SNDL Inc

F:VY4

Earnings Call Transcript 2019-Q2

[Operator]

Welcome to the Sundial Growers Inc. Second Quarter 2019 Results Conference Call and Webcast. [Operator Instructions]

I would now like to turn the conference over to Jayson Moss, Investor Relations of Sundial Growers. Please go ahead, Mr. Moss.

[Jayson Moss, Investor Relations]

Good morning, everyone, and welcome to Sundial Growers' second quarter 2019 financial results conference call. Earlier this morning, we issued a press release announcing our financial results for the three and six months ended June 30, 2019. This press release is available on our website www.sndlgroup.com and was filed on EDGAR and SEDAR as well.

Presenting on this morning's call, we have Torsten Kuenzlen, Chief Executive Officer of Sundial; and Jim Keough, Chief Financial Officer of Sundial. Also joining us on the call will be Andrew Stordeur, President of Canadian Operations; and Ryan Hellard, Chief Experience Officer.

Before we start, I would like to remind investors that certain matters discussed in today's conference call or answers that may be given to questions including but not limited to information regarding the continued development and growth of the demand and markets for our products, our production capacity, growth strategies and capabilities and licensing status could constitute forward looking statements. Actual results could differ materially from those anticipated. Risk factors that could affect results are detailed in the company's financial reports and other public filings that are made available on Sedar and Edgar.

Additionally, all financial figures mentioned are in Canadian dollars unless otherwise indicated. No fiscal period subsequent to the fiscal year ended December 31, 2018 has been audited. Following prepared remarks by Torsten and Jim, the Company will conduct a question-and answer-session.

Now, I would like to turn the call over to Torsten.

[Torsten Kuenzlen, CEO]

Good morning, everyone, and thank you for joining us for our second quarter of 2019 financial results conference call. This is our inaugural quarterly earnings release as a public company following the listing of our shares on NASDAQ on August 1, 2019. We are excited about our strong second quarter financial results. Before we speak to these results, I'd like to first highlight several significant milestones achieved by Sundial.

Most recently, we successfully completed an initial public offering or NASDAQ, in which we raised gross proceeds of US$143 million. This additional funding, combined with the previously announced other financings of over CAD 250 million and a further debt financing being finalized as we speak, we are well financed and positioned to be one of the leading global cannabis companies.

Our management teams deep consumer packaged goods experience, our focus on building consumer centric premium global brands, and our tailored supply chains all drive an operating model that strives to deliver profitable, sustainable growth.

In Canada building brands that consumers loves, starts with a superior product. Our modular purpose built, fully controlled indoor growing facilities are highly capable growers and our extensive library of premium cannabis strains enables small batch cultivation focused on quality and consistency. We believe that this craft at scale approach will enable us to produce noticeably better cannabis.

Our Canadian operations continue to progress remarkably well and quickly. We significantly scaled up production at our flagship facility in Olds, Alberta and have now already completed more than 150 harvests with the vast majority of those coming during the second quarter.

Having completed that many harvests allowed us to learn very quickly and continue to find tune our cultivation rooms to improve yields, quality and consistency. We believe that this will continue to improve quality and quantity of our harvests going forward.

The Sundial Cannabis brand offers five product lines come, eat, flow, lift and spark. Each line is focused on meeting specific consumer needs with tailored product offerings that provide premium experiences.

So far, we have launched four products, Zen Berry under the Calm line, Daydream, under the Flow line, and Citrus Punch as well as Lemon Riot in the Lift line. Subsequent to the end of the second quarter on July 2, we closed the acquisition of Bridge Farm Group, a leading U.K. based producer of ornamental plants, flowers and edible herbs. We're very pleased to bring the Bridge Farm team into the Sundial family.

Bridge Farm currently operates three growing facilities with approximately 1.5 million square feet and plans to expand to approximately 3.5 million square feet by early 2021. Bridge Farm's state-of-the-art facilities experience management team and strong customer relationships are competitive advantages we are excited to leverage going forward.

Using a phased approach and subject to necessarily regulatory approvals, we intend to initially cultivate hemp for the purpose of extracting CBD. Bridge Farm will serve as a hop follow global CBD business as we will leverage its competitive advantages to provide high quality CBD products from a traceable supply chain that retailers and consumers trust. We are in discussions with many of Bridge Farm's existing retail partners to sell our branded CBD products throughout the U.K., the Rest of Europe and beyond.

