.

Pretty significant gross margin gain as well so I'd say overall, we feel really good about getting back to that type of gross margin level and certainly we're starting to realize that some of that in 2022 sharing with do you have anything to add there.

Yeah, just real quick I would say I mean, I mentioned in my prepared remarks.

Speaker Change: Yeah, just real quick, I'd say, and I mentioned this in my prepared remarks, even just looking at our Q1 margins, we're already seeing the substantial improvement that we did expect. And as Scott mentioned, the last

Even just looking at our Q1 margins were already seeing substantial improvement that we can expect them and as Scott mentioned, the last kind of piece from a cost side is getting the China production moved over into the new manufacturer and so we're seeing the improvement we expected him you know of course macroeconomic environment, so volatile, but we.

Speaker Change: kind of piece from a cross-site is getting the kind of production moved over to the new manufacturer. So we're seeing the improvement we expected. You know, of course, macroeconomic environment so volatile, but we have done a really good job of managing that. So I think just got to point by the end of the year, we're going to be a lot closer to that 40% run rate.

I have done a really good job of managing that so I think to.

I've got to point by the end of the year and we're gonna be a lot closer to that 40% run rate.

Okay makes sense, one more if I could just to clarify so any well first of all any kpis very interesting things you could tell us about the launch and elevate you know what what you're seeing from from your retail partners. It sounds like it's growing at least as well as expected given the increase in shelf space and I think a specific question.

Speaker Change: Okay, make sense. What more if I could just to clarify this. So any, well, first of all, any KPIs, right? You know, interesting things you can tell us about the launch and elevate, you know, what you're seeing from your retail partners. And it sounds like it's going at least as well as expected.

Speaker Change: given the increase in shelf space and I think a specific question, PetSupplyPlus

Pet supplies plus you said five feet I think last quarter, you said four feet. So can we presume that that's a you know increase in and be a positive initial trends.

Speaker Change: You said five feet. I think last quarter you said four feet, so can we presume that that's an increase in base on positive initial trends?

Absolutely and I'm going to let Donald chime in here in a second but I just wanted to reiterate we came off the global pet from last week and the feedback.

Speaker Change: Absolutely. And I'm going to let Donald chime in here in a second, but I just want to reiterate.

Donald Young: came off the global pet from last week and the feedback.

Donald Young: around the whole brand, not just Halo Elevate, but the redesign of Halo Holistic and our overall transition of True Dog into Halo has been received tremendously from retailers, from consumers. And, you know, I think this, at this time, like, we can finally be super excited about what we got going into market because 2021 was really about positioning ourselves.

The whole brand not just hey will elevate but the redesign of halo close to kick in and our overall transition of two dog in the Halo has been received tremendously from retailers from consumers and you know I think this at this time like we can finally be super excited about what we got going into market.

Because 2021 was really about positioning ourselves for rapid growth this year and sort of bring us into 2023, but we bought <unk>.

Donald Young: for rapid growth this year and sort of booing us into 2023, but we've.

Speaker Change: up sort of increased our expectations, I would say, in terms of retail footprint and whatnot coming into this year. And I'd love, Donald, just to expand on that a little bit.

Sort of increased our expectations I would say in terms of retail footprint and whatnot coming into this year and I loved Donald just expand on that a little bit.

Thanks, So much Scott Yeah again, Mike again, we go back and just talk about again the excitement you create when you build a new brand and as we've started really are lots of pet supplies plus really kicks off in April and Petco comes a little bit later, but we had current stores already that so.

Donald Young: Thanks so much, Scott. Yeah, again, Mikey, can we go back and just talk about, again, the excitement you create when you build a new brand? As we've started, really, our launch of Pets by Splice really kicks off in April , and Petco comes a little bit later. But we had current stores already that sold Elevate or Holistic, and we switched them over. What the exciting part is already is it comes down to trial. So, we have a partner right here in my hometown that now...

Elevate or let's say can we switch them over with exciting part is already is it comes down to trial its a way of a partner right here in my hometown.

