Q4 2021 Valens Company Inc Earnings Call

Hello, and welcome to the Valens company's fourth quarter and fiscal year 2021 financial results Conference call.

At this time all participants are in a listen only mode.

A brief question and answer session will follow the formal presentation.

If anyone should require operator assistance during the conference. Please press star zero on your telephone keypad.

As a reminder, this conference is being recorded it is now my pleasure to introduce your host Everett Knight Executive Vice President of corporate development and capital markets off the Valens company. Thank you ever at please go ahead.

Yes.

Thank you operator.

Good morning, before we begin on behalf of the balanced company, we'd like to give our heartfelt sympathy to any of our stakeholders in Ukraine, or Russia, or those who have family and friends in either country that are being unwittingly subject to an unfortunate political agenda that is unfolding there today.

Our thoughts are with you.

Welcome to the Valens company's fourth quarter and fiscal year 2021 financial results conference call for the period ended November 32021.

A replay of this call will be archived on the Investor Relations section of the Valens Company's web site at the balanced company Dot Com slash investors.

Before we begin please let me remind you that during the course of this conference call Valens management may make statements, including with respect to management's expectations or estimates of future performance.

Statements other than statements of historical fact constitute forward looking information or forward looking statements within the meaning of the applicable securities laws and are based on expectations estimates and projections as the date hereof specific forward looking statements include without limitation, all disclosures regarding future results of operations economic.

<unk> and anticipated courses of action. These forward looking statements are subject to a number of risks and uncertainties that may cause actual results to differ materially from expectations.

For more information on the company's risks and uncertainties related to forward looking statements. Please refer to our latest annual information form or latest management discussion and analysis, otherwise known as M. DNA each filed with the Canadian Securities regulatory authorities at SEDAR Dot com or at the Valens Company's web site at the back.

Company Dot com or Edgar dotcom.

The risks described in the annual information form, which may cause the actual financial results performance or achievements of the Valens company to be materially different from estimated future results performance or achievements expressed by forward looking information or forward looking statements are hereby incorporated by reference herein. Although these forward looking statements reflect management's current belief.

<unk> and reasonable assumptions based on current available information available to management as the date hereof, we cannot be certain of the actual results that will be consistent with the forward looking statements in the future. We caution you not to place undue reliance upon such forward looking results for any reconciliation of non-GAAP measures measured and discussed please consult our.

Latest MD&A as filed on SEDAR and Edgar.

Joining me on the call today are Mr. Tyler Robson, Chief Executive Officer, Mr. Sunil Gandhi, Chief Financial Officer, and Mr. Jeff Fallows, President with that I would now like to hand, the call over to Tyler Tyler. Please go ahead. Thanks.

Thank you everyone and welcome to everyone that has joined our earnings call to discuss our results for the fourth quarter and fiscal year 'twenty 'twenty. One ended November 32021.

To kick us off I'll I'll, probably start by saying we are disappointed in the results to say, the least and we're not complacent and we're not satisfied with the numbers that we did put up in the quarter and we we've done multiple things since year end at November due to right size the shift not only internally, but really focus on fundamentals.

Before I give my thoughts on the corner quarter I just wanted to thank our shareholders as we acknowledge the challenging capital markets environment and our share price.

Sure you were suffering alongside with you as shareholders and we want you to know that in no way are we happy with the situation and doing everything we can to ensure that public valuation accurately reflects the value we have created in our company.

Overall, our financial performance in this quarter was not up to my expectation, but we have made clear progress in the execution of our strategy and I believe it sets us up for a successful 2022 since November we have not been complacent. We are now we've now made incremental changes in our business plan that set us better up for the year in the fourth quarter, we were only firing on too.

Three cylinders provincial sales in Greenville showed strong growth despite a very difficult industry dropped back. However, one of our cylinders BTB was not firing as we reconstructed it for future growth as a result, our BW revenue significantly declined in Q4 as we finally made the shift the aggressive shift away from viewers.

Fewer smaller companies to a fewer bigger better we.

We did that for two reasons, the lack of consistency and forecasting and some of our clients and the inefficient and unprofitable business models. They were running we expect to bring 2020 do you expect to bring multiple bankruptcies and a really choppy sector and we wanted to make sure we got away from them sooner than later.