Another significant step in our growth strategy was securing worldwide rights, including copyrights and trademarks, to a portfolio of brand names, designs, domain names and other intellectual property associated with Top Leaf and BC Weed Co. Top Leafand and BC Weed Co. are recognized premium cannabis brands known for award winning cultivars by loyal consumers.

The Sweet J, previously called Sweet Jesus strain, won the Gold Sativa Flower award at a recent high times Cannabis Cup. Strawberry Cream previously named Voodoo Child, won second place for hybrid flower at the same competition. We're delighted to bring these high profile brands into the Sundial portfolio and are confident they will serve premium cannabis consumers we're looking for exceptional quality.

The premium nature of Top Leaf and BC Weed Co. products will drive improved margins and profitability as we roll out increasing number of SKUs under these brands in the coming months. We expect to launch our first Top Leaf product at the end of this quarter. We then plan to produce and commercialize our BC Weed Co. products from our third Canadian facility in Merritt, British Columbia upon completion of construction and licensing.

We are currently scaling production of multiple new strains to commercial quantities and continue to cultivate new strains on an ongoing basis to continue to penetrate and capitalize on the growth and the play recreational cannabis market.

Moving to medical cannabis, which we call heal. We acquired a 50% interest in a company called Pathway Rx. Pathway Rx uses advanced technology and an extensive library of cannabis strains to identify and customize treatments for symptoms associated with a wide range of medical conditions. In the future we intend to leverage Pathway Rx's cannabis strains to develop cannabis based pharmaceutical drugs.

We're also leveraging partnerships with leading research institutions, including the University of Saskatchewan's Cannabinoid Research Initiative of Saskatchewan and the University of Calgary's Coming Schools of Medicine to facilitate a research and found approach to identify and develop cannabis strains for medical use.

Before I hand it over to our CFO Jim to discuss our financial Q2 results in greater detail, I'm happy to highlight that we generated over CAD 20 million of gross revenue and a narrow adjusted EBITDA loss of only approximately CAD 500,000 for the second quarter.

With that, I'd like to hand it over to Jim to walk you through our detailed financial results.

[Jim Keough, CFO]

Thanks Torsten. Good morning, and thank you for joining us on our conference call this morning.

We are very proud of our Q2 2019 financial results. Given that we only started selling our products during the first quarter of this year, I'll refer to the comparable period as Q1 2019 unless I indicate otherwise.

Our Q2 results demonstrate our ability to scale our production and successfully market our products while maintaining cost discipline. For the second quarter of 2019, we reported gross revenues of CAD 20.3 million, representing a nearly 12 fold increase from CAD 1.7 million in gross revenues for the first quarter.

In total, we harvested 9,551 kilograms of dry flour and trim in the second quarter and we sold 4,741 kilograms of product. This represents a significant increase from the first quarter of 2019, during which we harvested 1,896 kilograms and sold 323 kilograms of product.

Majority of our sales were to other licensed producers in both the first and second quarters of 2019 as we just launched our sundial branded product Zen Berry into the market earlier this year. As we increased sales of our Sundial, Top Leaf and BC Weed Co. brands into the adult use or play market, we expect the percentage of our sales to other license producers to decrease through the remainder of 2019, and become a minority of our sales in the future.

On average, net selling price in the second quarter was CAD 4.07 per gram as compared to CAD 4.64 per gram in the prior quarter. This included bulk sales of trim at a lower price point. We continue to strive to optimize our revenue and gross profit mix. The addition of new provincial boards, including the Ontario Agreement, which Torsten mentioned earlier, will diversify and add flexibility to our portfolio.

Cost of sales during the second quarter totaled CAD 10.4 million or CAD 2.20 per gram. This compares to CAD 0.8 million or CAD 2.41 per gram in the first quarter of 2019. Cost of sales per gram decreased through efficiency gains and economies of scale as production capacity increased. We expect this trend to continue as we increase production capacity and continue to focus on cost optimization and control.

For the second quarter, gross margin before fair value adjustments was CAD 8.9 million , representing 46% of net sales. This compares to gross margin before fair value adjustments of CAD 0.7 million or 48% in net sales for the first quarter of this year.

Adjusted EBITDA for the second quarter of 2019 was effectively at a breakeven level, coming in at a modest loss of less than half a million dollars. On a comparable basis, we reported an adjusted EBITDA loss of CAD 5.5 million in the first quarter. We continue to move towards sustainable profitability.

