Tilray Brands Inc (TLRY) 2018 Q3 法說會逐字稿

Good day, ladies and gentlemen, and welcome to the Tilray's Third Quarter 2018 Earnings Conference call. (Operator Instructions) As a reminder, this conference is being recorded.

I would now like to introduce your host for today's call, Ms. Katie Turner. Ms. Turner, you may begin.

Good afternoon, and thank you for joining us on Tilray's Third Quarter 2018 Earnings Conference Call. On today's call are Brendan Kennedy, President and Chief Executive Officer; and Mark Castaneda, Chief Financial Officer.

Before we begin, please remember that during the course of this call, management may make forward looking statements within the meaning of the federal securities laws. These statements are based on management's current expectations and beliefs and involve risks and uncertainties that could differ materially from actual events and those described in these forward-looking statements. Please refer to Tilray's final prospectus for its initial public offering and other reports filed from time to time with the Securities and Exchange Commission and its press release issued today for a detailed discussion of the risks that could cause actual results to differ materially from those expressed or implied in any forward-looking statements made today.

Finally, on today's call, management will refer to adjusted EBITDA, which is a non-GAAP financial measure. While the company believes adjusted EBITDA will provide useful information for investors, the presentation of this information is not intended to be considered in isolation or as a substitute for the financial information presented in accordance with GAAP. Please refer to today's release for a reconciliation of adjusted EBITDA to net loss, the most comparable measure prepared in accordance with GAAP.

And now I'd like to turn the call over to Brendan.

Thank you, Katie. Good afternoon, everyone, and thanks for joining us today.

On today's call, I will review the progress we have made on our strategic initiatives as we further extend our operations in Canada and internationally to capture the robust opportunities for long-term growth in the global medical and adult-use cannabis industries. Mark will then review our third quarter financial results in more detail and discuss our long-term financial targets. After that, we will open the call for your questions.

At Tilray, we remain in the early stages of achieving our growth potential. Since our last earnings call at the end of August, our team has been intently focused on making disciplined operational actions, making key strategic investments and generating additional capital to support the sustainable growth we expect to achieve over the next several years.

Focusing on our third quarter for a moment, we're pleased with all -- our overall business momentum. Revenue increased 86% from the third quarter last year to USD 10 million, and total kilogram equivalent sold increased both sequentially and on a year-over-year basis. Our medical cannabis business continues to perform strongly, and we expect the adult-use market to become a meaningful part of our business as supply ramps up. Mark will discuss this in more detail along with where we see our margins heading as we increase sales.

Taken together, what you will hear is that the results reflect the beginning of a global transformation of $150 billion industry from a state of prohibition to a state of legalization. As we have discussed with you in the past, this continues to accelerate and become a reality.

Tilray medical cannabis products are now available to patients in 12 countries on 5 continents, reflecting our position as the leader in global medical cannabis distribution. The foundation we have built in medical cannabis has helped us as we position our business to also benefit from the opportunities in adult-use cannabis. We believe and our progress to date reflects that companies such as Tilray with trusted brands and multinational supply chains will be the ones that win not only with consumers, but regulators as well.

Building our brand and supply chain has become our core focus since we founded Tilray, and we have made significant investments to develop the right assortment of products and brands to scale our operations and to recruit the right team. We have built a premium, vertically integrated business to pioneer the development of multiple markets around the globe. While this approach will continue to require initial investments in the short term, we believe it creates a strong foundation and unique barriers to entry that can be leveraged and scaled in the medium to long term.

To reiterate, our global growth strategy is focused on 6 top line performance drivers, all of which we pursue with a focus on discipline, efficiency and potential to generate strong returns as the business continues to grow: first, increasing our production capacity and inventory to serve the rapidly growing global medical market and adult-use market in Canada; second, maintaining a rigorous focus on quality as we scale; third, partnering with established distributors and retailers to scale distribution of our products further and faster; fourth, developing a differentiated portfolio of brands and products that appeal to a diverse set of patients and consumers; fifth, expanding the addressable medical market by fostering mainstream acceptance; and sixth, continuing to pioneer the future of our industry by investing in innovation, R&D and clinical research.

