22nd Century (XXII) 9 Mar 232022 Q4 Earnings call transcript

Good day, ladies and gentlemen, and welcome to the 22nd Century Group's Fourth Quarter and Year-End Results Conference Call. At this time all lines are in a listen-only mode.

Following the presentation, we will conduct a question-and-answer session. [Operator Instructions]. This call is being recorded on Thursday March 9, 2023.

to for conference XXnd like Kreps, to now Relations Investor Century. would turn over the Matt I Please go ahead.

Good morning, call. conference fourth quarter and welcome to XXnd Century's results

Joining results Business. Events The moving at subheading. Earlier available are Hugh we issued the year our section John Jim XXXX. xxiicentury.com, release release, in President with under website fourth today, remarks our and me the announcing Q&A start presentation quarter press Jim, and CFO; full our Miller, XX-K Tobacco with our the and prepared We'll CEO; our of a today are for earnings of Kinsman, Investors Mish, Analysts. call into today's John our session Research from Hugh a before and

time commercial today's focus VLN for in our will we advancements and revenue limited GVB business on tobacco call, Given hemp/cannabis units. driving the

addressed questions welcome today's contact have release. are to that Investor you information Relations email are If today's my using not call, you in provided on

call. today's about reminders Few

Some of are the today statements made forward-looking.

statements contemplated that results from may materially and to differ subject cause those other factors to Forward-looking these actual statements. risks, by uncertainties are

the information factors regarding found with be our quarterly Additional and filed reports can annual, other in these SEC.

non-GAAP call, taxes, as financial today's also and we expenses. as noncash nonoperating and including we during adjusted which may amortization earnings adjusted EBITDA, Also depreciation measures, interest, discuss define before for certain

these refer our earlier to on press please details measures, issued more For today. release

Jim call to the I'll beginning slide with And turn over three. on that,

Thanks, Matt, and good everyone. morning,

we the and from entity. only an of company as show to hemp/cannabis revenue content, unit. XXXX a become and commercial accelerated as and into of as advanced aggressive we all R&D and and The rollout with XXXX growth first fourth those opportunities activities Century, quarter, more nicotine just reduced doing and commercial were our margin beginning The evident more truly benefits transformative transform XXnd of quarter business progresses will are for in really VLN our cigarettes,

laid are Those results multi-state The them door pilot we to this. tell major aggressive confident are smokers to wanting Our the to program. exceptional groundwork to John's less. smoke clearly VLN to retail help VLN going willing brands XXXX VLN. Chicago in so launch are adult an results you why pilot bringing switch that chains carry And for showed to our

We top and chains have distributors level our national regional that of goal distributor established of will end relationships achieve with XX to tobacco the C-store up by and the XXXX. states serving

industry market. continued to as share APIs our launched recently volumes an submitted to distribution provide to category an CBD in management model distribution molecules. We based scale confirmed around we first dominant derived hemp pharmaceutical trial derived position industry to centered GVB plant CDMO+ ingredients have the growing FDA application the and

position strengthened on industry by putting place The has more Grass meeting November the discussion. even facility to facilities. revenue plans Valley our actually back our about target in come fire fully I'll talk new stronger volumes And with after and in even the our to continue that our later fire, at build

Perhaps most call. you on of importantly those this to

of inclusive operations overhead This VLN first hemp/cannabis units. company. positive cash and corporate this business to path the both clear a for confirming and are We our is

and four updates. You've positive. other both among we the for cash This how Valley, and adjustments been Grass update overhead the summarizes in it get corporate asking includes fire allocation Slide for

chains. growing launch and to funnel that multiple national relationships of will top states retail with has us hundreds top stores with distributors enable regional Core-Mark/Eby-Brown in across or the of XXXXs now VLN place a and

of brands driven CBD is early this still consumer represents I'll of improved hemp/cannabis XX cash XXXX. demand top distribution. up we positive to customer to per to results, centralized intend GVB we fully and first consumer XXX sold our example states by Again, detail about that extraction and And for for XXXX hit verticalized CBD positive path industry hemp/cannabis, million year Prineville going the talk John units you. crude cash to continued acceleration cartons initial provides the more math the back clear in Our derived as and get now solution manufacturing into business after an with Again, and such products, John. taking operating as facility, with ingredients a

into let his business good are John? a the unit, in doing point That's to our John work teams tobacco dive incredible

good Jim, and morning, Thanks, everyone.

