Good morning. My name is Rob, and I will be your conference operator today. At this time, I would like to welcome everyone to the HEXO First Quarter 2022 Earnings Call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star followed by the number one on your telephone keypad. If you'd like to withdraw your question, again, press star one. Before we begin, we would like to remind you that certain matters discussed in today's call or answers that may be given to questions asked could constitute forward-looking statements. These statements are based on the company's current internal views, estimates, expectations, opinions, forecasts, beliefs, assumptions, and other statements that are not statements of fact regarding the future of the business, future plans, strategies, operational results, and other future conditions. These statements should not be read as assurances of future performance or results. They involve known and unknown risks, uncertainties, and other factors that could cause actual results, performance, or achievements to differ materially from current expectations or those implied by such statements. This morning's discussion is qualified in its entirety by the cautionary note regarding forward-looking statements and the risk factors that are included in the Annual Information Form, Management Discussion and Analysis and Annual Report. Please review these materials for more information about the forward-looking statements and the risk factors that could cause actual results, performance, development, or events to differ materially from our current expectations and those implied by such statements. HEXO disclaims any intention or obligation, except to the extent required by law, to update or revise any forward-looking statements as a result of new information or future events for any reason. I will now turn the call over to Scott Cooper, President and CEO of HEXO. Good morning, everyone, and thank you for joining us today. Late last night, we released our Q2 2022 Results for the quarter ended January 31st, 2022. Before I jump into the results this quarter, I wanted to provide an update on a couple of key developments that occurred over the course of the last couple of months. When I joined HEXO in November last year, I was immediately tasked with preparing a very challenged balance sheet as a result of the Redecan acquisition and the related convertible debenture that was put in place at that time last summer. The proposed agreements we've announced with Tilray will restructure and reduce our significant debt burden and provide an ample liquidity cushion while minimizing dilution to existing HEXO shareholders, a key pillar underpinning our path forward strategy. This was indeed a transformational quarter for the company. While the convertible note was a significant inhibitor to HEXO's growth prospects, I am pleased that we can now, as a result of our recently announced proposed strategic alliance with Tilray, put that behind us and continue to position ourselves to retain and grow our significant market share, but we become a cash flow positive business within the next four quarters. Let me begin by reviewing the proposed strategic partnership with Tilray before providing an update on our path forward strategy. On March second, HEXO entered into a proposed strategic alliance with Tilray Brands in which Tilray will acquire $211 million of senior secured convertible notes that were originally issued by HEXO to High Trail Investments. This proposed alliance between HEXO and Tilray achieved several goals including it de-leverages the balance sheet to a more manageable level, it raises sufficient liquidity to fund The Path Forward, including unlocking of $80 million of restricted cash, it preserves value and minimizes dilution to existing shareholders, and it offers significant commercial benefits to HEXO, representing upside to The Path Forward. Further, the separate three-year CAD 180 million equity backstop commitment demonstrates the support and belief of our existing shareholders. The Tilray agreement is expected to deliver up to $50 million combined cost synergies within two years of the completion of the transaction and will leverage both companies' commitments to innovation and brand building to strengthen market positioning and capitalize on opportunities for growth. Most importantly, the terms of the agreement provide HEXO with the financial flexibility to execute on The Path Forward with runway and strong liquidity profile enhanced by the standing commitments to be used monthly as needed. I am pleased to report that this proposed transformative strategic alliance is on track and is expected to close in May. As you may recall, last quarter, we introduced The Path Forward, a strategic plan that utilizes HEXO's current assets and our capabilities to drive accelerated organic growth, build market share, and become operationally cash flow positive within the next four quarters. The Path Forward is made up of five priorities. Continue to reduce manufacturing and production costs, streamline and simplify the organizational structure, realize cost synergies