VLNS - Earnings call transcript Q2 2022

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Operator

Hello, and welcome to The Valens Company's Second Quarter Fiscal 2022 Financial Results Conference Call. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded. At this time, it is now my pleasure to introduce your host, Everett Knight, Executive Vice President of Corporate Development and Capital Markets of the Valens Company. ahead. go please Everett,

Everett Knight

be Welcome results Valens period conference A website call XX, operator. section Investor fiscal the of ended second XXXX XXXX. Valens will this of financial call thevalenscompany.com/investors. replay on to you, the Company's Relations The at quarter May archived Thank for the

estimates call, All statements me respect meaning may management hereof. make future anticipated statements including with operations, economic and within please projections or limitation Before forward-looking that statements facts applicable courses forward-looking the Valens' we let estimates of begin, performance. based course constitute results The of during management’s of date of the without expectations the other than regarding Specific securities are forward-looking or laws to disclosures and and as you expectations, such remind of conditions future this statements the conference assumptions, actions. on historical statements include of all information

to and website each as the For more and which at and Analysis EDGAR Management’s and information Securities related Information Discussion herein. Annual hereby our Company reference and our on on please risks www.sec.gov by on latest Form filed Valens the uncertainties to latest or at refer Authorities forward-looking thevalenscompany.com sedar.com at Regulatory company’s are with statements, incorporated

cannot results. caution not reliance information forward-looking statements on management’s can will differ certain that results. be outcomes undue forward-looking the available not we as forward-looking to available upon be future. statements you assumptions these results hereof, be no from with in assurance current current actual place reflect such the There management we consistent the to materially actual these the based Although beliefs and that on reasonable will of the date Accordingly,

MD&A For filed SEDAR any on EDGAR. as latest please measured our of discussed, reconciliation and and consult measures non-GAAP

Shea, Chief Chief President Tyler. Officer; ahead. hand like Officer; Commercial questions. to Now, that, over for now me Adam on be the also Jeff and and Gandhi, Fallows, Mr. Tyler, Robson, will Mr. call Mr. call Financial available are go Sunil Mr. the With Executive would please joining today Chief I Officer to

Tyler Robson

Obviously, taking for going into to probably Slide a head you, the few on. Thank start time, to everybody I'm And six. things jump hit and right going Everett. we're it on right thanks,

So other to the going I up not biggest the remove to to industry our that going want as what's fast happening would, fast growth not fundamentals. we in Even I want have the is double-digit said clear do did from the X.X%. things on SG&A cash to and company, enough. than to again, is though our And expectations. was every try improving. we We with did But in on be burn have noise but the it's did very it decline focus quarter on and revenue segment And this really what's adult enough. net rec. increased not

some team do things it, you of short. boards we make the the opportunities. But better few When missed transition are would right accelerating sell now I Obviously, on look excuse. of at provincial control, the out as biggest it all a job provincial do do that but [indiscernible], is an from prepared to those one to double-digit A I'm need So of being the which some things not of using happened our of the we And comment. right an sales. the growth job our I did did obviously, happening. say outstanding

because thought have depletion what's because products the look you provinces going four missed on, when weren't didn't the ready the So depletion. strategy at the available, for of some weeks products of them we retailers of those

out than SKU different a it number. under being was of stock, rather So

record a I to of be am And we it it Verses without shipments of track. got of the and everything expect the of Verse And we month then, and of out to now. that corrected we So that's made ahead are back it. late where we to without any that essentially June, And have on is happy Kelowna any facility. say the

I'm going again, same at end being I are I'm a things pretty improve. optimistic the fundamentals So things of there's improving. that time with but business the very lot And of day, happy at the of internally. to cautious the lot way and are know a exact But noise

turn So you Jeff. over it I'll at that

Jeff Fallows

Great, thanks, Tyler.

core message that all is our seven areas. from Slide and progress coming focus both the on is So of challenges the with first improvements

gain provincial QX to as at continue launches product to new gain in momentum. market We the share began level

However, step our back changeover aggregate a rapid saw in gains. our resulted despite to taking in brand Again, Verse our from in both with best Verses we us a and share challenges June related sales revenue rebound sales market demand in month-to-date. aggregate to retail

reaching QX equal We dollars revenue a roughly from at QX. Roads of that aggregate also saw rebound to seasonally revenue weak Green

quarters. of partners, we address inconsistency However, including already expected expected dissipate and we table savings both two material over of underway which line below challenges these on and delivering to and the deliver plan left are QX, a are and gummies, margin against to demand Integration growth, our and as limited in from manufacturing vapes QX. amount the into above quarter. the strong to supply deeper with get next are initiatives third-party were the gross are Efforts cost

took over line focus said, anticipated cash for the our of That originally have translate effectively longer be cash key performance. net flow some our we launch, able that and the material impact to see areas burn confident planning planned here. annual we million of quarters are originally than see two an additional benefits to EBITDA the see the our efforts in next are Managing have beginning a created opportunity to balance remain initiatives in our And we savings, manage our reducing of than to forecasted. of full but statement, and deliver benefits us. the more to yet in cash cash and to reduction preparation use will with targeted cash the the $XX of While