six market. adult tried to with We smokers are pilot where The an to exceptional disruptive interest reduced in K using and a offers our VLN rapidly understand has is incredibly nicotine cigarettes, from in effective repeatedly have whom Slide in studies. of were proven to and we moving quit VLN reduce tool bring that Chicago Starting to their to Circle been easy product new from XXXX. clinical confirmed and failed most traditional methods. smoking

and the Illinois Colorado excise favorable incentives. in from Moving we sales pilot, tax MRTP a added expanded financial where structure provides the state

Arizona, K distributors in plans Utah. non-traditional Friendly. been Mercantile launch XXnd We have Smoker Circle Rock Creager and announced organizations with began Eagle both and Colorado, partners with and Century, in Mexico and also New excellent We

launch of these wanted apparent and to access have national other their VLN, quickly It local our delivery to to club we schedule. plans took use networks. develop national ahead local but current accounts distribution that As traditional regional shape, became major wanted scale and systems distributor retailers through would

Slide action our Seven of the focus days. to over last XXX the power demonstrates

national that we signing distribution the of We have and created includes are a largest last two Core-Mark, number distributor stage the in the C-store distributor. network

number chain nation. developed of regional, the the final chain local number one group in stages country with the in the C-store Additionally, of are we and have signing accounts VLN. C-store distribute club and in to the piloted a We two

the next plus as We agreements soon are into three California, Texas two mentioned announced launching largest weeks. military a list today top regional plans more. in sales four the announced of just that in three have growing going also XX retailers Florida, We few We active funnel. cigarette states and the bases just I in the and were finalized as states,

more Japan. two announcing Switzerland in and also are tests international We

In that scale retail rollout VLN. for massively go summary, this as markets. and of distribution close cigarette with And our the partners point is be national new we're short ready partners largest within and with starting the naming just expands we important a could as these most and to footprint

Slide Now see you eight, enhanced turning what this to can programming enables.

new have announce C-store leaders our announced to expanded national ecosystem four partners We and pipeline, first regional dramatically eight the including have including of the markets. the top and C-store in distributors. chains We've states distribution begun with and many largest retail the in

the ability we end, our a almost new in the VLAN launch As updating available XXXX three have Less hundreds stores. year. at of to enabling in goal of us an the XXX end to was time than stores came by months to later, states of achieve

partners near XXX to retail we of stores operate top regional the launch stores Our our Texas states, in in plus expect targeted chains, such approximately alone future. XXXXs CEFCO, where based as

Our sales. pipeline date to regional annual exciting through this logos is most full adding on of cartons look the new represent we national year. of announced slide we cigarette opportunities, Perhaps move partners XXX and and as importantly, many to this million states forward to the

this our chains states to positive. need retailers. scale to hit The only okay. we be cartons wouldn't channels And potential on earlier every originally distribution volume XXX on category. expected. volume, confirmed the and After a or multiple We than The we one which in pathway million goal cashflow highlighted from is of several achieving XX Then of and states launch national than point in on we that to Chicago every trajectory. Slide of scale share we entire shelf represent becoming of now of exceptional the our on shows are cartons states, more well fraction in based corner these late to results just this on pilot year nine process investment had sales cashflow across year be we rate can focus year large positive, run achieve in demand well per million X.X approximately we need a the

Slide international a reduced two allowing little its many, to our enacted after national Zealand over cigarettes be for On sold, years. also I XX, important New efforts particularly in policy starting are content nicotine only know

tobacco, have are leaders seeds, or closely support committed working enough we our to supply product, Zealand it's grow efforts. with to Whether market We entire X local sticks. reduced their to tobacco, our our about the New with nicotine seed tobacco billion

planning expand detailed more our with also programs Switzerland follow-ups. Korea and Japan are in in We to pilots South and launch

closer fuel from the FDA on about ban Finally, have XX, path the been State to talked and to the Federal products be we by menthol King nicotine that moving the only administration. the believe and forward We combustible content bands extensively only for for the we local the harm reduced VLN add a exempt Menthol including of true best Slide both believe action, menthol market having federal reduction. could made clear priority ban. reality tobacco is menthol from are which federal which proposed our a mandate, Biden the fire cigarette both and a regulations, on cigarettes

the New more through this of more, introduced by Zealand, or And or level toxic the migrate local clinical standard easily meets that it. more have products. the and the than approach science regulations whether reduced will even data nicotine all bills as shows less we state this product that a the taken smokers mandates to only that such back But year quit help any national with federal currently XXX at

