HEXO Corp.
Q2 2019 Earnings Call Transcript

Published: 14 Mar 2019

[Operator:]

Good morning and welcome to HEXO Corp's Second Quarter Fiscal 2019 Earnings Call. After the presentation, we will conduct a question-and-answer session. All lines have been placed on mute to prevent any background noise. Please note that this call is being recorded today, March 14, 2019, at 8

[Jennifer Smith:]

Good morning, everyone and welcome to HEXO Corp's second quarter fiscal 2019 earnings call. My name is Jennifer Smith and I am the Senior Manager of Investor Relations at HEXO Corp. We will start with a presentation by our CEO, Sebastien St. Louis, who'll recap the company's second-quarter results recently announced definitive arrangement agreement to acquire Newstrike Brands Limited and financial outlook before opening the floor to questions from financial analysts.

[Sebastien St. Louis:]

Thank you, Jennifer. Welcome, everybody. Really exciting times and glad to have everyone on the call today including our first call that we're opening up to the public. So it'll be an analyst question, but we have our shareholders, investors and the public online as well. So, very excited to be leading in. I mean, Q2 was a busy quarter, we continue to execute on our strategy towards it becoming one of the leading cannabis producers and product innovators and not only in Canada but in the world. Our vision has remained consistent to create a branded consistent on and off cannabis experience across a variety of verticals in a variety of experiences ranging from sleep, to sport, to sex, to diet, to fun. Through this vision, we intend to become the premiere branded ingredients for food companies not only a top two in Canada, but also top three globally. We continue to focus on operational scalability, product innovation and brand leadership on the path to achieving this goal. In Q2 we executed on our promise to list in the U.S. gaining our New York Stock Exchange listing on the American on January 23, 2019. We closed the public offering of $57.5 million. I think very significant who were the leaders in that public offering to Tier 1 chartered Canadian banking institutions. So CIBC and Bank of Montreal. We hit our construction an licensing milestones as well. We had announced a year ago that we would put up a million square foot state of the art purpose build greenhouse. And not only did we get that done on time, on budget, we actually got it licensed within the construction timeline. So we got everything done and ready in 12 months, which is positioning us very well for the next year.

[Operator:]

Your first question comes from Tamy Chen of BMO. Please go ahead.

[Tamy Chen:]

Thanks. Hi, Sebastien. First question on Newstrike, are you able to give us an update in terms of where the company is with respect to the ramp of their greenhouse in Niagara? Where are they currently at? Any color there would be helpful.

[Sebastien St. Louis:]

Yes. So, of the total 450,000 square feet that we're adding, there's 250,000 feet that are licensed operational and we're looking forward to bringing in the HEXO team in there to ramp up the yields. We believe that coupled with the great infrastructure Newstrike's put in place, putting in HEXO's management and production processes will greatly increase a yield there.

[Tamy Chen:]

And the other 200,000 square feet that's still under construction?

[Sebastien St. Louis:]

That's correct. So, well under way, the walls are all up, the glasses on, but there will be a licensing -- there's an expected licensing delay on that. But of course, we're putting our regulatory team which as we've proven time and time again and one of the best in the business, so we don't want to anticipate any major issues.

[Tamy Chen:]

Okay, thanks. My next question is just looking at yesterday there was some Health Canada data that came out about industry production inventory and sales data. And there seems to be this continued disconnect in terms of inventory seems to be piling up, but it's not fully through enough down to the sales channel. And just wondering if you have any insights and what HEXO's experience has been. I mean, what's causing this, is it production issues, is it supply chain issues and as a result, can you just comment on how we should think about HEXO's pace of sales over the rest of this year in this context?

