Q1 2020 Earnings Call
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Good day, ladies and gentlemen, and welcome to todays Pyxis International Inc. fiscal year, 2021st quarter results Conference call.
At this time all participants are in listen only mode. If anyone should require assistance during the conference. Please press star zero.
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As a reminder, this call is being recorded.
I would now like to introduce your host for today's conference call Joel Thomas Chief Financial Officer, Mr. Thomas You May begin your conference.
Thank you Justin.
With me. This evening is Pieter Sikkel, our president and Chief Executive Officer, and Chairman of the Board of Directors, Michael Shannon Vice President Treasurer.
Before we begin discussing our financial results I would like to cover a few points.
You may hear statements. During the course of this call that express a belief expectation or intention as well as those that are not historical fact these statements are forward looking and involve a number of risks and uncertainties that may cause actual events or results to differ materially from these forward looking statements.
These risks and uncertainties are referenced in the Safe Harbor statement included in our press release and prescribed in more detail along with other risks and uncertainties and other filings with the FCC, including our most recent Form 10-K .
We do not undertake to update any forward looking statements made on this conference call to reflect any changes in managements expectations or any change in assumptions or circumstances on which these statements are based.
Included in our call today may be discussion of non-GAAP financial measurements, including earnings before interest taxes, depreciation and amortization, commonly referred to as EBITDA and adjusted EBITDA that are not measure measures of results of operations under generally accepted accounting principles.
In the United States and should not be considered as an alternative to U.S. GAAP measurements.
The table, including a reconciliation of and other disclosures regarding these non-GAAP financial measures is included with our earnings release issued today, which is available on our website at Www Dot Pyxis talk Tom.
Any replay rebroadcast transcript or other reproduction of this conference call other than replays provided by pictures International has not been authorized and is strictly prohibited.
Investors should be aware that any unauthorized reproduction of this conference call may not be an accurate reflection of its contents.
Now I'll hand, the call over to Pieter Sikkel, our CEO , President and chairman of the board.
Peter.
Thanks Joel.
Good evening, everyone and thank you for joining us as we head into the second quarter fiscal 2020 , we continue to make exciting progress in our transformation.
Our lease business is performing well and customers are responding positively to the changes we are making to the business.
Our legal Canadian Kinda, Miss industrial him and the liquids businesses, demonstrating strong growth and continue to advance and in Africa, We're making positive progress in the development of our value added agricultural products Division.
We are continuing to evaluate the consolidation of pyxis ownership in two of our majority owned Canadian kind of its businesses with two of our minority owned U.S. hip and knee liquids businesses under the common control of a subsidiary separate from Pyxis other operations and we are assessing related opportunities to monetize a portion of our interest in this subsidiary in fiscal 2020 .
As we head into the next chapter of our one tomorrow transformation journey, we remain focused on optimizing our business and balance sheet management, reinforcing our commitment to drive enhanced value for shareholders.
The alliance one lease team is doing an excellent job in terms of implementing operational improvement initiatives and strengthening relationships with customers, who continue to recognize our efforts to drive positive change.
Through our relationships and international footprint, they're making progress on our strategy to improve global market share.
Our growing I mean sustainability and trace buzzi programs remain critical to the success of the lines one.
We're proud of the leadership role of dedicated and talented employees play in these areas.
Based on previous performance and expected full year results, we anticipate sales will be more heavily weighted towards the back half of the.
This quarter was particularly exciting so figure as the company continued to execute against its growth strategy, maintaining strong market share this quarter and making progress against its commitment to increase like nasty.
Following its entrance into new Brunswick earlier this summer.
The company quickly establish its established itself as a leader in the market and achieved a 7% share of sales in the first few weeks after its launch.
You Brunswick monks that province in which figure products are now available for sale and figure has more than doubled its retail footprint, while maintaining its commitment to building strong retail relationships and working to enhance yields and product mix, while meeting consumer demand.
With regards to the expansion of its been said with the island and Ontario facilities the expansion of Siguiri East licensed.
That's kinda design and God is substantially complete and the license amendment was submitted as planned.
We expect the new square footage to be operational by the end of the calendar year.
<unk> is also progressing in its expansion plans and as a quad all necessary properties and is in discussion with municipalities for zoning for phase two of its project.