Donald Young: We can very confidently say we've given away a lot of bags already. We've not had a single bag returned. So what tells you immediately is on the KPI, palatability. We knew we were never in doubt. We knew it was an amazing food. We knew it was different than everything else when it comes from a nutrition point of view. So once we get that first trial, it really, again, it's customers come back. For example, we had a customer walk in that bought a three-pound bag. Five days later, he walked in and bought four bags.

We can very complex say, we've given away a lot of bags already we've not had a single bag returns. So it tells you immediately it's under Kpis Pals a belly. We knew we were never in doubt we know it's an amazing food we knew what was different than everything else. When it comes somebody nutrition point of view. So once we get that first trial.

<unk> customers come back for example, you have a customer walking that bought a three pound bag.

Five days later he walked in about four bags, that's the magic of really saying when you start again, when you're building a brand new excitement and new game active recommendation wherever you make storm Scott's commission against becoming the most innovative premium pet food company. That's what we've done we talked about those pillars over and over again, there's no one in the industry that stacks up against our nutritional.

Donald Young: That's the magic you're really seeing when you start again, when you're building the brand, you're creating excitement and you gain active recommendation. We have a unique story.

Donald Young: Scott's mission, again, to become the most innovative premium pet food company is what we've done.

Donald Young: We've talked about those pillars over and over again. There's no one in the industry that stacks up against our nutritional profile.

And as far as touched by excuse me as far as pet supplies plus yes, again when I. Originally talked we always knew we had to put up of white space they've expanded again the drive from three to four so now we have five feet of space in all of their all of their stores and we're very excited about that.

Donald Young: And as far as pet spice, excuse me, as far as pet spice plus, yes, again, when we originally talked, we always know we had a foot of wet space. They've expanded, again, the drive from three to four, so now we have five feet of space and all of their stores. And we're very excited about that.

And just one more thing to add Mike.

Speaker Change: Just to one more thing to add Mike, you know, obviously elevate is a huge growth lever for this year, but our international footprint is just really expanding quickly and, you know, when we had go through the Q1 call in a couple of months or two here, you'll see the expansion there in terms of what we've gotten going. So the Halo holistic brand continues to grow internationally and really match up with admission and become the most innovative company in the world.

Obviously elevated is there is a huge growth lever for this year, but our international footprint is just really expanding quickly and you know when you go to the Q1 call in a couple of month or two here, you'll see the expansion there in terms of what we've gotten done so.

Halo holistic brand continues to grow internationally and really match up with our mission to become the most innovative meet pet food company in the world.

Perfect I appreciate it thank you.

Thank you our next questions come from the line of George Kelly with Roth Capital Partners. Please proceed with your question.

Speaker Change: Thank you. Our next question has come from the line of George Cully with Ralph Capital Partners. Please proceed with

Hey, everybody thanks for taking my questions.

George Kelly: Hey everybody, thanks for taking my questions. So first just to follow up on the last question.

So first just to follow up on the last question.

George Kelly: curious, congrats on getting more space with these key retail partners and I was just curious like what gave them confidence.

Hi, curious congrats on getting more space with these key retail partners.

And I was just curious like what gives them confidence.

George Kelly: Before really selling a lot of products, why did they increase the aisle space? Were they running tests in a select number of stores or what led them to boost your presence? Sure.

Before really selling a lot of product why did they increase to the Io space, where they're running tests in a select number of stores or.

What what led them to boost your your your presence sure.

So.

When we first brought the proposition of Halo elevated to our retail partners I think they were extremely excited about the food first and foremost in terms of the nutritional profile of the recipes that.

Speaker Change: When we first brought the proposition of Halo Elevate to our retail partners, I think they were extremely excited about the food first and foremost in terms of the nutritional profile, the recipes that Donald Ryan created once they actually saw

So Ryan created once they actually saw.

