BioHarvest Sciences Inc.

Greetings and welcome to the BioHarvest Sciences first quarter 2025 corporate update conference call. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation. As a reminder, this conference is being recorded. Before we begin the formal presentation, I'd like to remind everyone that statements made on today's call and webcast, including those regarding future financial results and industry prospects are forward-looking and may be subject to a number of risks and uncertainties that could cause actual results to differ materially from those described on the call. Please refer to the company's regulatory filings for a list of associated risks, and we would also refer you to the company's website for more supporting industry information. In addition, throughout today's call, the company may refer to adjusted EBITDA, a non-IFRS financial measure, which it believes provides helpful information to investors about the performance of the business on an ongoing basis. A reconciliation of adjusted EBITDA to its most directly comparable IFRS financial measure is included in today's earnings release, which is available on the BioHarvest website under the Investors tab. If you require operator assistance, please press star then zero. On our call today, we have Chief Executive Officer Ilan Sobel and Chief Financial Officer Bar Dichter. I would now like to hand the call over to CEO Ilan Sobel. Ilan, the floor is yours.

Thank you, operator, and good afternoon, everyone. I'm pleased to welcome you to today's first quarter 2025 Corporate Update Conference Call. For those of you who are new to our story or joining us for the first time, I would like to introduce our company and background very quickly. BioHarvest Sciences is a biotech innovator and the inventor of botanical synthesis, a proprietary platform technology process which synthesizes plant-based compounds without having to grow the plant. Rooted in plant cell biology, botanical synthesis provides consistent, reliable, economically viable, and patentable potent non-GMO biological compounds for the use in the pharmaceutical, nutraceutical, cosmetic, and nutrition industries. We at BioHarvest have spent over 15 years perfecting our patented botanical synthesis technology platform. providing an alternative for non-GMO production of plant-based biological compounds without the need to grow the entire plant. And in fact, only requiring us to use the physical plant once in the initial stages of our process to develop a valuable perpetual cell bank. Our botanical synthesis platform technology allows for the creation of consistent botanical compounds with much greater levels of potency than what is produced by the plant. This is achieved via the platform technology's ability to develop valuable cell banks which produce a mirror of the phytonutrients or phytomedicinal compounds contained in the plant, but at magnified levels of potency for specific targeted molecules, and the ability to multiply these cells in industrial-scale bioreactors to produce a final soluble, bioavailable, and highly efficacious end product. The platform technology also gives us the ability to address significant unmet market needs across the pharmaceutical, nutraceutical, cosmetics, and nutrition industries, both with our own BioHarvest branded products sold via our direct-to-consumer health and wellness products business and by developing molecules or compounds for industry partners via our CDMO services business units. In the first quarter of this year, we continued to scale both our products and CDMO business units. Revenue rose 47% year-over-year to $7.9 million, exceeding our $7.8 million guidance, driven by balanced growth in the Vineyard business across both our Vineyard.com website and our Amazon business. Total active subscribers as of February 2025 reached a major milestone, exceeding 50,000 consumers in the USA, and recurring subscribers comprise a very healthy 90% of revenue of our Vineyard.com platform. In the Amazon channel, which represents a healthy 20% of our business, we saw continued improvement in key performance indicators such as customer conversion, repeat purchase rates, and return on advertising spend, otherwise known as ROAS. We are continuing to operationalize our strategy to broaden the reach of VINIA into new consumer segments with our expanded portfolio of VINIA product offerings, while also reinforcing our core value proposition with existing customers anchored in delivering the multiple benefits of Vinaya for approximately $1 per day. We also improved growth margins by 227 basis points to 58.5%, up from 56.2% a year ago, driven by the benefits of scale including finalizing the implementation of 22% larger bioreactors, as well as other savings and cost efficiencies across the business. The continued scaling of our business, combined with the yield improvements we are generating from our efforts to digitize the biological metrics in our production process, positions us well for ongoing operational improvements and a structurally stronger margin profile. It's important for me to acknowledge that these significant gross profit margin gains that we have achieved over the last two years have been all through our efforts to drive scale and efficiencies in the business as we have continued to maintain the same retail price across all our capsule-related SKUs for the last four years since entering the USA on May 12, 2015. Now I'd like to turn to our Direct-to-Consumer Health and Wellness Products Division. Our Direct-to-Consumer Health and Wellness Products Division is led by Vinya, our flagship red-grave cell-derived nutraceutical, sold direct-to-consumers accounting for the majority of our revenue. Vinya delivers a full matrix of red grape polyphenols, including Pyrethes resveratrol at 100 times the level of what is found in the red grape itself, and has been clinically