Clever Leaves Holdings Inc.

Good day and welcome to the CleverLeaves first quarter 2023 earnings conference call. All participants will be in a listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star, then one on a touchtone phone. To withdraw your question, please press star, then two. Please note this event is being recorded. I would now like to turn the conference over to Jackie Keschner, Gateway Group Director of Investor Relations. Please go ahead.

Good afternoon, everyone, and thank you for participating in today's conference call to discuss Cleverleaf's financial results for the first quarter ended March 31st, 2023. Joining us today are Cleverleaf's CEO, Andres Fajardo, and the company's CFO, Hank Haig. 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-Q for the quarter ended March 31, 2023, which was filed prior to this call, as well as other filings made by Cleverleafs 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 and 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 condition 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. During the first quarter, we continued to execute on our strategic growth objectives, leveraging our commercial momentum in our core cannabinoid markets and our meaningfully improved cost structure. We generated particular sales strength in Brazil and Israel, and we drove sequential and year-over-year margin improvements in our non-cannabinoid segments. In addition, we have progress on ramping our Colombian smokable dry flower shipments and completing the wind-down of our operations in Portugal. Importantly, we have reduced our operating expenses by 48% year over year, reflecting the benefits of our restructuring and cost optimization initiatives. With these changes, we were able to reduce net loss by 75% and reduce adjusted EBITDA loss by 35% as we continue to navigate our path to cash flow positivity. We came into 2023 with an emphasis on three key strategic areas of growth. our focused commercial strategy, our low-cost, high-quality production in Colombia, and our optimized cash management. I will share a brief update on our recent progress in each of these areas, starting with our Colombian production operations. As we previously disclosed, we are now exclusively cultivating and producing our products out of Colombia, from supporting our existing extract business to progressing early launch and ramp efforts for our flower exports. To optimize our cultivation process, we have maintained reduced harvest levels relative to the year-ago quarter, reflecting our continued focus on cultivating THC flour for export and processing our existing CBD inventory for extract sales. We ultimately expect to leverage these operations' expansive mature capacity, advantageous cost structure, and optimal agricultural climate to drive greater operational efficiencies and cost reductions over time. To further catalyze these efforts, we partnered with Pretorian Global, a leading US-based brand owner that operates the Binx brand and an intellectual property provider to the global cannabis and hemp industry. Under the terms of this agreement, we will work with Pretorian to select specific flower strains for initial cultivation trials at our Columbia facilities, with the goal of producing premium quality cannabis flowers and downstream products for distribution to the European Union, United Kingdom, and Australia by Q2 of 2024. From an R&D perspective, this partnership allows us to combine our cultivation and development know-how with Pretoria's production-efficient, high-yield, and flavor-forward genetics. Developing and launching these products also enables us to build on our existing traction in Australia and Europe while establishing our early pathways into the UK. From a production standpoint, one of our key operational priorities has been completing and supporting the launch of our Colombian dry flower exports. We have already sent our first commercial shipments of our Colombian grown flower product to both Australia and Germany. The completion of our flour shipments to both of these core markets represent a key operational milestone. We soon expect to complete sales to pharmacies, and from there, we continue to target ramping flour shipments to the UK and Israel by end of 2023. We will further fine-tune our products and processes in response to the respective market feedback we receive from these shipments. As we have discussed in relation to our prior flour production in Portugal, Adapting our products to the evolving requirements of the core markets is an imperative and ongoing step towards scaling our Columbia flower shipments. With these market-specific evaluations underway, we're maintaining a focused approach to strain development to ensure we are prioritizing the highest quality and most commercially viable genetics. At present, we're focused on refining two or three individual strains, and we will provide updates on new strain launches in our target markets as they reach completion. Moving into our focus commercial strategy, we have continued to activate and rampart commercial pathways across the core markets we identified for 2023, which comprise Australia, Germany, Brazil, Israel, the United Kingdom, and Colombia. This work includes both building upon the inroads we have already established and signing new partnerships to take a deeper into our earlier stage markets. And I will share some recent developments on these fronts. In Brazil, our largest market during Q1, sales of our approved products under RDC 327 have continued to run, and they served as a strong driver of our cannabinoid revenues in Q1. Most recently, we announced a five-year agreement to supply CBD-dominant products to Hypera, one of the largest Brazilian multinational pharmaceutical companies. Through our partnerships with Green Care and Hypera, we expect to significantly grow in the Brazilian cannabis market. The CBD products manufactured under these agreements are registered under RDC 327 and they are already being sold to drugstores and pharmaceutical distribution channels. We look forward to further supporting these partnerships and expanding our presence in the Brazilian market. In Australia, we were able to sell the vast majority of our remaining Portuguese flower inventory. As we previously shared, our Portuguese flour has historically received strong market feedback in Australia, given its high THC content, butt size, and terpene profile. We aim to build upon this track record as we launch and scale our Colombian flour exports in Australia. The sales of our Portuguese flour to Australia also aid the progression of our wind-down process. However, even our Portuguese production operations have fully ceased, Please note that we are now accounting for items related to our Portugal operations, including these sales under discontinued operations. You will see this change reflected in our Q1 2023 financial presentation and year-over-year comparisons, as Hank will describe in greater detail shortly. In Israel, we have continued to sell APIs in the form of isolates and extracts, and we're in the process of preparing our flour to be launched later in the year. Finally, we continue to expect our first shipments of cannabinoid products to the UK in the coming months. To touch our third growth objective, optimized cash management, our wind-down process in Portugal has continued to proceed smoothly. We undertook this process as part of our ongoing restructuring initiatives with the aim of capturing greater cost and capital efficiencies as we leverage our existing production advantages and minimal capex needs in Colombia. As of the end of the first quarter, our Portuguese flower cultivation, post-harvest processes, and manufacturing activities have all ceased in full, and we have completed the bulk of our workforce reductions. We continue to track towards the completion of our wind-down activities, and we expect our operational transition to drive increased savings by the end of this year. With our strategic progress during the first quarter, we believe we have built a solid foundation for continued execution on these objectives through the remainder of 2023. I will describe our opportunities and objectives 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 first quarter financial performance.