Q3 2022 Clever Leaves Holdings Inc Earnings Call
Good afternoon, everyone and thank you for participating in today's conference call to discuss <unk> financial results in the third quarter ended September 32022.
Let me yesterday are cleverly CEO Andre the hurdle and the company's CFO Hague.
Before I introduce Andre.
I remind you that during today's call, including the question and answer session statements that are not historical facts, including any projections or guidance statements regarding future events or future financial performance or statements of intent or belief.
Forward looking statements and are covered by the Safe Harbor disclaimers contained in today's press release, and the Companys public filings with the SEC.
Actual outcomes and results may differ materially from what is expressed in or implied by these forward looking statements.
Specifically, please refer to the Companys Form 10-Q for the quarter ended September 30th 2022, which was filed prior to this call as well as other filings made by club relief with the SEC from time to time.
These filings identify factors that could cause results to differ materially from those forward looking statements.
Please also note that during this call management will be disclosing adjusted EBITDA adjusted gross profit and adjusted gross margin.
Our non-GAAP financial measures as defined by SEC regulation G.
Reconciliations of these non-GAAP financial measures to the most directly comparable GAAP measures statement disclosing the reasons why a company management believes that adjusted EBITDA adjusted gross profit and adjusted gross margin and provide useful information to investors regarding the company's financial condition and results of operation are included in today's release.
That is posted on the Companys website.
With that I will turn the call over to Andreas.
Thank you, Jeff and good afternoon, everyone.
During the third quarter, we worked diligently to continue progressing our growth strategy by improving the quality of our products enhancing our commercial capabilities, while reducing operating costs across all our subsidiaries.
Kind of a great business, we generated 12% year over year revenue growth as we adapted to evolving demand dynamics in our target markets and navigate it quarter to quarter variability in our sales cycle.
We also faced some onetime disruptions noncash Turkmen revenues due to retailer inventory reductions across a variety of channels.
We continued to reduce our cash burn and focus on aligning our cost structure more closely with our core operational priorities as.
As we progress further into the fourth quarter, we will continue working to improve our operational efficiency and to strengthen our foundation for growth.
To further contextualize the performance during the quarter I'd like to first review the operating dynamics in our production geographies.
In Portugal, we have seen product requirements, both across several key flower markets around the world.
These changes have affect their product market fit and we have been working diligently on realigning.
For instance, our flower has been very successful in the Australian market given its high THC profile sites in Turkey profile. However, following the results of our most recent flower product launch in Israel, we identified and are in the process of changing youre going to let the characteristics of our flowers to better meet market demand.
Part of this process of improvement we have to delay several I kind of shipments to Germany. So we have planned to complete during the quarter.
New shipments are already been processed and expected to be in the German market by year end.
We also plan to optimize the number of <unk> and harvest cycles to ensure that we are growing the most premium and commercially viable genetics to address greater selectivity in our markets.
While these changes will lengthen the ramp time of Portugal operations, we are already seeing progress as improvements in our current crop and R&D cycles.
To further improve our Portuguese operations, we replace leadership and completed an overall restructuring to ensure that we can operate with improved efficiency and expertise, bringing new talent with significant experience in cannabis flower constipation.
While these changes we saw getting softer out form our Portugal operation during the quarter anchoring funding pressure on our economy segment revenues. We are convinced that with the operational improvement means lamented our Portuguese operations are now optimally positioned for growth in 2023 and beyond.
Quality more stable and lower cost products.
Finally, we have recently obtained EU GMP certification for our post harvest facility in Portugal, which will further accounts are revenue generating capability in the country.
For instance, we have recently expanded our customer service portfolio to include GMP processing services now that we have certification, providing a gateway for flower each of the.
This will allow us to gain operating scale and will give us access to product from top growers around the world, which we tend to use as a complement to our self growth portfolio.
We will provide additional updates on these considerations and look forward to identifying additional value creation opportunities for our customers.
In Colombia, we continued to prepare for the commencement of dried flower exports, while navigating the effects of quarter to quarter Lumpiness in our extra sales cycle.
