Intercure Ltd.

Thank you for standing by and welcome to EnterCure's fourth quarter 2022 earnings call. At this time, all participants are in a listen-only mode. After the speaker presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 1-1 on your telephone. I would now like to hand the call over to Ori Mindelbaum, Investor Relations. Please go ahead.

Thank you, Latif, and good afternoon, everyone, and welcome to Intercure's fourth quarter and full year 2022 results conference call and webcast. A copy of the company's earning press release is available on the news and events section of our website at intercure.com. With me on today's call are Alex Rabinovich, Intercure's chief executive officer, and Amos Cohen, the company's chief financial officer. Today we will review the highlights and financial results for the fourth quarter and full year-end of December 2022, as well as more recent developments. Following these formal remarks, we will be prepared to answer your questions. But before we begin, please let me remind you that during this conference call, Intel Truth Management may make forward-looking statements made within the meaning of applicable securities law. Forward-looking statements may include, but are not necessarily limited to, financial projections or other statements of the company's plan, 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. Also, please note that unless otherwise indicated, all amounts discussed in this call and expressed today are in Canadian dollars or new Israeli shekels. Additionally, please note that the results mentioned pertain solely to the company's operation in the cannabis sector unless otherwise specified. And with that, I will turn over the call to Alex Rabinovitch, InterQ CEO. Alex, please go ahead.

