Thank you for standing by. This is the conference operator. Welcome to the Stryve Foods, Inc. Third Quarter 2021 Earnings Call. As a reminder, all participants are in listen-only mode, and the conference is being recorded. After the presentation, there will be an opportunity to ask questions. To join the question queue, you may press star then one on your telephone keypad. Should you need assistance during the conference call, you may signal an operator by pressing star and zero. I would now like to turn the conference over to Austin Ke, General Counsel. Please go ahead.
Thank you, operator, and thank you all for joining us. With me today are Stryve Foods Chief Executive Officer and Co-founder, Joe Oblas, and Chief Operating Officer and Chief Financial Officer, Alex Hawkins. Before we begin, I would like to remind everyone that part of our discussion today will include forward-looking statements, which are based on our current expectations of future performance. Our actual results could differ substantially from these expectations. These statements are not guarantees of future performance, and therefore, undue reliance should not be placed upon them. We do not undertake to update these forward-looking statements at a later date. We refer you to today's earnings press release and the SEC filings filed by Stryve Foods, Inc. for a more detailed discussion of the risks that could impact future operating results and financial condition.
In addition, today's call will also include a discussion of non-GAAP financial measures such as EBITDA. Non-GAAP financial measures should be considered as a supplement to, and not a substitute for, GAAP financial measures such as net income. We refer you to the reconciliation of the non-GAAP measures to the nearest GAAP measure included in today's earnings press release for further detail. I would now like to turn the call over to Stryve Foods Chief Executive Officer and Co-founder, Joe Oblas.
Thank you, Austin, and good afternoon, everyone. Our strong top-line growth demonstrates that we are continuing to make great progress in helping Americans snack better, eat better, so they can live happier, healthier lives. During the third quarter, net sales more than doubled compared to last year as we realized significant increases across all of our sales channels. This was particularly true in wholesale, where we have added thousands of additional doors to our retail footprint over the past year, and in doing so, have been able to introduce our better for you air-dried meat snacks to thousands of new customers. As Alex will explain later in greater detail, we held our gross margin steady versus the year ago quarter. We view this favorably considering the significant cost pressures the entire economy is facing because of both labor and commodity cost increases.
In addition to these very pronounced headwinds, we deliberately invested heavily in our products to increase our retailer penetration by continuing to build awareness, driving trial, and supporting repeat purchases. Through the first nine months of 2021, our gross profit margin was 40.9%, which is more than 500 basis points higher than the same period last year. We believe our gross margin remains among the highest in the healthy snacking space, and we look forward to maintaining our margin outperformance as we continue realizing the advantages of scale. We have accomplished this without taking price on our customers. In terms of the rest of our P&L, there were non-recurring costs during the quarter indirectly related to the business combination, as well as additional costs relative to last year's third quarter as we transitioned to public company status and invested in talent ahead of growth.
This impacted our EBITDA and net loss, which both grew on a quarter-over-quarter basis. That said, let me be clear that we are very pleased and optimistic by the trajectory of our business. We see great opportunity ahead of us as we drive market share growth in the snacking category while effectively managing through considerable cost headwinds affecting all CPG companies. We believe that our momentum has now reached an inflection point where retailer adoption and our strong in-store performance should lead to significant growth over the next several quarters. I would now like to provide an update on our expanding retail footprint. Please recall that by the end of June, our products were available in more than 25,000 retail doors. During the third quarter, we added over 4,000 net new locations, including a significant expansion within Circle K.
We also previously announced that we'll be going into approximately 2,600 Speedway convenience locations in early 2022. Further, we have been awarded additional expansion within 7-Eleven that will also take place in early 2022. This is impactful as continued expansions are a great indicator regarding the health of a brand. Recent expansion wins already secured in the fourth quarter have included a significant expansion in both store and SKUs in Walmart, along with another new region within Costco. Costco is proving to be a fantastic partner for us, and as we are consistently exceeding our own expectations of unit sales per week per store. We will also be participating in one of their multi-vendor mailers next year with on-shelf placement in all regions, which should expand brand awareness and drive significant incremental sales.
