Turning Point Brands, Inc. (TPB) Q4 2019 Earnings Report, Transcript and Summary

Hello and welcome to the Turning Point Brands Fourth Quarter 2019 Earnings Conference Call. All participants will be in listen-only mode. [Operator Instructions]. Please note this event is being recorded. I would like to turn the conference over to your host today, Bobby Lavan, Chief Financial Officer. Please go ahead, sir

Thank you, operator. Good morning, everyone. I'm Bobby Lavan, CFO of Turning Point Brands. Joining me today are Turning Point Brands' President and CEO, Larry Wexler; Graham Purdy, Chief Operating Officer, Jim Murray, Senior Vice President of Business Planning and Louie Reformina, Head of Business Development, who is picking up the IR role. This morning we issued a news release covering our fourth quarter 2019 results. This release is located in Investor Relations section of our website where a replay of today's conference call will be available. In this call, we will discuss our consolidated and segment operating results and provide our perspective on our progress against our strategic plans. As is customary, I direct your attention to the discussion of forward looking and cautionary statements in today's press release and the risk factors in our filings with 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 and you should not place undue reliance upon them except as provided by Federal Securities Laws, and 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'll now turn the call over to Larry Wexler, our CEO.

Thank you. Bobby, and good morning, everyone. Thank you for joining the call. Let me first address the vape disruption or vape gate as we call it, head on. We entered 2019 with strong momentum across the board. In the third quarter call, we shared with you, the rather dramatic impact that the late summer vape controversy had on our results. The impact of the vaping disruption from last summer carried over to the fourth quarter, which further compounded by the acceleration of the PMTA, additional FDA flavor regulation. We moved swiftly and announced plans to restructure the business. We did this with speed and efficiency, announcing a company-wide workforce reduction of 10% in early November and implemented our consolidation plans to right size the platforms. In the fourth quarter, we completed the warehouse reorganization going from four warehouses a year ago to one. We have eliminated low margin platforms and consolidated our entire wholesale B2B business under VaporBeast, our premier platform. We shut stores and are now actively exiting certain leases. And we shrunk our exposure to the vape business to a manageable size and affords us both B2B and B2C access for our quality products and brands while retaining sufficient capacity to ensure that we come out of the PMTA pathway as a winning player. Vape gate was an earnings drag and a management distraction, where we moved rapidly to restructure and rationalize the organization so we can get back to growing the business. As far as the right sizing initiative in the quarter, we addressed all aspects of the business, including writing off unsalable inventories and writing down certain other vape inventories due to the accelerated PMTA timeframe and the FDA flavor ban. While the category-wide reset affected our business in the material way, I'm pleased to say that we have addressed all known and anticipated issues resulting from these external events. Initial sales results for vaping in 2020 are already exceeding our expectations. While early, the results vary by platform, we are seeing a stronger than anticipated recovery. We have retained the flexibility to come out of the PMTA process as materially stronger player and believer we are well positioned relative to other less prepared and less resource competitors. Adding to that, our Nu-X product pipeline, and the many white spaces we see available in the market, we are now better prepared to drive for accelerated results. We've seen several major shifts in the tobacco business over my 36 years in the industry. The PMTA is one of those moments and we are confident that we will be on the right side of that process. We believe our scientific and regulatory expertise will allow us to get a robust portfolio of products through the PMTA. Let me be clear, this portfolio of products pivots us from simply being a distributor of third-party vaping products to marketing a suite of proprietary vapor brands. Now let me give you a quick snapshot of the performance of our decor tobacco business. Fundamentals and results continue to deliver strong, compelling and sustained results. First in Smokeless. Net sales for the year increased double-digits on the continued robust advances of Stoker's Moist Snuff, partially offset by secular decline in chewing tobacco. In the quarter, Stoker's Moist Snuff delivered another record share of one full share point compared to a year ago, with both cans and tubs delivering significant gains. In smoking, Zig-Zag positioning delivered strong results in the quarter with both U.S and Canadian rolling paper net sales up high single-digits. Growth is being delivered with new products including cones. We have already captured greater than 20% of the measured market. In Canada Zig-Zag equities are even stronger with the brand commanding a 65% category share in the measured universe. We are on track to further propel the brand forward with our new Canadian distribution contract and the recreation marketing partnership, which will help facilitate our entry into large and growing universe dispensaries. The core tobacco business is strong we're especially focused on accelerating growth. Both Stoker's and Zig-Zag remain the engines behind the continued company gains, with total tobacco gross profits of 8.8% in the quarter. Having put the changes in the vape business behind us, we remain primarily focused on growing the core tobacco business, while also delivering novel new products to consumers who are searching for new forums and actives via the Nu-X umbrella of products. Nu-X CBD products were available in over 4,000 stores at year end 2020. To add some color and perspective on our path forward. Let me turn the call over to Graham Purdy, Chief Operating Officer.

