Q2 2025 Organigram Global Inc Earnings Call

Good morning, My name is Christa and I will be your conference operator today at this time I would like to welcome everyone to the organic Graeme Global second quarter fiscal 2025 earnings conference call.

Krista: My name is Krista and I will be your conference operator today.

Krista: At this time, I would like to welcome everyone to the OrganiGram Global Second Quarter Fiscal 2025 Earnings Conference Call. After the speaker's remarks, there will be a question and answer session. We ask that you please limit yourself to one question and one follow up. You may recue if you have any questions.

After the Speakers' remarks, there will be a question and answer session. We ask that you. Please limit yourself to one question and one follow up you may requeue, if you have any questions.

Krista: Thank you.

Max Schwartz: Max Schwartz, you may begin your conference. Thank you very much, and good morning, everyone. Thanks for joining us today.

Max Schwartz: Max Schwartz you May begin your conference.

Max Schwartz: Thank you very much and good morning, everyone. Thanks for joining US today as a reminder, this conference call is being recorded and recording will be available on <unk> Web site 24 hours after today's call.

Max Schwartz: As a reminder, this conference call is being recorded, and recording will be available on OrganiGram's website 24 hours after today's call. Listeners should be aware that today's call will include estimates and other forward-looking information from which the company's actual results could differ. Please review the cautionary language in our press release dated May 12, 2025, on various factors, assumptions, and risks that could cause our actual results to differ. Further reference will be made to certain non-IFRS measures during this call, including adjusted EBITDA, adjusted gross margin, and adjusted gross margin percentage. These measures do not have any standardized meaning under IFRS and are intended to provide additional information and, as such, should not be considered in isolation or as a substitute for measures of performance repaired in accordance with IFRS.

Speaker Change: I should be aware that today's call will include estimates and other forward looking information from which the company's actual results to differ. Please review the cautionary language in our press release dated May 12, 2025 on various factors assumptions and risks that could cause our actual results to differ further reference will be made to certain non <unk> measures. During this call, including adjusted EBITDA adjusted gross margin and adjusted gross margin.

Percentage. These measures do not have any standardized meaning under IRS are intended to provide additional information and as such should not be considered in isolation or as a substitute for measures of performance prepared in accordance to the buyer are opposed to.

Max Schwartz: Our approach to calculating these measures may differ from other issuers, so these measures may not be directly comparable.

Speaker Change: Calculating these measures may differ from other issuers. So these measures may not be directly comparable please see today's earnings report for more information about these measures.

Max Schwartz: Please see today's earnings report for more information about these measures. Listeners should be aware that the company relies on reputable third-party providers in making certain statements relating to market share data. Unless otherwise indicated, all references to market data are sourced from Clifire, in combination with data from WeedCrawler, provincial boards, retailers, and our internal sales figures.

Speaker Change: Listeners should be aware that the company relies on reputable third party providers and making certain statements relating to the market share data unless otherwise indicated all references to market data are sourced from quantify or in combination with data from we'd crawler provincial boards retailers and our internal sales figures today.

Max Schwartz: Today we will be hearing from key members of our senior leadership team, beginning with Beena Goldenberg, Chief Executive Officer, who will provide opening remarks and commentary, followed by Greg Guyatt, Chief Financial Officer, who will review our financial results for Q2 Fiscal 2025.

Speaker Change: Today, we'll be hearing from key members of our senior leadership team beginning with Goldenberg, Chief Executive Officer, who will provide opening remarks and commentary followed by Greg Guyer, Chief Financial Officer, who will review our financial results for Q2 fiscal 2025.

Max Schwartz: With that, I will now introduce Beena Goldenberg, Chief Executive Officer of OrganiGram Global Inc.

Speaker Change: With that I will now introduce the Beulah Goldenberg Chief Executive Officer of <unk> Global Inc. Please go ahead Ms Goldberg.

Beena Goldenberg: Please go ahead, Ms. Goldenberg. Good morning, everyone, and thank you for joining us today for our Q2 Fiscal 2025 Earnings Call. We're very pleased to report a record-breaking quarter by revenue, as well as some very encouraging operational results, which we anticipate will continue to improve as seasonal sales pick up in Q3 and Q4.

Speaker Change: Good morning, everyone and thank you for joining us today for our Q2 fiscal 2025 earnings call. We're very pleased to report a record breaking quarter by revenue as well as some very encouraging operational results, which we anticipate will continue to improve as seen sales pick up in Q3 and Q4.

Beena Goldenberg: This marks our first earnings call since rebranding to OrganiGram Hldg, a name that better reflects our evolution into a diversified, international cannabis leader. The refreshed brand identity aligns with our position as a market leader in Canada and underscores our active expansion across Europe, Australia, and most recently, the United States. It's also the first quarter where the full impact of our motif acquisition is reflected in our financial results.

Speaker Change: This marks our first earnings call since rebranding to organic brand as well a name that better reflects our evolution into a diversified international cannabis leader the refresh brand identity aligns with our position as a market leader in Canada and underscores our active expansion across Europe, Australia and most recently.

Speaker Change: The United States.

Speaker Change: It's also the first quarter, where the full impact of our <unk> acquisition is reflected in our financial results.

Beena Goldenberg: Now let's start with a look at the Canadian market and how we're navigating the current landscape. In Q2, Canada's cannabis market grew 4% year over year, with the strongest momentum in vates and pre-rolls, two categories that together make up about half the market. We're especially well positioned here. By the end of the quarter, OrganiGram was the number one LP by market share in both, including a leading 21.7% share in vates. When you add flour to the mix, these three categories—flour, vapes, and pre-rolls—represent around 85% of the total market, and we've built a strong, dominant presence across all three.

Now, let's start with a look at the Canadian market and how we're navigating the current landscape.

Speaker Change: In Q2 candidates, Canada candidates market grew 4% year over year with the strongest momentum in data and pre rolls to categories that together make up about half the market, we're especially well positioned here by the end of the quarter organic brand was the number one LP by market share in boat, including a leading 21.

7% share in <unk>.

Speaker Change: When you add power to the mix. These three categories flower and pre rolls represents around 85% of the total market and we've built a strong dominant presence across all three.

Beena Goldenberg: To put today's market structure in perspective, the top three LPs collectively hold just 27% of total market share, showing how fragmented and competitive many categories still are. But in categories like milk, flour, gummies, hash, infused pre-rolls, and vapes, the top three control between 45 to 70% of the market. These are the segments where scale, production capability, and execution matter more, contributing to higher barriers and more concentration compared to flour in traditional pre-rolls. While part of our competitive edge lies in our ability to win and defend share in fragmented, high-volume categories like flour and traditional pre-rolls, our strategy also includes reinforcing leadership in segments like flavour-forward milk flour, where we have over a 40% share, cash, where we have a 20% share, and gummies, where we have over 17% share.

Speaker Change: But today's market structure in perspective, the top three lp's collectively hold just 27% of total market share showing how fragmented and competitive many categories sell our.

But in categories like milk flower gummy hash and he is pre rolls and beat the top three control between 45% to 70% of the market.

Speaker Change: These are the segments, where scale production capability and execution matter more contributing to higher barriers and more concentration compared to flower and traditional pre rolls.

Speaker Change: Well part of our competitive edge lies in our ability to win and defend share fragmented high volume categories like flower and traditional pre rolls.

Speaker Change: Our strategy also includes reinforcing leadership in segments like flavor forward, no flower, where we have over a 40% share.

Speaker Change: Where we have a 20% share and gummies, where we have over 17% share.

Beena Goldenberg: These are categories where innovation is more scalable and defensible and where we continue to outperform.

Speaker Change: These are categories, where innovation is more scalable and defensible and where we continue to outperform.

Beena Goldenberg: Our recent entry into beverages through the Collective Projects Acquisition is a strong example of this dual strategy in action, entering a smaller, under-penetrated category with higher barriers to entry, where we see clear opportunity to build a dominant position as the market evolves. Collective Project Beverages, in Q2, represented 5.4% of the beverage market share nationally, with the majority coming from sales in Ontario. While we currently have some distribution in five other provinces, we see a path to expanding that footprint by leveraging our sales team with the goal of delivering similar sales performance as we see in Ontario.

