GURU Organic Energy Corp.

13th, 2025 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 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 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. Please take a moment to read the disclaimer on forward-looking statements on slide two of the presentation. I will now turn the call over to Carl Goyette, Guru's Chief Executive Officer. Thank you, Operator.

Bonjour à tous. Good morning, everyone, and welcome to GURU's Fiscal 2025 First Quarter Results Conference Call. Joining me this morning is our CFO, Indy Seraf. We're excited to share GURU's strongest first quarter performance on record. We remain focused on expanding in the U.S., reinforcing our leadership position in clean energy, and progressing towards profit and beauty. Today, we'll walk you through the key drivers of our success, how we're strengthening our position, and what's ahead as we continue to execute on our strategy. Our net revenue grew by 8% to $7.7 million, fueled by strong consumer demand, particularly in the U.S., where sales momentum continues to build. U.S. sales surged 46% year over year, reaching $2.1 million, or 27% of net revenue. Gross margin expanded to 59.5% from 52.9%. Net loss improved by 31% to $1.3 million, marking our lowest loss since Q2 of 2021. Adjusted EBITDA loss improved to $1.1 million. Our cash position remained strong at $25.2 million with no debt. These results underscore the strength of our brand, our disciplined approach to profitability, and a growing consumer shift towards better-for-you energy options. Turning to slide six. The U.S. remains a major growth engine for Guru. We continue to gain momentum in key channels, expand our distribution, and strengthen our position in the better-for-you energy space. We continue to expand in key retail channels, with natural channels can sales up 20% in Q1 over last year and Whole Foods up 37%. Our top national accounts, which represent 80% of our volume in this channel, all experience double-digit growth. reinforcing Google's position as a leader in the natural energy drink segment. The Costco Los Angeles Roadshow featuring our Zero lineup allowed us to connect with health-conscious consumers, increase brand trial, and expand our visibility in a key growth market. At the same time, our online business continues to thrive. Amazon U.S. consumer unit sales increased 58% in the last 12 weeks, while Amazon Canada grew 43%. Repeat purchase rates reached an all-time high, reaching 65% in the U.S., demonstrating strong brand loyalty. These results show that Guru is not only growing, but gaining momentum in key channels. Consumers are actively choosing good energy with no artificial sweeteners, zero sucralose, and zero aspartame. And Guru is delivering exactly that. Turning to slide seven. At Guru, innovation is a key driver of our success. It fuels our growth, strengthens our brand, and reinforces our leadership in a better-for-you energy. Our Xero line continues to perform exceptionally well in the U.S., reinforcing a position in the fast-growing Xero sugar energy segment. In Q2, we launched Xero Wildberry, Wild Ruby Red, and Wild Ice Pop in Canada. With Xero Wild Ice Pop also launching in the U.S., as our fourth zero product in that market. While still early, we are already seeing strong initial traction, reinforcing our leadership in the fast-growing zero sugar energy segment and highlighting the strength of consumer demand for clean plant-based alternatives. But innovation is not just about flavors. It's about staying true to our values. Unlike many so-called better-for-you brands that still use artificial ingredients, Kuru offers the only zero-sugar organic energy drink with no sucralose and no aspartame. Consumers today are looking for clean, healthy plant-based energy, and we're delivering it without compromise. With a strong demand for authentic, better-for-you alternatives, we see significant opportunities to continue expansion in the U.S., Canada, and online. I will now turn the call over to NG Seraph, our CFO, to discuss our financial results in more details. NG, over to you.

