MediPharm Labs (OTC:MEDIF) Corp. (TSX: LABS) has announced a robust start to 2024, reporting its strongest quarter in terms of revenue and adjusted EBITDA in three years. The company's first-quarter financial results were buoyed by a nearly 70% increase in revenue year-over-year, largely due to the VIVO acquisition and marked growth in international and business-to-business (B2B) markets.
MediPharm's balance sheet remains solid with $17 million in cash and a debt under $3 million, alongside full ownership of its assets.
Key Takeaways
- MediPharm Labs experienced a nearly 70% revenue increase year-over-year, attributing to its best quarter in three years.
- The company's growth is driven by the VIVO acquisition and expansion in international and B2B markets.
- MediPharm has a strong balance sheet with $17 million in cash and less than $3 million in debt.
- The company is considering accretive investments and organic growth initiatives.
- Regulatory changes in Australia, Germany, Brazil, and the US are expected to provide growth opportunities.
- In Australia, MediPharm's leading brand, Beacon Medical, saw a 40% increase in unique prescribers.
- The company plans to launch new THC products and non-smokeable formats in 2024.
Company Outlook
- MediPharm expects the positive quarterly trends to continue through 2024.
- The company is well-positioned for growth due to regulatory changes in key international markets.
- New B2B international agreements are expected to contribute to further growth in 2024.
- MediPharm is exploring growth opportunities in Brazil, France, and Poland.
Bearish Highlights
- The company is maintaining a conservative approach to cost and infrastructure.
- There is still the presence of non-compliant products in certain markets, posing challenges for compliant suppliers.
Bullish Highlights
- MediPharm has invested in GMP compliance and pharmaceutical production to capitalize on evolving regulations.
- The company has seen success with its branded products, particularly in Australia.
- The DEA's reclassification of cannabis in the US is expected to facilitate medical research, benefiting MediPharm.
Misses
- Despite the strong performance, the company is still working towards profitability, aiming to reduce its adjusted EBITDA loss.
Q&A Highlights
- MediPharm plans to launch alternate non-smokable formats in the medical and adult-use markets in the second half of 2024.
- The company expects a 10% quarter-over-quarter growth in the Australian market.
- There is optimism about the prospects in both the US and Australian markets, with a focus on maintaining market share as these expand.
MediPharm Labs Corp. has kicked off 2024 on a high note, showcasing significant revenue growth and a promising outlook for the year. The company's strategic investments and focus on international expansion, particularly in markets with evolving cannabis regulations, have positioned it as a key player in the industry. With a strong balance sheet and a series of new product launches on the horizon, MediPharm is poised to continue its growth trajectory and strengthen its market presence.
InvestingPro Insights
MediPharm Labs Corp. (MEDIF) has demonstrated a substantial growth in revenue, as reflected in the latest financial results. To provide a deeper insight into the company's financial health and stock performance, here are some key metrics and InvestingPro Tips:
InvestingPro Data:
- Market Cap (Adjusted): 26.75M USD
- Revenue Growth (Quarterly) Q1 2023: 62.59%
- 6 Month Price Total Return as of mid-April 2024: 25.25%
InvestingPro Tips:
1. MediPharm holds more cash than debt on its balance sheet, which reinforces the company's solid financial position mentioned in the article.
2. Despite the recent growth, analysts do not anticipate the company will be profitable this year, aligning with the cautious tone regarding profitability in the "Misses" section of the article.
For readers looking to delve further into MediPharm's financials and stock performance, there are additional InvestingPro Tips available. Currently, there are 6 more tips listed on InvestingPro that could provide valuable insights for investors. To access these tips and take advantage of real-time data, visit https://www.investing.com/pro/MEDIF and use the coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription.
These insights and metrics are crucial for investors considering MediPharm's potential for growth and the risks involved, especially in light of the company's recent revenue increases and international expansion efforts.
