Auxly Cannabis Group Inc.

Ladies and gentlemen, thank you for standing by. Your conference call will begin momentarily. Please do not disconnect your lines and your patience is appreciated. Once again, the conference call will begin momentarily. Please do not disconnect your lines. Your patience is appreciated. Thank you. Good morning, ladies and gentlemen. My name is Michelle and I will be your conference operator today. At this time, I would like to welcome everyone to the Oxley Cannabis Group Q4 and full year 2022 earnings results call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session from the company's financial analyst. If you would like to ask a question during this time, simply press star then the number one on your telephone keypad. If you would like to withdraw your question, please press star then the number two. Thank you. Mr. Schmidt, you may begin your conference.

Thank you, operator, and good morning, everyone. thank you for joining us for oxley cannabis group's fourth quarter and full year 2022 financial results conference call my name is brian schmidt cfo of oxley cannabis group and joining me today is hugo alves ceo a replay of this conference will be archived in the investor relations section of oxley's website i encourage you to follow along with the presentation slides which are posted on our website in the investor section under presentation Before I turn the call over to Hugo I would like to remind everyone that our discussion today involves forward-looking statements that are based on assumptions that are subject to risks and uncertainties that could cause actual results to differ materially from the views expressed today. Management can give no assertion that any forward-looking statement will prove to be correct. Forward-looking statements during this call speak only to the original date of this call and we undertake no obligation to update or revise any of these statements except as required by applicable law. Manager refers you to the cautionary statement and risk factors included in Oxley's disclosures. And note that all references on this call are to Canadian dollars unless otherwise stated. And with that, I'll turn it over to Hugo to commence the presentation.

Thanks Brian and good morning, everyone and welcome to our fourth quarter and full year 2022 earnings call. i'll start the presentation on slide five. 2022 was a challenging year for the cannabis industry increasing competition fragmentation and an oversupply of cannabis continue to create pressure on pricing. and this is exacerbated by global economic hen wins, punitive taxation, and unreasonably restrictive regulations, which continue to help prop up a strong illicit market. Oxley was certainly not immune from the impacts of these dynamics, but despite those challenges, we are happy to report that 2022 is a strong year of growth and progress for Oxley. We were the fifth largest LP over the course of 2022 and also maintained our number one position in the 2.0 product segment for a third year in a row. And importantly, in order to better position Oxley within the current market realities, we evolved our strategy at the end of the third quarter by streamlining our portfolio to focus on consumer favorites and the largest product categories of dried flower, pre-rolls, and vapes, enhancing our capabilities and automation at our Leamington facility to deepen and further leverage our high-quality, low-cost cultivation and manufacturing advantage, reducing costs throughout the organization, and internalizing our sales team to focus exclusively on Oxley products, improve relationships with retailers, and increase distribution. Turning to slide six. Dried flour, pre-rolls, and vapor products account for approximately 85% of all industry sales and represent the largest opportunities for Oxley. We are leaders in the vapor market. Oxley finished 2022 as the number one vapor company on a full year basis, the third consecutive year that we have managed to achieve that standing. We have three strong and differentiated vapor brands at different price points, with all three brands being in the top 10 vape brands nationally. And thanks to the success of all three brands, our products are broadly distributed nationally, and we have refocused on vapor innovation and are happy to report that our new Ice Series vapes under BAC4E and our Blunt Flavored vapes under CoLab have enjoyed broad consumer success since launch. And since acquiring sole ownership of our Leamington Cultivation Facility at the end of 2021, we have started to lean into dried flower and pre-roll products and are making excellent progress in establishing our brands within those product segments. We feel that we have natural competitive advantages in both formats. We have made incredible strides in product quality and operational efficiency at Oxley Leamington and believe it is now one of the lowest cost producers of high quality cannabis in the country. and we have made significant investments in pre-roll and manufacturing and packaging, R&D, and automation to develop what we believe is a best-in-class product in terms of quality, consistency, and price. In 2023, we'll continue to participate selectively in other product categories, but our organizational focus and resources will be largely dedicated to our dried flower, pre-roll, and vapor products. Moving to slide seven, We continue to be committed to building lasting brands that resonate with consumers, and we will continue to make investments in insights, innovation, and brand development so that we can ensure we are helping our consumers live happier lives by consistently delivering phenomenal products at a great price under brands that they can trust. We have a well-rounded brand portfolio which addresses various consumer segments, product formats, and price points. Back 40 continues to be our largest and strongest brand. Consumers continue to love the brand's value proposition of simple, high-quality cannabis products at a great everyday price. Back 40 products are widely distributed, being found in over 90% of retail locations in Canada, and as a result, Back 40 has consistently been a top five brand nationally by revenue over the past 12 months. In the back half of 2022, we added a fifth brand to our portfolio, Parcel, to compete in the fast-growing ultra-value pricing tier. We have seen the ultra-value price tier grow rapidly in 2022 as consumers look for increased value for money in the face of economic uncertainties. Approximately one-third of dried flower volumes are now transacting at the ultra-value price segment. And Oxley-Leamington's high-quality, low-cost advantage allows us to offer consumers high-quality single-strain flower at ultra-value pricing while maintaining profitable margins. And we are delighted with the early performance of parcel products, and we will work hard to increase the breadth of parcels portfolio and distribution over the course of 2023. Turning to slide eight. As consumer preferences continue to evolve, innovation and new products continue to drive both customer and consumer purchasing behavior. Over the back half of 2022, we successfully launched 30 exciting new SKUs to market across all product categories. In 2023, we'll continue to innovate to meet the evolving needs of our consumers, but we will focus intently on dried flour, pre-roll, and vape product formats. We will look to increase the breadth of our product portfolio in those key categories to set the stage for continued growth and further leverage the competitive advantages that we believe Oxley has in those three product categories as outlined earlier in the call. In Q1 of 2023, we've already increased our SKU count in those three product categories by 30% on a blended basis. We will continue to seek additional listings for exciting new flower, pre-roll, and vape products throughout 2023 and leverage our new internal sales team to build retailer excitement and distribution for those products. Turning to slide nine, Oxley-Leamington is one of the premier cannabis cultivation facilities in the world. There are very few competitors that can match our mix of high quality and low cost, and we plan to leverage this advantage to continue building to leadership in dried flower and pre-roll segments and improve our overall gross profit margin. Through continuous improvements in cultivation strategies and genetic selection, we have seen overall product quality and potency increase over the course of 2022, and importantly, we have seen those improvements translate into increased sales and market. As already mentioned, we've increased our focus on flower innovation and have a portfolio of commercially ready strains for launch over the course of 2023. Turning to slide 10, we've also made significant advancements in enhancing our automated manufacturing capabilities. We successfully installed and commissioned our second pre-roll filling machine at our Leamington facility, doubling our filling capacity. We've been working with these machines for a couple of years now and have developed what we believe are best-in-class operators and know-how, and we are seeing the results of that gained experience and the increased quality and consistency of our pre-roll products. We have also been working collaboratively with one of the world's largest tobacco equipment manufacturers to develop a much larger, first-of-its-kind filling machine that which will again materially increase product throughput and efficiency and make us one of the largest manufacturers of cannabis pre-rolls in the world. We have completed factory acceptance testing of this machine. It is in transit and we look forward to taking delivery and having it commissioned in the back half of 2023. Our automated pre-roll packaging equipment is also now operational at our Leamington facility and producing units. We continue to work with the equipment's manufacturer to increase speeds to specification, and we expect to see continued increases in production of pre-rolls in Q1 2023 and beyond. I'll stop here and now turn over the presentation to our CFO, Brian Schmidt, to walk you through the financial results. Brian, over to you.