Q2 2020 Earnings Call
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As a reminder, this call is being recorded I.
I'd now like introduce your host for today's conference call Mr., Joel Thomas Chief Financial Officer, Sir you may begin.
Thank you Chelsea.
With me this evening Pieter Sikkel <unk>, President Chief Executive Officer in Germany, The board of Directors, Michael Shannon Vice President Treasurer.
We begin discussing our financial results I would like to cover a few points.
Your major statements during the course of this call that express a belief expectation retention levels. Those that are not historical fact these statements are forward looking involve a number of risks and uncertainties that may cause actual events or results to differ materially from these forward looking statements. These risks and uncertainties are referenced the shape.
Overstatement included in our partially.
Described in more detail along with other risks and uncertainties and that's why we should be FCC, including our most recent Form 10-K , we do not undertake to update any forward looking statements made on this conference call to reflect any change in management's expectations or any change in assumptions or circumstances in which these statements are based.
Included in our call today, maybe discussion of non-GAAP financial measure much including earnings before interest taxes, depreciation and amortization, commonly referred to as EBITDA and adjusted EBITDA, but are not measures of results of operations under generally accepted accounting principles in the United States and should not be consider.
As an alternative to U.S. GAAP measurements that table, including a reconciliation of no. Other disclosures regarding these non-GAAP financial measures is included with our earnings release issued today, which is available on our website at Www Dot pictures Dot com.
The replay rebroadcast transcript or other reproduction of this conference call doesn't replace why did it should international has not been authorized and is strictly prohibited investors should be aware that any unauthorized reproduction of this conference call may not be an accurate reflection of its cons Dutch I'll hand, the polar Pieter Sikkel or she go president and.
Turning to the board I guess.
Good evening, everyone and thank you for joining us this past quarter on team at Pyxis continued to focus on the execution of our strategy and driving performance across all segments of our business.
In order to develop a platform from which we can continue to grow through the second half of the yeah.
Reflecting on the first two fiscal quarters, we're proud of the progress we've made I look forward to further demonstrating our commitment to driving disciplined growth and strong results to improve our balance sheet and the remainder of physical 2020 and beyond.
We expect to see growth areas, which we will discuss shortly to.
Ramp up significantly with positive adjusted EBITDA on a run rate basis by the end of June 2020.
We're also continuing to evaluate the consolidation of pyxis ownership and its two majority owned Canadian kind of its businesses with its minority owned U.S. him next generation flavor businesses.
Looking at second quarter performance leaf business performed in line with expectations, we experienced strong body EMS solid orders across geographies, including China.
And improving margins.
Pointing to the successful implementation of our team strategic initiatives.
We remain focused on maintaining low levels of uncommitted inventory and driving T.F., it's aligned with our working capital strategy.
The markets such as the U.S. continue to present challenges for instance, the ongoing impacts of trade <unk> pensions with China.
However, we are encouraged by strong performance in other markets and look forward to continuing to pursue growth in those areas.
You under lease business.
We're executing our strategy to position on new business ventures for aggressive growth and expansion.
Oh wholly owned in direct Canadian cannabis subsidiary ticketing is setting the standard for success as it makes parent progress against it strategy to increase capacity and expand its presence across Canada.
Consistent with that timeline to build two or 332000 square foot facility in prison said would island.
November the six figure out east received approval from health, Canada to operate an additional 210000 square feet with approximately 46000 square feet for processing and other activities and 164000 square feet well growing.
Bringing the parent total license square footage in Prince Edward Island to approximately 234000 square feet.
We've been preparing for receipt of this license Amendment bike center racing on tissue culture program and upon receipt of the approval from Health, Canada. We began today operating in the news square footage.
New run rate at the facility is expected to be up to 28000 kilograms per year.
We are nearing completion of construction on the remaining section of the Prince Edward Island expansion, which includes an additional 10000 square feet.
Processing, another space and the 88000 square feet of growing space.
Licensing process for the final phase of the expansion will begin soon and once the full square footage comes online we expected production capacity to be up to approximately 43000 kilograms per year.
This additional capacity complements the work currently underway to ensure we are executing against it gets growth strategy.