The target completion date for phase two of the Fig and Norfolk build out at the end of calendar 2020.
We continue to make progress in the industrial hip and knee liquids categories as well.
Pretty accountancy LLC, our unconsolidated industrial hemp joint venture recently announced that it is launching its line of roll on less than a month late to CBD product format on the under its current kind of with the old brand.
Looking at the liquids business and some continues to take market share and sales are continuing to grow as expected keeping pace with the success we've seen in previous courses.
Likewise pure themselves are strong and we continue to see growth in line with the projections for the year.
[noise] pharma remains at the heart of everything we do.
Our expansion into value added agricultural products is a key area of focus as we work to help diversify farmer incomes.
The refurbishment and expansion work being done to the oil and refinery operation into Diamond Tanzania is moving forward as planned.
We expect to go into commercial production for Sunpower oil extraction in late 2019.
A strong relationships with Thomas.
It will be a substantial differentiator as we work to develop high quality traceable sustainable somehow oil in various product formats.
We are maintaining our previously provided full fiscal year, 2020 revenue guidance and modifying or adjusted EBITDA range to 150 to 170 million as a result of the contemplates it said potty kind of a supply arrangement that did not occur.
Our team in Canada will continue to work to secure additional supply on similar terms and conditions.
Well. It's included in our guidance is $9.3 million of adjusted EBIT da that may be adversely impacted by trade issues.
Related to continuing a new tenants in a number of jurisdictions that may not be favorably resolved.
Moving forward in fiscal year 2020 , we're committed to the ongoing execution of our strategy.
Part of the next chapter of our transformation.
Working together to achieve our shared purpose to transform People's lives. So that we can grow a better world.
Our team remains focused on pursuing growth opportunities enhancing dependency and unlike unlocking value for the benefit of our shareholders custom as affiliates and employees.
Bill.
Thank you Peter.
Now for our results.
For the first quarter ended June Thirtyth, 2019 sales and other operating revenues decreased 14.3 million or 4.9% to $276.7 million when compared to the same period last year.
This decrease was primarily due to an 11.5% decrease in lead volumes attributable to hurricane floor, it's reducing the U.S. crop size different tariffs on U.S. tobacco as well as timing of shipments from Africa.
This decrease was partially offset by the continued development.
Well the other products and services segment, and a 7.2% increase in average sales price due to favorable product mix.
Cost of goods sold decreased $12.6 million or 5% to 237 million.
This change was primarily due to the decrease in lease volume in North America.
Gross profit as a percentage of sales increased to 14.3% for the three months ended June Thirtyth 2019 from 14.2% for the same quarter last year.
This increase was primarily due to the increased sales and the other products and services segment, it's favorable lease product mix.
Selling general and administrative expense increased 11.3 million or 29.7% to $49.4 million for the three months ended June Thirtyth 2019, when compared to the same quarter last year.
These increases were primarily due to startup costs associated with branding marketing and advertising expense for the figure cannabinoid in Hubble juice illiquid brands as well as the evaluation to be partial monetization of a portion of the other products and services segment.
Restructuring and asset impairment charges decreased 1.3 million to $200000 for the three months ended June Thirtyth 2019, when compared to the same quarter last year.
The main driver of the difference was cost savings and restructuring associated with the closure of a processing facility.
In the leaf other regions segment in 2018.
For the quarter cash taxes paid decreased 4.2 million to $5.2 million this year.
While income tax expense increased to 23.5 million for the three months ended June Thirtyth 2019 from the benefit of 25.3 million for last year's first quarter. This increase was primarily due to the change in the effective tax rate.
The occurrence of certain discrete items during the three months ended June Thirtyth 2019.
As we look ahead to the remainder of fiscal your 20.
We are committed to the pursuit of value enhancing opportunities and driving efficiencies across our operations.
We're also confident that our one small transformation will deliver improved results and allow us to continue to capitalize on the momentum we have generated thus far.
We are excited by the prospects for the future.
And what the remainder of this year will bring.
Operator at this time, we'd like to open the line up for questions.
Well. Thank you if you would like to signal with questions. Please press star one your Touchtone telephone if you're joining today you say speaker phone. Please make sure you function is turned off to allow your signal to reach our equipment again that will be star one for questions.
Our first question today will come from Korea, Martinson with Jefferies.
Hi, This is actually John Crawford on for Kirk.
