Q2 2024 Tilray Brands Inc Earnings Call
Thank you for joining today's conference call to discuss two great brands financial results for the second quarter of fiscal year 2024 ended November 30th 2023.
All lines have been placed on mute to prevent any background noise.
After the Speakers' remarks, there'll be a question and answer session for analysts and investment firms conducted via audio.
MS: I will now turn the call over to MS bearing Dorado jewelry brands, Chief Corporate Affairs and Communications Officer.
MS: You may now begin.
MS: Thank you operator, and good morning, everyone by now you should have access to the earnings press release, which is available on the investors section. So many brands I'd say, it's already got Com and has been filed with the SEC and SEDAR. Please note that during today's call, we'll be referring to various non-GAAP financial measures that can provide useful information for them.
Speaker Change: That's it.
Speaker Change: The presentation of this information is not intended to be considered in isolation or just the.
Speaker Change: The financial information presented in accordance with GAAP.
Speaker Change: The earnings press release contains a reconciliation of each non-GAAP financial measure to the most comparable measures prepared in accordance with GAAP. In addition, we will be making numerous forward looking statements. During my remarks and in response to your question.
Speaker Change: These statements are based on our current expectations and beliefs and involve known and unknown risks and uncertainties, which may prove to be incorrect.
Speaker Change: Actual results could differ materially.
Speaker Change: In the.
Speaker Change: Statements.
Speaker Change: In our earnings press release.
Speaker Change: The risks and uncertainties associated with such forward looking statements.
Speaker Change: Today, you will be hearing from key members of our senior leadership team beginning with Irwin Simon Chairman and Chief Executive Officer, who will provide opening remarks and commentary followed by Paul Merton Chief Financial Officer, who will review our quarterly financial results for Q2 fiscal year 2024.
Speaker Change: Also joining us for the question and answer segment are Denise Jackson, Chief strategy Officer, Instead of International Flair Mcneill, President, Canada, and Tiger Moore, President of our U S beer business.
Speaker Change: And now I'd like to turn the call over to Kelly brands, Chairman and CEO Irwin Simon.
Kelly Brands: Thank you Darin and good morning, everyone and happy New year and thank you for your continued support of jewelry brands and for joining our call today over the last several quarters, we have been articulating what truly sets del Rey brands apart, our diversified business model of cannabis.
Kelly Brands: <unk> lifestyle brands, all operating under our strategy innovation, which we believe will drive our continued growth and future success as we have demonstrated by our record revenue in Q2.
Kelly Brands: With the dedication and efforts number more than 300 employees worldwide.
Kelly Brands: Have created a global portfolio of the loved brands in an.
Kelly Brands: Innovative high quality products backed by best in class operations facilities and robust distribution that supports our goal to become a multibillion dollar company.
Kelly Brands: Before Steve and complementary business segments consists of <unk>.
Kelly Brands: Canada's consisting of adult use in medical cannabis across our broad portfolio of product formats, including whole flower pre rolls vapes concentrates oils edibles coffee goes and THC infused trees bear.
Kelly Brands: Every case, including craft beers spirits ready to drink flavored malt beverages, ciders and energy drinks and non alcohol beverages wellness, which consists of our Manitoba harvest MTS II products ingredients in snacks as well as our hemp based CBD infused beverages.
Kelly Brands: And of course, our European medical distribution business, which distributes pharmaceuticals, including medical cannabis.
Kelly Brands: In Q2, we continue to focus on organic growth as well as strategic transactions.
Kelly Brands: Canada, we maintained our number one market share position with a recent and hexcel and trust acquisitions, which drove considerable cost savings and operational efficiencies. We continue to strengthen our market positions operations distribution network and innovation across both medical and adult use.
Kelly Brands: Markets.
Kelly Brands: Internationally, we continue to grow our existing medical markets and strengthen our medical distribution and medical cannabis operations through a relentless focus on cost and efficiencies.
Kelly Brands: And finally, we've expanded our beverage alcohol business with our recent acquisition of eight iconic brands and Anheuser Busch, which tripled our beer business from $4 million of cases, a year with 12 million cases on an annualized basis.
Kelly Brands: We remain committed to our vision of changing People's lives for the better one person at a time, yeah I had to fly. This purpose, we are inspiring and empowering the worldwide community to live their very best life enhanced by moms connections and well be there.
Kelly Brands: At the same time, we've earned the trust of our stakeholders patients consumers community and partners across the spectrum of our wellness and lifestyle products in doing so we're delivering on our mission to be the most responsible trusted and market leading cannabis consumer products companies.
Kelly Brands: Ross the globe.
Kelly Brands: In fact through our strategic execution and achievements our business are comprised of a leading global cannabis business operating best in class portfolio of brands with high quality products that pass the most rigorous call. A recent poll regulations in the world with the number one market share in Canada.
Kelly Brands: And leading market share in Europe.
Kelly Brands: The fifth largest craft brewer in the U S with highly sought after brands dominated in key regions across northeast specific northwest and southeast and one of the most awarded Bourbon brands with Brecher rigs distillery with recent awards, including Best American blended whisky best Whiskey under.
$50 and 2003 worlds best blended whisky as the World Whiskey Awards.
Kelly Brands: And we're also leader Adm's foods, and snacks with our Manitoba harvest brand.
Kelly Brands: Diversifying our business beyond cannabis has put us in a very strong position today and has positioned us well for future growth opportunities.
Kelly Brands: Today, we do not engage in any cannabis operations in the U S. Due to it being federally illegal if that and when rescheduling of candidates were to happen in the U S. For Kilroy brands. We expect this would open the opportunity for certain institutional investors to invest into it.
Kelly Brands: And that were not previously able to invest in the cannabis industry and potentially provide a path for til rate itself pharmaceutical grade medical cannabis in the U S subject to Doctor prescriptions. As you know is a leading medical cannabis provider in the world with our knowledge and.
Kelly Brands: Experts use of medical cannabis and the regulatory compliance set applied we are well positioned to participate in a federally legalized medical market in the U S.
Kelly Brands: Our underlying goal for kilroy, bringing this to continue to deliver industry, leading profitable growth and sustainable long term shareholder value through our focus on three fundamentals number one maximizing profitable revenue growth through organic growth and expansion initiatives.
As well as key strategic acquisitions with strong synergy opportunities.
Kelly Brands: Realizing the benefits of optimizing asset utilization and <unk>.
Kelly Brands: Cost management to ensure our lead efficient cost structure across all our business segments.
Kelly Brands: Continuing to strengthen our industry, leading balance sheet and our cash position.
Kelly Brands: During Q2, we generated record net revenue of crypto Ray brands of $194 million.