Thank you, Larry. Hello everybody. As you know, I'm a freshly minted COO, and believe it or not, I'm fully energized about the situation I'm inheriting. Like Larry, many of us have lived through highly tumultuous times in the tobacco industry. From the price wars of the 80s to Marvel Friday, the MSA in the 90s, SCHIP in the 2000s, these are challenging but not overwhelming times for the well-prepared and that's how I would characterize my team. Thoughtful, well-prepared, enabled to move swiftly and efficiently. As we look in the future with a sense of purpose and energy, allow me to summarize how we are prepared to meet and exceed the challenges before us. Starting with the cultural revolution we have already kicked off. Your management team will win with integrity, accountability, and responsibility. Let me tell you what that means to each member of the leadership team. Winning is the benchmark, it's why we come to work, why we fight so hard and punch above our weight in the industry. It means everything to everyone here at TPB. Accountability to each other and to the company plan. We have full alignment across the company and with our shareholders. Active engagement and personal ownership by the leadership team is a hallmark trade of the organization. Integrity, an unwavering commitment to ethical and compliant behavior. That does not mean we don't think outside the box, just what the bright lines of the box are drawn that we comply appropriately and completely. Responsibility. Responsibility is somewhat different than accountability. A team member may be responsible for advancing a new product or initiative, but the department head is accountable. Both are necessary components of any winning organization. This is an organization committed to winning and everything that we do. It includes new products, new actives, new initiatives, and new channel opportunities. We will be tenacious and outwork our competitors. Hard work is just as important as talent and intelligence when competing in the marketplace. Decision making is fact-based and focused on solving for consumer wants and needs. Our 2020 strategies are clearly communicated with full alignment across the organization. First, maximize the core business. We are relentlessly focused on driving Stoker's MST growth and expanding the iconic Zig-Zag portfolio across both the U.S and Canada. Next, cost efficiency. We've successfully grown our gross profits and we are rapidly focused on capturing increased operating leverage through solid cost controls and spending efficiencies. This will deliver a higher return on invested capital. Improving products. We will use our rich and robust data tracking system to identify emerging product forms that consumers are increasingly gravitating to. The evolution of consumer preference is a given. Identifying and testing products early ensures a deep winning product pipeline. And finally strategic acquisitions. We're in deep dialogue in several potentially transformative acquisitions, that does not mean we are certain of the outcome, but we will most certainly continue to pursue accretive opportunities that can further propel company growth. We have the access to capital and we will officially deploy those resources to accelerate the company momentum. Fourth quarter 2019 was certainly a challenge given the dynamics of the vaping industry. Despite those tests, we not only coordinated and initiated a comprehensive restructuring plan, but also delivered strong results in our core tobacco business. Smokeless sales trajectory remains exceptionally positive with high-single digit growth in the quarter and a record for the year in terms of both net sales and Stoker's MST market share, up one full point to a year ago, with share in store selling at 8.1%. Perhaps most encouragingly sales advances are being driven by both same store sales from a growing body of Stoker enthusiasts and continued store wins. With that. Stoker's MST in store representing 54% of industry volumes, the runway for continued growth looks bright and encouraging. In smoking, Zig-Zag’s U.S. paper share in the measured universe increased for a third sequential period to 35% up 2.9% to year ago on new products momentum and remains the number one premium roller paper brand. This Zig-Zag paper cones distribution drive continues with a total of 22,000 stores carrying at year end, capturing a 25% share of the major cones market. Zig-Zag hemp rolling papers are now available in 35,000 retail outlets. Establishing Zig-Zag as the number one hemp brand with a 27% share of the hemp segment. In late fourth quarter, we initiated shipments of hemp cigar wraps to the U.S trade. Initial enthusiasm has been highly encouraging with wholesale take rates rapidly depleting our opening stocks. Replenishment is in transit. And in Canada, we are eagerly looking forward to not only a Zig-Zag paper cones expansion, but also the mid to late second quarter opening of the swiftly growing dispensary market. Zig-Zag expansion and brand building efforts are in place and will be carefully monitored to ensure progress against the plan. And in NewGen, we're seeing positive early indicators on both the rebound and sales vitality and efficiencies gained from our methodically planned and implemented restructuring program. NewGen growth will also be fueled by exciting new CBD products and other actives in the product pipeline, including gummies, tinctures and shots, just to mention a few. I trust, you can sense my enthusiasm for the challenges I've inherited as COO and the optimism and confidence of the team I'm surrounded by. And with that I'll turn it to Bobby for a review of our fourth quarter financial performance. Bobby?

