Q2 2023 Aurora Cannabis Inc Earnings Call

Speaker 2: If anyone true to choir 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 to you a Nance Christian Christianin vice president corporate development and investor relations. Thank you, and ask you may begin.

Speaker 3: Thank you, John , and good afternoon everyone. We appreciate you joining us today.

Speaker 4: This news release, accompanying financial statements and MD&A are available on our IR website and can also be accessed via CDAR and EDGAR. In addition, you will find the supplemental information deck on our IR website.

Speaker 5: LISNERS are reminded that certain matters discussed on today's conference call could constitute forward-looking statements that are subject to risks and uncertainties related to our future financial or business performance.

Speaker 6: Actual results could differ materially from those anticipated in these forward-looking statements. The risk factors that may affect actual results are detailed in our annual information form and other periodic filings and registration statements. These documents may similarly be accessed by a C-DAR and Edgar.

Speaker 7: Following prepared remarks by Miguel Englín, we will conduct a question and answer session with our analysts.

Speaker 8: We ask you to limit yourself to one question and then get back in the queue for follow-up. With that, I will turn the call over to Miguel. Miguel, please go ahead.

Speaker 9: Thank you, Ann. First and foremost, we are very proud, we achieved what we set out to do several quarters ago, namely reaching our objective, a positive, adjusted EBITDA by the end of the 2022 calendar year.

Speaker 10: We are confident that we can deliver positive adjusted EBITDA on annualized spaces going forward, although there may be some quarter to quarter variability due to that dynamic nature of the canvas industry. And the seasonality we previously talked about in our bevel business.

Speaker 11: Importantly, as part of our business transformation, we also completed the structural changes we had intended to make as part of our cost rationalization.

Speaker 12: These will certainly yield benefits for Aurora in both the near and long term.

Speaker 13: Annualized savings now told approximately $340 million since February 2020 and included substantial progress in cutting quarterly SGA to well below $30 million.

Speaker 14: Our next financial milestone will be achieving positive operating cash flow as part of our plan to build long-term shareholder values. We expect this to be a multi-quarter initiative and we will update the market on our progress to this new milestone.

Speaker 15: Looking forward, our enthusiasm for the future is anchored by our number one position in global medical cannabis among Canadian LPs. And the growth we've been able to sustain despite some quarter to quarter variability. With loyal patients and existing markets and more developing countries, towards the open, we think the top line growths tend to

Speaker 16: should continue. As a reminder, medical cannabis is a business we want to invest behind, not only because of its growth characteristics, but because of its defensive nature in all of the times. It also enjoys mbable as dust and gross margins that consistently exceed 60 percent, twice that of consumer cannabis.

Speaker 17: Aurora is also ideally positioned because of our robust balance sheet and net cash position.

Speaker 18: which puts us in select company among our industry peers.

Speaker 19: This has allowed us to repurchase approximately $302 million in convertible debt in the last 12 months, resulting in about $17 million in cash intersaving on an annual basis.

Speaker 20: Finally, our investments in science, reading, and genetics have resulted in proprietary cultivars and driven meaningful improvements to yields and potency that have benefited all of our product models.

Speaker 21: We also remain committed to furthering medical cannabis clinical research in Canada, which should position us for innovation. It will be a key factor to success going forward.

Speaker 22: So those key strengths as a backdrop, let's take a deeper dive into our global medical cannabis business.

Speaker 23: As we had expected, international medical revenue rose sequentially compared to Q1, which can be attributed to our strength in the Australian market as well as continued success in Europe .

Speaker 24: Our European business continues to demonstrate stability and growth on a year-over-year basis.

Speaker 25: Angered by the German medical market, we remain number two in flowers.

Speaker 26: Based on recent comments from the health minister, we expect further clarity around recreational legalization in Germany sometime in the spring. With a potential start to the market there as early as 2025.

Speaker 27: We continue to believe Aurora's position as one of only three companies with a medical domestic production license will give us a significant advantage as the regulatory framework is developed.

Speaker 28: We were also bullish on the opportunities that lie ahead in our other key European markets, which include Poland, UK, Czech Republic, and France.

Speaker 29: While markets such as Australia and Israel continue to develop, our presence across nearly a dozen countries outside of Canada affords us relative insulation to individual economic and regulatory climates.

Speaker 30: Turning to the high margin Canadian medical market, most of the sequential growth and revenue was driven by one time benefit from Q1.

Speaker 31: However, even after normalizing for this adjustment, we still experience a 2% growth in revenues.

