Q1 2024 Village Farms International Inc Earnings Call

Okay.

Yeah.

Operator: Good morning, ladies and gentlemen, and welcome to the Village Farms International first quarter 2024 financial results conference call. This morning, Village Farms International issued a news release reporting its financial results for the first quarter and for March 31st, 2024. That news release, along with the company's financial statements, is available on the company's website at villagefarms.com under the Investors heading. Please note that today's call is being broadcast live over the internet and will be archived for replay both by telephone and via the internet beginning approximately one hour following completion of the call. Details of how to access the replays are available in today's newsroom.

Speaker Change: Good morning, ladies and gentlemen, and welcome to the village farms.

Speaker Change: First quarter 2024 financial results conference call.

Speaker Change: This morning village farms issued a news release reporting its financial results for the first quarter ended March 31st 2024.

Speaker Change: That news release, along with the company's financial statements are available on the company's website at village farms Dot com under the investors heading.

Speaker Change: Please note that today's call is being broadcast live over the Internet and will be archived for replay both by telephone and via the Internet beginning approximately one hour following completion of the call.

Speaker Change: Details on how to access the replays available in today's news release.

Operator: Before we begin, let me remind you that forward-looking statements may be made today, during, or after the formal part of this conference call. Certain material assumptions were applied in providing these forecasts, many of which are beyond our control. These statements are subject to a number of risks and uncertainties that could cause actual results to differ materially from those expressed or implied in these forward-looking statements. A summary of these underlying assumptions, risks, and uncertainties is contained in the company's various securities filings with the SEC and Canadian regulators, including its Form 10-K MDNA for the year ended December 31st, 2023 and Form 10Q for the quarter ended March 31st, 2024, which will be available on Edgar and Cedar Plus.

Speaker Change: Before we begin let me remind you that forward looking statements.

Speaker Change: It may be made today.

Speaker Change: During or after the formal part of this conference call.

Speaker Change: Certain materials material assumptions were applied in providing these statements.

Speaker Change: Many of which are beyond our control.

Speaker Change: These statements are subject to a number of risks and uncertainties.

Speaker Change: That could cause actual results to differ materially from those expressed or implied in forward looking statements.

Speaker Change: A summary of these underlying assumptions risks and.

Speaker Change: And uncertainties.

Speaker Change: It was contained in the company's various securities filings with the SEC and Canadian regulate regulators, including its Form 10-K M. D N. A for the year ended December 31st 2023.

Speaker Change: <unk> 10-Q for the quarter ended March 31st 2024.

Speaker Change: This will be available on Edgar.

Speaker Change: Edgar and SEDAR plus.

Operator: These forward-looking statements are made as of today's date, and, except as required by applicable security law, we undertake no obligation to publicly update or revise any such statement. I would now like to turn the call over to Michael DeGiglio, Chief Executive Officer of Village Farms International. Please go ahead, Mr. DeGiglio.

Speaker Change: These forward looking statements are made as of today's date.

Speaker Change: Except as required by applicable security laws.

Speaker Change: We undertake no obligation to publicly publicly update or revise any such statements.

Speaker Change: I would now like to turn the call over to Michael.

Michael: <unk> Chief Executive Officer of village farms International.

Michael: Please go ahead, Mr dig little.

Michael: Yeah.

Michael A. DeGiglio: Thanks, Eric. Good morning, and thank you for joining us today. I'm happy to be here.

Michael: Thanks, Eric Good morning, and thank you for joining us today and I'm happy to be here with me are Steve Ruffini, Chief Financial Officer, and Galen Lefebvre, Chief operating officer, and Eddie Smith, our corporate controller.

Michael A. DeGiglio: With me are Steve Ruffini, Chief Financial Officer, Ann Gill and Lefever, Chief Operating Officer, and Patty Smith, Corporate Controller. For today's call, I'll begin with some perspective from my point of view on what's driving our strong start to 2024. Then I'll share my thoughts on how we are leveraging the unmatched capabilities we have built to lead in the global cannabis industry. My first topic will be how Q1 highlights how the Canadian cannabis business once again achieved several sales records while delivering profitability and cash flow, and our fresh produce business generated net income on a solid year-over-year sales growth. Together, these drove a 21% increase in consolidated sales and a six-fold increase in adjusted EBITDA.

Dig Little: For today's call I'll begin with some perspective from my point of view on what's driving our strong start to 2024, then I'll share my thoughts on how we are leveraging the unmatched capabilities. We have built to lead in the global cannabis industry.

Michael: My first topic will be.

Michael A. DeGiglio: Q1 was especially strong for our Canadian cannabis business. Retail branded sales grew 28% from Q1 last year. All of it organic, meaning we generated these sales. This sales growth was entirely in-house. Without acquisition, which drove a record net sales of over $50 million in Q1.

Michael: Q1 highlights our Canadian cannabis business once again achieved several sales records, while delivering profitability and cash flow.

Michael: And now fresh produce business generated net income on a solid year over year sales growth together. These drove a 21% increase in consolidated sales and a six fold increase in adjusted EBITDA.

Michael: Q1 was especially strong for our Canadian cannabis business retail branded sales grew 28% from Q1 last year all of it organic meaning we generated these sales.

Michael: This sales growth entirely in house.

Michael: Without acquisitions.

Michael: Which drove a record net sales of over $50 million.

Michael: In Q1, this strong growth nearly four times out of the Canadian market on a year over year basis is really as a result of our focus on delighting consumers with quality and innovation across a range of brands positions with different usage occasions and price points.

Michael A. DeGiglio: This strong growth, nearly four times that of the Canadian market on a year-over-year basis, is the result of our focus on delighting consumers with quality and innovation across a range of brands positioned for different usage occasions and price points. I can't overemphasize how important or how difficult this is in any industry, but especially in the Canadian market with this highly restrictive market. In my view, our operational expertise is translating into higher quality products, which in turn is translating into market share success across all our brands.

Michael: I can't overemphasize, how important or how difficult. This is in any industry, but especially in the Canadian market with its highly restrictive marketing in my view, our operational expertise is translating into higher quality products, which in turn is translating into market share success.

Michael: Across all our brands.

Michael A. DeGiglio: Of course, this growth would also not be possible without strong partnerships with our trusted provincial distributors and retailers. It was roughly a year ago that I challenged a Canadian cannabis team to find new opportunities for growth in our pursuit to be number one in the market, to renew our market share momentum in flower and deliver share gains beyond the core flower category. During Q1, we were the fastest growing of the top five producers, further narrowing the gap to number one.

Michael: Of course this growth would also not be possible without strong partnerships with our trusted provincial distributors and retailers.

Michael: It was roughly a year ago that I challenged our Canadian cannabis team to find new opportunities for growth in our pursuit to be number one in the market to renew our market share momentum in flour and deliver share gains beyond the core flower category.

Michael: During Q1, we were the fastest growing of the top five producers further narrowing the gap to number one I'll.

Michael A. DeGiglio: Our share expansion, which has continued into April, our ninth consecutive month of market share growth, was driven by both the flower and pre-roll category. We moved into the number two position nationally in pre-rolls, the result of relentless focus on leveraging our high-quality flour into products that consumers trust. We will keep doing this in profitable categories.

Michael: Sure expansion, which has continued into April our ninth consecutive month of market share growth was driven by both the flower and pre Ro categories.

Michael: We moved into the number two position nationally and pretty well. The result of relentless focus on leveraging our high quality flower and some products that consumers trust.

Michael: We will keep doing this and profitable categories importantly, the entire team embraces challenge leadership growers innovation and branding teams production and sales teams as well as our third party producers.

Michael A. DeGiglio: Importantly, the entire team embraces this challenge, leadership, growers, innovation, and branding teams, production, and sales teams, as well as our third-party producers. We are proving that we are leaders, not just in cultivation, post-harvest disciplines, and manufacturing, but across all the competencies critical for our share growth, innovation, brand building, and understanding the consumer, specifically where consumer preferences are going. The second topic, Examples of Capability Beyond Cultivation. I want to share three examples that demonstrate that.

Michael: We are proving that we are the leaders not just in cultivation and post harvest disciplines in manufacturing, but across all the competencies and critical for our share growth innovation brand building and understanding the consumer specifically where consumer preferences are going.

Michael: Second topic examples of capability beyond cultivation I want to share three examples that demonstrate this.

Michael A. DeGiglio: The first is an innovation mindset across everything we do. This mindset means that we are laser-focused on improvements to our existing brands and products. We do not launch them and then leave them.

Michael: The first is an innovation mindset across everything we do this mindset means that we are laser focused on improvements to our existing brands and products, we do not launch them and leave them, we continually strive to improve them.

Michael A. DeGiglio: We continually strive to improve. These three quick examples of this: first, two years ago, we invested in moving our BC production to hang dry, the first and probably only to do so at scale. That conversion was just the beginning of an all-hands-on journey to improve our flower quality in other ways as well.

Michael: These three quick examples of this first two years ago, we invested to move our BC production to hang dry the Paris, and probably only to do so at scale.

Michael: That conversion was just the beginning of an all hands on journey to improve our flower quality in other ways as well in total I believe all these incremental improvements are contributing to our market share gains.

Michael A. DeGiglio: In total, I believe all these incremental improvements are contributing to our market share gains. Second, in Quebec, our team innovated around deep and accurate data insights to anticipate consumer needs, which they met by commercializing existing products differently. This has also contributed to our market share gains. And then, finally, earlier this year, the team revisited packaging appeal, like the pink bags we recently launched, which honors our iconic, best-selling Pink Kush product.

Michael: In Quebec, our team has innovated around deep inaccurate data insights do you anticipate consumer needs, which they met by commercializing existing products differently.

Michael: This has also contributed to our market share gains and then finally earlier this year the team revisited packaging appeal like the paint bags, we recently launched which honest our iconic best selling pink Kush products.

Michael A. DeGiglio: Consumer and bartender engagement was wonderful. We also are evaluating selective packaging opportunities to further elevate product quality and freshness. The second example is last month's launch of our high-def pre-rolls, a true game-changer in the pre-roll category. These Pure Ground Flour, with THC of 36 to 44% with no concentrates, no infusions, not even keef, just pure flour from pure sun farms. There's nothing else like it on the market.

Michael: Consumers and Bud tender engagement was wonderful. We also are evaluating selective packaging opportunities to further elevate product quality and freshness.