Full transcript - Medipharm Labs (MEDIF) Q1 2024:
Operator: Ladies and gentlemen, thank you for standing by and welcome to the MediPharm Labs 2024 First Quarter Financial Results Conference Call. Please be advised that today's conference call is being recorded. Before we begin, please note that remarks today may contain forward-looking information and forward-looking statements within the meaning of applicable security laws. This includes, without limitation, statements about MediPharm Labs and its current and future plans, expectations, intentions, financial results, levels of activity, performance, goals or achievements and other future events, trends, profitability, business growth or development. Forward-looking statements are made as of the date hereof based on information currently available to management of MediPharm and on estimates and assumptions made based on factors that MediPharm believes are appropriate and reasonable in the circumstances. However, there can be no assurance that such estimates and assumptions will prove to be correct. Any factors could cause actual results to differ materially from those expressed or implied by forward-looking statements. Additional information is contained in MediPharm Labs' filings with the Canadian and Provincial Security Regulators which are available on SEDAR at sedar.com. The company's remarks may also contain references to certain non-IFRS financial measures, including EBITDA, adjusted EBITDA, gross profit and actual gross profit. These measures do not have any standardized meanings according to the International Financial Reporting Standards or IFRS and therefore, may not be comparable to similar measures presented by other companies. MediPharm believes that the non-IFRS measures reference provide information useful to shareholders and investors in understanding our performance and may assist in the evaluation of the combined company's business relative to that of its peers. For more information, please see the section titled Reconciliation of Non-IFRS Measures, the most recent MD&A of MediPharm which is available on SEDAR. I will now pass the call to David Pidduck, CEO of MediPharm. Please go ahead, sir.
David Pidduck: Thanks operator and good morning everyone. We appreciate you joining us for MediPharm Labs' Q1 2024 conference call. Joining me on the call today are Keith Strachan, MediPharm's President and Greg Hunter the Company's Chief Financial Officer. I will address some of our highlights for the start of the year and discuss how we believe recent global market developments position MediPharm favorably for growth. I will then hand the call over to Keith and Greg to provide more insight on some of the operational and financial results. Q1 was our best quarter in terms of revenue and adjusted EBITDA in three years. Q1 performance continued to be improvement trend on our path towards profitability. We've made great progress in all fronts; revenues, gross profit, OPEX, and adjusted EBITDA. This quarter saw revenues grow almost 70% versus prior year and 7% over prior quarter. This shows not just the effects of the VIVO acquisition, which we completed last year, but strong growth in some of our international and B2B markets. Greg will discuss our significant improvement in gross profit, OPEX, and cash flow. We closed our VIVO transaction just over a year ago. We are on track in our integration efforts as we continue to realize efficiencies and synergies. Our cost reductions are expected to continue, including the rationalization of some of our manufacturing sites in the coming quarters, which we anticipate will feed further efficiencies in savings throughout 2024. Our focus on EBITDA improvement continues to bear fruit as we had less than $1 million adjusted EBITDA loss in Q1 2024, we anticipate these quarterly trends in EBITDA improvement continuing in 2024 as we continue toward breakeven adjusted EBITDA. Our balance sheet is in great shape, the 17 million in cash less than 3 million of debt and full ownership of all our assets, including the three production facilities. Our cash position of 17 million, combined with our quarterly cash burn of about $1 million, has significantly improved our liquidity position. This financial stability positions us well for considering accretive investments in M&A and in organic growth initiatives. There are many distress assets available today on the market, but we are being very cautious and thorough in our due diligence to ensure that any contemplating transaction would be accretive. Our experience with the VIVO integration has shown that we can quickly and profitably integrate and drive synergies with life-sized organizations. There have been many recent global developments that position MediPharm well for future growth. Evolving regulations in Australia, Germany and Brazil, and recent announcements in the U.S., all point to the emerging need for stronger GMP compliant and pharmaceutically capable companies. Today, global sales represent over 30% of our revenue and