Q4 2021 Tattooed Chef Inc Earnings Call

Greetings. Welcome to Tattooed Chef Incorporated fourth quarter fiscal 2021 financial results conference call. At this time all participants are in a listed only mode. A question and answer session will follow the formal presentation.

Greetings welcome to touch each chef incorporated fourth quarter fiscal 2020 One financial results conference call. At this time, all participants are in a listen only mode.

Question and answer session will follow the formal presentation, if anyone should require operator assistance. During the conference. Please press star Zero and your telephone keypad. Please note. This conference is being recorded I will now.

If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. Please note this conference is being recorded. I will now turn the conference over to Devin Sullivan, Senior Vice President of the Equity Group.

Now I'll turn the conference over to Devin Sullivan Senior Vice President of the equity group. Thank you you may begin.

Devin Sullivan: Thank you, Sherry. Good morning, everyone, and welcome to Tattooed Chef's fourth quarter and full year 2021 financial results conference call. On the call this morning are Sam Galletti, President and Chief Executive Officer, Sarah Galletti, Chief Creative Officer and the Tattooed Chef, and Stephanie Dykman, the company's Chief Financial Officer.

Thank you Sheri good.

Good morning, everyone and welcome to tattooed chefs fourth quarter and full year 2021 financial results conference call on.

On the call. This morning are Sam Galletti, President and Chief Executive Officer, Sarah Galletti, Chief Creative Officer, and the tattooed chefs and Stephanie Dykeman, the company's Chief Financial Officer.

Speaker Change: Matt Williams, Tattooed Chef's Chief Growth Officer, will also be available for questions.

Matt Williams tattooed chefs Chief growth Officer will also be available for questions.

Matt Williams: Earlier today, the company issued its press release, a copy of which is available in the investor's section of its website, www.tattooedchef.com.

Earlier today the company issued its press release, a copy of which is available in the investors section of its website www dot tattooed chefs dotcom.

Matt Williams: 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 could cause future results, performance, or achievements to differ significantly from the results, performance, or achievements expressed or implied by such forward-looking statements.

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 could cause future results performance or achievements to differ significantly from the results performance or achievements expressed or implied by such.

Forward looking statements.

Matt Williams: Important factors and risks that could cause or contribute to such differences are detailed in the company's filings with the Securities and Exchange Commission.

Important factors and risks that could cause or contribute to such differences are detailed in the company's filings with the securities and Exchange Commission.

Matt Williams: Set 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.

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.

Matt Williams: In addition, within the earnings release and in today's prepared remarks, adjusted EBITDA is referenced.

In addition, within the earnings release and in today's prepared remarks, adjusted EBITDA as referenced it is important to note that this is a non-GAAP financial measure that the company believes it is a useful metric that better reflects the performance of its business on an ongoing basis.

Matt Williams: It is important to note that this is a non-GAAP financial measure that the company believes is a useful metric that better reflects the performance of his business on an ongoing basis.

Matt Williams: A reconciliation of this non-GAAP financial measure to its most directly comparable GAAP financial measure is included in today's press release, which has also been posted to the company's website.

A reconciliation of this non-GAAP financial measure to its most directly comparable GAAP financial measure is included in today's press release, which has also been posted to the company's website.

Matt Williams: With that said, it is now my pleasure to turn the call over to Tattooed Chef's President and CEO , Sam Galletti. Sam, please go ahead.

With that said it is now my pleasure to turn the call over to tattooed chefs President and CEO Sam Galletti Sam. Please go ahead.

Thank you Devin.

2021 was an exceptional year for tattoos, Jeff highlighted by record revenue and increased manufacturing footprint abroad, and distribution base and an expanded and innovative product line.

Sam Galletti: 2021 was an exceptional year for Tattoo Chef.

Sam Galletti: highlighted by record revenue, an increased manufacturing footprint, a broadened distribution base and an expanded and innovative product line.

We achieved our revenue guidance.

Sam Galletti: that have entered 2022 with a great sense of optimism.

That have entered 2022 with a great sense of optimism.

Sam Galletti: Briefly, fourth quarter revenue of $52.3 million helped us generate full year revenue of $213.4 million, up 43.7% from 2020, and driven by a 56.7% increase in branded product sales to $132.5 million, or 63% of total 2021 revenue.

Briefly fourth quarter revenue of $52 3 million helped us generate full year revenue of $213 4 million up 43, 7% from 2020 and driven by 56, 7% increase in branded product sales to 130.

$2 5 million or 63% of total 2021 revenue.

Sam Galletti: I am very proud of our team and the results that we were able to deliver in a challenging environment of supply chain constraints and inflationary pressures.

I am very proud of our team and the results that we were able to deliver in a challenging environment of supply chain constraints and inflationary pressures.

Sam Galletti: Although our gross margin was impacted by significantly higher freight and container costs, we believe that our vertically integrated operating model, specifically that much of which we manufacture, we grow, has helped us weather some of the more severe consequences of this unprecedented operating environment while providing us with important and sustainable competitive advantages.

Although our gross margin was impacted by significantly higher freight and container class, we believe that our vertically integrated operating model, specifically that much of which we manufacture we grow has helped us weather some of the more severe consequences of this unprecedented operating environment, while providing.

With important and sustainable competitive advantages.

Sam Galletti: Rather than focus on what we can't control, we have devoted our resources to managing those things that we can.

Rather than focus on what we can control we have devoted our resources to managing those things that we can by adhering to the principles of product innovation distribution marketing and strategic M&A, along with a long term focus of mix diversification from private label to branded and frozen to Ami.

Sam Galletti: By adhering to the principles of product innovation, distribution, marketing, and strategic M&A, along with a long-term focus of mixed diversification from private label to branded, and frozen to ambient, we are confident in our ability to generate continued growth, expand our margins, elevate our brand profile, and deliver value to our shareholders.

We are confident in our ability to generate continued growth expand our margins and elevate our brand profile and deliver value to our shareholders.

Sam Galletti: We ended the year with a much more diversified base of customers. Tattooed Chef is now available nationally at the club, mass and grocery, and establishing a presence in the food service industry.

We ended the year with a much more diversified base of customers tax you. Jeff is now available nationally at the club mass and grocery and establishing a presence in foodservice industry.

We brought in we brought in our product distribution and diversified our channel mix to include 160 retailers covering approximately 14000 locations, including new Blue chip names like target Kroger Publix, HEB Albertsons Safeway among others.

Sam Galletti: We brought in our product distribution and diversified our channel mix to include 160 retailers covering approximately 14,000 locations including new blue chip names like Target, Kroger, Publix, H-E-B, Albertson's Safeway, among others.

Sam Galletti: It's important to remember that our success in establishing a presence in these locations is not an end in and of itself, but an important incremental step towards capturing a significant sales growth opportunity.

It's important to remember that our success in establishing our presence in these locations is not an end in and of itself, but an important incremental step towards capturing a significant sales growth opportunity.

Sam Galletti: While the breadth of our national footprint is important, it is the depth of our presence, represented by the introduction of new SKUs into existing national distribution points that will help drive our growth.

