Good morning and welcome to IM Cannabis' Fourth Quarter and Full Year 2024 Earnings Conference Call. Today's conference call is being recorded. At this time, I would like to turn the conference over to Anna Taranko, Director of Investor and Public Relations. Anna?

Good morning, and thank you, operator. Joining me for today's call are IM Cannabis Chief Executive Officer, Oren Shuster; and Chief Financial Officer, Uri Birenberg. The earnings and press release that accompanies this call is available on the Investor Relations section of our website at investors.imcannabis.com. Today's call will include estimates and other forward-looking information and statements including statements concerning future results of operations, economic conditions and anticipated courses of action and are based on assumptions, expectations, estimates and projections as the date hereof. This information may involve known and unknown risks, uncertainties and other factors that may cause actual results to differ materially from those expressed or implied by such statements. Factors that could cause or contribute to such differences are described in detail in the company's most recent filings available on SEDAR+ at www.sedarplus.ca and EDGAR at www.sec.gov. Furthermore, certain non-IFRS measures will be referred to during this call. The term non-IFRS adjusted EBITDA loss or non-IFRS adjusted EBITDA will hereafter be referred to as adjusted EBITDA loss or adjusted EBITDA as applicable. Any estimates or forward-looking information or statements provided are accurate only as of the date of this call and the company undertakes no obligation to publicly update any forward-looking information or statements or supply new information regarding the circumstances after the date of this call. Please also note that all references on this call reflect currency in Canadian dollars, unless otherwise stated. With that, it's my pleasure to turn the call over to Oren Shuster, CEO of IM Cannabis. Oren, please go ahead.

Thank you, Anna. Good morning, everyone, and thank you for joining us today. As a medical cannabis company based in Germany and in Israel, the April 2024 partial legalization in Germany was a game changer. Since then, the German market and our sales in Germany have experienced extraordinary growth at a tremendous velocity. But my personal 2024 highlights were the continuous improvements we made both strategically and operationally, building a solid, lean basis from which to drive sustainable growth in 2025. In 2024, we started to shift our focus from the transition years in 2022 and 2023 towards delivery. At the same time, we continued fine-tuning to maintain our efficiency and agility. This is an ongoing process. It is especially important in the dynamic cannabis market to ensure that we keep our competitive edge. As a company, we had two areas of focus in 2024. One, full integration and active cost management to drive efficiencies; and two, building a strong, payment supply chain to support growth in 2025. On an operational level, we continued to lean into active cost management and full integration to drive efficiencies. We reduced our overall operating expenses by $4 million or 17% to a total of $18.7 million in 2024. This decreases builds on the 43% decrease we had in 2023, where we spent a total of $22.6 million, coming from $40 million in 2022. Overall, we have managed to reduce our operating expenses by 53% since 2022. The reduction in the operating expenses is most impactful in Q4 of 2024, where we are starting to see initial impact of the savings we initiated during this year. We fully integrated our marketing and supply teams with the goal of building the operational infrastructure and stable supply chain we need to drive growth in Germany in…

[indiscernible] one of this quarter's milestones that Oren already mentioned. The adjusted EBITDA in Q4 2024 resulted in a profit of $0.5 million compared to an EBITDA loss of $4.3 million in Q4 2023, which is an improvement of almost $5 million. Our Q4 results were mainly impacted by the following points. Our revenue in Q4 increased by 25% versus Q4 2023. This growth was driven mainly by an increase of 280% in the German revenue. We continued with our expense reduction process, which resulted in a decrease in operating expenses of approximately 42% versus Q4 2023. I will now take you through the overview of the Q4 2024 and 2024 full year financial results for the company's operations. Revenues for 2024 and 2023 were $54 million and $48.8 million, respectively, representing an increase of $5.2 million or 11%. The increase is mainly attributed to the accelerated growth in Germany with an increase in revenue of $10 million and decreased revenue in Israel of $4.8 million net. The decrease in Israel is attributed to the Oranim deal cancellation, which resulted in a decrease in revenue of approximately $8.5 million compared to 2023. Excluding the Oranim revenue in 2023, we have an increase of revenue in Israel as well of approximately $3.7 million or 12%. Revenue for the three months ended December 31st, 2024 and 2023 were $13.3 million and $10.7 million, respectively, representing an increase of $2.6 million or 25%. The increase is mainly attributed to the accelerated growth in Germany with an increase in revenue of $3.7 million and decreased revenue in Israel of $1.1 million net. The decrease in Israel is attributed to the Oranim deal cancellation, which resulted in decrease in revenue of $3.4 million compared to 2023. Excluding the Oranim revenue in Q4 2023, we had…

