Morning, ladies and gentlemen, and welcome to the good natured Products Inc.'s Q3 2023 Results Conference Call. At this time, all lines are in a listen-only mode. Following the presentation, we will conduct a question-and-answer session. If at any time during this call you need assistance, please press star zero for the operator. This call is being recorded on Tuesday, November 28th, 2023. I would now like to turn the conference over to Spencer Churchill. Please go ahead. Thank you, operator. Hello, everyone, and thank you for your interest in good natured. I'd like to welcome you to our conference call regarding our third quarter of 2023 results, were released earlier this morning. My name is Spencer Churchill. I'm Vice President of Investor Relations and Corporate Development here at good natured Products. I'm joined today by Paul Antoniadis, Executive Chair and CEO of good natured, who will provide an overview of the quarter and commentary on the business and strategy. I'm also joined by Kerry Biggs, our CFO, who will be speaking to the Q3 results in more detail. If you have not yet received a copy of the press release, you can access it under the News tab on the good natured Investor website at investor.goodnaturedproducts.com. For those of you unable to listen to the entire call, a recording will be made available in the Recent Investor Events section of the website. Before I turn the call over to Paul, I'd like to remind investors that management's prepared remarks contain forward-looking statements within the meaning of security laws, which are subject to risks and uncertainties, and management may make additional forward-looking statements in response to your questions. These forward-looking statements include, but are not limited to, expectations surrounding future financial results, new orders and customer additions, new product launches, and M&A activity. We'll also be discussing non-IFRS financial measures, the definitions for which can be found in our MD&A and press release issued this morning. All financial results discussed in the call are in Canadian dollars, unless otherwise noted. With that, I will turn the meeting over to Paul. Thank you, Spencer. Welcome, everyone, and thank you for joining us today. Our solid performance during the third quarter marked an inflection point in our fundamentals that we broadly spoke to last quarter. The combination of gradual normalization in our Industrial Business Group and continued momentum in packaging revenue led to sequential growth in total revenue for the first time since broader macroeconomic challenges and industrial segment commenced in Q4 of 2022. We also demonstrated the operating leverage we have created through our expense reduction and containment activities that show progress in aligning our cost structure to lower year-over-year consolidated revenues. Adjusted EBITDA was positive for the eighth straight quarter, an increase almost 15-fold from Q2 of 2023 levels on the back of a 6% sequential increase in total revenue. Year to date, in 2023, the company is generating positive Adjusted EBITDA of CAD 1.4 million in positive cash flow from its operation, excluding finance costs, which Kerry will speak to a bit later. Our solid third quarter results reflect our dedicated team's effort in continuing to reduce our operating cost structure while maintaining margins at the high end of the range. This has allowed us to sustain positive Adjusted EBITDA and position the company for improving cash generation from our operation as and when consolidated revenues begin to recover. Revenue in Q3 of 2023 from our Packaging Business Group grew by 4% year-over-year compared to Q3 of 2022, and is up 34% year to date in 2023. The growth in our Packaging Business Group continues to outperform the broader industry. As expected and noted in our call from last quarter, year-over-year packaging growth comparisons were less pronounced in Q3 of 2023 as we lacked the anniversary of the July 2022 FormTex acquisition. We also saw launch dates for several recently acquired customer programs, such as our May announcement of a Texas food producer being pushed out into late Q4 of 2023 and early Q1 of 2024. Our Industrial Business Group saw lower revenue in Q3 of 2023, due in part to reduced third-party volumes and declines in average selling prices as we comp against the abnormally strong pricing market conditions in 2022. Industrial revenue declines slowed in Q3 of 2023 compared to prior sequential quarters, and we continue to expect more of our industrial capacity will be used in our own manufacturing facilities as Packaging Business Group revenues increase. Our unwavering commitment to our customer-centric culture enables us to work intimately with our existing clients, ensuring deep alignment with their ongoing needs. We prioritize understanding and serving their unique supply chain requirements, fostering a collaborative environment that supports their efforts in achieving their business and sustainability objectives. Simply put, by focusing on our customer success, we help drive forward their goals by offering tailored, sustainable solutions that contribute significantly