for Jim on our pass I franchise. you that, an On hemp/cannabis Jim? to update back

for year amazing progress now opportunity a beyond. at tobacco and unit seen an transformative well to been and It's John. positive the cashflow Thanks, as business

rich pharmaceutical faster turn kilos XXXX in intend of broad same packaged have leader for hemp in even servicing products And selling quarter active goods, an ingredients consumer discuss of into we cannabinoid XXXX. a volumes and the derived Slide timeline. the growing. accelerated XX America and hemp/cannabis for the and global do in as with footprint on fourth of is industries, the extracts GVB Let's and manufacturing to nutraceutical XXX,XXX finished market to hemp North we how

Grass a achieve planned exceeded deliveries fourth revenue positive to in more operations our due cash detail. the November had margin original positive of setback customer plans all the regardless I'll aggressively maintain and Valley we targets combination in even to scale which fire, enhancement, cash responded We primarily into with go for XXXX and though our quarter. a impacted We and operating

management. our why even is built. truly we have GVB it. plant sets goods category we science This This have been was from what vertically here's integrated have complete it that to we now for. building is retail to building and been ingredients finish apart And receptor What what control

our starts fully Slide of XX output month by underpinning extraction Oregon expected an world-class end facility XXXX. the per capacity Prineville, manufacturing with covers kilos chain. This of assets XX,XXX integrated the ingredient a in with

has third-party distillate from of temporarily injected will They're production market. the a it in purchases our year-end the scales, facility which this capacity Valley As November, our replacing Grass results. into displace isolate crude lot of cost a majority fire one-time our and

are for a superior We to It a sheet to balance in will recover campus and build fortunate cannabis/hemp excellence the have economic both an strong far center long-term be absolute insurance scalability. fully even of efficiency back world. coverage and

variety for Vegas extensive XX,XXX our products our will manufacturing there, agreement, can This and of distribution square is our From with this repeat of product synergies. an sales CDMO+D white produce customers. capability label a site tremendous leverage team new VLN foot Las VLN the I'll an consumer market I'll for which a the Again, teams distraction accelerant of not cover amount shortly.

industry. trial European in seven clinical at top finally, Europe an These margin, conducting these to even strong revenue, to filed pharmaceutical we market immediate but allow for and to market footprint to U.K. nutraceuticals create start And DMF long-term in have volumes U.K. have trials quickly allow that landed in new CBD go used very RXP food ingredients a be we as opened FDA would the the speak. acquired supplying to to our a years facilities clinical the with the revenues companies five the emerging to that the clinical isolate are due access and sales the also by not they out in We've higher take trials and multibillion-dollar

complete Slide on more XX Grass provides update Valley.

our situation doing remind that will and thankfully, I the foremost, from and are employees all were First safely of extracted you well.

the able fourth still standards customers our we're Next, source and ingredients, and supply products in certify we to to quarter. them our delivered

is actually volume goal. already fact, almost in sequentially shipped to In with revenue January. growth kilos XX,XXX XXXX increased into we our and XX% by volumes That XX,XXX hit continuing kilos,

this a the We provides and seeing the hemp premium our consistently. source marketplace ability in of as to grows. shortage supply And are raw to market a

a to We comprehensive gets distillate our campus then us are standing efficiency Valley margin interim Prineville cashflow original up have which an progresses, XXXX could will support production, and Grass in recovery enabled. greater as for and facility scalability that positive, builds economic enable isolate than and will

well with key office We're state Oregon in governor's the also working as for their economic directly agency incentives. development as

retail are to our brand channel We model partnership shelf. expertise. is CPG say cannabis model, an this, capabilities leverages the XX top Slide the the new This details key established from brands scale in distribution turnkey opportunity but several we verticalizing There and for way this management business brands to CDMO+ world-class a the cannabis/hemp the exclusive ingredients cornerstone looking pioneering is should distributed consumer revenue, very the space. source with announce ultimately GVB, to and retail by soon. manufacture to solution license expansion no for and other a our profit in units and offers transformative solutions

seeking team and CBD products. and high high velocity, placed retailers margin to enables small sales with also channel It further products footprint VLN our consumer innovative leverage us

or one move are will opportunities. on be scale several and deals these to transformative two excited the revenue Just to of forward we

