Q3 2020 Tilray Inc Earnings Call
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Mr Relations. Thank you Sir you may begin.
Good afternoon, and thank you for joining us until raised third quarter 2020 earnings Conference call with me today are Brendan Kennedy, Chief Executive Officer, and Michael Crichton Chief Financial Officer before we begin please remember that during the course of our discussion management may make.
Forward looking statements within the meaning of the private Securities Litigation Reform Act 1995 as amended these statements are based on management's current expectations and beliefs and involve risks and uncertainties that could differ materially from actual events and those described in these forward looking statements. Please.
For the total raise reports filed from time to time with the United States Securities and Exchange Commission and Canadian Securities regulators, along with the earnings press release issued today for a detailed discussion of the risks that could cause actual results to differ materially from those expressed or implied in any forward looking statements.
On today's call management will also refer to adjusted EBITDA and gross margin, excluding inventory valuation adjustments, which are non-GAAP financial measures. All the company believes that these non-GAAP financial measures are useful to and I guess, one for information to investors. The presentation of this information is not.
Tended to be considered in isolation or as a substitute for the financial information presented in accordance with GAAP todays earnings press release contains a reconciliation of each non-GAAP financial measure to the most comparable measures prepared in accordance with GAAP and now I'd like to turn the call over to Brendan.
Hello, everyone and thank you for joining us I would like to cover three items today.
First I will review highlights from Q3, including how we have continued to significantly improve our financial performance by optimizing our cost structure next.
Next I will provide an update on our strategic priorities the current state of business in.
And finally I will discuss what's next for till right as we look ahead to 2021 and beyond.
As I discussed on prior earnings calls 2020 has been a transitional year, it's over a year during which we had realized significant accomplishments by focusing on profitable growth in our three core businesses International medical.
Canada adult use in Manitoba harvest foods.
At the same time.
Probably challenging work that our team has done to optimize our cost structure and mitigate the impacts the COVID-19.
In doing so we have strengthened our financial position against the challenging industry backdrop, better aligned ourselves with market demand and establish the foundation, which we can leverage to generate enhanced shareholder returns.
We are encouraged by our progress in Q3, as we substantially narrowed our adjusted EBITDA loss compared to both Q to Q1.
Based on our Q3 results, we believe our current momentum positions us to achieve our goal of breakeven or positive adjusted EBITDA in Q4.
As we had stated throughout 2020. This has been our objective and is now clearly within reach.
Sequentially adjusted EBITDA in Q3 improved to a loss of 1.5 million U.S. dollars from a loss of 12.3 million in Q2.
For 87% improvement and when compared to Q1, adjusted EBITDA loss improved by 17.2 million or 92% from the loss of 18.7 million. These.
These results demonstrate the significant impact we have achieved with our broad based cost cutting measures.
Notably <unk> as I will explain in more detail. This was accomplished with Q3 revenues of 51.4 million, which is moderately better than Q2.
We remain focused on growing our top line sales despite our cost cutting efforts and continued to invest in our business, where we see opportunities for reasonable returns.
Importantly, our new cost structure and improved balance sheet will allow us to leverage future sales growth without adding significant asked your name.
For reference we have reduced our quarterly EPS GNS, including R&D from approximately 48 million in Q4 2019 draft.
Roughly 26 million over the past few quarters.
A remarkable improvement over a short period of time.
Although we will continuously evaluate opportunities to optimize spending the heavy lifting is now behind us.
As I indicated we have refocused our business on three key areas of growth.
International Medical where we've built an enviable track record and our leading provider.
Canadian adult use which is making tremendous inroads in converting the lets it market to the legal market, but still has a long way to go.
This transformation provides a catalyst or expansion as more value added and illegal candidates products come to market and become more accessible and affordable through increased points of distribution.
Including the number of brick and mortar retail stores.
I should add that the transition to ecommerce ordering curbside pickup and delivery and the current cobot environment, coupled with the heightened concern for quality and safety appears to be accelerating the migration from the bus market.
Manageable harvest tempt foods, which provides us with the Hampton CBD products platform.
In the United States and 19 other countries around the world.
Now, let's discuss each of these segments in greater detail.
International Medical sales were flat compared to Q2, although although there was good demand in the marketplace the market experience to unexpected setback setbacks.
First there was an approximately four week period in early Q3, when Canada imports to Germany were curtailed market wide due to international narcotics control board or I didn't see be quotas.
Second.
We were subject to covert related administrative delays for import permits I'm product entry in Germany.
While we were able to recognize some of these sales later in the quarter.
Some activity shifted to Q4.
We remain bullish on our competitive position and business potential in the E U and Germany in particular, however, the market may remain volatile in the coming quarters due to recently reimposed kobin restrictions.
We're continuing to see increases in both the number of patients in Germany with cannabis prescriptions as well as the number of doctors, who are writing prescriptions for these patients.
While these increases are off of a relatively small base. We believe that we are effectively building brand awareness similar to the way that we didn't catch up four years ago and expect to see continued patient and revenue growth given Germany's large population base.
In fact, we believe that the adoption curve in Germany is occurring at a faster pace compared to Canada during 2014 in 2015.
Recently, we have seen a number of competitors, either Ses European operations or significant significantly reduce their presence there.
We believe this will become a long term strategic advantage for till right.
Commitments, we have made you market.
With our Portugal, GMP campus and regional leadership team based in Germany position US well it continues to capture market share in Germany, and more broadly in Europe.
In Portugal, our phase two construction is all but complete given it's warmer client time, it does amenable to year round cultivation, and a lower cost of labor our facility in Portugal, as an annual capacity of roughly 40 metric tons of dried Canada.
That can be shipped to other countries around the world.
With full GMP certification is our international hub for medical campus exports into R&D.
Looking ahead, we are optimistic about our opportunity in France.
We will be submitting our application and we'll wait to hear we have been selected as one of the suppliers to the country's medical cannabis trial.
The French government recently published their degree that provides details on how the medical campus experiment will be administered.
The French authorities have indicated that approximately 3000 patients will be able to participate in that the selective companies will supply medical cannabis that complies with pharmaceutical standards, including GMP.
The first prescriptions are expected to occur in early 2021.
Given our experience with GMP practices and the reputation we have established in Germany. We believe to Ray is well positioned to be selected as a supplier for the program.
This will allow us to establish the foundation for future business in France.
We're also encouraged by the possibility of participating in the Dutch coffee shop experiment.
That's government is currently determining whether and how controlled cannabis can be we supply the coffee shops. The program is called the controlled Canada supply chain experiment we.
We recently applied for one of the 10 licenses that will be awarded which would be another international revenue opportunity for to it.
Our medical Canada sales in Australia, and New Zealand continued to benefit from patient growth.