to their short and long-term goals. To touch quickly on liquidity, we finished the quarter with CAD 11 million in cash, down slightly from the beginning of the year. At this time, our finance expenses are the primary reason the business is not consistently generating positive operating cash flow and producing negative net income. The rapid rise in interest rates has greatly increased the cost of servicing the variable rate debt over the past year. We're actively engaged in ways to restructure and renegotiate our debt obligations in order to reduce the leverage on the balance sheet and lower our cash interest and principal payments. In addition, we continue to explore options to enhance our ability to execute on our strategic growth objectives over the long term.... Finally, in terms of outlook, the demand for sustainable packaging remains robust. This is evident in our strong sales pipeline and by our August announcement of the company's second largest packaging commercial contract in a multi-year deal with an existing pharmaceutical packaging customer. Our teams will continue to identify and put in place new initiatives that will reduce our operating and production costs to further enhance our operating leverage. Despite operating and macro conditions remaining volatile for the remaining part of the year and into 2024, we are optimistic that slow normalization in our Industrial Business Group should continue. With that, I will hand it over to Kerry Biggs, CFO of good natured, to talk through the Q3 financial results in more detail. Over to you, Kerry. Great. Thank you, Paul, and hello to everyone on the call today. Revenue for Q3 2023 was CAD 19.4 million, compared to CAD 26.2 million for Q3 2022 last year, and CAD 18.3 million for Q2 2023. That was the prior quarter. In terms of business mix, the Packaging Business Group represented 54% of total revenues for Q3 2023, compared to 38% in Q3 of 2022. Packaging Business Group revenue increased 4% year-over-year, driven by the addition of new customers and cross-selling of new products to existing customers, but partially offset by lower blended average ASPs amongst the national packaging segments. The Industrial Business Group contributed 42% of total revenue for Q3 of 2023, compared to 58% in Q3 of 2022, the prior year. Industrial Business Group revenue declined 46% year-over-year. As Paul mentioned earlier, we do continue to see signs of a slow normalization in the industrial end markets. Lead times are nearing pre-COVID levels, and the 9% sequential decline in total industrial revenue in Q3 2023, as compared to the prior quarter, Q2 of 2023, is the lowest since the macro adjustments began last year. On the margin front, Variable Gross Margin, a non-IFRS measure defined in our MD&A, and press release for Q3 2023 was 36.6%, compared to 34% in Q3 of 2022, and 36.5% in Q2 2023, the prior quarter. There were three primary factors that influenced this year-over-year increase in Variable Gross Margin. First, a higher mix of revenue from the Packaging Business Group in Q3 2023 as compared to Q3 of 2022, again, driven by the factors previously noted. Second, a lower Industrial Business Group revenue mix contribution. Finally, productivity enhancements to the variable cost of products, such as direct labor efficiency, as evidenced by the 29% decline in Q3 2023 variable cost of products, which exceeded the decline in revenue as compared to Q3 of 2022. Gross margin for Q3 2023 was 26.7%, compared to 27.2% for Q3 2022. The slight year-over-year decline was due to increased overhead expense, primarily related to higher utility costs and a small increase in equipment depreciation. We are maintaining our targeted ranges for variable gross margin of 28%-35% and gross margin of 21%-28%, which is supported by our focus on increasing the mix of revenue contribution from our Packaging Business Group. On the SG&A front, SG&A, CAD 3.4 million in Q3 2023 is down 26%. This was equaling 17.6% of Q3 revenues, compared to 17.5% of revenue in Q3 of 2022. The strong cost reduction performance was driven by a decrease in headcount from 218 last year to 181 at the end of Q3 2023, along with a number of other cost-saving initiatives that we put in place. SG&A also declined sequentially from Q2 2023, the prior quarter by 8%, and is now at the lowest level since Q3 of 2021, and 30% off peak levels from Q4 of 2022, when we commenced our cost containment activities. If we view it another way, if we annualize the Q3 2023 quarterly SG&A costs, our SG&A for a full 12 months would total approximately CAD 13.6 million. Comparing that to the CAD 17.9 million of SG&A costs for the full fiscal year 2022, our 12-month run rate is now trending CAD 4.2 million lower as a result of the cost-saving initiatives that we've put in place. We will continue to look for sources of operating cost savings and efficiencies with our intention to grow revenue well outpace, and given the substantial reductions to date, we would expect any additional efficiencies may be more incremental in nature. On the EBITDA front, Adjusted EBITDA, again, a non-IFRS measure for Q3 2023, was CAD 0.7 million compared to CAD 0.8 million in