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spk10: Good afternoon. My name is Michelle, and I will be your conference operator today. I would like to welcome you to Canopy Growth's first quarter fiscal year 2024 financial results conference call. At this time, all participants are in a listen-only mode. I would now like to turn the call over to Tyler Burns, Director of Investor Relations. Tyler, you may begin.
spk04: Good afternoon, and thank you all for joining us today. On our call today, we have Canopy Growth's Chief Executive Officer, David Klein, and Chief Financial Officer, Judy Hong. After financial markets closed today, Canopy Growth issued a news release announcing the financial results for our first quarter ending June 30, 2023. News release and financial statements have been filed on EDAR, EDGAR, and CDAR, and will be available on our website under the Investors tab. Before we begin, I would like to remind you that our discussion during this call will include forward-looking statements that are based on management's current views and assumptions, and that this discussion is qualified in its entirety by the cautionary note regarding forward-looking statements included at the end of the news release issued today. Please review today's earnings release and Canopy's reports filed with the SEC and CDAR for various factors that could cause actual results to differ materially from projections. In addition, reconciliations between any non-GAAP measures to their closest reported GAAP measures are included in our earnings release. Please note that all financial information is provided in Canadian dollars unless otherwise stated. Following prepared remarks by David and Judy, we will conduct a question and answer session. We will take questions from analysts. To ensure that we get to as many questions as possible, we ask analysts to limit themselves to one question. With that, I will turn the call over to David.
spk03: Thanks, Tyler. Good afternoon, and thank you for joining us today to discuss Canopy Growth's first quarter results for fiscal 24. During the call today, I'll cover four key topics. First, the progress of our transformation to a simplified asset-like business. Second, the improved performance of our Canadian cannabis business. Third, the strong top-line performance for BioSteel and stores in Bickle. And finally, a brief update on Canopy USA and the encouraging developments with our U.S. cannabis brands. Following my remarks, Judy will provide a brief review of our first quarter fiscal 24 results and review the actions we've taken recently to strengthen our financial position and improve liquidity. Over the past year, we've made significant and sweeping changes to our business. Our strategy is anchored in our commitment to building beloved consumer brands within an asset-light operating model. We fundamentally believe this model will enable us to compete more effectively. We've streamlined and simplified the business in the following ways. We divested our national retail operations to reduce complexity and eliminate channel conflict. We closed many facilities to focus cultivation, into two purpose-built sites. We've outsourced production of edibles, vapes, and beverages to contract manufacturers, which is accelerating speed to market while reducing the overhead and risks involved in developing new products. Collectively, these actions resulted in a roughly 60% reduction in both our cultivation footprint and total headcount. This transformation to a simplified asset-like model is working. as evidenced by our increased ability to execute and deliver measurable results. Today, our remaining cultivation facilities in Kincardine, Ontario, in Kelowna, British Columbia, are producing the high-quality flower that consumers desire. Our cultivation infrastructure has been greatly simplified, and our supply is more effectively matched to demand. Our transformation has delivered significant cost savings with SG&A expenses and cost of goods sold reduced by a combined $172 million to date, including $47 million in the first quarter of fiscal 24. We continue to expect this transformation to yield $240 to $310 million in cost savings by the end of fiscal 24. While we're pleased with the significant progress already made, our work to complete the transformation of canopy growth is not yet done. Over the next weeks and throughout the remainder of the year, we'll continue to execute on opportunities to drive efficiencies and reduce expenses as we drive our business to adjusted EBITDA positive, exiting fiscal 24, excluding investments in BioScale. Next, I'd like to spend a few minutes discussing the performance of our Canadian cannabis business in the first quarter of fiscal 24. Our adult-use cannabis business delivered the third straight quarter of stable-to-growing revenues, increasing 12 percent sequentially to 24 million dollars this improved performance is being led by the resurgence of our tweet brand in fact in the first quarter tweet push means 28 gram was one of the top five performing flower skis in canada the demand for tweet is strong across the country including in the larger markets of british columbia alberta and ontario as more consumers experience these high quality strains the demand has elevated the Tweed brand to the number eight rank within the total flower segment of the Canadian adult use cannabis market, moving up 19 places year over year. As we look to the year ahead for our Canadian cannabis business, we'll continue Tweed's momentum