GURU Organic Energy Corp. (GUU.F) Q4 FY2025 Earnings Call Transcript & Summary

Welcome to the GURU Organic Energy Fourth Quarter and Fiscal Year 2025 Results Conference Call and Webcast being recorded today, January 22, 2026 at 10:00 a.m. Eastern Time. [Operator Instructions] GURU's press release, MD&A and financial statements are available in the Investor section of its website and on SEDAR+. 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 2 of the presentation. I will now turn the call over to Carl Goyette, GURU's Chief Executive Officer.

Thank you, operator. [ Foreign language ] Good morning, everyone, and welcome to GURU's Fiscal 2025 Fourth Quarter and Annual Results Conference Call. Joining me this morning is our CFO, Ingy Sarraf. Let's turn to Slide 5. Fiscal 2025 marks a defining turning point for GURU. It reflects successful execution and strengthens fundamentals across profitability margin and cash flow. We delivered record net revenue of $34.7 million, reduced net loss by 85% from $9.4 million to $1.4 million and drastically improved adjusted EBITDA loss to nearly breakeven. We also generated $3.3 million in operating cash flow, a major turnaround from the $9.3 million outflow in fiscal 2024. We ended the year with $28.5 million in cash, cash equivalents and short-term investments. as well as $10 million in unused credit facilities. Taken together, these outcomes demonstrate the strength of our repositioned commercial model and our ability to deliver disciplined, profitable growth. Turning to Slide 6. The second half of the year marked a clear inflection point for GURU. We delivered two consecutive profitable quarters for the first time as a public company, finishing the year near breakeven. Over the past few years, we made a clear commitment to return to profitability and executed with discipline, protecting margins, managing costs and continuing to grow. Alongside operational discipline, we applied a thoughtful approach to capital allocation, repurchasing approximately 2.4 million shares since 2022 under our NCIB at an average cost of $2.20 per share. This reduces our outstanding share count and enhances our per share financial metrics as we continue our path to profitable growth. Turning to Slide 7. In Q3, we delivered a record $10.4 million in net revenue and our first profitable quarter since going public with $1.3 million in net income and a 12.4% net margin. We kept that momentum going into Q4, delivering another record performance with $10.1 million in net revenue, up 41.5% and securing our second consecutive profitable quarter. Q4 also delivered several key commercial milestones. Record Amazon performance in Canada and in the U.S., driven by a solid momentum during October's Prime day and even stronger results during Black Friday. We expanded our nationwide presence at a leading wholesale club with 2 new 18-can variety packs, further strengthening our retail footprint in Canada and solid results from the launch of our innovations. Both quarters delivered industry-leading gross margins above 65%. Retail performance also strengthened across key accounts in Canada reflecting improved control over pricing, promotions and inventory. What gives us confidence is that this momentum is supported by strengthening underlying fundamentals across channels. Let me walk you through the key drivers. Turning to Slide 8. Our fiscal 2025 transformation was driven by 4 key elements: First, our successful transition back to a direct distribution in Canada, improving improved execution focus and deepened retailer relationships. Second, we delivered sustained revenue growth with net revenue increasing 14.9%. Third, we expanded structural margins with gross margins improving by 940 basis points to 64.7%. And fourth, disciplined cost management, reduced SG&A expenses as we continue to significantly improve our marketing efficiency. Together, these drivers brought us to near breakeven and position us well for fiscal 2026. We are encouraged by the progress and remain focused on maintaining the same discipline and execution going forward. Let me walk you through performance by geography, starting with Canada. Turning to Slide 9. Our Canadian distribution performed exceptionally well. Full year sales grew 16.9%, with Q4 up 45.1%. We launched 2 new 18-can variety packs in Costco. Innovation remains a key differentiator. GURU ranked as Quebec's #1 innovation performer for the fourth consecutive year, led by ZERO Wild Ice pop. Direct distribution fundamentally changed our business. We now control our destiny at retail through deeper partnerships, stronger activations, better inventory management and a direct line of sight to our consumer. Turning to Slide 10. The U.S. delivered consistent growth throughout fiscal 2025. Full year sales increased 8.6%, with momentum building into Q4 as sales rose 29.3%. In the natural retail channel and Whole Foods combined, consumer scanned dollar sales grew 22%, reflecting strong momentum across our U.S. retail footprint. On Amazon, we delivered record results during Black Friday. Earlier in the year, Prime day also contributed significantly to momentum, including GURU reaching the #2 brand position in Canada during the October event. Turning to Slide 11. Innovation continues to be a major growth engine for GURU. Our ZERO Sugar line, Wild Berry, Ruby Red, Ice Pop and Strawberry Watermelon expanded across both countries, meeting fast-growing demand for better-for-you zero sugar options. Island Breeze Punch launched in Q4 is showing strong early sell-through. And early in fiscal 2026, we introduced Dragon Fruit Cherry Sorbet with an additional ZERO Sugar innovations planned throughout the year. With that, I'll now turn the call over to Ingy for a deeper look at our financial performance. Ingy, over to you.