I was just hoping if you could clarify what's included in your updated guidance is the timing.
Downward due entirely to the Canada.
Or.
That also inclusive of the $9.3 million.
Potential.
Exposure from trade, there just kind of trying to yeah.
So it does not include the $9.3 million, we just called that out so that folks are aware.
But or we believe that there are a lot of opportunities around that 9.3, whether they'd be onshore offshore. So I'm joined here, we wanted to make sure that you're aware of that at the same time the supply contract that we described or we don't have a replacement right now, but we have entered into other supply contracts on on favorable terms and conditions and we're working hard to define the Phil that change, but at any rate, we called those out and have moved our guidance accordingly.
Okay. Thank you and then can you just give a little bit more information on what those trade disruptions are and whether or not that's related to the Chinese restrictions on your tobacco or what the other regions are.
That are associated with that and that.
In terms of the supply contract.
You previously guided to.
Your new business is becoming profitable by the end of the year does this impact.
Thank you.
Oh, Yeah, we're still we're still working on the new businesses to become on a run rate basis I'm positive you know towards the end of the year. So that is that's still part of what we're working towards the change in the supply agreement arrangement.
And not achieving this particular surprise supply agreement does it make it more challenging but we are you know again working on Backfilling that and I'm sure, we'll have to kind of wait and see where that plays out as it relates to the to the tariff situation. There are a number of different countries, where the tariff regime in the U.S. and then reaction by other countries has created challenges and we've talked about this before and it's sort of been in an ongoing evolving process and so I'm were you know working through those challenges just as many other companies that that does show around the world or perhaps the deals.
Same kind of situation.
Okay. Thank you and then just lastly is there anymore.
Well, we continue to move forward on it and you know as there's more information we will have that out there.
Okay. Thank you.
And next we'll be Mary Gilbert with Imperial capital.
Yes.
Good afternoon or good evening.
What are the revenues associated with the supply agreement that Didnt.
Through.
And also what is the status of the Canada health approval on the expanded phase of figurines and is that on.
On track side from the supply agreement issue.
Yeah, So maybe that deal does the last part of that first.
Yeah, we're we're on track related to the health Canada.
License extension process and so everything is on track related to that at this time.
And we're looking forward to having the new additional square footage up you know online as soon as possible.
But the team there is ready to go and it's quite exciting.
Okay, No no update on timing on that sorry go ahead.
No I think thats in the hands of health, Canada or other than ourselves I mean, where we're very optimistic I think the team has done a fantastic job. The evidence package and everything else was was submitted on a timely basis I just got back from the facility actually this morning, it looks fantastic and we can't wait to get it running with several football fields with of ER ER industrial scale kind of its production and I think it will be one of the most efficient factories or.
Or a kind of its production facilities up in Canada is that it really looks fantastic we'd be excited to show everyone around it.
Excellent Okay, and then I'm sorry, where are you also going to give me an idea of the revenue associated with that supply agreement that didnt come through.
Yeah, we really haven't put anything out there related to that but that is included in our revenue guidance that we felt.
Okay, Yeah, which you you maintain that guidance also it looks like the.
If we look at the core tobacco business. It really reflects the comparison to last year right in the in the sense that you had you have shipments that benefited last year that went in that went from Q4 into Q1, and then because we had the effect in Q2 associated with the hurricane in the tariff.
That sort of the ongoing impact out of North America and then it also reflects that we haven't yet got the Africa shipments is that what you were sort of thing in terms of just sort of the timing between Q1 Q2 looking at just core tobacco.
No no I mean, I think we're pretty <unk> pretty pleased actually with the performance of a tobacco ER division in the quarter. It was pretty much to plan, probably slightly lower in terms of revenue than we planned for and a little bit higher in terms of margin or from the various origins around the well, which up obviously reflects the efficiency improvements that we've continued to try to put in place.
We didn't because of the hurricane of course, we didn't have the as much in the way of carryover shipments in North America as we might have had in previous years. So that would have a a touch of an effect, but other than that it was a pretty normal.
Quarter one.
Yeah for the rest of the globe.