and apply the same winning approach to our Doja and Seven Acres brands. Another exciting development for our Canadian portfolio is the addition of Juana Edibles. In late May, we announced that Canopy will now distribute Juana in Canada, unifying our North American house of brands, which is part of our long-term strategy. This is a significant step toward becoming the leader in cannabis edibles in Canada. We've developed an ambitious brand growth strategy for Juana early in the current quarter, starting with the availability of Juana gummies for registered medical cannabis patients through Spectrum Therapeutics. we're already seeing strong demand reaffirming the brand's potential within the Canadian market. And we're also working with the Juana team to deliver more industry-leading innovation to drive the brand's leadership in the Canadian cannabis market. We expect the addition of Juana to be accretive to revenue and adjusted EBITDA as we cement Canopy as Canada's leading cannabis edibles company. I'll now speak to the performance of our consumer products business in the first quarter, starting with BioSteel. The BioSteel brand delivered its fourth consecutive quarter of record revenues, increasing 68% sequentially, more than double the prior year. This strong performance by BioSteel in the first quarter was due in part to our continued drive into the food, drug, and mass market channel in Canada, ahead of the key summer selling season. For those of you that live in Canada, I'm sure you've seen that the BioSteel brand has become ubiquitous. and is prominently featured in gas stations, grocery stores, and Costco nationwide. In the U.S., we're tightening BioSteel's geographical focus to prioritize key markets, including the central, northeast, and southeast regions. While the brand continues to deliver record top-line growth, the investments required to sustain this business are significant. As I outlined on our last call, together with our board, Management is actively engaged in a strategic review of the business, including exploring a sale. And we expect to have a decision in short order to reduce the drag on our profitability as we remain focused on our core cannabis businesses. Turning briefly to our world-leading vaporizer brand, Storz & Bickel. Distribution gains in the United States helped grow revenues 16% year-over-year to $18 million in the first quarter. Historically, Storz & Bickel has experienced significant growth following the launch of new products, and I'm excited to share that we're in final preparations to launch a new line of innovative Storz & Bickel vaporizers this fall, setting the performance standard for cannabis vaporizers. I fully expect this will drive the next era of growth for the Storz & Bickel brand. Finally, I'd like to briefly speak about our U.S. cannabis businesses, which continue to drive brand growth, primarily leveraging an asset life expansion strategy. Beginning with Jetty, this past July, the brand brought California's number one solventless vape to the state of Colorado, its third U.S. market after launching in New York State this past March. Building on their decade of leadership in the California market, Jetty expanded its product offerings in the state with the launch of the market's first OCAL-certified solventless vapes in a variety of sativa and indica strains. OCAL is comparable to organic certification for the cannabis industry. Moving on to Juana, in collaboration with Certerra Wellness in Florida, Juana products from the brand's premium and innovative cannabis-infused gummies lineup are now available to patients in 45 medical cannabis treatment centers across the state of Florida. marking the 15th active U.S. state or territory in which Juana cannabis edibles are sold. It's worthwhile highlighting that in addition to these individual growth strategies, the Canobie USA ecosystem companies continue to develop collaborative opportunities and synergies, including Terrasyn becoming the sole manufacturer, supplier, and commercialization partner of Juana brands in the fast-growing New Jersey market. as well as being Juana's new partner in Maryland, which is now adult use legal. Speaking of Terrasen, I'd like to congratulate them on their transformative TSX listing, which marks the first multi-state operator to successfully trade on a major exchange. We look forward to continuing to support their success in working together to capitalize on the large market opportunity in the U.S. In summary, Canopy's Q1 earnings demonstrate that our transformation to a simplified, asset like model is already yielding results. Our core cannabis, our core business is stabilizing and growing. Our commercial execution has strengthened and we have delivered significant cost savings that put us on a path to achieve positive adjusted EBITDA in our cannabis businesses exiting fiscal 24. And while BioSteel continues to demonstrate record top line growth, our focus remains North American cannabis leadership and as such, We're advancing with strategic options to reduce the cash burn associated with BioSteel, as well as exploring additional measures to monetize other non-core assets. Ultimately, we remain convinced by the potential of the $50 to $70 billion North American cannabis market, and to meet this opportunity, we've transformed Canopy into an asset life and more focused organization. We'll have more to share about our additional actions to further cement this transformation over the coming months. With that, I'll turn it over to Judy.
