Hello everyone, welcome to the Thorne HealthTech fourth quarter 2022 earnings call. My name is Charlie, and I'll be coordinating the call today. You will have the opportunity to ask a question at the end of the presentation. If you'd like to register a question, please press star followed by one on your telephone keypad. I will now hand over to our host, Thomas Wilson, VP of Investor Relations, to begin. Thomas, please go ahead. Good morning, everyone. Thank you for joining Thorne HealthTech's fourth quarter and full year 2022 earnings call. With me today are Paul Jacobson, our CEO, Tom McKenna, our COO, Michelle Crow, our CMO, and Ann Blake, our Corporate Controller, who's available for questions. In addition, Saloni Varma, our new CFO, who we are delighted to have joining next week, is also with us today. Before we begin, please note that today's discussion contains forward-looking statements that are subject to risks and uncertainties. Actual results may differ materially from those indicated by our forward-looking statements. More information about potential risk factors can be found in our 2021 annual report on Form 10-K, in our upcoming Form 10-K, which we anticipate filing after market today, and in other SEC filings. Today, in addition to U.S. GAAP reporting, we will be discussing financial measures that do not conform to GAAP. We believe these non-GAAP measures enhance the understanding of our performance because they are more representative of how we internally measure the business. Non-GAAP financial measures should not be considered in isolation from or as a substitute for GAAP measures. A reconciliation of GAAP to non-GAAP results is available in the earnings press release we issued after market close yesterday and in the supplemental investor presentation posted to our IR website. With that, I'll turn the call over to Paul. Thank you, Thomas. Good morning. Thanks everyone for joining the call. Today, I'll discuss our full year and fourth quarter 2022 results, update you on progress we've made against core growth strategies shared during the IPO process, provide our outlook for 2023, including financial targets for the year. I will also share a few comments related to our longer term positioning, including the expansion of our vertical operations with a new world-class facility that will add new capabilities and bring capacity online to fuel efficient long-term growth. As Thomas mentioned, additional details can be found in the earnings release and investor supplement issued after market close yesterday. Let's dive in. 2022 was a pivotal year for Thorne. It was our first full year as a public company. Our team navigated well through a challenging macroeconomic backdrop and seized opportunities to grab market share. Our customers proved resilient in the face of inflationary pressures all around them. We saw the consumerization of healthcare continue and the increasing awareness of the benefits of a healthy lifestyle fuel meaningful growth across our end markets. Executing our core strategies has enabled us to significantly outpace market growth rates, and we are well-positioned to benefit from lasting industry tailwinds and continue to do so. Now I'll share some of our financial highlights for the full year. First, I'm pleased to add another solid year to our history of strong, profitable growth. For the full 2022 period, we achieved sales growth of 24.1% and our Adjusted EBITDA grew 19.1%. During the IPO process, we established our intention to drive higher sales while continuing to grow profitably, which we have done. Zooming out to a three-year view, our sales are up roughly 30% over 2019 on a compounded annual growth rate with Adjusted EBITDA of 44.2%. Our full year 2022 growth in the DTC channel was 44% over last year. The DTC space has been a significant growth catalyst for Thorne, with channel sales over 40% of our total business mix. We have benefited from a 45% increase in the number of active subscriptions year-over-year. The trust customers have in our solutions to help optimize health and performance continues to show up in our routinely strong net promoter scores, which came in at 69 for 2022, compared to 69 in 2021. Our test, teach, and transform model continues to gain traction with customers, and we're confident improvements to the user experience of certain health tests, along with personalized product support through our recently launched Thorne Advisor, will continue enhancing the value of our flywheel. Third, the professional and B2B business grew 11.8% for the year, despite the disruption of sales through certain of our international distributors to end consumers in Ukraine and Russia. We've continued to work closely with our partners in that region. On balance, our growth in the professional and B2B channel was primarily from the combined strength of our network of more than 47,000 health professionals, which offer incremental credibility and validation as a common entry point for nutritional supplement consumers. Steady growth in the early innings of online dispensary sales to patients and individuals under the care or supervision of health professionals in that network, and