Organigram Holdings Inc.

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. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. We ask you to please limit yourself to one question and one follow-up. You may re-queue if you have further questions. Thank you. Craig McPhail, you may begin your conference.

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 Organigram's 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, Reference 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 HIFIRE data as of November 30th, 2022, pulled on December 21st, 2022. I would like to introduce Bina Goldenberg, Chief Executive Officer of Organigram Holdings Inc. Please go ahead, Ms. Goldenberg.

Thank you, and good morning, everyone. With me is Derek West, our Chief Financial Officer. For today's call, we'll discuss the results for the three months ended November 30th, 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 flour 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 flour, gummies, and hash. In Ontario, we had the top three selling SKUs. We were number three in gummies, number two in hash and whole flour, and number one in milled flour 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 Weed Crawler, we had the number one hash SKU, were number one in milk flour, 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 Rola in Quebec. These brands offer unique strains such as Runts and MAC1 in 3.5 gram formats and pressed cash. They provide us a position in the small pack size value segment that isn't covered by our successful big bag of buds. In terms of production, with the 4C expansion complete at Moncton in Q4 of fiscal 22, we achieved scaled 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 the larger capacity and improved yield, the company has significantly reduced its cost of cultivation, the lowest cost in our history. In Winnipeg, we have increased our output for gummies and kilograms by 35% from Q4-22 to Q1-23. 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 poaches per day production. At Lac Supérieur, 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 cubes. 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 crop flour, and over 2 million packaged units of hash. As well as expanding and increasing automation at Lac Superior, we are adding staff to the packaging chip 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 and in Q1 have added 26 skews to the shopper's 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 flour to Israel and Australia. This is a 71% increase over $3.4 million in Q1 of fiscal 2022. On November 17th, we signed a new agreement with CanDoc in Israel. This agreement over a three-year term supply allows for the shipment of 10,000 kilograms of dried flour with an option for CanDoc to order an additional 10,000 kilograms. This is a great long-term partnership with CanDoc. The product sold in Israel is dual branded with Organigram and is identified as indoor grown Canadian flour, which is recognized as 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 Derek to present the financial review, and then I will return with some closing comments.

Thanks, Bina. As Bina 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 flour 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 for 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-commercial cash share-based compensation increased to $15.7 million in Q1-23 from $12.6 million in Q1-22. While the 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 Max Superior 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 where the higher volume of product solds and the lower per unit cost of production, which resulted in a large increase to gross margins. Q123 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 mountain facility as a consequence of the 4C expansion. From State of the Cash Flow's perspective, there was cash provided from operations of $3.5 million compared to cash used of $9.3 million in Q122. This improvement was primarily driven by the quarter's positive adjusted EBITDA and a decrease to accounts receivable. Cash used in investment activities in Q123 was $1.7 million compared to cash generated at $54 million in the prior year's comparison period. In Q123, the cash used 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 the cash generated in Q1 2022 includes proceeds of $60 million from the redemption of short-term investments. In terms of our balance sheet, on November 30th, 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.

Thank you. 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.

At this time, if you would like to ask a question, press star, then the number one on your telephone keypad. As a reminder, we ask you to please limit yourself to one question and one follow-up. Your first question comes from a line of Andrew Protenu from Stiefel.

Your line is open.

Hi, good morning. Thanks for taking my questions and congrats on the great quarter here. Thank you. I wanted to talk a little bit about gross margin, please. I think Q1 was the first quarter where you benefited from the expanded production and month, and as you mentioned, saw some great gross margin expansion. And then in the outlook section, you mentioned that it could potentially stabilize from these levels in the rest of fiscal 23. Please correct me if I'm wrong in interpreting that, but assuming that's what... your press release indicates. Could you talk about, you know, what kind of expectations you have for price compression that could offset, you know, your yield improvement and scale benefits that you expect to see in the rest of fiscal 23? Maybe you could, you know, to the extent that you can, dive down into your assumptions of price compression on the types of products and Is this primarily on your domestic business here in Canada, or do you see the potential for price compression on your international sales?

Yeah, thanks, Andrew. I think that we're seeing price compression now in the Canadian REC market, particularly around flour. 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, you know, the other capex ends around automation, et cetera, and the extra margin we should be able to get from Lac Superior 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 red business if everything remains equal. But as noted, we do see price compression that could be such that it is equal in offsetting. We're hopeful that it will not be fully equal in 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 correct price compression is not meaningful as it is, 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, there'll 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.

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 you know your your internal planning and what you're comfortable with in terms of the level of biological assets and inventory, you know, 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 assets could be a source of cash going forward?