Yeah.

An important takeaway from our investors, despite a declining or a decline in revenue quarter over quarter, we were able to grow our gross profit margin meaningfully which represents an early sign that the decisions. We made in 2021 are moving the business in the right direction. Looking forward. We entered we are entering 2022 best positioned for growth as we begin to realize the revenue benefits.

Our successful listing is pushed back in 2021, we have continued to take market share into the new year with the backdrop investors can expect revenue growth back on track. This year operationally, We commission the K two in Pommies facilities and acquired like food technology is giving us access to a next generation product development capabilities, and allowing us to drive economies.

Enemies of scale through automation launch flower pre rolls topical edibles and new product verticals subsequent to quarter end, we believe manufacturing cannabis infused beverages at Pommies facility innovation as the core of our story for 2022, we manufactured a range of innovative products, including CONTRAN Candy candy on flower versus.

Blackberry and key lime Selzer's and if a lineup of concentrates.

In summary, we made real strides in the execution of our strategy in 2021, despite a competitive and challenging operating environment in Canada and globally. However, we locked the revenue growth with the transition and investors should expect with the transition behind US. We are now on top of a top tier brand branded cannabis company in Canada with the portfolio of exciting.

It's exciting brands that we are best positioned to grow our market share in Canada target categories.

Accordingly, we do not believe the value segment.

The significant strategic transition we successfully completed in 2021 is currently reflected in our share price everyone. In our company is aligned and focused on doing their part to fix the situations. We look forward to delivering our 2022 commitments and invite all investors to measure us against the financial and operational targets. We've established at our Investor day with that overview I'll turn the call over to Jeff.

<unk> President of the Valens company to dive deeper into our operational achievements and strategic initiatives.

Tyler looking back over 2021, we made big strategic strides in the midst of a tough global environment. However, as Tyler mentioned it is very clear we still have work to do.

We're an acquisitive 2021 we entered 2022 with kind of this top innovative cannabis platform, a joint b to C and D to be offering that mimics large CPG companies and offers a unique opportunity for investors to gain access through higher margin branded products.

Furthermore, this strategic decision to focus on larger more consistent customers enables thought enables violence to operate more efficiently generate higher margins through higher volume output provide consistent manufacturing revenue and improved working capital. We are already starting to see momentum from this realignment and anticipate the benefits.

The flow through from revenue and gross margin growth through 2022.

We successfully increased our Canada wide provincial listings by 21% to 219 at the end of Q4 2021 compared to 181 at the end of Q3 'twenty 'twenty. One we further expanded to 255 at the end of January 2022 as expected we have seen this translate into sales momentum.

Q1, 2022, and investors should expect growth in this area.

Going forward, we will be removing underperforming listings that we've accumulated through acquisition and putting more resources into successful listings to drive utilization and profitability.

We introduced product listings as a benchmark metric during 2021 as we believe that the time that this was the best way to demonstrate to our investors. The progress we were making in our branded product strategy. Starting in Q1, we will no longer be referencing this metric, but instead will be giving our shareholders update on our market share.

We now have a well placed portfolio of brands in the market and expect to see strong momentum and market share gains from these and other listings achieve in 2020 one throughout 2022.

Said more succinctly, we are now a branded product company and market share will be a key indicator of our performance.

I want to highlight some of our product and brand achievements in 2020 one.

<unk> Specie Godbout 28 Gram was the number two best selling SKU across all categories in Alberta, British Columbia, Ontario, and Saskatchewan. During the three months ended January 2022, based on Hi Fi our data.

Estimated share of the cannabis infused beverage category increased 10% in Q4 2021 from 9% in Q3, and Alberta, British Columbia, Ontario, Saskatchewan based on high fire data before the commissioning of the parties facility.

This puts us in the top three in market share in Canada.

One of our partner brands holds the number one position in topical is in Canada.

In January 2022 volumes achieved the eighth highest market share of all license producers in Ontario with versus BC got about 28 Gram as the number one best selling SKU across all categories based on Ocs depletion data encompassing online sales to consumers and wholesale sales to private retailers.

