GURU Organic Energy Corp. announced its results for the second quarter ended April 30, 2022.
“In the second quarter, we delivered our best Q2 topline performance to date with net revenues of $7.6 million, compared to $7.1 million in Q2 2021, while maintaining sector-leading gross margins of 54%,” said Carl Goyette, President and CEO of GURU.
“This performance was driven by a 26% increase in sales volumes despite the impact of COVID-19 in the first half of the quarter. True to our methodical and prudent approach, we delayed certain marketing activities to Q3, in the context of COVID-19 restrictions across Canada in place during our first quarter and the first half of the second quarter.”
“With a return to in-person events in Canada and with the majority of restrictions lifted since late spring, we have been going full steam ahead with our summer programming and marketing activations, building on our recently executed ‘Made in Plants’ marketing campaign. This includes the launch of our summer marketing campaign ‘Good Energy for the Everyday’ with digital, out-of-home, in-store and third-party event components, and a mix of sponsorship and sampling activities at various events across Canada throughout the summer. This comprehensive campaign will provide us with a solid baseline for our future marketing programs as we continue to build our brand awareness and reach new health-conscious energy drink consumers seeking natural, plant-based energy across Canada.”
“In the U.S., our strong growth in Q2 was driven by strong demand at the consumer level, as shown by Q2 SPINS data, with a 61% increase in consumer purchases in California, quarter over quarter, and a 31% increase in the U.S. overall5, and by a limited-time rotational program in the wholesale club channel. We are also pursuing other selective customer acquisition initiatives in the U.S. and through our various online platforms,” added Mr. Goyette.
Net revenue in the second quarter increased by 7% to $7.6 million, compared to $7.1 million for the same period a year ago. The increase is reflected by a 26% growth in volume overall, as a result of higher velocities, new product launches, and increased points of sale in Canada, and a new club rotational program entry in the U.S., partially offset by costs associated with the exclusive Canadian distribution agreement. For the six-month period, net revenue increased by 7% to $14.6 million, up from $13.7 million for the same period in 2021, as volume overall grew by 24%.Gross profit totalled $4.1 million, compared to $4.4 million in Q2 2021. Gross margin was 54%, compared to 55% in Q1 2022, reflecting careful supply chain management and prudent pricing practices. For the six-month period, gross profit totalled $7.9 million, compared to gross profit of $8.5 million a year ago. Gross margin for the period was 54% versus 64% last year. The decrease in gross margin was anticipated due to the change in our Canadian distribution, sales and merchandising model, effective as of Q4 2021, and comprises distribution, selling and merchandizing fees (a portion of which was previously categorized as SG&A expenses). Gross margin was also slightly impacted by higher product costs driven by inflationary pressures on input and transportation costs.
Selling, general and administrative expenses (“SG&A”), which include operational, sales, marketing, and administration costs, amounted to $8.2 million in the second quarter, compared to SG&A of $5.5 million for the same period a year ago. Selling and marketing expenses accounted for more than 70% of the increase in SG&A as the Company invested in targeted sales and marketing campaigns during the quarter, notably its ‘Made in Plants’ marketing campaign, the launch of GURU Guayusa Tropical Punch across Canada, the launch of the 500 ml format in Quebec and the listing of the 355 ml 4-pack across Canada, as well as continued trade marketing investments in the U.S. For the six-month period, SG&A amounted to $15.3 million, compared to $10.2 million a year ago.
Adjusted EBITDA3 amounted to $(3.7) million compared to $(0.8) million last year. The decrease in adjusted EBITDA was mainly due to higher selling and marketing expenses, and to a lesser extent, to lower gross margins.
Net loss for the first quarter totalled $4.0 million or $(0.12) per share (basic and diluted), compared to a net loss of $1.2 million or $(0.04) per share (basic and diluted) for the same period a year ago. The increase in net loss reflects the lower margins and the additional costs associated with brand, field and trade marketing activities.
As of April 30, 2022, the Company had cash, cash equivalents and short-term investments of $52.8 million and unused $CA and $US denominated credit facilities totalling $10 million.
1. Nielsen: Last 52-week period ending April 23, 2022 – All Channels, Canada.
2. Market Research conducted by element54 and Patterson Langlois for GURU in June 2021 with 1,500 participants in the province of Quebec.
3. Nielsen: Last 52-week period ending April 23, 2022 – Convenience and Gas (C&G) channel, Quebec.
4. Please refer to the “Non-GAAP financial measure” section for additional information on reconciliation of net loss to adjusted EBITDA at the end of this release.
5. SPINS IRI data, Total Multi-Outlet (MULO) channels, period ending March 20, 2022.