We would like to point out that as Torsten spoke to in his remarks, we added the Top Leaf and BC Weed Co. brands to our portfolio through the Sun 8 transaction in the second quarter. Research and development costs associated with this transaction amounted to a one time, CAD 1.5 million expenditure during the quarter, which is included in our adjusted EBITDA.

It is important to note that without this charge, our adjusted, EBITDA would have been over CAD 1 million. We expect our research and development costs to be lower than this on a quarterly go forward basis.

From a capital spending point of view, we continue to build out of our flagship old facility. Additions to property, plant and equipment in the second quarter amounted to CAD 33 million as compared to CAD 30 million in the first quarter of 2019.

For the second quarter, the bulk of the expenditures were directed toward the construction of Parts 4 and 5 at our Olds facility. We continue to expect Part 4 to be built and licensed by the end of 2019 and Part 5 by the end of Q1 2020.

In addition, we expect to complete the construction of our people, processing and packaging facility in the fourth quarter of this year. The initial phase of the construction of the Merritt facility in British Columbia has also begun.

Turning to our liquidity and capital resources, our balance sheet strengthened considerably during the quarter. We completed two financings during the quarter and our IPO subsequent to June 30. Let me start with our initial public offering.

On August 6, 2019, we successfully closed our IPO of 11 million shares at a price of US$13 per common share, raising gross proceeds of US$143 million. This equated to approximately CAD 170 million of net proceeds. These proceeds will be used for the construction, expansion and transition of our cultivation and processing facilities, in addition to ongoing capital expenditure requirements, to maintain and grow our business and for acquisitions and general corporate purposes.

Additionally, in May 2019, we closed a private placement offering of 8% convertible notes, raising approximately 93 million of gross proceeds. We also entered into a term debt facility of just under CAD160 million on June 27, 2019. The first tranche of the facility CAD 115 million was used to fund the acquisition of Bridge Farm Group and repay their outstanding debt.

The second tranche of approximately CAD 45 million remains available to the company upon satisfaction of certain conditions precedent. At quarter end, and prior to the proceeds from the IPO, we had unrestricted cash and cash equivalents of approximately CAD 38 million and our net debt position stood at approximately CAD 130 million.

Overall, the combination of these financings has strengthened our balance sheet and positioned the company to capitalize on organic growth opportunities, as well as accretive acquisitions. We've achieved a lot over the first half of 2019. As always, we remain diligent in allocating capital to our highest value, adding priorities that are focused on cost discipline and growing sustainable profitability for the long-term.

Now I invite Torsten to provide some closing remarks.

[Torsten Kuenzlen, CEO]

In conclusion, I'm proud of what we have achieved to-date here at Sundial. We believe we are at the forefront of an industry where we can create significant value over time. We will continue to take a prudent approach to deploying capital and therefore we will be allocating capital to initiatives that offer the best risk adjusted returns for our shareholders, given our go-to-market strategy and our strength and balance sheet.

We believe, we will execute on our organic growth opportunities and participate in the consolidation of this fast growing global industry. I'm proud of our Sundial employees for their continued support and the results they are helping us achieve.

With that, I would like to turn it over to questions.

[Operator]

[Operator Instructions] Our first question comes from Vivien Azer of Cowen.

[Vivien Azer, Cowen]

So my first question is around your price realization in the quarter, please. So a little bit surprising to see the sequential decline in your average selling price per gram, fully understand the negative mix that you're getting from trim. Could you guys just elaborate on the pricing that you're getting between the Sundial brand at wholesale versus trim so that we can think about how to model your ASPs appropriately going forward? Thanks.

[Torsten Kuenzlen, CEO]

So Vivien, the average price that we have for provincial boards, the gross price – for the three months ended June 30th was about $6.52. We also sold to LP, LP-to-LP for about 450 and then we had some trim that was sold at about 225. The decrease in the price is really related to the mix that we had over the first quarter and compared to the second quarter and in the first quarter we had a larger relative percentage of provincial board sales and no trim sales.

So really the entire shift is related to mix, but the provincial board price remains strong and our future supplies to provincial boards that will remain strong and improve.

[Vivien Azer, Cowen]

That's very helpful. Yes 650 is a much better number. Will you guys be disclosing your mix between trim LP-to-LP and then provincial wholesale so, we can think about how to model that out?

[Torsten Kuenzlen, CEO]

I mean, we certainly can go through that discussion in detail I think that it's I mean – clearly it's we're going to continue to have a majority of our sales in the next quarter LP-to-LP and then we will continue to build into the provincial board channel.

