Good morning, welcome to Sundial Growers' first quarter 2021 financial results conference call. As a reminder, all participants are in listen-only mode, and the conference is being recorded. After the presentation, there will be an opportunity to ask questions. To join the question queue, you may press star then one on your telephone keypad. Should you need assistance during the conference call, you may signal an operator by pressing star then zero. If you are participating online, you can submit a question using a ask question tab on your screen. Yesterday afternoon, Sundial issued a press release announcing their financial results for the first quarter ended March 31st, 2021. This press release is available on the company's website at sndlgroup.com and files on EDGAR and SEDAR as well. Presenting on this morning's call, we have Zach George, Chief Executive Officer, Jim Keough, Chief Financial Officer, and Andrew Stordeur, President and Chief Operating Officer. Before we start, I would like to remind investors that certain matters discussed in today's conference call or answers that may be given to questions could constitute forward-looking statements. Actual results could differ materially from those anticipated. Risk factors that could affect results are detailed in the company's financial reports and other public filings that are made available on SEDAR and EDGAR. Additionally, all financial figures mentioned are in Canadian dollars unless otherwise indicated. I'd also like to note that we are conducting the call today from our respective remote locations. As such, there may be brief delays, crosstalk, or minor technical issues during this call. We thank you in advance for your patience and understanding. We will now make prepared remarks, and then we'll move on to the question-and-answer session. I would now like to turn the call over to Zach George. Good morning, everyone, and thank you for joining us on our first quarter 2021 earnings call. We are now more than a year into this global pandemic. Unfortunately, COVID-19 continues to significantly affect Canadians as a third wave is in full force. That said, we believe that there's a light at the end of the tunnel, as vaccines are currently proliferating across the country and the world. Our top priority remains the health and safety of our employees. We remain committed to stringent procedures to ensure the protection of our employees and consumers while minimizing disruption to our operations. Despite the negative impact that store closures and orders to stay at home have had on retail sales, we are grateful to be designated as an essential service provider, which has enabled us to continue to operate and serve customers and consumers while so many small and medium-sized businesses have not had the same opportunity. We are pleased to announce Sundial's first-ever quarter with positive results from Adjusted EBITDA. This result reflects the continued efforts from our teams across the organization to build a platform targeting attractive capital deployment opportunities while we focus on the continued improvement of our cultivation practices in an immature and rapidly changing industry. Sundial continues to focus on operational improvements and capital deployment opportunities, both of which will enable Sundial to become a stronger and more diverse cannabis company. Since December, we have made a number of investments across the capital structure of public cannabis companies, and last week, we entered into an agreement to acquire all of the issued and outstanding common shares of Inner Spirit Holdings and the Spiritleaf Retail Cannabis Network. We are pleased with our investment track record, which started with our internal program and has evolved to include a partnership with third-party capital. While we have made several significant strategic investments this past quarter, we continue to see a robust pipeline of additional investment and M&A opportunities. Sundial remains debt-free and has a total capital base, including liquid securities, loan assets, and an unrestricted cash balance of more than CAD 1 billion. Today, approximately 70% of this balance sits in unrestricted cash. Maximizing our returns on deployed capital and corporate stewardship are key priorities for our board and management team. At the end of the first quarter of 2021, the company had deployed approximately CAD 96 million into several cannabis-related investments. These investments generated CAD 15.7 million in interest income and fees, including CAD 12.9 million of realized and unrealized gains on marketable securities. As of today's call, we see absolute realized and unrealized gains in Q2 that are greater than that of Q1. However, much of this exposure is subject to market risk and may change prior to the end of the second quarter. In terms of our cannabis operations, Sundial remains focused and committed to its cultivation and processing activities and the improvement of its cultivation outcomes. Revenue declines in the first quarter were the results of the continued growth of the discount segment, inventory monetization across Sundial 's Grasslands brand, and slower industry sales driven by seasonality and COVID-19 restrictions across Canada. Our negative gross margin in Q1 was largely attributable to aggressive price reductions on our Grasslands products undertaken to optimize inventory levels to align with demand, in addition to maintenance capital items and an unanticipated spike in utility pricing in February. Moving forward, we will be limiting the offering of discount products in markets where we view the economics as neither attractive nor sustainable. Sundial has