Intercure Ltd.

Good day everyone and welcome to Intercure's third quarter 2021 conference call. At this time participants are in a listen only mode. A question and answer session will follow management's remarks. This conference call is being recorded and a replay of today's call will be available on the events and presentation section of Intercure's website and will remain posted there for the next 30 days. I'll now turn the call over to Mr. Phil Carlson of KCSA for introductions and the reading of the safe harbor statement. Please go ahead, sir.

Good morning, everyone, and welcome to Intercure's third quarter 2021 earnings results conference call. A copy of the company's earnings press release is available on the news and events section of our website at www.intercure.co. With me on today's call are Mr. Alex Rabinovich, Intercure's chief executive officer, Mr. Amos Cohen, the company's chief financial officer. Today, we'll review the highlights of financial results for the third quarter 2021, as well as more recent developments. Following these formal remarks, we will be prepared to answer your questions. Before we begin, please let me remind you that during this conference call, InterCures management may make forward-looking statements made within the meaning of applicable security laws. Forward-looking statements may include, but are not necessarily limited to financial projections or other statements of the company's plans, objectives, expectations, or intentions. These forward-looking statements are based on current expectations that are subject to a number of risks and uncertainties that may cause actual results to differ materially from those expressed or implied in such statements. Factors that could cause actual results to differ materially include, but are not limited to, the risk factors contained in the company's filings with CDAR and the Securities and Exchange Commission. Please also note any forward-looking statements made here are, as of today, and except to the extent required by law, the company assumes no obligation to update statements as circumstances change. Also, please note that all amounts expressed during this call are in Canadian dollars or new Israeli shekels unless otherwise noted. Now I will turn the call over to Mr. Alex Rabinovich, Intercure's CEO. Alex, please go ahead.