Hey, good maintains a strong presence in 100% of stores throughout Prince Edward Island, Nova Scotia, New Brunswick, given the expansion plans underway in Prince Edward Island, we expect sales to et cetera, right into the fourth fiscal quarter as we continue to drive market share and deliver new innovative products.
One example of this work was our expansion into new high a T.H.C. strains in Norfolk last month to meet the growing demand for those products.
In line with the kind of is two point a Canadian market.
<unk> is on track to launch T.S.C.T.H.C. vaping products in December subject to regulatory approvals.
Other exciting news from figure includes launch about 10 to an old man said reality at supported by a century capabilities.
Hey, guys also announced that its hemp cultivated program is underway, it's just drawing on the expertise or criticality LLC, our unconsolidated industrial <unk> joint venture.
Speaking of which our industrial business continues to see solid performance from criticality and has a number of exciting new products expected to roll out in the second half the fiscal <unk> fiscal year to further bolster growth.
This past quarter critic can see successfully launched roll on ligaments available for sale under the current companies corn and parents select CPG brands.
Kinda T has developed a device diverse product offering with products across multiple categories, including oil drops April Bulls, and Topicals and it's been adding for future launch.
Well the elections tossed acting oral powders and moisture ceilings.
In terms of him supply.
Crops are coming in strong we anticipate a significant increase in the supply of him for the production of CBD.
Since they haven't buying season kicks off in September we have set expectations to purchase over 450000 kilograms of high CBD and.
Which is expected to yield 30000 kilograms of CBD before my lights isn't sold in multiple product lines.
We're also continuing to scale our extraction capabilities to ensure we have to capacity to adequately process a supply as it grows.
Regarding E liquids evolving regulatory environment and recent reported health concerns from illicit products are impacting the market and associated volumes.
The segment currently represents a small part of our revenue and profitability. We continue to monitor these developments closely.
Leave that continues to be significant long term opportunity in this space.
Repairing them into the market five years ago, we built the from production facility to ensure it would exceed standards that wouldn't be established by regulations.
Not yet then in place.
The uncertain regulatory environment continues and our approach remains the same across all of our E. Liquid brand. We will continue to employ exact thing production and quality standards that we believe clearly differentiated products in the marketplace.
For example, we test all of our Purilum based illiquid Smith, both internal and third parties. So that we know what is and more importantly, what is not in our products before they reach consumers.
We believe it clear regulatory framework. It requires these types of standards is essential to creates in consumer confidence in the market.
And Tim had a strong quarter experiencing record sales and continued margin improvement.
In line with that strategy to provide a diverse product offering humble about 10 are working to launch a number of pure limb predict predicate product SK use that add to that array of tobacco flavored products.
The regulatory landscape continues to evolve evolve we remain confident and the opportunity presented by E liquids.
We believe that we are well positioned to expand our share in markets, where the salary illiquid products is legal for adult consumers based on product quality and rigorous testing policies and the benefits of our international presence provides as well as the elasticity about brands to move into new segments.
For example, humble juice Coke and other affiliates I currently working to develop new CBD lines, we anticipate will begin to roll out the market by the fourth fiscal quarter.
All of that being said a vision remains the same we are committed to our role as a global agricultural company and using that role to transform the lives of people around the world.
Our efforts to enter the value added agricultural products are progressing inline with expectations.
They're making strides in both Tanzania, and Malawi as well as other areas to establish operations that will ultimately support expansion into new crops.
On November six we received a certificate from the Tanzania, <unk> Bureau standards certifying that up Pyxis Agriculture Hansen and subsidiary is in compliance with national quality and safety manufacturing standards.
Our strategy, we expect to begin commercial sunflower oil production in late calendar 2009 pain.
We highly value our strong pharma relationships and look forward to further assisting them in achieving economic success through income diversification.
Based on the current outlook, we are maintaining a previously provided full fiscal year 2020 adjusted EBITDA guidance range and modifying our revenue guidance range to 1.75 billion.
To 1.85 billion U.S. dollar.
Included in our guidance is 9.3 million of adjusted EBIT da maybe adversely impacted by trade issues related to continuing a new tyres across a number of jurisdictions may not be favorably resolved.
