Entourage Health Corp

Good morning, everyone, and welcome to the Entourage Health Corp third quarter 2022 conference call. At this time, all participants are in listening mode and the conference is being recorded. After the presentation, there will be an opportunity for analysts and members of the media to ask questions. To join the question queue, you may press star then one on your telephone keypad. Should you need assistance during the conference call, you may signal an operator by pressing star then zero. A replay of this call will be available on the Entourage Health website later today and will remain posted for 90 days. I would now like to turn the conference over to Marianela de la Barrera, Senior Vice President, Communications and Corporate Affairs with Entourage Health. Please go ahead, Ms. de la Barrera.

Thank you, Gaylene, and good morning, everyone. Welcome to Entourage's third quarter 2022 results conference call. Please note, as noted, this call is being recorded. For copies of our financial documents filed on November 14, 2022, or our press release issued this morning, or to retrieve a recording of this call, please visit our investor relations page of our website at www.entouragehealthcorp.com. The replay will be available later this afternoon. With us today is George Skorseth, Chief Executive Officer and Executive Chairman of Entourage Health, as well as Vani Maharaj, our Chief Financial Officer. Today, we will review the business highlights and financial results for the third quarter as well, discuss recent developments. Following formal remarks, we will open the floor for questions. I would also like to remind you that during today's call, we will discuss our business outlook, which will contain certain forward-looking statements. Actual events or results could differ materially from those expressed or implied by such forward-looking statements due to several risks and uncertainties, including those mentioned in our most recent filing with CDAR. These comments are made based on predictions and expectations as of today. Other than as required by applicable securities laws, the company does not assume any obligation to update or revise them to reflect new events or circumstances. Now at this time, it is my pleasure to introduce George. Go ahead, George.

