GURU GURU Organic Energy Corp

GURU Organic Energy Corp. (TSX: GURU) (“GURU” or the “Company”), Canada’s leading organic energy drink brand, today announced its results for the third quarter ended July 31, 2022. All amounts are in Canadian dollars unless otherwise indicated.

Financial Highlights(in thousands of dollars, except per share data)	Three months endedJuly 31		Nine months endedJuly 31
	2022	2021	2022	2021
Net revenue	7,730	8,049	22,299	21,725
Gross profit	4,238	5,037	12,161	13,569
Net loss	(6,530)	(2,027)	(13,694)	(3,862)
Basic and diluted loss per share	(0.20)	(0.07)	(0.42)	(0.13)
Adjusted EBITDA4	(6,492)	(1,803)	(13,254)	(3,067)

“As we continue our strategy to replicate our success in Quebec across Canada, we have great confidence in our game plan, our differentiated brand, and our strong distribution partner. Year-to-date, we have already generated a 20% increase in shipments compared to last year. Following our summer campaign, we are seeing momentum in English Canada consumer scan data and in our latest round of research, the most significant to date with 4,000 consumers. The positive results confirm our strategy, as we continue to see improvement in awareness, trial and conversion to the GURU brand,” said Carl Goyette, President and CEO of GURU.  

“While we are encouraged by our growth in consumer purchases and market share, more work is required on execution and marketing. We will continue to invest strategically and prudently to increase brand awareness and conversion. We will also continue to improve in-stock positions and execution to mitigate industry-wide labour and logistics disruptions, which were felt more over the course of the summer than in previous quarters. In the beverage industry, executing well at store level is just as important as creating demand through marketing, and we will be laser-focused on these two tactics over the coming quarters,” added Mr. Goyette.

Results of operationsConsumer scan data in Canada has shown strong year-over-year sales increases of more than 35% for the last few months. As such, retail internal shipment volume increased by 12% in the quarter, compared to the same period in fiscal 2021. The 23% gap between consumer purchases and shipments can be mainly explained by inventory depletion at retail and industry-wide labour and logistics disruptions.

Net revenue for the third quarter stood at $7.7 million, compared to $8.0 million in the same quarter last year, primarily due to the change in the Company’s Canadian distribution, sales and merchandizing model, and the previously mentioned labour availability and logistics constraints. For the nine-month period, net revenue increased to $22.3 million from $21.7 million in the same period of 2021.

On the marketing front, the Company deployed its largest Canadian campaign to date, “Good Energy for the Everyday” during the third quarter of 2022 and was an official sponsor of CTV’s The Amazing Race Canada, the most-watch summer series in Canada. Following these campaigns, select Canadian retailers outside of Quebec are beginning to report increases in GURU market share, primarily in areas where GURU’s consumers were targeted. In September, the Company launched its “Back to Reality” national marketing campaign, including the Occupation Double TV reality show in Quebec, which is aimed at bringing Good Energy to its progressive urban consumers across Canada through the fall.

The Company’s U.S. performance held steady during the quarter, with GURU continuing to hold the number one energy drink position in the natural store sector in California and aiming to expand its distribution network in that state. To replicate the success of its #1 ranked 2022 Innovation SKU in Quebec, the Company launched GURU Guayusa Tropical Punch this past August in targeted U.S. banners. Meanwhile, in the online sales segment, the Company continued to show strong performance in Q3 and has scaled back investments in consumer acquisition to improve profitability in that segment.

Gross profit totalled $4.2 million, compared to $5.0 million in Q3 2021. Gross margin was 54.8% for the third quarter in 2022, compared to 62.6% for the same quarter in 2021. However, gross margin has improved from 54.3% in Q2 2022, reflecting careful supply chain management and prudent pricing practices. For the nine-month period, gross profit totalled $12.2 million, compared to gross profit of $13.6 million a year ago. Gross margin for the period was 54.5% versus 62.5% last year. The decrease in gross margin was anticipated due to the change in GURU’s Canadian distribution, sales and merchandizing model, effective as of Q4 2021, and comprised 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 $11.0 million in the third quarter, compared to SG&A of $7.2 million for the same period a year ago. Selling and marketing expenses accounted for $8.5 million of the $11.0 million in SG&A in Q3 2022 and increased 76% versus the same period a year ago, as the Company invested in targeted sales and marketing campaigns during the quarter. The Company’s largest campaigns were its “Good Energy for the Everyday” marketing campaign, the Amazing Race Canada partnership and the Canadian Elite Basketball League championship weekend partnership, but also included many other sponsorships and events across Canada, as well as continued trade marketing investments in the U.S. For the nine-month period, SG&A amounted to $26.3 million, compared to $17.5 million a year ago.