Having national distribution with Costco is a huge achievement for the brand, and we understand that it is only awarded to those that perform at a very high level within their regional footprints. Retail velocity is an important indicator of the health and vitality of a brand, as it informs you how much of a product is sold per store per week in a given channel. We believe that it's a key driving factor in a buyer's decision for increased store counts, SKUs, and additional placements. With that in mind, let me give you an update on this metric. Overall, based on the most recent SPINS and IRI data for the convenience channel, our units per store per week were up 146% versus the same period last year. The retail sales of our products are up 229% year-over-year.
This underscores the argument that we are the fastest-growing major meat snack brand in America within the convenience channel, with additional strong growth within natural and MULO. Let's now do a deeper dive on Vacadillos, our newest brand that features Carne Seca. As you may recall, this brand targets the rapidly growing Hispanic community, but also has great crossover appeal because of its amazing taste and texture. We are seeing strong momentum and velocities with the brand overall, especially within the convenience channel. We are excited to announce that we plan to add sticks to the Vacadillos product line in 2022, possibly as soon as the second quarter, which we believe should be very well received by our retailers in the marketplace. Sticks currently represent about half the market opportunity in meat snacks and are particularly popular in the convenience channel.
We will also be looking to add Stryve Slabs to our retail assortment next year. This is already a tremendously popular product purchased through e-commerce, representing about half of our sales through this channel, and we are optimistic that Slabs will continue to drive significant incremental growth for us for 2022. The launch of Slabs to retail provides us with an opportunity to generate revenues in additional locations within the retail environment as they are intended to be slotted in the charcuterie sections and not with the traditional jerky products. Slabs are also a high-margin product that should be accretive to our long-term margin profile as they have a lower production cost on a per-ounce basis.
Since early August, the launch of Stryve Nutrition, we've had great feedback from customers who have purchased the products on stryve.com, and we expect they will be available next year on Amazon and in select retailers. We are also developing additional nutritional products to further scale this vertical and would expect the entire category to be a positive contributor to net sales throughout 2022. As we look to 2022, and we begin to see the revenue growth of the additional distribution wins that I've already mentioned, we want to ensure that our manufacturing capacities stay ahead of the curve. We will not only be continuing to expand our facility in Madill, Oklahoma, we will be adding a second manufacturing facility that will house all of our operations that are currently existing in the DFW area.
This new factory is being designed to add additional manufacturing capabilities to allow us to continue to innovate and disrupt. We are excited about bringing another factory online next year as it further extends our protective moat that we have established in this industry and should help us significantly as we aim to become one of the largest participants in the wider meat snacks category. Next, I'd like to address leadership. In October, we welcomed Greg Christenson and Charlie Vogt to our board. Greg and Charlie both possess broad and deep experience in optimizing growth of public companies, and we believe that they will be instrumental in helping us achieve our strategic objectives. I also want to thank Jaxie Alt for all her many contributions over the past three years. She is a wonderful friend and partner to us all.
As you may be aware, she resigned as Co-CEO and CMO effective November 17th to pursue other opportunities, but will stay on in an interim capacity to advise on sales, marketing, and strategic planning. While we are certainly sorry to see her step down, let me reiterate that this management team and board have significant experience growing differentiated CPG businesses in a variety of channels, and therefore, we have every confidence that we can continue to drive market share growth. Finally, while there are numerous M&A opportunities in the snacking and healthy eating categories, at this time, we are squarely focused on building momentum for our existing business and setting ourselves up for a very strong 2022. We would consider acquisitions in the future if they made strategic and financial sense and align with our mission and thesis.
For now, our efforts and resources will be devoted to the significant opportunity we already have in front of us. With that, I will turn the call over to Alex.
Thanks, Joe. For the third quarter, net sales increased 104.6% to $9.1 million compared to $4.4 million in the year-ago period as we experienced sales growth across all three of our channels, wholesale, e-commerce, and private label. Net sales to wholesale customers rose 198.3% to $5.4 million from $1.8 million as we added significant new doors of distribution across our brands during the quarter itself on top of additional distribution that we secured earlier this year. E-commerce sales rose 50% to $2.8 million, up from $1.9 million. The significant majority of this was derived from our own websites with the balance from Amazon and other third-party platforms.