no interest in pursuing unprofitable revenue growth. We are unwilling to seek the maintenance of market share at all costs. We believe that the combination of continued oversupply, a lack of differentiation in the majority of branded product, in addition to regulatory and operating dysfunction at many levels, will create a reckoning for the industry during 2021. We welcome this reckoning as the rationalization and regulatory evolution moves the Canadian recreational industry towards greater health over the next several years. We have made progress with our cultivation results, and Andrew will provide more details. We still have work to do in our core operations to achieve the goals that we have established for Sundial and our shareholders. We continue to see some of our Canadian peers move away from cultivation partially or entirely due to the inability to deliver consistent cultivation outcomes. We have not wavered with our commitment to cultivation in our indoor modular facility, and our brand promise to consumers is fundamental to our strategy. We continue to maintain our focus on keeping our employees safe and adjusting to market demands. Our strong financial position, unique cultivation facility, and focus on premium inhalables have positioned us for improved performance in the second half of 2021 and beyond. I am excited about Sundial 's future and our competitive positioning. Thank you all. I will now pass it to Jim for commentary on our financial results. Thanks, Zach, and good morning to all who are listening in. I would like to remind everyone that all amounts that I mention this morning are denominated in Canadian dollars unless otherwise stated. Let's start with a review of the improvements that we've achieved in our liquidity and capital structure during the quarter. We opened 2021 with CAD 60 million of cash on hand. By the end of Q1, that number was CAD 873 million, and as of May 7th, 2021, the company had an unrestricted cash balance of approximately CAD 753 million, in addition to investments in marketable securities at market value of CAD 327 million, for a total of CAD 1.08 billion when combined. Our outstanding share count was 1.77 billion at the end of Q1 and sits at 1.86 billion today. During the first quarter of 2021, Sundial issued 857 million common shares pursuant to at-the-market equity programs, registered direct offerings, and warrant exercises, for total proceeds of CAD 854 million. Subsequent to the quarter end, the company issued 85 million shares through its at-the-market equity program for total proceeds of CAD 97.7 million. The first quarter of 2021 was a transitional period for Sundial, and we have realigned our business into two segments for operational and reporting purposes, one being cannabis operations and the other being investments. By the end of the first quarter of 2021, the company had deployed a portion of the capital raised into several cannabis-related investments totaling CAD 96 million. During Q1, the company realized CAD 2.8 million of interest in fee revenue from loans to third parties and CAD 12.9 million in realized and unrealized gains from investments in marketable securities. This revenue has been classified as income from operations, reflecting the new segmentation of our operations and the intent to continue to deploy significant capital, targeting a portfolio of enhanced risk return opportunities in the cannabis industry to provide exposure to attractive debt, equity, and hybrid instruments. Now, let me explain the net loss for the quarter in more detail. Net loss for the three months ended March 31, 2021, was CAD 134.4 million, compared to a net loss of CAD 64.1 million in the previous quarter. Effectively, all of this net loss arose from CAD 130 million of non-cash fair value adjustments that are required under IFRS reporting on the derivative warrants attached to the direct offerings that were issued during the quarter. There was no cash impact from the fair value changes resulting from these valuation adjustments. There will be no cash payment ever for the derivative warrants amount that is disclosed on our balance sheet. These two amounts will fluctuate each quarter with our share price until the warrants are exercised or expire. For clarity, management estimates that if this revaluation was done using market conditions as of May 10th, 2021, the fair value of the outstanding derivative warrants, which are shown as a liability on our balance sheet, would decrease by approximately CAD 34 million. There would be a non-cash gain on our income statement of the same amount. Sundial continued to strategically deploy its capital throughout the first quarter and subsequent to quarter end. To summarize our deployment of capital in our investment segment to date, Sundial invested CAD 22 million in Indiva Limited, a Canadian producer of cannabis edibles. We entered into a strategic capital partnership with the SAF Group, focused on cannabis-related opportunities and investments in Canada and internationally. The first mandate of the joint venture is a special opportunity fund with an initial commitment of CAD 188 million by Sundial, in addition to commitments from third-party limited partners. Sundial acquired just over 10% of the issued and outstanding common shares of The Valens Company Inc. Valens is a research-driven, vertically integrated end-to-end developer and manufacturer of innovative cannabinoid-based products. Sundial also announced that it entered into an arrangement agreement pursuant to which the company will acquire all of the issued and outstanding common shares of Inner Spirit Holdings and the Spiritleaf Retail Cannabis Network for