this segment grew by 75% year-over-year, and 33% sequentially in Q1 versus Q4. These international markets generally have more restrictive regulatory requirements, but enjoy higher margin. We've invested over many years in the foundations and capabilities for significant global growth, quality systems, licensing, GMP facilities, IT infrastructure, clinical trial capabilities, R&D, a drug establishment license, big pharma partnership, and global footprint and infrastructure, these are the capabilities that MediPharm is invested in, specifically to position us to benefit from the very trends we now see emerging. Our pharmaceutical, medical, and clinical approach has made us a partner of choice for pharma companies looking to enter the cannabis market in their respective countries. Our extensive suite of regulatory approvals and GMP drug establishment license, NHP, and other licenses allow us to ship cannabis and drug products to most countries with a cannabis regulatory framework. With tightening requirements in multiple jurisdictions, we've been approached by several international companies for support with quality-focused GMP production and supply. In the last several months, we have signed a number of new B2B international agreements, including deals with local pharma companies. In Q1, we began to see some of the first revenues from these new initiatives. We look forward to further growth in 2024 as these agreements begin to generate revenue. I thought I would share our perspectives on some of these key market developments and the potential positive implications for the company. First Australia. Australia has implemented new GMP requirements. These new tighter rules require that all products now must meet new GMP standards in Australia. This change has opened many branded and B2B opportunities for the company already driving new vaping oil sales in Q1. In Q1 2024, MediPharm medical cannabis sales in Australia saw a 64% increase from Q4, 2023. The main contributor to the increase with both branded and white-label GMP vape sales. Now to Germany. In Germany, we expect the changes to the German legislation in removing cannabis from the narcotic list could reduce the prescribing stigma amongst physicians and drive market growth. The new regulations have opened up commercial opportunities to streamline in-country operations and expand the addressable patient base. In Q1 2024, MediPharm's Beacon Medical GMBH hosted a successful audit at its German office. This clears the path to increased branded product sales in second half of 2024. MediPharm now has 14 product registrations under the Beacon brand in Germany that's up from 5 in Q4 2023. German medical cannabis sales had a 36% increase versus Q4 2023. 70% of these sales were non-flower products, including oil, CBD isolate, and dronabinol. Moving to Brazil, Brazil is a challenging market to get approvals through their strict farmer regulations. MediPharm recently completed a successful ANVISA audit. The company already has two approvals and with our local big pharma partner, we expect further file approvals in the coming quarter. And the U.S. The U.S. recently, as you are all aware, the Associated Press reported that the U.S. Drug Enforcement Agency, U.S. DEA, will move cannabis from a Schedule 1 to a Schedule 3 drug. MediPharm sees this as a solid step towards recognizing the medical benefits of cannabis and facilitating further clinical research. Today, researchers face significant challenges in getting trial approvals and then dealing with the logistics of sourcing and managing clinical trial materials that may contain cannabis. MediPharm is the only purpose built cannabis facility that has been inspected by the U.S. FDA and holds the current drug establishment license. MediPharm has been referenced in FDA investigational new drug application and an abbreviated new drug application, and a drug master file. The company has also sent multiple cannabis shipments into the U.S. for clinical trials, which were DEA approved. In the short-term, MediPharm will use this leading FDA and DEA experience to position itself as a go-to partner for cannabis research in the U.S. Longer term, we believe it is likely that any new U.S. FDA regulations will raise the bar on manufacturing quality requirements. MediPharm will be able to use its advanced GMP process validation and pharmaceutical product characterization to launch products into the future regulated U.S. market. All of this is in addition to progressing some of our existing longer-term clinical trials and drug applications. We continue to execute in line with our plans. We now have revenue, gross profit, OPEX, and EBITDA results all trending in the right direction. We have a robust revenue pipeline for the number of new agreements signed and in the works for multiple partners in multiple markets. And as just discussed, MediPharm also has many significant longer term strategic growth opportunities. I will now pass call over to our Co-Founder and President, Keith Strachan.