Michael: The second example is last month's launch about high Def pre rolls a true game changer in the premium category.

Michael: These pure ground flower.

Michael: With THC, a 36% to 44% with no concentrates now infusions not even Keith just pure flower from pure sudden farms, there's nothing else like it on the market initial response from retailers and boards are exceeding our expectations.

Michael A. DeGiglio: Initial response from retail and boards is exceeding our expectations. And the third success story is our Super Toast brand launched last summer. Super Toast was our entry into the milled flour category, which we launched in Ontario, where milled flour has higher indexes compared to the rest of the country. SuperTurst has taken share every month since launch.

Michael: And the third success for a as a Super Telus brand launch last summer Supercharge was our entry into the milled flower category, which we launched in Ontario, where milk over index as compared to the rest of the country.

Michael: <unk> has taken share every month since launch is now the second best selling milk brand in Ontario, with more than 20% share and it's still growing.

Michael A. DeGiglio: It's now the second best-selling milk brand in Ontario with more than 20% share, and it's still growing. This product is top-tier and competitively priced, using the quality BC-grown flour that we are known for. Quality is a theme here.

Michael: This product is top tier and competitively priced using the quality VC grown flower that we are known for.

Michael: Quad is a theme here, it's our DNA, including our premium brands, notably sore and tantrums importantly, while growing our cannabis business. We also delivered healthy results in fresh produce our heritage business, which continues to build expertise we use in both protos and in cannabis.

Michael A. DeGiglio: It's in our DNA, including our premium brands, notably Soar and Tantan. Importantly, while growing our cannabis business, we also delivered healthy results in fresh produce, our heritage business, which continues to build expertise we use in both produce and in cannabis. T1 built on a steady improvement throughout last year and saw our best financial results in several years. We not only generated year-over-year sales growth but also another quarter of positive EBITDA, as well as a profit.

Michael: Q1 built on the steady improvements throughout last year, and so our best financial results in several years, we not only generate year over year sales growth, but also another quarter of positive EBITDA as well as a profit we look to build that through the rest of this year as we begin to benefit from our investments in cultivation aided by AI as well.

Michael A. DeGiglio: We look to build on this through the rest of this year as we begin to benefit from our investments in cultivation, aided by AI, as well as implementing automation for labor savings, and our unmatched world-class growers in support.

Michael: Is implementing automation for labor savings and our unmatched world class growers and support teams.

Michael: And the third topic is opportunity the final topic I wanted to cover today is the global conversion momentum towards legalization of cannabis first my thoughts on village farms competitive advantages.

Michael A. DeGiglio: The final topic I want to cover today is the global momentum towards legalizing cannabis. First, my thoughts on Village Farms Competitive Advantages. Our experience in Canada, which leverages our deep growing expertise and a stable core team every single day, and where we are the profitable market share leader with broad capabilities in branding, marketing, and commercialization, positions us very well to succeed and lead in emerging cannabis markets. We are leveraging our brand and product success in Canada through exports to four of the largest legal medical cannabis markets outside North America, Australia, Germany, the UK, and Israel. And we're more as markets open.

Michael: Our experience in Canada, which leverages, our deep growing expertise and a stable core team every single day.

Michael: And where we are the profitable market share leader with broad capabilities and branding marketing and commercialization.

Michael: Positions us very well to succeed and lean.

Michael: In emerging cannabis markets, we are leveraging our brand and product success in Canada through exports to four of the largest legal medical cannabis markets outside North America, Australia, Germany, the UK and Israel, and we'll add more markets open.

Michael A. DeGiglio: Notably, April 1st saw partial legalization in Germany, which will provide patients there with great access to high-quality legal products. As an unexpectedly large market, Germany is an important focus for our international medical cannabis strategy. In fact, our EU GMP certification was obtained through the district government of Dusseldorf.

Michael: Notably April 1st saw partial legalization in Germany, which will provide patients there with great access to high quality legal products.

Michael: As an annex as unexpected large market, Germany is an important focus for our international medical cannabis strategy in fact, our EU GMP certification was obtained through the district government of Dusseldorf, We began shipping our best selling Canadian strengths in Germany about this time last year and have been adding both local.

Michael A. DeGiglio: We began shipping our best-selling Canadian strains to Germany about this time last year and have been adding both local distributors and sales since. We are launching the first recreational cannabis market in Europe. The Netherlands is expecting to start production in Q4 with revenues in 2025. We are not only that we are the only North American participant in this limited licensed country, which, like Canada, has a large legacy consumer base. Like Canada, it is a country where we have a long history, deep relationships, and huge respect for their growing expertise.

Michael: <unk> and sales since then.

Michael: We are launching the first recreational cannabis market in Europe, the Netherlands expecting to start production in Q4 with revenues in 2025, we are not only that we are we are the only north American persistent in this limited licensed country, which like Canada is a large legacy consumer base.

Michael: Like Canada, as a country, where we have a long history deep relationships and huge respect for their growing expertise indications are that they respect us mutual.

Michael A. DeGiglio: Indications are that the respect is mutual. And then, relative to Canada, though, this has a significantly more favorable tax regime and supply chain, and the program is designed to support Canadian capital. We also think it can be a springboard into other EU markets as they emerge. Our experience also bodes well for the cannabis opportunities here at home in the United States, but first, over to Steve for a more detailed review of the funding.

Michael: And then relative to Canada has a significantly more favorable tax regime and supply chain and the program is designed to support our capital investment.

Michael: We also think it can be a springboard into other EU markets as they emerge.

Michael: Our experience also bodes well for the cannabis opportunities here at home in the United States, but first over to Steve for a more detailed review of the financials.

Stephen C. Ruffini: Thanks Mike. Here are some details on the quarter. Total sales grew 21% year-over-year to $78.1 million, with strong growth in both cannabis and produce. Net loss improved to negative $2.9 million or $0.03 per share, a $3.8 million improvement from last year, with adjusted EBITDA improved by $3.1 million to $3.6 million. Looking at the individual business segments, Canadian Canvas delivered record sales, record retail branded sales, and another quarter of positive adjusted EBITDA in cash flow. As Mike noted, net sales were up 49% year-over-year to $50.5 million. Reminder that all Canadian canvas figures are in local currency.

Stephen C. Ruffini: Thanks, Mike some details on the quarter total sales grew 21% year over year to $78 $1 million with strong growth in both cannabis and produce net loss improved to negative $2 9 million or <unk> <unk> per share a $3 8 million improvement from last.

Stephen C. Ruffini: Year with adjusted EBITDA improved by $3 1 million to $3 6 million.

Michael: Looking at the individual business segments Canadian cannabis delivered record sales record retail branded sales and another quarter of positive adjusted EBITDA and cash flow.

Michael: As Mike noted net sales were up 49% year over year to $50 5 million reminder, that all Canadian Kansas figures or in the local currency.

Stephen C. Ruffini: Within this total, retail branded sales grew 28% to $39.2 million. In our non-branded channel, we continue to take advantage of the improved wholesale market conditions to monetize non-branded spec biomass inventory, not designated for a brand, and our growth areas. Non-branded sales were $8.7 million, which was 181% higher than Q1 last year and 10% higher than Q4. International export sales for Q1 were $2 million, roughly in line with Q1 last year, which included a load in order to Australia ahead of a change to market regulation. Q1 2024 export sales were nearly double that of Q4 2023, led by repeat orders to the UK and Germany.

Michael: Within this total retail branded sales grew 28% to $39 2 million.

Michael: In our non branded channel we continued to take advantage of the improved wholesale market conditions to monetize non branded spec biomass inventory not designated for our branded.

Michael: And our growth areas non branded sales were $8 7 million, which was a 181% higher than Q1 last year and 10% higher than Q4.

Michael: International export sales for Q1 were 2 million roughly in line with Q1 last year, which included a load in order to Australia ahead of a change to market regulations Q.

Michael: Q1, 2020 for export sales were nearly double that of Q4 2023 led by repeat orders the UK and Germany.

Stephen C. Ruffini: While we expect export sales to remain lumpy quarter by quarter, we are on track to deliver solid year-over-year growth in 2024. Canadian cannabis gross margin improved from Q4 to 25%, but was still impacted by the lower margin non-branded SPAC biomass sales. Excluding these sales, gross margins were 31% at the low end of our annual 30 to 40% target range. A reminder that costs. It costs more to grow vegetables in the winter months.

Michael: While we ex back export sales to remain lumpy quarter by quarter. We are on track to deliver a solid year over year growth in 2024.

Michael: Canadian cannabis gross margin improved from Q4 to 25%, but was still impacted by the lower margin non branded spec biomass sales. Excluding these sales gross margin was 31% at the low end of our annual 30% to 40% target range.

Michael: A reminder that cost.

Michael: It costs more to grow in the winter months SG&A expenses as a percentage of sales for Q1 improved to 21%, 27%. We continue to expect the SG&A to sales ratio for 2024 to be a couple of points lower than last year.

Stephen C. Ruffini: SG&A expenses as a percentage of sales for Q1 improved to 21% and 27%. However, we continue to expect the SG&A to sales ratio for 2024 to be a couple of points lower than last year. Q1 adjusted EBITDA for Canadian cannabis of $5.5 million was a 4% increase from Q1 last year. Finally, for Canadian cannabis, we generated nearly $5 million in total cash, right in line with the Jeff at EBITDA. And it was another quarter of strong free cash flow of $6.3 million, up 20% from last year. Turning to our U.S. Canvas business, C1 sales were $4.5 million with a gross margin of 59%. The adjusted EBITDA loss was $600,000 for a net loss of $700,000.

Michael: Q1, adjusted EBITDA for Canadian cannabis.

Michael: $5 5 million was at 4% increase from Q1 last year.

Michael: Finally for Canadian canvas, we generated nearly $5 million in total cash right in line with adjusted EBITDA and it was another quarter of strong free cash flow of $6 3 million up 20% from last year.

Michael: Turning to our U S canvas business Q1 sales were.

Michael: $4 5 million with a gross margin of 59% adjusted EBITDA loss was 600000.

Michael: For a net loss of 700000 and the business is being challenged by two factors the prevalence of synthetic hemp based products primarily delta.

Stephen C. Ruffini: Business is being challenged by two factors; the prevalence of synthetic hemp-based products, primarily Delta A, which the consumer is not differentiating from naturally occurring hemp-based THC. Second, not surprisingly, these products are also being challenged in states where legal cannabis is being sold. Unless and until we get FDA clarity, these challenges will remain.