total consideration of approximately CAD 131 million, including cash of approximately CAD 102 million. Let's turn our focus to operating results, starting with Adjusted EBITDA. Sundial recorded its first ever Adjusted EBITDA of CAD 3.3 million in Q1 2021, compared to an Adjusted EBITDA loss of CAD 5.6 million in the prior quarter. The significant increase was mainly due to realized investment gains and income from the company's strategic cannabis-related portfolio investments. As discussed, these will be a core part of Sundial's operations moving forward. In Q1, we've seen cash flow improvements due to investment revenue, as well as realignment and refinement of our cannabis operating model. In the first quarter, cash provided from operations was positive CAD 2.3 million before changes in working capital, including the first quarter of investment revenue. In the previous quarter, the company used CAD 12.2 million from operations. Net revenue from cannabis for the first quarter declined by 29% to CAD 9.9 million from CAD 13.9 million in the previous quarter. Sales were negatively impacted by provincial boards reducing inventory levels, retail market conditions, and continued price compression across the industry and Sundial's product portfolio. Average gross selling price per gram equivalent of branded products net of provisions was CAD 3.15 per gram, compared to CAD 4.14 per gram in the prior quarter, reflecting industry price compression and a consumer shift to value products. General and administrative expenses were about 9% higher at CAD 7.1 million, compared to CAD 6.5 million for the previous quarter, reflecting legal and other fees related to the investment segment and the build-out of our direct sales team. In Q1 2021, sales and marketing expenses reflect spending discipline and seasonality at CAD 950,000 compared to CAD 2.3 million in the previous quarter. We have increased investment commitments in both our sales and marketing teams and have added key additional team members. Adjusted gross margin before inventory impairment and fair value adjustments was negative CAD 1.6 million compared to CAD 3.2 million for the previous quarter. This was despite our improvements from cost optimization initiatives, our focus on margin-accretive strains and SKUs, and improved cultivation outcomes, due primarily to market price trends and to value price products. There is more work to be done to improve our margins from cannabis operations. Total capital expenditures in the first quarter of 2021 were not material, but we have budgeted CAD 5.7 million in capital expenditures for full year 2021 related to processing automation, minor facility improvements, and maintenance capital. I would like to invite Andrew Stordeur, President and COO of Sundial, to provide remarks related to cannabis operations. Thank you, Jim. As we continue to see volatility in the industry and continued price compression, Sundial's ability to deliver high-quality inhalables through our commitment to cultivation excellence will remain a key component of our strategy. The price dynamics of the discount segment are not sustainable for Sundial's portfolio and assets. Moving forward, we will focus on improving our margin through product mix and strategic revenue management while continuing to further simplify our supply chain and our portfolio products. While there's still room for improvements in those areas, we have made progress over the course of the first quarter of 2021. Sundial's commitment to cultivation excellence has been developed around three pillars of focus, people, process, and plants. Now let me start with people. In quarter one, we restructured our supply and operations teams at our Olds facility. We believe that a more streamlined organization will allow our teams to become more nimble and make more informed decisions given the dynamic nature of the industry. We have recently invested in cultivation leadership and will also be adding product engineer capability at our Olds facility to develop a more sustainable innovations launch program. We went from more than 100 SKUs at the beginning of 2020 to less than 40 SKUs at the beginning of this year. We launched three concentrate SKUs in Q1 2021 under the Top Leaf and Grasslands brands. We signed a new partnership with Stigma Grow to develop additional hydrocarbon concentrate offerings under our Top Leaf brand. Our innovation pipeline for the balance of 2021 is focused, and we will be launching several new products in the next few months. Our second cultivation pillar is around process. With over 700 harvests since inception, Sundial has tremendous access to cultivation data and insights. Our team is currently in the process of revamping our entire genetics playbook, which will allow us to drive further cultivation consistency. In Q1, Sundial harvested its highest potency flower since the Olds facility's inception, with Top Leaf's LA Kush Cake initial lots producing potency in excess of 28% THC. The product has seen strong velocity since launch. We have increased our average potency results by approximately 15% year-over-year. Finally, our third cultivation pillar is around plants. We continue to invest in developing a library of cultivars that look to achieve a combination of higher potency, more robust terpene profiles, and above-average yield. We received our first laboratory results in our new extended library of genetics, and we'll prioritize these for launch in the fourth quarter of 2021. Our focus is still on brand sales. However, we have seen an increasing sales trend in wholesale market opportunities. We feel that Sundial is well-positioned to take advantage of these B2B