Kelly Brands: Which marked our 34% growth from the prior year period and generated gross profit of $47 million and adjusted gross profit of $52 million.
Kelly Brands: We also significantly reduced our convertible debt by $127 million in the quarter, an additional $18 million after the quarter and plan to further reduce our indebtedness optimizing our capital structure and enhancing our financial flexibility.
Kelly Brands: Now moving to our businesses, we grew our Canadian net revenue by 31% in the quarter compared to the previous year driven by innovation across all product categories. This was achieved both organically and due to recent acquisition despite price compression of approximately $3 6 million.
So in the prior year quarter, which also negatively impacts top line revenue and profitability.
Kelly Brands: <unk> continues to maintain a number one market share position in Canada, the largest federally legal cannabis market in the world with approximately 12, 5% market share in adult use cannabis. This was 570 basis points ahead of the next L. P.
So really Canadian adult use cannabis sales and is number one in Ontario, Quebec in British Columbia, which represents approximately 60% of the Canadian population on a combined basis. We're also number one in cannabis flowers oils concentrates and Ta.
Kelly Brands: Beverages and number two in pre rolls number for NV and the top 10 in all other categories.
Kelly Brands: All while operating under rigorous high quality control standards.
Kelly Brands: In Q2 until Ray sold approximately 17 million grams of cannabis flower $19 million pre rolls and over one 5 million units of cannabis beverages, almost 500000 base and over 400000 units of Edibles in Canada, and we expect.
Kelly Brands: With sell $85 million pre rolls by the end of fiscal 2024.
Kelly Brands: Our August purchase of the remaining 57, 5% equity ownership of trusts beverage company for Molson, Canada elevated our market share and THC beverages to approximately 40% and positions us at the forefront of adult use beverage sector, where we trusted.
Kelly Brands: <unk> patients healthcare professionals and government officials in over 20 countries.
Kelly Brands: And achieved early mover advantage in new countries as medical cannabis legalization advances.
During Q2, we grew our international cannabis net revenue by 55% and are the market leader in medical cannabis across Europe, with leading shares in Germany, and Poland and other countries in which we participate similar to the U S. The growth of our international cannabis business is not.
It's dependent on adult use legalization.
We continue to take an active government relation draw internationally and just recently, we met with various members of German Parliament to discuss the proposed regulation and advancing adult use medical cannabis initiatives, which we believe will increase the accessibility of medical cannabis patients in Germany and <unk>.
Kelly Brands: Further work to reduce any stigma of medical cannabis as therapeutic option.
Kelly Brands: We're also optimistic about the potential abolishment of the tender procedure for in country cultivation in favor of permit procedures, providing kill rate with the flexibility to meet the needs of patients. It is expected that these regulations will be passed in the first quarter of calendar <unk>.
<unk> 24.
Kelly Brands: We remain committed to advancing medical cannabis as evidenced by our investments made in Europe behind our high quality medical cannabis products and best in class facilities in Portugal, Germany, where we're currently one of the only three companies in Germany that can cultivate and country as well as our medical distribution net.
Kelly Brands: Work led by our integrated medical distribution companies with access to approximately 13000 pharmacies. We also remain committed to medical cannabis education and research in October we announced our support of an independent clinical trial to research the efficacy of medical.
Kelly Brands: Cannabis as a treatment for Glioblastoma <unk> pharma also known as Cc pharma business established medical distribution platform for traditional branded and generic pharmaceuticals, as well as medical cannabis across 13000 pharmacies as well as wholesales and distributed from a revenue.
Kelly Brands: <unk> is currently equal in size to our cannabis segment comprising of 35% of total sales in Q2. It grew 12% from the prior year period, driven by improved procurement of pharmaceutical products.
Kelly Brands: Increased demand from a bottomline perspective, we're laser focused on optimizing our medical distribution platform in the quarter. We expect the cost optimization plan to reduce costs with our medical distribution segment by one $5 million annually the actions to achieve these savings were off.
Kelly Brands: Already executed in the quarter and we continue to evaluate for further cost optimization and production efficiencies.
Kelly Brands: Now turning to our beverage alcohol business beverage alcohol revenue in Q2 was $46 $5 million, representing 117% growth year over year, and we're only getting started in ramping up this segment. The craft beer industry today is still a large category and beverage alcohol.
With approximately $21 billion at retail in 2022 with our recent acquisition of the iconic craft beer and beverage brands, we have anchored till Ray's leadership position as the fifth largest craft brewer in the U S by sales volume working with the Boston Consulting group, we have developed a.
Kelly Brands: Beverage strategy identifying new opportunities for our pockets of growth across craft beverages, focusing on brand newness more connected to drinkers and by playing a leading role in driving excitement around craft beer to a broader consumer audience through product innovation market.
Kelly Brands: And sponsorships and advanced that connect with consumers across demographics Bellway brand is now uniquely positioned to become top 12 beer and alcohol beverage company.
Kelly Brands: By leveraging our portfolio to a more occasions through core products, such as craft beer and beyond through innovation to categories like flavored malt beverages ready to drink cocktails and spirits. This will be accomplished through a three pronged approach.
Kelly Brands: We will deploy a regional approach to scale our brands in key markets across the U S and maximize the potential of the portfolio to gain share from competitors.
Kelly Brands: We will execute a very focused national brand strategy revitalizing stockpile.
Kelly Brands: <unk> has national craft brand by targeting share and connection occasion to reach mainstream male and female beer drinkers.
Kelly Brands: Two one national brand and many regional brands, we will provide robust coverage across the U S and other countries, we will expand our innovation strategy to increase brand appeal to new consumers and occasions beyond craft beer in secondary targets.
Kelly Brands: We can also leverage our regional footholds to further grow our brands in new markets by using test and learn taxis, which may include multi brand first a variety packs or installing multi brand caps and tap rooms before entering the market with full distribution.
We can similarly, capturing new consumers and increase off premise consumption to break neck innovations.
Kelly Brands: We will build on our demonstrated success growing brands, such as Sweetwater and montage to grow our newly acquired consumer loved brands, including Dr. Top Bluepoint, Breckenridge brewery and barrel Red Hook Brewery Widmer brothers square mile Cider and by <unk> energy.
Kelly Brands: <unk>.
Kelly Brands: Our strategic playbook is already in play or expand our beverage alcohol business across the U S and Canada and getting our cost structure right.
Kelly Brands: <unk>, forming the productivity and profitability of the breweries we acquired <unk>.
Kelly Brands: We expect our beer gross margins to increase once we fully realized the cost savings achieved in connection with our fully integrated beverage alcohol platform.
Kelly Brands: We are aggressively working to launch new innovation across our beer and non alcoholic craft brands and expect to rollout new products in Q3 retailer.