As we progress our flower preparations euro applying the learnings from our Portugal operations to establish an efficient foundation and a focus on premium products.
Many of our current customers have already consider a cultivation facility and expressed strong interest in our Columbia flower capabilities to our expensive capacity and cost competitiveness.
From a capacity perspective, we have the ability of scale to cultivate a significantly higher number of strengths relative to both our competitors and their own existing Portugal operation.
Wowing us to explore identify select and grow premium genetics.
In conjunction with Columbia, optimal environmental growing conditions, which meaningfully reduce our need for artificial lighting, our extensive pest control our scale and location offer a strong cost advantage as we prepared to address a greater portion of the global flower Mark.
From where our flower preparation sit today. We believe we are currently on track to complete our first flower shipments from Colombia to Germany, and Australia in the first quarter of 2023.
Within our existing extra business several shipments that we planned to complete in Q3 were delayed to Q4 of this year or Q1 of 2023. These were primarily due to regulatory delays and hurdles in both Germany and Israel.
The phasing of certain orders from Brazil, and Australia.
Cyber attacks with the Columbia Health Agency in Lima suffered which delayed export certificates.
For Brazil in particular shipments of products approved under our D. C. Three to seven ramp to very swiftly in the first half of this year and we expect some of this pickup to resume in Q4.
As a fundamental part of our growth strategy, we transformed our commercial capabilities during Q3.
We created a chief revenue officer function and I am currently sphere, hitting disposition, which centralizes, our commercial efforts and functions, including marketing and sales operations looking to improve pipeline management optimize relationship management with our current and potential customers.
Managed outreach strategies to increase our customer base and increase our speed and probability of conversions from leads to sales.
In line with these efforts, we created product expertise for both flower and extracts that we integrate it with the operation teams under our CFO to be focused on producing the highest quality products for our core markets as well as working with commercial teams in the next row to increase our sales effectiveness.
Alongside these operational enhancements, we have driven in Colombia in Portugal, we have continued to our work to improve our working capital and right size, our inventory levels to better reflect current market opportunities.
We harvested 1936 kilograms of dried flower during the quarter compared to 17304 in the year ago period, representing an 89% year over year reduction.
In Colombia, we have sustained our exclusive focus on THC flower product development, and we are using our existing inventory to complete our extra shipments.
We will continue incurring costs related to processing recurring inventory for extra sales in our existing partnerships and we will soon have some additional and potentially higher cost contributions related to the new harvest post harvest processes needed for our dry flower product.
As a result, we believe that these costs are reduced agricultural output will continue to pressure our all in cost per gram in the short term.
However, we believe that driving improvements in our inventory over time will allow us to operate with a more efficient long term infrastructure.
In Portugal as I mentioned earlier, we are further refining our production plan to ensure we are cultivating only the most premium and commercially viable flower strains.
This increased selectivity has caused us to adapt our previous approach to launching new strengths and addressing our capacity utilization.
We are currently operating with reduced scale as we complete this additional work, but expect to build a stronger long term operational strategy and benefit from additional economies of scale now that we've completed the EU GMP licensing for our post harvest facility.
The reduction in scale implemented in Q3 and in early November we will allow us to further reduce operating expenses and Portugal.
While our work to optimize both of our cannabinoid production geographies remain gradual we believe that strengthening our operational framework will allow us to maximize the revenue generation potential for harvest and position ourselves to capture additional market expansion opportunities around the globe.
Finally in our nutraceutical business, we experienced some onetime quarter adjustments in Q3 across most of our titles as retailers reduced inventory levels. Our specialty distributors had ordered inventory more heavily in the first half of the year, which ended up reducing your volumes in Q3.
Nearly all of our channels had inventory reduction at the warehouses there.
While these dynamics pressured our third quarter top line performance in our non kind of related segment. We believe the bulk of the adjustments of our distributors' ordering cadence in Q3 are complete as of the end of Q3.
Despite these onetime inventory adjustments, we have also been increasing our presence in major mass market retailers and pharmacy chains across the U S. We have expanded our presence to over 30000 stores and key major retail pharmacy chains have increased their portfolio with us.