opportunities as other licensed producers divest from cultivation practices. These pillars are underpinned by our continuous focus on reducing costs. In the first quarter of 2021, our cultivation and production costs were reduced to an average of CAD 4 million per month from CAD 10 million per month in the first quarter of 2020. Our top-line numbers regressed versus Q4 2020 and year-over-year. As Zach mentioned earlier, Sundial will not pursue unprofitable revenue growth, and we are unwilling to grow market share at all costs. We believe increasing our investment into our direct sales team will enable us to win by accelerating the distribution of our products through new customer acquisition, brand activation, and by improving education with both customers and consumers on our product portfolio. As a result, we added 13 dedicated salespeople to the organization in quarter one, which significantly improves the breadth and frequency of our customer coverage and will be a key enabler to increasing our market share in the core and premium segments moving forward. With an increased focus on driving the right assortment at store level, our new retail team increased distribution on Sundial's priority SKUs by 25% across several key markets in the first quarter. While we are encouraged with the progress made in operations for quarter one, we still have work to do on driving a sustainably profitable cannabis operation segment with cultivation excellence at our core. With that, I'd like to turn the call back to Zach for closing remarks. I thank our team for their efforts, our customers for their trust, and our shareholders for their continued support as we work to position Sundial for success. Thank you for joining us today, and please stay safe. I will now turn it back over to the operator for the question period. Our first question comes from Tamy Chen of BMO Capital Markets. Please go ahead. Thanks. Good morning, everyone. First, wanted to ask if you could explain a bit more on the rationale for the acquisition of the Inner Spirit franchise in some corporate stores. Is it to have your marketing team better engaged with this network of stores to increase penetration of Sundial products? Just if you could elaborate a bit more on the thinking of why acquiring into retail. Hi, Tamy. Good morning. Thanks for the question. Unfortunately, we're going to actually punt on this question for now. We are satisfying a number of conditions to close the transaction, and we'll be providing a very fulsome update closer to the time of close, which as we said, is early in Q3. We'd be happy to give a much more detailed answer at that time. Okay, fair enough. If we can pivot to what's been happening in the rec market here. Noticing in the press release and in many of your comments, you're talking about this sort of sustained price decline in flower in Canada. I wanted to ask, first off, why in your view this is sustaining, how long you think it might continue, and how do you think about this overarching dynamic, as you're trying to drive more higher margin sales, which will naturally come with higher price point products? Thanks. Hey, Tamy, it's Andrew here. Thanks for the question. Yeah, I think, first and foremost, the price compression continues. I think we've seen that as of last year moving into this year as well. As far as timelines go on that, we're going to be in that position, I think, as an industry for a while. I think largely that's driven by high inventory levels and really monetizing that inventory across all provinces with a lot of the licensed producers. It's here to stay for a while. As you mentioned, we're pretty optimistic, given that this is a consumer product category that we're going to see the core and premium segments move in the right direction. That's going to take a little bit of time. I think the important thing for our position on that is we have the ability to not chase revenue and not chase market share in the discount segment. Our balance sheet is extremely strong, and we have the ability to lead for a healthy industry dynamic. As I think we stated in the opening comments, one of the key actions we're taking is really get selective on key markets, and we're going to make decisions on pulling out of some markets on the discount segment. I think that's a good thing for the industry, and that's certainly a good thing for Sundial. We're going to continue to focus on, we mentioned the frontline sales investment that we have. I can tell you full-heartedly that that team's not going to be focused on driving discount products and really renting market share. They're going to be talking about our premium offerings, Top Leaf, and certainly in Sundial. I think consumers want to hear that. Certainly, our customers want to hear that. That's really where we're focused on. We're in this for a little bit, a while longer, no question, but we're pretty optimistic that the segment's going to move consistent with other more established categories in CPG. Got it. Thank you. Our next question comes from David Kideckel of ATB Capital Markets. Please go ahead. Well, hi, good morning. Congratulations on the quarter. Thanks for taking my questions. I want to go back a little bit to your strategy here, Zach and team, with acquisitions, taking a stake in companies. Not to mention the Inner Spirit Holdings acquisition specifically, but can you maybe help us understand, what is the overarching strategy here? We note that you are in the process of acquiring Inner Spirit versus taking a stake in other companies. I think you mentioned on your prepared remarks The Valens Company. There's also Indiva. What is the overarching strategy