Good afternoon, everyone. I'd like to start by saying we really appreciate your participation in today's event. As you can see from many signs posted on the venue, our firm really values the annual Excel poll that's now open for balloting. If you think we've earned it, we'd be very grateful for your recognition with a five-star vote for TD Cowen. With that, always have time for a great cannabis story. Up here, we've got Mike, CEO of Cronos Group. Cronos Group, as some of you might know, is a globally diversified licensed producer of medical and recreational cannabis. They own the number two recreational brand in Canada and the number one medical brand in Israel. The company has optimized its cost structure over the past couple of years and is now, we're starting to talk about expanding demand. Given that growing demand, domestic and international, they've been growing along with it as well. For those of you not familiar with the business, Mike, maybe just walk us through what's changed in the cannabis industry landscape both domestically and internationally, and some of the drivers maybe that shaped your transformation and strategic decisions. Yeah, I think the last few years has really been a complete reverse of the trend we saw for the preceding five years or so, where originally there was this huge amount of hype and demand, and everyone was building and building and building capacity to be able to meet it. It ended up being a big oversupply. People were building not just for Canada, but for international markets. You had COVID hit, markets did not open. You then had just years of sort of rationalization, facilities shutting down. A year or two ago, you saw with the shutdowns happening, suddenly there was maybe not as much excess supply to go around. You had international markets start to open. A little over a year ago in April, there was a regulatory change in Germany that removed cannabis from the narcotics list that caused a huge amount of growth. As you had supply dropping off in Canada, you also had demand internationally pulling. I think that's sort of reversed the trend that people have seen for the last few years. For anyone coming back to the story, it's probably surprising, but a much more positive operating environment. You have also transformed your business as well, right? You went through a period of right-sizing it for today's market. Absolutely, yeah. I think that looking organizationally, getting back to being more lean, more flexible, focusing really on our core, making sure that we had the right products, the right innovation pipeline, ended up moving us up to number one brand in Canada. We ended up then being on the other side of that where we have had supply shortages, so we were not able to keep up with demand. We have an expansion that will bring our capacity, will give us an extra 70%. That is coming online next month or two. We are excited to take back the number one spot and also number one in Israel. We are really excited with where we are today. Absolutely. Maybe let's just focus on Canada. The Canadian rec market, you probably alluded to it over the last several years, has faced some pretty intense competition. You guys have been able to, not you're getting back to number one, but what I'd say is you've been able to maintain that market share despite that competitive pressure. You've got an impressive 20% share in the gummies category, for example. Maybe just talk about sort of that competitive dynamic in the market and what's really allowed you guys to differentiate yourself from the competition. Yeah, I think if you're trying to build a brand, it really comes product first. If you build product up, I think that consumers will try different products. If they like the product, they will return to that product. Once there's a few products in a brand they like, they'll start to trust the brand and try the new products. You have to continuously make sure that every product is differentiating, is providing value to the consumer. I think that's probably been tough for most of the industry. Gummies is a great example of how we did it. We came in a little later than others. We made sure that we had the right proposition. We continue to bring out new flavors, new cannabinoid profiles. That's allowed us to separate. Flower, you see the consistency with the actual SKU performance. We've got different strains that have stayed at the top, like GMO Cookies, for a long time. I think finding sort of those hero SKUs and those winners, leaning in, making sure that we're able to consistently have them supplied is the way to build a brand. We've always had fewer brands than others. We believe in fewer, bigger, better. Spinach being a large brand, then adding Lord Jones versus starting with a handful of brands and having similar products in each. Okay. I guess along the same vein, obviously, in traditional industries, marketing is a big thing around branding. How do you think about it in light of cannabis, given that you're highly restricted in terms of how you can market in Canada? Yeah, it's pretty close to the tobacco regulations. You can do in-store marketing if it's an age-gated environment. I think that a big part of it is being able to, once someone tries the product, make sure that you have real quality there. I think R&D is such an important point for us that if you do have a superior product, when someone does try it, you make sure that they're coming back. In-store, being able to communicate with the actual benefits of the product, what's unique about it, why do they want this product, communicating with the retailers, having a good sales team. Everyone does go through provincial wholesalers, so you sort of have the same clearing. Distribution is really about relationships with some of the key accounts, making sure you're keeping independents informed with new innovations. It's a mix of sales and marketing, but it's all very important. There's been some of your competitors have sort of blamed price compression on their inability to make money. Obviously, there has been price compression over the last number of years. Maybe just talk about how you see the pricing environment. Do you see any more risk of further compression from there? You know, I think if we're looking just domestic, it depends on the product format. There's always some risk. I think that what we've seen in the past, and I'll always say there's some risk, is you don't always