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spk07: Good morning and welcome to the Turning Point branch second quarter 2021 earnings conference call. All participants will be in listen-only mode. All lines have been placed on mute to prevent any background noise. Should you need assistance, please signal a conference specialist by pressing the start key followed by zero. After today's presentation, there will be opportunity to ask questions. Please note this event is being recorded. I would like to turn the conference over to your speaker, Louis Reformina, Chief Financial Officer. Please go ahead. Thank you.
spk03: Good morning, everyone. This is Louis Reformina, our Chief Financial Officer. Joining me are Turning Point Brands President and CEO Larry Wexler and Graham Purdy, Chief Operating Officer. This morning, we issued a news release covering our first quarter results. This release is located in the IR section of our website, www.turningpointbrands.com, where a replay of today's conference call will also be available. In this call, we will discuss our consolidated and segment operating results and provide a perspective on our progress against our strategic plan. As is customary, I direct your attention to the discussion and forward-looking and cautionary statements in today's press release and the risk factors in our filings for the Securities and Exchange Commission. The disclosure outlines various factors that could cause actual results to differ materially from projections or forward-looking statements that may be cited in today's discussion. These forward-looking statements and projections are not guarantees of future performance. They should not place undue reliance upon them except provided by federal securities laws. We undertake no obligation to publicly update or revise any forward-looking statements. In the call today, we will reference certain non-GAAP financial measures. These measures and reconciliations to GAAP can be found in today's earnings release. along with reasons why management believes that they provide useful information. I will now turn the call over to Larry Rexler, our CEO.
spk05: Thank you, Louis, and good morning, everyone. Thank you for joining the call. We are pleased to report a quarter that once again outperformed our expectations. In the second quarter, revenue was up 17% to $123 million, above our prior guidance range, and adjusted EBITDA was up 32% to $30 million. Revenue growth was led by Zigzag, which had an exceptional quarter with over 70% growth. We are harvesting the fruits of our strategic growth initiatives and are continuing to outperform the market. We were also aided by a favorable comparison against COVID disruptions in our rafts business that negatively impacted the prior year period and the consolidation of Recreation Marketing's results. There was progress throughout our product lines. Paper cones and e-commerce continued to provide a big boost to sales, while our wraps business benefited from Salesforce execution against favorable market demand and benefited from a trade inventory load. In total, wrap sales doubled in the quarter. Stokers performed in line with our expectations and was up 8%, led by double-digit growth in MST. which continues to be well-positioned for the secular shift into the value category. Our chewy tobacco business gained share but had a modest sales decline as it comped against a competitor going offline in last year's quarter. Nugent faced a tough year-over-year comp and a new regulatory hurdle outperformed their expectations during the quarter. The vape distribution team responded well to the implementation of the PAC Act which made the logistics of delivering vape products to customers and consumers more challenging. While we still expect volatility in NuGen, we are seeing progress in both the FDA's efforts around the PMTA process and increased enforcement against unauthorized products still in the market. During the second quarter, the FDA issued 52 warning letters to manufacturers that did not submit a PMTA. to bring the total to the end of the quarter to 131 warning letters sent out since January in an effort to bolster its enforcement against illegal products in the market. Importantly, on May 20th, the FDA posted its continued compliance list, which provides a directory of those deemed new tobacco products for which a PMCA was timely submitted. We believe this list will provide retailers and trade customers more clarity on which products they can carry. This includes our submissions for our deemed products, all of which have now received acceptance letters. A number of the products are now in scientific review. We are confident that we have submitted robust filings and anticipate working successfully with the FDA through the process. We believe that both the PACT Act and the PMTA process are creating barriers to entry in our business, that will position us well in the long term as these factors force a consolidation in the industry. We've also been very active in our capital deployment with share repurchases and investments. In April, our subsidiary, Recreation Marketing, acquired DBW, a distributor with strong presence in British Columbia and with major national chains. While DBW adds marginal profitability at the onset, It serves as a great platform to expand distribution of our more profitable proprietary products in the area where we previously had limited reach. Last week, we announced a $8 million investment in Opal, one of the most recognized brands in the cannabis space, with product offerings in seven states. Opal has a nimble, answered-like, non-plan-touching business model that has allowed it to scale across multiple states and a team that's been adept at managing the ever-changing complexities of the cannabis market. OPAL fits well within our strategy of building a house of scalable, well-known brands in the cannabis industry, joining previous investments in Docklight, which holds the rights to the Marley brand for cannabinoids and doses. What caught our attention with OPAL is their experienced management team and the awareness they have been able to build with the brand, even in states in which they do not currently operate. Our investment will allow them to accelerate their growth, while also providing a prime opportunity to increase our own product sales presence in dispensaries. Yesterday, we also announced the acquisition of certain cigar assets of Unitebac. Cigars are a very important multi-billion dollar category, where industry observers have highlighted that growth is being driven by cannabis consumption. Cigars are a perfect complementary product to our MYO cigar business. but one where we were lacking the necessary IP to compete effectively in the space. Unit2BAC assets come with a portfolio of grandfathered products and other FDA premarket filings, providing us with a broader and more cost-effective platform to compete in the market. Our plan is to expand distribution for Unit2BAC's brands while leveraging the IP to introduce line extensions in the ZigZag cigar portfolio. With approximately $180 million of liquidity on our balance sheet to end the second quarter, along with strong free cash flow generation, we remain very active on the acquisition and investment front. With another solid quarter of performance, we are able to raise our guidance once again and look forward to continuing our momentum. To add some additional color and perspective on our quarter and the path forward, let me turn the call over to Graham Purdy, Chief Operating Officer.