here? Is it a combination of both or are there certain metrics you're looking for and certain companies to decide how to proceed, or just any commentary on the strategy there would be helpful. Thanks. Sure. Good morning, David, and thanks for the question. Look, I think the strategy on capital deployment is very much in line with our commentary from last quarter. We do see in Canada consolidation on its way in a material manner. We are looking at opportunities in the space from really two main perspectives. One, in terms of classic M&A, where we can consolidate or be a consolidator, take certain costs out of a structure, and position ourselves well in the Canadian market. We also have the ability, through our partnerships and what we've done off of our own balance sheet, to look at asymmetric investment opportunities, which are really just that, where we see an attractive risk-reward, and typically the opportunity to earn modest equity-like returns, in many cases higher up in the capital structure. When you look at some of the small stakes we've taken in the equity of certain businesses, the common theme that you see is really a differentiated model from our perspective. That would not apply to certainly every company or business model in Canada. From our perspectives, there are a few that really stand out in terms of capabilities and what we perceive as a strong future role in the Canadian landscape. We think that will evolve over time. You'll likely see us recycle capital in a number of instances. There are many reasons why smart M&A transactions never get completed. We continue to have wide-ranging discussions with a number of parties in the industry and are trying to walk slowly towards these transactions that we think make a lot of sense for Sundial shareholders. Understood. Thanks for that color, and would agree with you, Zach, full on that this is a very differentiated and what looks like a potentially lucrative business model. With that said, I think Jim or Andrew, you mentioned two of your operating models here, both for reporting and strategic purposes, include both cannabis as number one and number two as your investment model. Shifting back to your cannabis business line here, I think Zach as well, you mentioned you have the potential to stop unprofitable business segments within your cannabis segment. I'm just wondering from the potential that you have now with your balance sheet and over CAD 1 billion and the investments you're making into companies, why bother with cannabis insofar as we're seeing where the market is and all the challenges there, when in fact, your investment side of the business could potentially be much more lucrative than cannabis. In other words, is all this trouble worth the effort? Thanks. Let me just answer, and then I'll pass it to Andrew. I think, look, what we're seeing is, as we mentioned, and as you know as well, David, a number of our peers are effectively moving away from cultivation. We have what we believe is a world-class facility. As we've really learned to operate within that facility and refine our cultivation practices, we've reached improved results. We do see this as a commodity business at the end of the day, and so I think it's a contrarian perspective to take to effectively triple down on cultivation, but one that we're embracing. I think that you're going to see more cultivation get pulled out of the system. You're going to see a wholesale market that comes back in a very robust manner as this industry evolves. You've got a small number of very strong players that have very low cost structures. What we're trying to attack is really the premium flower segment, and it all comes down to really usable plant matter and cultivation outcomes. We need to have narrower, more consistent outcomes, and that's really the charge that Andrew's been leading. Yeah, David, I'll just add to that. Look, I think we're pretty manically focused on inhalables, and that's obviously the largest segment inside of cannabis. Our right to win in that is really predicated on cultivation. As Zach mentioned, we have the small batch at scale facility that really will enable that strategy to really take hold. Look, there's some small micro growers out there that are doing a fabulous job, but nobody's done it at scale. That's really our mandate, right? If we do that really well, this side of the business is all about making it as boring as possible and as predictive as Zach mentioned as possible. When we do that, and when we're able to actually drive that cultivation consistency at a scale that really nobody's doing in the industry globally, quite frankly, that's really our right to win, and that's what we're focused on. When we do that, it's going to have a significant impact on our ability to drive shareholder value. Okay, that's very helpful. Thank you. If I can just squeeze one quick one related to both what you guys are talking about here. Just with respect to your JV with the SAF Group, and your previous commentary on a potential SPAC, is there opportunities then to build from within to potentially spin one of your own internal businesses out here into a SPAC, or should we be thinking about this as more external opportunities? Thanks. Then I'll hop back into the queue. Sure, David. Yes, you should be thinking about those vehicles today as oriented to pursue external opportunities. Your point on spinning out segments could be a very important discussion two, three years out, to the extent that we have more scale and a stabilized business that we think as a pure play would have a better positioning in the markets in North America. We're certainly not there yet. We're just at the