GURU Organic Energy Corp.

Q4 2021 Earnings Conference Call


spk_0: welcome to the grow organic energy fourth quarter and fiscal two thousand and twenty one results conference call and webcast being recorded to date january twenty two thousand and twenty two at ten am eastern time at this time or participants are now listen only mode following management's presentation there will be a question and answer session with financial analysts instructions will be provided at that time for you to queue up her questions if anyone has any difficulties here in the conference this for star followed by zero for operator assistance at any time gurus press release empty and may and financial statements are available in the investors section of it's website and on said are during the call the company may refer to known to certain non gap measures reconciliation suffer available in it's am dna also know that olsen and shall 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 girls current and future plans expectations and intentions results level of activity performance goals or achievements are other future events or developments as such lists take a moment to read the disclaimer on forward looking statements on slide to of the presentation i will now turn to call over to cargo yet girls as chief executive officer
spk_1: if you operator or the reduce the morning everyone and welcome to our earnings call jamie this morning it are seattle interest twenty twenty one with a remarkable year for do am so proud of all that we have accomplished other team and a significant progress we made over such a short period of time laying the groundwork for our future lot and during an ongoing global pandemic in fiscal twenty twenty one i would first full year at a public company we achieved record annual net revenues for an eighth consecutive year reaching a record thirty million in net sales revenue lobbying highly profitable for most of these years we need our first meaningful push across canada and increase or total the total doors in north america by fifty nine percent to almost twenty four thousand dollars added that it the post you for increased from twenty one thousand to twenty four thousand dollars comes mainly from the convenience and guess generally canada as a result of our pepsico agreement with a potential to increase even more and grocery drug mass we delegate canada in us can earn their listing district in addition we've about to new product innovation than twenty twenty one your the money to kick up our fiscal year and what you a tropical punch to cap it off even more significant you like you for twenty twenty one and for the first time in goes history we were finally able to really start investing in our breath this investment is of course reflected in our results and will continue to be as we aim to accelerate our groped by driving brand awareness and trial with over seventy five million dollars in available cash and credit we now have the means to deploy them required marketing efforts to really elevate a progressive bread in markets outside of cubic that's the plan we went to the market with a little over a year ago and i'm proud to say we are now at the shooting as promised some of the major marketing initiative executed in key for and with you it you can expect more up to twenty twenty two include the distribution of nearly six hundred thousand and of ghoul across canada to various his door and good marketing events the deployment of our first major english canada digital and other home media campaign with the help of leading marketing agency simply and brand momentum as part of her back to university campaign beyond camp sampling or back the university campaign included event sponsorship out of home advertising and social media contest targeting twenty four universities across canada including eight in quebec the guy use a tropical punched launch in quebec supported by a big campaign this past fall on reality tv show up that ya dumb and existing partnership in which we invested more heavily and twenty twenty one than in twenty twenty and by other trade sampling it out of home activations the results animated by does need investment so far have been very promising and we believe a lot more can be achieved as we continue to build i would go nation in fact our most recent market research showed that our brand awareness and the rest of canada nearly doubled and q when twenty twenty one to queue for twenty twenty one this increase was mostly driven by whenever key consumer target segments which entry seventy percent and fifteen to thirty two percent more recently we also establish unique partnerships with high profile can eat and key results mainly whistler momo and set them which i being activated at the beginning of the calendar year these that of partnerships are in line with who vr the bread and will allow it to connect with a captive active and health conscious audience yeah on sampling handling and various promotional events you can expect more of these types of on brand partnerships going forward and as the coven situation normalize it the also plan on doing more or less sustainability different last year we deployed at first nation wide clean up programs and we will accelerate that good energy movement next summer we grew our team in twenty twenty one to support our long term growth plan and are increased focus on brand building activity going from a team of about forty two almost seventy primarily based in montreal that california notably emanuel we met joined our team in december twenty one as an executive vice president of marketing she has an extensive background and leadership experience and brand building marketing and e commerce prior to joining gurus yelled senior leadership position including that of ceo an outdoor retailer like on the he has also worked with a number of brands in the last twenty years including the north face and fellas and to agency work at taxi and guess it we are happy to have emanuel on board as we went up our marketing in canada while we have significantly increased our workforce over the last year we nonetheless remain a nimble and acid like company that relied on strong partners uncle backers to distributors we believe this is the right operating model as we look to accelerate or brands grow and focused on elevating are granted the point of are expanding distribution how now during the call to injury will provide you with more detail on a queue for results easy or you
