Entourage Health Corp

Good morning, everyone, and welcome to the Entourage Health Corp First Quarter 2023 Results Conference Call. At this time, participants are in listen-only 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 1 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 the next 90 days. I would now like to turn the conference over to Katherine Flemon, Director of Communications with Entourage Health. Please, go ahead, Katherine.

Thank you, Brenda, and good morning, everyone. Welcome to Entourage Health's first quarter 2023 results conference call. Please note this call is being recorded. For copies of our press release and supporting documents or to receive a recording of this call, please visit the investor relations page of our website at entouragehealthcorp.com. The replay will be available later this afternoon. With us on today's call, George Scorsese, Executive Chief Executive Officer and Executive Chairman of Entourage Health, and Bonnie Maharaj, our Chief Financial Officer. Today, we'll review the business highlights and financial results for the first quarter 2023, as well as discuss recent developments. Following formal remarks, we will open the floor for questions. I would also like to remind everyone that during today's call, we will discuss our business outlook and 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 recent filings with CDAR. These comments are based on predictions and expectations as of today. Other than as required by applicable securities law, the company does not assume any obligation to update or revise them to reflect new events or circumstances. At this time, it is my pleasure to introduce George, Entourage House CEO and Executive Chairman. George, please go ahead.

Thank you, Catherine, and good morning, everyone. I'd like to welcome everyone to Entourage's earnings conference call today. I am pleased to provide an overview of our first quarter financial results. Firstly, I'll briefly touch on 2022 and our business transformation plan, which has set the stage for our Q1 results. Throughout 2022, Entourage maintained our commercial and financial targets. Furthermore, our momentum has continued into Q1 2023, where we are not only sustaining our performance, but also surpassing expectations by achieving several noteworthy milestones. In 2022, we strategically invested in our processes, products, and production capabilities, positioning the company for long-term stability. These transformative initiatives are now yielding tangible financial gains, propelling the organization towards significant growth. Throughout our strategic partnership with HEXO, our trusted third-party supplier, we have secured processing resulting in dependable and cost-effective biomass. A threefold strategy drove by decision to outsource, leveraging their expertise, infrastructure, and resources to efficiently scale production in line with demand to adapt to a dynamic market condition. By streamlining operations, we have effectively reduced overhead costs, minimizing cash burn, and reallocating capital to key business areas. As we entered 2023, we did so from a position of strength. Through the streamlining of our supply chain, standardizing of operational procedures, and strategic investments in automation, we have achieved enhancements across our business processes. Building on this statement, I want to address some notable financial highlights, which Vani will speak to in more detail shortly. In Q1, achieving growth with revenue reaching $15.1 million. This represents a 24% sequential increase, demonstrating our ability to generate consistent quarterly growth. Notably, our net medical revenue was $6 million, representing a 61% increase over Q4 2022. Additionally, as part of our business to become asset-light, we have experienced increased profit margins of 25% in Q1 2023 compared to 86% for Q4 of 2022, resulting from increased automation and production process of finished and semi-finished goods, resulting in lower direct labor costs across the board. With the sale and closing of our Strathroy facility on May 18th, the net proceeds were paid to BMO, in partial repayment of our outstanding secured credit facility. The company is in the process of seeking additional financing from its other secured lender, Liuna Pension Fund, to pay off the remaining balance of the BMO credit facility. Considering these achievements, we believe that our team's collective efforts, coupled with successful execution of our strategic initiatives, will lead to a positive adjusted EBITDA in 2023. Now let's delve deeper into our objectives for 2023. We have set ambitious targets and outlined a clear roadmap to drive our business forward. Our key objectives for 2023 encompass several critical areas, including revenue growth, market expansion, product innovation, and most importantly, operational excellence. When it comes to revenue growth, we are strategically focused on our medical business, which operates within a high margin sector. Not only have we witnessed robust sales growth in this area, but we have also achieved an 11% increase in Starseed's active patient base, accompanied by a 20% increase in patient renewals. This serves us as a testament to our proficiency in attracting and retaining a continuously expanding customer base. We are optimistic about the future of our medical segment as we continue to increase the numbers of patients in the insured category through new product offerings and solutions for patients on our platform. While we did observe a slight decline in dried flower sales on the adult use side, our overall growth trajectory remains intact during Q1. Notably, we made significant advancements in our pre-roll category, and I'll touch on that shortly. Our pre-roll sales accounted for 66% of total revenue, as well, color consistently maintain a market share of 5% across this category, with a notable share of 9% in British Columbia, which is one of the most competitive markets. These statistics demonstrate the strong demand for and popularity of our pre-roll offerings, solidifying our position as a leading player in the market. We are delivering on our customer promise by building premium brands, cultivating a culture of loyal customers, emerging as a market leader. With nearly 80% of distribution across Canada, our color cannabis and Saturday cannabis products are now found in over 2,100 stores coast to coast. In addition to these milestones, we're also seeing the benefit of strong partnerships we built last year, such as the one with Austin Beer, most notably. We introduced cannabis-infused iced tea beverages, such as Teapot. In Ontario, Teapot is among the top five in cannabis-infused iced tea categories. We recently announced it has gained popularity nationally, recently announcing expansion into Quebec and further expanding to our reach in BC in the coming months. Our strong innovation team has played a crucial role in our success. In 2022, our Color and Saturday brands launched 37 products across six geographical regions, creating 61 distinct SKUs. Additionally, Our medical channel launched 15 new SKUs in Q1, introducing soft chews and CBD chewing gum, which has been well received by our medical patients. This momentum will carry over into 2023. The breadth of options becoming increasingly significant as we are catering to consumers' preferences in their purchasing decisions while tapping into new market opportunities. And finally, operational excellence. As a cannabis company, we place great emphasis on operational excellence, from quality control to compliance, processing and packaging. We maintain strict adherence to our rigorous standards to deliver products of unmatched quality and consistency. From the moment our product is conceived to the moment it reaches the hands of our customers, we ensure that operational excellence remains our guiding principle. But before I hand it over to Vani, I would like to recap how our strategy will generate further growth for us in 2023. Our long-term outlook, let's begin by our focus on medical leadership. We're seeing early signs that our strategy for medical cannabis commands adjusted gross margins, twice that of consumer cannabis. Secondly, product diversification and premium offerings. Develop a range of differentiated products with varying price points to cater to different consumer segments, delivering consistent quality flour. Next up, branding and marketing. Invest in building a strong brand image and reputation to differentiate products from competitors. Premiumization allows for higher pricing and better gross margins. Cost savings is also part of this. We continue to work on reducing our SG&A through cost analysis, optimization efforts, and streamlining our admin costs. Automation and efficiency. Moving forward, our focus remains on increasing automation and efficiency while reducing production costs. To achieve this, we are implementing advanced technologies, optimized workflows, and adopting industry best practices. As part of our efforts, we have recently acquired four pre-roll machines. These machines enable us to manufacture over 80,000 pre-rolls per day, and we have plans to commission additional units that would further enhance our capacity to produce 100,000 pre-rolls per day. And lastly, adjusted EBITDA. We aim at being cash flow positive and adjusted EBITDA profitable in 2023. In summary, our initiatives drive sales growth, optimize efficiencies, direct cost discipline, and strengthen our balance sheet, including reducing our debt load, will be principal factors to our success in 2023 as we continue to expand our top line and are on track to achieve our financial objectives. This concludes my opening remarks. I'll now hand the call over to Vani, our CFO. We'll review our financial results.