Thank you, Carl, and good morning, everyone. Turning to Slide 13. Let me walk you through the key financial highlights. Fiscal 2025 net revenue was $34.7 million, up 14.9% or 20.4% excluding last year's U.S. wholesale club rotation. Q4 set a new record at $10.1 million, up 41.5%. Gross margin for the year expanded 940 basis points to 64.7%, with Q4 at 65.1%. This reflects benefits of our direct distribution transition improved pricing, disciplined promotions, efficiencies and the onetime adjustments disclosed in Q3. Our 65% gross margin gives us real runway. We can invest selectively in high-return growth initiatives without compromising our progress towards sustained profitability. It's no longer an either/or, we now have the flexibility to do both. SG&A expenses decreased 10% to $24.6 million in fiscal 2025, down from $27.3 million last year, reflecting continued improvement in marketing efficiency and operating discipline. In Q4 2025, total SG&A as a percentage of net revenue decreased to 65.9% from 94.4% a year ago. We expect to maintain disciplined SG&A allocation, prioritizing the highest return opportunities across markets. In fiscal 2025, we reduced our net loss by $8 million to $1.4 million and improved adjusted EBITDA loss by 97.2% to near breakeven. Q4 marked our second consecutive profitable quarter. Finally, we generated positive operating cash flow of $3.3 million versus $9.3 million outflow last year, strengthening our financial position to $28.5 million in cash and short-term investments, no debt and $10 million in our new credit facilities. Our strong financial position provides us with the flexibility to invest in high-return growth initiatives while maintaining disciplined financial management. Overall, we're really pleased with the progress we've made and confident in the levers we have in place to drive further efficiency and growth. With that, I'll turn the call back over to you, Carl, for closing remarks.

Thanks, Ingy. Let's turn to Slide 15. As we enter fiscal 2026, GURU has real momentum, strong capabilities and a solid foundation to build on. We achieved profitability, we now operate with a structural margin profile built for sustained profitable growth. We have the financial strength to invest in growth, and we're seeing pure momentum across retail, wholesale club and e-commerce. Our priorities are clear: expand distribution across Canada and in the U.S., scale e-commerce and digital acquisition, advance our ZERO Sugar innovation pipeline, reinforce brand presence in health-oriented retail channels. The better-for-you energy drink category keeps growing and GURU is uniquely positioned to capture share through our organic plant-based energy platform and robust innovation pipeline. I want to thank our team for their exceptional execution throughout 2025, and our retail partners and customers whose commitment and energy made these results possible. This transformation is truly a team effort. [Foreign language] Thank you. We are proud of the progress made energized by the momentum we are carrying into fiscal 2026 and committed to executing with the same discipline and focus in the year ahead. Operator, we'll now open the call to questions.

[Operator Instructions] Our first question comes from Martin Landry with Stifel.