Broader distribution and stable pricing all of which have resulted in solid gains for the business.
On September 28, we announced that Australian researchers published preliminary results, indicating that one of our GMP produced products may reduce nausea, and vomiting for cancer patients undergoing chemotherapy.
The pilot phase of the study ran for two and a half years with 81 participants enrolled.
The trial will now move to phase three clinical trial to determine with much more certainty the effectiveness of medical cannabis to combat nausea, vomiting, and determine if it should be considered for use in routine can cancer care.
In summary, we're committed to long term profitable growth in Europe as regulations continue to change and country markets develop.
Early partnership approach with government agencies, our emphasis on clinical data and our ability to produce high quality GMP manufactured met candidates products at scale in the E U four that you.
Puts us in a leading position.
As new international market opportunities are presented we will leverage the knowledge and experience of our medical Advisory board to determine what is best for the company.
Turning now to Canadian though is a Q3 revenues.
Increased 13.1% compared to Q2.
Demonstrates how we can grow this business without focusing on the deep value segment of the market.
We attribute our success to several strategic decisions, including partnering with kindred as our exclusive sales agent.
Valuating our portfolio pricing.
Introducing new judo product.
And improving our operations.
Well the operations, we have made significant improvements which have resulted in increased yields in potency.
In 2020 or yields are up approximately 42% at AACR and ASCO in Ontario facility relative to 2019, and all of the harvest had been above 20% THC potency.
Our kindred partnership has established us to leverage the breadth and depth of their sales force to grow distribution.
With both existing and new potential buyers and retail partners.
Well, we continue to focus on higher potency premium categories.
We evaluated our pricing strategy to ensure our product offerings are priced appropriately in all categories segment.
Our combined mainstream and premium product offerings now make up over 70% of our our adult use business compared to NIS, 50% in Q1, as we continue to de prioritize value product offerings.
In late September our wholly owned subsidiary I parked announced the newest addition to its candidates infuse edible product line.
Sally while these companies chose gummies are handcrafted using clean and simple ingredients, our bacon and gluten free.
Tsetse Waterman gummies and bounced THC CBD pineapple mango gummies are currently available in six provinces across Canada.
I teach the sour Cherry gum, he will be available in Q4.
The company's complement our already existing impressive array to data offering including base under our Cana can borrow natural brands chocolates and our good chip in childhood, while he brands TBD beverages every sold by food and beverage company, our JV with Anheuser Busch Inbev.
We continue to work on additional form factors and plan to introduce additional innovative products Canadian consumers that meet the needs of this growing industry.
As indicated our adult you strategies focused on profitable long term growth.
Consequently, while we introduce the value segment product offering we're not aggressively fighting for market share gains in a segment that offers a little or no profit potential.
Instead, we continue to manage our product offerings and margins with the goal of maintaining rational pricing and sensible margins.
During Q3, we were pleased to have grown our share of the market and we are encouraged by the fact that we did so well selling approximately 90% of our products in the mid to high potency categories.
At the beginning of year.
We were estimating end of your store count between 812.
We have been pleasantly surprised that the count has exceeded the high end of our range.
With approximately 1200 50 stores currently open.
This is a positive for both <unk> and the growth in evolution of the broader adult use market in Canada.
We're also hopeful any potential covenant related restrictions will not negatively impact store count growth going forward.
I'm not in the solid Q3, we are bullish on our prospects for continued growth in the adult use market in Q4 and beyond.
Q3 revenue from manageable harvest was slightly below Q2.
As we have said before we view this business as a relatively predictable revenue and profit engine help fund other growth initiatives.
We continue to drive for additional distribution and sales are cautious about cobot related impacts to our consumer behavior.
And the effects they may have on retailers that carry our products.
Our team is working hard to broaden distribution and grow the direct to consumer business.
Offset any negative impacts you may see from reduced retail traffic.
As we head into the final quarter of 2020 and look forward to 2021, we see opportunities in our business that will enable us to deliver revenue growth.
Proved gross margins and breakeven or positive adjusted EBITDA in Q4.
We were disappointed with the results. There is recent adult use legalisation boat new-zealand.
However, we remain optimistic over the next three years, we see the possibility of 40 additional countries legalizing medical cannabis and four additional countries, taking serious steps towards legalizing adult east candidates.
Acceptance of candidates will provide opportunities for us to expand the reach of tolerate brands around the world.
In the United States, we thought several state managers pass with a strong majority of the vote in Arizona, Montana, New Jersey, South Dakota and Mississippi.
The number of states, but the legal medical market now increases and 34, plus Washington DC to 36 then.
The number of states with adult use.
Now increases from 11, plus Washington, DC to just keep.
The case her federal equalization candidates reform emerge as stronger from the selection. We now believe that it's only a matter of time.
An additional five Republicans centers now represent a state its constituents have legalized cannabis.
Don't use legalization in new Jersey is likely to have a domino effect upon the states New York, Pennsylvania, and Connecticut has elected officials are worried that their residents will go to new Jersey, the purchase product and thereby not generate tax dollars in their home state.
For now we will build and strengthen our portfolio of trusted CBD brands in states, where legally permitted we.
We will address the federal CBD market upon further clarity from the FDIC.
To conclude we are operating in an efficient manner across our entire business global medical candidates.
Canadian don't use cannabis in global hemp.
With the completion of our significant cost reductions, we're now poised to leverage our cost structure and ensure we are one of the global winners in this industry.
We have ample cash and availability on our ATM to execute our strategy.
With our infrastructure in place, we will continue to focus on building brands and developing products that resonate with consumers and established till ray as the most trusted candidates in M. company in the world.
With that I will turn the call over to our CFO Michael crude tech.
To review our financials.
Thank you Brendan and thanks to everyone joining us on the call. This afternoon.
Please note all the financial information that we provide today was prepared in accordance with U.S. GAAP and is in us dollars unless otherwise indicated.
Before we get into details I'd like to reemphasize that the tollway team has made remarkable progress in Q3 and year to date, but.
The team has been successfully and safely managing the challenges presented by coded growing our core business, reducing our cost structure, improving margins and positioning our company to leverage future revenue expansion.
We have experienced unprecedented circumstances and our employees around the globe have responded by staying focused and delivering strong financial results.
Now to some details.
Q3, 2020 total revenue of $51.4 million was flat compared to the same quarter last year.
Looking below the surface, however, robust growth in our I don't use international medical and health products channels was offset by a decision to discontinue any meaningful bulk sales all of which were recorded in Canadian medical sales last year.
Excluding the year over year impact the bulk sales total revenue increased 25%.
Including bulk sales, Canada segment revenue decreased 11% to $31.4 million compared to 35.5 million in the same period last year.
