Delivra Health Brands Inc.

Good morning and welcome to the Delivera Health Brands Inc. 2023 results conference call. As a reminder, all participants are in listen-only mode and the conference is being recorded. After the presentation, there will be an opportunity to ask questions. To join the question queue, you may press star then one on your telephone keypad. Should you need assistance during the conference call, you may signal an operator by pressing star, then zero. The information communicated by Delivera Health Brands Inc., the company, is intended solely for discussion purposes and are not intended as and do not constitute an offer to sell or a solicitation of an offer to buy any security and should not be relied upon by you in evaluating the merits of investing in any securities. The company believes the information communicated in this overview to be reliable but makes no warranty or representation whether expressed or implied and assumes no legal liability for the accuracy, completeness or usefulness of any information disclosed. Any estimates, investment strategies and views expressed during this conference call are based upon current market conditions and slash or data and information provided by unaffiliated third parties and is subject to change without notice. All forward-looking information provided during this conference call are given as of the date hereof and are based upon the opinions and estimates of management and information available to management as of the date hereof. Except as required by law, the company disclaims any obligation to update or revise any forward-looking statements, whether as a result of new information, events, or otherwise. I would now like to turn the conference over to Gaur Devi, President and CEO of Deliver Health Brands, Inc. Mr. Davey, please proceed.

Good day and welcome everyone to our Quarter 2 Shareholder Investor Conference. We are extremely pleased to be here with you today. I'm Gord Davey, the President and Chief Executive Officer of Deliver Health Brands. I'm joined today by our Chief Financial Officer, Jack Tassie. During our first conference call in October of 2022, Jack and I took you through the positive results of a transformational year for Deliber Health Brands and outlined our strategy and vision for our fiscal 2023 and beyond. Today, we are excited, pleased, and grateful to take you through the outstanding and historic results of our first two quarters of 2023, which provide a positive, sustainable future for our company. We will take you through what is driving the results, our strategic approach, and the challenges we face. We will also take you through what you can expect from Deliver Health Brands as we continue to expand. Before we get into that, I'd like to share again the excitement and celebration of our new identity and name change to Deliver Health Brands, a global health and wellness company that is uniquely positioned in the consumer packaged goods segment, as well as the constantly evolving cannabis space. We are on a mission to change how people approach their health. Helping people take control of their health with alternative wellness solutions is what energizes our Deliver Health Brands team. Our portfolio of innovative brands, Dream Water, Live Relief, and Live Relief Infused, provide solutions for common everyday issues like chronic pain, arthritis, anxiety, and sleeplessness. Deliver Health Brands products have allowed millions of consumers to reclaim their mobility, energy, and in turn their lives. Our customers believe in and love our products as much as we do, and we are grateful to have so many loyal brand champions. Every day, our team of professionals continue to design health and wellness solutions that will enhance lives everywhere. Deliver Health Brands has strived to create a culture centered around inclusion, diversity, and teamwork. We have created our vision, mission, and values around this culture. Our vision of Deliver Health Brands We are building a community of wellness naturally. Our mission of Deliver Health Brands, we are pioneering the alternative wellness space with innovative products that bring relief to everyday health issues and enhance the quality of life. These are reinforced by the values of Deliver Health Brands.

Trust, passion, agility, drive, courage, and humility.