And their animals and plans animals start to feed the food and the results there in terms of power stability and overall performance at Gast I'm really excited about the proposition and when they saw those halo elevate bags live George and more importantly saw them in their plan O Gram and how.

Speaker Change: and their animals and friends' animals start to feed the food and the results there in terms of palatability and overall performance, it got them really excited about the proposition. And when they saw those Halo Elevate bags live, George, and more importantly saw them in their planogram and how they pop and just create a huge billboard effect, it really got them excited.

And they pop and just create a huge billboard effect. It really got them excited whereas they said hey, let's go at it in some more stores, maybe a little bit more.

Speaker Change: Whereas they said, hey, let's go add it in some more stores, maybe a little bit more.

Square footage here or there. So it really was just about getting the thing in their hands in their stores and generating that excitement and then lastly, just my fantastic sales team led by Donald are the partnerships that they have and the trust that our retail partners have with us from a sales team perspective.

Speaker Change: square footage here or there. So it really was just about getting the thing in their hands and in their stores and generating that excitement and then lastly just my fantastic sales team led by Donald, the partnerships that they have and the trust that our retail partners have.

Speaker Change: with us from a sales team perspective, and then just our overall team, right? Like we were down in Orlando at Pet Supplies Plus with their district team leaders, and they're, you know, all the way up to their CEO . You know, we're constantly meeting with Petco and Philips. And so that's just how we roll. You know, we partner with our retailers, and they want to grow with us. So it's no like magic formula, to be honest. It's just a general.

Then just our overall team right like we we were down in Orlando with pet supplies plus with their district team leaders in there all the way up to the C. E. O. You know, we're constantly meeting with Petco and Philips and so that's just how we roll we partner with our retailers and they are they want to grow with us. So it's no like magic formula to be.

Honestly, it's just a general excitement in terms of what they're seeing and more so just sort of the proof is in the pudding now.

Speaker Change: excitement in terms of what they're seeing and more so just sort of the proof is in the pudding now.

That's excellent that's excellent and then.

Speaker Change: That's excellent. That's excellent. And then same topic, but a slightly different question

Same topic, but slightly different question.

You said in the press release I believe that you anticipate sort of boosting your initial advertising campaign or AD spending around the brand in the first half of this year just curious what that's going to look like is.

Speaker Change: you said in the press release I believe that you anticipate sort of boosting your initial advertising campaign or ad spending around the brand in the first half of this year. Just curious what that's going to look like. Is it mostly digital spending in store kind of promotions or like what are you going to do to really get the point out there?

Is it mostly digital spending in store kind of promotions or like what are you. What are you going to do to really get it out there.

Absolutely happy to answer that and I also wanted to just make sure I just like to reiterate is this isn't all about halo elevate right. We have an existing business and Halo holistic and then our true dog business that we're folding into Halo that we continue to support and that will always be part of our growth plan moving forward. So.

Speaker Change: happy to answer that. And I also want to just make sure.

Speaker Change: like to reiterate it. This isn't all about Halo Elevate, right? We have an existing business in Halo Holistic and then our True Dog business that we're folding into Halo that we continue to support now will always be part of our growth plan moving forward. So we're going to see an acceleration in terms of our marketing efforts, call it in the back half of the year, June , July timeframe, once the full Petco store reset happens. You'll see a really exciting

We're going to see an acceleration in terms of our marketing efforts call. It in the back half of the year June July timeframe once the full petco store reset happens youll see.

A really exciting campaign driven around some video execution that will be used in the digital environment, you know whether it be on our paid social banners connected TV, we have a full a media plan that will be rolling out to support the launch of not only hail elevated but the the rebrand.

Speaker Change: campaign driven around some video executions that will be used in the digital environment, you know, whether it be on paid social banners connected to TV, we have a full media plan that will be rolling out to support the launch of not only hail elevate but the the rebrand of halo holistic. So it's a combination of performance marketing on our DTC side in terms of acquiring customers and

Hello holistic so it's a combination of performance marketing on our DTC side in terms of acquired customers and building long lifetime value with that millennial parents, and then providing awareness in a general sense for the brand and then really tying that back into what Donald.

