Q1 2021 Arcadia Biosciences Inc Earnings Call
[music].
Good afternoon, and welcome to Arcadia Biosciences first quarter 2021 earnings conference call.
Today's presenters will be NAV, laffin, president and CEO and from Hany CFO of Arcadia.
This call is being webcast and you can refer to the company's press release at Arcadia buyer Dotcom before we start if you turn to slide two we would like to remind you that Arcadia biosciences will be making forward looking statements on this call lease ups ahead of expectations and currently available information.
However, since these statements are based on factors that involve risks and uncertainties. The company's actual performance and results may differ materially from those described or implied today you can review the company's safe Harbor language in their most recently filed 10-K and again on slightly up this presentation.
And on.
With that I'll now turn the call over to Mr. Matt Laughing President and CEO.
Thank you operator, and good afternoon, all welcome to our first quarter conference call and thank you for joining us normally I begin our calls with highlights of our accomplishments for the quarter.
However, today I would like to begin our call with specific coverage of an exciting and strategically pivotal event for the company.
Just after the market closed today, we announced that we acquired leaf brands a portfolio of leading CBD and wellness products featuring sole spring the number one selling CBD infused botanical therapy brand in the U S and the natural category in summary of this transaction is strategically transformative for <unk>.
Acadia.
Is it substantially broadens, our product offering and direct access to consumers.
With this acquisition, we gain one best in class CBD and wellness brands with an immediate and significant impact on our top line revenues with potential for strong organic and synergistic growth to a customer base of over 5000 U S retail stores through an established network of national retail distributors and long.
The independent grocers through which we believe are good wheat, good hemp CBD and GLA consumer products can be sold three compelling cost synergy opportunities and four experienced F. M. C G management or of fast moving consumer goods management, referring now to slide three of our presentation.
Patients. The this acquisition is in line with our stated strategy to maximize the value capture from our proprietary innovations and good for you foods and wellness products by the vertical integration of our supply chain, we believe with greater control over the manufacturing and placement of our products, we can better participate in the product <unk>.
<unk> and brand equity we create.
We acquired these assets from the parent company.
Which made its public market debut on the any Oh exchange in January of this year with an initial market capitalization in excess of $1 billion. It is the largest cannabis company in California by revenue footprint and brand portfolio.
If you'll flip to slide four I'd like to tell you more about this important transaction leaf brands comprises four brands with approximately 80, skus spanning 17 product categories in the health and wellness marketplace.
Three of these brands sole spring savvy naturals, and Zola generated $6 million of revenue in 2020, the fourth and newest brand protocols was launched in March of this year and therefore did not contribute to revenue in 2020.
Beginning with sole spring the number one selling CBD Bath <unk> body brand in the natural channel. According to spins data. So all of spring was launched in June of 2019 targeting channels, including natural specialty conventional drug and online at MISO Spring Dot Com Sol Spring is currently sold in over 2000.
The stores, including Sprouts, Wegmans, vitamin Shoppe, fresh time thrive markets and others. The sole spring body care lineup includes bath bombs body borrowers lotions, deodorants lip balm and muscle reps now moving clockwise on the slide as pro vault. This is of CBD infused sports performance Formula made with natural.
Ingredients and is designed to provide effective support and recovery for athletes and people with pain.
Product formulations include muscle rubs, Bath salts and other creams as I just mentioned pro fault was launched in March of this year.
It's anchored at sprouts market and is showing good reorder velocity we.
We've also received initial order indications from other target customers because of the demand for sports Formula for pain management.
And the initial positive reception of this brand we believe the prospects for this line to become a strong revenue contributor are encouraging this product competes favorably with bio freeze on IC hot which collectively generate about $250 million in revenues per year.
Continuing clockwise to Savi Naturals. This is a non <unk> D and fuse line of all natural body care products, including soaps lotions creams, using proprietary formulations and natural ingredients sourced from around the world.
We especially like having the diversity of the non CBD product line to broaden our offerings. This is the most mature line of the products on the leaf portfolio, having been acquired in 2018 and has a strong consumer brand loyalty.
The naturals are sold in greater than the 1000 retail doors with target channels of online natural specialty and conventional stores and lastly, we have zola coconut water solar is a leading coconut water sourced exclusively with sustainably grown coconuts from Thailand and was named the best tasting coconut water by expert curious.