Q3 2022, and CAD 0.1 million in Q2 2023. The small year-over-year decline in Adjusted EBITDA reflects the lower revenue in gross profit, which slightly exceeded the decline in SG&A, excluding acquisition costs and one-time charges, as well as fulfillment and logistics costs. However, as Paul noted earlier, Adjusted EBITDA increased materially from Q2 2023 on the combination of higher revenue and gross profit and lower operating costs. Adjusted EBITDA for Q3 2023 as a percent of revenue increased to 3.6%, compared to 3% in Q3 2022, as the decline in SG&A expenses slightly outpaced the decline in gross profit. The company recorded a net loss of CAD 3.2 million this quarter, Q3 2023, compared to a net loss of CAD 2.1 million in Q3 of 2022, and a net loss of CAD 3.6 million in Q2 2023. Excluding changes in non-cash expenses such as share-based comp, depreciation and amortization and foreign exchange, a 52% year-over-year increase in debt servicing costs was the primary reason for the year-over-year increase in our net loss. As Paul noted, the end of the quarter was an CAD 11.1 million cash balance, down from an CAD 11.9 million cash balance at the end of 2022. Year-to-date net cash inflow of CAD 3 million from financing activities was offset by CAD 2.3 million in cash outflows for CapEx and CAD 1.4 million of cash outflows used in operations, which include CAD 4.9 million in financing costs paid in the nine months ended September 30, 2023. And finally, net working capital at the end of the quarter was CAD 6.9 million, compared to CAD 10 million at December 31, 2022. We had CAD 103 million in assets against CAD 88 million in liabilities, which equates to an asset to liability ratio of 1.17 times at quarter end Q3 2023, compared to 1.22 times at December 31, 2022. So I'll wrap up by encouraging listeners to visit our investor website at investor.goodnaturedproducts.com, where you can download our MD&A for additional commentary on our Q3 2023 financials. So with that, I'll turn it back over to Spencer. Spencer? Thanks, Kerry. Operator, could you now please give instructions for the Q&A section? Thank you. Ladies and gentlemen, we will now begin the question and answer section. Should you have a question, please press the star followed by the one on your touchtone phone. If you're using a speakerphone, please flip the handset before pressing any keys. Your first question comes from Ahmed Abdullah from NBC. Please go ahead. Yes. Hi. Thank you, guys, for taking my question. I would just like to touch on the Q4 outlook. You highlighted that the industrial segment is entering a transitional period with stabilization in Q4. Could that mean that we start seeing revenue growth for that segment? And then on the packaging, you highlighted that you're entering into commercial production on some packaging deals. Overall, should we expect quarter-over-quarter revenue increases? And then I have a follow-up to that. Yeah, sure. Great to hear your voice, Ahmed. First I'll start off by traditionally, fourth quarter from a seasonality perspective, if you look historically, has been a lighter quarter in total revenue. So I think that needs to be taken into note. And with regards to the industrial business, you know, we're, you know, the slow normalization is gonna continue through the fourth quarter. I think the positive signs that we've indicated in our earlier commentary just give us some encouragement as we position ourselves into 2024. And then, I think there was a third component around the packaging. You kind of broke up a bit related to new programs. Can you just repeat that, Ahmed? Yeah, just any color in terms of what these new product and new packaging deals could do- Yeah. to the Q4. Can it drive higher revenues for the quarter on a quarter, like, quarter-over-quarter basis? Yeah, I mean, our packaging pipeline just overall is very, very strong. You know, we had some delay on launching, and we mentioned a few of the programs in our prepared remarks. And we anticipated those to start a bit earlier, and they've been pushed out. So, you know, that's mostly due to, you know, just getting the program up on its feet and our clients kind of working through their existing inventory for those new programs. But we remain really, really optimistic around the packaging business. Like we haven't seen the sales pipeline demand at this level in the history of the company, and we feel like we're really positioned well to take advantage of the sustainable trends that have really continued to build momentum in the macro picture. Okay, great. Thanks. And for the range given for the Variable Gross Margin, you're running right now at about 37% margin. Is there a reason why it was not raised? Because it's still at 28%-35% for the year. Yeah, you know, I'll turn it over to Kerry to kind of answer that question. I'll kind of set the stage to say, you know, we wanna continue to maintain consistency in the margin expectation. You know, as we continue to see the industrial business kind of normalize in the general marketplace. I think it's just from our perspective on how we're managing our costs and how we're looking at the business, we just generally