This is very exciting as our own dot-coms not only provide us with outstanding margin but also enable us to have a direct relationship with the end consumer, which in turn will help us build a loyal following. In addition, we have far better control over shipping, inventory, and most importantly, the consumer experience. Finally, private label rose 18.5% to 916,000, up from 773,000. Private label continues to be an important piece of our story. Not only does it provide incremental volumes, but it helps to deepen our relationship with our retailers. With the limited need for marketing support, its cash conversion is attractive. Overall cost of goods increased by $3 million - $5.8 million during the quarter compared to $2.8 million in the year ago period.
This was driven primarily by increased sales volumes as well as increased labor and commodity costs. Clearly, our primary input commodity is beef, and beef prices have increased significantly in the last year due to what we believe to be the direct and indirect factors related to the pandemic. This isn't just limited to beef. Many of our other inputs have been affected as well, although they have a lower impact on our overall business. We are also experiencing wage pressure driven by what we believe to be similar factors. Further, we are seeing a more expensive and less efficient transportation network. However, gross profit increased 104% to $3.3 million in the third quarter, up from $1.6 million in the year ago period.
As a percentage of net sales, gross profit margin held at 35.9% compared to 36%, which we view as a solid outcome considering the aforementioned cost pressures and is a further testament to our business model. Some of the factors that led to this performance include the following. While the increase in gross profit dollars was primarily driven by our sales performance, our early investment in our production facility, and specifically automation, provided us with excess capacity relative to our production volume. This enabled us to absorb the higher net sales without having to significantly increase overhead costs. Importantly, earlier this year, we enhanced our manufacturing process, which allows us to prepare raw meat exactly to our specifications.
This enables us to purchase the same cuts and quality as we always have, but without having to pay a premium to our suppliers to prepare the meat to our specification prior to delivery. Gross profit margin was impacted by trade discounts and promotion spending to support efforts to increase velocity and distribution. We view this as a long-term investment in our business. Wholesale revenue is growing with respect to our overall mix of net sales. While e-commerce may have a higher margin profile, wholesale allows us to achieve scale and can better leverage our existing marketing spend by providing consumers with more frequent opportunities to purchase product. While our gross profit and margin for the quarter were strong despite the challenging operating environment, I think it's worth spending a moment discussing the macro landscape in which we currently operate.
As I mentioned before, we are pressured on input costs, labor, and transportation, all to varying degrees. Suffice it to say, we have been affected by the same challenges as most other businesses in this regard. While we had hoped that the impact would be short-lived, it is now looking more likely that the current supply chain environment may persist in the near term. In addition to seeking to maximize yields and optimizing our buying, to mitigate the impact of these pressures, we are looking to increase our average net sales per unit sold. We'll look to accomplish this in three ways. First, higher pricing. To clarify, we have not pushed through price increases during the third quarter or in the fourth quarter so far, but we will look to take price in some regard moving forward. Second, influencing mix.
We will seek to influence product mix in a favorable manner to drive sales of higher-margin SKUs. Third, optimizing promotions. We will seek to optimize our promotional plans in an effort to maximize the impact of each promotional dollar. While some peers have already increased their pricing by 10%-15%, we believe that we have multiple distinct levers to pull that we hope will help us protect margins and therefore will not be relying exclusively on pricing to mitigate the cost pressures we're facing. Turning to our other expense lines. Selling expenses increased $3 million- $5.8 million, up from $1.8 million last year. This was due primarily to increased digital media advertising and paid search. Included in these results are the increased marketing efforts in brand support that we plan to push forth upon the closing of our business combination.
While we continue to invest in our marketing our products, we realize that not all of the expenses incurred during the quarter are recurring. We believe that operating leverage will be forthcoming as we add points of distribution. We anticipate this making our marketing spend more effective since the same consumers we already target have more opportunities to buy our products. Operations expense rose half a million dollars, which is primarily due to the increase in freight out expense for our direct-to-consumer web fulfillment operation because of the increase in sales volumes. However, as a percentage of net sales, it decreased 300 basis points to 13.6% of sales. Salaries and wages increased $1.1 million-$2.3 million, up from $1.2 million.