<unk> digital brand focused on food and cooking Zola is packed with natural plant based electric <unk> and is made with non GMO project verified gluten free vegan ingredients Zola is sold in 4000, natural foods and grocery outlets, including Safeway stop and shop and.
Albertsons with this purchase we acquire of 20000 foot square foot.
The GMP licensed ISO certified manufacturing facility in Chatsworth, California onsite capabilities include ingredient sourcing formulation manufacturing and QA, QC warehousing and flexible fulfillment and shipping we believe the scale capacity of this facility is several times the existing production volume.
Which bodes well for our synergy plans, which I will expand on in a moment gross margins range from 30% to 60% depending upon the SKU and the channel being sold into today of the aggregate GM of this business.
Our gross margin is close to 40% through some very basic and inexpensive automation to increase production efficiencies some strategic product mix shifts and improved ingredient sourcing. We believe we can increase gross margins by $5 to 600 basis points within 12 to 18 months.
With this acquisition, we also gain a seasoned management team with proven FMC gx expertise, including go to market strategies marketing manufacturing supply chain, and food and product expertise and the beverage topical on wellness markets as evidenced by our strong sales track record having built Nash.
On the acclaimed brains brands such as those in the leaf portfolio three key executive adds include.
Chris <unk>, formerly CEO of Zola, Chris will be the chief growth officer for Arcadia, Chris founded Zola and Asa E beverage company in 2001 of few years later, Chris successfully extended the <unk> brand to include coconut water, a post exercise favorite hydration drink and Gruza.
All of the revenues to over $20 million annually in 2000 Sixteens. All the was acquired by growth investors Carp, Riley and Chris stayed on as Chief Executive Officer, doubling down on his passion for delicious plant based drinks in May of 2019, <unk> acquired Zola and Chris joined <unk> as head of beverage and a member of the executive.
<unk> in January 2021, <unk> was acquired by the parent company.
As chief growth officer at Arcadia, Chris will lead our growth strategy development and sales and marketing execution for our consumer foods business.
Brett Mitchell, formerly CEO of leaf brands will be the general manager of leaf brands for Arcadia, Brad has been chief operating officer of leaf since its inception in 2019, overseeing the manufacturing launch and expansion of each of the leaf brands prior to leaf Brett was the vice president and sales of operations for food distribution company base.
On Southern California.
The Linda Yao, whose arrival to Arcadia, We announced just last week is our vice president of operations and has a proven track record leading all aspects of the supply chain <unk>.
Including building things from scratch and startup and small companies to leading supply chain innovation within fortune 500, pharmaceutical chemical and CPG companies.
Most recently she was the vice president of operations at Sola working closely with Chris to establish and lead a global supply chain for plant based beverages before Zola Yao served more than eight years with the Danone company, a premier multinational food products company, where she held senior management positions in supply chain management.
For Arcadia, Yao will oversee supply chain strategy for all product manufacturing and production, including demand planning procurement and supply of relations order fulfillment inventory management logistics customer service and data analytics now I'd be remiss not to mention that much of the success of the leaf brand stems.
From the superior formulations of food grade natural ingredients tested for safety efficacy sustainability and environmental impact sourced from around the world by Hugo and Deborah set of Adra Hugo on Debra are the veteran experts in the National Foods category responsible for the.
<unk> standards now adopted by the natural foods industry in fact, Hugo Naturals, which many of you may be familiar with which is a very popular line of body care products was their first successful brand of wellness products and.
And lastly, the purchase consideration for these assets was 4 million of cash plus 827400 shares of Arcadia common stock.
If youll turn now to slide five I'll take a moment to showcase what we believe to be significant bi directional revenue and cost synergy opportunities with this conversation of this combination.
Let me begin with synergies enabled via the leaf business. The leaf brands team has established a national distribution footprint with significant product flow through the largest national distributors, including UNFI K E Dot and Lotus light and direct sales to national grocers like Sprouts, Wegmans Albertsons and.
Safeway as well as into specialty nutrition outlets in pharmacies like vitamin Shoppe <unk>.