I will reiterate, we have great products, we have great people, and our portfolio brands are in growing categories, which provides sustainable, profitable growth, an important foundational pillar to deliver health brands. Our products are in large categories that are consistently growing. Sleep category is a $25 billion category, going at over 20%. Our topical pain category is a 13 plus billion category, going at over 10%. In the cannabis category, exponentially growing and expanding as the market continues to be educated. The labor health brands are front and center in these categories with strong brands and proprietary intellectual properties. We will now take you through the outstanding results, our execution plans for the remainder of the year, and our strategies and outlook for 2024 and beyond. Our year is not being without risks and challenges. It is what you do in these challenging times that help define your future. There continues to be COVID hangover, which creates uncertainty and can slow momentum. Supply shortages continue, which test your systems, strategic planning, and agility in the marketplace. Inflation is very high, which affects margins, capital markets, and people's willingness to spend. And the war in Ukraine continues, which creates uncertainty in the markets and with global expansion. Our team has been faced with these factors, not unlike other companies. But in the midst of dealing with these challenges and risks, Deliver Health Grants has produced historic positive results. Jack will later take you through in more detail. However, here are the top line results of our second quarter. I am very excited to be able to report that for the first time in company history, we are EBITDA positive. Quarter one was our first quarter, we are cash flow positive. And quarter two is the first quarter, we are EBITDA positive. Let me outline the significance of this achievement. In 2020, as we began our transition to a health and wellness company, we were negative $9 million in EBITDA. Quarter two last year, we were negative $954,000 in EBITDA. This year, quarter two, we are positive $140,000. That's over a million-dollar improvement quarter over quarter. Let us continue with historic positive Q2 results. We've increased net revenue by 37%. We've increased our gross margin percentage from 37% to 41%, a significant increase from 9% back in 2020. We continue to decrease our SD&A expenses by 45% quarter over quarter. With higher revenue and higher margins and lower costs, it has improved our EBITDA. It is the right formula. How was this accomplished? Well, we executed on our strategic initiatives. Those included USA Expansions, through products, channels, and customers, through international growth in territories and customer base, accelerated infused topical platforms through channels, territories, and customers, and also with key partnership focus through impactful customer programs, e-commerce expansion, and innovation. These were the strategic pillars Jack and I talked about in our last investors call. We have done what we said we would do, and we are just at the beginning of this phase of Deliver Health Grants. I'd like to call out a specific channel and customer that we have partnered with to help accelerate our sales. One of the key channels for Dreamwater is the travel hotel channel, but a perfect place to need a great night's sleep. Good sleep fast is what we say. We have signed on over 460 hotels in the USA through our distributor partner, Little Drug. This includes our innovative Dreamwater Sleep Gummies, and our sleep shop formats. Please look for our products as you travel. We have also expanded our airport coverage, adding innovation to the DreamWater lineup with DreamWater Sleep Gummies and DreamWater Immunity. Again, we encourage you to look for our products as you travel. With these positive results, we also reported in December another major milestone. We have completed this sale with a non-revenue generating facility in Lucky Lake, Saskatchewan. This improves our cash flow and provides extended working capital to help execute our strategies. This also significantly improves our balance sheet, a particularly key step to deliver health grants. How do we continue to improve at an accelerated rate? We will continue to execute our outlined strategies above. as well as execute on detailed plans for 2024 and beyond with our pillars of growth. Deliver Health Brands has seven pillars of growth moving forward. Current account acceleration, new account growth, Liberleaf launch in the USA, e-commerce expansion and growth, international expansion and growth, Liberleaf infused distribution, and mergers and acquisitions. The success of these strategies is dependent on investment, execution, and, of course, marketing. We have the team and the plan to accomplish this. These strategies support our acceleration plan of more products in more areas with more customers, and we're just getting started. We have completed our transition to a health and wellness company in our position for unprecedented growth. We are not without challenges, however, our team and our board prepared to take on the challenges and continue to bring long-term sustainable growth to deliver health brands as shareholders and investors. Jack will now take you through some detailed financials and a business overview. We appreciate your support in our vision of Deliver Health Brands.

