GURU Organic Energy Corp.

Welcome to the Guru Organic Energy First Quarter 2023 Results Conference Call and Webcast, being recorded today, March 16, 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. The Roos 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, 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 Goya, GURU's Chief Executive Officer.

Carl Goya Thank you, Operator. Bonjour à tous. Good morning, everyone, and welcome to our earnings call. Joining me this morning is our CFO, Indy Seraf. For those who are following the webcast, you will be able to turn the pages of the presentation on your own. Let's now turn to slide four. Q1 2023 marked the last quarter of our Canadian distribution model transition period and was mainly impacted by two non-recurring factors, the remaining balance of the pipeline sale recorded in Q1 of 2022, and the inventory reduction initiated at PepsiCo Hubs in Q1 of 2023. In the current context, we continue to manage our business efficiently and in a prudent manner, protecting our gross margin and optimizing our marketing investments, which resulted in a lower net loss compared to Q1 of 2022. During the quarter, we put into motion our Winter of Good Energy campaign, especially tailored to winter sports, where our presence was felt at ski centres and other winter sports centres across Canada to promote our good energy. Over the last year, with the help of PepsiCo, we continued to make our energy drinks more available to retailers and consumers in Canada in preparation for our 2023 product launch and national marketing campaigns. As a result, Our Better For You energy drinks are now distributed in more than 95% of convenience stores and 77% of grocery stores and drugstores across Canada. The national marketing campaign in support of the launch of our new 2023 innovation called Guru Theanine Food Punch will officially start at the end of the month. We are excited by this launch since this was the first time in the last three years that we didn't launch a new product in the fall in Quebec. The C&A Fruit Punch launch comes on the heels of our last innovation, Guru Guayusa Tropical Punch, which has performed very well, becoming Guru's number two SKU in Canada and the category's number one flavored energy drink SKU in Quebec. Our upcoming campaign is based on the learnings of our 2022 activities and will target key urban areas where our brand positioning resonates best with consumers and where our marketing spend gained the most traction last year. The campaign will showcase the functional benefits of our new ingredient, thiamine, which is proven to improve focus and mental performance. With the current inflation, we are starting to see an impact on consumer behavior, with the consumers continuing to drink their energy drinks while buying in bulk or on promotion as a tactic to fight back inflation. For example, in Quebec grocery stores during the month of December, Red Bull gained market share by reducing their four-pack price by more than $0.50 versus last year, while our price increase resulted in a four-pack price point that was $1 higher than the previous year. We have not historically been aggressive on promotional pricing. However, we will ensure that our historical market share growth trend continues, and we will adjust our promotional pricing tactics, if required, over the coming weeks. Turning to slide five. In the U.S., consumer scan data grew 20% in California natural food stores in the last 52 weeks compared to previous year, which reinforces our number one energy drink position in the natural channel. Guayusa Tropical Punch also continues to deliver strong results, reaching the number two best-selling SKU in California natural stores only four months after its launch. Lower Q1 revenues were mainly the result of delistings at less profitable locations and the turning of orders. This short-term noise aside, we're continuing to make inroads in California. Following our successful roadshow in 2022, we will start a new 12-week rotational program in over 40 POSCO locations in Los Angeles in June. This win would allow us to showcase Guru Gwayusa to our larger market of better-for-you consumers. Turning now to online sales. These also continue to show strong top-line performance, with improved profitability in Q1 driven by optimized investments. Over the past several months, we have achieved better return on investment and will continue to grow this segment's profitability. As mentioned before, this channel is complementary to our retail presence and distribution, which remains our core focus for growth. I will now turn the call to NG, who will provide you with more details on our financial results for the first quarter. NG, over to you.

Thank you, Carl, and good morning, everyone. Turning to slide 7. For the last 12 months, consumer stamp data in Canada showed a 24% year-over-year sales increase over the same period last year. reflecting continued demand at the consumer level. Because we are still overlapping our transition year, this growth in consumer sales has not yet translated into revenue growth. Net revenue for the first quarter was $5 million compared to $7 million for the same period in 2022, mainly due to the remaining balance of the initial PepsiCo pipeline fill in Q1 2022 and the reduction in inventory on hand by PepsiCo in Q1 2023. which together had a $1.5 million impact on net revenue. U.S. sales decreased to $0.8 million from $1.2 million in Q1 2022, mainly due to the delisting and the timing of orders. In Q1 2023, gross profit totaled $2.7 million compared to $3.8 million for Q1 2022. Gross margin remained strong, at 53.7% in Q1 2023 versus 54.5% for the same quarter last year. SG&E was $5.7 million for Q1 2023 compared to $7.1 million for Q1 2022. Selling and marketing expenses accounting for $2.9 million of the $5.7 million in SG&E in Q1 2023. That went towards targeted sales and marketing activities including the Winter of Good Energy campaign. In Q1, adjusted EBITDA amounted to a loss of $2.6 million, a $0.4 million improvement from a loss of $3 million for the same period last year, mainly due to the lower selling and marketing expenses. Net loss for the first quarter was $2.6 million, or $0.08 for basic and diluted shares, compared to a net loss of $3 million for the first quarter last year, or $0.10. per basic and diluted share. The decrease in net loss reflects the decrease in costs associated with brand sales and trade marketing activities. As of January 31st, 2023, we had cash and cash equivalents and short-term investments of $42.5 million and unused credit facilities totaling about $10 million. Our prudent balance sheet management puts us in a strong financial position to continue self-funding our growth with the ability to deploy the right investments aimed at our eventual return to generating sustained profitability. Carl, back to you for concluding remarks.