The immediate access to this national retail footprint is of significant value to Arcadia as we are on the midst of bringing our existing and new consumer food products to the retail market the.
The grocery network is ideal for our good wheat based consumer foods like pastas flowers in the forthcoming pipeline of products powered by good.
Similarly, their installed base of pharmacies and vitamin shops are perfect targets for our plant based G. On the GLA Sonoma 400, Omega six capsules of which we can begin selling immediately into these channels, perhaps the most obvious revenue synergy for Arcadia.
And gaining with this acquisition, we will be the introduction of our archipelago premium Hawaiian CBD through the leaf distribution network versus having to incur of the time and cost to stand up the retail network ourselves from scratch. This will be of new SKU available to all stores were sole spring of sold.
Moreover, now that we have formulation manufacturing and brand capabilities to produce our Hawaiian CBD products internally, we will capture better margins not having to pay outside formulated pack.
Packaging developers and co.
Co manufacturing profit so thus far I have highlighted the retail sales synergies, we gained by leveraging the leaf retail distribution network of manufacturing and formulation capabilities depicted at the top of slide four the switching now to the ways in which Arcadia capabilities and investment can drive synergies to the leaf brands e-commerce as of <unk>.
Largely an untapped segment for the leaf products as there has been no online marketing investment in them their online sales account for between 7% and 15%, which we believe speaks to the brand strength given the lack of any marketing.
With a typical online marketing budget, we believe 25% to 30% and online sales as a percentage of total sales is a reasonable expectation.
With that said based upon our learnings from building the digital backbone for the three farm daughters ecommerce business. We've developed the proficiency to effectively capture online consumers. We believe these learnings will translate favorably to targeting new online consumers.
For our leaf CBD and wellness brands, a product category. The generally does very well on e-commerce.
With that in mind, let's have a look at the growth projections for CBD sales and I can talk a little bit about what we see on the horizon for our line of CBD products.
If youll turn to slide six as you can see CBD has already become a large commercial market at over $4 billion and the expectations for continued growth remain impressive in particular beverages and other adjustables are predicted to lead the category in growth as you know of number of large and well known companies and brands.
Are getting in the game in the significant way Charlotte's web Molson Coors and Martha Stewart's company are charging forward with CBD infused beverages gummies and capsules in fact several of our distributors are clamoring for us to introduce the CBD infused beverage formulation to the.
For that reason, we're evaluating beverage formulations brand strategies and the regulatory environment for Injectables as new product opportunities.
Okay I'd like to now turn to highlights for Q1 and events subsequent to quarter end. Another transaction highlight occurring just after the quarter end is our acquisition of the assets of of grasses, a food ingredient company based in Barcelona, Spain and includes all of the physical on intellectual property assets to enable our Arcadia to further.
<unk> trigger Dorian.
Turning to slide seven you will see sort of Dorian is a novel cereal, resulting from a cross between two species durum wheat and of wildfire Lee, giving food companies and consumers a cereal with a unique functional and nutritional properties. It is highly functional in a way.
On a wide range of cereal based applications, such as breads crackers, pastas baked snacks and beer as of crop <unk> is a robust and sustainable cereal that is water efficient with good disease in pest resistance and broad environmental adaptability finished products made with <unk> have a unique gold.
<unk> and slightly sweet buttery taste to.
<unk> is commercialized within a network of more than 50 grain producers and twenty-five millers and distributors for delivery of product to customers. That's been sold in 10 countries was seven retailers in Europe. Most recently launching his true Dorian bread product with Albert Hein, the largest grocery retailer in Holland.
To help size of the acquisition financially we acquired these assets for approximately 250000 in cash.
Our recurring revenues from the business today are between 750000 of $1 million per year, and we expect to be breakeven within a year post acquisition.
We will spend the next 90 days of integrating the tried to OEM operations with our good wheat operations quantifying synergies such as adding good wheat formulations to the traded volume channels in Europe.
And the opportunities to sell through of the Dorian products here in the states again, leveraging the leaf retail distribution network as we are able.
And now for an update on our good wheat business, we made good progress refining and optimizing our E. Commerce digital architecture in Q1 by March we were consistently converting website impressions to actual sales transactions at a rate above industry averages of 2% driving sales up in March over February as.
