Earnings Call Transcript - OGI Q1 2023

Operator, Operator

Good morning. My name is Rob, and I will be your conference operator today. At this time, I would like to welcome everyone to the Organigram Holdings First Quarter 2023 Earnings Conference Call. Thank you. Craig MacPhail, you may begin your conference.

Craig MacPhail, Speaker

Good morning, and thank you for joining us today. As a reminder, this conference call is being recorded, and a replay will be available on our Organigram website. Listeners should be aware that today's call will include estimates and other forward-looking information, which the Company's actual results could differ. Please review the cautionary language in today's press release on various factors, assumptions and risks that could cause our actual results to differ. Further, references will be made to certain non-IFRS measures during this call, including adjusted EBITDA and adjusted gross margin. These measures do not have any standardized meaning under IFRS. Our approach to calculating these measures may differ from other issuers, so these measures may not be directly comparable. Please see today's earnings report for more information about these measures. Listeners should also be aware that the Company relies on reputable third-party providers when making certain statements relating to market share data. Unless otherwise indicated, all references to market data are sourced from high-fire data as of November 30, 2022, pulled on December 21, 2022. I would like to introduce Beena Goldenberg, Chief Executive Officer of Organigram Holdings Inc. Please go ahead, Ms. Goldenberg.

Beena Goldenberg, CEO

Thank you, and good morning, everyone. With me is Derrick West, our Chief Financial Officer. For today's call, we'll discuss the results for the three months ended November 30, 2022, and a general business update. We will then open the call for questions. The first quarter of fiscal 2023 reflected the results of our efforts in fiscal 2022 to enhance scale and efficiency through facility expansion and productivity improvements. These initiatives have had a positive direct impact on our bottom line. In the quarter as well as a 43% year-over-year increase in net revenue, we delivered our fourth consecutive quarter of positive adjusted EBITDA, positive net income and record adjusted gross margin. In Q1, we maintained our number three position among Canadian LPs. We were number two in the flower segment, number three in gummies and hash and again held the number one market position in capsules. SHRED remains a solid and well-recognized brand, embraced by cannabis consumers and we continue to hold the number one position in milled flower by a wide margin. We expect our focus on product innovation, brand revitalization, strong sales execution and advanced plant science will enable us to continue to gain share. Looking at provincial board data. We have leading market share in the maritime and we're number one in flowered gummies and hash. In Ontario, we have the top three selling SKUs. We were number three in gummies, number two in hash and whole flower and number one in milled flower and capsules. In Quebec, our sales have nearly tripled compared to Q1 of fiscal 2022. This is partly from the addition of products from the Laurentian acquisition, but also due to significant increased sales of our overall portfolio. Based on data from Weak Crawler, we had the number one hash SKU, we're number one in milled flower, and SHRED was the third largest brand in the province. This national market strength comes from our focus on creating products that excite consumers. In Q1, we introduced 17 new SKUs, including infused pre-rolls, such as Edison Grape Crescendo and Tremblant Sweet Cherry. In November, we launched Holy Mountain, a new brand in English Canada and Wo La in Quebec. These brands offer unique strengths such as R*NTZ and MAC-1 and 3.5 gram format and pressed hash. They provide us a position in the small pack size value segment that isn't covered by our successful Big Bag O'Buds. In terms of production, with the 4C expansion completed at Moncton in Q4 of fiscal '22, we achieved scale benefits from a record harvest in Q1. After the expansion, Moncton has an annual capacity of 85,000 kilograms, but this will increase as we continue to refine our cultivation technology. This includes LED lighting implemented in fiscal 2022 and fractional watering, which is now in place in all grow rooms. In the quarter, we achieved a yield of 168 grams per plant, a 30% increase over 129 grams in Q1 of fiscal '22. As a consequence of a larger capacity and improved yields, the Company has significantly reduced its cost of cultivation, the lowest cost in our history. In Winnipeg, we have increased our output for gummies in kilograms by 35% from Q4 '22 to Q1 of '23. This was driven by the increase of Monjour units in response to high consumer demand. We continue to have great productivity on our packaging line with 35,000 to 40,000 pouches per day production. At Lac-Superieur, construction is substantially complete. We expect to begin to move into the new building in February, which will help support the launch of several new exciting hash SKUs. The greenhouse expansion is expected to come online in May. This will take us towards expanding the facility's annual capacity to 2,400 kilograms of craft flower and over 2 million packaged units of hash. In addition to expanding and increasing automation at Lac-Superieur, we are adding staff to the packaging team to increase production. Another initiative completed in Q1 was transitioning our medical cannabis business from direct patient fulfillment to having orders completed through medical cannabis by Shoppers Drug Mart. This provides a proven and trusted platform for our patients. We remain committed to our medical cannabis business, ending Q1 having added 26 SKUs to the Shoppers channel. Our center of excellence is now active and focused across various cannabinoids to develop and launch new product technologies. One area of activity is supporting discovery and development efforts on novel vapor ingredients and substrates. This research also creates an industry-leading vapor data set that will serve as a foundation for future development activities, including consumer safety, product quality, and performance. The state-of-the-art Biolab facility has been operational since June. The focus is on developing genetic toolboxes to aid the research of key cannabis traits and accelerate R&D activities. This has already supported several plant science discoveries that will benefit our current plant portfolio and long-term growth strategies. So overall, this foundation of increased capacity, high-quality, efficient production, and innovation serves us well in addressing markets in Canada and internationally. In Q1, we delivered $5.9 million of dry flower to Israel and Australia. This is a 71% increase over $3.4 million in Q1 of fiscal 2022. On November 17, we signed a new agreement with Canndoc in Israel. This agreement over a three-year term supply allows for the shipment of 10,000 kilograms of dried flower with an option for Canndoc to order an additional 10,000 kilograms. This is a great long-term partnership with Canndoc. The products sold in Israel are dual-branded with Organigram and are identified as indoor-grown Canadian flower, which is recognized as a premium product by Israeli consumers. We also expect to make further shipments to Australia in fiscal 2023 and are looking at other international opportunities. I will now turn it over to Derrick to present the financial review, and then I will return with some closing comments.