spk_2: thank you go out and good morning everyone knows what in queue for two thousand and twenty one girl generated record revenues of eight point five million dollars compared to six point one million last year a growth of thirty eight percent the athletes like mainly driven by fear velocity growth and increased point of sale in canada as we continue to execute er go offline the oven canada grew thirty nine percent as i really thought of higher volume and kid that and hi triple digit growth in ontario western and atlantic to canada mainly due to the large initial order fantastical and que for two thousand twenty one to kick off our partnership which is partially offset by distribute or product featuring as a result of this it's look at agreement with tactical coming into effect you might sale which represent about fourteen percent of net revenue on an annual beast it grew by forty three percent in us dollars into four or thirty seven percent in canadian dollars as a result of new door and increased product the man we expect us to continue to perform live in the coming quarters based on skin data showing that thirty two percent growth and retail failed national and cure for two thousand twenty one vs two for two thousand and twenty as a lot stronger meant i'm in california with forty two percent for the same period activity that but with this new can even distribution and field model and the significant ramp up our marketing activity to execute our growth strategy there had been an adjustment and some other key metrics namely undergoes my and energy any friend as anticipated as a reminder cost associated with that the conservatives are included in our lead reading at the top of our income statement in parallel can eat in fields related costs have also been meet you partially offsetting this logo with margin the owner all impact or bottom line is minimal and in the long run we expect the benefit the benefits of the spectacle agreement to greatly outweigh the short term adjustment which started and cure for it and will be fully reflected in two thousand and twenty two result kill for goes crossfit totaled four point three million compared to three point seven million a year ago growth might it was fifty one percent compared to sixty one percent last year mentioned the decrease in vote margin was mainly due to the change in our business model in canada as a result of the tactical agreement effective on october fourth it includes distribution selling and merchandising from was magic was also slightly impacted by you creep promotional activities and a product costs given by higher input and transportation costs evgeny was ten point three million compared to four point two million an increase of six point one them five point four million of that represents the ramp up of our sales and marketing activities in support of the launch of our distribution agreement and the execution of our plan as we entered into new markets we need investments in federal targeted marketing and advertising campaign during the quarter including the back to university media campaign in western canada and ontario
spk_3: and out of home and digital campaign
spk_2: the launch of the kid back specific marketing campaign this past fall which reality tv show off your passed on to be an existing partnership in which we increase their investment in fiscal two thousand and twenty one compared to two thousand twenty and long supporting ongoing field and treat likening investors notably in california and continued investment in our online
spk_4: field club month
spk_2: notes that the increased quarterly marketing spending que for two thousand twenty one is more indicative of what we can anticipate going forward as we aim to sustain our brand awareness and trial activities although it is expected to fluctuate from quarter to quarter due to timing of certain investments and the knowledge driving brand awareness over the coming quarters in support of our national distribution campy the national distribution in canada is key to our success as we into group or can eat and market share while also sustaining our leadership position in quebec
spk_5: now that's why our results
spk_2: adjusted a be dealt with negative five point seven million compared to negative zero point four million a year ago due to hire a journey partially offset by an increase in goes profit met last like a quarter total six million or eighteen cents per diluted share compared to a lot of three point one million or eleven cents per diluted share a year ago infused to be the clothing of our financing has considerably enhanced i will already strong financial division which now stands at sixty seven million dollars of cash and equivalent an unused credit facility totaling about ten million as of october thirty first two thousand twenty one these funds will allow us to make significant a significant a meaningful investments in our brand in canada and in the us over the coming years in support of our growth objective we remain prudent and the context of good lengthy and the are on crown variant which has resulted in another round of restrictions and logged out and very region including restrictions on gathering and pushing back the reopening of on campus learning in many regions of canada among many other measures obviously this isn't ideal for up considering our core consumer be but the important thing is that any near term impact on field or our ability to execute certain market marketing exhibition will be transitory and really a question of timing on the operational trent we also continued like contingency plans in place and are holding higher inventory levels to ensure that our operation run at seamlessly as possible in the concept of ongoing supply chain and logistic pressures car back to you to discuss our next that and outlook for two thousand twenty two
spk_6: thank you you