[Vivien Azer, Cowen]

And then what point would you think that that tapers off you noted in your prepared remarks that ultimately that goes away over what time horizon should we think about that?

[Torsten Kuenzlen, CEO]

We’ll continue through 2019 to have a majority of sales LP-to-LP and then it'll begin to taper off next year.

[Vivien Azer, Cowen]

Okay that's great. And in your press release and prepared remarks, you noted, new products hitting the market in the coming weeks and months. How should we think about the timing for Top Leaf and BC Weed Co. specifically? Thanks.

[Torsten Kuenzlen, CEO]

So we've already begun to cultivate – our brands - our products for Top Leaf. We expect that the first ones will come in the second half of 2019, hit the market. But we've – begun cultivating multiple strains for the Top Leaf brand, BC Weed Co. brand will come to market as soon as we receive license for our BC facility and Merritt.

[Vivien Azer, Cowen]

Terrific and then just on Top Leaf last one, have you already had discussions with the provincial boards in terms of getting shelf space for those offerings? And if so, what kind of pricing should we expect? Thanks.

[Torsten Kuenzlen, CEO]

Yes we have had lots of conversations with our provincial board partners. I can tell you the feedback has been extremely optimistic about it. Pricing certainly can be more accretive than Sundial which is great.

[Vivien Azer, Cowen]

Correct.

[Operator]

Our next question comes from Tamy Chen of BMO Capital Markets.

[Tamy Chen, BMO Capital Markets]

My first question is I just want to make sure I heard this write that for Pod 5, that you're anticipating it to be built and licensed. Did you say the end of 2020 I just wanted to make sure I heard that?

[Torsten Kuenzlen, CEO]

No so that's end of 2019. So both Pod 4 and 5 each with 220 additional grow rooms will be – are expected to be ready with construction and license and starting to grow this year.

[Tamy Chen, BMO Capital Markets]

Okay, thanks I am glad.

[Torsten Kuenzlen, CEO]

Thanks Tamy.

[Tamy Chen, BMO Capital Markets]

My next question is, I just want to get a better understanding of how we should think about your product rollouts in Ontario and some of the other provinces outside of Alberta the rest of this year. Is it just a function of your increasing, not only the cultivation, but your processing, throughput and packaging? Or are you also making some sort of volume allocation decisions at this point, because you're trying to build extract inventory heading into the new form factors as well?

[Torsten Kuenzlen, CEO]

Thank you, Tamy. It's a combination of different factors. as you know what we have for insured is continuity of supply of all existing SKUs to our existing provincial boards and retailers in those provinces. As we build up our capacity and we increase the growth of the new strains for the top leaf brand, we will sequentially roll out those SKUs to the additional provincial boards. We believe we will have enough product for the new form factors to continue to expand across the country to provinces as well as rollout additions, Alaska use under the sundial brand and then under the top leaf brand.

[Tamy Chen, BMO Capital Markets]

Okay thanks. And if I may, just one more, I just want to get a bit of color on the tax side. I noticed that, you know in Q1 I think sales and marketing was more than the 5 million range while G&A was more in the 1.2 million range. But the quantities of those two-line items seem to go into reverse in Q2 if I'm looking at it right. So I just want to understand what’s going on there?

[Jim Keough, CFO]

Yes, we are seeing continued ramp of costs for G&A and for sales and admin. I think we're starting to plateau now as we're building out our head office and starting to see the G&A costs come to a stabilized level. And, but we will, as we rollout to the other boards, begin to ramp up more on the SG&A side as we move forward.

[Tamy Chen, BMO Capital Markets]

Okay and so I have just got one more quickly on the Bridge Farms side. I know there's a couple of licenses you're waiting for before you can start really converting and growing hemp at Bridge Farms facilities. I know there was also discussion or plans to have any interim sourcing third-party CBD isolate. Could you give an update on that have you identified a source for that?

[Torsten Kuenzlen, CEO]

We are working with the U.K. team, make sure we’re going to fly over it today on the details of that. You know, initially the plan was to use our own produce CBD right from the beginning in our conversations with the retail partners. They're very keen to come to market early as we're looking through all alternatives of accelerating that, including potentially sourcing trusted CBD in the beginning and producing with that board in the CBD until our own production is fully up and running. Those plants are advancing well and we are in conversations with the retailers on the product formats and the timing for those introductions.

[Operator]

Our next question comes from Doug Miehm of RBC Capital Markets.