The decrease was almost entirely driven by the lack of bulk sales in the current year compared to 10 million. The bulk sales included in the prior year period as well as a 12.8% decline in Canadian medical sales to $3.4 million.
On the other hand.
You sales grew to 20 million or 25.8% all international medical contributed $8.1 million during the current quarter, a 42% increase year over year.
Excluding the impact of bulk sales, our Canada segment revenue increased 23.5%.
As previously indicated we expect continued growth in both the I don't use an international medical channels and minimal if any bulk sales as we focus on higher margin opportunities.
We will take advantage of bulk sales on an opportunistic basis and in cases, where it helps us rebalance inventory levels in certain products.
Going forward, we expect kind of us to continue to grow at a faster rate than him and to reflect the higher percentage of our total revenue.
The growth and I don't you sales is attributable to several factors, including improved presence in retail outlets. The launch of a kind of is 2.0 product starting in December 2019.
Started about kindred relationship in June 2020.
In a recent review about pricing strategy.
Year to date 2.0 products accounted for approximately 19% that you sales and are expected to contribute to our growth in the I don't use channel as we continue to introduce new form factors.
Our Canada segment sales mix continues to evolve and it now characterized by 63% I don't use in Q3 2020. This is 45% in Q3 2019 and 58% at the end of Q2 2020.
11% Canadian medical in this year's Q3 versus 39% in the year ago period, including bulk or flat at 11%, excluding bulk and compared to 13% in Q2 2020.
And 26% International medical in Q3, 2020, compared to 16% in the year ago period, and 28% in Q2 2020.
As mentioned earlier there were no bulk sales in Q3 2020, well bulk represented 28% kind of its revenue in last year's comparable period.
Hence segment revenue increased 27.7% to $20 million compared to 15.7 million for the same period last year.
The increase was generally due to greater promotional activity in large format retail and increased E commerce sales.
Going forward and despite the significant year over year growth, we expect Manitoba harvest business to deliver relatively consistent revenue unless there is more clarity from the FDA on CBD in the U.S.
Until CBD can provide a growth catalyst for the business. Our team continues to explore expanded distribution for our hemp based products and other ways to generate sales growth.
Fight the negative impact of it 19 may have on our retail partners.
Segment revenue mix during Q3, 2020 was 61% cannabis and 39% compared to 69% candidates and 31% in Q3 last year.
In Q2, our segment revenue mix was 60% cannabis and 40%.
As indicated we expect an ongoing shift to higher percentages of how did the sales over the coming quarters.
On a sequential basis revenue increased 2% in Q3 2020 to 51.4 million from the 50.4 million in Q2 of this year.
This was driven by a 13.1% increase in adult you sales, which was offset by an 11.4% decrease in Canadian medical sales.
A 1.3% decline in temp sales and a 2.6% decline in international medical sales.
The declines in Canadian medical and himself well largely consistent with market trends some of which were due to COVID-19 related patient and consumer behavior changes.
The decrease in international medical sales was primarily due to German quota related and import export approval related delays during the quarter.
Recent activity indicates we may be able to recover a portion of the lost sales attributed to these delays during Q4.
Total kilogram equivalent sold decreased 53% to 5107 in Q3 2020 from 10848 in the prior year's Q3.
The decrease was primarily due to the discontinuation of bulk sales.
Our average net selling price per Gram of candidates in Q3, $2026.15 and 89.2% increase or $2.90 from the $3.25. During the same period in 2019, and a 133% increase from a reported selling price of two dollarssix.
The four cents in Q2 of this year.
As you May recall, we had a onetime transaction in Q2 related to the settlement of a supply contract without which ever reported selling price would have been $5.03.
Compared to the normalized figure the Q3 net selling price per Gram increase by 22.3%.
The increased selling price during Q3 was due to a shift in distribution channels and product mix, including the continued growth of our international medical business, a shifting sales to higher potency and higher priced products and the continued growth of our 2.0 products in Canada, which did not exist in the same period last year.
Going forward, we expect our average selling price per gram to remain stable or increase overtime that sales of international medical cannabis continue to make up a larger percentage of our sales mix.
While we remain optimistic on international markets given the recent resurgence of COVID-19 in European countries and the restrictions that are likely to follow we're cautious about the potential impacts and are taking whatever measure as possible to ensure the uninterrupted supply product to our distributors and patients.
Our average cost per Gram of Canada sold in Q3, 2020 was $4.23 per Gram and 85.5% increase from $2.28. During the same period in 2019 and $2.06. During the Q2 of this year.
Please recall the cost per Gram in Q2 of this year was skewed by a onetime bulk transaction associated with the settlement of a supply contract.
Excluding the onetime transaction cost per Gram in Q2 2020 was $3.42.
The year over year increase is due to a combination of fewer kilograms sold due to the lack of bulk sales.
The sales growth of higher cost kind of its 2.0 products.
A decision not to attribute any cost but to byproduct starting in 2020.
And the limited absorption of fixed cost at our Portuguese facility, while the ramp up cultivation.
As previously indicated we made the decision to stop attributing any cost the byproduct produced at our high Park in Portugal facilities. This decision should reduce our need to make future inventory adjustments. However, this decision also had the impact of increasing our cost program on the flower and derivative products that do have value.
We continue to implement process improvements at all our facilities to reduce production costs.
Our efforts have included the closure of Hyde Park Gardens, and enhancement to our cultivation methods that have improved yields by over 40% at our growing facilities.
As we expand our 2.0 offerings in Canada and its I don't you sales continue to grow we anticipate better throughput and cost absorption at a high Park holdings processing facility.
In Portugal, we should see future improvements in our production costs as we see our international medical sales grow and our cultivation assets come fully online.
Gross margin for Q3, 2020, including inventory valuation adjustments was 7.3% compared to 31% in the same period last year and negative 10.7% during Q2 2020.
During Q3 of this year, we took a charge of $13.4 million related to inventory.
Proximately 8 million was the result of an exhaustive review of all products in stock cannabis and hub and a thorough evaluation of their potential user demand in the market.
The other roughly 5 million was related to a payment made to settle a supply contract that was disclosed as a subsequent event in our Q2 10-Q.
Terminated contract believed does a future purchase commitments totaling $17.4 million.
Gross margin for Q3 2020, excluding inventory valuation adjustments was 33.4%, which represented a 200 basis point increase from the year ago period of 31.4% and a 720 basis point increase from Q2 2020 of 26.2%.
Gross margin for cannabis, excluding inventory valuations and adjustments was 27% in both Q3 2020 and the year ago period, an increase from 10% in Q2 2020.
Looking ahead, we expect to see expansion of gross margins due to lower costs at our facilities, resulting from our cost cutting measures and additional operating efficiencies from more throughput and better fixed <unk> fixed cost absorption supplemented by the availability of low cost third party supply on an as needed basis.