Adjusted EBITDA4 amounted to $(6.5) million compared to $(2.0) 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 third quarter totalled $6.5 million or $(0.20) per share (basic and diluted), compared to a net loss of $2.0 million or $(0.07) 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 July 31, 2022, the Company had cash, cash equivalents and short-term investments of $48.0 million and unused $CA and $US denominated credit facilities totalling $10 million.

1 Nielsen: periods ending July 9 and August 6, 2022 - All Channels, Canada.2 Nielsen: Last 18 months, period ending August 6, 2022 - All Channels, Canada.3 Market Research conducted by element54 and Patterson Langlois for GURU in June 2021 with 1,500 participants in the province of 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.

Conference callGURU will hold a conference call to discuss its third quarter 2022 results today, September 14, 2022, at 10:00 a.m. ET. Here are the details to access the call:

• Via webcast: https://edge.media-server.com/mmc/p/znh9kzg4
• Via telephone, please register for the call using this link: https://register.vevent.com/register/BIae0719f6077046f09f0c73cd48ba5562

Once registered, you will receive your dial-in numbers and unique PIN to access the call seamlessly. It is recommended that you join 10 minutes before the event, though you may pre-register at any time.

A webcast replay will be available on GURU’s website until September 14, 2023.

About GURU ProductsAll GURU energy drinks are plant-based, high in natural caffeine, free of artificial sweeteners, artificial colours and flavours, and have no preservatives. In addition, all drinks are organic, vegan and gluten free – and the best thing is their amazing taste.

About GURUGURU Organic Energy Corp. (TSX: GURU) is a dynamic, fast-growing beverage company launched in 1999, when it pioneered the world’s first natural, plant-based energy drink. The Company markets organic energy drinks in Canada and the United States through an estimated distribution network of over 25,000 points of sale, and through guruenergy.com and Amazon. GURU has built an inspiring brand with a clean list of organic plant-based ingredients. Its drinks offer consumers good energy that never comes at the expense of their health. The Company is committed to achieving its mission of cleaning the energy drink industry in Canada and the United States. For more information, go to www.guruenergy.com or follow us @guruenergydrink on Instagram and @guruenergy on Facebook.

For further information, please contact:

GURU Organic EnergyInvestorsCarl Goyette, President and CEOIngy Sarraf, Chief Financial Officer514-845-4878investors@guruenergy.com