With the majority of our large capital projects behind US, we expect to showcase the violence low cost manufacturing capabilities in 2022 with the launch of several new products within our versus and BK brand portfolio designed to drive greater volumes and increased production efficiencies.

Going on to our U S strategy Greenville generated $5 $7 million of revenue in its first full quarter of consolidation from $4 7 million and a partial third quarter consolidation subsequent to quarter end greenhouse launched its first ever brand campaign on the day. This this campaign was designed to showcase Green Road.

<unk> simplified the buy decision and increase the frequency of interaction with our customers.

Through the loss of this through the launch of this brand campaign and our newly rationalized product portfolio, we even deepen our penetration into existing channels, including convenience smoke conveyed an independent pharmacies as well expand our reach into new channels, including chain pharmacies mass market retail specialty stores in pet stores.

We are focused on maximizing our manufacturing capabilities across the green roads product line with opportunities to leverage <unk> industry relationships to drive additional <unk> partnerships increased asset utilization support a strong margin profile and capture additional market share.

With a sophisticated online marketing strategy and a robust E. Commerce platform, we have realigned our distribution channel strategy to better leverage the online direct to consumer market. Our e-commerce platform, along with our portfolio repositioning will contribute meaningfully to top line revenue growth and continued to improve our margin profile.

As investors have seen from recent announcements we have now entered the growth and optimize phases of our business plan, which are focused on maximizing sell through driving higher utilization across our facilities and pursuing optimization initiatives to ensure we remain operationally agile we are working to position ourselves competitively in the market.

Particularly as we navigate the ongoing logistical and inflationary challenges and retail price compression across several categories and the current Canadian environment.

As we discussed during Investor day through our integration initiatives, we have eliminated a number of overlapping functions and centralized some shared services across different business segments, we have invested in automation such as.

The commissioning of the Pommies facility and automated edit made compatible manufacturing equipment packaging lines and pre roll machines.

We expect further automation to happen over the coming months as we continue to push towards profitability.

We are also optimizing our product portfolio to eliminate underperforming product skus and those that were not aligned with our go forward strategy as well as realigning certain brand offerings to better address consumer demand opportunities.

Finally, we have made advancements in our biomass sourcing strategy by leveraging existing relationships and buying power as the largest purchaser in the country to source biomass.

Low cost.

While we believe these changes will make material positive financial and competitive impacts on our business. There is still much work to be done.

We enter 2022 as an innovative branded product company with a larger total addressable market, a broader product offering and opportunities for growth and greater competitive advantages than we had when we started 2021.

This was the promise we made to our shareholders at the beginning of last year.

Looking forward we.

We laid out some very specific benchmarks in our investor day that clearly set out our objectives for 2022.

One to.

To be a top five player in Canada, and Vapes edibles and beverages.

Number two to be a top 10 player in Canada and flower products number.

Number three achieve gross margin improvement and positive EBITDA by Q4 2022.

And number four expansion in your in the U S market as permissible under federal regulation.

Finally, we rolled out revenue and EBITDA guidance for 2023.

Revenue of a minimum of $225 million and adjusted EBITDA margins of greater than 10%.

I'll now turn the call over to ever to discuss industry trends and capital markets activities. However, Please go ahead.

Thank you Jeff in the fourth quarter, we successfully closed the acquisition of <unk> candidates and citizen stash, which propelled valens entry into the flower and pre rolls segment, which represents two of the largest categories in the Canadian cannabis market currently accounting for over 70% of retail sales.

We view the combination of these recently closed acquisitions to strongly position valens branded products across the value chain significantly bolstering our innovative low cost platform into flower as consumers look for new and innovative products in the market infused pre rolls are anticipated to gain market share.

In Canada, the infused pre rolls sub category is growing rapidly and is positioned to be consumers goto product over non infused pre rolls as in mature markets in the U S.

As the subcategory represents 46% of all pre roll sales in California in 2021, According to BC B B DSA with only a fraction of that in Canada. Today Valens is well suited for our significant gains in this category given its expertise in concentrate.

It's pre roll manufacturing and innovating in categories, where complexities are apparent.

Subsequent to the quarter end balance began trading on the NASDAQ capital markets, which represents yet another important milestone that reflects our commitment to all shareholders. As we continue to advance our global growth initiatives by capitalizing on the legalization of cannabis around the world and strengthening our corporate governance.

