AMA part 2
r/TheCannalysts Aphria Inc. - AMA u/AphriaInc Hello TheCannalysts Community! Im Carl Merton, Chief Financial Officer at Aphria Inc., and Ill be hosting an AMA with TheCannalysts on Wednesday, August 7th at 6:00-7:30pm EST. Looking forward to answering your questions about all things Aphria Inc. Until then, I want to give you a sneak peek at what we have growing. Carl To learn more about Aphria Inc., please visit https://aphriainc.com/ and https://aphriainc.com/investors/ . EDIT: NEW VIDEO Special Sneak Peek of our Greenhouse!!! Share123154 Best Write a comment GoBlueCdncash cows to feed the pigs 5d Given the popularity of this AMA the moderators will be removing duplicate questions. So if you want your question answered, review what is already posted BEFORE asking it. We will also remove non questions in order to improve readability. GoBlue saskski 38m Where do I find the answers to all these questions below 1 EquityViking 36m Lol wait for him to answer them 4 Agent248 5d When should we expect cannabis related revenue from CC pharma? How is the construction for colcana coming along? Any eta on when it will be done? When should we expect first sale from this new greenhouse? Does aphria have all the needed licenses for the facility? I like the strategy of working with local health boards in Argentina and hospitals to run trials. Any Idea on when we should expect meaningful revenue numbers? What should we expect from Jamaica in the coming year now that they are going to start selling products under Sensi brand. Any revenue estimates you can share? What should we expect from UK and Australia? I know its early to talk about those but just wanted to get understanding of how much of Aphrias strategy has changed (if any) after recent management changes. Will aphria be extracting products for other LPs if opportunity presents itself? Any current agreements? Is Vic still involved as a consultant with aphria? Thank you for taking the time to answer my questions. I look forward to your continued excellent work at Aphria. 41 AphriaInc 39m Agent248 thanks for your questions. With respect to CC Pharma recording cannabis related revenue, I think I should clarify a couple of things. CC Pharma does not grow cannabis and technically wont ever record revenue from growing cannabis. CC Pharma is a distribution business. It will record revenue from distributing cannabis as soon as we are able to import cannabis into Germany under EU-GMP certification or as soon as Aphria Deutschland completes its first harvest of cannabis. In the interim period, CC Pharma is setting up its business for distributing cannabis. It also maintains a small distribution agreement with a company call EMMAC for distributing cannabis in Germany, once EMMAC secures all required permits, licenses and supply. Colcannas construction continues to advance. Irwin and I were in Colombia recently and came back very impressed with the opportunity in Colombia. What became clear during our trip is that the Colombian market has been slower to develop due determining the appropriate way to establish GMP standards in Colombia. What also became clear was just how big the opportunity in South America is (650M people, medical benefits, etc.). Taking advantage of Colombias equatorial position and using that as a growing hub to feed the continent presents a tremendous opportunity for Aphria. To do that, we will need to secure GMP certification for the grow and infrastructure, but the opportunity is just too large to not take that step. The first big step for us in Colombia was land levelling, which is complete. The next step is build-out of the greenhouses and infrastructure. Aphria has secured all required licenses for Colombia, except for GMP certification, which the government is still trying to establish. In the interim, while those steps are occurring, we are working on securing EU-GMP certification in Canada, to allow us to temporarily export product out of Canada and import it into LATAM to generate LATAM sales earlier. The government in Argentina recently passed new rules on their special access program and the advance work we did with Hospital Garrahan on the pediatric epilepsy trial has positioned us very well in LATAM to leverage the Aphria medical brand. Vic is no longer involved with Aphria, other than as a shareholder. 17 Agent248 31m Thanks! You answered all of my questions except for Jamaica. Any sales forecast? Whats the current capacity? 2 AphriaInc 23m Please see my response to lurkerbyday 4 Agent248 18m Thanks. 1 wrinkledpenny 5d Hi Carl, Thanks for taking the time to visit us and congrats on the quarter. 1) When will we see an expanded Broken Coast? 