XX, Moving European Slide position improved. in to greatly the has our also higher market margin

Our faster and tariffs import other to European duties and supports inclusive market. our landed Netherlands $X cost than facility customers, billion of growing delivery and more warehouse

a than marketplace more GVB global of pathway ingredients. accounts. and are with novel ingredients core and provide and for brings applications, securities acquisition applications the exciting massive food for beverage and large intended footprint GVB's form consumer that and an high-quality market beverage a data of play products RXP nutraceutical food XXXX Our U.K. to the as food provider technical These

We U.S. rules current our food same distinct it's market, incremental when new market establishes the lines, go consumer the business to the specific its is hemp nutraceutical to direction the believe that. will emerging FDA which from growing

all together operations. it Bringing cash XX, Slide hemp/cannabis on the positive

as our to online First, scale bring operating revenue. resuming execute bulk we on for production enhancement crude additional performance extraction and we gain continue house margin

retail distribution high brands for meet demand consumer new CBD Second, off products consumer our new sites vertical agreements a new to velocity products. products placing expanding at kick top growth channel seeking CBD rapidly

to half not if operating positive it us earlier. with day, opportunities return new get by contract our parameters CDMO+D to XXXX, Just normal growth as cash coupled a stands and organic can first

FDA food another opens We for reliable guidelines the CDMO longer our notable that drug also have term our markets with a capabilities up who in with will of calibrated, solutions. FDA premiums specific of file master customers pricing in to ingredients set opportunities market adjacent with plus sales the nutraceutical large channel demand opens U.S. ingredients precisely new and adjacent repeatable

And finally, on note quick hops.

leveraging in to and with we franchise were unique are engineered accelerate KeyGene of industries. the plant of breeding specific agreement third Our top and new tools identify our genetics. alkaloid nutraceutical early and extensive capabilities, which the expanded new biotechnology beer research hot properly developing to traits XXXX, In benefit traits, techniques consumers we products to our molecular both

I to we past had as the to down what technological progress that's And significant lock as want IP will discuss in turn we filed soon let I Hugh termed the milestone. making detail an financials. is go Hugh? final to give me are work. into clear update to that, this that the on And then be the with over it as able to

Thank you, good to Jim, and everyone. morning

unit increased Starting revenue addition XX.X Slide on financial increased the XXX% manufacturing. of GVB results, net CMO reflecting sales and with quarter to off million, fourth quarter-over-quarter sales XX for

our and sales of continue experience increased demand customer bulk hemp/cannabis We ingredients. both including most higher to tobacco strong and for units volume CMO our products, hemp/cannabis

XX. sales XXX,XXX Profit Slides mix explain the I Valley the reflecting of XX Grass for with and combined profit will to lower manufacturing, fire. negative further decreased Gross on gross quarter-over-quarter CMO margin impact slightly

year the for again CMO Grass XXXX XX.X reflecting lower sales the addition sales GVB XXX% decreased fiscal sales. unit result of increased as Gross profit to margin a well as as million mix, higher X.X million Valley slightly CMO and to of Net year-over-year fire.

an million X.X from reflecting XX, Slide to slightly cigars. to tobacco quarter decreased flavored increase margin the low fourth Gross of negative increased sales sales our XX%. unit tobacco XX profit increased of margin million XX,XXX Moving revenue on for

launch forward margins profit the going to We improve VLN. expect with gross accelerated of

Moving Difficulty] higher to customer Grass grew demand the XX. due prior thorough million Hemp/cannabis and Slide Valley strong X.X relationships. X.X quarter from [Technical revenue planning fire, hemp/cannabis products. Also, ingredient due fourth for than fourth to Difficulty] quarter [Technical was the despite quarter billion revenue continued company's to the customer XX% strong contingency

QX fire. we to Gross back Gross margin margin improve to hemp/cannabis extraction decreased Grass reflecting by to facilities Valley year. the of continue is have again negative the as its impact build full extraction our The business capabilities XXXX. expected this restoration of will XXX,XXX,

Slide million increasing will stock and new growth. national needs VLN facility. in credit as XX reflect distribution describes are capital increased the GVB point. capital The as for consumer hemp/cannabis debt VLN the to Working both ingredients bulk at increased facility needs growth multiple CDMO working completed partnerships, due fund significant demand rapidly $XX our this recently senior well a scale requesting

firms and our [indiscernible] no are The issue of one, is monthly credit original cash three years, X% in discount. thereafter. with facility year Summary amortization amortization X%