We're pleased to shed the complaint filed against Pyxis uncertain about its offices in the United States District Court for the Eastern District of North Carolina on June the seventh 2019 voluntarily dismissed without prejudice on October 31st 2019.
We are proud of the progress we have made up in Pos to quotas and are excited about the many new growth opportunities on the horizon in the coming months, we expect to provide additional data points on the progress of our growth initiatives.
We look forward to sharing details about not only new products and partnerships that also sales growth data.
Clearly reflects the value potential of our organization.
We believe the complementary capabilities and figure east figure, Norfolk, Criticality and Purilum.
Combined with us entry platform position us for success across the cannabinoid value chain from C to consumer.
As well as pull trace ability and consumer transparency.
The second half this fiscal year, we will continue to aggressively push for growth for our shareholders employees contracted form S and the communities in which we operate with that I'll like to hand back to Joe tell myself, yes.
Thank you Peter and now [noise] results from the quarter sales and other operating revenues increased 3% $383 million for the three months ended September Thirtyth 2019, when compared to the same period last year.
Decrease was primarily due to an 11.2% decrease in average sales prices related to the leaf other regions segment product mix in Asia, and South America, having a higher concentration of byproducts. This decrease was partially offset by the continued sales growth in the other products and services segment and a 7.7%.
Increase and the least other regions segment volumes, primarily in South America.
Or the timing of shipments, partially offset by lower volumes in the least north American segment forgettable cheap hurricane warrants, reducing the prior year U.S. crop size import tariffs on U.S. tobacco.
Cost of goods sold decreased 6.6% $322.8 million for the pretty much set at September Thirtyth 2019, well compared to the same period last fiscal year.
This decrease was mainly due to favorable foreign currency exchange rate fluctuations in the leaf other regions segment, resulting in lower lease raw material prices in Africa, and South America and a decrease in the least North American segment sales and other operating revenues. These decreases were partially offset by the continued sales growth.
The other products and services segment.
Gross profit as a percentage of sales increased to 15.7% for the three months ended September Thirtyth 2019 from <unk> percent for last year same quarter.
The increase was attributable to favorable foreign currency exchange rate fluctuations in the leaf other regions segment, resulting in lower lease raw material prices in conversion Pos in African South America as well as the continued growth of the other products and services segment.
The increase was partially offset higher leaf north American conversion costs from the impact of Hurricane Florence on the part of your U.S. crop.
Selling general and administrative expense SGN, a increased eight point threemillion $47.3 million for the three months ended September Thirtyth 2019, when compared to the same period last year.
Yes, you name as a percentage of sales increased 12.3% for the three months ended September Thirtyth 2019 from 9.9% last year.
These increases were related to branding marketing and advertising expense for the figure cannabinoid and humbled Juicy liquid branch and cost incurred in connection with the evaluation of a partial monetization of the company's investment in certain businesses included in the other products and services segment.
These increases were partially offset by restructuring initiatives enacted in the leap segments in the prior year.
Income tax expense decreased $32.1 million, the 22.7 million for the three months ended September Thirtyth 2019, when compared to the same period last year.
This decrease was primarily due to the change in the effective tax rate year over year.
And the occurrence of certain discrete items this year.
The three months ended September Thirtyth 2019, the company reported a net loss was $16.5 million or dollar and 81 cents per basic share compared to net loss of 54.6 million or $6. Unfortunately per basic share for the same quarter last year.
The decrease in net loss, primarily due to a $32.1 million decrease in <unk> income tax expense and a 3.2% increase in gross margin.
The company's liquidity requirements are affected by various factors, including crop seasonality foreign currency and interest rates green tobacco prices customer Mitch crop size and quality branding marketing and advertising expense to support the other products and services segment increased legal and professional costs associated with developing a partial mont.
Disposition plans and the extent of pardon me a facility expansions as of September 32019, the company's available credit watch and cash totaled $476.9 million. The company will continue to monitor and it just funding sources as needed to enhance and drive various business opportunities that maintain flood.