The breadth of our national footprint is important it is the depth of our presence represented by the introduction of new skus into existing national distribution points that will help drive our growth at the end of 2021, we expanded our total doors to over 14000 or total distribution points.

Sam Galletti: At the end of 2021, we expanded our total doors to over 14,000, our total distribution points to over 100,000. We view this as a significant accomplishment when considering we exited 2020 with just over 4,000 stores and 23,000 points of distribution.

Over 100000, we view this as a significant accomplishment when considering we exited 2020 with just over 4000 stores and 23000 points of distribution. We are continuing to pursue the significant organic growth opportunity and have a long term goal of having 30 frozen skus in.

Sam Galletti: We are continuing to pursue the significant organic growth opportunity and have a long-term goal of having 30 frozen SKUs in each retail location.

Each retail location.

Sam Galletti: The channel diversification and broadening distribution is manifesting itself in the consumption data as measured by SPIN's IRA.

The channel diversification and broadening distribution is manifesting itself in the consumption data as measured by spins IRI.

Sam Galletti: Tattooed Chef's year-to-date growth performance through 12-26-2021 in MULO is extremely encouraging. We are the fastest-growing health and wellness brand in the categories in which we compete, which include frozen appetizers and snacks, breakfast, lunch, and dinner.

<unk> year to date growth performance through 12, 26, 2021, and mobile is extremely encouraging we are the fastest growing health and wellness brand in the categories in which we compete which include frozen appetizers and snacks breakfast entrees and vegetables for example.

Sam Galletti: entrees and vegetables. For example, in frozen breakfasts, we grew retail dollars 496% and are the number one health and wellness brand as measured by spins and the fastest growing.

In frozen breakfast, we grew retail dollars, 496% and are the number one health and wellness brand as measured by spend and the fastest growing.

Sam Galletti: In the frozen entree category, Tattooed Chef is now number 7 ranked health and wellness brand and growing the fastest of the top 30 brands in the category. Frozen entrees is by far one of the largest categories in the aisle and we clearly have momentum and are taking market share.

In the frozen Entre category tattooed chef is now number seven ranked health and wellness brand and growing the fastest of the top 30 brands in the category frozen entrees is by far one of the largest categories in the aisle and we clearly have momentum and are taking market share.

Sam Galletti: We also view innovation through the lens of expanding product accessibility, which is why we are so enthusiastic about our upcoming entrance into ambient and refrigerated plant-based products to complement our growing position in the freezer aisle.

We also view innovation through the lens of expanding product accessibility, which is why we are so enthusiastic about our upcoming entrance into ambient and refrigerated plant based products to complement our growing position in the freezer aisle.

Sam Galletti: In that regard, I am pleased that the integration of the acquisitions we completed in 2021, Boots in New Mexico and Belmont Confections is proceeding on track and provides us with substantial capacity to introduce new products.

In that regard I am pleased that the integration of the acquisitions, we completed in 2021 foods in new Mexico, and Belmont Confections is proceeding on track and provides us with substantial capacity to introduce new products.

Sam Galletti: We believe that our investment thus far to upgrade the facilities, increase automation, will allow us to dramatically increase throughput and meet anticipated demand for these products. This will support our efforts to unlock greater shelf space and expand our channel penetration beyond retail and club.

We believe that our investment thus far to upgrade the facilities increased automation will allow us to dramatically increase throughput and meet anticipated demand for these products. This will support our efforts to unlock greater shelf space and expand our channel penetration beyond retail and club.

Sam Galletti: With respect to foods in New Mexico, the Karsten facility is scheduled to open during the beginning of the second quarter with an initial focus on manufacturing a variety of salty snacks.

With respect to foods in New Mexico. The Carson facility is scheduled to open during the beginning of the second quarter with an initial focus on manufacturing a variety of salty snacks, the Albuquerque facility, which produces Mexican foods, including case of DS Burritos and other handheld items and sauces has commenced manufacturing.

Sam Galletti: The Albuquerque facility, which produces Mexican foods, including quesadillas, burritos, and other handheld items and sauces, has commenced manufacturing Tattooed Chef-branded products. These products began shipping to Kroger earlier this month, and we expect further distribution throughout this year.

Tattooed chef branded products. These brought these products began shipping a kroger earlier this month and we begin and we expect further distribution throughout this year.

Sam Galletti: Belmont Confections, which we acquired in December 2021, has even more capacity, allows us to produce a variety of bars. We are currently co-packing out of that facility and will begin transitioning to Tattooed Chef branded bars beginning later this quarter. Our inaugural entry is a first of its kind brain fuel oat butter bar powered with adaptogens that help to reduce stress, promote mental balance, and provide long lasting focus.

Belmont Confections, which we acquired in December 2021, as even more capacity allows us to produce a variety of bars we.

We are currently co packing and out of that facility and will begin transitioning to tattooed shell branded bars. Beginning later this quarter. Our nonaccrual entry is a first of its kind break your own butter bar powered with adaptor genes that helped to reduce stress promote mental balance and provide long lasting focus this product was fees.

Sam Galletti: This product was featured at Expo West and samples were shown to attendees, including buyers at the show.

<unk> at Expo West and samples were shown to attendees, including buyers at the show we are expecting shipments to be ready during Q2, and I want to emphasize that our branded products will carry higher margins than our current co pack products.

Sam Galletti: We are expecting shipments to be ready during Q2, and I want to emphasize that our branded products will carry higher margins than our current COPAC products.

Sam Galletti: The addition of these facilities and associated capital project investments has increased our total manufacturing capacity to more than 315,000 square feet, a fourfold increase from 2020.

The addition of these facilities and associated capital project investments has increased our total manufacturing capacity to more than 315000 square feet, a four fold increase from 2020.

Sam Galletti: They're also expected to support up to an additional $300 million in annual revenue in the next two to three years.

There are also expected to support up to an additional $300 million in annual revenue in the next two to three years.

Sam Galletti: We are also investing in cold storage solutions to further strengthen our process and production to reduce associated costs.

We are also investing in cold storage solutions to further strengthen our process and production to reduce the associated cost we have contracted a lease for cold storage in April and expect to be in raw material storage in the coming weeks with full product storage and pickup opportunity. This is a beautiful turnkey facility.

Sam Galletti: We have contracted a lease for cold storage in April and expect to begin raw material storage in the coming weeks with full product storage and pickup opportunity. This is a beautiful turnkey facility. We estimate that these initiatives will produce an approximate 50% annualized cost savings as compared to using third-party storage units for the refrigerated and frozen goods.

We estimate that these initiatives will produce an approximate 50% annualized cost savings as compared to using third party storage units for the refrigerated and frozen goods as a point of reference in 2021, we spent more than $5 $8 million in cold storage.

Sam Galletti: As a point of reference, in 2021, we spent more than $5.8 million on cold storage.

Sam Galletti: Perhaps most importantly, we expanded our team of professionals to help support our growth this year and beyond. We welcomed Gaspar Varasi as Chief Operating Officer in late 2021 to lead our global operations and production, with a current emphasis on robotics and automation.

<unk>. Most importantly, we expanded our team of professionals to help support our growth this year and beyond we want gas fired veracity as chief operating officer in late 2021 to lead our global operations and production with a current emphasis on robotics and automation.

