Q1 2024 Organigram Holdings Inc Earnings Call

February 13, 2024

For fiscal 2024 earnings conference call.

After the Speakers' remarks, there will be a question and answer session. We ask that you. Please limit yourself to one question and one follow up question. You May you may re queue. If you have any further questions. Thank you Max Schwartz you may begin your conference.

Good morning, My name is Krista and I'll be your conference operator today at this time I would like to welcome everyone to the organic Graham Holdings first quarter fiscal 2024 earnings conference call. After the Speakers' remarks, there will be a question and answer session.

Good morning, and thank you for joining US today as a reminder, this conference call is being recorded and a recording will be available on our web site 24 hours. After todays call listeners should be aware that this call will include estimates and other forward looking information from which the company's actual results could differ. Please review the cautionary language in our press release dated February 13, 2024 on <unk>.

Good morning, My name is Krista and I'll be your conference operator today at this time I would like to welcome everyone to the organic Graham Holdings first quarter fiscal 'twenty 'twenty four earnings conference call.

We ask that you. Please limit yourself to one question and one follow up question. You May you may re queue. If you have any further questions. Thank you maxed Schwartz you may begin your conference.

After the Speakers' remarks, so it'll be a question and answer session. We ask that you. Please limit yourself to one question and one follow up question.

These factors assumptions and risks that could cause our actual results to differ.

You may re queue. If you have any further questions. Thank you maxed Schwartz you may begin your conference.

Good morning, and thank you for joining US today as a reminder, this conference call is being recorded and a recording will be available on our web site 24 hours. After todays call listeners should be aware that today's call will include estimates and other forward looking information from which the company's actual results could differ. Please review the cautionary language in our press release dated February 13 2024.

And as such should not be considered in isolation or as a substitute for measures of performance prepared in accordance with IRS. Our approach to calculating these measures may differ from other issuers. So these measures may not be directly comparable please see today's earnings report for more information about these measures in this call references to fiscal 2023 13 months period from September one 2022 through September.

Various factors assumptions and risks that could cause our actual results to differ.

Further references we made to certain non <unk> measures during this call, including adjusted EBITDA free cash flow and adjusted gross margin among others. These measures do not have any standardized meaning under ifr asked and are not intended and are intended to provide additional information and as such should not be considered in isolation or as a substitute for measures of performance prepared in accordance with IRS.

Various factors assumptions and risks that could cause our actual results to differ.

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Listeners should also be aware that the company relies on reputable third party providers are making certain statements relating to market share data unless otherwise indicated all references to market data are sourced from high fire and combination with data from we'd call our provincial board retailers and our internal sales figures.

Our approach to calculating these measures may differ from other issuers. So these measures may not be directly comparable please see today's earnings report for more information about these measures in this call references to fiscal 2023 13 months period for September one 2022 through September 32003.

Today, we'll be hearing from key members of our senior leadership team beginning with peanut Goldenberg, Chief Executive Officer, who will provide opening remarks and commentary.

Listeners should also be aware that the company relies on reputable third party providers Im taking certain statements relating to market share data unless otherwise indicated all references to market data are sourced from high fire and combination with data from we'd call our credential board retailers and our internal sales basis today, we'll be hearing from key members of our senior leadership team beginning with peanut Goldenberg, Chief Executive Officer, who will.

By Gregory yet Chief Financial Officer.

<unk>, our quarterly financial results for Q1 fiscal 2024 also joining us for the question and answer segment as Tim <unk>, Chief Commercial officer, as a reminder to our analysts and institutional investors on the call. Today. We are pleased to invite you to join US at our Investor day at our Moncton, New Brunswick facility on the evening of April night for dinner and the morning of April 10th or we will offer it.

Listeners should also be aware that the company relies on reputable third party providers im making certain statements relating to market share data unless otherwise indicated all references to market data are sourced from high fire and combination with data from we'd call, our credential board retailers and our internal sales figures.

To provide opening remarks and commentary.

Slowed by Gregory yet Chief Financial Officer, who will review our quarterly financial results for Q1 fiscal 2024 also joining us for the question and answer segment as Tim <unk> <unk>, Chief Commercial officer, as a reminder to our analysts and institutional investors on the call. Today. We are pleased to invite you to join US at our Investor day at our Moncton, New Brexit facility on the evening of April 9th.

More of our flagship facility and showcase our science backed product development pipeline anymore. If you have not yet received an invitation or would like more information about the event. Please contact me via email my email address can only be found at the bottom of our press releases I will now introduce meaning Goldenberg Chief Executive Officer of we're getting Graham Holdings, Inc. Please go ahead Ms Goldberg.

Today, we'll be hearing from key members of our senior leadership team beginning with peanut Goldenberg, Chief Executive Officer, who will provide opening remarks and commentary followed by Greg who yet Chief Financial Officer, who will review our quarterly financial results for Q1 fiscal 2024.

For dinner and the morning of April 10th or we will offer a tour of our flagship facility and showcase our science backed product development pipeline. Edward if you have not yet received an invitation or would like more information about the event. Please contact me via email my email address can only be found at the bottom of our press releases I will now introduce <unk> Goldenberg, Chief Executive officer of <unk>.

Thank you Matt Good morning, everyone. Thank you for joining our call today and for your continued support of organic ground.

Also joining us for the question and answer segment as Tim <unk> <unk>, Chief Commercial officer, as a reminder to our analysts and institutional investors on the call. Today. We are pleased to invite you to join US at our Investor day at our Moncton, New Brunswick facility on the evening of April night for dinner and the morning of April 10th or we will offer a tour of our flagship facility and showcase our science backed product development.

Q1 fiscal 2023 with the dedication of our thousand employees across three facilities in our corporate head office, we demonstrated record breaking international sales for the company introduced award winning products completed extensive efficiency driving capex projects and expanded our market share in key growth categories.

Getting Graham Holdings, Inc. Please go ahead Ms Goldenberg.

Pipeline Edward if you have not yet received an invitation or would like more information about the event. Please contact me via email my email address can only be found at the bottom of our press releases.

Thank you Matt Good morning, everyone. Thank you for joining our call today and for your continued support of organic ground.

Reaching the number two spot among L. P. All while maintaining our negligible debt position.

Throughout fiscal 2023 with the dedication of our thousand employees across three facilities in our corporate head office, we demonstrated record breaking international sales for the company introduced award winning products completed extensive efficiency driving capex projects and expanded our market share in key growth category.

I will now introduce meaning Goldenberg Chief Executive Officer of we're getting Graham Holdings, Inc. Please go ahead Ms Goldberg.

We then started fiscal 2024 off on a strong footing securing $124 6 million strategic investment from our dedicated partner at.

Thank you Matt Good morning, everyone. Thank you for joining our call today and for your continued support of organic ground.

At a premium of over 100% organic ground share price at the time of announcement.

Reaching the number two spot among Lps, all while maintaining our negligible debt position.

With this transformational deal now formally approved by shareholders and the first tranche of $41 $5 million now closed organic brand will focus on delivering on its objective of being a global cannabis leader driven by geographic and product expansion backed by industry leading innovation.

We then started fiscal 2024 off on a strong footing securing the $124 6 million strategic investment from our dedicated partner at a premium of over 100% to organic ground share price at the time of announcement.

Reaching the number two spot among L. P. All while maintaining our negligible debt position.

Two thirds of the $124 $6 million investment will be used by organic ramp to create strategic investments will named Jupiter two.

We then started fiscal 2024 off on a strong footing securing the $124 6 million strategic investment from our dedicated partner.

Peter will target investments in emerging cannabis opportunities internationally that will enable organic ground to apply its industry, leading capabilities in products brands and cultivation to new markets.

At a premium of over 100% organic ground share price at the time of announcement.

We have identified geographic expansion as a strategic priority and this opportunity presents the company with the capital to make global Foundation as emerging cannabis markets continue to see significant growth we.

Two thirds of the $124 $6 million investment will be used by organic ramp to create strategic investments will named Jupiter Jupiter will target investments in emerging candidates opportunities internationally that will enable organic ground to apply its industry, leading capabilities in products brands and cultivation to new markets.

We have seen tremendous interest from cannabis companies looking for partnership opportunities in growth capital organic grandma's now uniquely positioned to take advantage of these opportunities.

Organic brand continues to differentiate itself as a leader with its flagship facility in mountain, which we believe is the largest indoor cannabis facility of its kind.

