GURU Organic Energy Corp.

Welcome to the Guru Organic Energy first quarter fiscal 2022 results conference call and webcast being recorded today, March 15, 2022, 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 that 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 CEDAR. During the call, the company may refer to certain non-GAAP 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 Guru'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 forward-looking statements on slide two of the presentation. I would now like to turn the call over to Carl Goyette, Guru's Chief Executive Officer.

Thank you, Operator. Bonjour à tous. Good morning, everyone, and welcome to our earnings call. Joining me this morning is our CFO, Angie Serra. Thank you. In our first quarter of 2022, we generated record Q1 net revenues of $7 million compared to $6.6 million last year, reflecting sales growth in Canada and in the U.S. We continued to build our partnership with our exclusive distributor in Canada, which officially began this past October, and worked actively on the planning and execution of our ambitious long-term Canadian growth strategy. We also made good progress in the U.S., securing new DSD partnerships and new points of sale. Our Q1 performance was achieved despite various Omicron-driven restrictions throughout the quarter, impacting businesses and consumers to varying degrees in the different markets where Guru is present. In this context, and after a solid start to our brand awareness efforts with our Back to University campaign in Q4, we did moderate our Canadian marketing activities during Q1. and in the first half of the second quarter due to the extent of those sanitary restrictions and the lockdown measures, as we felt this was a prudent thing to do. With the majority of sanitary restrictions lifted, we are now ramping up our activities, which we expect will be sustained through to the end of the year bearing further COVID-19 related interruptions and in alignment with our new business model in Canada. Over the next several quarters, Google will continue to be squarely focused on driving brand awareness and trial in the Canadian market, markets that together are more than two times larger than Quebec. This work began in Q4 2021, was slowed down a bit in Q1 due to Omicron, and will now re-accelerate in support of our truly nationwide distribution. Planned activities include but are not limited to a major national marketing campaign promoting a botanicals-driven SKUs, namely Matcha, Yerba Mate, and our latest top-performing innovation, Guayusa Tropical Punch. This campaign, coupled with other activations, will be notably supporting the Canada-wide availability of Guayusa in major retailers effective this quarter. Our exclusive distributor will proceed with its first official large-scale in-store activation for Guru. which will be executed with many major corporate and independent retailers across the country in April. Peru will be the first focus of our exclusive distributor during that period. We also have a series of other planned activities, partnerships, and sponsorships to reach our target consumers and key Canadian markets throughout the spring and summer. It's a mix of on-brand grassroots and mainstream activation. More to come on this front. Turning to the U.S., we continue to execute our strategy and experience improved results quarter over quarter with new doors in grocery, drug, natural, and independent retail chains. This has been supported by the strengthening of our DSD network in the Western U.S. market. To that effect, we recently partnered with leading regional DSD distributors, Buffalo Market, DPI Specialty Foods, and bite-sized Hawaii, enabling us to significantly increase our points of sale by more than 1,500 since the beginning of the year, primarily in California. Some other notable wins include our full penetration of Whole Foods Market Chain, the world's leading natural and organic food retailer with whom we've had a relationship with since 2005 when we first entered the U.S. market. We were already widely available, but now we will be in every store. And we have also expanded our selection with the addition of Yerba Mate in their over 500 locations. This month, we're also introducing a limited edition variety pack, which will be exclusively available at Sands Club, a leading leadership warehouse club with over 200 US locations. We expect this new win will have a strong impact on our US failed in Q2. This initiative could also have the potential to generate recurring revenue. Guru continues to generate strong demand at the US consumer level quarter over quarter, as shown in Q1 SPINS data, with a 49% increase in consumer purchases in California and 27% increase in the US overall. While U.S. sales only represent 17% of our sales in Q1, these numbers reflect growing interest in our brand, primarily in California, and with minimal marketing spent. 2021 was defined by our listing on the TSX, securing our game-changing Canadian distribution agreement, successfully transitioning to our new Canadian business model by year-end, and ensuring we had the capital and resources to execute our ambitious growth plan. all of which were successfully achieved. Now, the rest of 2022 is all about the execution of our expansion plans, but just as importantly, about establishing our new baseline in what will be our first full year working with an exclusive distributor, a working relationship that continues to grow and strengthen week by week. Just a year ago around this time, Zulu had very low distribution and brand awareness in Canada outside of Quebec. markets where we had yet to invest any significant distribution in marketing dollars. Following our first big marketing push in Q4, our brand got a huge initial boost and great response within key consumer segments. While this momentum was attenuated due to Omicron restrictions and lockdown, we are ready for the work ahead of us to move the needle further, which will take time and commitment. We are really motivated by those early indicators to keep moving forward with the execution of our Canadian growth strategy. We are excited to continue to work towards truly breaking through in Canadian markets outside of Quebec, where we have a huge opportunity to conquer market share in an industry ripe for disruption. I'll now turn the call over to Ingi, who will provide you with more details on our Q1 results. Ingi, over to you.

Thank you, Carl, and good morning, everyone. Guru generated record Q1 net revenue of $7 million compared to $6.6 million last year. The increase is reflected by sales growth in Canada and the U.S., driven by a 22% increase in volume overall as a result of stronger velocities and increased points of sale, partially offset by the cost of the new exclusive Canadian distribution agreement. Canadian sales in dollars increased grew 5%, reflecting the change in the company's business model launched on October 4th, 2021. U.S. sales, which represents about 17% of net revenue in Q1 2022, grew by 9% in U.S. dollars in Q1 or 7% in Canadian dollars as a result of new doors and increased product demand. We expect the U.S. to continue to perform well in the coming quarters based on the SPINS data mentioned by Carl. As a reminder, Costs associated with our distributor services in Canada are included in net revenue at the top of our income statement. In parallel, Canadian sales-related costs have been reduced, partially offsetting the lower gross margin. The overall impact to our bottom line is minimal, and in the long run, we expect the benefits of our Canadian distribution agreement to greatly outweigh these short-term adjustments, which are now poorly reflected in our 2022 results. Q1 gross profit totaled $3.8 million compared to $4.1 million a year ago. Gross margin was 55% compared to 51% in Q4 2021 and 62% last year. The decrease in gross margin versus last year is mainly due to the change in our business model in Canada, which includes distribution, selling, and merchandising fees. Gross margin was also slightly impacted by rising product costs driven by higher input and transportation costs. SG&E was $7.1 million compared to $4.7 million, an increase of $2.4 million. $2 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 growth plans as we entered into new markets. We invested in several targeted and sales marketing campaigns during the quarter, notably the Fall Quebec Marketing Campaign with Occupation Double, that ended in December 2021, and existing partnerships in which we increased our investment in fiscal 2021 compared to 2020. The start of partnerships with ski resorts, as well as continued field and trade marketing investments in Ontario, Western, and Atlantic Canada. However, due to COVID-19 Omicron variant restrictions and lockdowns, the company moderated its marketing activities during the quarter. Adjusted EBITDA was negative 3 million, compared to negative $0.4 million a year ago due to higher sales and marketing expenses. Net loss for the quarter totaled $3.2 million, or $0.10 per diluted share, compared to a net loss of $0.6 million, or $0.02 per diluted share, a year ago. As of January 31, 2022, our financial position remained strong at $61.7 million of cash and cash equivalents and unused credit facilities, totaling about $10 million. These funds will allow us to invest in our brand in Canada and the U.S. over the coming years in support of our growth objectives. Carl, back to you for concluding remarks.