As we discussed on our last earnings call in March It was our intent to substantially increase our digital marketing spend in April with our three farm daughters partners to increase the scale up of our customer acquisitions and begin building a broad base of good week consumers concurrently however in April diligence with leaf brands was.
Well underway.
We quickly recognized having access to the leaf sales and distribution networks gives arcadia of the horsepower and in house flexibility to drive strong sales.
Any more strategically advantageous arrangement through a partnership than.
Through a partnership where strategic decisions on profits are shared equally.
So when broached the topic with our partners at three farm daughters. They welcome the opportunity to also make their own strategic decisions and invest in what they believe is best for their brand and their business goals. Therefore, we mutually agreed to reconfigure our alliance as the license arrangement versus a joint venture whereby they licensed.
The good wheat ingredients from Arcadia for their products the.
The continued commercial success of the three of the brand.
Pastas and flowers remains of an essential importance to both of us and we continue to collaborate well to ensure the success of the brand shift.
Shifting for a moment of Arcadia innovation as we have discussed over the prior couple of of Investor calls our portfolio of developed trades in wheat, and hemp represent the potential for significant commercial value and our primary innovation emphasis is now around new food formulation and.
And product line extensions.
As such we have reduced our investment in new trait discovery.
<unk> increased our investment in revenue generating activities for these new product introductions. This evolution necessitates of different expertise and capability to lead our innovation efforts. Hence the reason, we recently hired Tracey Baker as our vice President of product innovation, who brings nearly 40 years of experience and product formulation and commercialization with the <unk>.
Organizations like Tropicana.
CECO and Gerber.
As we complete this evolution, we no longer require of Chief Technology officer at the company. Therefore, it's with mixed feelings that I announced the Doctor Andy Schulz will be transitioning out of the company by month end Randy has been instrumental in advancing our trades to commercial viability and building intellectual property protection and most recently, leading our good hemp variety of <unk>.
<unk>, we thank him for his contributions and look forward to following his continued professional successes.
Now with respect to good wheat, new product introductions tracey's, leading efforts to evaluate the greatest bang for our Buck in food formulation.
From among those Youll see listed on slide eight that is to say where does our nutrient dense good we'd have the greatest value to consumers and food formulated.
We believe the most immediate category opportunities and where customer testing is currently focused on those shown including pancakes waffles baking mixes snacks and pizza crusts.
And in fact outlined on slide nine we're targeting of the introduction of two to three good wheat products in 2021.
We're evaluating consumer preferences testing formulations and lining up manufacturing over the next few months in order to begin commercialization introduction likely in Q4 of this year also indicated herein is the staggered launch by brand for our commercial introductions as you can see we're planning for a total of six brands to.
<unk> launched in addition to the good week consumer products. These are rough estimates based on a number of variables. Therefore, we do expect some changes to these timelines as much as plus or minus 30 days for each.
Switching briefly now to good hemp seed update because of the delay in the approval from health, Canada revenues for good hemp seeds.
Did not start in earnest until April.
Which totals to day, just over 315000 per the year and slightly under 1 million seats sold but for the quarter sales were in fact de minimis.
We're now well into the growth growing season, and our sales team has been in the field actively engaging with growers and having attended a number of hem conferences for us the fog around the seasons prospects has dissipated and it is clear to us that the lack of action on the part of the FDA to establish a regulatory framework for hemp extracts.
<unk> is causing the seed market to regress, specifically in the fall of last year hemp analysts were projecting an increase in acres planted for 2021.
Over the 72000 acres that were planted in 2020.
The most everyone expected actually well over 100000 acres of hemp to be planted in the 2021 planting season, most recently and to the contrary hemp benchmarks published their estimates for the 2021 planting season of approximately 27000 acres based upon licensing data. This is of.
[laughter] downturn that very few anticipated based upon the reasonably positive by buying signals that I think everyone, who is receiving up until very recently.
We are seeing as growers continue to struggle to secure offtake contracts for hemp, they are changing their minds and declining to grow in 2021 and in some cases are choosing to grow commodities instead, which are at an all time high.
We will continue to compete aggressively for our share of seeds sold through the balance of 2021.