have the most rational pricing strategies from competitors. I think it depends on how much external financing comes in. There are companies that you can't imagine a world where they would be profitable but continue to have capital injections. It is difficult to compete with it, but I think that there's still, if you're able to have a superior product, you can find a way to be profitable. As you know, we've been cash flow positive and now adjusted EBITDA positive. I think there are ways to do it. There are different product formats, but it's really picking an area, being really focused and leaning in. I think that allows you to do it. Yeah. So have you, I mean, you talked about the capital injection. Are you still seeing, I mean, that was definitely something that happened a number of years ago, but are you still seeing the same amount of capital injection into the? No, not the same amount. I think you're seeing it certainly slow down. That certainly helps the supply-demand dynamic. I think price compression, it's not being used as a form of marketing. It's almost using inventory as financing. As that starts to go away, I think it becomes a healthier environment. The fact that the product now is going to Europe and you do not have that oversupply. We've seen on flower prices coming up. I think you've seen prices drop on vapes and edibles, but overall, the prices for good product have not been dropping. Okay. So just maybe on the demand side of things, obviously, Canada has gone through a period of oversupply. Recent calls, you guys have spoken about demand growth again. Now you're in the process of expanding your GrowCo facility. What's changed? I guess what gives you the confidence in demand expansion and more specifically to the Canadian market? It's really hard to separate just Canada. When I think about Canada right now, one of the challenges we've had is how do we allocate the existing supply between Canada, Israel, Germany, U.K., Australia to make sure that we can maintain the right amount of distribution until we have the expansion come so we can fill those channels. We see a lot of unfilled demand today. Canada, part of why there is that short is the international markets pulling. Being able to fill that without even accounting for growth in other markets is key. If you have good product, there's really never been an oversupply of good quality product. If you look at the raw numbers, you have a lot of inventory being destroyed or inventory that goes to extraction. From a quality product, it does sell. I think people will, there's some fungibility from a consumer's mind if there's good product in the legal or the illegal market where they'll go to. If people know you have good product, they'll find a way to get it. We haven't really seen risk to that. I think it's making sure that we expand the right way and know how to allocate between the international markets and Canada going forward. You still think at the end of the day, you can still make money in Canada? No, if nothing else, it's a great way to absorb fixed costs. International, there's a lot of money made. No, jokes aside, there is a way to make money. I do think that the tax policy is very punitive. I think that it makes it difficult to make money without scale. With scale, and as you can see, there's consolidation, I do see the opportunity there. Yeah, you actually led into the next question around excise taxes. Obviously, very punitive for the industry as a whole. I think there's been talks around unifying the different provincial excise tax schemes into a single one. Any idea how close we are to that? I know it's government, but. You know, it feels like I'm always saying this, but I think that one of the challenges that we keep facing as an industry is there'll be something viewed as an existential event that hits and the government has to focus on. Obviously, you just had a leadership change in Canada. Managing the tariff policy has been front and center. This is something that there's different aspects to excise tax, but there are a lot of logical steps that it would benefit all parties. Having a single stamp, there's a lot of waste right now, and it's hard for people to believe, but there's a physical stamp being applied separately for each province. You're probably thinking, why is there a stamp when there's a QR code? That's what we have now. Just that alone, the amount of waste estimates like $100 million for the industry in cost savings. That is not coming out of the government's pocket, right? If anything, when you are able to have that cost savings that allows for industry to thrive, there should be more tax revenue generated. If you look at the collections from the CRA, just shifting where the excise tax is collected and putting that on the provinces versus the federal government, when you look at the amount of unpaid taxes, excise tax, a lot of the licensed producers do not pay excise tax. If you shifted that burden to the province, you would immediately change that. You would have the product sales flowed only to taxpayers. It would increase revenue. There's things like that that I think that now we're sort of hopefully on the other side of sort of the urgency of tariffs and getting through leadership change. There's a better chance, but the way that I approach things is we are in the environment we're in. We will push for better environments, but we need to operate with what we have. These are the rules we have. Until things change, we have to be able to win within the rules we have now. I'm from Quebec, so I know all about being different from a government perspective. Maybe just switching gears to Israel. Despite competing against the locals, you guys have the number one brand in Israel. Let's talk about sort of the competitive dynamics in that market and what gives you guys the competitive edge there. I view us as a local Israeli company. We have boots on the ground. We were one of the original commercial licensed producers in Israel. We take the same approach in Israel as we do in Canada. We have the same, like I mentioned before, having the right strains and the right products go to the top. Peace Naturals' leading strains are the same leading strains Spinach has. It shows it is a borderless product. If you have something that consumers love in one country, they tend to like it in another country as well. Having a better value proposition is really the key. Of course, following