Speaker Change: Our recent entry into beverages through the collective protect acquisition is a strong example of this dual strategy in action entering a smaller underpenetrated category with higher barriers to entry, where we see clear opportunity to build a dominant position as the market evolves.

Speaker Change: Collective project beverages in Q2 represented five 4% of the beverage market share nationally with the majority coming from sales in Ontario.

Speaker Change: We currently have some distribution in five other provinces, we see a path to expanding that footprint by leveraging our sales team with the goal of delivering similar sales performance as we see in Ontario.

Beena Goldenberg: In Canada we believe beverages have significant runway for growth. The category has matured with better tasting products and higher consumer adoption, with the category now outpacing the growth of the overall market. We're optimistic that improved products combined with potential future regulatory changes, like selling outside cannabis retail stores, could unlock the growth potential of the category.

Speaker Change: In Canada, we believe beverages have significant runway for growth the category has matured with better tasting products and higher consumer adoption, but the category now outpacing the growth of the overall market.

Speaker Change: We're optimistic that improved product combined with potential future regulatory changes like selling outside candidates retail stores could unlock the growth potential of the category.

Beena Goldenberg: Importantly, the Collector Project acquisition also marked our entry into the U.S. hemp-derived THC beverage market. Today, our products are distributed in 10 U.S. states and carried by major retailers like Total Wine and Top Ten Liquors. The U.S. market for hemp-derived THC beverages is booming, having already surpassed $1 billion in 2024 and projected to grow to over $4 billion by 2028, according to Euromonitor International Ltd. Unlike in Canada, the U.S. regulatory framework is more flexible, allowing these products to be distributed directly to consumers or in mainstream channels like liquor, grocery, or convenience stores. When the product is available where consumers already shop, it seems that consumers are buying it.

Speaker Change: Importantly, the collective project acquisition also marked our entry into the U S hemp derived THC beverage market today.

Speaker Change: Today, our products are distributed in 10 and USD.

Speaker Change: By major retailers like total wine and top 10 liquors.

Speaker Change: The U S market for hemp derived THC beverages is booming having already surpassed $1 billion in 2024 and projected to grow to over $4 billion by 2028. According to Euromonitor International Ltd.

Speaker Change: Unlike in Canada. The U S regulatory framework is more flexible, allowing these products to be distributed directly to consumers or in mainstream channels like liquor grocery or convenience stores.

Speaker Change: When the product is available where consumers already shop, it seems that consumers are buying yet.

Beena Goldenberg: As they do, we have the products meet their growing demand.

Speaker Change: As they do we have the products to meet their growing demand.

Beena Goldenberg: In fact, a few days ago, Collector Project won recognition at the 2025 High Spirits Awards, only a few short months following the launch of the brand in the U.S. We received the Gold Award for Blood Orange Yuzu and Vanilla, and a Platinum Award for Mango, Pineapple, and Coconut, hemp-derived THC beverages. OrganiGram will begin consolidating revenue from U.S. beverage sales immediately, beginning to tap into the world's largest consumer cannabis market, and setting the stage for broader international growth.

Speaker Change: In fact, a few days ago collective project won recognition at the 2025 High Spirits Award only a few short months following the launch of the brand in the U S.

Speaker Change: We received a gold award for blood Orange use do them vanilla and a platinum award for mango, pineapple and coconut hemp derived THC beverages.

Speaker Change: Organically, we will begin consolidating revenue from U S beverage sales immediately beginning to tap into the world's largest consumer cannabis market and setting the stage for broader international growth.

Beena Goldenberg: Further, we plan to launch beverages with our F.A.S.T. nano emulsion technology soon, which we believe will give us a competitive edge in the category. The onset, duration, and offset for beverages with F.A.S.T. is even quicker than it is in gummies, more closely resembling alcohol.

Speaker Change: Further we plan to launch beverages with our fast nano emulsion technology, which we believe will give us a competitive edge in the category.

Speaker Change: <unk> duration and offset for beverages with fab is even quicker than it is in gummies more closely resembling alcohol.

Beena Goldenberg: On the topic of international growth, we achieved $6.1 million in international sales in Q2, a 177% increase from Q2 of last year. We anticipate the upward trend in international sales will continue as we deepen our relationships with customers abroad, particularly Sanity Group, where we've made a significant strategic investment to secure our continuous supply to the rapidly growing German market. Germany continues to represent a large growth opportunity, as approximately 10% of its 80 million population self-report cannabis use, while only 0.5% are registered medical cannabis patients. Mature medical jurisdictions experience 2-3% registration rates, so we believe there's still a lot of growth potential in the German medical market, notwithstanding any movement on the recreational side.

Speaker Change: On the topic of international growth, we achieved $6 $1 million in international sales in Q2 of 177% increase from Q2 of last year.

Speaker Change: We anticipate the upward trend in international sales will continue as we deepen our relationships with customers abroad, particularly sanity group, where we've made a significant strategic investments to secure our continuous supply to the rapidly growing German market.

Speaker Change: Germany continues to represent a large growth opportunity as approximately 10% of its 80 million population self report candidates use well only <unk>, 5% of our registered medical cannabis patients.

Speaker Change: Mature medical jurisdictions experience to the 3% registration rates. So we believe there's still a lot of growth potential in the German medical market notwithstanding any movement on the recreational side.

Beena Goldenberg: Outside Germany, we continue to supply cannabis to our customers in the UK and Australia.

Speaker Change: Outside Germany, we continue to supply cannabis to our customers in the U K and Australia.

Beena Goldenberg: We're also excited to share that we expect to launch branded vape products in Australia before the end of the calendar year. BoxHot, which has grown into $150 million retail sales brand domestically, is poised to become a meaningful player on the international stage. And we see this as an important step in expanding our branded footprint globally.

Speaker Change: We're also excited to share that we expect to launch branded baked products in Australia before the end of the calendar year.

Speaker Change: Fox Heart, which has grown into a $150 million of retail sales brand domestically is poised to become a meaningful player on the international stage and we see this as an important step in expanding our branded footprint globally.

Beena Goldenberg: Also factoring into our international growth plans is our Jupiter strategic investment pool. In February, we closed the final tranche of the $124.6 million strategic investment we've received from British American Tobacco for gross proceeds of $41.5 million. The Jupiter Pool started off as an $83 million pool, earmarked for international M&A and strategic investment opportunities. After our first two strategic investments in open book extracts in the US and Sanity Group in Germany, Jupiter has $58 million remaining. We remain active in evaluating the best deployment opportunities for this capital, prioritizing strong ROI and increasing competitive advantages that will help accelerate growth in our international business.

Speaker Change: Also factoring into our international growth plans is our Jupiter strategic investment pool in February we closed the final tranche of the $124 6 million strategic investment we received from British American tobacco for gross proceeds of $41 $5 million.

Speaker Change: Did you put a pool started off as an $83 million pool earmarked for international M&A and strategic investment opportunities.

Speaker Change: After our first two strategic investments and open book extracts in the U S and Sanity group in Germany, Jupiter has $58 million remaining.

Speaker Change: We remain active in evaluating the best deployment opportunities for this capital prioritizing strong ROI in increasing competitive advantages that will help accelerate growth in our international business.

Beena Goldenberg: Now, moving on to Motif. We're making great progress integrating the Motif team, their facilities, and their operations into the broader OrganiGram business. All personnel are now fully under the OrganiGram umbrella and collaborating across both operations and administrative functions. We've been particularly impressed by the depth of expertise and talent the Motif team brings, and we're already seeing the benefits of this combined strength, such as being able to close listing gaps in our combined portfolio thanks to a stronger, unified sales force and product line-up. Operationally, we've moved all commercial THC extraction to the Aylmer facility. That's helping us scale more efficiently and freeing up space and people and mountains to focus on international flowers.

Speaker Change: Now moving onto OTT, we're making great progress integrating the mochi team their facilities and their operations into the broader organic ramp at.

Speaker Change: All personnel are not fully under the organic Remo Bella and collaborating across both operations and administrative functions.

Speaker Change: We've been particularly impressed by the depth of expertise and talent Mot's team brings and we're already seeing the benefits of this combined strength such as being able to close listing gaps in our combined portfolio. Thanks to a stronger unified sales force and product lineup.