Canadian the our continues line on US ensure majority opportunity appropriate. we business we well to of get the see recreational our when that focus THC the there, finger market our with pulse remain we to keep positioned in the continue market to of enter While to

saw further on continue the to partnership continue to sell an accelerate and QX, with through qX, Coldhaus see we initiatives revenue as Moving licensed and to a to in Despite meaningful both BXB end, made in our increase coming eight, and our provincial of segment ongoing to we growth net showing secured provincial this as more significant is strategic strength In X.X% brand producer. we've XX.X% SG&A our modest to sales a see launch for from we top are solidifying transition, Verses Quebec Canadian to a setback executing focus particularly growing X.X% share to market sales firmly quarter realign exclusive Slide progress This expected saw we orders. our larger LP decline customers in which on X.X%. exclusive this as both Bon we us cannabis in strong in XX in quarter, of quarters. quarter, at and products a Verse retail. the expanded temporary showing of the Subsequent Jak, recreational the from resulting sales expect strong to X.X% this

U.S. of have in returned additional we Roads to XX revenue I've initiatives, by Green Roads, momentum integration primarily Green launches actioned the new with for cost few our into actioned in QX back increasing quarters. cost months annual channels Our business Five savings and savings, driven in X products. annual branded over product be million in million CBD next identified to distribution and early XX.X% new growth international

annual identified to to by end original on is XXXX. With year $XX savings cost million action the Valens fiscal date management's target exceed track

X.X% become a QX. Slide share fastest as of companies XX XX in Moving the top Valens for measured market consumption. XX, with by to the May has growing one nine, months and licensed importantly, three ended retail Most is producer Valens

resonate with consumers. within through continue we our portfolio brand to develop products As strength that

and Slide XX. to XX Moving

four an dive expanded all product We share which continue product performance a based a fire in QX position on vape to impressive QX, provincial despite deeper Since of the top Verses market high share future into quarters. market launching more sales. market keep share market category this basis affordable showing Ontario under Despite with noted are SKUs an categories the we a increasing share in the launched evidence number decline we already on the data. the category taking our we the are is that eye manufacturing to in most vapes, quarter-over-quarter This quarter-over-quarter. across we seven remain X.X%. competitive QX, little to to with our us Starting continuing away our vapes our for over category get vape participate. brand. XX we on May, in platform, LP in In improving targeted from In competitors with seeing

we see share at Since we beginning seltzers to consumers the market in of year, eponymous a added our for launch have QX. for continue the At quarter beverage from summer ruby in beverages grapefruit, mango Furthermore, to time lineup of with tremendous QX, the arriving launch and the hear heard to budtenders. share with XX.X% fifth market consecutive We just of and vs our expand the facility. season. in continued feedback and of the

our based leadership which our short tremendous dried to in offerings, not Moving continue a in over product flower are of on growth and we flower. time, to despite two cultivating rolls, build categories flower have seen pre we period

in last the year, in with our Canada. launch has We SKUs incredible BC one since have traction become of God and July best-selling its buds seen it Verses of now

the in innovation realizing our we believe roll with we quarter quarter With further premium adult category. when look are rec. infused Willie mil Verses revenue Haze, contract as take of the launch in and super roll category, a Verses share we look of summary, success new and In and formats. the our we flower me, superior the our in the add of pre of the setback Jar Furthermore, to pre convenience the under excuse Lemon to provide of J’s in consumers replicate indicative launch into variety Big during don't the to is we market opportunities dried

to to in months objectives our first strategic continue of market make we share. against contrary, strides the great continue the On XXXX and grow six

and brands core XX, innovation an shift to all ongoing Working provincial With launches store Coldhaus, our our brands. signing Canadian of field we and our XX% product help us the in provide most by retail about cannabis significant in in each category with sales allowing the to conjunction attributes with point to Coldhaus Alberta across with in penetration educate share and Ontario, to connect product This and partnership market, consistent dedicated strategy Columbia, and with category. expanding markets. has and frequency team distribution partnership have target our the of product achieve a and objectives distribution expect drive store strategy coverage will market with staff which expand allow categories touch exclusive to we will recent Coldhaus of British our reach increase in the made for Slide markets. retail saturated increase us Coldhaus

better sophisticated can importantly, across their system have to stores serve retail utilize Canada. More to CRM we real-time data