Disability and meet cost expectations I want to take a moment to reiterate Peter sediments dark team is looking for continued growth in the second half the fiscal year and continue to drive value an opportunity across the business now I'd like to turn the call back over to computer for some closing remarks.
Thank you for that update Joe we're pleased to share this update on the business with all of you today and look forward to continued growth and opportunity in the second half the.
Well that night operator, please open the lines for questions.
Yes, Sir.
If you would like to ask a question. Please.
Pressing star one on your telephone keypad.
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Our first question I'm married Gilbert with Imperial capital.
Yes, good evening.
Hi.
Gradually and on the Health Canada license.
Sansone that very good news.
With regard to figure east and the 28000 kilograms of run rate, if we work with them $5 per Gram that equates to about 140 million of run rate revenues is that sort of the way we should think about it.
And equally with criticality in 30000 kilograms, using lets say 3000.
Let's see price to retail at 3000 per kilogram that would equate to 90 million in in revenues again. These are all lower pricing. So it doesn't seem like they're crazy numbers, but I wondered if we're thinking about it correctly and what would be the barriers to be able to achieve that metric along with.
It seems like the either deviate from that those two segments alone could total 60 million and I, just you know or more.
Yeah, and Mary is as we've as we pointed out you'll you'll start to see the impact of these new businesses in a bigger way as we get into our fourth fiscal quarter and as you know we start to see some of the sell through of related to the expansion the bigger crops in the various elements that you just to see.
Right.
You know as as to where selling prices are two two retail you know there there. It just depends on you know the product it depends on a lot of different factors. So I don't know that I'd want to throw it in average price out there, but the pricing you know you've used or you know would would tend to be you know probably.
You are pretty conservative price based off of where the market is today I think the comment that I would make with regards to your observation on the the the CBD prices is that that would be sort of you know a bulk oh CBD price, probably I'm at a higher volume levels.
Based on where the market is today, you're at much higher all in values when you get into the consumer product. So there will clearly be you know mix for us.
As we continue to gear up or consumer products as well as a sell some and bought and we've not really provided a lot of delineation between you know what will be bookshelves versus consumer sales other than to say that the consumer based retail sales were working to your those up and you'll see a lot more from US as you know we go across the back half of the.
Sure.
Okay, and then maybe so yeah. It sounds like these metrics are conservative because again you know as you pointed out it's more on bulk and not really related to the value added products that you're launching.
So I wanted to find out a couple of things. One is you you know Canada 2.0, you announced that he would be launching vaping product. So I wondered if.
It's going to be kind of a roll out where we'll see they think its first and then you said you have to seek approval I wondered if there was like a for you know some sort of timing delay before we see that hit the market and then we got another product because aren't there are opportunities also for edibles and.
And beverages and would you be it be participating in that thank you.
Yeah. So Mary I think the first point that I would make there is that related to the inhalable a teaching hospitals in the in the Canadian market or team up there has developed a really good set of products and the all said when those products will come to market Didnt.
In mid December so everything is in place to be able to roll those those products out and.
We just always put the coal fired there related to you know rules and regs. So we're in a very good position there.
We do have additional products behind that we'll be talking more about those as as you know we get ready to bring those to market. We think that the product offerings that there were coming with on the favorable side for T.H.C. really provides a great opportunity for retailers do you have probably what are the highest margin products in.
Their facility on a per square inch basis and show a we we have had a a really good reaction from from retailers and I work. We're excited about these opportunities again, we'll talk more about the product innovation pipeline and whats next a when appropriate.
Okay, and then just lastly, the and I'll I'll move on but as we think about you know the partial monetization process. How should we think about timing and how should we think about timing in in terms of these additional metrics coming out and how does we you know looking out the other segment.
Which of course does not include the minority investments in there just like we saw in the first quarter. This sequential on revenues are you know sort of flat out we sort of we saw the same thing in Q2, two as well and does that have to deal with you know building inventories in anticipation of roll out and.
Is that where we start to see the momentum beginning in the fourth quarter. Thank you, yes, I mean, yeah.
Yeah. When you when you look at the other products and services segment, we've had pretty substantial growth no. One on a percentage basis remember that these are all startup businesses that were starting especially from zero in to your point you know there are a number of the investee businesses that are not included you know in those results rather there's a.