Speaker Change: Operationally, we've moved all commercial teach the extraction to the Elmore facility that is helping us scale more efficiently and freeing up space and people in London to focus on international flower.

Beena Goldenberg: In March, we added additional shifts to Aylmer's hydrocarbon line, which now runs 24-7. With these changes, our monthly production capacity has grown significantly.

Speaker Change: In March we added additional shifts to Amherst hydrocarbon line, which now runs 24 seven with these changes our monthly production capacity has grown significantly.

Beena Goldenberg: We're also currently investing $800,000 in capital to further expand the extraction capacity, more than doubling our distillate production to 2,900 kilograms and our hydrocarbon isolate to 1,400 kilograms annually. The enhanced capabilities give us better cost control of our derivative inputs, while increasing our B2B opportunities, helping us realize some of the key synergies of the motif acquisition.

Speaker Change: We're also currently investing $800000 in capital to further expand the extraction capacity more than doubling our distillate production to 2900 kilograms, and our hydrocarbon isolate to 1400 kilograms annually.

Speaker Change: The enhanced capabilities give us better cost control of our derivative inputs, while increasing our b to b opportunities, helping us realize some of the key synergies of the motif acquisition.

Beena Goldenberg: While we're very pleased with our progress and now have a view to higher synergies than previously estimated, there's more work to be done. Some ongoing projects include the integration of our ERP system, transitioning coded pre-roll production to in-house. streamlining workflow to enhance end-to-end production efficiencies across facilities, and enhancing our London warehouse facility to allow us to distribute Moncton products through London with faster turnaround, enabling us to obtain Tier 1 status for flow-through with the OCS, as well as cut freight costs and boost on-time deliveries, which should also drive demand. All in all, we're starting to feel the momentum that this integration adds to our business, and we expect to see larger contributions and synergy realization in the back half of the year.

Speaker Change: While we're very pleased with our progress and now have a view to higher synergies than previously estimated there's more work to be done.

Speaker Change: Some ongoing projects include the integration of our ERP system transitioning coated pre roll production to in house.

Speaker Change: Streamlining workflows to enhance end to end production efficiencies across facilities.

Speaker Change: And enhancing our London warehouse facility to allow us to distribute mountain product through London with faster turnaround, enabling us to obtain tier one status for flow through with the ocs.

Speaker Change: As well as cut freight costs and boost on time deliveries, which should also drive demand.

Speaker Change: All in all we are starting to feel the momentum that this integration adds to our business and we expect to see larger contributions and synergy realization in the back half of the year.

Beena Goldenberg: With Collective Projects, we now have another business to integrate. However, this is a much smaller asset-light business.

Speaker Change: With collective project, we now have another business to integrate whoever this is a much smaller asset light business. Our focus with collector project is less about integrating a large operation footprint like motif and more on expanding the distribution of collective protect across Canada and the U S.

Beena Goldenberg: Our focus with collective projects is less about integrating a large operation footprint like Motif and more on expanding the distribution of collective projects across Canada and the U.S. At the same time, we're pleased to share that we will begin bringing some beverage capabilities into our Winnipeg facility. Near the end of Q1, we committed to investing approximately $1.2 million into a beverage manufacturing line to leverage Winnipeg into a production hub for more of our ingestible products. While we continue to rely on co-manufacturing for beverages in Canada and the U.S., bringing some of our production in-house will help us scale up our beverage expertise, experiment with novel formulations, including our fast-acting soluble technology, and address incremental demand.

Speaker Change: At the same time, we're pleased to share that we will begin, bringing some beverage capabilities into or will it take facility.

Speaker Change: Near the end of Q1, we committed to investing approximately $1 $2 million into our beverage manufacturing line to leverage Winnipeg into a production hub for more of our injectable products.

Speaker Change: While we continue to rely on co manufacturing for beverages in Canada and the U S.

Speaker Change: Bringing some of our production in house will help us scale up our beverage expertise experiment with novel formulations, including our fast acting soluble technology and address incremental demand.

Beena Goldenberg: On the topic of capital investments, in Q2, we began the installation of upgraded high-intensity LED light in half our Moncton grow room, which is currently estimated to increase our flower production capacity by roughly 7,000 kilograms annually, and is expected to be completed by June. This $9 million investment, before government subsidies are applied, is part of the $16 million capacity-enhancing CAPEX project . projects we outlined in Q1 to be phased over the next 18 months, and will allow us to meet the needs of a market-tightening supply and increased international demand. The other $7 million project involves leveraging our London warehouse to open up space for additional grow rooms in Moncton, which is expected to increase capacity by another 7,000 kilograms annually.

Speaker Change: On the topic of capital investments in Q2, we began the installation of upgraded high intensity led light and have our Moncton grow room, which is currently estimated to increase our flower production capacity by roughly 7000 kilograms annually and is expected to be completed by June.

Speaker Change: This $9 million investment before government subsidies are applied as part of the $16 million capacity enhancing capex projects.

Speaker Change: <unk>, we outlined in Q1 to be phased over the next 18 months and will allow us to meet the needs of a market tightening supply and increased international demand.

Speaker Change: The other $7 million project involves leveraging our London warehouse to open up space for additional grow rooms in mountain, which is expected to increase capacity by another 7000 kilograms annually.

Beena Goldenberg: The London Warehouse construction and licensing is expected to be completed by the end of the fiscal year, and once completed, we will relocate inventory from Moncton, freeing up space for the construction of nine additional grow rooms. This incremental Moncton capacity enhancement is expected to commence in early fiscal 2026. In addition to ensuring we can supply our increasing domestic and international flower demand, higher capacity means spreading more of our fixed costs over a larger revenue.

Speaker Change: The London warehouses construction and licensing is expected to be completed by the end of the fiscal year and once completed we will relocate inventory from Austin freeing up space for the construction of nine additional grow rooms.

Speaker Change: Incremental amongst and capacity enhancement is expected to commence in early fiscal 2026.

In addition to ensuring we can supplier, increasing domestic and international flower demand higher capacity and spreading more of our fixed costs over a larger revenue base.

Beena Goldenberg: And speaking of flowers, a quick update on seed-based production. This is an enterprise-level innovation, which we are pioneering on a large scale to modernize cannabis production and bring it to the same level as other mature agricultural industries. Seed-based harvests from F1-stabilized seeds are robust, uniform, with dialing characteristics, which together result in more consistent and repeatable flowers. Given the demand for consistency and quality both at home and abroad, this lower cost and faster alternative to clone-based production has the potential to transform the way cannabis is cultivated at scale. In Q2, 22% of our harvest came from seed-based production.

Speaker Change: And speaking of flower a quick update on seed based production.

Speaker Change: This is an enterprise level innovation, which we are pioneering on a scale on a large scale to modernize cannabis production and bring it to the same level as other mature agricultural industry.

Speaker Change: Based harvests from F. One stabilized C. A robust uniform with Golden characteristics, which together result in more consistent and repeatable flower.

Speaker Change: Given the demand for consistency and quality both at home and abroad. This lower cost and faster alternative to cone based production has the potential to transform the way candidates is cultivated at scale.

Speaker Change: Thank you to 22% of our harvest came from seed based production.

Beena Goldenberg: We continue to work with our strategic investee, Bilos Bioscience, in the U.S. to step up our efforts to stabilize strategic genetics. While we continue genomics research to identify genetic markers that influence things like resistance to powdery mildew, terpene expression, THC potency, yield, and more.

Speaker Change: We continue to work with our strategic Investor <unk> Bioscience, and the U S to step up our efforts to stabilize strategic genetics.

Speaker Change: While we continue to Numis research to identify genetic markers that influence things like resistance, the powdery mildew chirping expression THC potency yield and more.

Beena Goldenberg: Looking at where we are now and where we want to go, we have a few key areas of focus in the coming quarter. One, we will focus on accelerating international revenue growth by capitalizing on increased export volume, initiating branded international sales in the US and Australia, and leveraging our forthcoming EU GMP certification. Two, we will look to gain market share in Canada, leveraging consumer-centric innovations in the fastest growing categories, like box-hot diamond doobies, shred-ex heavy slims, debunked liquid diamond baits, and ongoing growth in big bag of buzz. Three, we will increase growth margins and deliver consistent cashflow from operating activities through motif synergies, higher scale and capacity, growth in international and controlling costs.