Michael: Which the consumer is not differentiating from naturally occurring hemp based THC.

Michael: Not surprisingly these products are also being challenged in states, where legal cannabis is being sold unless and therefore until we get FDA clarity. These challenges will remain weak.

Stephen C. Ruffini: We believe the future of the CBD market is a viable alternative to the higher THC products and continue to hone our capabilities, including internalizing our gummy production, a category which continues to have strong growth. We are also acting on a number of strategies designed to optimize revenue in the current environment, including building on our strong subscription-based sales and adjusting our price structure as we continue to manage costs. We've already seen some encouraging improvements in the velocity of purchases by our subscribers, although moving to fresh produce.

Michael: We believe the future of the CBD market as a viable alternative to the higher THC products and continue to hone our capabilities, including internalizing, our gummy production.

Michael: Category, which continues to have strong growth. We are also acting on a number of strategies designed to optimize revenue in the current environment, including building on our strong subscription based sales and adjusted and adjusting our price structure as we continue to manage costs.

Michael: <unk> seen some encouraging improvements in the velocity of purchases by our subscribers.

Stephen C. Ruffini: Q1 sales increased to $36.1 million with positive gross profit for the third straight quarter of $3.3 million. Adjusted EBITDA was also positive $2 million. That makes three out of the last four quarters in positive territory, with a trailing 12-month total of more than $3.5 million, and Q1 was our best quarter since Q4 2021. And I'm pleased to report we achieved profitability for fresh produce in Q1, with net income improving more than $2.7 million to a positive $100,000.

Michael: Moving to fresh produce Q1 sales increased to $36 1 million with positive gross profit for the third straight quarter of $3 3 million. Adjusted EBITDA was also positive $2 million.

Michael: That makes three out of the last four quarters in positive territory with a trailing 12 month total of more than $3 5 million.

Michael: In Q1 was our best quarter since Q4 2021.

Michael: And I am pleased to report we achieved profitability for fresh produce in Q1 with net income improving more than $2 $7 million to a positive 100000.

Stephen C. Ruffini: Turning to our consolidated cash flows in the balance sheet, cash flow from operations for the quarter improved by $3.6 million to break even. We ended Q1 with total cash of $31.7 million and working capital of $78.2 million. Total term debt at the end of Q1 was $46 million, composed of 22 million for fresh produce due in May 2027 and $24 million of cannabis debt with maturities starting in February 2026. We remain comfortable with our net debt level of $18 million, which includes our $4 million produce operating loss.

Michael: Turning to our consolidated cash flows and the balance sheet cash flow from operations for the quarter improved by $3 6 million to breakeven.

Michael: We ended Q1 with total cash of $31 7 million and working capital of $78 2 million.

Michael: Total term debt at the end of Q1 was $46 million.

Michael: Composed of $22 million for fresh produce.

Michael: Due in May 2027, and $24 million of cannabis that with mature starting in February 2026.

Michael: We remain comfortable with our net debt level of $18 million, which includes a $4 million produced operating line.

Stephen C. Ruffini: Finally, note that in early April, our Clean Energy subsidiary saw the start-up of operations at the Renewable Natural Gas Facility adjacent to our grow operations in Delta, B.C. The facility, which was financed and built by our partner, Toreva Renewables, converts landfill gas under our contract with the City of Vancouver to natural gas. We receive a royalty from the facility revenues, and you will see resulting profitability beginning in our Q2 results. Now, I turn the call back to Mike. Well, thank you, Steve.

Michael: Finally note that in early April our clean energy subsidiary saw the startup of operations at the renewable natural gas facility adjacent to our <unk> operations and Delta BC facility, which was financed and built by our partner to reap renewables converts landfill gas under our contract with the city of Vancouver.

Michael: Natural gas.

Michael: We receive a royalty.

Michael: From the facilities revenues and you will see resulting profitability beginning in our Q2 results.

Michael: And now I'll turn the call back to Mike.

Michael A. DeGiglio: Well, thank you, Steve. Like most in the industry, we were disappointed that we did not see a change to the excise duty in April's Canadian budget. We are, however, encouraged that the topic has the attention of a number of federal agencies, including a review by the Finance Department. We will continue to work and partner with government and peers on this important initiative that will support the industry long term, which is not only contributing to local economies and safety for consumers but supporting a product category that is increasingly shown to have a range of health benefits.

Mike: Well. Thank you Steve so like most in the industry. We were disappointed that we did not see a change to the excise duty in April's Canadian budget.

Mike: We are however, encouraged at the topic has the attention of a number of federal agencies, including a review by the Finance Department.

Mike: We will continue to work and partner with government and peers on this important initiative that will support the industry long term, which is not only contributing to local economies and safety for consumers, but supporting our product category that is increasingly shown to have a range of health benefits in the interim we remain uniquely positioned in.

Michael A. DeGiglio: In the interim, we remain uniquely positioned in Canada and the Canadian market to deliver market share and sales growth with profitability and positive cash flow. The momentum towards cannabis legalization in the United States appears again to be getting its rightful priority with those who can affect needed change in Washington. We applaud the many leaders who are pressing the conversation into action.

Mike: Canada, and the Canadian market deliver market share and sales growth with profitability and positive cash flow.

Mike: Momentum momentum towards cannabis legalization in United States appears again to be getting its rightful priority with those who can affect needed change in Washington.

Mike: We applaud the many leaders who are pressing the conversation into action.

Michael A. DeGiglio: It is critical for those who are still unjustly criminalized and for the safety of those currently working in the industry. Full federal legalization has been proven in Canada to reduce access to illicit product, particularly for underage users, ensure a safe, consistent product for all consumers, and contribute to both employment and tax revenues for local communities. The United States needs to remove all criminalization inconsistencies, open access to capital markets for the safety and viability of the industry, and realize the benefits of full federal legalization.

Mike: It is critical for those who are still on just the criminalised and for the safety of those currently working in the industry.

Mike: <unk> Federal legalization has been proven in Canada reduce sx to illicit product, particularly for under age users, ensuring safe consistent product for all consumers and contribute to the two both the employment of tax revenues for local communities.

Michael A. DeGiglio: The United States needs to remove all criminalization inconsistency is open access to capital markets with a safety and viability of the industry and realize the benefits of full federal legalization and we deserve nothing less than that.

Michael A. DeGiglio: And we deserve nothing less than that. Then, finally, we are often asked how we translate our leading Canadian expertise into a U.S. strategy once we are permitted to do so as a NASDAQ-listed company. Much of the detail depends on how far Washington progresses toward legalization.

And then finally, we are often asked how we translate a leading Canadian expertise into our U S strategy. Once we are committed to do so as a NASDAQ listed company <unk>.

Michael A. DeGiglio: <unk> of the detailed depends on how far Washington proceeds towards legalization.

Michael A. DeGiglio: But we will either find a way or make a way. Our preferred option is to deploy assets in Texas, which are very similar to and larger than the Canadian assets from which we built our leading profitable cannabis business. As we assess all options, be assured we'll take a measured approach to optimize any investments for our shareholders. Let me be clear, we remain as focused on the U.S. market as we were before entering the Canadian market.

Michael A. DeGiglio: But we will either find a way or make away our preferred option is to deploy assets in Texas, which are very similar to and larger than the Canadian assets from which we built a leading profitable cannabis business.

Michael A. DeGiglio: As we access all options be assured we will take a measured approach to optimize any investments for our shareholders. Let me be clear we remain as focused on the U S market as we were before entering the Canadian market I have every confidence we will succeed.

Michael A. DeGiglio: I have every confidence we will succeed. And we are even more cannabis experienced with five years in Canada. As Frank Sinatra once said, if you can make it there, you can make it anywhere. So with that, operator, I'll turn it over to you for Q&A.

Michael A. DeGiglio: And we are even more cannabis experience with five years in Canada as Frank Sinatra. Once said if you can make it there you can make it anywhere.

Michael A. DeGiglio: So with that operator ill turn it over to you for Q&A.

Operator: At this time, I would like to remind everyone that in order to ask a question, please press star then the number one on your telephone keypad. Your first question comes from the line of Aaron Grey with Alliance Global Partners. Please go ahead.

Speaker Change: At this time I would like to remind everyone in order to ask a question. Please.

Michael A. DeGiglio: Press Star then the number one on your telephone keypad.

Operator: Your first question comes from the line of Aaron Grey with Alliance Global partners.

Aaron Thomas Grey: Please go ahead.

Aaron Thomas Grey: Hi, good morning, and congrats on the quarter. It's turning really nice there.

Aaron Thomas Grey: Hi, good morning, and congrats on the quarter, turning really nice there so.

Aaron Thomas Grey: First question for me, I just want to talk a bit about wholesale. You've had a couple nice quarters of wholesale growth, 9 million Canadian in the Q. Can you speak a little bit more to how you see the segment evolving over the year, and provide more color in terms of maybe the customer base and contract structure for that business today? You mentioned some areas within it which were lower margin; is there also some contract mix within that? Just how we can maybe provide some more color in terms of, you know, what's involved within that number and how we can think about that evolving. Thank you.

Aaron Thomas Grey: First question for me just wanted to talk a bit about wholesale you've had a couple of nice quarters of wholesale growth 9 million Canadian in the queue can.

Aaron Thomas Grey: Can you speak a little bit more to how you see the segment evolving over the year provide more color in terms of maybe the customer base and.

Aaron Thomas Grey: In contract structure for that business today that you mentioned some spot within it which was lower margin and is there also some contract mix within that is how we can maybe provide some more context.

Aaron Thomas Grey: What's involved within that number and how we can think about that evolving. Thank you.

Aaron Thomas Grey: Yes.

Stephen C. Ruffini: Thanks, Aaron. This is Steve.

Aaron Thomas Grey: Thanks, Darren this is Steve.

Aaron Thomas Grey: The sales in Q1 were primarily spot we have a few small contracts with a couple of the smaller lp's on supply side, but no material supply agreements in place.

Stephen C. Ruffini: The sales in Q1 were primarily spot. We have a few small contracts with a couple of the smaller LPs on the supply side, but we have no material supply agreements in place. Again, taking advantage of what we perceive to be a... lower supply availability, as the supposed excess supply is either aged out or, quite frankly, wasn't good quality. So we have been able to take advantage of that. It is agriculture, and, you know, not everything we grow is, is, you know, brand quality. So based on, you know, size or potency, but there are, there are. There is good demand out there, and we've been able to take advantage of that.