Thank you, Uri. To sum up 2024, while I'm very proud of the growth IMC delivered in Germany, I'm delighted with the progress we made internally, both strategically and operationally. In Q4, with our positive adjusted EBITDA, we are starting to see the initial impact of the savings we initiated during 2024 through our active cost management and full integration. This gives us a very strong foundation leading into 2025, where we already see that Q1 is shaping up to be the best quarter in sales we have had to date in Germany. I will now hand the call over to the operator to begin our question-and-answer session. Operator?

Thank you. [Operator Instructions] Aaron Grey, please go ahead.

Hi. Thank you very much for the questions today. So first question for me, just wanted to touch on Germany. So great to hear that 1Q is off to a great start. So just if we just touch back on 4Q and again this is specifically on Germany. It does look like it was a little bit softer. Obviously, you've had tremendous growth in 2Q and 3Q for Germany. It looks like some of that growth stopped still hit about $5 million from what I'm seeing here. But can you talk about were there dynamics specifically in the quarter that slowed some of that growth that seems to have come back in 1Q or just some of the dynamics that's going on within the German market there that might have led to some -- you're seeing.

Okay. Thank you for the question, Aaron. So like you said we started with a very strong growth in Q2 and Q3. In Q4, we had some delays. And but we -- I think that I said that it was just a delay and Q1 looks very good. And it's not something that is part of the ongoing. I think that it's part of building the supply chain. It's a long process. And I think that the target was to be very stable with the supply in '25. And we are going into '25 with a much stronger supply chain. And I believe that we will see it also in the quantities in '25.

Okay. Thanks. And then can you comment on any changes you're seeing in the competitive dynamic for Germany? Obviously, there's a lot of operators internationally that are putting a lot of focus on the German market. So changing competition, whether it be pricing or otherwise that you're starting to see?

The German market is very dynamic. I think that what we see is that the market is changing from week to week. There is definitely a competition in the market. It's still -- we see more or less the same leading competitors. And so this is what we feel right now. The German market value products are very successful in the German market and it's very clear. So I don't foresee a very big change. The market will be competitive. It's part of our plans. I believe that there will be a price compression, there is a price compression. And it's part of what we took in our plan from the beginning.

Okay. I appreciate that color. And then just kind of piggyback off of that, with the price compression, how should we think about the margin profile? So we still had 20% gross margin for the quarter, EBITDA positive there. So how should we think about the margin progression for the year as we think about potential growth, but also some pricing pressure?

So it's very difficult to know how the market will develop because also there have been some political changes in Germany. But I think that we don't think that we will go down with the margins in our estimates. We even think that it might be better than it is now.

If I may add you cannot take year '24 as a reference for future expectations regarding gross margin simply because of the onetime event related to inventory over the year. So we cleaned all our old inventory and we are set for new inventory to sell and there is a big demand in Germany also in Israel. So I'm expecting it to be better than what you see in 2024 for sure. To say exactly how much, it's a little bit complicated, but 20% that you mentioned is not the levels that we expect.

It's Uri Birenberg, the CFO.

Okay. That's helpful. Last question for me just on Israel. It seems to have stabilized a bit there. I had seen a little bit of softness. So are you feeling comfortable with that market now? I know there's been a lot of shakeout between competitors fewer products coming from Canadian LP. So just commenting quickly on the broader Israeli market and how you're expecting for that to evolve in 2025.

So as of now, we don't foresee any significant growth in the Israeli market. So we think that it will be more or less stable unless we will see some regulations change and the focus on growth for us is mainly in Germany.

Okay. All right. Thanks very much. I'll jump back into the queue.

Okay. Thank you. Thank you very much, Aaron.

Thank you. [Operator Instructions] Are there any further questions?

Okay. Thank you, operator, and thank you all for joining on our call today.