Derrick West, CFO

Thanks, Beena. As Beena mentioned, in the first quarter of fiscal '23, we benefited from the increased efficiency and scale we created in fiscal '22. Gross revenue grew 37% from Q1 '23 to $60.9 million, and net revenue grew 43% from the same period in fiscal '22 to $43.3 million. These revenue increases were primarily due to higher recreational net revenue, which grew 43% from Q1 of fiscal '22. The cost of sales in Q1 fiscal '23 were $32 million compared to $28 million in Q1 '22, an increase of 13%. The low increase in cost of sales relative to the increase in revenues was due to the lower cost of production that was achieved through higher output from expansion and improved yields. We harvested approximately 22,000 kilos of flower during Q1 '23 compared to about 12,000 kilos in the same prior year period, an increase of 92%. In Q1, the harvest benefited from the increased annual capacity at the Moncton growing facility to 85,000 kilos. We expect to see similar harvest levels in '23, which positions us well to meet our Canadian and international sales demand. On an adjusted basis, gross margin was $12.8 million or 30% of net revenue over the $5.5 million or 18% in Q1 of '22. The significant improvement in adjusted gross margin was primarily due to the higher overall sales volumes, combined with a lower cost of production. SG&A, excluding non-cash share-based compensation, increased to $15.7 million in Q1 '23 from $12.6 million in Q1 '22, while our total spend increased as a percentage of net revenue, SG&A expenses decreased to 36% from 42% in the previous year's quarter. The increase over the prior period was primarily due to the increased employee headcount related to the acquisitions of the Winnipeg and Lac-Superieur facilities, increased professional fees, ERP implementation costs, and non-cash amortization of the intangible assets acquired from the acquisitions. In the quarter, we achieved positive adjusted EBITDA of $5.6 million compared to negative $1.9 million in Q1 '22. The primary drivers of this significant improvement in profitability were the higher volume of products sold and the lower unit per unit cost of production, which resulted in a large increase to gross margins. Q1 '23 was our fourth consecutive quarter of positive adjusted EBITDA, based on our outlook for revenue, including international sales and improved efficiencies primarily achieved through scale, we expect this trend to continue. In the quarter, we had net income of $5.3 million compared to a net loss of $1.3 million in Q1 fiscal '22. The transition to positive net income is primarily due to higher gross margins along with a fair value gain in biological assets that occurred as a result of a large number of plants now growing in the multi-facility as a consequence of the 4C expansion. From a cash flows perspective, there was cash provided from operations of $3.5 million compared to cash used of $9.3 million in Q1 '22. This improvement was primarily driven by the quarter's positive adjusted EBITDA and a decrease to accounts receivable. Cash used in investment activities in Q1 '23 was $1.7 million compared to cash generated of $54 million in the prior year's comparison period. In Q1 '23, the cash use reflects a net redemption of short-term investments of $5 million, offset by the purchase of property, plant and equipment of $8.4 million. Note that cash generated in Q1 '22 includes proceeds of $60 million from the redemption of short-term investments. In terms of our balance sheet, on November 30, 2022, we had $95 million in cash and short-term investments compared to $99 million at the end of fiscal '22. The small decrease is primarily a result of capital expenditures of $8.4 million, partially offset by the cash provided from operating activities. With Organigram generating positive adjusted EBITDA and the expected completion of the planned CapEx spend during fiscal '23, we expect to generate positive free cash flow by the end of calendar 2023. This concludes my comments. I will now turn the call back to Beena.

