Else Nutrition Holdings Inc.

Greetings. Welcome to ELS Nutrition first quarter conference call. At this time, all participants are in a listen-only mode. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. Please note this conference is being recorded. I will now turn the conference over to Alexandria Investor Relations. Thank you. You may begin.

Good morning, and thank you for joining ELS Nutrition's 2025 first quarter financial results and business update conference call. On the call with us today is Hametal Yitzhak, Chief Executive Officer of ELS Nutrition. The company issued a press release today containing its 2025 first 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 first quarter ended March 31st, 2025. 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 CDER and ELS Nutrition's website. With that, we will now turn the call over to Hamital Yitzhak, Chief Executive Officer. Please go ahead, Hamital.

Thank you, Alexandra, and good morning, everyone. I appreciate your joining us to discuss our first quarter 2025 results. Before I begin, I want to take a moment to acknowledge the delay in reporting. This delay was due to technical reporting issues outside of our control combined with broader macro pressures we've been navigating in Israel and funding constraints. We thank you for your patience and continued support as we worked to ensure the completeness and accuracy of our disclosures. As we entered 2025, we remained in an ongoing process of reshaping health nutrition, implementing the strategic changes necessary to drive long-term success. While the headwinds of 2024 have persisted into the early part of this year, I can confidently say that we are moving forward with more discipline, sharper focus, and growing confidence in the direction we're taking. we are continuing to implement a comprehensive transformation strategy, one rooted in operational discipline, market focus, and product innovation. Due to funding and cash flow constraints, we've made difficult but necessary decisions to realign our cost structure. Over the last few quarters, we reduced overhead, restructured roles to reflect current priorities, and eliminated inefficiencies that were weighing down our performance. These moves were essential in significantly lowering our cash burn, protecting core capabilities, and positioning us for a more stable and sustainable future. We're also continuing to scale our operations in smarter, more cost-effective ways. A major milestone in this effort is our planned shift toward manufacturing powder formulas in Europe. This initiative will allow us to reduce production costs, improve gross margins, and better control inventory and logistics. This geographic diversification is a key part of mitigating supply chain risk, navigating tariff, and strengthening the reliability of our product delivery. On the U.S. radar side, I'm very pleased to share that our Kids Ready to Drink products are now in 950 Walmart stores in the U.S., a significant leap forward in our presence with mainstream retailers. On the regulatory front, we've remained deeply committed to advancing our infant formula products and continuing our advocacy in Washington. In March, we saw a meaningful shift with the launch of Operation Stork Speed, an initiative aimed at accelerating innovation and increasing infant formula resilience in the U.S. market. This initiative directly supports our goal of introducing clean label, plant-based infant nutrition that meets the highest safety and scientific standards. In addition, we also recently recognized as part of our lobbying efforts the U.S. House Appropriations Committee Advancement of the Financial Year 2026 Agriculture Appropriations Bill, which includes groundbreaking provisions to expand access to alternative infant formulas. This legislation is a vital step forward for the countless families seeking plant-based non-dairy and non-soy options due to allergies, intolerances, or personal values. For too long, U.S. regulations have limited innovation in this space, while global markets have moved ahead. The bill's language directing the FDA to streamline approval pathways and issue clear regulatory guidance marks a turning point, one that embraces inclusion, diversity, and nutritional accessibility. While additional steps remain, this progress sends a powerful message. The needs of modern families are being heard. and the future of infant nutrition is changing for the better. Our hope and our expectations are that this evolving regulatory environment will finally allow us to begin clinical trials for our infant formula product, which we know addresses an important gap in the market. We're proud to be contributing to this national conversation, and we're featured in the Washington Times in an op-ed that underscores the need for modernized regulations and greater access to safe, science-backed alternatives for families. Now let me briefly walk through our financial performance for the first quarter, which is reported in Canadian dollars. We're pleased to share our financial results for the first quarter of 2025, which reflect meaningful progress in operational efficiency and cost reduction. Total revenues for the quarter were 2.1 million, same level as in the first quarter of 2024, while increasing gross margins and significantly reducing operational costs. This stability in top-line performance is encouraging, given the broader market headwinds and reflects the resilience of our core business. Most notably, gross profit and gross profit margins surged from half a million to which reflects 25%, tripling from 0.18 million, which reflects 8%, in the prior year quarter. This significant improvement was driven by a substantial reduction in cost of sales, down 15% year over year, highlighting our successful efforts to optimize production and supply chain operations. Operating expenses saw a dramatic reduction of nearly 48%, falling from 4.2 million to 2.2 million. This was achieved through disciplined cost control across all major categories. Noting two in particular, employee benefits were reduced by 24%, reflecting a leaner, more focused team structure, which we expect to decrease further over the next coming quarters. Advertising was cut nearly in half, reflecting a more efficient spend, but also reduced marketing expenditure due to funding constraints, but still maintaining the same revenue level. These efforts contributed to a significant narrowing of our operating loss, which improved by over 58% to $1.7 million from 4 million in the first quarter of 2024. While non-operating items including warrants and convertible loan reevaluations impacted our bottom line, our net loss improved by 37% year over year, landing at 3.43 million. Importantly, our loss per share decreased from $0.04 to $0.01 supported by a larger shareholder base and improved financial discipline. We remain confident in our strategic direction and are encouraged by the early signs of operational turnaround. Our focus on sustainable growth, cost efficiency, and innovation positions us well for the quarters ahead. Looking ahead, we plan to continue operating with a small team well into 2026. with a goal to become cash positive by the end of 26 or the beginning of 27, focusing on a few critical areas, maintaining and growing our retail accounts, growing online sales, adding international distributors, improving gross margins through efficiency in sourcing, production, and logistics, and growing our product portfolio with an emphasis on adult and infant nutrition. In parallel, we continue to pursue select strategic partnerships that could accelerate our path to scale. Conversations are ongoing at this moment, and we remain open to opportunities that align with our mission and deliver value to our shareholders. As we implement these initiatives, we remain focused on what matters most, delivering better nutrition to more families and building a stronger, more agile business. In closing, I want to reiterate my deep appreciation to our investors, our team, our suppliers, and retail and regulatory partners for their continued support. While challenges remain, our strategic path is clear, and we are confident in our ability to drive meaningful progress in the months ahead. At this point, I'd like to address questions that come in from investors. Alexandra, please lead the Q&A session.