Can i industry sign banking maine presentation fast
good morning my name is Joe Luce Rd I'm the president and CEO of key relief T relief is a leading multi-state operator in the United States we have operations in 11 states with plans to enter at least two more markets in 2019 we are a vertical cannabis company meaning we cultivate manufacture and dispense cannabis we have the largest retail network in the country with 42 stores operational today underneath the key relief banner we are also public in October of 2018 key relief went public on the Canadian stock exchange through a reverse takeover process we raised 400 million dollars from over 100 institutions around the globe and I'm anxious to tell you our story today and how we're gonna deploy that capital to create shareholder value in 2019 and beyond first a bit of background about myself so I've been the CEO for the last three years prior to cannabis my experience was in private equity in M&A in 2010 I was responsible for opening the first vertical medical marijuana business on the East Coast in the state of Maine I was also responsible for opening the first vertical business in Massachusetts in 2015 I joined a company called palliate eck in 2016 as its CEO now key relief with the goal of creating the first true National cannabis brand and I believe are well on our way to doing that before I get into our company in specifics I want us to spend a few minutes talking about the industry in general and our perspective on how things are going and then I'll get into the details about our business so I think we all know this but we've seen unprecedented growth in the cannabis sector but haven't been in the industry for nine years what's amazing to me is the accelerated pace of change we've seen over the last 12 months it's absolutely incredible last year it's estimated that cannabis was an 11 billion dollar regulated space and growing by estimates to twenty three billion in the next four years but more importantly the addressable cannabis market today is 50 billion dollars in growing every single quarter so we are incredibly optimistic about the the Headroom and the market and our ability to continue to grow given the demand for cannabis importantly the public opinion is changing rapidly on cannabis but recent polling suggests that ninety-three percent of Americans now support medical use and greater than sixty percent support adult use the public perception on cannabis is changing rapidly from many different elements primarily from a taxation perspective and also because I think Americans are more and more recognizing that we don't want to be a society that warehouses people for nonviolent drug crimes so we think those trends are positive and what's happening is it's generating positive results at the ballot box and state houses and we think at the federal level in 2019 I have never been more optimistic about the legislative framework that's happening in cannabis both at the federal and state level a groundbreaking event happened in December of 2018 the farm bill which will have dramatic impact on our company and I'll explain that to you in a minute but the farm bill was the first break breakthrough in the wall where cannabis is becoming mainstream CBD a compound from hemp will be the first mainstream cannabis compound that will be sold nationally and will break through that the the decades of MIT propaganda from the pharmaceutical industry and we're very encouraged by that at the federal level we expect that despite the recent shutdown once the legislature get bats back to work we think the split house is going to inert to the industry's benefit in 2019 the Democrats are going to take leadership on this issue in the in the Congress this year you will see standalone pieces of legislation pass out of committees and on the House floor including banking research and we also believe both chambers will take action on this Zach this year we are spending a lot of time and energy in Washington DC bringing these issues to light and lobbying for the interests of the industry and we think that will get significant legislation in 2019 for folks that don't know what the states act is the states Act is a federal recognition that states can make their own Marijuana Policy why that's important for US companies is because it will not only give us access to federal banking but it will dramatically reduce our cost to capital and it will likely allow us to list on US exchanges which is exciting to us as they said the hemp was a the hemp the farm bill was a breakthrough and federal legislature in 2018 by some estimates the CBD market will be twenty two billion dollars in 2020 that it's going to be the hottest trend in consumer products in 2019 you will see every company in the industry rushing into this space luckily we had the foresight to anticipate this and develop a national CBD brand which we launched in November and will be a mainstream product for our company in 2019 so medical cannabis is legal in 33 states in the u.s. Missouri and Utah most recently added to the ranks in ten states we have adult use programs already hemp is now C CBD from hemp is now legalized all this suggests that cannabis will continue to be mainstreamed and that the companies that that are that have the infrastructure today will be the ones that would be the ultimate beneficiaries of these changes and this significant growth that we expect to see in the industry over the next four years importantly at the state level what we believe we're about to see is the acceleration of adult use programs driven by the Massachusetts catalyst so Massachusetts is the first state on the East Coast to implement an adult use program at December of 2018 Massachusetts is a state with 7 million people in 24 million tourists with only 5 stores open the state is already projecting that the markets on a hundred million dollar run rate and we expect Massachusetts to open up dozens of companies in 2019 in this day Massachusetts will generate tens of millions of dollars in tax revenue in 2019 and that will not be ignored by the neighboring states and states all up and down the seaboard and companies that have the infrastructure in those markets today like key relief will be the ultimate beneficiaries of the liberalisation of those programs Maine has already passed an adult use bill we expect meanwhile implement an adult use program in the summer of 2019 in new jersey governor phil murphy campaigned on adult use cannabis we expect the New Jersey Legislature will pass an adult use bill in the first half of 2019 unleashing a state with nine million people to adult use cannabis in New York Governor Cuomo has finally got religion on cannabis so much so that he put it in his budget and by his estimates cannabis can deliver 300 million of tax revenue to the state in New York and the first year alone finally in Connecticut governor Lamont has acknowledged that cannabis for adult use as a foregone conclusion and that he could no longer let the black market control this industry more importantly this will put pressure on many other states on the eastern seaboard and across the country to look more closely at adult use programs we fully expect that in Arizona in Florida you will see adult use ballot initiatives in 2020 the governor governor wolf of Pennsylvania has already publicly