Beena Goldenberg, CEO

Thanks, Derrick. Before we open the call to questions, I would like to reiterate that our success in the first quarter of fiscal 2023 resulted from the strategic investments we made in our business in fiscal 2022 that helped improve our margin and enabled us to compete profitably in today's competitive industry. This disciplined approach will continue and will help drive solid progress throughout the rest of the year. Thank you for joining us today. Operator, you may open the call for questions.

Operator, Operator

Your first question comes from Andrew Partheniou from Stifel. Your line is open.

Andrew Partheniou, Analyst

Congratulations on a successful quarter. I'd like to discuss gross margin. I believe Q1 was the first quarter where you benefited from the expanded production in Moncton, which contributed to notable gross margin growth. In your outlook, you mentioned that it might stabilize at these levels for the remainder of fiscal '23. Please correct me if I'm misunderstanding that. Assuming that's what your press release suggests, can you share your expectations regarding price compression that might counterbalance the yield improvements and scale benefits you anticipate for the rest of fiscal '23? Perhaps you could elaborate on your assumptions regarding price compression for specific product types. Is this mainly affecting your domestic operations in Canada, or do you foresee potential price compression in your international sales as well?

Derrick West, CFO

Yes. Thanks, Andrew. I think that we're seeing price compression now in the Canadian rec market, particularly around flower. And when we factor that in, notwithstanding, we do believe that we can continue to decrease our cost of production as a consequence of just the continued flow through of the higher yields and in terms of our cost of cultivation that will help our flower margins and as well with the automation CapEx spends around automation, et cetera and the extra margin we should be able to get from Lac-Superieur based on having an improved cost structure there post-expansion. I think that while we have room for all things being equal, we have room to improve the gross margin rate in the Canadian rec business, if everything remained equal. But as noted, we do see price compression that could be such that it is equal and offsetting. We're hopeful that it will not be fully equal and offsetting. But in light of that, we do believe that we can achieve the current gross margin rate that we have now being the 30% as we move forward. And if the price compression is not meaningful as we look at this, then we have room to increase the rate. And of course, as we continue to grow, which we would expect, knowing the innovation that we continue to do as sales move up will be more gross margin dollars, But the guidance we've given is specific to the rate of 30%, which we haven't historically provided, but we are comfortable that this is the new normal for us in the climate of the current market and again, with an offset for some price compression.