By increasing the number of Skus in store.
We believe that the strength of our retailer and distributor relationships coupled with innovative marketing strategies. We have recently implemented we saw strong revenue performance in the fourth quarter and 2022.
As we continue adapting to evolving market conditions across our business, we believe that our operational agility the depth of our knowledge and partnerships across our core markets on our commitment to driving greater operational and cost efficiencies are strengthening our capabilities and our foundation for long term growth.
When an organization level, we have continued to support our team members and enhance the quality and efficiency of our operations and with the strong restructuring progress we have made.
As we close 2022, and then through 2023, we're moving forward as a leaner and more focused business with an unrelenting commitment to quality across our product portfolio.
Now I'd like to turn the call over to our CFO pancake, who will discuss our third quarter financial performance in greater detail Henk.
Thank you Andres our revenue in the third quarter of 2022 was $3 3 million compared to $4 million in the year ago period.
We experienced softness in our non cannabinoid segment revenues as a result of inventory reductions across most channels.
As well as the timing of inventory orders among our distributors. However, as Andreas mentioned earlier, we believe the bulk of these disruptions were concentrated in Q3 and that we should return to a more normalized top line performance over the coming quarters as we work with our partners to mitigate.
<unk> economic pressures.
While our cannabinoid segment revenue grew 12% year over year. This was offset by variability in the timing of certain flour and extract shipments as a reminder, the quarter to quarter Lumpiness in our sales cycle is a factor of the many regulatory approvals and quality control checks.
Involved in our production and export process.
Which can drive delays in shipment completion.
With that said our ability to adhere closely to evolving regulatory standards and provide high quality pharmaceutical grade products in our target markets is central to the value we provide to our global customer base.
Our all in cost per Gram of dried flower equivalent in the third quarter of 2022 was $1 13 per gram compared to 15 cents per gram in the year ago period.
The year over year increase was driven by our significantly reduced harvest.
With our new harvest decreasing by approximately 89% year over year.
While our harvest production costs remained low in Colombia as a result of our reduced harvest, we continue to incur costs related to processing, our existing inventory for extract sales.
In Portugal.
We incurred costs related to scaling our existing flower operations, which we have recently work to reconfigure.
So we expect our total all in cost per Gram to remain elevated through a combination of these dynamics I'd like to emphasize that these are all near term unit economic considerations.
In Colombia, we are working to right size, our harvest and prepare for smokable dry flower exports and we believe that our costs will moderate to more advantageous level as we ramp dry flower production.
On the customer demand.
We also expect flower products to eventually comprise a greater share of our product portfolio.
And that our extra costs will remain at similar or lower levels to what we've driven historically.
In Portugal, we expect unit cost to improve over time as we process additional harvests.
Cultivation of our premium flower on a smaller scale and bring our post harvest facility fully online now that we've completed the EU GMP licensing process.
The operational enhancements and workforce reductions we've already implemented have generated some initial cost savings and we aim to drive additional efficiencies as we continue progressing these initiatives.
Our gross profit in the third quarter of 2022 was 0.3 million, which included a one 7 million inventory provision compared to $1 9 million, which included a 0.7 million inventory provision in the year ago period.
Our adjusted gross profit, which excludes the inventory provision in the third quarter of 2022 was $2 million compared to $2 6 million in the year ago period.
This reflects an adjusted gross margin of 59, 8% compared to 65, 1% in the year ago period.
The year over year decreases were primarily driven by our softer revenue performance during the quarter.
As well as by increased inventory provisions related to aged obsolete or unusable inventory.
We also continued to mitigate headwinds from wage inflation rising transportation costs, and both labor and material availability in our nutraceutical business.
These factors have continued to pressure our margin performance and we will continue monitoring these impacts and the broader status of the labor and supply chain conditions.
As a result of the headwinds we've discussed in our revenue performance as well as adverse conditions in the broader cannabis market.
We performed an interim impairment assessment on our indefinite lived intangible assets related to our Colombian licenses and recognized a total impairment charge of $19 million during the third quarter.