Congrats on your great results. I would like to just dig in into the revenue growth on a year-over-year basis for Q4. Just trying to compare apples-to-apples. So I was wondering if maybe you can discuss your performance at retail in Canada. You gave in your MD&A, the scanned dollar sales for the last 52 weeks, I think you're up 22% year-over-year. Wondering if you could break the performance for Q4, that would be greatly helpful.

Yes, absolutely, Martin. I'll start with the U.S. because the U.S. is -- I guess, the U.S. is easier because most of our business is tracked in the U.S., right? So I gave, in my remarks, I also spoke about it. In the U.S., when you look at spins, which is really tracked, and we add all foods to this, as we get to plus 22%, right? So when I combine spins, wholefoods and other untracked, they're really in the range of like 20% in the U.S. So that's kind of the growth we're seeing, the real growth we're seeing in the U.S. and Q4 would be around 20%. And for Canada, it's a little bit more complex because as we discussed, right, there's a lot of growth that's happening in untracked channel. We're seeing online, Costco, some discount, independents growing faster than some of the track, right? So we need to do a little bit more of a calculation to get to give you a good number on this, right, so we look -- so what we do is we look at track channels and then we add back the shipments for whatever is on track. And the number is exactly the same, right, in Q4, we're seeing also plus 20% in consumer offtake when combining tracked and untracked for Canada. So overall, growing at 20% in U.S. and Canada is the short answer.

Super clear, and it's easy to understand, and that's an apples-to-apples. So that's helpful. Okay. And then you do say in your opening remarks that you have momentum and you're entering fiscal '26, with momentum. Looking at Q1, it's almost done now. So any color you can give us on your performance at retail for Q1?

Yes. As you know, Martin, we don't give formal guidance. I know it's almost done, but it's not done. I can tell you, the sales team is pushing as hard as they can. So there's always a little bit of timing which large orders are going to be delivered when and all this. I can't give you an exact number, but I can tell you -- the few things I'll give you to help you answer this question. The first is the industry is doing really, really well, right? The industry is growing healthy, both in Canada and in the U.S. at around 10%. And there are strong tailwinds for anything that's better for you, ZERO sugar and innovations. So obviously, we want to -- the discussion that we almost want to have with you is to look at, let's say, a longer-term horizon, let's say, Q1 and Q2 to say we expect to outgrow the industry significantly, right? So if the industry is growing at 10%, expect us to outgrow this and keep growing market share. That's one thing that I think is fair for us to tell you in terms of outlook without giving you an exact number. From a margin point of view, we also are very proud in our margins. Our margins are industry-leading, they've always been part of our recipe. These margins are key for us to be profitable. So we will protect and defend this. And there's obviously pressure in margins like everybody else, but this is something that we're proud of and we will defend, right? So don't expect big movements from a gross margin point of view, except from some pressures that are cost related, right? And then from a profitability point of view, which obviously everybody is interested in this as we gain scale, we've said for a number of years that we were going to get back to profitability. Not everybody believed us. I think we've just proved that we can be profitable two quarters in a row. That's the intent, right? So when we look at the future of this business, this business will be a profitable business. It doesn't mean we will be profitable every quarter, right? We want to be -- I think we've been clear last quarter. And I want to be clear again that we are still very much focused on growth, right? And we will attack some opportunities, and we will make investments if we think there's going to be a great return for our future. So some quarters, we may not be profitable. Some quarters, we may be more profitable. I think the one thing that I would want to commit with you, with Ingy as well, like we said last quarter, is that whenever there's a loss, we'll -- if there is a loss in the future, we'll point to exactly the investments we're making, obviously, as much as we can without disclosing our strategy. But we'll be able to tell you, "Hey, here's the -- an example of investments we're making this quarter. Here's why maybe we're seeing a small loss, but this is going to pay back in the future." right? And the beauty is we have $28 million in cash in the bank account, and we have money to invest, and we still really much believe in the potential of this brand and we will want to continue investing in this brand in the future.

Okay. That's helpful. Just a point of clarification, when you say you intend to be profitable, are you talking at the EBITDA line or at the net income line?

The EBITDA, yes.