[Sebastien St. Louis:]

Yes, and well, I think that pace of sales I've mentioned that Q3 would be relatively flat and that's much do do not only the growing out of B9 but also all the processing equipment required. I think as a general rule, all the LPs including HEXO generally under-estimated the amount of packaging, infrastructure and logistics and the employees and space that it would take to actually do fulfillment. It's one thing to grow this product. It's one thing to bag it and drying bags, but by the time you're thinking about putting it in individual multiline products that's one complex. And this is why HEXO was very bullish and why we think our Belleville facility is transformational. A 2 million square foot facility will give us enough space to fulfill that $400 million net sales next year and beyond. And so that's all baked into that forecast that we're giving you, that we will be up and running in Belleville in fact that we expect to have that fully up and running by the end of the summer. And so, we don't expect any -- too many more challenges from there. But that's where you're seeing the disconnect is basically inventory piling up from cultivation and LPs not being able to process it.

[Tamy Chen:]

And my last question is, think on the last call, you had indicated that the range in terms of how long did it take for B9 to hit full run rate production could be anywhere between 6 to 18 months. I'm just wondering if that's still what you're guiding to and if so, what are the key variables in driving this big delta in the range?

[Sebastien St. Louis:]

So, I think I've mentioned to you was kind of the end of the year, so end of the calendar year is when the B9 would be fully operational. Now, what's exciting is we're actually starting to see possibility to go beyond the current 108 tons fully ramped up number. But we're not commenting or guiding to that number just yet; so, preferred to give a macro number. Essentially the factors that can affect that or strange choice product mix requirements, there can always be onlining and commissioning, for example, when you commission a new building, especially in greenhouse, you'll often have things like a glass break that can go in the first month. So you'd have to deal with those issues. These are all relatively minor issues, but they can all affect the timeline by a week or two. Of course, HEXO has had over six years in greenhouse experience now, so our team is pretty good at handling those problems as they occur.

[Operator:]

Your next question comes from Brett Hundley of Seaport Global. Please go ahead.

[Brett Hundley:]

Hi, this is Luke Purdah on for Brett Hundley. First one here is can we get an update on the Trust partnership with Molson. The company expect to have production ready for late this calendar year. Is there any segment of the beverage market that you're targeting?

[Sebastien St. Louis:]

Yes. Thank you, Luke. So, I'm glad you're asking the question. I'll take a moment to point out that that $400 million in net revenue next year that does not include trusts. And I want to clarify that that's not because trust have revenue, it's because the way the joint venture is structured, the 42.5% net income is expected to flow through HEXO's balance sheet, but the sales will be consolidated up into Molson. So we'll all see the sales there. Now, we're not giving you a number of what it's going to do but we're very confident and we're going to let Brett via the CEO of trust come out in the following months with his detailed plan. But essentially, October 209, as long as we get that beverage legislation as expected, we will be one of the top two average companies. Trust will be one of the top two beverage companies with a variety of SKUs across a variety of different products. And it's really a full spectrum strategy. We're targeting most segments of the market, although we won't be launching -- most likely we won't be launching economy segment right on day one.

[Brett Hundley:]

And as it relates to HEXO's hub and spoke model, what's a good timeframe for expecting this model to fill out? Have you been in disappointed that you haven't found another partner by now?

[Sebastien St. Louis:]

No, not at all. I think last quarter I said it would take 12 months. So that's what I committed to. We're well on track with that timeline and these are very complex deals and I won't sacrifice the economics of HEXO in terms of speed. So, what's important is finding the right partner, global distribution, best in class technology and we're also making sure that there's a cultural fit between the organizations. So all that takes quite a bit of time. If you look at the negotiation of the Molson deal, just the negotiation, it was almost eight months. So we're quite happy with the health of our funnel and we remain on track for delivering something in the nine months now.

[Brett Hundley:]

And the last one here on the Newstrike Brands deal, you talked about that $400 million expected in revenue from the combined entity, seems fairly conservative based on Newstrike capacity and legacy growth brands with HEXO. Can you talk a little bit about the forward asset mix expectations for Newstrike and any other factors that might own your forward revenue projections?