took which brand of slide their we not some our of to months switch was Quebec. Verses of out to XX, which the of have Lastly, On Quebec being the additional business brand visibility launch, start see suppliers seeing depletions muted our saw Slide behind over More forward. properly think will rebranding an in rebranded markets devices. sales and hit now our going expanded rebound provincial rebranding we disruptions had XXXX. to July. we our retail an record that complete SKU specifically, Verses. these in transition in in work rounds ensure velocity XX, in with for back six continuity and of absent Roads off on organically With step for anticipate have a to the This XX% the for to to quarter minimize simply sell revenue. with into Quebec the a Quebec, secured earlier, in launch Green a will online already provincial but continue With quarter, caused products. are the the in of September did year. orders ERP and demand quarter mentioned QX rebounding, key by to subsequent exposure distributors product Canadian we the in Green Bon as Even the strong with one the end, market. resulted distributors to our provincial due we is and And stock Roads Jak, system, footprint highest more approximately changes have retailers as exclusive process was delineated discussed, in a product we'll to in when rebrand this we of this full we SKUs in said, with accelerate action June sales by with monthly realizing and importantly, are growth we opportunity pipeline We've stock strong provincial revenue purchase into busiest delays outs was categories. in That us, in strongly

vape of the year. We in back the of be seen SKUs in launch and have and expect to early us key new these success areas half growth of gummy for the

that in XX, this And into channels. products said, our have to for moving to in new quickly In international to U.S. markets and remains more CBD-based fruit appropriate quarter. success in with products bear competition the addition, deliver offerings Green efforts Roads Slide early the area solution-based are strong. we started to new distribute branded

Roads with see in expect in around efforts launch BXB build in which to kiosk pass success discuss we relationships, of as performance. leverage from partnership I'll back focus with premium strategy Signifi our our been to Green We the have greater locations online all key Tyler that, quarters, to Tyler? capabilities, these a distributor greater new our more team. and U.S. the fully coming particularly it With the volumes retail

Tyler Robson

to sales XX.X% QX Thanks with X Jeff. increased revenue BXB quarter-over-quarter million. increasing

BXB can Moreover, continue for to the outside that profile to which platform as Sunil? within realigned economic biomass processes demand and remain we new opportunities a each bit provides of optimize be pipeline lumpy for and quarter-to-quarter optimistic sales, the higher cannabis we as partners optimize our will upside. margin robust headwinds. seen industry customer. remains with manufacturing have strengthen both industry their BXB we While bulk

Sunil Gandhi

Thanks, XX, Tyler. Slide please.

price challenging our highly environment that of the and continues the Let supply state Canada. fragmented me saying to compression start volatile ongoing chain operating cost retail by of inflationary be with pressures in industry given

right that structure in we challenging As which We at XXXX have the to actions do marketplace. and size, a discuss result, our detail more this will in aggressive a anticipated I with will later environment business, across the time expect been taking streamline call. financial our failures cost be

QX in markets by Roads BXB our with revenue. X.X% on see to broad Now XX, consolidated volatility across Slide the net XX million can in provincial offsetting strength revenue you than Green increased sales international more XXXX, and

Largely As markets of previously provincial $X.X Verse potential discussed, XX.X% asset Verses. due by turned from sales revenue certain to to that decreased the rebranding million in from SKUs the quarter. to depletion

X.X into is that a orders But provinces revenue with delayed July excluding of purchase product combined expanded This rebounded with company. the QX and for strong for budtenders. portfolio us already give these provincial confidence pipeline had the and in from month have for in factors gaining rebrand the consumers sales June, pushed about shipments June. million to best even May ever Additionally, revenues traction

in The of by segment sales up the double-digit $X previous in primarily driven demand growth increase from customers. is to revenue XX.X% Our new million bulk reaching in quarter. QX, some and BXB onboarding continue higher

in performance to the the in in million, CBD growth sales revenue U.S. driven sales of business Road Slide international direct from a from $X.X quarter increase Australia $X.X the Growth Green also was and to $X.X up million shipments double-digit the primarily in XX.X% saw Our reach quarter from International in ecommerce quarter. Canadian showed to XX. driven strong million facility. consumer by facilities by the Florida an growing growth previous

on balance we optimization new mix. such and XX% by million, include through profit QX in the moving QX. were BXC between and net and our -- flower gross inventory adjusted Moving as and product channels. our condition BXB implemented higher the profit initiatives coming mix margins numerous in and quarter, sourcing, margins automation, in sales quarters. revenue gross impacted growth and with provincial was to These commissioning packing, in over in negatively $X.X QX flat costs or the Despite improving biomass optimizing in gross this adjusted slide, of input adjusted

are revenue QX. flat and for would to EBITDA to QX. integration $XX.X profit BXB with result was improvement receivables Furthermore, a variables costs, XXXX. starting a lower benefit confident being negative demonstrate profile points improved $XX.X of initial QX margin to XX.X our the Adjusted EBITDA by basis million million QX quarter in our this risk net The improvement of to in recorded we're adjusted the of significant to Adjusting negative qX, As the QX quarter in in EBITDA as attributable relative adjusted impairment have XXX that reported negative will as we of compared percent million in million includes SG&A this a gross SG&A on was a the initiatives. quarter. on in non-cash related $X.X been realize in basis,