Speaker 32: We are extremely happy with this when coupled with recent cost reductions which drove meaningful improvements in profitability.

Over the past several months, Laura Patients have been given access to the largest ever selection of products and formats on a lower medical. With over 75 SKUs launched in the medical channel between Q1 and Q2.

These include products from our full portfolio of adult used cannabis brands.

such as being quick strips, rabia premium flower, and new pre-rolls, concentrates, and minor canvanoid oils.

Notably, our Canadian medical business benefits from strong patient retention, with insured patients comprising about 80% of all medical sales as part of a concentrated market with significant barriers to entry.

Our industry leading market share also remains at about 25%, roughly double that of our closest competitor.

To sum up, we remain very optimistic for this segment, as we are not only increasing the number of patients in the insured category, but have also experienced your of your increases in basket size and participation rates.

Note that only about 1% of the Canadian adult population is involved with medical cannabis.

So any sort of movement makes a massive difference. But the benefits outsize to a very small subset of companies like Aurora that participate in this segment.

Switching the Canadian adult rack, our Q2 revenue shows sequential growth of 7%. This increase was achieved despite some temporary industry disruption and a reduced number of shipping days over the holidays.

The key driver for us here was Strong Sales Execution coupled with a strong type line that innovative new product offerings.

As you may recall, one of the key reasons for our acquisition of Thrive last year was their ability to manage our Canadian Rec business, and we are thrilled to see our M&A strategy paying off.

Finally, we plan to drive significant shareholder value of the lawn run, where our controlling interest in Bevo, which is one of the largest suppliers of propagated vegetables and ornamental plants in North America.

We are currently repurposing the Aurora Sky Facility for Orchid and vegetable propagation with minimal capital investment.

This will not only increase Bevo's production capability and extended shipping range in Canada and the U.S., but also enable us to generate predictable, incremental revenue and adjusted EBITDA.

And with that, now let's turn the call over to Glenn for our financial review.

Thank you, Miguel. Good afternoon, everyone.

Before reviewing our Q2 financial performance, let me take a couple of minutes to discuss our balance sheet and cash flow.

I'd like to reinforce what I said a number of times before and that is we take great pride in having one of the strongest balance sheets among Canadian OPs and are one of a very few in that cash position.

Of course, we're always on the lookout for further opportunities to improve through smart and defensive capital allocation decisions.

As of yesterday, February 8th, we have approximately $310 million of cash, including $65 million of restricted cash. And we believe this is sufficient to fund operations into our cash flow positive.

We have only $149 million Canadian, the principal remaining on our convertible loans due in 2024.

During Q2, we have repurchased $135 million in principal on our convertible move, so the total cost of $128.7 million cash, including our credit interest.

The debt we repurchased during calendar 2022 has resulted in cash interest savings that now total approximately $17 million annually.

We also continue to have access to significant capacity under our base shelf perspectives, including approximately $180 million remaining under our ATM program.

32, we issue 39.5 million shares for net proceeds of $68.8 million.

The current shelf will expire in April , and we do expect to refile a new shelf and ATM program at that time.

And we reiterate that the proceeds from share issuance are expected to be used only for strategic purposes.

Our operating cash loan key to consists of the Venetian for $60.6 million.

But that included $15.5 million for a number of one-time payments related to our business transformation.

$12.4 million for one-year payments such as insurance and health damage fees, and approximately a $12 million investing in working capital.

So we are pleased with the positive impact our business transformations having for our future cash flows.

With the restructuring of our business now largely executed, we do not expect one-time payments to require these levels.

And we do expect that the combination of reduced costs and increased revenue from the same footprint will be significant levers for the company to reach positive operating cash flow.

At the same time, it is worth noting that there may be some quarter to quarter variability in operating cash flow.

As we saw in Q2, when the company achieved significant increases to sales, the long cash conversion cycle of this industry means that investment in working capital may be required, which may negatively impact operating cash flow for that period.

Forgirdly capital expenditures were approximately $3.5 million, down 36% from the $5.5 million last quarter, and more than offset by $14.7 million of cash from the sale of our Polaris facility.

Looking now to Q2 Business Performance.

P2 total net revenue grew 25% to $61.7 million compared to $49.3 million last quarter. We saw strength across all business segments while also benefiting from a full quarter contribution from Nebo.

We achieved our goal of positive adjusted EBITDA, generating $1.4 million. This was primarily due to growing revenue in our industry-leading Canadian and international medical cannabis operations and from reductions in costs across our business, but primarily in S-GNA. We achieved our goal of positive adjusted EBITDA, creating $1.4 million.

