Else Nutrition Holdings Inc.

Greetings and welcome to Ellis Nutrition's third quarter 2024 earnings call. At this time, all participants are in a listen-only mode. If anyone should require operator assistance, please press star zero on your telephone keypad. At this time, I would like to turn the call over to Alexandra Schilt, Vice President of Crescendo Communications, the company's IR firm. Please go ahead, Alexandra.

Good morning, and thank you for joining ELS Nutrition's 2024 Third Quarter Financial Results and Business Update Conference Call. On the call with us today, Kamital Yitzhak, Chief Executive Officer of ELS Nutrition. The company issued a press release today, November 14, 2024, containing its 2024 Third Quarter Financial Results, which is also posted on the company's website. If you have any questions after the call or would like any additional information about the company, please contact Crescendo Communications at 212-671-1020. The company's management will now provide prepared remarks reviewing the financial and operational results for the three months ended September 30th, 2024. Before we get started, we would like to remind everyone that today's call will contain forward-looking statements that are based on current assumptions and subject to risks and uncertainties that could cause actual results to differ materially from those projected, and the company undertakes no obligation to update these statements except as required by law. Information about these risks and uncertainties are included in the company's filings as well as periodic filings with regulators in Canada and the United States, which you can find on CDAR and ELF Nutrition's website. With that, I will now turn the call over to Hamital Yitzhak, Chief Executive Officer. Please go ahead, Hamital.

Thank you, Alexandra, and thanks to everyone for joining us today. During the call today, I'll be discussing key areas of focus for health nutrition, our current challenges, and our path forward towards sustainable growth. First, our revenue for the third quarter for 2024 was $1.8 million, representing 5% growth from the prior year. but a decline sequentially, which was a result of specific timing delays in order from key large retail partners. Although we had expected our products to launch in these stores by now, these orders have been postponed, which has affected our anticipated revenue for the quarter. While such timing shifts are part of the complexities in working with large retailers, we remain confident in our positioning within these stores and we are in active discussions to solidify our presence as soon as possible. Furthermore, limited marketing budgets have restricted our ability to fully support the visibility and consumer demand generation we plan for our product lines. As a brand that is relatively new to the mass market and markets its products to constantly changing new customers, we rely heavily on marketing to drive brand awareness and product education, especially as we introduce new products like Ready to Drink. While we have been prudent with our marketing investments during this period, securing capital will allow us to strategically allocate resources to reignite our marketing efforts and create a stronger presence at the retail level. Towards this end, during the third quarter, we have been highly focused on executing on our financing strategy. which remains a critical part of our efforts to achieve a healthier capital structure and accelerate growth. I'm pleased to report that the company has engaged with bankers on a non-exclusive best effort basis to provide a short-term bridge funding and a long-term straight debt. The non-dilutive straight debt is to be repaid over a long period by the company. This long-term financing, should we succeed to execute, will be pivotal for us, allowing us to increase our marketing efforts, address immediate operational needs, assist the company to reach profitability, and begin optimizing our capital structure. It will replace the diluted convertible debt currently in place, which creates constant pressure on the stock. Furthermore, in the past three quarters, we have implemented various cost-cutting measures to reduce operational expenses and improve efficiencies across our business. For a year to date, we had experienced a 12% decrease of operational expenses amounting to $1.5 million Canadian dollars. We are on track to reduce manufacturing costs in the next 18 months by a significant amount, which, if happens, will improve our gross margin and allow us to reach break-even by the end of 2026. Now turning to our product range and retail expansion, we're making significant strides in broadening our footprint across key retail channels and bolstering our product pipeline with new launches. One most recent milestone is our pilot in Costco Canada stores. If successful, this trial could pave the way for distribution over 100 Costco locations across Canada and may also lead to a U.S. win later down the road. Additionally, we're in advanced discussions with a well-known mass retailer regarding placement of our Ready to Drink Kids products in close to 900 U.S. stores still this year or in early 2025. Put together these two new initiatives could generate significant incremental revenue for Q4 2024, further enforcing our growth trajectory and expand our 2025 sales significantly. We also plan to perform the first commercial production run of our adult ready-to-drink product very soon and plan to launch it in early 2025 with several Canadian retailers that are already showing interest in carrying it. Production for the U.S. market is set to start in early 2025 with an anticipated rollout online and in stores thereafter. This expansion into new product lines will help us meet the increasing demand we are witnessing from retail partners, providing us with the momentum to scale further in 2025. Now let me discuss our financials for the third quarter of 2024. Revenue. for the 2024 third quarter was 1.8 million compared to 1.71 million for the third quarter of 2023, an increase of 5%. The company's gross profit in Q3 of 24 was minus 0.2 million Canadian dollars, mainly due to the conservative inventory write-off compared to 1.2 million Canadian dollars in Q2 2024. Operating expenses. The company's gross profit in Q3 2024 was minus 0.2 million Canadian dollars mainly due to conservative inventory write-off compared to minus 2 million Canadian dollars in Q2 of 2024. Companies' quarterly operating expenses remained approximately at the same level in Q3 of 24 compared to Q3 of 2023 and stood on $3.6 million. Overall, we remain focused on building a sustainable, growth-oriented business at ELF Nutrition. While we're navigating some timing-related challenges, our team is committed to securing the funding and partnerships needed to drive ELF forward Our goals for the remainder of this year and into next year are to finalize our funding initiatives, increase our retail footprint, and strengthen our financial position. At this point, I'd like to address questions that come in from investors. Alexandra, please lead the Q&A session.