Speaker Change: Looking at where we are now and where we want to go we have a few key areas of focus in the coming quarter. One we will focus on accelerating international revenue growth by capitalizing on increased export volume initiating branded international sales in the U S and Australia and leveraging our forthcoming EU GMP certification.

Speaker Change: Acacia.

Speaker Change: Two we will look to gain market share in Canada, leveraging consumer centric innovations in the fastest growing categories like box at Diamond do these shred X heavy slim <unk>.

Speaker Change: Liquid diamond bait and ongoing growth in big bag of parts.

Speaker Change: Three we will increase gross margins and deliver consistent cash flow from operating activities through motif synergies higher scale and capacity growth in international and controlling costs.

Beena Goldenberg: And four, as the market leader in Canada, we will continue to strongly advocate to key government officials through our enhanced government relations program, focusing not only on changes that will support our business, but the sector as a whole. Our goal is to build consensus at the federal, provincial, and territorial level for the need for common sense cannabis regulations, excise reform, and a national export strategy that defends an industry that contributes more to the Canadian GDP than breweries or wineries and distilleries.

Speaker Change: And for as the market leader in Canada, We will continue to strongly advocate to key government officials through our enhanced government relations program, focusing not only on changes that will support our business, but the sector as a whole our goal is to build consensus at the federal provincial and territorial level for the need for common sense cannabis.

Speaker Change: <unk> exercise reform and a national export strategy that depends an industry that contributes more to the Canadian GDP than brewery or wineries distilleries.

Greg Guyatt: On that note, I will turn it over to Greg to discuss our financial performance for the quarter. Thank you, Beena. We are very pleased to report a record quarter ahead of key seasonality in Q3 and Q4, as we believe our results will continue to improve throughout the year in line with previous guidance. We experienced strong year-over-year growth in the quarter. Our growth sales were up 79% and surpassed $100 million for the first time in any given quarter. Similarly, our net revenue was up 74% year-over-year to reach $65.6 million. These results were supported by a full quarter of financial contributions from our Motif business, as well as organic growth in our recreational and international businesses.

Speaker Change: On that note I will turn it over to Greg to discuss our financial performance for the quarter.

Greg Guyer: Thank you.

Greg Guyer: We are very pleased to report a record quarter ahead of key seasonality in Q3 and Q4 as we believe our results will continue to improve throughout the year in line with previous guidance.

Greg Guyer: We experienced strong year over year growth in the quarter, our gross sales were up 79% and surpassed the $100 million for the first time in any given quarter. Similarly, our net revenue was up 74% year over year to reach $65 6 million.

Greg Guyer: These results were supported by a full quarter of financial contributions from our most each business as well as organic growth in our recreational and international businesses.

Greg Guyatt: As we scale both domestic and international sales, fuel by growth in Germany, the launch of branded sales in the US, and the expected launch of branded sales in Australia this fiscal year, we are beginning to approach the milestone of becoming a half-billion-dollar run-rate business by ship sales. In Q2, our international sales increased 177% to $6.1 million from $2.2 million in the same prior year period, and increased 84% sequentially since last quarter from $3.3 million. Building off of our leadership in Canada, we are aggressively pursuing growth in international markets through strategic acquisitions and growth markets, and we continue evaluating a robust pipeline of strategic opportunities supported by our Jupiter pool of approximately 58 million.

We scale, both domestic and international sales fueled by growth in Germany. The launch of branded sales in the U S and the expected launch of branded sales in Australia. This fiscal year. We are beginning to approach the milestone of becoming a half billion dollar run rate business by ship sales.

Greg Guyer: In Q2, our international sales increased 177% to $6 1 million from $2 2 million in the same prior year period and increased 84% sequentially since last quarter from $3 3 million.

Greg Guyer: Building off of our leadership in Canada, we are aggressively pursuing growth in international markets through strategic acquisitions and growth markets and we continue evaluating a robust pipeline of strategic opportunities supported by our Jupiter pool of approximately 58 model.

Greg Guyatt: Adjusted growth margin for the quarter increased to $21.9 million, or 33%, compared to $11.6 million, or 31%, in the same prior year period. This improvement was primarily driven by growth in our recreational business following the Motif acquisition, as well as increased contributions from international sales. On a sequential basis, Adjusted Gross Margin remained flat. While we benefited from greater scale and stronger international shipments, motif margins were lower than the core OrganiGram business, which reduced our overall Adjusted Gross Margin. OrganiGram's standalone Adjusted Gross Margin was 37% in the quarter. We expect Motif margins will benefit from the realization of integration synergies which will build throughout the back half of the year to $5 million this year, partially driven by recent capital expenditures designed to improve operational efficiency and capacity at Motif.

Greg Guyer: Adjusted gross margin for the quarter increased to $21 9 million or 33% compared to $11 6 million or 31% in the same prior year period.

Greg Guyer: This improvement was primarily driven by growth in our <unk>.

Greg Guyer: In a recreational business following the <unk> acquisition as well as increased contributions from international sales.

Greg Guyer: On a sequential basis adjusted gross margin remained flat, while we benefited from greater scale and stronger international shipment. Most of these margins were lower than the core organic organic brand.

Greg Guyer: Which reduce our overall adjusted gross margin organic Standalone adjusted gross margin was 37% for the quarter.

Greg Guyer: We expect motif margins will benefit from the realization of integration synergies, which will build throughout the back half of the year to $5 million up to $5 million this year.

Greg Guyer: Partially driven by recent capital expenditures designed to improve operational efficiency and capacity.

Greg Guyatt: As a result of the work done so far, we are now expecting our annual synergies to reach approximately $15 million next year, up from the previously disclosed $10 million. Although these offsetting factors averaged a flat adjusted gross margin in the quarter, we exited March with an adjusted gross margin of over 39%. As noted in previous quarters, we continue to expect adjusted gross margin to stabilize around 35% for fiscal 2025, with stronger performance anticipated in Q3 and Q4, with our long-term adjusted gross margin target of 40% in the second half of fiscal 2026. G&A costs in the quarter were flat at $14.9M compared to Q2 of last year, including the incremental costs from Motegi.

Greg Guyer: As a result of the work done so far we are now expecting our annual synergies to reach approximately $15 million next year up from the previously disclosed $10 million.

Greg Guyer: Although these offsetting factors average thats why the gross adjusted gross margin in the quarter, we exited March with an adjusted gross margin of over 39% as noted in previous quarters. We continue to expect adjusted gross margin to stabilize around 35% for fiscal 2025 with stronger performance anticipated.

Greg Guyer: In Q3, and Q4 with our long term adjusted gross margin target of 40% in the second half of fiscal 2020.

Greg Guyer: G&A costs in the quarter were flat at $14 9 million compared to Q2 of last year, including the incremental cost for multi.

Greg Guyatt: This is reflective of controlling overhead and new business integration, included in our DNA cost for ERP expenditures of approximately $0.6 million for the final phase of our ERP project, which is expected to be completed by the end of this year. Selling costs for the quarter, including marketing, were $7.5 million versus $5.4 million last year. The increase was attributed to higher trade investments with retail partners to support the growth of the business. Total SG&A costs for the quarter were $22.4 million, a modest increase of 10% versus the prior period last year. As a percentage of net revenue, SG&A was 34%, down from 54% last year and 40% last quarter.

Greg Guyer: This is reflective of controlling overhead and new business business integration.

Greg Guyer: <unk> and our G&A cost per ERP expenditures of approximately <unk> 6 million for the final phase of our ERP project.

Greg Guyer: I expect it to be completed by the end of this year.

Greg Guyer: Selling cost for the quarter, including marketing were seven 5 million versus $5 4 million last year. The increase was attributed to higher trade investments with retail partners to support the growth of the business.

Greg Guyer: It'll SG&A cost for the quarter were $22 4 million, a modest increase of 10% versus the prior period last year as a percentage of net revenue SG&A was 34% down from 54% last year and 40% last quarter.