With over 130 micro climate, three tiered programs and in House lab testing, we can grow and test the multitude of cultivars and Doyle and theyre growing conditions without interrupting the growth cycle of our other popular strains are facilities unique characteristics recently enhanced by most of our $29 million in.

We have seen tremendous interest from cannabis companies looking for partnership opportunities in growth capital organic grandma's now uniquely positioned to take advantage of these opportunities.

Organic growth continues to differentiate itself as a leader with its flagship facility in mountain, which we believe is the largest indoor cannabis facility of its kind.

We have seen tremendous interest from cannabis companies looking for partnership opportunities in growth capital organic grandma's now uniquely positioned to take advantage of these opportunities.

Efficiency driving Capex projects completed last year presents several other advantages.

With over 130 micro climate, three tiered programs and in House lab testing, we can grow and test the multitude of cultivars and Doyle and theyre growing conditions without interrupting the growth cycles of our other popular strains are facilities unique characteristics recently enhanced by most of our $29 million in.

Demand for flower in the international markets is growing as is the competition for these markets, which makes providing novel and stable cultivars at priority organic ground has the capability to quickly trial and test unique cultivars and controlled environment, allowing us to tailor our production to address the needs of key international.

Organic brand continues to differentiate itself as a leader with its flagship facility in mountain, which we believe is the largest indoor Canada facility of its kind.

Efficiency driving Capex projects completed last year presents several other advantages.

Yes.

We recently completed our first shipment to Germany, and we anticipate our first UK bound flower to shipped out in the near term and we are also negotiating with additional partners in other jurisdictions.

Demand for flower in the international markets is growing as the competition for these markets, which makes providing novel and stable cultivars at priority organic Graham has the capability to quickly trial and test unique cultivars and controlled environment, allowing us to tailor our production to address the needs of key international part.

Efficiency driving Capex projects completed last year presents several other advantages.

Organic brands position as a key export partner to candidates distributors abroad is expected to be further enhanced by the EU GMP certification at the mountain facility, which is expected later this year subject to the successful completion of an audit.

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Organic brand has also began transitioning part of its garden to see base production <unk>.

<unk> based production is the preferred method and mature agricultural markets as it produces more robust plans and it's cheaper and faster to conduct on a large scale. We began this process in December 2023, and will provide updates on our progress in subsequent quarters.

Organic <unk> position as a key export partner to candidates distributors abroad is expected to be further enhanced by the EU GMP certification at the mountain facility, which is expected later this year subject to the successful completion of an audit.

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Smoking is also home to the center of excellence, the dedicated research and development facility where BHP.

Organic brand has also began transitioning part of its garden to seed based production seed based production is the preferred method and mature agricultural markets as it produces more robust plans and it's cheaper and faster to conduct on a large scale. We began this process in December 2023, and will provide updates on our progress in subsea.

Underground collaborate on product development and scientific research in December 2023, organic <unk> was successful in validating molecular markers for powdery mildew resistant and validated assays related to European synthesis.

Organic brand has also began transitioning part of its garden to seed based production.

Quarters.

<unk> production is the preferred method and mature agricultural markets as it produces more robust plans and it's cheaper and faster to conduct on a large scale. We began this process in December 2023, and will provide updates on our progress in subsequent quarters.

Smoking is also home to the center of excellence, the dedicated research and development facility, where BHP and organic ground collaborate on product development and scientific research.

Furthermore, pharmacokinetics studies relating to nano emulsified injectable formulas are now complete with results currently in compiled and analyzed.

This will allow us to quantify the onset time and Pete cannabinoid levels in the blood. So he can substantiate these claims with consumers.

In December 2023, organic <unk> was successful in validating molecular markers for powdery mildew resistant and validated assays related to European synthesis.

Smoking is also home to the center of excellence, the dedicated research and development facility, where BHP inorganic Graham collaborate on product development and scientific research.

Our R&D capabilities are beginning to more rapidly translate the technical know how that is expected to provide organic ground with competitive advantages for years to come spending spanning from more robust plans to better consumer experiences backed by science and rigorous testing protocols.

More pharmacokinetic studies relating to nano emulsified Ingestible formulas are now complete with results currently being compiled and analyzed.

In December 2023, organic grandma's successful and validating molecular markers for powdery mildew resistant and validated assays related to European synthesis.

This will allow us to quantify the onset time and Pete cannabinoid levels in the blood. So we can substantiate these claims with consumers.

Now, while our mountain facility can supply, our domestic and international markets with an annual capacity of approximately 90000 kilograms per year, our facilities in Winnipeg and lack superior are also key elements of our ongoing success.

Are there more pharmacokinetics studies relating to nano emulsified injectable formulas are now complete with results currently and compiled and analyzed.

Our R&D capabilities are beginning to more rapidly translate to technical know how that is expected to provide organic graham with competitive advantages for years to come spending spanning from more robust plans to better consumer experiences backed by science and rigorous testing protocols.

This will allow us to quantify the onset time and Pete cannabinoid levels in the blood. So he can substantiate these claims with consumers.

Our dedicated edibles facility in Winnipeg is capable of producing over 4 million gummies per month supporting organic brands position at quarter end as the number two edibles producer in Canada with over 18% market share and the number one pure CBD edibles producer with almost two thirds of the market share in this segment.

We are also very excited to introduce our nano emulsion gummies to the market by the fall of 2024.

Now, while our mountain facility can supply, our domestic and international markets with an annual capacity of approximately 90000 kilograms per year, our facilities in Winnipeg and lacked superior are also key elements of our ongoing success.

Our newly expanded craft cannabis attached facility in Lake Superior has now completed for craft harvest and the facility is producing approximately 2 million units of hash annually.

According to internal models cross referenced with fingers from PDSA organic I mean, its a largest legal hash producer in the world and command over 20% of the harsh market in Canada as of the end of Q1.

We are also very excited to introduce our nano emulsion gummies to the market by the fall of 2024.

Our newly expanded craft cannabis and cash facility in Lac Superior has now completed for craft harvest and the facility is producing approximately 2 million units of hash annually.

And in keeping with our core strength of innovation. We are pleased that our first to market Rep strip passion innovation is performing well in the market and that we have successfully grown that can hash category by bringing in new users with this flavorful and easy to use format.

Yeah.

We are also very excited to introduce our nano emulsion gummies to the market by the fall of 2024.

According to internal models cross referenced with figures from PDSA organic reminisce of largest legal hash producer in the world and command over 20% of the hash market in Canada as of the end of Q1.

Our newly expanded craft cannabis attached facility in Lake Superior has now completed for craft harvest and the facility is producing approximately 2 million units of hash annually.

With our three facilities now fully expanded and equipped with substantial automation capabilities organic brand is poised to more aggressively compete in the ready to consume product category as consumers are displaying a clear preference today for convenience and quality.

And in keeping with our core strength of innovation. We are pleased that our first to market Rep strip cash innovation is performing well in the market and that we have successfully grown that cash category by bringing in new users with its flavor full and easy to use format.

According to internal models cross referenced with figures from PDSA organic brand has the largest legal hash producer in the world and command over 20% of the hash market in Canada as of the end of Q1.

In Q1 fiscal 2024 ready to consume products made up 46, 5% of sales compared to 37% in the same period last year.

And in keeping with our core strengths of innovation. We are pleased that our first to market Rep strip cash innovation is performing well in the market and that we have successfully grown that can hash category by bringing in new users with this flavorful and easy to use format.

With our three facilities now fully expanded and equipped with substantial automation capabilities organic Rem is poised to more aggressively compete in the ready to consume product category as consumers are displaying a clear preference today for convenience and quality.

In Q1, 2024 organic ground produced and sold over $8 million pre rolls. If you were to line up all these pre rolls end to end they would spend a distance of approximately 780 kilometers.

In Q1 fiscal 2024 ready to consume products made up 46, 5% of sales compared to 37% in the same period last year.

So essentially we can light up a path from Toronto to New York City.

The investments we made in our payroll processes in fiscal 2023, and the ensuing ramp up have led to a 38% increase in troops, though pre rolled production run rate of 100% improvement in packaging throughput and 150% improvement in the rate that we produce our shred heavy.

In Q1, 2024 organic ground produced and sold over $8 million pre rolls. If you were to line up all these pre rolls end to end they would spend a distance of approximately 780 kilometers. So essentially we could light up a path from Toronto to New York City.

In Q1 fiscal 2024 ready to consume products made up 46, 5% of sales compared to 37% in the same period last year.

