GURU Organic Energy Corp. (GURU) Earnings Call Transcript & Summary

Ladies and gentlemen, welcome to the Annual Meeting of GURU Organic Energy Corporation. Please note, the meeting will be recorded. I would like to introduce Mr. Joe Zakher, Founder and Executive Chairman of the corporation. Mr. Zakher, the floor is yours.

[Foreign Language] Please note that this meeting will be held in both official languages, and questions may be asked in either language and will be answered accordingly. [Foreign Language]. Ingy?

Good afternoon, ladies and gentlemen. We would like to remind you that registered shareholders and registered proxy holders are the only persons entitled to vote or to ask questions during the shareholder question period at the end of the meeting. We will conduct the votes on all the matters before us by poll, using the online platform. The poll will be open for all motions and resolutions at the same time. This will allow you to choose to vote on each motion and resolution immediately or to wait until the conclusion of discussion prior to casting your vote. Once discussion on all items of business has concluded, we will take a short pause before declaring the voting closed on all resolutions. So please make sure you have voted ahead of this time. To vote, please click on the voting icon on the left of your screen. Then simply select your voting direction for each resolution laid out in turn. It's important to add that a vote cannot be canceled once submitted. If you have already voted by proxy, it's not necessary to vote again. Please note that if you choose to vote again, only your vote cast during the meeting will be counted, and the vote that you submitted by proxy will be revoked. Once the voting has opened, the resolutions and voting choices will be displayed. We now declare the polls open. We have received satisfactory proof that the notice calling this meeting was duly publicized and sent to the shareholders of the corporation. Carl Goyette has been designated to act as proposer and Joe Zakher as seconder. Please note that both Carl and Joe are shareholders of the corporation. [Foreign Language] Once the formal part of the meeting is terminated, we will proceed to Carl's presentation, followed by the question period. [Operator Instructions]. [Foreign Language]

My name is Carl Goyette, and I move that the following be nominated as Directors of the company. Joseph Zakher, Carl Goyette, Eric Graveline, Philippe Meunier, Alain Miquelon and Suzanne Poirier.

My name is Joe Zakher, I second the motion.

I confirm that to my knowledge, the company has received no written notice from a shareholder nominating another individual for election to the Board of Directors within the period prescribed by the bylaws. [Foreign Language]. The last item on the agenda is the appointment of the auditors for the financial year ending on October 31, 2022, and the authorization of the directors to related to determine of the remuneration. I would add a motion for the appointment of auditors.

My name is Carl Goyette, and I move that KPMG chartered professional accountants be appointed auditors of the Corporation for the fiscal year ending on October 31, 2022, and that their remuneration be determined by the Board of Directors.

My name is Joe Zakher, and I second that motion.

As we have now covered all of the items of business on the formal portion of the meeting, we ask that all registered shareholders and proxy holders complete and submit their votes now if they have not already done so. I remind you that if you have already voted by proxy, it is not necessary to vote again. [Voting]

The voting period is now closed for all of the items of business on the meeting agenda. We will now take a short break to tabulate the votes. [Foreign Language] I would like to remind everyone that only shareholders or proxy holders can ask questions and that the instructions for asking a question appear on your screen. I would like to remind everyone that management's remarks today may contain forward-looking statements. Several assumptions were made in preparing these and many factors could cause GURU's actual results to differ materially from those expressed or implied by the forward-looking statements. As a result, you are cautioned not to place undue reliance on them. Over to you, Carl.