Thank you. Thank you, Gord. This is Jack Tassi, CFO of Deliver Health Brands. Before providing the high-level financial overview, it is important to state that all commentary provided is should be understood and explained in the context of the latest financial statements and MD&A filed by the company. The company continues to build on its quarterly and annual results after the strategic review back in March 2020. Change in strategy and direction continues to pay off with tangible improvements in financial results. This progress is not risk-free of challenges as we operate in an environment with high inflation and with significant pressures on consumer spending and corporate environments, including our vendors and distributors and customers with significant cost pressures. In conclusion, the company will continue to find markets and distributors that are relevant to its growth and products. As mentioned on the annual call back in October 2022, the company is no longer burning cash compared to prior years, and in Q1 of this year, of fiscal 2023, The company reported a slight EBITDA loss but was close to breaking even. And in Q2 of fiscal 2023, the company is reporting a positive EBITDA of $140,000 to the first time in its business journey. And this confirms two achievements so far. Number one achievement, this is a clear illustration that this unique business model works and is very scalable. The second point, which is the relevance of our products and ability to compete with very well-backed brands in the health and wellness space. During this conference call, I will build on the same key performance indicators presented in the annual investor call as the company gives significant attention to the following three internal key performance indicators. The first key performance indicator, uncover performance. potential in the U.S. and international markets for the company's Greenwater brand and SKUs. This strategy was explained in the annual investor call of October 2022. As communicated, managing customer mix and focusing on international distributors continues to be the strategy, and it certainly paid off. As per our financials of Q2 of fiscal 2023, The company's U.S.-based sales increased by $500,000, or 51%, as a result of international distribution. In sum, an improved second quarter of this year's net revenue by 37% of both brands, combined green water and liver leaf, compared to the same quarter last year is another level of our growth strategy. This high percentage of growth in Q2 covered the shortage in Q1 that we had, leading to a year-to-date growth rate of net revenue by 6% in the first six months of this fiscal year. This takes us to the second key performance indicator, which is maintaining and growing gross profit and gross profit margin. This high-level background, the company succeeded year-over-year in increasing its gross margin from 24% last year to 32% this year or last year, Again, as a result of the company's focus on the right customer mix, which means lower sales fees and lower distribution costs, the company managed to increase its gross profit and profit margin in Q2 from 644,000 or 37% last year to 987,000 or 41% this quarter. The company took provisions on write-downs of 121,000 compared to 161,000 last year, This provision relates to aging SKUs. Year-to-date results exhibit the same financial improvements in this quarter. The company reported year-to-date gross profit of $1.86 million and a gross profit margin of 45% as compared to $1.35 million and 35% in the same period last year. The company considers such margin percentages as financial achievements especially when compared to prior years as a result of the company's ability to manage the customer mix. This takes us to the third key performance indicator, which is targeting improvements and adjusted EBITDA. Our objective was always to break even to demonstrate that our business model works and is scalable. In the second quarter, We achieved this milestone, and the company reported around 140,000 in positive adjusted EBITDA compared to 944,000 negative adjusted EBITDA in the same quarter last year. This improvement will allow the company to invest and reinvest in needed marketing products and innovation to socialize our existing products and the new products such as our Sleep Gummies product, and the new Immunity Dream Water Shop offered in the U.S. with new customers and markets. Given the progress in Q2, year-to-date results are almost at a break-even point compared to last year's 1.7 million negative adjusted EBITDA. Finally, a few observations related to the Statement of Financial Position. We reported last fiscal year, fiscal 2022, that current assets included an asset held for sale of $2.3 million that related to our Lucky Lake facility, and I'm delighted to state that this asset was sold for gross proceeds of $3 million, excluding payments of liens to transfer the title and disposal costs. Accounting gain reported was around $600,000. Second point is, As of the end of Q2, there are no impairments to intangible assets on the balance sheet, and this indicates strength in our brands and future possibilities and opportunities as well. Finally, the balance sheet is in good position to support future growth, given the sale of Flucky Lake assets and given the current state of our adjusted EBITDA, which makes the company ready to invest in marketing programs. Finally, The company continues to navigate capital markets to explore opportunities to fund future innovation and inclusion of other brands. In conclusion, management will continue to improve shareholder value and explore opportunities that are long-term in nature, and based on such improved results and milestones, we are hoping that the performance of DeliverHealth brands gets noticed by existing shareholders and potential investors, given how the company embraced change in uncertain times, leading to positive financial performance. Thank you. Have a good day.

We will now begin the question-answer session. To join the question queue, you may press star, then 1 on your telephone keypad. You will hear a tone acknowledging your request. If you are using a speakerphone, please pick up your handset. Before pressing any keys to withdraw your question, please press star, then 2. We will pause for a moment as callers join the queue.

Once again, if you have a question, please press star, then 1.

As there are no questions from the phone lines, this concludes the question and answer session. I would like to turn the conference back over to Gord Davey for any closing remarks.

Thank you so much. We want to thank you for your time today. The Liver Health brand is excited and encouraged with our continuous improvement. We'll continue to execute on our strategies, stay rigorous in our financial responsibility, and scale our business sustainably. We appreciate your support and our vision for Deliver Health Brands. We hope that you have a wonderful day. Thank you for your time today.

This concludes today's conference call. You may disconnect your lines. Thank you for participating and have a pleasant day.