through, you need to have excellence in sales and manufacturing and marketing, but it does all start with product quality. Awesome. Maybe just we'll head to the other markets that you're in. Obviously, gross margin is no secret. For any cannabis company, international markets is much higher than it is in Canada. Maybe just talk about why is that and how do you expect, or do you expect that margin, or how do you expect that margin gap to evolve over time? Yeah, I think the biggest reason is excise tax, right? You could lump in the provincial distributions and implied tax. Not going through the government for distribution certainly is more efficient cost-wise. Not having the excise tax because it's medical, there's still a markup for the pharmacies and retailers, but that's the primary reason. I don't expect that you're going to have the margins are where they are today. I also think that the idea is you'll be able to grow. There'll be more scale and consolidation. Overall profitability should increase. Also, if you look at margin profiles, flower is for the most part going to be about as low on the margin profiles you get in Canada, same in the U.S. As we're able to get higher margin products, edibles, vapes introduced in international markets, I think that would offset some of that shift. Tax policy will certainly drive a lot. And then getting scale and being able to absorb fixed costs will be really helpful. Is there any regulatory differences in the international market? You talked about the higher margin edibles and gummies and what have you. Are you able to offer that product to like in your international medical markets? Not every market's the same. There are some markets where there's opportunities. Some are more limited than others. Germany is primarily a flower market that may start to open. U.K., you're starting to see the ability to do limited derivative sales. I really have to go market by market. The overall, if you look at it, you're looking at like 90% flower in most of these markets today. I do think over time that will shift. It's a trend we see every time a market opens. It starts with flower. You'll maybe have tincture oils. Over time as the government gets more comfortable. If you think naturally, what would be the most logical format for a medical patient? You wouldn't expect that prescribing combustible flower would be the first option. It does make sense over time that, and I understand why they do that because it's coming from a plant. It's botanical, so that just makes it feel safer. It's not a manufactured product. I think that once there's comfort and they review data, it tends to happen faster and faster each market. Okay. I guess outside of Canada and Israel, I guess what international markets are you actively pursuing? We're in Germany and U.K. and Australia today. Then there's other markets that are smaller but we see potential in. Primarily in Europe, the usual suspects, we sort of look at a market and if we feel like it's something that, one, we have the supply to be able to actually fill and you want to be consistent with supply to patients, it's a market that we'd look at entering. You've got Poland, Switzerland, France, Czech Republic. There are markets that are smaller than Germany and U.K., but I think still pretty meaningful. Okay. And in terms of, I guess, are there any differences in the distribution model between your international markets and how you distribute in Canada? Yeah, I think because you're going through a government wholesaler and you've got retail stores versus pharmacies with scripts, with prescriptions, it's going to be very different. It's much more of a pharmaceutical medical model. You're more restricted on marketing in the medical markets, less as far as a central warehouse pulling product for being responsible to either have private partners or your own warehousing internationally. I think that's a key difference, not having the government wholesaler. Yeah. Okay. Maybe just switching gears to the actual business operations. I mean, your adjusted gross margin, you've got really strong momentum in recent quarters. You've gone from the mid-teens previously to kind of around 30% in the second half of 2024. Obviously, you hit a new high watermark last quarter. Maybe just talk about what's driving that expansion and how do you think about the sustainability? Yeah. One major one is the consolidation of GrowCo. Once we started consolidating GrowCo, I think you get a better picture of what the supply chain looked like and it was not really reflected in the business before. Also, with the revenue growth, you have seen significant fixed cost absorption and benefits of scale. That is something we think is really important, removing unnecessary costs. Some of the products also that were started off as CMOs and we look to bring in-house, that is a trend we will continue to do. I think we always like to start off, if we are launching a product, I want to make sure the demand is there before we fully scale up production or put any investment in. Some of it is just flipping over naturally when we saw success with products, watching that grow. Right. Congratulations on that, by the way. It's been a solid, really, really good improvement. Maybe just talking about your manufacturing capacity, you have a sense of your internal capacity utilization currently. I guess as you continue to grow, how do you decide between building new facilities or expanding what you've got? Yeah, we have space is definitely not something we're short on. When we moved from the originally Staynor as a cultivation facility, it was a hybrid cultivation manufacturing. We're only operating out of the newest building on Staynor. It's 280,000 sq ft and we're maybe in half of the building. We still have obviously space at GrowCo. A lot of the capacity expansion was related to flower production. Within Canada or Israel, we're in pretty good shape for growth. Yeah. I mean, I guess if you think about the speed of growth that you're seeing in those international markets, do you think there could ever be a case, I guess, for having the manufacturing closer to your sales points? I think it really depends on what specific product we'd be looking at. I think when we model everything out and look at what makes the most sense, having warehousing could be an answer, but it's really a question of what's the cost of shipping versus the increased cost of