We've now stabilized the company in a much cleaner operating structure and see a real opportunity to drive more revenue from these assets in the future.

Let me now address each of our business within a bit more detail.

Canadian medical regularly was $25.8 million in QQ, up 10% from Q1.

Much of the sequential growth in revenue was driven by a one-time revenue recognition benefit as more shipments than usual were in transit at the end of Q1.

However, normalizing for this adjustment, Canadian Medical still delivered a 2% increase.

Performance though is important given that most of our final cost production were in this segment during Q2 2023.

So looking forward to fiscal Q3, we expect the Canadian medical business to perform similarly to Q2 excluding that one-time revenue benefit of $800,000.

International medical route youth was $13.8 million and reflected a 69% increase versus Q1.

and return to levels more consistent with Q4 2022. We expect our international business to deliver revenues in fiscal Q3 that are consistent with that of Q2. Taken together, our medical business is in Canada and internationally generated $39.5 million of revenue, up 25% from Q1. Medical cannabis represented about 64% of our Q2 revenue, maybe 7% of gross profit. Adjusted gross margin was 61% down from 67% in the prior quarter. The decrease was primarily driven by higher sales than to a certain international export market.

Adjust the gross margin before fair value adjustments on consumer cannabis net revenue is 20% means YouTube compared to 25% in the prior court.

So we forward we of course remain committed to maximizing profitability through low cost production and margin of creder categories and all supported by our science leadership. Our controlling stake in Bebo enabled us to recognize $6.6 million net revenue during Q2 up from $3.3 million in Q1. This increases a result of a full quarter of contributions compared to only a partial quarter in Q1. Bebo is categorized as client for obligations in our financial disclosures.

As a reminder, BEVO has a seasonal cadence with two-thirds of BEVO's annual revenue and EBITDA being realized during the period from January to June .

On an annualized basis, that was business is steady, predictable, and supports our ability to generate positive adjusted deeper down.

Bevos adjusted gross margin before fair value adjustment was 50% in Q2 compared to 60% in Q1.

The adjustment primarily related to one time weather-related impact on fuel costs, which management expects to be very transitory in nature.

Due to seasonality, you would expect improved margins in the key spring and summer sales windows.

Overall, Aurora has adjusted gross margins before fair value adjustments, which is 45% in Q2 versus 50% in Q1, still amongst the industry's best.

Excluding the restructuring and non-recurring cost of $14 million in Q2, SGA and R&D were well-equaled, down 17% sequentially to $26.6 million.

Notably, we have made good on our commitment to reducing SGN 8 to below $30 million as part of our business transformation plan, a rate that we can sustain going forward.

So pulling all of this together, we generated positive adjusted deep at the $1.4 million compared to a loss of $7.4 million in the previous quarter.

And finally, just a reminder that our fiscal year 2023 has only three quarters, as we have changed our fiscal year end to March 31st. And that's in order to achieve certain internal costs, the staffing efficiency.

So thanks for your interest. I'll now turn the call back to Miguel.

Thanks Glenn. At Aurora, our purpose is opening the world to cannabis as a global leader in this very exciting industry. In that spirit, let me share some final thoughts.

First, we are very pleased to have completed our transformation plan, delivering on approximately $340 million in annualized savings since February of 2020. Our entire team's hard work resulted in positive adjusted EBITDA while maintaining a strong balance sheet that will allow us to compete at a very high level.

and take advantage of future global opportunities. Second, we've done this without sacrificing growth opportunities in our high margin domestic and international medical cannabis businesses, which remain one of the best places in the industry to invest.

Third, we complete our plan during a period of volatility and uncertainty around the Canadian wreck market.

The good news is a continues to rationalize which will give us an opportunity to market share improvement.

Finally, our future success will be enabled by science through continued plant genetics, improving yields, and better crop quality. We believe this will drive high margin and new cultivar licensing opportunities in the future and place a role at the center of the Ministry of Wildlife Innovation. Looking forward, we continue to focus on profitable growth opportunities across all the future.

Operator, please open the line for questions.

Thank you. At this time, we'll be conducting a question and answer session. If you would like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate that your line is in the question queue. You may press star two if you would like to remove your question from the queue.

for participants using speaker equipment and maybe not necessarily pick up your hands up before pressing the star keys.

And we ask that you please limit yourself to one question. Thank you.

One moment while we pull for questions.