spk04: Thank you, Larry. Let me now give you a quick snapshot of the performance from the segment level. Zigzag Products saw double-digit growth in the quarter, led by a doubling of sales in both our MYO cigar wraps and Canadian businesses, and strong double-digit growth in U.S. rolling papers, led by e-commerce and paper cones. Our MYO cigar wrap business compared favorably against the previous year period that experienced a COVID-related disruption when our third-party manufacturer went offline. With retail sales accelerating, we were able to leverage a more efficient supply chain post the Derford acquisition to fill the backlog that was built up heading into the current quarter and further benefited from an inventory trade load-in as our customers built buffer inventory which pulled roughly 2 million of sales into the quarter. In the U.S., ZigZag Papers' position as the leading premium and overall paper brand strengthened, increasing its share in the measured market by 2.4%, points year-over-year to 35.1%, according to MSAI. After not growing share for the first three years since our IPO, this was the eighth consecutive quarter of ZigZag has realized year-over-year share growth, reflecting the portfolio and channel efforts put in place to revitalize the business where we are still in the early stages of this process. Our new products and our expanding e-commerce platform again provided a boost. During the quarter, our paper cones had 33.3% share of the segment in the measured channel according to MSAI, up 10.5 points from the previous year as our volumes more than doubled. We continue to lead the growth and penetration of the product in convenience stores and are expanding our presence in the non-measured alternative channel where ZigZag is still underrepresented. In Canada, we had a strong quarter of growth with our business more than doubling, as recreation marketing, which is now being consolidated, continues to ramp and is now being bolstered by DBW. E-commerce was again a big driver of growth. Our e-commerce business, which is now double digits of our U.S. paper sales, is still only a year and a half old and continues to make strides up over 3.5 times last year's levels and up 50% from the previous quarter. Stoker's products saw high single-digit growth in the quarter, with double-digit growth from MoistNuff, again being the driver. Stoker's market share was up to 5.8%, a little over 50 basis points compared to a year ago, according to MSAI. Stoker's MoistNuff is now in stores representing 62.2% of industry volumes, 3.8 points above last year's level, which still leaves a long runway for further growth. Chewing tobacco sales saw a low single-digit decline during the quarter after comping against a quarter that saw 6% growth when a competitor experienced COVID-related disruptions in the prior year period. Despite the tough comp, Stoker's Chew gained 20 basis points with a 26% share in the second quarter according to MSAI to position Stoker's as the number one chewing tobacco brand. With the continued secular shift into the value category and Stoker's positioning as a leading value brand The chewing tobacco business is well-placed to provide us with a stable annuity stream of cash flow going forward. Moving to new gen, where we once again had a resilient quarter in a very disruptive environment. Our vape distribution business saw double-digit declines against a tough comp during the prior year, when we benefited from a COVID-related disruption at a B2B competitor and a strong B2C orders during stay-at-home provisions. The business did benefit from advanced buying in April ahead of the stricter shipping regulations around vaping as a result of the implementation of the PACT Act. We believe this boosted sales by 2 million during the quarter as customers adjusted to the longer lead times by building inventory. The PACT Act had meaningful impact on costs. Our outbound freight expense in vape business, which we recognize in SGA, was up over 300 basis points as a percentage of its sales from the previous quarter, and this increase was only partially passed on to the customer. We believe that the additional cost and complexities around logistics and delivering vape products to customers caused by the PACT Act is consolidating the industry further and positions us well to take share. Outside vape, wild hemp contributed to our growth, and we are encouraged by the early reception of our free white nicotine pouch as we begin its rollout during the second quarter. Going forward, while we continue to expect short-term volatility in the vape distribution business, we like our positioning from a long-term competitive standpoint and are excited by some of our new product launches, including free at NUX. And with that, I'll turn it to Louis for a review of our fourth quarter financial performance.