spk11: Thank you very much, David, and good afternoon, everyone. I'll start by recapping our first quarter fiscal 2024 results, including the progress we're making to achieve profitability. I'll then discuss our balance sheet and the additional actions we've taken to delever the balance sheet and improve liquidity. I'll then review our priorities and outlook for the balance of fiscal 2024. Let's begin with our first quarter fiscal 24 results. Overall, we view Q1 as a key inflection point as significant business transformation we've undertaken over the past year are reflected in results across our P&L. We delivered revenue growth and profitability improvement across virtually all of our businesses generate additional cost savings, and remain firmly on track to achieve $240 to $310 million of cost reductions by the end of current fiscal year. Looking at our consolidated financial results, we delivered net revenue of $109 million in Q1, which is up 3% compared to Q1 of last year. Excluding the impact of retail divestiture, net revenue increased 16%. Drivers of revenue growth were BioSteel, which was up 137%, and Storz and Bickel, up 16% year-over-year. Q1 gross margin was 5%, with all businesses except for BioSteel showing improvement on a year-over-year basis. Excluding BioSteel, Q1 gross margin was 18%, and adding back non-cash depreciation and E&O expenses We estimate cash gross margin was approximately 35% excluding BioSteel. Q1 adjusted EBITDA loss was 58 million, an improvement of over 20 million relative to Q1 of fiscal 23. We estimate over 60% of adjusted EBITDA losses in Q1 was attributable to BioSteel. Free cash flow was an outflow of 151 million, which included a few non-recurring items, which I'll speak to in more detail later on. I'd like to now review the results of our key businesses in more detail, starting with Canada. Q1 net revenue was 40 million, a second quarter in a row of sequential revenue increase. Our adult use B2B business was down 9% compared to last year, but was up 12% compared to the prior quarter, led by strong growth from our pre-flower and pre-roll products. Canadian medical sales increased 7% compared to last year. Gross margin was negative 1%, and cash gross margin, adding back non-cash depreciation costs and E&O expenses and costs, was an estimated 32%. The improvement versus last year was driven by the cost reduction actions we've implemented, including savings across our cultivations, direct and indirect manufacturing costs, facility and distribution costs as part of our business transformation plan. We expect additional cost reductions to drive further improvement in gross margins following our full exit of one Hershey main facility at the end of July. Best-of-the-world cannabis sales were down 26% year-over-year, but increased 16% versus Q4 of fiscal 23. Last year's revenue included a 3.5 million opportunistic bulk sales to Israel, as well as a one-time crude sale in the US CBD business. Post margin was 34%, reflecting an improvement in our US CBD business post our strategy shift partially offset by a geographic mix shift with last year's margin boosted by high margin bulk sales to Israel. So when you look at our cannabis business in total, we delivered revenue of $50 million, gross margin of 18%, and an estimated cash gross margin of 32% in Q1. Turning to non-cannabis, starting with stores in Big Gold, SMB saw its revenue return to growth in Q1, with sales growing 16% year-over-year, primarily driven by improved U.S. performance. As you recall, our U.S. sales at fiscal 2023 were negatively impacted in part by financial challenges at certain distribution partners. Over the course of the past several months, we've enhanced our U.S. presence with additional resources And this effort is driving expanded distribution of these tourism vehicle vaporizers in our key U.S. market. SMB gross margin saw an improvement to 43% compared to 36% a year ago, driven by higher sales in the U.S. SwissWorks grew its sales 9% year-over-year, benefiting from increased contributions from its body care product line. Gross margin remains healthy at 48%. Let me now spend a couple of minutes on BioSteel. BioSteel saw an outsized revenue growth this quarter, up 137% to over 32 million during Q1, driven by increased distribution into food, drug, mass, and club channel in Canada. So a strong velocity driven by increased brand