the success of our direct sales force, which engages health professionals in addition to pro sports teams, athletes, and influencers. Moving down the P&L, gross margin fell to 50.2%. The benefit of a normal cost of living price lift in January and a subsequent more targeted raise in August was mostly offset by the sell-through of lower margin products like creatine and certain other bulk powders. As we stated during the third quarter call, the decline in gross margins stemmed from our decision to seize an opportunity to lock up supply ahead of other market participants that were experiencing supply chain difficulties. By doing so, we will hopefully gain incremental lasting market share. As expected, that raw material cost pressure has begun to unwind from the sell-through of those materials, and we are now operating under new supply agreements. Turning to operating expenses, we continue to be efficient with our R&D spend, which was relatively flat as a percentage of sales. The increase on a dollar basis was primarily from costs associated with the redesign and relaunch of our approved Gut Health Test and further development of our OneDraw collection device, which I'll touch on later. Our marketing costs were 12% of sales, slightly less than our guidance, and relatively flat as a percentage of sales year-over-year. We've stayed efficient in managing our customer acquisition costs and maintained a healthy LTV to CAC ratio of 4.6 for 2022 compared to 4.5 last year. SG&A costs as a percentage of sales increased slightly year-over-year, driven by higher shipping and fulfillment costs in the current environment. We are also seeing some of these costs come down, but they remain elevated relative to last year. Also contributing to higher SG&A costs was an increase in stock-based compensation and public company costs. These cost increases offset some of the efficiency gains made since the IPO in September 2021. Rounding out our financial performance for the full year, Adjusted EBITDA grew 19.1% despite higher shipping costs and less drop-through from the gross margin line, which had a corresponding impact on our Adjusted EBITDA margin. Lastly, Adjusted EPS came in at $0.32 per share. Now, turning to some of our financial highlights for the fourth quarter. On the top line, we delivered another record quarter, with sales of $63 million growing 27.7% over the fourth quarter of 2021, which was our strongest quarter last year. We also saw nice sequential growth over the third quarter of 2022, which I'm pleased with considering the macroeconomic circumstances. Our sales performance on the quarter was underpinned by 46% growth in our DTC channel and 17.5% growth in our professional and B2B channel. The strength of our DTC channel during Q4 was mainly for the same reasons I mentioned in my comments on the full year. However, we also saw significant growth in the professional and B2B channel sales with a strong showing in our NSF for Sport product suite as well as our NR suite relative to Q4 of last year. Some of our more recent high-profile launches like Daily Greens Plus are core to our nicotinamide riboside suite. We believe a number of factors help maintain our sales growth trajectory despite increasing inflationary trends that continued through year-end, including, first, our best-of-breed science-backed offerings that support health and performance are inherently more resilient in maintaining wallet share than many other discretionary items, especially as awareness of the benefits of a healthy lifestyle and consumerization of healthcare is accelerating on a global scale. Second, our generally higher-end consumer base is likely to be better equipped to cope with inflationary pressure for some period of time longer than the broader population. Although we have been judicious in acting limited pricing actions, maintaining our focus on preserving the trust of our customers we've spent years cultivating. Third, our efficient marketing engine continues to ramp its capabilities and attract new customers on top of providing stability in the percentage of repeat purchases during the quarter. Fourth, we've experienced steady upticks in the sales volumes of some of our more recently launched higher-priced offerings and have seen favorable volume increases for certain formulations such as encapsulated products. Lastly, also in line with our long-term strategies, we are slowly beginning to penetrate certain high-growth international markets in Asia-Pac, where we have a very limited presence now, but see ample opportunities to make further inroads. Our gross margin of 50.1% declined from the fourth quarter of 2021, primarily from the sell-through of higher volumes of products containing ingredients like creatine, which were more heavily impacted by supply chain disruptions than some other raw materials. As a reminder, much of our significant forward purchase of the then scarcer ingredients occurred in mid-2022. We substantially finished selling through that inventory in Q4. With respect to operating expenses for the fourth quarter, R&D spend during Q4 of 2022 was up 4.5% over Q4 of last year. The R&D organization continues to capitalize