production, depending again on the country. If you think about production costs in Germany, it's going to be pretty hard for Germany to be competitive cost-wise with some of the other markets. There are going to be low-cost jurisdictions. When we get to a point where we look at expansion, that's something we might consider. I think we still have a good runway for growth and margin expansion with the infrastructure we have. It's nice having the fixed cost base really already there with plenty of room to be able to grow into. Yeah. That is a credit to some of the work that you have done over the last number of years, right? I think within the industry, one of the more fascinating industry dynamics is the innovation piece. Maybe just talk about why new genetics and products are so important for market share and margin. Maybe as a follow-up to that, what gives you the confidence in your ability to compete against your peers out there? Yeah. I think it's easy to forget that it's a very young industry. And while cannabis has been around for a long time, because it's been illegal, you haven't had a lot of room to innovate. You don't have the most success when you're sort of in a basement worried about being arrested with innovation. Now that we've been able to start pulling in food scientists, agronomists, horticulturalists, just on how to make a pre-roll, talent from different industries, like for vapes. There are so many different product formats. There are so many different cannabinoids that we're still learning about. I think if you're sort of looking at things and saying, "Well, this worked last year, maybe it'll work next year," you have certain products that'll be the case, but I think you'll fall behind. I think every industry innovation is important, but especially because we're such a young industry, you have to continuously reach for that or you'll get left behind. As far as confidence competing against peers, I mean, we never want to be overconfident. You don't want to ever take competition for granted. I think as far as justifying investments we make, I would say performance. We've been able to compete and win. I think that we're growing. I think that if we had supply, I think we probably wouldn't have lost the number one spot. Still, like the other top brands, there's other good competitors out there. We have to keep focusing on innovation, keep making sure that we're listening to the consumer, and we're delivering value to them. I think you made a good point in saying sometimes I do think that we forget how young the industry is, just given the explosion that we saw historically. In terms of the, I guess, do you have a sense maybe how product innovation contributes to your top line in terms of, do you have any sort of targets around innovation, whether that's in terms of sales or SKUs or timelines? I think it depends on the category and depends on the year. Sometimes you're entering a new category. I think a lot of it is, so Lord Jones, for example, when I look at chocolate fusions or hash fusions, I think it makes sense to go into a category with a narrow proposition that you know is going to be sticky and you know when you win the consumer, you're going to have that consumer loyal and staying with you. I might know that that's going to be a smaller growth driver, but it's stickier and it's something you want to own. There are other areas where you're launching and you're saying, "Okay, we need this to be sort of a big winner. It's a bigger space." Overall, I look at just when I think of innovation, I'm really thinking borderless, not just what was in Canada. Stepping back to the original thesis, Canada's advantage is that it was the first real federally legal cannabis market for adult use. All of the pains and struggles of operating in the U.S., you have a bigger consumer market, but it was really tough to innovate. When I think of innovation in Canada, it's not just what is the return going to be in Canada. It's, am I developing a product in a blueprint that I know when markets like the U.S. or Germany, Israel, U.K., when those open, will this product also win with that consumer? That's really the return I care the most about. When we have a top strain in Canada that we bred ended up being a top strain in Israel, that's I think the biggest win because it gives me confidence that then it became the top strain in the U.K. or Germany. That's what I think matters the most and that's where you get the most return. Awesome. I think with the last couple of minutes we have before we open it up to questions from the audience, let me just talk about how you view capital allocation, more specifically, maybe if you can talk about the Altria partnership that you've got and then maybe some thoughts around how you think about vertical integration, which you talked about with a couple of clients prior. Yeah. I think capital allocation, it's always one of the first questions that we get. Obviously, we probably look a little bit different balance sheet-wise. I think being disciplined is extremely important. It's really easy to sort of chase opportunities that make you lose focus or that are banking on some regulatory thing happening. I don't like betting on regulatory change. We want to make sure that there's an opportunity today and then what's the upside from there? Does it fit within our strategy? Not feeling pressured that I think opportunities will come. I think that as you see rationalization, you will start to see opportunities come up, avoiding taking on things that might be toxic. You might have something you like, like a brand or a region as part of a bigger company. If you take on the bigger thing, what's sort of the anvil that comes with it? Continuing to be opportunistic and being very disciplined, I think is key. The relationship with Altria is a bigger relationship. I think that for Altria, it's an adjacent category to tobacco. They do not look at it as something that would cannibalize any of their sales. I think that there are a lot of similarities in the supply chain, a lot of knowledge and infrastructure in the U.S. that they have. I am sure it sounds familiar that you have a highly regulated plant that people combust or extract and vaporize. Understanding tax policies and navigating the government is something that they are really good at. Any questions from the audience? No? All right. We save the best for last. Thanks, Mike. All right. Thanks. Thanks.