Distribution <unk> already provided confidence in our ability to execute on our growth strategy and to achieve our ambitions to grow our beverage segment into a top 12 business.
Kelly Brands: Finally, our wellness segment is an important element of our U S strategy due to strong consumer interest in better for you snacks and end products since the kill rate of free a business combination we've turned around the Manitoba harvest business onto a path of growth and greater potential again product innovation is a poor phone.
Kelly Brands: This needs of Gen Z and millennial consumers, the new Hamlin forward snack foods and supplements offering in CBD beverages.
Kelly Brands: Fuel year day, while Q2 revenue was consistent of $12 $9 million, Manitoba harvest branded hemp business continues to expand its U S and Canadian leader market share could.
Kelly Brands: Consumption up in both natural and conventional channels with the brand's top five customers all see growth to conclude.
Kelly Brands: We've set the stage for continued growth in the near and long term and consider opportunities across our diversified business, both numerous and exciting as we continue to disrupt the global CPG industry with products that fuel consumers' needs and change People's lives for the better one.
Kelly Brands: Person at a time and.
Kelly Brands: And everything that we do we intentionally do to maximize profitability sustainable revenues and ensure optimal efficiencies all while maintaining our balance sheet strength as we invest in our industry, leading brands with that I will now turn the call over to Carl to discuss our financials in greater <unk>.
Carl: Retail Earl.
Carl: Thank you <unk> as a reminder, our financial results are presented in accordance with U S GAAP and in U S dollars.
We're also referencing both GAAP and non-GAAP adjusted results throughout our discussion today and our earnings press release contains a reconciliation of our reported results under GAAP to the non-GAAP measures and a feature in our remarks.
Carl: Let's now review our quarterly performance for the three months ended November 32023 Q.
Carl: Q2, total revenue rose to a record $194 million.
Carl: Compared to the prior year quarter at $144 million.
Carl: Representing 34% growth.
Carl: And our legacy businesses grew 10% organically and excluding acquisitions and the excellent advisory fee.
By segment cannabis net revenue rose, 35% in total with International Canada is up 55% and Canadian candidates up 31%, despite $3 $6 million of price compression in Canada.
Carl: Price compression not only negatively impact topline revenue, but also profitability as it would have dropped to the bottom line.
Carl: Cannabis excise taxes, which are a reduction to revenue totaled $27 4 million compared to $16 $8 million last year.
Carl: This reflected a sharp increase in cannabis revenue generated in Canada versus the year ago period due in part to the Axon Trust acquisitions and a change in our revenue mix to higher excise tax products.
Carl: Note that excise tax is predominantly computed as a fixed price on gram sold rather than as a percentage of the selling price and therefore continues to become a larger component of net revenue, particularly as current growth categories like infuse pre rolls and concentrates become the biggest part of our sales mix.
While an excise tax for US has been established to present these challenges to the minister of finance in Canada, We do not believe some level of reform is likely in the near term.
Carl: So about two thirds of Lps have excise taxes owed and this could lead to additional insolvencies and even more industry consolidation, which is needed to stabilize in the industry.
Carl: Distribution revenues from our <unk> pharma also known as <unk>, our European medical distribution business Rose 12%.
Carl: Net beverage alcohol revenue rose, 117% and wellness revenue rose 2%.
The inherent benefits of our diversified business model are reflected in the segment contributions to our overall revenue mix.
Carl: We're not overly dependent on any business line from a top line a gross profit standpoint, and believe each segment, including cannabis wellness distribution in beverage alcohol are on a trajectory for sustainable growth.
Carl: In Q2, our Canada segment represented about 35% of our total revenue mix comparable to last year.
Distribution segment represented 35% down from 42% last year.
Carl: Beverage alcohol represented 24% up from 15% last year and wellness represented about 7% down from 9% last year respectively.
Carl: These percentage changes from Q2 last year due primarily to contributions from Hexone Trust and the new craft beverage brands acquired in early October.
Carl: Next quarter, we believe the mix will balance to approximately 30%, Canada, 30% distribution, 30% beverage alcohol and 10% wellness.
Carl: Diversification is also reflected in our geographic footprint with about 60% of our net revenue from North America, and slightly less than 40% from EMEA.
Carl: The remainder from other parts of the world.
Carl: Turning to profitability gross profit increased 11% to $47 4 million compared to $42 9 million in the prior year quarter.
Carl: Gross margin decreased to 24% from 30% in the prior year quarter.
Carl: While gross margin for U S. GAAP purposes declined from the prior year.
Carl: Adjusted gross margin exclusive of the impact of the Hexcel advisory fee, which ceased after we purchased XO rose to 27% compared to 26%.
Carl: I will discuss adjusted gross margin by individual segment in a moment.
Carl: Net loss in the 3% to $46 2 million compared to net loss of $61 6 million in the prior year quarter.
Carl: On a per share basis, this amounted to a net loss of seven.
Carl: There's 11 in the prior year quarter.
Carl: During Q2, we renegotiated a supply agreement between our free <unk> wholly owned subsidiary and a free environment and non wholly owned subsidiary that is expected to result in $33 million annually and additional income being allocated that salary shareholders as opposed to the non controlling interest.
Carl: Further as part of this renegotiation, we believe we will save more than $22 million annually in cash income taxes.
Carl: The renegotiated supply agreement was effective September one 2023.
Carl: Amended agreement had been implemented at the onset of the fiscal year and would have improved our loss per share attributable to <unk> shareholders by <unk> <unk> for Q1, which would have increased the value attributable to <unk> stockholders by $15 million.
Carl: Despite all of this we still expect to pay over $140 million and Canadian excise tax this year.
Carl: Beginning this quarter, we are introducing two new reporting metrics to our discussions adjusted net income loss and adjusted earnings per share.
Carl: Definitions of both are identified in the press release, along with the relevant reconciliations and calculations.
Carl: For the quarter, we are reporting an adjusted net loss of $2 7 million, which will be calculated on a per share basis resulted in EPS of zero for the quarter adjusted.
Carl: Adjusted EBITDA was $10 1 million down from $11 million in the prior year quarter.
Carl: This is consistent with the termination of the actual advisory services contract upon our acquisition of XO, which represented $7 8 million on the $11 million and adjusted EBITDA in the prior year period.
Carl: During the quarter, we continued to make great progress against the <unk> synergy plan, increasing the amount of the synergies from $27 million to between 30% and $35 million.
Carl: As of the ended the quarter, we achieved $22 million in annualized savings on an annualized run rate basis of which $14 million represented actual cost savings during the period.
Carl: These synergies are being achieved via consolidating packaging fee curve in freight and logistics.