Our ability to consistently compete in a difficult cannabis landscape is a testament to organic drums unwavering dedication to its consumer and its craft in fiscal Q1 2020 for our brand the brand with the top three L. P. In all major categories, excluding base and a top five L. P in market shares in.

The investments we made in our payroll processes in fiscal 2023, and the ensuing ramp up have led to a 38% increase in tubes style pre roll production run rate of 100% improvement in packaging throughput and 150% improvement in the rate that we produce our shred heavy.

All regions across Canada.

Our ability to consistently compete and a difficult cannabis landscape is a testament to organic rems unwavering dedication to its consumer and its craft.

Began the quarter and the number two position among mlps with a six 7% market share and maintain this position while growing our market share to seven 3% in December.

In fiscal Q1, 2020 for our Grand ground with the top three LP in all major categories. Excluding base and then topped five L. P. In market shares in all regions across Canada, we began the quarter and the number two position among mlps with a six 7% market share and maintain this position while growing.

As of the end of Q1 organic brand maintained the number two market position among L. P for five consecutive months and in December 2023, we had our strongest month ever with $33 $5 million in retail sales driven by consumer receptiveness to innovation and change and tubes, the pre will infuse pre roll.

Our ability to consistently compete in a difficult cannabis landscape is a testament to organic rems unwavering dedication to its consumer and its craft in fiscal Q1 2020 for our Grand ground with the top three L. P. In all major categories, excluding base and a top five L. P in market share.

Our market share to seven 3% in December.

And gummies.

The reintroduction of jokes with a large contributing factor to our success in the quarter as well with $2 $9 million in ship sales in Q1.

In all regions across Canada, we began the quarter and the number two position among mlps with a six 7% market share and maintained its position while growing our market share to seven 3% in December.

One of our key domestic areas of focus for fiscal 2024 will be to increase our share of the vape category, which we believe will unlock market share gains in.

As of the end of Q1 organic brand maintained the number two market position among L. P for five consecutive months and in December 2023, we had our strongest month ever with $33 $5 million in retail sales driven by consumer Receptiveness to innovation and change and two style pre will infuse pre rolls.

And supported the school organic brand has recently launched its new vaporization hardware, resulting from our strategic investment in Green tank, which is anticipated to increase flavor performance and potency per pump, while decreasing clogging a major consumer pain points.

And gummies.

The reintroduction of jokes with a large contributing factor to our success in the quarter as well with $2 $9 million in ship sales in Q1.

One of our key domestic areas of focus for fiscal 2024 will be to increase our share of the vape category, which we believe will unlock market share gains in.

Looking at our earnings for the quarter, which Greg will expand on shortly we are pleased to deliver adjusted gross margins, which returned to our previously reported levels.

And gummies.

The reintroduction of jokes with a large contributing factor to our success in the quarter as well with $2 $9 million in ship sales in Q1.

And supported the school organic brand has recently launched its new vaporization hardware, resulting from its strategic investment in Green tank, which is anticipated to increase labor performance and potency per pump, while decreasing clogging a major consumer pain points.

Also delivered positive adjusted EBITDA and cash flow from operations of $7 $7 million.

One of our key domestic areas of focus for fiscal 2024 will be to increase our share of the vape category, which we believe will unlock market share gains in.

Contributing to these improvements where our growth in the premium category and the reintroduction of Edison jolt to the market.

And supported the school organic brand has recently launched its new vaporization hardware, resulting from our strategic investment in Green tank, which is anticipated to increase labor performance and potency per pop, while decreasing clogging a major consumer pain points.

Looking at our earnings for the quarter, which Greg will expand on shortly we are pleased to deliver adjusted gross margins, which returned to our previously reported levels.

As we focus on driving domestic and international market share gains through continued innovation and expansion into baked refining our product and geographic mix and reaping the benefits from increased automation at our facilities, we expect our margins to demonstrate more stability in fiscal 'twenty four compared to fit.

Also delivered positive adjusted EBITDA and cash flow from operations of $7 7 million.

Looking at our earnings for the quarter, which Greg will expand on shortly we are pleased to deliver adjusted gross margins, which returned to our previously reported levels.

Contributing to these improvements where our growth in the pre rule category and the reintroduction of Edison jolt to the market.

23.

On a year over year basis, we expect both revenue and incremental margin growth.

As we focus on driving domestic and international market share gains through continued innovation and expansion into bakes refining our product and geographic mix and reaping the benefits from increased automation at our facilities, we expect our margins to demonstrate more stability in fiscal 'twenty four compared to fill.

Also delivered positive adjusted EBITDA and cash flow from operations of $7 $7 million.

I will now hand, the call over to Greg to review, our financial performance for the quarter.

Contributing to these improvements where our growth in the premium category and the reintroduction of the Edison jokes to the market.

Thank you Pina, it's a pleasure to be here today as a new member of your organic ground team I've been involved in the cannabis industry for many years now and I've walked organic brand growth leadership position in Canada. So I am very pleased to join this incredibly focused and disciplined team and particularly pleased to join at such a pivotal time in the company.

As we focus on driving domestic and international market share gains.

23 on.

Through continued innovation and expansion into vape refining our product and geographic mix and reaping the benefits from increased automation at our facilities, we expect our margins to demonstrate more stability in fiscal 'twenty four compared to fiscal 'twenty three on.

On a year over year basis, we expect both revenue and incremental margin growth.

I will now hand, the call over to Greg to review, our financial performance for the quarter.

Evolution.

As Bina mentioned, we started off the quarter achieving positive adjusted EBITDA and positive cash flow from operations, demonstrating our investments in automation and our commitment to long term efficiencies are beginning to pay off.

Thank you Dana it's a pleasure to be here today as a new member of your organic ground team I've been involved in the cannabis industry for many years now and I've walked organic ground growth leadership positioning in Canada. So I am very pleased to join us incredibly focused and disciplined team and particularly pleased to join at such a pivotal time in the company.

On a year over year basis, we expect both revenue and incremental margin growth.

I will now hand, the call over to Greg to review, our financial performance for the quarter.

Q1 fiscal 2024, gross and net revenue decreased by 8% and 16% respectively, primarily due to net decreases in international revenue of $4 8 million and medical sales of $1 million when compared with Q1 fiscal 2023 organic around cost of sales in Q1 fiscal 2024 with <unk>.

Thank you Dana it's a pleasure to be here today as a new member of your organic ground team I've been involved in the cannabis industry for many years now and I've walked through organic brand growth leadership position in Canada. So I am very pleased to join this incredibly focused and disciplined team and particularly pleased to join at such a pivotal time in the company.

This evolution.

$7 3 million compared to $31 6 million in Q1 fiscal 2023, representing a decrease of 14%.

Q1 fiscal 2024 growth in net revenue decreased by 8% and 16% respectively, primarily due to net decreases in international revenue of $4 8 million and medical sales of $1 million when compared to Q1 fiscal 2023 <unk>.

That evolution.

The decrease in cost of sales over the same period. The same prior year period was primarily due to lower medical and international sales and lower cultivation and post harvest call.

Organic around cost of sales in Q1 fiscal 2024 was $27 3 million compared to $31 6 million in Q1 fiscal 2023, representing a decrease of 14%.

Included in Q1 fiscal 2024 as cost of sales were $1 7 million of inventory provision primarily related to net realizable value adjustments of inventory.

We harvested approximately 20000 kilograms of flowers during Q1 fiscal 2024 compared to about 22000 kilograms in Q1 fiscal 2023, which represents a decrease of 11%. The decrease was primarily attributable to changes in our culture of our mix to address changing consumer preferences.

The decrease in cost of sales over the same period. The same prior year period was primarily due to lower medical and international sales and lower cultivation and post harvest costs.

$7 3 million compared to $31 6 million in Q1 fiscal 2023, representing a decrease of 14%.

Included in Q1 fiscal 2024 as cost of sales were $1 7 million of inventory provisions, but primarily related to net realizable value adjustments of inventory.

The decrease in cost of sales over the same period. The same prior year period was primarily due to lower medical and international sales and lower cultivation and post harvest call.

While yields in PC content will fluctuate over time the trend we've seen over the last two years has been larger yields and higher potencies and Q1 organic Graham experienced a 53% increase in flower produce containing more than 24% THC anticipated higher yields should reduce the cost of cultivation.

We harvested approximately 20000 kilograms of flower during Q1 fiscal 2024 compared to about 22000 kilograms in Q1 fiscal 2023, which represents a decrease of 11%. The decrease was primarily attributable to changes in our culture of our mix to address changing consumer preferences.