Speaker Change: building long lifetime value with that millennial parent and then providing awareness.

Speaker Change: in a general sense for the brand, and then really tying that back into what Donald does well, extremely well, and has done with Neutro and Merrick is to provide that in-store support, not only from a marketing perspective, but education at the store associate level. You know, I have to tell you, I think my sales team is going to be on the road probably every day from now until, you know, I don't know, Donald, maybe 2024, educating store associates and really driving.

Does well extremely well and has done with neutral and merit is to provide that in store support not only from a marketing perspective, but education at the store associate level I have to tell you I think my sales team is going to be on the raid are probably every day from now until.

Don't know if Donald maybe 'twenty 'twenty four educating our store associates and really driving that active recommendation in store. So that's really the plan George its in store and it's out of store and I just would add that this isn't things that were just sort of shooting in the dark.

Speaker Change: that active recommendation in store. So, that's really the plan, George. It's in store and it's out of store. And I just would add that this isn't.

Speaker Change: sort of shooting in the dark because we've done this two times over with Neutro and Merrick. The majority of my team comes from those brands as well as other successful brands.

Cause we've done this a few times over with neutral America. The majority of my team comes from those brands as well as other successful brands.

In the past here. So you know we have a really solid plan. We're excited about it at our retail partners are excited and we're just again the initial feedback we've gotten on the Halo elevated product Graham even I I urge you to go check out our Halo pets website, it's super dynamic Super exciting and I were just to bring a lot of energy to.

Speaker Change: in the past here. So, you know, we have a really solid plan. We're excited about it. Our retail partners are excited. And, you know, just again, the initial feedback we've gotten on the Halo Elevate product brand, even I urge you to go check out our Halo Pets website. It's super dynamic, super exciting, and we're just going to bring a lot of energy to the industry.

The the industry.

Yeah.

Speaker Change: Very cool. And then a few modeling related questions. If we could go back, one of the earlier questions was about the quarterly progression and how you're going to get to that hundred million in in 2023. And Rob, I think it was you that

Very cool and then a few modeling related questions. If we could go back one of the earlier questions was about the quarterly progression and how you're going to get to that 100 million than in 2023.

Rob I think it was you that.

Speaker Change: You commented just about the annualizing the first quarter number and that kind of getting you approximately halfway there. Why would we annualize the first quarter? I mean, shouldn't it build from first quarter? And is there any kind of, I mean, is it DTC that's going to be a little weak this year and kind of offset some of these gains? Or should there be a sequential build throughout the year?

You've commented just about Annualizing, the first quarter number in that kind of getting you approximately halfway there.

Why wouldnt, we annualize the first quarter I mean shouldn't it built from first quarter and is there any kind of when does the D. T. C. That's going to be a little weak this year and kind of offset some of these gains or should there be a sequential build throughout the year.

Speaker Change: I think because we, George, just to be clear, because we're not going to be giving guidance for 2022 and we're not really planning on giving guidance for Q2 and Q3, I really just use that as a tool to kind of show that we're expecting to see that business really expand.

Thank you know because we George just to be clear because you know, we're not going to be giving guidance for 2022, and we're not really planning on giving guidance for Q2 and Q3 I really just use that as a tool to kind of show that we're expecting to see that business really expand.

Up to 100 million in and we're starting to put real points on the board in terms of getting there. So you know I think you're right in that as we get pick up is as our same store or as our sales increase at and pet specialty locations.

Speaker Change: up to a hundred million, and we're starting to put real points on the board in terms of getting there. So, you know, I think you're right in that as we get pick up, as our same sort, our, as our sales increase at, at pet specialty locations.

Sure you could see growth there, but you know, we're just not going to be giving incremental quarter over quarter guidance.

Speaker Change: Sure, you could see growth there, but you know, we're just not gonna be giving incremental quarter of a quarter guys

Fair enough and then last question for me on.