on our deep strategic partnerships to advance key studies in a cost-efficient manner, such as our work with the Mayo Clinic related to SynaQuell and our brain health portfolio. These types of partnerships showcase our long-standing efforts to optimize productivity in developing both our physical portfolio and knowledge-based assets. Marketing costs for the fourth quarter were also up over last year, mainly from higher personnel and influencer costs as we followed through with our strategy of investing in our marketing engine to drive brand awareness, efficiency, accelerate new customer acquisition. Our impressive Q4 LTV to CAC ratio of 8.3 reflects a reduction in marketing spend in Q4 following our decision to prioritize profitability closing out 2022 in the face of uncertainties from challenging macroeconomic conditions. That decision did not impact our routinely world-class Net Promoter Score, which came in at 71 for the quarter, far outpacing that of a typical e-commerce company, regardless of the industry. SG&A also increased over the fourth quarter of 2021, but declined as a percentage of sales. I'd remind you that Q4 of last year was our first full quarter post-IPO and therefore included marginally higher public company transition costs. We also saw year-over-year increases in shipping and fulfillment costs that are a natural byproduct of sales growth. Turning to profit, Adjusted EBITDA grew an impressive 65% over Q4 of last year. However, our Adjusted EBITDA margin of 14.2% was impacted by less drop-through from the gross margin line. Lastly, our Adjusted EPS came in at $0.13 per share for the quarter. Turning to the balance sheet, we ended the quarter with $36 million of cash on hand and $13 million of debt for a net cash position of $19 million. At the end of the year, we had not drawn down on the revolver, but we intend to use borrowings from time to time, primarily for the purpose of our new facility expansion. As of March 31st, we had drawn $15 million on the revolver to fund an escrow account for the developer. We are being prudent in our use of cash and financing for this facility, and separately for equipment purchases specific to the expansion. Before closing and outside the financial results, I want to touch on the importance of four areas for our long-term future growth, which include our new plant, the OneDraw device, critical findings in brain health research, and international expansion. Our new plant in South Carolina is a significant bet on our future, and I want to discuss the rationale. By the end of 2023, we will have completed expansion of our current facility as well as a new facility next door, giving us the capacity to become a top five manufacturer of supplements in the United States. We've had experience doing this before, as our current plant was completed in 2018. A far more complex challenge, given that we had to move across the country from Idaho and maintain two workforces simultaneously. Thorne has consistently outgrown the generic supplement industry by multiple fold. In 2022, we grew somewhere between 10x and 15 x the industry average based on which data is most reliable. We remain very confident that we're at the cutting edge of a huge developing trend called scientific wellness, which will require deep personalization. We believe no company can deeply personalize products and testing unless you also control manufacturing. Many companies doing it have no control or expertise in the highly complex areas of formulation and production. Instead, they rely solely on marketing to reach customers. We're steeped in AI on the testing, data, and product development side, where we see all sorts of opportunities for disruption. It's gonna be very hard to disrupt the highly skilled and trained blue-collar workforce that knows how to run a large manufacturing operation efficiently when paired with AI and all these other areas. Once the plant is completed, we will have the ability to make liquid-filled products, generate personalized packaging, and improve upon our printing operations. It will also lead to increasing free cash flow and higher gross margins. This weekend, at the 14th World Congress on Brain Injury, the findings from a randomized double-blind placebo-controlled study using the product SynaQuell will be presented. These findings are a collaboration between Thorne HealthTech, Mayo Clinic, and HealthTech Connex in Canada. The poster, Non-Pharmacological Supplements, is a potential neuroprotective intervention for subconcussive impairment, will highlight the positive findings seen with supplementation in ice hockey players over the season in areas like selective attention and focus, visual processing speed, stimuli processing, and markers of neuronal damage. With OneDraw, to summarize our regulatory position, we have been cleared for direct-to-consumer use in Japan by the PMDA and in Brazil by Anvisa. In the U.S., we've received supervised use clearance by the FDA, and we are reacting to comments by the FDA for direct-to-consumer use and submitting to the Department of General Surgery relatively soon. Through R&D, we've expanded the cartridge capabilities to include dried