From a production perspective, we are aggressively increasing capacity. Our GMP-certified facility in Nanaimo, British Columbia continues to operate at full capacity based on our robust medical cannabis demand.

Furthermore, we have both our Tilray Canada and Tilray Portugal entities focused on cultivating, producing and distributing medical cannabis. Tilray Canada serves as our production hub for patients in North America and globally. Once complete, Tilray Portugal will focus on supplying the global medical market, primarily in the EU.

Tilray Germany and Tilray Australia and New Zealand are similar in that they focus on importing products and on sales and marketing. During the third quarter, we received regulatory permits in Canada and Germany to export medical cannabis flour to Germany, making Tilray the first and only company to import both flour and oil medical cannabis products to the German market. Our team is committed to maintaining a rigorous focus on quality as we expand for both our medical and adult-use cannabis products.

As many of you know, adult use in Canada began on October 17. We were pleased to launch our products in 8 provinces. Based on strong initial consumer demand and constrained inventory across the industry, we are aggressively scaling capacity. Additionally, we recently signed an agreement with Prince Edward Island to supply cannabis to adult-use consumers.

We are ramping up capacity at 2 High Park facilities to support the adult-use market, including High Park Farms in Enniskillen, Ontario and the High Park processing facility in London, Ontario. High Park Farms recently received a cannabis sales license from Health Canada to supply and sell finished cannabis products within the Access to Cannabis for Medical Purposes Regulations as well as sales for the adult-use market. Last week, we received additional licenses for 2 cultivation areas that had not yet received their licenses, which previously limited the output of this facility in the short term.

In the third quarter, we completed our first outdoor crop harvest in Portugal. This is an exciting corporate milestone. Tilray was the first licensed producer in Canada to ever harvest outdoor crops outside of Canada. We are continuing to build out the facility in terms of our Dutch style glasshouse, which we expect to be complete by the first quarter of 2019.

Our EU campus located in Portugal has several benefits including an ideal climate, skilled labor, reduced regulatory costs and tariff-free access to all EU markets. When fully operational, our 4 production facilities located on 2 continents will allow us to significantly increase our global production output while reducing costs and hedging against regulatory risk.

By the end of 2018, we expect to increase our production space to 912,000 square feet, a more than 15-fold increase compared to 2017. With more than $0.5 billion on our balance sheet, we have the capital needed to build out this capacity. On our existing properties, we have the ability to expand our total production space to 3.8 million square feet. As we scale our capacity, in parallel, we continue to develop a differentiated portfolio of brands and products that appeal to a diverse set of patients and consumers by investing in innovation, R&D and clinical research.

In the coming year, we intend to announce our support of additional clinical trials in multiple countries. We've already exported 2:100 CBD oil to the United Kingdom for a pediatric epilepsy clinical trial; received approval from the U.S. government to import a medical cannabis study drug in capsule form for a clinical trial at the University of California San Diego Center for Medicinal Cannabis Research to examine the safety, tolerability and efficacy of cannabis for essential tremor; exported CBD 100 medical cannabis, an oral solution of cannabinoid extract, from Canada to Australia to distribute to critically ill children in Australia suffering from intractable epilepsy through a compassionate access scheme.

In pursuit of our long-term growth strategies, we believe an important competitive differentiator for Tilray from other companies operating in this industry is our commitment to clinical research and the halo that gives the brand in international medical cannabis markets. Tilray will continue to be a pioneer in both the medical and adult-use cannabis industries.

As we move forward, we believe we have the financial flexibility to fuel both our near- and long-term strategic objectives. We are pleased with the demand and support Tilray received in the completion of our USD 475 million convertible senior notes private placement offering on October 10, subsequent to the end of our third quarter. We intend to use the proceeds to support our continued strategic growth initiatives as we build a leading world-class medical cannabis and adult-use production and distribution infrastructure.