awareness of BioSteel from our NHL sponsorship, which drove greater shipments than expected, ahead of the key summer selling season. We believe Q2 performance will show more modest growth. Growth margin came in at a negative 24%, which was impacted by higher warehousing and product costs, inventory destruction costs, E&O expenses due to aging of certain inventory, as well as higher repair and maintenance costs at the Verona Manufacturing Facility. BioSteel also saw an increase in its SG&A expenses compared to Q1 of last year, driven by higher AMP spend due to the NHL sponsorship costs that began in the second quarter of last fiscal year. As we said in the last call, we've implemented a number of actions to reduce our costs across the P&L at BioSteel, which are expected to improve both gross margins and reduce AMP spend in the coming quarters. Let me now speak to the progress we're making on our path to profitability. Q1 fiscal 24 adjusted EBITDA loss was a negative 58 million compared to 79 million a year ago. The improvement is driven by cost reduction of 47 million from the business transformation plan, which was partially offset by a 6 million decline in BioSteels gross margin, a 12 million increase in BioSteels AMP spend, and lapping last year's payroll subsidy benefit of $3 million. Looking at our SG&A expenses more closely, selling and marketing, G&A, and R&D expenses declined by a combined 15 million or 17% compared to a year ago. Excluding increased investments in biofuel, selling and marketing, G&A, and R&D expenses declined by 26 million or 30% year-over-year. Our acquisition, divestiture, and other costs increased by $5 million to $9 million, but the biggest driver of the increase is over $5 million of costs related to the restatement of BioSteel's historical financials. I'd like to now review our cash flow and balance sheet. Our cash and short-term investment balance at June quarter end was $571 million, reflecting a net cash outflow of $212 million from the March quarter end. Breaking down the cash outflow of $212 million, first, cash flow from operations was an outflow of $149 million. Included in the cash outflow was a $30 million interest payment. Q1 cash outflow also included several non-recurring cash payments, including $17 million in litigation-related payments and cash restructuring costs that we did not expect to recur. and BioSteel saw an increase in working capital this quarter due to sales growth, including an approximately $16 million increase in its accounts receivables. We expect our cash flow from operations, excluding BioSteel, to be roughly in line with our interest expenses as we exit FY24, driven by the completion of our cost reduction program. Second, within cash flow from investing activities, Q1 saw an inflow of $83 million from disposition of facilities that we closed as part of our business transformation plan. We continue to expect additional proceeds from asset sales before the end of September for total proceeds of up to $150 million. And net financing activities resulted in an outflow of $133 million. That pay down during Q1 of $118 million relates to the second pay down of the senior secure return loan following the agreement in October of 2022, the $15 million other financing activities related to the lease termination payment for the Quebec JV that we exited. Turning to the balance sheet, as of June 30, 2023, we had $571 million in cash and short-term investments, and total debt of 1.045 billion. Subsequent to the quarter end, we've taken additional actions to strengthen the balance sheet and improve liquidity. We settled the full 237 million principal amount of the July 2023 unsecured notes through exchanging 64 million of the notes into equity, refinancing 40 million into a new convertible note, which we expect to equitize post our annual shareholder meeting in September, and paying the remaining $133 million in cash. We made $93 million of payment to reduce $100 million of the senior secure return loan principal amount at $0.93, and we removed the minimum cash liquidity covenant under this terminal. We also remain on track to generate total proceeds of up to $150 million by end of September of which 90% of the net proceeds will be used to pay down the term loan at 95 cents on the dollar. So following the completion of these actions, and assuming that the promissory note held by Constellation