early stages of the development of this platform, but surely something that we're thinking about as we look further down the road. Given the constraints of a SPAC structure, you're likely not going to see the SPAC look at any of our internal assets as a qualifying transaction. We expect to provide the market with an update on our partnership with SAF, the third party funds that we're engaged in raising today, as well as any updates related to the SPAC in the next 30-60 days. Okay. Thanks very much, and congrats on the quarter. Our next question comes from Pablo Zuanic of Cantor Fitzgerald. Please go ahead. Thank you. Good morning. Two questions. One, regarding M&A, as you describe it, can you talk about opportunities, if you're thinking about opportunities overseas or, say, in the U.S.? Related to that, I'm assuming that because of your U.S. listing, sole U.S. listing, you're more limited in terms of doing businesses or acquiring businesses in the U.S. The second question is more on the operational side. I understand you're going through a transition period. You have a war chest there with all that cash that was raised. You have reported sales to the provincial boards for about 37% sequentially. Can you give some context around that number? What were the retail underlying trends? I suppose they were better than - 37%. Just elaborate in terms of what do you need to do better to improve that number, right? What I'm learning, and maybe I'm wrong, is that small companies can do very well in the value end, or the lower price points. Other companies can do very well in the high premium, but scale doesn't necessarily seem to be a recipe for success necessarily, right? Just talk about how you can improve the business, relative to what was the drop that you reported in the first quarter. Thank you. Sure. Let me let Andrew speak to revenue and the current market environment and steps we're taking to improve core operations. On the first question regarding M&A, Pablo, you're correct to point out that our NASDAQ listing creates challenges for us to directly invest in plant-touching assets in the U.S. We think that opportunity set will evolve over time, there's various ways that we can take advantage of opportunities in the U.S. as some of our peers have in a structured manner, or through entering for distribution or product mix that is not THC related. That's an evolving scenario. We are getting presented with a lot of opportunities internationally. We have vehicles, we have capital to look at and take advantage of those opportunities. I will say that we are very committed and focused to being successful in Canada, and being a part of what we think will be a very healthy landscape when we emerge from the current dysfunction in the next two to three years. Hey, Pablo, it's Andrew here. Thanks for the question. I'll break this up into two pieces for you, because I think there was this concept around what's happening in the industry and some of the dynamics there that we're dealing with in Canada, and then what are we doing about it specific to the operations. Let me give you some color on what's happening and certainly what we saw in Q1, and we're seeing the same thing in Q2 with regard to industry headwinds. First and foremost, look, the industry was down in January and February. We saw it bounce back in March, but we had a slow industry to start with. I don't want to belabor the point around pricing dynamics, but that's real. The discount segment, we used to have value, but now we've got value and discount, and the discount segment is accelerating at an unsustainable pace. That's certainly not an area that Sundial wants to lead on. I think we saw some provincial boards do what they needed to do with regards to managing their inventory and reducing weeks of coverage, and that certainly impacted us in the first quarter, largely in Western Canada. That said, moving forward, as I stated before, our strategy is still very much in the inhalables piece, and we need to drive a better product mix, particularly in a brand like Top Leaf. We have some outstanding strong pricing on Top Leaf. We're close to CAD 7 a gram in the markets that we compete in that premium segment. That's significant. As we drive a better premium segments mix into our profile, that's what we want to see. That's going to mean we're going to have to make some tough decisions, but right decisions when it comes to walking away from the discount segments like markets where it just doesn't make sense. Let me just quickly touch on the ops side. I'd love to say that the progress in the operation side and the facility follows a 90-day window in a fiscal calendar, but it's just not that simple. We've been in operations really for about 2.5 years here, and we've been focused really on optimizing our costs over the past year. While that discipline will remain, it's also about taking the next step and doubling down on cultivation, as we mentioned. In my opening remarks, I mentioned kind of three pillars on that, and that's really around people, process, and plans. It's in that order for us. It's very important. We have new genetics that are coming to market in Q4. We're excited about that. We're taking our existing commercial strains and we're streamlining that. That's part and parcel to what we mentioned in the remarks as well around our SKU optimization. It's all about simplifying the supply chain. We're seeing some of our counterparts go the opposite way, and I don't think that's needed, especially if you want to play in the core and the premium segments. You have to earn your right to win there. That's really what we're focused on in the facility, in the operations