Sam Galletti: We have also added a Director of SEC Compliant and Technical Accounting.

We have also added a director of SEC compliance and technical accounting.

Director of Sox compliance Vice President of sales and support logistics and Vice presidents for all of the manufacturing facilities in the United States.

Sam Galletti: Vice President of Sales and Support Logistics, and Vice Presidents for all of the manufacturing facilities in the United States.

Sam Galletti: It's been an exciting and productive full year as a public company, and I want to thank each of you for your continued interest and support. We have accomplished a lot, and we have learned a lot. And although our story has many chapters to be written, I am confident that we are well positioned to achieve our objectives and deliver shareholder value.

It's been an exciting and productive full year as a public company and I want to thank each of you for your continued interest and support we have accomplished a lot and we have learned a lot and although our story has many chapters to be written.

That we are well positioned to achieve our objectives and deliver shareholder value.

Sam Galletti: I'd like to turn over the call to Sarah to discuss our innovations and marketing initiatives. Sarah?

I'd like to turn over the call to <unk> to discuss our innovations and marketing initiatives Sara.

Sarah Galletti: Thank you and good morning, everyone. As we proceed with our vision of creating a new food category, we are very excited to achieve continued diversification within our product portfolio over multiple categories and find new ways to expand our presence and our multidimensional brand.

Thank you and good morning, everyone. As we proceed with their vision of creating a new food category. We are very excited to achieve continued diversification within our product portfolio.

Over multiple categories and find new ways to expand our presence and our multi dimensional brand.

Sarah Galletti: We curate our product line with the overarching goal of creating better for you foods coupled with the familiar foods we know and love. We call it Nostalgic Innovation.

Our product line with the overarching goal of creating better for you foods, coupled with the familiar foods, we know and love we call it sounds like innovation.

Sarah Galletti: Through 2021, we added 40 new delicious and innovative creations, more than double the product introductions in 2020.

Through 2021, we added 40, new delicious and innovative creation more than double the product introductions in 2020.

Sarah Galletti: Looking at 2022, we have a pipeline of more than 250 new products, including the upcoming introduction of our refrigerated plant-based bars, a range of Mexican items, and wood-fired pizzas.

Looking at 2022, we have a pipeline of more than 250, new products, including the upcoming introduction of our refrigerated plant based bars, a range of Mexican items and wood fired pizza.

Sarah Galletti: We continue to see growing consumer interest in plant-based foods, and in the last year, our products have performed consistently well in the market. Within the single-serve plant-based frozen entree space, we hold six out of the top ten products.

We continue to see growing consumer interest in plant based foods and is in the last year, our products have performed consistently well in the market within the single serve plant based frozen entrees space, we hold six out of the top 10 products innovation has been a key growth driver for the tattooed chef brand, we nearly doubled the number of branded skus to seven.

Sarah Galletti: Innovation has been a key growth driver for the Tattoo Chef brand. We nearly doubled the number of branded SKUs to 73 and expanded from five product categories to seven.

Three and expanded from five product categories to seven.

Our marketing efforts ramped up later in the year and we continue to test and refine our playbook, making a concerted effort to diversify our media mix and appropriately allocate our spend to promotional efforts that align with our brand and our target customers, including Youtube Spotify General market network television and programmatic.

Sarah Galletti: Our marketing efforts ramped up later in the year, and we continue to test and refine our playbook, making a concerted effort to diversify our media mix and appropriately allocate our spend to promotional efforts that align with our brand and our target customers, including YouTube, Spotify, General Market Network TV, Programmatic Connected TV, as well as social channels such as Instagram, where consumers are highly engaged with our brand.

Connected TV as well as social channels, such as Instagram, where consumers are highly engaged with their brand.

Sarah Galletti: We focused our spend and tested them in various regions. They were strong performers, giving us a really effective return on ad spend and amplifying the growing organic reach that our social platforms and product packaging efforts create for the brand.

We focus our spend and tested in various regions. They were strong performers, giving us a really effective return on AD spend and amplifying the growing organic reach that or social platforms and product packaging efforts create for the brand.

Sarah Galletti: In Q4, we strategically shifted our social media aesthetic to present ourselves as an all-encompassing lifestyle brand.

In Q4, we strategically shifted our social media aesthetic to present ourselves as an all encompassing lifestyle brand.

Sarah Galletti: We're focused on showcasing real and authentic moments, whether that be of people enjoying our innovative plant-based foods or jamming out to our latest Taste the Jam Spotify playlists. Our main goal is to connect with our audience and in a way that is different from other brands, which means showing up differently on purpose. We believe that we are just scratching the surface.

We're focused on showcasing real and authentic moment, whether that be if people enjoying our innovative plant based foods are jamming out her latest piece to jam Spotify playlists. Our main goal is to connect with their audience and in a way that is different from other brands, which means showing up differently on purpose. We believe that we are just scratching the surface.

Sarah Galletti: As a leader in leveraging marketing tools, we are driving new consumers to our brand, to the freezer aisle, and to our retail partner stores. In 2022, you'll see us accelerating with our most aggressive marketing to date to build consumer awareness and engagement. This will allow us to expand our community and build loyalty to our TattooTiff brand and our evolving product line. With that, I will turn it over to Stephanie to review our financial results. Stephanie? Thanks, Sarah. Thanks, Sarah.

As a leader in leveraging marketing tools, we are driving new consumers to our brand to the freezer aisle and to our retail partner stores. In 2022, you will see us accelerating with their most aggressive marketing to date to build consumer awareness and engagement. This will allow us to expand our community and build loyalty to attack.

Chip brand and our evolving product line with that I will turn it over to Stephanie to review our financial results Stephanie.

Thanks, Sarah and good morning, everyone.

Stephanie Dykman: Revenue in the 2021 fourth quarter increased 32.2% to $52.3 million from $39.6 million in last year's fourth quarter.

Revenue in the 2021 fourth quarter increased 32, 2% to $52 3 million from $39 6 million in last year's fourth quarter. The increase was due primarily to 21, 7% rise in tattooed chef branded product revenue.

Stephanie Dykman: The increase was due primarily to a 21.7% rise in Tattooed Chef's branded product revenue to $29.2 million from $24 million in last year's fourth quarter. For the quarter, branded revenue accounted for 56% of total revenue compared to 61% in the comparable prior year period.

To $29 2 million from $24 million in last year's fourth quarter 40 quarter branded revenue accounted for 56% of total revenue compared to 61% in the comparable prior year period. During 2021, we began offering new promotional programs.

Stephanie Dykman: During 2021, we began offering new promotional programs on sales of Tattooed Chef branded products to some new and existing customers.

On sales of tattooed chef branded products to some new and existing customers.

Stephanie Dykman: As a result, as of year-end, we have accumulated an allowance from 2021 sales for promotional programs of $4.13 million.

As a result as of yearend, we had accumulated and allowance from 'twenty to 'twenty one sale for our promotional programs are for one $3 million.

Stephanie Dykman: Gross profit in the fourth quarter was $1.1 million, or 2.1% of revenue compared to $4.4 million, or 11.1% for the prior year period.