We will continue to pursue both organic and inorganic growth opportunities. Our recent acquisition of Alef Biotechnology for $3.9 million is a great first strategic transaction for us and builds on our previous partnership that started with Alef in February of 2017 to import and distribute Tilray products in Chile and Brazil. We now have the ability to produce, import and distribute Tilray-branded medical cannabis products throughout Latin America. The Chilean government has been a pioneer, legitimizing and regulating medical cannabis in Latin America, and we are excited to be investing in one of the region's most exciting markets for biopharmaceutical development.

Going forward, we will continue to pursue strategic M&A transactions that open new territories, increase our capacity, increase our brand offerings through innovative form factors, improve R&D technologies, facilitate retail distribution. We are proud of our operational and strategic achievements thus far, and we expect our pace to accelerate in the near term.

As laid out in our prior earnings call, we anticipate the following milestones in the next 6 to 12 months: signing additional adult-use supply agreements in Canada; shipping Tilray products to pharmacy chains in Canada; exporting Tilray medical products to new countries; expanding Tilray's medical cannabis product offerings in the international markets we currently serve; extending our existing pharmaceutical partnerships to additional countries and regions; completing the build-out of our facility in Portugal; obtaining a manufacturing license and GMP certification in Portugal; obtaining production and sales licenses for High Parks processing facilities in London, Ontario; additional clinical trials; recruiting additional executives from outside the industry to further strengthen our management team; and finally, adding strategic partnerships.

In summary, we are excited about our opportunities for growth over the next several years. We have consistently taken strategic actions to position Tilray for success in the global medical and adult-use cannabis industries. We look forward to continuing to take actions that will drive near- and long-term value creation for our shareholders as well as all of those who work with and serve in the medical and adult-use markets as well as our employees around the world.

With that, I would like to turn the call over to Mark.

Thanks, Brendan. Good afternoon to those who are joining us on today's call and webcast. It is a pleasure to be speaking with you today.

We are pleased with our third quarter financial results and the significant growth and opportunities that lie ahead. Focusing on our Q3 results in more detail. Please note, all of the financial information we discuss today is prepared in accordance with the U.S. GAAP and is in U.S. dollars unless otherwise indicated.

Q3 revenue was $10 million, representing an increase of 86% compared to the third quarter last year. Revenue growth was driven by increased patient demand, bulk sales and export sales.

Extract products represented a greater mix at approximately 46% of revenue for the third quarter of 2018 compared to 18% of revenue for the same period last year. We are pleased with our medical cannabis revenue, though we do expect to see an inflection in our growth trajectory throughout 2019 when adult-use revenue from additional form factors will be included in our results since it went into effect in mid-October.

Moving on to operational metrics. Total kilogram equivalent sold increased over twofold to 1,612 kilograms from 684 kilograms in the same quarter of 2017. The overall average net selling price per gram was $7.53 in the prior year and $6.24 in the third quarter of 2018. The reduction was primarily due to an increase in bulk sales as a percentage of total revenue compared to the prior year's quarter.

Excluding bulk sales and looking at Canadian direct-to-patient sales, our average net selling price per gram increased 9.2% to $8.22 compared to $7.53 per gram. On the production side, we expect significant increase throughout 2019 as we expand our capacity to 90 metric tons as we bring our Ontario greenhouses and Portugal facilities fully online.

Gross margin for the third quarter decreased to 31% from 55% in the same period last year as a result of procurement of third-party supply and a larger portion of our revenue being attributed to the bulk sale channels. As we indicated on our last quarter's call, we continue to balance our product supply as we were long THC extracts and short CBD product. We expect continued balancing through the end of the year while we ramp up our production.

Additionally, margins were impacted as we incurred start-up costs in ramping our cultivation. Longer term, we continue to expect 50%-plus gross margins as we lower our cost for greenhouse and outdoor cultivation and as we ramp those facilities past our start-up phase. We also expect to reduce revenue per unit as we begin selling wholesale in the adult-use markets whereas today we are selling direct to patient.