[Sebastien St. Louis:]

Yes. So, I'm not breaking up the HEXO and Newstrike. So forecast is really a function of us correcting the overly conservative analyst's estimates. I'm glad to hear your comments. I mean if you think that's conservative, that was certainly -- the intention is to hit that number. So, we'll do that or better and so anything above that is really upside. We're quite happy. Just providing that to the market is obviously a much bigger number than where the market had us. So we'll make sure we do that. I think if we can do better, obviously that's great, but achieving that $400 million in net revenue next year will firmly put us in the top two position we believe.

[Operator:]

Your next question comes from Graeme Kreindler of Eight Capital. Please go ahead.

[Graeme Kreindler:]

Good morning, Sebastien. Thank you for taking my question here. I wanted to touch briefly on the joint venture in Greece. I saw that you put in an initial investment in this quarter and you're expected to increase the ownership in the summer. Can you just outline in terms of how the capital commitments can roll out and what sort of developments are going on there in terms of an update on the facility being built and any other initiatives going on the ground right now?

[Sebastien St. Louis:]

Yes. So, the reason we structured it as a joint venture is because HEXO as a company is very focused on adult use sales. We're very focused on delivering our powered by HEXO model and are working directly with Fortune 500. The issue was Europe in the short-term is that all the near-term revenue is really medical. And so what we did is to not distract our management team is we stood up. HEXO is really as a medical forward joint venture and that still gives us all the opportunity to use those facilities for transporting purposes on the adult use side. But as such, for the moment until we need to vertically integrate it, it's essentially going to be a 50/50 joint venture. So what we've done is about a $2 million investments and we own 50% of that venture. The venture itself needs to fund itself for the next phase of construction. We're expecting that that funding will be about €27 million will be the requirement. Currently, we're evaluating whether or not that HEXO will finance that itself directly, which could be very likely. So, that could potentially be about $50 million in CapEx from HEXO, which could, of course, increased our ownership and give us a control position. So, we're currently in discussions that. State of progress is very good that we have excellent relationships with the Greek government and are expecting licensing relatively soon.

[Graeme Kreindler:]

And then I just wanted to get some more clarity on the development of the various zones in a million square foot greenhouse. I saw that the first harvest is expected in Q3. So, is there a number you can give on how big in terms of square footage these zones are and how they're expected to come online as the first one will now be on harvest schedule?

[Sebastien St. Louis:]

Yes. So, on purpose, we've been trying not to do kind of a zone-by-zone licensing because we're trying to get some more meaningful press releases. But I can tell you that every single cultivation zone in that building is now fully licensed. The plants are rolling out very nicely and we're on track so there's no issues there. We do plan at the first harvest to actually do a full announcement kind of a ribbon cutting for the licensing of the entire building including the front of house. So that's going to be coming up in a press release a in the future.

[Operator:]

Your next question comes from Matt Bottomley of Canaccord Genuity. Please go ahead.

[Matt Bottomley:]

Good morning, Sebastien and Jennifer. I just wanted it to go back to the HIP deal, the Newstrike deal there and a couple of implications. The first just on the ability to diversify into other provinces. Are there other provinces outside of Quebec where you think Newstrike, obviously Ontario is probably one of them, gives you an edge or brings relationships in that will help you get increased purchase orders throughout Canada?

[Sebastien St. Louis:]

Yes, I mean, I think the HEXO sales team has done a phenomenal job. We've obviously been focused on Quebec, but we were doing -- we have phenomenal relationships and BC, Alberta and Ontario. Really supply constrained to be able to flex that muscle. What Newstrike did that was there was quite good, they've also built the amazing relationships, but they've focused on province outside of Quebec. So, there was a lot of synergy. Not a lot of overlap. So essentially, yes, it's a good news story. I think that having a presence at Ontario will be meaningful to the OCS and the Ontario government. And so, we expect to be able to be one of the major providers there in the following years.