Thank you, Phil, and welcome everyone to Intercure's third quarter 2021 earnings conference call. I'm delighted to be hosting our first earning call as a NASDAQ-listed company. This is an exciting time for all at Intercure family as we continue to execute our profitable growth strategy, establishing our leadership position, achieving new firsts and new records. This includes seven consecutive quarters of high-digit growth and improved profitability, five consecutive quarters with positive cash flow, crossing one ton mark in GMP medical cannabis product dispensed monthly, over 70,000 patients served, and achieving annualized revenues run rate of $100 million, increased gross profits, and a just EBITDA run rate of $23 million. This is one of the strongest performance of any NASDAQ-listed cannabis company. Before we dive into the highlights of the third quarter of earnings and other recent developments, I would like to briefly introduce you to Intercure and how we became who we are, the leading, profitable, and fastest growing cannabis company outside North America. Today, Israel-based Intercure is a leading global cannabis company with over 14 years of organic growth. We are one of the world's true cannabis pioneers. We are Israel's largest licensed cannabis company and we were one of the first to offer good manufacturing practices certified and pharmaceutical-grade medical cannabis products. For our participants from the United States who might not be familiar with these terms, I would like to explain a bit more. Besides the US and Canada, all major countries are in a different stages of implementing pharmaceutical standards and regulations of medical cannabis. These standards which also known as EU GMP or GMP, are much stricter towards the entire supply chain from genetics, cultivation to distribution and dispensing. For example, GMP medical cannabis is a physician prescribed from a testicle narcotic product dispensed only through authorized pharmacist by a licensed pharmacist. Although Israel is known as world leader in cannabis research, is also a leader in developing and implementing a federally endorsed regime for pharmaceutical medical cannabis. Since the implementation of this regime, pharmaceutical medical cannabis is prescribed by a growing number of physicians and medical experts for more than 60 medical indications. For some of these, pharmaceutical cannabis becomes a first line of treatment, setting a stage for a consistent 3-4 average monthly growth of patients. Medical cannabis is now the largest out-of-pocket Rx product sold in Israel with a run rate of over 40 tons dispensed annually. This medicalization process combined with growing public support has also set a clear pathway for legalization of adult use. Israel is few years ahead of all other international markets representing the future of international cannabis industry. These are exciting times as GMP medical cannabis continues to expand globally in Europe, UK, South America, Africa, and the Pacific, where policymakers are slowly implementing similar regulations. We strongly believe that as a proven leader, we are well positioned to capitalize on this global cannabis revolution, which begins with GMP medical regulation, and we believe it will be followed by legalization of adult use. Since 2008, our company has been developing, cultivating, and distributing our high-quality branded products offering with the largest GMP product portfolio to date. As a true pioneer, we were the first to import GMP medical cannabis using designated, fully loaded, tail-to-cockpit airplanes, the first company to export dry flowers to the EU, and the first Israeli licensed producer to become publicly traded in Tel Aviv stock exchange, following by a listing on TSX, and now we are also a publicly listed company on NASDAQ. We have built a market-leading international supply chain with a profitable, scalable, and vertically integrated seed-to-sell GMP standards operation and executed 14 years of organic profitable growth. We achieved much more than record profitable growth during those 14 years. We have grown from approximately 10 employees when we first began cultivation to over 320 employees today, in which more than 60 of them are specialized pharmacists. Additionally, we expand cultivation from our original 2,000 square feet to over 355,000 square feet of advanced climatized control facilities with a maximum capacity of 2 million square feet. Those are one of the largest and most advanced in the space, producing a diverse product range from ultra-medical strains for treating children with severe autism to high THC premium cookie strains. And we are constantly continuing to develop and launching new cultivars and ramp-up production to meet the growing demand for our branded products. We increased our pharmaceutical-grade distribution operation, which now covers 100% of the Israeli, UK, and German markets. In parallel, we're continuously expanding our leading and one-of-its-kind pharmacy chain focused on dispensing medical cannabis, which now includes 20 pharmacies, 14 of which are licensed to dispense medical cannabis. Leveraging the company's integrated unique operating model dedicated to serve the growing medical cannabis patient community, companies branded pharmacies are the top performing in the GMP regulation globally. Additionally, during the month of October, the company reached a record of one ton of medical cannabis products dispensed in one month. This represents our leading position with approximately 30% market share of the Israeli medical cannabis. Since 2018, we have increased our revenues from $3 million to a run rate of over $100 million, 33 times higher and keep growing. A key part of our strategy is our strategic partnership with some of the leading international pharma and cannabis companies. including SLE of Teva Pharmaceutical, Novolog, Tilray, Organigram, Fortmer, Charlotte-Webb, and Cookies. These strategic and exclusive partnerships emphasize our commitment to be the best in class across all factors. We are currently duplicating our winning model into new territories with evolving supportive regulation, and this includes Germany and the United Kingdom, and also Australia. It's important to note that recently Israeli regulators have begun implementing a reform on exportation of pharmaceutical-grade cannabis, enabling us to export our products for the first time in bulk. This will have a tremendous positive effect on our international business, especially as the target markets continue to evolve in implementing GMP medical cannabis programs. Behind all of this success is InterQ's management team and dedicated employees who have significant proven experience building leading international companies in highly regulated markets, and our chairman, Mr. Ehud Barak, who served as Israel's 10th prime minister. With that all said, I will now move to our third quarter results. I'm very proud to share that InterQ reported revenue of $25 million or 62 million new Israeli shekels for the third quarter of 2021, three times greater than the third quarter of 2020 and up 36% sequentially. This also represents the company's seventh consecutive quarter of high-digit growth and its fifth consecutive quarter with positive cash flow from operation. EBITDA for the third quarter of our cannabis sector approximately $6 million, or 14 million new Israeli shekels, increased driven by revenue growth, improvement in gross profit, and operating profit. These are impressive results, and Amos will speak more about our financials shortly. In addition to our strong financial results, I would like now to focus on some of the milestones we achieved throughout the quarter. On September 1st, We were pleased to commerce trading on NASDAQ, a significant milestone for our business and a testament to our success we have accomplished so far. In addition to the status of trading on one of the world's leading stock exchange, this listing also provide us with important capital to fuel our future growth. This NASDAQ listing also expands our visibility and access to both US retail and institutional investor sharing our execution and profitable growth journey as federal legislation and regulations are evolving in the U.S. and around the world. During third quarter, we acquired Canomed's retail assets. This includes two medical cannabis dispensing pharmacies with another pharmacy in the process of receiving its license as well as adding another medical cannabis patient support center to our operations. This acquisition is part of our consolidation strategy of the Israeli medical cannabis market, which began with our previously announced acquisition of Israeli licensed cannabis producer, Better. Since the integration process of these assets began, I'm happy to share with you that their revenues and profitability increased by more than 30%, representing the strength of our vertically integrated structure and our ability to execute. We were also the first company to meet the new importation requirement set by the Israeli Medical Cannabis Agency, also known as 109 Reg. Being able to meet the 109 requirement enabled us to resume importation from our strategic partner and since then we have successfully landed and released shipments from Tilray, Organigram and Fortmer Life Science. This impressive shipment supports only part of our leading dispensing operation capacity and the growing demand for our branded products. We expect to continue leading importation to Israel, meeting the evolving challenging regulatory requirements. We ramp up our cultivation and manufacturing in our southern facility site to full capacity, and together with our northern facility, we are now the largest cultivator in Israel to date. To continue meeting the growing demand for our high-quality branded products, we have begun the process of expanding our southern facility, including phase B of our post-harvest. During the third quarter, we completed a number of successful new product launches. It is worth noting that these new high-quality and high-CFC products quickly became some of the most patient-requested and the top-selling products showcasing the strength of our brand positioning within the market. In addition to these milestones, during the month of September, I purchased over 420,000 shares of our stock in the open market, valued at over $3.7 million. I did so because I believe that the company, InterQ, is undervalued, considering our leading position, financial performance, strong balance sheet, and proven ability to execute our strategy. Finally, post-period end, InterQ received 5.2 million shares back from the sponsors of our SPAC transaction. According to the agreement, the shares were subjected to free furniture from the SPAC sponsor based upon share price target criteria. The return of the shares to the company without cost adds significant value of approximately $56 million by current share price to all InterQ shareholders. We look forward to continue our strong momentum in the remainder of the year and throughout 2022 as we remain focused on operational excellence and executing profitable growth. I will now hand it over to Amos to discuss our financial results in more detail, after which I will have some more closing remarks.