shown to significantly increase arterial dilation after 90 days of consuming one 400 milligram capsule every day. This increased arterial dilation improves blood flow, enhances both physical energy and mental alertness and other critical longevity-related metrics. Vinya is quickly earning a reputation as being a premium, high-quality product and recognized by consumers and the industry as a leader in driving enhanced blood flow delivery and its derived benefits. As of today, we have surpassed 9,000 verified customer reviews with a 4.8 out of 5 rating. And we look forward to shortly reaching the milestone of 10,000 reviews. I'm proud to say that despite a significant pricing premium relative to competitive products, which is in some cases more than 100% premium, Vignier is always a top 10 performer in its Amazon category, and often over the past few weeks we have entered into the top 5 positions. we have now surpassed more than $55 million of lifetime revenue. And I feel we are still just tipping our toes into the ocean as far as the opportunity is concerned, as consumers today increasingly realize the integral relationship between blood flow, quality of life, and longevity. Q1 saw the rollout of our Vineyard Superfood Tea line-up in individual tea sachets, and we are seeing encouraging results with very positive feedback on the product quality and taste, as demonstrated by our 4.9 out of 5 rating on Amazon. In the course of this quarter, we will roll out two new SKUs in our Vineyard Superfood Tea lineup, with the rollout of an English Breakfast Tea and Matcha Green Tea in K-Cup compatible pods. We will also build upon our product line of Vineyard Superfruit Coffee, where we have sold to date more than $2.5 million of coffee since launching in December 2023 across a regular and a decaf coffee in K-cup compatible pods, just two SKUs. Our new product will be Vineyard Espresso in Espresso compatible pods, targeting the 5 million plus households that today have Nespresso compatible machines. I'm excited to say that as we speak here today, we are preparing to launch our Vinia Daily 2X Formula Chews. This is a double dosed 800 milligram format designed for highly active consumers and athletes in a great tasting grape flavored chew. Importantly, These two are InFormSport certified. InFormSport is the world's leading testing and certification program for brands producing sports and nutritional supplements. It is recognized by sporting and governing bodies, anti-doping bodies, and nutrition industry organizations, and the armed and special forces. The InForm Sport Certification ensures the highest quality and safety for athletes and professionals as every batch of product produced is required to undergo testing for over 2,000 banned substances. This certification is a critical enabler for being able to penetrate into the professional and amateur sporting markets as well as military channels where it has a significant role to play given its unique blood flow derived benefits. The second half of this year, we'll also see the rollout of our Vinia blood flow hydration powdered beverage lineup, which we will use to disrupt the multi-billion dollar hydration and sports drink categories. Our product lineup will be uniquely differentiated as being the only sports drink or hydration beverage which delivers hydration benefits backed with the power of superior blood flow. We will educate consumers about the important relationship between blood flow and hydration, given the critical importance of having high-performance blood flow levels in our body to best transport the water and electrolytes to all of our body's cells. I'm looking forward to sharing further developments of this launch over the next few months. The expansion of our Vinny Insight Strategy with additional vineyard product lines, provide consumers with superior science, superior efficacy and superior taste, while allowing BioHarvest to address a highly incremental, younger consumer and capture incremental revenue from this important market segment. As part of this effort, we are also in the process of activating incremental marketing channels, such as podcast integrations, TikTok, and a health and wellness influencer program. Whilst Venia product innovation represents a significant incremental revenue and gross profit opportunity for BioHarvest, we are excited to add in 2026 our Oliver Bosco side sales. In March this year, we shared in vitro results showing our olive verboscicide cell compound reduced fat accumulation in human liver cells. With further clinical support, we plan to launch this product in 2026 to the market and to our highly engaged subscriber base, which represents an immediate significant revenue opportunity for the business. Overall, Our direct-to-consumer health and wellness products division has proven the potential of our botanical synthesis technology and the significant market demand for high-performing plant-based non-GMO compounds that we provide. I'm personally super excited by the innovation lineup we have for our direct-to-consumer business over the next 24 months. I would like to now turn to our CDMO services division. One year ago, we launched our CDMO, Contract Development and Manufacturing Organization, Services Division, to give industrial partners, leaders of industry, access to botanically synthesized non-GMO proprietary compounds via our botanical synthesis technology. This strategic move was made to deliver on the company's North Star, to discover, develop, manufacture, and democratize life-changing plant compounds that improve the health and wellness for hundreds of millions of people whilst protecting the planet for future generations to come. Our CDMO unit develops patentable plant-based compounds for pharmaceutical, nutraceutical, cosmeceutical, and nutrition customer partners. These complex molecules offer faster development, lower cost