[Matt Bottomley:]

Okay. And then going just back to the international comments, you had a little bit more of a focus on the longer term recreational potential outside of Canada. Does this deal at all expedite any of your other endeavors medically given that it is a bit easier to get product out the door from an indoor facility? At least that's been my experience speaking with a lot of LPs.

[Sebastien St. Louis:]

Yes. So for sure, that gives us additional flexibility, especially for test runs in the lead in. Long term, I don't want the export from Canada. I don't know if that makes sense. That doesn't make sense from a costing perspective. Really what we're interested in doing is setting up zone by zone transporting. So think about a European product approval zone for HEXO products, Latin America product approval zone for HEXO products and then state by state in the U.S. where it's legal. Then we will stand up a global supply chain. Whether we source from marijuana or hemp-based cannabinoids in those various jurisdictions again legally, and hopefully from certain centers that are logistically better. So Greece would feed long-term our European endeavor versus Canada's taken care of with the existing infrastructure. The U.S. will be mostly fed by industrial hemp , and Latin America most likely coming out of Columbia. So what's significant about having that into our goal is the ability to start early work on fast-forwarding . We are applying for example, within DIMA in Columbia right now for HEXO product approvals which would give us a platform in Latin America. So that's the sort of low capital deployment impact that we're doing to really lever or attack our IPO regulatory expertise.

[Matt Bottomley:]

Just one more for me. Just given -- the sector was pretty quickly, do you have any other updates on what the federal government in Canada is saying on these derivative product classifications that are hopefully going to come out in fall? And just what the techs are doing in preparation of potentially your SKUs going up, who knows, three-four-fivefold?

[Sebastien St. Louis:]

Yes. So we're planning on having full product lines or , I mean we've hired in chocolatier onto our IDE Team and so we will be ready. My concern and the risk factor there is more of the government. So although we have indication that this will still be ready for legalization in October, there are rumors of a potential federal election before then, so we're just keeping our eye on that to see what impact that may have. But if we get the legal go ahead in October, HEXO will be ready as I mentioned with trust with a full line of beverages and also in a couple of animals category in base.

[Operator:]

Your next question comes from John Zamparo of CIBC.

[John Zamparo:]

Maybe we could start on the Newstrike deal. I'm just trying to better understand the supply constraints because it seems like the existing footprint in getting -- get you to over 100,000 kilos a year in relatively short order and only about a third of that is dedicated to Quebec. So I guess why did you feel the need to accelerate this and acquire capacity?

[Sebastien St. Louis:]

Really because we're not constrained to Quebec, John. We have demand from all the other provinces, so as I mentioned, the HEXO team has been working very closely with Ontario, BC and Alberta, and we expect that their demand will be quite high. And given the lack of supply from various competitors, what's interesting about Newstrike is newer term supply. So we're completely confident or be -- our 108 tons, we will get there, and in fact maybe better but what's important is that near-term supply and supply that we have now and start to build the brand, ensure we get distribution and get in front of customers.

[John Zamparo:]

And it has been communicated in the past that you may look to offload some of the ownership of the cultivation assets. Do you still look to own these in the future? Does this deal change that or do you still feel the same way as before about ownership of cultivation?

[Sebastien St. Louis:]

I feel the exact same ways before. So it's -- that has not changed but that's a decision that will be made given the realities that come in the future. So before I can make that decision, we need to have that global supply chain. In the meantime, it's critical that we establish ourselves as that top two distribution partner with all the provinces because the provinces will require companies like HEXO to essentially run that wholesale distribution in the background. So there is a lot of things that have to fall in place for that to become a reality. I still think it eventually will.

[John Zamparo:]

And last one for me; I just want to follow-up on the prior question about this coming October. What are your thoughts on preliminary regulations that have been released from Health Canada on derivative products? And how do you feel about your ability to operate within that? And I guess lastly, do you think the current proposed regulations present similar restrictions in the market as we've seen for round one of legalization?