Greg Guyatt: Adjusted EBITDA in the quarter was $4.9 million compared to negative $1 million in the prior year period. The year-over-year increase was primarily due to higher gross margins as a result of higher international sales and increased operating efficiency and scale. With $6.3 million in adjusted EBITDA for the first six months and seasonally stronger quarters to come, we are on track to outperform fiscal 2024 adjusted EBITDA this fiscal year. Net income for the quarter was $42.5 million, compared to a net loss of $27.1 million in Q2 fiscal 2024. The largest contributing factor here was the change in the fair value of derivative liabilities.

Greg Guyer: Adjusted EBITDA in the quarter was $4 9 million compared to negative $1 million in the prior year period. The year over year increase was primarily due to higher gross margin as a result of higher international sales and increased operating efficiency and scale with $6 3 million and adjusted EBITDA for the first six months and seasonally.

Greg Guyer: Stronger quarters to come we are on track to outperform fiscal 2024 adjusted EBITDA This fiscal year.

Greg Guyer: Net income for the quarter was $42 5 million compared to a net loss of $27 1 million in Q2 fiscal 2024, the largest contributing factor here was the change in fair amount in the fair value of derivative liabilities.

Greg Guyatt: of which just over 35 million was associated with BAP's top up price and the issuance of preferred shares associated with the final 41.5 million trough from BAP. On a smaller scale, we saw some additional non-cash benefits from the appreciation of our investments in Philos, OBX, and Sanity. From a cash flow perspective, cash used by operating activities before working capital changes was $1.6 million in the quarter, compared to a cash use of $8.3 million in the prior year period. The change in cash use is primarily due to improvements in adjusted gross margin versus the prior year.

Greg Guyer: Of which just over $35 million was associated with the AC top up rate and the issuance of preferred shares associated with the final 41 5 million trough from BHP on.

Greg Guyer: On a smaller scale, we saw some additional noncash benefit from the appreciation of our investments in silos Obs insanity group.

Greg Guyer: From a cash flow perspective cash used by operating activities before working capital changes was $1 6 million in the quarter compared to cash used of $8 3 million in the prior year period. The change in cash used was primarily due to improvements in adjusted gross margin.

Greg Guyer: Versus the prior year.

Greg Guyatt: On the topic of cash, we maintain a strong balance sheet and remain confident in our liquidity position, which we believe is sufficient to fund operations and strategic growth initiatives following recent acquisitions, while supporting our near-to-mid-term goal of consistent profitability. As of March 31, we had a total cash position of $83.4 million, including both restricted and unrestricted cash, and negligible debt. We plan on investing $8 to $10 million in sustaining capital expenditures during fiscal 2025. As Beena mentioned, we've started to invest in the previously mentioned Munchkin Flower Capacity Enhancement Project. These capital expenditures will be funded out of operating cash flow, and we will continue to evaluate our long-term cash needs and optimize our capital structure accordingly.

Greg Guyer: On the topic of cash we maintain a strong balance sheet and remain confident in our liquidity position, which we believe is sufficient to fund operations and strategic growth initiatives. Following recent acquisitions, while supporting our near to mid term goal of consistent profitability.

Greg Guyer: As of March 31, we had total cash position of $83 4 million, including both restricted and unrestricted cash and negligible data.

Speaker Change: We plan on investing $8 million to $10 million in sustaining capital expenditures during fiscal 2025 as Bina mentioned, we've started to invest in the previously mentioned Moncton flower capacity enhancement project.

Speaker Change: These capital expenditures will be funded out of operating cash flow and we will continue to evaluate our long term cash needs and optimize our capital structure Accordingly.

Greg Guyatt: We are encouraged by our performance this quarter, as our continued focus on efficiency, scale, and market leadership, alongside the acceleration of our international strategy, translates into meaningful year-over-year growth. As we move through fiscal 2025, we expect to reduce costs as a percentage of net revenue, while increasing the mix of higher-margin international sales. At the same time, we're seeing tightening supply in the Canadian market, which presents an opportunity to expand flower capacity and take price on our category-leading brand.

Speaker Change: We are encouraged by our performance this quarter as our continued focus on efficiency scale and market leadership alongside the acceleration of our international strategy translates into meaningful year over year growth as we move through fiscal 2025, we expect to reduce cost as a percentage of net revenues.

Speaker Change: While increasing the mix of higher margin international sales.

Speaker Change: At the same time, we're seeing tightening supply in the Canadian market, which presents an opportunity to expand cloud capacity and take price on our category leading brand.

Greg Guyatt: We look forward to updating you on our progress in the quarters ahead.

Bina: We look forward to updating you on our progress in the quarter that with that I will turn the call back to Bina.

Beena Goldenberg: With that, I'll turn the call back to Beena. Thank you, Greg. As we progress through fiscal 2025, we are confident in our ability to execute on our strategic priorities. The integration of motifs, revenue expansion on collective projects, our international expansion efforts, and the continued success of our innovation pipeline all position us well for sustained growth and improved profitability.

Speaker Change: Thank you Greg as we progress through fiscal 2025, we are confident in our ability to execute on our strategic priorities. The integration of motif revenue expansion on the collective project our international expansion efforts and the continued success of our innovation pipeline all P.

Speaker Change: <unk> is well for sustained growth and improved profitability.

Beena Goldenberg: We appreciate the continued support of our shareholders, customers and employees. We remain committed to driving innovation, operational excellence and long term value creation.

Speaker Change: We appreciate the continued support of our shareholders customers and employees, we remain committed to driving innovation operational excellence and long term value creation.

Max Schwartz: Now let's open up the floor for questions. Thank you.

Speaker Change: Now, let's open up the floor for questions.

Speaker Change: Thank you we will now begin the question and answer session. If you would.

Max Schwartz: We will now begin the question and answer session. If you would like to ask a question, please press star 1 on your telephone keypad to raise your hand and join the queue. And if you'd like to withdraw that question, simply press star 1 again.

Speaker Change: To ask a question. Please press star one on your telephone keypad to raise your hand and join the queue and if you'd like to withdraw that question simply press star one again.

Max Schwartz: And as a reminder, please limit yourself to one question and one follow-up.

Speaker Change: As a reminder, please limit yourself to one question and one follow up.

Frederico Gomes: Your first question comes from Alliance Global Partners. Please go ahead. Good morning. Thank you very much for the questions. So first question for me, you guys talked a lot about international some of your growth aspirations.

Speaker Change: Your first question comes from Aaron Grey with Alliance Global Partners. Please go ahead.

Aaron Grey: Good morning, Thank you very much for the questions.

Aaron Grey: So first question for me you guys talked a lot about international some of your growth aspiration. So we could just dive a little bit deeper into your outlook for 'twenty.

Beena Goldenberg: So if we could just dive a little bit deeper into your outlook for 2025 and fiscal I know EUGNP certificate doesn't change capacity and you're already sunk into markets, but given the greater margin capture you'll have with the EUGNP change, how do you think about allocating capacity internationally, given the greater margins you'll get there, versus balancing the Canadian market share aspirations that you have? So any color on any capacity constraints you might have, how you're looking to balance between your goals domestically and internationally. Thank you. Yes, sure. Thanks for the question. So first of all, we will continue to work on balancing the demands between both domestic and international sales.

Aaron Grey: In fiscal <unk>.

Aaron Grey: I know you GMP certificate doesn't change capacity and you're already selling into markets, but given the greater margin capture you'll have with the EU GMP change how do you think about allocating capacity internationally.

Aaron Grey: Given the greater margins, you'll get there versus balancing the Canadian market share aspirations that you have so any color on any capacity constraints you might have how you are looking to balance between your goals domestically and internationally. Thank you.

Aaron Grey: Yes sure. Thanks for the question so first of all.

Aaron Grey: We will continue to work on balancing the demands between both domestic and international sales, while certainly international sales have higher margins today, because they don't have excise taxes.

Beena Goldenberg: While certainly international sales have higher margins today because they don't have excise taxes, we want to make sure we don't walk away from our leading position in some of our domestic flower brands, such as our big bag which are still experiencing very good growth. And the reason why this is very important and some of our competitors have chosen to walk away from the domestic market is because we do see that there will be more price compression in international markets. We're already seeing value flowers showing up in Germany and you're going to see supply from all over the world, not just from Canada, in these markets.