Yeah, I think way it where were on a pretty normal schedule from South America Africa area slightly delayed between or just the late this of the crop in in Malawi, and Zimbabwe and then there's some power shortages ends and Bobby as well, so where we're working to overcome those and try and get our shipments out that before the end of the year and then for the rest of the rest of the global I'd say, where where where where we're looking well on track and I think there's several opportunities with some logic crops around the globe a that we're looking to to take up and see if we can't improve on those numbers as we go through the.
Okay, and then one sort of last question twofold.
One is just kind of following up on that if you could just give us an update on the supply demand within the industry.
I'm just looking at how you know the industry is balanced with that and then number two on the new businesses you talked about strong growth in Purilum and and then Tim So I Wonder if you could talk about what those growth rates are that you're seeing there and what is the status of gaining distribution with corporate.
And the opportunities for gaining some real distribution within core it like for example.
We got to get on Amazon.
And you know what about additional let's say bricks and mortar type distribution within the U.S. Thank you.
So that's a whole conference call those of questions there.
But HM.
Sorry, what was the first one.
Yeah, Sorry go ahead, Oh supply and demand find them on sorry, I was I didn't write them under a supply and demand I think where we're actually fairly balanced around the globe and an old types absolute early and and Oriental and there's there's a slight.
In silicon itself, just because of the weather conditions and the way the crops have come out and the alkaloid levels. We've got shortages in certain parts of the qualities and the and they and and the types and we have and we got a it on the total global supply basis, we've got some oversupply of certain other styles from the plan I I mean, I think every player with looked at that in a slightly different way because it depends what varieties you plan on what you're going to meet techniques or how you purchase it and so on and so forth.
But in general I, you know I would I would describe it as a fairly balanced situation you've always got to manage through these i. I think what's good for US is that uncommitted inventory came down again.
Uh huh.
On a year on year basis in the quarter to quarter basis, So where we're sitting around the midpoint of our range. So really it did that the whole situation. It's Mac is not controlling what you do and I think we feel like we've got pretty good control of where we are and that's obviously despite.
A recent a you know a discussions around declining rates of consumption, particularly in the United States and so on but <unk> today I think there's a situation that the team is doing a pretty good a job with managing through.
In terms of the Purilum inventor, Mike I think what we always said was when we even started that business back in 2014.
That we would do things the right way, we would do a talks could toxicological tests on all of the ingredients that we we utilize to manufacture.
Our E liquids, we would do manufacture those in the high quality facilities, we would do everything in the correct way and with the increased focus on regulation. We are seeing a considerable amount of customers and businesses are looking to fewer than and to ensure that they have ER products that meet the standards of the of the present and the future of this is just having an uptrend ups shouldn't mystic cells or.
Model and I think thats really benefiting the business there and that certainly I mean, we obviously don't give out those numbers at this point in time or exactly what the growth rates up but you know that that they suddenly while in the double digits or would you say that.
In sum we relaunched.
With different some different packaging in a hole and and and additional flavors and I think we've seen very good uptake on that that's been limits. It a little bit as we've been building up inventory I've seen a lot of excitement in the way of really starting to push through a orders that we had talked at the moment, So where we're really looking forward to seeing what that can do in quarter, two and on the rest of the year not only here in the United States, but internationally as well.
And certainly we feel let's say gaining share as as a in fact some of humble the liquids are as well.
And in terms of current.
I think obviously.
We are we're very excited to not only see the current select which I think is a starting to gain some some good traction in certain they the the additional sales teams that we put in place are getting a lot of inquiries around that that product and we're building up the inventory there as well the lindemann line or will be out in the.
And then in the next couple of weeks it was a.
We pushed out of that and I just a few days early that it was coming online, but it will surely in the next in the in the in the next two weeks have be be available. Then I think that's a very interesting product I like I can certainly bouts for how well it works and Ah I I think is the next development and we got a really nice pipeline of products that will be coming out or across the CBD lines and that actually next generation with figure up in Canada as we get to kind of that kind of is two point, though coming in October .
After October 17, so.
This is true so what we're we're we're feeling good about the products that we've got coming with building different methods of distribution there'll be some more announcements in the quarter about some other things that were doing and probably in September or so there's a lot of things that we're working on are working on right now the tubing preparing for a long time and I think you'll see foster movement as we go forward.
Great. Thank you.
And moving on to Bryan Hunt with Wells Fargo Securities.
Thank you and good evening I was wondering if you could delve into you know the other businesses, which are going to consolidate.
