Freshii Inc.

Good morning and welcome to the Freshie, Inc. fourth quarter and fiscal 2021 earnings conference call. All participants will be in a listening mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then one on your telephone keypad. To withdraw your question, please press star then two. Please note, this event is being recorded. I would now like to turn the conference over to Paul Hughes, General Counsel. Please go ahead.

Thank you, and welcome to Freshie's fourth quarter and fiscal 2021 earnings conference call. Joining me today is Matthew Koren, our founder, chairman, and chief executive officer, and Daniel Hurun, chief financial officer. Please note that remarks in this conference call may provide certain information regarding our expectations, future plans, and intentions that may constitute forward-looking statements. I would refer you to our most recently filed management discussion and analysis, which includes a summary of the significant assumptions underlying such forward-looking statements and certain risks and factors that could affect our future performance and our ability to deliver on these forward-looking statements. The fourth quarter and fiscal 2021 earnings release, the related financial statements, and the management discussion and analysis are available on CDAR, as well as the investor relations section of Freshy's website at freshy.inc. All figures discussed on this conference call are in Canadian dollars, unless otherwise noted. Following our prepared remarks, we will open the line for questions. As we will not be conducting any follow-up calls this morning, we encourage you to use this question period to ask us any questions you might have about our results and our business in general. At this time, I would like to turn the call over to our CEO, Matthew Korn.

Thanks, Paul. Good morning, everyone, and thank you for joining us today. In Q4 2021, Our North America franchise restaurant segment recorded double digit growth in same store sales and adjusted EBITDA. Our new restaurant development pipeline is stronger than it has been since the onset of the pandemic. Our consumer packaged goods business more than doubled its sales in the quarter versus the prior year. And our recent acquisition of majority control of Natura Market, the fast growing online health and wellness retailer, has begun to nicely integrate into the freshy culture and continues to grow sales. At the parent level, we maintained our healthy balance sheet through the fourth quarter with a cash position of $30.8 million as of year end. We saw parent level revenue more than double in Q4 versus Q4 2020 as a result of sales growth across all business lines, as well as the completion of the Matura market transaction on November 1st. The company repurchased $.8 million in Class A shares through our NCIB in the fourth quarter and continued deployment of the $1 million investment fund directly into our franchise restaurant segment to help in the acceleration of our franchise restaurant network's recovery and growth coming out of the pandemic. I'd like to share some specific trends for each of our new reporting segments. I will start with our North American franchise restaurant segment. In the fourth quarter, our North American franchise restaurant segment recorded same-store sales of 10.1% and adjusted EBITDA growth of 15%. This adjusted EBITDA growth was achieved even as Freshie continued to invest significant corporate dollars back into our restaurant network to assist our franchise partners in improving operations, driving sales, and shouldering the ongoing impacts of COVID-19 pandemic on some of our stores. The quarter sales improvements were contributed to by our continuing digital sales growth, with Freshie's app sales up 58% versus prior year. Another driver of our sales trajectory was Freshie's continued strong menu innovation. In Q4, as the weather got colder in key markets, Freshie launched a revamped soup menu, featuring a delicious butternut squash soup, as well as popular stables like spicy lemongrass and tortilla soup. During the LTO period, our soup sales mix doubled compared to prior year. We believe the menu innovation that we have planned for 2022 will resonate with our restaurant guests and continue to drive traffic and profitability to our stores and digital sales channels. In Q4, Freshie opened five North American franchise restaurants and closed four, resulting in a positive net store growth of one location. In terms of future restaurant growth, our new store development pipeline is strong. Our franchise partners have continued to demonstrate their commitment to continued expansion, and as you will have read in our press release, since November 2021, we have signed franchise agreements with current franchise partners for 42 new freshie restaurants in Canada and the US. I often view development from existing franchise partners to be the single greatest lead indicator of the health and momentum of our business, I am thrilled that so many existing partners are continuing to reach their entrepreneurial goals through further Freshie development. I want to thank them for their continued trust in the Freshie mission. As I mentioned, our development pipeline is as strong as it has been since the pandemic began. We believe we have the ability to grow our franchise pipeline with both new and existing franchise partners in the quarters to come. I would now like to discuss some updates in retail and e-commerce segments. I'll start with some specifics on our consumer packaged goods business. In the fourth quarter, Freshie's CPG business continued to grow its sales and expand its points of distribution. The CPG business recorded system sales growth of 135% for the quarter and grew points of distribution by 42% versus Q4 2020. For fiscal 2021 as a whole, Freshie's CPG business reported 83% growth in its system sales versus 2020. This sales growth was driven in part by the strong performance of Freshie's Energy Byte and Elixir Wellness Shot platforms. Energy Bytes, Freshie's well-known better-for-you snack offering, saw sales increase of 226% in the fourth quarter versus the prior year, with our Elixir Wellness Shots also up 155% over the same period. Our CPG team continues to innovate our product set, particularly in the energy bite category that is proving popular with both retail partners and customers. Our peppermint cocoa energy bite was a successful holiday period limited time offer in both retail and freshie restaurants, and our team has plans for more energy bite innovation in the coming quarters. Following year end, our CPG division announced a new partnership with 7-Eleven in Canada, which is now in its early stages across 600 locations. Going forward, the focus of the CPG team will be to continue to drive sales, grow the list of retail partners offering our products, and expand points of distribution. We expect this continued focus growth will allow us to drive further profitability improvements through scale. Staying with the retail and e-commerce segment, I'll now share some specifics on the Natura Market business. On November 1st, we completed the acquisition of majority control of Natura Market. As a reminder, Natura Market is a growing online retailer that makes on-trend healthy products available at scale across Canada. The Natura business had sales of $20.2 million in fiscal 2021, including 20% sales growth following the transaction on November 1st through year end as compared to the corresponding period in the prior year, and over 100% growth as compared to the corresponding period in 2019. As part of the continuing positive sales growth trajectory, we are particularly pleased with Natura Markets Black Friday and Cyber Monday sales performance in the fourth quarter, which was a record sales performance since Natura's founding. Natura has made an immediate positive impact on Freshie's overall business revenue and significantly expanded our presence and capability in the delivery and digital commerce spaces. The way people access health and wellness is evolving and the acquisition of majority control in the term market ensures that Freshie is well positioned to meet the next generation of our customers where they are. During Q4, we took significant strides forward as an omni-channel health and wellness brand. Our restaurant division has recorded ongoing sales recovery, and grown its development pipeline. We also completed the Natura Market transaction and grew our Better For You CPG sales, product lineup, and reach in a quarter. I'd like, again, to thank our franchise partners, our retail partners, and our HQ and Natura Market team members for their essential contributions to Freshy's mission. I'm so proud to work alongside all of the great people in our organization. I'll now turn the call over to our CFO, Dan Haroon.