from acquisitions and recent plant closures, focus on revenue management, including more disciplined pricing, and five, accelerate organic growth by building market share, capturing market share gains, and capturing missed revenue opportunities. This plan is underpinned by specific actions to fortify our balance sheet, strengthen the leadership team, and enhance our corporate governance, which have already been successfully executed. The plan is expected to generate incremental run rate cash flow of CAD 37.5 million in fiscal 2022, and an additional CAD 135 million in fiscal 2023, for a total of CAD 172.5 million over the next two years from a combination of cost reductions and anticipated revenue growth. I would now like to provide a brief update on each of the core pillars of the strategy. Reducing manufacturing and production costs. The company expects to reduce manufacturing production costs by leveraging existing capabilities across facilities. We are actively applying best practice and learning from our highest margin categories and top facilities across the entire operation to improve and optimize productivity. To date, we've identified approximately CAD 30 million in savings from optimizing HEXO's production network and leveraging the capacities of recent acquisitions. Specifically, this includes transition from co-packing agreements towards in-house production, leveraging HEXO's scale to deliver on procurement savings, and reconfiguring the company's production network to achieve greater efficiencies. For example, moving vape production and distillate production to the Redecan facility. Two, the company expects to streamline and simplify its organizational structure and more closely align operating costs with overall revenue. We announced that these cost reductions will be achieved through a combination of reduced reliance on outside consultants, streamlining the organization as a new IT platform is implemented, right-sizing the organization, and realizing the synergistic benefits of previous acquisitions. These initiatives are expected to represent a 30% reduction in the company's SG&A by fiscal year-end 2023. As part of these initiatives, subsequent to the quarter end, the company announced the reduction of 180 positions, resulting in savings of approximately CAD 15 million on an annualized basis. Half of these positions were related to previously announced closure of Stellarton facility, and the remaining reductions were related to reducing back-office positions where there is significant overlap as a result of the recent acquisitions, simplifying Hexo's operating model to drive clear accountability and delayering management. Third, the company expects to continue to deliver on synergies as a result of the recent acquisitions. Fourth, HEXO will continue to focus on revenue management, including more disciplined pricing across our entire range. By leveraging our brand continuum, we are well-positioned to differentiate ourselves across features and price balancing our approach to both volume and profit. HEXO will offer greater value, great value to consumers, strong margin for customers, and grow our own margins. Fifth, to increase revenue, the company plans on accelerating growth through organic market share gains and capturing revenue opportunities through better demand planning, acting on proprietary consumer insights, and building strong customer relationships. For example, in the past, the company was delivering only 65%-70% of its demand to customers. The company has now connected its demand forecast to what it intends to harvest. We're taking learnings from the legacy Redecan and applying them across the entire organization. Earlier this year, we executed a proprietary quantitative consumer survey with thousands of consumers that identified usage occasions and demand spaces in the cannabis category. We'll use this to drive unique innovation and brand building under new marketing leadership. The company will also put a focus back on medical and consolidate our medical efforts with Redecan, given their strength in this category. We are making substantial progress on our plan in only one quarter, and it is yielding results. With that, I would like to now turn the call over to Curt. Thank you, Scott, and good morning, everyone. This is my first time in the CFO chair at HEXO, and I look forward to working with you. Before drilling into the details, let me recap a couple of Scott's points and give you a high-level summary of the quarter. Our biggest financial challenge has been to fix the balance sheet, to relieve the drain of the senior secured convertible note and establish liquidity. With Scott's leadership, we've made enormous progress on both of those objectives in Q2. Once we close the Tilray transaction, the monthly redemptions will end, maturity is pushed out to three years, and we free up $80 million in restricted cash. Once we close on the equity backstop, we'll have another CAD 60 million of cash per year, if necessary, through the sale of equity. As the new management team settles in and we dive deeper into the business, we're seeing what I