Gross profit in the fourth quarter was $1 1 million or two 1% of revenue compared to $4 4 million or 11, 1% for the prior year period.

Stephanie Dykman: Full year 2021 gross profit was $22.1 million or 10.4% of revenue as compared to full year 2020 gross profit of $21.7 million or 14.6% of revenue.

Full year 2021, gross profit was $22 1 million or 10, 4% of revenue as compared to full year 2020 gross profit of $21 7 million or 14, 6% of revenue the gross margin decline for full year 2021.

Stephanie Dykman: The gross margin decline for full year 2021 included the additional promotional allowance mentioned above and freight and container costs of $31.3 million compared to 2020 costs of $18.4 million, which is an increase of 70.5% or $13 million.

Included the additional promotional Laos mentioned above and freight and container costs of $31 3 million compared to 2020 cost of $18 4 million, which is an increase of 75% or $13 million.

Stephanie Dykman: Gross profit also reflected the impact of lower-margin, private-label, and co-packing products being produced at our recently acquired New Mexico and Belmont Confection facility.

Gross profit also reflected the impact of lower margin private label and co packing products being produced at our recently acquired New Mexico, and Belmont confection facilities, partially offset by higher revenues and improved production capacity, we expect that gross margin will be positively.

Stephanie Dykman: partially offset by higher revenues and improved production capacity.

Stephanie Dykman: We expect that gross margin will be positively impacted as we transition the acquisitions in both New Mexico and Ohio from private label co-manufacturers into manufacturing Tattooed Chef branded products.

<unk> as we transition the acquisitions in both new Mexico, and Ohio from private label co manufacturers into manufacturing tattooed chef branded product.

Stephanie Dykman: This, combined with the expansion of products into refrigerated and ambient space, will provide increased margins.

This combined with the expansion of products into refrigerated and ambient space will provide increased margins.

Stephanie Dykman: We will also be making investments in equipment for our frozen products of $20 million that will increase our production capacity, improve yields, decrease labor costs, and allow us to remain in our same manufacturing footprint.

We will also be making investments in equipment for our frozen products of $20 million that will increase our production capacity improve yields decreased labor cost and allow us to remain in our same manufacturing footprint.

Stephanie Dykman: Operating expenses decreased to $14.8 million in the fourth quarter of 2021 compared to $19 million in the prior year period. The decrease in operating expenses was primarily due to merger-related bonus, stock plus cash, approximately $13.6 million incurred in the fourth quarter of 2020, offset by the higher sales and marketing costs spent in 2021.

Operating expenses decreased to $14 8 million in the fourth quarter of 2021 compared to $19 million in the prior year period. The decrease in operating expenses was primarily due to merger related bonus stock plus cash approximately $13 6 million.

<unk> incurred in the fourth quarter of 2020 offset by the higher sales and marketing costs spent in 2021, which we view as important investments in our continuing growth as Sarah mentioned, we believe that these investments have helped drive revenues and establish the foundation.

Stephanie Dykman: which we view as important investments in our continuing growth.

Stephanie Dykman: As Sarah mentioned, we believe that these investments have helped drive revenue and establish the foundation of a recurring, loyal customer base to support our planned new product introductions this year.

And other recurring loyal customer base to support our planned new product introductions this year.

Stephanie Dykman: The loss before provision for income taxes was $13.5 million compared to Q4 2020 income.

The loss before provision for income taxes was $13 5 million compared to Q4 2020 income before provision for income taxes of $23 5 million in Q4 2020, the company recognized a nonrecurring gain of $37 2 million.

Stephanie Dykman: before provision for income taxes of $23.5 million.

Stephanie Dykman: In Q4 2020, the company recognized a non-recurring gain of $37.2 million on settlement of a contingent consideration derivative liability related to the holdback shares, which were remeasured with changes in fair value.

On settlement of a contingent consideration derivative liability related to the holdback shares which were re measured with changes in fair value.

Stephanie Dykman: Income tax benefit was $0.4 million compared to an income tax benefit of $42.1 million in Q4, 2020. The 2020 income tax benefit was resulted from the merger transaction that had step up in the tax basis of intangible assets and the change in tax status from an S corporation to a C corporation. With respect to 2022, we believe that income tax will be aligned with our operating results.

Income tax benefit was 0.4 million compared to an income tax benefit of $42 1 million. In Q4, 2020 2020 income tax benefit was resulted from the merger transaction that had step up in the tax basis of intangible assets and the change in tax status.

From an S Corporation to a C Corporation.

With respect to 2022, we believe that income tax will be aligned with our operating results.

Stephanie Dykman: Net loss for the quarter was $13.1 million compared to net income of $65.6 million in Q4 2020, which included the above referenced $42.1 million income tax benefit.

Net loss for the quarter was $13 1 million compared to net income of $65 6 million in Q4, 2020, which included the above referenced $42 1 million income tax benefit it.

Stephanie Dykman: Adjusted EBITDA loss was $11.4 million compared to adjusted EBITDA loss of $1.7 million in Q4 2020.

Adjusted EBITDA loss was $11 4 million compared to adjusted EBITDA loss of $1 7 million in Q4 2020, the quarter over quarter variance was due primarily to lower gross profit margins and higher sales and marketing expenses as we discussed earlier.

Stephanie Dykman: The quarter over quarter variance was due primarily to lower gross profit margins and higher sales and marketing expenses as we discussed earlier.

Stephanie Dykman: We continue to maintain a strong financial position. At December 31, 2021, cash and cash equivalents were $92.4 million, and long-term debt was $0.7 million. Net cash used in operating activities was $51.3 million for full year 2021, compared to net cash used in operating activities of $13.4 million last year.

We continue to maintain a strong financial position at December 31, 2021, cash and cash equivalents were $92 4 million and long term debt was 0.7 million <unk>.

Net cash used in operating activities was $51 3 million for full year 2021, compared to net cash used in operating activities of $13 4 million last year.

Stephanie Dykman: which included $4.3 million increase in accounts receivable resulting from increased revenue, a $10.7 million increase in inventory, a $2.1 million increase in prepaid expenses, mainly due to the increase in prepaid advertising expenses, and a $4.6 million decrease in accounts payable, accrued expenses, and other current liabilities.

Which included $4 3 million increase in accounts receivable, resulting from increased revenue.

$10 7 million increase in inventory, a $2 1 million increase in prepaid expenses, mainly due to the increase in prepaid advertising expenses and a $4 6 million decrease in accounts payable accrued expenses and other current liabilities capital expenditures.

Stephanie Dykman: Capital expenditures increased to $63.8 million from $7 million last year, and primarily reflected that we used $16.9 million to purchase property, plants, and equipment to enhance our production processes and efficiencies, as well as $46.9 million to complete the two strategic business acquisitions in 2021.

Increased to $63 8 million from 7 million last year, and primarily reflected that we used $16 9 million to purchase property plant and equipment to enhance our production processes and efficiencies as well as $46 9 million to complete the two strategic business.

<unk> in 2021.

Stephanie Dykman: Turning to our outlook for 2022, it is important to understand that we are continuing to operate in a challenging inflationary environment, which is most evident in our freight and container costs, which are incorporated in our cost of goods sold, while managing through certain supply chain constraints.