Aaron Grey: We want to make sure we don't walk away from our leading position in some of our domestic flower brands such as a big bag of Bud, which are still experiencing very good growth and the reason why this is very important and some of our competitors have chosen to walk away from the domestic market.

Aaron Grey: Because we do see that there will be more price compression in international markets, we're already seeing them Val.

Aaron Grey: Value flower showing up in Germany.

Aaron Grey: And youre going to see supply from all over the world not just from Canada. In these markets. So in order to make sure that we have a long term plan, we want to make sure. We're balancing both now we have a higher demand coming out of some of our international markets and that's part of the reason why we're working on increased.

Beena Goldenberg: So in order to make sure that we have a long-term plan, you know, we want to make sure we're balancing both. Now, we have higher demand coming out of some of our international markets and that's part of the reason why we're working on increased capacity, flower capacity. We've done some work on improving some of our efficiencies in our facility. The 7,000 kgs coming from the LED upgrade, we're already starting to see some benefits on that as the project is coming to completion and rooms that were turned a couple months ago are starting to now generate extra flowers.

Aaron Grey: <unk> power capacity, we've done some work on improving some of our efficiencies in our facility.

Aaron Grey: 7000, kgs coming from the led upgrade we're already starting to see some benefits on that as the project is coming to completion and rooms that returned a couple months ago, we're starting to now generate extra flowers. So.

Beena Goldenberg: So, you know, the two projects together will give us an extra 14,000 kilos of capacity and we keep driving better efficiencies in our So, we'll continue to look at growing our international sales.

Aaron Grey: The two projects together will give us an extra 14000 kilos of capacity.

And we keep driving better efficiencies in our flowers. So we'll continue to look at growing our international sales.

Beena Goldenberg: Your question on, you know, how much is the upside potential? We expect to sell more in the back half internationally than we did in the front half. And, you know, with international sales, you need to start generating the following through medical doctors prescribing those specific cultivars. So the cultivars are momentum in Germany and they will have higher demand and as we shift to those markets with those cultivars. So, we're pretty excited about the following opportunity, but it's going to be a balancing act for sure. You know, obviously, we like the margins with international, but the truth is the margins in the domestic market are getting better as there's less competition and we've been to actually take some pricing in the domestic market.

Aaron Grey: Your question on.

Aaron Grey: How much of the upside potential we.

Aaron Grey: We expect to sell more in the back half internationally than we did in the Fantast.

Speaker Change: And with international sales you need to start generating a following through medical doctors prescribing those specific cultivars. So the cultivars are gaining momentum in Germany, and they will have higher demand and as we shipped to those those markets with those cultivars.

Aaron Grey: So we're pretty excited about that.

Aaron Grey: Following opportunity.

Aaron Grey: But it's going to be a balancing act for sure you know obviously.

Aaron Grey: We like the margins with international but the truth is the margins and the domestic market are getting better as there's less competition and we've been able to actually take some pricing in the domestic market.

Aaron Grey: Yeah.

Frederico Gomes: Really appreciate that call there, Beena. That was helpful.

Speaker Change: Really appreciate that color they have been and that was helpful.

Frederico Gomes: Second question for me, you know, just want to talk a little bit about the margin evolution. Gave some great color there on the gross margin. So as we think about EBITDA profitability, you know, where do you believe?

Speaker Change: Second question for me just wanted to talk a little bit about the margin evolution gave some great color there on the gross margin. So as we think about EBITDA profitability, you know where do you believe.

Greg Guyatt: EBITDA margins have the potential to get to in the medium term, and what are some of the most meaningful levers? You gave some color in terms of incremental synergies that you found, you know, going from, you know, 10 to 15 million. Was that more so on the gross margin side or on the SG&A side? And then how much of those synergies have been realized to date?

Speaker Change: EBITDA margins have the potential to get to in the medium term and what are some of the most meaningful levers you.

Speaker Change: You gave some color in terms of incremental synergies that you've found going from $10 million to $15 million was that more so on the gross margin side or on the SG&A side and then how much of those.

Speaker Change: Synergies have been realized today, so any color in terms of the margin and how we should think about the evolution would be helpful. Thanks.

Greg Guyatt: So any color in terms of the margins, how we should think about the evolution will be helpful. Sure, thanks for that question. So, first of all, I'll touch on the synergies. So, we realized, I'd say, about $1.5 million versus the $5 million that we're targeting for this year, and the majority of that is in COGS, but there is certainly some overhead expenses from cost avoidance and just the general integration of the two businesses. So, I'd say, in terms of what's going to drive EBITDA growth in the future, it's going to be a combination of margin growth.

Speaker Change: Sure. Thanks for that question so first of all on.

Speaker Change: The synergies that we realized.

Speaker Change: $1 five 5 million.

Speaker Change: We are targeting for this year and the majority of that is in.

Speaker Change: As in Cogs, but there is certainly some some overhead expenses from from cost avoidance and the general the general integration of the two businesses. So I would say in terms of what's going to drive EBITDA growth in the future, it's going to be a combination of margin growth.

Speaker Change: As I mentioned earlier, we're targeting about 40% gross margin in the back half of fiscal 2026, and then also just general cost management.

Greg Guyatt: As I mentioned earlier, we're targeting about 40% growth margin in the back half of fiscal 2026. And then also, just general cost management is something we're always looking at and making sure that we're spending our capital prudently. So, certainly, as we look forward to the back half of the year, when key seasonality and stronger parts of our business kick in, we are expecting to see the EBITDA margin improve as well. Okay, great. Really appreciate that, Keller.

Speaker Change: Something we're always looking at.

Speaker Change: And making sure that we're spending our capital prudently.

Speaker Change: By and large we're not as revenue grows we are not expecting our SG&A to grow.

Speaker Change: Materially.

Speaker Change: And that's going to be an important driver as you start seeing the.

Speaker Change: The scaling of our topline and we get the leverage on the P&L it drops.

Speaker Change: Drops straight down to EBITDA, so our longer term target for EBITDA, we expect it to continue to grow as a percentage of sales.

Speaker Change: So certainly.

Speaker Change: As we look forward to the back half of the year when he seasonality.

Speaker Change: Macarthur business kicked in we are expecting to see the EBITDA margin improve as well.

Speaker Change: Okay, great really appreciate that color Glenn jump back into the queue.

Frederico Gomes: I'll go ahead and jump back into the queue.

Frederico Gomes: Your next question comes from the line of Frederico Gomes with ATB Capital Markets. Please go ahead. Good morning. Thanks for taking my questions. First question is on the cash flow. We saw a negative cash flow this quarter. I think a good portion of that was related to working capital. So first, could you maybe talk about the drivers behind those working capital changes this quarter, you know, maybe the key items here that drove that? And second, could you talk about your cash flow expectations for the reminder of the year, you know, things like movements in working capital, COPEX, as well as the initial margin expansion and the seasonality that you mentioned as well?

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

Federico: Hi, good morning, Thanks for taking my questions.

Speaker Change: First question is on the cash flow.

Speaker Change: The negative cash flow this quarter I think a good portion of that was related to working capital. So first could you maybe talk about the drivers behind those working capital changes this quarter.

Speaker Change: The key items here that drove that in seconds.

Speaker Change: Could you talk about your cash flow expectations for the reminder of the year.

Speaker Change: Things like movements in working capital Capex as well as the potential margin expansion and the seasonality.

Speaker Change: That you mentioned as well thanks.

Greg Guyatt: Thanks.

Greg Guyatt: Sure, may I start with the cash question? Thanks, Frederico. So the last, in Q2, we actually spent $6 million at the end of the quarter on the collective project acquisitions. That had a negative impact on cash flow, just from a timing perspective. But primarily, the biggest driver, as you mentioned, was our investment in working capital, which was intentional. Q3, Q4 is really our strongest time of the year. So in Q2, our plan was to invest into working capital to ensure that we're prepared for the strong growth that's to come. With working capital, there's a number of puts and takes, but the most significant increase was an increase in inventory, which is required to be prepared for the growth that's coming for the next two quarters.

