Thank you for standing by, and welcome to the Fourth Quarter and Full Year 2022 Earnings Conference Call and Webcast for Laird Superfood, Inc. I would now like to turn the call over to Mr. Steve Richie of Laird Superfood to begin.

Thank you, and good afternoon. Welcome to Laird Superfood's fourth quarter and full year 2022 earnings conference call and webcast. On today's call are Jason Vieth, Laird Superfood's President and Chief Executive Officer; Anya Hamil, our Chief Financial Officer; and Andy Judd, our Chief Commercial Officer. By now, everyone should have access to the company's fourth quarter and full year earnings press release filed today after market close. This is available on the Investor Relations section of Laird Superfood's website at www.lairdsuperfood.com. Before we begin, please note that during the course of this call, management may make forward-looking statements within the meaning of the federal securities laws. These statements are based on management’s current expectations and beliefs and involve risks and uncertainties that could cause actual results to differ materially from those described in these forward-looking statements. Please refer to today's press release and other filings with the SEC for a detailed discussion of the risks that could cause actual results to differ materially from those expressed or implied in any forward-looking statements made today. And now, I’d like to turn the call over to Jason.

Thank you Steve. Welcome everyone and thank you for joining us today. It's been a busy few months since we reported our progress and turning around Laird Superfood and I'm excited for all the progress that we will be sharing with you today. I'll start the call with an update on our overall business and progress against our key strategic initiatives. Before I hand it over to Andy Judd, our Chief Commercial Officer, for a deeper dive into our performance across products and channels. Then Anya Hamil, our CFO will cover the fourth quarter in detail, and we'll finish by opening up the call to your questions. During our last call, I announced that we would be closing our manufacturing facilities in Sisters, Oregon as we had just completed an agreement with both a co-manufacturer and third party logistics provider to handle the powder manufacturing and distribution for our business. I am happy to report that we have already completed that transition to these two partners and that they're both are now fully operational and integrated into our supply chain. Since December, these partners have produced and shipped 100% of our powder products and they have proven to be responsive, adaptable and supportive in every way. Let me take a moment to share my immense pride in our Laird Superfood supply chain team who in the span of just a couple of months came together to completely shut down our manufacturing facility in Oregon to stand up both the new co-packer and third party distribution center in Utah and to build and implement the various support systems and other controls required to run our business there. This was all accomplished before the end of January and I am blown away by the speed and professionalism with which our combined teams…

Thank you, Jason. Next month, I will celebrate my first year at Laird Superfood. We just returned from the natural products Expo West trade show and I am as optimistic as ever as we showcased our brand transformation and talk to retailers about our mission to help consumers achieve new levels of performance by ensuring they fuel their bodies with real, functional, whole plant based foods. As Jason discussed, it has been a year of strategic change and tremendous progress as we worked to improve our go to market model and transition from a primary focus on DTC to an omnichannel brand. I am grateful for the hard work our team has made to improve our business fundamentals operating more efficient and effective marketing model and build these foundations for multichannel growth for years to come. Q4 progress was marked by an improved trend in crucial sales channels that we have historically been underdeveloped including a plus 19% net sales growth in retail excluding club and a significant growth on Amazon that Jason mentioned. While our overall online business in Q4 was down 5%, the channel saw sequential growth in back to back quarters on reduced spend as we continue to see strong Amazon growth and our most efficient quarter in our DTC business for the year. This improvement is consistent with our strategic plan as growth on Amazon was up plus 38% year-over-year, while simultaneously improving average order value on the platform by 8% versus year ago. This strong Q4 close enabled us to deliver plus 18% net sales growth on the platform for 2022 versus year ago. We are also seeing the benefit of scaling our approach to the platform and saw a plus 16% sequential increase in Q4 and our subscribing save orders. For our DTC business,…