Included in Q1 fiscal 2024 as cost of sales were $1 7 million of inventory provision, but primarily related to net realizable value adjustments of inventory.

We harvested approximately 20000 kilograms of flower during Q1 fiscal 2024 compared to about 22000 kilograms in Q1 fiscal 2023, which represents a decrease of 11%. The decrease was primarily attributable to changes in our culture, our mix to address changing consumer preferences.

Base and in the long run.

This flowers sold we expect to achieve a higher gross margin rate.

While yields in TC content will fluctuate over time the trend we've seen over the last two years has been larger yields and higher potencies and Q1 organic <unk> experienced a 53% increase in flower produced containing more than 24% THC.

In Q1 fiscal 2024, adjusted gross margin increased to 31% or $11 2 million up from 30% or $12 8 million in Q1 fiscal 2023, the increase in the adjusted gross margin rate was primarily due to lower cultivation and post harvest call lower depreciation.

While yields in PC content will fluctuate over time the trend we have seen over the last two years, it's been larger yields and higher potencies and Q1 organic Graham experienced a 53% increase in flower produce containing more than 24% THC anticipated higher yields should reduce the cost of cultivation.

Anticipated higher yields should reduce the cost of cultivation in the long run.

Flowers sold we expect to achieve a higher gross margin rate.

To some extent and resumed sales of Edison, Joel partially offset by lower international sales.

As Bina mentioned in comparison to Q4 fiscal 2024, where adjusted gross margin was 17%. We received a marked improvement in adjusted gross margin in Q1.

<unk> in the long run.

This flowers sold we expect to achieve a higher gross margin rate.

In Q1, SG&A increased to $16 7 million compared to $15 7 million in Q1 fiscal 2023 or an increase of 7% the increase in expenses.

Expense and resumed sales of Edison jolts, partially offset by lower international sales.

As Bina mentioned in comparison to Q4 fiscal 2024, where adjusted gross margin was 17% we achieved a marked improvement in adjusted gross margin in Q1.

The increase in expenses, mainly relates to foreign exchange losses on foreign currency denominated receivables as the Canadian dollar weakened during Q1 fiscal 2023 and strengthened in Q1 fiscal 2024 and higher professional fees primarily related to product cheaper.

To some extent and resumed sales of Edison, Joel partially offset by lower international sales.

In Q1, SG&A increased to $16 7 million compared to $15 7 million in Q1 fiscal 2023 or an increase of 7% the increase in expenses.

As Bina mentioned in comparison to Q4 fiscal 2024, where adjusted gross margin was 17%. We received a marked improvement in adjusted gross margin in Q1.

These were partially offset by lower depreciation, resulting from impairment charges recorded in fiscal year 2023, We're pleased to report that in the quarter. We returned to positive adjusted EBITDA of 136000 compared to Q4 fiscal 2020, Three's adjusted EBITDA of negative $2 4 million representing an <unk>.

In Q1, SG&A increased to $16 7 million compared to $15 7 million in Q1 fiscal 2023 or an increase of 7% the increase in expenses.

Kris of $2 5 million, we anticipate adjusted EBITDA to exceed fiscal 2023 of adjusted EBITDA.

These were partially offset by lower depreciation, resulting from impairment charges recorded in fiscal year 2023.

Net loss for Q1 fiscal 2024 was $15 8 million compared to net income of $5 3 million in the same prior period. The increase in net loss from the comparative period is primarily due to a lower gross margin, resulting from a reduction in the gain on fair value of biological assets.

We're pleased to report that in the quarter, we returned to positive adjusted EBITDA of 136000 compared to Q4 fiscal 2020, Three's adjusted EBITDA of negative $2 4 million, representing an increase of $2 $5 million, we anticipate adjusted EBITDA to exceed fiscal 2020 Three's adjusted EBITDA.

These were partially offset by lower depreciation, resulting from impairment charges recorded in fiscal year 2023, we were pleased to report that in the quarter. We returned to positive adjusted EBITDA of 136000 compared to Q4 fiscal 2020, Three's adjusted EBITDA of negative $2 4 million.

From our statement of cash flow perspective, net cash provided by operating activities was $7 7 million in Q1 fiscal 2024 compared to $3 5 million in the prior year prior year period. The increase in cash provided by operating activities was primarily due to a return to historical working capital level. After a planned <unk>.

<unk>, an increase of $2 5 million we.

Dissipate adjusted EBITDA to exceed fiscal 2020 Three's adjusted EBITDA.

<unk> and accounts payable in advance of our ERP go lives.

Cash provided by investing activities in Q1 was <unk> 4 million compared to cash used of $1 7 million in Q1 fiscal 2023, the increase compared to the prior year period was primarily due to higher purchases of property plant and equipment of $8 4 million in Q1 fiscal 2023, partially offset by proceeds.

<unk> and accounts payable in advance of our ERP go lives.

Leads from the net redemption of short term investments of $5 1 million.

We are pleased to state that we have one of the healthiest balance sheets in the space.

December 31, 2023, we had total a total cash position of $54 6 million, including both restricted and unrestricted cash. This does not include the $41 5 million. We received from <unk> in January by way of reminder, top of the $41 $5 million tranche will be allocated to organic ground's operating.

Dukson in accounts payable in advance of our ERP go lives.

Cash provided by investing activities in Q1 was <unk> 4 million compared to cash used of $1 7 million in Q1 fiscal 2023, the increased compared to the prior year period was primarily due to higher purchases of property plant and equipment of $8 4 million in Q1 fiscal 2023, partially offset by proceeds.

<unk> from the net redemption of short term investments of $5 1 million.

We are pleased to state that we are one of the healthiest balance sheets in the space.

Cash in Q2 fiscal 2024.

December 31, 2023, we had total a total cash position of $54 6 million, including both restricted and unrestricted cash. This does not include the $41 5 million. We received from <unk> in January by way of reminder, half of the $41 $5 million tranche will be allocated to organic ground operating.

The other half will be allocated to project Jupiter overall, we are pleased with our results for the quarter, which saw organic around once again deliver positive adjusted EBITDA and improved adjusted gross margins, while the company expects to continue to report growth in year over year adjusted EBITDA periods. When the company achieved significant increases the sales.

<unk> from the net redemption of short term investments of $5 1 million.

We are pleased to state that we are one of the healthiest balance sheets in the space as of December 31, 2023, we had total a total cash position of $54 6 million, including both the restricted and unrestricted cash. This does not include the $41 5 million. We received from <unk> in January by way of reminder.

Cash in Q2 fiscal 2024, while the other half will be allocated to project Jupiter. Overall, we are pleased with our results for the quarter, which saw organic around once again deliver positive adjusted EBITDA and improved adjusted gross margins, while the company expects to continue to report growth in year over year adjusted EBITDA.

May result in increases to receivables, which could negatively impact cash from operating activities. This concludes my comments I will now turn the call back to be not.

Half of the $41 $5 million tranche will be allocated to organic ground operating cash in Q2 fiscal 2024.

Thank you Greg.

As has been the case historically organic ground will continue to drive growth and shareholder value through an industry, leading focus on innovation and the integration of new technologies that provide sustainable competitive advantage for the company and differentiated experiences for consumers at home and abroad.

The other half will be allocated to project Jupiter overall, we are pleased with our results for the quarter, which saw organic ground. Once again delivered positive adjusted EBITDA and improved adjusted gross margins, while the company expects to continue to report growth in year over year adjusted EBITDA periods. When the company achieved significant increases to sales.

Periods when the company achieved significant increases to sales may result in increases to receivables, which could negatively impact cash from operating activities. This concludes my comments I'll now turn the call back to peanuts.

We also continued to leverage our leadership position in the industry to advocate for much needed reform in the sector that will not that will not only level the playing field for all companies, but also support the development and growth of a sustainable industry in the long term.

Thank you Greg.

May result in increases to receivables, which could negatively impact cash from operating activities. This concludes my comments I will now turn the call back to be not.

We believe that the cannabis industry in Canada has begun to reach an inflection point that will remove supply in the market and accelerate consolidation.

Thank you Greg.

Companies engaging in THC inflation could've dubiously enjoying temporary competitive advantages to artificially inflating their label THC content are facing more pressure as health, Canada, and the Ocs have announced random THC testing protocols.

We believe that the cannabis industry in Canada has begun to reach an inflection point that will remove supply in the market and accelerate consolidation.