side. So hopefully that provides some color for you, Pablo. Thank you. That's very helpful. Can I maybe just squeeze one more? When I talk to the many companies out there, I find that there are different strategies when it comes to strains, right? There are some companies that if I look at the scanner data, almost 40% or 50% of their flower business may come from just one strain, right? You have other companies where they have a more diversified portfolio in terms of strains. There's the third category that I consider the limited edition companies that have strains for the season, and then they change them later on. I suppose they all make sense, do you have a view on what works better right now, or they're just different strategies and to each their own? Thanks. I'll pass it on. Yeah. Its Andrew here. Good question. Look, we're big believers in focus on your core. Get that right and then earn your right to move into more diversification in your product portfolio. First and foremost, we got to make our current commercial genetics work. We also know consumer preference moves over time. Certainly, what we've seen in more established markets out of the U.S., that cycle is six to nine months, and you can really get a good strain and drive that forward. You're going to have to come in with a good innovation pipeline. That process, given that we're an agri-foods business, takes time to run that R&D cycle. Genetics will be a key part, and that's part of my three-pillar kind of process I laid out there, plans being the last piece of that. It's going to be a key part of our focus moving forward, and we have the facility with the small batch scale capability to run that play. I would say primarily focus, and I mentioned in the SKU optimization initiative, we got to get the core right. Our customers are asking for it. I think consumers are looking for consistency in cultivation, and I think we can deliver on that. That's what we're focused on in the short term here. Got it. Thank you. Our next question comes from Vivien Azer of Cowen. Please go ahead. Hi. Thanks very much. Zach, I just wanted to pivot back to the portfolio cleanup that you guys engaged in in the quarter. It makes sense that you would discount the Grasslands product, move it through the system so that you guys can now have a better footing as you orient towards profitable market share versus market share at all costs. As I look at your balance sheet, it looks like your inventories grew about 30% over the course of the quarter. Can you help me reconcile that? Yeah. Thanks, Vivien. I'll let Andrew talk about inventories and how that's feeding operations into Q2 and beyond. Hey, Vivien, thanks for the question. Yeah, absolutely. I think when you have a CAD 10 million top-line number, and as we grow out, I think that's a big focus for us. The best way for us to manage that inventory level to a sustainable rate is, we want to have at least two to three months of inventory on hand. It's sellable inventory, the right quality inventory, and we're proactively managing that as best we can given our cultivation focus. We've also got, obviously, a dynamic in the industry with provincial boards trying to get their weeks of coverage and inventory under control. It's very dynamic, and it's certainly an area of focus for us. It's very much predicated on our ability to grow a consistent quality product that consumers and customers want. Once we do that, we can drive that top-line number up and certainly, we can get that inventory level to where we need it to be, which is about two to three months, as I stated. Got it. Just to follow up on that then, Andrew, presumably the inventory that you guys have on hand is better quality. You guys talked about the improvements in potency year to date. How do we think about gross margin go forward? Was the negative gross margin in the first quarter truly a one-off, and how do we think about recovering gross margin? Thanks. Yeah. Thanks, Vivien. Good question. Look, I think the gross margin, it's certainly not across the entire portfolio. I think that's the first piece I'd mention. There's certainly a pretty large range there on how we look at inhalables and the margin profile that we're able to drive. Look, maybe I'll touch on a couple pieces, and then if Jim and Zach want to add in, please feel free to do so. The big one is we saw a kind of further price compression in the quarter. I'm not going to believe that point. It is what it is. We're seeing that across the industry. We had some discounts and allowances as well, and some returns. That was really proactive for us because obviously the ability to manage the right assortment at store level starts at what is in stock at the provincial level. We want to make sure the freshest and highest potency product is there. We were proactively managing that. We had some discounts and allowances and some returns that we had to manage through normal course of business. As we get tighter on our inventory, provincial boards get tighter on their inventory and get more selective on their SKU assortments, we're certainly in a better position to manage that moving forward. My last point, I'd say as we look at gross margin, we did have some cultivation production variance in there due to increased power charges that we saw largely in February. That's tough to manage given our fixed kind of cost base in our asset holdings. We anticipate that to be one-time factors, and certainly we'll see that kind of bounce back as we come into Q2 and the balance of the year here. Pass it to Zach and Jim if they want to add anything to that. Yeah, just Vivien, the point on our utility cost is an important