spk_1: in twenty one twenty two our focus is on the execution of our marketing and selling strategy to increase gurus bennett way can a product trial and ultimately a resale than canada love in the us with a focus in california as we move forward and as reflected in our fourth quarter results will continue to invest in our brand the that these types of investments or a prerequisite to compete on a bigger scale makes sense now that we have a strong partner and high levels of national distribution and place in canada with the strongest position we can now can be more effectively with larger breasts and increase or brand awareness as with solidifies bishop of the national energy drink market disruptive based on recent and ongoing surveys and feel assessment which confirmed or number one brand status with the eighteen to twenty five eight who can get back you know we are in the right track to attract the next generation of energy drinks consumers whether the our existing and drink and tumors are new to the category we aim to achieve this by leveraging and adapting are learning and key success factor than get back into the deploy the the cross canada in california while continuing to reinforce preposition and neck the first few months of the given calendar year will will be critical this is when we that make their annual plan a grandma and product listing decision for the next twelve months given that this is our first year of our partnership with that ago we expect the coming weeks to be very be as we continue to receive product listening confirmation i'm a dining perspective and other those decision are expected to be confirmed and cute so we can expect something maliki again and you were on account of that dining and given go sizable initial ordering to for in canada we anticipate that in addition to our partnership with the ethical a positive impact of our fall brand marketing campaign will support an increasing number of though it and twenty twenty two the latest numbers provided by that we go are showing significant distribution games in western canada and interior reaching over eighty five percent waited distribution in the cmd channel that december i will number of doors it's moving rapidly everyday now reaching almost twenty four thousand dollars we will provide a full of the on the door count asked a to review period next three for now the weight distribution games we are experiencing reflect impressive ramp up in canada since the adoption of a new distribution model on october fourth on the product innovation fund we will be introducing a new larger five hundred ml format for guru original and do like starting in quebec desperate to compete against the leading brand as forty five percent of the comeback energy grid god is consumed in four hundred and seventy three ml format this will bring what you have to consumers you will also be launching google why you subtropical punch across canada in the spring which has been a two successive cubic already generating record sales among all twenty twenty one in the base of the and into industry since it's official marketing launched last november specifically what you said market share jumps to three point five percent of the overall market and made the top ten selling scuse over for week period in december twenty one her record among all twenty twenty one industry innovations which is an even stronger performance than the year the mighty launch a year earlier you brought up innovations like your but ip and why use a tropical punch and to be done yet to be continued to be an important part of their go strategy and will continue to diversify your product offering in the future in the us we continue to make inroads in california with increase product demand and the signing of additional banners independent retailers as well as regional distributors which will result in an increased indoors in twenty twenty two i will us strategy we people continue to focus on california and go see a regional distribution agreements and continue or expansion intellect recognized banners with a regional and national presence online activities also continue to show somebody without having gone three phone says the on tip of the pandemic our strategy producer center will be mean to thing meaning continue investing in consumer tradition in our ecommerce that once this concludes our former remarks i will now turn the call over to the operator for the queue any
spk_0: thank you and sorry mind there to ask a question simply press star one on your telephone to withdraw the question press the pound or has key again that is star one even have a question i first question in some the line of martine landry with steve sell your line is health and please go ahead
spk_7: hi good morning and gallon indeed
spk_8: that think that whining hello
spk_7: my my first question i want to touch on your gross margin i was wondering if it be possible to get the did more collar on the yep you know the change on your your basis it it has eroded by roughly at thousand depths and damn in a huge you talk about promotional activities being and one of the reason he talk about hiring but costs and and betsy and dad to santa anderson the little bit and or how much of of the change goes into each buckets
spk_9: yeah for sure
spk_10: and i'll take it if one of it's okay with your cats chicago have
spk_2: okay so unexpected are goes my sons were lower income for then i'll i'll break out the ten percent of the another ten point that the coins or from magic sixty one to fifty one so as to look at it eighty percent of it is really do to this that change and new business model in canada ah of course a portion of which is being recovered lower in the financial the by detailed expenses that like the other another one percent or one point you could say is due to the promotional activities and that will vary from quarter to court and the last one is we do to the higher cost the transportation so as you can see the majority of it is really do to the change in business model and we expect this we need to be don't always the gonna get from gross margin standpoint for it should be in on getting better and of course this will vary based on cost pressures pricing opportunity than the market and the problem promotional environment
spk_1: okay you know that that's a very good answer as if i may add in theory on this is this was all expected unlucky when we know she had in this disagreements mean we knew we knew this was coming in media and will affect our business model we really thought it was worth it she look at the games and distribution that we have made over over the last few months and going from that scene april last year going from roughly a thirty percent and distribution him and can union stores to eighty five percent now if you compare advocate know those might and versus when the cost would have been thrust into this ourselves it's is is comparing would have taken years ah when ago salesforce to get to those levels of the of it's mission so it's it was all planned and we're very happy with this said this this issue
spk_11: okay that's helpful