Under an individual unit.
Considering maybe the challenge is that you're having by having to take EBITDA down by $10 million in your guidance and you know that business would likely be valued off of for revenues can you give us an idea what the total topline revenues were for those combined businesses for Q1 and or what they contribute to your total guidance for the year.
Yeah, Weve, Brian we've got we've not broken any of that out yet there will be more information coming as those businesses get a little bit bigger they're I wouldn't want our what our Q comes out or likely tomorrow, you'll be able to see the breakout of the.
Of the other segment and and so you can you can look up you know whats going was going across those those new businesses related to you know that the top line and the cost it's still very early days, but they're growing very quickly and I. You know I think really the question is going to be when we get out to the fourth quarter.
You know demonstrating that we've been able to execute on our plan and and no hit our marks out there because that helps to set us up for where we want to be next year and the year. After that show up but things are moving very quickly very positively and we've got a really good team that we've built both through acquisition as well as a as a as well as new hires so a real strong CPG capability to drive that business.
And when you talk about monetization.
Can you tell us exactly what the use of proceeds will be.
You know what do you plan on using it that those funds for.
Well I think no.
Obviously first and foremost to fund the opportunities associated with those businesses new requirements that they have but then there are also other opportunities to have.
Capital come back to the shareholders and Ah.
And show up you know in the cases of pictures it'll provide opportunities for no additional debt reduction.
Okay very good.
When you are.
You just skus for me.
You know.
In your sales guidance, what does that imply for tobacco leaf volumes are you looking at volumes to grow again and this fiscal year.
Oh, we we haven't directly projected volumes, but I would say we're tracking to to apply and then as I mentioned earlier, we've got a certain opportunities with various crops around the globe. So I I can just say, we're feeling in a pretty good position, but obviously, it's very very early in the year.
And we've got to get the packing done the shipping done and everything else. So it's a it's a little bit early to to give a very solid reply around those numbers, but so far leave we seem to be tracking the way we would expect.
And then my last question is why.
A lot of your large customers have made investments and other cannabis companies as well as CBD.
What are the opportunities for you all to potentially cross sell some of your new capabilities to your traditional customer base and are you doing any of that today.
Well, we would we would announce that if if if there was a specific agreement but at the same time ER, obviously, we're working with our entire customer base, both in old and new categories where appropriate.
And they're all you know obviously, we continue to investigate opportunities as they do.
And yeah, I mean that at the end if they we you can see that we're in and and ER segment of business lines. They are exploring the future as much as we were already in the future in many ways. A I think we're ahead and that creates opportunities.
For a full floor for actually all of us who Uh huh.
A win win solutions in these various businesses.
And then my last question is if I look at New Brunswick, New Brunswick is bigger.
In terms of total doors versus what you had in P.I. and.
Ah, Yes, forgive me I'm blanking right now, but you know given the fact that you grew your share so rapidly and it's not too dissimilar to what it what it is your other two markets is it fair to think that your your cannabis business came close to doubling on a sequential basis.
It's growing very rapidly we haven't we haven't given anything there, but it's substantial and the rollout initially the PPI, the Nova Scotia, and now New Brunswick, and we're gearing up for the next provinces that that will be announcing here in the near future. So.
Very rapid expansion.
And.
Generally in line with our expectations and of course with the pretty substantial increase in square footage that we've got coming on.
In PPI here in.
Over the next couple of months, we're very excited about that and is in line with our plan. So.
So.
Very exciting times.
Well I answered I ask the second conference call or the question, So I'll hand, it off thanks.
And the next question will come.
The next question comes from Hale Holden with Barclays.
Hi, Thanks for taking my call.
I just had three quick ones Joel you had talked last quarter about potentially putting in receivables type facility.
To make.
The new ventures.
Self funding, if that's still on the table or part of expectation.
Yes, Hello, I don't know that its focused so much on the new facilities really are the new business is related to our our programs. We do have a our programs in place today. It was more related to some of the expansion.
On.
Some of the the.
The real estate.
Requirements and so there are both on balance sheet and off balance sheet opportunities available to us.
Some that result in debt others that utilize more lease type structures and so as we think about structured finance opportunities that's really what we're focusing on not so much on.
On Monday, our facilities.
Got it.
My second question is just sort of on a path to a partial monetization.
I was wondering if the gating factor was.