This was partially offset by the write off of approximately $6 7 million in corresponding deferred tax liability related to the indefinite life intangible assets.
Operating expenses in the third quarter of 2022, or $26 5 million compared to $11 6 million in the year ago period.
The increase was primarily driven by the intangible asset impairment charge of $19 million related to our Colombian cannabis licenses.
As we continue adapting to evolving conditions in our operating environment, we will keep advancing our cost reduction and restructuring work we've undertaken throughout the year, including the most recent reductions we have made to our workforce and operational scale and Portugal.
Starting with our restructuring near the end of the first quarter, we have steadily right sized our personnel new harvest output production infrastructure and organizational priorities to align more closely with our current market opportunities.
In Q2, and Q3 combined these actions drove sequential reductions in our G&A R&D and sales and marketing expenses of approximately $2 8 million.
Additionally, one other significant example of our cost reduction efforts was our recent decision to change our audit service provider we.
We implemented a competitive bid process with several qualified firms each submitting proposals for evaluation.
As a result of this process the company will realize a meaningful reduction in expense for the coming year.
Net loss in the third quarter of 2022 was $20 2 million compared to net income of $1 million in the year ago period.
Net loss in the current period was primarily driven by the $19 million impairment charge, partially offset by $6 7 million deferred tax liability write offs related to the indefinite lived intangible assets I just mentioned.
Note that net income in the prior year includes a $9 1 million gain on re measurement of warrant liability and a $3 $4 million gain on debt extinguishment as well as the zero point $5 million in interest and amortization of debt issuance cost.
Adjusted EBITDA in the third quarter of 2020 to improve to negative $5 4 million compared to negative $6 million in the year ago period.
This is mainly due to cost reductions mentioned earlier, partially offset by higher inventory provision and sales and marketing expense.
The cost improvements we have implemented throughout the first three quarters of 2022 have significantly contributed towards a reduced adjusted EBITDA loss.
Have driven steady sequential improvements in this metric year to date from the first quarter of negative $6 7 million through the second quarter negative $6 3 million and for the third quarter of negative $5 4 million.
At September 32022, our cash balance was $17 6 million compared to $37 7 million at December 31, 2021.
The decrease was primarily attributable to operating losses, and our repayment of $22 9 million in debt obligations earlier in the year.
This was partially offset by net proceeds of $26 3 million raised in our at the market stock offering year to date through the third quarter as well as by $2 5 million proceeds related to the partial sale of equity investments.
Through the remainder of 2022, we aim to further improve our liquidity position through reducing our expenses and investment in working capital.
Lastly, due to our softer than expected revenue performance across both business segments during the quarter.
We have revised our full year 2022 revenue forecast.
We now expect our 2022 revenue to range between 17 million and $17 7 million compared to our previously disclosed range of 20 million to $25 million.
Based on our continued progress with reducing costs across our organization.
Currently remain comfortable with our previously stated expectations for our full year adjusted gross margin, which we expect to range between 50 and 55%.
We have also narrowed the range of our 2022, adjusted EBITDA, which is expected to range between negative $23 million to negative $22 million as compared to our previous range of between negative $23 million to negative 20 months.
With our continued cash burn reductions, we now expect our 2022 capital expenditures to be approximately $1 5 million compared to the previous range of approximately 2 million to $3 million.
We believe our ongoing focus on restructuring our cost.
Optimizing our cash efficiency and streamlining our organizational processes has placed us in a strong position to support our long term growth and profitability objectives as we execute on our strategy into 2023.
This concludes my prepared remarks, and now ill turn the call back over to Andres to review some of our market opportunities and most recent operational highlights and greater depth on drugs.
Thank you Henk.
Before we open the call to questions I'd like to briefly review, the regulatory and commercial opportunities available target markets across the globe.
During Q3, we continued expanding our pipeline and started executing on key orders that we expect to grow during Q4 ending 2023.
In addition, we have focused on demand generation for a Colombian flower, which is expected to export in Q1 of 2023 and is expected to be a significant growth for the company next year.