call a target-rich environment for continuing to improve our profitability through cost savings, revenue enhancement, improved capacity utilization and operational efficiency, and better inventory terms. We remain confident in our ability to capture the run rate cash flow improvements previously outlined in The Path Forward of CAD 37 million by the end of fiscal 2022, and an additional CAD 135 million by the end of fiscal 2023. At a high level, this quarter, operationally, on a quarter-to-quarter basis, we raised unadjusted gross margins from 25% to 36% and added CAD 5 million to EBITDA. In this quarter, we also re-examined the valuations of our business and concluded that we had to recognize substantial impairments. We took CAD 100 million in fixed asset impairments, CAD 141 million in intangibles, and wrote off the entire balance of goodwill of CAD 375 million. Finally, despite improving EBITDA by CAD 5 million quarter on quarter, we didn't reach EBITDA breakeven. As a result, we breached the covenant on the senior secured convertible note. The noteholder subsequently waived enforcement of the default through the earlier of May 17th or closure of the Tilray deal. Nevertheless, under accounting rules, we revalued the senior secured convertible note to the default rate of 115% of face, triggering a fair value loss of CAD 50 million. Once the Tilray transaction closes, that note will be revalued to actual face value at the time of that transaction. Now I'll discuss the results in more detail. First, with respect to revenue, total revenues were CAD 52.7 million and were our second consecutive quarterly high, representing a 60% increase over Q2 of the prior year. International sales were a particular bright spot, growing 36% quarter-on-quarter. Zenabis international sales nearly doubled quarter-on-quarter and accounted for 54% of our total international volume. Medical revenues had a healthy quarter-on-quarter 21% growth, reflecting a reinvigorated product innovation pipeline and renewed focus on deployment of our commercial capabilities. We continue to be optimistic about HEXO's ability to capture revenue and market growth. We're overcoming the operational challenges that left as much as 70% of our orders unfilled. For example, we are aligning our cultivation with market demand through weekly meetings between the market and operational sides of the business. We've also made great strides in debottlenecking key parts of the production process, increasing throughput and reducing unit costs at the same time. Turning to gross margin, our adjusted gross margin improved quarter over quarter from 25% to 36%. This was a function of multiple factors. Strong performance in general at Redecan, favorable product mix within adult use, successful introduction of several new products, and growth in medical as we noted above. Also, HEXO's total non-beverage gross margin before adjustments increased by 15% from the previous quarter. While this is a striking improvement, it is not out of line with our larger industry peers. Turning to SG&A, those expenses remained flat from a prior quarter and have decreased on a prorated basis from expenses realized after the acquisition dates of Redecan and 48North in the first quarter. Impairments to PP&E, intangible assets and goodwill were taken after the Canadian cannabis market experienced adverse changes, as I noted. These impairments have been reflected in significant adjustments to management's forecasts of future net cash inflows and earnings from previous budgets and forecasts. As noted, our adjusted EBITDA increased by CAD 5.6 million from a - CAD 11.2 million to a negative CAD 5.6 million. This increase was driven by increased gross margins and flat SG&A expenses. In addition to the previously mentioned restructuring of the secured note, HEXO is also in negotiations with KAOS Capital to finalize a standby equity purchase agreement. It's expected that the standby agreement will permit HEXO to demand that KAOS and its partners subscribe for an aggregate of CAD 5 million of common shares per month over a period of 36 months, with a maximum standby commitment to be CAD 180 million over the term of the agreement. A 5% standby commitment fee payable in common shares will be due upon execution of this agreement. The proceeds from the standby commitment are expected to be used to fund interest payments under the notes and general corporate purposes. The standby agreement remains subject to negotiation and completion and, among other things, receipt of necessary regulatory and TSX approvals. Looking forward, as we've made real progress in our capital structure and balance sheet, we continue to focus on The Path Forward. I'll just remind you of those five priorities. Continue to reduce manufacturing and production costs. Streamline and simplify the organization. Realize cross synergies from acquisitions and recent plant closures. Focus on revenue management, including more disciplined pricing. Accelerate growth through organic market share gains and capture missed revenue opportunities. We've already been successful in building a strong foundation