But expect now for this malaise the persist until the FDA follows through on regulations. The primary hope for action by the FDA now is the Bill HR 841 introduced into the house in February of 2021 by Congressional representative Kurt Schrader of Oregon. This bill allows the use of CBD as the dietary.
Supplement provided that the supplement meets other applicable requirements. If past we believe this bill will reinvigorate demand for hemp genetics in time.
Before turning the call over to Pam for a review of the financials I'd like to close with the macro perspective on our corporate mission healthy people healthy planet.
Having executed on the stated goal to vertical wise I believe the fundamental commercial strength of the company and our strategic plan to achieve that mission to create shareholder value of stronger now than ever before.
Believe this because one we have a broad suite of plant based on sustainable good for you consumer food and wellness products lined up for retail and E. Commerce channel revenue generation too. We are enabled to provide quality assurance of our premium consumer products from seed to shelf are critically important criteria for any CPG.
Sourcing products, especially in the emerging CBD market three we can maintain better control and margin protection against market shocks like those we are seeing in the hemp seed markets today.
Four we are now fully participating in brand in retail margins and lastly, we possess proven Mcg leadership expertise.
With that said I'll wrap up with that and turn it over to Pam for an update on the financials Pam.
Thank you, Matt Okay, I'd like to take a few moments to share the financial highlights for the quarter on with you now.
As Matt mentioned at the onset of the call. We are very pleased that may be at the acquisition of leaf brands and Delek coconut water and we look forward to reporting revenue from product sales starting in the second client.
Turning to slide number 10 total revenues recognized from the first quarter of 2021 were 828000 compared to $309000 from the first quarter of 2020 with the majority of the $519000 increase driven by good wheat grain sales this quarter, along with additional GLA product sales.
Total operating expenses of $6 2 million in 2021 were up slightly from the $6 1 million recognized in 2020 out of the comp composition different cost of product revenues of $856000 increased by 724000 from the first quarter of 2020% of the first quarter of 2021 due primarily to.
Higher good wheat grain in GLA product sales along with the distraction of some non viable seed in Hawaii.
R&D expenses for the quarter were $1 million from 2021 as compared to $2 2 million in 2020.
The $1 $1 million decrease was driven primarily by lower employee related expenses as we shifted our focus away from the true research and development and towards the the development of commercial products. During the latter portion of 2020.
Selling general and administrative expenses totaled $4 1 million in the first quarter of 2021 of $346000 increase from the $3 7 million recognized in the first quarter of 2020.
Increase the play expenses, along with higher marketing and advertising activities, partially offset by lower consulting related stock compensation expense from the first quarter of 2021 as compared to the first quarter of 2020.
Net income to common stockholders was $2 $1 million from the first quarter of 2021 compared to $2 5 million in the first quarter of 2020.
Give a little more detail on that other income and expense line on the slide that totaled $7 4 million for the first quarter of 2021, and $8 3 million for the first quarter of 2020.
So the first quarter of 'twenty 'twenty. One includes the included an unrealized gain in the amount of $7 $5 million related to the one 875 million shares of <unk> stock that we hold as the stock price increased significantly from December 31, 2020, and March 31 2021.
When we recognized $769000 of issuance cost associated with the pipe transaction on January of this year that brought in $25 $1 million of gross proceeds.
In addition to the noncash gain of 322000 for the change in the fair value of warrant liabilities from the end of quarter four to the end of quarter one.
And the first quarter of 2020 did not include any issuance of operating costs that we did recognize a noncash gain in the amount of $8 $2 million of change in the fair value of common stock warrant liabilities.
The number of warrants outstanding that are associated with these liabilities increased significantly with the January type transaction.
And the balance of cash and cash equivalents totaled $32 8 million at the end of first quarter of 2021.
Short term investments at the end of the quarter with $19 1 million.
Comprised of the fair value of the by a series of stock held and up from the $11 6 million fair market value balance at the end of December 2020.
So this concludes our financial highlights for the first quarter of 2021. Thank you very much for your attention today and I will turn the call over now to the operator for question Leah.
Hi, Dave to ask the question. Please press the star and.
And the number one key on that.
Just on telecom.
P. J question has been answered or you wish to remove yourself from the queue. Please back to the county.
Your first question comes from the line of Bank line from Lake Street Capital. Your line is open.