[Doug Miehm, RBC Capital Markets]

First question has to do with the number of kilograms that you are able to harvest, and it looks like it's grown from around 63 kilograms per harvest to 102 in the most recent quarter. My first question has to do with the number of rooms – the average number of rooms in each of those quarters that you had running what were they?

[Torsten Kuenzlen, CEO]

Yes, so Doug right now as we sit here, we have 77 revenue generating flowering rooms. There is other rooms in which we have all clones and we have all veg plants we do our R&D. But the revenue generating rooms that flower for sale are 77, three of those I know a Rocky View, facility, which is mostly R&D and that's where we scale up our clones. 74 of those rooms are in our flagship facility in Olds. As you recall, the 74 rooms are spread over four are so-called pods.

Each of all pods has 20 identical grow rooms. So three of those pods have 20 rooms and we have one smaller pod with 14 rooms. So that's the 74 and you will have seen the press release recently where we announced that we got those additional 34 rooms and that's what's driving the increased harvest numbers.

Obviously, that is multiplied by the yield that we're getting per square foot. That's well our old facility is really beginning to show its strength. So the yields are continuing to increase and we're very encouraged by the numbers we're seeing, as we dial in the rooms, as we use them for a second, third and fourth time. Those room conditions get even better for the strains and therefore the harvests improve even more. So it's the number of rooms times increase yields that's driving the additional agronomic, which in turn drives the revenue.

[Doug Miehm, RBC Capital Markets]

Yes. So I was just trying to figure out how many rooms were in operation in Q1 and Q2?

[Torsten Kuenzlen, CEO]

We need to look at the specifics, so we had 40 rooms in operation in quarter two and 74 of them in operations for Q2 not for all of quarter two. So the timing within the quarter than it depends and obviously, we need about 60 days to get a growth through start to finish. So there’s bit of timing that’s likely end up.

[Doug Miehm, RBC Capital Markets]

Can you talk about seasonality in the Bridge Farm business, what does it looked like historically? And what are the implications of that?

[Torsten Kuenzlen, CEO]

Yes. So the Bridge Farm business traditionally had a bit of seasonality in particularly, a quarter two. So as they sold their bedding plants to consumers in the spring, that's where their peak was and one of the reasons for actually getting into the cannabis business and growing hemp, is that in the shorter season, so in the other quarters where demand is a little bit lower, gives them an opportunity to fully leverage their capacity during those times to create CBD. So it really overall increases the capacity utilization of the facility.

If you then look at the rest of the quarter, say, there’s somewhat, even quarter three, maybe a little bit lower than the others even that's a bit of a uptick in quarter four at end with the Christmas Flower Poinsettias grown there.

So probably Q2 strong growth in Q1, in Q4 and Q3, probably the one that has the lowest seasonality. You'll see us use that capacity then to grow CBD plants in those facilities during those times.

[Doug Miehm, RBC Capital Markets]

And last question just has to do with this. I guess one time R&D charge, 1.5 million. Can you tell me how that qualifies as R&D and why it's one-time and that sort of stuff? Because that does make your numbers look a little bit better than relative to the 0.5 million, of course.

[Jim Keough, CFO]

Yes, sure Doug. So that was part of an acquisition of Pathway Rx that we -- a company that we acquired 50% interest during the quarter. And under that agreement, we were required to incur $1.5 million of roughly $1.5 million of expenditures for consulting services that they did for us related to R&D.

So when we made this acquisition of Sun 8 excuse me, with Sun 8, when we did that acquisition it’s really a one-time kind of expenditure. We will incur R&D on an ongoing basis, but it will never arise in that manner where it comes through an acquisition.

So that's what we refer to, that Sun 8 costs, sort of a one-time cost. And why I tried to emphasize that, in terms of looking at our adjusted EBITDA, that if those had not been included, that we would have been positive.

[Operator]

Our next question comes from Kate Grafstein of Barclays.

[Kate Grafstein, Barclays]

I was hoping if maybe you could touch a little bit on your rationale for entering the Europe CBD market first before maybe entering the U.S. and just more broadly, what will you expect M&A to play in your international expansion plan. Thank you.

[Torsten Kuenzlen, CEO]

So when we mapped out the future of the cannabis market globally, the euro monitor data that some of you might have seen which indicated but by 2025, Europe actually is projected to have the highest cannabis sales of any continent.