Total operating expense increased to $23.1 million, which includes $11.2 million in noncash stock compensation expense. Excluding the noncash stock compensation cost, operating expenses increased to $11.9 million from $5.1 million in the prior year. The increase is primarily due to $4.6 million increase in general and administrative expenses associated with higher professional fees and increased resources to support our growth and expansion for the start-up of our operations for adult use.

Net loss for the quarter was $18.7 million or $0.20 per share compared to $1.8 million or $0.02 per share in the third quarter of 2017. Net loss included noncash stock compensation charge of $11.2 million compared to $35,000 charge in the prior year, about $6.8 million of noncash compensation charge over last year's performance awards triggered upon IPO. Excluding the noncash compensation charge, net loss was $7.5 million or $0.08 per share.

Adjusted EBITDA was a loss of $7.4 million compared to a loss of $1.7 million in the third quarter of last year. The increase in net loss and adjusted EBITDA was primarily due to increase in operating expenses related to continued growth, expansion of international teams and costs related to the IPO.

Turning to the balance sheet. We ended the quarter with cash and investments of approximately $119 million. In October, we announced the pricing of $475 million convertible senior notes due 2023 in a private placement, resulting in proceeds before expenses of about $460 million. We intend to use the proceeds for working capital, future acquisitions, general corporate purposes and repay existing mortgage.

As we look ahead, we do not provide guidance. However, we are aware that guidance does exist for our performance. The slow start and rollout in adult use across the country has been impacted by many factors, including the timing of licenses, distribution and retail infrastructure. We are not immune to these factors, and they will impact our results. However, we have witnessed that all markets that have transitioned from an illicit to legal market have had bumpy beginnings, then thrive once the infrastructure and start-up periods have passed.

On a longer-term basis, we intend to further build on our early relationship in the global cannabis industry and to achieve strong growth for years to come. We see an opportunity to capture a sizable portion of this market with an estimated gross margin of 50%-plus, adjusted EBITDA margins of 25% to 30%. The EBITDA margins are based on the legal markets that exist today. As new markets are added, we will invest and develop those markets, would have a short-term impact on those margins but also provide for greater revenue upside.

This concludes our prepared remarks. Brendan and I are now available to take your questions. Operator?

(Operator Instructions) Our first question comes from Mike Grondahl with Northland Securities.

In the adult-use market in Canada, what would you call out as the 1 or 2 sort of biggest challenges or hurdles that kind of exist in the market today? And how long do you think till those kind of go away?

I think the biggest hurdle that we weren't expecting was a change in retail operations in Ontario. Obviously, initially, we were expecting 4 physical retail stores to open up in Ontario. And with the change in government in Ontario, they decided to initially have online only and not to license and open physical stores in the largest province by population until next April. And so over the short term, it definitely negatively impacted the industry, and in some ways, negatively impacted the consumer experience. Because if you look at Washington or Colorado, Oregon and California, Nevada, day 1, October 17, you would have seen a lot of people in physical stores. I think over the long term, starting next April, you're going to see private companies and entrepreneurs open physical stores much faster, much more quickly than crown corporation -- the crown corporations would have -- than the OCS would have. And so while it's a negative impact over the short term, I think starting next April, it will have a very positive impact. That change in regulations will have a positive impact not only on Tilray, but on the entire Canadian industry.

Got it. Got it. And then with the Tilray brands out in the marketplace the last month, kind of any early feedback or read? Kind of what are you seeing so far?

It's really too early to tell. We thought it was really interesting that the product mix that people chose, the brand mix that people chose province by province -- as all these different retail locations were being set up, it was really the buyers who were picking the initial brands and initial products, and we're looking forward to those choices being made really by consumers, consumers picking brands and products that they love. That's really going to be what determines long-term success in this industry in Canada.

And Mike, with the imbalance we have today with more demand than supply, everything is selling out. So it's really hard to tell what consumers are going to prefer longer term. Also, consumers are limited on their form factors, so as vape cartridges and edibles and beverages hit the market within the next year, we'll really see what consumers want. So this is really kind of short-term high demand for every product that the consumer can get their hand on.