Thank you, Ingy. Good morning, everyone. I'm very pleased to provide you with a brief overview of GURU's results and accomplishments in 2021 and outlook for 2022. 2021 was a remarkable year for GURU. I'm so proud of all that we have achieved as a team and of the significant progress we have made over such a short period of time, laying the groundwork for our continued growth and all during an ongoing global pandemic. Over the last year, we significantly increased our GURU team from 40 to 70 people, while remaining a nimble an asset-light company that relies on strong partners and a growing consumer base. We believe this is the right operating model as we look to accelerate our growth through integrated marketing campaigns and focus on elevating our brand by expanding distribution networks in Canada and in the U.S. For the first time in GURU's history, by Q4 of 2021, we finally have the ability to significantly invest in our brand and focus on expanding our reach outside of Quebec. With over $70 million in available cash and credit, we now have the means to deploy the required marketing activities to progressively elevate our disruptive brand in Canada and in the U.S. That's the plan we went to the market with a little over a year ago, and I'm proud to say that we are now executing on as promised. In fiscal 2021, our first full year as a public company, we achieved record annual net revenues for an eighth consecutive year, reaching a record $30 million in net revenues, while being highly profitable for most of these years. We made our first meaningful push across Canada and increased our total doors in North America by 67% to more than 25,000 doors as of today. We also concluded two major transactions, which will allow us to implement our growth initiatives mainly our game-changing exclusive Canadian distribution agreement with a global CPG leader which became effective as of October 4. And in parallel, raised an additional $50 million, mainly with North American institutional funds to fuel our growth plans. These major transactions have allowed us to fast track our marketing activities in Canada. We provided over 600,000 cans of GURU across Canada through various in-store and field marketing events to promote our brand. We deployed our first major marketing activations in English Canada with the support of leading marketing agencies, including our Back-to-University campaign, which included digital and out-of-home components. We rolled out two great product innovations, Yerba Mate to kick off year -- the fiscal year and Guayusa Tropical Punch to cap it off. The latter was propelled by a massive campaign in collaboration with reality TV show Occupation Double this past fall, an existing partnership in which we invested more heavily in fiscal 2021 than in 2020. I mean we activated unique partnerships with high-profile Canadian Ski resorts, namely Whistler, Bromont and Sutton since the beginning of the current calendar year. We organized over 60 cleanups -- 60 cleanup community activities across Canada from June to September 2021 to clean up several of our favorite play grounds along with other community-oriented activities. The results generated by these investments have been very promising, realizing our best sales months ever in November 2021, and we believe a lot more can be achieved as we continue to build our GURU nation. In fact, our most recent market research demonstrated that our brand awareness in the rest of Canada nearly doubled between Q1 of 2021 and Q4, 2021. This increase was mostly driven by one of our key consumer target segments, which increased from 15% to 32%. Turning to our fiscal 2022 first quarter results, which we reported this morning. We generated record Q1 net revenues of $7 million compared to $6.6 million last year, reflecting sales growth in Canada and in the U.S., driven by a 22% growth in volume as a result of stronger velocities and increased point of sales. We continue to go by partnership with our exclusive distributor in Canada, which officially began this past October, and we're actively in the planning and execution of our ambitious long-term pan-Canadian growth strategy. We also made good progress in the U.S., securing new DSD partnerships and new points of sale in addition to expanding some of our existing partnerships with key retail chains. Our Q1 performance was achieved despite various Omicron driven restrictions throughout the quarter impacting businesses and consumers to varying degrees in different markets where GURU was present. In this context, after a solid start to our brand awareness efforts with our back-to-university campaign in Q4, we moderated our Canadian marketing activities during Q1 and in the first half of the second quarter to respect the extensive sanitary restrictions and lockdown measures in place. With the majority of sanitary restrictions lifted, we are now ramping up our marketing activities, which we expect to sustain from now to the end of the year barring COVID-related interruptions and in alignment with our new business model in Canada. Over the next several quarters, GURU will continue to be clearly focused on driving brand awareness and trial in the Canadian markets. Markets that together are more than 2x larger than Quebec. This was began in earnest in Q4 2021, was slowed down a bit in Q1 due to Omicron and will now accelerate in support of our now truly nationwide distribution. Planned activities include, but are not limited to, a major national marketing campaign, promoting botanicals driven SKUs, namely Matcha, Yerba Mate and our latest innovation, Guayusa Tropical Punch. This campaign we called made in plants coupled with other activations will be notably supporting the Canada wide availability of Guayusa in major retailers effective this quarter. Our exclusive distributor will proceed with its first GURU official large-scale in-store activation with many major corporate and independent retailers across the country. We've have also planned a series of other activities, partnerships and sponsorships to reach our target consumer base and key Canadian markets throughout the spring and summer