Carl: Operating cash flow was negative $34 million compared to positive $29 2 million in the prior year quarter.
Carl: The increase in cash used during Q2. This year was primarily related to the settlement of pre acquisition liabilities assumed in connection with the <unk> acquisition and an increase in accounts receivable in the current period.
Carl: Also the prior period included a working capital reduction and the cash collection of $18 $3 million from HDI related to the XO convertible note, which did not recur in the current year.
Carl: Turning now to our business segments gross cannabis revenue of $94 6 million was comprised of $72 million in Canadian adult use revenue.
Carl: $11 9 million and international cannabis revenue.
Carl: $6 $3 million and Canadian medical revenue revenue and $4 3 million in wholesale cannabis revenue.
Carl: Net cannabis revenue was $67 1 million.
Carl: Being a 35% increase from the year ago period.
Carl: The positive variance related to increased organic growth of over 11%.
Carl: And the acquisitions of hacks and trust.
Carl: Offsetting the increase in net cannabis revenue was the elimination of the advisory services revenue from the prior year quarter due to the XO acquisition, which terminated our previous strategic arrangement that we have in place.
Carl: International candidates grew 55% largely because of the expansion into emerging international medical markets. Additionally, in the prior period. The company recognized a one time return adjustment of $3 $1 million related to a former customer in Israel.
Carl: <unk> gross profit was $26 million and candidates gross margin was 31%.
Carl: <unk> to $21 3 million and 43% in the prior year quarter.
Excluding the actual advisory fee and return adjustment in the prior year quarter and the wholesale sale in the current quarter adjusted cannabis gross margin increased to 37% from 33%.
Carl: As I just referenced a portion of the decrease in gross profit was a result of the termination of the <unk> services agreement disagree.
Carl: This agreement contributed no of gross profit in the current year compared to $7 8 million in the prior year.
Carl: Additionally, we made a significant wholesale transaction that resulted in negative gross profit of $2 million.
Carl: We entered into this agreement to optimize our inventory levels and prioritize the generation of positive operating cash flow.
Carl: European distribution revenue derived predominantly through Cc pharma increased 12% to $67 2 million from $60 2 million in the prior year quarter.
Carl: The increase was driven by the strengthening of the euro relative to the U S. Dollar increased capacity through outsourcing to third party production facilities as well as leveraging internal production and improved procurement processes.
Carl: This has allowed to already fiber to improve its product mix.
Carl: We also continue to be focused on optimizing portfolio and production capacity to prevent constraints on continued revenue growth.
Carl: So a farmer gross profit decreased to $7 1 million compared to $7 7 million in the prior year.
Carl: Pharmacy gross margin decreased to 11% from 13% in the prior year quarter, which was due to product mix.
Average alcohol revenue was $46 5 million up 117% from $21 $4 million in the prior year quarter.
Carl: The positive Delta was due to contributions from increased organic growth of over 10%.
Carl: And our Montauk Flurry acquisition last November and the newly acquired brands acquired in early October this year.
Carl: Beverage alcohol gross profit increased to $16 million compared to $10 million, while average beverage alcohol gross margin decreased to 34% from 47% in the prior year quarter.
Carl: Adjusted gross margin from beverage alcohol from our legacy business was 54, 8% up from the prior year quarter of 47%.
Carl: Adjusted gross margin from our newly acquired craft brands was 21%.
Carl: <unk> has previously address the efforts we are spending to improve the newly acquired craft brands adjusted gross margins to levels consistent with our legacy beer adjusted gross margins.
Carl: Wellness revenue was relatively consistent at $12 9 million compared to $12 7 million in the prior year quarter with the increase being driven by our promotional sale at a large bulk retailer.
Carl: <unk> gross profit was $3 7 million down from $3 9 million in the prior year quarter and gross margin fell to 29% from 31% as we experienced a change in sales mix towards more golf retail sales, which have a lower margin and is specific to this quarter our.
Carl: Our cash and marketable securities balance as of November 30 was $261 4 million.
Carl: Down from $433 5 million in the year ago period.
Carl: The majority of the decrease related to the redemption of the <unk> convertible notes upon maturity in the amount of $107 3 million combined with litigation settlements inherited from acquired businesses at XO exit costs.
Carl: Having now completed half of our fiscal year, we are reiterating our fiscal 'twenty four guidance of adjusted EBITDA between 68% and $78 million.
Carl: Note that when we first issued this guidance, we projected a significant step up in EBITDA contribution during the second half of the year, most particularly in Q4, which we continue to anticipate.
Carl: This step up as a function of our beer business, leading up to the summer Ah historically busy season.
Carl: New innovations scheduled to be launched as part of the spring reset certain volume guarantees associated with our spirits business and in our distribution business as pharmacies by involved customers added them going on vacation.
Carl: But we also projected positive adjusted free cash flow from operations, excluding our integration costs from <unk> Trust, the newly acquired brands and the cash income taxes related to a three of diamond.
Carl: We are also managing capex and working to strengthen our industry leading balance sheet.
Carl: Let me now conclude our prepared remarks and open the lines for questions from our covering analysts.
Speaker Change: Operator, what's the first question.
Speaker Change: Thank you.
Speaker Change: Our first question is from the line of Andrew Carter from Stifel. Please proceed with your question Sir.
Andrew Carter: Thank you good morning, so looking at back half guidance I appreciate kind of what you just said, but if I've got my math, right and you need $16 million to $40 million of incremental EBITDA in the second half of the year and then you've got $25 million second half last year from Hector piece of 35 million to $45 million of incremental EBITDA to meet the guidance.
Andrew Carter: In the second half could you talk about kind of stepped up seasonality how much that is going to contribute incremental synergy capture year over year or making progress on kind of the Abi Abi craft brands gross margin how much of the in second half and then kind of one more within this quarter, how much was kind of.
Andrew Carter: One time costs associated with.
Speaker Change: Adi, obviously nothing's you excluded that could swing the profit second half and help that number. Thank you.
Okay. Thanks, Andrew So just in terms of a number of the items first off when we look at the XO and trust acquisitions, we've increased our synergy target, 2% to 30% to $35 million, we already have.
Speaker Change: $22 million of that and you've got 14 of it in the most recent quarter, so youre going to see you're going to see that flow through the store.
Speaker Change: So our numbers through the end of the year, we're seeing increased seasonality in the cannabis Canadian cannabis business in Q4.
Speaker Change: We see increased seasonality every year in the distribution business in Q4.
Speaker Change: Every year, except for the two years of Covid.
Speaker Change: And that was that's really driven by pharmacy stocking up on medicines in advance of the summer months.
Speaker Change: When a lot of Germans disappear from Germany for their holidays over the summer and they buy in advance.