Gross margins for him excluding inventory valuations and adjustments was 43% in Q3 2020 compared to 43% in the year ago quarter and 50% in Q2 2020.
The sequential decline is due to a labor and overhead rate adjustment made in the previous quarter X.
Excluding the rate adjustment Q2 gross margins were 41%.
As previously indicated [noise] weeks.
We expect margins to fluctuate between the mid to high Thirtys and mid to high fortys, depending upon the nature and timing of discounting and promotional activities.
Moving to expenses, excluding impairment charges of which there were none during Q3 total operating expenses were 36.5 million in Q3, 2000, 23.1 million or 8% decrease compared to the prior year quarter, and a 5.5 million or 13.1% decrease from Q.
To 2020, excluding the $28.4 million up impairments incurred last quarter.
However, the savings are even more significant if we compare Q3 to the annualized SGN a run rate of Q4, 2019, which results in an 18.5 million reduction or 48%.
These favorable expense comparisons reflect the significant progress we have made over the past few quarters and aligning our cost structure with the current business environment and strengthening our position as a leaner more efficient leader in the kind of this and have been industries.
To date during 2020, we have eliminated 482 positions throughout the company and are on pace to achieve an annualized savings impact net of severance cost of $38 million.
These head count reductions combined with our already implemented efforts to achieve operating efficiencies have resulted in $55 million annualized cost savings versus our Q4 2019 run rate.
All our efforts began before the onset of coated and we're not in response to the pandemic.
While this challenging it hard work is behind US we will continually look for ways to increase our efficiency and optimize our cost structure as we adapt to the dynamic business conditions of a fast evolving industry.
Importantly, and while I focus on cost cutting over the last three quarters may have moderately distracted our efforts to grow sales. We do not believe any of the implemented reductions will have a negative impact on our ability to generate growth in any of our segments.
On the contrary, we believe we are now better positioned to invest in opportunities that will generate the highest expected returns.
In particular, we expect ongoing growth in international medical a category in which we have established a proven track record.
Additional growth and I don't use driven by increased listings of our flower products and sales from our new and existing 2.0 products and continued baseline sales of hemp products until we can launch CBD nationally through that throughout the U.S.
As we increase sales, we're now positioned to realize the benefits of our new cost structure.
Net loss for Q3, 2020 was 2.3 million or two cents per share compared to a net loss of $36.4 million or 37 cents per share in Q3 2019.
This marked a 79.4 million improvement compared to Q2, 2020, and a 181.8 million improvement versus Q1 2020.
We do expect to experience volatility on the net income loss line due to the ongoing evaluation of the outstanding warrants associated with the equity offering completed in March of this year.
Adjusted EBITDA loss for Q3, 2020 was 1.5 million compared to the adjusted EBITDA loss of 21.9 million in Q3 last year.
Improvement in the year over year adjusted EBITDA loss was primarily due to lower operating expenses and better revenue mix.
On a sequential basis, our adjusted EBITDA loss was an 87.4% improvement from the 12.3 million loss in Q2 2020.
The reduced loss is mostly attributable to our cost reductions and operational efficiencies.
As indicated in prior quarters. During 2020, we remain focused on achieving breakeven or positive adjusted EBITDA by the end of Q4 2020 and believe we have the momentum to realize this goal.
Turning to the balance sheet. We ended Q3 2020 with cash and cash equivalents of approximately 155.2 million, representing an increase of $18 million from $137 million at the end of Q2 2020.
This included proceeds from our ATM offering program of $45 million during Q3 2020.
Between our cash balance future access to the ATM program and increased efficiencies in our business. We believe we have sufficient capital and access to capital to manage our operations and execute our plans for the foreseeable future.
Our estimated cash flow need for Q4, 2020 is approximately $30 million to $33 million, which primarily consist of operating cash needs of 8 million to 10 million.
Lets interest and principal payments of approximately 15 million and Capex of approximately seven to 8 million.
These numbers assume no meaningful additional impacts due to COVID-19, and the remaining Capex assumes completion of phase two in Portugal. This year.
As we look ahead, we intend to leverage our 2020 achievements by generating significant revenue growth with a lower cost base that will allow us to deliver solid shareholder returns.
We're still in the early stages of the legal cannabis industry and more meaningful revenue opportunities. Currently exist. We believe future opportunities will continue to surface as more countries legalized medical and or I don't use cannabis.
We also believe there will be additional revenue opportunities related to CBD in the U.S. once the FDA provides more clarity on nationwide regulations.
Well 2020 has been a transitional year for till right. The actions taken will enable us to expand our presence in existing markets for cannabis and him and capitalize on future opportunities and new and emerging markets.
We are well on our way to being recognized as the most trusted cannabis and held company.
Thank you for your interest until Ray.
Brenda and I are now available to take your questions.
At this time, we'll be conducting a question and answer session. If you would like to ask a question. Please press star one on your telephone keypad.
Indicate your line is in the question queue, you May press star to trim Love your questions from the queue corporate just spend using speaker equipment. It may be necessary to pick up your handset before pressing the star Keith one moment. Please poll for questions.
Our first question comes from the line of Pablo.
Cantor Fitzgerald you May proceed with your question.
Good afternoon, everyone can you just touch on the German market I mean, we're hearing different things right. The data for the third quarter showed a sequential drop of 20% you spoke broadly about it but just Ah you know what has to happen in <unk> got to lease for growth to accelerate in that market.
Then remind us about your age in the <unk> right. Because you know other piece also talk about being what entering doesn't Martin could you have companies from a bunch of we're also talking about that so just to remind you that edge and then you got the lease to help to drive that goes for the margin there. Thanks.
Great. So when we look at the German market look at patient prescriptions.
And compare them to Canada back in 2014.
14, 15, but the growth in Canada is.
I saw that the growth in Germany is it steady Oh, obviously off of a much larger population be more.
More than more than double the population and so we're confident that we'll continue to see a patient patient growth there.
Yeah in Q3, we were.
Set back slightly by.
Some issues regarding Germany is I have to be a key.
It does and so we had some product that.
Oh, we were scheduled to ship from from Canada, and from Portugal to to Germany in Q3 that because of the fact that that Germany was at its core that we had about a four to six week delay some of that revenue pushed over.
To.
Into Q4.
When we when we think about our edge.
We have invested heavily in our GMP facility in Portugal, So we have a a.
A medical campus cultivation.
And processing facility in the EU for that you are.
Until we've been able to.
Historically ship products from Portugal to to Germany, and we.
We believe that the European campus. This.
It gives us an edge not only in.
Countries, such as Germany, but also in countries such as France that will implement a their medical cannabis.
Program here this quarter and we expect to.