2) Are there plans to buy 100% of Althea? They seem to have a lot of good things going on. 3) Can you tell us anything about ACT II? Irwin's other company... Thanks again 39 AphriaInc 36m Wrinkledpenny, thanks for the question but I have one back. How exactly does one wrinkle a penny? Broken Coast represents a tremendous brand in Canada. We are extremely proud of all the work done by the John, Kevin and the entire Broken Coast team. The brand maintains a commanding presence in the super-premium category. When considering an expansion, we take many things into consideration. One of those is the general level of supply. Obviously, if there is a sufficient level of supply, building more can create problems. In Canada, currently, it does not make a great deal of sense to start building new grow today unless it is to support growth in the super-premium category. This presents an opportunity to consider expansion for Broken Coast. The question then becomes, how much more supply is the correct amount to add. This is where we are at on the expansion plans for Broken Coast. Do you add 5,000 kgs of supply, 20,000 kgs or 50,000 kgs? This question isnt as easy as it first seems. There are also questions on the impact of scarcity on price. Add too much supply, destroy scarcity and impact your selling price. It changes the entire economics of the expansion. Once we announce the expansion at Broken Coast, we anticipate the build and license approval will take at least two years. As I mentioned in one of my other posts (or will mention), we do not publicly comment on our investment strategy as it relates to individual investments. ACT II appears to be best characterized as the tin foil hat club not having enough time on their hands. ACT II is a SPAC organized by Irwin, while he was winding down his time at Hain. It has $300 million to invest in organic brands. It has no tie to cannabis. When Irwin was first interviewed by the Board, he disclosed to them that the SPAC was being organized. He committed to the Board, that if joined Aphria and as long as he was with Aphria, the SPAC would not invest in Cannabis. Further, his involvement is limited to his role as Chair and is not involved in day-to-day operations. 15 vouching 4d Hi Carl, Thanks for doing this and congrats on the impressive Q results Why has Aphria never taken IR and PR as seriously as other companies? I understand that Aphria does not want to "pump" their own company and that's great. I get that Aphria cares about long-term growth, but still it would nice if Aphria cared more about its public image. I know a new PR firm was hired, but not much has changed. What really went down with all the rumors about equity deals/partnerships and why was Aphria not able to secure some sort of partnership? Why did so many potential deals leak in the past? I recently had the opportunity to meet with some of the SOL guys and I was wondering if Aphria would still ever consider dealing with SOL again if the right opportunity came up? For example, As part of the LATAM assets, I know Aphria has a right to purchase the Brazilian license once that is secured. Is this something that APHA will still buy from SOL? Is Vic still involved in Aphria at all as a consultant or even someone that will visit the company once in a while? Will Irwin take up Cramer on the offer to appear on his show? I know many on reddit emailed Aphria about it. Does Irwin know he invited him on the show? I feel like it's something that's in the works lol those two go way back. As an accountant myself, is the company looking for a CPA that lives and breathes Aphria? LOL Thanks! 39 AphriaInc 31m Vouching, I wonder how many people were able to figure out your screen name and what it meant. I remember my days vouching transactions. Very tedious work but you would be shocked to find out how much you can learn out about a company by doing it. I am going to disagree with you (yes, I realize it isnt just you but most of this community). We do take PR and IR seriously, we just dont believe in self-promotional, rah-rah, press releases announcing artists in residence, the selection of an e-commerce platform or that we are announcing we are building our facilities in one place in Canada because we have access to free water (dont even get me started about the ridiculousness of selecting a place to locate a facility anywhere in Canada and basing your decision on only one variable). Since the start of Aphria, we have released news based on our (my) belief that we need to present ourselves as a mature, seasoned business, in order to appeal to institutional investors. If something material happens, we press release. We dont press release noise. Investors are smarter than that. Further, it is what appeals to strategic partners and institutional investors (something this industry is severely lacking in). I understand that some investors believe that other investors are sheep and need to be fed a constant stream of rah-rah press releases. I dont agree with that. In the last four months, investors made it very clear to us that the most important thing wasnt a glossy press release (they dont want that anymore), they want results. So, for the last four months we did that. We focused on execution in Canada. That focus helped us achieve our Q4 results. Now that we have issued those results, Tamara and her team have a series of initiatives that I believe address your concerns. I want to be clear; we arent going backwards but you will definitely see us more often going forward. A positive first step in that regard was Irwins visit on Monday to Cramer and the Mad Money set. There will be some of you who think we arent going far enough. I understand that, I am not sure we can ever make them happy. But at the end of the day, this isnt a sprint. It is a marathon. We are here for the long-term, we are building assets for the long-term, we are building brands for the long-term, we are building relationships for the long-term. It is a different kind of company than one built for a quick pop on a stock price to benefit early investors at the expense of later ones. Rumours are just that rumours. Too many people believe everything they read. Just because someone claims to know someone, who knows