spk03: Louis? Thank you, Graham. Our performance in the second quarter was ahead of plan once again. Turning segment reviews, zigzag products net sales in the quarter increased 72.3%, $47.2 million, with a doubling in our MYO cigar wrap in Canadian businesses and strong double-digit growth in U.S. rolling papers. Total zigzag segment volume increased 64.6%, while price mix increased 7.7%. According to MSAI, first quarter industry volumes for U.S. rolling papers increased mid-single digits in the measure channels. During the quarter, our volumes grew at 2.8 times the rate of the overall market and zigzag contributed over 90% of the industry's growth, with our paper cones being the major driver. This growth excludes the incremental volume growth we are seeing from the alternative and e-commerce channels. MYO cigar wrap industry volumes were up strong double digits in the quarter. During the quarter, we saw the segment's gross margins expand by 160 basis points to 58.8%. This was the result of the financial benefit of eliminating royalty payments to Durford, resulting in higher margins for our MYO cigar wrap product. ZigZag accounted for 58% of our segment operating income in the second quarter and continues to be our fastest-growing segment. Stoker's products net sales increased 8.3% to $33.4 million in the quarter. Net sales for the MST portfolio grew 16.1% and represented 62% of Stoker's revenues in the quarter, up from 58% a year earlier. Total Stokers volume increased 2.4%, with price mix advancing 5.9%. Segment gross margins expanded by 80 basis points to 54.4% during the quarter, driven by price across the segment and fixed cost leverage in our MSD business. Year-over-year industry volumes for MSD were flattish, with chewing tobacco declining by approximately 3%. Stokers branded shipments to retail continue to outpace the industry in the quarter, growing its MSAI share in both chewing tobacco and MSD. Moving to our new gen segment, net sales decreased 10.0% to 42.1 million, driven by tough comps in the base distribution business, but was up 13% sequentially, which was above our expectations. We continue to expect near-term volatility due to the PMTA process in 2021, along with the impact of the PAC Act. For the quarter, new gen gross profit contracted 20 basis points to 33.5%. Now moving to the consolidated business. Adjusted EBITDA for the quarter was up 32% to $30.0 million. We achieved 41% incremental margins during the quarter, reflecting the strong performance in our core segments as we leverage our fixed cost structure. In this morning's release, we updated our 2021 guidance as follows. Net sales of $447 to $462 million. This is up from previous guidance of $422 to $440 million and includes $109 to $114 million in the third quarter. Adjusted EBITDA for the full year is now expected to be $108 to $113 million, up from previous guidance of $103 to $108 million. For ZigZag, we expect strong double-digit sales growth. As Graham mentioned, MYO Cigar Up benefited from roughly 2 million afforders from a trade inventory load that pulled forward sales from the third quarter. As a reminder, in 2020, our cigar wrap business benefited from $5 million in backlog bills in the fourth quarter as we recovered from manufacturing-related disruptions early in the year. This will affect year-over-year comps during that fourth quarter. Going forward, we expect zigzag gross margins to moderate slightly from second quarter levels due to mix as recreation marketing ramps up and adds the contribution of lower gross margins from its DBW acquisitions. For stokers, we expect high single-digit sales growth. In chewing tobacco, we faced another tough comp in the third quarter when we threw 10% year-over-year last year, as the competitor was temporarily out of the market. For new gen, we now expect flat growth, up from previous guidance of mid to low single-digit decline in revenue. This includes low single-digit declines for vape distribution. This is up from previous guidance of single-digit decline, offset by growth in NUX. We believe vaping sales in the quarter benefited by $2 million as customers increased inventory levels as they adjusted to the longer delivery times due to the logistical challenges that we packed at. Moving to our balance sheet, we ended the quarter with $157 million of cash on the balance sheet and $179 million of available liquidity. This puts us in a strong position to execute on an active pipeline of opportunities we are currently evaluating to grow our business. With that, I'll turn the call back to Larry for closing comments.