This Now XX. our and large sources with majority combined moving chart activities operations of cash forward a we $X.X end this cash of of before improvement a waterfall uses of cash million Slide QX, flow step investing realization shows Overall integration over took to the And of QX. the since quarter-over-quarter. from in and initiatives. the showing is this flow from

the trend this on million moderating alone initiatives a revenue improvement latter contract in product regions focus the on last in deliver begin that operations in improving Further half the into this QX. EBITDA to improvement experienced earnings flow working EBITDA the move mentioned pathway representing These profile much of investments savings continue primary savings. in growth in and the adjusted include positive into XXXXs. month sales biomass improved and Cash are one-time or expect sourcing earlier our previously provide as the quarter's adjusted seen to achieving of $X.X to that associated improvements is represents track brand with of on integration growing business, that launches and from provincial significantly to QX Negative, the now come ahead. to XX.X%. and drag although smaller growth we called taller targeted quarter reduced has capital year. cash. we procurement on and stem We elements mentioned from back Key we've costs EBITDA adjusted as fiscal

the improved that from one, this in improvement negative are cash negative and significant based and of to following cost margin have operations to performance EBITDA of to through action expect nine between improvement QX. the burn throughout and the reductions demonstrate been in $XX expected million We on QX cash level factors combination QX and reduce

we to Secondly, expected facility dispose to underway and of have initiatives as stash add cash assets position. admission, non-core the to our such is this citizen

Thirdly, in we continued largely are launch improvement as now management have expecting several capital phases. through we product working moved

being lines, deterioration prudence and the in flexibility as that non-dilutive capital increase margin our we matter error, a operating exploring or such are of of financial Now event in to our conditions. increase to solutions market options, as working said, currently of further

Moving have additional of another identified in we next months into XX, $X of cost savings million initiatives, to our million actioned cost five kind in few the integration annual quarters. only savings be Slide $XX actioned to

a we exceed year and With the to-date, fiscal estimate our $XX million as initial are original XXXX. to the target end identified of action track by on

million the takeaway to $XX.X or of of company expects is the Of financials budgets as identified Q&A in our savings that line. we progress shows in our expect expansion of approximately integration as this and margin excess quarters. the are benefits XX% initiative the cost SG&A savings of to from the million and operating been that through the costs realize QX COGS have this additional SG&A fruits the XX% the in conclusion, process-related the impact we QX, XX% the and we get cost the through before savings to session, $X action of quarter impact In these in remaining in Of huge million anticipate that coming clearly Valens our Management further initiatives. have with majority coming organization to come we only they coming come had a million, through through deliver the to or drive streamline overall the made SG&A $X.X cost XX% realized The smaller efficiencies. and $XX on positively important QX. and to

-- our that margins in our are of integration the the we've over not seen to QX I of With control impact positive greater gross However, and QX. largest largely further on the we online say, forward contract strides goods coming related being one impact coming initiatives for and sold, should quarters. cost of the expect biomass growth costs cost inputs automation

will and With the and than better. moving today a and call open session. are different to that, were the the question-and-answer we line quickly are we We over the turn in company I QX the much for for operator

Operator

you. Thank

Thank now the question-and-answer [Operator will We conduct session. you. Instructions].

line Our first Grey with of Global your the Please from Aaron procced Partners. Alliance question questions. with is

Aaron Grey

the Hi, good morning and for thank questions. you

for just to first June you visibility right, month me, in sales going to record So July. about for Verses question talked provinces into from the Verse strong

talked you Just feel the from terms quantify of provinces Thank for brand how the that the commentary in impact We want not And in think had it, about you. on you sell you SKU disconnect through, time. if the could numbers? having at of just and especially you retail or switch to with the the couple for with online potentially certain of then shelf revenue on some comfortability that, a weeks. different period get

Tyler Robson

quarter or Commercial a Adam, was to why say Aaron. but inventory, to it comment for at Officer balanced team But at Chief the everything those? one say And basically in Great the hurt even kick you end over it Shea, of a us. month, we the brand the don't both end their Thanks, year But challenging make to very it of could Yes. smooth Adam question. our was would say I definitely lumpy would on provincial will transition. boards, I it doing some transition least. did second, I