Thank you, Graham. Company results in the fourth quarter were turbulent, as we moved swiftly to address the vapor disruption with an orderly restructuring program designed to unlock increased competitiveness and efficiency. As a consequence of the highly publicized vape disruption, total company net sales were up 15% to a year ago. Despite the significant vape disturbance, the performance in our Smokeless and smoking businesses were very encouraging, with both segments up versus a year ago. So I’m going to go a little off script here and start with NewGen. A year ago, we started filing Schedule D, which discloses adjusted segment operating profits. When I look at the performance of our respective businesses, I build a model that uses the information disclosed there. I encourage you to do the same. I point you to the NewGen buildup that shows adjusted operating profit in NewGen swung from a positive 3 million in the fourth quarter of 2018 to negative 2.5 million in the fourth quarter 2019. No one is more disappointed about $5.5 million year-over-year swing than me. Segments going negative are not something we take lightly and we reacted but didn't get the benefits until the lower volume month in December. The segment was positive in January by a considerable margin. So going back on script, let me summarize some exciting new developments. Moving to the FDA and PMTA pathway, TPB filed ingredient disclosures for the new redeemed products as required with the agency on February 12. Additional submissions are being readied for the next filing date for May 12, 2020. With these filings in motion, including the social, scientific and pharmalogical testing regimes required, total expenses on the PMTA will be 15 million to 18 million. Yesterday the TPB Board of Directors approved a $50 million share repurchase authorization intended for opportunistic execution to strengthen shareholder returns. And finally, yesterday the Board unanimously approved an 11% increase in the dividend to $0.05 per share, which will be paid on April 10 to shareholders of record as of the close of business on March 20th. We are committed to total shareholder returns. And even with vape gate, 2019 was the strongest cash flow from operations year, as we continue to implement stricter working capital policies. We ended the year with 95 million of cash on the balance sheet and 141 million of liquidity dedicated to capital allocation. Turning now to the segment reviews. In Smokeless, the Stoker's brand continues to deliver sustained growth momentum. Smokeless net sales increased 8% to 25 million in the quarter. Net sales for the MST portfolio grew 21.7% and represented 54% of Smokeless revenues in the quarter up from 48% a year earlier. Total Smokeless volumes increased 6.5% with price mix advancing 1.5%. Year-over-year industry volumes from Moist declined by approximately 2% with chewing tobacco eroding by 6%. Stoker's shipments to retail outpaced the Smokeless industry in a quarter growing its share in both chewing tobacco and MST. In the quarter Stoker's MST shipments from wholesale to retail were up approximately 25% with year entry inventories at their lowest levels in the past few years. Turning to the smoking products segment. Net sales in the quarter increased 1.9% to 27.6 million on high single digit growth for both U.S and Canadian papers, partially offset by year-over-year decline of 700,000 in non focused cigar and pipe products. I can't wait for those businesses to stop being a negative comp. Cigar wrap net sales were flat a year ago despite sequential depletion of 1.5 weeks of trade inventories. Total smoking volume decreased 0.6% while price mix increased 2.5%. According to MSAi fourth quarter industry volumes for U.S cigarette papers increased by low to mid-single digits, while cigar wrap shipments to retail contracted by the same amount. Moving to our NewGen segment, where vaping products sales were disrupted on significant media headlines and a general decline in consumer off-take and trade inventory depletions. Largely as anticipated, total NewGen net sales decreased 37% to 27.6 million, including a $1.5 million contra revenue reserve for riptide return goods. For the quarter, NewGen gross profit was negative 15.8 million reflecting 23.2 million in write-offs and reserves as a consequence of the FDA flavor ban and accelerated PMTA. Moving to the consolidated business. Adjusted EBITDA for the quarter was 14.2 million as compared to 17.1 million in the prior year. In this morning's earnings release, we also provided our 2020 guidance, which included projected 2020 total net sales of 338 million to 353 million. This includes $100 million from vaping sales with no PMTA upside assume. Adjusted EBITDA of 69 million to 75 million. The company expects 15 million to 18 million of total FDA PMTA expenses, which includes 2 million spent in 2019. Our banks have agreed to a carve out a PMTA expenses in the adjusted EBITDA calculation. And for the first quarter we expect sales to be 82 million to 86 million. M&A discussions continue as we evaluate potential partners and targets more to come, I'm very excited about the opportunities there. And with that I'll turn the call back to Larry for closing comments.