To highlight some of our latest commercial achievements, we announced our expanded partnerships with <unk>, a European Medical Academy leader in which we will supply <unk> with high THC dried flower product from a whopper strained cultivated in Portugal.
<unk> will then utilize these products to produce ICANN upon which we'll have one of the highest each levels available in German pharmacists.
In addition to deepening our existing commercial partnerships, we have strengthened our chairman market presence through developing our relationships with see some pharmaceutical operators and distributors supporting the rollout of our kind of product line and working to leverage <unk> Germany's.
Status is a licensed medical cannabis distributor.
With these various established pathways to the German market, where advantages be positioned to continue deepening our presence as well as benefit from incremental regulatory catalysts as they unfold over time.
In July we also launched our whopper strained with both inter cured in Israel unnamed Eugene Australia.
This train exemplifies the type of premium high THC genetics that have become the exclusive focus of our flower production.
We will work to continue supporting our global momentum for the strain of course, our core markets and we are using the learnings from these initial wells lunches to further refine our approach as we roll out additional high quality high THC strain.
These learnings will also inform the rollout of our Colombian drive power product and we currently expect Germany, and Australia to be among the first of our target markets to receive these trucks.
Columbia flowers sales, which we expect to start ramping up in Q1 of 2023 presented very significant Avenue of growth for clear released in 2023 and beyond.
From a product standpoint, we have been working for over a year on quality improvement and we have increased the number and type of genetics.
We have also significantly improved key flower characteristics, such as THC and therapy profile, but size and density.
Having already source power around the world and based on feedback from our customers. We are confident our product will be well received and its destination markets.
In addition, flower from Colombia, Hasnt very attractive cost position, which is Hartford cultivators in different countries to match.
And will allow us to expand their market affordability.
Finally, the sustainability aspect of Colombian product grown with very minimal artificial lightning and utilizing more than 70% rainwater is generating significant interest across our customer base as a matter of fact, we have several of our customers are already interested in the flour and are working with them to nail down agreements for supply will begin in <unk>.
1023.
As part of our strategy of growing our genetic base and improving our product quality, we announced a new partnership with household push in leading legacy genetics cannabis company based in the United States near the end of Q3.
In this three year agreement, we will be the exclusive producer of various genetics for house of push outside of the United States and Canada growing streams, such as Uber pushed pre 98, and San Fernando Valley, EOG Kush in our Colombia, and Portugal facilities.
We will collaborate with the house's push to develop the proper cultivation protocols theater for each of the genetics as well as complete an initial evaluation and adaptation face at each production locations.
We look forward to expanding these Suez partners global footprint and working to expand their broader market visibility in the U S where possible.
In South America, we have started shipments of our extra products into Brazil, where our products can be found in pharmacies around the countries. We are already seeing a significant shift from the compassionate use keen to RBC $3 27.
Sales forecast from our Brazilian partners allow us to feel very bullish on Brazilian growth during 2023.
In addition to Brazil, we recently reached a key product milestone with one of our Peruvian medical cannabis partners and the Naturals just last week, we announced that naturals had obtained the <unk> registration and then 55% THC dominant oral solution produced by clever decent Colombia on sold under the <unk>.
Natural brands in Peru.
Andrew 50 is the company's first ph dominant product to a paid sanitary registration for commercialization as a finished product and we are the first product to secure this registration in Peru altogether.
We view this achievement is a testament to our high quality cultivation and product development standards and we are attract to conclude the initial thousand unit shipment of <unk> 50 in the first quarter of 2020.
As we look to a year ahead, we're gradually and steadily activating our commercial pipeline in our core markets, while improving our position for additional growth opportunities.
Beyond the targeted markets, we have identified and activated in 2022. We are also underway with accelerating commercial opportunities in the United Kingdom use of medical cannabis sprint prescribed Barrett registered especially faster has been legally in the U K since 2018, making this market and <unk> opportunity for our pharmaceutical grade products, we couldnt.
We expect to export the flower from Portugal to the UK. The first quarter of 2023, and we believe additional exit and flower exports from Colombia will follow over time.