Adam Shea

appreciate I Yes. question. the Thanks, Tyler. Aaron,

choppiness now some very good Verses weeks, QX, several in very, strong, in. orders replenishment And impact. despite very question we around I'm the seeing we'll normalized a next strong transition rate. bullish throughout where have our we're over depletion spot coming think your be To specific on So to the the Verse we're I

our a depending from million to of on week, average So the rate on boards between major provincial is average, on a markets customers, the anywhere the point to depletion XXX,XXX in year.

having team weeks certainly we no believe really one SKUs So the or indicative two or of to our activated, have did unfortunate being but go. not where efforts depletions an impact, by wasn't due of the brand would

Aaron Grey

color. Okay. relates on profitability Great. help your just for in us items much me, a for Thanks some line of it from the the there very that second margin, gross bridge on question gross target, focus here And second margin, EBITDA on very we and the as just to to us to or the color then, margin of side. get terms more of there want on Any you. a improvement, margin the what's gross improvements of on target be you the whether help profitability specific gross will helpful. based in not the in the terms Thank to embedded can it EBITDA

Tyler Robson

Absolutely. don't that Sunil, you why one? take

Sunil Gandhi

company. contract don't we margin would database as gross see, mix, that growth to views, statement a official situations long-term we sales guidance gross We our to Look, need it would on to is be based improvements mix, from that an largely want expect think, to margin Sure. automation. the give know where our expect and we I profile our we business on provincial double north cost absolutely based obviously this from now, of really margin But steady to profile be. where definitely of XX%. We back it the

Aaron Grey

All jump right, the I'll great. back queue. Thanks for the in color.

Operator

questions. Haywood next Please Gilmer Your Neal Securities. line from with your of the with question proceed

Neal Gilmer

Maybe on of announced few get first the the sort over success start Yes. distribution And fully far was questions. what of sort of Obviously, evaluating you as implemented? or the Coldhaus the as does Good that just things going morning. it when months of partnership. Thanks sort monitoring program? actually be that for June, are to of I'll the in

Tyler Robson

Adam, Yes. yours. and It’s you the great on a start add question. then why don't of I'll back to

Adam Shea

the Yes, sounds start over is to -- the Valens about We've good. cannabis question. for in will they to them markets for in logistics, three now well solely Neal, with over major in the excited of markets an et experts partnership. they're who ability with got XX% universe, cetera. represent the Coldhaus, distribution, familiar bi-weekly of legal frequency, partnership thanks Anyone of specifically where will brands, exclusive with Coldhaus drugstore, well weekly Ontario, retail those Alberta BC, that coverage and and XX% have cannabis universe. Very

bullish. our So to that both the of able Valens X. on bullish specific and navigate we're very And September very This laser and gets ultimately consumers for we're underway help better team ability be portfolio. priorities have brands focus retailers related to to

So we're success very knowing feeling that bullish about Coldhaus’ of record in other categories.

Tyler Robson

Yes.

Neal. Just kind that, to add on of

are stores we any biggest be the and the big like store in can in much sales going have, we very that on intel how agency. I be whether maneuver. would competitive they frequently, the model to we've much direct methodical unlike say, only and model CRM we physically it’s system the Canada, concise more more unlike the thing seen think not I is

So SKUs can which and store, they're stores be information then we on find literally doing as in are aren't. out the carrying laser which ones focused that

be So Coldhaus all I've ones, force sell interviewed my dominant never anything I seen the do then going big there. believe And through it's in the to before career. most we've out like

Neal Gilmer

great. Okay, that. both for you Thanks of

about you saving announced to have through to $XX profitability, sort the Second on least simple I cost EBITDA go question guess think it. at the If initiatives, million. trying way if I'm I of of guys just is take the

that level just loss going basically was just QX, are that reported some of there million if through this, quarter, COGS SG&A, some in coming certain of to X to off get QX. of sort like, you to a but is going you're the going in profitability is and revenue, a EBITDA So such EBITDA what there we you're it what know, I need in achieve of just that's guys don’t revenue through that sort where answer -- from

Tyler Robson

said, follow Like But it, you answer you if stab up? Jeff, I Absolutely. Sunil why take then at we'll a exactly. don't and don't will know

Jeff Fallows

simple Sure. if math the do Obviously, you it. on

Let's margin, gross example, targeted come a sort can say, around an applying of assumption to sort for of you XX% levels. SG&A

I think of to is what you're going both. combination a see

the think one, well we're I growth, going areas footprint, both two, of savings on to to retail towards the higher I plus million the that as product pipeline, or will XX product recreational retail want seeing number if running, these increase, we mix we in Sunil, know recreational sales, that's we're that all Number contribute in as other revenue don’t you as business, mix, towards number margin products. continue think, we to other through SKU said, And Green think of EBITDA initiatives as thirdly, Roads and as add as I the see one. that. sales our positive. to

Sunil Gandhi

hit flexing you're I obviously levers. it's think all Jeff a on nail the three head,

so at growth, that the stay contribute all the expansion And there. will same it's in revenue down the and and SG&A going margin time, all

Neal Gilmer

very Thanks great. much Okay, guys.