Separate disclosure and those that we have a world where we outline those and you can see the contribute contribution those.
In our in our equity pickup line up but what I would say is is that no as we get into the back half of the sure and in particular are the fourth quarter, you'll start to see hopefully a a pretty significant ramp oh, well you know related to.
You know to just as a new businesses in the way that it will impact our disclosure on the other products and services Oh segment.
But you know is as we as you know as we look at what we've done. So far you know this year were up about 140% year over year, you know a in that other products and services. So what we should continue to see a nice growth there and again its you know from a starting point of user startup businesses.
[noise]. Thank you.
[laughter].
Thank you. Our next question comes from Bryan Hunt with Wells Fargo Securities.
[noise], Peter and Joel Thanks for your time My first question as you know you all <unk> guidance down for revenue by about $100 million <unk> point as well as pushed all profitability.
They shouldn't and the other business by a quarter and I was wondering if you could address.
Both of those factors what are the drivers behind again, reducing sales on the as well, especially profitability.
Yeah. So a couple of things on that Brian Yeah, I think the first point that I would make is that we're really excited to get our license or yesterday the extension on to the the or additional square footage that you know we have come online and it is generally inline with what we laid out I'm probably over a year ago and so when you think about.
But the multitude of.
Various factors that they need to be considered when you you know look out that far related to a you know a regulatory approval. We did pretty good to identify the end of October you know beginning of November based on where we are right. Now we believed that we will start to see revenue and profitability coming in.
From I'm not only you know the expansion of figure east, but also from our Hep C. B D business and it's just a question of how much of that we will be able to fit into.
You know, our fourth quarter and but at any rate you know what we should start to she is a building of of of the results or related to all of the nexgen businesses and I think there's definitely a little bit that we're looking out related to that there is also I think.
On the tobacco side <unk>, some some some potential movement as well and in timing movement, but you know the good news related everything that we've looked at is that you know it's allowed us to hold our EBITDA range and and you know the good news is that everything on the news on the new businesses is progressing generally in line with the time friendship.
No we've laid out a lot of you know what would be occurring is sort of in that last month of the fourth fiscal quarter and so we thought it was prudent just to say look were generally in line with timing, but Oh you know, we maybe you know three four weeks a little you know behind where we wanted to be but getting pretty good when you think about what we established over it.
You're going to find me if I can just add to that maybe on leaf and and really incenting revenue. I mean, we were very pleased to see the improvement in profitability in the quarter, both in percentage terms and the in dollar terms.
I think alone and that is reflected to a lower costs in the business and lower leaf costs part of that does get passed on to the customers and obviously affects the revenue line, but at the same time, we're focused on profitability, but we're focused on controlling I've managed shape. We're focused on working capital and I think in general or this is a a positive for the business.
As we move forward that to the rest of the.
[noise] lots of different lots of good news in the press release, but wanted to address those two factors, but when I when I looked at the the new license for the expansion. You know you you. All said you started operating enough. The expansion today when do you get your first harvest off a of the Ics offer this uh huh.
And as square footage.
So the team is working aggressively right now to no get the the new square footage populated that's that's probably first and foremost and you have to do it in a way so that as it starts to come to harvest. Its in line with all your harvested capacity and ability. So that you can utilize your team.
As appropriately and not you know create bottlenecks for yourself. So we're going to be ramping up very very quickly across you know the next a 90 days and I will start to have no crop harvest thing is we get into our fourth fiscal quarter and you know won't be pushing aggressively to get that into you know the.
Boxes, and tens and jars and various things we need to you'll get a packaged into so that we can start she sells at the end of our fourth quarter. So we're moving very aggressively at the same time, you know we want to be thoughtful around how we do it and make sure we get it right.
Right I have like 20 questions, but I'm only going ask two more.
When I when I look at.
You all mentioned in the press release and in your script.
Yeah, you continue to get have success across P.I., Nova Scotia, New Brunswick, you've been quoting market share.
Positions as well as percentages in the last several conference call a yet you didn't call them out this quarter could you can you discuss where you stand and P.B. I never Scotia, New Brunswick.