is settled in equity, we estimate our total debt balance will decline to approximately 570 million with minimal short-term debt obligation. In addition, our annual interest expenses are expected to be reduced by 20 to 30 million to approximately 80 to 90 million at current interest rates, resulting in additional cash savings going forward. We continue to work on a number of options that are executable over the next coming months that would strengthen our financial position and improve liquidity. Electina provide our key priorities and outlook for the balance of fiscal 24. In Canada cannabis, we're firmly on a path to achieving profitability at current run rate revenue as we achieve the remainder of the cost reduction program. We also believe that the addition of Juana gummies into our portfolio provides potential upside to both sales and profitability in the back half of our fiscal 24. In rest of world cannabis, we expect continued growth in Australia and Poland as well as improved performance in Germany, driven by a new supply of high-TC flour in the back half of our fiscal 24. For stores in Bickel, Q2 is expected to be impacted by seasonality, with sales and profit down compared to Q1. However, we expect growth in the back half of the year, driven by a new product launch in the fall and a continued focus on improving performance in the U.S. For BioSteel, we expect Q2 sales to show more modest growth compared to Q1, as sales velocity and shipment patterns are expected to normalize post the summer selling season. This work sales are expected to be down in Q2 versus Q1, again, impacted by seasonality. From a cash flow standpoint, we expect our cash from operations exiting fiscal 2024 to be aligned to our interest expenses including BioSteel, based on current business momentum across our core businesses and completion of our cost reduction program. In closing, we believe Q1 results demonstrate that we're well underway to achieving our target of positive adjusted EBITDA as we exit I-24, with the exception of BioSteel. We're also actively working to remove the drag toward profitability and cash flow from BioSteel as soon as possible. and several initiatives are underway to continue to improve our balance sheet and strengthen our financial position. This includes our prepared comments. We'll now take the questions. Operators, David and I are now happy to take questions from analysts.
spk10: Thank you. Ladies and gentlemen, we will now begin the question and answer session. If you would like to ask a question, please press star followed by the number one on your telephone keypad. If you would like to withdraw your question, please press star followed by the number two. And if you are using a speakerphone, please lift your handset before pressing any keys. To ensure an efficient call that gets to the questions of as many analysts as possible, analysts are requested to limit themselves to one question and rejoin the queue for any follow-ups. One moment please for your first question. Your first question will come from Vivian Azer at TD Cowen. Please go ahead.
spk02: Hi, good evening. Thank you so much. Hi, Vivian. Hey, Judy. Hey, David. So, Judy, you mentioned at the end of your prepared remarks that you wanted to present upside to the targets that you're reaffirming today. And, David, in your prepared remarks earlier, You noted that the wanted distribution agreement would be accretive to both revenues and profitability. So I just want to dig into that a little bit more and better understand how, number one, the economics work on distribution. Because really, like, you know, for a business at scale, which maybe that's just not the case here, you know, CPG margins are generally higher than distribution margins. So I just want to understand that a little bit. And then more importantly, I think from a strategic standpoint, like, how are you thinking about prioritizing Juana within your total portfolio? Because it seems to me that you guys are having a fair amount of success in revitalizing your master brand in flower. Um, but the master brand approach, you know, that, that you guys inherited seems to have brought a lot of risk to the portfolio. Right. And, and so if you're picking different brands across different categories, maybe you're de-risking the portfolio a little bit. So I'd love to get your perspective on that. Thank you so much.