blood spot, dried plasma, and a cartridge specifically designed for genetic sequencing, all without the need for cold chain storage. We have also validated a proteomics assay for the U.S. Cancer Moonshot Project. We're seeing enough evidence to believe the device coupled with some unique tests we're developing to say that the OneDraw will be an important contributor to our business in the not-too-distant future. Internationally, we've expanded our e-commerce capabilities in China using a multi-platform approach. In 2022, we were a top 10 brand for a few months towards the end of the year on TikTok, the business is continuing to expand in 2023. Korea has also been a bright spot for us, utilizing both e-commerce for consumers and developing a drop-ship business with hospital clinics for their patients. Our Thorne Asia venture with Mitsui has recently led to our first retail relationships in Asia as well, starting in Singapore. With those updates, I'll now close with our outlook for the full year 2023. Based on recent results, our ability to deliver strong sales growth over a multi-year period by executing our core strategies, our increasing capabilities at scale, the position we have centered at the intersection of multiple high-growth markets that have also effectively been upsized for the remainder of the decade, we expect our full-year 2022 guidance to be net sales of between $280 million and $290 million, representing growth of 22%-27% over 2022. Gross margin of between 49% and 52%. Adjusted EBITDA of between $30 million and $32 million, representing growth of 22%-31% over 2022. Adjusted EPS of between $0.37 and $0.39. In addition, our guidance for Adjusted EBITDA and Adjusted EPS includes the following assumptions. Marketing costs of between... 14%-15% of net sales. Depreciation of approximately 2.5% of net sales. Interest expense to be approximately 1% of sales. An estimate full year adjusted tax rate of 27%, and diluted weighted average shares outstanding of 54 million as of December 31st, 2023. With that, I'll now open up the line for your questions. Operator? Thank you. If you would like to ask a question via the telephone lines, please press star followed by one on your telephone keypads now. If you'd like to withdraw your question, please press star followed by two. When preparing to ask your question, please ensure you are unmuted locally. As a reminder, that's star followed by one on your telephone keypad now. Our first question comes from Elizabeth Anderson of Evercore. Elizabeth, your line is open. Please go ahead. Hi, guys. Thanks for so much for the question. Could you go into maybe a little bit more detail as we think about the 2023 guidance? You know, I obviously saw the revenue outlook that you provided, and I understand the accounting changes. Can you tell me about sort of where you see the biggest drivers of growth and sort of maybe also what you factored in for OneDraw in some of your new initiatives into the guidance? Right. Hi, Elizabeth, it's Paul. In terms of the way we are forecasting 2023, we are basically assuming that we're getting a diverse growth across multiple channels the same way that we always have, we are not forecasting anything major yet coming from OneDraw. We are having conversations with various groups, we are not putting significant numbers from OneDraw in there at all. It's basically assuming reasonable growth on our consumer business on our B2B and professional segments, pretty much what you've seen before. Got it. No, that's helpful. As you sort of have, now we've lived through a couple of quarters of this higher inflationary period and, you know, maybe sort of a more volatile macro. What can you say sort of in terms of any changes to the demand profile that you're seeing across any of your channels or product lines? All right. I'm gonna let Michelle make a comment on demand on the consumer side of things, and then. Yeah. Demand volumes are really strong. DTC demand in Q4 was up 46%. We saw growth in the number of purchasing customers on the new side and the repeat side. In terms of unit economics, we saw order size, net price per unit both increase and relatively stable order frequency. We've been continuing to see these strong trends as well in Q1. Right. We're also expanding our sales force on the doctor side, we expect to see good demand on the medical side in the United States as well. Got it. Can you also comment on how you see the international growth trending this year? I know you just talked about some of your expanded distribution in China, et cetera. Can you How do you see that mix changing in 2023 versus 2022? Yes. Based on what we're seeing, the two focus areas, as I mentioned in the prepared comments, are going to be China and Korea. We have taken complete control ourselves of all the e-commerce channels in China, and we expect significant growth there on a direct-to-consumer basis. The same is true of Korea with a little bit of a difference there in that we are working with some physician models as well as direct-to-consumer. We see both Korea and China providing reasonable growth for us this year. Got it. Maybe one last one for me. I think you said