More around putting this new holdco, together and getting audited financials and all your ducks in a row or was it more a desire on your part to kind of show stronger growth than get passed for animal launch.
Just remember on early next year.
Well I think.
First off all the components of.
Making sure that you have a clear understanding of all your businesses and in that we.
Maintain our books and records related to those that put us in a very good position to be able to.
Think about how those businesses can work together.
And then in addition to that.
We do have very.
Rapidly growing businesses and that is obviously, a big part of what.
You know is the current plan and I think what you know probably a lot of folks find interesting.
One of the challenges has been because we have our own line, our allied business, which is performing very well.
When we talk about the new businesses.
It's more difficult to see.
The growth in the changes and so.
Now that they are growing more rapidly.
And.
As a result of that we've had the change in the reportable segments and and in the future as they continue to grow while we continue to analyze and provide.
Additional disclosure related to how we how we talk about those businesses.
And so the question is.
Are we really seeing.
The value that's been created by relating to those new businesses.
In our share price today, and we think that it will help.
Investors to better understand what's being created.
As we go move moving into the future with the structure that we've that we've talked about so that's probably one of the bigger drivers.
Yes.
Can you sort of related to the share price comment you made.
This second liens in the low eightys.
I was wondering if there is opportunity maybe it's two and exchange to capture discount there or.
If the intention or so probably to pay this off at par across their maturity.
Yes, no look I think that we've got a.
A consistent track record if you look over the last.
Decade, and a half related to how we've approached to capital structure and we'll continue to approach it in the in the same fashion. So.
We've got I think good support from the capital markets and into a really good set of banks around the globe that we work with so.
And we see that.
Being in place as we move out into the future.
Great. Thank you so much I appreciate it.
Thank you.
And that could be.
And Ann Gurkin Davenport.
Hello, everyone.
Hi, good afternoon, Thanks, Hi, I'm, starting with the debt conversation you had targeted reducing debt.
$25 million to $50 million kind of year by year is there any update to that that expectation.
Yes, I think I think generally speaking more.
Still focusing on debt reduction and.
Executing on our plan.
And we'll have.
The the full balance sheet out.
With with the Q.
Likely tomorrow and you can see.
We have some disclosure related to.
Our debt numbers in our.
In our.
The press release that went out earlier today.
And that is is down.
Year over year.
Again.
But.
Are there a lot of different factors that help related to that so.
Okay great.
And then I will turn into a conversation about the <unk> market, what how do you. How you define what is the size of that market in the U.S. you. All the estimated size on an estimated growth rate for that market for sales.
Any rough.
So its growing very quickly that's the one thing we know for sure and.
We have a number of different states that we're sourcing out of this year.
And we have I think some very attractive varieties that that.
That we work with our farmers related to that or.
Higher in CVD content, which.
Versus.
The types of strains that you have for fiber.
So we think we're well positioned I think trying to get actual numbers, though related to.
US production of of hemp is difficult because you have to get into whether or not attempt for CBD or hemp for fiber remember him for fiber can have CBD.
By dry weight below 1%.
Whereas hemp for CBD can have CBD levels, our dry weight in the field of.
North of 10% so.
Of course, all of that being with GC levels below the federally mandated 0.3% level. So it gets very difficult to really get your arms around the size of the crop in the us.
And then to further stratify with with.
The two broad categories that I, just kind of laid out.
Okay.
Are you having conversations with CPG companies anything you can share with us any progress on that front.
Yes, there are always ongoing conversations with.
Potential partners.
But I think a lot of our focus today is on our own CPG capability and consumer adoption of our product sets and and so these businesses again are growing very rapidly and it's very exciting times are our team both internally, which has been growing quickly on the CPG side as well as.
Our third party advisors.
Are really helping to propel our own CPG capability very quickly we're excited about it and and if you really think about it I mean, we kind of looked at it and the way. If you. If you if you take the various convictions for the global market between.
Either liquids and CBD and and cannabinoids in general and obviously THC products I mean, you're looking at somewhere between 150 billion and 200 billion dollar opportunity over the next four to five years.
Yes, and yes, I mean growing to that and you just think about our company. We decided to go all the way up to the top of the value chain, because I mean, we've been a 145 year and.