Positive EBITDA. Okay. Okay. I mean it does answer most of my questions, I just wanted to maybe have a little bit of a long-term picture. And I think you've answered it a little bit. I'm trying to grasp a little bit what's your growth algorithm from a revenue standpoint longer term. You talked about growing faster than the industry. Is that a little bit how we should think about your long-term growth algorithm?

Yes, we'll give you a similar answer to the one that's given. Because the mindset is the same, right? Obviously, longer term, we obviously think that this brand and our organization can outgrow the industry. In fact, our mission is to transform and clean up this industry. We think that there is a place in this very large industry for a product that is much healthier that has a much cleaner list of ingredients that provide the same benefits. So obviously, we think that the product and a brand like GURU can outgrow the industry significantly, right? The protection of our margins still stands, right? There's no reason why we would complement on this. I think the big thing that changes over a longer term is with scale, profitability becomes much easier. We're still a fairly small company. If you look at our cost base, the cost of being public and there's some costs in there that are fixed costs that are part of our structure in SG&A that, over time with scale, are not as significant, right? So you can't -- in the future, you should start seeing much better EBITDA margins on a more consistent basis.

And the next question comes from Sean McGowan with ROTH Capital Partners.

A couple of questions specifically about the quarter, maybe this might be more for Ingy and then some bigger picture questions. At both the gross margin level and the operating expense level, the performance was kind of better than I had modeled. Was there anything in those numbers that was like an unusual benefit that would make us maybe not expect this kind of performance in the future? Can any -- unusual offsets to expenses?

No. It was a very regular quarter. Of course, we're in the new structure, right, in the new business model. So no, it was very regular in terms of SG&A and even in terms of gross profit. Nothing that was one-off.

Yes. Well it looks like you're generating more gross margin than you had even before the -- going back 5 years or so. So you're coming in at a higher margin level than you had even before Pepsi, right?

Yes, we had a very good gross margin from a pricing standpoint. We had, of course, the benefit of the transition back to the new model. And we also have some continued impact from our pricing discipline and a tighter control over our promotional activities.

Okay. That's helpful. And then looking at -- I hear that you're not going to get into the guidance business, at least not yet. But given the kind of some unusual things that happened over the course of the last fiscal year, can you give us some help on what we should expect in the cadence of growth in 2026, given the comparisons up against some unusual quarters last year?

Yes. Well, obviously, the aspiration remains the same, the aspiration like as I said, I think this is a growth company, and we will do everything we can to be a high-growth company, outpace the industry, Q1 and Q2, we have more visibility on, obviously. We also -- so we have the benefit of the new model in Q1 and Q2. I think Q3 and Q4 will be comparing direct distribution quarters with direct distribution quarters. So we will not have that benefit. So most of the growth will come from the volume, right? Right now, we're benefiting from volume growth and from margin improvement, right? So as you model this down the road, then it's -- we will be focused on generating pure volume growth to generate revenue, right? Because we don't think there's not much pricing that we're going to take this year, right? So it's more of a volume growth just Q3 and Q4, but we have a very aggressive year in front of us with great innovations that are coming, momentum from a distribution point of view, momentum with a lot of retailers and e-commerce. So we're very confident for this year, obviously, in remaining a growth company. I'm not sure if that answers your question. I think I gave a lot of color on Q1 and 2. Beyond that is a little bit still far, but I think the momentum, there's no reason why momentum would stop, right? Unless something really -- that we don't control happens, right?

Right. Okay. The working capital figures were also, I think, a positive surprise in terms of actually getting a source of cash in the fourth quarter. Not something you typically see with this kind of revenue growth. So given your aspirations for growth, should we expect the company will need to invest in working capital in 2026? So should we expect it to kind of revert to being a use of...

Yes, I think it will be much more neutral in 2026 versus you saw the shift in receivables, the timing of receivables and payables in 2025. So I think it will be much more neutral like we saw in previous years of working capital because we're at the right levels of inventory, the right levels of investments there.