Andrew Partheniou, Analyst

Appreciate that fulsome answer. And if I could switch gears a little bit and talk a little bit about the balance sheet inventories, biological assets. Seeing that you did increase it this quarter, which I think you previously guided to and in line with the production expansion, could you talk a little bit about your internal planning and what you're comfortable with in terms of the level of biological assets and inventory in any way that you're comfortable with talking about a turnover absolute dollars or anything like that? And when do you think that inventory of biological asset could be a source of cash going forward?

Derrick West, CFO

Yes. I think on the bio asset, it's the increase that we had from the last quarter and also the gain that was on the income statement as we measure the fair value growth of those assets. It was a fairly significant percent increase in the quarter to take it up to approximately $21 million now. We are planting in all our available grow rooms now in the Moncton facility. There will be small fluctuations by quarter. But without another expansion or an acquisition of another facility, this is roughly where the bio assets should reach, give or take a few million dollars. So I think that's a fairly stabilized number. For inventories, we did see an increase as well. But I think in prior calls, Beena has mentioned a few times that we had demand that essentially outstripped our current production. And so as soon as we have the available flower ready, it was shipped out. So we were probably running fairly lean to lean on our inventory level. So we are trying to build in a small reserve there, of flower to ensure that we can meet all sales orders as they come and then to maximize sales and profitability. So I think that inventories are more up to move slightly north from their current number. But again, I think that some of the increases in inventories are now baked into our balance sheet, but I would expect the inventories to move slightly more than what bio assets would as we look forward.

Operator, Operator

Your next question comes from the line of Aaron Grey from Alliance Global Partners. Your line is open.

Aaron Grey, Analyst

Nice to see that the EBITDA improvement there. So quick question for me that I had just around the price compression and market share, specifically more so for Canada, can you just give us a reminder in terms of how you think going forward in terms of how you look to balance profitability of the SKUs you're putting out against share? Obviously, it's been a big momentum in terms of the gross margins that you guys have seen. Shares where you guys were outperformers. It seems like they might have softened a bit in the past two months, but would love to get a reminder in terms of your outlook on how you're looking at profit versus share? I know it's a little bit of both, but during sometimes, you might lean more on one versus the other. Thank you.

Beena Goldenberg, CEO

Certainly, Aaron. It's crucial for us to prioritize revenue growth that is also profitable. We are cautious in our approach. I’ve mentioned previously that we are comfortable competing in the value segment, as that’s where the majority of consumers are. However, we don’t want to lead in reducing prices at any cost. Toward the end of this quarter, we experienced some softness in our large format 28-gram flower due to some pricing pressures entering the Ontario market. We didn’t match that pricing, but we have adjusted our own prices to stay competitive. Over the last four weeks, we have already seen some recovery from that pricing pressure. As Derrick mentioned earlier, price compression is occurring due to an oversupply of flower in the market from all competitors, including ourselves. Other competitors are considering increasing production capacity, which reflects the current market dynamics that are leading to price compression, particularly for large-format products. Therefore, we have made pricing adjustments while ensuring we are still comfortable with the profits generated from that segment. Regarding your question about balancing market share and profitability, we will manage this closely, keeping in mind our goal to drive revenue while maintaining a focus on profitable sales growth.

Aaron Grey, Analyst

Okay. Great. That was really helpful answer there. Some question for me just want to switch over to international, another really nice quarter there that we saw the last quarter. So just on the go forward, are you guys still confident in being able to maintain or build off that base of about $6 million or so in the go forward or anything that we should think about? I know some competitors had kind of stalled on Israel. You guys were remaining pretty heavy there talking about your indoor premium sale, which I know is in high demand. So just your outlook on international would be very helpful? Thank you.

Beena Goldenberg, CEO

Yes, absolutely. We've experienced good growth in our shipments to Australia, with an increase in customers. Our longstanding relationship with Cannatrek continues, and last year we also added Medcan to our roster. We are continually introducing new cultivars, and there is strong interest from both of our Australian customers. Beyond our partnership with Canndoc, we are expanding our business in Australia. Additionally, we are exploring opportunities in other markets and are in discussions with potential customers in Germany. Last year, we were unable to capitalize on these opportunities due to limited flower capacity, as we were primarily focused on meeting the demands of the Canadian market and existing international clients. Now that we have excess flower capacity, we have initiated several conversations and are optimistic about growing our international business, with more updates expected in the coming quarters.