Speaker Change: Okay, fair enough. And then last question for me on Factor Gross Origin. When is the Chinese business, when is that manufacturing switch happening? And then secondly, how big was the pricing or how big is the pricing that you're taking on April 1st? And that's all I had. Thanks very much.

In fact, the gross margin.

When is the Chinese business that when is that manufacturing switch happening and then secondly, how big was the pricing or how big is the pricing that you're taking on April one and that's all I had thank you very much.

Yeah.

Probably you can take that.

Speaker Change: Rob, you can take that. Sure. I'll take that. So, to switch to our new coming manufacturer for China is occurring at the end of Q2, we're going to have some simultaneous production just to meet demand, but that's very much occurring Q2. And then with regards to the margin and the price increase magnitude, I'll pass the brochure.

Sure I'll take that so the switch to the ER to the to our new come in fracture for China is occurring at the end of Q2, we're going to have some simultaneous production just to meet demand.

You know very much occur in Q2, and then with regards to the margin and the price increase magnitude I'll I'll pass over to Cheryl.

Sure still across across the various channels the average price increases roughly 7% to 10% they kind of theory through channels, but that's the average across the seven to 10, I think 9%, okay. Okay place T S.

Speaker Change: Sure, so across the various channels, the average price increase is roughly 7 to 10%. It kind of varies through channels, but that's the average across. I'd say 7 to 10, I think 8 to 9% is a good place to use.

Thank you.

Thank you our next questions come from the line of Jim Metallurgy with Dawson James. Please proceed with your questions.

Speaker Change: Thank you. Our next question has come from the line of Jim McElry with Dawson James.

Thank you and good morning.

Jim Mallory: Thank you and good morning. I'd like to understand a little bit better the inventory fill that you're going to be

Like to understand a little bit better the inventory fill that youre going to be experiencing for the year is it correct to assume that the biggest impacts will be in the first.

Jim Mallory: experiencing for the year, is it correct to assume that the biggest impacts will be in the first half and can you kind of

Half and can you kind of.

Jim Mallory: give us a range for how much inventory bills account for the Q1 increase or the Q1 dollar amount in sales.

Give us a range for how much inventory bills account for that.

The Q1 increase or the Q1 dollar.

All of our mountain sales.

Yeah, absolutely. Thanks for joining us this morning, Charlotte do you want to take this one.

Speaker Change: Yeah, absolutely. Thanks for joining us this morning. Charlotte, do you want to take this one?

Sure.

Charlotte: Sure, I guess let me just make sure I understand that question.

Let me just make sure I understand the question.

Charlotte: On the Q1 corridor report or sales, beat your question is how much of that is kind of related to ISOs with the launch?

On the on the Q1 quarter over quarter sales beat your question is how much of that is kind of related to that ISO with the lunch.

Yeah, that's a that's a fair way to put it yes.

Okay I'm sorry.

Charlotte: Okay, so I'm not going to kind of carve out, you know, customer by customer revenue. I will say, we are, Donald mentioned as soon as prepared remarks, we are launching in pet closed seasonal aisle across their locations here in Q2. So you're seeing some of those Q1 same with pet supplies plus, so there's definitely some stocking orders in Q1 that, you know, helping that growth that's obviously planned.

I'm not going to kind of carve out you know customer by customer by customer revenue I will say we are Donald mentioned this in his prepared remarks, we are launching and petco seasonal Isle across their locations here in Q2, So youre seeing some of those shipments in Q1 came with that supplies cluster, there's definitely some stocking orders in Q1.

That that you know helping that process, obviously plan.

And you know, we do expect to continue to get incremental orders throughout the years with the drought.

Charlotte: And, you know, we do expect to continue to get incremental orders throughout the years with the throughout the year with those customers and have some reset as well later in the back half of the year.

You know with those customers and have some reset as well later in the back half of the year.

Okay, I think I get it.

Speaker Change: Okay, I think I get it. Secondly, on inflation overall, I'm trying to figure out if you guys are playing catch-up or if you're ahead of it.