[Sebastien St. Louis:]

Yes. I mean, there is still tons of -- they are not as clear as we would like. I mean, we don't have clear marching orders at the moment from Health Canada. I know they are working very hard on delivering that and I'm confident that they will. In the meantime, HEXO's regulatory team has been in this ambiguous position for the last 5 years. I mean this is not new to us, regulatory ambiguity is something we thrive in and we can operate with whatever the regulator requires us to do. We're not capital constrained, we have a phenomenal team and so we will respond. Obviously, it has an impact on the quality of products available to consumers, so we're working tightly with Health Canada on those rags to try to make sure certain decisions are made that allow us to inform the consumer, put products on the legal market that can adequately compete with the black market and of course differentiate in the broader attributes, especially when we start to talk about or powered by HEXO experiences.

[Operator:]

Your next question comes from Robert Fagan of GMP Securities.

[Robert Fagan:]

Sebastien, I just want to focus on your guidance for the next quarter being so much flat in terms of revenues. If we kind of look at that outlook and assume you double sales in the Q4, it would still require a pretty significant rampup in volumes in Q1 2020 to hit your 20 tons supply commitment to Quebec. How confident are you feeling about that and is there any risk for that?

[Sebastien St. Louis:]

I'm absolutely confident about that Rob. Look at historically what we've done in terms of rampup, so if you look at the multiples we've put forth on previous sales; I think there has always been a doubt for HEXO's ability to rampup and we've executed every single time. So I'm telling everybody now we will execute again. Are there risks? Yes. So there is some licensing risk around our Belleville facility. So that Belleville facility and the infrastructure and the backing is critical towards getting this done. But we've given ourselves adequate buffer, the license application is already in, we're already in conversation with Health Canada, and we have of course, phenomenal relationship. So we think that's adequately mitigated.

[Robert Fagan:]

Other one on the Newstrike acquisition -- good support from the board and some management there but with no premium for pros, acquisition price and you know, the 25% of shareholders entering into support agreements; do you see any risks to that deal closing and/or maybe a longer time period to close it?

[Sebastien St. Louis:]

Yes, there is always risk. I mean, I don't know if -- I don't expect anyone to come over the top. But I mean, if anyone wants to come and pay 4x the price, we're not going to get annoyed at that. At the end of the day there is an extreme alignment between HEXO's management and board and Newstrike's management and board, and their partners like the Hip. So we really have a shared vision and HEXO is really -- have the differentiated strategy. Our structure powered by HEXO centralizing intellectual property in the hub and being able to gain insight from consumers and every specific vertical while running those separate verticals with management teams that are experts in those verticals; that's a unique structure to HEXO. And so no other acquirer could offer that structure to Newstrike, so I think that they would remain very aligned to going on this journey with us. And of course, we do have 25% hard lockups which helps. So I do think the deal will close but there are always risks that someone comes in and tries to overpay materially.

[Robert Fagan:]

Just again, on the Newstrike deal, what's the plan for the branding of products across Canada? Are you going to rationalize any SKUs of Newstrike in favor of HEXO branded product or do you maintain kind of similar distribution to currently for the Hip brands versus your own?

[Sebastien St. Louis:]

We're going to wait until close to really rationalize anything, see what -- exactly what we're going to do here. But conceptually, we want to push HEXO as a master brand strategy, so HEXO core products which includes our dried flowers, our , and then having powered by HEXO products that are distributed through Fortune 500s. So under that plan we're going to have to look closely in workloads over the HIP as well to see where the support comes in, and we look forward to giving those news post-close .

[Operator:]

Your next question comes from Steven Schneiderman of Cowen & Company.

[Steven Schneiderman:]

Just one question on Q3 being relatively flattish. Is that more of a factor of what you're seeing in terms of market demand or is that more of a factor of current production limitations? And just also in the face of that you produced twice as much candidates as was built in the quarter, it would seem to -- that there should be enough inventory for a little bit more of meaningfully rampup in the quarter. So I just wanted to get your thoughts there?

