Delivra Health Brands Inc.

Good morning and welcome to the Deliver Health Brands, Inc. ERN 2024 Results Conference Call. As a reminder, all participants are in listen-only mode and the conference is being recorded. Presenting on today's call will be Gord Davie, President and CEO, and Jack Tassie, CFO. 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 Deliver 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. A 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, and usefulness of any information disclosed. Any estimates Investment strategies and views expressed during this conference call are based upon current market conditions and or data and information provided by an affiliated third party and is subject to change without notice. All overlooking 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 Gord Davie, President and CEO of DeliverHelp Brands, Inc. Mr. Davie, please proceed.

Good morning, everyone, and thank you for joining our fiscal 2024 shareholder update for DeliverHelp Brands. My name is Gord Davey, the president and CEO, and I'm proud to be leading this company at such a pivotal moment. As we reflect on our performance over the last fiscal year and beyond, I want to take this opportunity to not only highlight our significant progress, but also share a vision for the future. Over the past four years, we've made exceptional strides as a company, and I'm excited to provide an overview of our journey, how we positioned ourselves for sustainable success, and how we plan to continue delivering value to you, our shareholders. Let us begin on reflecting on our transitional starting point. To fully appreciate the accomplishments that we've made, it's important to remember where we started. Four years ago, Deliver Health Brands was facing substantial financial and operational challenges. At the time, we were reporting just over negative $9 million in adjusted dividend. Our revenues were just under $8 million, a level that wasn't sufficient to support our cost structure. Our margins were just at 9%, indicating a lack of efficiency across the business. Our SG&A expenses were disproportionately high, hampering our ability to invest in growth areas. And perhaps most concerning, we were burning over $1 million in cash each quarter. This was clearly unsustainable. We recognize that these challenges required urgent attention, and we needed a comprehensive restructuring. It wasn't just about cutting costs, but about fundamentally rethinking our strategy, improving efficiency, laying out a strong foundation for future growth. The good news is that the team at Delivered Health Brands rose to the occasion. We set out with a clear focus on operational excellence, financial discipline, and innovation, and we began executing a multi-year turnaround plan. Fast forward to today, and I'm incredibly proud of the results we've delivered. The significance of our transformation over the past four years. The transformation we've undergone has been remarkable, and I'd like to walk you through some of the key highlights. Our brands of Dreamwater and Live Relief are global brands and available in thousands of locations. We are now at a positive EBITDA position. From a negative $9 million adjusted EBITDA four years ago, We've now achieved positive EBITDA for the second straight year of roughly $900,000. This shift demonstrates not only our ability to control costs, but our improved operational efficiency across the board. We've grown our revenue. Revenues have grown to over $12.3 million, an impressive increase that reflects both organic growth and strategic efforts to capture new market opportunities. That's a substantial increase over the $7.8 million revenue that we started with. Our growth strategy is built around expanding our Dreamwater and Live Relief product offerings and reaching new customers, something we've done consistently and which we'll continue to focus on. Our margin has expanded. Our margins have also expanded significantly from just 9% four years ago to 52% today. This is a critical metric as it underscores the effectiveness of our efforts to streamline operations, optimize costs, and enhance profitability. It is not just about top-line growth. We've built a more profitable and resilient business. The alignment of our SG&A expenses. On the expense side, we've brought our SG&A costs in line with our revenue growth. By focusing on operational efficiency, we've freed up resources that can now be reinvested in areas that drive growth, such as innovation, marketing, and customer acquisition. And