MediaLyla RadmanovichPELICAN PR514-845-8763media@rppelican.ca

Forward-Looking StatementsThis press release contains “forward-looking statements” within the meaning of applicable Canadian securities legislation. Such forward-looking statements include, but are not limited to, information with respect to our objectives and the strategies for achieving those objectives, as well as information with respect to our beliefs, plans, expectations, anticipations, estimates and intentions. Forward-looking statements are typically identified by the use of words such as “may”, “would”, “should”, “could”, “expect”, “intend”, “estimate”, “anticipate”, “plan”, “foresee”, “believe”, or “continue”, although not all forward-looking statements contain these words. Forward-looking statements are provided for the purposes of assisting the reader in understanding the Company and its business, operations, prospects, and risks at a point in time in the context of historical and possible future developments, and the reader is therefore cautioned that such information may not be appropriate for other purposes. Forward-looking statements are based on assumptions and are subject to a number of risks and uncertainties, many of which are beyond our control, which could cause actual results to differ materially from those that are disclosed in or implied by such forward-looking statements. Those risks and uncertainties include the following, which are discussed in greater detail under “Risk Factors” in the Company’s Annual Information Form for the year ended October 31, 2021, available on SEDAR at www.sedar.com: management of growth; reliance on key personnel; changes in consumer preferences; significant changes in government regulation; criticism of energy drink products and/or the energy drink market; economic downturn and continued uncertainty in the financial markets and other adverse changes in general economic or political conditions, as well as the COVID-19 pandemic or other major macroeconomic phenomena; global or regional catastrophic events; fluctuations in foreign currency exchange rates; net revenues derived entirely from energy drinks; increased competition; relationships with co-packers and distributors and/or their ability to manufacture and/or distribute GURU’s products; relationships with existing customers; changing retail landscape; increases in costs and/or shortages of raw materials and/or ingredients and/or fuel and/or costs of co-packing; failure to accurately estimate demand for its products; history of negative cash flow and no assurance of continued profitability or positive EBITDA; intellectual property rights; maintenance of brand image or product quality; retention of the full-time services of senior management; climate change; litigation; information technology systems; fluctuation of quarterly operating results; risks associated with the PepsiCo distribution agreement; no assurance of continued profitability or positive EBITDA; and conflicts of interest. Certain assumptions were made in preparing the forward-looking statements concerning availability of capital resources, business performance, market conditions and consumer demand. Consequently, all of the forward-looking statements contained herein are qualified by the foregoing cautionary statements, and there can be no guarantee that the results or developments that we anticipate will be realized or, even if substantially realized, that they will have the expected consequences or effects on our business, financial condition, or results of operation. Unless otherwise noted or the context otherwise indicates, the forward-looking statements contained herein are provided as of the date hereof, and we do not undertake to update or amend such forward-looking statements whether as a result of new information, future events or otherwise, except as may be required by applicable law.

Non-GAAP Financial Measure

Adjusted EBITDA Adjusted EBITDA is a non-GAAP financial measure. Adjusted EBITDA is defined as net income or loss before national Canadian distribution agreement set-up costs, reverse acquisition of Mira X expenses, income taxes, net financial expenses, depreciation and amortization, and stock-based compensation expense. The exclusion of national Canadian distribution agreement set-up costs eliminates the impact on earnings of costs that are not expected to re-occur in the near term. The exclusion of net finance expense eliminates the impact on earnings derived from non-operational activities, and the exclusion of depreciation, amortization, and share-based compensation eliminates the non-cash impact of these items. We believe that adjusted EBITDA is a useful measure of financial performance without the variation caused by the impacts of the items described above because it provides an indication of the Company’s ability to seize growth opportunities in a cost-effective manner, finance its ongoing operations and service its long-term debt. Excluding these items does not imply that they are necessarily non-recurring. Management believes this non-GAAP financial measure, in addition to conventional measures prepared in accordance with IFRS, enable investors to evaluate the Company’s operating results, underlying performance and future prospects in a manner similar to management. Although Adjusted EBITDA is frequently used by securities analysts, lenders and others in their evaluation of companies, it has limitations as an analytical tool, and should not be considered in isolation, or as a substitute for analysis of the Company’s results as reported under IFRS. This non-GAAP financial measure is not an earnings or cash flow measure recognized by International Financial Reporting Standards (IFRS) and does not have a standardized meaning prescribed by IFRS. Our method of calculating this financial measure may differ from the methods used by other issuers and, accordingly, our definition of this non-GAAP financial measure may not be comparable to similar measures presented by other issuers. Investors are cautioned that non-GAAP financial measures should not be construed as an alternative to net income determined in accordance with IFRS as indicators of our performance or to cash flows from operating activities as measures of liquidity and cash flows.

Reconciliation of Net Loss to Adjusted EBITDA

	Three-month periods ended		Nine-month periods ended
	July 31, 2022	July 31, 2021	July 31, 2022	July 31, 2021
(In thousands of Canadian dollars)	$	$	$	$
Net loss	(6,530)	(2,027)	(13,694)	(3,862)
National Canadian distribution agreement set-up costs	-	113	-	147
Reverse acquisition of Mira X expenses	-	36	-	112
Net financial (income) expenses	(294)	(6)	(521)	97
Depreciation and amortization	234	147	643	337
Income taxes	17	(185)	57	(241)
Stock-based compensation expense	81	119	261	343
Adjusted EBITDA	(6,492)	(1,803)	(13,254)	(3,067)