for this plan by fortifying the balance sheet, strengthening the leadership team, and enhancing corporate governance. On a final note, I would also like to thank everyone at HEXO for their commitment and effort over the last year. We recognize the resilience and positive outlook of the whole team in a challenging period. We've now turned the corner, and I look forward to leveraging this team's expertise to build a robust future for HEXO. Thank you for your continued support. Operator, we would now be happy to take questions from the participants. At this time, I would like to remind everyone, in order to ask a question, press star then the number one on your telephone keypad. Your first question comes from the line of Aaron Grey from Alliance Global Partners. Your line is open. Hi, good morning, and thanks for the questions here, and congrats on the progress you guys made on The Path Forward. So talking about the bright spot you said in international, and you said Zenabis doubled Q over Q. Just any incremental color you could provide there, maybe in terms of the markets you were selling to. Also going forward, whether or not there was kind of some one-time sell, and you expect that level of sales to continue going forward. Thank you. Morning, Aaron. Thanks for the question. Val, could I ask you to take that one? Yep, for sure. Good morning. Yeah, markets that we continue to sell into, as we work with Zenabis are of course Israel, Malta, and into Europe. We have strong relationships within the international domain and expect to see continued growth. Thanks. I'd also add. Great. Go ahead Aaron, just to add, we're also looking at South Africa and Australia as markets as well. Okay, great. Glad to hear that, continue to see growth there. The second question from me, Scott, you talked about, you know, some survey work you guys are doing right now on the consumer front, to get up to understanding, obviously aligning, you know, better with demand and cultivation, and it seems like teams are communicating more now. Can you talk about maybe some of the insights, you know, that you're continuing to see, you know, unfold. Obviously a lot of moving parts in the marketplace in terms of consumer demands, whether it be price or THC levels. Maybe some high-level views in terms of, you know, how you view the marketplace today, you know, from your studies and what you believe consumers are gonna look for, demand going forward. Thank you. Yeah, great question. Thanks, Aaron. Again, Valerie, I'll turn that one over to you. No problem. We were, again, extremely fortunate to conduct a national study of over 3,000 Canadian consumers, and within that we were able to identify over six unique demand spaces, which really coined the understanding of usage occasions and consumption habits, and we're uniquely tailoring our overall offering to consumers to align with that. I will suggest some key findings that we have found is the importance of sleep to the Canadian consumers and how cannabis plays an important role within that. I would also suggest that, you know, your question around potency is important to Canadian consumers overall and is top of mind as we are outlining and building our product roadmap moving forward. Okay. All right. Great. Thanks so much, and I'll go and pass along. Your next question comes from the line of Pablo Zuanic from Cantor Fitzgerald. Your line is open. Morning. Can you just give us an update, if it's possible, in terms of regional coverage within Canada? I mean, the company started very strong in Quebec, right? It seemed to lose share there and gain in Ontario and Alberta. Just an update in terms of where you are, especially with Redecan and the assets you acquired, in terms of regional scope, if you can break it. An update in terms of how much share you've lost in Quebec, and I'll have a follow-up. Thank you. We are nicely present. Valerie, I'm gonna turn over to you again just around the market positions in each of the provinces and the Redecan rollout as well. No problem. We continue to maintain the number one share position in adult rec just in Canada, rolling three-month share of 10.3% overall. We continue within large markets to leverage our partners as it relates to Quebec, Ontario, Alberta and British Columbia. I'm really excited to announce that we have seen the expansion of Redecan on a national level. We've introduced Redecan into Manitoba, Saskatchewan, Newfoundland, New Brunswick, and Nova Scotia and PEI. In addition, in February, we saw the introduction of Redecan into the Quebec market. Continued efforts as we build out our product pipeline and continue to grow our market share with our key brand partners. Okay, thank you. Just a follow-up, Scott. Maybe focusing on. It's a two-part question. One, an update in terms of the JV with Molson Coors and the relationship there. How much progress are you making in Canada and in the U.S., with that JV? And the second part to the question is more about your U.S. plans. I understand, you know, you were hamstrung with a convertible debt. Now you have the agreement with Tilray. In the past, the prior CEO had