Alright, Thanks for taking my questions here, congratulations on a good quarter and it sounds like a lot going on over there on.
The first question is in the context of the quarter itself.
The clarification around the the grain sale classification that you have four for good week range.
Is that is that revenue to three from daughters.
How that's termed or is it as good we grain sales in the quarter or is that something else.
And then I can take that question that is not sales two three bombed out or is that with those of our sales to other customers.
Okay and.
On.
Okay.
All right interesting.
Okay.
The next net.
Question on have you talked about the $6 million.
The recurring revenue from the acquisition.
And Matt It sounds like the $6 million number was the revenue from those brands. In 2020 is that is that correct thats not a forward looking estimate.
And the actual 2020 number.
Yes, thanks for clarifying your asking for clarification of that is correct that was the revenue generated by three of the four brands in 2020.
<unk> was launched.
In March of this year of so anything that generates will be additive to that recurring number.
Got it okay as well.
Both of those existing brands.
Got it okay.
And then.
You talked about integrating your Hawaiian operations into the supply chain of this acquisition.
It sounded like like what you were referring to was that there was going to be.
New labels to the brands that are.
<unk> that have of Hawaiian like of Hawaiian brand element to it is that correct that these are going to be new brands in this portfolio of not youre not necessarily going to be replacing the existing supply chain with your own internal internal capability does that range.
That's correct these will be additive to the existing skus that they have they don't currently sell of Hawaiian CBD.
So this will be an app.
AD.
Okay.
Got it.
And then on the.
The two other I guess two other really quick questions. One you talked about the.
The expectations later this year of launching new good wheat brands consumer product one two and three is how it was phrased on here.
It.
Is it fair to assume that debt you're focused now exclusively on building your own brands internally and that the partnership model is not something maybe you will entertain that down the road, but the internal brand development of what you're focused on for good weighted correct.
We think thats, the best best way to create value for our shareholders and we've learned a lot about the value of the good REIT brand itself and we believe that it will.
It will resonate directly with consumers. So that is our strategy going forward and look I think three of farm daughters will continue to be successful as well.
I think that it is their desire to to add other products and do things with their brand that are of interest to them.
And we want to we want them to be free to do that while we pursue what makes the most sense for us on our shareholders as well.
Got it.
And then last question and this is something I asked on the last call, but but given your comments about the trade trade portfolio the damage to re ask it.
At this point given how much has changed in your in the strategy even over the last six weeks can.
Can you talk about really what is in your Youre trait discovery.
The pipeline today, and really what's left of the kind of legacy AG biotech capabilities in terms of.
Head count today versus a year ago.
What remaining strategic objectives, there are on anything.
That would be helpful.
Sure. So when we look at wheat in particular.
There is a fairly broad set of traits that we have that we've added to by having acquired the <unk> assets that we believe will are applicable to just about any wheat formulation of any food formulated with the wheat.
To improve its nutritional content. So we think that either whether it's high fiber reduced gluten extending the shelf life of the wheat.
All of those capabilities are within the portfolio of traits that we have.
So that right. There we think is enabler to become a gold standard in wheat, which is of very large opportunity for us.
And so.
That the the way to do that at this point is to to develop new formulations and focus on food science in order to ensure that we're bringing those products to market.
In the right <unk>.
<unk> and taste.
Which is which is a slightly different skill set than the.
The the buyout of the traditional biotech. So that's that's the reason for the evolution and.
That's an example of the breadth of the traits that we have available to us on our portfolio for wheat for example.
For hemp.
We've developed strong varieties for our good hemp.
And we have continued to kind of evaluate.
Genetic opportunities, but I think for the time being given that what we've learned is that the germplasm the market for hemp in the near term and foreseeable future is not likely to be a very large market.
We think our for the.
Near term our dollars are better spent and iterating on those varieties and.
And Jean Jean Plaza germ Plasm advantages that we are at.
Attributes that we've created the date, so discovery of new traits, we've really.
Decreased that investment to zero for the near term and are investing in exploiting those discovered trades to date.
Got it and that would be a significant reduction in our R&D.
Both head count and spend that's why you see such a significant improvement or a reduction in debt expense over the prior year quarter.