Keith Strachan: Thanks, Dave. Thanks everyone for joining us this morning. As Dave mentioned, Q1 was our best quarter in over three years in terms of revenue and adjusted EBITDA. I'm excited to share some of the operational and commercial highlights that let our success and some new opportunities going forward. Our international sales had strong start to the year, growing 75% year-over-year. In Germany, the additional growth came from commercial launch of dronabinol. This is a pure 99% THC API that we sell both in bulk and filled syringe formats to multiple customers. Traditionally, the dronabinol market was supplied from European synthetic sources. Our product is naturally derived isolate that is preferred by patients seeking natural solutions. Our process and scale also makes our costs very competitive. Based on our more natural product and our competitive pricing, many customers and partners have been selecting us as their vendor of choice. STADA, our large pharmaceutical partner, continues to see growth in oil sales with a 30% increase from the same period last year. This more than makes up to the lower German flower sales where we continue to take a step back based on price compression, changing the margin profile. We will continue to supply select GMP flower and GMP flower manufacturing services where the business makes sense for many firms. The vast majority of our GMP flower from our [indiscernible] facility is directed to our branded products in Australia. Our brand, Beacon Medical, is a leading brand in Australia. Our strategy for this medical market is to win over prescribers and patients with consistent quality and product that is always in stock. This patient-centric approach of a prescriber by prescriber sales strategy has been paying off. In March 2024, we had 350 unique prescribers. This is a 40% increase from the 250 unique prescribers that we had in March, 2023. Also in March 2024, we had almost 35% of our physicians prescribe a Beacon branded vape cartridge. This displays the fast adoption of our GMP vapes that we just launched in September 2023. In Australia, we continue to expand the portfolio as we have two new 30% THC skews hitting the market in Q2 2024. The team is now working on the GMP validation and stability of our live resident vape cartridges to give patients a more full spectrum option for inhalation carts. International work continues in countries prime for growth such as Brazil, France, and Poland. Dave spoke about Brazil and in France, the government just completed a successful medical cannabis pilot program and is now launching a full program similar to the ones that we see in Germany and Australia. The Polish cannabis market has been active longer, but given that product requirements are difficult, it is still an under-supplied nation. MediPharm is working with multiple clients to leverage our GMP status and pharma quality to commercialize products in both these jurisdictions. Back in Canada, in Q1 we had eight new product launches in various product categories. Our success in the domestic markets has been in cannabis oil. This category represents 60% of our sales and we're able to win here a consumer-seek a wellness product that has the same attributes as other products they take for therapeutic benefits, such as nutraceutical. MediPharm is one of the only domestic producers who align well with this customer segment. However, we need to keep innovating in the wellness and better for you cannabis categories. We are currently reviewing some alternate, non-smokeable formats and anticipate launching these domestically in our medical channel and in the adult use market in the back half of 2024. We are very proud of the great strides we made in Q1 2024, which is evident in our significant profit improvement. This momentum will be the driving force on our path to profitability that I see making meaningful progress in 2024. I'll now pass the call to Greg to discuss MediPharm’s financials.