And our first question comes from the line of Vivian Azare with Cowan. Please proceed with your question.

I think you're good evening.

Good evening, Deb.

So I wanted to dig in on medical cannabis gross margins, please. Down a little bit, you know, year over year and sequentially clearly was not an impediment to you guys hitting your target for positive adjusted EBITDA, which is really, really nice to see and congratulations on that.

But given the call out that the margin dilution was coming from frontier market, do you think that kind of current gross margin levels for that business are an appropriate run rate? It seems like you've got a lot of opportunity ahead of you and your mix to frontier market might kind of stay at these levels and will climb a little bit until there's a little bit of a little bit

a real catalyst in Germany. Thank you. I mean, so as it pertains to medical cannabis, I think structurally we don't see the margin compression that maybe you would see in the rack market. We're up to about 25% of the Canadian business and the reimburse market, which represents about 80% of our revenues.

internationally, you also don't see those impediments. And yeah, there will be places maybe where lower cost items gain a little bit of traction, but because the model is structured in the manner that most of the supply chain takes their margin off of percentage of the wholesale list,

And because you see reimbursement in those markets, there's not a structural reason, you know, to see margin-oppression. Secondarily...

You know, in the wreck business in Canada, you're competing as hundreds of manufacturers, and in some cases some that need to sell their product at a lower number. In most of the international markets, you know, you're really only competing as three or four other manufacturers because of the significant barriers to entry. So you don't see that competitive.

aspect where you play on price. And lastly, you really are seeing value from clinicians and physicians and patients as they are interested in quality, which comes at a cost. So overall, we see this as a steady business from a margin standpoint and we see consistency in market to market in.

there was a little bit of, you know, next change to the fact that the overall margins, there's nothing there structurally that gives us pause.

And the next question comes from the line of Michael Lavery with Piper Sandler. Please proceed with your question.

Thank you, good afternoon.

Good afternoon Michael. I just wanted to come back to the ATM. You mentioned you've got the remaining amount to go there And if I cut it right, I think you also said you would anticipate renewing that Can you just give us a sense given where your balance sheet is already?

What the thinking is, and I guess it's some amount of how much is enough, you know, is there a point at which you would feel like you've exhausted what you need out of the ATM or something that you feel like it's got a longer runway. How are you thinking about that?

Yeah, I think it's a great question because it's, you know, there's so much of point of interest right now, which is runway use of cash, what's the right amount of cash. I think first and foremost, you know, people should look at, you know, a company's actions, maybe more so than even what they say. And we've been very, very conservative.

and our balance sheet. Right from the beginning when I became CEO , the company worked extremely hard to have a strong balance sheet. And we saw a lot of this disruption. And clearly understand what using the ATM means and.

and what that means to, you know, to others when you look at it. But first and foremost, we believe that it was important for external, you know, stakeholders to see the company to have enough cash to be able to run the business. And obviously that, you know, goes into how much cash you're burning. So we worked extremely hard and we've seen, you know, progression from at one point, the company had over a hundred million dollars a quarter in SG.

upside for global cannabis. I mean, I think there's no question that at some point, you're gonna see a significant amount of profitability opportunities around the globe. We believe in medical first, and the question is who's gonna be there? And we think we're gonna be there. So the use of the ATM, you know, is.

is used strategically. You know, I think people have seen the thing. It's good stewards of the cash. We've sold assets quickly in a good price is, we've taken converts down. In many cases, below a part. And Michael, I think, you know, we'll continue to do three things. First, it's always focused on having strong balance sheet.

so that we will have to wear with all to be there when these opportunities hit, as well as be there when potential lemonade and other things happen such as Bebo, which we thought was a great play. Secondly, we will be very judicious in our use of cash, and hopefully people have seen that here.

And third, you know, we're possible. We will use it to find, you know, margin of creative and profit opportunities. And we were really thrilled this quarter. If you look at our sort of cash use and where it went, that in each of our four key businesses, we saw growth. And so I think you put that all together and you can sort of see that the future will look very similar to how we'd use cash in the past. Thank you.

And the next question comes from the line of Andrew Carter with SIFL. Please proceed with your question. Please proceed with your question.