Operator, Operator

Your next question comes from the line of Tamy Chen from BMO Capital Markets. Your line is open.

Tamy Chen, Analyst

I've got two here. One is, Beena, follow-up to the comment you made that you saw some softness was at the end of the quarter or just after the quarter on your large format and that you made some adjustments to pricing, is that a meaningful assessment? I wasn't sure how to take that or was it just some modest tweaking on your 28-gram flower.

Beena Goldenberg, CEO

So in answer to that, the competitive activity came into the market in October. We were watching our off-take and seeing the impact. We did make adjustments that announced the market that didn't take effect in the quarter, but after the quarter ended. So, we have some adjustments to pricing. In terms of whether it's a full scale, listen, it's an adjustment on our 28-gram large-format flower, but not to all of our SKUs. So, it depended on the kind of turns we had on our SKUs, so we're being selective to make sure we remain competitive. We are excited about the fact that we will be introducing our Holy Mountain large-format offering in this quarter. And we will come in with what is a brand that has been grounded in consumer insights. We're very excited about the opportunity. But we've also know that we've come in with the kind of pricing that is the right price for that brand relative to the competitive set. So, I'm not sure I've given you a lot more clarity only to say that I wouldn't say it's a tweak, but it wasn't a whole scale adjustment either.

Tamy Chen, Analyst

Thank you for your insights on pricing. I understand your cautious approach to guidance, particularly given the potential for ongoing price compression. Could you share your expectations regarding the extent of this price compression for fiscal '23? Additionally, I remember that a couple of quarters ago, you suggested we might be seeing some stabilization in pricing. However, based on your comments today and those from a competitor, it seems that price compression is still a widespread issue in the industry. Do you believe stabilization will occur eventually, and how long do you think that will take? What factors are driving this situation, and when do you expect to see an end to it?

Beena Goldenberg, CEO

I'd like to address your question in this way. The overall supply of cannabis in the Canadian market shows a significant surplus of production. With many of our competitors having extra flower, they may take actions that aren't necessarily best for the industry but serve their cash flow needs. A few quarters ago, I thought we had stabilized flower prices, but we're now seeing compression in large format flower pricing. This issue is likely to persist until supply and demand are better aligned. There will always be some players making moves that are beneficial for them but not for the industry as a whole. We have increased our capacity driven by demand exceeding our supply, and we are confident in having customers for that added capacity. However, some competitors are producing more flower than there is demand for, which is what is driving price volatility. The stabilization will likely occur once some of that excess capacity is removed from the Canadian market.

Operator, Operator

Our next question comes from the line of Ty Collin from Eight Capital. Your line is open.

Ty Collin, Analyst

Thanks for taking my question and congrats on a great quarter here. I want to circle back to the balance sheet. Beena, could you talk about how you're thinking about your cash position today? You've got $95 million on hand around $20 million of CapEx commitments remaining this year and you're expecting to get to positive free cash flow by the end of the year. So that does leave quite a big cushion. Should we think of that as mostly dry powder for M&A? Or is there a chance you consider returning some of that to shareholders on cash flow and maybe pricing stabilize a little bit?

Beena Goldenberg, CEO

Yes. We still have a good amount of capital expenditures to allocate this year. As mentioned, there's an additional $20 million available as we explore opportunities. We have sufficient cash, allowing us to consider a longer investment horizon and focus on capital expenses that will enhance our ongoing margin improvements, particularly through automation and efficiency. While we have determined some projects, we will keep assessing areas where we can further optimize our operations and boost our margins and profits in Canada. Furthermore, our balance sheet supports the pursuit of additional opportunities. This year, 2023, is set to be intriguing. With tight capital markets, many companies are struggling financially, which may present us with valuable chances to explore. We have the flexibility in our balance sheet to seek the right opportunities and aim to continue building a strong business.