Speaker Change: As you as you go through if we look at the Abi transaction sorry, the newly acquired brands, what we're seeing is as even more seasonality.
Speaker Change: Then then Sweetwater and we all know what happened last year with Sweetwater at Montauk in the fourth quarter and so we see profitability increases there as well we have a couple of internal cost savings plans.
Speaker Change: Arc that are going to net us about $5 million over over the back half of the year.
Speaker Change: <unk>.
Speaker Change: And and we have invested immensely and new innovation or both Adi and for Sweetwater for that spring reset.
Speaker Change: And in the back half of the year and Andrew I think the Big thing is this year, you're going to remember we closed on the Abi deal.
Speaker Change: Only two months ago, So we really didn't get any benefits from it.
Speaker Change: But you've got to step back our beer business was up 10%.
Speaker Change: In this quarter, where traditional beer businesses had been down or flat. So we're seeing some good organic growth from our beer business. We're seeing good organic growth from our cannabis business you saw what happened in Europe, you saw what happened.
Speaker Change: In our Canadian markets, and Thats, even with price compression.
Speaker Change: So, let's let's step back you heard what we said we increased our synergies that.
Speaker Change: That we're going to get now from the <unk> $30 million to $35 million, we were only operating that for about three months. We closed on trust, we're consolidating that business into our London facility.
Speaker Change: And we have a.
Speaker Change: A major market share on that so we're well positioned and I think the big thing is how do we take and get organic growth. This is key number one number two is cost savings and we put in place very early on we're just out of corporate here, we've taken a $5 6 million and then focusing on the integration.
Speaker Change: Of the Hexcel business, the trust business and the Abi deal and then last but not least we got a lot of innovation coming out in our product line both in beer and candidates. So we feel there's a good path to achieve the back half.
Speaker Change: I guess the second question just.
Speaker Change: From Canada, you mentioned the price compression ongoing obviously at a much lower rate, but it's still a headwind in the profit you also mentioned mix, Helen kind of where the consumer is that stagnation.
Speaker Change: At a certain point looking at Canada.
Speaker Change: You see the profit pool, increasing and I guess, Vince you mentioned two thirds of Lps are paying kind of a regressive tax taxes owed.
Speaker Change: See any risks there that.
Speaker Change: Okay.
Speaker Change: Number one forsman honestly, even happening, but number two there could be settlements or whatever that could make basically the whole kind of Canada adult use market, just a very difficult value proposition overall to where you would kind of reconsider investment in that.
Speaker Change: So ill step back for a second you know, let's say, Canada is the only market in the world of recreational canvas legal.
Speaker Change: We have one of the largest share we're number one in Ontario number one in Quebec and number one in British Columbia.
Speaker Change: As over 60% of the population.
Speaker Change: What we're seeing in Canada, Yes, we don't like price compression and we got a 12, 513% share with our next competitor out there about four 5% share points lower.
Speaker Change: What we have to focus on is a couple of things.
Speaker Change: More and more sales number one number two taking more and more costs out you've heard Karl talked about renegotiating, our agreement and taking costs out of our agreement with our grower.
Speaker Change: As we bring hexcel and there we're looking to take $35 million of total costs that are there.
Speaker Change: But as we grow sales will now grow we will now sell 18 19 million.
Speaker Change: <unk> roles of year, we will sell more and more flower.
Speaker Change: Big thing is organic growth and taken out more and more costs ultimately listen the industry's only five years old I come back and I say this year.
Speaker Change: Lps will go away.
Speaker Change: More consumers will get educated about cannabis in the cannabis market will grow I see a big opportunity in the beverage category for us in the Canadian market and the edibles and listen with our infrastructure in Canada and now having a facility in Belleville in London, It doesn't stop us from going into the beverage.
Speaker Change: The beer business, the craft beer business or other businesses in Canada to offset some of our cost of our interest infrastructure diversify like we've done in the U S. So we're committed to the Canadian market and.
Speaker Change: We think theres a lot of opportunities there.
Speaker Change: Thanks, I'll pass it on.
Speaker Change: Thank you.
Speaker Change: Thank you.
Speaker Change: As a reminder to allow as many analysts as possible to ask questions. We ask you. Please ask one question at this time.
Speaker Change: Our next question comes from the line of Aaron Grey with Alliance Global Partners. Please proceed with your question.
Aaron Grey: Hi, good morning, and thank you for the question.
Aaron Grey: So for me I wanted to touch on some of the comments you made in terms of potential rescheduling and the U S and opportunities on the medical side, so assuming if it might be schedule III as many people predict it might be can you speak to how you think you'd be able to leverage your Canadian in Europe European expertise.
Aaron Grey: Spoke to prescriptions do you think there needs to be additional steps in terms of the current existing framework in the U S participate in terms of selling into pharmacies or do you think you'd be able to utilize that in terms of the existing dispensaries. We're most cannabis medical medical sales are being done and if you could expand upon how you might be able to participate in the U S.
Aaron Grey: In the event of rescheduling on medical side. Thank you.
Aaron Grey: Listen I think as I've said and I said in my comments, what rescheduling does and medical cannabis legalized couple of things I think it brings into some additional shareholders in regards to still shareholders. It changes the way in regards to some of the banking reform takes possibly but more important.
Aaron Grey: Medical cannabis now which is legal.
Aaron Grey: And about 10 10 states medical cannabis is.
Aaron Grey: The.
Aaron Grey: Trinity to sell medical cannabis in the U S.
Aaron Grey: Nationally where today, we are the largest in Europe, and we have a big business in Canada, So taking our infrastructure and are hopefully.
Aaron Grey: We could in import products from the Canadian market or ultimately would we buy something in New York.
Aaron Grey: That would allow us to get into the medical business, but again, we have the expertise we have the research we work with the doctors we work with the doctors on writing prescriptions to date, we work with multiple hospitals as you heard.
Aaron Grey: As talked about doing research on brain cancers, and some other sleep apnea and some other diseases out there is <unk> I mean, we've been doing this now for the last five six years, so taking that knowledge, taking that research and taking the expertise and we may have to move some of our people here.
Aaron Grey: Set up the infrastructure to do it but it would not be a big issue for us to do it to get into the medical business in a big way in the U S.
Speaker Change: Okay, great. Thanks, so much of the call I'll jump back in the queue.
Speaker Change: Thank you.
Speaker Change: Thank you once again remind you. Please ask one question.
Speaker Change: As long as many analysts as possible to ask questions.
Speaker Change: The next question will be from the line of Tami Chen with BMO capital markets. Please proceed with your question.
Tamy Chen: Hi, Good morning, Thanks for the question I just wanted to ask.