Yeah, there really has not been a much change there weve you know generally done in sort of a number two never through a number four position depending on the weak and depending on on the product line and so you know we continue to be in that position. We're now getting ready to you know push across the rest of Canada, and so lot of focus on that.
Our sales teams that are dedicated to the marathon, obviously looking for additional opportunities and we're seeing those especially in the again. It was 2.0. So we'll see what happens when that occurs but we're hoping you know and planning for or you know what what should be a very good market position related to those new products coming you know coming online.
And then at the same time starting to expand into some some some some pretty big provinces. So lot of good things coming up.
All right and then my last question.
Kind of touched on it when I look at your cannabis 2.0 product portfolio. You know they are your baked product, which is sleek and and I would say attractive.
How do we know when that product gets approved you know the light emitting prime and find its yes right. It's a it's.
It's approved in moving forward. So we just we provide you know regulatory call outs that you know we always want to make sure that you know were in compliance with all regular <unk> <unk>, you know requirements and those can be modified changed whatever the case may be so that we just make a call it on that.
And so you all will be selling into the market and the month of December that new product correct.
That's when the product will be being sold to by retail so everything's happening right now.
Okay, I will hand, it off to somebody else. Thanks for your time.
Thank you. Our next question will come from Hale Holden with Barclays capital.
Hi, This is actually had broker on for a hail a quick question kind of bouncing off of that.
They TV been that kinda canvas 2.0, I was wondering if you hey, I guess if there if you perceive you know distribution disruptions or you know supply chain issues with that I know, there's some previously I and the launch the original like regulation or rig.
Canvas and that Canada.
Yes, so wrecked cannabis and in Canada, you know was Oh launched a October 17th of last year and on October 17th of this year. There was a 60 day window that was placed on I cant. It was 2.0 that brings it to the middle of the summer and or you know I think we're moving full steam ahead.
To a two to be on the market and [noise] and therefore are for the retailers as a as they wants to point out so everything's moving the planning and finding is a as laid out by health Canada.
And then for guidance you know, there's little revenue guidance, and then seeming to die or I guess for your friends even EBITDA.
What kind of gives you confidence that you're going to be able to hit that due to the next two quarters and then.
What I guess is hitting or what's the expectation.
For I guess, the better EBITDA margins there.
Well I think you know we have a plan that that you know we put together before we started the year and we've been executing on that plan. The plan is or you know largely playing out as we anticipated. There you know obviously some puts and takes that we're getting into you know the the big shipping quarter.
Now the the third and fourth quarters and you know, it's there's always a lot of moving pieces as we get into that but we've got a good you're going there's good demand for our products. If you recall last year, we were able to grow our volumes you know if you looked at where we had been across the prior you know for years, we've kinda bid.
Short of either you know slightly below 380 million kilos to slightly above.
Last year, you know, we moved up to over 400 million kilos, a full service volume, we're tracking very nicely. This year or you know based on our plan and show you know, we we look to try to you know to execute on that to you know be you know very close to that 400, Woodward slightly above or below its hard to say at this point, but you know again.
You know a nice incremental growth last fiscal year, and we're pushing hard to try to do that again this year. So.
Thanks, and last one for me, if you're expanding and to the rest of Canada, which I think is should be a pretty big opportunity.
I can you kind of as I described your go to market strategy, there and where you're targeting I and maybe you have to Joe's share gains that you will try to get a and there's been a specific markets.
Well, we've got a very I think sound strategy, we have a good better best strategy. We really are focused on the premium segment, we've had great adoption by the consumer in the markets that we've watched in so far or Brad you know figure and what the team has developed in in the market again has been very well.
Received and as as we look out you expansion into you know the <unk>. The other parts of Canada. There's you know a really good game plan that our branding marketing and sales team has put together and no. There are limitations as to what you can do into Canada space, but you know we I think is.
Pretty good job of identifying up opportunities and you know if you look at work teams put together with our but tender out on if you look at the way that they've been flexing you know ours are century technology and the transparency is that gets to the consumer related to you know a product that they're consuming they can see you know the mother plant. One it was plant did what facility was planted in.