in the prepared comments that you're responding to comments for self-use in the United States for the OneDraw approval. How do you think about, like, roughly speaking, the timeline for potential approval there for the self-use? Right. Let me tell you that we've been surprised at the way the cadence has gone. In other words, the FDA group, in this case, the PMDA in Japan, being the first to clear us for direct-to-consumer use was not expected. They're known for being particularly difficult. Because of that, we believe that we're gonna have some reasonable opportunities with the device in Asia because of the Japanese clearance makes a big difference to us overseas. In the U.S., we got comments back and we are expecting to resubmit based on the comments we've received in the next couple of weeks. The FDA has to respond to us, I believe, around July at the latest. You know, I mean, we have no control over that. It could happen fast, it could happen in July. I just don't know yet. Okay. Got it. Thanks so much. As a reminder, if you wish to submit a question, please press star followed by 1 on your telephone keypad now. Our second question comes from Susan Anderson of Canaccord Genuity. Susan, your line is open. Please go ahead. Hi, good morning. Thanks for taking my question. I was wondering if maybe you could just talk about the EBITDA margin. It looks like the guidance for this year is maybe in the 10%-11% range. How are you thinking about that longer term, and do you think that you can still see that grow as we go throughout the years? Yes. I'll make one comment here, and then, I'll also see if Tom McKenna wants to make a comment. As I mentioned, and I tried to highlight in the prepared remarks, we are completing a brand-new plant and expanding our current one, which will come online later this year. In order to accommodate the necessary hiring, it means that we have to add to our blue-collar workforce during the course of this year, and get them trained. There's no way we can open a new plant till we have the workforce in there and ready to go, and they have to go through significant training on the machinery. Our best estimate, and I'm emphasizing that this is a guess, that it's gonna knock off 3-4 gross margin points this year, which is where we're coming in on Adjusted EBITDA. We basically, as I made the comment in the prepared remarks, that, you know, we're making an investment in our long-term future. Our growth is telling us that we should do it, and we're big believers in the importance of not only controlling manufacturing, but doing it here in the United States, and trying to get a jump on what we think is gonna be a big reshoring trend. Tom, do you wanna add anything to that or do you think we're good? Yeah, I think, Susan- Okay. To Paul's point... What? Susan, can you hear me? Yeah, I can hear you. Okay. To Paul's point and to answer your question about the longer term, while we're effectively taking a hit on the investment side to position ourselves for greater capacity and demand in the future, the staffing that we're scaling up this year will not be necessary in the future. In other words, we can capitalize on reasonably more stable staff with greater output. We're anticipating that our gross margins over time, by the middle of this decade, will move into sort of the, you know, sort of mid-50s range and then potentially higher thereafter as we continue to progress through the decade and have greater volume going through our facilities, again with more stable staffing. You know, with respect to the overhead allocations dropping. Okay, great. That's helpful. Then just really quick on the marketing spend, I think it's gonna be second-half weighted. I guess, or should we expect a similar large campaign that you guys did last year or how should we think about that? Any thoughts on or any color on what that will be? Yeah, Susan, I'm gonna let Michelle Crow answer that. She's our Chief Marketing Officer. Go ahead. When we look at 2023, as we mentioned, we're planning on around 14%-15% of sales spent on marketing. This year, our cadence will be more evenly distributed than last year. We will have one big brand campaign that we're planning to launch around July and that will feature a big high-profile partner we're going to be announcing soon that we're really excited about. There will be a slightly higher spend around the, you know, Q3 range. However, it'll be more even than it has been historically. Okay, great. If I could just add one more. I'm just curious, just on the macro environment. There's been some talk around just, you know, VMS slowing, consumers getting impacted. I know you guys cater, though, to a higher-end consumer. It doesn't look like you guys are getting impacted, but just curious if you've seen any change in consumer behavior, how they buy your products either in the DTC channel or the professional channel? From a macro standpoint, demand continues to be really strong. We're not seeing the impacts of it. I do know that we're hearing a variety of things either from various organizations about the growth rate of the supplement industries being somewhere in the generic level I'm speaking, not