Thanks, Andy. Net sales of $9 million in the fourth quarter of 2022 were sequentially flat to the third quarter of 2022, and decreased 4% as compared to $9.4 million in the prior year period, driven by lower volume in DTC and club channels. As Andy discussed, our DTC decline was primarily driven by 52% year-over-year reduction in media to cut inefficient spend and reduce customer acquisition costs as we build a more sustainable direct to consumer business going forward, and improve our profitability in this channel. The decline in DTC was partially offset by tremendous growth in our Amazon.com channel, driven by continued adoption and momentum built from optimized marketing strategies. Our wholesale channel also delivered double digit growth, driven by new distribution in the natural channel and velocity improvements in liquid creams. As reported, gross margin was negative 4.6% driven by one time exit and disposal costs related to the transition to co manufacturing model and restructuring costs associated with closure of our Sister's facility. Adjusted gross margin was 19% a decline of 440 basis points versus Q4 of 2021. The margin compression versus the year ago period was driven primarily by fixed cost deleverage on a lower production volume as we reduced and optimized inventory levels, leading into our packaging refresh and transition to co-packing, as well as increased costs associated with inventory reserves and disposals and inflationary freight costs. Operating expenses totaled $15.3 million, an increase of $6.1 million compared to $9.2 million in the year ago period. The increase was driven by impairment of intangible assets, losses and termination of leavers of manufacturing facilities. That was in disposal costs, including impairment charges for factory equipment, furniture and software, as well as severances and retention bonuses. Excluding onetime costs, operating expenses were $6.1 million which is…

Thanks, Anya. When I joined Laird Superfood last year, it soon became apparent that while we had an exceptional brand, we would need to do a hard reset of our business fundamentals. Since last summer, our team has been reworking every aspect of this business and I'm extremely pleased that we are now in the cusp of emerging as a much improved business. With a stabilized e com platform and green shoots forming in our wholesale operation, we are in a great position to leverage the flexibility of our new asset light supply chain and drive growth across our business in 2023. We have assembled a small but mighty team of CPG leaders and experts, and I look forward to seeing all that they will deliver in this year and beyond. This concludes our prepared remarks. Operator, we are now ready to open the call to questions.

[Operator Instructions] The first question is from the line of Alex Fuhrman with Craig Hallum. You may proceed.

Hi, guys. Thanks very much for taking my question. I wanted to ask about the significant improvement in gross margin that you're expecting to see this year? And Anya, I think you kind of touched on this in your very last remarks here. But if I'm understanding this correctly, it sounds like the improvement in margin rate from shifting to the outsourced model. It sounds like you should see that right away and then Q1 has perhaps an additional headwind related to the quality control issue, as you think about your target of 30% plus this year, should we expect gross margins to build throughout the year and kind of grow into that target? Or are you more or less expecting to be right around there, notwithstanding the Q1 quality issue?

Hi, Alex. Thank you for the question, it's Anya. Jason, go ahead.

Hi, Alex. Hi, sorry, we're having to do this remotely today. We've got a couple of folks that got sick, including myself coming back from Expo. So we might be a little bit awkward in some of these. Hi, Alex, thanks for your question. Listen, I tell you that we had planned for the gross margin to build throughout the year. Really, we expect it to largely achieve it in the first quarter, but we knew we had some offsetting costs as we made the transition. We had moved most of the inventory in Q4 had set up and done some production runs, but we expected really to step into that relationship with our co-packer over the course of a couple of months. I can tell you that it's gone seemingly between us and the co-packer, they're doing a phenomenal job. They've come up to speed much more rapidly than we had planned in our forecast and in our plans. So we're really excited about where that is. As you alluded to though, we do have this quality issue that will impact us. I did mention that we expect that to be offset over the course of this year as we work with our supplier around the root cause behind this. We're very comfortable that we understand what the issue is. And so now we're working that back expect to have remediation against that. But for the first quarter, certainly we would expect to see an impact. And as a result, as you said, a build in the gross margin profile as we move sequentially through the year, so that we're exiting well over 30% by the end of the year.

Okay. That's really helpful. Thanks, Jason. If I could ask, just on the direct to consumer, business, it sounds like your customer acquisition costs were reduced really significantly. Is that a function of something you're doing differently or maybe some ineffective marketing programs that got cut. Curious where you're seeing that coming from and if you think it's possible to sustain that going forward this year?