Yeah, I think on the bioassets, 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 you know, without another expansion or an acquisition of another facility, you know, this is roughly where the bioassets should reach, you know, 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 when I I know Bena's mentioned a few times that, you know, we had demand that essentially outstripped our current production. And so as soon as we had the available flour ready, you know, 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 flour to ensure that we can meet all sales orders as they come in and to maximize sales and profitability. So I think that inventories are more apt 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 inventories to move slightly more than what bioassets would as we look forward.

Thanks for that. I'll get back in the queue. Your next question comes from a line of Aaron Gray from Alliance Global Partners.

Your line is open.

Hi, good morning. Thanks for the questions and nice to see that even improvement there. So a quick question for me that I have around the price compression and market share specifically more so for Canada. Okay, just give us a reminder in terms of how you think going forward in terms of how you look to balance profitability of the excuses 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, you guys were an outperformer. It seems like they might have softened a bit in the past two months, but we'd 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 some times you might have to lean more on one versus the other. Thank you.

Right, no problem, Aaron. So let me start by saying that it is important for us to continue to see revenue growth, but it's profitable growth, right? And that's important to us. We are cautious. I've said many times on these calls that we don't have a problem competing in the value segment because that's where most of the funding is. That's where the consumers are. However, it is not our desire to lead the race to the bottom. We had a little bit of softness at the end of this quarter on our large format 28-gram flower. as a result of some competitive activity coming in to the Ontario market at the price floor. We did not match that, but we have made adjustments to our pricing in order to ensure we remain competitive. And in the latest four weeks have seen already a rebound to some of that softness that resulted as a result of that price compression. So, you know, further to what Derek said earlier, we do have price compression. There is a lot of flour out in the marketplace today. More supply across all the other competitors and us than there is demand. We have heard from other competitors. They're looking at moving production capacity to grow tomatoes. I mean, this is the reality of the market, which is why we are projecting some price compression, especially in the large format products. And as a result, we adjusted our pricing. That being said, we adjusted it to the point where we're comfortable with the profit that we generate from that business. So back to your question of market share over profitability, we will be managing that tightly. It's certainly our interest to continue to drive our revenue. But again, there will be a continued focus on profitable sales growth.

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

Yes, certainly. Listen, I think we've seen some good growth, actually, in our shipments to Australia. We've increased the number of customers. We have a longstanding relationship with Canitrek. But last year, we added MedCan to our customer base and continue to add new cultivars. And, you know, interest remains strong. from both of our Australian customers. And so besides the CanDoc agreement that we have in Israel, we have a growing business in Australia. And at the same time, we're looking at other markets. We are in conversations with some customers in Germany. The reality is this is an area of the business we could not take advantage of last year when we just didn't have the flower capacity and we were operating can-to-mouth just to supply the Canadian market. and our existing international customers. So by having this excess flour, we have engaged in several conversations, and we do have confidence that we will grow our international business, and we'll have more to share on that in the upcoming quarters.

Fantastic. Thank you very much. I'll jump back in the queue.

Your next question comes from a line of Tammy Chen from BMO Capital Markets. Your line is open.

Hi, good morning. Thanks for the question. I've got two here. One is a follow-up to the comment you made that you saw some softness. Was it 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 adjustment? I wasn't sure how to take that, or was it just some modest tweaking on your 28-gram flower?

So in answer to that, the competitive activity came into the market in October. We were watching our offtake 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 terms 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 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.

Okay. Well, that's still helpful incremental commentary on that. And last follow-up on this whole pricing discussion. This, you know, you're being a bit cautious in your guidance, which I understand, with respect to your calling out the potential for continued price compression. I was wondering, are you able to, like, do you have a sense in what's in your guidance or expectations the sort of magnitude of price compression you're sort of expecting over fiscal 23. And within that, I guess, higher level is, I think, you know, a couple of quarters ago, you had thought that maybe we were starting to see some stabilization in price, but it sounds like both from your comments today and your competitor that reported earlier that this price compression across the industry is still continuing. You know, do you see at some point it will stabilize like how, How long do you think it might take to get there? What continues to drive this? When do you think we'll be kind of out of this tunnel here? Thank you.

I'd love to know the answer to that. But let me perhaps address your question in this way. If you look at the overall supply of cannabis in the Canadian marketplace and you look at the size of the market and the demand, there is still a significant surplus of production coming out into the market. And while there is a lot of extra capacity with some of our competitors, they have extra flour, people will do what I might call silly things to get product out and to try to generate some cash from that inventory. You're right, a couple of quarters ago I thought we had stabilized on flour. We kind of had a few quarters of it that had stabilized. But we really see, especially the large format flour prices, are being compressed now. And I think until the supply and demand gets aligned, this could always be a problem. There will always be somebody out there who might make a move that isn't what I would say the best move for the overall industry, but might be the right thing for them. From our perspective, we did add capacity, but we were adding capacity because our demand was greater than what we could supply. And so we have confidence that we have customers for that extra flour capacity. But we have some competitors who are producing a lot more flour than They have demand, and that's what's causing the volatility in pricing. Again, when will it stop? When some of that capacity is taken out of the Canadian industry.