by company. Somewhere in the 2%-3% range in 2022, and even lower with some big companies. You know, we're just not, we're not seeing it. We are very focused on this trend I mentioned of scientific wellness and deep personalization and we think that's where our future lies. Michelle also has a comment here. The one additional thing I would add, as you may recall when we were in 2022, we pulled back marketing spend in the second half of the year. The biggest impact of that was just on the rate of new customers acquired. In the first half of the year and the second half of the year, unit economics remained really strong. We're of the mindset that it's really because of our brand and the depth of our portfolio that we're able to reach customers in the luxury segment that want to buy our products frequently. As we kind of look to next year, we're still early in our growth cycle, Year-over-year group, you know, brand awareness 4%-6.5%, we're confident that unit economics will be strong in 2023 as well. Yeah, I'm also gonna ask Tom McKenna to make a comment based on some of the things he's seeing inside the plant. Tom? Yeah, Susan, probably the best way to take a look at least near term on what we're seeing for our products in overall demand is this month we'll have orders of a little over $95,000, which is a record for us. In fact, in each of the months thus far this year, we've had record orders fulfilled. You know, I we can't perfectly forecast what's gonna happen in the future, but we can say at the moment right now, we're not seeing anything on the downside. Great. That's really helpful. Thanks for all the details there. Good luck the rest of your year. Thank you. Thank you. As another reminder, if you wish to submit a question via the telephone lines, you can do so by pressing star followed by one on your telephone keypad now. Our next question comes from Steven Mah of Cowen. Steven, your line is open. Please go ahead. Okay, great. Thanks for taking the questions. Two follow-up questions on OneDraw. You mentioned you're developing OneDraw, a OneDraw proteomics assay for the Cancer Moonshot. Could we get some more color on like what type of markers are gonna be in that assay and what types of tumors are going to be targeted in that assay? The second one, you mentioned you are in BD discussions with OneDraw. Any sense of timing there, or is that predicated more on U.S. FDA approval for at-home use? I'm gonna make a comment on the first one, and then if Bodi wants to add anything. We are currently working in this Moonshot Project, but we're not privy right now to some of the data that they're working on, so I cannot comment on that specifically. We do know that it's they're using that it's being used inside the military right now on testing for various oncological aspects, but I don't know anything more than what we've said. Bodi, do you wanna add anything? Just one more comment. Besides the proteomic, we're working on OneDraw. Independently, we're also exploring other omics with OneDraw. One development we have is we're exploring the possibility with the OneDraw device to collect blood and analyze the metabolomics, which is a very important factor that can potentially create a health scores for us. We're working on that, and we'll keep the team posted. Okay, thanks. About the BD timings of OneDraw. Yes. I would see that we hope to be able to put something into the public forum by the middle of the year. Okay, great. Similarly on the Microbiome Wipe, could you give us any business development updates there for its use by others as a medical device? We're exploring the possibility to register as a medical device in partnership with a medical device company. As we mentioned before, we have our core business focused on consumer. We're not a medical device company. We do not have a plan to register the device ourself. We're actively doing business developments in the United States. Meanwhile, also explore the opportunity for international, especially focusing on Asia. Yeah, some of the people, in Asia that have had an interest in the OneDraw device are, similarly doing the same thing in the microbiome pipeline. Okay, great. Thanks for the color on that. Then maybe if I could sneak one last one in. Could you provide any color on the brain health timing of launch? Thank you. Yeah. Go ahead, Michelle, because you're working on the marketing side. Yes. As it relates to the brain health launch, we're beginning our pilot beta testing right now, so really trying to identify the exact target market and finalize our testing profile, and we are hoping to launch by Q4. Also, Steven, I'd mentioned that a big part of this platform includes product development, and through our bioinformatics platform. I mentioned in the prepared remarks, SynaQuell. We are going to update everyone very soon on some of the clinical trial results coming out of the Mayo Clinic trial, which was run on concussed hockey players during the course of the season. Okay, great. Thank you. Thank you. As a final reminder, if you do wish to submit a question via the telephone lines, you can do so by pressing star followed by one on your telephone keypad now.