We are already starting to see the benefits of trading on the NASDAQ with overall liquidity improving 47, 2% just two months after listing.

It was a blockbuster year for Ipos in the NASDAQ along with companies switching to the NASDAQ in search for liquidity in 2021, there were 753 ipos in the NASDAQ compared to an average of approximately 161 annual ipos in the last 10 years on the NASDAQ representing a 360.

8% increase as the NASDAQ became more crowded in 2021, increasing awareness became an issue amongst recently listed companies Manny.

Management continues to believe that the long term benefits of trading on the NASDAQ will outweigh the short term volatility as experienced in our share price at the start of 2022.

Currently institutional ownership in the cannabis sector is approximately 44% lower than the average of mature CPG industries as candidates is still in the early innings of attracting institutional capital.

We are already seeing the beginning to see capital inflows amongst a broader base of institutions as they come on board as investors as part of our capital market strategy, We anticipate institutional holdings to increase with ownership percentage in parallel parallel to that of our U S listed Canadian peers as we continue to broaden.

Institutional and public outreach initiatives through increased participation in investor conferences, marketing Roadshows and media relation activities as part of our Investor day initiatives, we've teamed up with Ben Zynga, a well known financial media and news company to live stream the Investor Day conference to its approximately 10 million.

Active users.

We continue to believe that listing on the NASDAQ was the correct decision for our shareholders and with valence share price at current levels. We believe this represents an attractive entry point for investors over the long term, we believe with our joint BDC and BTB platform that mirrors large CPG companies. It offers a unique opportunity.

<unk> for investors to gain access to a differentiated business model than our U S listed Canadian peers, we will continue to update the capital markets community of our activities throughout 2022.

Further integration opportunistic M&A and CPG partnerships that would complement our low cost innovative manufacturing platform will be the focus in 2022 with the U S being at the top of our list for such opportunities. We are working to provide our shareholders with greater exposure to this massive market and a variety of strategic virtu.

<unk> subject to changes in the U S federal regulatory landscape.

A bright spot in our low cost manufacturing platform is the ability to balance spot biomass purchases with longer term contract growing arrangements to ensure consistency of supply at predictable prices with further declines in biomass pricing expected in 2022. This provides balance with a significant tail.

Oh and to leverage its position as one of the largest bulk purchasers of biomass in the Canadian market, keeping input costs low while driving higher margins through branded sales and utilization all of this at a time when inflation cost pressures are reducing margins across all other industries.

Our recent Ontario Auditor General report highlights that there are nearly 1800 candidates products available for sale in the province of Ontario with over 800 cannabis licenses competing for the Canadian cannabis market place today, we expect 2022 will be a challenging environment for under capitalized companies.

And with further bankruptcies anticipated, we believe only companies like ours with distinct competitive cost advantages and advanced product capabilities will thrive and take market share.

We now have one of the most sophisticated low cost manufacturing platforms in Canada with the capabilities to capture additional market share through comprehensive manufacturing and distribution platform, which utilizes the innovation and automation with even more coming online over the next few months next.

Next use use of contract ROE partners.

Combined with spot purchases provide for efficient use of capital.

And last speed to market with manufacturing new innovative products as consumer preferences constantly involved in this environment.

We are a very different business than we were last year with 75% to 85% of our revenues now in our control and with a new refresh <unk> contracts and as a management team. We continue to believe that balances undervalued compared to its peers.

This year, we are hyper focused on our business fundamentals with the expectation to drive revenue growth achieved positive EBITDA and attain deeper U S. CBD market penetration. We believe the success of these initiatives. These initiatives should shrink the valuation gap between Valens and our peers.

In addition, we believe our recently.

Listing on the NASDAQ was the right decision as it is already showing an increase in liquidity and expanding our reach to investors in the U S.

With that I'll turn it over to Sunil.

Thank you everyone I will cover the financial results for the period just ended net revenue decreased by 12, 3% to $18 4 million for the three months ended November 32021, compared to $21 million in Q3 of 2021. This decrease in revenue was primarily driven by the transition of <unk>.

<unk> business to align with the fewer bigger better strategies to reduce working capital rich tradition to a negative impact of the floods in British Columbia, which resulted in significant supply chain disruptions spin.