Ty Collin, Analyst

Okay. Great. I appreciate the color. And maybe ripping off your comments on the opportunity set out there, could you maybe update us on how you're thinking about U.S. opportunities might have changed following some of the recent disappointments in Congress and maybe whether this elevates some overseas investments in the pecking order or maybe even turn attention back to Canada in the near term in terms of potential M&A opportunities?

Beena Goldenberg, CEO

We have stated multiple times that we aimed to establish a solid foundation in Canada, and I believe we have achieved that. If a suitable opportunity arises in Canada that complements our efforts to reach some under-indexed market segments, we may consider it. However, we feel that Canada is in a good place now, and we are ready to explore opportunities beyond its borders. We are closely monitoring Germany, especially since draft regulations were released in the fourth quarter, and we expect the final regulation report to be available by the end of March. Germany is definitely on our radar. Regarding the U.S., it's disappointing that the anticipated safe legislation did not pass by year-end as hoped. Nevertheless, we can't ignore the U.S. market since it's right next door. We continue to keep an eye on the U.S. We had previously looked into CBD opportunities, as many competitors did, given its availability due to our TSX and NASDAQ listings. However, most companies that invested in CBD have not seen significant returns because the U.S. market is highly fragmented, and until the FDA regulates CBD, it doesn't appear to be a promising opportunity. This leads us to consider THC opportunities, which cannot be pursued under our current listings. Nonetheless, we see some creative options being explored for compliance with our listings, and if we identify a viable opportunity, we will certainly share that news. This is an important next step for our business that we are actively investigating.

Operator, Operator

Your next question comes from the line of Michael Freeman from Raymond James. Your line is open.

Michael Freeman, Analyst

Congratulations on a terrific quarter. Could you share your thoughts on the results of the capacity expansions that you have completed and those that are currently in progress? How has this impacted your ability to meet the demand for some of your most popular brands domestically? You mentioned having limited supply compared to demand for SHRED brand products. Have you been able to satisfy demand in areas where you were previously unable to? Additionally, how do these capacity expansions affect your ability to supply international markets?

Beena Goldenberg, CEO

Sure. So, my technical difficulty memory. Yes, absolutely. We talked a lot last year about being hand to mouth on our supply and not having the capacity to introduce SHRED to all jurisdictions across Canada. We were able in the fourth quarter to finally get shipments to every province. And so we have now the flower supply to be able to continue to supply those markets. We were lapped into BC. SHRED takes as we've gone into other provinces, it takes a little ramp-up time as people try it, understand it, come back to it. So, we are seeing a ramp in D.C., and we hope to see even greater demand in that market. So, we do have enough flower now for supplying our business across the country. And we also have excess capacity to capitalize on some of the international opportunities that we've had inbound requests for but could have. So, our priority last year was supplying our existing Canadian business and our existing international customers. And now, we have a great opportunity to capitalize on some of those opportunities we didn't have the flower for before.

Michael Freeman, Analyst

All right. Great. That's very helpful. Now shifting gears to your product and brand mix. I wonder if you could touch on how the launch of the Holy Mountain brand has been going, where you see gaps in your current portfolio, and I appreciate if you could touch on your pre-roll offerings in this answer?

Beena Goldenberg, CEO

We are very excited about the launch of Holy Mountain. We have begun shipping the 3.5 gram format and the press cash format, and the response has been positive. We're also looking forward to introducing a larger flower offering within Holy Mountain, along with new SKUs being added to that portfolio throughout the year. Distribution for Holy Mountain has just started, and we anticipate being available in all of English Canada and Wola in Quebec in the next couple of months, and we will continue to push for distribution growth. Overall, we have a stronger innovation pipeline for the latter half of the year compared to the first half. I mentioned some infused pre-rolls we've shipped already, but we also plan to introduce some exciting new innovations later this year, and we'll share more details when the time is right. Our plans are based on significant consumer insights, which I referred to regarding Holy Mountain and the infused pre-rolls. You also asked about areas needing development. In the vape segment, it's clear we have an under-index. We launched SHRED-X vapes last year with three to four SKUs, and our sales per SKU are in line with those of key competitors. However, our overall market share is lower because we have fewer SKUs available. Expect to see more vape products from us as we work to address this gap. We are confident in our quality and have insights into consumer preferences. While we tend to be more conservative with our schedule than some competitors, we recognize that having a broader selection is important in the vape category. Therefore, we will be expanding our product lineup.