Hey, thanks. Good afternoon. So what I guess what I wanted to know is do you think you can achieve like strip out candidates that don't use do you think you can be positive EBITDA in that business considering kind of the difficult mark and just kind of a second separate question kind of how you you McGill and the board are looking at the business I think I've got

Right now, yeah, $274 million of enterprise value. You think that captures what the sum of parts potentially is on the medical business, Canada Medical Newity Febo, which you can do there. And then also just the genetics investment, difficult to value in the markets. Is that a consideration in something you keep in mind that potentially is a floor to consider here?

regulated, reimbursed, compliant manner is going to be the first mover of all of that. And we are one of the leaders, if not the leaders in that globally. So clearly the valuation and where we see ourselves, we don't think is representative of that opportunity. but

You know, we don't have complete control of that. The medical business that was built in Canada and now is finding its way all across the globe and key markets is wonderfully portable, wonderfully defensible and has extremely high margins as I've talked about. And as we see new markets coming on like Australia and...

Switzerland and Austria. You know, those are tremendous opportunities that only a small subset of companies will take advantage of and, you know, how people value that. So be it, the genetics piece and the science piece, you know, has been sort of sitting there on the side all along and with having what may be one of the largest cannabis genetic libraries and what may be, you know, All right. Go.

sort of possessing some of the most important IP around biocid, genetics and others, there's going to be value in that, particularly as you get into clinical research and more value. And, you know, we'll have to see, but I clearly think our value overall. Now, you know, the rack piece, can you make money and rack as a standalone? Is sort of a tough question.

because we see so many efficiencies and learnings in having both. And it would be an easy sort of answer to say, well, why don't you just get out of whack and focus on medical, which is really a strength for us. But you're starting to see that when you're in a market and you have both, there are significant advantages.

and we see that with product lines, we see that with innovation, we see that with production. And I think really importantly, you will see that in Germany. And we're very bullish on not only the opportunities in the progression of medical, but also in RAC and having that key, loin of facility and others and being able to be there at the beginning in medical and then transition in RAC.

it's saying RAC where we would be in medical. Get the judge in his mental mental heart.

And our next question comes from the line of Pablo Zwaneck with Cantor Fitzgerald. Please proceed with your question.

This is Matthew Baker on for Pablo. Thank you for taking our questions. I have a two-part question. Firstly, what explains the stickiness of your market share in the Canadian medical market? And then on the other hand, why is your medical market share in Germany so much less sticky? And then as a follow-up, what are your latest thoughts of the win?

German rec cells will begin and you still think imports will not be allowed. Thank you.

cells will begin and you still think imports will not be allowed. Thank you. We're welcome. That's so.

Canada is a hard market. They're all sort of hard, but the reason it's so sticky is we've made really significant investments in this. We've been here a long time and we think we're pretty good at it. We have roughly a 25 share. The next closest competitor is at about a 9 share.

So this is a piece of business where you have to make a lot of investments.

experience matters, particularly the clinicians and physicians and the clinics. And you have to continue to invest call centers, innovation, support mechanisms, science, engagement with key stakeholders and veterans and others. And so it's just a commitment we've made and I think you have to hit on all cylinders.

And I think, you know, without being, you know, sort of, you know, arrogant about it, I think we're pretty good at it, but at a long time in Canada, in other markets, some other folks, you know, got there first. And it's not always that first mover status matters. I think it takes more time.

We're really excited about the German process. I think three primary reasons. First is they're actively engaging with the EU and the expectation is with what they come up with would be applicable in other markets, Poland, Czech Republic and others. And we've heard from those regulators in those markets that they're looking to mah is.

We expect to hear some more from the regulator in late spring. And we do expect enhancements to both, you know, what we've heard on the rec side, but also on the medical side, which not a lot of people are talking about. And, you know, the current administration in Germany has a big initiative on reducing bureaucracy. And only about 30% of the patients today in Germany are able to navigate through that medical qualification process for cannabis products. And if that was cleared up, you'd see a real big change. 0.1% of the adult population in Germany is in that system.

I mentioned Canada at 1%, so any sort of change there will have really outside benefits. So, more, not with a lot more late spring.

And as soon as we hear something, we'll let people know. And we do expect some version of rec sales to happen day mid 2025, which is when there's a critical action and there've been some promises made about when this is gonna launch. What that looks like, we'll see. But these things may take a little bit longer, but.

with a country like Germany, it may take a bit and be a little bit more long time period, but when it happens it sticks. So we're willing to work with them on that.

And the next question comes from the line of Frederico Gomez from AGB Capital. Please proceed with your question.

Hi, thank you, good evening. Thanks for taking my question.

My question is just from the adult use side here in Canada. You mentioned that much of your sales increased coming from higher sales of value brands. You know, should we be reading to that? Was that more opportunistic or is there any in shift in strategy there? You know?

whereby you plan to rely a little bit more on the value segment to grow volume and maybe accelerate growth on the consumer side. Thank you.