Specifically, the BTB revenue decreased by 53, 9%.

Two $4.1 million for the three months ended November 32021, as we strategically transitioned away from our underperforming BTB partners. During this quarter offsetting this decline. However was up 31, 7% increase in provincial sales and a 21, 3% increase in.

Revenue from Green roads, reflecting the first full quarter of consolidation from Q3 2021.

Adjusted gross profit margin for the fourth quarter was 34, 1% compared to 27, 4% in Q3.

The improved adjusted gross margin in our most recent quarter compared to Q3 was attributable to improved efficiencies in our Canadian operations by leveraging the newly completed key two facility as well as the increased contribution of the Greenwood business to our overall sales mix.

The adjusted gross profit margin is normalized for the impact associated with $3 $6 million in inventory write downs, which were mainly related to costs associated with discontinuing previous.

Brand partner or BTB relations, namely faulty hardware and out of date packaging.

While we are making strides towards improving the margins in our Canadian business. We are still performing below our long term expectations due to the inherent inefficiencies of new production processes, especially those associated with new product launches.

In addition, the impact of a globally tight labor market and supply chain challenges is resulting in inflationary cost pressures and the Canadian market continues to face a heightened level of price compression at the retail level 2021 was an increasingly complex environment not only in order flow ramped up.

Significantly, but also due to heightened lead times and increased cost exacerbated from the pandemic.

So looking forward to 2022, we do anticipate some margin headwinds caused by increased supply chain related cost and continued retail price compression that being said, we still anticipate that adjusted gross profit will continue to improve from 2021 levels as we optimized product mix towards branded <unk>.

Sales.

And drive increased utilization lower biomass pricing and make our manufacturing processes more efficient through automation.

Operating expenses were $25 $7 million in the quarter compared to $19 $5 million in Q3 2021 the.

The increase in operating expenses compared to the previous quarter was due to a combination of factors such as the reduction in the Canadian emergency wage subsidy of $2 $9 million as well as the inclusion of the citizens SaaS business with increased labor costs and the inclusion of a full quarter of the greenhouse visits and increased sales and marketing costs really.

<unk> to our own brands.

As previously announced we are expecting to rationalize our operating cost footprint for our integration initiatives in 2022.

So valid ended the fourth quarter with an adjusted EBITDA of negative $13 $3 million compared to negative $6 $2 million in Q3.

Decrease in adjusted EBITDA was mainly driven by the digest.

By the flurry of activity as we.

Integrated many acquisitions as well as the reduction in the Canadian emergency wage subsidy and operating cost we simply grew faster than our revenues. We are confident that the combination of our integration initiative in 2022, and our anticipated market share and revenue gains will result in positive EBITDA by Q4 2022.

From a balance sheet perspective volume continues to improve its working capital balances to ensure a strong position as at November 32021, overall receivables of $28 $6 million included $27 million of trade receivables from customers with the balance being made up of other non trade receivables.

The balance of trade receivables as of November 30th declined by 21, 5% from the balance outstanding in the previous quarter.

Yeah.

This was in accordance with the realignment of our <unk> business receivables were elevated in 2021 has been to be comprised of substantial portion of the historical revenue base. However, the ongoing shift toward the BBC and retail channel is already showing improvements with faster payment cycles and a decrease in overall.

Receivables and we expect this trend to continue throughout 2022.

In addition balances subsequently collected has trade accounts payables outstanding with the same customers our highest recorded a trade receivables valuation allowance provision representing 76% of the total receivables balance that was outstanding as at November 32021.

Now as that November 30th the company had $42 million of inventory on hand, compared to $29 $6 million has that the previous quarter. The increase in dry cannabis inventory was mainly attributed to the inclusion of citizen staffs as well as in preparation of new brand offerings from Contra Brent and <unk>.

The increase in extracted cannabis inventory was attributable to new innovative product launches in relation to our branded strategy as we tried to take advantage of outdoor biomass that came off the field in October .

In addition, the company has had to increase safety stock inventory levels due to the disruptive supply chain environment to ensure supply to key customers is not compromised.

We expect inventory levels to normalize in the months ahead as we are targeting inventory on hand of approximately 90 days of sales by the end of Q4 2022.