Tamy Chen: You can talk a bit about how you view your current liquidity position you are targeting for this fiscal year to be positive adjusted free cash flow, but that would suggest there's still be other cash outlays that you excluded from this but is it would be a burden on your cash balance and you've highlighted a number of various innovation investing.
Tamy Chen: And for example, you hear that.
Tamy Chen: Alcohol segments. So I'm just wondering how at this point you view your liquidity position.
Speaker Change: I view, we're in a pretty good shape at the end of the quarter, we had close to $260 million of cash.
Speaker Change: Our debt bank debt and our subordinate debt.
Speaker Change: Is basically.
A little over a little less than $500 million.
Speaker Change: And we're working off the 20 fours, so I view us as generating cash investing back in our businesses.
Speaker Change: You got to remember this year can be as we go into the back half and get more and more.
Speaker Change: Cost savings out of this business.
Speaker Change: And generating more and more cash universe alcohol spirits business, our international business.
Speaker Change: It helps us to reinvest back in their business. So.
Speaker Change: I come back and see us being in a pretty good place.
Speaker Change: Okay. Thank you.
Speaker Change: Thank you.
Speaker Change: The next question is from the line of Owen Bennett with Jefferies. Please proceed with your question.
Owen Bennett: Good morning, Gents hope all well and just a quick one on the international business you mentioned.
Speaker Change: <unk> about <unk> and drive it into into the back half and you didn't really talk about the international business. So I was hoping you could just touch a bit more on the expansion into new international markets you'd call out in the quarter and then assuming that the new legislation gets passed in Germany. When can we expect to see.
Speaker Change: A meaningful pickup in terms of number of patients in that market and can we see and that will also have support in the back half of the year. Thank you.
Speaker Change: No.
Speaker Change: For that and I think it's important.
Speaker Change: We talked about rescheduling in the U S and what our international business has done because it's all medical cannabis and our growth with cannabis.
Speaker Change: <unk> is over 50% in internationally without of course any acquisitions on the team has done a great job.
Speaker Change: I'm going to let Denise talking about that in one second but we have spent some time in Germany meeting with the German government and we expect some things from that so Denise Thanks, Ellen in Ireland.
Denise Jackson: To answer your first question in terms of the back half so we have.
Denise Jackson: Strategy that looks at how do we grow our existing markets and major markets first today as we've talked about our Germany, Poland and Luxemburg and then also how do we continue to grow the ones that were that are emerging and were entering and we consider those along the lines of the UK Portugal.
Denise Jackson: All Italy, Czech Republic, we are monitoring of course.
All the new regulations that are being discussed whether Ukraine legalizing.
Denise Jackson: And also looking at Switzerland in terms of the medical market.
Denise Jackson: We continue to basically roll out what we consider our go to market strategy, which is try to be.
Denise Jackson: That first mover and get that early advantage, we find that doctors utilize.
Denise Jackson: Worldwide knowledge that we have on medical cannabis and so as we go into new countries, our reputation in medical candidates where we.
Denise Jackson: Look at it as an expert by both medical professionals as well as government and health care professionals with OE and we provide education symposiums.
Denise Jackson: And really work to bring the reputation of knowledge of tail range each of those markets.
Denise Jackson: Answering your second question in terms of the legislation that's coming on board.
Denise Jackson: Note that in sometime in January the legislation is going to be in front of the German Parliament again.
Denise Jackson: Early February it will be in front of the state parliamentary system for their review and we're hoping to see that legislation passed in Q1 of this year 2024.
Denise Jackson: And then shortly after that we will expect to see the rollout of decriminalization and social clubs.
Denise Jackson: As well as the rescheduling of medical cannabis as narcotic.
Denise Jackson: We will see doctors come onboard we are obviously, increasing our educational efforts to bring more and more health professionals on board with medical cannabis as a therapeutic option and we're really really optimistic about the future in Germany.
Speaker Change: Great. Thanks, guys really helpful. Appreciate it.
Speaker Change: Thank you.
Our next question is from the line of Johnson <unk> with CIBC. Please proceed with your question.
Johnson: Thank you good morning, I wanted to get to the change in the agreement with free of Diamond.
Johnson: It sounds like a material win so just confirming the amounts that you now expect to save.
Johnson: 30% to $35 million typically pay to your JV partner and also 20 plus million in cash taxes, a year, so $55 million year annually. The increase valued until right just confirming that that's that's the change and the question is how did this come about.
Johnson: Why did the JV partner agreed to it <unk> have to give up something to receive such a benefit.
Speaker Change: So thanks, Thanks John.
Good question. So just I just want to be clear that because of the way the accounting works for the for a for a free of Diamond.
Speaker Change: The number that you that you raised in terms of the 33% to 35, that's going to change the allocation of net income or net loss in an individual quarter. It doesn't it doesn't flow through the income statement and will create additional net income for the consolidated entity it changes.
Speaker Change: The of the allocation of that income between the JV partner and <unk>.
Speaker Change: As it relates to the cash taxes that obviously impacts our cash balance.
Speaker Change: And it also that part only will flow through our.
Speaker Change: Through our income statement.
Speaker Change: In terms of the negotiation I think when we when we looked at the agreement and when our when our partner looked at the agreement they realize that the Canadian market had had changed and we needed to we needed to modify the agreement.
Speaker Change: Obviously, there were there were given takes associated with that without agreement, but at the end of the day.
Speaker Change: We've been able to modify that and deliver that value to our shareholders. I think the most important thing as you know.
Speaker Change: We have a good partner in the master annuities that have worked with US I think as we look.
Speaker Change: At the long term of the industry, but the most important thing is when we went in there.
Speaker Change: Price compression has hit this company close to $200 million over the last couple of years.
Speaker Change: They were not sharing within the price compression I think there are some important here that there was even though there is a there was a time limit on this year, but.
Speaker Change: Walking in there win win for both and hopefully we can sell more cannabis we've consolidated some additional cannabis into his specific into their facilities.
Speaker Change: With <unk> and some of the <unk> acquisitions and some of the other stuff. We're doing so there was multiple parts of it that makes sense and I think part of that too was in doing that was benefit of some tax opportunities for us that was very very helpful. So.
Speaker Change: It was a win win situation.
Speaker Change: Got it that's helpful. Thank you.
Speaker Change: Thank you.
Speaker Change: Our next question is from the line of Matt Bottomley with Canaccord Genuity. Please proceed with your question.
Matt Bottomley: Good morning, everyone I just wanted to follow up with some of <unk> comments with respect to.
Matt Bottomley: When you asked about sort of the value proposition out of Canada, and then specifically with respect to ultimate market share at least in the medium term I know on the back of sort of tolerate a free combination.