Our next question comes from Graeme Kreindler with Eight Capital.

I just was wondering, could you elaborate a bit on the company strategy in terms of balancing inventory needs for medical international markets as well as adult use, what the strategy is going ahead?

So in terms of the international markets, our strategy is really on getting Portugal fully up and running, licensed. Two weeks ago, 3 weeks ago, I was in Portugal for our first outdoor harvest there, and that was exciting. As far as I know, that makes us the only LP in Canada that's ever grown a product outdoors, ever harvested a product outdoors, which is an exciting development for us. And we're looking forward to processing that product and distributing it inside of the EU and potentially in other international markets. Our greenhouse in Portugal will be completed at the end of this month, have plants in it next month. Our GMP processing facility will be complete in Q1, and so that will really -- what we'll do is -- that will replace the products we currently export from Canada. So we'll begin to supply products inside of the EU from the EU, and so that's part of our international -- the international part of your question. What has been a little bit surprising in Canada, really leading up to October 17, one of the things that was surprising is that I think most people in the industry were expecting some decrease in demand from patients. And clearly, for us, as part of our long-term strategy, patients come first. And we didn't expect a run-up in demand within the patient population pre-legalization. We actually thought the opposite, and most of our peers thought the opposite. And what happened was we saw a significant increase in demand from patients in the days and weeks prior to legalization. And that was pretty counterintuitive to what we were expecting.

Can you elaborate a bit maybe how you see that -- those patient figures developing? Now that we're about a month in from adult use, how sticky do you think that is, considering what we talked about on the infrastructure in the adult-use market? How do you see that developing over the next couple of months?

It's really hard to predict based on a number of different things. In some markets such as Colorado, you see different tax rates between the adult-use consumers and the medical patients. You don't really see that in Canada, which is very surprising. Cannabis -- medical cannabis is really the only product prescribed by a physician that is taxed in Canada. So depending on taxes, depending on form factor, if there are different form factors between adult use and medical and different tax rates, we would expect continued growth in the medical patient base. I think the other significant development that we expect in Canada really in the next few months is that Canada is the only country in the world where Tilray products are available where they're not available in pharmacies, and that's going to change. Everywhere else, Tilray products are available in pharmacies. In Canada, they are not. But with companies such as Shoppers Drug Mart and Pharmasave, we do expect these products to be available in pharmacies fairly, fairly soon. And that will be interesting to see in a place like Ontario, where there aren't retail stores open. But you may see products -- you may see Tilray products available in physical pharmacies. It'll be really interesting to see how that impacts the patient base.

Okay. And my last question here, just quickly, on -- for the revenue for the bulk sales to other licensed producers, can you disclose what that was of the total top line there?

It was about 50%.

Our next question comes from Scott Fortune with Roth Capital Partners.

Can you step through kind of -- I know licensing, there's been a backlog, but kind of the progress on High Park and to eliminate kind of the supply issues, how long has this gone for you guys going forward with kind of fourth quarter and going forward for direct side of things?

Sure. So there's 2 High Park facilities, one is High Park Farms in Enniskillen, Ontario. Obviously, by the name, it's a cultivation facility. And I'll sort of walk through that one first. So the High Park Farms facility is now -- is fully licensed. We had been waiting on 2 zones. About 50% of the new facility that we had upgraded, we have been waiting on that to be licensed for lots of -- I guess, 4 months, 5 months, something like that. It was finally licensed last Friday, and so that took longer than we expected. But we are excited to get that portion of the facility up and running. And so we've been taking clones to put plants in those 2 zones, and that will significantly increase our capacity at High Park Farms. The rest of the facility is now fully -- I mean, the entire facility is now fully licensed. We are currently processing at High Park Farms, and so processing and packaging finished products for the adult-use market. We had submitted our full licensing application and all the documentation for the High Park processing facility in London, Ontario and anticipate having that facility licensed within our expected time frame.

Okay. And then are you looking at all supply issues to potentially bridge by buying wholesale at all, to bridge the shortage right now?