Stephen C. Ruffini: Again, taking advantage of of what we perceive to be a.

Stephen C. Ruffini: Lower supply availability.

Stephen C. Ruffini: Either the.

Stephen C. Ruffini: As opposed to the excess supply is either aged out or quite frankly wasn't good quality. So we have been able to take advantage of that.

Stephen C. Ruffini: It is agriculture and not.

Stephen C. Ruffini: Not everything we grow is is brand quality, so based on size or potency, but there are there is good demand out there and we've been able to take advantage of that yes.

Michael A. DeGiglio: Yeah, and I'll add to that. I mean, nowhere in the script did we talk much about B2B business. You know, we're very focused on building our brand globally. That's number one.

Speaker Change: Yes, and I'll add to that I mean nowhere in the scripted we talked much about <unk> business. We're very focused on building our brand globally. That's number one that's what we talk about however, we have a large footprint.

Michael A. DeGiglio: That's what we talk about. However, we have a large footprint, and every time we expand that footprint, the B2B business is important to us as we develop new products, and new innovation to penetrate the branded categories more so. In addition, you know, we do have relationships with some other LPs, and I think that's good for the industry, working together. So, I think it's going to be, to your question, probably part of the future, but it's not our primary focus.

Michael A. DeGiglio: And every time, we expand that footprint. The <unk> business is important to us as we develop new products, new innovation to penetrate the branded.

Michael A. DeGiglio: Categories more so.

Michael A. DeGiglio: In addition.

Michael A. DeGiglio: We do have relationships with some other Lps and I think thats good for the industry.

Michael A. DeGiglio: Working together so.

Michael A. DeGiglio: So I think thats going to be to Europe question, probably part of the future, but it's not our primary focus will be.

Michael A. DeGiglio: Leave it at that and the other thing I would just say is the way to Canadian structure is set up is.

Michael A. DeGiglio: And we'll leave it at that. And the other thing I'd just say is the way the Canadian structure is set up.., is, You know, with the tax structure, and, you know, we're very cognizant of dilution, and we're investing as a growth company heavily in Europe, we're gearing up for the U.S., we know it's eminent, and the B2B business without the excise tax, just like our international business, is great business for us from a margin perspective, so that's important.

Michael A. DeGiglio: With the tax structure and.

Michael A. DeGiglio: We're very cognizant of dilution and we're investing as a growth company heavily in Europe, we're gearing up for the U S. We know, it's eminent and B to B business without the excise taxes like our international business is great business for us from a margin perspective so.

Michael A. DeGiglio: That's important right now.

Aaron Thomas Grey: Okay, great. I appreciate that. That was a really helpful color.

Speaker Change: Okay, Great I appreciate that that was really helpful. Color and then second question didn't want to turn to retail branded sales, which have continued to trend upward fee and seeing some nice share gains which is correlating with.

Aaron Thomas Grey: And then, second question, I wanted to turn to retail branded sales, which have continued to trend upward for you and are seeing some nice share gains, which is correlating with. Just in terms of overall strategy on the branded side, you guys started off under more of a single brand with Pearson Farms. You've expanded out, right, Fraser Valley, as well as most recently with Supertoast and Soar. So can you speak today about how you feel about your comfortability in terms of where the House of Brands stands today?

Aaron Thomas Grey: Just in terms of overall strategy on the branded side you guys started off on under more of a single brand appears on farms, you've expanded out rate Fraser valley as well as most recently with Super Toast and sore. So can you speak today to how you feel in your comparability in terms of where the house of brand stands today or do you believe there is still opportunity to launch additional brands, particularly at <unk>.

Aaron Thomas Grey: Do you believe there's still opportunity to launch additional brands, particularly as you look to increase share in some of the novel former categories that are still underpenetrated today? Just in terms of your overall strategy in terms of how you feel about entering these new categories, or are you underpenetrated via new brands versus existing brands and how that's evolved? Thanks.

Aaron Thomas Grey: <unk> increased sharing some of the novel form of categories that youre still under penetrated today.

Aaron Thomas Grey: In terms of overall strategy in terms of how youre feeling about entering these new categories, where you're underpenetrated via new brands versus our existing brands and how that fall.

Michael A. DeGiglio: Yeah, well, I think we've done a great job. I mean, we purposely stayed with that one brand till we developed our experience in the marketplace, understood the consumer very well, and then slowly watched as the market was having a separation between value and premium. In fact, we're very proud of our premium penetration. You know, it's often said if, you know, you can get five to ten percent, and I think we're on track to do that.

Speaker Change: Yeah, well I think we've done a great job I mean, we purposely stayed with that one brand two we developed.

Michael A. DeGiglio: Our experience in the marketplace understood the consumer very well and then slowly watch as the market was having separation to value and premium in fact, we're very proud about.

Michael A. DeGiglio: Penetration.

Michael A. DeGiglio: It's often said.

Michael A. DeGiglio: You can get 5% to 10% and I think we're on track to do that we have a couple of product sales, which saw tamped down so it's going well on the we've seen the consumer, especially starting on the West Coast and then traveling further east looking for value, we have solid value without Fraser Valley brand and supercharge us as well.

Michael A. DeGiglio: We have a couple products, as you know, with SOAR and TAMTAM, so it's going well. We've seen the consumer, especially starting on the West Coast and then traveling further east, looking for value. We have solid value with our Fraser Valley brand and Super Toast as well, so I think we're pretty much in the total range of price, the different categories tied to price as well, and now we're very focused on innovation within those brands.

Michael A. DeGiglio: I think we're pretty much in.

Michael A. DeGiglio: Total range of price.

Michael A. DeGiglio: Different categories tied to price as well and now we're very focused on innovation of products within those brands. It's not to say, we won't launch any brands in the future, but there has to be a reason to launch another brand and we have to make sure it will be profitable.

Michael A. DeGiglio: It's not to say we won't launch any brands in the future, but there has to be a reason to launch another brand, and we have to make sure it will be profitable. We're also looking at how these brands will work for us, extending them globally as we penetrate international markets, and very excited about what we're going to be doing in the Netherlands with our brands there as well. So for now, I think in Canada, we want to maximize the penetration and the profitability of our current brands.

Michael A. DeGiglio: We're also looking at how these brands will work for us extending them globally as we penetrate international markets and are very excited about what we're going to be doing in the Netherlands with our brands there as well so for now I think in Canada, we want to maximize the penetration and the profitability of our current.

Michael A. DeGiglio: Brands, we have a number of brands coming out of our Quebec businesses. There that are doing very well as I mentioned.

Michael A. DeGiglio: We have a number of brands coming out of our Quebec businesses there that are doing very well. As I mentioned, Quebec is just the pillar when it comes to understanding the consumer, and that translates across all our cannabis businesses in Canada and abroad.

Michael A. DeGiglio: Back is just.

Michael A. DeGiglio: They are the pillar when it comes to understanding the consumer and that translate to translates across all our cannabis business in Canada and the board.

Operator: Okay, great. Thanks very much for the call, and I'll go ahead and jump back into the queue. Your next question comes from the line of Frederico Gomes with ATB. Please go ahead. Good morning, this is Eric Livshits on.

Speaker Change: Okay, great. Thanks, very much for the color and I'll go and jump back into the queue.

Operator: Your next question comes from the line of Frederico Gomes with ATB. Please go ahead. Good morning.

Michael A. DeGiglio: Your next question comes from the line of Andrew Rico, Goldman's with HEB.

Frederico Yokota Choucair Gomes: Please go ahead.

Eric Livshits: Good morning, This is Eric Lipschitz Port Frederico Gomez.

Frederico Yokota Choucair Gomes: Just in regards to your produce segment so over the past several quarters.

Eric Livshits: Obviously seen some nice improvements there, especially.

Frederico Yokota Choucair Gomes: Especially on the profitability front could.

Frederico Yokota Choucair Gomes: Could you just give some more color into <unk>.

Frederico Yokota Choucair Gomes: What's driving these improvements and how sustainable you think they are thank you.

Michael A. DeGiglio: Well, as we've communicated over the last couple of years, ourselves, as well as every tomato grower, not that we just grow tomatoes, but it is our largest category in fresh produce worldwide, all suffered from a devastating virus that was incurable until resistance was being bred into the genetics by the seed companies, which took about seven years to get where we are today. So, that was pretty devastating for the industry. Many companies didn't make it, and we weathered that storm. So, I would say, number one, that change has been tied to going from tolerant varieties to fully resistant varieties, and we can see that change.

Frederico Yokota Choucair Gomes: Well as we've communicated over the last couple of years ourselves as well as every tomato grower not that we just grow tomatoes, but.

Michael A. DeGiglio: Large category and fresh produce but worldwide all suffered from a devastating virus.

Michael A. DeGiglio: Curable.

Michael A. DeGiglio: Joe resistance was being bread in the genetics by the seed companies, which took about seven years to get where we are today. So.

Michael A. DeGiglio: That was pretty devastating for the industry many companies that make it and we weather that storm. So I would say number one.

Michael A. DeGiglio: That change has been tied to going from.

Michael A. DeGiglio: Tolerant varieties to now fully resistant varieties and we can see that change.

Michael A. DeGiglio: You know, the produce business is a mature commodity business. As you know, it's a NAFTA business that competes with Mexico and Canada, and it's never going to be a huge margin business, but it's an important business for us because all of our technology. When you really look at us as a leading cannabis company, and you just take the cultivation segment, which is one portion of our success there, it is driven by our deep 35-year knowledge and DNA, and as we pursue the U.

Michael A. DeGiglio: The produce business is a mature commodity business as you know, it's a NAFTA business that competes with Mexico and Canada.

Michael A. DeGiglio: And it's never going to be a huge margin business, but it's an important business for us because all of our technology. When you really look at us as a leading cannabis company and you just take the cultivation segment, which is one portion of our success. There. It is driven by our deep 35 year knowledge and DNA.

Michael A. DeGiglio: And as we pursue the U S market thats going to be very apparent that we maintain those businesses, even if they work in parallel with each other the technology changes the way we grow the knowledge.

Michael A. DeGiglio: The technology changes, the way we grow, the knowledge, it's very important. So, we're happy where we are with the results of this quarter, and I think we're on our way to having a decent produce business, but there are other reasons why that business will continue to be part of our organization.