Got it. Thank you. Your next question comes from the line of Ty Collin from 8 Capital.

Your line is open.

Hey, thanks for taking my questions and congrats on a great quarter here. I want to circle back to the balance sheet. Bina, 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 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 when cash flow and maybe pricing stabilizes a little bit yes i i think the the answer is listen we have um you know we have still quite a bit of capex to spend this year um you know we've talked about it as you mentioned there's 20 million more as as we look at opportunities um we have the cash so we're able to look at a longer timeframe and look at return on investment capital expense that will help our ongoing margin improvements. So this is around automation and efficiency driving. So while we have identified projects currently, we'll continue to evaluate where we could continue to optimize our business, improve our margins, improve our profit in Canada. But certainly, we do have enough cash on our balance sheet to explore other opportunities. This is going to be an interesting year in 2023. We all know that with the tight capital markets right now, a lot of companies are low on cash, and there might be great opportunities for us to explore. So we have that optionality in our balance sheet that we will You know, look for the right opportunities and hopefully continue to build what is a great business for us.

Okay, great. Appreciate the color. And maybe riffing off your comments on the opportunity set out there, could you maybe update us on how your 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 turns attention back to Canada in the near term in terms of potential M&A opportunities.

Right. So, listen, I think we have mentioned many times on these calls that, you know, we wanted to establish a solid foundation in Canada. I think we're there. You know, if there's the right Canadian opportunity that is, what I would say complementary in terms of addressing some under-indexed segments in the marketplace, we might look at it. But really, we recognize that Canada is now in a good position, and it's time to look outside the Canadian borders. We are watching Germany closely, as most people are. While we saw draft regulations in the fourth quarter we're expecting to see their final um regulation uh report out by the end of march and so germany is a market that we're looking at for sure um as for the us um you know it is disappointing with all the you know high hopes for safe to pass before the end of the year um and it didn't but we you know you can't help but look at the u.s market it is right right next door. And so we continue to look at the US. And while in the past, we looked at CBD opportunities, as many of our competitors did, because they were available to us with our current TSX and NASDAQ listings. What we've evaluated is most companies who invested in CBD have not seen the benefit of that investment, mostly because It is a highly fragmented market in the U.S., and until FDA regulates CBD, we don't really see it as a great opportunity. So that leaves THC opportunities, which we know we can't do with our listings. But there are some creative ways that people are looking at that market, and we continue to explore opportunities that would be compliant to our listings. And, you know, if we find one out, you'll hear about it, obviously, but it's something we're looking at for sure because it is an important next evolution for our business.

Great. Thanks for the questions. Sure.

Oh, and again, if you would like to ask a question, please press star, then the number one on your telephone keypad. Your next question comes from the line of Michael Freeman from Raymond James. Your line is open.

Good morning, Bina. Good morning, Derek. Congratulations on a terrific quarter. I wonder if you could comment on the result of the capacity expansions that you've completed and are in progress, respectively. How that has filtered into your ability to supply some of your most popular brands domestically. You've mentioned having limited supply relative to demand of the Shred brand products. I'm wondering if you have been able to satisfy demand in some jurisdictions where you previously weren't able to, and also how these capacity expansions filter into your ability to supply international markets.

Sure. So my memory, yes, absolutely. We talked a lot last year about being hand to mouth on our supply and not having the capacity to introduce shreds to all jurisdictions across Canada. We were able in fourth quarter to finally get shipments to every province. And so we have now the flour supply to be able to continue to supply those markets. You know, we were last into BC, you know, shreds, takes as we as we've gone into other um 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 dc and we hope to see even greater demand in that market um so we do have enough flour now for for supplying our business across the country um and we also have excess capacity to capitalize on some of the international that we've had inbound requests for but couldn't supply. 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.

All right, great. That's very helpful. 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.