someone, who knows someone who is on the inside, doesnt mean it is true. If someone on the inside is providing information, they are doing what is called tipping which is illegal and could land them in jail. Not sure how many people are really willing to take that risk. If people arent willing to take the risk, why would you believe a rumour supposedly started by one. As I have said many times, getting a strategic partnership is not the be all and end all that some in the retail investment community believe. If we are going to do it, we are going to do it from a position of strength, not because if we dont we have no liquidity in less than 60 days. We will do it because the strategic partner brings things to our business that we cant bring ourselves (or would be too expensive or take too long to bring). Do they bring us brands, a route to market that we dont otherwise have access to, a distribution channel that we can leverage, bench-strength to add to our growing team, etc. Those partnerships are about putting two companies together to give each other something they dont have and make both of them stronger. I also think having one strategic partner instead of multiple partners could be a mistake. If the partners are not on the same page, there will be discontent. It may make more sense to have multiple partners with one in each different category. Having one partner who controls your business potentially closes too many other doors. We have to do what is right for shareholders in the long-term. Aphria is no longer involved with SOL on any level. The Brazilian license option does not involve SOL other than paying the pre-negotiated price. We would not be interested in acquiring it, unless we secured the full 90% ownership. If we are unable to secure the full 90%, I imagine we would exercise our option and then look to sell the asset as soon as possible. As I said in another post (or will say), Vic is no longer involved with Aphria, other than as a shareholder. In case you missed it, here is a Link to Irwins appearance on the show on Monday. Irwin and Cramer do have a long history based on his time as CEO of Hain. We were aware of Cramers offer at the time. We assessed the opportunity to go on Cramer as a key inflection point for Aphria. There wasnt much point to go on without something tangible to discuss. Our Q4 results, gave us that tangible result. I am always looking to add talent to my accounting and finance team. Send your resume to [Investors@aphria.com](mailto:Investors@aphria.com), if you are interested. A condition of employment would be giving up your posting ability on the subReddit about Aphria (although if the community found out you were an employee; I am sure the weight they attached to your comments would lessen - you appear to be a well-respected poster). 9 SellInsight 22m Hi Carl, if you don't mind I am also going to submit my CV to investors for consideration. Willing to relocate to Leamington as well. Also a designated cpa. 2 igotahugedick 2d Looks like question 5 has been answered...looking forward to hearing what he says to questions 1 and 2 7 vouching 2d yep lol pretty crazy. I really did think it was going to happen soon since Irwin has been on his show many times. I think DD gets licensed this week as well. 3 LordHypnos 5d Hey Carl, congrats on the quarter. Can you speak to any of the opportunities in the U.S sector Aphria is exploring? Also, what is Aphria's strategy to join the U.S market? 32 TrollBearPig-what 5d Yo Hypno! Just in case you haven't checked out the MD&A yet: U.S. Expansion Strategy: The Company believes that the existing U.S. cannabis market is hindered by the federal prohibition on cannabis resulting in poor capital allocation by active players as they jockey for first mover advantage. Currently, operators are forced to create cultivation and distribution centers in each state they wish to participate in, forcing them to operate multiple facilities in order to become a multi-state operator (MSO). The current MSO model results in poor capital allocation as money is invested within multiple individual states where investments would not be made but for current interstate trade barriers. The Company is focused on participating in U.S. federally permissible activities, and is therefore currently reviewing the landscape and looking to prepare for legalization of cannabis through the purchase of profit generating companies in other industries and converting their existing operations to include cannabis when it is federally legal to do so. The Company is looking to develop cannabis operations based on the best locations to service the United States as opposed to operating individual locations in less desired locations as a result of the current legalization structure, when federally legal to do so. Furthermore, the Company is evaluating potential strategic partnerships in order to accelerate and escalate the Companys brand capabilities and strategies. The Company intends to be well poised to capitalize on the U.S. market once it becomes federally legal to do so through this unique strategy. The Company believes investing in more established industries will generate faster returns through positive EBITDA, while putting the Company in the best possible position to generate significant long-term returns when the U.S. legalizes cannabis federally and removes the current barriers in the industry. 