spk03: Yeah. So, so I'll start out. Um, so yeah, so one, uh, one in Canada right now is, is, um, you know, roughly a 13 share of the edibles market. And we think that with our team's driving distribution in Canada, we can grow that share a reasonable amount. We, as a result of our ownership of Juana through the option structure, we actually will get all of the brand owner economics for Juana in Canada. So it's not just distribution margin, it's the entire uh, margin related to brand ownership as well as distribution. Of course, we have to pay, um, us to manufacture to our, our, our CMO partners. So that's why we think it's generally accretive from a growth standpoint. It'll be accretive, uh, from an, uh, an EDADA standpoint and a margin standpoint. And we also think it will, um, uh, you know, it's, it's just a nice add from a dollar standpoint to, to our portfolio. I'll address the master brand approach because I think if you look at the brands we have in Canada, the flower brands in Canada, we've focused on revitalizing Tweed first because Tweed is actually, at least according to surveys, the best-known cannabis brand in Canada. However, we had some work to do from a quality standpoint, and I think we've now delivered that quality into the market, and we saw a lot of growth behind Tweed. a couple of really strong strains in Tweed. And we'll apply that to our Doja brand and Seven Acres brands in the flower space. We talked about Juana in the edible space in Canada. And then from a beverages perspective, you know, we continue to drive Tweed as a beverage brand as well as Deep Space as a beverage brand in this market. So we like that. And then, Vivian, the other thing that we like is having Juana in markets like Toronto and Montreal and Vancouver as well as having it in markets like the Sertara markets in Florida and their overall positioning in Colorado. So it's, you know, it starts to get exposure and feel like a real North American brand. And we've said this before, and I know we don't disclose financials as it relates to Juana, It's a profitable business that's positioned really well in some really key markets across the U.S., and we just want to revitalize that in Canada.
spk11: And Vivian, I think just in terms of a financial standpoint, if we take a step back, what we said about Canada was that all the actions that we've taken was really to position Canada to achieve profitability at the current one rate of revenue, And I think I've said in the past that if we achieve 35 to 40 million of revenue in Canada, then we believe that we have the cost structure to achieve our profitability. And, you know, this is now the three quarters in a row where we've been in that range of revenue. So to the extent that WANA provides upside to that range of revenue, we think that there is potentially an upside to improving our profitability in the Canadian business. We'll provide more details as we get more color just in terms of the revenue and the profit potential of the brand once it's fully in the Canopy system in Canada.
spk07: That's really helpful. Thanks so much.
spk09: Your next question will come from Erin Gray at Alliance Global Partners. Please go ahead.
spk08: Hi, good evening, and thank you for the question. So, I want to shift a little bit to... Are you guys able to hear me okay? Yes. Okay, great.
spk05: Yeah, I want to shift a little bit to international. So, I know, you know, more recently you've been bringing up Australia and Poland, but I want to talk a bit about Germany. You mentioned a little bit about getting the high THC flour in the supply. Some of your peers in that country have been talking about potential big uptick in inpatient growth, given it's going to be removed from the narcotics. So wanting to take on Germany, given that it's been one of your key markets that you're going to look towards. So do you think there's a lot of opportunity there for reinvigorated patient growth going forward that you might be able to take advantage of and how you think about that market? Thanks.
spk03: Yeah, so Aaron, we've done a lot of work to get regulatory clearance for our strain offerings in Germany and to ensure that we had the GMP production capacity in Canada. And we feel good about our ability to produce the right strains for that market. And at the beginning of July, we actually added significantly actually to our sales team in Germany so that we can address that market really well. So we feel bullish on it. Again, I think we're seeing a lot of growth out of Australia. We're seeing really good growth in the market in Poland. And we believe that we can get some good growth out of the German market as well. And as Judy called out in her comments, we feel good about the performance of that international business. It's a little bit muted on a year-over-year basis because of the the one-off sale into Israel this quarter last year, but we feel pretty bullish on the international markets.
spk09: Your next question will come from Michael Lavery at Piper Sandler.
spk10: Please go ahead.
spk01: Thank you. Good evening. Just wanted to drill into BioSteel a little bit. It drove the beat against our estimates and has some nice momentum. But obviously, you've been clear that it's got an investment level that's not appropriate for where you are and that you're looking for a better home for it. But I guess a couple of things related to that. If the economics are a little tricky given kind of the ramp up stage it's in, have you found a lot of demand for that? Is there somebody with more appetite and ability to make that investment upfront? And I guess timing-wise, can you give a sense of if that does go through, when we might expect that to happen? Is this something that is in the works? Or I know there's not much detail in these things that you're normally able to give, but just some sense of how to think about what the trajectory looks like and where that fits in kind of the rest of the year or into 2025.