Operator

Please from Andrew Stifel GMP. with go your question. with is Partheniou question next ahead line Our of the

Andrew Partheniou

growth questions. Hi, good as have business, international very about first taking all impressive morning, my U.S. Maybe BXB talking here. thanks rates for and well, the

little was a occur. could on And there. channels, bit supplement that really to in BXB these you bit could Just of understand, CVD softening a believe cylinders seems international be expect or maybe and growth of in looking are Or hitting this replicable. do sometimes reacceleration see growth that little overtake all it forward to trying because the rec you would softening stronger it rates quarter or a before

on see Just way wondering of the or about if businesses. we it next should to momentum the these quarter, think that all continued proper

Tyler Robson

question. great Yes,

of for destiny. adult you should it So, or attention first U.S. stability a do verticals, moving the over forecasting own We our believe a expect to lot were there, of board biggest stability, control to kick across part, with we the of forward the opportunity rec area there's and to which bring in because the being side. I Jeff, huge I in will I'll our us answer sales. and do the provincial obviously,

extremely it's BXB, as far As lumpy.

of the other seeing we're by rec, And seeing week, licensed without as week it's are by the producers just So month of lot lot challenges a a month. well.

right we of strategic the optimize our then what there's with relationship. manufacturing backfill to do, So is a like turbulence, which the now and goal lot BXB have, partnerships, capabilities but

momentum then side. on and to why So expect rec touch the U.S. the don’t more of adult especially other I you BXB the some continue, through on do stability opportunities Jeff, and

Jeff Fallows

Green Roads some we did it see From Sure. and can of product the that There third-party the held back growth side, not quarter. performance were noted, growth while the challenges with -- our availability related that say to suppliers didn't the in the also, bit that demand. a terms we meet but to or providing we our expectations were Instagram of online consistency meet quarter-over-quarter, as strategies Facebook us XX% in the I

So growth Green more we more there and do that. is Roads shelf coming expect there's the opportunity working there's out to more coming quarters, of demand in hard realize

I'd you're a we're time say of say that. was starting bump nurturing the of nice but quarter. one realizing I and [indiscernible] the has that, benefits to us patient in been of right, those that's terms materialize. with won't time, there sort long a efforts side, that international that's in little And been building On there a all this see But

looking revenue to saw now, by QX as the we're come. that be growth continuing that so channels think excited and QX we about to we're the there's more And and provided right at additional those

Andrew Partheniou

or your your sales Coldhaus transitioning versus process little developing And to that. Coldhaus for back partnering Thanks And exclusively decision-making own a here. of between force. going maybe kind bit deeper with maybe going into

Just this partner you wondering, drove in-house? developing Verses them what to really versus

Tyler Robson

this the that think to store this routing. even with we Coldhaus, Adam, at of whether forward, interviewed going And like the opportunity the like look seen level CRM it. the distribution the Tuesday, at big system, the never sales anything we've question. anything time it's a when XX:XX I sophistication models, feel can am. looked We on No, at XX:XX on between the seen never agencies. you at free I've platforms and at the saw And hand, and/or of And Yes. be majority am predictability tag end. whether we a all it's it's at is that of great with

that add repeatability you extremely would partners, of anything. And other to choose why we traceability the at Adam, too. know want Coldhaus if I some understand you of if look successful. They've then can think their them. So I you been don't and

Adam Shea

things it's really three only -- the sales the at in balanced Tyler's Andrew, force to way look this a add Coldhaus. I'd about is, comments Yes. to anchored is is that

So you're up the tire their going to wearing see, the retailer to store. will Valens, see a show Valens representative

going over has in rather, that XX-minute really sort then that call, So as representative the not did minutes, significance frequent have different intelligence us about talking to a being basis, on a Tyler person XX could priorities. just BC, very partners they're routing we they're Valens we their their the allows who's see randomly Ontario around anchored of that reach that -- who's any things frequency consistently just referenced, also And and the that considered. of very drive about store in course not a store other in to methodical of XX XYZ see call there in the at key specific isn't in

very be to out X. for That that. So September underway in excited

Andrew Partheniou

for Thanks in back the queue. I'll that. get

Operator

Thank you.

next line question. from Frederico your proceed Our Capital. ATB coming question with the Please is Gomes of with