spk05: We had a strong first half to the year. Our core businesses continued to perform, led by ZigZag's performance. We were benefiting from solid execution in a favorable environment, driven by the secular growth in cannabis consumption. Stokers continues to drive share gains, and NewGen has performed well amidst the disruption of the PMTA process and the PAC Act. which are likely to be transformational events for the industry. A strong performance would not be possible without the continued efforts of our employees. I want to personally thank them once again for the commitment and contribution to our success. Thank you for participating in the call today. And with that, I'd like to open the call to questions.
spk07: Ladies and gentlemen, as a reminder to ask questions, you will need to press star one on your telephone. To read your question, press the pound key. Please stand by while compiling the tiering roster. Again, if you would like to ask questions, please press star one. We have our first question from Eric Deslures from Craig, Hollywood Capital. Sir, your line is open.
spk03: All right, great. Thanks for taking my question, and congrats on a really impressive quarter here. So first for me, in new gen, nice job weathering the volatility from both PMTA and the PAC-DAC here. Understanding the dust has not fully settled yet, but could you give us an update on the competitive landscape there and your ability to ultimately increase mix of proprietary products?
spk05: As we've been talking about, there's a lot of volatility in the business. We've seen a number of smaller competitors go out of business. We've also seen some of the – one of the larger competitors grow a bit. Looking forward – We expect to see accelerated activity by the FDA as it gets close to their previously announced date for completing the PMTA process, which is in September. I don't think they're going to hit that. They've given every indication they're not going to complete the process by then, but I think that they're going to want to put some news out in terms of where they are along that process. So we continue to see volatility. The USPS is currently still shipping some B2B products. So we haven't seen the complete implementation of the PACT Act. That'll be another disruptive event going forward.
spk03: OK, great. It seems like you guys are. well-positioned to handle all that, so good to see. Next one for me, on the M&A front, you guys have really made some nice investments in Gosis, Docklight, now Old Pal. clearly building up an impressive brand portfolio, kind of attaching yourself to that high-growth cannabis segment. With Old Pill, you guys called out the fact that they are non-plant-touching. Would you guys look to consolidate any of these non-plant-touching cannabis brands in the near future here? Or should we think of really all of these as sort of remaining minority investments until we get some sort of federal reform? Yeah, I mean, so there are minority investments at the moment, as you mentioned. You know, I think our objective is that, you know, these are standalone companies right now. We have the option to deploy more capital. So I think that the strategy here is to build a house of brands, diversify our portfolio, and be able to kind of double down as these businesses get the risk as we get closer to federal legalization to bring them in-house. You know, how we do that will be kind of determined in the future as the market kind of develops. Okay, that makes sense. And then last one for me here, just within the zigzag business. I'm not sure if I missed it, because you guys quantify to the best of your ability the inventory pull through in the quarter. And then maybe give us an update on the competitive landscape in that non-measured channel and your efforts to increase share there. Thanks.
spk04: Yeah, Eric. So, Eric, this is Graham. Yeah, we estimate it's about $2 million that was pulled into the quarter.
spk03: Yeah, so what happened was, you know, going into the quarter, we filled our backlog. And post the quarter, our trade customers wanted to build up inventory or buffer, given what happened with COVID over the last year. And so we believe that pulled 2 million of that inventory into the quarter. Okay, that makes sense. Yeah, and then just an update in that non-measure channel and the competitive landscapes, your ability to penetrate there, just any kind of color there would be helpful. Thanks.
spk05: We continue to make progress. We actually had tested by signing some people to that area. We like the results of that test. We're now in the process of hiring more people to address the non-measured channels, if you will. You're starting to see some penetration by zigzag, additional penetration by zigzag in dispensaries, as well as in head shops and other non-traditional areas. We have a long runway. We still have lots of upside there. We're not totally satisfied with where we are, but we're making progress.
spk03: Yeah, I would say the old pal investment, you know, outside of the investment itself being attractive, is a great strategic complement to our strategy there. And, you know, old pal sells a decent mix of flour, which goes along well with our smoking accessories that go into dispensaries. That makes sense. Great. Well, congrats again, guys.