As we looked at the United States, obviously still a lot of fragmentation there and we saw a terrific opportunity to jump on the bandwagon and get first mover advantage in the U.K. And the Bridge Farm acquisition in particular was attractive in terms of the quality of the product, the trusted customer supply chain.

Now, some of the retailers that operate in the U.K. also operate in the United States. So as we bring our CBD products, including those Sundial natural brands to Canada and to the U.K., that obviously sets us up well to test those products, confirm the validity, and then make a strong point for U.S. retailers ultimately to also bring those to the U.S. And that's what we would prioritize the U.K. or Europe in the first instance here.

In terms of M&A, we're very keen to continue to align our strategic complexity with our capability to execute. So you will see us do a smaller number and then a decisive number of larger M&A, if and when the opportunity is right.

But now, we are very focused on continuing to drive all Canadian business and get the share across the country that we intend and we've just got the keys and partnered with our new Bridge Form colleagues here to really get on top of the U.K. business, continued to drive the legacy plan business and develop the plans to bring the products to market on the CBD frontier and next year.

And from there, I think the next focus will indeed be on the United States for us, the opportunities, of course, and in parts of Asia as well, Latin America that we will look at and M&A will really be a part of the expansion strategy in Canada, we might look at some complementary M&A in the U.K. and then ultimately we'll look at the U.S. and internationally as well and use M&A as a component of our growth together with some organic growth that we think we can generate internally.

[Operator]

Our next question comes from [indiscernible] of Canaccord Genuity.

[Unidentified Analyst]

I just wanted to ask a quick question on company strategy for Cannabis 2.0. It seems like you guys have $17.5 million of inventory. I'm wondering how you guys are stockpiling this in anticipation of the derivatives market and perhaps you can shed some color in terms of what products you guys will be targeting and whether you'll be able to bring these to market right when the derivatives market opens. Thanks.

[Ryan Hellard, Chief Experience Officer.]

It’s Ryan Hellard, Chief Experience Officer. We've begun to use parts of that inventory to begin -- to develop inventory for Phase 2. So we've begun the extraction and the production of the base oils, which will then transfer into future products, such as Topicals and Vape Cartridges.

So we've already begun to move through that inventory as we begin to prepare finished goods inventory for the release of those Phase 2 products and we'll continue to do that moving through the lower value flower products, including [Sheikh] over the next two quarters.

[Unidentified Analyst]

One last question. So with the acquisition of Bridge Farm, the company has entered Europe and you have plans to go to be selling CBD. Per your MD&A it says that the Homestead Facility may be converted so that you can also be growing high THC cannabis. I was wondering if you can speak to your strategy for International medical marijuana markets.

[Ryan Hellard, Chief Experience Officer.]

Indeed, so we will be able with the right licenses and place obviously and all the permits to grow medical cannabis in that facility as well as well as in our facility heal over time. We think about the vectors of growth for us that we call heal, help and play. Heal being medical cannabis. Obviously, we have plans to be a significant player in that market. Our pathways are x, x acquisition, very much supports that together with a research initiatives and the clinical trials that we have started here. So we are very much looking forward to leveraging both of our facilities to produce high quality medical cannabis and be a significant player in that market as well.

[Unidentified Analyst]

Sorry, I just have one more question with having shipped your first batch to the OCS, perhaps you can speak to kind of your experiences of maneuvering the provincial channels. Have you faced a lot of difficulty just trying to gain some color on that? Thanks.

[Andrew Stordeur, President, Canadian Operations]

Hi, it’s Andrew Stordeur here, President, Canada. You know, I think the provincial boards have been really receptive of kind of where we've positions Sundial as we launch that brand first. I think it's -- it kind of speaks to the consumer need states that we're going after. And certainly top lease has been well received as well. So I think for the most part, you'll see us expand into all the western provinces and we certainly have aspirations to kind of move across in 2020 across Canada. So overall well-received and we anticipate the momentum continuing.

[Operator]

This concludes the question-and-answer session. I would like to turn the conference back over to Torsten Kuenzlen for closing remarks.

[Torsten Kuenzlen, CEO]

Thank you, everyone for joining us here for our inaugural earnings call, excited to be partnering with you here as we move forward. Look forward to sharing the exciting progress we are expecting in quarter three and look forward to the dialogue with all of you. Appreciate your time and interest for many of its early in the morning and look forward to our next interactions. Thank you. Bye-bye.

[Operator]

This concludes today's conference call. You may disconnect your lines. Thank you for participating and have a pleasant day.