We have been. We have been looking at lots of different supply agreements and looking at all of the different farmers, all the different suppliers, cultivators in Canada. The challenge is that -- really twofold. One is that over the last -- really over the last year, we kept hearing about all of this capacity that people were building out. And when we went to buy some of that supply, it's just not available. People tended to exaggerate their capacity and tended to exaggerate the metric tons that they were going to be producing. And so there's far less supply than -- frankly, than we expected. And the second thing that we're seeing is that there's far less quality supply than we expected. When we've gone out to do our own inspections for quality and look at the product that is available, it's a much lower quality than our standards would allow us to purchase. And both of those things have been very surprising. We've often said that 5 years from now, 10 years from now, we would hope to buy all of our supply from farmers not only in Canada, but in other countries around the world. But it seems like a lot of companies are having trouble scaling.

Okay. And then last question. Potentially -- you expanded to Latin America. The Mexico market comes onboard. Kind of what's your strategy there, serving it from the BC side of things? Or will Latin America be able to supply that? Or kind of what's your strategy for -- if Mexico comes onboard here?

So we would look at -- we would potentially look at a company that we acquired, Alef, as a source of supply. Obviously, also look at our facility in Portugal and then also look at local supply within Mexico and look at potential strategic acquisitions or building capacity organically in Mexico or partnering with an established partner not within this industry, but within a similar industry, within the agricultural industry in Mexico.

Our next question comes from Mike Hickey with Benchmark Company.

Just a couple. Curious to your view, I guess, on the shifting political landscape in the United States post-midterm elections. Both sessions are out. It appears sort of the potential for medical cannabis legalizations were promising, but I wanted to hear your view.

Yes. So obviously, there were a lot of big developments over the last few weeks not only in the United States, but in places like Mexico. In the U.S., we saw 1 state, Michigan, legalize cannabis for adult use, which brings us to 10 states. And then 2 states legalized for medical purposes, Utah and Missouri, 2 very conservative states. You saw a very conservative Senator Orrin Hatch come out in favor of legalizing medical cannabis in Utah. Obviously, one House race that was really important to us, in the Texas 32nd, Colin Allred beat Pete Sessions. I think he was an 11-time incumbent. And Pete Sessions as Chairman of the House Rules Committee had prevented numerous medical cannabis and cannabis bills from coming before the House for a vote. And so we are optimistic that without Pete Sessions, we will start to see more bills come out in the next Congress. I think that all of those things, along with obviously Jeff Sessions, a drug war dinosaur, no longer being Attorney General are all positive signs for this industry. If I were going to point to 2 more characteristics, indicators, we're now at a point where 93% of Americans believe that medical cannabis should be legal. 9 out of 10 -- you can't get 9 out of 10 Americans to agree on anything, but they agree on that. And then 65% of Americans believe that cannabis should be legal for adult use. And in sort of looking at that number and the subset of that number, 51% of Republicans believe that cannabis should be legal for adult use, and so the first time the majority of Republicans believe that this should happen. And so all of those things point to the fact that the majority of Congress now comes from a district that has legalized cannabis or medical cannabis in some form. This is a bipartisan issue at a time where there aren't a whole lot of bipartisan issues. I think you'll see Mitch McConnell include hemp cultivation in the next farm bills. So Senator McConnell will do that, and that will allow for CBD products to be more widely available in the U.S. And so we're optimistic about the long-term prospects in the United States. And I guess, just finally, we talked about Mexico, but we're also really optimistic about other countries around the world that are legalizing medical cannabis. We're now at a point where 35 countries have legalized medical cannabis. And it's really clear to me how we get from 35 to 40 to 50 to 60 countries that have legalized medical cannabis in a relatively short amount of time. 2, 3 -- 2 or 3 years, I think that's where we'll be.

Okay. Good, sounds good. That's helpful. The second question from me is sort of back in the U.S., sort of your view on multistate operators. Obviously, they continue to scale. You saw a big deal announced just today. But do you feel like you're sort of losing your first-mover advantage or it's being eroded without this sort of federal legal path for you to do business in the United States?