spk07: Your next question comes from the line of Gaurav Jain from Barclays. So your line is open.
spk01: Hi. Good morning, team. Thanks a lot for taking my questions. So, you know, three questions. One is on this acquisition of . Can you help us just dimensionalize, like, how could this opportunity pan out over the next few years? And has been growing quite fast over the last 12 months, but I guess after six months it will run into difficult . So could this kind of growth rate that we are seeing at Zigzag right now, like 30%, 40%, can it sustain now for the next few years if you can scale up the cigar business?
spk03: Yeah, I don't think we're going to underwrite 40% growth forever. So what I will say is the markets that we compete in now with rolling papers and wraps is less than $500 million from a wholesale manufacturer revenue standpoint. The cigars market, which is a perfect complement to our MYO Cigar Reps product, is a $2.5 billion-plus market and growing pretty nicely. And so this provides us a great platform to be able to reenter that market more efficiently and more cost-effectively. And so that's a big market opportunity for us to be able to get back into with these acquisitions.
spk01: Okay, that's very excellent. Secondly, in all these acquisitions that you have done, you know, while in those days, you know, they're now almost, I would say, a year old. So what have your learnings been and have those acquisitions met the targets that you had set out when you had made those initial investments?
spk03: Yeah, I think, you know, with wild hemp, our expectations for a gradual ramp, I think that is taking place now. It is a relatively new category in smokable hemp CBD. That is one that we feel has growth potential as some nicotine cigarette smokers want a alternative form of smoking experience without the nicotine. So it's been as we expected. Endosys, you know, we're kind of pleased with some of the transformations it's doing in terms of expanding the brand into other categories like gummies and other form factors, as well as entering the CBD line. But it's early in the progress still in terms of kind of the introduction of these lines.
spk01: Sure. And lastly, with the housekeeping items, What was the benefit of the consolidation of recreation marketing, which I think has happened into the zigzag line? If you could just separate it out for us, and if there was already the benefit of this acquisition that recreation did, the DVW acquisition in this quarter.
spk03: Yeah, it's about $2.5 million for the quarter, and DVW had about a little over a month of benefit into that quarter.
spk01: Sorry, two months ago.
spk03: Yeah, two months of benefit during the quarter.
spk01: Sure. Thanks a lot.
spk07: Your next question comes from the line of Susan Anderson from B Riley FDR. Your line is open.
spk03: It's Alec Legg on for Susan. Just a question on zigzag sales through the e-comm channel. Have you ever disclosed what percentage of sales are through e-comm? And then just longer term, what percent of penetration would you aim to reach? And then what's the margin delta between selling through your e-comm channel versus your partners? Sure. It's about right now as a percent of our U.S. paper sales in the teens percentage of our U.S. paper sales. So our goal is to continue to ramp that. The one part of the business that we think has more significant opportunity to ramp is our B2B business. So that is kind of dovetails with our alternative strategy into getting more of our product into dispensaries and head shops. So part of the strategy last year in terms of attacking that was using this platform and going to trade shows to sign up more consumers and customers onto it. And obviously that did not happen to the extent that we thought last year, given that there weren't any trade shows. So that's still a big piece of the strategy that we are still kind of rolling out. So we continue to expect that e-commerce business to continue to ramp for us. And then I guess just the margin difference between selling through that channel? It's comparable at the moment. It can fluctuate depending on the product mix. Okay. And then I guess another follow-up on ZigZag, just utilizing that brand awareness. I think you've mentioned previously on expanding into apparel and accessories at the alternative channel. I guess how is that progressing? And then what do you think the longer-term opportunity for that would be? It's going well. It's still a small piece of the business but growing nicely. And this also dovetails well into our head shops and alternative strategy and e-commerce. These are products, you know, when we focus just on convenience stores, there wasn't really a home for them in convenience stores just because of the limited shelf space that you have. But they are perfect products to get into head shops that want to embrace more of the lifestyle around the brand. And so we're seeing some success around that as well as selling through our e-commerce channels. So it's still early as well on accessories, but we're seeing nice growth on it. Perfect. Thank you so much.
spk07: Again, as a reminder, if you want to ask questions, please press star 1 on your telephone. Your next question comes from the line of Greg Pandy from Saidati and Company. Please go ahead.
