Freshii Inc.

Greetings, and welcome to Freshie Inc.' 's second quarter 2022 earnings conference call. At this time, all participants are in a listen-only mode. A phone question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Jeremy Mandel, Senior Director of Legal. Thank you. You may begin.

Thank you, and welcome to Freshie's second quarter 2022 earnings conference call. Joining me today is Daniel Haroun, our chief executive officer, and Victor Diab, our chief financial officer. Please note that the 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's discussion and analysis, which includes a summary of 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 second quarter earnings release, the financial statements, and management's 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. At this time, I would like to turn the call over to our CEO, Daniel Root.

Thanks, Jeremy. Good morning, everyone, and thank you for joining us today. In Q2, our revenue was up 87% over the prior year, driven by the consolidation of Natura Market and system sales growth in both our restaurant and CPG businesses. as we continue to make critical investments to help enable our future growth. Our Nutura market team has reacted well to a challenging e-commerce environment, doubling down on product selection while being very disciplined in managing the business during temporary channel headwinds. Our CPG team continues to build strong relationships with retailers, focusing on our top skills in top markets. And finally, I'd like to spend a few minutes to provide some insight into my first few months as CEO of Freshie, beginning with my time visiting markets across North America with our restaurant franchise partners. At our partner support center, we have established our North Star. Happy, capable, profitable franchise partners executing at their best. In the past 90 days, I've had the opportunity to visit almost 100 restaurants across North America and meet with franchise partners that collectively own more than half of our locations. These visits were critical to help us develop a deeper understanding of our current opportunities and challenges on the ground, as well as assessing our real estate for a post-COVID-19 operating environment as we work to lay the foundation for future growth. In listening to our partners, it's important to acknowledge just how challenging the past two years have been and continue to be on our restaurant partners. from the restrictions of the pandemic, labor and supply chain shortages, and now a more challenging operating environment with inflation putting pressure on consumer discretionary spend. Despite those challenges, I walked away encouraged by the resiliency our partners have shown and the optimism they have expressed about the path forward. While acknowledging the pandemic has changed some trade areas for the long term, and we see this in some of the stark differences between our higher performing locations and those that are further behind the rest of the network in their recovery. A consistent message I heard was that it's time to go from playing defense back to offense. In short, we must forge ahead and compete with the current realities head on while seeking to ensure that the brand and the network are well positioned for sustainable long-term growth. We took meaningful steps to begin that process in the spring and summer. We realigned our organizational structure by strengthening our leadership team with key additions and internal promotions and are adding field resources to assist franchise partners in improving existing operations while also beginning to invest in key functions such as real estate development and construction to support our next phase of anticipated growth. In addition, we continue to strengthen our North American restaurant pipeline which currently includes agreements for the planned development of over 100 locations. We are particularly pleased to report that many of our multi-unit partners are ahead of schedule in respect of their planned development. Our development team has also been very active in reengaging with the landlord community for a holistic review of our store network and are optimistic that these relationships will enable continued growth of that restaurant pipeline. We will, however, continue to be disciplined for the right real estate in the right trade area to set our franchise partners up for long-term success. We are also implementing new tools and processes to assist in the improved site and candidate selection. We believe these changes will improve the quality of the franchise network over the long term. We also began to shift to a more simplified approach to innovation, focused on our core menu platforms and offering a wider variety of price points for the customer. Utilizing existing ingredients and preparation models to develop new offerings where possible will allow us to deliver a great, repeatable customer experience for our current menu, while also offering exciting innovation for our guests, supported by marketing activity and traffic driving initiatives. For example, in August, we recently began promoting our Classics LTO lineup. which consists of four new menu offerings made up entirely of existing ingredients and workflows. A new innovation, such as our classics lineup, as well as continuing to broaden the options we offer our guests, becomes even more important in the challenging operating environment we see today. We began to see a softening of restaurant system sales in the second half of the quarter, and that has continued into Q3, as we outlined in our release. We recognize the inflation challenges are impacting consumers in different ways. While some consumers may be returning to full-service dine-in, travel, and other forms of entertainment after a long period of restrictions, others are feeling the impact of inflation and higher gas prices on the amount of discretionary spending they have available. We recognize we need to address the immediate short-term realities of our operating environment while also laying the foundation for the business's next stage of anticipated growth in the long term. We will be launching a set of traffic driving initiatives in the fall as many households enter a new next phase of normal, with kids going back to school and some workers back in the office, whether it's most days or just some days each week. We will also begin our normal course longer term strategic planning process, and we'll share more updates on this in the coming quarters. Across all of our divisions, we have a strong team working closely with our partners to enable growth in a disciplined manner. I'm so proud of the way our partner support center has embraced a significant amount of change over the past 90 days, and our team is laser focused on our North Star, both in meeting the challenges of the current operating environment and capitalizing on a growth opportunity for the brand in the years to come. I'll now pass the call over to Victor, who joined us in June as our new CFO.