About half of the increase was related to non-recurring retention bonuses, while another $0.2 million was related to severance. We also increased our sales headcount to help drive growth, operational headcount to support a second shift of production, and added resources in support roles related to SEC reporting and public company compliance. However, as a percentage of net sales, it decreased by 250 basis points to 25.1%. Going forward, we may expect to see some additional growth in headcount to support reporting and compliance needs due to our public company status, but we do not anticipate that our salaries and wages will scale proportionally with sales. EBITDA, a non-GAAP financial measure, was a $7.6 million loss, which compares to a $3.2 million loss in the prior period.
Net loss increased to $8.7 million compared to $4.4 million in the same quarter last year. The increase was primarily attributable to increased selling and marketing expenses, increased operations expense, and approximately $1.7 million of non-recurring non-cash expense indirectly related to the consummation of the business combination, all of which was partially offset by growth in net sales and gross profit. Now let's discuss cash and liquidity during the quarter. Our cash balance as of September 30th was $13.4 million. This was inclusive of us paying out $12.9 million in transaction costs in the quarter and reducing debt considerably during the quarter itself. Our efforts overall have dramatically improved our net working capital position by $48.2 million in preparation for strong growth ahead.
Finally, with respect to the full year, we are increasingly confident in our annual net sales range of $31 million-$34 million we first issued on our second quarter conference call. This would represent 82%-100% growth compared to 2020. We are very excited by our future and look forward to sharing further business developments and updates as we move forward. We would now be happy to take your questions. With that, operator, please open the line.
Thank you. We will now begin the question and answer session. To join the question queue, you may press star then one on your telephone keypad. You will hear a tone acknowledging your request. If you are using a speakerphone, please pick up your handset before pressing any keys. To withdraw your question, please press star then two. We will pause for a moment as callers join the queue. The first question comes from Brian Holland with Cowen and Co. Please go ahead.
Thanks and congratulations on the great momentum here in the third quarter. I want to start on that manufacturing facility, Joe. You know, what does that imply about how quickly you think you'll get to full utilization at Madill, where I believe you have approximately $100 million of revenue capacity? Is this for just unique products, or is, you know, again, is there something to be implied about how quickly you think you can get to $100 million?
Well, we're in the midst right now of currently expanding our drying capacities in Madill currently. If you recall from how we're currently structured, we maintain our office here in Plano. We have an e-com fulfillment center in Carrollton, and we have looked at pulling our fulfillment down to the DFW area to really help Madill be focused on producing, you know, product up there. Also, you know, we do a significant, you know, amount of packages here out of down in this area. We are, we saw it as an opportunity to kind of consolidate all the operations down here in the DFW, and for us, we would move our office and build a factory around it and get all of our people under one roof, which would be fantastic.
Yes, we would be adding additional manufacturing capabilities as well. As you know, as we look at new products we'd want to bring to market, it would give us opportunities to produce them versus purely being air-dried. We would significantly increase our air-dried capacity. You know, as we get towards the balance of next year, you know, we very easily could be bumping up against that, you know, that run rate. From our standpoint, we wanna be ahead of the curve. It's gonna take us, you know, a significant period of time to get that factory up. Rather than, you know, figure it out when it's too late, we wanna be proactive and do this and really feel it'll be. It really will help the strength of the business going forward.
Yeah, appreciate the color. That, I guess, leads into the second question. How long do you expect before that facility is up and running? How should we think about CapEx during the build-out?
Well, we're looking at some opportunities right now. My, you know, opinion today is it would be in the back half of the year, probably around the fourth quarter. You know, from a capacity standpoint, you know, we're looking at various different designs. All I can say today is that the capacity would be a significant increase over the $100 million capacity of Madill.
I think with any kind of, you know, build-out or construction, there's some variability in timeline, you know? You know, we have ambitious goals to increase our manufacturing capabilities and capacities consistent with our thesis, right? We are always building ahead of the curve. That's the plan. We never wanna be behind the eight ball, because, look, we're the only place you can make these kind of products at this level of scale. We have to be ahead for when the demand comes. That's a big part of why we're pursuing this strategy. We'll, you know, continue to evaluate the different designs and opportunities of how this might come about or what the CapEx requirements might look like.