spk02: Hey, guys, thanks for taking my questions. Just shifting gears to Stokers, can you just kind of walk us through, in light of the 8% growth there, did you take pricing typically in the May-June period? And I think earlier you mentioned the trade down. Where do you think we are in terms of consumers trading down? Is it more intense than normal, or is it just kind of on par with what you saw last year?
spk05: Okay, so the trade down is a secular trend over many years. We did see some acceleration last year during the lockdown period of COVID moving in. I think it's returning more towards traditional long-term secular rates.
spk02: Okay, great. And then just in pricing, did you take some pricing on tubs and then cans like you did in the prior year? yes okay and then um just also just moving on in terms of the buyback you bought back a little bit more stock than you typically have it looks like just how are you thinking about the buyback in terms are there any metrics that we should be thinking about um you know that that's accelerating accelerated the buyback during the period it's meant our buyback is meant to be opportunistic in you know in in situations where there's uh
spk03: a lot of non-fundamental kind of drivers to our stock, we take those opportunities to be more aggressive on the buyback.
spk02: Okay. And then just one final one. Just in the premiumization that you're seeing, I guess, from papers to cones, where do you think we are in terms of that? Kind of like what percentage and then how much legs does that have to it, or is it just kind of a trend that has several years to go, you think?
spk03: So we think – so we are driving – there's two separate channels, right? There's the measured channel and the non-measured channel. So let's take the measured channel first. In the measured channel, we are driving the growth and penetration of kind of cones in there. So it's still relatively new in the C-store channel of our – within the industry of stores that order – Papers, only 30% ordered paper cones, so there's still a decent opportunity there in terms of penetration. Within our papers business in the metric channel, it was teens percentage of our volume. So we're still kind of hurling that penetration. In the non-measured channel, we believe cones is a bigger percentage of the market, and we are also much more heavily underrepresented there. So we see bigger upside in the non-measured channel in terms of kind of our opportunity set there.
spk02: Okay, great. That's very helpful. Thanks a lot.
spk07: Again, ladies and gentlemen, if you want to ask questions, please press star 1. Your next question comes from the line of Vivian Asser from Cohen & Company. Your line is open.
spk06: Hi, this is me with watch on for Vivian. Thanks very much for taking my questions. My first question is on big that can you please offer more color on the growth that you solve by channel? Last quarter, we discussed your distribution opportunities in alternative channels. How big of a contributor was that channel and more specifically, the distribution gains in that channel? Thank you.
spk03: Sure, it's, you know, we'll I would say that we saw strong growth across the channels, right? Because in the measure market, we're gaining share. Cones is a big driver of our ability to gain share in that channel. In the non-measure channel, a lot of it is incremental, right? So e-commerce is a big driver of that. I mentioned it was teens as a percentage of our U.S. paper sales, and that was just starting to ramp, really, due to last year. So a decent contributor to growth. And you're seeing, you know, in our mix a bigger percentage of our volumes that are going into these non-measured channels, which means that the alternative strategy is ramping up. So we're seeing healthy growth in each of the channels, you know, in the measured channel driven by our market share gains and in the non-measured channel, you know, kind of increasing our penetration in terms of the stores that we are in.
spk06: Understood. Thank you. And my next question is turning to Stokers. Despite a tough comp, the business continues to do well. Can you comment at all on the growth by form factor, specifically tubs versus cans? Thank you.
spk05: So with Stokers, we were introduced the concept of tubs into the market, which established the Stokers tubs as the leading brand and remains the leading product in the market, and it is the driver of the growth. It is a It is an excellent value buy for the consumer. If you look at it on a per can basis, it sells at a discount to our cans. And you have the convenience factor of only going to the store once a week or so. And so tubs are the driver. In fact, what we see when we put tubs into can stores, that you do see a migration from cans to tubs. The cans are actually a great introductory product. for the tubs and leads to consumers to the tubs. They're a great combination.
spk06: Makes sense. Understood. Thank you. And last question. As it relates to your recent investment in OPAL, can you elaborate on the mechanics of being able to make that investment? Thanks.
spk03: Sure. Yeah, I mean, OPAL is structured as a non-plant touching cannabis company, so they license out the brand. uh to their partners and so we were able to invest directly into well we have a convertible note uh at the moment but um that is convertible into a kind of series of common shares as well thank you there are no further questions at this time sir please continue
spk05: Thank you, everybody, for joining the call. We look forward to seeing you next quarter with some more good news. Thank you.
spk07: This concludes today's conference call. Thank you for participating. You may now disconnect.
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