Thank you, Bobby. While temporary setbacks are never welcome, I've always chosen to see the world as it is and not as I hoped it would be. Reality is often a great motivator. It helps us focus on the task at hand. First, to grow the tobacco business. We did exceptionally well in 2019 in both Smokeless and smoking core products. Second, to contain and control costs, which are embedded in our 2020 plan and psyche. This priority objective will aid in delivering improved operating leverage. Next, to identify new market opportunities, like paper cones, for example, where we can leverage our existing equities to secure meaningfully strong new revenue streams. And finally, we remain very committed and engaged to identify high quality acquisition candidates that can accelerate growth and shareholder value. Our company remains solid and resilient and our people remain committed to the journey. Thank you for participating in the call today. And with that, I'd like to open the call to questions. Operator?

[Operator Instructions]. And the first question comes from the Vivien Azer with Cowen.

This is Steve Schneiderman pitching in for Vivien today. Let's start on vapor. The Nielsen data we've seen so far would not suggest an improvement in the category. So can you please expand on your comment a certain portions of the vapor market are exceeding your early 2020 expectations? And in addition, can you offer perspective on your expectations by thing system type so open, closed and disposables? Thank you.

So Steve, as you know vaping from our perspective is almost entirely open systems, which doesn't really show up as much in Nielsen, there was a dramatic pullback in September, October, November, the market is still off and we have our own retail so we can kind of see that. But the nice thing that's happened is all the small guys that kind of were nipping on our heels has fallen out of the market. Like we, I'm not happy we went negative in the fourth quarter, but we have the balance sheet and the flexibility to maintain that. There are other guys who had to go to work for cash, and those guys are effectively out of business. So we're just taking market share at this point.

Okay, great. So if we think about the run rate guide for 100 million vape sales, when you finished the quarter with a 27.6 inclusive of the returns for riptide, where should we think of it, in place of the recovery that you're seeing where the further headwinds coming from?

Yes. So you've got the PMTA process that's going to play out in May. And there's going to be sort of a -- just a lot of noise that we're expecting in the market in the second and third quarter. So we're sort of expecting a little bit of slowdown in a second and third quarter and that kind of will bounce back up in the fourth quarter. Now, we're not giving ourselves enough credit for PMTA which has significant upside. So right now, we're just kind of with vape or we are being conservative just cause our investors, our employees, like they want that business to maintain its optionality with PMTA where we come out in the end and being one of a few manufacturers that's participating in, but we also needed to bring the noise down. So we are being conservative. We're not looking to grab every dollar at every -- at all costs. And so it's just right now we are kind of expecting a slowdown in the second and third quarter.

All right. Thanks, Bobby. Within the Nu-X sales, sorry it was in NewGen sales. How much was Nu-X specifically? And how have you progress on CBD after being short on some inventory in that last period? Imagine you've probably caught up, or you still selling out?

Yes, so we are selling out. Some Nu-X sales were going to stop disclosing, we're going to keep it as part of NewGen just because it's gotten to a size that it's sort of proprietary to us. And it's frankly was confusing investors. So we are very excited about it. It's also integrating into the rest of our business. But it was -- it was up year-over-year. It's a strong business. It's going to be up significantly in 2020. On the CBD side, we're in 4,000 plus stores, I think 4,200 at the end of 2019 that's pushing forward. We're pretty excited about the opportunity there. I mean, I went through the airport the other day and saw CBDs in Hudson News like, so it is becoming more ubiquitous as we sort of discussed in previous calls. The input on CBD the input costs is down 80 plus percent. So over the past year, which creates a huge tailwind from costs it also allows us to grab those 499 and 999 price points, so we're really excited about. And it's a slog, I mean, we have a the lineup of meetings over the next month is massive with chains, and sub chains are really starting to accept it. And so we're pretty pumped about the opportunity this year. It's all about execution at this point.

Well, let's take a little bit to Smokeless. Gross profit was down 140 bps. What was the major change in the promotional cadence during the quarter? And is this something that we should expect to continue throughout 2020?