don't see a need to increase that range at this moment. But I'll let Kerry speak to it in more detail. Yeah, no, I think that's, I think that's fair, Paul. You know, given the volatility we've seen over the last 12-18 months, you know, I think at this point, we wanna, we'll call it, you know, overpromise under deliver and overpromise, right? Or overpromise, under deliver, I guess. So, I think, you know, we will look at this moving into the next year. But I think at this point, you know, we wanna keep things conservative, and, you know, at this point, kind of continue to beat the numbers here. Okay. But there's nothing you would call out that would cause expenses to jump in Q4 to a point where you have to give a lot of the margin back. Like, there's no specific item that you're expecting. You know, I think- At this point- Yeah, go ahead. Go ahead, Kerry. I'll, I'll just tag on to your comments. Yeah. Okay. I think at this point, no. You know, we've kept our ranges of variable margin consistent throughout the whole year. So at this point, there is no callout that, you know, we would think that, you know, margins are gonna go any lower here. Okay. Thank you. That's great color. I'll queue up. Thank you, ladies and gentlemen. As a reminder, should you have any questions, please press star one. Next question comes from Ahmad Shaath from Beacon. Please go ahead. Hey, guys. Hi Paul. Congrats on a solid quarter. I guess just continuing along the lines of the previous questions, maybe if I want to dig deeper into the pipeline of opportunities for the packaging side. And you guys alluded to the fact that some margin pressure from the larger national accounts. Has there been any change in your strategy with regards to the customer segment you wanna focus on in light of the recent environment? Would you prefer to capture more of those national accounts, sacrifice some margin just to get in some stability in the business and some visibility, which is also tying into whatever you're trying to do on deleveraging the balance sheet a little bit to give you some security with the discussions with the lenders? Or what's your view on that? Yeah, I think overall, you know, if you look at our packaging sales pipeline and, you know, just kind of reflecting on, you know, the different stages in our pipelines, it's a real balance between, you know, national, we call it regional enterprise and, kind of the small business segment. Like, we really work at... Nothing really changed in that pipeline mix. I would actually say we probably have seen, you know, all part of it growing to a level that we haven't seen before. It's been really across the board of the customer segments. It's not being dominated by, you know, a national segment or a small business segment. It's actually we've seen a good mix from all, you know, from all market segments that we're targeting. So I would just say in general, there's really no change. You know, you know, if you're looking at the announcement we made on an existing pharmaceutical, you know, organic, you know, growth there, like, we're also working to expand our business with our existing customer base, right? So, you know, we built, you know, a customer-centric culture. We work really hard with all of our partners, outsource partners, to ensure that, you know, we have the ability to, you know, take advantage of this pipeline that we've built over the years and the trust that we've built in through their success of fulfilling these customers' orders and supporting them through these, you know, frankly, changing operating conditions over the last 2-3 years. I think those efforts are really paying off. Like, we're seeing, you know, new programs coming from our existing customers, like that pharmaceutical and the... You know, I think that just reflects our team's effort in serving those customers. So I'm, you know, our pipeline is built off of new and it's no change in strategy, but it's also built off of our existing customer base, you know, national and really small, just bringing us new business based off the success that we've had with them over the last two to three years. Got it. That's, that's great color, Paul. So that should be, I guess, neutral to positive to, to your margin, going forward. And then just to follow up on that, as you ramp up those more bigger contracts towards the tail end of this year and, and, and to next year, should we expect, the outsource, third-party manufacturing time cost to continue to trend down? Or is that, a function of more like the geography of the, the balance of the contract, or do you need to satisfy that you'll need to rely on some third party guys as well? So just trying to get a sense of how much more room on that cost line that we can cut. Well, I mean, that cost line is, you know, to look at our just general overall product cost lines and expense lines. But I would just say in general, you know, just to kind of answer that, you know, indirectly first is, you know, we're attacking our costs, like, just across the board. You know, our SG&A lines, you know, I think we've demonstrated the progress we've made. You know, we haven't stopped. The team's looking at every