In sum with improvements across our flower products in Portugal, electrify Colombian flowers, the expected growth in our extra orders our expanded pipeline and our enhanced commercial capabilities. We currently expect 2023 to be a year of significant growth for <unk>.
From a regulatory standpoint, there are several tailwind for the industry and particularly for us the release.
As many of you have likely seen over the past few weeks there has been increased regulatory progress towards recreational cannabis legalization across several of our core markets.
In Colombia represent to be for Colorado status adult use cannabis legislation bill received approval in the country's house of Representatives last month.
And the Bill will subsequently move forward for a set of presentation approval.
We have seen similar legislative process of risk out of Germany, as German health Minister cards. Multibank has recently presented a paper outlining patent legislation to rig meet adult use cannabis distribution and consumption.
In addition, the Australia ingredients are underway with perhaps an appeal to legalized and regulated adult use cannabis.
<unk> of regulatory advancements have also resumed in the U S for <unk>.
<unk> issued an executive order part of individuals convicted of freighter Omar one possession Offences and started an intent to review the schedule move categorization of Mario one.
Each of these markets are at different stages of regulatory progress as we've seen with past kind of it's market expansion opportunities. These incremental advancements are complex and gradual requiring extensive debate approval and careful establishment of legislative frameworks.
We will continue to monitor these regulatory development and many others that are right across our target markets and we remain broadly supportive of growing cannabis acceptance across the globe and a corresponding market opportunities. This offers.
With the international market pathways, we have activated and the increased efficiencies we are driving throughout the organization. We will continue working to strengthen our commercial presence and streamlined our cost and capital structure to support our growth initiatives.
We look forward to advancing our strategic process and further improving our positioning for long term growth into 2020.
Operator, we will now open the call for Q&A.
Thank you.
We will now begin the question and answer session to join the question queue. You May Press Star then one on your telephone keypad, you will hear a tone acknowledging your request.
If youre using a speakerphone please pick up your handset before pressing any keys.
To withdraw your question. Please press Star then two.
We will pause for a moment as callers join the queue.
Our first question comes from Pablo <unk> of Cantor Fitzgerald. Please go ahead.
Okay.
Hi, This is Matthew Baker on for Pablo Thank you for taking our questions.
Can you give more specifics from your growth in Germany, our specifically what parts are growing and then what is driving that growth and is and then as a second question Israel market shut down for now and related to that what are you leveraging.
How are you leveraging the interfere your expertise and your Portugal facility. Thank you.
Sure. This is andres. Thank you. Thank you for the question and thank you for joining the call.
So.
Again, Germany, and Israel both R. R.
Part of our target markets, our strategic markets. We chose this year to focus on.
Germany 8-K, what we have seen growing for us is basically our flower.
During Q3, we were able to sell <unk>.
Before some of our Portuguese produce flower, we did quite successfully and we're looking to continue doing so in Q4 and beyond we have already started planning for additional straight from Portugal to be introduced at the beginning of 2023 and as mentioned before during the call.
So.
Preparing shipments for <unk>.
Colombian flower, which is looking very very good from a THC perspective, We've got Olympics are there as well.
Certainly of course.
There's a story behind behind those trains. So we're very bullish on that just arent be flower is what's attracting new ones.
First of all <unk> pension that we're seeing right now we've sold through our own distributor.
These Germany.
Flower with our iconic brand from third parties that has also been successful. So I guess, what we have been building in Germany has the capability to be able to sell product to pharmacies across the country and as well to build that relationship with prescribing physicians.
Where that's the case, that's one and the second the second element to Germany for Us and we have been continuing to work on this.
For the most part of this year has been Dx truck side of things for the extra side of things.
We partner with at the farm.
Which is a European pharmaceutical company.
We have been working with them, we started by selling some CBD dominant products. We're now evolving to sell other balance in high THC products and that.
It is also is also working it takes time, we have to develop the demand through decisions, but it's working and we are.
Positive on Germany in that regard.
Certainly, we're well position we haven't.