Matt Bottomley: <unk> there was there was a whole of maybe getting as high as 30%. So given the fact that you're a 500 basis points ahead in terms of market share who is number two how much.
Matt Bottomley: Hum.
Matt Bottomley: Increased market share is things that are in your control, whether it's through innovative products versus just continuing to wait for this market shakeout, which seems to be taking longer than everyone had anticipated.
Speaker Change: That's a great question as I look at it and say, we have a 12, 513% market share and I look at everybody else.
There is about another 10% market share and then I look at the other 800 Lps with 1%, 5%, there's a lot there.
Speaker Change: A lot of growers out there I think.
Speaker Change: What we're seeing is either a lot of consolidation or a lot of small lps going away.
Speaker Change: Originally I come out there and said.
Speaker Change: At a high high double digits or in the 20% 25% market share.
Speaker Change: You got to remember we're number one in Canada are number one in Ontario number one in <unk> number one in British Columbia, which represents.
Speaker Change: 60 over 60% of the population so.
Speaker Change: Think there's good opportunities to grow market share.
But on the other hand, where I look at big opportunities is in the beverage category. The edibles category I think there is some big opportunities and they've been going forward.
Speaker Change: You heard what I said before it.
Speaker Change: More and more consumers the market is growing in Canada. The problem is there is still way too many Lps theres still the high cost with excise tax.
Speaker Change: And from our standpoint here I think as we could get a grow in other categories and that's the big thing and how do we become that low cost producer. The other big thing in the Canadian market, which we have to focus on is building brands.
Speaker Change: And it's hard to build brands when the government does allow you to advertise so how do we advertised.
Speaker Change: Within the marketplace and ultimately be within the guidelines of what health, Canada does of the.
Speaker Change: You heard what I said before I think we have a great infrastructure great leadership team in Canada, We now have our Belleville facility, which we acquired from Molson that can do non alcoholic drinks that can do energy drinks can do water drinks, we would do other drinks so with that do we expand into other categories and other.
Speaker Change: Adjacencies to our cannabis business, but I'm looking for some conditional major growth coming from the beverage category, which I think.
Speaker Change: From a size standpoint, and I think there is still big opportunity in vape and edibles category in Canada.
Speaker Change: Okay. Thanks for that.
Speaker Change: Thank you.
Speaker Change: Our next question is from the line of Michael Lavery with Piper Sandler. Please proceed with your question.
Michael S. Lavery: Thank you good morning.
Michael S. Lavery: Just wanted to come back to the beverage alcohol segment.
Michael S. Lavery: Focus on the <unk>.
Michael S. Lavery: Recently acquired brands I know you gave some of the gross margin drivers.
Michael S. Lavery: How you've got line of sight on improvement there but.
Michael S. Lavery: It sounds like Youre really.
Michael S. Lavery: <unk> to turn the topline around as well it looks like those are running down close to 10% or so.
Speaker Change: Can you just.
Speaker Change: Give us a little more confident that <unk> got some plans that can make that happen and we've seen the U S consumer be pretty fickle, sometimes in craft beer, especially so.
Speaker Change: What is it that would.
Speaker Change: Saipem and get.
Speaker Change: Get these bank.
Speaker Change: Brands back to growth.
Speaker Change: Good question I think again, let's come back and look at our legacy brands or Sweetwater Montoc ALPA.
Speaker Change: Alpine.
Speaker Change: <unk> and.
Speaker Change: And Green Slash you heard what I said, we grew 10% in our legacy <unk> businesses in the last quarter. So we're growing our current legacy businesses, which is important.
Speaker Change: Could you come back and look at the brands, we acquired from Abi There are some great brands and there are many shock top we've talked to people, but chalked up to talk to people some of the stuff in bluepoint here in the northeast.
Speaker Change: Breckenridge brewery.
Speaker Change: <unk>.
Speaker Change: <unk> 10 barrel. So we really have some great brands that from a regional standpoint that may be only sold in certain parts of the country and where do we expand.
Speaker Change: Our distributor base is excited about it our retail base is excited about it our convenient stores excited so that's what makes me feel good as we've been out there making.
Speaker Change: Presentations and talking to our customer base right now there's a lot of interest there.
Speaker Change: The second thing is we have a pipeline of innovation that we have moved on very quickly in these brands have not had innovation.
Speaker Change: <unk> done with them in the last couple of years. So I feel good about the innovation I feel good about the distribution I feel good about getting the distributors excited and now as we bring this together and there is a real focus on it with.
Speaker Change: A dedicated sales team a dedicated national accounts team.
Speaker Change: We're putting pressures on our distributors.
Speaker Change: I feel we can really get the growth. The next thing is as we bring these into our facilities.
Speaker Change: And we look at some of the costs introduced we can get our margins back to where our traditional margins or with our.
Speaker Change: Current brands, so I'm real optimistic and.
Speaker Change: I come back and I say this year, yes, the beer industry has gone through some challenges and growth.
Speaker Change: <unk>.
Speaker Change: And again spending time with BCG and do in our studies here.
Speaker Change: There is some great opportunities within the beer category now there has to be changes, but alcohol there has to be changes.
Speaker Change: In regards to <unk>.
Speaker Change: Nonalcoholic Theres got to be some other changes in how do we get males and females and Gen. C. Drinking beer is a lot of the stuff that we're going to do.
Speaker Change: And we've talked about it we're going to expand into some water business energy drink business in some other categories, we're not going to be just the beer business, where we will be the til rib beverage business I think which is important because we have manufacturing facilities. We have distribution out there and we have a sales and marketing infrastructure to drive this behind it and I got to tell you.
Speaker Change: There is a tremendous amount of sporting venue users tremendous amount of universities that have reached out to us and want us apart of their sponsorship.
Speaker Change: Okay. Thanks, so much.
Speaker Change: Thank you.
Speaker Change: The next question is from the line of Frederico Gomez with ATV capital markets. Please proceed with your question.
Frederico Gomez: Hi, good morning.
Frederico Gomez: Alright, My question morning.
Frederico Gomez: You may.
Frederico Gomez: You mentioned a key strategic acquisition in your prepared remarks, something you look at so can you remind us kind of how you're looking at acquisitions.
Frederico Gomez: Between the order alcohol and cannabis stagnant.
Frederico Gomez: So geographically.
Frederico Gomez: You're focused on Canada would be west or are you also looking.
Speaker Change: At opportunities elsewhere. Thank you.
Speaker Change: So I come back and look at strategic acquisitions as I've said.
We got a lot of us grow we've got a lot of brands.
Speaker Change: We're into most categories in the Canadian market.
Speaker Change: And with that if there was something strategic that could help our cost structure.
Speaker Change: That would help us.
To take that.