Thank you, Carl, and good morning, everyone. Let's take a closer look at our financial results for Q1 2025 on slide 9. We delivered net revenue growth of 8%, reaching $7.7 million, driven by strong U.S. performance and expanding consumer base. Gross profit increased by 21% to $4.6 million, supported by higher pricing execution and a more efficient promotional strategy. As a result, Gross margin expanded to 59.5% from 52.9%, reinforcing our ability to scale profitably. At the same time, SG&E expenses improved as a percentage of net revenue, declining to 79% from 85%, reflecting greater operating efficiency. With these strong financial fundamentals, net loss improved by 31% to $1.3 million, marking our lowest quarterly loss since Q2 2021. Our adjusted EBITDA loss also improved to $1.1 million as we continue to leverage scale while driving margin expansion. On the balance sheet, we remain well positioned to fund our growth initiatives. We ended the quarter with $25.2 million in cash and no debt, giving us the financial flexibility to execute our strategic priorities. This compares to $25.5 million in Q4 2024. Our $10 million in unused credit facilities further strengthens our ability to invest in high-impact growth opportunities. Let's turn to slide 10. As we continue through fiscal 2025, our key financial priorities remain expanding our presence in the U.S. by increasing sales velocity and distribution, optimizing growth margins, through pricing execution and disciplined promotional strategies, ensuring a seamless and flawless transition with PepsiCo, optimizing supply chain efficiencies and maintaining strong retailer relationships, and managing costs, minimizing tariffs impacts and driving efficiencies, while maintaining a strong cash position to support our long-term profitable growth. We remain confident in our path to sustained profitability. and will continue to execute with discipline to drive long-term value for our shareholders. With that, I'll now turn the call back over to Carl for closing remarks.

Thank you, Angie. Let's turn to slide 12. Q1 was a strong start of the year, building on the foundation laid in 2024 with our zero line and the momentum that has followed. Our record quarterly performance Continued margin expansion and financial discipline put us in a great position to accelerate our growth in 2025. In the coming quarters, we will continue to focus our energy on areas where we expect to achieve significant growth by successfully executing our transition with PepsiCo, ensuring operational excellence and uninterrupted growth, scaling our presence in the U.S. through innovation and expanded retail distribution, launching our zero line in Canada and continuing to differentiate our brand in the Better For You segment, and optimizing our brand investment strategy to drive long-term profitability. We're just getting started. Consumers are embracing clean, good energy, and Guru is at the forefront of this movement. With a strong momentum, expanding zero line, and disciplined execution, we are well-positioned to accelerate growth in 2025 and beyond. We're excited about the opportunities ahead and look forward to continuing this journey with you. Thank you for your time today. This concludes our formal remarks. I will now turn the call over to the operator for the Q&A.

Thank you. We will now begin the question and answer session. To ask a question, you may press star, then one on your touchtone phone. If you are using a speakerphone, please pick up your handset before pressing the keys. If at any time your question has been addressed, and you would like to withdraw your question, please press star and then two. At this time, we will pause for just a moment to assemble our roster. And your first question today will come from Martin Landry with Stifel. Please go ahead.

Hi, good morning, Carl and Angie. Good morning.

Good morning, Martin.

Carl, my first question, as usual, is I was wondering if you could provide us with the growth of your revenues at retail, all channels, tracks and untracked, in Canada for the quarter, if that would be possible.

Yep. For the last 12 weeks, it'd be flat, Martin. Okay. The reason for that is December and January were a little bit softer because we delayed some promotions that were not sustainable or not profitable. But we saw an acceleration in February with some of those permissions kicking in, namely a very successful promotion at Costco and the strong start of our innovation at Gustav. So all in all, flat in tracked and untracked.

Okay. Okay, that's helpful. Angie, I was wondering, your gross margin expanded significantly this quarter. It's tracking really well sequentially. Would it be possible to provide a gross margin bridge so that we better understand all the moving parts related to your gross margin expansion on a year-over-year basis?

Yes, for sure, Martin. So, yeah, we're really proud that our gross margin improved significantly. So, it went up by 660 basis points. And if we break it down, the majority of it, so 590, came really from pricing and, like Carl mentioned, timing and lower promotional spend. So, our sales team, like he also said, made strategic decisions to discontinue some of the promotions that weren't profitable. So, So that's the majority of it, and the remaining, the 70 basis points, were really driven by more favorable COGs. So overall, we continue on the path of a disciplined approach for our gross margin with our pricing, with our promotions, and with our operational efficiencies.

