Bzam Ltd

Good morning, ladies and gentlemen. My name is Sylvie, and I will be your conference operator today. Welcome to BASAM Limited's fourth quarter and full year 2022 conference call. To ensure an enjoyable experience for all participants, all lines have been placed on mute. Following the presentation, we will open the call for questions. If you would like to ask a question, simply press star, then number one. And if you would like to withdraw your question, please press star, then two. Note that this call is being recorded on Monday, May 1st. 2023. And I would like to turn the conference over to Mr. Matt Millich, Chief Executive Officer. Please go ahead, sir.

Thank you, Sylvie. Good morning, and thank you all for joining us for our Q4 and full-year 2022 conference call. Today, we will provide comments on our performance as well as an update on our operations and outlook. This call is being recorded, and the audio recording will be available on the company website at bazaam.com. Joining me on the call this morning is Sean Bovingdon, our Chief Financial Officer. Today's discussion includes forward-looking statements. We caution that such statements are based on management's assumptions and beliefs and are subject to uncertainties and other factors that could cause actual results to differ materially. I refer you to our news release in MD&A for more information on these assumptions and factors. With that, I will now turn to the financial results and our outlook going forward. Fiscal 2022 was a transformational year that has laid a foundation for the years ahead. The ZAM transaction that was completed in November 2022 has ushered in a new chapter in the company's history. The enhanced scale expands revenue generation opportunities while also serving to reduce operating costs. The integration is nearly complete, and we have been pleased with the results to date. we have seen revenues grow materially and have crystallized the expected cost savings. As of December 2022, BZAM increased its recreational market share to 4.7%, compared with 1.4% in December 2021, and has since surpassed 5% market share, making BZAM the sixth largest producer in Canada by share. The Q4 results were negatively impacted by one-time restructuring costs related to the BZAM transaction, as well as certain year-end provisions and revaluations. We expect to see the investment thesis come to fruition in the quarters ahead as the streamlined operations serve to decrease costs and increase margins. When paired with the substantially increased revenue resulting from the enhanced product suite and distribution synergies, We believe that our objective for positive adjusted EBITDA and free cash flow in fiscal 2023 remains intact. In fact, Q1 2023 has already demonstrated solid performance with approximately $24 million in net revenue booked, representing nearly 40% growth from Q4 2022. Capital efficiency remains at the forefront of our strategic initiatives. During the year, management completed a comprehensive review of operations to reduce costs and identify revenue generation opportunities. Initiatives taken in 2022 include right-sizing headcount, minimizing reliance on third-party service providers, and monetizing redundant assets. During 2022, we were pleased to complete all necessary steps to obtain EU GMT certification with final approval now pending. The company has established strategic distribution partnerships for cannabis-derived medical products, and upon receiving final approval, will be able to execute on these relationships. With that, I will now hand the call over to Sean to take you through the Q4 financial results. Following this, we will give some brief comments on the outlook for 2023 before taking questions.

Thank you, Matt. Good morning, everyone. With that, just going through some of the financial results, starting off with our gross revenue, which for the three months ended December 31st, 2022, was $24.8 million, an increase of 100% compared to the same period in the prior year of $12.4 million. Quarterly net revenues for the fourth quarter increased by 82% year over year to $17.2 million. This strong growth was driven by an increased demand for our core SKUs, the introduction of new products, and enhance distribution channels. Of note, excluding the impact of the Bazam acquisition from November the 3rd, Seagod's brand's gross and net quarterly revenues increased by 28% and 21% respectively year over year. This underscores the value of combining the two growing companies with significant momentum and complementary revenue basis. The company's direct gross loss before changes in fair value of biological assets for Q4 2022 was $2.7 million, representing a 15% direct gross loss margin. This loss was primarily driven, however, by non-cash adjustments for inventory provisions and depreciation. Normalized direct gross profit excluding these provisions was $3.5 million for the quarter, or 20%. This growth profit margin is expected to increase in 2023 as we increase capacity utilization and eliminate overheads connected to the redundant facilities that are currently held for sale. Cost control, as Matt mentioned, is a key focus for the company. Our team completed rigorous operational review during the year, and strides have been made across the company to improve profitability. Notably, in fiscal 2022, the adjusted SG&A was reduced to 57% of sales from 80% of sales in 2021. And this continues to decrease as a percentage of sales in 2023. This was the result of rationalizing headcount, transitioning to a dedicated in-house Salesforce team, and renegotiating our service level agreements with our vendors. The company ended the year with a net working capital position of $45.4 million, an increase of 77% from December 2021. The increase from prior year was supported by the inclusion of the BZAM current assets, allowing full utilization of our existing revolving credit facility. We expect the company's liquidity position to be further enhanced as the assets held for sale are monetized in the year ahead. This stable capital position provides a platform to execute on opportunities, which we are seeing throughout the cannabis sector. With that, I'll pass it over to Matt again to discuss the outlook.