Most likely ship product from Portugal to to friends in the first half of next year.
Hopefully in Q1.
So when you look at the the two largest economy and in Europe, Germany, and France you.
Over 140 million people.
We think that that we think that's a long term opportunity and it's both are just starting.
But clearly we think all.
All the countries in you will begin to implement and grow their medical campus programs.
And if I may just a follow up.
No I understand the schempp affords me the strategy, but you know when you think with U.S. market. Other companies are trying to use their brands.
B or or or should be the products to raise awareness for the add on T.H.C., Brian So someday when they considering the U.S. they have already brand awareness right supposedly.
Advantage there do you think along those lines also or obviously I don't see my dog Harvista. Some brand we will be using for 48 C. Right is that something you have to be focused on right now is that something more more more long term so everybody ought to do right now thanks.
It's something we discuss on a regular basis, clearly Ah Manitoba harvest has a CBD products in market in the U.S. and we do think that there is.
Brand awareness and Manitoba harvest the CBD.
Brand a has has great potential, but it's most likely not a a to b brand. We do think about the long term opportunity and our strong.
Strong desire to get our our brands into the U.S. not only the tillery brand, but other other note use brands, but the big question to U.S. and what will the what will the eventual distribution model look like.
Right. Thank you.
Our next question comes from the line of.
Aaron Grey with Alliance Global Partners you May proceed with your question.
Hi, good evening and thanks for the questions.
First one for me is just in terms of you know kind of a shift away from the value segment into more of a the premium pricing you know certainly makes sense, just given kind of the margin profile, but just given the fact that you know values been growing so much kind of overall within the Canadian market could you just kind of speak more to more to the reasons why you're not going to kind of focus as much on the value you know or your sales.
I always get kind of the product out there at a reasonable profit or kind of what the strategy is just given device segment continues to grow there. Thanks.
Yeah. Thanks for the question or you know I think that as we've looked at the value segment and we look at the pricing that's going on there and the opportunity to actually capture some margin products or we just don't see it as an opportunity for us to go ahead and continue to to enter with new.
New products in that market, we do have the batch and that particular segment of the market that we do quite well with but we just don't think that there's real need for us to go ahead and try to grow that significantly with a with very low with any margins instead, we've been focusing on the the premium sector of market and we're in.
Now selling significant portion other of our products in both the mid to high potency.
As well as in the mid to up to premium categories.
The other thing is I I, just think that you know, we're seeing significant price compression in that value segment and it's just it's too it's too costly to chase it.
All right great no. Thanks for that color and then just second one from me quickly congrats on kind of getting closer to that EBITDA profitability I just want to know kind of how to think about kind of the EBITDA margin improvement I'll kind of over the next you know 12 to 18 months, where do you think the EBITDA margin profile could go from here. Thanks.
Yeah, I don't know that we've got a kind of a forecast of the EBITDA margin I mean, we're still focused on delivering Q4 in terms of the breakeven or positive EBITDA as we've talked about and I think that we'd like to look to make improvements on that as we move into 2021, but I I don't have the.
The visibility to provide you guidance right now.
Alright, great. Thank you.
Our next question comes from the line of Vivien Azer with Cowen You May proceed with your question.
Hi, good evening, thanks for the question.
So my first one is just a housekeeping item, but thank you very much for all the detail on your uses of cash that's certainly been getting a lot of investor questions around on your balance sheet and liquidity broadly so I apologize if I missed it but did you guys happen to your ATM after closing the quarter.
After closing Q3, yes no.
No we didn't.
Okay, Great and then my real question is a follow up.
So I really appreciate you know that this you know pricing exercise in portfolio and kind of hit if you will reprioritization make a lot of sense for you guys from a margin perspective, but I am curious what kind of kind of the competitive landscape assessment you guys have died like.
Do you feel that you know you are as well place to go after a smaller portion of the market successfully like what's your assessment. There like are you thinking about your competitor price segments increasingly.
Because everyone wants to sell premium is the highest margin. So just curious how like an evaluation the competitive landscape and part of that at all if at all.
But if you want to take this you want me to start.
Yeah. So.
Thanks again, you know, we we launched the batch about a year ago, because we thought as an opportunity and in that by segment. We we've seen we've seen price compression.
E.
Our our waiting a bit to see how how it plays out over the long term. We we've had success with a borrowing costs, while we continue to do really well and.
In the two dido categories, whether it's whether its edibles, a baby and edible category chocolate, we launched a gummy is in in Q3, and we'll continue to.
It really is a a number of new new form factors in Q4.
From additional gummy products too.
Hashed product, a new beverages, Bates topicals, but will be Q1.
And so we see that as a kid.
As a long term opportunity and will.
We continue to evaluate how how much we want to pursue that value segment over the long term.
Yeah, I mean, I guess I'd add just a little bit of color to that also relative to the premium segment is that I think that we have looked at the kind of where we sit in that space and.
We did make some price adjustments to be competitive in the space. So that we can go out and capture our share I think that when we look at it we're probably not in as many retail locations as we as we could be right now and that's the benefit of our relationship with kindred are that we are getting additional points of distribution on a pretty aggressive basis.
And and we feel like there's a lot of opportunity for us still in the higher priced segment.
Just by being in places, where we don't currently exist.
So that's a good opportunity for us and so we're still focused on capturing our fair share of the market in that particular space and we will keep a presence and that value segment, but just not but to to when they're in the sense of trying to work on market share growth there, where we don't think it's sustainable.
Gotcha that that call out on incremental points of distribution. That's really helpful. Thank you.
Our next question comes from the line of Graham Crane layer with eight capital you May proceed with your question.
Yeah, Hi, good afternoon, and thank you for taking my questions I wanted to follow up on the comments made regarding the international market and specifically some of those bottlenecks that were experienced in the Q3 period regarding a shipment restrictions and permit delays I'm wondering based on the defense.
You have right now are the outlook you have right now it would there be any sort of disruption in terms of the outlook on international revenues outpacing a domestic revenues because of that and I was wondering based on those disruptions in the quarter as a possible could you could you give us the magnitude and what the adjustment would be.
If those didn't exist where the international growth <unk>. Thank you.
So our international Thanks, Ram or international medical has seen.
Has seen significant growth compared to medical growth in Canada the <unk>.
Ah the delays that took place do that has to be in Germany.
I sort of see that at the one time.
One quarter delay.
And.
And not only a delay between Q3 in Q4, but a longer term.
One quarter delay as we look at the size of the.
International medical market and.
When.
When that international market will.
Exceed the market opportunity in Canada.
Yes.
Okay, and then just just to follow up on that I mean, you know that the timing remains you know you know outstanding and it's difficult to actually panned, but when you talk about that point about when it ultimately exceeds what's what's being generated in Canada. What is the real Lynch pin for that you had a construction milestone imports.
