Alcanna Inc.
Q4 2020 Earnings Call Transcript

Published: 26 Mar 2021

Operator:

Good morning. We would like to welcome everyone to Alcanna Inc.'s Fourth Quarter 2020 Earnings Results Call. At this time, all participants are in listen-only mode. Following the prepared portion of the call, we'll conduct a question-and-answer session. Instructions will be provided at that time for you to queue up for questions. A copy of the company's earnings press release and management's discussion and analysis is available on their website and includes cautionary language about forward-looking statements, risks and uncertainties, which also apply to the discussion during today's conference call. All amounts discussed on today's call are quoted in Canadian dollars. I will now turn this call over to Mr. James Burns, Alcanna's Chief Executive Officer. Please go ahead, sir.
James Burns:

Thanks, Laurie. Good morning, everyone. I hope you can hear me okay through the mask that we're observing our COVID protocols as we do here at Alcanna. So hopefully it’s okay. Not as confusing as our statements were this quarter, again, we apologize to anyone trying to decipher them. It's been David Gordey, our CFO, who is here with me; and Roxanna Bevilacqua, our VP Finance who is also here this morning have done an unbelievable job trying to make these statements in all the transaction that we've done and conform to accounting standards and try to make it somewhat understandable. But having said that, we realize it's very confusing and we just offered to certainly our shareholders, people who were used to calling or anyone just feel free to contact us directly if you will need some help to deciphering, try to compare apples to apples instead of apples to oranges. It wasn't an easy task to put them together this quarter. We were very pleased with the fourth quarter and obviously extremely pleased with 2020 as a year. It was exceeded anything we could have ever imagined as a company on many fronts. Certainly on operations level, our liquor business is firing on all cylinders, continues to do so. Even in the fourth quarter 7.6% same-store sales growth is what was not the mid double digits that we are experiencing in Q2 and Q3, but it was still – it's still a very strong growth over last year. And in fourth quarter of 2019 is the quarter we really started shifting pricing, particularly in Wine and Beyond since. So it was actually a very good strong sales quarter for us Q4 2019. So it was already tough to overlap. So, on many, many fronts, we were pleased. There was a hard lockdown in Alberta when people were just essentially not allowed to go to other people's homes. So even traditional family, Thanksgiving and Christmas events, let-alone holiday parties and so on just didn't happen. So I won't say there's a follow-up in sales because sales grew very strongly, but it wasn't the spectacular growth. I would say that since the holiday period ended for Q1, we're back to seeing what we saw in Q2 and Q3 until March 12, when COVID started, and obviously there was the panic buying last year. But having said that, our sales are still extremely strong, and the trends of at-home consumption versus on-premise consumption have not changed. So we're still very optimistic for the business going forward this year. Same-store sales may not be the greatest – the way to – analytic to use given how high last year was with on-premise offline. When on-premise starts becoming online and people would be comfortable with it, not just allowed to go, but want to go, we'll see what happens, but we're very optimistic going forward.
Operator:

Thank you. We will now take questions from the telephone lines. Thank you. And the first question is from Kyle McPhee from Cormark Securities. Please go ahead. Your line is now open. Mr. McPhee?
Kyle McPhee:

Sorry guys. I'm on now. Your MD&A points out that your admin expenses had some one-time cost this quarter related to the spinout in RTO. I know you guys conservatively do not adjust for that and that you . So can you quantify those one-time items for us?
David Gordey:

Yes. We speak to it in a couple of different places, Kyle, MD&A, and then in the financial statements as well in one of the notes. But a good way to look at it is if you look at the Q4 admin costs versus Q3 admin costs, that delta of a couple million dollars is really what the one-time non-recurring costs were in the quarter. So it was quite heavy between transaction costs, all the transactions we had going on in some other items as well. But our trend of admin costs in Q2, Q3 is a good trend going forward. When you get past all of the transaction costs, there'll be additional costs in Q1 as well to expect there.
Kyle McPhee:

Okay. Helpful. On the liquor business, your gross margin has been normalizing a bit higher. We now have the 2020 numbers. Hoping you can provide color on 2021 in terms of what we should expect are the moving parts and the trends and strategies, again, just for the liquor business relative to what we saw in 2020.
David Gordey:

Yes. I think helpful for everyone on the call to remember where we started from in 2019, we've come long ways. Our team has done a great job of improving margins as we went through 2020, especially in Q3 and Q4 compared to Q3 last year, Q4 last year. So very pleased with where we ended up. Q4 was probably a little softer than what we would have expected had we had a normal holiday season, people spending time just by themselves and not hosting parties weren't buying many interesting things, maybe even trading down just because they were just celebrating by themselves. So margin in Q4 was probably a little softer than what we might hope for in 2021. In Q1 and Q2 2021, you're going to see a lift in margin in all likelihood from where we were last year because again, we were still ramping up. From where we are today, I think we're probably in a range that we can expect going forward. We might be able to push it a little bit higher in some spots, but we want to be cautious. We’ve gained a lot of market share, had a lot of hard work. And so any gains that come from this point forward will most likely be from our private label program rather than doing anything on the promotion front or in-store sales.
James Burns:

Yes, exactly. In terms of pricing in the marketplace, it's probably where it's going to stay. We do believe we have margin improvement from, as David said, private label. We can always refine that and that program is going well, particularly in spirits and with locally sourced spirit distillers, we're having great success, developing new products that are doing very, very well. And then just to better using our warehouse, we have a new SVP in-charge of the warehouse for the last a year or so, doing a fantastic job as well as our buying group, maximizing limited time offer from manufacturers and bringing our cost of goods down, which is obviously reflected in margin, that's the whole point of margin, but the customer doesn't see that. So that's where margin improvement could come from, Kyle, but pricing is probably where it's going to stay.
Kyle McPhee:

Okay. Thanks for that. Just on – I mean, Alcanna is not sitting with a lot of excess liquidity, free cash flow is still rolling in. On the cannabis side of the business, you are now funded by the new Nova Cannabis . Wondering what happens with liquidity you guys are building up? Is there M&A potential on the horizon? Or are those opportunities limited and it's really more about return of capital through various means like dividends and buybacks?
James Burns:

Yes, the $120 million question. So I guess first off we're sort of cautious prairie boys and girls, Roxanna. The money's not in the bank till the money's in the bank. So the Otter transaction for British Columbia is scheduled to close on Wednesday and we have every reason to believe it will, but until it does, it hasn't. So, but assuming that that transaction comes to a successful conclusion, then we will have a stream amount of liquidity. And we'd still do have a convertible debenture outstanding, which comes due this January. We are able to redeem it early if we choose now within this last year of its life. That is certainly an option that we would consider, once Otter is closed as well as the traditional means of returning capital to shareholders, issuer bids, dividends. I mean, everyone, there's only so many ways to do it. M&A, we always look at – we would always be interested in new opportunities. The nature of our businesses there is limited because so many provinces are still government liquor stores. There's an opportunity in 14 months when the moratorium on licenses in British Columbia ends and the government has yet to announce what it will do, instead we could continue that moratorium, replace with something else we don't know. We do have the right to build Wine and Beyond under our transaction with Otter Co-op. So that's an opportunity that's potential for us, as well as Ontario still obviously it was delayed in any kind of a reform of its liquor retail laws because of COVID, totally understandable. So there's still a lot opportunity there, which isn't really M&A, Kyle, but it is growth opportunities for us that are potentially there in future.
David Gordey:

It's a fantastic position for us and our shareholders to be in and we'll be disciplined. And we won't be going and diversifying this company and going into a new line of business or anything like that. So we'll make sure that we take our time and strike when the opportunity…
James Burns:

Cormark is safe, Kyle. We will not be making a bid for Cormark. You can rest easy.
Kyle McPhee:

When we're thinking about using your cash in order to repay the convert, do you take the balance sheet to debt-free or is there a target level of leverage you'd like to keep in place with whatever new tranche of debt you arrange?
David Gordey:

Obviously, leverage is something that's important to companies going forward to make sure we have the right capital structure, but I think we're going to take our time, Kyle. We're just going to make sure that we take our time and execute on the right opportunities at the right time. So if we exited 2021 with little to no leverage on the balance sheet, I wouldn't be shocked. But if the opportunity presents itself to leverage up a bit, I'm happy to do that as well. We have actually some pretty good opportunities on growth. We're going to be having four new Wine and Beyond stores open this year, which is – it takes a bit of capital between the CapEx and the inventory. And we have some irons in the fire for some ones in 2022 and 2023. So there'll be leverage at the appropriate amount of time in this business.
James Burns:

We're probably disinclined to just leverage just to return to shareholders when we have so much excess cash right now or will.
Kyle McPhee:

Understood. Okay. And just last point of clarification, at the front end of the call you mentioned it was a very noisy confusing quarter for your financial statements. I just want to confirm that that's really all about just you reported your entire BC liquor operations as discontinued and not including numbers. And I guess beyond that, there was no other noise you're referring to?
David Gordey:

Well, plus that in the transaction costs, which you out of the question about. Now other than that, I think we put up a great fourth quarter, very, very happy with how the business performed, even though same store sales were a little lighter than they were in Q3 and Q4 – Q2. The team did a fantastic job of controlling costs in the stores. And so that actually propped up the bottom line a little bit better than what we were forecasting, so very, very pleased. And as you saw in the press release, Q1 is going very well firing on all cylinders, as Jamie said.
Kyle McPhee:

Got it. Okay. That's it for me. Thanks for the update guys.
David Gordey:

Thanks Kyle.
Operator:

Thank you. The next question is from Graeme Kreindler from Eight Capital. Please go ahead. Your line is now open.
Graeme Kreindler:

Hi, good morning guys. And thanks for taking my questions here. I was wondering on the real estate side of things for both liquor as well as cannabis. I think there's a lot of room to be opportunistic on real estate during the COVID period and certainly you have outlined your plans for expansion on the liquor side of things here. I'm wondering as we're starting to see a bit of a reopening in provinces and that is going to ebb and flow, but are you seeing any of these deals tighten or maybe there's less than there would have been a couple months ago, or is it still a very robust environment right now to get some favorable returns there on the real estate side of things? Thank you.
James Burns:

It's still very favorable, extremely favorable for new leases for new stores like for new Wine and Beyond, so we've negotiated enthusiastically on behalf of the landlords that have some tremendous deals for these Wine and Beyond we're opening this year, which we will never dreamed we could ever do a year ago, but it's just it they're fantastic for our business. And I believe for the landlords as well. So we're very pleased there. In terms of lease renewals, not as much of an opportunity, a really good liquor store that landlord knows that if we pretended we would walk without a rent reduction, they would know it's bluff and they could get somebody to backfill it and then open a liquor store the next day. So your room on those ones is really – not really that limited. So the rent renewals you are what you are, the lease is the lease. Most leases have a term clause that says the rents can’t come down anyway on a renewal. You can keep them flat, and a lot of them were staying flat, but not really, there's no sort of edge on the good sites.
David Gordey:

We're not married to any real estate going forward. We've closed a number of stores, 30 plus stores in the last few months, last year or so.
James Burns:

Yeah. We've got a few more to go, we call them landlord stores, because you're essentially just running them for the landlord, all that inventory and cost to look after the store to make little to nothing. So most of those are gone now, we've only have a handful left and we will – I'm sure we'll be out of all of them by the end of this year for sure. If not long before that.
Graeme Kreindler:

Understood, appreciate the color there. And then with respect to the expected build out to the Wine and Beyond, and convenience format stores, particularly in the Alberta market, do you see those stores when they're opening, are those stores that are going to hold in your current market share or given your expectation of increased at-home consumption. Do you think this is something that more holds in as the market continues to grow? Just curious in terms of what those look like strategically within the overall market in Alberta. Thanks.
James Burns:

Sorry, just clarify that a little bit Graeme, I'm not – just to make sure I answer exactly what you're asking.
Graeme Kreindler:

So do you see those new stores as stores that are going to grow your overall market share or they're going to open current market share given more at-home consumption? That makes sense.
James Burns:

No, we would definitely see them as growing market share absolutely. Wine and Beyond is a whole different business. And, do we cannibalize some of our own stores if you have a Wine and Beyond near? Yeah a little bit. One is in a trade area where we don't really have maybe a one star close, but in convenience format store, people its convenience. You're going to buy a bottle on the way home. Wine and Beyond is a destination, and yes, there are some people, if you happen to live near one, you can use it as a convenience store as well, no reason you can't. But people have much bigger basket sizes. The average person spends three minutes in a Liquor Depot or an Ace, and 37 minutes in a Wine and Beyond. It's just a different business so it's very incremental. It'll take businesses from everywhere.
David Gordey:

A long, a wide-wide trade area.
James Burns:

Yes. They have huge reach. So Calgary, we only have one and it's literally on the extreme North edge, the North Pole of Calgary. So we have the three we have coming are basically, we probably do one more in Calgary, but we basically will fill all the trade areas of Calgary by Q3 of this year when we open these three stores. And we've been trying to get store sites in Calgary for years and just couldn't get them at any rents that were sensible, that had any decent risk return equation to that that investment. And all of a sudden we've got three, so we're thrilled.
David Gordey:

We'll have one in Northwest Calgary, one in Northeast Calgary, one in the South and one in the West, probably room for one in maybe another couple of small ones at some point in time.
James Burns:

Yes. We're actually also – we have one small format Wine and Beyond, which is 12,000 square feet and there are room for sort of in the fields for that banner in certain markets for just sort of that size as well.
David Gordey:

Yes. Very excited for this year, the real benefit of those stores will come in 2022 this year at the top line as we open them up. But the real bottom line would start next year and definitely in 2023. So I'm very excited to add that to this company's financial performance going forward.
James Burns:

Yes, we should – we've sold some EBITDA, no question about it. We believe it exceptionally good prices, but we anticipate we'll have that all back again by 2022. The four new ones should be all open in Q3. So we'll have them all permitting, and trades and COVID shutdowns not withstanding for full op for Q4 we expect unless something happens, but close enough, if not for sure. So they'll keep for us obviously a great quarter anyway in our business and it was this year, it's just not as great as the Q2 and Q3 and the COVID thing. So it's really exciting. And then of course BC I think we're going to do this spectacularly well when we get the stores clean there.
Graeme Kreindler:

Okay. Understood. Thank you for that. And then my last question here, you mentioned in the Q4 period, you had some what you see as maybe some trade down from consumers, as there was increased lockdowns. I'm wondering as you start to see a bit of reopening, have you been doing any shifts in the mix or types of products you're carrying or labels within the store in anticipation of that? Or is the consumer trend with respect to not just how much they're buying, but what they're buying, do you think that's going to have some stickiness as well? Thanks.
James Burns:

So in terms of our product mix no. I mean, we haven't – as you've seen Graeme, we have tremendous selection even in our convenience format stores. And that's part of our business model is to offer that. We could have a different inventory level and have much less selection and just stick to the main top selling SKUs, but that's not what our business is about. And including and frankly, especially our discount business Ace is about great prices, but also tremendous selection. We signed during COVID interestingly enough, I think David's comment in terms of the fourth quarter was that instead of buying that $60 bottle of wine, because it's your special Christmas dinner and Thanksgiving, it was just you and your spouse, you say what the hell we'll buy our $15 anyway, so it was more of that. Overall during COVID the premium spirits have been done exceptionally well. And I think anecdotally, what people are doing, I like the tequila category as one I can think. High-end tequila is selling really, really well because people who drank tequila as their beverage of choice in bars and restaurants setting, and they could only afford and only wanted to afford more moderately priced brand, realizing how much cheaper it is to have your alcohol at home than it is in a bar or a restaurant with their extremely high markups. They've been trading themselves up and buying the premium brands because you can afford that at home. It's the same price as or it's actually, it's still cheaper than having the cheap tequila shots in the bars, so that's been. And if you go and look at some of the websites and the reporting of some of the manufacturers of the distillers and so on, you'll see high high-end stuff has done really, really well. Somewhat it's kind of counter-intuitive because you think times are tough, people nerds with their money, but it's worked the other way. A small luxury that they're willing to spend money on, their credit card statements are so low at the end of every month people's because they're not going out, that they've got some excess availability in their psyche to go in and treat themselves as David said. So we'll see if that continues. It doesn't matter so much to us as it does to the manufacturers, but higher end products we tend to do better margin on frankly, so it helps but.
Graeme Kreindler:

I appreciate the insight. That's very interesting. Thanks a lot guys. And that's it for me.
James Burns:

Thanks Graeme.
David Gordey:

Thanks Graeme.
Operator:

Thank you. The next question is from John Zamparo from CIBC. Please go ahead. Your line is now open.
John Zamparo:

Thanks. Good morning, everyone.
James Burns:

Hey, John.
John Zamparo:

I'm going to ask about the promotional environment. It was obviously pretty favorable in 2020. I'm curious what you're seeing to start the year so far from competitors on that front.
James Burns:

No real changes in the promotional environment to the stage, John. Obviously we were able to save a few bucks in Q2 by not having some promotions out there just as people had blinders on, and they weren't really paying attention to promotions at that point in their lives, but no one's getting aggressive, no one's doing anything different at this point in time. And so I think everyone's happy with the rising tide is floating all boats and so everyone's just happy to have their share of the pie, increased size of the pie. We'll do some more flyers, like some more promotional windows this year than we did last year. And we see the competitors doing that too, but nobody is so far being overly aggressive as David said, there's a stasis, there seems to be an equilibrium the people the market has settled in, I don't believe there's room to raise prices, as we've said earlier for our company, anyway we don't intend to do that, but the market seems to have settled.
John Zamparo:

Okay. That's helpful, thanks. And then sticking with the level of competition what's your perspective on store count growth or square footage growth, whichever you measure for the overall market in Alberta in 2021 or 2022?
James Burns:

It doesn't really move much anymore. There's extraordinarily over inventory liquor retail stores in Alberta, 2,200 some odd places, you can buy liquor to take home between actual liquor stores and then hotels, and so on bars that have an off-license that are allowed to sell for off-premise consumption. So they come and they go, people go bankrupt and somebody takes it over again. And there seems to be no shortage of people who want to think that it's a good living to rent a liquor store at certain economics, if you don't cut your cost of working per hour, it can be a great way to support a family as a small business. So we don't see the major grocery store chains, which are our main competitors, superstores; Sobeys, Costco of large competitors are – they tend to be – their liquor stores are part of grocery store development. So, as they build a grocery store, they might put one on, but those are big, huge investments. The liquor is sort of an afterthought for them, so it comes as they make these big grocery investments. And those only usually come with new neighborhoods as an Alberta's with the energy industry and our own provinces economic issues are well-known, is not growing population-wise, so we had once did it's more or less flat actually. So there are new neighborhoods being built, of course, as older ones transition and new grocery stores and new competitors that way, but I would say probably by the vast majority of new square footage and the liquor retail industry in Alberta will be us, three Wine and Beyonds, so 60,000 feet, so other than that, probably not too much, very little, everywhere, there is no trade area that isn't already over supplied by somebody, so there is little room for someone to come in.
John Zamparo:

Right. Fair enough. That's helpful. I'd love your sense on kind of the longer-term and how you might hang on to some of the gains you've made in the past 12 months as vaccines eventually roll out and consumers at least consider returning to pre-pandemic behavior. Is it that consumers now have a chance to try one and be on stores? And they're going to stick with that choice? Jamie you referenced the price delta between at home consumption and on-premise consumption, which I think is a valid point. Just would like to get a sense of how you plan to hang on to these gains, if consumers do return to behave in the same way they did in 2019, or maybe the assumption is that they don't, but just like to get your thoughts on kind of the longer-term on that front.
James Burns:

Yes, I guess, that's much more a question for a sociologist than a couple of the retailers here. But I had just anecdotally from my own life, my own adult children, he used to spend a lot of their disposable income in restaurants and bars even the ones with young children of their own and just to get out and do it. And they've had a year now, year and a few weeks of not doing that and cooking more or eating at home more and they like it and they realized just it’s how low their credit card debt is at the end of every month, and it's changed things. Does that mean that they'll never go back, absolutely not. Probably people will go a lot once the vaccinations are rolled out, people will feel comfortable again. And where it will return to 2019, I mean, again, I'm not – I took one sociology course in university, so as 101, after that, that's the end of my sociology expertise. So that was an extraordinary long time ago. So I don't know, my guess is, that it will be somewhere in between what it was then and what it has been for 2020. And we've, as you said are Wine and Beyonds in particular have been – we were putting our overall sales – same-store sales growth for the last few quarters. We have not broken up Wine and Beyonds specifically, but I can just tell you it's many, many multiples above the overall in terms of how Wine and Beyonds have done during this time, obviously because they're great huge wide open spaces, people felt more comfortable there, not in a smaller format, they could socially distance easily. And they – people realized, I think there had been still some misunderstanding in our marketplace and of our customers did in Wine and Beyonds with somehow a luxury brand or a high-end brand, and it's not, it's actually has the same margins or even a tad lower than our Ace Discount banner. It has luxury products and luxury stores inside that discount box, but it's not a luxury banner. And people really got there and realized that, that places are wow, this is a selection, but boy are these prices ever could, cheaper as a rule in many cases than the Ace in their neighborhoods. So they come and you have to do that, it's a destination, it's costly, you have to give people a reason to drive by, did not go to their own local convenience store, even if it's an Ace, one in ours, and to come to a lot of competitors and come to a Wine and Beyonds, so that's what we do. So it's…
David Gordey:

It’s a hard question to answer and we're very cautious, it's one of the reasons we're going to be just careful about cash and our liquidity, and just want to see how the world unfolds here. Is there vaccinations going to pick up finally and everyone will – this will all start to be behind us at some level by this summer, is the third wave going to come or the variance – it's just also unpredictable. So all of this dictates to me to be careful and just wait and not do anything precipitous, I like our position though. We're in a solid position where you can control our fate, we don't have debts, so we're not exposed to a big downswing, so I really like our position. And I think for all the reasons Jamie said, it's going to be a slow change, we're not going back to 2019 in my view, over a short amount of time, it's going to take some time for people to feel comfortable to go out on a regular basis. My hope is Q4, is that people have the ability to have holiday parties, et cetera, and social gatherings in their house, which will be a win for us. So I see some potential tailwinds for us as well this year.
James Burns:

Yes, if we get good weather this summer the backyard barbecues and all that stuff, what you're doing those summer long weekends used to be huge sales events for us. Last summer they really weren't, other than, because there was no – no one was even working, weekend didn't matter, it wasn't the same bumps, so we could do really well there too. And it's maybe the restaurants and bars well once the patio season comes, we're – little colder climate out here than Ontario, John as you know, so patio season takes a little longer to kick in, but they'll do so better, but a lot of restaurants and bars are hurting and many are not opening again, we keep hearing all the time as real estate coming available, because restaurant extra bar why is closed, and they're so far in debt now. And they would only be doing this reopened to pay the debts back, to pay their deferred rent back. And they're just keeping up the go, so I guess we'll just see.
David Gordey:

Yes. And we've come a long way, so we had great same-store sales increases in 2020, if we give up a little bit of that low single-digits is my outside range. The cash flow being generated from this business is still terrific, especially because we worked so hard over the last two years to get a lot of our maintenance CapEx done and the store is up to snuff to where they need to be. We still have some opportunities to sell some low performing stores. So the cash flow to this business is going to be great.
John Zamparo:

It's great color. So thank you for that. And just one last one, another broad question just on the cannabis side. Margins, or at least gross margins are down somewhat, I think that's partly because of the discount pilot, I'm less interested in margins though. I’m just kind of curious what you're seeing from the operating environment and from consumers, anything that's been remarkable or represents a change versus the past that you're willing to share.
James Burns:

Yes. And I just would feel a little awkward about, even though it's – I'm the Chair of Nova and Dave is a CFO of Nova, it's technically, that's another separate public company now. So it's kind of – I'm not really sure how we're supposed to answer going forward and deal with this. We still own 63% of it, and obviously we owned it for this whole – the first quarter. Just anecdotally, John our Nova or whatever it was our in the fourth quarter. Our deep discount trial that we've use to see how that the kind of the same thing we've done in liquor, how did that translate to the cannabis consumer? Did it resonate the same way it has in liquor? And the answer was a resounding yes, but we know just from looking at the stores of competitors and in one competitor in particular YSS, which is now part of us, part of Nova, I should say. So obviously we know their numbers for real, not just anecdotal, where we had a deep discount store in Q4 that happened to be near one of theirs, it didn't really affect theirs. And they went down a little bit, but not very much then leads to this huge growth in sales, massive growth in sales came from the illicit market. And that's – we definitely get that, our teams in the Nova stores and sort of the deep discount stores are Value Buds. We'll say that these new customers are coming from illicit market, not necessarily from – just from other legal retailers. So we find that extremely encouraging, because our pricing is as good or better. And – but you don't have to break the law, you don't have to meet a guy in a parking lot at 10
David Gordey:

Yes. We can hit that price point to compete with them, which is great and make money at the same time, which is even better. And there is still a long runway for pulling people out of the illicit market and that'll depend on the licensed producers producing better and better product. Maybe the government is loosening up some rules on the packaging, et cetera, and the types of products, but price point, we know we can compete there and be a big player.
James Burns:

Yes. Better product and more consistent, especially. Consistent supply is still a huge hindrance in the cannabis business. You don't get a consistency, we know that Diageo is always going to give us all a – we want for the Captain Morgans, you don't have to worry about that. As much as we can sell, they'll have, cannabis, it doesn't work that way. You have no idea what you're going to sell week over week, because the supply is so inconsistent, so far.
John Zamparo:

So that's upside opportunity.
James Burns:

Yes. That’ll change. That will get better. So that's the only – so exactly that's only – that's not a bad thing, that's a good thing sitting here today because we've done well even in that environment, what is it to give us more normalized, it'll only make it easier to operate if you have a good network and you’re – you know what you're doing, if you're a retailer.
John Zamparo:

That's super helpful. That's all for me. Thank you very much.
James Burns:

Thanks John.
Operator:

Thank you. The next question is from Walt Stroud, who is a shareholder. Please go ahead, your line is now open.
Unidentified Analyst:

Good morning. I just want to know if you're ever going to reinstate the dividend.
James Burns:

Hi, Walt. That's certainly an option, that we've been looking at the – you pay dividends from free cash flow and historically this company got itself into trouble paying dividends and it didn't have the free cash flow to support it. Going back into 2014, 2015, 2016, and had to reduce it because of that and borrowing money to pay dividends, and we never going to do that again. So we want to make sure that our cash flow can support any dividend that we might decide on someday. But it's certainly an option that we would consider that we're looking at.
Unidentified Analyst:

So it's not in the near future.
James Burns:

Well, it's an option leave and consider. If I told you one way or the other, then that's a material thing I shouldn't be saying here on the phone call, so…
Unidentified Analyst:

No, I understand while – I mean, I've been a shareholder for many years and I was really disappointed when you discontinued the dividend, because it was obviously a reason for buying the shares in the first place.
James Burns:

Right. But if somebody didn't have the cash flow to support its dividend and it should have cut it a long time ago in my opinion. And I wasn't here then, so…
Unidentified Analyst:

All right.
James Burns:

So we have cash flow. we also – we will definitely look at it again. It's definitely a way to return to capital to shareholders for sure Walt.
Unidentified Analyst:

Thank you very much.
James Burns:

You bet.
Operator:

Thank you. There are no further questions registered at this time. I'll turn the meeting back over to Mr. Burns.
James Burns:

Thanks, Laurie. Just again, appreciate everyone's interest and support of our business and our Nova business that is now launched as an independent company, which we're very pleased with how that's gone and is going. So appreciate everybody's interest and look forward to visiting again in a few months when we release Q1. Thank you so much.
Operator:

Thank you. The conference is now ended. Please disconnect your lines at this time, and we thank you for your participation.

Alcanna Inc. Q4 2020 Earnings Call Transcript

Other Alcanna Inc. earnings call transcripts:

Alcanna Inc.
Q4 2020 Earnings Call Transcript