Turning to our outlook for 2022. It is important to understand that we are continuing to operate in a challenging inflationary environment, which is most evident in our freight and container costs, which are incorporated in our cost of goods sold while managing through certain supply chain constraints.

Stephanie Dykman: With that in mind, we expect 2022 annual revenue of $280 to $285 million, driven by a combination of new product introduction and a significant increase in retail distribution via new relationships and further penetration of existing accounts compared to 2021, supported by capacity acquired in 2021.

With that in mind, we expect 2020 to annual revenue of $280 million to $285 million driven by a combination of new product introductions and a significant increase in retail distribution via new relationships and further penetration of existing accounts compared to 2020.

One supported by capacity acquired in 2021 with respect to the cadence of this growth we expect that the first quarter of 2022 will benefit from $6 million to $8 million of advertising in relation to Indian sales that are not likely to recur later in 2022 this increases.

Stephanie Dykman: With respect to the cadence of this growth, we expect that the first quarter of 2022 will benefit from $6 to $8 million of advertising in relation to MVM sales that are not likely to recur later in 2022. This increase assumes no material deterioration in general market condition or other factors related to COVID-19 trends.

Seems no material deterioration in general market condition or other factors related to COVID-19 trends Marvy game marketing expenses for 2022 are expected to be 27% to $32 million, we anticipate capital expenditures of $20 million with investments to include additional.

Stephanie Dykman: Marketing expenses for 2022 are expected to be $27 to $32 million. We anticipate capital expenditures of $20 million with investments to include additional automation machinery as well as robotics. This will decrease labor, improve yield, and increase capacity and throughput in the same manufacturing footprint.

Machinery as well as robotics, this will decrease labor improve yield and increase capacity and throughput in the same manufacturing footprint.

Speaker Change: Thank you all for your attention, and I'll turn the conversation back to Sam.

Thank you all for your attention and I'll turn the conversation back to Sam.

Mhm Q&A now.

And we ran well open up the call for Q&A right.

Sam Galletti: If you would like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue.

If you would like to ask a question. Please press star one on your telephone keypad, a confirmation tone will indicate your line is in the question queue.

Sam Galletti: You may press star 2 if you would like to remove your question from the queue. And for participants using speaker equipment, it may be necessary to pick up your handset before pressing the star 2.

You May press Star two if you will.

Like to remove your question from the queue and for participants using speaker equipment. It may be necessary to pick up your handset before pressing the star keys. Our first question is from Brian Holland with Cowen and company. Please proceed.

Speaker Change: Our first question is from Brian Holland with Cowan and Company.

Brian Holland: Yeah, thanks. Good morning, everyone. If I could start with just thinking about that 2022 revenue guide.

Yeah. Thanks, good morning, everyone.

Could start with just thinking about that 2022 revenue guide.

Brian Holland: Obviously, you exit the year at about a $200 million run rate. You're guided to 80. Revenues have been fairly range-bound throughout the year. I know there's a lot of distribution gains coming.

Obviously, you exit the year at about a 200 million dollar run rate of your guidance to 80 revenue has it been fairly range bound throughout the year I know, there's a lot of distribution gains coming in in the rearview as well, but you picked up.

Brian Holland: in the rear view as well that you picked up. Just thinking about the cadence of the year on the top line, when do we expect to see that inflection toward the run rate that would point closer to that 280 or so rate?

Just thinking about the cadence of the year on the topline when do we expect to see that inflection towards the run rate that would point closer to that 280 or so range.

Brian Holland: As we stated, Q1 will be higher in revenue based on the MVMs that we have already set up for the first quarter. You'll start to see that run rate in Q2 and Q3.

As we stated Q1 will be higher in revenue based on the N V and that we have already set up for the first quarter, you'll start to see that run rate in Q2 and Q3.

Brian Holland: And it's really us having all of that retail business throughout the entire year. Remember that a lot of the stores that came in were in Q3 and Q4. And so we'll continue to see that. Matt, do you want to add anything to that?

And it's really us having all of that retail business throughout the entire year remember that a lot of the stores that came in were in Q3 and Q4 and so we'll continue to see that Matt do you want to add anything to that no.

Matt Williams: No, I would agree with that. I think that, you know, obviously, Brian , the new distribution kind of started coming into effect, obviously, in the 3rd and 4th quarter of 2021 and so.

I would agree with that I think that obviously Brian .

The new distribution kind of started coming into effect, obviously in the third and fourth quarter of.

2021, and so what I would let Stephanie said, you'll see that run rate clearly in Q3 and Q4 not only with the overlap that we're going to get from the new business that came on in 2021, but also those new games that we're starting to see as customers are resetting with the commitments we've got.

Speaker Change: What I would, you know, like Stephanie said, you'll see that run rate clearly in Q3 and Q4 not only with the overlap that we're going to get from the new business that came on in 2021, but also those new gains that we're starting to see as customers are resetting with the commitments we've gotten so far this year.

So far this year.

Speaker Change: And just to clarify, so we've got the commitments in 2021, but the sales don't hit until 2022. Is that the way to think about this?

And just to clarify so we got the commitments in 2021, but the sales don't hit until 2022 is that the way to think about this.

Speaker Change: Yeah, yes. And, you know, usually a lot of early, you know, end of Q3 or end of Q4, start of Q1, resets are happening now, and you'll start to see that product shipping in Q1, Q2 for the Q3, Q4, you'll start to see the full revenue benefit of that.

Yes, yes and no.

Usually a lot of early end of Q3 end of Q4 startup Q1 resets are happening now and you'll start to see that product shipping.

In Q1 Q2 for the Q3 Q4 Youll start to see the full <unk>.

Revenue benefit of that.

Speaker Change: Okay, understood. And then if I just move down to the gross margin, so it seems like if my math is right, based on the promotional allowance, I believe, Stephanie, that was about an 800 fifths gross margin hit.

Okay understood and then if I could.

Moved down to the gross margin. So it seems like if my math is right based on the promotional allowance I believe Stephanie that was about 800 bps gross margin hit.

Speaker Change: But that is one time, so that's not a factor as we look at the 2022, like that gross margin should snap back. Did I hear that right?

Okay.

That is one time, so that's not a factor as we look at the.

2022.

Gross margin should snap back at that.

Did I hear that right.

Speaker Change: We'll see SNAP back. What happens when you first build that accrual is you take that hit up front for the promotional allowances, and then you're looking at differences between it and promotional spend that we're seeing. We happen to know that there were sales that occurred in Q4, that the promotions were moved earlier into Q1, 2022. And so we wanted to make sure that we had that fully accrued for. We will continue to promote the brand in a way that is healthy.

We will see snap back what happens when you first built out accrual is you take that hit upfront for the promotional allowances and then youre looking at differences between it and promotional spend that we're seeing we happen to know that there were sales that occurred in Q4 that the promotions were moved earlier into Q1 2022.

And so we wanted to make sure that we had that fully accrued for we will continue to promote the brand in a way that is healthy and.

Speaker Change: competitive, but that is certainly higher than we expect it to be for Q1 2022 and into 2022.

Competitive.