Hey, Steve, this is Graham. Look the answer to that question is pretty simple. We anticipated a nice growth out of some of the big chain wins that we had last year. We just didn't anticipate the, massive growth that we got out of those chain accounts. And then we have some programs that are embedded into those chain accounts that you had tickers at the end of the year that essentially caused that tick down.

Yes, we see -- we were, we found ourselves about a $1 million offside on annual promotions just because we -- like we did not expect to be a five or six share in the Speedway. Like we didn't, we just didn't expect that to happen. And so at the end of the year, there are sort of tickers that come in and so they're things that would be, it's not really fourth quarter, it's more than the annual program. And so you're seeing margins that are a little artificially depressed because we had to catch up those allowances. Those allowances will be spread out throughout the year 2020. And I got in here and I think, there was -- we were not set up to have a business that was growing as fast as it was from a systems perspective. We now put those systems in place, allowances are sort of reviewed less from an accounting perspective and now very do from an operational perspective. And so it just really was a catch-up. It wasn't some sort of fourth quarter promotion.

Got it. That makes sense. And last one for me, Bobby, on the buyback, I know you used the term opportunistically. But how long is the duration of the buyback program, would seems to be doing it all in one year would be a lot because certain that would be about 10% of your shares outstanding based on yesterday's close?

Yes. We're going to be opportunistic. I mean at the end of the day we feel really good about the business today. We feel like this PMTA provides this optionality that is dramatic. We think Moist is doing great. We're really excited about what's going on in Canada with Zig-Zag, we've got this massive alternative strategy on Zig-Zag. And so that's at the end of day, we're going to evaluate the stock on a monthly basis and kind of just see is there a better use of our capital investing in our business or is there a better use of capital buying our stock? And so that's sort of the way that we look at it. It's there is an element of -- we need to improve liquidity in the stock and so there are things that we're doing to do that. And so ultimately the buyback is just another lever in our toolbox to drive shareholder return.

And then next question comes from Susan Anderson with B. Riley FBR.

I guess just to follow-up on NewGen as we look out to 2020, with all the restructuring activities that you guys have now undertaken. Should we look at -- I mean, is fourth quarter or kind of a benchmark for margin, say growth and operating? Or should we think about it differently as we look out to 2020 with the restructuring that you've done?

Yes, I mean there's - at the end of the day, we want to get that gross margin up. And so that's where I will say 2020 is sort of a is an investment year from our perspective. And so, it's I think fourth quarter should be viewed as a low. That's the way I would look at it. But there will be a little bit of depression in the second and third quarter as we go through, and there's a little bit of just volatility in the market as we have competitors who are going to liquidate. And so we're not, I would tell you a year ago, our mentality was to chase that. We're not going to chase that. So we're very focused on holding 30% plus margins and moving that up. So that's where it's a transformational change from a business perspective.

Okay, great. That's helpful. And then nice growth again on Stoker's MST, I guess. Can you remind us sounds like market share grew again, I think you said 6% or 7% Speedway, but like overall, where's your share versus competitors? And then the opportunity and door expansion and I guess have your goals for the brand change given the success that you're seeing there is longer term in terms of market share.

Hi, Susan, this is Larry. We were very pleased with Stoker's, and what we're pleased at is not only to be knocking down new chains, but we're also organically growing in the stores that we had distribution. Stoker's share is running about 4.5 right now and we expect that to continue, we've got a lot of plans for new distribution and to continue to promote the brand. This is a brand that's capturing consumers, consumers love it.

Great. That sounds good. And then maybe if you could talk a little bit about the that Canada partnership? Like how big could this be? This the sales opportunity for the exact longer term? I know it's early innings, but just any thoughts around that'd be great.

Susan, we're going to kind of keep a little closer to that, at the end of the day, we sell to a third-party in zig-Zag in Canada that hasn't really maintain the brand. And so there's, despite that, the brand has a 65% market share. So at the end of the 65 is great. We want a 100%, and so there's an opportunity and dispensaries or opportunities, alternative shops. And so the market is in, this is the same dynamic we're seeing play out in the U.S. is where that's where the growth is coming. So we need to chase that growth. Like we see significant opportunities up there.

Great. And then I guess just curious on the cones, which continue to grow robustly. Are you seeing any cannibalization at all in the papers from the cones?

Yes. Susan that will be natural. There are already so much substituting for each other. But the fact is that the cones are reaching additional people. So it is net positive or accretive to the brand. [indiscernible] occasions where people just want to have a prepared paper rolls.