Greg Hunter: Thanks Keith and good morning everyone. As discussed in prior calls, MediPharm management has been focused on growing our revenue-based through organic and inorganic initiatives, reducing cash burn, and driving towards profitability as key priorities. I'm pleased to report that Q1 was another step in the right direction. Before reviewing results for the quarter, let me add some additional commentary on the progress we made on these priorities in the first quarter. Revenue of 9.8 million was the highest in over three years and increased 3.9 million or 67% versus prior year and improved 0.6 million or 7% sequentially, despite Q1 typically being lower due to industry seasonality. We had our largest commercial shipment of dronabinol to Germany in Q1, representing 0.6 million in revenue. We had our largest commercial shipment of vapes to Australia in Q1, representing 0.5 million in revenue. And we recognized 0.6 million in revenue from a new domestic contract manufacturing customer. Our growth profit of 2.7 million was the highest in over four years and was over 27% of revenue. In addition, we executed an additional cost reduction plan that will save approximately 1 million on an annualized basis, starting in Q2 by making a difficult decision to close our Hope facility. And finally, we improved our adjusted EBITDA loss from 1.6 million in Q4 to 0.9 million in Q1 2024. This is the best result in over four years. Turning to the P&L performance for the first quarter. Revenue for the first quarter of 9.8 million increased 3.9 million or 67% versus prior year, and increased 0.6 million or 7% sequentially from Q4 2023. Canadian adult use and wellness revenue of 2.1 million in Q1 2024 declined versus Q1 2023 as we carefully managed sales and marketing expenditures and exited selected products with a focus on profitability. Revenue also declined sequentially from 2.7 million in Q4 2023, driven by industry seasonality. Canadian medical cannabis revenue for Q1 2024 increased significantly from 0.6 million in Q1 2023 to 3.5 million in Q1 2024, driven by the integration of the VIVO medical channel and new business with third-party medical channels. Revenue decreased sequentially driven by order timing from third-party medical channels. International medical revenue increased from 1.8 million in Q1 2023 to 3.2 million in Q1 2024, driven by the integration of VIVO's Australian business, new Australian vape and oil business, as well as new dronabinol sales in Germany. Revenue increased sequentially from 2.3 million in Q4 2023, driven by increased dronabinol sales in Germany and new vape business in Australia. The international business represented approximately 33% of total revenue in Q1. Pharmaceutical and B2B revenue in Q1 2024 of 1 million increased from 0.5 million in Q1 2023 and increased 0.6 million sequentially from Q4 2023. The increase is largely due to the new contract manufacturing customer mentioned earlier. As Dave and Keith discussed previously, pharmaceutical revenue is a longer-term strategy and will take time to pay off as clinical trials progress and applications make their way through the long-term process of approvals. Gross profit for Q1 was 2.7 million or 27.4% and improved significantly versus Q1 2023 up 6.6%. Q1 2024 gross profit also increased versus Q4 2023, driven by increased international medical cannabis revenue that typically enjoys higher margins. Q1 2024 gross profit was 34% when adjusting for several discrete items such as biological assets fair value adjustments, inventory write downs, and severance for restructuring. This was the highest adjusted gross profit in over three years. Gross profit continues to improve driven by product mix, production efficiency, and cost reductions. Management continues to focus on efficiencies to drive gross profit. General and administrative expense in the first quarter of 4.3 million increased versus prior year due to the integration of VIVO, a 1.5 million bad debt recovery in Q1 2023, and 0.5 million of severance for restructuring in Q1 2024. G&A increased sequentially versus Q4 2023, largely driven by severance for restructuring. Marketing and selling expense of 1.3 million was consistent with prior year and decreased 0.2 million sequentially. Total OPEX, which includes G&A, marketing and selling, and R&D expense was 5.6 million for Q1 2024 and increased 2.7 million versus prior year due to the integration of