one. We actually saw in the month of February, our power prices effectively double. They're back down to basically January levels now. That was a painful spike that impacted our cultivation and processing costs. Can you quantify what the magnitude of that incrementality on the energy cost was? Yeah, it was approximately CAD 300,000. Okay, understood. Thanks very much. Once again, if you have a question, please press star then one. Our next question comes from Shaan Mir of Canaccord Genuity. Please go ahead. Hi. Thank you for taking my questions. My first question is just on some commentary in the press release around the company seeing an increased sales trend for wholesale markets. I was wondering if you could detail some of the developments that you're seeing on that side, particularly as it relates across the different pricing spectrums. Where are you seeing that resurgence of interest? Then also if I could tag on, how does Sundial expect to approach this segment of the market going forward? What should we expect from a branded products versus wholesale mix in the balance of the year? Thank you. Hey, Shaan, it's Andrew here. My apologies. That first piece of the question cut out for me. Would you mind just repeating that, and I'll take it from there? Yeah, for sure. The first part was just on some of the commentary that was in the press release regarding increased sales trends on the wholesale market. Just wondering if you could detail some of the developments that you're seeing in those wholesale markets, particularly as it relates to different product pricing spectrums. Got it. Okay, thanks. Yeah. It's actually really interesting. We're seeing kind of a full 180 when it comes to demand on B2B kind of wholesale side of it. As we stated, we're seeing a lot of our peers simply divest from cultivation. That's driving a lot of interest in producers that can do that at scale, and Sundial is certainly well-positioned to take advantage of that. I would say that early days of when we went legal here in Canada, we had a huge demand there on wholesale B2B, and I think we saw that kind of taper off a little bit in 2019 and 2020, and we're seeing that come back full force. I think that's a really positive for us given our small batch scale approach and our focus on cultivation. I would say when it comes to the pricing side of what we're seeing in the market, it's the same thing we're seeing on the retail side, quite frankly. Everybody wants above 20% THC. You're starting to see a pretty big floor there when it comes to the ability to monetize and get product above 20%. Certainly, if you can get above 23%-25%, you're seeing very healthy margins on that side. Again, nobody's really doing that at scale. There's a lot of larger companies that really want to maintain the right product coming in, and they just can't get that consistency through the different markets in which they're able to procure that product from at the prices they need to get it at, given that the supply is pretty short in that high potency range. I think that just gives you another bit of color there. In regards to what does it mean for us, I think it was a core focus of our business early days. We made a pivot in 2020 to really about 80% branded, 20% wholesale. We're still focused on the branded side, but we're going to be advantageous as it makes sense for us and our business as we have more of these conversations and we look at scaling appropriately with the right cultivars and the right partnerships on the wholesale side. Thank you for the color there. My second question, I'm just going to pivot to talking on the cultivation and production costs in the month. You noted that average production and cultivation costs per month came down to CAD 4 million in the quarter versus CAD 10 million last year. If I remember correctly from the Q4 reporting, I believe that figure was down to CAD 2 million per month on a monthly basis. Just trying to get an understanding for why the sequential increase on that front, and how that played into your margins, and then also if there's any sort of forward commentary, maybe detailing relative to Q1 where you think a sustained average cost level is, I'd appreciate that. Thanks. Jim, do you maybe want to touch on that with regards to some of the changes we've made in CMP? Yeah, sure. No, happy to. I think that as Zach mentioned, we had some elevated costs, and I think he only mentioned one aspect of that. I think we saw some other non-recurring elevated costs in that we did a complete replacement in many of the grow rooms of the lamps. We had some other processes that we accelerated testing and other aspects that we accelerated that were on a temporary basis. The total number that I think we look at in terms of non-recurring costs was about CAD 700,000. I think we have to be clear also when we speak about the COGS numbers that you're referring to and the cost of CMP, is some of those CMP costs of course are sitting now in inventory as we talked about in the previous question. Not all of those are flowing through to our income statement. I think that we expect that we'll get down to a more normalized level of something in the range of CAD 3 million-CAD 3.5 million a month on CMP costs. Thank you for the color, and that's it for my questions. This concludes the question-and-answer session. I would like to turn the conference back over to Zach George for any closing remarks. Thanks, operator. Thanks to everyone for joining our call today. We look forward to updating you in the coming months. Stay safe. This concludes today's conference call. You may disconnect your lines. Thank you for participating and have a pleasant day.