I got in here, Susan, Larry, Larry wisely told me that Americans are really lazy, and so cones are -- from our perspective, we sell a French orange booklet that's got 32 leaves in it and versus we sell for the same price, a cone box that has six cones in it. And so, the gorilla math is by converting somebody from French orange papers to cones. There's literally a 5X multiplier on the opportunity. So that's just massive from our perspective. And it's more convenient to the consumer.

Yes. Just to give you an indication there. Since we've introduced cones, our share has gone up for three quarters and were up.

Thanks so much you guys. Nice job. Nice to see the quarter business strength and rebalancing NewGen. Good luck for this year.

And the next question comes from Jamie Clement, Buckingham.

Hey, Bobby. Just to be clear the share repurchase authorization, is that in the way signals, any relative lack of enthusiasm in the deal pipeline, dose it?

No. And Jamie at the end of day, like I think you guys all are aware, like vape gate was extremely disruptive. We terminated 60 people, right? And we run a tight ship and so we have real deals in the pipeline, but they require management to push them through. And if it wasn't for vape gate, we would add deals done in the fourth quarter. So that the pipeline is frankly stronger. We did move management around where we dedicated some resources solely to getting deals done and those are moving forward. But deals you never want to be forced to do deals. The pipeline is strong, the frankly it's -- there are a bunch of companies that I bid for in sort of late summer that have come back and said is that offer still on the table, which is an interesting dynamic. And so we are sort of evaluating that. I will tell you, there is carnage industry blood everywhere when it comes to these cannabis and CBD companies. It is -- the opportunity set is massive. We're just -- it's just a capacity issue. So we've got this quarter through, cleaned up our books, reset the business, we moved Jim Murray straight to deal making, which is awesome and it's -- we're going to get stuff done.

Okay, great. And Graham, if I could turn to you, I know you rattled off a couple of things. Can you talk a little bit about new product pipeline? Both CBD as well as just other non-CBD actives?

Yes. So we've went around the back half of 2019 with a focus on sort of going to smaller price points for consumers. It's our belief that CBD products will arrive in the mainline channel when the price points are acceptable for consumers in that channel. And so we spent a lot of time in the back half of the year developing products that made sense for down the street. At the same time, you see these large swaths of active ingredients that are sold in other form factors. Like take coffee, for instance, caffeine is probably one of the largest active ingredients in the marketplace. And so we've introduced a caffeine inhaler. So we've taken a known active ingredient and put it into a form factor that makes sense. And with our core competencies. So you're going to see some development around caffeine. And you're also going to see sort of the introduction of additional cannabinoids profiles like CBG and CBN. So if you want to go onto our website, the Nu-X website, you'll see that we've got two products on there now that sort of cross away from CBD and get into the other camp cannabinoids. So it's just the first step in terms of looking at these alternative actives and putting them in form factors and price points that it makes sense for sort of our down the street trench warfare.

Okay. And then just on the CBD and the hemp in general, I read a couple articles that the farmers were having some problems in the hemp space. Is that actually kind of a good thing for you guys? Is there anything that you worried about in terms of supply chain? I think you know what I'm talking about, right.

So supply chain is fine -- the mark -- at the end of the day, you can buy all the hemp you want and more. Larry and I personally went to a farm a few weeks ago. The only real negative, Jamie, on that is no one likes to see farmers get hurt. But and so the farmers were a big part of the farm bill, and so a world where like they're getting hurt, they stopped having a champion Congress, and then the FDA takes time on sort of creating these regulatory walls that we ultimately forge on. So that's the really only the side negative. I would tell you there's more hemp out there than processing capacity. So supply chain is fine. Frankly, we -- people were underwriting $6,000 a liter on CBD a year ago. Right now I can go buy CBD at 750 to 1,250 liter right now, and there's unlimited capacity. There is unlimited amounts of CBD out there, so it's we're not seeing any issues on that side. Really, the only thing that we're concerned about that we are building up a correlation to work on is you've just got these farmers who got really hurt and that's ugly. That's never great. Other than that issue, we feel great about supply chain.

Thank you. And does that conclude the questions-and-answer session. I would like to return to floor to Bobby Lavan for any closing comments.

Thanks everyone. We are going to be aggressively on the road meeting with investors over the next few months, so I encourage you there are website and come and see us. Talk to you soon.

Thank you. The conference is now concluded. Thank you for attending today's presentation. You may now disconnect your lines.