Speaker Change: Sure.

With the cost question, Thanks, Puerto Rico.

Speaker Change: So the loss in Q2, we actually spent $6 million at the end of the quarter.

Speaker Change: On the collective project acquisitions that had a negative impact on cash flow just from a timing perspective.

Speaker Change: But primarily the biggest driver IC Madison was our investment in working capital, which was very intentional.

Speaker Change: Q3, Q4 is really our strongest time of the year. So in Q2, our plan was to invest into working capital to ensure that we're prepared for the strong growth that's to come.

Speaker Change: With working capital. There is there is a number of puts and takes but the most significant increase was in <unk>.

Speaker Change: Frequent inventory.

Speaker Change: Which is required to be prepared for the for the growth that's coming through.

Speaker Change: The next two quarters.

Greg Guyatt: Did I cover everything?

Speaker Change: Did I cover everything.

Greg Guyatt: Yeah, maybe just the second part of the question related for your expectations for the reminder of the year. I guess you answered sort of the question about the working capital for the second half, but also CapEx and the impact of the potential margin expansion. From a CapEx perspective, we're expecting to spend, on a regular sustaining capital, $8M-$10M for the full year, as well as the $9M that was mentioned for the month in LED grow room expansion. The timing of that, we expect most of it to happen this year, and so you'll see that being funded through operations, which, as we mentioned, Q3-Q4 is going to be our strongest period for the year of cash flow.

Speaker Change: Yes, maybe just the second part of the question.

Speaker Change: Related for your expectations for the remainder of the year.

Speaker Change: I guess, you answered sort of the.

Speaker Change: Question about the working capital for the second half.

Speaker Change: But also capex and the impact of any potential of margin expansion.

Speaker Change: From a capex perspective, we're expecting to spend on a regular sustaining capital.

Speaker Change: $10 million for the full year.

Speaker Change: As well as the $9 million that was mentioned.

Speaker Change: For the month led grow room expansion.

Speaker Change: Timing of that we expect most of it to happen this year.

Speaker Change: And so youll see that being funded through operations, which as we mentioned Q3 Q4 is going to be our strongest period for the year.

Speaker Change: Of cash flow, so we actually expect to be cash flow positive for the <unk>.

Greg Guyatt: So, we actually expect to be cash flow positive for the full year, and we'll see that starting to come through in the third quarter. Perfect. I appreciate that, Greg.

For the full year, and you will see that starting to come through in the third quarter.

Speaker Change: Perfect I appreciate that and then maybe just a second question for me.

Frederico Gomes: And then maybe just a second question for me. If you could comment on your strategy for the US hemp derived THC market. I know that you talked a little bit about that. We know that's a lot of brands in the marketplace today. A lot of other companies investing in that market as well.

Speaker Change: If you could comment on your strategy for the U S.

Speaker Change: Hemp derived GT markets I know that you talked a little bit about that.

Speaker Change: A lot of brands in the marketplace today.

Speaker Change: A lot of other companies investing in that market as well so.

Beena Goldenberg: So how do you plan to differentiate and in regards to margins in that segment? When do you think, you know, they could be accretive and they could be meaningful to your overall margins? Thank you. Sure.

Speaker Change: Do you plan to differentiate and in regards to margins in that segment.

Speaker Change: When do you think they could be accretive it could be meaningful to your overall margins. Thank you.

Speaker Change: Sure So let's start off by saying listen we're early days.

Beena Goldenberg: So let's start off by saying, listen, we're early days in expanding the collective project brand in the US market, and we're very excited about the results so far. In the markets where it's, you know, on the store shelves, we're talking to retailers and the offtake is strong. It is our intention to continue to build out the distribution. Right now we're selling into 10 provinces. We expect to see stronger distribution, probably in another six provinces before the end of the fiscal year. And we expect our direct-to-consumer website to start to launch this month. So continuing to build that way.

Speaker Change: And in expanding the collective project brand in the U S market and we're very excited about the results. So far in the markets, where it's on the store shelves were talking to retailers and the offtake is strong.

Speaker Change: It is our intention to continue to build out the distribution right now we're selling into 10.

Speaker Change: Provinces are we expect to see stronger distribution, probably in another six provinces before the end of the fiscal year and we expect our direct to consumer website to start to launch this month.

Speaker Change: So continuing to build that way.

Beena Goldenberg: The priority right now in the US is to drive trial and awareness. We have a very strong summer support program kicked off to drive velocity at retail, so offtake, really get to consumers. What we think is the benefit of collective project, and you're right, there are many brands in the US, but some of them are not very good. They don't taste very good. We have great tasting products with collective project, as I mentioned, the awards we just received, and we're excited about getting people to try. So we have a lot of sampling programs during the summer in places where you can't have infused samples, we'll have non-infused samples, we'll have a lot of POS and programs. So back to your question about margins in the short term, we're investing to drive the growth of this product.

Speaker Change: The priority right now in the U S is to drive trial and awareness, we have a very strong summer support program kicked off to drive velocity at retail so uptake and really get to consumers. What we think is the benefit of collective project and you're right. There are many brands in the U S. But.

Speaker Change: All of them are not very good but they don't pay is very good we have great tasting products with collective project as I mentioned the awards. We just received and we're excited about getting people to try. So we have a lot of sampling programs during the summer and places where you can't have been few sample.

Speaker Change: <unk> will have non in few samples will have a lot of Pos and programs. So back to your question about margins in the short term, we're investing to drive the growth of this product so.

Beena Goldenberg: So we expect to do roughly a million dollars US in retail sales. So it's still small, but we're investing that margin back to drive the offtake and to increase awareness. This is key part of our strategy in the US.

Speaker Change: We expect to do roughly a million dollars in retail sales.

Speaker Change: It's still small, but we're investing that margin back to drive the offtake and to increase awareness. This is key part of our strategy in the U S. Obviously in Canada, we expect to see.

Beena Goldenberg: Obviously, in Canada, we expect to see growth in our business and that will grow and appreciate the gross margin that comes with that business. So not a strong investment programs in Canada, although we will leverage our sales relationships and gain distribution. And the product talks for itself in Ontario, really a strong performance in that market. And we just need to get other provinces to take on the top selling SKUs because we know they perform. So it's a strategy of investment right now, more focused on investment in the US to gain that consumer adoption and really break through.

Growth in our business and that.

Speaker Change: We'll grow in and appreciate the gross margin that comes with that business so not as strong.

Speaker Change: <unk> programs in Canada, although.

Speaker Change: We will leverage our sales relationships and gain distribution in the.

Speaker Change: The product talks for itself in Ontario really strong.

Speaker Change: Performance in that market and we just need to get other provinces to take on the top selling skus because we know they perform so it's a <unk>.

Speaker Change: Strategy of investment right now more focused on investment in the U S to gain that.

Speaker Change: <unk> consumer adoption and really breakthrough as you mentioned lots of players in the U S, but not a lot of them have the money to invest behind the growth and or the product that delivers to the consumer expectation.

Beena Goldenberg: As you mentioned, lots of players in the US, but not a lot of them have the money to invest behind the growth and or the product that delivers to the consumer expectations. Thank you very much, Beena.

Speaker Change: Thank you very much.

Yewon Kang: Your next question comes from the line of Yewon Kang with Canaccord Genuity, please go ahead. Hi, good morning. Thank you for taking my question. Apologies aside with some of the remarks in the opening statements, but the international sales saw a significant sequential increase. So just wondering if you could provide some color on what drove that growth. Was it primarily due to the expanded orders from existing partners like the CNB Group, or did you onboard new customers during the period? Thank you.

Speaker Change: Your next question comes from the line of Ivan Kim with Canaccord Genuity. Please go ahead.

Ivan Kim: Hi, Good morning, and thank you for taking my question apologies, if I missed some of the room.

Speaker Change: In your opening statements, but international sales.

Speaker Change: Significant sequential increase so just wondering if you could provide some color on what drove that growth was primarily due to the extended orders from existing partners like the Saturday group or did you onboard new customers during the period. Thank you so much.