Slide for note, $XX few balance million assets Last Of acquisition. the XX, of million, GVB more me our than the see goodwill sheet. highlights you'll a includes from intangibles from and total of $XXX key

the excludes strength $XX the sheet to million from received Difficulty] $X which of not million insurance new from balance proceeds or of the And date additional a [Technical fire. include credit of our the proceeds does facility

well. be insurance additional XXXX expect as proceeds received We to in

higher are XXXX and cash growth operations. through organic continued sales products requirements year reflecting of fiscal hemp/cannabis Century's anticipated decrease, VLN XXnd volume for

to due growing are making Century hemp/cannabis XXnd meet investments VLN the flow to in pace now consumer on both products. cash XXXX and demand to year for fiscal becoming is company a fact, In positive we

will to pass I Jim. back now it

you. Thank

years year we here ourselves an saying And we to position significant momentum. that is really several to the the have R&D to a continue build into working of we're transformation, commercial company. and been move company is from this What

are leveraging launch VLN major launch can distribution of that national time. customers, our a stores with hundreds We demand regional supports aggressive C-store as we and multi-state at

become Century in growing units with the rapidly on as model new are Steady again, top-branded to arrangement our that volumes is U.S. GVB and a and shelf. cash for inclusive commercial Our ingredient execution industry provides overhead move Europe entity. and XXnd mature CDMO+D And that targets centralizing allocations products corporate of hemp/cannabis positives. new and VLN these into we our integrated fully from

that, open questions. call please Michelle, with for And the

Thank will Instructions]. you. the Ladies question-and-answer and gentlemen, begin session. we [Operator now

question first Your comes Aaron from Partners. Alliance Global Grey,

So for me. question first

Just want launch some bit the of to and in have a the little legacy get more in actually terms markets. color trending of VLN

So on [Technical can we if maybe Chicago just touch Difficulty].

Hey, good This John. is Aaron. morning,

that see we are for continue We positive us. to results very

received, the of the driving want consumer pilot, about forward. product performing way our the gotten consumer feedback which driving the that we are the again, plans talking we've is all All is done, path moving results now results forward. testing our we've The get initial we've through we the

we the little markets, just that of with in national driver obviously big a in moving plans is distributors we retail. what expansion we've time. develop then terms of how and established the legacy of relationships So our key that into take bit see on key things driver the the These forward. That's how the

as quarter to distributors as the to Mercantile more traditional the said really we distribution happen. retail Eagle And go those second it about into Rock became my network. and the we in our pipeline, of with we said quite with three as Creager I All K paths forward. Friendly talk seeing be As But the apparent had discussion had in that are Smoker I going and start distribution is well. Circle previously, launched continuing

there. Okay, color great. that I appreciate

towards for me, question hemp/CBD. Second the

taking this this So of month from it regulation. FDA back the year to obviously, news terms earlier the Congress in or

space, stand in space. for of interim will have color just bullish current of So sound yourselves not have to the do the of you like how might how see state at seems some would but operators you industry terms get in where some believe positions that you you love to terms think in CPG kind impact the the bigger guys, of pretty coming you the in the guys would

of you to might that FDA of So it think taking any in have you and color have that Congress the back terms guys an you. the industry? for might impact how Thank in terms

take up I'll that sure. Yes, one Aaron.

ingredients we and to establish XXnd today, disconnected far focused thus from to fully that We've saying in gray limit what I basis is we think expect We're a the a on activity. market FDA core is business the the to basis dominant and XX% Century market. the about think This been from FDA exists CDMO need that way you is call is and CBD. growing on really both XX%. our safety threshold for an it's

they're have is in would multinational going does that cake. We simply to accounts. projected is of current had particular on enabled and is or that the established. limit some that in order growth to FDA But space by icing our a to growth The additional counted market. at the market what the nutraceutical market the on already kind authorization and go gray massive to again, be of this and in safety get lot the really better point fact to draw final bring that And in sooner Congress that nutraceutical around, in the that box our

we'll has the the us it's of that do finalize Farm open stage Congress. as limit for sign will set safety anticipate the that to will So very Pan-Atlantic to for part fall. then the market. that progressed the nutraceuticals We And good the Congress threshold then, renewal up FDA act a FDA in that really Bill and