[Sebastien St. Louis:]

Yes, it's entirely related to the supply and packaging infrastructure. So I've alluded to this earlier in one of the questions but effectively growing cannabis is one thing and producing it and putting it on the inventory as bulk packaged inventory but then actually packaging is for the consumers and entirely different beast, and we're ramping all -- we're ramping up all that production infrastructure to rapidly accelerate; so that's really what's happening. Although the product coming off the line from our B9 facility is -- I mean, the hardest are starting soon. Once it come off the line you have all the testing protocols, you have all the cleaning protocols that need to go in such as the radiation or other, and then you need to actually have the packaging, shipping etcetera loading into the stores; so there is a delay there. And really it's that delay coupled with the kicking in of B9 which is causing a bit of a flat Q3 but of course we're unlocking that in Q4. So we think it's momentary and then there is really a complete decoupling when we hit that $400 million net next year, and of course, that's supported by very strong demand; that's why we're confident putting that number. We have that demand end up through multiple provinces beyond Quebec.

[Operator:]

Your next question comes from Graeme Kreindler of Eight Capital.

[Graeme Kreindler:]

I just wanted to ask a question with respect to Belleville. Are there any specific licensing requirements there or how are those expected to unfold overtime as we can scale-up there?

[Sebastien St. Louis:]

Yes, so our intention is to get a master site license for the project, so that would be the entire 2 million square feet which essentially enables our future strategic partners to drop in without waiting, right. So the idea is that we would get a trust to operate under our HEXO license. So there are quite a few complexities due to achieving that but our regulatory team again had tons of experience there. You have your usual security requirements, all the laser fences, the cameras which we have tons of experience with. And from a sub-site license the various sections of the building will need to either have processing license or manufacturing license etcetera; all that's well underway, so we're confident we're going to deliver, certainly complex.

[Graeme Kreindler:]

And then one last thing, is there a projected timeline for closing with respect to the Hip transaction or a target date at this point?

[Sebastien St. Louis:]

We're planning on closing in 60 days following shareholder approval.

[Operator:]

Your next question comes from .

[Unidentified Analyst:]

I wanted to circle back to the JV with Trust here. You probably saw earlier this week that a new acting FDA Commissioner was announced, Ned Sharpless. I'm just wondering from the Farm Bill and how this relates to hemp and potentially more and Trust. Do you see any setbacks with this interim FDA Commissioner?

[Sebastien St. Louis:]

I don't think there is much setbacks as this is general understanding. So the state-by-state FDA approvals I think are going to progress. Of course that's still up in the air and anyone's best guess is to exactly when but we're feeling pretty confident, so let state that we will see FDA approval at the state level and that would be part of HEXO strategy to enter into the U.S. So at that point our strategy is to extracting those specific FDA legal states to source in industrial hemp in those specific states; and then to provide our formulated part by HEXO experiences through our Fortune 500 partners that was operating in those states and then feed in their distribution and manufacturing on a state-by-state basis. So the plan remains sound, the timing of course is still up in the air. So we're working hard on that.

[Unidentified Analyst:]

And a follow-on to that now going into Canada, is it a fair assumption that in the U.S. this will be really focused on hemp derived CBD and in Canada there we could see a mix of THC and CBD beverages?