So certainly. So first of all, on Holy Mountain, we're very excited about this launch. We did start shipping the three and a half gram format and pressed hash format into the market. And saw some good response to that. We're very excited about introducing also a larger format flower offering in Holy Mountain. And we have some new SKUs that we'll add to that portfolio as the year goes on. In terms of distribution, Holy Mountain has just started shipping. We expect that we will be in all of English Canada with Wola in Quebec. you know, in the next couple of months. So we'll keep pushing that distribution growth. In terms of, you know, our overall plan, we do have a stronger innovation pipeline for the back half of our year than we had for the front half. I did talk about some of the infused pre-rolls that we have started to ship, but we have some very exciting new disruptive innovation that we plan to introduce in the back half this year. And we're excited about it. So, you know, again, I don't want to tip my hat yet on what they are, but as they come out, I'm sure we will issue press releases. We're excited to see the response from consumers. But it really was grounded in significant consumer insights as we built our plan. And, you know, I mentioned this with respect to Holy Mountain and with respect to infused pre-rolls as well. The other thing you asked about was where we might see underdevelopment in some of the segments. In the vape segment, it's no surprise to anybody that we have an underindex on our vapes. We introduced ShredX vapes last year, and we introduced three to four SKUs. And when you look at our actual sales per SKU, our actual sales are pretty much in line with some of the key other LPs, vape SKUs out there. Our actual overall share is lower because we just don't have the same number of SKUs out in the marketplace. So you could expect to see more vape offerings from us in the balance of the year, really to address our underdevelopment. We're confident we have the quality and the insight on what consumers are looking for. And we've always been probably tighter on our skew mix than some of our competitors. And we recognize that in their category, more is more. So we will add some items to our lineup.

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 with them beyond the Center of Excellence, perhaps talks on new jurisdictions, etc.? ?

We have a very strong partnership with . They are, or I would call them, they're a very engaged strategic investor is probably the right way of saying it. We have conversations with them regularly. We have meetings as we talk about not only the developments in the Center of Excellence, which is really sort of that long-range research, and we meet to talk about what the work is that we're going to do in the PDC in order to generate both benefits to today's business as well as long-term business. So very strong relationships. We, obviously, they're a large shareholder. We update them on how our business is going. And, you know, in the past, they have been very supportive in terms of, you know, helping us in terms of getting, you know, some equipment if they have a stronger relationship with suppliers. You know, it's a kind of, you know, it's not day-to-day by any means, but it's an ongoing thing. discussion that we have with them. And we continue to look at ways to work together in the future.

Fantastic. Thank you very much. I'll pass it along.

Thank you.

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

Good morning, everyone. Just two questions for me. The first is one of your peers that reported earlier this week was you know, 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 in sort of a 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 there's any chance of meaningful upside from where we are today without changes from the federal government at this point?

Great question. So let me start with the first one. You know, everybody has sort of heard there are an increasing number of, you know, LPs going into CCAA. There's a need for the shakeout. This industry is highly fragmented and as people run out of runway, run out of cash, I suspect we'll have more of those that have to exit the market. And as a result, as a company like ours that has now the flour, the capacity, the ability to supply the market, I do think there is opportunity to grow our revenue and our market share. I think it might be closer to the end of the 12-month period, then I think there might be more silly stuff happening in the short term until people really have to throw in the towel. And so as a result, we're being cautious, but certainly we believe, similar to what you've heard, that there will be a consolidation in this industry and there is opportunity for those who have scale and who have lower costs to be able to capitalize on the opportunity in the short term. Longer term, what do I think in terms of the size of the market opportunity? I mean, the market is still growing, right? We're still seeing month over month, annual, I think the latest BDSA forecast is like 13% growth year over year. There's lots of market, you know, other markets other commodities or other industries that would love to see a 13% year-over-year growth in the market. So I do think that there is some buoyancy. We had a really strong fourth quarter. Everybody knows that the summer is the largest demand period for cannabis, and we still had some restrictions around COVID, and I think you're going to continue to see some opportunities of growth in the marketplace. But, you know, I think long term, this is, you know, I'm happy to be in this space. It's really exciting. I think the consumers are going to continue to come. And, you know, will the government regulations change to make it, you know, easier to compete? I'd love to see, you know, the removal of 10 milligram cap on edibles because we have a very strong and thriving edible business that would benefit from that. We know we're not offering consumers ideally what they're looking for with a cap on 10 milligrams. We look at a Colorado market that has edibles at 15% of the market and on average people are buying 100 milligrams at a time. So there is opportunity certainly if regulations change to address that. I'd love to see CBD decoupled from THC and the opportunity to sell CBD through pharmacies and natural grocery stores. We have a great brand in Montjour that has pure CBD gummies and with other minor cannabinoids that would be a great opportunity. But again, we all know that regulations take a long time to change. So, you know, we are involved with our industry association. We are at the table at ICED. talking about what the industry needs to continue to grow. And I am confident that it will change over time. I just don't believe it will change fast enough for some of the LPs that are struggling today.

Very great. Thanks, Bina. And there are no further questions at this time.

Ms. Bina Goldenberg, I'll turn the call back over to you for some final closing remarks.

Well, great. Thank you, everybody, for joining us today. You know, 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.

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