Michael A. DeGiglio: It's very important so.

Michael A. DeGiglio: We're happy where we are with the results of this quarter and I think we're on our way to have a decent produce business but.

Michael A. DeGiglio: There's other reasons why that business will continue to be part of our organization.

Speaker Change: Great. Thank you I'll hop back in the queue.

Operator: Your next question comes from the line of Mike Regan with Excelsior. Please go ahead.

Michael A. DeGiglio: Your next question comes from the line of Mike Regan with Excelsior. Please.

Mike Regan: Please go ahead.

Mike Regan: Hey everyone, thanks a lot. I guess in terms of. Can you update us on what you're seeing regarding the supply and demand dynamics now that the CRA is starting to garnish the unpaid taxes from some of the LLPs that haven't paid them and how that's affecting the pricing at this point?

Mike Regan: Hi, everyone. Thanks, a lot I guess in terms of.

Mike Regan: Can you update us on what you're seeing regarding the.

Mike Regan: Supply and demand dynamics now that the CRA is starting to garnish.

Mike Regan: The tax the unpaid taxes from us from the <unk>.

Mike Regan: Is that haven't paid them and how that's affecting the pricing at this point.

Michael A. DeGiglio: Well, I don't, we haven't seen that really, you know, that's not at a level where we can identify if that's going to improve pricing going forward. I think it's pretty lumpy with what the CRA is doing. In some cases, they're taking a very tough stance, and others, they're extending terms. So I think it's too premature to say, but, and I also don't want to talk for them, but we're not necessarily seeing that driving benefits in the industry, as opposed to, I mean, there's a number of reasons, just not companies owing the CRA; it's companies that can't have the right And I think ultimately, that's the more important driver that will lead to better prices going forward and more stable capacity in the marketplace.

Speaker Change: Well I don't we haven't seen that really.

Mike Regan: It's not at a level, where we can identify if thats going to improve pricing going forward I think it's pretty lumpy with what the CRA is doing in some cases their take.

Michael A. DeGiglio: A very tough stance than others, they're extending terms. So I think it's too premature to say, but I also don't want to talk for for them, but we're not necessarily seeing that driving the benefits in the industry as opposed to.

Michael A. DeGiglio: I mean, there's a number of reasons just not companies owed owing the CRA. It's companies that can have the right cost of production or the quality and I think ultimately that's the more important driver that will lead to.

Michael A. DeGiglio: Better pricing going forward and more stable.

Michael A. DeGiglio: Capacity in the marketplace.

Michael A. DeGiglio: Thanks.

Michael A. DeGiglio: And then I think the press release said that you actually expect harvest from the, or I guess production starting in the Netherlands. Is that, I guess, producing this year, but then actually seeing sales next year? Could that actually generate sales in 2024?

Michael A. DeGiglio: And then I think the press release.

Michael A. DeGiglio: You actually expect.

Michael A. DeGiglio: Harvest from the or I guess production starting in the Netherlands is that I guess, producing this year, but then actually seeing sales next year could that actually generate sales in 2024.

Michael A. DeGiglio: No, we'll go into production, you know, it takes... When you look at the time you need to go from tissue culture or cuttings, which we're actually starting to produce right now in the Netherlands, and taking that into production in a facility, growing the plant, and then, as you know, there's a tremendous amount of post-harvest and manufacturing work that goes in. So we're looking at being planted out in full production in the fourth quarter of this year, and generating revenues in the first quarter of 2025.

Michael A. DeGiglio: Now where it will go in production you know it takes.

Michael A. DeGiglio: When you look at.

Michael A. DeGiglio: So the time you need to go from.

Michael A. DeGiglio: Tissue culture, or cuttings, which we're actually starting to produce right now in the Netherlands and taking that into.

Michael A. DeGiglio: Production in our facility growing the plan and then as you know there is a tremendous amount of post harvest and manufacturing work that goes in so we're looking at.

Michael A. DeGiglio: Being planted out in full production in the fourth quarter of this year with generating revenues in the first quarter 'twenty five.

Speaker Change: Got it Okay and just one final question. If I may you said the produce looks like it has been one of the strongest quarters in.

Mike Regan: Okay, I have one final question if I may. Like you said, produce looks like it's been one of the strongest quarters in a couple of years, at least. And 1Q is typically a sort of seasonally slower quarter. So is this... Is this sort of the level of productivity we could see continue as volume starts to ramp up and the seasonally stronger quarters going forward?

Mike Regan: In a couple of years at least.

Mike Regan: And <unk> is typically is sort of a seasonally slower quarter. So is this.

Mike Regan: And then sort of like level of productivity, we could see continue as then the volume starts to ramp up in the seasonally stronger quarters going forward.

Stephen C. Ruffini: This is Steve. You know, over the historical results of the produce business, which, you know, we've been reporting publicly on since 2006, seasonality definitely shows up in quarter to quarter. Q1 has been a challenge, as Mike alluded to, due to the virus.

Steve: This is Steve.

Mike Regan: Over the historical results of the produce business, which we've been reporting publicly gone since 2006.

Steve: Seasonality is definitely shows up quarter to quarter Q1.

Speaker Change: It has been a challenge.

Stephen C. Ruffini: Q1 has been.

Steve: A challenge as Mike alluded to due to the virus Q1, historically is one of our better pricing months, which does drive profitability and Q2.

Stephen C. Ruffini: Q1 historically is one of our better pricing months, which does drive profitability. And Q2 tends to be a challenge because the Canadians, the Mexicans, and the U.S. people are all producing in that quarter. So we expect to see positive EBITDA every single quarter. It will be nice, but typically, Q2 is our challenging quarter, and Q1, Q3, and Q4 are typically profitable. EBITDA quarters for us.

Stephen C. Ruffini: Tends to be a challenge because the Canadians the Mexicans and the U S. People are all are all producing.

Stephen C. Ruffini: In that quarter so.

Stephen C. Ruffini: Do we expect to see positive EBITDA every single quarter.

Stephen C. Ruffini: It will be nice, but typically Q2 is our challenging quarter in Q1, Q3, and Q4 are typically if profitable.

Stephen C. Ruffini: EBITDA quarters for us.

Mike Regan: Got it. Great. Thanks a lot.

Speaker Change: Got it great. Thanks, a lot.

Operator: Your next question comes from the line of Eric DeLaurier with Craig Hallam Capital. Please go ahead.

Stephen C. Ruffini: Your next question comes from the line of Eric <unk> with Craig Hallum Capital. Please go ahead.

Eric Des Lauriers: Great, thank you for taking my questions and congrats on the strong results here. Thanks, Bill.

Eric Des Lauriers: Great. Thanks for taking my questions and congrats on the strong results here.

Eric Des Lauriers: Another question on the non-branded Canadian cannabis dynamics here. I'm just wondering if you could sort of help provide some more color on the dynamics between the sort of secular trend of producers moving to, you know, more asset light models versus the impacts of seasonality here. I guess I'm wondering if the secular trend here is strong enough that you expect this sort of sequential growth that we've seen over the past few quarters to continue, or if there's seasonality either in demand or perhaps in the quality of your supply that might cause higher non-branded sales in the winter months and the summer months. Just looking for a bit more color on some of the dynamics that you're seeing within unbranded in Canada. Thanks.

Eric Des Lauriers: Thanks, another question on the <unk>.

Eric Des Lauriers: Non branded Canadian cannabis dynamic share just wondering if you could sort of help provide some more color on the dynamics between the sort of secular trend of producers moving too.

Eric Des Lauriers: More asset light models versus the impacts of seasonality here I guess im wondering if b.

Eric Des Lauriers: The secular trend here is strong enough that you expect this sort of sequential growth that we've seen over the past few quarters to do.

Eric Des Lauriers: Continue or if there is seasonality either in demand or perhaps in the quality of your supply that might cause higher non branded sales in the winter months in the summer months.

Eric Des Lauriers: Just looking for a bit more color on some of the dynamics that youre seeing within non branded in Canada.

Michael A. DeGiglio: Yeah, I think it's hard to predict that on a quarter-to-quarter basis. You know, we have to constantly measure that we have a large footprint there, and we can continue to expand our footprint in cannabis. It just depends on what's going to happen with our international division. We're very steadfast about expanding internationally. And, you know, every time we expand the footprint to penetrate an emerging market, there is a product that would be available, as Steve alluded to, that we would look at the B2B partners to supply that product. In addition, we're not opposed to working with B2B partners that may come to us and look for a program, if it makes sense for us. We'll take a look at that.

Speaker Change: Yes, I think it's hard to predict that.

Eric Des Lauriers: On a quarter to quarter basis.

Michael A. DeGiglio: We have to constantly measure that we have a large footprint there and we can continue to expand our footprint in cannabis.

Michael A. DeGiglio: It just depends.

Michael A. DeGiglio: What's going to happen with our international Division were very steadfast on expanding internationally and.

Michael A. DeGiglio: Every time, we expand our footprint.

Michael A. DeGiglio: To penetrate in emerging markets. There is product that would be available as Steve alluded to that would be.

Michael A. DeGiglio: That we would look at the beta be partners to supply that product. In addition, we're not opposed to working with <unk> partners that may come to us and look for that.

Michael A. DeGiglio: Our program.

Michael A. DeGiglio: If it makes sense.

Michael A. DeGiglio: For us, we'll take a look at that but again I want to reiterate.

Michael A. DeGiglio: But again, I want to reiterate, we are a global cannabis company that's going to, you know, we're on a mission to be number one globally with branded products and cannabis. But the cultivation side of our business, you know, we don't have a machine making cannabis. It's a farming operation, and there are variations in size and other attributes in the product. So working with partners that may take the product for their manufacturing purposes that are, you know, positive for us, we will continue to pursue that. But it's hard to say for sure, since it's not our primary focus, what that will be on a quarterly basis at this point.

Michael A. DeGiglio: A global cannabis company, that's going to we're on a mission to be number one globally with branded products in cannabis.

Michael A. DeGiglio: But the cultivation side of our business, we don't have a machine, making cannabis where it's a farming operation and there are variations in size and other attributes and the products. So working with partners that may take product for their manufacturing purposes that.

Michael A. DeGiglio: Our.

Michael A. DeGiglio: Positive for US we will continue to pursue that but it's hard to say for sure since it's not our primary focus what that will be on a quarterly basis at this point.

Eric Des Lauriers: That's helpful. I appreciate that, Cohen. Next question from me.