I think that we have lots of different advantages. One, we have over $500 million in cash to invest today. We have a public company stock as currency to conduct M&A transactions around the world. We are able to be listed on NASDAQ rather than other exchanges that some of the multistate operators are listed on outside of the United States. We're able to distribute our products around the world and comply with not only import and export laws in the countries in which we operate, but also international treaties. I think that -- and in September, we announced an export from Canada to the U.S. for clinical trial at the University of California San Diego. I think that, that gives us advantages to very quickly deploy capital in the U.S., if -- I should say when the farm bill passes and when we see something like the CARES Act or, I guess, now the STATES Act passed. And so all those things would lead us to deploy capital swiftly into the U.S. I think besides the exchanges where you see the multistate operators list and the lack of liquidity that those stocks have, I think another disadvantage you see amongst the state operators is that all of the products that they produce are -- and all the products that they sell within an individual state are cultivated and processed and packaged and distributed solely within that state. And I think that puts them at a distinct disadvantage when federal law changes in the U.S. because they're going to have all of these cultivation facilities licensed in all of these different states. And a company such as ours would deploy massive amounts of capital in 1 single location or 2 single locations in 1 or 2 states and quickly move that product from state to state, assuming federal legalization.

And our final question comes from Tamy Chen with BMO Capital Markets.

Just first question is, I just wanted to clarify, so your -- this quarter, the Q3, you did not ship any product to the adult-use market. Is that correct?

That is correct, Tamy.

And so could you speak to how your adult-use shipments -- starting in October, how you performed versus what your commitment was to the provinces? And also for this initial October shipments, was it all out of the Nanaimo facility? Or did you have products shipping out from the High Park greenhouse as well?

Yes. So we finally received our license from the greenhouse in Ontario, and we did ship product from that greenhouse as well. And so we do have a good start. And I think if you look around the industry, no one can keep up with the demand. And we're in the same boat as everybody else. We just can't produce product fast enough as the demand is coming.

And there was a bit of a dance at the end of the quarter where we had product packaged and pelletized and ready to ship, but the -- several of the destinations, the distributors, the crown corporations didn't have licenses to receive the product. So -- and that's sort of a dance that took place across many of our peers in Canada.

Right. And so at the High Park greenhouse, would you know what your current run rate production is at this point?

So as we said, our total production is around 66 metric tons. We had only half of our license -- our facility license. That license just came in this past week. So effectively, theoretically, about 33 would be the theoretical capacity. Now that we have the rest of the licenses in place, we'll be able to start planting those, so we'll get closer to that 60.

Right, okay. And again, on the wholesale, can you speak to the pricing that you're getting so far in the adult-use market?

So because of our relationships with our retailers, we don't disclose our pricing. You will see that in the Q, the overall averages, but we were informed not to disclose the pricing from the -- with our customers.

Okay, got it. And my last question is, just wondering in terms of your mix, you mentioned you're long, I believe it's THC but not enough CBD. I'm just wondering why that is. I would have thought in the medical market, you would have more CBD products. I'm just wondering why there's this mix difference right now.

So we were not planning enough CBD initially. The CBD demand outstripped our supply, and we had some extra THC oils, and that's what we sell wholesale. And we made commitments to sell that about a year ago. So we felt we would have plenty of THC oil. We were long. But on the CBD side, we were -- we just couldn't keep up. It's also a very popular international product. So our 2:100 product uses a lot of highly concentrated CBD.

Fortunately, for the international market, we are able to use CBD that is sourced internationally. We are not allowed to sell any finished products either medically or for the adult-use market in Canada using internationally sourced GMP-certified CBD.

Ladies and gentlemen, thank you for participating in today's question-and-answer session. I would now like to turn the call back over to Mr. Brendan Kennedy for any closing remarks.

Thanks, everyone. We appreciate your questions and participation on today's call. Have a great afternoon or evening.

Ladies and gentlemen, thank you for participating in today's conference. This concludes the program. You may all disconnect, and have a wonderful day.