these finalize that growth steps gray the which that growth They're healthy then finds very taken. this The are And and as it as nutraceutical for with FDA direction. explosive order is a positive to an will mean shelves ingredient in brands. multinational These of what major the CBD that really needed its way to opens towards business up drive this in under just be moving things. market. cash will So

opens in on DMF, will short which that dominant mid-term this or that growth, market see be continue the to is absolutely our the right positioned the We certifications direction. on compliance growth. to our be we long-term And and in as are and ourselves up quality grade as secure to we've that very sure required. make How not our is the counted pharmaceutical our trending have it

it And be position, the a position and an then in types will of as with as dominant as lead to formulations CDMO ultimately then help well. those supplier the ingredient

we would space. way So it, have a been that on shock nutraceutical happened. going the it's without this going. it FDA move if We weren't It made like box really to exactly simply could it's but had on and have acted It Congress. around a they've counting

Cowen. next comes TD Vivien of The from question Azer

much thank So or two. over incremental the you year VLN aspirations the around very the detail all next for

expansion of about hit upper state you XX. understand some be of could the level whether course to aspiration? that could monitoring XXXX you to KPIs that of talk the the noted we you. end the up that You key be Can should Thank over

goes out we the the drivers We volume know sense which again you totally through actually this this XX% call the the to the primarily are at be be starting that national brand business. volume, previous which, account because The are where chain to of states for XX through chains we'll when chains. KPI makes laid going look the over even,

makes that sense. So

into ties strategy for having distribution set that's up We've well. there. key as the So us then right the hit of got again distribution which network a the national driver to changes,

and the to terms retailers, just change those of in it's be us on building for So the partnerships, them basis. going a daily we're the distributors

educated consumer into product really about meeting to The all finding what critical product. out conversation previous meant this it. my no back gets repeat XX% personal That and what in what million advocacy Those mind it product question is Those had away education last whatever are smokers lower is in which are they're for definitely It that trial, does, be the we've nicotine needs. are going And for, kind either really purchase. my or people solution this XX% ties about met. it's performs. smokeless drivers. looking the to their it awareness There's mind, we're is doubt their Aaron's that a and There's and product is. doubt intake, the situation the of no our of to back understand things throw about who of to when XX preferences

the awareness that stores, through all scale becomes it campaigns the and set marketing is go. of to into Now

So those understand I that we question, know what at. and terms Vivien. in to We've that's hope itself, it answers are its We our We of the The it. product key now we're think But position. your got in category really correctly. looking priced works. how promote

Now it's getting sure making the word people understand it. about out and

we the But That being think volume in for right? about, driving to And modeling consumer ASPs, average if helpful. how for cigarettes and been from I cartons purposes? carton absolutely. So standpoint, commercialized Yes, going XX-K million Obviously, is price your you. quarter model we're legacy around the disclosure should of on guys it's fourth consumers mix the about cartons. about our cry X,XXX. like the appreciate sold differential the a use remind far based talking a are start from the VLN that sold were being carton to versus you us have can are that you disclosure Thank the just for research that X.X

there Couple Vivien. questions

retail? price the at to clarify, are sales at looking average Just you

I now business sticks is VLN no. in cognizant that where should consumer so everyone your be there that you're But your terms legacy for component level difference use mix we should on the manufacturer going guys commercializing can more XX-K, those There segment of ASP cartons your so you for a right? guys disclosed in Well, research. be revenue versus towards of, Like realizing revenues. based that calculate average are an think a cartons sold you the are

Understood. Yes.

states. have significantly again this projection obviously going we of these the especially cartons actual what So, I think you I is with is which is XX number significantly taking year forward Hugh XX through these increased, mean, the states. And projection our and higher moving with probably to be with

looking states outlook. $X.X The we positive bit look and moving selling way back to the these our channel-specific going cash million, be and talked products a at that in at we're we're get small the marketing XX kind a about within how to flow just then does the numbers. into can projections to the of the markets fraction. forward, the little addressable number in, business, you this Even to in it's When you approach

at There's those volume, XX% of to there of states clear questions. within XX% million those pathway X.X to total a states the represent looking chains hope your you're volume If I XX cartons. just simple the answer that math. a represent the get as

bit. a little Yes, bit, Understood. Okay. little a

Okay. I then. clarify it can offline

The Fuhrman Group. next from of Craig-Hallum question comes Alex Capital

would love the VLN launch bigger like markets Chicago. pilot original to to stores as those have some how hear what be to with going do about been doing launch in And and California to I as relative markets? in Texas, ready the get the you markets up think you're you scaling differently Southwest much approach you of bigger