We have also seen the CRA begin to garnish companies, who are in arrears when their excise taxes and many companies are already stretching their payables to preserve cash.

Companies engaging in THC inflation, who have dubiously enjoyed temporary competitive advantages to artificially inflating their label THC content are facing more pressure as health, Canada, and the Ocs have announced random THC testing protocols.

As capital markets have dried up and increased enforcement removes unfair advantages and penalizes, those who don't contribute to the health of our sector. The Canadian market will experience a shakeout.

We believe that the cannabis industry in Canada has begun to reach an inflection point that will remove supply in the market and accelerate consolidation.

We have also seen the CRA begin to garnish companies, who are in arrears when their excise taxes and many companies are already stretching their payables to preserve cash.

If this materializes organic brand stands to cement itself as a long term industry leader, owing to a strong balance sheet, increasing production efficiency industry, leading R&D and re invigorated focus on international expansion supported by project Jupiter.

We have also seen the CRA begin to garnish companies, who are in arrears when their excise taxes and many companies are already stretching their payables to preserve cash.

Once again, we thank you for joining us today and for your continued support of organic growth during a very exciting time for the company.

We look forward to seeing as many of you as possible at our Investor Day in April and should you have any questions. Please feel free to contact Max.

Thank you and I'll now open the call for questions.

This materializes organic bran stands to cement itself as a long term industry leader owing to its strong balance sheet, increasing production efficiency industry, leading R&D and re invigorated focus on international expansion supported by project Jupiter.

If you'd like to ask a question. Please press star followed by the number one on your telephone keypad. If you would like to withdraw your question again press Star one.

Once again, we thank you for joining us today and for your continued support of organic growth during a very exciting time for the company.

We look forward to seeing as many of you as possible at our Investor Day in April and should you have any questions. Please feel free to contact Max.

Your first question comes from the line of Aaron Grey from Alliance Global Partners. Please go ahead. Your line is open.

Once again, we thank you for joining us today and for your continued support of organic growth during a very exciting time for the company.

Thank you and I'll now open the call for questions.

Hi, good morning, and thank you very much for the questions.

Nice to see the gross margin improvement during the quarter along with some of the other achievements you had so quickly on the gross margin right. So a nice uptick in the quarter you talked about some of the levers that participated to that so when you think about lower post harvest costs depreciation along with some of the mixed with withdrawal.

If you'd like to ask a question. Please press star followed by the number one on your telephone keypad. If you would like to withdraw your question again press Star one.

We look forward to seeing as many of you as possible at our Investor Day in April and should you have any questions. Please feel free to contact Max.

Your first question comes from the line of Aaron Grey from Alliance Global Partners. Please go ahead. Your line is open.

Thank you and I will now open the call for questions.

If you'd like to ask a question. Please press star followed by the number one on your telephone keypad. If you would like to withdraw your question again press Star one.

It would have been the biggest contributor sequentially. It looks like if you back into some of the P&L might've been depreciation.

Hi, good morning, and thank you very much for the questions.

Nice to see the gross margin improvement during the quarter along with some of the other team's achievements you had quickly on the gross margin right. So a nice uptick in the quarter you talked about some of the levers that participated to that so when you think about lower post harvest costs depreciation along with some of the mixed with withdrawal.

Offer further color that would be greatly appreciated and then on the go forward. How do we think about mix contributing to the margin, particularly as you think about beeps historically it has been.

Your first question comes from the line of Aaron Grey from Alliance Global Partners. Please go ahead. Your line is open.

Hi, good morning, and thank you very much for the questions.

One of the more tougher formats to be profitable and so if you could offer any color in terms of how youre thinking about margin and mix as you look to increase your share in basics.

Nice to see the gross margin improvement during the quarter along with some of the other achievements you had quickly on the gross margin right. So a nice uptick in the quarter you talked about some of the levers that participated to that so when you think about lower post harvest costs depreciation along with some of the mixed with withdrawal.

It would have been the biggest contributor sequentially. It looks like if you back into some of the P&L might've been depreciation.

Perfect. Thank you Erin for the question I'll pass the first part of the question over to Greg to talk about the gross margin and then I'll take on the mix part of the question. So go ahead Greg.

Offer further color that would be greatly appreciated and then on the go forward. How do we think about mix contributing to the margin, particularly as we think about base historically it has been.

It would have been the biggest contributor sequentially. It looks like if you back into some of the P&L might've been depreciation which can offer further color that would be greatly appreciated and then on the go forward. How do we think about mix contributing to the margin, particularly as you think about <unk> historically has been.

Sure. Thanks, Bina well first of all we believe we've set ourselves up to drive higher margins throughout 2024, and beyond and really as he mentioned it.

One of the more tougher formats can be profitable and so if you could offer any color in terms of how youre thinking about margin and mix as you look to increase your share in base. Thanks.

Increasing production efficiencies from continuing to dial in our automated processes such as around our pre roll production and we're going to see expect the eventual savings and higher yield related to the fee based transaction as well.

Perfect. Thank you Erin for the question I'll pass the first part of the question over to Greg to talk about the gross margin and then I'll take on the mix part of the question. So go ahead Greg.

One of the more tougher formats to be profitable and so if you could offer any color in terms of how youre thinking about margin and mix as you look to increase your share in basics.

We're also going to see contribution from power at Laurentian ultimately as well.

Sure. Thanks, Bina well first of all we believe we have set ourselves up to drive higher margins throughout 2024, and beyond and really as he mentioned it.

Perfect. Thank you Erin for the question I'll pass the first part of the question over to Greg to talk about the gross margin and then we will take on the mix part of the question. So go ahead Greg.

And on the international side, it's really going to be driven by EU, GMP, which will help improve our margins on that front.

Increasing production efficiencies from continuing to dial in our automated processes such as around our pre roll production and we're going to see expect to eventual savings and higher yields related to the fee based transaction as well.

Also contributing we will have some new innovation as we mentioned before around the nano emulsion and further expansion in debate.

Sure. Thanks, Bina well first of all we believe we've set ourselves up to drive higher margins throughout 2024, and beyond and really as he mentioned it.

So as I said I think that those factors will continue to drive margin improvements as we get through the rest of the year.

We're also going to see contribution from Laurentian ultimately as well.

And on the international side, it's really going to be driven by EU, GMP, which will help improve our margins on that front.

Yeah.

Okay, great. Thanks, Greg and just building on what Greg said, so when you're out there in a boat.

Also contributing we will have some new innovation as we mentioned before around the nano emulsion and further expansion in debates.

And while <unk> has been a competitive market in the past for us They took the big opportunity for improved mix because we're competing in the flowers team that has the slimmest of margins.

We're also going to see contribution from power at Laurentian ultimately as well.

And on the international side, it's really going to be driven by EU, GMP, which will help improve our margins on that front.

Peter.

Also contributing we will have some new innovation as we mentioned before around the nano emulsion and further expansion in debate.

And so this is a great opportunity for us and totally incremental we're not cannibalize in existing business.

Okay, great. Thanks, Greg and just building on what Greg said, so when you're out there in a boat.

So as I said I think those factors will continue to drive margin improvements as we get through the rest of the year.

And while <unk> has been a.

Come in with products that are differentiated with our Green bank advance our investment being in the vaporization technology. So we're very excited about what that could contribute but just as I mentioned in the script.

Competitive market in the past for us the big opportunity for improved mix because.

Peter.

Okay, great, Thanks, Greg and Jeff.

We're competing in the flower that has the slimmest of margins.

Building on what Greg said, so when you're out there in a boat.

And so this is a great opportunity for us and totally incremental we're not cannibalize in existing business. We come in with product that is differentiated with our green bank advance investment being in the vaporization technology. So we're very excited about what that could contribute but just as I mentioned.

At the end of the day are ready to consume products are growing and that's what's driving the growth in the category versus just flower right. It's all about convenience as consumers are looking for it so as we convert from flower pre rolls as we convert people from pre rolls debate, so to gummies to some of the derivatives.

And while <unk>.

Has been a competitive market in the past for us they to the big opportunity for improved mix because.

We're competing in the flowers team that has the slimness of margins.

So this is a great opportunity for us and totally incremental we're not cannibalize in existing business. We come in with product that is differentiated with a green bank advance investment being in the vaporization technology. So we're very excited about what that could contribute but just as I mentioned.

And in the script.

That's the mix that's going to improve our domestic recreational business and then obviously the impact of international sales.