Okay, that's helpful. Thank you. Carl, you know, we're just on the eve of... the company transitioning its distribution in Canada. So, you know, obviously when we look at that from an outsider, there are some risks that you could have some out-of-stock position at retail during that transition. So I would like to understand a little bit better how you intend to mitigate that risk, those risks during transition.

Yes, of course. I expected you to ask questions like this because this is an important project. I'd say this is our main focus for me and pretty much the whole Guru team is focused on that transition and it's going very well so far. The best way to give you a simple answer to your question, Martin, would be to use the traditional 80-20 rule. So for 80% of the business for us, 80% of the business are comprised of very large corporate accounts retail and wholesale, right? So it's a combination of Sobeys, Couchetard, Metro, Costco, Loblaws, right? These are the big guys that comprise 80% of our business in Canada. And the customer sentiment's been very good. They've been very receptive. They're happy to deal with us directly again. So honestly, this is very good. We're in the final stages. I wouldn't say it's all done. You're finalizing the last details, but this is in very, very good shape. Then the 20%, right, is a longer list of regional, a lot of independents. It's called the long tail, so a much longer list of smaller retailers that still are important, right, but that are often dependent on how our distribution is going to be structured with the bigger guys, right? So it's progressing. It's not as advanced. So the 20% is not as advanced as the 80%. but we're confident that we're going to be there on time. Obviously, the goal, and we have a special target for the team, is that there's not going to be any disruption for retailers, but mainly for consumers. There's going to be a switch between on the week one and week two, some retailers will delay an order or two for one week or two, but it should be very transparent for consumers. Obviously, our number one goal is to make sure we don't have any out-of-stocks for consumers. We're putting a lot of A lot of effort behind this, some strong promotions for transition. The sales force is excited. A lot of our salespeople are saying this is going to be the good old guru days, right, because people love selling directly. As you know, we had a distribution partner that was doing sales for us, and we're excited to be doing sales again directly. For salespeople, this is exciting.

Okay. Great. Thank you. And maybe my last question, you know, with the – the political tensions that we've seen recently, you know, the bi-Canadian trends have emerged. And I was wondering if that had an impact on you and on your products recently.

Yeah, I'm glad you asked because in the beginning, right, it's been going back and forth. It's hard to follow. And in the beginning, we were not seeing any accelerated momentum. But I would say that... A portion of our stronger February, I would say, is linked to this. When we look, and it's very recent data, but we look at the latest weeks, we're seeing an acceleration in some of our customers. For example, the Costco promotions, the strong start of our innovation we've mentioned about, and we look at our scan data on a weekly basis, and we're seeing some acceleration. And we're starting to hear some other stories, which is good news as well, from other manufacturers in Canada that are seeing an acceleration in their sales. So clearly there seems to be now Something we're not necessarily seeing and retailers were not seeing in January. It seems like there's a little bit more of a movement, which obviously we see very positive for Canadians to stand together for being proudly Canadian and encouraging Canadian products. So very happy with that.

Okay, cool. That's great to hear. Thank you. That's it for me. Thank you, Martin. Thank you, Martin.

Your next question today will come from Sean McGowan with Roth Capital Partners. Please go ahead.

Good morning. Thanks. Good morning. This is the highest quarterly gross margin I think you've had in any quarter since entering the Pepsi agreement in late 2021. And, you know, thanks for the breakdown on what drove that. But would you say there are any unusual factors that drove that, like that lower promotion? Should we expect that to sustain, or is that kind of an unusual benefit that we won't see in future quarters?

Yeah. So I'll start, Carl, and feel free to jump in. Yeah, sure. Yeah, so I think it's – I wouldn't call it unusual. I think we're going to sustain strong margins moving forward I think that, yes, promotional activity will normalize. And we know, right, we're entering the spring period with innovations coming in and summer. So they will normalize in the upcoming quarters. But I also think that we'll continue to apply our pricing discipline and continuously also improve our operations. So efficiency will also continue benefiting from it. But, yes, promotional activities will increase.