Are they can see the amount of T.H. easy math CBD. The third party testing results related to crop protection agents fertilizers, Oh pathogens. You know, it's really I think a interesting approach that we've developed and one that has resonated with the consumer and so we're going to continue to push really hard on these various tools that are.
And our you know in our in our in our game plan to a you know as we rollout across the rest of Canada and hopefully it really helps to differentiate us as consumers I think you know and the feedback that we're seeing on line and and you know in other formats has been really good related to our products and as we get into 2.0.
I think that will really help the even distinguish us further.
It's you know it's about you know producing really good liquids the taste good and that are paired with a really good device that that allow the consumer habits very well rounded you know experience every time. They use you know our products and so you bring that all together and that's I I think how our go to market strategy is a little bit different than some of it.
Players out there.
Great I'll pass on next.
Thank you. My next question comes from Stan then you can with independent credit research.
Oh good afternoon, thanks for taking my questions well I'm surprised that everyone has been so focused on the enemies business.
About asking the question something on the man stream business.
Which I thought was actually doing pretty well.
Hi, Jerry are quite.
Nice margins gross margins and the rest of the World and I was wondering was it related to the and in the meantime, its it was mainly related to be a little closed.
Cost per kilo.
Which will surprisingly low and so the question was.
Can you explain this it'd be a movie collaborate numbers.
Yeah, I mean, I I think I cannot I can talk about it sounds good to hear for me.
I think I mentioned earlier already that costs were down in the business. The both that down from the restructuring that we've undertaken over many years in creating efficiencies in our supply chain, there will sit down with a pricing to pharma as lot of that is currency related.
And and obviously that that so long as we can translate that a cross into a customer pricing that helps with them that margins than they a and the margin structure and looking out into the business. I think we also had a good quarter in terms of processing, we were a little bit up there in revenue as well, so where we've got.
He was going through a facilities again that helps.
With the with the with the cost structure as well so.
On an old for this year, where where we're obviously pleased with the way the leaf businesses is going particularly in the other global segment.
And Ah you know were excited about a you know other opportunities that we see that a that we'll continue to come up and hopefully we can execute on some of those as we go through the remainder of the yet and you will see a <unk> and you are a strong results from that segment.
And do you expect the cost, particularly domestic <unk> segment.
To be depressed because of the rest of the year.
I think it very much depends on where you're shipping from at the any particular time not every market is the same particularly in if you look at the second quarter. We had a we had a quite a significant mix change or in terms of my products, but also it's a big big a quota for South America to ship out.
And obviously, south American any particularly look at the Brazilian Raul and you look at the currency.
There you can see the effect that that has been to U.S. dollar translation as you move into other markets around the world you don't have that same a currency effect so that'll that'll.
That'll that'll change this year goes out.
Okay that sounds fair and then switching.
Two other products business.
For the last six months, you've generated an operating loss of 29 point to make them.
His reasons start up costs and do other things in your business I was wondering if you can tell me what was the cash cost associated with these operating loss.
For the last six months and possibly sort of I'm, just trying to really be cash flowing product.
Oh on discount or started to starting on a this you know sort of business line.
Yeah stand and what I, what I would use I would direct you to two things one we provide.
Summary of operating results through operating income so sales and then down to operating income and you can see or other products and services in there. So hopefully that helps to give a little bit of context. The other thing that I would use I'm also direct you to our press release and the build up from our GAAP net income or two.
To our adjusted EBITDA, but I think that you've got a lot of components, there, but you know our grid proxies for cash.
But just pool, just as a ballpark anything but this operating loss is a good proxy for cash loss for the six months period.
Yeah, I said I would say I would say generally do you know we're in the middle of building businesses right and you know the biggest challenge that that you've got when you're when you're doing startup businesses is that you've got to bring people then you've got to invest in the brands the marketing the advertising and that.
Happens you know before you have the sales dollars associated with those activities and so that is a lot of what you're seeing running through our S. You Naylon, how you know related to the new businesses and its pretty much as as we laid out and as we had called out and I think in line with what we were expecting so no surprises there.
And I I think it's no general along with our expectations.
No I actually meant under positive crime pacing up is because this is obviously, it's probably not.