Thanks, Alex. This is Andy. Yes, I'll jump in here. We're really pleased with the trajectory and what we saw in Q4. On our CAC overall, I do think it is something that we'll be able to sustain going forward. The combination of a couple of things. One, I believe in the last quarter's call, we talked about new research that we brought back that's really helping us and the upfront with better targeting overall against a new segmentation model that came in at the tail end of summer which is really helping us with what I would classify as more qualified leads versus more broad prospecting. But also as implication secondly to the overall structure of where we spend our dollars and how we spend our dollars in Q4. So we're really pleased that I think we've come to a place where we're starting to even see a little bit of improvement from there on our overall marketing. We still do have some things that we're going to lap out that are -- the long term contracts that will expire here as we go through the balance of 2023. That I think we'll see continued efficiency gains on our overall marketing spend. But yes tremendous progress made by the team in Q4 without a doubt.

Hi, Alex, let me add one thing to that -- Alex, I'll add 1 thing to that. I think Andy is very humble in this space. And I just want to say that in the last year really, there have been two big pushes that you've been leading. One is to shift non-working media over to media. And so you saw in Q4 with media down 52% the channel still performing as it was. So he's been able to take out a lot of cost and still hold up the channel performance pretty much where it was. So really great job there. But then secondarily, he's been moving "working media to be truly working". So we had a number of programs, marketing programs that really were not effective and Andy has been doing a great job with his team of weeding those out. And so what we expect this year is A, to be able to spend less, but B, to be able to spend it more efficiently even where we are still spending. So it really does bode well for the next year and beyond.

Okay. That's really helpful. Thank you all and Jason and your whole team. I hope you all feel better soon.

Thanks Alex.

Thanks Alex.

Thank you, Mr. Fuhrman. The next question is from the line of Bobby Burleson with Canaccord. You may proceed.

Hi, Jason and Anya, sorry for the background noise. So just curious on a couple of things. Congratulations on that gross margin outlook well over 30% exiting this year. I'm curious does that include any benefit from the potential reimbursement or would that be an addition?

Yes. Hi, Bobby. Thanks for that question. I think it's as we think about the margin going through this year, I would tell you that we ought to be over 30% regardless certainly with -- at this point, that would be included in there. But we expect that in either condition we would be able to exceed 30% over the course of this year. This is really, I mean, as we've talked about in the past, we needed to make this move in order to really be able to reset our margin profile and in doing so would just put ourselves into a very different manufacturing position, not only in terms of the cost, but I want to mention too, just this asset light model and the flexibility that it presents in a business that's still very young and as a result has some erratic swings in sales from month to month. So this really allows us to produce not only more cost effectively in general, but really as the revenue is swinging in any given month can match up our supply to our demand much better and really help our inventory carrying costs and our labor costs as well. So it's a really big transformational change for our business.

Great. And then in terms of the net sales growth, high single digit, curious what's happening on a segment level there. That sounds like DTC is on track and there's still some big changes coming to wholesale. So curious kind of order of magnitude, where the contribution is coming from the top line growth from your segments?

Hi, Bobby. This is Anya Hamil. Thank you for the question. So our growth is going to be driven by retail channel, including club more so than in 2022. We expect that segment to be outpacing the overall company growth and then within e-com, it's also returning to growth in 2023, driven by Amazon, while we stabilize in our direct to consumer segment. Hope that helps?

No, that's helpful. And the DTC opportunity for aseptic is that kind of baked into -- is there going to be some commencement for that this year as long as everything goes right with your commence that you'd have some aseptic moving through DTC and perhaps Amazon?

Yes, Bobby. This is Andy. I do think that's an opportunity for sure. We'll start to begin to have that happen in the second half of the year as we put the proposition and make sure that we get the right profit structure around that unit pack out going in the second half for sure.

Great. Thank you.

Thank you, Mr. Burleson. That concludes the question-and-answer session, as well as today's call. Thank you for your participation. You may now disconnect your lines.