Got it.
The context.
Very good well I appreciate you both answering my questions and ill get back in queue.
Okay. Thanks, Ben.
And your next question comes from the line of Steven Ralston from Zacks. Your line is open.
Hello can you hear me.
Yes, Hi, Stephen how are you hi, congratulations on the base.
Lease acquisition, it's quite transformative it seems like you mingle elite from being an AG company too.
Consumer brand name company.
Do you have on it.
Youre welcome.
<unk>.
I'm curious about.
A couple of things one is.
I'm looking at the now you have multiple product line.
And I'm trying to look through these layers of revenues that you are going to be generating going forward.
Leaf is about $6 million of year.
It seems like the relationship with tried to iridium is going to be on.
Most of the million.
Uh-huh Youre good week and GLA is.
Well you did.
At least 800000 in the first quarter. So we'll call it by the $4 million run rate on the year really basis because.
Both of growing.
And then you have this additive layer of the.
Hawaiian CBD product line that will probably come online.
I mean conservatively it seems like you'd be generating at least $2 million quarter.
How off of that.
Well I mean, I think it's premature for us to give specific guidance, but I think you kind of laid out all of the shots on goal that we're looking at that will contribute to revenue the timing of which we're doing our best to <unk>.
SaaS.
And whether that like you said I think of the recurring revenue. If you looked at what these products produced in 2020 is around $7 million, including try to Oreo.
And then as we as we.
Push these products on e-commerce hard to predict how quickly and how much revenue but.
When you look at how well some of the CBD topical brands do online it's encouraging.
So we know we're going to refrain from commenting gift, giving guidance or commenting on it but I think you are putting the pieces together and connecting the dots to.
To appropriately to recognize that we really are well positioned right now.
To bring these products to market and have significant revenue generation during the year and.
Into the future.
Thank you.
Last question, but it's the broad general one.
Could you go into any further details of how you expect to get the synergies through of feed.
While the multiple distribution channels that you now have access to.
Yes, so I think.
If you go back to the comments I went through.
There is a very broad independent grocery chain.
Net leaf is selling into that.
They've done very well with their products and have a good relationship on.
Whether it's Safeway Albertsons and others, we think those are.
Premier outlets and great opportunities for all of the products. We just we took you through on slide I think.
Inc.
And so leveraging those relationships.
And introducing through those relationships. These new products, we think is of tremendous synergy.
And similarly, with the Hawaiian CBD going into were sole spring is today and over.
A couple of thousands of stores in.
In addition, we can see significant synergies of the other direction of the experience that we've had with.
On the digital infrastructure for selling our three foreign buyers pasta.
There are some significant learnings there and we think we're pretty well positioned to use those learnings to begin targeting.
Consumer demands for those brands that have yet to really be invested in from an ecommerce standpoint, so that would be synergies going the other direction also.
We we really see some some significant.
The low hanging fruit with regard to improving efficiencies around manufacturing.
Some minimal investment in automation should should bring a fair amount of.
The improvement in margin.
<unk> frankly.
Has come down as an ingredient cost over the last year very very significantly so people were paying $11 four per kilogram of distillate.
16 months ago today, it's maybe $1000. So when we look at the prior margins, where they were and where they are going to be in 'twenty, one taking into account those on.
<unk> and formulations.
<unk> formulations sourcing improvements, we think that there are significant opportunities for synergies there on the cost side, so between revenues and costs, we're pretty excited about.
The growing this business and growing it more profitably.
Then.
It was in 2020, and then when I look at how it did against COVID-19 and all of the other challenges last year, we feel like.
We've got a tiger by the tail so.
We're pretty excited about this deal on.
How we're going to do here for the rest of the year.
Thank you for answering my questions.
Sure. Thanks Steven.
I'm showing no further question at this time I would now like to turn the conference back to Mr. Matt Hoffman. Please go ahead Sir.
Well, thank you everyone for joining us.
And your continued interest and support we are looking forward to real time reporting our key milestones and achievements in the field and commercial markets and we wish you all safety and good health of a good afternoon.
This concludes today's conference. Thank you for your participation and have a bunch of slow day you may.
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Thanks.
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[music], Inc.
[music].
[music].
[music].