Frederico Gomes

guidance. Hi, this million. [Indiscernible] on that quarter, questions. My your than my $XXX annualized. good more you revenue the morning, would for had is question be first thanks That taking double sales

much understand, your drive would us So to how within have, BXB? of that Canada? expect come Thanks. next could year? And would that you segments how in just grow expect U.S.? growth maybe you trying the to from growth? come you how much you which Or Just be, How control of remind faster? that to And from much much BXC will

Tyler Robson

Jeff over question. time going give cannabis. with in don't Yes. on turbulent No, expect of to kick to breakdown guidance we good think how it Obviously, or formal probably the we're I Sunil. unfold. to I'll the revenue a

to to multiple levers but think add feel going Jeff verticals, I come or on. from free it's

Jeff Fallows

Sure.

maybe up. I'll I can start you think Sunil clean and

said segments, we're various think our in getting focus. we specifically, Canadian obviously, the and getting very for looking if and us recreational space, that's our we lot that the that's So a at of there's opportunity priority, a significant

the capable U.S. CBD on number is to one. just we Roads significant of a business, So of the from that what growth. the that, started we in two, from think we've We doing. Green surface, coming only scratch think Number business the anticipate amount

to And our also perspective, going so a significant from add profile. that's contribution to growth that

start Tyler as lumpy. I to international be quarters. the in could move a revenue forward our BXB think of you're of basis the going won't then the some pie forward. meaningful see, to of coming profile piece be also relationships and big we're But to more to we're be add that it here going and some the opportunities that started said, as we on seeing, a Sunil? also take nurturing, a very contributor little

Sunil Gandhi

Yes.

think Jeff on. nailed it I straight

pillars it segments expect the growth and that but think to look way to with roles. we I Roads be rec Green adult we at the playing our to Canadian is of is, want to where get two key us supporting meaningful, other

Green and the Roads. and being led growth adult rec margin revenue So the by Canadian

Frederico Gomes

you then a you the color. share second some product targets, particular, and question certain are is, in And have for Thanks categories, them rolls. Okay. pre for behind market

Thank initiatives drive for right pre what in comment place the in you of you. to So on growth year? now have you remainder rolls the could

Tyler Robson

Yes, absolutely.

got Adam, the would for a haven't I very believe pre first, some And I And really we our of do numbers say weeks. on. real -- couple infused then behind categories. some of I reasons. One, in are delayed yet. example, made I'll go of market tag rolls free share So to then it feel eight there's listings to in Alberta, think

be a gain in back of really year, been of start the start, listings that's going will momentum. Adam? Coldhaus really to to So half that year expect push with the half a later coinciding with needle, will the the lot live, that the we believe

Adam Shea

on You based across that, that look of you you spot say is pre segments, Frederico, a we rolls feeling are would be on on think I year-over-year, there's three you're impact frankly, the The be quickly And at, different that on, than marketplace rolls. it said. premium in on think what We're thought additional depending more ago. when of that I points today, dynamic was thing the year period call pricing a only ahead all Tyler. to would comparing Tyler the we pre there where we'll

several about worried the very I'm have that feeling next not So weeks. innovation the about coming in we bullish

Frederico Gomes

the Thanks the in color. Okay. I for will queue. back hop

Operator

your James. questions. is question the Friedman next The with you. from of line Thank Michael Raymond proceed with Please

Michael Friedman

those cost give examples for tangible wonder -- morning the few exercises, questions. a thanks both of you've could very saving and bucket taking been from of ones these your example could give future. team. my enacting how And you already, and that actioned Hi, good the I bucket. in that if targeting an much. the you are COGS Thanks you've SG&A the if affecting you And

Tyler Robson

start a That's Sunil, you and add on? Absolutely. great question. then why don't I'll

Sunil Gandhi

of where think I a from. on things where we we in the kind We slides one mean, know highlighted we're you I can getting XXXX. very Sure, had of acquisitive see the material

duplication of out that naturally have coming we centralize did and we So areas things. of where to need

cost, some we've been rationalization the that cost, SG&A through cost the some in that through undertaking of months see lines a you is reduction, cases coming there of people lot year. six So infrastructure first

different the growth, as you're the going On you're to few come So see see costs, like, lower become areas, undertaking input profile just things, of labor you've significantly COGS, going things through as costs, contract impact initiatives, through that changing. input been SG&A. a well would run the it, to reduce other not

As of make your of product we certain average a lot natural installed, to the down. goes are cost we've CapEx areas, that is automating it labor

In be cases, and in [indiscernible] cases but So those might there's sourcing. we're in it savings realizing In capital. overhead, all cases, applications some people other cases, infrastructure other and other in areas. it's

Michael Friedman

really Okay, appreciate letting that. you I helpful. that's

or seeking Now, you how as double revenue us guess, assure in I at wonder, you can Are same costs, I you're year the you're are where so. areas not to time creating that you there these saving undergoing exercises these reducing bottlenecks? the next -- over cost