Beena Goldenberg: Sure. No, it wasn't new customers. It was meeting incremental demand for our existing customers and not just Sanity Group. We have some strong customers in Australia as well that continue to see a higher demand in their markets. You know, there's a demand for high quality product. And while there's a lot of discussion of international flower coming from, you know, Colombia or South Africa, you know, Canadian cannabis, we've been growing it for a while, the quality is great. It's recognized worldwide. So there's increased demand. And one of the things that I mentioned earlier was the thing about medical markets is once a cultivar is established, you know, that a doctor is prescribing it and they see the benefits, consumers come back to that cultivar.

Speaker Change: Sure no it wasn't new customers. It was meeting incremental demand for our existing customers and not just sanity group, we have some strong customers in Australia as well that continue.

Speaker Change: To see a higher demand in their markets.

Speaker Change: There is a demand for high quality product and while there's a lot of discussion of of international flower coming from.

Speaker Change: Colombia, or South Africa Canadian cannabis, we've been growing at for a while the quality is great recognized worldwide. So there is increased demand and one of the things that I mentioned earlier was the thing about medical markets is once a cultivar is established.

That a doctor is prescribing it and they see the benefits consumers come back to that cultivars. So you start you might start small, but it continues to build off of the repeat purchases of those cultivars in those markets you have to make sure that when you go into international markets you have stability data for cultivars so take.

Beena Goldenberg: So you might start small, but it continues to build off of the repeat purchases of those cultivars in those markets. You have to make sure that when you go into international markets, you have stability data for cultivars. So it takes a while to build that demand. But once it's there, it continues to drive incremental, you know, orders. And we're really starting to see that. You know, we expect to see our EU GMP certification in the upcoming months. That won't increase demand. That will just speed up our fulfillment because you take out the middleman, you take out the converter, product will get to the market faster, repeat purchases will come in faster.

Speaker Change: A while to build that.

Speaker Change: That demand, but once it's there it continues to drive incremental.

Speaker Change: Orders in and where we're really starting to see that.

Speaker Change: We expect to see our EU GMP certification in the upcoming months that won't increase demand that will just speed up our fulfillment because you take out the middle man you take out the converter product will get to the market faster repeat purchases will come in faster. So we're excited to leverage that and sorry I also.

Yewon Kang: So we're excited to leverage that. And sorry, I also forgot to mention that once we have EU GMP, pricing will go up because you take out the converter in the middle. So we're excited about what this international business will continue to grow, but it is not from increased customers. We have significant demand from our existing customers, and we continue to prioritize fulfilling those customer requests. Thanks for that color.

Got to mention that once we have EU GMP pricing will go up because you take out the convert or in the middle So.

Speaker Change: We're excited about what this international business will continue to grow but it is not from increased customers. We have significant demand from our existing customers and we continue to prioritize fulfilling those customer requests.

Speaker Change: Thanks for that color.

Yewon Kang: Just the second one for me here is on the collective product acquisition. It's been a few weeks and obviously very early days since integrating that brand into your platform. But I was wondering if you guys could provide any color into any insights that you might have gained from having exposure into the US hunter web space, any differences between how the recreational market functions, even on the consumer level, and any insights there would be helpful.

Speaker Change: Just a second one for me here is on the collective product acquisition, it's been a few weeks and obviously very early days.

Speaker Change: Integrating that brand into your popcorn, but I was wondering if you guys could provide any color into any insights that you might have gained.

Speaker Change: From having exposure to the U S drive space any.

Speaker Change: Differences between how the recreational market functions.

Speaker Change: Even on the consumer level and any insights there would be helpful. Thank you.

Beena Goldenberg: Thank you. Certainly. So, you know, we closed the collective project on March 31st, so the last day of the quarter. And so, you know, it's still early days. But I can tell you a couple of things on collective projects. So first of all, in Canada, we have some great relationships with our co-mans. They currently were the licensed producer as well, because the collective arts team weren't a licensed producer. We're working on converting those relationships where we're the licensed producer. There's some efficiencies we gained through excising and distributing the product, and obviously leveraging our sales team to gain more distribution.

Speaker Change: Certainly so.

Speaker Change: We close the collective project on March 31, so the last day of the quarter.

Speaker Change: And so it's still early days, but I can tell you a couple of things on <unk>.

Speaker Change: Collective project, so first of all.

Speaker Change: In Canada, we have some great relationships with our co Mans. They currently are where the life licensed producer.

Speaker Change: As well because the collective art's team we're into licensed producer we're working on converting those relationships that were where the license producer. There are some efficiencies we gained through exercising and distributing the product and obviously leveraging our sales team to gain more distribution and we obviously have relationships.

Beena Goldenberg: And we obviously have relationships with the boards and could drive some of that. So we're pretty excited about the revenue growth opportunity in Canada. I also mentioned that we have invested $1.2 million in our Winnipeg facility. And this is where we're looking to look at new formulations, looking at where we bring in our fast nanotechnology to really differentiate our products further. So there's lots of upside potential. And clearly, taking some of the product in-house will better leverage our infrastructure and improve our In the U.S.

Speaker Change: With the boards and could drive some of that so we're pretty excited about the <unk>.

Speaker Change: Revenue growth opportunity in Canada, I also mentioned that we have invested $1 $2 million in our Winnipeg facility and this is where we're looking to look.

Speaker Change: Look at new formulations, looking at where we bring in our fast nano technology to really differentiate our products further so there's lots of upside potential.

Speaker Change: And clearly taken some product in house will better leverage our infrastructure and improve our margins in the U S. It's a little bit different U S. Obviously, we're dependent on Coleman our relationships, we've actually just changed their co manufacturer for collective project because.

Beena Goldenberg: it's a little bit different. U.S. obviously we're dependent on co-man relationships. We've actually just changed our co-manufacturer for collective projects because we got better costs and better quality of ultimate product that's important for us. We have a great relationships with some key distributors to get the products out into more of the markets and build that distribution and establish relationships with some of the key retailers. Really the focus on collective project in the U.S. is distribution and driving awareness trial so we get some offtake really seeing that momentum behind the brand. There are only four big players in the U.S.

Speaker Change: We got better costs and better quality of.

Speaker Change: The ultimate product that's important for us.

Speaker Change: Great relationships with some key distributors to get the products out into more of the markets and build that distribution and establish relationships with some of the key retailers really the focus on collect a project in the U S is distribution and driving awareness trial. So we get some uptake.

Speaker Change: Really.

Speaker Change: Really seeing that momentum behind the brand there there are only.

Speaker Change: Four big players in the U S that have hemp derived THC beverages that have the dollars behind it that could help drive that trial and we're excited to be one of those and that is our intention to continue to drive.

Beena Goldenberg: that have hemp-derived THC beverages that have the dollars behind it that could help drive that trial and we're excited to be one of those and that is our intention to continue to drive and grow in that market in the U.S.

Speaker Change: And grow in that market in the U S.

Max Schwartz: Thank you for the color, I'll hop back into the queue. And we have no further questions in our queue at this time.

Speaker Change: Thank you for the color I'll hop back into the queue.

Speaker Change: Thank you.

Speaker Change: And we have no further questions in our queue. At this time I will now turn the conference back over to management for closing comments.

Beena Goldenberg: I will now turn the conference back over to management for closing comments. Well, thank you everybody for joining our call today and thanks for your insightful questions. We are really looking forward to our key seasonality coming up in Q3 and Q4. Looking forward to seeing the expansion of our collective project acquisition, the realization of the motif synergies, the growth in our international sales, and we look forward to updating you further next quarter.

Speaker Change: Well, thank you everybody for joining our call today and thanks for your insightful questions.

Speaker Change: Really looking forward to our T seasonality coming up in Q3, and Q4 looking forward to seeing the expansion of our collective project acquisition the realization of the motif synergies the growth in our international sales and we look forward to updating you further next quarter, thanks and have a good day.

Max Schwartz: Thanks and have a good day.

Max Schwartz: Ladies and gentlemen, this does conclude today's conference call. Thank you for your participation and you may now disconnect.

Speaker Change: Ladies and gentlemen, this does conclude today's conference call. Thank you for your participation and you may now disconnect.

Speaker Change:

Speaker Change: [noise].

Speaker Change: Yes.

Speaker Change: Yeah.