Clever Leaves Holdings Inc.

Good afternoon and welcome to the CleverLeaf Q4 and Fall Year 2022 earnings call. All participants will be in a listen-only mode. Should you need any assistance, please say no for operator by pressing the star key followed by zero. After today's presentation, you'll be having an opportunity to ask questions. To ask a question, you may press star then one on your telephone keypad. To cancel your question, please press star then two. Please note, this event is being recorded. I'd now like to turn the conference over to Ms. Jackie Kashner, Director of Investigation. Please go ahead.

Good afternoon, everyone, and thank you for participating in today's conference call to discuss Cleverleaf's financial results for the fourth quarter and full year ended December 31, 2022. Joining us today are Cleverleaf's CEO, Andres Fajardo, and the company's CFO, Hank Hague. Before I introduce Andres, I remind you that during today's call, including the question and answer session, statements that are not historical facts, including any projections or guidance, statements regarding future events or future financial performance, or statements of intent or belief, are forward-looking statements and are covered by the safe harbor disclaimers contained in today's press release and the company's public filings with the SEC. Actual outcomes and results may differ materially from what is expressed in or implied by these forward-looking statements. Specifically, please refer to the company's Form 10-K for the year ended December 31, 2022, which was filed prior to this call, as well as other filings made by cleverly with the SEC from time to time. These filings identify factors that could cause results to differ materially from those forward-looking statements. Please also note that during this call, management will be disclosing adjusted EBITDA, adjusted gross profit, and adjusted gross margin. These are non-GAAP financial measures as defined by SEC Regulation G. Reconciliations of these non-GAAP financial measures to the most directly comparable GAAP measures in a statement disclosing the reasons why company management believes that adjusted EBITDA, adjusted gross profit, and adjusted gross margin provide useful information to investors regarding the company's financial conditions and results of operations are included in today's press release that is posted on the company's website. With that, I will turn the call over to Andres.

Thank you, Jackie, and good afternoon, everyone. Our fourth quarter on full-year results reflect the strategic progress we have made across our target markets, as well as the development of a leaner, more efficient operational foundation for our business. Across our key metrics, our full-year performance came in line with our revised 2022 financial outlook. In fact, the 90% year-over-year growth that we generated within our cannabinoid business for the year allowed us to exceed our revised top-light guidance targets, even as we continue to experience revenue headwinds stemming from broader macroeconomic pressures in our non-cannabinoid business. From a cost perspective, we expect that the steady expense reductions and restructuring initiatives we implemented throughout the year will allow us to operate with greater operational and capital efficiency. As we continue to progress our strategy, we remain focused on further optimizing our foundation in 2023. At the outset of 2022, we announced a refined strategic focus for cleverness. In this new approach, we aligned our commercial efforts on a select set of international core markets with near-term catalysts, and we worked diligently to optimize our cost structure and balance sheet to best support these pipeline opportunities. I am proud to say that we made progress on these fronts during the year. On the commercial side, we announced several new partnerships for our extract and flower products. and we activated, ramped, and expanded some of our key commercial pathways across our target markets of Australia, Brazil, Germany, and Israel. In addition, we welcomed the completion of Colombia's regulatory framework for dry flower exports and continued our preparations for launching our own commercial flower shipments out of Colombia. One significant recent strategic step we announced earlier this year is the wind-down of all of our operations in Portugal and transitioning our operational focus solely to Colombia. In line with our ongoing restructuring initiatives, we've worked to have our Portuguese flower cultivation, post-harvest process, and manufacturing activities ceasing full by the end of the first quarter of 2023. Currently, We are exclusively cultivating our flower strains in Colombian greenhouses, where we expect to leverage our expansive, mature, environmentally sustainable, and cost-effective production infrastructure. With over 1.8 million square feet of fully built-out cultivation capacity and the UGMP certifications for the production of both cannabis extracts and dry flower, we have significant capacity to meet consumer demand and reach our key international markets. In addition, Colombia's lower cost structure and optimal agricultural climate continue to give us a critical competitive advantage, allowing us to drive greater production and cost efficiency. With our existing production infrastructure, we believe we are well positioned to ramp quickly in Colombia to serve our global customer base while maintaining our focus on growing premium and commercially viable strains. As we have previously shared, we expect Colombia flower sales to be a significant avenue of growth for us this year. as we work diligently to improve the quality and key characteristics of our flowers, such as THC content, terpene profile, bud size, and density. Our Colombian operations house a genetic discovery and development platform, comprising of outside strains from major cannabis brands and in-house development products, and we expect that successful output from the program will expand as we accelerate our dry flower production and continue making key product market fit improvements for our core geography. We're currently on track to complete our first commercial flower shipment from Colombia to Australia by early in the second quarter. We have completed some early test shipments with a focus on scaling our shipping process once our initial commercial shipment is complete. With our first commercial shipment targeted for Australia, we then aim to ramp shipments to Germany, the UK, and Israel by the end of the second half of this year. We believe our robust and efficient foundation in Colombia will allow us to optimally launch our flour exports while supporting the continued growth of our extract business. We have continued to focus exclusively on THC flour product development while using our existing inventory for extract sales. We have significantly reduced our Colombian harvests year over year to manage the inventory buildup and focus on the right strengths. And this decrease in new harvests, our ongoing extraction and processing costs, and the forthcoming incremental cost contributions related to the harvest and post-harvest processes for dry flour will pressure our all-in cost program in the near term. However, we believe that right-sizing our inventory levels will allow us to be efficient with our cash spending, besides having some reduction in costs to produce our cannabinoid products, as we will not have the higher expenses related to our Portugal operations going forward. The operation of footprint optimization, which resulted in the winding of our Portugal operations, was part of a broader effort we have been working on to optimize our cash use. In March, we went through a leadership change that resulted in profound restructuring of the company's executive team and top-level organization, which was in line with a focused strategy for profitable growth. Similarly, we reduced and right-sized headcount across all of our operations, optimized spending across all our functions, and reassessed all CapEx projects, resulting in an 82% CapEx reduction as compared to 2021. From a balance sheet perspective, we paid off two of our largest remaining pieces of debt. In sum, we implemented varied restructuring activities that we believe will allow us to drive greater costs and cash-use savings in 2023. Finally, in our non-cannabinoid segment, we experienced some headwinds across certain channels as retailers reduced inventory levels at the warehouse level. During the fourth quarter, this primarily occurred across our smoke shop and alternative channels, and nearly all of our channels saw reduced union volumes as a result of broader macroeconomic pressures on consumer spending. To help mitigate these effects, we've implemented select pricing increases, and we're closely monitoring how macroeconomic conditions evolve over the coming months. That said, we believe that the depth and breadth of our retailer and distribution relationships will help us navigate further variability in this segment. With the significant improvements we've made to our cost structure and the minimal capex required by our Colombian operations, we have built a linear operational framework for this business, one that I believe will allow us to make greater progress towards cash flow positivity. From a commercial standpoint, we expect to concentrate our efforts on the core target markets we've announced for this year, Australia, Brazil, Israel, Germany, the United Kingdom, and Colombia. As we build upon the market pathways we have developed and position ourselves for additional near and long-term catalysts in these markets going forward. I will describe our opportunities and objectives in these markets in greater detail later in the call. But first, I'd like to turn the call over to our CFO, Hank Haidt, who will discuss our fourth quarter and full-year financial performance in greater detail. Hank?