line item, challenging it, trying to find more efficiency. Do we stop doing it? And then related to, you know, our outsource manufacturing footprint, it's never been as strong and capable than, you know, over the last two years. Like, we've got a great partnership up in northern Minnesota. You know, we're gearing up to drive as much business through our outsource partners, and, and that's really important to us. And, and we've done it, like, and we'll continue to do it. So I think this is more about, you know, looking at that pipeline and delivering the products to those customers as fast as we can, whether they're existing or new. And our outsource relationship is complementary to that success. I think the cost initiatives and cost reductions are—it's a much more broader effort that we're, you know, looking across all of our SG&A, SG&A lines, including wages. That's great. Appreciate that. And last one from me is maybe on a comment on, you know, the debt service and what you guys trying to do on reducing down the balance sheet. I mean, can you talk to us about that, those conversations? I know you might be thinking about some of the covenants that are coming, and I know the 2024 covenants haven't been revised, but any color you're able to give us on the discussions on the debt side and what you guys trying to do would be very helpful. Yeah, absolutely. I'll kick it off, and then, Kerry, please add any additional commentary. You know, first, there's no issues with the current covenants with Wells being good standing. Some of the things that we're looking at, obviously, is really the debt services. And I think for folks that are listening in, whether it's the first time or you know have been investors long term, that we own a lot of our buildings and our debt services, just alone on our mortgages, has gone up dramatically, right? So we own three of our facilities, properties, and one is a lease. So we're exploring, you know, sale leasebacks. We're exploring potential refinancing in this space. We've also opened up some pretty robust negotiations with our mortgage back partners. And all in all, I will tell you, Ahmad, just everyone's been very positive and in exploring these options, and obviously, you know, on the real estate front, there's levers that you can, we can pull, but we're exploring all those options on the sale-leaseback and refinancing of the building. But I would say thus far it's been... You know, we're optimistic on how these discussions are going, but we need a little bit more time to bring it to fruition. I don't know, Kerry, just anything else you'd like to add? Yeah, no, that, that kind of hit it on the head. I just would say on the, on the covenant side, you know, I think it's been disclosed that, you know, Wells has waived our, you know, TT M EBITDA through the, you know, through 2023. And we have, you know, ongoing discussions with, with them, and just a great relationship. So I think history would suggest that, you know, they will work with us moving forward. So I think we're in, we're in a good spot as it relates to the covenant type of things. Got it. That's, that's, that's very helpful. Maybe just one small follow-up on that. Have you guys kind of run rough math about the potential or the appraised value for the real estate and how much would that raise in a sale and leaseback scenario? It is typical of your industry to just lease those facilities in general, so you have a good footing there. So I'm just wondering if you have gone through that exercise. Well, I would say that we're in slight... I think we've been, you know, very open in our last call that, you know, we're exploring all these options and, you know, all of our... You know, I'm just gonna speak in general, just in all three properties, or, you know, the loan values typically have been, you know, 55%, LTV value. So I... You know, there's a lot of value in the property that sits on our balance sheet along with the debt. So, you know, I don't have anything here to specifically announce, but I think in general, we want, you know, our owners on the call and potential owners that are listening in, that we are evaluating that. Obviously, you know, we're not gonna give away our property for the sake of, you know, putting cash on our balance sheet. We're not gonna give it away, but I think we are evaluating it and exploring those options. And then obviously, as they come to fruition, whether it's refinancing or whether it's a sale-leaseback, we'll obviously, you know, communicate that as and if that event takes place. That's great. Appreciate it, Paul. I'll turn it back over to you. Thank you, ladies and gentlemen. It appears we have no further questions at this time. Great. Thank you, operator. For anyone who didn't have the opportunity to ask a question or wishes to ask a question offline, please send these to invest@goodnaturedproducts.com with your contact details, and we will respond as soon as possible. Thank you, everyone, for joining us today, and have a great rest of your day. Ladies and gentlemen, this concludes your conference call for today. We thank you for participating and we ask that you please disconnect your lines.