[Sebastien St. Louis:]

100%. So our intention is to deliver a range of experiences. So one of those experiences, for example, is our powered by HEXO fund. That's euphoric experiences which requires THC, we would love to put that experience globally everywhere but we're not going to break any laws and any level of government to do it. What's exciting though is that it's not just a question of CBD, everything HEXO is trying to do is to go beyond the ingredient. So for example, anybody could put THC in a product and say, 'hey, go get high' in absolute fun; for HEXO, the power by HEXO fund is when we can dial-in that high if you will, deliver it in a said amount of time, guarantee a set offset time, have a consistency of experience, and maybe be able to take away some of the elements of that experience with THC that are not pleasant like the , for example. So we could bring in our powered by HEXO diet and combine it with our experience to basically modulate out of that regulation. Speaking of that, when you start to look at industrial hemp, what's interesting is you have access to more cannabinoids from industrial hemp than just CBD. And the same way that we want to go beyond THC, we want to go beyond CBD where I want to do is take industrial hemp, extract it, gather a list of cannabinoids than formulate it using our proprietary patented powered by HEXO experiences, so we can deliver things like powered by HEXO diet with hemp legislation. So imagine a sparkling water that reduces appetite for 4 hours, that's a stretch-full given our IDE Team to put on the market, it won't be next month but I think over the following years we could certainly get there. That product would be fully enabled and that experience would be enabled under Hemp Laws. Overtime, our goal is to see full range approval including Marijuana Laws in the U.S. which should give us every single experience but we have a range of stuff we can do in the meantime.

[Operator:]

Your next question comes from Scott Fortune of Roth Capital Partners.

[Scott Fortune:]

You've covered everything, I just want to get a quick update on the medical side, obviously but what you're seeing from the medical side and you expect to kind of go into the Europe to international side on the medical side for prior recreation and coming onboard there?

[Sebastien St. Louis:]

So, HEXO itself from here is not interested in going out for medical in Europe. Our JV partner that's set up which is under the leadership -- well, we'll be announcing leadership shortly but our JV partner, HEXO Med in Greece will be exclusively focused on medical in Europe. So those plans will be rolled out in the future. As for medical in Canada, we're really seeing it as an additional direct channel. So there our intention is to basically centralize all of our product and branding under that HEXO brand, there is the changes coming in April from Health Canada which are requiring that to align, and so we expect to use essentially that channel to be able to test our forward products, test some ideas, advance innovation and we're excited about that potential. I think when we start doing that we might start to see some update but it's nothing that's going to move the needle on that $400 million. Really the 90% plus of our sales are expected in the adult-use channel.

[Operator:]

Your next question comes from John Zamparo of CIBC.

[John Zamparo:]

One follow-up; I was just wondering if you could comment on your CapEx needs over the next -- call it, year and a half? Thanks.

[Sebastien St. Louis:]

We're very capitalized. I mean the last $57 million we raised was really directed towards our innovation design and engineering department, so there is some CapEx required that in building up laboratory space, test kitchens, that type of stuff. In terms of our Belleville facility that total CapEx requirement is $100 million to start. Obviously, as we add small partners, there may be additional CapEx needs. When we start to look at Trust, for example, that's probably about our $24 million investment in the near-term but that could change materially if we add, for example, a large food partner to the mix which would require their own lines. So right now we're not anticipating and we need to go back to market, we're well capitalized with the put in place for us, and so from a CapEx perspective we're in pretty good shape. But of course, as we grow strategically, I'll remind everybody on the call that I see the global vision for HEXO requiring significant amount of capital. So just as we've established a leading market share position on adult use in Canada, we know that that cost kind of a total of $400 million when we start to look at the CapEx and the OpEx. So when I look at Europe, which long-term to be 5x the opportunity, that's $2 billion required over there, the U.S. is 10x; so that's another $4 billion. All that to say that over the next 10 years HEXO will require about $6 billion in capital to achieve it's vision, whether that comes direct from treasury in the form of raises or M&A, I think you're probably -- anyone's best guess but call it a $3 billion on the raise side and $3 billion on the -- essentially the M&A side to achieve our vision of becoming a Top 3 global cannabis player by market share.

[Operator:]

There are no further questions at this time. Please proceed.

[Sebastien St. Louis:]

Thanks for your time everybody. Pleasure to talk to you, see you next quarter.

[Operator:]

Ladies and gentlemen, this concludes your conference call for today. We thank you for participating and ask that you please disconnect your lines.