Right now we don't have that as something we're ready to share publicly.
Yeah, no, fair enough. I did wanna ask about both Costco and Walmart. Yeah, I guess similar questions on both. Just kinda curious about timing for Costco to go national and Vacadillos to get into Walmart. Any sense on approximately how many SKUs per store in both of those cases? I'm sorry, I did want to verify on Vacadillos, is that all Walmarts? Excuse me, all Walmart stores or is that gonna be more of a gradual build?
Let me answer that the best way I can. Costco right now looks to be in the middle of the second quarter, and as it's an enormous undertaking, we feel, you know, we got a lot of work to do. As far as the, you know, we also mentioned there we added an additional region. That'll come on in the first quarter. We will see incremental Costco growth, but then very significant as we continue through the year. Regarding Walmart is gonna be bringing in two SKUs of Vacadillos. We do not have the store counts yet. The way Walmart works is there's a reset period, and that reset comes up right around the end of April. Those would be second quarter adds as well.
You know, the Stryve expansion will take place at that time as well.
Great. Last one for me. You know, I think it's interesting in this dynamic for a company your size that you are vertically integrated. I'm just curious, you know, any examples here of situations where your one ability, the fact that you're vertically integrated and two, your ability because you have kind of the flex on capacity utilization where you are today in Madill versus what your 1 to 100% utilization would imply, ability to serve retailers in this market to maybe step in. Obviously, we hear about product shortages, empty shelves, et cetera. I'm just curious, one, if you've got examples of being able to leverage your competitive positioning and your advantaged manufacturing to win some business.
Yes. We were very fortunate to actually pick up a retailer because one of their vendors could not provide products. They're in the Pacific Northwest, but I don't wanna specifically call them out by name, but it was a material add for us, and it was because we had the capability to step in and produce product quickly. We are seeing that throughout the marketplace, so there's a lot of discussion going on right now. It is definitely an interesting time. Yeah, it gives us that flexibility because the contract manufacturing landscape in this country right now is severely strained. We are very thankful that we make our own products.
I did ask that question because that vendor is, I won't name them either, but the vendor is right around the corner from my house. I'll leave it there and get back in the queue. Best of luck going forward and keep up the good work.
Thank you, Brian.
The next question comes from Mike Grondahl with Northland Securities. Please go ahead.
Yeah. Hey, guys. Just digging a little bit deeper on maybe Costco and Walmart. Is it possible to quantify or do you have a range of like what you initially have to deliver as they roll out Vacadillos? Or even at Costco as they go national in 2Q, what you guys have to kinda deliver to get it in all those stores?
Well, typically, I mean, I think probably most people on this call are customers of Costco, and you'll see that when you go in there's typically a couple pallets of each of the SKUs. Costco has roughly just under 700 buildings right now. You know, basic math, you're looking roughly 1,400 pallets of product, and that's an enormous amount. That's basically roughly 70 truckloads. Yeah, that's a big one. The Walmart one, Mike, we just won't know here for probably another SIX weeks to the number of stores. I have been very pleased to see the excitement from our buyer.
Great. You know, how do you feel about delivering that? Are you ramping up, hiring? How do you kinda feel, you know, meeting those targets?
Some of the things like we mentioned, you know, during the previous portion of the call is that we're currently expanding our drying capacities at our existing factory. I mean, it's a very large undertaking, and it's gonna take a lot of work. But we feel very confident as a team that we will execute and pull it off. It is a big material increase. We're, you know, we're gonna do everything we can. For us, it's extremely important because Costco is a banner retailer that you really wanna do well in this country. We've been doing well since we got in there. I mean, I think as we spoke about the
One of the biggest driving points, if you recall, about four months ago, we announced that we were going into our first region of Costco. Since that time, we've expanded there, added now what will be three additional regions plus Costco business centers. Now we've been awarded a national buy. Obviously, it's of extreme importance to us, and we would not have agreed to accept the offer if we didn't believe that we could execute.
Good. Hey, just lastly, private label sales, you know, didn't grow as much as some of the other categories. Anything to call out there?
