GURU Organic Energy Corp.

Welcome to the Guru Organic Energy Second Quarter Fiscal 2022 Results Conference call-in webcast, being recorded today, June 14, 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 difficulty sitting in 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-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 of level of activity, performance, goals, or achievements, or other future events or developments. As such, please take a moment to read the disclaimer on the 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, Indy Seraph. In our second quarter, we delivered our best Q2 top-line performance today, driven by a strong increase in overall sales volume despite the impact of COVID-19 in the first half of Q2, which delayed some certain marketing activities and opportunities to Q3. We also maintained sector-leading gross margin of 54%, which reflects our careful supply chain management and prudent pricing practices. During the quarter, we launched our first national marketing campaign of the year, Made in Plants, a six-week marketing campaign which included a comprehensive mix of out-of-home banners and digital content, in addition to in-store activations in major cities across the country. This made-in-plant campaign also proved to be the ideal outlet to officially launch our latest innovation, Guru Guayusa Tropical Punch across Canada. Following a successful launch in Quebec at the end of 2021, we were excited to bring Guayusa to a whole new and significantly larger market who was thirsty for new brews from Guru. Thanks to the continued support of PepsiCo Beverages Canada, Guayusa has reached over 50% weighted distribution in all accounts in a very short period of time. And in Quebec, Guayusa is currently ranked the number one innovation queue. While still anecdotal, some of our initial results have shown that we have grown from 0 to 2.5% market share over the last year in a leading national convenience balance. We also have access to a limited database of store-level market share information, where we see that Zulu has reached over 2% market share in over 100 of stores, and even reaching 4% in a large proportion of these. Furthermore, this last Friday we received some very positive news from our latest marketing research, which confirms that our targeted marketing investments are working as we continue to gain market share mainly from consumers converting from other brands and attracting new consumers to the category seeking a healthy alternative to chemical energy drinks. These initial market results show that our product and brand is well-received and gives us confidence in our strategy aimed at adapting and replicating our Quebec success across Canada. We know by experience it will take time and discipline to reach these levels of market share across all banners and channels, but we are on the right track. We are currently assessing our four-week campaign results with PepsiCo Beverage Canada, the first such program we worked together on. There has been a lot of good learning on both sides, and our goal is to keep setting the bar higher for future in-store sampling and activation. The next campaign plans to start in the coming days. During this past quarter, we also launched our new 500ml format in Quebec. which reached over 50% weighted distribution in the same timeframe, confirming our distributors' reach and execution strength. On product pricing, our previously announced price increase became effective on May 16th in Canada. It will ensure that we remain true to our price positioning in the market relative to peers and offset rising input and transportation costs, which will contribute to our ability to maintain our strong margins. This price increase is approximately 6 to 10% and is reflected on promotion and regular prices. Turning to the U.S., we generated strong demand at the consumer level during the quarter, as shown in our Q2 SPINS data with a 61% increase in consumer purchases in California quarter over quarter and 31% increase in the U.S. overall. Moreover, Net revenues increased sharply in Q2, driven by the availability of limited edition variety packs in 200 SAMS club locations in the U.S. The program, which is the first of its kind for us, is set to run for the next couple of months. While this may lead to other rotational program opportunities, it also represents an opportunity to increase brand awareness in a new channel. Our online activities also continue to perform well, growing over 60% in revenue compared to last year. I will now turn the call over to Angie, who will provide you with more details on our Q5 results. Angie, over to you.

Thank you, Carl, and good morning, everyone. Let's start with net revenue, which came in at a record Q2 of $7.6 million compared to 7.1 last year. This was driven by a 26% increase in volume overall as a result of higher velocity, new product launches, and increased points of sale in Canada as well as the rotational program in the U.S. Net revenue in Canada contracted despite volume growth in Q2 2022, reflecting our new distribution and sales model in Canada since the beginning of October. As a reminder, we have reduced our selling prices to our exclusive distributor last year to compensate them for the incremental services. U.S. sales represented about 28% of net revenues, and grew by 92% in U.S. dollars compared to the same period last year. Q2 gross profit totaled $4.1 million compared to $4.4 million a year ago. Gross margin was 54% compared to 55% in Q1 2022 and 63% last year. The decrease in gross margin versus last year was anticipated due to the change in our distribution sales and merchandising model, effective as of the end of last year. Gross margin was also slightly impacted by higher product costs driven by inflationary pressures on inputs and transportation costs. SG&A was $8.2 million compared to $5.5 million last year. Over 70% of the increase represents sales and marketing spend, notably the Made in Plants marketing campaign, Guayusa Tropical Punch Canada-wide launch, the 500ml format listing in Quebec, and the 4-pack listing across Canada. As mentioned in our Q1 remarks, in line with our methodical and prudent approach to our marketing spend, we chose to delay certain marketing activities planned for Q2 to Q3 in the context of COVID-19 restrictions across Canada in place for the first half of our quarter. Adjusted EBITDA was negative $3.7 million compared to negative $0.8 million a year ago due to higher sales and marketing expenses. Net loss for the second quarter totaled $4 million, or $0.12 per diluted share, compared to a net loss of $1.2 million, or $0.04 per diluted share, a year ago. As at April 30, 2022, our financial position remains very strong, with cash and equivalents and short-term investments of $52.8 million and unused credit facilities totaling about $10 million, allowing us to comfortably pursue our growth objectives, and the related investments required for our planned return to historical profitability. Carl, back to you for concluding remarks.