Low international scale.

In this quarter and we expect to add a growing.

International sales as we look out, especially as a result of adding the EU GMP benefit that we expect to have some time. This summer. So at the end of the day, that's what's going to drive our improved mix.

And in the script.

That's the mix that's going to improve our domestic recreational business and then obviously the impact of international sales.

We're still very proud of our flower category, but the category overall industry is changing and ready to consume is becoming a bigger part of it and we're participating in and both gummies infuse pre rolls and pre rolls in a big way.

Had a low international sales.

In this quarter and we expect to have growing.

That's the mix that's going to improve our domestic recreational business and then obviously the impact of international sales.

Thank you really appreciate that color from both.

Had a low international scale.

In this quarter and we expect to have a growing international sales.

Greg and Gino second question for me.

Oftentimes, we've talked about the need for a shake out.

As we look out, especially as a result of adding the EU GMP benefit that we expect to have sometime this summer. So at the end of the day, that's what's going to drive our improved mix.

You talked about in your prepared remarks.

Industry is changing and ready to consume is becoming a bigger part of it and we're participating in and both gummies infused pre rolls and pre rolls in a big way.

The issues that you had called out a few quarters ago.

A greater need in terms of THC installation and now there are some Casey testing protocols that you mentioned unpaid taxes are something that we've known about it in the industry and you also called out how those might be being cut down as well and basically it seemed that you might have.

Still very proud of our flower category, but the category overall, the industry is changing and ready to consume is becoming a bigger part of it and we're participating in and both gummies and fused pre rolls and pre rolls in a big way.

Thank you really appreciate that color from both.

Greg and Bina second question for me.

Afternoon, we've talked about the need for a shakeout.

It's somewhat of a different tone in terms of.

That shakeout, maybe being more on the doorstep than maybe we had seen in the past. So just any more color you can offer in terms of what you might be seeing.

You talked about in your prepared remarks.

The issues that you had called out a few quarters ago as being a greater need in terms of THC inflation and now there are some casey testing protocols that you mentioned unpaid taxes are something that we've known about it in the industry and you also called out how those might be being cut down as well and basically it seemed that you might have.

Thank you really appreciate that color from both Gregg.

Incremental to what you mentioned in the prepared remarks to why you might see more of a shakeout in the industry in 2024, and what we might have expected to see in passengers, but didn't quite come to fruition. Thank you.

Greg and Dana second question for me.

And as we've talked about the need for a shakeout.

You talked about in your prepared remarks.

Yes, no problem. So absolutely we were a big we.

<unk> had somewhat of a different tone in terms of.

Shakeout, maybe being more on the doorstep than maybe we had seen in the past. So just any more color you can offer in terms of what you might be seeing.

We talked a lot about THC inflation and I'm not sure we've seen the full impact of the benefit of both the Ocs random testing in health Canada.

Incremental to what you mentioned in the prepared remarks to why you might see more of a shakeout in the industry in 2024, and what we might have expected to see in past years, but didn't quite come to fruition. Thank you.

Testing, because we still see a THC inflation is alive and well out in the market, we actually see that flower over 25% THC has been up versus last year. It's now represent 77% of all flower sales were a year ago. It was.

<unk> had somewhat of a different tone in terms of that.

Shakeout, maybe being more on the doorstep than maybe we had seen in the past. So just any more color you can offer in terms of what you might be seeing.

Yes, no no problem. So absolutely we were a big we.

Incremental to what you mentioned in the prepared remarks to why you might see more of a shakeout in the industry in 2024, and what we might have expected to see and passengers, but didn't quite come to fruition. Thank you.

We talked a lot about THC inflation and I'm not sure we've seen the full impact of the benefit of both the Ocs random testing in health Canada.

Hum.

42%. So it was 42% of the flowers. So we are seeing continued higher THC and we are still seeing random testing showing that there are several players out there continuing to.

Yes, no problem. So absolutely we were a big we.

Testing, because we still see.

THC inflation is alive and well out in the market, we actually see that.

We talked a lot about THC inflation and I'm not sure we've seen the full impact of the benefit of both the Ocs random testing in health Canada.

Flower over 25% THC has been up.

Versus last year, it's now represent 77% of all flower sales were a year ago. It was.

Identify their THC.

Testing, because we still see a THC.

Flower as higher potency than it really is but we expect this is going to somehow start to stop as testing continues and and the boards are challenging we heard anecdotally. Some boards are pushing back on over 30% flower and asking for a secondary testing. So that's that is going to take time.

THC inflation is alive and well out in the market, we actually see that flower over 25% THC has been up versus last year. It's now represent 77% of all flower sales were a year ago. It was up.

Up 42% so was 42% of that flowers. So we are seeing continued higher THC.

And we are still seeing Brandon testing showing that there are several players out there continuing to.

Up 42%. So it was 42% of the flowers. So we are seeing continued higher THC and we are still seeing Brandon testing showing that there are several players out there continuing to.

Identify their THC.

To.

It kind of happened through the industry, but we're excited to see that it's starting to be addressed.

Flower as higher potency than it really is but we expect this is going to somehow start to stop as testing continues and and the boards are challenging.

Why do I think the Ah <unk>.

Consolidation of the shakeout is going to happen and I think it's in the next 12 months and that's because we've been watching very carefully the cache of different companies. When the debt is due that how people are her stretching their their payables and what was giving some of these players in the <unk>.

Anecdotally some boards are pushing back on over 30% flower and asking for our secondary testing so that that is going to take time to.

Identify their THC can fly.

Kind of happened through the industry, but we're excited to see that it's starting to be addressed.

Why do I think the Ah <unk>.

History more runway with the ability to not pay their excise taxes. This really wasn't a fair playing field company like organic brand pages are excise taxes on time, but.

To.

It kind of happened through the industry, but we're excited to see that it's starting to be addressed.

But you know there were stories up to 80% of cannabis companies out there, we're not paying their excise taxes on time or in some cases not paying them at all.

Why do I think the Ah <unk>.

Stretching their their payables and what was giving some of these players in the industry more runway with the ability to not pay their excise taxes. This really wasn't a fair playing field.

And what is new news and we saw a little bit of this last year, where the CRA went in to a couple of L. P as last year.

Like organic van pages are excise taxes on time, but.

I couldn't see any hope of getting there and excise duties repaid and close them down, but what's really the new news that we started to hear at the start of this calendar year is that the CRA has started to ask the provinces to garnish their payments to the L. P. So that for their amount.

But there were stories up to 80% of cannabis companies out there we're not paying.

History more runway with the ability to not pay their excise taxes. This really wasn't a fair playing field company like organic brand pages are excise taxes on time, but.

Excise taxes on time or in some cases not paying them at all.

And what is new news and we saw little bit of this last year, where the CRA went in to a couple of Lp's last year.

But you know there were stories up to 80% of cannabis companies out there, we're not paying their excise taxes on time or in some cases not paying them at all.

Inc. In arrears excise taxes. What this means is companies that were planning to leverage that money arent going to have that opportunity going forward. I think this is going to be the real change that we're going to see in the next six to 12 months, where that with that cash not being available and of course, the board's arent happy.

Couldn't see any hope of getting there and excise duties repaid and close them down, but what's really the new news that we started to hear at the start of this calendar year is that the CRA has started to ask the provinces to garnish their payments to the Lps so that for their amounts owed.

And what is new news and we saw a little bit of this last year, where the CRA went in to a couple of L. P as last year.

But having to do this work and might even choose to stop ordering as much from those L. Ts I think this is going to be the dynamic change that accelerate that shakeout.

In arrears excise taxes. What this means is companies that we're planning to leverage that money arent going to have that opportunity going forward. I think this is going to be the real change that we're going to see in the next six to 12 months, where that with that cash not being available and of course, the board's arent happy.

We all talked about the fact that it needs to happen, where too fragmented and industry. So we're proud to be the number two L. P. But you know with seven 3% market share at the end of December, but still a very small market share compared to what a normal mature category would have so this is necessary and we do think it's coming.

Inc. In arrears excise taxes. What this means is companies that we're planning to leverage that money arent going to have that opportunity going forward. I think this is going to be the real change that we're going to see in the next six to 12 months, where that with that cash not being available and of course the boards are unhappy.

About having to do this work and might even choose to stop ordering as much from those Lps I think this is going to be the dynamic change that accelerates that shakeout.

Okay. Thank you real helpful color there on your view of the market. So really appreciate it I'll jump back in the queue.