Oh sort of expands and obviously parents got some.
Pretty negative effect on cash we'd be time, I'm, just trying to evaluate.
Okay. This corner I start up.
And yeah My estimate yeah, that's basically the reason why I'm asking all that's.
Alright, well anyway, good luck for.
The next quarter and thanks for taking my questions.
Yeah no problem.
Your next question will come from Bryan Hunt with Wells Fargo Securities.
[laughter], yes, I kinda falling on the line at what stands just said I mean your EBITDA on the on the Standalone lease business is over $190 million. Now you know can you talk about maybe some of the progress you've made in <unk> and the last 12 months to.
To drive EBITDA this level.
Yeah, I think it kind of goes back a lot of what you know Peter was highlighting a bit a minute ago and that is no. We have as over the last call. Four years spent time energy money to you know restructure and reposition a number of our operations.
On the World I think a lot of that has helped US I think also some of the increases that we've seen in certain markets related to volume has also been helpful. As we've been able to take market share and working to continue to focus and on on various opportunities. So you know you've got certain markets.
It's obviously I'm had been probably in related to stick counts, but there's still opportunities there as manufacturers. The supply those markets are looking to take cost out of their supply change rationalize the number of markets, there's sourcing our product out of and so we're obviously trying to focus them into markets you know, where we can continue to ticket.
Take advantage of economies of scale, and obviously share some of that you know with some and then at the same time, there are still markets with pockets of growth and being aligned with those you know is very important as well and looking for opportunity in those and I think there a couple other is probably to think about as well yeah. I I mean, I think I think Brian to do the other thing I I would focus you on week, we continue to.
<unk> expanding our value added services.
And they a in the least segment. So we've talked about that many times that space, we've seen our Jordan and U.S. operations continue to grow.
And we continue to expand those them, we do see the situation where manufacturers continue to look for ways to outsource certain parts of the supply chain.
And also I'd point, you to the add to the other announcement that came out this evening on value added agricultural product.
Whether tens and tens Nan voted standards, a approved or facility and Ed. If you think about the volume of other agricultural products that we putting through our existing agricultural and economic structure and you think the cost benefits that that gives across all the products.
So that that the agricultural outreach tractor is there is a involved with you could start see other efficiencies in terms of cost that would benefit the the lease side of the business as well so all in old I mean, it's a very integrated strategy across multiple products, but they are.
Together in different ways in terms of improving the profitability of each segment, a and finding opportunities to continue to grow.
And then just to two last questions on it at about the capital structure. One you all have been are active in buying back bonds last couple of years, you know given where the second liens were quoted a earlier today I think in a kind of 57 eight contacts.
It do you see that as an opportunity and then second you know if I go back to the last couple of press releases you. All said there would be a monetization in this fiscal year.
You know that and that would imply before March.
Has have have one can you get back in the market to buy bonds. This year and then a and then two has the timing on some type of monetization changed at all.
In terms of other potential before March period.
Yeah, so a as it relates to a the monetization work that we've been doing you know we continue to go down to a you know you a multi pronged or strategy and Oh, you know, we're continuing to work through the various pieces that we need to work through related to that and and so.
So you know that that plan you know is as we laid it out and Ah you know not really you know in a position to to talk probably anymore about it or timing at this point, but we you know our you know working aggressively related to you know to that opportunity.
I think it's the same time you know when we talk about repurchases of we obviously do fine current pricing are very attractive and so we're I'm definitely paying attention to you know what's going on a related to you know our various securities, including our second lien notes and.
We still have the same a philosophy and strategy in place to reduce long term debt you know as we go for it so nothings nothing's changed there.
Well I wish you the best of luck in a second conference call. Thank you.
Thank you Ryan.
Thank you, though I no more questions in queue at this time I would like to turn the call over to Mr., John Thomas for closing remarks.
Thank you for joining our call the seemed to call were made available for playback Bernie interest a person's through 30 P.M. on Tuesday November 12 again, thank you for participating in our conference call.
[laughter]. Thank you ladies and gentlemen. This concludes today's teleconference. You may now disconnect. Please enjoy the rest of your dad.
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