talked about buying land and cultivation in California. I just want to see an update in terms of how you're thinking about the U.S. opportunity, or do you have too much to fix right now that, you know, you don't wanna be buying assets in the U.S.? Thanks. Yeah. Thank you for the question. So, first on the joint venture with Molson and Truss Beverages, I continue to be very pleased with the progress that Truss Beverages is making. It was recently announced as a result of the efforts of Truss Beverages and a number of companies in collaboration with the government that one of the kind of restrictions around the beverage category was you can only purchase five beverages within your limit, and that's been increased to 48. So we anticipate continued progress. The innovation funnel that Truss has for 2022 is, you know, second to none, and they continue to be very consumer focused and have very strong customer partnerships. Very pleased with that. In the U.S., continue to roll out CBD beverages and continue to have a strong commitment to that business as well and you know, in a number of new states, both in direct to consumer and with distributors. On your second question around the U.S. expansion plans, we continue to absolutely look at the U.S. market with interest you know, around operating within kind of the legal framework. In the short term, we continue to progress the action plan around extracts of hemp-derived CBD and other minor cannabinoids as an ingredient. As we get through the balance sheet transformation, free up cash, again, within that framework, we will absolutely be looking to the U.S. in the right kind of sequencing and timeframe for growth and expansion. Thank you. Our next question comes from the line of John Zamparo from CIBC. Your line is open. Thanks. Good morning. Morning, John. I wanted to start on the cost cutting. It's a lot of moving parts, so I just want to better understand it. I think it's CAD 50 million in synergies from M&A last year. There's another CAD 30 million in savings from the production network that you've identified subsequent to that. There's around CAD 35 million savings on SG&A, if you reference the 30% cut, and now CAD 25 million savings for your portion of the Tilray deal. Roll all that together, you get to around CAD 140 million. I'm trying to get a sense of ultimately how much of that falls into COGS versus SG&A. Yeah, thanks for the question, John. Kirk, can I turn that one over to you? Yeah. Hi, John. You're right. It is a complicated set of numbers, and we have been trying to isolate those numbers ourselves. Just in the last few weeks, we've set up a special team in a Value Creation Office to be tracking all of those initiatives separately. I anticipate that, as we get better at tracking those things, we'll be able to offer specific details. You know, you touched on the CAD 35 million from SG&A. That's pretty well isolated in the SG&A. But the balance of it is gonna be a combination of both COGS and SG&A, and we'll be sharpening that up and sharing it with you in the future. Okay. Understood. Just a clarifying question on that. Was there any progress made on the CAD 37.5 million in targeted FY 2022 savings in FQ 2, or is that all targeted for FQ 3 and FQ4? Yeah. We did do a significant headcount reduction in February, which will certainly show up in Q3. There were some ongoing cost reductions in Q2, but I think the bulk of the CAD 37.5 million we're gonna capture in fiscal 2022 is gonna be in the second half of the year. Okay. Got it. On the revenue side, you did endure some significant organic declines and you referenced some meaningful missed opportunities, but can you add more color on some of the other initiatives you have to retake share? It does seem like some of your competitors have caught up to some of the products that HEXO does well in. I'm curious what you're working on innovation or what other initiatives you have to take back share. Yeah. Great question. Thanks for the question, John. Val, I'm gonna turn that one over to you. You bet. So once again, I just wanna reiterate that we remain the number one LP in the adult recreational market with 10.3% market share on a rolling three-month basis. We are again working hard to launch plans to allow us to grow organically, and there's tremendous opportunities with our breadth of assets that we have in the fastest-growing categories overall. Over the course of last quarter, we very much focused on mix and driving sustainable growth for our shareholders on a day in and day out basis, and we've been building our product pipeline and innovation pipeline as it relates to Canadian consumers, referencing once again the national U&A study that we conducted which allowed us to identify unique use cases and consumption habits of Canadian consumers. You will start to see the effects of this work hit the market, in early spring, of this year, when you start to see some of those products hitting the market. One that I'm most excited about that I wanna make sure that I highlight is the launch of our Readies Plus, which is an infused pre-roll, Redecan style, so the straight edge