Okay. That's helpful. And some bigger picture questions. You mentioned cost as a potential headwind. Is there anything specific that you can point to it? And the reason I ask is there's been some chatter on some of the other company conference calls about aluminum costs, are you seeing anything in input costs that give you any concern or that might offset some of your pricing?

Yes, of course. Like the rest of the industry, we're feeling the pressure really aluminum related, and we see it, of course, to our co-packing costs, of course. For the rest, the other inputs whether freight or the raw materials where -- it's broadly stable within the normal CPI index increases. So it's really aluminum that's putting a pressure, of course.

Okay. Maybe for Carl. Carl, are you seeing any new entrants into the category that you think are worthy to keep your eye on? I mean, some of the big guys are doing pretty well, but some new entrants also not doing so badly. Are there any companies that you would look at?

Well, there is always a lot of action in this industry, and there's always been. Like we've been around 25 years, and there's not a year where there's not a ton of new entrants and I guess the industry doing so well, the industry having so much momentum consumers consumers' appetite for innovations, better-for-you, ZERO sugar. Obviously, it makes this space attractive for a lot of new entrants. So there's nothing specific I would point to in terms of -- I think, what we need to look at is, yes, this is an attractive industry. Yes, this is an extremely competitive industry, right? So we need to be very focused, very methodical about our strategy knowing exactly where our brand can play and what type of consumers we're going after. If we're trying to please everybody, we're not going to please anybody, but we know that there is a real consumer base for products that are like GURU, and we're very focused on that, not being distracted by all the other new entrants that come and go. The reality is a lot of people come, a lot of brands come and go. That's kind of the high level, what I would give you. We don't see that many new entrants, to be honest, in this exact same space, from an ingredients, clean ingredients list point of view with no sucralose, no aspartame, natural caffeine and the benefits we offer from a boost and focus point of view. We don't see that many new entrants. So in that sense, we're lucky and we're very well established in that positioning. So when we see -- when we look at all these new entrants, as much as we wish them good luck, we know that having -- being around since 1999 and being so established in the natural channel, in e-comm channels, on Amazon, having the relationships we have with retailers, is really a meaningful advantage over the new entrants that come in right? It doesn't mean that it's impossible for new entrants to be successful. We've seen some new entrants come in and be very successful. But we're not -- we don't get distracted by this. We're very much focused on our own strategy while obviously taking lessons from anybody who is successful in this industry is our way is something that we look at and say, "Hey, wow, these guys have done really well", especially if they're in the better-for-you space, right? Because we think Obviously, this is fundamental to our mission. We think that this industry needs -- I said this earlier, but this industry desperately needs a transformation for the better. It's really an industry that's full of chemicals, and we think that, that should not be the case. It should be an industry that's providing consumers with healthy products.

Thank you. Then another competitive question. So Monster and Coke have had a relationship for a long time, Celsius and Pepsi have a relationship for a long time. KDP is jumping on some of these new entrants aggressively. Does this make it harder, you think, for new entrants? Because the core businesses of some of these bigger consumer products companies are not that strong, and carbonated soft drinks, not a growth category. Does it make it harder or easier for new companies to kind of get in, establish some share and then sell out? It seems to be the game plan for these guys.

I don't know. It is always like you see -- I think what's important is to be innovative and to find your own way. And we spoke about channel shifts, the opportunities and on track. There are so many new channels. Consumers are not shopping in the same way. E-commerce levels, the playing field very much on brands, right? So there are so many other ways to grow than only in the traditional channels. Obviously, traditional retail channels play a big role. This is where the bulk of the industry is being sold. But this is a over $26 billion industry growing so fast. The reality is there's so many other ways to win in this industry without necessarily going into the massive systems, the large DSD players, right? When you get to $1 billion, I guess at some point like you have no choice. But at the size we are and we look at the opportunities or at the size of whenever a new entrant coming in, new entrants have plenty of opportunities to grow outside of these big distribution giants.

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

I simply want to thank everybody for joining, and thanks for choosing Good Energy. Have a great day.

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