GURU Organic Energy Corp.

Welcome to the Guru Organic Energy Second Quarter 2023 DevOps Conference Call and Webcast. Being recorded today, June 14, 2023, at 10 a.m. Eastern Time. I'm all participants in the listen-only mode. Following the management's presentation will be a question-and-answer session with financial analysts. Instruction will be provided at 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. Group press release MD&A and financial statements are available in the investor section of the website and on CDER. The one at all the company may refer to certain non-GAAP measures. Reconciliations are available in the 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, levels of activity, performance goals, or achievements, or other further 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 Mr. Carl Goddien of Guru Financial Executive Officer. Please go ahead, sir.

Thank you, operator. Bonjour à tous. Good morning, everyone, and welcome to our earnings call. Joining me this morning is our CFO, Nji Sarath. For those who are following the webcast, you can now turn the presentation to slide five. First off, we are pleased with our results for this quarter on several levels. Peru's Q2 net revenue of $7.7 million was the best Q2 in our history, with C&E Fruit Punch having a strong impact on our performance. Our latest innovation, C&E Fruit Punch, was officially launched in Canada in March with our Punch Up Your Mind national marketing campaign. This campaign included in-store displays, promotions, and activations combined with digital, social media, and influencer engagement. As a result, Canadian Food Punch achieved remarkable results in its first month, including becoming the industry's most successful launch in the last two years, with over 3% market share in Quebec. Our targeted marketing campaign also helped grow sales velocities in major Canadian urban centres, which had a positive impact on our performance in Q2. Moreover, C&E Fruit Punch and Guayusa Tropical Punch are now ranked among the top three innovations in Quebec since the beginning of the year. We see this as a testament to our ability to create great tasting products for health-conscious energy drink consumers, which bodes well for our future product launches. Turning to slide six. During this last quarter, our marketing team, led by Raja Gaurar, our Chief Revenue Officer, took steps towards refining our marketing strategy based on last year's learning. We put more emphasis on building direct connections with consumers through our in-store activation, social media content, and influencer engagement. We expect this refined marketing strategy will be evidenced in our upcoming summer campaign. In addition to our national sponsorship activities with the Canadian Elite Basketball League, known as the CEBL, and the Amazing Race Canada. On May 24th, the 2023 CEBL season launched in Ottawa, where we had a first taste at sponsoring a major sports league for an entire season. We are really impressed with the CEBL organization and proud to partner with them. They have a real enthusiasm for the game and represent a growing basketball community. We are also thrilled to partner once again with The Amazing Race Canada for its ninth season. Following past success, this year will feature even more unique activations and opportunities to showcase our better-for-you energy drink brand across Canada. On top of our marketing initiatives, we've also been working to improve our in-store execution with our exclusive distribution partner, PepsiCo, and we see a clear improvement over last year. PepsiCo continues to work towards making our energy drinks more available to retailers and consumers in Canada. We are presently in 95% of convenience at gas stores and 77% of grocery and drugstores. We're also starting to increase our presence in the food service sector. Looking now at our U.S. operations, please turn to slide seven. As mentioned during last quarter's call, the U.S. offset strong comparables versus Q2 2022, which included a one-time large order from Sam's Club. The latter, combined with our change in strategy for the e-commerce channel, explains the U.S. operations contraction in Q2 of 2022. However, the true picture regarding our second quarter is that we have been working on developing the U.S. market through the natural food channel and the leading club channel retailers. For the natural food channel, it meant securing our leadership position by increasing our presence and sales velocities. As well, as mentioned last quarter, we delisted from stores in other channels that were not profitable. This strategy has allowed us to achieve the following results in the last 52 weeks. Over 18% growth in the natural food sector, beating the category growth of 9% for the year. Over 22% growth at Whole Foods, and the number one position in strategic natural banners in California. Since launching our Guayusa Tropical Punch innovation in the U.S., it is delivering strong results and is now ranked as the number one guru product in sales velocity in the natural food channel. The other portion of our strategy consisted of entering the wholesale club channel market. Following the success of our 2022 Fall Roadshow with Costco, We just started selling an exclusive format of Guayusa Tropical Punch in over 40 locations in Los Angeles for the three summer months. This rotational program will allow us to showcase Guayusa Tropical Punch to a larger market of better-for-you consumers and could open the doors to new opportunities in this channel. Turning now to online sales, our change in strategy showed improved profitability in Q2. Over the past several months, we have achieved a better return on investment and will continue to work on growing 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 Ingi, who will provide you with more details on our financial results for the quarter. Ingi, over to you.

Thank you, Carl, and good morning, everyone. Turning to slide 9, net revenue for Q2 rose to $7.7 million from $7.6 million for the same quarter in 2022, mainly driven by increased sales velocities in Canada and the launch of Guru's newest innovation, K&N Fruit Punch. In Canada, sales increased by 21% or $1.1 million to $6.6 million versus the same period last year. and the company's national market share grew from February to April to a high of almost 5%. U.S. sales during the quarter decreased to $1.1 million from $2.2 million in Q2 2022, mainly due to the Sam's Club one-time program in Q2 2022. Gross profit totaled $4.1 million in Q2 2023, the same as last year. Gross margin decreased to 53.1% in Q2 2023 from 54.3% for the same quarter last year, mainly due to higher cost of goods sold and more promotional activity. SG&E was $7.1 million for Q2 2023, compared to $8.2 million for Q2 2022. Selling and marketing expenses decreased to $4.7 million from $5.2 million in Q2 2022, as Guru took a more targeted approach to its investment in sales and marketing campaigns during the quarter. General and administrative expenses decreased to $2.4 million from $3 million in Q2 2022 as a result of cost-controlled measures. Net loss for the second quarter was $2.6 million, or $0.08 per basic and diluted share, compared to a net loss of $4 million for the second quarter last year, or 12 francs per basic and diluted share. The improvement in our net loss position mainly reflects the decrease in costs associated with brand, field, and trade marketing activities. In Q2, adjusted EBITDA amounted to a loss of $2.5 million, a $1.2 million improvement from a loss of $3.7 million for the same period last year, mainly due to lower selling and marketing expenses and general administrative costs. As of April 30, 2023, Kuru had cash and cash equivalents of $40.7 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 return to generating sustained profitability. Carl, back to you for concluding remarks.