Tyler Robson

there out if for cut someone question. repeat if answer, could you So but welcome me, you the else, to

Michael Friedman

achieving guidance? growth you're be creating your saving repeat as for it confident undergoing I'll these revenue in you're [XXXX] exercises, can bottlenecks [ph] not Yes, briefly. material How we cost that

Tyler Robson

that's Yes. [ph], we example, this we'll invest a that great use I when And Sunil, well. units can you always to XXXX say was and the be on plan you call day. [FlowerPak] to automation, used for I question. add know do as a in would frank, it

CapEx core SKUs hour. not in XXXX right cutting velocity have that bottlenecks. really a Now and push. optimize see on ton really the platform an We've of now, it's And we're we're just we And potentially really the through. pushing to invested doing anywhere,

platform of synergies pushing. really we just recognizing the it's the that really So built and

any foreseeable we are items in the of going line So don't out any the future. that in see product bottlenecks

Michael Friedman

very thank much. you Okay,

Sunil Gandhi

exactly on what he's think think to is scalable right. to Tyler I build was what saying, business, like I a referring Yes,

reduce revenue. overhead we realized deprioritize, on Those us looking our reducing mean et business at a but areas you're might material for reordering, sometimes ability to in would better, things ability for get impact are those expect more post generate of automated, could out we're acquisition, some types actually the have we you to just not cetera. So I product like building a more revenues. the be to more scalable to areas, a And you grow system, cases that of couple ability costs, fewer, where that's of bigger,

part, So for would have that. in been savings the areas most the impact that not

Tyler Robson

double to SG&A. with as that side, than like the half almost like the check look Michael, companies your us you for add other at on more Organigram, area, I'd other revenue on research

industry, lot think expect doubled unreasonable a year invested with you in the our we note can to SG&A we've the in, over doubled that SG&A, not I look that especially the automation with that our acquisitions. of last it's

as just and methodical is that we've And savings. those part, some delayed mentioned, of process. more his cost to Jeff this been realizing the in So

and time. ramp and that over out revenue that continue can we So smooth

Michael Friedman

color. this for Thanks terrific. That's

Operator

of you. with next your from Thank line George question Todorovic The is proceed Please with question. the partners. M

George Todorovic

Yes, good guys. morning,

morning. Cortellucci Nicholas Just filling this in for

you rebound the and of most seeing So product are forms during firstly, June July? in what

Tyler Robson

Yes, you that great don't talk on Why Adam? question. one? Adam

Adam Shea

totally I'm Sorry, sorry that. about

to back For there. The some phone just about for where most the the was, I everyone was for to seeing The product. format, tech just bounced confirm problem my the question in reason product we're apologize, sorry.

George Todorovic

Yes.

Adam Shea

on Yes, little we're all significant sluggish our of we the across one form very, of uptick with frankly, the Bates in seeing we're area way strong quite very leading where actually, a business, volumetric parts think orders. a concentrates. But all bit is the I having replenishment is frankly, are factors.

Our dried pre side. our opportunities Lots well, is flower business, edible as business roll of on edible business, I business, the still, similarly, the say normalized. beverage would

the I really concentrates with the a of think right anticipated. now in that little we're bit exception seeing business. softness it the of across that softness board was But a we

about we volumetric far as now. good now where we're as on So are right feeling we QX right proceed through

George Todorovic

That sense. makes Great.

you me. What question terms few next hand the of thinking are for on Second cash in over quarters? using the

Sunil Gandhi

Your question around, on what quarters? are we seeing on next the few cash hand for

George Todorovic

terms of it? Yeah, using in

Sunil Gandhi

cash that reduce our what think we down. the stated goes EBITDA as material burn I we to the expect definitely was in Yes,

along as you negative of towards CapEx EBITDA or year. towards material or flow, you'd working us will you're are going capital the balance things whatnot. us down and gives the you what confidence that a path allow That's investment expect obviously, but any to getting don't the expect the like So cash some to path, cash naturally through navigate that breakeven, on and we're path, that

George Todorovic

Good Thanks. it.

Operator

remarks. the closing At you. time, over Robson for turn Tyler Thank this I'll to floor

Tyler Robson

it. appreciate Yes,

what to was quarter Just my want basically were said do to SG&A. time. burn and such for on big say the we cash drive to we opportunity the adult not doing that continued we missed coming bounce support going you is said with again this thank we enough Even though rec, will expectation. We're we're and everybody a Obviously, for and to continue will back happening we doing business we quick it's down, everything forward. not up

the again, operator call. So the to to it I'll turn thank with everybody want close that, back to you. Thank

Operator

Thank Thank for does you. today's conclude call. participation. your This you

this at time great have day. You a may lines now disconnect and your

Valens (VLNS) 15 Jul 222022 Q2 Earnings call transcript