Vericity, Inc. Price & Performance (VERY)

Thank you, operator. Good afternoon, everyone, and thank you for joining us today for The Very Good Food With additional questions not covering during this earnings call at investverygoodbutchers.com, A replay of this call will be archived on the Investor Relations section of our website at www verygoodfood.com/investors until September 16, 2022. Listeners are reminded that certain matters discussed in today's conference call or answers that may be given to questions and they are subject to risks and uncertainties relating to Very Good Food Company's future financial or business performance. These statements are based on management's current expectations and beliefs and involve risks and uncertainties That could cause actual results to differ materially from those described in these forward looking statements. For a comprehensive discussion of the risks And uncertainties faced by Very Good Company, please refer to Very Good Goods' most recent financial information filed with the Canadian Securities and Exchange Authorities at www.cedar.com and as an exhibit to the Form 20 F filed with the SEC on May 26, 2022 and available at www.sec. Ec.gov. Please also note that on today's call, management will refer to adjusted EBITDA and adjusted general and administrative Full information for investors. The presentation of this information is not intended to be considered in isolation or as a substitute to financial information presented in accordance with IFRS.

For definitions and reconciliations of the non IFRS SEDAR with the SEC. I will now hand the call over to our Chief Executive Officer, Paramol Rana.

Thank you, Bradley. Hello, everyone, and thank you for listening to our Q2 2022 earnings call. I will begin by giving an overview of Q2 2022 addressing both challenges and milestones before passing it over to Pratik to review the numbers. Q222 was a period of important transition for our company as we implemented our strategy to 1, stabilize 2, right size And 3, optimize the business, which we committed to early in the quarter as we endeavor towards profitability. We made notable progress on all three of these fronts. And while we still have a lot of work in front of us, we are better positioned today than we were 3 months ago. With respect to stabilization, in June, we completed a USD6.5 million Financing, which provided us some level of short term stabilization, so we could focus on cost cutting. It did not significantly improve our long term cash will provide us with extended cash runway. Pritik will address our current cash runway and our future financing efforts later on this call and how we are addressing these issues. During Q2, we also made important progress towards rightsizing the organization. In May, we made a strategic decision to cease regular operations at the Victoria, Fairview and Patterson facilities and consolidate operations into the Rupert facility.

We are also We also closed our Victoria store during the quarter and we no longer plan on opening the Mount Pleasant store. These Closures are not just about rightsizing overhead reduction, but also about optimization, greater production efficiency And long term strategic vision. With the right sized organization, we are now well positioned to execute our long term strategy, which is focused on higher margin U. S. Wholesale and foodservice channels. During the Q2, We also committed to limiting our e commerce sales due to high digital marketing costs to acquire new customers, implemented initiatives I would now like to address the management changes we made throughout Q2 and more recently during the current quarter. Early in the Q2, we announced the departure of our co founders, Mitchell Scott and James Davidson. As a result, 3 functional leaders were appointed to executive positions and served on a temporary executive committee. Jordan Rogers, formerly the Canadian sales Head of Canadian Sales was appointed as Chief Commercial Officer and Later in the quarter, with Matthew Hall's departure, after the initial implementation of our stabilization, rightsize and optimization Initiatives, I was promoted to Chief Executive Officer to replace the Interim Co CEO, Matthew Hall.

Last month during the current quarter, we also announced the appointment of our new Chief Financial Officer, Pratik Patel. Pratik has extensive leadership experience in finance and accounting. I feel confident in his ability to lead our finance operations as we continue to optimize the Our management transitions have been necessary and we are now with the right team in That will enable us to continue optimizing the business with focus on achieving profitability and growth. As we have said, our optimization effort is focused on streamlining the organization's mindset, culture, processes, tools, organizational design as well as production. We have revisited our strategic initiatives with greater focus on efficiency, and we are prioritizing measures and strategic initiatives that will support our long term growth. I would like to point out that we are already seeing results related to our refocus In May, we announced the listing of Loblaw Companies, which included availability of our Cajun sausage, Prattwood sausage and meatballs from our We have also had several important wins during the current quarter, including ViceMarkets, The Giant Company and Mayors. These listings within prominent U. S. Market chains show important progress towards our goal of product availability in every major city in the United States.

