GURU Organic Energy Corp.

Welcome to the Guru Organic Energy 4th Quarter and Full Fiscal Year 2022 Results Conference Call and Webcast, being recorded today, January 26, 2023, 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 2 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, Ndi Serach. For those who are following the webcast, you will now be able to turn the pages of the presentation on your wall. Let's now turn to slide 4. Over the past year, we have done what we set out to do since becoming a public company, which was to launch our Canadian market expansion and invest for the first time in our 20-year history in major national marketing campaigns. This was accomplished with the support of our exclusive Canadian partner PepsiCo and their national distribution network. These initiatives have led to two major accomplishments. First, new organic energy drinks are now distributed in more than 96% of convenience and gas stores and 70% of grocery, drug, mass stores across Canada. And second, we achieved a 31% increase in consumer purchases or scanned retail sales in fiscal 2022, which is a true measure of our success. Turning to slide five. If these numbers have not translated into top-line growth, it's due to the fact that fiscal 2022 was a transition year, and it impacted short-term net revenues in several ways. First, with the change in our business model in Canada that started in Q4 2021, when we signed our exclusive distribution agreement. Since then, our distribution partner takes care not only of distribution, but also sales, merchandising, and after-sales services, in return for a discounted price. This discount had a $5.3 million negative impact on our fiscal 2022 net revenue. While this impact is significant, it is less than we anticipated when we decided to embark into this long-term partnership. Second, this new business model required that our partner make a substantial initial pipeline fill of about $2.7 million in Q4 2021. and the balance close to $1 million in retail pipeline sale in Q1 of 2022. Third, also upon entering this agreement, we optimized our product portfolio in order to respect other distribution agreements that our partner had in place. This led us to phase out our energy water line at retail, which generated approximately $600,000 in net sales in 2021. Finally, we did not launch a new product in Q4 2022, as we have historically. This was an intentional move to align to a more strategically timed Q2 launch, which pushed our innovation launch to Q2 of 2023. While the change in our business model and investments made in our expansion activities have had an impact on our financial performance in the short term, we firmly believe it was the right decision and that they will pay off in the long run. We are seeing steady progress in distribution, retail execution, brand awareness, and sales velocity, which bodes well for the future. Looking ahead, we expect to adjust our marketing spend as we shift our focus from top of funnel brand awareness marketing efforts to more targeted efforts aimed at converting marketing investments into products sold, which has historically been our focus. Our goal this year is to concentrate on having greater impact on sales velocity instead of brand recognition. building on the baseline in which we invested this past year. For a more specific example, this will entail investing in more point-of-sales marketing like fridges and less spending on broader visibility marketing like billboards outside of stores. We will also be targeting key urban areas where our brand positioning resonates best with consumers and where our marketing spend gained the most traction. Turning to slide six, In the U.S., our consumer scan data showed continued growth in our area of focus in California, where we solidified our number one energy drink position in the natural store sector. According to SPIN, we experienced 13% growth in California in Q4 2022 versus Q4 2021, showing continued strength in this market. We are working on growing our sales velocity and expanding our distribution network in that state with the ongoing deployment of Guru Guayusa Tropical Punch in targeted banners. The US launch of our top innovation Guayusa has delivered strong results. It became the number one SKU in our portfolio in several natural store chains in just the first few weeks after launch. Our online sales segment also continued to show strong top-line performance in the fourth quarter and reached record value in the first month of fiscal 2023, driven by Black Friday and Cyber Monday. For 2023, we will continue to focus on profitability instead of volume growth for this segment and adjust investments in marketing. This channel is complementary to our retail presence and distribution, which remains our core focus for growth. I'll now turn the call over to Ingi, who will provide you with more details on our financial results for the fourth quarter. Ingi, over to you.

Thank you, Carl, and good morning, everyone. Looking at slide eight. In Q4 2022, consumer scan data in Canada showed a 33% year-over-year sales increase over the same period last year, reflecting strong demand at the consumer level. As outlined by Carl, Because of the transition year, growth in consumer sales has not yet translated into revenue growth. Net revenue for the first quarter was $6.8 million, compared to $8.5 million for the same period in 2021, mainly due to the initial pipeline fail related to the Canadian distribution agreement. Now that we have better visibility on our shipments and inventory, we can quantify it as having a positive impact of about $2.7 million in Q4 2021 versus Q4 2022. Excluding a one-time price discount of $0.4 million to a club wholesaler, the company's U.S. performance held steady during the fourth quarter, with Guru continuing to hold the number one energy drink position in the natural store sector in California. In Q4 2022, gross profit totaled $3.5 million, compared to $4.3 million for Q4 2021. Due to pricing initiatives, gross margin was 52.1% for the fourth quarter in 2022 compared to 51.0% in the same quarter last year, which offset higher product costs driven by inflationary pressures on input and transportation costs. SG&A was $7.8 million for Q4 2022 compared to $10.3 million for Q4 2021 Selling and marketing expenses accounted for $5.5 million of the $7.8 million in SG&A in Q4 2022, as we continued investing in targeting sales and marketing campaigns, including the Back to Reality national campaign. In Q4, adjusted EBITDA was negative $4.0 million, a $1.7 million improvement from negative $5.7 million in Q4 2021 due to higher gross margins and lower selling and marketing expenses. Net loss for the fourth quarter was $3.9 million, or 12 cents per basic and diluted share, compared to a net loss of $6.0 million for the fourth quarter last year, or 18 cents per basic and diluted share. The decrease in net loss reflects the stronger margins, and the decrease in costs associated with brand, field, and trade marketing activities. As at October 31, 2022, our financial position remained very strong, reflecting prudent balance sheet management with cash and cash equivalents and short-term investments of $46.3 million and unused credit facilities totaling about $10 million. This puts Guru in a strong position to continue self-funding our growth with the ability to deploy the right investments aimed at our return to long-term profitability. Carl, back to you for concluding remarks.