spk_12: an engine when i started on the on the promotional activity
spk_7: you know him in their analysts they last week monster indicated that day we're doing less promotional activity given the inflationary pressure on on costs and that that this was kind of acting as a similar way to up a price increases am i'm just wondering what are you seeing here in canada are you seeing west promotional activity vs last year
spk_1: yeah you can gloves and only and i'll jump up
spk_10: okay perfect yeah so we're seeing competitors
spk_2: during that type of behavior in two different modes right so one of our competitors the thinking price increases while the other me be reducing from optional spend to protect themselves from these increases and call so as you mentioned like you've heard on the call so it it's both strategy i'd coming up to see that yes there is left them with similar activities are pressured and we're seeing it options and i wanted to be assured that you know we will be will remain on strategy from a fight for listen and we are evaluating that but we will not be leaving any money on the people that wanted to it in a well
spk_13: he has nothing to have
spk_12: okay okay and then they may be my last question is
spk_7: on mcguire you saw that the lunch seems to have been very successful and them you know a wondering now you that you have a bigger portfolio ah you know he is a really huge you probably see are seeing a big an impact on your philosophy
spk_1: and in i was wondering if you didn't discuss high level how it how's your velocity gone up and get back since the launch of both the year but maddie production and quite user yes a on have the exact numbers but an even the velocity that what you saw obviously with the point type of them like a chair in our two point five and like a cherry as effective a very high velocity that it's lee and it's it's it's been a thick a young boy you sexy exceeded our expectations for sure and if know about obviously when you launch a new product is always a little bit of their can like they so i can beat me a launching a new that a been to have been campaign going on a lot of our do consumers are also trying and then new innovation china over all this is all very positive in the band their the there's a positive oxide in total bellantoni them and market here for the band now we need to wait a few a few my man to see if you know how many new consumer their meeting use the brand vs just changing and switching skewed within the family but overall we're very happy with that not only did
spk_14: execution of the marketing plan the distribution games we made with their were going so when we launched it but also and making the list of the toughening up and selling and and get back in december it is quite an achievement a for a new innovations obviously there and very big success
spk_0: okay that's it for me thank you
spk_15: thanks
spk_16: the next question comes from now on saturday with lawrence and bank ag your question please
spk_17: oh hi good morning everyone good morning i'm on
spk_18: got i thought get my first question is i think you're in you're prepared remarks you've mentioned that it was a larger pepsi co order and signed a just wondering if there was some sort of far pull forward from our from that order and meet you may see some a light for the squatters if if you could share some color how much of would be like how they dead
spk_1: order was in if the first quarter with see that impact do you want a glaring i want with yeah oh if i can i can say is i get there is you know we're in this if we're all that we're learning to dance with ethical a to this is the the up to visit and period you started in october point there as you know which meant the end of our fiscal year and that time it was a difficult to forget where both our team than that and ethical a team exactly what type man what the amount in the country and we would need that was so many new though if we're gonna going in
spk_17: and with high velocity relaunching and what use the i believe played their league they thought or than over the course of of the quarter we realized while they're going on there some real inventor you know me and business that could be made for their they died in the quarter with some higher level than the country that needs to be depleted today and acumen a elegant a thief analogy
spk_1: transitory adjustments in the new relationship but overall it's it's all positive
spk_17: oh you know that and of and just be the
spk_2: i think as you mentioned it that this is probably the bought him off gotten profit margins and when a improve i'm just wondering how gradual that process would be like is it every quarter a few basis points or is it like after one year that we can see them a young a substantial improvement back can with
spk_10: the peace going to look like when that that's what i'll i'll go back like to the it's right that of course there's a change in business model so there's an impact on the goes much in that will remain some of it right because don't forget we went some just moving the product edibles much and level way now they're also doing moving selling and merchandising the product how
spk_9: however like that this is below it because we are seeing some and
spk_17: but the the treatment is less than originally anticipated so we are seeing some advantages there but of course it's gonna valuable on fighting opportunity to grow more like i that and caucasus for we will see some improvement and i believe that what was the a couple of points improvements coming to up again and again it's gonna be reevaluated every quarter of quoted that
spk_2: you know we're learning to dance like i said rifle it's the first year it will set up here at the transition year off for really making sure that we well set up doing the groundwork for future
spk_1: okay know that sad that's great color and maybe just one last one for my and see if i heard that correctly so for next year we we should expect advertising and marketing budget in the range of twenty twenty one million we don't really give guidance on tv playing but that you can expect you know we went public to make sure that we had fellow either will and we mix it and by examining and won't need to invest in our brand right and because what we promised to do and that's exactly what we're doing we will continue to invest in our brand for yeah i thought i think lot on know one the i know i went ahead and say you know if you look at eat as the often discussed me we went public can we raise money to invest in marketing so this is again all very much plan and we're regular meeting as promise and the marketing done that we said he would execute that he looked the as vienna year
