GURU Organic Energy Corp.

Welcome to the GURU Organic Energy Third Quarter 2021 Results Conference Call-In Webcast, being recorded today, September 14, 2021, at 10 a.m. Eastern Time. At this time, all participants are in a listen-only mode. Following management's presentation, there will be a question-and-answer session with financial analysts. Instructions will be provided at the time for you to queue up for questions. If anyone has any difficulties hearing the conference, please press star followed by zero for operator assistance at any time. GURU's press release, MD&A, and financial statements are available in the Investor section of its website. and on CDAR. During the call, the company may refer to certain non-IFRS measures. Reconciliations are available in its MD&A. Also note that all financial figures are expressed in Canadian dollars unless otherwise indicated. I would also like to remind you that today's presentation may contain forward-looking statements about GRU's current and future plans, expectations and intentions, results, level of activity, performance, goals or achievements, or other future events or developments. As such, please take a moment to read the disclaimer on four looking statements on slide two of the presentation. I would now like to turn the call over to Carl Guyot, GRU's Chief Executive Officer.

Thank you, Operator. Bonjour à tous. Good morning, everyone, and welcome to our third quarter earnings call. Joining me this morning is our CFO, Ndi Seraph. This past quarter has been quite active for the GRU team. Since the signing of our game-changing agreement with PepsiCo Beverages Canada and the closing of our $50 million financing, we have been working to successfully transition our Canadian distribution activities to PepsiCo. The process is going very well and will be completed before the agreement takes effect on October 4th. Our existing distribution partners have been extremely collaborative in this process. The feedback from our retailers has been overwhelmingly positive. We feel really good about what's to come. In terms of our financial results, Google keeps growing quarter after quarter despite COVID-19's challenges. We achieved record revenues in Q3, reaching $8 million with a gross margin of 63%. Our 22% increase in revenues versus same quarter last year was primarily driven by sales growth in Canada due to higher velocity and increased points of sale. Online sales continued to grow and perform well as a result of continued investments in consumer acquisition. In Canada, we are in full execution mode, following new doors added in the last months in Ontario, Western Canada, and Atlantic Canada. Our new banners are pleased with the results so far, and we anticipate investing more to grow a Canadian market share over the coming months. Once the PepsiCo agreement takes effect and we reach higher distribution levels, we will significantly increase our upper funnel awareness marketing investments. We have been running digital in-store field marketing and sales activation to drive consumer interaction and brand trials. And these activities are now ramping up and will continue to run throughout the year. We've also been careful with our investments due to ongoing COVID-19 restrictions across Canada this summer. We did nonetheless distribute 350,000 Guru cans over the spring and summer periods as we look to increase brand awareness and convert new customers across Canada with our tried-and-tested liquid-to-lips approach. We are also running our first national Back to University campaign, which includes sampling, event sponsorship, out-of-home advertising, social media contests, and other unique activations on campus at 24 universities across Canada. including eight in Quebec. These activities are in the process of being rolled out, so stay tuned. Turning to distribution, subsequent to Q3, we confirmed two major convenience and gas banners in Canada, representing more than 1,000 additional points of sale. We also have added another 1,000 independent retailers in Canada and in the U.S. These upcoming distribution gains are thanks to the relentless efforts of our sales force and the support of our new distribution partners. We expect to get on the shelves in these new locations during the fall of 2021. Although our sales efforts are year-round, our industry follows a seasonal cycle, with fall being the season during which we are traditionally the most active in terms of soliciting major banners ahead of their annual planogram and product listing decisions for the following year. During the spring, we are then able to start confirming product listings as well as rolling out in-store availability. However, as isn't the case of these last wins, there are always some exceptions to the cycle, and we are really pleased to be able to jump on this opportunity to expand our presence in the CNG channel. While growing our business is our top priority, we remain very much in touch with our social values, which matter to us, our employees, and our consumers. We are always looking for ways to support our communities, protect the environment, and share some good energy. From June to September, the Guru Good crew, comprised of our employees, Guru ambassadors, and volunteers, organized 60 community cleanup initiatives across Canada. From riverbanks to skate parks to hiking and bike trails, the Guru Good crew collected litter and gave a shiny new look to some of our most beloved outdoor playgrounds while sharing the good energy and meeting new consumers. Guru teams across the country have also been supporting frontline workers throughout the summer. In May and June, over 35,000 cans of Guru were donated to frontline workers, including healthcare workers, first responders, and COVID-19 testing and vaccination clinic staff. I'll now turn the call to Inji, who will provide you with a summary of our financial performance for Q3. Inji, over to you.

Thank you, Carl, and good morning, everyone. In Q3 2021, we generated record revenues of $8 million compared to $6 million last year. The increase reflects sales growth in Canada as a result of velocity growth and increased points of sale. Sales in Canada grew by 32%, including triple-digit growth in Ontario, Western, and Atlantic Canada, while U.S. sales declined by 7% in constant dollars or 18% in Canadian dollars. U.S. sales which represent about 15% of total sales for the first nine months of fiscal 2021, decreased this quarter mainly due to the timing of sales, as our launch in the fresh market was postponed from June to August, and to a stronger 2020 comparative quarter, which saw a spike in sales due to a COVID-19 rebound effect in buying activity after the first wave. We expect our U.S. performance to get back in line in Q4 based on SPIN data showing a 38% growth in retail sales nationally in Q3 2021 versus Q3 2020, as well as an even stronger momentum in California with 54% for that same period. Gross profit totaled $5 million compared to $4.4 million a year ago. Gross margin remained strong at 63%. compared to 66% last year. The decrease in gross margin versus last year was due to increased promotional activities and higher product costs, driven by increased demand for ready-to-drink beverages and higher transportation costs since the onset of the pandemic. SG&E was 7.2 million or 90% of sales compared to 2.7 million or 41% of sales a year ago. The increase is mainly the result of our expansion initiatives which included field and trade marketing investments in Ontario, Western, and Atlantic Canada, expansion plan investments, set-up costs incurred for the national Canadian distribution agreement, as well as additional costs associated with the operations of a public company. Adjusted EBITDA was negative $1.5 million compared to earnings of $1.8 million a year ago due to higher SG&A partially offset by the increase in gross profits. As a result, net loss totaled $2 million or $0.07 per diluted share compared to a net income of $1.2 million or $0.05 per diluted share a year ago. In Q3, the closing of our financing has considerably improved our already solid financial position, which now stands at $68.5 million of cash and cash equivalents and unused credit facilities totaling about $10 million as of July 31, 2021. These funds will allow us to invest in our expansion activities in Canada and in the U.S. over the coming years. Starting next quarter, and as a result of the change in our Canadian distribution and sales model following to the PepsiCo agreement, you will start seeing an adjustment in some of our key metrics, including gross margin, as the costs associated with PepsiCo services will be included in net sales at the top of our income statements. We also expect Canadian sales-related costs to be reduced, which will partially offset the lower growth margins. We expect the impact of these changes to be minimal to our overall bottom line, and that, in the long run, the benefits of our agreement to greatly outweigh these short-term adjustments. These adjustments to our financial statements will begin in the fourth quarter and will be fully reflected in the first quarter of fiscal 2022. As in the previous quarter, we remain prudent in our assessments regarding the impact of COVID-19 on our business going forward. Since the beginning of the pandemic, we have put in place contingency plans and increased our inventory on hand to ensure that our operations run as seamlessly as possible, no matter what the business context. That being said, we remain hopeful that we will return to a more normalized situation in the coming quarters. Carl, back to you to discuss our next steps and outlook for the coming quarters.