As of June 30, 2022, our products were in a total of 2,100 stores. During the Q2, we made notable progress In our necessary transition, our refocus strategy and our stated initiatives, we do recognize that the work is far from finished. And while we are in a better position today to focus on the path to profitability and growth, we still focus on further optimization of our business. Finally, I am excited to announce that last week, Berry was awarded the Food Network Supermarket Award for our Cut Above Pork And the most noteworthy vegan newcomers category, I would like to give recognition to our R and D department for creating a fabulous product And for their leading innovation, an important cornerstone of our company, which is still very robust. Before I hand the call over to Pratik, I would like to take this opportunity to say that my appointment to lead our company is a great honor to you. Prior to joining Berry, I spent more than 25 years in the food manufacturing industry working for several industry leading companies. Here at Atveri, I previously led our operations and know this company intimately from operations and market facing perspective.

I feel confident with our diverse portfolio of clean, healthy, plant based alternatives and our strong brand. We will continue to gain recognition With vegan as well as flexitarian consumers and that with our track record of innovation, we are well positioned to grow within a sizable It is now my pleasure to introduce Pratik Patel, Chief Financial Officer, will summarize Q2 2022 financial highlights. Thank you, Pratik. You may begin.

Thank you, Parmel. I would like to take this opportunity to say that I'm pleased to be here. It has only been a couple of weeks Since I joined and I can already see that Berry is an organization that is taking difficult yet important steps that will enable us to succeed. And now I'll cover some of the numbers. In Q2 2022, revenue was $1,500,000 compared to $2,800,000 in Q2 2021, representing a 46% decrease. Subsequently, revenue was down from $2,000,000 Q1 2022 or 26 The decrease in revenue was driven by a year over year decrease of $1,800,000 in e commerce sales, reflecting our stated intentions to focus on wholesale revenue. Ecommerce orders fulfilled during the Q2 were $381,000 down from $2,200,000 in the same period of 2021 and down from $1,100,000 in the previous quarter Q1 2022. I would like to remind our shareholders that during the quarter, we made the strategic shift to focus on sustainable growth and a path to profitability as opposed to solely focusing on top line growth. As part of the shift, we decided to limit our e commerce sales due to high digital marketing costs to acquire new customers. Wholesale revenue during the Q2 increased 117% to $987,000 compared to 455,000 in the same period of fiscal 2021.

Subsequently, wholesale revenue was up from $773,000 in Q1 2022 or 28%. General and administrative expenses during the 2nd quarter decreased by 39% or $1,900,000 to $2,900,000 in Q2 2022 compared to $4,800,000 in Q1 2022. Excluding share based compensation and depreciation expense, adjusted general and administrative expense decreased by $1,600,000 or 28% to $4,000,000 in Q2 2022 compared to $5,600,000 in Q1 2022. The decrease in adjusted general and administrative expense was primarily driven by a decrease in salaries and wages. Marketing and Investor Relations Expenses decreased by $1,000,000 or 64 percent to $560,000 in Q2 2022 compared to $1,600,000 in Q1 2022. On a year over year basis, marketing and investor relations expense decreased by 78% compared to $2,600,000 In Q2 2021, the decrease in marketing and investor relations expense was mainly due to a decrease in marketing initiatives related to customer acquisition. Adjusted EBITDA was a loss of $7,000,000 in Q2 2022 compared to $5,700,000 in Q2 2021 and $10,000,000 in previous quarter Q1 2022. During the 6 months ended June 30, 2021, net cash used in operating Operating activities was $14,000,000 As a result of the net loss for the period of $27,500,000 Partially offset by a change in non cash expenses related to share based compensation of $14,600,000 Finance expense of $764,000 depreciation of $841,000 and share and unit issued for service of 227,000 Net cash used in investing activities for the 6 months ended June 30, 2021 was $8,300,000 due to capital expenditures and leasehold improvements Incurred for the commissioning of Rupert facility.