Go right now you know I I would assume that's part of the equation here is that part of our sales and marketing and education efforts on the on the ground in Europe, what we may be you could lay off some of the steps here to understand you know what the what the building blocks are as you've you've hit a milestone on here on capacity what else comes in behind that to really.
And to really get to that inflection point that would be appreciated. Thank you.
Yeah, I think the two biggest drivers are going to be patient growth in.
In Germany, and France. So we are hopeful that we will ship products from Portugal to France.
Yeah in the first half of next year in the first quarter of next year.
And the the market size there is.
83 million people in Germany, I think roughly 67 million people in France.
Oh, no I'm 40, I guess hundred 50.
That's not that's not right [laughter], absolutely different doing math on the fly not connect cranach her in 30, roughly around 30 million.
And.
The the opportunity there is that we will see other [laughter] countries.
We go lives medical cannabis following behind Germany, and France and.
How long will it take for all all of those countries to legalize I think.
I think that.
We'll see.
Possibly being tired you we go as candidates for medical use.
Over the course.
The next you know, let's call it let's call. It 18 months and so we need to we need to see a regulatory change.
And you know we need to see.
ER doctors and.
Pharmacists sort of embrace medical cannabis as medicine I think.
If I'm going to look at one key [noise] drive.
Driver for the rest of Europe, It would be how quickly does the patient count.
In France exceed 2000 patients that will be a good indication of how quickly.
How quickly a that market is is going to to grow in.
In Q4 coated <unk> the real unknown for you.
In terms of.
ER growth, but in terms of pay patient acquisition I'm, there are fewer patients going into their doctors.
Because of coated and answers likely yes.
And so that that made.
Reduce growth problem from what it would be not a coated environment.
And and all of this growth is really focused on medical I am optimistic about our chances and that's owned and I do think we will see a number of countries in Europe.
He was poor.
Yes, you know throughout a 2021 and 22.
Thank you for that and maybe I'll ask one follow up question to that when you're talking about the l. a wave of regulatory reforms and Europe in terms of unlocking more market value do you see potential developments in the United States, particularly on the medical cannabis side of things do you see that as a.
Potential catalysts to spur further reform and that you or do you look at those those two markets is as being exclusive of one another thanks.
I really look at those markets as being exclusive.
From one another I don't think any.
I don't think any medical cannabis change in the U.S. will drive medical cannabis change and you.
You could potentially argue that medical cannabis change in Europe might drive medical cannabis change and and United States.
Yeah, it's not a it's.
It's not absurd to think that at some point there could be an opportunity to.
[noise] export medical canvas from Canada or from Portugal to the United States score for medical Pandas purposes, just like we export from Portugal and Canada.
Countries such.
Such as.
Uh huh.
Germany, New Zealand, Australia UK.
Understood appreciate it thank you.
Our next question comes the line of Scott Fortune with Roth Capital Partners. You May proceed with your question.
Good afternoon.
Real quick just follow up on that you know kind of leveraging your partnership over there and Novartis and kind of expanding can you call out some of the other countries you think or will expand in your opinion.
Are you leveraging your your partnerships in Europe for launches and ramping up that side of the business.
<unk>.
We use with a number of different.
Besides our relationship with sends division of Novartis.
There's a number of.
Reason number of different farms.
Pharmaceutical partners.
Partners in.
In countries around the world. So you said.
Half a dozen partners in Germany from.
Our import or pay a little more I too far.
Pharma provide obey the day he Phoenix in Germany, we we partner with government agencies in some countries such as Croatia.
I always PPI in Australia, CBC in New Zealand.
And for for different partners and in Latin America.
America from.
Mega Labs Soco brand a pair of.
There and so.
We continue to to build relationships with pharmaceutical partners in individual countries around the world. We continue to have a healthy pipeline of product registration.
In countries around the world So.
So we're we're registering our product happen anywhere from a half a dozen sorry anywhere from a dozen to two dozen of our pharmaceutical products.
On a regular basis and additional countries.
So that we can exports from Canada, and Portugal, whether it's oil product or a flower products.
Based on whatever individual distributors are looking for.
Individual countries.
Okay. Thank you and then real quick follow up you Kinda clinical studies or the medical study here, you've done or are we going to see more.
Data come out in 2021 that continues to drive that side of the business fits into kind of how.
Are you looking at the clinical studies going forward here.
We are you know, we we saw a clinical trial.
In Australia move from.
From phase two to a phase three so I think I believe it was about 81 patients and <unk>.
It is.
Phase three is it.
It's more than a few hundred I can't remember the exact number but its more than 200 and somewhere in the range of 200 to 350, we've seen in a slide that way in two of our U.S. clinical trials.
Entirely.
Entirely due to covance. So it moves those research institutions in the U.S. in New York.
The slight delay recruiting patients and.
In the middle of a coded.
But they have.
They have recovered from that initial delay so we may see.
Some of the data coming out of that those two U.S. trials [noise].
Quarter in 2021.
Thanks for the color. Thanks.
Our next question comes from the line of Mike Hickey with the Benchmark Company. You May proceed with your question.
Hey, Brendan Michael and congrats on the quarter guys in Ah. Thanks for squeezing me on I've got three questions, but they're.
Pretty small Brendan Michael So I think you can be speeding through just one I was hoping that you could we.
Remind us of the size of the Canadian cannabis market and how much of that market is.
The black market still illegal sales on what you're seeing in terms of.
A possible conversion of that black market to the legal market.
The I thought you know for a while maybe co then we'll do that maybe it's not all this location price selection beyond the second one at Brendan I know you look at the U.S. a lot Michael your [noise].
You're based in Boulder, you look at the Colorado.
Market that was considered mature.
Expanded 13% and 19 and 23% year to date through August so when you see that sort of market growth double digit market growth in a market that was considered mature what does that tell you about the possibilities.
The accelerated growth for more growth than you originally thought in Canada in the home market.
Lastly, curious about the pick up in yield 42%, that's pretty significant win with high potency. If you can remind us who is your head or Coca base in their patent changes on your team or what exactly you're doing to.
You get those sort of strong results. Thanks, guys.
Great.
So your first question was around the the size of the Canadian market I think that.
Where does that I saw was that a 2020.
2020, retail sales were going to be somewhere in the 2.6 billion a range you know that.
The overall Canadian market is is.
It's roughly sized I believe boy a size with that market and the legal market [noise] a few years ago in the $6 billion to $8 billion range. I think it's my guess is in a AFFO in mature Canadian market, it's likely to be eight to 10 million and.
So one way of thinking about thinking about the Canadian market there's a.
Roughly a.
100% one.
Hundred percent growth opportunity.