Speaker Change: That's helpful. I appreciate that color.

Speaker Change: Our next question from me So you have mentioned.

Michael A. DeGiglio: So you've mentioned some of these technological improvements in the produce business that have helped improve productivity and profitability here. You also mentioned that you're sort of taking some of those insights and bringing them over to the cannabis business as well. Could you just provide either some more color or some tangible examples of some of the technology that you've sort of tested out in produce and are now bringing to cannabis as well?

Speaker Change: Some of these.

Speaker Change: Technological improvements in our produce business that have helped.

Michael A. DeGiglio: Through productivity and profitability here you also mentioned that you are.

Michael A. DeGiglio: Sort of taking some of those.

Michael A. DeGiglio: Insights.

Michael A. DeGiglio: Bringing them over to the to the cannabis business as well could you just provided.

Michael A. DeGiglio: Give us some more color or some tangible examples of some of the technology that you've sort of test it out and produce and are now bringing to cannabis as well it seems like.

Michael A. DeGiglio: Yes.

Michael A. DeGiglio: It seems like a source of this potential innovation that you are highlighting as one of your strengths going forward. And I'm just wondering if you could- Yeah, I'd rather address that with you in the Q&A, Eric, than talk openly on the phone. I mean, these are trade secrets and the secret sauce that we have. That's what we've always talked about, our 35 years of DNA and knowledge. I think it's fair to say, and I say this in the most humble way, that the results and the proof are in the pudding when it comes to what we've done in Canada versus our competitors, and there's a reason for that. It's not pure luck, but I'm happy to address that one-on-one, but I certainly don't want to put that information out publicly.

Michael A. DeGiglio: A source of this potential innovation that you.

Michael A. DeGiglio: Highlighting as one of your strengths going forward and I'm just wondering if you can.

Michael A. DeGiglio: I'd, rather I'd, rather address that I'd, rather address that with you in the Q&A, Eric can talk openly on the phone I mean, these are trade secrets and secret sauce that we have that's what we've always talked about 35 years of DNA and knowledge I think.

Michael A. DeGiglio: I think it's fair to say and I say this in the most humble way that the results and the proof is in the putting in what we've done in Canada versus our competitors.

Michael A. DeGiglio: And there is a reason for that stopped pure luck, but I'm happy to address that one on one but I certainly don't want to put that information out publicly.

Operator: Your next question comes from the line of Doug Cooper with Beacon Security. Please go ahead.

Michael A. DeGiglio: Your next question comes from the line of Doug Cooper.

Michael A. DeGiglio: With Beacon Securities.

Operator: Please go ahead.

Doug Cooper: Good morning, gentlemen. Have a nice quarter. Just a couple of quick ones for me. Mike, in your wholesale, were there any sales destined for the international market in that number, or was that all Canadian?

Doug Cooper: Hey, good morning, gentlemen.

Doug Cooper: Just a couple quick ones for me.

Doug Cooper: Michael.

Doug Cooper: In your wholesale with Remy.

Doug Cooper: The international market.

Doug Cooper: That number is that all Canadian.

Doug Cooper: Thank you for the Canadian market.

Speaker Change: What was the question, Doug I'm, having a hard time hearing you.

Michael A. DeGiglio: What was the question, Doug? I'm having a hard time hearing you.

Doug Cooper: You're just wondering on the wholesale side of your business. Can you hear me now? On the wholesale side, is any of that, do you think, destined for the international market, or is all that for domestic consumption? Wholesale, there's a wholesale market increase.

Speaker Change: Just wondering on the <unk>.

Doug Cooper: It's already a business.

Michael A. DeGiglio: On the retail side, you think testing for the international market will go back with domestic consumption.

Doug Cooper: Wholesale wholesale.

Doug Cooper: Yes, I mean, there's certainly a lot of our wholesale business probably most of it is going internationally just be transparent with that.

Doug Cooper: And we sort of know where its going in.

Michael A. DeGiglio: Yeah, I mean, most of our wholesale business, probably most of it is going internationally. You know, just be transparent with that, and we sort of know where it's going, and we're okay with it going internationally. We're probably not as okay with it going domestically, depending on the type of product it is. So, I'd rather not get too deep into that, but I will. I don't think it's right to talk about it publicly, but there is a chunk of it going international for sure on the B2B site.

Doug Cooper: We're okay with it going internationally.

Michael A. DeGiglio: We're probably not as okay with it domestically depending on the type of product it is.

Michael A. DeGiglio: So I'd, rather not get too deep in that but I will.

Michael A. DeGiglio: I don't think that's right to talk about it publicly but.

Michael A. DeGiglio: There is a chunk of it going internationally for sure on the <unk> side.

Michael A. DeGiglio: Okay. And what do you think the market share differential now is between you and Tim Ray here at number one? You know, you said you'd narrowed the gap. What do you think that gap is now?

Michael A. DeGiglio: Okay, and what do you think the market share differential now between <unk> and <unk>.

Michael A. DeGiglio: We continually here number one you said you narrow the gap what do you think that gap.

Michael A. DeGiglio: Can you repeat that, us and who? Oh, well, like, I think I'll just comment on this that I think, you know, we are consistently striving to be number one. That's our goal in Canada, and doing that, as I said in my remarks organically, we're not, you know, each time we get very close, it seems certain companies buy another company, and then they jump up again. So we find that pretty amusing and like it because it challenges us, but we're steadfast to be number one. And I don't track exactly the points yet, but the momentum is there, and we'll be celebrating when that day comes. I can tell you that for sure.

Speaker Change: So can you repeat that Hudson, who.

Michael A. DeGiglio: Yes.

Michael A. DeGiglio: Oh.

Michael A. DeGiglio: Well I think I'll just comment this that I think.

Michael A. DeGiglio: We consistently striving to be number one that's all go in Canada and doing that as I said in my remarks organically. We're not each time, we get very close seems certain companies buy another company and then they jump up again, so we find that pretty pretty amusing and like it because of challenges.

Michael A. DeGiglio: US, but we're steadfast to be number one.

Michael A. DeGiglio: And I don't track exactly the points, yet, but the momentum is there.

Michael A. DeGiglio: We will be celebrating when that day comes I can tell you that.

Operator: Your next question comes from the line of Pablo Zuanic with Zuanic & Associates.

Michael A. DeGiglio: Your next question comes from the line of Pablo <unk> with <unk> Associates. Please.

Pablo Ernesto Zuanic: Please go ahead.

Pablo Ernesto Zuanic: Thank you. Good morning, everyone.

Pablo Ernesto Zuanic: Thank you good morning, everyone.

Pablo Ernesto Zuanic: Two quick questions on the domestic business.

Pablo Ernesto Zuanic: Look, two quick questions on the domestic business. So, of course, congratulations on the growth. They beat the margin now. It's running around 10, 11 percent in your cannabis business. Last year, first quarter was around 16. Is that something that we should think is a norm now going forward?

Pablo Ernesto Zuanic: So a question on regulations on the growth the beat the margin now it's running around 10, 11% and domestic enduring cannabis business last year first quarter was around <unk> is that something that we should think it's a norm now going forward and then related to that in terms of a strong growth you've had in the rig market.

Pablo Ernesto Zuanic: And then related to that, in terms of the strong growth you've had in the REG market, expand a little bit on what you're doing with pre-rolls. Is that just normal pre-rolls, or are you working on infused? Just what's driving that shared gain that brought you to number two in pre-rolls? Thank you.

Pablo Ernesto Zuanic: A little bit in terms of what youre doing on pre rolls is that just normal pre rolls.

Speaker Change: Joining fuels just whats driving the share gain that Brexit the number between pre rolls. Thank you well on the second question I mean, as I said with high Def we have a lot of innovation very focused laser focus on innovation across the board, but especially pre rolls infused, whereas we do infuse pre rolls all kinds of pre rolls and continuing to <unk>.

Michael A. DeGiglio: Well, on the second question, I mean, as I said, with Hi-Def, we have a lot of innovation, very focused, laser-focused on innovation across the board, but especially pre-rolls. We do infuse pre-rolls, all kinds of pre-rolls, and we continue to invest in our technology to produce them, driving our costs lower. But the Hi-Def is an example. No one else has it on the market. It sold out in a day. It did very well.

Michael A. DeGiglio: In our technology to produce them.

Michael A. DeGiglio: Driving our costs lower but the high Def as an example, no one else has had on our marketed sold out in a day. It has done very well. So we are number two in pre rose across the board and Thats. Our goal is to be number one there as well. So that's a product that we focused very hard on over the last year on innovation and producing it in a pre.

Michael A. DeGiglio: So we are number two in pre-rolls across the board, and that's our goal is to be number one there as well. So that's a product that we focused very hard on over the last year on innovation and producing it in a profitable way, and we'll continue to look at other categories going forward. You know, as far as margins are concerned, as we stated, our goal, you know, still remains between Over the five years, as a ramp-up NASA industry, we've produced different products. You know, if you take, you know, if you take any agricultural commodity, it produces different products on the same plant.

Michael A. DeGiglio: <unk> go away and we will continue to look at other categories going forward.

Michael A. DeGiglio: As far as margins as we stated out.

Michael A. DeGiglio: Go.

Michael A. DeGiglio: Still remains between 30% and 40% overall gross margin.

Michael A. DeGiglio: Over the five years as a ramp up nascent industry, we produce different products.

Michael A. DeGiglio: If you take if you would.

Michael A. DeGiglio: Take any agricultural commodity it produces different products on the same plants and in case of cannabis you have small and if the preferences large you have to do something with the smalls, whether you put that into a manufacturing process to create powder milk product in pre roll or you find a customer that wants malls at a reduced price. So you will.

Michael A. DeGiglio: And in the case of cannabis, you have smalls, and if the preference is large, you have to do something with the smalls, whether you put that into a manufacturing process to create powder or mill product or pre-roll, or you find a customer that wants smalls at a reduced price. So you have to deal with these issues.

Michael A. DeGiglio: Have to deal with these issues and sometimes when those inventories creep up before we can find another way to get that product in the market at a decent margin, we'll take the hit on that compression for that quarter, but overall once we get back on step right now our goal is to not have.

Michael A. DeGiglio: And sometimes when those inventories creep up before we can find another way to get that product in a market at a decent margin, we'll take the hit on that compression for that quarter. But overall, once we get back on track right now, our goal is to not have any inventory beyond six months. And honestly, you really can't sell a product from the time you harvest it under four to five months; it just goes through drying, manufacturing, you have to jump through tremendous hoops to ship the product and test it, and it takes time to do so. So we're getting back on track, and I think you'll see those margins stabilizing in that range soon.