In addition, we paid $1,300,000 for the acquisition of the cultured nut and Lloyd James Marketing Group, Inc. Net cash provided by financing activities for the 6 months ended June 30, 2022 was 4,700,000 Net cash used in financing activities for the 6 months ended June 30, 2021 was 3,200,000 During the 6 months ended June 30, 2022, we recognized interest and accretion expense on the credit facility fee payable of $83,000 and interest $229,000 related to the revolving line of credit and term loan. In Q2 2022, we incurred debt financing costs totaling $5,300,000 which will be amortized over the term of the credit facility at the effective interest rate. During the 6 months ended June 30, 2022, we recognized accretion interest accretion expense of the deferred financing cost of 1,500,000 As of June 30, 2022, the remaining carrying value of the deferred financing cost was $2,400,000 As of June 30, 2022, a Total of $5,800,000 was outstanding under the credit facility. On June 2, we closed a private placement offering with an institutional investor Gross proceeds of CAD8.2 million or CAD6.5 million. As of June 30, 2022, We were holding cash and cash equivalents of $6,200,000 a reduction of $15,800,000 from $21,200,000 as of December 31, 2021.

The decrease is primarily related to the company's prior commitments to capital expenditure and payables. As of August 15, our cash balance is We will need to seek additional financing within the near term in order to fulfill our outstanding obligations and fund ongoing operations and will be required to obtain subsequent Financing by the end of September. To address liquidity, we have reduced cash outflow. We've reduced headcount, Consolidated production to Vancouver and limited capital expenditure. We are also continually evaluating other alternatives of generating cash in I would also like to provide a brief update on our NASDAQ listing and the notice received in January for this year from the listing qualification department regarding our need On July 11, 2022, we were granted an additional 180 days 180 day period for NASDAQ listing qualification department or until January 9, 2023, to regain compliance with the minimum USD1 Bid price required for continued listing on the NASDAQ Capital Market. We are evaluating all available recourse to regain compliance with the bid price rule, Thank you, Pratik. I will now talk about some of the important commercial highlights from our Q2 as well as more recently and would like to point to several of the positive indications we're seeing.

We believe there's demand to co manufacture products for brands in the natural and plant based space. These opportunities are being explored Potentials to support further capacity utilization and increase revenues. Our innovation pipeline continues to be robust With innovations planned for 2023, we recently hosted a product ideation session with one of our core customers and are reviewing potential SKUs to meet this customer's needs. We are securing new and incremental shelf placement at our retail partners due to our innovative and value added products that have clean ingredient decks, which is leading to increased consumer adoption. We executed an e commerce summer sale with No CAC in conjunction with the reevaluation of the channel. Internally, we have determined that we can operate our e commerce channel in Select regions with no customer acquisition costs. We will examine the potential for additional seasonal promotions in 2022. Additionally, we continue to evaluate the e commerce business on a monthly basis. We have set targets that we must meet for our e commerce channel to continue, but ultimately, our desire is to shift from an online presence to an in store presence. In Canada, Q2 revenues grew by 117% compared to Q2 2021.

We've surpassed 1,000 doors in Canada with recent listings in major accounts like Loblaws and Natural and Chain accounts in Eastern Canada. Our same store sales continue to increase with the additional placement of our innovation SKUs, ribs, steak and our Butcher Select line. In the United States, in Q2, we added 3PL distribution capacity across the United States, providing us with access and the ability to major retailers that recently listed our products, including Wegmans, Giant, Meijer, Weiss and additional natural and independent chain accounts, representing a total of 1,000 new doors coming on board. In foodservice, we focused on shoring up our team and have recently redeployed 2 members from our restaurant operations to the foodservice sales team to support our efforts. We've secured some initial distribution within the Canadian Foodservice 3PL channels and have already seen repeat purchase orders.

Thank you, Parimal, Pratik and Jordan. I would like to again remind our listeners to email invest at verygoodbutchers.com should you have additional questions related to this earnings report. Thank you for listening and have a good day.

Thank you. That does conclude today's teleconference and webcast. You may disconnect your line at this time and have a wonderful day. We thank you for your participation.