To take us from.
2.8 billion to 5.6 billion.
It's certainly a possibility over the course of the next let's call. It one to two years the question will be.
Doesn't mature and it's really sort of tie in question. One question two I think.
The question will be what does the illicit market look like in a fully mature Canadian market.
So if you think about you know, let's let's let's pick 10 10 billion as the size of the Canadian market in Canadian dollars.
5.5 point 6 billion would be and we got two yes, the 6%.
Of the total market being Regal purses.
And 44% it with it.
I think we can get to a stage.
Like in Washington State of Colorado, where the legal market legal the regulated market.
As you know it is a 90% and they looked at market is 10% to 20%. So there's still tremendous upsize upside in the in the Canadian market over the short to mid term the question will be.
Two years from now three years from now five years from now does the Canadian market look more like Colorado, and Washington State, where the illicit market has essentially been stepped up or does it look like a California, where there is a.
So a a robust and in pricing oh with the market.
And so that's how that's how we think about the long term opportunity.
Opportunity and and compare it to a place like Colorado, where you still see no significant growth on a year over year basis.
In terms of cultivation.
We at our and it's gone building, you're right our yields are up 42% compared to.
Last year.
Almost all the product actually all of the product coming out of that facility is above 20% THC and.
We have had a had a cultivation francoise slip back she does an amazing job.
And then the a team of a cure Steve.
Thanks, Gary in Enniskillen, Ontario that have.
I figured out how to dial in that that facility and.
Oh each one of these facilities is the you know, it's a unique machine and it it takes a little while to fine tune all the different variables, whether its nutrients soil temperature humidity, a C or two that we pump in it takes a while to dial it all in.
Her to maximize yields maximize potency.
So we're we're proud of what we've what we've accomplished there and hope to continue to improve both the.
The quality and the potency of our products and continued to decrease our costs.
Hi, Thanks, guys. Good luck.
Our next question comes from the line of Andrew.
Harder with Stifel. You May proceed with your question.
Hey, Thanks, good evening preserving cash flow guidance you outlined for next quarter I just wanted to check real quick because it says there's $69 million of non cancellable inventory purchases in the queue.
No even last quarter I assume that was part of a write off could you help us understand kind of what's happening with <unk>.
She said on kind of how that <unk> cash plans.
Yeah, Andrew I'm happy to answer the question that are really hard time hearing you an understanding all the details of your question.
Yeah sure the $69 million in non Cancelable inventory payments into Q, because your yep yep.
Yes, so I mean, there are some longer term contracts that we've got in place Weve done a good job on.
Negotiating out to a significant portion of those.
And we continue to work on what we can do that to go ahead and get ourselves into a favorable position with a with any remaining contracts that we think are are not necessarily in our favor.
So we're focused on it and we just it's one of those things we've had success and we continue to to look at what we can do going forward.
Okay. Thanks, and I guess the second question is and this is I guess can be put to El Pais with all the time spent on these calls talking about U.S. I guess.
Understand what the fundamental right here I mean, you have to Canadian template everything's taken longer and.
Out here like affirmation of south.
Yes.
It was 25% to 30% or in terms of this platform and cash.
Task and you asked and I'm past is teaching specifically and this is the first question we get from investors on story here, maybe insider sales then pretty significant here. So could you talk about what's your confidence how you recruit masters [noise].
Investing towards the U.S., which wouldn't be required thanks I'll pass it on.
Thanks, Andrew.
Yeah, I think that.
I think that I would say Ben the.
The opportunity with this industry into in into three three categories, we have seen.
We've seen the Canadian industry, whether medical or adult use grow over the past over the past several years. We're you know while we have been operating internationally since 2015 2016, it's very.
Early days when when I think about the long term opportunity I don't focus on.
On the 37 million people in Canada I'm much more.
Focus on the 700 million people in Europe.
Where there's clearly a long term medical cannabis opportunity and we're well positioned.
As well positioned if not better positioned than other oh piece too.
To win there.
And then there's the the third category is is the U.S. and.
When we when we look at the U.S., we have built a.
Brand.
And that portfolio of products that we think can.
Can be successful in the U.S. most of our executive team is based in the U.S. I feel like I know that that market well the real.
Besides besides our U.S.C.D. strategy, that's part of mental Barfuss. The real question I have is you know in.
In the long term how.
How would this product he distributed in the U.S. will it be.
Distributed like the.
The current MSL model will be distributed like a chocolate products will be distributed using distribution channel that's more similar to tobacco.
Or will it be distributed like like an alcohol product Hum like beer and.
The answer that question really determines the right right U.S. strategy.
I happen to be of the opinion that I think in the long term this products not distributed in the U.S. like that.
The current and that so models not distributors alike.
Chocolate product.
In retail locations throughout the U.S., but I do think it's distributed more like.
Tobacco I'm more like a beer and alcohol on me on the adult use side I think on the on the medical side. The product is distributed more like our medical products.
In Europe, and less like the current MISO model and I think that gives us a huge leg up.
Existing a U.S.U.S. so companies.
Thank you.
Our next question comes from the line of Glenn Mattson with Ladenburg. Please proceed with your question.
Hi, Thanks, a realized that so late and most of my questions been answered, but I. Just question quick on the ATM, but Ah think Vivian a reference.
She said you guys said you hadnt tapped it says in the quarter, but can you just give us an idea of what your plans are going forward. If you intend to continue to use it or if you feel like you're well positioned as far as the balance sheet goes and that's it for me. Thanks.
Yeah. Thanks, Thanks, Glenn Yeah, we look at the ATM as an opportunistic a way for us to go ahead and raise capital.
And I think it's one of those things that we will use at points in time to to go ahead and continue to strengthen the balance sheet.
And we'll just kind of when it suits us and what it seems appropriate. We'll we'll go ahead and continue to layer in additional cash.
Our next question comes from the line of Selkirk with MKM Partners. You May proceed with your question.
And so I guess my question is the cost structure and looks right for leverage but what gives you confidence you didn't get Canadian growth per share without having to really increase spending I guess, because because you're spending.
Slowed and with it your Canadian market share and kind of region sales were stagnant. So how does how does it increase without a return of spending.
So.
I'll take a stab at this person then Brendan Gordon and Phil and right I missed some things but.
One of the things as I indicated earlier in one of the questions asked is that we've got an opportunity to go ahead and expand our distribution up pretty significantly still we've got in I think in Q3 alone. We added over 46 listings and I think between Q3 and.
Into October we've got over 110, new listings that we've gone ahead and increased and.
And that's on the basis of working with our partner Kindred up because as we indicated earlier was as we went through the cost cutting exercise. We had 18 internal sales people that were working for till Ray are there out in the field and by moving to Kindred. We got 43 people in the marketplace or go ahead and.