Yes. Right. Good morning, Alex.

if difference markets. the in at So the you look

retail had Chicago tested a We test. predominantly of XXX-store a communication pieces. lot in we So different

components, Friendly introducing We've throughout with utilize education MRTP back into we it there, Circle of what enhanced to getting As pricing. we've Colorado, we're are of again, And moved the much to some have, now we programs. marketing K variables two Smoker do who And retail we're had of really where pricing. that some going again We components. the had And gets and start now trial scale tested more markets, great call to the that? I we partners piece. aligned of how the our on would pricing awareness definitely going some start that the,

a marketing the of groups get what us the buy really do product, where product, stores upping frequency going larger aware large the out. do really of allow get communication that's of product, And the educated and cadence with to of set the understand start much How the our this actions. to is people you of now the to can we about benefits is

back it Again, what of the product been successful terms I product, get in delivers. to has the

a getting consumer larger it's Now to the at scale. much

to of differences going So see what that you're will the Alex. be

And you a well business, be on flow can on the bit I in of presumably the cash capital Thanks. need to given XXXX, get positive I both us trajectory XXXX? you then, inventory sides helpful. really Okay. tobacco imagine little the walk you're more That's of as mean going be how grow continuing math you're working marketing for the as the to to and on side. in expenses, that of through growth

going will just help working need to of Just on to be to to a significant in get of to you helpful. primarily up the kind have can it or is spend be marketing capital? path us going is revenue metrics size that, coming less or there there any So

Yes, have I it.

So is, really units. into business two the key of it sort I if maybe break just think I

really at unit look are to required the tobacco, XXX,XXX it's point? overhead. cash call when sales hit positive about we reach What units quarterly. that corporate If around, you it flow post to It's XXX,XXX

the in really we're it, had enough call $X.X that of $X.X Jim density we and that annualized that can offline. it's percentage So not a million discuss really at to to. further point significant And million mid-market from markets and as you've referred

can a give for you discretionary at basically point, breakeven critical overhead you're like when flow to we John's it the all to And channel be cover cash distribution we is distribution momentum enough that And of on it it looks what does and that have costs. line volume sales, allocation, that marketing clearly achieve to XXXX. would after right significant now division. clear in sight point basically But have and

the unit, is for lot base bulk there. organic have and a ingredient domestic we overseas our then again demand which it both really a on Europe strategy, our product business executing of of pent-up significant in And growth for hemp/cannabis function

confident very that. about felt we So

revenue if as mentioned, that revenue from, you with I you a clear were a to then you new $XX say some overhead the flow well. positive incremental of we're post unit get start in would to combine be, to million on to create, streams breakeven, corporate to the flow free when had $XX as cash Jim distribution business free path anywhere to million side as And starting cash particularly have again

comes Wright, question next The MKM. from Brian ROTH

Is how level just worked how kind just but Florida of think as the sense of kind the gotten worked, be and to of your California stages, early I out it would on, Texas, of marketing that just about had the pilot. that kind question wanted then, helpful. in the in far call? haven't in up big we programs or to visibility of stores, it a with I the the you're But just I Is prioritized. about of call? it's kind thinking know and gets still how And as states, customers that how the starting rule follow your

a the Sure. had laid said, Yes. Brian lot go, go, goals about in were terms states the customers also they the we that to to some XX those primary they're reason We their we be looking where we And go like going there's our why knew that we as were the were message why. were strategies at. that out, there a of these targets. Customers we understood states. talking in have own of want rollout of reasons cadence,

these two organizations some of is how came the between distribution So agreements about.

As of recall, our of during call. right because the that. some for know now, huge you'll wasn't list there's happening we there But saw California our what's VLN, opportunity last a customers on

and business? they organizations move to do know way working it their best some you're can is which both have factors stores we of research? seeing what more going as to what states, What it's to what environmental you're those an drive of been scale of cadence would most is, some marketing What volume? The through enhanced that's of best that the the So to pull. the determine scope within the able we into, are put see more those seeing through in we markets the program be that together are levers now our are markets of to around through

obviously, retail Now, enhanced and know we're what well. do some programs we to constraints FDA. is still what starting where at as to marketing looked the But have that now and FTC we with we do know companies cigarette

not give I what bigger of levers or more stores. these going rather want markets the I'd put and So you're now you we enhanced specific competitors out our with to see well. for those examples because know can pull what But that not marketing in as some it's programs to