But that is certainly higher than we expect it to be for Q1 2022 and into 2022.

Speaker Change: understood. And then I guess last one for me, and I'll pass it on, is just thinking about

Understood and then I guess.

Last one for me and I'll pass it on is just speaking about.

Speaker Change: your balance sheet position and capital needs. You've got 90 million of cash. You've given the gross margin guidance. We know what the marketing spend is gonna be. So you got 30 million of marketing. You got 20 million of CapEx.

Your your your balance sheet position and capital needs.

You've got $90 million of cash.

You got it.

You you've given the gross margin guidance, we know what the marketing spend is going to be so you've got $30 million of marketing you've got $20 million of Capex. There is obviously other operating expenses there and then.

Speaker Change: There are obviously other operating expenses there, and then whatever the working capital dynamics might be. Just help us think about your position there.

Whatever the working capital dynamics might be just help us think about sort of your position there.

The likelihood and the Optionality you have one.

Speaker Change: the likelihood and the optionality you have on needs for capital and sources of capital over the next 12 months.

Our needs for capital and sources of capital over the next 12 months.

Speaker Change: So one of the nice things and fortunate things that we did last year is we utilized cash to fund the acquisition. And so the cash burn looks incredibly high for 2021. Whereas when we roll into 2022, we don't have any real debt on the balance sheet. I believe that there's 0.7 million. And so we have the opportunity to finance.

So one of the nice things and fortunate things that we did last year as we utilized cash to fund the acquisition and so the Casper looks incredibly high for 2021, whereas when we roll into 2022, we don't have any real debt on the balance sheet I believe that there is zero point $7 million and so we.

We have the opportunity to finance the equipment and that's what we're looking into right now while interest rates are still low we believe that we have enough cash at this moment in time in order to make it for the next couple of years, even with the inflationary pressures that we're facing today on top of that we expect to.

Speaker Change: the equipment and that's what we're looking into right now while interest rates are still low. We believe that we have enough cash at this moment in time in order to make it for the next couple of years even with the inflationary pressures that we're facing today. On top of that we expect to start seeing profitability in the back half of 2023 and obviously that certainly helps with cash. Okay, thanks. I'll leave it.

You start seeing profitability in the back half of 2023, and obviously that certainly helps with cash.

Okay. Thanks, I'll leave it there I appreciate the color best of luck.

Thank you Brian .

Speaker Change: Our next question is from Rob Dickerson with Jeffries. Please proceed.

Our next question is from Rob Dickerson with Jefferies. Please proceed.

Yeah.

Got it great. Thanks, so much.

Rob Dickerson: I just had a question, I guess, kind of on operating expenses slash, you know, the step up in the marketing expectation for the year. You know, I guess, you know, kind of, if we go back.

Sort of a question.

I guess kind of a one off.

Operating expenses were you know.

Do you step up in the marketing expectation for the year.

I guess you know.

If we go back.

Rob Dickerson: of 2020, right, and we think about, you know, kind of where we thought the business could be, let's say in 22 or 23, right, that's changed for a number of different reasons.

For 2020, right. Then we should think about you know kind of what where we thought the business could be let's say in 'twenty, two or 'twenty three right that's changed for a number of different reasons.

Hum.

Rob Dickerson: That said, you know, SG&A is obviously increasing at a kind of much faster rate than I think we would have expected and, you know, faster than we're seeing fail.

That said you know SG&A is obviously, increasing at a much faster rate than I think we would've expected and.

Faster than we're seeing sales.

Speaker Change: So, I'm just curious, you know, as you kind of thought through the budget for 22, you know, do you just basically say, look, it's very, or it's essentially imperative for us

So I'm just curious.

You kind of thought through the budget for 'twenty two.

Do you just basically say look it's very it where it's essentially imperative for us.

Speaker Change: you know, to be supporting the brand, especially the new innovation, to make sure that we're getting the velocity. So we need to continue to lean in to take those expenses up higher relative to sales growth, which is obviously putting more pressure on your margin outside of anything that's happening in COGS. Just kind of curious as to, and I'm asking, you know, too, because,

To be supporting the brand, especially in the new innovation.

To make sure that we're getting the velocity. So we need to continue to lean in to take those expenses up higher relative to sales growth, which is obviously, putting more pressure on your margin outside of anything that's happening in Cogs, just kind of curious as to.

Yeah.

I'm asking too because.

Speaker Change: You know, I mean, if we think about kind of what the implied margin is probably for 20.

I mean, if we think about kind of what the implied EBITDA margin is probably for 22 relative to what we thought it would have been two years ago.

Speaker Change: relative to what we thought it would have been two years ago, it's obviously much lower.

It's obviously much lower.

Speaker Change: but it's not just because of COGS, it's actually because of a much faster rate in SG&A spend.

But it's not just because of Cogs, it's obviously because of a much faster rate in SG&A expense.

My first question. Thanks.

Speaker Change: So I think that part of what we've seen in the increase of SG&A has also been the build and infrastructure. One of the bigger hires that Sam discussed earlier in the call is we hired a chief operating officer.

So I think that part of what we've seen in the increase of SG&A has also been the building infrastructure.

One of the bigger hires that Sam discussed earlier in the call is we hired a chief operating officer and as you might recall. It is one of those things that I was pulling double duty there for awhile and we understand the need to have me focused in one place and have somebody focused on operations.

Speaker Change: And as you might recall, it is one of those things that I was pulling double duty there for a while, and we understand the need to have me focused in one place and have somebody focused on operations.

Speaker Change: without that overlap so that we can continue to run this business as we grow. We've also made several additions to the infrastructure within, not just for what we need last year, but really looking forward to the staffing needs.

Without that overlap so that we can continue to run this business as we grow. We've also made several additions to the infrastructure within not just for what we need last year, but really looking forward to the staffing needs for our growth in 2022, and 2023 and ensuring that we had time to pick the correct candidates.

Speaker Change: for our growth in 2022 and 2023, and ensuring that we had time to pick the correct candidates, have them trained, have them understand the way that Tattooed Chef works, rather than coming in too late for those items, like SOX compliance that is going to be incredibly important to us in 2022 with the growth in accounting, and the need, honestly, just to step up that department.

Have them trained have them understand the way that tattooed chef works rather than coming in too late for those items like Sox compliance that is going to be incredibly important to us in 2022 with.

With the growth in accounting.

And the need honestly just to step up that department.

Speaker Change: We'll continue to spend on marketing and advertising because it's important to the brand and even our budget where it's going to be out for 2022 we don't feel is.

We'll continue to spend on marketing and advertising because it's important to the brand.

And even our budget, where it's going to be out for 2022, we don't feel is.

Speaker Change: near where some of our competitors are, and we feel that it's important that Tattooed Chef become a household name today rather than waiting until inflation resides or issues throughout the world resolve themselves.

Near where some of our competitors are and we feel that it's important that tattooed chef become a household name today, rather than waiting until inflation resides or you know issues throughout the world resolve themselves.

Speaker Change: Okay, fair enough for that. I guess it sounds like then from here as we get to 22, kind of that, you know, incremental rate.

Okay fair enough, but the I guess it sounds like then from here as we get through 'twenty two.