So valves ended the quarter with a cash and marketable securities position of $19 1 million as at November 30th compared to $32 5 million in cash and restricted cash has at August 31 2021.

Representing an overall cash burn rate of $13 3 million and an improvement from Q3 subsequent to quarter end the company raised $40 million in debt financing. The proceeds from the debt financing were used to repay previously existing debt and will be used for general working capital purposes.

We expect to improve on cash burn rates starting in Q2.

This of 2022 and into the back half of the year with the implementation of the $10 million in annual cost efficiencies that was announced in early February which are largely being sourced from the elimination of overlapping functions across different business segments, the reduction in manufacturing and sourcing costs and realization of M&A synergies.

Furthermore, with investments in large capital projects largely behind US, we expect capital expenditures to be significantly lower in 2022 as compared to the previous three years.

Combination of realizing cost efficiencies in the second half of fiscal 2022 and reduced capital expenditures is expected to result in a meaningful improvement in our cash burn rates in the back half of the year all based on the path towards becoming EBITDA positive by Q4.

So with that I will turn the call over to the operator to open the line for the Q&A session.

Thank you we will now conduct a question and answer session. If he would like to ask a question. Please press star followed by one on your telephone keypad, a confirmation tone will indicate your line is in the question queue.

You May press star two if he would like to remove your question from the queue for participants using speaker equipment. It may be necessary to pick up your handset before pressing the star keys, we ask that you limit yourself to two questions. Initially so that we have time to speak with as many of you as possible. If you have additional questions. Please rejoin the queue and we will endeavor to come back to you.

Later in the call.

Our first question today is coming from Gerald Pascarelli with Cowen. Please go ahead.

Hi, Good morning, Thank you very much for taking the question.

I just wanted to try to bridge the margin progression, obviously nice expansion so.

Sequentially here in the fourth quarter, you did have a full quarters benefit of a green roads and so booking forward. It is the main driver behind the margin progression just positive mix shifts to to your branded products in Canada as well as.

That's one of the screen roads do you expect both of those to go up as a percentage of your revenues or do you have any rate increases.

Got it in there just in particular, given the current environment that that CPG is operating in any color there would be helpful. Thank you.

Yeah, absolutely. Thanks for the question I'll pass it to Sunil to talk about one yes the.

The progression in gross margin is expected to be come from both sides of improved sales mix on the branded and the increased contribution of Green Roche over the course of a full year as well as our internal improvements in operating efficiency, we would not have factored in rate increases into our gross margin improvement profile for this year.

Got it that's that's very helpful. Just last one for me is on is on C. P. D. It seems like you are certainly increasing your penetration.

Across the retail landscape.

E Commerce is there any broad color you can provide on how sales have been trending maybe post the quarter.

Looking at the $5 7 million compared to the 4.7 million seems like like sales would have been roughly flattish right, but if if if you factored in.

Fourth quarter and three Q. So just any any color on any potential revenue progression that you're seeing at a Greek routes or whatever you are seeing would be helpful. Thank you.

Yeah, Jeff why don't you take that one for sure yeah. So so there would be a slight growth Q3 to Q4, there from that implied.

<unk> quarter in Q3, but I think largely it was flat I that would be particularly as we're getting you know getting our hands around the business again launching the strategies that you're now seeing come to bear, including some product rationalization et cetera, as we look to you know to Q1 and into.

2022, obviously, we don't give.

Give guidance, but what I can say is the the our Q1 from a green roads perspective is subject to obviously, some seasonality and related to both the Christmas season.

In early January new year season.

As you know are in the U S. A large part of the business gets done on the on the Black Friday.

And and how sort of lagging in fact into our into December .

Got it.

Got it. Thank you very much for the color I'll hop back into the queue.

Thank you. Our next question is coming from Neal Gilmer of Haywood Securities. Please go ahead.

Yes, good morning, everyone.

I'm just wondering your thoughts on how we should be thinking of the b to B segment from here or was this sort of this sort of decline that we saw bring the BDA segment to its trough does it grow from here. When you were just focused on those fewer.

Bigger better just sort of wondering how we should be thinking of that aside from obviously your own branded products into the marketplace.