of development, improved safety, and scalable production that others simply can't match. We've built robust infrastructure with the tools and scientific talent that we have to handle multiple projects in parallel while sourcing plans ethically. Our proprietary AI tools, which we have developed internally, are producing tangible results in driving optimization across our R&D processes, including playing a critical role in discovering new high-value compounds. We can deliver trial-ready biomass in 9 to 15 months and scale to full production within 20 to 24 months. generating high margin revenue through non-recurring engineering fees from our CDMO customers. Successful programs then moved to royalty-based manufacturing, providing long-term recurring revenue and potential equity upside. To date, we've already signed multiple CDMO customers, including a marquee partnership with Tate & Lyle to develop next-generation plant-based zero-calorie sweeteners. Our selective strategic R&D focus targets high-impact projects with strong commercial potential. And to that end, I'm very pleased to share that we've successfully completed stage one of development for a major CDMO program with a NASDAQ-listed pharmaceutical partner. This is a major win for our company and a sign for what is coming. I want to remind our investors that stage one carries the highest development risk. And this achievement underscores the adaptability of our botanical synthesis platform technology to diverse molecule and compound types. With a high likelihood of continued progress over the next 12 to 18 months, we're on track for volume manufacturing and broader CDMO growth as the platform proves itself over time. The R&D experience gained in Stage 1 has sharpened our analytical capabilities, further strengthened by our proprietary AI tools, and will enhance the efficiency of future CDMO projects across a wide range of compounds. Before passing the call off to our CFO, Bart Dichter, I'd like to remind the market of our 2025 growth strategy. Our growth model is guided by the principle of balancing growth with profitability while achieving scale. We have elected to reach adjusted EBITDA break-even at $11 to $12 million in quarterly revenue, which we expect to achieve in the second half of 2025. This approach enables continued investment in three critical strategic areas. One, expanding our direct-to-consumer portfolio by scaling our veneer compound with new products enabling us to penetrate new channels, improve funnel conversion, and reducing customer acquisition costs, while launching new clinically-backed compounds like our olive cell product focused on liver health. Two, investing in R&D to drive critical process improvements. utilizing new technologies, many being applied from other relevant industries and applied to our processes, which we call Botanical Synthesis 2.0, aimed at further improving gross margin in our manufacturing organization and the speed of compound development in our CDMO. And three, building AI-powered CDMO tools to speed up go-to-market timelines for compounds we develop, as well as to improve efficiency levels, translating to lower R&D costs required for the development of each compound. Long term, we target a 20% adjusted EBITDA margin for our direct-to-consumer health and wellness products division, with even higher margins expected in the CDMO. These initiatives support our mission to deliver high-impact, life-changing compounds across multiple delivery formats and high-value wellness categories, driving strong lifetime value and accretive margins. With that, I'd now like to turn the call over to our CFO, Bar Dichter, to review our financial results for the quarter ended March 31, 2025. Bar, over to you.

Thank you, Ilan, and good afternoon, everyone. I will provide you with a succinct review of our financial results. A full breakdown is available in our SEC filings and in the press release that crossed the wire after market closed today. Please note that all figures are in U.S. dollars unless stated otherwise. Revenue for the first quarter of 2025 increased 47% to $7.9 million, which exceeds our prior revenue guidance. as compared to 5.3 million in the first quarter of 2024. The interest was as a result of the continued success of our Vinnia family products. Gross profit increased 53% to 4.6 million, or 58.5% of total revenue in the first quarter of 2025, as compared to 3 million, or 56.2% of total revenue in the same year-ago quarter. The increase in gross margin was primarily driven by benefits of increased manufacturing scale and improved manufacturing yield. Total operating expenses for the first quarter totaled $6.3 million as compared to $4.4 million in the same year-ago quarter. The increase in operating expenses was primarily due to increase in marketing spend, which was reduced on a percentage of revenue to 46.8%, as compared to 48% in the same year-ago quarter, and the higher expenses from the CDMO service division. General and administration expenses increased 67% in the first quarter of 2025, but declined by 6% versus Q4 of 2024, reflecting an increase in operating leverage as the company continued to scale. Net losses for the first quarter of 2025 totaled $2.3 million, or $0.13 per basic and diluted share, as compared to a net loss of $6.6 million, or $0.48 per basic and diluted share, in the same year-ago quarter. Adjusted EBITDA loss. A non-IFRS measure totaled at $1.4 million in the first quarter of 2025, as compared to an adjusted EBITDA loss of $1.1 million in the same year-ago quarter. Cash and cash equivalents. as of March 31, 2025, totaled $3.4 million as compared to $2.4 million as of December 31, 2024. During the quarter, we raised $3.9 million in debt financing, primarily from existing investors. I would like now to pass the call back to Ilan to offer some closing remarks, after which we will begin our Q&A session.