That incremental rate.

Speaker Change: of spending SG&A starts to kind of balance out, right? That starts to normalize from here. And then that's where you get the incremental operating leverage and kind of back half profitability in 23. Is that fair?

Spend in SG&A starts to kind of balance out right as it starts to normalize from here and then that's where you get incremental operating leverage and kind of back half profitability in 'twenty three is that fair.

Speaker Change: Yes, hey Rob, this is Sam. I think also as far as the mark, the marketing span, you know,

Yes, Hey, Rob this is Sam.

Also as far as the Mark the marketing spend.

One thing that.

Sam Galletti: You know, when we first started a year ago, one thing was the people looked at is they wanted to get more comfortable with the brand diversification because we were concentrated in club and club could be, you know, you know, it's club, it's a different world than traditional conventional retail. What what people wanted from us is they wanted us to get that distribution into conventional retail and conventional retail.

When we first started a year ago. One thing was that people looked at is they wanted to get more comfortable with the brand diversification because we were concentrated in club and club could be you know.

Is club, it's a different world than traditional.

Traditional conventional retail.

What what people wanted from us as they wanted us to get that distribution into conventional retail and conventional retail cost a lot of money you know like we built the brand in club and you can do it pretty with pretty not.

Sam Galletti: cost a lot of money. You know, like we built the branding club and you could do it pretty, with a pretty, not aggressive marketing spend. But once you get into this conventional retail world with this national distribution, it takes a lot of money, but it is really where the value comes in once you start getting that distribution and that, you know,

Not not aggressive marketing spend but once you get into this conventional retail world with this national distribution. It takes a lot of money, but it's is it is really where the value comes in once you start getting that distribution and that.

That all over the country that we have now so.

Sam Galletti: all over the country that we have now. So, you know, it is a big span as far as I'm concerned, but it's exactly what we needed to do to really build this brand for long term.

It is a big spend as far as I'm concerned, but it's exactly what we needed to do to really build this brand for long term.

Sam Galletti: for long-term growth opportunities, and it's happening.

For a long term.

Growth opportunities and it's happening and that's what and that's what people wanted us to do and that's what we did in 2020 'twenty. One we got into almost $15 over 14000 supermarket chains with <unk> brand, it's happening and it's repeat business and it's exactly what the goal is.

Sam Galletti: And that's what people wanted us to do, and that's what we did in 2020-21. We got into almost 15,000, over 14,000 supermarket chains with Tattooed Chef brand. It's happening. And it's repeat business, and it's exactly what the goal is.

Speaker Change: Okay, Rob, this is Rob. This is Matt to just, you know, we had no insights department, right? We had nobody doing, you know, insights to, to help to support the relationships that we've established with.

Okay Fair and then Rob This is Rob this is Matt to Josh.

We had no insights department right, we had nobody doing insights too.

To help to support the relationships that we've established with.

Matt Williams: you know, key retailers like Target and Kroger and, you know, obviously, Albertsons Safeway, even Walmart for that matter. And so as you as you evolve the business, we we know that to support the long term longevity of our existing business and, you know, how we are managing our velocities and our promotional spend, we needed to invest in an insights department and data. Right. So, you know, we've.

Key retailers like target and Kroger.

Obviously, albertsons Safeway, even more for that matter and so as you as you evolve the business.

We know that to support the long term longevity of our existing business and how we are managing our velocities in our promotional spend.

We needed to invest in and insights department and data right. So we've.

Matt Williams: We've got more robust contracts than we had at even the start of the year with Spins. We've had to invest in Insights contracts with Kroger at a level that are different than probably what we expected at the start of the year because our business is growing with them and there's expectations.

Got more robust contracts than we had at the start of the year with spins we've had to invest in <unk>.

Insights contracts with with Kroger at a level that are different than probably what we expected at the start of the year because our business is growing with them and there's expectations on their side to partner with them to drive insights as a.

Matt Williams: their side to partner with them to drive insights as a as an up-and-coming brand partner. So you know those are I think those things are in place now we're going to be able to leverage that insight and that information to continue to grow but I don't see kind of further needs for that in the future as we continue to shift this mix towards traditional grocery business.

As an up and coming a brand partner so it.

Those are I think those things are in place now we're going to be able to leverage that insight and that information to continue to grow but I don't see kind of further needs for that in the future as we continue to shift this mix towards traditional grocery business.

Speaker Change: Okay. That's all extremely helpful. I really appreciate it. And then just quickly, I think Mr. Holland asked the question. I just didn't, and my apologies, I didn't really fully get it. Just in terms of the cadence of the year, right? I mean, it kind of sounds like what you're saying is...

Okay. Yeah. That's all extremely helpful really appreciate it and then just quickly I think Mr. Holland.

Question.

I just didn't.

Apologies I didn't really fully get it. So it's kind of ask again just in terms of the cadence of the year right I mean, it kind of sounds like what you're saying is.

Speaker Change: You're still in some promotional flyers, let's say, maybe on the club side in Q1 and that should help.

You still had some promotional flyers, let's say maybe on the club side in Q1 and that should help lift revenues a little bit if we.

Speaker Change: revenues a little bit if we, you know, think about, you know, sales, you know, versus Q4. And then as you get some of the new distribution shelf receipts in Q2, Q3, it steps up further from Q1. That's the first question. And then just anything in terms of cadence on the gross margin side, given kind of where Q4 came in. And that's it. Thanks so much.

Think about sales versus Q4.

And then as you get some of the new distribution shelf resets in Q2 Q3, it steps up further from Q1.

First question and then just anything in terms of cadence on the gross margin side, given kind of where Q Fortunately.

Thanks, so much.

Speaker Change: So we expect to see increased gross margin, obviously, from Q4 into Q1 2022. And then I believe that we will start to pick up throughout the year. I think where we will start to see the effects of automation will really be Q3 and more so in Q4. The automation doesn't occur within a facility all at one time. It's a very planned.

So we expect to see increased gross margin obviously from Q4 into Q1 2022, and then I believe that we will start to pick up throughout the year I think where we will start to see the effects of automation will really be Q3 and more so in Q4, the automation doesn't occur with any facility all at one.

On time, it's a very planned procedure in Paramount we have five different production lines and obviously, we would need to go through line by line in order to continue manufacturing.

Speaker Change: Procedure in paramount. We have five different production lines And obviously we would need to go through line by line in order to continue manufacturing

Speaker Change: and continue to make sure that we have products on the shelf.

And continue to make sure that we have products on the shelf.

Speaker Change: Okay, fair enough. Yeah, yeah, and then on the quarterly revenue cadence again, I mean, you know, we still have.

Okay Fair enough and then.

Yeah, Yeah, sorry, and then on a quarterly revenue cadence again, I mean, we still have this disparity of these promotional activities that we have in Q1 and Q2 that will be hitting.

Speaker Change: this disparity of these promotional activities that we have in Q1 and Q2 that will be hitting, you know, obviously with the club channel. I think that what Rob was asking is when do we expect to see the run rate of more of a normalized business to get to that 280, to the guidance in revenue, and that will start to happen in Q3 and Q4 because of the diversification of the business moving more towards.