30 LordHypnos 5d I hadn't seen that, thanks! Prudent capital allocation.Love it. 12 lurkerbyday 5d Hi Carl, Congrats to you and your whole team on Q4 results. I have a few questions: As stated in MD&A, Aphria One is fully planted; does this mean 10k KG will be harvested per month? If true, that would be 5.5 times of Q4 sales. Given infused products won't be available for sales until December 2019, what are the plans to utilize the harvested inventory? Medical sales seem to be stagnant. Are there any plans to improve medical sales since its margin is higher? Do you have a rough estimate on the expected sales of the Sensi Herb house in Jamaica? What are the timelines for opening other stores in Jamaica? Thanks. 24 AphriaInc 25m Lurkerbyday, what does that mean you do by night? Aphria One is fully planted as of last week. It will take eight weeks (the first time we harvest with a fully planted greenhouse) for us to reach the 100,000 kgs level, Remember, 5,000 kgs of our capacity relates to Broken Coast and 10,000 kgs of our capacity is intentionally constrained based on overplanting mothers to ease the transition and ramp for Diamond. Products need to be in inventory well in advance of December 2019, in order to be on the shelf for December / January. We continue to invest in our medical portfolio. I said this last year, but a certain portion of medical users were really adult-use users in disguise. Over the year, the entire industry has seen a reduction in this platform as a result. This likely impacted us more at Broken Coast than at Aphria, for this very reason. I still see the medical platform as an important platform for us. But its ability to remain relevant will be driven by three things: (i) access; (ii) cost; and, (iii) eventual introduction of DINs. The various levels of government control (i) and (ii). If the government makes it too hard for patients to get medical cannabis and doesnt create a difference in price, those patients will choose ease of access. To a certain extent we direct (not control) (iii). We have supplied active ingredient for multiple clinical trials, including TBP, Medlab, CannPal and Hospital Garrahan. If one of those trials results in a DIN, the medical platform will transform. Sensi will officially open its first herb house next week. Lets let them have their opening night and a few months of operations before we start providing sales estimates. Sensi is also working on herb house licenses for locations in Portmore, Negril, Ochos Rios and Montego Bay. I understand the construction work is progressing but havent seen it in person for a while, so I am really looking forward to my visit next week for their Grand Opening. I believe the rate limiting step today is the licences. 8 igotahugedick 2d I like these questions a lot 3 5rberg 3d Hi Carl, thanks for your valuable time. With regards to the EU. Ive noticed a new Portugese entity. APL - Aphria Portugal, ownership 51%. Can you provide us with more information. For instance whos Aphria partnering with, by when is business activity to be expected. As more activity in EU is on going, Denmark Schroll + CC pharma and UK Althea. Can we expect an IR /PR update on the EU strategy upon the next milestone in the EU. 21 AphriaInc 19m 5rberg? Any relationship to 4sberg? He was an amazing hockey player but not very well respected in this area due to his playing for the Avalanche. Yes, we incorporated a new Portuguese entity in the quarter. We have not publicly released any additional information on the entity. As it relates to Portugal specifically, I think there is a great opportunity there to grow cannabis in close to ideal conditions. Important aspects in Portugal include site selection (where is the best place to grow in Portugal? North or South you might be surprised) but more importantly, to which countries will you be able to export. That part is still a giant unknown. Lets just say that we do not agree that importing into countries like German will be allowed forever. We will continue to provide updates on EU activities as material events occur. 6 IvanSkavar 3d Hello Carl! I noticed this latest quarter Aphria sold $4,171,000 wholesale. I'm wondering if you can provide any guidance on the state of your supply agreement with Emblem. 19 Avatarhash 3d Specially if you can give us blended average selling price. 7 AphriaInc 18m IvanSkavar, we are supplying Emblem. 5 cb153 14m IvanSkavar, we are supplying Emblem. https://www.globenewswire.com/news-release/2018/09/12/1569696/0/en/Emblem-signs-supply-agreement-with-Aphria-to-purchase-up-to-175-000-kg-equivalents-of-cannabis-products-over-five-years.html 25,000 KG due in the first year (May 2019 - May 2020). The deal is back-weighted, per Aphria IR, so we should see sales volume pickup in subsequent Qs 1 madmaxonline 5d 1) What's up with the JV with Verve Dynamics and how does that fit into the global plan? 2) Is there any progress being made in Argentina? 3) How long is it estimated to take for the Danish assets to start producing revenue? Thanks. 