Michael A. DeGiglio: Any inventory beyond six months and honestly you really can't sell a product from the time you harvested under four to five months. It just goes through driving manufacturing.

Michael A. DeGiglio: You have to jump through tremendous hopes to ship the product and test it and it takes time to do so so we're getting back on step and I think youll see those margins stabilizing in that range.

Pablo Ernesto Zuanic: That's good. And just to follow up on that, I mean, for Steve maybe, obviously your non-branded business continues to be a relevant, a very relevant part of the business, the cannabis business. Are we talking about, what's the price difference roughly? I mean, are we talking about a dollar per gram, two dollars per gram? Just give some guidance in terms of how diluted the margins non-branded is, or maybe it

Speaker Change: And then just to follow up on that I mean, Steve maybe.

Speaker Change: Obviously your non branded business continues to be a relevant very relevant part of the business. The economies business are we took what's the price difference roughly I mean I'll just go on a dollar per Gram to Louis program, just just give us some guide in terms of how they alluded to margins number entities or maybe its not thanks.

Pablo Ernesto Zuanic: Can you repeat the question? I'm not sure what the question was.

Steve: Can you repeat the question not sure. What's your question no. The question is if I look at we didn't kind of is between branded and unbranded sales how they lead to margins is non branded or are we talking about a slight price difference I don't know if you can talk in terms of percentages or you can talk in terms of dollars per gram.

Pablo Ernesto Zuanic: No, the question is, if I look at within cannabis, between branded and non-branded sales, how dilutive to margins is non-branded? Or are we talking about a slight price difference? I don't know if you can talk in terms of percentages, or you can talk in terms of dollars per gram for the lower price on non-branded versus branded. Well, obviously, the non-branded margin is lower than the branded margin since we reported that we were at 1% for the branded margin.

Pablo Ernesto Zuanic: For the lowered price on non branded versus branded industrial sales in front of us.

Pablo Ernesto Zuanic: Well, obviously, the non branded margin is lower than the branded margins. Since we reported that we were at three 1% for branded margin. So the price point that were selling for the non branded it depends on.

Pablo Ernesto Zuanic: So the price point that we're selling for the non-branded, it depends on who we're selling it to. As Mike alluded to, the market price for smalls certainly has come up, but it's not as good as the non-branded market price for larger bud, higher potency. As Mike said, we have good relationships with certain LPs, and that product may be leaving Canada for foreign markets, and we get a very nice price and a very nice margin on those sales.

Pablo Ernesto Zuanic: And who we're selling to as Mike alluded to.

Pablo Ernesto Zuanic: The market price for small certainly has come up but it's not as good as the.

Pablo Ernesto Zuanic: Non branded market price for larger, but higher potency as Mike said that we have good relationships with certain Lps.

Pablo Ernesto Zuanic: That product may be leaving Canada going to foreign markets and we get a very nice price in a very nice margin on those sales.

Stephen C. Ruffini: Your next question comes from the line of Scott Fortune with Roth MKM. Please go ahead.

Pablo Ernesto Zuanic: Your next question comes from the line of Scott Fortune with Roth MCM.

Operator: Hey, good morning. This is Nick on behalf of Scott.

Stephen C. Ruffini: Please go ahead.

Nicholas Steven Anderson: Congratulations on a good quarter here. First question for me on the cash flows. A good quarter in terms of profitability. Just curious how you view your potential cash generation while evaluating investments internationally and the opportunity in the U.S. here. With some of these markets moving forward, just wondering how you plan to balance the profitability side versus allocating future growth capital. Thank you.

Stephen C. Ruffini: Hey, Good morning. This is Nick on for Scott Congrats on a good quarter here first question for me on the cash flow is a good quarter in terms of profitability. Just curious how you view your potential cash generation.

Nicholas Steven Anderson: Evaluating investments internationally and the opportunity in the U S. Here.

Nicholas Steven Anderson: With some of these markets moving forward just wondering how you plan to balance the profitability side versus allocating future growth capital. Thank you.

Michael A. DeGiglio: Well, we continue to report that we're self-funding. The Netherlands is a huge investment. This is the first of probably two production facilities that we'll be building, and that's 100% paid for out of our cash. We have no debt on it.

Nicholas Steven Anderson: While we will continue to report that we're self funding the Netherlands is a huge investments. This is the first of probably two.

Michael A. DeGiglio: The production facilities that will be building.

Michael A. DeGiglio: And thats, 100% paid for out of our cash we have no debt on it we didn't raise any capital to do so.

Michael A. DeGiglio: We didn't raise any capital to do so. So we may not have the balance sheet of other companies, but certainly, we've diluted our shareholders quite a bit less, and we're always very prudent. And of course, the return on our invested capital is what we're always focused on. So we think that, you know, there'll be a short window for getting our return on investment on the investments we're making.

Michael A. DeGiglio: So we may not have the balance sheet of other companies, but certainly we have diluted our shareholders quite a bit less and.

Michael A. DeGiglio: We're always very prudent so.

Michael A. DeGiglio: <unk>.

Michael A. DeGiglio: And of course, the return on invested capital is what we always are focused on.

Michael A. DeGiglio: So we think that.

Michael A. DeGiglio: There'll be a short window on getting our.

Michael A. DeGiglio: Our return on investment and the investments, we're making and I think the same thing for the U S look.

Michael A. DeGiglio: And I think the same thing for the U.S. Look. At some point, as I said with the U.S., many times, it's an experiment because until there's clear federal legalization, the whole production side is going to change. You just can't operate 35 production facilities across, you know, 20 states. It'll go large-scale, low-cost.

Michael A. DeGiglio: At some point as I said with the U S. Many times, it's an experiment because til is clear federal legalization. The whole production side is going to change you just can't operate 35.

Michael A. DeGiglio: Reduction facilities across 20 states it'll go large scale low cost, that's where we shine and Thats, where we lead we have assets.

Michael A. DeGiglio: That's where we shine. That's where we lead. We have assets. And yeah, we're in Texas, and it's probably one of the most conservative states. But, you know, the territorial. We're the territorial man, not the hair.

Michael A. DeGiglio: And yes, we're in Texas, and it's probably one of the most conservative states, but the.

Michael A. DeGiglio: The territory, where the Terra maranatha hair. So you know in the long run we're going to get there and I think well.

Michael A. DeGiglio: So, you know, in the long run, we're going to get there. And I think we'll have the best quality, lowest cost production. Look, there's a model in the U.S. I won't mention the company.

Michael A. DeGiglio: Best quality lowest cost reduction.

Michael A. DeGiglio: Theres a model in the U S I wont mention the company.

Michael A. DeGiglio: I'm not, It's not one of my favorite states, but I will say that, you know, they see what we see, and I think that's where we'll end up one day, and we'll see who can manage it. So, as far as capital, it's the same in Canada. We used existing assets; we were able to convert them, remain in the produce business while we converted at a fraction of the cost. And in the end, I did, you know, Scott mentioned many times that that was the least important thing.

Michael A. DeGiglio: It's not one of my favorite state, but I will say that.

Michael A. DeGiglio: What we see and I think that's where we'll end up one day, and we'll see who can manage it so.

Michael A. DeGiglio: As far as capital.

Michael A. DeGiglio: Same in Canada, we use existing at US we were able to convert them remain in our produce business, while we converted at a fraction of the cost and in the end I did Scott mentioned many times that that was the least most important what was more important was the 30 years of knowledge of growing regardless, if it was different crops in cannabis and I.

Michael A. DeGiglio: What was more important was the 30 years of knowledge of growing, regardless if it was different crops and cannabis. And I think we're excited about the day we can enter the U.S. market and be a major player. I know that may not have answered your question exactly, but I wanted to put some added color to it.

Michael A. DeGiglio: Think we're we're excited about the day, we can enter the U S market and be a major player.

Michael A. DeGiglio: I know that might not answer exactly your question, but I wanted to put some added cultures.

Nicholas Steven Anderson: No, I appreciate that, Connor. Thank you.

Speaker Change: No I appreciate that color. Thank you and then second one for me just on the cultivation costs wondering if you could provide any puts and takes on the cannabis Cogs side, you mentioned hanging drawing and other initiatives to improve product and lower cost can you maybe quantify any improvement you've seen over the past couple of quarters and just how you expect hogs to trend throughout 2024 on the cannabis side.

Nicholas Steven Anderson: And then the second one for me, just on the cultivation costs; wondering if you could provide any puts and takes on the cannabis cog side. You mentioned hanging drying and other initiatives to improve the product and lower costs. Can you maybe quantify any improvements you've seen over the past couple of quarters and just how you expect cogs to trend throughout 2020 on the cannabis side? Well, we're not going to give our costs out anymore. We made that mistake early on, so we're not going to do that again.

Nicholas Steven Anderson: We're not going to give out costs that anymore, we made that mistake early out so.

Nicholas Steven Anderson: So we're not going to do that again, but I can tell you that it is a continuous improvement process.

Michael A. DeGiglio: But I can tell you that it is a continuous improvement process. It's really, you know, the strains you develop, not just tied to meeting the attributes of the consumer in the case of high THC levels and whatnot, but also in terms of yield profile, and, of course, where you grow them and how you grow them.

Speaker Change: Really strange to you.

Michael A. DeGiglio: Develop.

Michael A. DeGiglio: Not just tied to meeting the attributes of the consumer in the case of Ta high THC levels and whatnot, but also in terms of yield profile of course, where you grow them. How do you grow the other thing is scale as we.

Michael A. DeGiglio: The other thing is scale, as we've now expanded our Delta II facility by half. And again, scale drives costs down. So we're pretty bullish that over time we'll continue to drive our costs down going forward. And this is Steve.

Michael A. DeGiglio: Now expanded all delta too.

Michael A. DeGiglio: Facility and.

Michael A. DeGiglio: Half of it and again scale drives costs down so we're pretty bullish that over time will continue to drive our costs down.

Steve: Going forward, yes.

Michael A. DeGiglio: This is Steve there is some seasonality on the candidate side, obviously, we have to run the lights and the winter there is a higher cost on those grants and obviously in the summer we don't run the light so.