Obviously with the club channel I think that what Rob was asking is when do we expect to see the run rate.

More of a normalized business to get to that $2 80 to the guidance in revenue and that will start to happen in Q3, and Q4 because of the diversification of the business moving more towards grocery and food and away from club.

Speaker Change: grocery and food and away from the club. OK, sorry about that.

Okay, sorry about that thank you so much appreciate it.

Thank you.

Speaker Change: Our next question is from George Kelly with Roth Capital. Please proceed.

Our next question is from George Kelly with Roth Capital. Please proceed.

Good morning, everybody.

George Kelly: So two questions, two questions for me. First, another question on the revenue guidance for 2022. Curious if you could talk about the ramp with these newly acquired facilities and can you quantify the amount of revenue that you expect to come from them as part of your 2022 guidance?

So two questions two questions for me first another question on the revenue guidance for 2022.

Curious if you could talk about the ramp.

With these newly acquired facilities and can you quantify it.

The amount of revenue that you expect to come from them.

Part of your 2022 guidance.

Speaker Change: So let's talk first about New Mexico. New Mexico has started to ship products under the Tattooed Chef brand. And the products are actually on the shelf in Kroger today. And there were a few burritos that were taken and handheld. And we expect to see that continued growth out of New Mexico. And you'll probably really see that hit the market. Matt, when do you think that'll be?

So, let's let's talk first about new Mexico, New Mexico has started to ship products under the catchy chef brand and the products are actually on the shelf in Kroger today.

And there were a few brito that were taken in handhelds and we expect to see that continued growth out of new Mexico, and Youll, probably really see that hit the market and that when do you think that'll be.

Matt Williams: Most likely, I mean, it'll happen in March and April . I mean, April and May will be the majority of the new products hitting.

Most likely it will happen.

March and April I mean April and May will be the majority of the new products hitting.

Matt Williams: In the existing customers, correct? Yes, correct. And then, as we've talked about bars, the bars were shown to everybody at Expo West, which included buyers and various people in the industries, and so we're expecting Belmont or the Ohio facility to really be looking at Q3.

And then in the existing customer Thats correct, and then as we've talked about bars. The bars were show and to everybody at Expo West, which included buyers and various people in the industry and so we're expecting our.

Belmont or the Ohio facility to really be looking at Q3 based on timing and resets and things like that the facility is ready to go. It's just a matter of getting the orders and Matt and his team are working very hard on that we'll continue to see that expanded growth throughout the year and I think that it's really a matter of.

Matt Williams: based on timing and resets and things like that. The facility is ready to go. It's just a matter of getting the orders and Matt and his team.

Matt Williams: are working very hard on that. We'll continue to see that expanded growth throughout the year.

Matt Williams: And I think that it's really a matter of, as Matt has said, Q3 and Q4 to really see that start to drive home out of those facilities, as far as guidance on the new facilities.

As matter of fact, Q3, and Q4 to really see that start to drive home out of those facilities as far as guidance on the new facilities. We know what the revenue can be out of those facilities in new Mexico Youre looking anywhere between 200 to 250 million based on capacity, Ohio has a lot of capacity and we're looking at.

Matt Williams: We know what the revenue can be out of those facilities. In New Mexico, you're looking anywhere between.

Matt Williams: 200 to 250 million based on capacity. Ohio has a lot of capacity. And we're looking at probably, I don't know, somewhere in the range of 100 to 150 million, but we don't expect that for the next.

Probably I don't know somewhere in the range of $100 million to $150 million, but we don't expect that for the next.

Matt Williams: two years. This will be the beginning of it and as timing phases in and distribution for grocery retailers still faces some challenges. We'll provide more guidance on that probably when we report Q1 earnings.

Two years this will be the beginning of it and as timing phases in and distribution for grocery retailers still faces. Some challenges, we'll provide more guidance on that probably when we report Q1 earnings.

Speaker Change: Okay, that's helpful. And then last question for me. The 20 million that you're spending to automate some of your facilities.

Okay. That's helpful. And then last question for me.

The $20 million that you're spending to automate some of your facilities.

Speaker Change: Does that get everything now kind of up to date and where you want it to be or do you anticipate there being additional investments to bring that automation to maybe Belmont or New Mexico next year?

Does that get everything now kind of up to date, and where you want it to be or do you anticipate there being additional investments to bring bring that automation to maybe belmont or new Mexico.

Next year and then.

Speaker Change: Secondarily, on the same topic, what's the ROI? How do you think about that 20 million bucks?

Secondarily on the same topic.

What's the ROI, how do you think about that 20 million bucks in like Oh.

Speaker Change: As all that automation is fully implemented, what kind of gross margin pickup should you see?

Is that Oh that automation is kind of fully implemented what kind of gross margin pickup should you see.

And that's all I had thank you.

Speaker Change: Thank you, George. We look at the 20 million capital expenditures to really bring the existing facilities and the new acquisitions up to speed. There will always be some expense in CapEx, but I don't consider it to be significant in coming years for those facilities. With the increases and what we're looking at is it's again.

Thank you George we look at the $20 million capital expenditures to really bring the existing facilities and the new acquisitions up to speed there will always be some expensing capex, but I don't consider it to be significant in coming years for those facilities.

With the increases and what we're looking at is it's again.

Speaker Change: all about production capacity. And so on a burrito line, you could turn around and have

All about production capacity and so on a burrito line you could turn around and have cut down approximately six to eight people from the line and produce twice as many burritos as you produce today and so when you're talking about increases you're talking about fixed overhead and semi variable overhead going.

Speaker Change: cut down probably six to eight people from the line and produce twice as many burritos as you produce today. And so when you're talking about increases, you're talking about fixed overhead and semi-variable overhead going over a greater number of products per shift and per day. And so the increases can be substantial. We expect long-term gross margins, remembering how we account for finished good freight above the line and in our cost.

Over a greater number of products per shift and per day and so the increases can be substantial we expect long term gross margins remembering how we account for finished good freight above the line and in our cost of goods sold to really be in the 25% to 30% range, but that also.

Speaker Change: to really be in the 25 to 30% range, but that also includes some diversification into the other areas, such as refrigerated and ambient.

So include some diversification into the other areas such as refrigerated and ambient.

Understood. Thank you.

Speaker Change: We have reached the end of our question and answer session. I would like to turn the call back over to management for closing.

We have reached the end of our question and answer session I would like to turn the call back over to management for closing comments.

Management: Thank you for your participation today. 2021 was a milestone year for our company, and we are very excited about our future.

Thank you for your participation today 2021 was a milestone year for our company and we are very excited about our future on behalf of all of US are tattooed chef I. Thank you for your continued interest and support have a great day.

Speaker Change: On behalf of all of us at Tattooed Chef, I thank you for your continued interest and support. Have a great day.

Speaker Change: Thank you, this does conclude today's conference. You may disconnect your lights at this time and thank you for your participation. You may now disconnect your lights. You may now disconnect your lights. You may now disconnect your lights. You may now disconnect your lights. You may now disconnect your lights.

Thank you. This does conclude today's conference you may disconnect. Your lines at this time and thank you for your participation.

Okay.

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