17 AphriaInc 13m Madmaxonline, who knew Mel Gibson was interested in Canadian cannabis! Verve Dynamics continues to move forward. They had their official grand opening last week. Our Director of International Accounting represented us at the opening because it was the same day as our earnings release. Verve is an integral part of our global plan as an extractor. From what I have seen and heard, there is no extraction facility like in the cannabis industry. They will have a small greenhouse, with a small production capacity but will draw from local producers to meet their biomass needs. The facility continues to work on EU-GMP certification (not for bulk product but for oil, a much more stringent process, for which less than the fingers on your hand have been awarded globally). Once EU-GMP certification is received, the extracted material fits into our plans in Germany, Italy, LATAM, etc. Yes, progress is being made in Argentina. Argentina is an interesting market. There are lots of opportunities as the country has moved from its previous leadership to Macris leadership, which has been far more pro-business than previous regimes. However, the country struggles with out of control inflation. Last year, inflation was almost 50%. With inflation levels that high, it makes it difficult to agree to capital expansion programs. We continue to see Argentina as attractive. We continue to speak with the government on collaboration around a greenhouse, but subject to the above. The government itself has also made progress on its Special Access rules, recognizing the burdensome cost they were pushing to patients. They recently changed their rules on Special Access and now allow bulk purchases by insurance companies for Special Access. We see this as a great opportunity for our Rideau Oil, leveraging the results and our association with Hospital Garrahan. The Danish assets are close to producing revenue but for clarity, that will not show in our financial statements. We currently own 15% of the Schroll Medical. As a result of the level of ownership, it is not subject to consolidation on our financial statements. The Danish government continues to progress with its regulations but much like Health Canada in the early days of medical cannabis, some of the rules and regulations are being determined in real time. This means there have been governmental delays in getting the industry started. 6 Monteviale 2d Hi Carl, Thanks for doing this AMA Just want to touch on outdoor growing in Canada. If Im not mistaken I believe that leading up to legalization a number of LPs including Canopy, Aurora and Aphria all lobbied against outdoor cultivation. Recently, both Canopy and Aurora have joined a number of other LPs who have now looked at outdoor growing. Aphria has been silent. Can you provide us with some insight into Aphrias current views towards outdoor growing in Canada? Do the risks of growing outdoors warrant the cost advantage? Does saving pennies on the dollar matter when most of the low cost extracts from outdoor grow will be inputs for higher margin products? Once again thanks for doing this and remember one foot in front of the other. Cheers 16 AphriaInc 10m Monteviale, glad you are participating in the event. You guys have done great work for this community. Outdoor cultivation is not for Aphria today. We think there are too many issues with pest management, mold, powdered mildew, animal feces and a host of other issues, that will not survive HC tests. In our minds, the risks of growing outside are not commensurate with the potential rewards. Lets wait and see what happens in October before we come to any conclusions. 4 TrollBearPig-what 4d Hey Carl, congrats on the amazing quarter and thanks for doing this! Few questions Wondering if you have a rough estimate on how much of your current capital will be required for your Canada operations for example (Broken Coast expansions and supporting the next phase of edibles/concentrates/etc. And how much for pure international growth? Can you confirm if the indoor facility your building out in Germany is leveraging Broken Coast's knowledge? Meaning can we hope for Broken Coast level cannabis coming out of your German production facilities? The hybrid greenhouse styles you have seems very large and open, I was wondering what type of disaster scenario protection is Aphria employing to prevent a total crop loss from plant diseases and powdery mildew? Also are you able to control the environment by section in these types of settings for more strain specific settings or is it more of finding the sweet spot that 90% of plants will do well in. And just as a side note...as a U.S citizen, I just wanted to say that I really can't wait for the day I can buy CBD and Broken Coast products from you guys ;]. Thanks!! 12 Magdeburgler 1d Hello Carl, in the recent MD&A you wrote the following: "Also included in distribution revenue is $163 of CBD based products sold through the German market for the three months ended May 31, 2019 and year ended May 31, 2019. " Are these revenues just from Cannrelief products? When did you start to sell these products in Germany? A few weeks ago I emailed Aphria Deutschland and asked them, where I can buy Cannrelief products. They told me just in Hamburg for now, the rest of Germany will follow later. Are these revenues only generated in Hamburg? Is Aphria in active conversations with large german retail chains like " Dirk Rossmann GmbH " and " dm-drogerie markt GmbH + Co. KG " to get your products into their shelves? Greetings from Germany. 14 AphriaInc 3m Magdeburgler, thanks for holding down the fort for us in Germany. We see exciting opportunities to come. Take tomorrow for instance its groundbreaking day! Here is a sneak peek of what is to come: https://www.wiwo.de/unternehmen/industrie/hanfmedizin-wo-deutschlands-groesste-cannabis-plantage-entsteht/24879832.html Yes. Q4. Yes. We havent disclosed this information publicly.