It wasn't an area as much of, I'm not gonna say a lack of focus on the area, but we really ramped up sales quite a bit in the fourth quarter. You know, our team and our sales team, their performance has just blown us away. As you've noticed, and I hope it's clear in what we've talked about, a lot of these very large wins that we've just accomplished to get, like, for instance, the 2,600 Speedways expansion at 7-Eleven, this Costco, the Walmart, and numerous other retailers. Those are all wins that are just either product is landing in them now or will be landing in them in the first quarter. That makes a huge material difference. Our team has been nailing branded wins at, you know, a pretty busy clip.
Sure.
They haven't had as much time to dedicate to adding some private label.
Fair enough.
Yeah. I think that there's also an element of, you know, we get private label interests. As we've shared before, you know, we want to target a certain percentage of our business, but focusing our resources on growth in the branded business. While private label will always have a home here, so that we can, you know, continue to utilize capacity and capitalize on the cash flow characteristics of the private label business. We certainly will look to do our best to grow that in 2022.
Got it. Okay. Thanks, guys.
Thank you, Mike.
The next question comes from Alex Fuhrman with Craig-Hallum Capital Group. Please go ahead.
Hi. Thanks very much for taking my question. Wanted to ask about some of these levers that you mentioned that you have to pull regarding gross margin. The commentary about moving towards the mix of higher margin SKUs and optimizing the promotion you know seems easy enough to understand. I guess as you think about higher pricing, is there a kind of time in mind that you envision kind of getting to if you don't start to see beef and labor costs start to come back a little bit when you start to take pricing? You know, you've got a very unique product. Obviously, there's no one else out there that can make Biltong commercially in the quantities you have.
What are some of the kind of signposts you're waiting to see as you make the decision whether or not you're gonna raise prices and how much and on which item?
I think that we have concluded that that is part of the strategy. We'll work through the specific details of that and to push something forward, you know, in the coming months. I mean, there's a practical issue of the timeline that, you know, to be a good partner to your retailers of notice to give them. That's the thing we'll work through with, you know, our sales team and our buyer relationships to make sure that we put this forth in the right manner. What I will say is that anecdotally, we understand that most or several of the other competitors in the set in meat snacks have already taken price at most retailers.
It's already baked in in a lot of places, and retailers seem to be more receptive to these conversations than they are, you know, at any other time in history, just because it is very apparent across all categories that, you know, brands are continuing with these same challenges. You know, people have had more success in taking price.
Yeah. Okay. No, that makes a lot of sense. Then as you think about the you know the different kind of products you have in your mix, what are some of those products that are higher margin? You know what kind of effort can you take in order to really prioritize those both through the wholesale channel and your own direct-to-consumer platform?
Well, as Joe mentioned earlier, our charcuterie slab or our Slab product is, you know, has a lower cost to produce on a per ounce basis. It's fantastic product. It's just less, it's got better production yields is really what it comes down to. There's other products as well. They vary SKU to SKU. What we know is that we can have a meaningful impact on mix with our digital media and advertising campaigns that we push out, and also through our trade promotion. We can try and influence that mix as well.
Yeah. Alex, further on that, you know, obviously my background and Ted's background we come from the sports nutrition world and, you know, as we start to build out the rest of the suite, that is a very high margin area that we've had a lot of success in. And as we mentioned previously, we'll be expanding those products going into the first quarter and finally have gotten our branding done. We're you know, can't wait to get it out for the public to see. But it's gonna be something that we feel will be a big, you know, positive contributor to 2022, and that's a you know, a product line that's very accretive to margin.
Well, thanks very much for that. Looking forward to seeing that when it's out.
Awesome. Thanks, Alex.
This concludes the question and answer session. I would like to turn the conference back over to Joe Oblas for any closing remarks.
Thank you, operator. Well, thank you to everybody for attending today, and we're really looking forward to getting out and sharing further updates as we continue to progress. It's been a definitely an interesting quarter, but one we're very proud of. I mean, to continue with our sales growth has been fantastic, and to see the adoption by the retailers is super exciting. We're gonna get real focused and go out there and make a whole lot more product. Thanks, everybody, and, have a great week. Take care.
This concludes today's conference call. You may disconnect your lines. Thank you for participating and have a pleasant day.