Yeah, absolutely. Thanks for the question Neil I would say the best way to think about it is growth.

We have right side of the ship and DDB and what Youre going to see is growth coming out of the BTB segment now that we've effectively moved on from some of the other people and the relationships are now materialized.

And you will see growth.

Okay. Thanks for that Tyler My second question I guess, maybe just sort of your thoughts on your strategy to capture market share your comment to move away from talking about product listings to capturing market share and also acknowledging you're operating in a competitive marketplace, what sort of levers are you guys looking at to try to.

Make sure you capture that market share and grown over the course of 'twenty two.

Yeah. That's a great question. So I think the story for 2022 right now is distribution 'twenty 'twenty. One we spent a tremendous amount of time on acquisitions and integration and innovation of products. All of that is now in there and we've seen some products go out late January early February so right now the simple tale of the tape Prevalences moving cases.

We're going to open up distribution and that's where the growth is going to come from.

Okay. Thanks Kelly.

Thank you. Our next question is coming from Andrew <unk> of Stifel. Please go ahead.

Hi, good morning, Thanks for taking my question.

Maybe just starting off with.

It was my home province in Quebec wondering if you could provide any updates.

And maybe just thinking about it in a big picture sense, you know what kind of market share do you think you can capture.

In the province.

Yeah. Thank you Andrew it's Everett here I'd say, we're just in the beginning innings of that strategy taking fruition.

To be clear actually in the guidance, we put out and are objectives that does not include Quebec today and.

So all of those benchmark that investors should be I'm guiding us to them and are executing on it doesn't include it I'd say, that's upside we're going to give more information on that throughout the year and we'll give more transparency as it comes to fruition.

Okay.

Thanks for that then and my second question is.

It was on your on your listings and where you're at you went up significantly.

A number of listings in the past several months, but I am assuming it takes some time to ship the products and have them on the shelf. After you win a listing so I'm wondering if you can quantify.

Give us a sense of how many listings have yet to be shipped.

You've already won.

And if possible.

If we could know any any product formats like flower edibles that make up a large percentage of those listings that have yet to be shipped.

Sure Andrew Yes. So you can expect on that 255 number as of January at 90% of those now have been in the market its probably kind of in the back half of Q1. So you can see that I'd encourage all investors to look at the provincial sales increases on a high fire.

Now we've seen into Q1, but the remaining AR, we expect here shortly but that does not include the new submissions that we've asked for in recent submissions for the ocs as well as other provinces.

And as far as products go I'll turn it over to Tom Yeah, I would say youre going to see innovation go live throughout the year, but I would say the biggest ones to look for from balances right now as infuse pre rolls start to rollout beverages. The innovation in beverages has been material not only what's inside the can but the resealable lid and packaging innovation.

Now we can do stuff no one else is thinking about and then edibles I think edibles is going to start to move the needle as you see the growth in the U S.

<unk> to deliver I think it will start to open up in Canada. So I think those are the big biggest growth opportunities for us and again, just really getting back to distribution. It wasn't a key focus as far as last year was getting the right products under the right brands and the right provincial boards now, it's about getting velocity behind them.

Thanks for that and I'll get back in the queue.

Thank you. Our next question is coming from Federico Gomez of ATB. Please go ahead.

Yeah. Good morning, Thank you for taking my questions.

Could you provide more color on your capital position, so I understand that.

You guys are expecting to improve the cash burn there.

What are you know given your liquidity right now should we expect any any equity raise this year or and maybe could you give any sort of guidance of your expected cashews into anything too.

Thank you.

Yeah, well first of all to be clear I think we expect that the cash burn rate to improve along with the tracking of Abbott does strides Abbott does expect it to improve the cash burn rate will improve over the course of a year I'd. Just say this we raised we raised $40 million subsequent to quarter end, our integration initiatives will reduce that cash burn in the coming quarters.

So we're comfortable with our current balance sheet position.

Okay.

Okay. Thank you and then just.

You know.

Can you guys talk about the earn outs that you have in place for some of the acquisitions you've done so more specifically I believe you have an earn out for up to 20 meter for green relative to planning any Q, and then 17 need and for life foods.

And do you intend for it to be so I'm. Just curious you know as we approach those deadlines, how how are you seeing the performance of those companies and how likely is it that you will have to date.