Michael Freeman, Analyst

Okay. Great. That's very helpful. And if you would entertain one more. I wonder if you could touch on your relationship with British American Tobacco. And any interactions you might have at them beyond the center of excellence, perhaps talks on new jurisdictions, et cetera.

Beena Goldenberg, CEO

We have a very strong partnership with British American Tobacco, who is a highly engaged strategic investor. We have regular conversations and meetings to discuss developments in our center of excellence, which focuses on long-term research. We also address our work in the product development center to ensure we generate benefits for both our current and future business. It's a solid relationship; as a significant shareholder, we keep them updated on our business progress. In the past, they've been very supportive, assisting us in acquiring equipment through their stronger relationships with suppliers. Our discussions with them are ongoing, and we continue to explore ways to collaborate in the future.

Operator, Operator

Our next question comes from the line of Matt Bottomley from Canaccord Genuity. Your line is open.

Matt Bottomley, Analyst

Just two questions for me. The first is one of your peers that reported earlier this week was calling for potentially an increase in market share just on the back of less competition as there's a bit of a shakeout for some of the lower-end LPs that aren't as capitalized. I'm just wondering, if you think that's something that's reasonable and sort of 12-month time frame, if you think there'll be some potential tailwinds with respect to the ability to compete for provincial purchase orders? And the second is just your view on the overall total addressable market in Canada, maybe just at the retail level. Do you think that any chance of meaningful upside from where we are today without changes from the federal government at this point?

Beena Goldenberg, CEO

Great question. Let me start with the first part. Many have noticed that there's an increasing number of licensed producers entering Canada's Companies' Creditors Arrangement Act. This industry is quite fragmented, and as companies exhaust their resources and funding, I believe we'll see more of them exit the market. For a company like ours, which has the capability and capacity to supply the market, I see a chance to grow our revenue and market share. This might happen toward the end of the year, and we may see some instability in the short term as certain players struggle. Consequently, we're being careful in our approach. However, we do believe, as others have mentioned, that consolidation will occur in this industry, and those with scale and lower costs will be poised to take advantage of short-term opportunities. Looking at the long-term market potential, it continues to be promising. We're observing month-over-month and annual growth. The latest BDSA forecast suggests a 13% year-over-year growth, which is a rate that many other sectors would envy. Therefore, I believe there's positive momentum. We experienced a strong fourth quarter, as summer is typically the peak demand period for cannabis, despite some COVID-related restrictions. I believe there will still be growth opportunities in the marketplace. I’m excited to be part of this industry, as I expect consumer interest to persist. Ideally, I would like to see regulatory changes that allow for greater competition, such as lifting the 10-milligram cap on edibles, a move that would benefit our thriving edibles business. Currently, consumers are not getting what they desire with the existing cap. In Colorado, edibles account for 15% of the market, with consumers typically purchasing 100 milligrams at a time. So, if regulations were to change, there would definitely be opportunities. I would also like to see CBD separated from THC, allowing for sales in pharmacies and natural grocery stores. We have a solid brand, Monjour, which offers pure CBD gummies and other minor cannabinoids, presenting a great opportunity. However, we all know regulatory changes can be slow. We're actively participating with our industry association and engaging with the government to discuss the industry's needs for growth. I’m confident that changes will occur over time, but I doubt they will happen quickly enough for some licensed producers that are currently struggling.

Operator, Operator

And there are no further questions at this time. Ms. Beena Goldenberg, I'll turn the call back over to you for some final closing remarks.

Beena Goldenberg, CEO

Well, great. Thank you, everybody, for joining us today. We're excited about the quality of the results we reported, and we look forward to providing further updates throughout the year. So for everyone, have a great day, and we'll speak soon.

Operator, Operator

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