we've eliminated our cash burn. Finally, our financial discipline has enabled us to eliminate the cash burn that was once a major concern. By implementing strict cost controls and focusing on cash flow generation, we've secured the company's financial health and created a more sustainable model for long-term growth. Our fiscal 2024 specifically has been a standard year. With a 26% increase in revenue, our margins have expanded to 52% from 49%, And our EBITDA has surged by over 68%. These results reflect not only the effectiveness of our strategy, but also the strength of our execution. And we are now positioned for sustainable future growth. The progress we've made over the past four years have given us a strong foundation to build on, but we're not stopping here. We're now in a position to shift our focus towards accelerating growth. And I want to take a moment to share with you our roadmap for the future. We've identified four key pillars that will drive our strategy moving forward. These pillars will be supported with continued marketing and awareness programs to help our pull-through strategies. These include customer growth. First, we will continue to expand on our Dreamwater and Live Relief customer base. We've seen significant success in growing our existing customer relationships, but we know there is still untapped potential. By focusing on customer acquisition and retention, we aim to drive both volume and loyalty across our product lines. We'll be leveraging targeted marketing initiatives, deeper customer engagement, and personalized offerings to bring even more consumers into the Deliver Health brand fold. We're going to expand geographically. Secondly, we are poised to expand into new geographies. Our brands DreamWater and Liberleaf have gained strong recognition in key markets. and we believe that time is right to explore new territories, both domestically and internationally. Expanding our geographic footprint will diversify our revenue streams and position us to capture new opportunities. We're actively exploring partnerships and distribution networks that will allow us to scale efficiently in new markets. Our innovation and product development. Innovation has always been a core part of our strategy and will continue to be a driver of growth. Consumer preferences are constantly evolving, and our ability to stay ahead of these trends is key to our success. We've committed to investing in R&D to create new, innovative products and meet emerging customer needs. Whether through new formulations, delivery methods, or entirely new product lines, we'll ensure that delivered health remains at the cutting edge of the industry. And our brand portfolio growth. Finally, we're excited about the potential to grow our brand portfolio. Our current offerings have performed exceptionally well, and we see opportunities to introduce new brands that complement our existing portfolio. By diversifying our brand lineup, we'll not only enhance our market presence, but also create synergies across our product range, driving further growth and profitability. We will also remain diligent in our financial responsibility and long-term value creation. While we're focused on accelerating growth, equally important that we remain committed to financial responsibility. The discipline we've exercised in improving margins and managing expenses will continue to guide us as we move forward. We've demonstrated our ability to grow revenues while improving profitability, and we will maintain that balance. Our growth will be measured, sustainable, and aligned with our long-term vision for value creation. The future of Deliver Health Brands is bright. With a solid financial foundation, innovative product pipeline, and strategic expansion plans, we're well-positioned to capture the opportunities ahead. Our team is energized and committed to delivering on our promises to you, our shareholders, and ensuring that Delivered Health Brands continues to grow and thrive. I will close with anticipated optimism. In closing, I want to express my gratitude to our shareholders for your continued trust and support The journey we've been on over the past four years has been transformative, and I am incredibly optimistic about what lies ahead. Our fiscal 2024 results have set the stage for even greater success in the coming years, and I look forward to sharing more updates as we continue to execute on our strategic priorities. Thank you, and I'm excited for the road ahead. I will now pass it on to our Chief Financial Officer, Jack Tassi.