A single product commodity supply, we don't want to be in that position in the future in the new businesses. So we went all the way to the consumer and if you just think about our business, we can get lumpy incentive that opportunity, we'll let you know.
Double our revenue and quadruple Larry with the at least and that's what we're targeting so it's and I think thats everything we're doing is to is to target at least that.
As we as we go forwards and we're putting in place destruction facilities everything else to be able to.
Use our global footprint use those skill sets.
Rig brings skill sets into the company, particularly on the CPG side.
Make sure way selling premium products and.
Extracting obviously the maximum profitability from those products as well so that that's that's that's that's where we're heading and thats, where the opportunity is just staying at the growing level is not where we want to be.
Okay.
These into my next question perfect Segue, you had put out at your Investor day, our EBITDA target by 2023 of three three to 340 million is that still a realistic target by 2023.
Yes, so and what we put out was on what we were able to achieve.
In fiscal 2018, and yes, we believe that we can very aggressively grow from the level that we were at at the end of fiscal or for fiscal 2018, where.
Tobacco, we think has the ability to stay fairly stable are related to what it's able to do and recently, we've been able to grow our overall market share and total number of kilos.
That we've been selling through if we go back.
Five years ago, we were just under 380 million kilos of full service volume and for fiscal 19. We just finished over 400 million kilos of a full service volumes. So it's.
It's been very positive and we believe that we will continue to be able to.
Producing in in those range ranges with good stability related to that business and then on the other side significant growth related to all the new businesses as.
As.
We've shown in in that deck and is consistent with our expectations and beliefs around where we believe where we can drive the business. So.
Great and congratulations and quarter on the gross margin nice number to see.
Given that number and given SGN Ada increase NSG may in the quarter, how should I think about those two metrics as the year unfolds gross margin and Astrazeneca.
So gross margins.
We have a very good opportunity to see margins similar to.
Similar to last year.
And depending on how a few things play out we could be a little bit better.
But we'll just have to kind of wait and see where where where some of these markets.
Play out it's still early.
But generally it should be very similar to the prior year.
And then as we think about the S. Una we indicated that M&A would be going up related to the new businesses and so you are seeing the impact of the businesses that we have.
Acquire to a greater than 50% stake in and that our consolidated as well as.
Some of the new folks that we have coming into the company relating to the new businesses and then of course, the marketing branding advertising expenses and then we also have expenses associated with.
The the new businesses and the monetization strategy.
And that does cost associated with the monetization strategy. It does continue for the full year is that how we should think about those costs.
Likely not.
Okay.
And then can you help me with tax rate for the year.
Given the number of discrete items in this quarter kind of how I think about the failure.
Yes, I think when we talk about taxes and we've talked about this one before.
We've generally kind of been in the call it $10 million to $25 million of cash taxes paid and.
If we look at where we were for the first quarter, we were slightly over $5 million.
And so we kind of look at where we are going to be this year.
We're probably somewhere between a hair under $20 million.
Two.
Just over 20 million Thats, probably more in line with where we will likely be.
But.
Thats.
That's I think where a lot of the focus.
Is on on what will cash taxes being so.
Fantastic and then one more question just can you comment on.
Tobacco customer demand are you seeing any changes in the level of demand or purchase orders for your customers.
As I look out the next 12 to 18 months. Please.
I mean, I think it did it shifts up and down between customers and geographies as as as as we go forward. So.
Yes of course for certain markets less less.
Less volume as required them in here in the U.S., it's very obvious in the.
The declines in the domestic market with the gas prices with everything else I mean, right now we're seeing a drop in demand here at the same time.
There are there other opportunities in other markets around the world that we supply into where we're seeing growing demand and change in inventories and other opportunities to increase sales there so there'll be shifts across the platform and.
I think we've talked about this many times before and you know as as we see consolidation of geographies, where customers purchase product as we see consolidation of supplies and a reduction in the amount of supplies that are these customers purchasing from.
As they increase their standards in terms of sustainable and traceable production and these are the opportunities for us to continue to grow and by growing in small and fewer geographies, obviously that creates efficiencies that improves margins as well.
Okay, great. Thank you very much for your time.
And the next question will come from Mary Gilbert with Imperial capital.
Yes, I just wanted to follow up on the timing because it was a little unclear in one of the other question.
I mean, it sounds like I thought that maybe this quote unquote partial monetization opportunity could occur sooner rather than later.