Okay. Okay. Thank you. Yes, but they will improve. I think I would first want to add that, yes, they will promotional increase. And we intend to have strong promotions in the future, obviously, especially in the context of the transition. But let's all remember that when we transition, we will, you know, there will be some positive momentum for our gross margins. Remember last quarter, we spoke about that in our previous distribution prior to PepsiCo. We had gross margins that were in the 60% range. So this is still the target to go back to that 60% range. So even if promotional activities normalize, we expect gross margins to improve in the future. But that's post-Pepsico transition. So the next quarter, you might see some normalization, as Angie said.

Right, and that's where I was heading with my next question. I mean, if you're able to get this kind of gross margin now before you know, the benefit of that changeover? How much higher could it get? I mean, could it get to levels higher than what we saw before the Pepsi distribution came on in late 21?

It's hard to say now. It's hard to say. That's the goal. I'd say that's the goal. It's hard to commit to that now because we're finalizing pricing and discussions and the distribution model. And we'll give you full transparency. I guess the next time we speak, Sean, right, we'll be in June after our Q2 call, and then we'll have more of a model. Because at that point, we will be transitioning, so we will know what the new distribution model is and what the margins are and the pricing, the final pricing is. So we'll be able to better model this. But, yes, the goal would be to even have better margins than what we had in the past. Okay.

And are the margins now on U.S. sales actually lower than in Canada at this rate?

No, they're very comparable.

Yeah.

Thank you. Question following up on Martin's question about the risks, you know, of this transition. Can you What can you tell us about the new distributors you're working with? And, you know, what does the changeover do to your ability to forecast your shipments compared to how it was working with, you know, much larger, you know, big guy like Pepsi?

We can't. tell you much about a new distribution system because we intend to obviously make formal announcements as we go. But one thing is it's going to be like clearly from a forecasting perspective, like having a direct distribution model has significant benefits for us in terms of first driving performance. We think that we will be better at driving performance if we deal directly with retailers, right? It will also improve our ability to forecast because we will be building promotional calendars with them and promotions and how we work and we'll know exactly what the planogram is going to be and when we intend. So just more information will give us better ability to forecast. And if you look at how good we were at forecasting prior to having an exclusive distributor versus after, like we were caught a few times with big inventory fluctuations, for example, that we did not see coming. Obviously, that will not be the case because we will control a lot more of the inventory. So to your question, our ability to forecast, we obviously think it's going to be easier, not necessarily in this transition. I would say like Q2 and Q3, because of transition, it's going to be harder to control how much initial inventory new distributors are going to take and then when exactly is PepsiCo going to start depleting the inventory they have. So there's going to be a little bit of a transition. But post that transition, we think we're going to be able to drive a stronger performance, stronger forecasting, and better overall control in our business. I don't know if, NG, you wanted to add anything from an impact on financial impact of this or SG&E and all that?

No, I think we're committed to really planning our SG&E carefully and making sure it's as lean as possible for our structure. So, yes, it will fluctuate in the short term, but I believe that you'll still see some improvements since we want to return to profitability, and that doesn't change.

Okay. My last question is about the reduction in inventory. I would have thought that as you prepare for this switchover, you might actually see an increase in inventory, kind of getting ready to – to handle a buffer or just, you know, handle on your own. So should we expect to see that in the second quarter? So, I mean, it was a pretty big kind of source of cash in the first quarter. Did we see that reverse itself? Yeah.

Yeah. You could see some small fluctuations in the coming quarter, to your point. But overall, we're trying to tighten our inventory as much as possible because, to your point, because of the cash flow that it takes. But, yes, we want to make sure we're secure. We want to make sure our retailers – and our new customers will have enough inventory on hand and we're able to fulfill, especially considering also the demand we're seeing with our new zero lines and what's going on as well on the other side of the border, right? We're managing this very proactively in a way that's sustainable in the long term and in the short term.

Okay. Good luck and elbows up.

Thank you.

Thank you, San.

Thank you, San.

That concludes our question and answer session. I would like to turn the conference back over to Carl Goyette for any closing remarks.

I just want to simply thank everybody for joining and have a great day.

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.