Thank you, Gord. This is Jack Tassi, CFO, Deliver Health Brands. And it is a great day here today at Deliver Health Brands. I would like to give a great big shout out to the team for delivering strong results. And it is a pleasure to be on this call to update shareholders, potential investors and capital markets on our progress and latest developments. For providing the high level financial overview, it is important to state that all commentary provided should be explained in the context of the latest financial statements and MD&A filed by the company. Fiscal 2024 is an outstanding year for the company, to say the least. As indicated on previous calls, the company is no longer burning cash as a typical startup that is very reliant on selling its securities to fund operating losses and then going back to capital markets to ask for more. And it is important for shareholders and potential investors to be aware of as this differentiates deliver health brands from many small cap companies that are seeking profitability. The momentum that started over the last few years continues into fiscal 2024 by building on positive adjusted at the top from last year. The company achieved its best ever annual results in fiscal 2024. And this says one thing about our brands and products and offerings. that they appeal to consumers and have a strong loyal base that is growing and is solving their sleep and pain challenges. And this double digit growth in sales of 26% year over year demonstrates this very clearly. Net sales for fiscal 2024 closed at 12.4 million. And this is ahead of last year by 2.6 million, which is around 26%. And this is translated into adjusted EBITDA of $900,000, which is roughly 7% of the top line for this year. Up from EBITDA $500,000 last year, which is roughly 5% of net revenue. And this is another 68% growth in EBITDA margin. And this is the best way to drive shareholder value through top line and bottom line performance. This solidified the company's financial position and more importantly, gave the company the opportunity to invest back in needed marketing campaigns that is meant to help consumers understand our offerings, educate them on the multiple sleep and pain solutions we offer, and at the same time learning about our customer preferences and needs. And this is why the Sleep Gummies offering was launched earlier in Canada and globally. As a carry forward of our observations from prior calls, there is no change to our position to the fact that this unique business model works and is scalable, meaning that the company has the potential of becoming a brand powerhouse, and secondly, the relevance of our products and ability to compete with very well-backed brands in the health and wellness space. Similar to prior calls, I will unpack the year by building briefly on the same performance indicators we presented in prior calls. The first key performance indicator, which is to uncover potential in the U.S. and international markets for the company's green water brand and SKUs. This strategy was explained in prior investor calls. As communicated, managing customer mix and taking a strategic revenue management approach is key to us. And focusing on international distributors continues to be the strategy and it certainly paid off in fiscal 2024 as a continuation of the momentum that started in fiscal 2023 and this is the foundation to capitalize on in future years the company now or is now in a position where it has few larger customers with relatively standard needs to fulfill their orders versus having a very scattered group of small customers with each customer having its own programs and special offers. Of course, having large customers comes with its own concentration risks, however, higher returns and growing the brand requires standardization and serving such customers in our view. This takes us to the second key performance indicator, maintaining and growing gross profit and gross profit margin. This high level background, the company succeeded year over year increasing its gross margin from 24% in fiscal 2021, then 32% in fiscal 2022, and then 49% in fiscal 2023, and now 52% in fiscal 2024. And we believe margins are stabilizing at this position. It's not growing. This demonstrates the progress the company made in changing its customer mix and finding the right customer slash distributor mix, which means lower sales fees, and lower distribution costs. The company managed to increase its gross profit and profit margin from 49% to 52% this year. In dollars, this is from $4.8 million to $6.4 million. This means an additional $1.6 million flowing into our adjusted EBITDA stream. The company took provisions on write-downs, inventory write-downs of $246,000 compared to $398,000 last year, and this provision was $1 million. only a few years ago. This provision relates to aging SKUs. Although our sales increased by 2.6 million or 26% year over year, but inventory on a total basis was reduced by 1.5 million or 2.15 million compared to prior year's balance of 2.3 million. As a result of the new licensing agreement for our infused brand, and including overall reduction in inventory as a result of internal simplification projects that increase productivity and efficiencies across the board. This takes us to the third key performance indicator that's targeted improvements in adjusted EBITDA. As mentioned on other calls, our objective was always to break even, to demonstrate that our business model works and is scalable, and to help us invest in needed marketing and innovation products. Now that we are in a positive adjusted EBITDA position for the second year in a row, and thus we did increase our investments in marketing campaigns and digital and social marketing initiatives. The company reported around $900,000 of positive adjusted EBITDA, up from $500,000 in prior year, and this comes as a result of higher sales and gross margins. offset by an increased spend on selling and marketing initiatives of roughly $1 million that was reinvested in the business to target an increase in brand equity and future returns. Otherwise, our EBITDA would have been at $1.9 million, but we are taking a long-term approach to manage the business given our future outlook. The final KPI we mentioned in prior calls is scalability. Our financial and strategic adjustments or achievements open the scalability gate, which means including new SKUs and brands. The company is in a mature position to becoming a brand powerhouse and can add new brands into its business model given its scalability. An example of our recent scalability is the launching of Sleeve Gummies in Canada and globally. We listen to our customers and we introduce Sleeve Gummies that taste well, effective, and more economic price per dose And this helps in making our product accessible to everyone if the liquid sleep shot is a little luxury for some customers or consumers. To conclude, management is delighted that it continues to fulfill on its promises. And I can say that we are not satisfied and we believe that we have some work to do here to get this company to achieve more milestones, especially with this foundation that we have built over the last few years. As mentioned before, this is an unheard of turnaround given the company's strategic review in 2020, and we are hoping this translates to shareholder value when small cap markets recover in Canada, especially with the latest and expected easing of interest rates that is expected to have positive impact on consumer spending. We thank our shareholders and other stakeholders that supported us so far. And we are hoping that the financial progress and performance put out by the LiberHealth brands gets attention from existing shareholders and potential investors, given the successful outcomes as a result of the strategic choices made by the company that led to financial success. Thank you very much for listening. And with that, we will open the call for questions. Operator?

Thank you. We will now begin the question and answer session. To join the question queue, you may press star then one on your telephone keypad. You will hear a tone acknowledging your request. If you're using a speakerphone, please pick up your handset before pressing any key. To withdraw your question, please press star then two. We will pause a moment as callers join the queue.

Once again, if you have a question, please press star, then one. Since there are no questions, this concludes the question and answer session.

I would like to turn the conference back over to Gaurd Devi for any closing remarks. Please go ahead.

Yes, thank you. Thank you very much for everyone's time today. We are extremely excited about the future of deliver health plans. and we look forward to further expansion and growth inside our marketplace. Again, we thank you for your time, and there is much more to come for Deliver Health Brands. Thank you.

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