But then I wasn't sure as you talked about.
Showing are demonstrating the volumes and I think this was something hail with trying to bring up earlier.
That do you need to show that you're you've got the growth rate before even come to market or.
Is it just a matter of.
Getting.
Then the numbers and everything in order to come to market. Because you have a story to tell and that will sort of incorporate some of the data that we're looking for and so that this could be sooner event and then does.
Do you anticipate refinancing the cap stack.
This calendar year.
Thank you.
Yes, so maybe the first part of that.
The new businesses are growing very very rapidly okay.
Remember that these are essentially all startups right and yes, there are different levels of startup some started a year sooner. Some started six months later, but they are all essentially startups in the in the growth curve is substantial in the case of the.
Cannabis business legal cannabis business in Canada.
Part of that business is further along the the growth horizon.
The consumer product offering in the three provinces that we're in today.
The consumer has.
Adopted our products across each one of the categories, where we're competing which as it were in each of the three big categories.
And so we've had very good adoption relating to the brand and and we are now expanding into other provinces. So.
I think that that growth plan and the consumer product strategy is sound and is being well received by the consumer and it was a very good story.
To talk with folks about just like we're doing now and as you know as we look at what we're doing with.
Industrial hemp in the U.S. and CBD.
If you recall.
A little over a year ago, we were talking about one or factory would open our factories open and we're producing very.
Our high quality.
Full spectrum oil today, that's going into.
Now a variety of products and very exciting in those products.
Through the various channels that we're going after.
Are picking up.
No market share, albeit from a starting point of.
These projects Didnt exist a year ago. So so at any rate, it's very exciting and I think a very good story and then as we look at pure limits are more developed business.
As an EBITDA positive business.
And again, it's growing very quickly because of the position that we took four years ago and what we believe we're going to be the hallmarks of a strong flavor and E liquids business and so these are all.
Big positives and when we think about where.
On the.
The consumer is going to go and the kind of products that they are going to want in the future.
It is about next generation products, and that's where these businesses coming together create we believe real value in real opportunity and so this is what we are highlighting and stressing.
As we talk about these businesses and we believe that.
That it's a real opportunity so at any rate we are going to continue to push along those lines and we'll see where we are as.
As we look at various opportunities and we're looking at those right now so it's a very exciting times.
As it relates to.
Refinancing.
We will be looking at refinancing.
Year over probably the next 12 months, we're in the middle of that process right. Now we've had tremendous reverse inquiry already from folks that have been with us or across the last three or four rigs refinancings.
And we're we're excited about that as well so.
All the pieces will come together, so as we look across the this fiscal year and.
But we'll be talking.
With with the markets as we typically do as we work through these these opportunities.
Okay, great. Thank you.
And our next question will come from Ann Gurkin with Davenport.
Sorry, I have one more question on the guidance you gave for the year adjusted EBITDA in the range of 150 to 170 does that include includes fairly stable outlook for tobacco and then does it include contribution from these new businesses.
I'm confused on I'm sorry.
Yes, it Tibet tobacco should be fairly stable and that's that's what we're we're looking for and what we believe we are capable of this year.
And is there is there are a lot of moving pieces related to the new businesses.
As well as some of the costs.
That are associated with these new businesses as were building them up and.
And so there are a lot of moving pieces right now, but all of that is included in the development of the guidance.
To breakeven at best for the new businesses.
It's still very early in the year and we'll we'll provide additional information as we can.
But as we said before I mean part of part of what you're seeing in the segment breakout that we have now for the other segment you can see the M&A costs and I think we've been clear that we got to make sure that we've got the right teams that were investing in the brands properly related to branding advertising marketing and then you got to have the right team, especially as you're going after the very CPG segments. So.
But we believe we've got the right path, we've got the right team a proven track record are related to our CPG team. So we're really excited about where they are driving things and we understand their caution and those are built into the plan.
Okay perfect. Thank you.
And that does conclude the question and answer session ill now turn the conference back over to Mr., Joel Thomas for any closing or additional remarks.
Thank you for joining our call today the call will remain available for playback for any interested persons.
830, P.M. on Tuesday August 13th.
Again, thank you for participating in our conference call. This evening.
Well thank you.
That does conclude today's conference we do thank you for your participation have a wonderful day.