VIVO, a 1.5 million bad debt recovery in Q1 2023, and 0.5 million of severance for restructuring in Q1 2024. In addition, Q1 2024 operating expenses increased 0.6 million or 12% versus Q4 2023, driven by 0.5 million severance associated with restructuring. When adjusting for severance and other discrete items, Q1 2024 operating expense was 5.1 million and is consistent with Q4 2023. Management continues to focus on expense reduction opportunities. Adjusted EBITDA loss for Q1 was 0.9 million and improved 2.1 million or 70% versus Q1 2023. This improvement in adjusted EBITDA is driven by revenue growth, the improvement in gross profit, and the reduction of expenses. Q1 2024 adjusted EBITDA improved 0.7 million or 42% versus Q4 2023, driven by gross profit and continued expense reductions. Moving to a few notable items on the balance sheet. Trade and other receivables increased from 5.9 million at Q4 2023 to 6.5 million at Q1, driven by increased revenues. As of Q1, 92% of accounts receivables is aged 60 days or less. Our cash burn in Q1 was approximately 1 million, resulting in an ending cash balance of 17 million at March 31st. The company has less than 3 million of debt and contrary to many other cannabis companies, MediPharm is also up to date on cannabis excise duties and trade payables. Although we still have work to achieve profitability and become cash flow positive, Q1 was another step in the right direction. Revenue was the highest in over three years and increased 7% sequentially to 9.8 million and 67% year-over-year. Adjusted gross profit of 34% was the highest in over three years. Adjusted EBITDA loss improved sequentially and versus prior year to 0.9 million and was the best in over four years. And finally, we have a strong balance sheet relative to our peers with 17 million of cash and less than 3 million of debt. As a result of our strong balance sheet and significantly improved financial performance, we are well positioned to invest in organic and inorganic growth opportunities as the industry continues to mature. With that, I'll turn it over to the operator to open the line for questions.
Operator: Thank you. [Operator Instructions]. Your first question comes from the line of Aaron Grey from Alliance Global Partners (NYSE:GLP). Your line is open.
Remington Smith: Hi, good morning and thank you for taking my questions. This is Remy Smith on for Aaron Grey. My first question in regards to Germany with the cannabis reform that happened there more recently. So now that we're live post April 1, the first phase, can you speak to any data points on increased interest status seen from physicians as well as patients in the market?
David Pidduck: Thanks, Remy. I'll let Keith take that.
Keith Strachan: Good morning, Remy. Yes, there's a lot of excitement with April 1 in Germany and the rules. I think the most notable thing on our end is with it no longer being narcotic. It opens up some additional pharmacies that wouldn't usually carry cannabis and some physicians who probably wouldn't usually prescribe cannabis. So what we're seeing is pharmacies are definitely busier with prescriptions and there's definitely been a patient increase. With that, we're seeing more and more, as Dave mentioned in his comments, international B2B interests. So that pipeline is filling with folks that want to do business with MediPharm given that we have a vast portfolio of GMP licenses for both, concentrate products and flower. And so we're working our way through those to make sure that they're good, viable partners. Some of them that we've signed on in the last month, they'll be launched in later this quarter. And then what we'll probably see is the bigger volume from bigger, longer term partners like STADA and ADREX, to start flowing in more and more in the back half of 2024. So, I guess to summarize, lots of interest definitely on the flower side and that should flow into also, oil products. And being that we are the second largest oil manufacturer for Germany, we should get also, as the market grows, will maintain that market share.
Remington Smith: Alright, that's helpful there. And then my second question for rescheduling, have you looked further into the potential impacts of rescheduling Schedule 3 and the opportunity to co-present, I know you touched on a little bit in the opening remarks, but how big of a revenue opportunity do you believe the direct medical channel can be for you guys?