Those earn outs over the following quarters. Thank you.

Yeah. Thanks for that question this is Jeff.

Obviously that would come.

Come in line with providing some guidance, which we're not a we're not typically doing here what I can say is two fold number one.

From a life food technologies perspective in terms of earn outs. They were stage over a period of time I can say that we have not paid and earn out as of yet from that transaction, but secondly, I can say from an overall.

Review of the acquisitions that we made in 2021 and as we look at our business plan and strategy for 2022, we continue to be very comfortable and very happy with.

Now where we're sitting.

And.

That's about the best guidance, we're gonna be able to give in terms of a payout of earn outs right now.

Yeah.

Okay. Thank you I'll hop back in the queue.

Once again, ladies and gentlemen that is star one if you would like to register a question at this time. Our next question is coming from Rahul Saragossa of Raymond James. Please go ahead.

Hi, good morning, gentlemen, thanks, so much for taking my questions.

So first I like to look at the U S CBD sales.

Last quarter. It was 4.7 I believe on the partial quarter. This is a $5 seven for the full quarter.

Our back of the envelope would've suggested it should have been stronger than that so can you give us a little color in terms of why that number came in at $5. Seven is that seasonal weakness and how are you still seeing that business for 2022.

Yeah. So so again you know as we took control of the business and started to implement some changes you can understand that.

When we acquired the business it did come out a period of not a lot of capital availability and they went through a lengthy sales process with us in terms of a lot of due diligence. So you know when we got when we got in there and we started to work with the management team. There was a number of initiatives, we had to put in place, including looking at the product portfolio and realigning it getting the brand campaign launching et cetera. So I'd.

Say.

Or a little that's that's really what you're seeing from the Q4 performance from Green roads, but I also look as we look into 2022, we're very comfortable with the trajectory that that are that we're seeing now in that business.

And as we say in our opening remarks.

We're expecting growth from that business segment.

Great. Thanks, Jeff So just as a follow up then given the.

The guidance did you guys put out.

On your on your on your Investor Day, Chipboard being EBITDA positive in the back half of this year and given sort of the relative cost profile and let's assume some cost mitigation that meantime.

Back of the envelope would imply sort of a three times growth in sales from where you are so you know not too if that's possible, but how should we be thinking about the split of that between sort of the D. D D drugs to Jack to direct to consumer.

Consumer as well as and then and then the U S.

Maybe I'll I'll I'll look at that I'll address that a little bit and also all alternatives. Some of my partners here to answer as well, but again, achieving EBITDA positive positiveness, we're not expecting that to all come from revenue growth right. So as we've as we've talked about theres been an aggressive initiative launched already towards 10 million in savings. We also guided that there will.

An additional 10 million in savings to come in 2022 applying that against them.

Our our expectation of revenue growth in the quarter, that's where we get are in the coming quarters, that's where we get our view on positive EBITDA and again, we're reiterating today that we're comfortable with that perspective in terms of you know the.

The breakout of where we expect some of that growth to come from our north and south of the border again, we're expecting plus or minus.

35% to 40% of that to come south of the border.

Terrific. Thanks, so much Jeff unless there's any more comments I will get back in the queue.

Hmm.

Thank you, ladies and gentlemen at this time I would like to turn the floor back over to Mr. Robson for closing comments.

Thank you operator, and everybody for joining us today to conclude we are proud of the progress. We've made over the course of 2021, we look forward to showing investors, how we can deliver our strategic goals throughout 2022 2021 was an inaccurate acquisitive year for the Valens for Valens and we are confident in our abilities and further stream.

Minor operations, while growing top and bottom lines as we enter 2022 as an innovative branded manufacturing company.

With that with that has invested in strategic automation.

Into 2022, we expect to take market share expand for eventual sales and further growing our U S presence. We believe we're well positioned for future growth I can speak for the rest of our management team. When I say, we are now more excited than ever about the future of balance as we continue to advance towards profitability again, I would like to thank everyone for their support and with that I'll turn the call back to the offer.

To close thank you.

Ladies and gentlemen. This concludes today's event you may disconnect your lines or log off the webcast at this time and enjoy the rest of your day.

Yeah.

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