spk03: Yeah, Michael, that's a fair question. We love the BioSteel brand as consumers, and consumers love the brand. It's authentic. It's healthy. It resonates with consumers, both athletically inspired consumers and others. But as we started on this path to really simplify our business and focus on the cannabis industry that we believe in, in this $50 to $70 billion addressable market that we have, in the cannabis business just in North America, it just becomes clear that we need to make sure that we're at least not sitting here with a real strong drag coming from a brand like BioSteel that's not a cannabis-focused brand that sits in our portfolio, right? So as we said in my comments, and it's really probably all I can offer at this point is, you know, we're working with our board and with the BioSteel team to significantly reduce the drag on EBITDA and cash flow that we're experiencing from BioSteel, and we're going to move as quickly as we can on that.
spk09: Ladies and gentlemen, as a reminder, if you would like to ask a question, please press star 1 now.
spk10: Your next question will come from John Zamparo at CIBC. Please go ahead.
spk06: Thank you. Good evening. My question is on the cost reduction plan. It's a fairly wide range that you have remaining when you think about what's left. I wonder what are some of the factors that will determine whether you get closer to the $240 million end of the range or the $310 million, and just a clarification on that. Does that range include remediation efforts on the BioSteel brand, or is that to be considered ex-BioSteel?
spk11: So I'll address this, John. So to address the second part of your question, this is really excluding BioSteel. So the cost reduction plan is really around the Canada transformation plan, as well as just, you know, the reductions that we've made across the organization to ensure that we're continuing to streamline our business and simplify our operations. And as a result, we've been obviously able to generate significant cost savings year-to-date and from fiscal 23, and we have remaining cost reduction program to get to that range of 240 to 310 million target. The reason that we're leaving the range wider at this point in time is really I think the second kind of phase of our cost reduction program is just starting, or has executed in July, and that's really about exiting, a full exit of the one Hershey, the main campus where, you know, we've fully exited the row operations. We have obviously, you know, moved all of the production over to, the old beverage facility and saving on all of the manufacturing and indirect costs and direct manufacturing costs. So we think we've done a good enough of a modeling job to understand where the cost reductions are coming from, but we just want to make sure that as we're executing the plan that that range is appropriate and we'll provide more details as we have the full P&L visibility in the coming months.
spk09: Your next question will come from Matt Bottomley at Canaccord. Please go ahead.
spk12: Hi, this is Yewon King for Matt Bottomley. Thanks for the question. I guess just wanted to touch on the EBITDA guidance that was reiterated for fiscal 2024. And apologies if I missed this earlier during the prepared remarks. But just trying to understand the different components within the quarterly adjusted EBITDA loss amount. um for the current quarter so given that the current outlook is calling for all segments except bioskeletal to contribute positively to adjusted EBITDA for the full year could you maybe help us dimensionalize the contributions from each of the segments for the quarter and how we should think about these segments contributions to the total adjusted EBITDA amount for the rest of the year thanks
spk11: So, I'll try to be as helpful as I can. So, I think I can do that by just giving a bit of a bridge in Q1. So, our adjusted EBITDA loss in Q1 was roughly 58 million. I commented in my remarks that we estimate about 60% of that loss is attributable to biased deals. So, if you're basically removing biased deals loss from that 58 million, you're going to be somewhere, you know, call it around 25 million of adjusted EBITDA loss. I've also outlined that basically we have, you know, the range of the cost savings remaining is roughly 100 million or so at the midpoint of the range. So that 25 million loss will get breached to our expectation of break even to positive adjusted EBITDA. post-completion of all the cost savings programs. So that's how you would bridge from excluding bio-steel, what's remaining in Q1 as an adjusted EBITDA, to adjusted EBITDA positive exiting at 524.
spk09: There are no further questions, so I will turn the conference back to Mr. Klein for any final remarks.
spk03: Thanks again for joining us today. I encourage you to try some of our outstanding products from our innovative brands as you enjoy the rest of your summer. Our investor relations team will be available to answer additional questions. Have a good evening.
spk10: Ladies and gentlemen, this does conclude your conference call for this afternoon. We would like to thank you all for participating and ask you to please disconnect your lines.
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