David Pidduck: Yeah, I think that there's a great opportunity with the rescheduling of cannabis in the U.S., and we really have a short-term strategy there and a long-term. Short-term, it opens up more opportunities for research. So as you see on the back of all of the rescheduling, there are more and more calls for funding to do more research in cannabis, at the effects of cannabis, the toxicology of cannabis and so on and so forth. There are not many providers in the world who can make a THC product that is GMP compliant, that the FDA will allow for, let's say, a new investigative drug trial, like the one that we're doing with the University of Southern California. As far as numbers go, that opportunity for us with the University of Southern California, I believe last year was around a $0.5 million in revenue. So -- and this year will be in or around the same. There are a lot of patients, multi-site, and that's great margins for us. That's small, that's only one trial though. So with the rescheduling, as you could imagine, ten trials, we have more than enough capacity, and resources to support that now with their current footprint. And so we could see that grow into a large opportunity of high margin work and really little competition. Folks like the University of Southern California, they don't want to buy cannabis oil from a facility North of Toronto if they don't have to. But we are the only person that met all of their requirements, and that will parlay into now us having the expertise and the experience to do more of those. So that's a short-term strategy. Long-term, what we see is this open up new conversations to add to new legislation. We think, especially when it comes to CBD, that that will fall under the guise of the U.S. FDA and they will treat it like another nutraceutical product. In Canada, we call them a natural health product, in U.S. commonly referred to in the regulations as a dietary supplement. And so what that would do is it'll allow everyone to fall into those regulations. We have the licenses today to make those products. So we have a natural health product, GMP license from the Government of Canada. We have our drug establishment license from the Government of Canada, and we have our U.S. FDA site license. So those channels are already open for us. We also have done extensive work in the characterization of those products. So things like validation and stability were months and years ahead of other people. So when that long-term opportunity comes, the tracks are already laid and we can take advantage of that right away. Whereas a lot of our peers in the space would be starting a bit flat footed or from ground zero, and that and depending on their infrastructure, may not even be able to get there. So we have a short-term and a long-term strategy in the U.S. and we're excited to go after both of those.
Remington Smith: Great, that’s helpful. And then my last question, just in Australia. Nice to see the rebound in the quarter. And you spoke to some new SKUs coming online. How much run rate do you see for growth in the market there, still just below kind of peak quarterly levels of 2.2 million. So curious if you believe you can eclipse that and grow beyond that in the next three quarters?
Keith Strachan: Yeah, I think for Australia there is a really good opportunity. The market there continues to grow. I think, a lot of new entrants into the space though, as well, especially on the flower side where we keep a little bit of a competitive edge. Dave mentioned in his comments the strict rules around GMP for concentrate products. We've seen that in our vapes, the vape products that we're setting, they're GMP and they have full stability and validation and all that. And we're seeing that grow, month over month, prescriber over prescriber. On the flower side we really do need to continue to refresh our portfolio. So with those two new 30% THC SKUs entering the market in this quarter, we will be able to gauge the opportunity there. We have planned for growth in that, both in this year and into next year. That growth projection for us is probably anywhere from like a 10% quarter-over-quarter, and then obviously when you get into your year results. So we are being conservative there that we don't build in too much cost or infrastructure to get ahead of ourselves. But I think that 10% growth it would be great for us at that margin and great for our small team. Just to remind everyone we are very asset light in Australia. We do have a great Managing Director there. And he has a small team of three that are out talking to physicians all around the country. But no infrastructure as far as quality and logistics, we do all through a partner, which allows us to be super flexible, and to keep our OPEX down.
David Pidduck: Maybe the only thing I'd add to that Keith is, on the vape front we're seeing good growth in vapes, but there are still a lot of what we'll call them non-compliant vapes in the market. And so there's going to be some growth in general in the market but I think there's going to be a growth as companies can't import further GMP compliant products or the government tightens in terms of people who are breaking the rules and have product on the market that's non-compliant. That will work its way out of the system. There's still lots of that in the system now, as that works its way out of the system, that's just good for suppliers like ours. And that's why we're seeing lots -- when we continue to see more B2B customers coming to us saying, can you help our suppliers. Our supply is running out, and we can no longer supply what we have now. So I think there's lots of good momentum for us in the Australian market.
Remington Smith: Great. I appreciate the answers there. That’s all for me.
David Pidduck: Thanks, Remi.
Operator: [Operator Instructions]. And there are no further questions at this time. I will now turn the call back over to David Pidduck for some final closing remarks.
David Pidduck: Great, thanks operator. Thanks everyone for joining us this morning and we look forward to speaking again at our Q2 call. Everybody have a great day.
Operator: This concludes today's conference call. Thank you for your participation. You may now disconnect.
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