Enhancing the reach of our products.
And so I think that's one of the ways that we just don't and that's a variable cost for us and so we benefit they benefit and so I don't think that that really has a significant impact on the cost structure going forward or the other thing is that we're going ahead and we we've actually narrowed our focus in terms of our brands and so we are focused.
Thing more dollar I guess, the same dollars on fewer brands in the sense of making those win for us.
And we think that that's another opportunity for us in terms of moving forward in the Canadian marketplace, and I would say that when we look at where we are we actually are growing pretty nicely. You know I think in Q3, we had some some pretty good momentum.
And in particular uncertain in certain categories and we looked at that will continue into Q4 weve seen promising results into the beginning of this quarter without really committing additional dollars.
And we think that that's a that that will continue as we go forward into 2021.
Super helpful. Thank you that's it for me.
Our next question comes from the line of Rupesh Parikh with Oppenheimer. You May proceed with your question.
Afternoon. Thanks for fitting me in so I guess just going back to your extended this 2.0 efforts.
To give some color in the prepared comments so as we look towards next year. What are some of your key priorities and then see what started as it's already happened. This year just curious, what's what's gone well and there may be areas that maybe you haven't met your expectations or start.
Yeah, you know looking forward Oh in Q3, we launched a.
Two different a child gummy products says our entrance into the gummy segment.
We expect to launch a third company product this quarter hashed product a this quarter.
We are.
We've seen.
Every emerges as Canada's number 160 beverage.
Now selling and nine to 10 provinces.
Ever.
Every will.
If it does again with the.
Abradee every minsky launching.
In Q in Q4.
Well a little further out.
We anticipate launching.
A few additional Dave.
Topical on chocolate products in Q1, and so we've seen success really across the board in.
Into the auto products, we think we've got a good a good wind up I think that.
If I were to.
Change something into two dogs, though in relation to your question we.
We actually would have brought more form factors [noise] to market faster.
And they pose crowded as as we expected, but we would launch more innovation in terms of edibles.
[laughter] concentrates there was there is wes.
Two other products in non big categories, or fewer tirado products and not big categories then.
We originally anticipated so I would have I would have changed our strategy a bit and launched a few more of the initial product that we held back.
Okay, great. Thank you.
Our next question comes from the line of Mike Grondahl with Northland Securities. You May proceed with your question.
Hi, This is Michael on for Mike. Thanks for taking a question maybe just one quick one on the extracts revenue growth year over year can you just give us idea what the mix was there from the adult U.S versus international.
I'm, sorry, you're asking for the XTRAC revenue growth.
Ah yes.
And the difference between the adult rack and international.
Yeah, just the kind of mix difference between those two and how they.
Got you add to that.
Well, so I've got the XTRAC compared to flower or on the international side of things, but I don't necessarily have a compared to to Canada.
In terms of I've got Canada mix in terms of the wreck, but it just don't think that I've got the the comparison of Germany to Canada. So do you want I can follow up with you on that one but I just don't have that comparison handy.
Gotcha.
Our next question comes from the line of Michael Library with Piper Jaffray. You May proceed with your question.
Thank you good evening.
Just one quick follow up on your thoughts on the U.S. Youve given some good color on how you think that market will evolve and a distribution model similar to alcohol or tobacco in some form or another but.
If that's not how it exists today, obviously whenever permissibility or legalization coms would it be right to assume that you would rather wait till the market evolves to something more like you would expect and hope for rather than try to make any entry into the current state by state model.
[laughter].
Yeah. So we continue to evaluate.
Potential options for entry into the into the U.S.
And.
And evaluate those opportunities on a on a regular basis.
I.
Yeah basically based on our you know had based on being.
A U.S., Delaware, a C Corporation and a listing on NASDAQ and obviously, we're prohibited from entering the U.S. market in a way that the U.S.M.S. those have but we do we do continue to evaluate options similar to.
The way some of our competitors have I think that I think that we will continue to see more clarity in terms of how a canvas products both adult use and medical will be distributed in the U.S.
In terms of medical we do think we have clear opportunities to export from other countries into the U.S. you know in terms of the don't use.
A little more clarity into the distribution model would severe.
Severely derive the path.
That we would use to enter your go to market.
So.
Just a wait and see for the most part and.
Have to.
No what you're up against before you really can make some decisions that I guess is a big part of it.
That's right I'm optimistic about the U.S. yeah. When I started in this industry 10 years ago, a 50% American thought that Canada should be revised hurdle is.
That was Gallops number back in 2010 today its 68% as of this morning. So that's pretty has pretty significant growth and more than 90% I think 94% of Americans with a medical calendar should we go out and say, there's clearly the sea change in terms of.
Public opinion.
Yeah, I think that the the ballot measures.
Campus was undefeated this oh election cycle and I think that we'll see five Republican Senators no five additional Republican Senators now.
Represented stay with their constituents as we go on.
Got it and that's that's how you drive change in a in the U.S. Senate.
That's helpful. Thank you very much.
Our next question comes from the line of God Dummies out with Jefferies. You May proceed with your question.
Hi, guys evening. Thanks for taking my question filling in for Olin right now I just have one on Germany, just wanted to get a sense about how the competition of the building up over there and if that has any near them implications on the selling price over there and the kind of trajectory you're seeing full price evitable, there that'd be quite helpful.
Michael I'll, let you start on price.
Yep.
So yes, so in Germany, I'd say in terms of price.
What we're seeing we're seeing I guess stability in prices relative to the oils that are sold there and we're seeing some price pressure on some of the flower, although I will say that in general what we saw a for us at least as we were able to take some pricing.
On a flower in Q3, and so we actually increased over Q2.
The pricing for the oils was relatively stable.
What we bring to do also is that we saw single digit growth in terms of prescriptions there.
We picked up the 200 basis points of market share and.
So from a competitive perspective, I think that we're we're holding our own obviously growing at the Hydros, which is a good a good opportunity for us and we continue to see that so I think that were that's generally what we're seeing and but I would say from the beginning of the year as we have seen some price pressure.
But but we were able to go out and increased prices a little bit in Q3.
Oh thanks.
Our next question comes from the line of Sam Garwood, well carry any you May proceed with your question.
[laughter].
My question was answered previously.
Ladies and gentlemen, we have reached the end of today's question and answer session I would like to turn this call back over to Mr. Bryan Kennedy for closing remarks.
In conclusion, I think you do artillery team for their work and dedication to our mission of improving People's lives through the power of cannabis unhappy. We appreciate your interest until Ray a participation on a quarterly call in.
Wish you all a pleasant evening. Thank you.
You for joining US today. This concludes today's conference you may disconnect. Your lines at this time. Thank you for your participation have a great rest of your evening.
[music].