Thank you, Ori. Shalom, everyone, and thank you for joining us for our fourth quarter and full year 2022 Irving School. 2022 was another successful year for InterQ as we continue to solidify our position as the largest, fastest-growing and profitable cannabis company outside North America. In line with our profitable growth strategy, we executed well on all fronts, This resulted in strong financial and operating results while further positioning Intercure for continued growth. In 2022, our revenue exceeded $150 million with adjusted EBITDA of $32 million. A significant achievement considering pharmaceutical grant regulation was only introduced less than five years ago and our first GMP prescribed product was dispensed in a pharmacy only in late 2019. Our remarkable profitable growth is a proof of our team's ability to execute with strong dedication to excellence, as demonstrated by our successful implementation of key operational decisions, capital investments, and strategic legal and regulatory victories. I am very proud of our team's delivering continued solid performance. These strong results are especially impressive when you take into account the slowdown in new patient recruitment in Israel during the first half of 2022. This was mainly due to the loss of physicians responsible for more than 20,000 market prescriptions as Minister of Health halted their license to prescribe medical cannabis. In the early days, we chose to focus first on leading the Israeli market, as we believe that any global leader has to dominate its whole market before expanding internationally. Although Israel is well known for its medical cannabis research, it's also developed and implemented the most advanced medical cannabis regulation to become today the biggest and most advanced pharmaceutical-grade market globally, with about 45,000 dispensed yearly. After four years since it was introduced, pharmaceutical cannabis represents about 15% of all prescribed pharmaceuticals in Israel, with a clear runway for this growth to continue. We expect market growth to resume as the Minister of Health announced a new reform known as the prescription reform that will cancel the need for a special license and will allow any physician to prescribe medical cannabis under the public health care system. Of the latest INCB UN guidance, the Israeli Ministry of Health is expecting major growth of the market in 2023 to 85 tons, up from 49 tons in 2022, marking expected growth of over 70%, assuming this reform implemented. If the new government in Israel assembled, The new Ministry of Health stated that the new reform would be implemented soon, and while patients suffering from current bottleneck of lack of prescribing doctors, many companies in the industry are struggling from continued losses and lack of capital. Companies are exiting the market and liquidizing their products with some short-term effect, especially on low and mid-quality products, which Amos will elaborate more on the financial results. Eventually, for 2022, patient count grew only 18%, while intercure grew 77%, emphasizing the strength of our leading platform. And we believe this commission represents an opportunity to grow our leading share organically and inorganically, even before barriers will be lifted and the market growth will resume. During 2022, we've also scaled up our up-splain operation by upgrading the solvent facilities, post-harvest, nursery, and growing areas. This further solidified Kandok's solvent cultivation site as one of the largest and most advanced facilities of its kind in the industry. Our expert teams have also successfully added and produced tens of new highly demanded strains into their growth cycles, including premium high THC cookies cultivars, humble genetics, and some of the industry's top shelf products. In the total, during the year, we successfully launched more GMP products than any other company in the industry. Committed and named, will remain focused on increasing not only our local cultivation in Israel, but also our global exclusive strategic partnership. During the year, we have been able once again to be the first company to meet the strict new 109 protocol and resume importation from our partners to Israel. Although the Israeli regulators are constantly hardening the importation process, we are well prepared for future evolving regulations with the best teams and pharmaceutical labs globally. As our core markets are growing and evolving, we are also increasing the high-quality supply of our existing strategic partners and evaluating new potential strategic partnerships. We have extended our successful exclusive partnership with Organica, a world-leading indoor grower, to supply us with up to 20 tons of our chosen genetics, extending its reach into our core markets in Europe and UK. We also announced expansion of the company's partnership program, forming a collaboration with the leading cannabis brand, Binz, to develop and offer a range of non-flour cannabis products which we believe will significantly enhance our product portfolio and further strengthen our market position. Both the Ministry of Health in Israel and the Ministry of Economic have eased the process of exportation, enabling us to ship pharmaceutical-grade cannabis products in any format to any legal markets in the world. I am happy to update that our teams have made great achievements and successfully completed export of InterQ's products to our EU hub preparing for EU GMP commercial launches in UK and Germany. We expect commercial export achievements to ramp up in the coming quarters. We have built a unique international supply chain that can supply every core market with our winning branded product portfolio, and we will continue to scale up our upstream operation in the coming quarters. Moving on to downstream. Keeping with our C2C model, we've expanded our one-of-its-kind dedicated medical cannabis dispensing operation during 2022. At the end of 2020, our specialized medical cannabis pharmacy chain was comprised of only three locations. As of December 2020, our chain includes 28 doors. We have developed 26 locations across Israel's major cities, out of which 20 are actively dispensing medical cannabis and six are in the process of obtaining the license to dispense. Growing our cannabis dispensing footprint more than nine times in the last three years has positively impacted our businesses while ensuring patients receive the highest quality service from more than 90 highly trained, specialized pharmacists. In 2023, we expect to add several more locations, and with that, all currently 26 will be fully running and operational. Our leading pharmacy chain will have a full national footprint. During 2022, we have developed two new locations outside Israel, which included Cookies branded shop in Vienna, Austria, which is up and running, and the pharmacy under development in the heart of London, UK. International expansion is one of our main goals ahead. As most of the world is taking a medicalized approach towards cannabis, a rapidly growing number of countries are adopting our unique and strict pharmaceutical cannabis regulations. In fact, the list includes more than 40 countries that are in various stages of adoption. Pharmaceutical-grade cannabis regulation is indeed becoming a world standard. Improving by avoiding other companies' mistakes, we carefully expanding our reach by duplicating our winning model in the UK, Germany, and Austria. All of these markets are in early stages, a few years behind the Israel market in product quality, but with similar competition and regulation. Our 15 years of know-how and execution, proven model and leadership position sets us up to succeed in every territory with supportive regulatory framework. Before I hand over the call to Amos, I want to know that 2022 has concluded 15 years of organic growth and one of our best year to date. During 2022, Intertour achieved Record revenues of approximately $150 million, 77% more than the revenues of 2021. Our gross profit increased to over $60 million, representing 41% of revenue. And adjusted EBITDA increased to $32 million, representing 22% of revenues. Net profits after tax were just under $17 million, generated $20 million cash flow from operations, and we ended the year with $95 million cash in hand and a solid balance sheet. As our target markets are evolving, we remain focused on execution with financial discipline while navigating through regulatory barriers and market challenges. While favorable regulatory cannabis reforms are on the horizon in Israel, Germany, and many other markets, we expect our growth journey to continue as we remain focused and committed to expand our leading platform, building shareholder value and improving quality of life for patient communities across the world. And now, I will turn the call over to our CFO, Amos Cohen, following which we will open the line for Q&A. Amos, the floor is yours.