And.

Secondly on inflation overall.

I'm trying to figure out if you guys are playing catch up perfect you're right you're ahead of it so obviously.

You're facing price increases, but so are the guys you're buying from.

Speaker Change: You're facing price increases, but where the guys you're buying from, so, you know, are we just playing hopscotch right now with this? No, and I think we've

Are we just playing.

The hopscotch right now with this no end and I think we've mentioned this in the past specifically as it relates to Halo elevate we were building these formulations already in and sort of a high inflationary period in terms of commodity costs. So we design them to his margins.

Speaker Change: Specifically, as it relates to Halo Elevate, we were building these formulations already in sort of a high inflationary period in terms of commodity costs. So we designed them to hit margins that were acceptable to the business, and we've maybe seen some slight increases here or there in terms of commodities. But overall, the product line was built based on...

That works out to go to the business and you know, we've maybe seen some slight increases here or there in terms of commodities, but overall you know the.

Product line was built based on where we're at in the market.

Speaker Change: where we're at in the market. And you know, over the summer we took a price increase and then we have another one coming up here April 1st as well. More so on the rest of the business has been hail elevate. So I'd say between our move to our new manufacturer where we've also contracted out

And you know over the summer we took a price increase and then we have another one coming up here April 1st it's well I'm more so on the rest of the business is more than a halo elevate so I'd say between our our move to a new manufacturer, where we've also contracted out.

Speaker Change: the majority of our commodity inputs over a longer period of time versus where we were previously, and the design of Halo Elevate in this

The majority of our commodity inputs over a longer period of time versus where we were previously and the design of Halo elevate in this inflationary.

Inflationary timeframe as well as the price increases have put us in a pretty proactive.

Speaker Change: inflationary time frame as well as the price increases have put us in a pretty proactive

Speaker Change: place if I'm with that. So I don't think we're playing catch up. I think we're in a good spot. And as any

If if I would would add so I don't think we're playing catch up I think we're in a good spot.

And as any.

Speaker Change: pricing comes down in the market in terms of input costs, I think that's where we're excited that we can realize even some greater margin gains. So, I think we're in a good spot, all things considered. Okay.

Pricing comes down in the market in terms of input costs I think that's where we're excited that we can realize even some greater margin gains. So I think we're in a good spot all things considered.

Okay, great. Thank you that's it for me Thanks a lot.

Awesome. Thank you so much.

Thank you as a reminder, if you would like to ask a question. Please press star one on your telephone keypad.

Speaker Change: Thank you. As a reminder, if you would like to ask a question, please press star one on your telephone.

There are no further questions at this time I would like to turn the call back over to management for any closing comments.

Speaker Change: There are no further questions at this time. I would like to turn the call back over to ManusWit for any close.

Thank you we'd like to thank everyone for joining us. This morning, I think you can tell from the call that we're at an exciting.

Rick: Thank you. We'd like to thank everyone for joining us this morning. I think you can tell from the call that we're at an exciting point in our business journey with better choice. All the things that we again outlined during the IPO process back in June are coming to fruition. We're seeing strong results in market.

In our business journey with better choice.

All the things that we again outlined during the IPO process back in June are coming to fruition.

We're seeing strong results in market.

We're seeing tremendous feedback from retail partners consumers and investors alike.

Rick: seeing tremendous feedback from retail partners, consumers and investors alike. Things are looking up for the better choice company. My team is extremely pumped about where we're going and we're excited to talk to you again in a month or two in terms of our Q1 results.

Things are looking up for the better choice company. My team is extremely pumped about where we're going and we're excited to talk to you again in a month or two in terms of our Q1 results.

Thank you. This does conclude today's teleconference. We appreciate your participation you may disconnect your lines at this time.

Speaker Change: Thank you. This does conclude today's teleconference. We appreciate your participation. You may disconnect your lines at this time. Enjoy the rest of your day.

The rest of your day.