Thanks, Marinella, and thank you to everyone for joining us this morning. Before we kick off the review of our results for the period, I wanted to address the news we issued alongside HECSO earlier this morning. We signed a long-term supply agreement to purchase bulk cannabis from HECSO to meet our supply, demand, and distribution commitments. More to come on this, but for now, we see this as a very positive development for our business. This will ensure we do not miss out on any of our fulfilling or any of our large purchases ever again. Moving on to our results, while I'm optimistic of what's to come, I can tell you that our last two quarter results prompted us to accelerate many of our optimization choices and move quicker towards our strategic priorities. For starters, In Q3, we generated $10.1 million in net revenue, which is marginally up from the second quarter, but down year over year due to a few macroeconomic factors in the market. And frankly, the product shortages I just alluded to, which impacted our ability to fill some of our orders. Despite these challenges, we continue to be agile, and we are taking steps to accelerate our path to profitability. Engaging with strategic partners and optimizing our operations will serve to strengthen us and get us to EBITDA positive in Q2 2023. Our strategy revolves around three priorities that contribute to my confidence in this statement. Firstly, optimization and simplification of our business strategy with a focus on our core competencies. Secondly, cost synergies that reduce our operating expenses. And lastly, investing in our commercial capability, distribution, and innovation to accelerate growth. I'll break each one down to further explain, starting with our first objective, optimization and simplification of our business strategy. As part of our growth strategy for 2023, we developed a new narrative. We have always demonstrated our commitment to providing a consistent supply of high-quality cannabis products to the Canadian retail and medical markets. While we have traditionally delivered on this promise, more recently we encountered a setback in our production. As part of a temporary solution, we engaged third-party suppliers to supplement with quality grown flour products, and this is where the realization set in for us. As we solved our flour shortfall, it became clear that it's not economical for us to continue growing anymore. We can now procure quality supply at a fraction of what it costs for us to produce it ourselves. Following an in-depth strategic review and analysis and after careful consideration, we're announcing today that we've made the difficult decision to exit from cultivation. This decision was not taken lightly because we took the time to carefully review our operations in alignment with our business goals and impact on our employees. Although this is one of the most difficult decisions we've made in the history of this business, it'll impact 35% of our workforce in the long run. we know it's the right decision for the overall business and to the shareholders. Our many talented employees are working with us as we transition out of cultivation activities over a five-month period, commencing immediately. I want to start by thanking our valued employees for their hard work and dedication to Entourage's success in the past. We're doing everything we can to ensure our employees are treated fairly, which includes sourcing new roles within the organization, and outside with our peers over the next five months. This leads me to expand further on our supply agreement with HEXO. With this supply arrangement in hand, Entourage has positioned well to meet the growing demand for our branded products. I have always been of the mindset that our industry is poised for collaboration, and by leveraging HEXO's cultivation capabilities, it will allow us to distribute more consistent premium products to the market at a fraction of the price. Our partnership with a like-minded company that has proven ability to deliver the highest quality cannabis products will ensure that Canadians continue to have access to our full portfolio of strains, including our proprietary strains. While this marks a significant shift in our business model, we are capitalizing on it and the result will be a much more streamlined business and cost structure. The reality is that every cannabis company in Canada is making cost savings a priority today. And if they're not doing that, they simply won't survive. We expect to realize and analyze cost savings of over $10 million from winding down our cultivation operations. And that's just a conservative estimate. As a result, we will be able to increase supply of in-demand products, grow accretive margins, drive revenue, increase cash flow, and achieve our positive EBITDA goals by Q2 of 2023. Fonny will provide more color in her views. I know she's also eyeing the significance of cash savings, and she will provide more insight into this. In fact, while our industry peers are contending with cash and funding issues, plus insolvency risks, that's one area I can confidently confirm is not a concern of Entourage. With the $30 million in financing from LPF and deferral of our debt payments, Our year-to-date cash position is one of the best in the industry, and we are well positioned to drive for profitable growth in 2023. How can we confidently get to profitability by this time? By carving out our growth acceleration plan that is rooted in our brand development. For now, I want to address how we're continuing to produce quality products for our adult use and medical channels. First up, the adult use market. While we have a diverse portfolio of products, we noted early in the year that premium and pre-roll market segments are the two fastest growing segments with the highest margins. And these two segments are turning out to be the sweet spot for Entourage and in the brand color cannabis and Saturday. Having established brand loyalty in the market, now we need to capitalize on this opportunity to build our house brands and play to our distribution strengths. With color pre-rolls capturing over 4% of the market share, and our placement secured in close to 2,200 stores, representing an 80% retail footprint. We will continue to leverage our commitment to innovation and brand building. We'll be able to bring higher yields to the market with our new cultivation partner, which will in turn result in higher expanded margins and higher returns. Taking a look at our medical business, we have grown 7% in medical sales and over 17% in the last nine months, which has compensated for the slips in our adult use sales. We are noting a consistent sequential increase in patient legislation and attention, and in fact, a 20% per quarter. The company now has 10 union groups, five insurance partners, and 24 clinics assigned to our Starseed medical platform. With the launch of Syndicate, our new e-commerce platform targeted patients without insurance coverage, We're giving new patients access to comprehensive catalog of cannabis products, formats, and brands at a competitive price. All those coming soon, products from Irwin Naturals, a large U.S.-based wellness conglomerate that we partner with in Q3. They have over-the-counter access in pharmacies across Canada and the U.S., a potential entryway for when CBD products become legal in the coming year or so. Through our medical platform, we plan to gain a significant share of the Canadian medical cannabis market. As a recap, our goal is to achieve a positive EBITDA run rate by Q2 of 2023. As a result, our medical cannabis business continues to grow and generate high margins. We expect the recreational marketing Canada to correct itself, and we'll be ready to increase our market share when it does. Meanwhile, we're focused on improving sales, marketing, and distribution of all our brands, doing so at a lot lower cost with a consistent quality supply source. I'm going to hand it over now to Bonnie, who will run us through the financials for the period. Thank you again, everyone. Bonnie, over to you.