with a mix of on-brand grass roots and mainstream activations. More to come on this front. Turning to the U.S., we continue to execute our strategy and to experience improved results quarter-over-quarter with new doors and leading in specialty grocery, drug, natural and invented retail chains. This has been supported by the strengthening of our DSD network in the Western U.S. market. To that effect, we recently partnered with leading regional DSD distributors, Buffalo Market, DPI Specialty Foods and Pint Size Hawaii, enabling us to significantly increase our points of sale by more than 1,500 since the beginning of the year. Primarily in California. Some other notable wins include our full penetration of Whole Foods Market chain, the world's leading natural and organic food retailer with whom we've had a relationship with since 2005 when we first entered the U.S. market. We were already widely present within Whole Foods but will now be in every store with an expanded selection of products to include Yerba Mate in their over 500 locations, mostly in the U.S. and a handful in Canada. We are also introducing a limited edition variety pack, which will be exclusively available at Sam's Club, a leading membership warehouse club with over 200 U.S. locations this month. We expect that this new win will have a strong impact on our U.S. sales in Q2. This initiative could also have the potential to generate recurring revenues. GURU continues to generate strong demand in the U.S. quarter-over-quarter as shown by Q1's wins data, demonstrating a 49% increase in consumer purchases in California and a 27% increase in the U.S. overall. While U.S. sales only represent 17% of our sales in Q1, these numbers reflect the growing interest in our brand, primarily in California with minimal marketing spend. 2021 was defined by our listing on the TSX, securing our game-changing Canadian distribution agreement successfully transitioning to our new Canadian business model by year-end and ensuring we have the capital and resources required to execute our ambitious road plans, all of which were successfully achieved. Now the rest of 2022 will be focused on the execution of our expansion plans, but just as importantly, on establishing our new baseline in what will be our first full year working with an exclusive distributor across Canada, a working relationship that continues to grow and strengthen week by week. Just a year ago around this time, GURU had very low distribution and brand awareness in Canada outside of Quebec, markets where we had yet to invest any significant distribution in marketing dollars. Following our first big marketing push in Q4, our brand had a huge initial book boost and a great response within key consumer segments. While this momentum was attenuated due to Omicron restrictions and lockdown, we are ready for the work ahead of us to move the needle further, which will take time and commitment. We are really motivated by those early indicators to keep moving forward with the execution of our Canadian growth strategy. The next month and quarters will be very, very active for GURU as some major Canadian marketing activities are put into action. As mentioned, in the coming weeks, we will be kicking off major marketing campaigns to drive national brand awareness and trial, including the launch of Guayusa across Canada. This Q has been a true success in Quebec, generating record sales among all 2021 innovations in the industry since its official launch -- marketing launch last November, and currently rankes the #6 top SKU in convenience and gas in Quebec. We are confident that it will be well-received in rest of Canada as well. Guayusa will also become available for listing in the U.S. by the fall. On the product and innovation front, we will be listing our 355 ML four-pack format in English Canada. On the pricing front, as mentioned in our Q4 call, we reviewed the industry dynamics, and we decided to take a price increase, which will be effective in mid-May. This will help us offset rising input and transportation costs. Also, this price increase is in line with our pricing strategy and current industry practices. In conclusion, the current phase of our North American expansion is focused on deploying a significant proportion of our capital and resources in 2022 to drive brand awareness and trial and ultimately increase our market share in Canada, where GURU has been the fastest-growing energy drink in the last 52 weeks. This expansion phase is supported by our strong financial position, allowing us to invest in our brand over a sustained period of time for the first time in our history and in new Canadian markets. We are also squarely focused on supporting and building our distribution partnerships in Canada to ensure long-term success. With respect to the U.S., we will continue to methodically expand our distribution network with an emphasis on California through DSD distributors and online, which will allow us to be most cost-effective as well as through the launch of innovations to optimize our current product offering. We are excited to continue to work towards truly breaking through in the large and growing Canadian and U.S. markets, where we have a huge opportunity to conquer market share in an industry right for disruption. In closing, I would like to sincerely thank our employees for their dedication and good energy, our Board members for their invaluable contribution, wisdom and counsel as well as our partners, suppliers and loyal customers and you, our shareholders, for your continued support. We are committed to creating sustainable value -- creating sustainable long-term value for all our stakeholders and excited about the future as we continue our journey as the industry disruptor. Thank you. Ingy, over to you for the shareholder Q&A.

Thank you, Carl. We will now proceed with the shareholder Q&A session. [Operator Instructions] Since there are no questions, this concludes our meeting today. [Foreign Language] Operator, back to you. Joe?

Stay safe. Operator, back to you.

Ladies and gentlemen, thank you for attending today's meeting. You may now disconnect.