Asset there that has distribution important distribution capabilities, we have built the relationship with pharmacies.
So we believe.
It will serve as a gateway for our own product and eventual yes, a gateway for our product from other parties, which if I.
If I may given that we now have the EU GMP certification in our Portuguese facility will allow us to bring our Colombian flowers flower from others.
Through our Portuguese facility and eventually to be sold in other parts of the <unk>. So I believe we're well positioned there for the competitive dynamics on Israel. None of the market is not shut down we have continued to ship product.
To Israel.
It is a complex and lengthy process, but I guess, if you have the right partners.
And work with them and work with the authorities.
It's durable we're a company that specializes in growing cannabis, where it has to be grown and sending it to different parts of the world. So we have been able to two.
To adapt ourselves to the ever changing requirements and base fairly market and we still see a lot of potential there for our own products, but having said that part of what we're focusing on now in Israel is also looking for ways to help Israeli company Internationalize I think thats something.
These companies have been working on and we have the platform to do the growth of our production from a distribution and from a client relationship standpoint, So I would say, yes, we're sending products the markets that shut down but beyond that what we're focusing on now is how do we bring cannabis and genetics and all of what the candidates.
Industry has built in Israel to international markets.
Thank you for that I appreciate the color if I may just one more follow up question. What is the Companys backup plan in the case that German Rec program does not allow imports in the first few years just any color that you can provide that would be super helpful. Thank you.
Sure in general.
It's very early as you know two two.
To know what's going to happen.
We have different strategies I would say number one of course, we have production so.
I don't think its a matter of.
If but I'm wondering if when they are going to allow imports.
We will be ready for that but beyond that what we have been doing is we have our input and distribution company within Germany, we have been positioning a brand at this point, where they're working with pharmacists and eventually working with other players in the market. So most probably in Portugal rollout, we're going to start leveraging those capabilities downstream, but we have also.
Building in Germany successfully.
To be a player within the within the.
The recreational cannabis if no.
When it's legal item of course, how it has evolved.
Thank you.
Thanks, Thank you.
Once again, if you have a question. Please press Star then one.
Our next question comes from Diana <unk> of Canaccord Genuity. Please go ahead.
Hey, guys. Thanks for taking my question.
I just wanted to ask if you could give.
Give me more color on 'twenty three in terms of the split between cannabinoid business non cat business segment, and how should we be thinking about the revenue ramp given that youre expecting to have first Columbian flower export in Q1 of 'twenty three.
Okay.
Next year, what's going to happen beyond.
Thanks for being a column for the question next year as you said, we're seeing two or three things that are I think quite crucially the cannabinoid business.
One we're seeing the Columbia flower enter the market in Q1 of next year, we're pretty confident on that and thats going to have a significant impact on our condominium sales second element.
As we said is we are.
Yes, we are reducing the scaling Portugal, but we're focusing on premium product. So we believe.
Growth there is also going to going to be.
It's going to be their third we are maturing some of the extract contracts.
We've already started shipping in 2022, those are going to mature in 2023 for instance, Brazil, which is a huge market. We started to ship it to a different clients and we're very very bullish on that so we see very different.
Revenues of growth.
For our Academy.
Business next year, having said that we are also.
We're also bullish on what's happening on the on the nutraceutical side in all of our store counts have been increasing our portfolio penetration has been increasing across our channels.
We have a.
Branding strategies.
Portfolio strategies that we have seen.
Our successful, which we believe are going to bring our growth next year as well.
I would say in.
In general.
Next year, maybe we're going to be closer to 50, 50% between both.
<unk>.
Okay, that's clear and that's it for me.
Thank you.
Thanks, Matt.
At this time. This concludes our question and answer session I would like to turn the conference back over to Mr. Photo Hondo for any closing remarks.
Thank you Ariel I'd like to thank everyone that attended the call today, and we look forward to speaking with our investors and analysts when we report our fourth quarter of fiscal year, we sort of.
Next March.
This concludes today's conference call you may disconnect. Your lines. Thank you for participating and have a pleasant day.
Yes.