spk_17: guinness media dinner you've seen the last quarter the had guinea increase my what we can say about this is eighty five percent of the at dna increase is indeed sales and marketing i so this is really money going towards building or brand and making sure that we we built this foundation for look for the future
spk_0: ah yes the will be seeing continued investment in a band with an next quarters and i don't think you should he investment we made in our bed and into for an exceptional we want to be continuing to invest in our benefited and and next that the next few years later listen this is why we have money that we raised to invest and then we getting here through the
spk_19: in that the number of expected that nine and and it's this visit our planning to see what we wanted to crickets
spk_20: yet know that that makes earth and that it for me thank you for taking my questions appreciate it thank you thank you
spk_21: things are next question comes from johnson peril with see i be see your question please
spk_1: a huge money and my guide on am i wanted to start in the distribution points the be increased to twenty three thousand seven hundred i think it was get can you talk about the cadence of that growth that figure that twenty one thousand in the last and dna and try to get sense of how much of the increase was prior to the pepsico deal vs subsequent to it not subsequent and ethical deal it's is read the anti increase winners were and the canadian though is when some ten thousand to twenty two to twelve thousand and seven hundred and him the all of these doors pretty much of the and since the best he could deal with iran oh png convenient than get my to there's
spk_22: eighty seven hundred you can mean it's and get doors since the yeah
spk_1: since the start of dear texaco i mean it
spk_21: now as we discussed in the bath and the grocery drug mass channel is a little bit more strict around there the review period in which means even though he died in october fourth that sceptical hill theme and kick our managers are meeting that retailers right now they're having a discussion
spk_14: and the close knit grocery drug let me tell us are really doing that reception that spring and they're very strict about that but this is why we mention in our call it we're going to be doing a whole wheat you are dark out in the spring once we have all the information and we've align with the retailer is on both when the product is gonna be on the shelf and and
spk_21: marketing plan to be can get nothing
spk_1: but they're obviously very impressive all impressive growth in into account or does it with investigation since the start of the of the to i mean very very taliban okay that's top ah my second question the a follow up on the prior when about pricing and and i kind of wonder how you think about the strategy as you increase door so much with has to go as a partner and as he get the brand in front of consumers who made the haven't seen it before it be viewed as an opera unity to leverage promotions even more or or is margin protection a greater priority in the near term other venting injury on this am can ours we added depth of the end of the ban on price and the and we that the goal is not to have consumers big guru for for a cheap price we when consumers to pick google because of better ingredients and a brand that better get so devalued so am i a in some way the next he is it answers your question now we want to be competitive rather a strategy and always been to try and get parody or close to thirty with the market leader that's not changing
spk_23: and i'm a promotional environment it's most of the promotions are being run let's see at to for six months editing for five while we will start running promotion the to for sections and to provide stay environment and that a significant increase and just just and
spk_21: now if there is important to keep on pricing as the engine my mention of we will take cold single unified them as well so those those me to way than that's what the industry is is discussing like now this had left and a reference has made to some other competitors in there and better call as well they're looking at the promotional structures but also the pricing to see what's the best way to take to offset some of their
spk_24: some of the cost that area inflation cogs
spk_1: well that into your questions on maria coller under that tongue yes study notes that doesn't make it an ass sticking with the and the monster call from last week their their data seem to suggest that the convenience store channel was growing a little slower than than the overall energy drinks market it is always seen in canada as well or you think that you need to be europe so rug industry
spk_21: yeah industry doing well hands and i don't know i can combat in that convenience stores versus the grocery store than canada is lima were reading the same as can documentation are you guys we're all getting nothing information i'm assuming that you're you're reading is right
spk_22: convenience is still by far the leading channel for energy drinks i did something allowed seven five defense and for a consumer that consumers lie and more white collar more educated and that grocery drive math and national channel is a screen very important breath as well
spk_2: so we you both channel that being very implants for future just as well as online i mean we spoke we haven't spoken about online the online in a pandemic in order to access the progressive educated white collar consumers working in front of the computers in of though and is a great way to access consumer side so
spk_25: comes over our industry going wow did you may need energy and eat a healthy energy more than ever before and they think of a pretty it's the right time to to meeting the consumers regardless of the channel
spk_21: okay okay understood and one more just the housekeeping questions you mentioned a partial off that to the sales growth was the return of products greedy prior distributors can you share the approximate side without return
spk_26: that one more recent romney yeah
spk_0: yeah
spk_1: oh yeah there were no we're not significant major regions we had a very good smooth transition but there was some returns right
spk_0: lol

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