You're welcome, Fred. No, there's no change in strategy. But I will say, you know, one thing that people should take away from this quarter is that Aurora has a unique ability to be opportunistic.

So when there's a medical opportunity globally, we can take advantage of it. When there's a medical opportunity domestically in Canada, we can take advantage of it. And so most of the change in what happened in Glenn reference this in his comments is we found ourselves in a very interesting situation.

where we grew some flower for daily special and it came in at a 28 or 29 potency, which is absolutely a super premium potency band, but because it was already registered with the provinces, we really have the choice. Do we want to sell it?

and see the benefit, or we want to hold onto it and relist it. And we didn't want to relist it. And so, you know, the reality was that product that was extreme, you know, high-potency and great quality went out under the daily special brand and had a little bit of compression, you know, inter-overall margin. So the Thrive team's doing an awesome job, and we do see, you know,

You know, and listen to them, you're thrilled to have that and it's, you know, a testament to great genetics and good cultivation that we found ourselves in that situation where thrilled to build out those sales.

And as a reminder, if you'd like to ask a question, please press star one. We ask that you limit yourself to one question, please. Our next question comes from the line of John Zamparo with CIBC. Please proceed with your question.

Thanks. Good afternoon. I wanted to ask about the Canada Health acquisition. I know this isn't hugely material, but 20M in cash is not meaningless in this space either. So just would like to get an update on what this asset brings to the table and what the financial implications of it so far.

Sure we have to. I've been talking for a bit when you want to talk about Cannon Health and that deal.

Yeah, the folks that can help are.

very closely attached to some of the key vet influencers in that population. They've been extremely good at building relationships and supporting veteran patients in the medical system, finding the right medicines for them.

And just actually kind of almost all of our new little bit of counseling service. We thought that they were very important part of our supply chain. And we thought since that business was so incredibly important to our profitability, we needed to make sure that we had that relationship locked up through a long term.

I think the acquisition there is really about solidifying the long-term value of our medical business, in particular the funnel of veteran patients and our ability to get very close to those patients, which obviously is critically important to understand their needs. And it has started paying off. We actually launched a new

product in our medical portfolio in the last month, a product called Valor, which was a cultivar selected by veterans from our coach facility for terpene profile on various attributes. They picked the name and it launched and you know again it just being that close to really critical patient.

question. Thank you.

And the next question comes from the line of Matt, bottomly with Canacorn Genuity. Please proceed with your question.

Yeah, thank you. Good evening, everyone. Just wanted to touch on the adjusted gross margin. Again, I know Gun you had some prepared remarks about this, but when you kind of look at the overall trend over the last three, four, even five quarters, it seems like the ratio of these types of adjustments are still fairly meaningful in relation to the size of your

variety of different growing medical markets internationally. I would expect these types of costs and these types of opportunities and challenges to continue indefinitely. So I'm just wondering how you're anticipating this adjusted line moving, just given that your actual audited or reviewed statements have pretty nominal margins.

up quite nicely. So we still see this from a medical margin as we've seen you know, the past several years, number of quarters in the Canadian medical. Consumer, the margin of this this quarter was generally mixed related as we go just described in opportunistic and certainly incremental.

don't mind the extra gross profit. And then the other pieces that you're referring to, you see a couple things in there that are hitting March. What we've just heard over Marches are fair value adjustments, of course, because it's not a pressing, but it's confusing and depreciation. We're trying to get to a cash margin that will allow you to understand.

due to some weather in California and then came right back down to January . So, I was just the first time you've never seen that before, one time in transit or a thing. I thought that wasn't very reflective of the crew growth margins. So, we will look at kind of paint a picture for you of the underlying abilities that companies generate cash flow.

I think that we will see less adjustments through, but as we go forward, now that we've finished the business transformation or completed our objective there, there has been through that transformation with facility shutdowns and changes in transfer and manufacturing lines, lots of S&A reductions, fair amount of noise in our financial, but I think we're passed by now.

everybody for your interest in time. We're thrilled with where we are. I would say this is absolutely not the finish line. You take anything away from this call is that our strategic plan is working. And we're thrilled with what we did here, but we're also thrilled with where we're going forward. Appreciate everybody, what you're interested in with what we're talking in the future. All the best, bye.

This concludes today's conference. You may disconnect your lines at this time. Thank you for your participation and have a great day.