Stephen C. Ruffini: There is some seasonality on the cannabis side. Obviously, we have to run the lights in the winter, so there is a higher cost for those grams. And obviously, in the summer, we don't run the lights. So there is some seasonality, quarter by quarter, in our cost program.

Steve: There is some.

Stephen C. Ruffini: Seasonality quarter by quarter, two our cost program.

Michael A. DeGiglio: Yeah, and that's why we always say in sort of an agricultural operation, you really need to look at your costs on an annual basis, for those reasons, Steve alluded to, not on a quarter-to-quarter basis.

Steve: Yes, and that's why we always say in sort of our agricultural operation you really need to look at your <unk>.

Michael A. DeGiglio: Cost on an annual basis for those reasons, Steve alluded to not on a quarter to quarter basis.

Operator: Your next question comes from the line of Pablo Zuanic with Zuanic & Associates, LLC.

Michael A. DeGiglio: Your next question comes from the line of Pablo <unk> with Xyrem <unk> and <unk>.

Pablo Ernesto Zuanic: <unk> LLC please.

Pablo Ernesto Zuanic: Please go ahead.

Pablo Ernesto Zuanic: Thank you for taking the follow up Mike look this is just a bit.

Pablo Ernesto Zuanic: Thank you, and thank you for taking the time for the follow-up. Mike, look, this is just more a big-picture, general question, and I think I disconnected before. When you see, you know, S&DL, or you see Canopy Growth, apparently, you know, take control of U.S. assets, right, relevant, sizable U.S. assets, and are able to keep their Nasdaq listing, does that make you think that maybe you have to do something sooner rather than later, right? And I know that you're...it's not so simple because of a regulatory issue, but you have examples of two Canadian companies moving in, right?

Pablo Ernesto Zuanic: Picture, a general question and.

Pablo Ernesto Zuanic: Disconnected before.

Pablo Ernesto Zuanic: When do you see.

Pablo Ernesto Zuanic: What do you see kind of growth.

Pablo Ernesto Zuanic: Apparently you know take control of U S assets right relevant sizable U S assets.

Pablo Ernesto Zuanic: To keep their NASDAQ listing.

Pablo Ernesto Zuanic: <unk> seen that maybe you have to do something sooner rather than later right and I know that.

Pablo Ernesto Zuanic: It's also simple we go through a regulatory issue, but you have examples of two Canadian companies moving in right.

Pablo Ernesto Zuanic: If we get to a point where we have full legalization or it's easier for foreign companies to buy U.S. assets, by then, it may be too late, right, because the U.S. assets will have been priced higher. So how do you think about that? And then the second question, which is related to this, of course, just a reminder of the scale of your Texas greenhouses, how long will it take you to flip them to cannabis, you know, is it a matter of one, two, three years? And just a reminder of the scale. Thanks.

Pablo Ernesto Zuanic: If we get to a point that we have full legalization or it's easier for foreign companies to buy U S assets, but then it may be too late right because the U S assets would have repriced.

Pablo Ernesto Zuanic: So how do you think about that and then the second question, which is related to the use of course, just a reminder of the scale of your Texas greenhouses, how long we take you to flip them to kind of as you know you see the amount of one two or three years on just to remind them of scale. Thanks, sorry.

Michael A. DeGiglio: Well, we have a huge footprint in Texas, so we would probably never flip all of them. If we were, we would probably be controlling a strong percentage of Texas and adjacent states. So we have a very large footprint, approaching six million square feet there. And what we, as I said many times, I believe it's the best location in the continental United States to grow cannabis. And that takes into account friendly states versus non-friendly states, not just climatological issues.

Speaker Change: Well, we have a huge footprint in Texas. So we would probably be we would probably never flip all of them. If we were we would probably be controlling a strong percentage of.

Michael A. DeGiglio: The Texas and adjacent states.

Michael A. DeGiglio: But.

Michael A. DeGiglio: So we have a very large footprint approaching 6 million square feet there.

Michael A. DeGiglio: And what we as I said many times I believe it's the best location in the Continental United States to grow cannabis and that takes into account friendly states versus non friendly states not just climate climate logical issues.

Michael A. DeGiglio: That being said, Uh, you know what? We always look for the pathways of other companies. So if some of these companies you mentioned have decided to take different paths, I'd imagine if I looked at their legal bills, it'd probably be about the same as our revenue. And, but I, you know, thank God that they're finding these pathways to do it. And both those companies you mentioned are approaching it differently, whether it's stress assets or rolling up. Now, we're on that every single day.

Michael A. DeGiglio: That being said.

Michael A. DeGiglio: You know what we always look for the pathways of other company. So if.

Michael A. DeGiglio: Some of these companies you mentioned have decided to take different pathways I'd imagine if I looked at their legal bills it'd probably be about same as our revenue.

Michael A. DeGiglio: And by the fact that they are finding these pathways to do it and both those companies you mentioned are approaching it differently, whether it's a stressed assets are rolling up now.

Michael A. DeGiglio: On that every single day, I mean, I can tell you openly there was a conversation that lasted one hour with NASDAQ yesterday and at the end of the day, we are not convinced right at this table this hour that those.

Michael A. DeGiglio: I mean, I can tell you openly there was a conversation that lasted one hour with NASDAQ yesterday. And at the end of the day, we are not convinced right now at this table this hour that those, you know, that's being allowed. We will know sooner than later, but I can tell you right here that we're waiting to get confirmation, and I don't see it yet. So, as much as there's a lot of news out there and press releases, we haven't seen it. We haven't seen the DEA yet.

Michael A. DeGiglio: That's being allowed.

Michael A. DeGiglio: We will know sooner than later, but I can tell you right here, we're waiting to get confirmation and I don't see it yet.

Michael A. DeGiglio: So as much as there is a lot of news out there and press releases, we haven't seen it.

Michael A. DeGiglio: Haven't seen the DEA, we haven't seen a lot of these things and we've always said that we're not going to make any moves to we understand clearly the playing field.

Michael A. DeGiglio: We haven't seen a lot of these things, and we've always said that we're not going to make any moves till we understand the playing field clearly and are measured in our approach going forward. But if it happens, we will look at those pathways, and we will go forward. As far as acquisitions go, I think there's a whole host. I mean, some of these acquisitions are sort of the darlings of the industry, and the company's been around, but you can look at the U.S. market, not just the first tier or second tier.

Michael A. DeGiglio: And we measured in our approach going forward so.

Michael A. DeGiglio: But if it happens we will look at those pathways and we will go forward as far as acquisitions go I think there's a whole host I mean, some of these acquisitions are sort of the darlings of the industry and the company has been around but you can look in the U S market not just first here a second there theres a whole host of third.

Michael A. DeGiglio: There's a whole host of third-tier companies. These companies have been making a lot of friends and family money for six, seven years. They're not going to be able to do an IPO, so I think there's a lot of opportunity. The question is where do you want to play, where can you succeed, where can you be profitable? So I think an M&A strategy would play into our plan as much as ramping up our Texas locations and looking at opportunities where we can grow in other states.

Michael A. DeGiglio: Third tier companies.

Michael A. DeGiglio: These companies have a lot of our friends and family money now for six seven years, they're not going to be able to do an IPO. So I think theres a lot of opportunity of your question is where do you want to play where can you succeed Greg can you be profitable. So I think M&A strategy would play into our plan as much as ramping up our Texas locations.

Michael A. DeGiglio: And looking at opportunities, where we can cultivate and other states. We already have and worked on option a b and C for the U S and we're very we're pretty clear on where we want to operate it at least initially that we think we can win.

Michael A. DeGiglio: We already have and work on options A, B, and C for the U.S. And we're very, you know, we're pretty clear on where we want to operate, at least initially, that we think we can win. I would never, you know, not say never, but endorsing cultivation in the northern part of the United States for us is just not on the table. It won't, in my opinion, and in our opinion, it won't pencil out long term.

Michael A. DeGiglio: I would never proud not say never but endorsing cultivation in the northern part of the United States for US is just not on the table it well in my opinion in our opinion it won't pencil long term you just can't get your cost of production and quality, where it needs to be and that's why I've said all along it's still an experiment until there is full.

Michael A. DeGiglio: You just can't get your cost of production and quality where it needs to be. And that's why I've said all along, it's still an experiment until there's full comprehensive legalization in the U.S. And my final comment is, we'll find a way, and we'll make our own way, but we'll be there.

Michael A. DeGiglio: Comprehensive legalization in the U S.

Michael A. DeGiglio: And my final Communist will will find the way it will make our own way, but we will be there.

Pablo Ernesto Zuanic: That's a great color. Thank you.

Pablo Ernesto Zuanic: That's a great color, thank you.

Speaker Change: That's great color. Thank you.

Operator: And I didn't make that up; that was from Hannibal. Yes, operator.

Michael A. DeGiglio: And thanks for taking that up that was sort of animal.

Speaker Change: Yes, operator.

Michael A. DeGiglio: I will now turn the call back over to Michael DeGiglio for closing remarks. Please go ahead.

Operator: I will now turn the call back over to Michael <unk> for closing remarks. Please go ahead.

Michael A. DeGiglio: All right, well, first and foremost, I want to thank the Village Farms team for all the incredible hard work to drive these great results. We have such a motivated, great team, and one of the things is that our team has been in place for a while. That says something about our organization. People want to be here. They love what they do, and I think it shows in the products we produce. And without good people, no matter where your assets are, or how good they are, you really don't have a business.

Michael A. DeGiglio: Alright, well first and foremost I want to thank the village farms team for all the incredible hard work to drive. These great results, we have such a motivated great team and one of the things is our team has been in place a while.

Michael A. DeGiglio: Something about our organization people want to be here, they love what they do and I think it shows in the products, we produce and without good people no matter, where your assets are how good are you really don't have a business. So.

Michael A. DeGiglio: Heartfelt thanks to them, and with that, thank you for participating in today's call. We look forward to getting back together in August for our second quarter results. With that, we can conclude the call.

Michael A. DeGiglio: Heartfelt, thanks to them and with that thank you for participating in today's call. We look forward to.

Michael A. DeGiglio: So youre getting back together in August for our second quarter results with that we can conclude the call.

Michael A. DeGiglio: Yeah.

Operator: Ladies and gentlemen, that concludes today's call. Thank you all for joining, and you may now disconnect.

Speaker Change: Ladies and gentlemen that concludes today's call. Thank you all for joining and you may now disconnect.

Operator: [music].