Speaker Change: B within our portfolio of brands, we would absolutely look at it but you heard what I said before one.
Speaker Change: One of the big things I'm looking at in Canada, how do we diversify and be in other categories with adjacencies to the cannabis industry and is that alcohol is that drinks et cetera. So that's what we're looking at in the Canadian market in regards to the U S market.
Speaker Change: We're focused on Bev alcohol here.
Speaker Change: We're focused on in regards to our Manitoba harvest is their food businesses with Adjacencies that.
Speaker Change: Would make sense to be part of our Manitoba harvest business.
Speaker Change: It's something that we would look at and then internationally.
We liked the Bev alcohol business internationally. There is some stuff that we've looked at there and how do we expand some of our medical business.
Speaker Change: In our international markets, and there's markets, where we could do an acquisition or two so we're looking at.
Speaker Change: That strategic they've got to be accretive.
Speaker Change: <unk> got to be good value there for us and how do we integrated into our current infrastructure.
Speaker Change: If you go back and look.
Speaker Change: With the til Ray a free acquisition, we took out over $100 million of costs.
Speaker Change: With the Hexcel business will take a close to $35 million of costs with truss and our beverage business will take out additional costs there.
Speaker Change: You come back and look at the Abi Sweetwater Manta will take a good amount of cost out of there. So what got to be as businesses that fit within where we can take out cost, but more importantly, we need organic growth.
Speaker Change: And ultimately use that infrastructure and as a company today of our size.
Speaker Change: Just being a public company costs out there today is higher cost for our insurance because we have candidates within years. So again, how do we absorb some of those costs with putting more sales on that that's something that we look at here.
Speaker Change: Thank you very much.
Speaker Change: Our next question is from the line of Vivian ASR with TV Cowen. Please proceed with your question.
Good morning. This is Robert on for Vivien answer and thank you for taking the question.
Robert: I just wanted to follow up on the international question, specifically in Australia, where we've been seeing some strong patient growth.
Robert: Any updates for your plans in that market and do you see any of these international markets, becoming saturated as more competitors achieve the necessary certifications. Thank you.
Speaker Change: Yeah no. Thank you for the question. So in terms of Australia, we see really great opportunity in Australia, and we have a.
A leading business there in both Australia, and New Zealand and both with our ex taxes out our flower.
Speaker Change: We have done is we have expanded our portfolio of flower in order to take advantage of that market, including.
Speaker Change: As of last quarter, we introduced both in cost into the market.
Speaker Change: The market really was looking for more of a proliferation around medical cannabis flower and we will continue to evaluate that market for a new form factors.
Speaker Change: In terms of your question about competition in achieving more certification.
Speaker Change: We have been in the market with GMP certification, our GMP certification is actually above the standards. That's actually require again failure and we find that health care professionals and government regulators.
Speaker Change: Enjoy the fact that we take the higher standard approach.
Speaker Change: <unk> that medical cannabis.
Speaker Change: And high standards as our key and we will continue to grow that market and look for opportunities to.
Speaker Change: Partner with additional cash.
Speaker Change: Cannabis dispensaries, partnering with health care clinics et cetera.
Speaker Change: Got it thank you.
Speaker Change: Thank you.
Speaker Change: At this time, we've come to the end of our question and answer session and I will hand, the Florida management for closing remarks.
Thank you very much everybody and thank you for joining us today.
Speaker Change: Sit here and proud of where we are.
Speaker Change: We are a global company, we are a diversified company and if you look at public companies out there today, there's very few companies that emulate are resemble what we do in canvas alcohol food and sell on a global basis.
Speaker Change: We're dealing in categories today that are new to the marketplace in regards to canvas, we're dealing with categories today, where there's a lot of regulatory requirements.
Speaker Change: And Thats something that we do as a company to ensure when we produce cannabis he goes through strict regulatory and quality control before we put any product out there and thats the same with every single product.
Speaker Change: I come back and I remember, joining a free or when we are a $50 million business today on the run rate to close to $1 billion.
Speaker Change: We had record net revenue of $194 million and that is after excise tax comes off the top we're number one in the Canadian market like I said before a tough market with a lot of Lps.
Speaker Change: Still an illicit market there and still a market. That's just five years old. We're a lot more consumers are being educated and we're trying to build brands out there and not being able to advertise.
So with that we've accomplished a lot and we got a lot more to do in Europe again, we're the largest medical cannabis company in Europe, with a 55% growth, which we see lots of opportunities in different countries, we see lots of change coming in Germany.
Speaker Change: <unk>.
With that spending a lot of time over there and having a grow facility in Portugal, and Germany gives us a leg up in a very good way and I think the important thing is theres a lot of sharing between the Canadian market medical business in the European market that we're doing that ultimately like I said before if these scheduling never happen what we could.
Speaker Change: Bring to the U S.
Speaker Change: I'm really excited about our bev alcohol business.
Our beer business being the fifth largest cannabis business I can remember when we first bought Sweetwater, we were selling about 2 million cases, plus a beer a year.
Speaker Change: Now, we'll sell close to 12 million cases have over 12 brands six processing facilities.
Speaker Change: 12 brew houses and.
Speaker Change: Brands that got tremendous opportunity.
Speaker Change: A big resurgence happening in the beer category.
Speaker Change: In multiple ways and I think that's something that we're going to help evolve and change with innovation with distribution with new products with education in both beer and as I've said and tried to clean. This how do you make beer cool again and not from just a drinking standpoint.
Speaker Change: From a standpoint of people.
Speaker Change: We really have to say I'm very lucky to get to work with a great organization over 'twenty 300 people.
Speaker Change: Around the world.
Speaker Change: We on boarded.
Speaker Change: Over the last two months over 700, new people with the acquisition of Abi and with that that went seamless and <unk>.
Speaker Change: Very much want to welcome them as part of the <unk> family.
Speaker Change: I was asked a question about our balance sheet, that's something that Carl and I spend a lot of time on managing our balance sheet something that keeps me up at night is that so how do we deal with our debt how do we generate cash and again, we're a five year old company that have done multiple acquisitions.
Speaker Change: We spend a lot of capex on growth Capex and how do we do that and at the end of the day manage your balance sheet and last but not least our shareholders. We're here for our shareholders.
Speaker Change: We're here to work for our shareholders and we're here to deliver upon our shareholders to invest money in with US. So we got lots to look forward to.
Speaker Change: The back half is a big back half for us there's a lot of heavy lifting to do we know, but I would tell you we have a good plan and a path to hopefully let us get there. So thank you very much for listening to today's call and look forward to speaking to you in the near future happy new year and have a great day.
This concludes today's conference you may disconnect your lines at this time. Thank you for your participation.