style, that we'll launch into the marketplace with higher THC. Again, capitalizing on the overall market moment and the, key indicators from consumers in terms of their needs for potency. We've leveraged this information and again, the really, really strong, Redecan brand to deliver this to Canadian consumers, and you can look forward to seeing that hitting shelves, like I said, in early spring. More to come in this front as we're rolling out our innovation pipeline over the next 12-24 months, but this is what you can expect from HEXO on a go-forward basis. Insightful innovation that are meeting the needs of Canadian consumers. Yeah. Val, I'd add, you know, the Readies Plus, very excited about that as well, and it took a lot of technical know-how to bring that to market. It's launched at a premium price, and as you say, that's what can be expected as we continue to leverage those consumer insights, and our capability to bring unique and compelling products to market. Okay. I appreciate the color. Thank you very much. Your next question comes from the line of Frederico Gomes from ATB Capital Markets. Your line is open. Hi, good morning and thanks for taking my question. Maybe could you give more color on the issues you're seeing with Redecan? You know, I know you mentioned competition, the pre-roll market specifically in Ontario. Just curious on what you're seeing in other provinces, as well as, you know, other product categories in terms of competition and potentially pricing pressure. Thank you. Thanks, Frederico. Valerie, over to you. Yeah, sure. I would suggest that we have a unique opportunity as it relates to our breadth of brands including Redecan. Our unique position to leverage our value continuum allows us to address price points and specific needs of consumers across the spectrum of cannabis needs, and allows us to balance both our overall volume and our profitability for our business overall. For sure, there's a lot of competition as it relates to the pre-roll category. Again, we are in a good position from our productive capabilities, our strong brand positions as it relates to Redecan and the deep innovation pipeline that we're building. We're feeling very confident in our position as it relates to the market across all categories and all markets. Scott, is there anything else you'd like to add there? Nope. Great answer. Thanks, Val. Okay, thank you. Just on your capital position right now, you still have, you know, some months until the deal with Tilray closes. I know that you have some assets for sale on the balance sheet. How are you seeing that? You know, will you need to raise any more capital, or do you rely on those asset sales? How comfortable are you with your cash position right now? Kurt, do you want to speak to that? Yeah, sure. Frederico, hi. The cash position is something that we track very closely. We do a rolling receipts and disbursements forecast going out 13 weeks and then out to 26 weeks as well. We manage that cash position pretty carefully. We do have asset sales coming up and that cash we anticipate will be going into the restricted cash. Nevertheless, you know, we believe that we've got adequate liquidity to get through to the conclusion of the Tilray deal in the middle of May. Thank you. That's helpful. I'll hand back to you. Thank you. Your next question comes from the line of Sahil Singla from RBC Capital Markets. Your line is open. Hi. Hi. Good morning. Good morning. I just wanted to get back on the Redecan revenues. You noted in the MD&A that there was a 29% quarter-on-quarter decline on a prorated basis, and it was due to logistical issues and competition. Could you please split the proportion from both of these? Finally, I wanted to confirm that the logistical issues are now resolved. Thank you. Thanks for the question. Valerie? Yeah. As it relates to Redecan, in the last quarter, there were a number of administrative and logistics issues that were unique events that we encountered within the quarter, and it was around amalgamation and relisting with provinces. In addition to that, we shifted our overall hero product of the Redees from 0.35 grams to 0.4, which enabled us to actually sell through all of the inventory before restocking in the marketplace overall. There were some integration challenges that we had to overcome over the time period of the second quarter. However, demand remained strong, and we're seeing that rebound now. Okay, thank you. That's it. There are no further questions at this time. Mr. Scott Cooper, I turn the call back over to you for some closing comments. Thank you, everyone. Thank you, everyone once again for joining us this morning. I am pleased that we can now, as a result of our recently announced proposed strategic partnership with Tilray, continue to position ourselves to retain and grow our significant market share and will become a cash flow positive business for the next four quarters. I have full confidence in The Path Forward, and again, appreciate everyone joining us this morning. Thank you. This concludes today's conference call. Thank you for your participation. You may now disconnect.