We all talked about the fact that it needs to happen, where too fragmented and industry. So we're proud to be the number two L P, but with seven 3% market share at the end of December that's still a very small market share compared to what a normal mature category would have so this is necessary and we do think it's coming.

But having to do this work and might even choose to stop ordering as much from those L. Piece I think this is going to be the dynamic change that accelerates that shakeout.

Thank you.

Your next question comes from the line of Federico <unk> from <unk> capital markets. Please go ahead.

Hi, good morning, and thank you for taking my questions.

We all talked about the fact that it needs to happen, where too fragmented and industry. So we're proud to be the number two L. P. But you know with seven 3% market share at the end of December that's still a very small market share compared to what a normal mature category would have so this is necessary and we do think it's coming.

My first question is just on on on your first shipment to Germany.

Thank you to really helpful color there on your view of the market. So really appreciate it I'll jump back in the queue.

Just curious about your expectations for that market given the potential votes happening.

Thank you.

Your next question comes from the line of Federico <unk> from <unk> capital markets. Please go ahead.

They are in terms of utilization and also in terms of your EU GMP certification.

Can you just maybe provide a little bit more color on exactly how does that impact your.

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

Thank you to really helpful color there on your view of the market. So really appreciate it I'll jump back in the queue.

International exports. Thank you.

My first question is just on your first shipment to Germany.

Thank you.

Sure So first about our German shipment.

Your next question comes from the line of Federico <unk> from <unk> capital markets. Please go ahead.

Just curious about your expectations for that market given the potential votes happening.

We had announced the agreement with the Sanity group, a while ago and as we work through the appropriate stability testing and regulatory requirements.

Hi, good morning.

They are in terms of utilization and also in terms of your EU GMP certification.

People are predicting my questions Mike.

My first question is just on your first shipment to Germany.

Excited that we finally got our first shipment out into the German market and as you said with the.

Can you just maybe provide a little bit more color on exactly how does that impact your.

Just curious about your expectations for that market given the potential votes happening soon.

International exports. Thank you.

A recent ruling that are they're going to remove candidates from the narcotics.

Sure. So first about our German shipment. So we had announced the agreement with the Sanity group, a while ago and as we work through the appropriate stability testing and regulatory requirements and we're.

Soon there in terms of utilization and also in terms of your EU GMP certification.

It <unk> quite as a narcotic it will open up the medical market as anticipated on the conservative side that the medical market will grow two to three times. This year. So we're very excited about the opportunity to increase our shipments to our partner now in Germany.

Maybe provide a little bit more color on exactly how does that impact your international exports. Thank you.

We're excited that we finally got our first shipment out into the German market and as you said with the.

Sure So first about our German shipments.

We had announced the agreement with the Sanity group, a while ago and as we work through the appropriate stability testing and regulatory requirements.

A recent ruling that theyre going to remove candidates from the narcotics.

And so yes, Germany might not be as exciting as it was about a year ago when everybody thought was.

Identify doesn't narcotic it will open up the medical market as anticipated on the conservative side that the medical market will grow two to three times. This year. So we're very excited about the opportunity to increase our shipments to our partner now in Germany.

Excited that we finally got our first shipment out into the German market and as you said with the <unk>.

What's coming but you know just like Canada evolves, we're going to get into a growing medical market first and they're testing pilot facilities and pilots on rack and we'll see where that goes but we're still very interested in the German market as a result of that and then your second question.

Recent ruling that theyre going to remove candidates from the narcotics.

<unk> quite as a narcotic it will open up the medical market as anticipated on the conservative side that the medical market will grow two to three times. This year. So we're very excited about the opportunity to increase our shipments to our partner now in Germany.

And so yes, Germany might not be as exciting as it was about a year ago. When everybody thought was coming but just like Canada evolves, we're going to get into a growing medical market first and they're testing pilot facilities and pilots on rack and we'll see where that goes but we're still very.

Round, our EOG MP fulfill our EU GMP certification. So we have gone through the work to get ourselves ready for the audit.

How it works with an EU GMP.

Certification is you have to get somebody over from <unk>.

Interested in the German market as a result of that.

And then your second question around our EU GMP facility EU GMP certification so.

European jurisdiction to come in and do the audit so it's a little bit difficult to confirm exactly when that will be scheduled but we've done our homework. We believe for audit ready and are just waiting for that for that auditor to come over.

We have gone through the work to get ourselves ready for the audit.

<unk> are interested in the German market as a result of that and then your second question around our EOG MP fulfill our EU GMP certification. So we have gone through the work to get ourselves ready for the audit them, how it works with an EU GMP.

How it works with an EU GMP certification is you have to get somebody over from.

What this will mean to us once we get certified is that instead of having to.

Move our G ACP flowers through a facility such as in Portugal, or one of these converters, who would then package it up and available for European market, we'd be able to ship directly in the case of of Australia, having GMP would allow us to.

<unk> is you have to get somebody over from <unk>.

For that auditor to come over.

A european jurisdiction to come in and do the audit so it's a little bit difficult to confirm exactly when that will be scheduled but we've done our homework. We believe for audit ready and are just waiting for that for that auditor to come over.

What this will mean to us once we get certified is that instead of having to.

To package our product.

Move our G ACP flowers through facility such as in Portugal or.

And ship it to Australia, rather than selling bulk product and both are in both of these cases, it would be higher margin business for us without requiring a middleman touching the product. So we're very excited about opening up more markets available to us with the EU GMP and the ability to take out the middleman by ship.

One of these converters, who would then package it up and available for European market, we'd be able to ship directly in the case of of Australia, having GMP would allow us to package our product.

What this will mean to us once we get certified is that instead of having to.

<unk> direct.

And ship it to Australia, rather than selling bulk product.

Thank you for the color Thats great. Thank you.

And both are in both of these cases, it would be higher margin business for us without requiring a middleman touching the product. So we're very excited about opening up more markets available to us with the EU GMP and the ability to take out the middleman by shipping direct.

My next question is just you know.

I think the U S market you have always.

<unk> said that Youre looking at it and do you think.

As a potential long term opportunity. We recently saw a competitor of yours that appears to be approaching is structured that would be compliant with the NASDAQ to gatineau print such an exposure there. So I'm just curious.

<unk> package our product.

And ship it to Australia, rather than selling bulk product and both are in both of these cases, it would be higher margin business for us without requiring a middleman touching the product. So we're very excited about opening up more markets available to us with the EOG M P and the ability to take out the middleman by ship.

If you would consider pursuing something similar or how do you look at it.

I think the U S market you have always.

That's where also a NASDAQ listed thank you.

Said that Youre looking at it.

Yes, thanks, Brad So so first of all we did our first investment in the U S last year in May when we invested in silos bioscience.

As a potential long term opportunity. We recently saw a competitor of yours that appears to be approaching is structured that way.

Direct.

Thank you for the color Thats great. Thank you. So my next question is just you know I think the U S market you have always.

B compliance with the NASDAQ to get no print touching exposure there so I'm just curious.

And so we did take some time to figure out how to set up the structure in a way that would be obviously compliant with our NASDAQ and T. S X listings and at the same time have some benefit to our organization and that's where we were able to access the high.

<unk> said that Youre looking at it and do you think.

If you would consider pursuing something similar or how do you look at it.

As a potential long term opportunity. We recently saw a competitor of yours that appears to be approaching a structured that would be compliant with the NASDAQ to get no print that your exposure there. So I'm just curious.

Given that Youre also NASDAQ listed thank you.

Yes, thanks, Brad So so first of all we did our first investment in the U S last year in May when we invested in Filose bioscience.

If you would consider pursuing something similar or how do you look at it.

<unk> C D flower as well as the seed to allow us to move into seed based production. So it was an investment in the U S and although you can't consolidate it.

And so we did take some time to figure out how to set up the structure in a way that would be.

Given that you're also a NASDAQ listed thank you.

Yes, thanks, Brad So so first of all we did our first investment in the U S last year in May when we invested in silos bioscience.

Obviously compliant with our NASDAQ.

<unk> listings.

It was there was benefit to our existing business.

And at the same time have some benefit to our organization and that's where we were able to access the high concentration of THC flower as well as the seed to allow us to move into seed based production. So it was an investment in the U S and although you can't consolidate.

And so we did take some time to figure out how to set up the structure in a way that would be obviously compliant with our NASDAQ and T. S X listings.

So we will look at the U S for sure with project Jupiter as well as other emerging markets, but the U S will be a focus and I can comfortably say that.