I'm Okay. cash just paraphrasing I Thank follow to the to on flow. sure up. the then you. answer And just wanted wanted make

as additional aware the saying that of? each basically, allocation no considered need working you're you're needs So of also includes as far corporate that of we kind flow And being positive adjustments are segments. also to capital getting by be the cash there's

in That working that's No, correct. Brian, changes absolutely capital. includes

if enough to meet accelerated we'd we from were and generated have substantial I enough point -- mean needs. growth, have even facility generate cash to availability probably capital working we that to at So be internally credit incremental a

milestones. flow safe So, those yes, all cash breakeven purposes, for at would and we be free

Our last question James. comes Dawson McIlree of from Jim

useful capital On look talked working about working work? for you or VLN that Is multiple does your scale, share need commitment? market stocking. I'm to it an that walk at how capital Can you fill there's inventory XX, How Slide target assuming per that works? cartons us through satisfy. you is the that national to that how

side. more Yes. the accounts If for purposes, and is Jim, on receivable modeling probably inventory

to as for a of it over leverage. VLN now It's core call it percentage doing it we're the safe percentage decline operating take sort is obviously just of initially. expectation well. short-term right with for up we're [indiscernible] sales our a growth. needs Obviously, as of working inventory, So building same because capital will as the But time the the

We pressure inventory incremental the this for satisfied, part capital inventory year latter going needs on the be have albeit of there'll working short-term just of into with more the scale. most

receivables become or availability a upfront manufacturing more AR upon well, I since paid don't then will VLN short-term lot need for of contract delivery. of hemp/cannabis. say is paid that And both most so, on and basically it financing just We necessarily would our our

of really the AR, can be VLN finance to the We'll a need definitely revenue modeled hemp/cannabis percentage the fund as which of So growth grows. now. to for

the inventory I more inventory sort capital our incremental the go need of will year. in steady-state for cash capital inventory our working think and working half will case, base second past And of needs be, the levels

diminishing you'll at will be hump point, working that to a that as or the makes continue happen that it seems question like still And you capital on does grow, relative enter. to hump, investments. sense it markets that you. rate But that at does When if to when peak you need

No, that complete makes sense.

particularly significantly because capital at hemp/cannabis. VLN both I needs QX at At working full certainly will. you both operating the in verticals, point we've kind a state That of leverage, contribution and XXXX. get be point. if the reached benefit point that margin think of that we Probably those cash would we of QX diminished XXXX, in that steady

it. Got

end let's you're an Is state on so XXXX to you correct? the by call since be And looking million basis, of needs. cartons annualized middle that XXXX, that at steady at still of would short X.X working then of capital it that kind the of

Yes, sure. year end a is the are from initial there. the significant as of XXXX ramp of it's to phase during we It'd as be incremental not mid-XXXX, why need XXXX fiscal capital which

Got Right. that.

equipment to anything capital needs that specific be any for? the we there there you want the running to get are hemp/cannabis it Is you looking up business lastly, should then, And significant Okay. and order state that have in at? to be

as of modeled facilities have the $X approximately for million, restoration Jim our discussed. We mostly

start before towards will. if probably extraction plant, interim circle working a of we capabilities sort excellence be of Our It as won't a you much.

you're hemp/cannabis year So than and million, steadily place. this extraction enough assuming of of towards a it's $X I full CapEx more new in restoration putting center if for working excellence think for capabilities

it. it's is then And Got whatever and that, growing after business the --

Exactly.

remarks. the questions closing no are for to this Jim Mish I will at back turn call There further time.

comments working on we are sustainable this. for thanks for positive Thank laser-focused both everyone business we've the the you, units are us to fundamentals achieve but hard today. that in and for been company to closing the cash Michelle long-term, business joining My for

Our long-term is XX now within months. XX to

updates future. And on our I'll as move VLN the ahead time Conference to our to forward like updating to expand our press the for look and arrange out you release. be if the U.S. continue we next GVB. a near we thank attending for team meeting, you'd next with stay to in noted So opportunities the our Relations Investor you please tuned week. your reach launch and ROTH really in on Again,

for We Ladies your conclude that your lines. this does please thank ask today. participation and and call gentlemen, you conference for you disconnect the