We've received many inbound there's a high interest because theres a lot of companies that are capital constrained so were.

And at the same time have some benefit to our organization and that's where we were able to access the high concentration of P. C. D flower as well as the seed to allow us to move into seed based production. So it was an investment in the U S and although you can't consolidate.

It was there was benefit to our existing business.

We're actively looking and we are going to explore.

So we will look at the U S for sure with project Jupiter as well as other emerging markets, but the U S will be a focus.

These.

Tested instruments that we've seen other people use around how to get our compliant structure.

I can comfortably say that.

It was there was benefit to our existing business.

But at the end of the day look we're looking at several verticals. So if we're looking at.

We've received many inbound there's a high interest because theres a lot of companies that are capital constrained so.

So we will look at the U S for sure with project Jupiter as well as other emerging markets, but the U S will be a focus.

Investing in Msos that set those or even brand plays we recognize recognize those are more difficult to structure and those will probably take us a little bit longer where we expect that there'll be.

We're actively looking and we are going to explore any of these.

I can comfortably say that.

Tested instruments that we've seen other people use around how to get our compliant structure.

We've received many inbound there's a high interest because theres a lot of companies that are capital constrained so.

Easier approach in the short term would be IP focused opportunities and hemp derived THC claims that we could consolidate and that can have a direct impact on us. So we're already in conversations today with certain companies and we're excited about the opportunity.

But at the end of the day look we're looking at several verticals. So if we're looking at.

We're actively looking and we are going to explore any of these.

Investing in Msos that set those or even brand plays we recognize recognize those are more difficult to structure and those will probably take us a little bit longer where we expect that there will be.

Tested instruments that we've seen other people use around how to get our compliant structure.

But at the end of the day look we're looking at several verticals. So if we're looking at.

But again, we'll watch how other companies structure compliant Lee and learn from that we don't have to reinvent the wheel and we're excited about these opportunities going forward.

An easier approach in the short term would be IP focused opportunities and hemp derived THC plays that we could consolidate and that can have a direct impact on us. So we're already in conversations today with certain companies and we're excited about the.

Investing in Msos that set those or even brand plays we recognize recognize those are more difficult to structure and those will probably take us a little bit longer where we expect that there'll be.

Thank you very much I'll hop back in the queue. Thank you.

Again, if you would like to ask a question. Please press star one on your telephone keypad.

An easier approach in the short term would be IP focused opportunities and hemp derived THC claims that we could consolidate and that can have a direct impact on us. So we're already in conversations today with certain companies and we're excited about the opportunity.

Entity, but again, we'll watch how other companies structure compliant Lee and learn from that we don't have to reinvent the wheel and we're excited about these opportunities going forward.

Question comes from the line of Ivan Kim from Canaccord Genuity. Please go ahead.

Hi, there good morning. Thank you for taking my question. This is yellow and came off would not bother me.

Thank you very much. Thank you. Thank you.

So I just wanted to ask a question about the international strategic investment arm that you guys are trying to set up right now.

But again, we'll watch how other companies structure compliant Lee and learn from that we don't have to reinvent the wheel and we're excited about these opportunities going forward.

Again, if you would like to ask a question. Please press star one on your telephone Keypad. Your next question comes from the line of Ivan Kim from Canaccord Genuity. Please go ahead.

Wanted to ask if those initial expectations in terms of where you guys wanted to deploy that capital has changed at all in the past few months just because.

Thank you very much thank you.

Hi, there good morning. Thank you for taking my question. This is Jim on came on for Matt Bottomley.

Again, if you would like to ask a question. Please press star one on your telephone Keypad. Your next question comes from the line of Ivan Kim from Canaccord Genuity. Please go ahead.

One of your peers recently announced that they're going to be acquiring a medical cannabis company in Australia and this has been a market that has been ramping up quite a bit and seems that a lot of Canadian Lps are taking interest in that market. So just wanted to see if if any of your expectations have kind of gone away from U S folks.

So I just wanted to ask a question about.

The international strategic investment arm that you guys are trying to set up right now.

Hi, there good morning. Thank you for taking my question. This is Jan came off would not bother me. So I just wanted to ask a question about.

Wanted to ask if those initial expectations in terms of where you guys wanted to deploy that capital has changed at all in the past few months just because.

The international strategic investment arm that you guys are trying to set up right now.

<unk> into more international focus thanks.

No. Thank you for your question. So you know when we've announced when we originally announced project Jupiter. We did say we would have a strong focus on the U S. But we also left room for international markets and we are interested in exploring markets like Germany and market cycles.

Wanted to ask if those initial expectations in terms of where you guys wanted to deploy that capital has changed at all in the past few months just because.

You know one of your peers recently announced that they're going to be acquiring a medical cannabis company in Australia and this has been a market that has been ramping up quite a bit and seems that a lot of Canadian Lps are taking interest in that market. So just wanted to see if if any of your expectations have kind of gone away from U S folk.

Two more international focus thanks.

Australia, obviously, we ship our export business to both Australia, and we've just shipped to Germany, and we expect to actually ship are any any time now to the U K. So there are other markets that are interesting and those markets will allow us to have a more direct impact on our business versus the U S.

Thank you for your question. So you know when.

When we've announced when we originally announced project Jupiter. We did say we would have a strong focus on the U S. But we also left room for international markets and we are interested in exploring markets like Germany and markets like Australia, obviously, we ship our export business to both.

<unk> into more international focus things.

And thank you for your question so you.

So theres going to be a balancing approach we will do some investments with some of those other markets and we'll see what are the best opportunities for us that meets our long term strategic goals.

You know when we even out when we originally announced project Jupiter. We did say we would have a strong focus on the U S. But we also left room for international markets and we are interested in exploring markets like Germany and markets like Australia, you know, obviously, we ship our export business to both.

Liam we've just shipped to Germany, and we expect to actually ship any anytime now to the U K. So there are other markets that are interesting and those markets will allow us to have a more direct impact on our business versus the U S.

But a good chunk of the Jupiter investment will happen in the U S. Because that is an opportunity for the future that we want to set ourselves up for so yes, we will look at Australia, and we'll look at Germany, and and you know, we'll see what the right opportunities are and hopefully we'll have news to share.

Australia, and we've just shipped to Germany.

So theres going to be a balancing approach we will do some investments with some of those other markets and we'll see what are the best opportunities for us that meets our long term strategic goals.

We expect to actually ship are any any time now to the U K. So there are other markets that are interesting and those markets will allow us to have a more direct impact on our business versus the U S.

And in the next few.

But a good chunk of the Jupiter investment will happen in the U S. Because that is an opportunity for the future that we want to set ourselves up for so yes, we'll look at Australia, and we will look at Germany.

A few months.

So theres going to be a balancing approach we will do some investments with some of those other markets and we'll see what are the best opportunities for us that meets our long term strategic goals.

Thank you for the color I'll jump back into the queue.

And we have no further questions in our queue. At this time I will now turn the call back to management for closing remarks.

And we'll see what the right opportunities are and hopefully we'll have news to share in the next.

Well. Thank you everybody for joining the call today as I can tell there's a lot of interest in our next steps on our Jupiter investment pool, and we're equally excited about this next stage of organic <unk> evolution and we continue to be proud of the work we do everyday in the domestic market in Cana.

But a good chunk of the Jupiter investment will happen in the U S. Because that is an opportunity for the future that we want to set ourselves up for so yes, well look at Australia, and we'll look at Germany, and and you know, we'll see what the right opportunities are and hopefully we'll have news to share.

A few months.

Thank you for the color I'll jump back into the queue.

And we have no further questions in our queue. At this time I will now turn the call back to management for closing remarks.

So with that I'll close out today's call and look forward to updating you soon on our second quarter and as a reminder, please come out to see our facility and come join us on our Investor Day in April. Thank you again for joining.

And in the next few.

A few months.

Thank you for the color I'll jump back into the queue.

And we have no further questions in our queue. At this time I will now turn the call back to management for closing remarks.

This concludes today's conference call. Thank you for your participation and you may now disconnect.

Yeah.

This concludes today's conference call. Thank you for your participation and you may now disconnect.

Please wait the conference will begin shortly.

This concludes today's conference call. Thank you for your participation and you may now disconnect.

Okay.

Yes.

[music].

Okay.

Sure.

Yeah.

Okay.

Got it.

Okay.

Yes.

Yeah.

Yes.

[music].

Yeah.

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