stated they need to look at adult use cannabis and we expect many of these other states that convert to adult use programs creating a huge amount of opportunity for existing operators so how to securely play in this space first as I said we are a vertical cannabis company we have 12 cultivation facilities today with 650,000 square feet in operation today which by many accounts makes us the largest operator in the United States we have 10 manufacturing facilities on any given week we extract more than 20 thousand grams of cannabis oil and all of our products are unified under the Cure leaf brand so we are not hoping to be a branded company we are a single branded company when we built this company we set out at the outset to develop one cohesive brand strategy around key relief so our stores are all key relief the vast majority of our products are key relief and we are laser focused on creating a national brand our thesis on cannabis and the value chain is actually quite simple cannabis is a commodity over time the cannabis will continue to be commoditized we've already seen on the west coast enormous pricing pressure on the commodity itself we think that will be true in Canada as well in fact we don't believe the Northern Hemisphere will be leading the cannabis cultivation industry in half a decade we will likely be importing cannabis from Uruguay or the southern hemisphere where we can't possibly compete with those inputs but for now it pays handsomely in the United States to be a vertical operator given the state-by-state infrastructure so for the for the next few years we will be a significant cannabis cultivators but ultimately what we're focused on is becoming the most accessible cannabis company in the US by having the most amount of retail where we can get to the patients and the consumers and have the shelf space but more importantly have a unified brand strategy where the products we sell in our stores are key relief products and not somebody else's so this is where we operate today from a regulated state cannabis perspective we operate in Maine Massachusetts Connecticut New Jersey New York Maryland Florida Oregon Arizona California and Nevada and we will enter Pennsylvania in Ohio in 2019 and I just want to point out a couple highlights from this map so in the state of Florida we are one of 13 vertical operators in the state in 2018 Kiril Eve opened more stores in Florida than anybody else we just started harvesting a 250,000 square foot greenhouse in Central Florida and we will be an industry leader in Florida in 2019 we will open up almost twice as many stores in 2020 up to the 40 store maximum and we will cover this state and create access to cannabis in the Cure relief products in New York we are one of 10 operators we have open all four of our allotted stores and we expect to be the significant beneficiary of the liberalisation of that market and the conversion to adult use in the years come in New Jersey we are one of six operators New Jersey is our most mature market in New Jersey we have an over 40% market share even though we're one of six operators we have the biggest market share in New Jersey because we have the deepest amount of SKUs we have the highest quality and we have the lowest price in the state in Connecticut we are one of four grower processors we are wholesaling now to the existing nine dispensaries and we expect nine more dispensaries to come online in 2019 in the state to enact an adult use program in 2019 as well and finally our home state of Massachusetts we are incredibly optimistic about this state given that we have one of the largest cultivation capacities in the state and we expect to be a beneficiary of the liberalization of that market in 2019 and finally on the west coast we're working our way to the West with MA and I'll talk more about that in a moment but more importantly beyond just the 13 states with which we operate in in 2019 we are creating the first true National cannabis brand so we have a CBD line called cure leaf hemp which was launched in November of 2018 in anticipation of the farm bill we expect that cure leaf hemp will be sold in 47 states in 2019 we will carry the cure leaf brand throughout the country and create the first truly National cannabis brand of the United States on the back of that product this is our brand architecture so on the top left is our medical cannabis products available in 13 states in 2019 we have over 200 SKUs of medical cannabis products available today depending upon state regulations we make everything you can imagine from flower to vaporizer pods to topicals edibles oral formulations any product that we can make that delivers cannabis to an individual that needs our medicine we can do importantly we also developed as they said the cure leaf hemp line so this is a 15 SKU and growing SKU and growing line of products that we will carry into mainstream retailers in 2019 we are designing end caps right now for major retailers and we expect to make announcements about this product very soon and I'm incredibly optimistic about our ability to capitalize and be the first National cannabis brand and finally we do have an adult use brand that's really targeted towards cannabis enthusiasts it's available in five states and will continue to roll that product out which is aimed at really the the most enthusiastic people but that want to use the double use cannabis I believe our company is ideally positioned that capitalize on growth opportunities we have a proven track record of ex success not only in winning licenses but also acquiring and integrating companies under one brand there's no other company that looks like us that operates as many states under one brand as key relief we have one licenses in Maine Massachusetts New Jersey New York and Maryland we have required an integrated companies in Maryland Connecticut Florida Arizona Nevada and California and we have a proven track record of not only acquiring companies at highly a creative prices for our shareholders but also integrating them into a common company with common SOPs and one common brand architecture it takes a lot of execution to do that between 2017 and 2019 we will increase our cultivation and operational capacity fivefold to over a million square feet and production we continue to grow our dispensary footprint at the end of 2017 we had seven stores at the end of 2018 we had 36 stores just this week we have 42 stores open and we will open up at least 68 stores with the licenses we own today in 2019 we have the proven track record of opening stores we open and store in this company almost every week we'll continue to do that through 2019 and stores translates into accessibility and that translates into revenue and finally we'll be distributing our national CBD brand which we believe will be on the shelves of mainstream retailers across the country in 2019 all that translates into revenue growth since 2016 we've grown the top line of this company almost 300% every year and we'll do that again in 2019 on our q3 earnings call we guided the market to four hundred million dollars in revenue I believe that key relief will separate from the pack in 2019 and we will deliver industry-leading returns for our investors and people will recognize that we are the highest quality asset in the industry we have a strong financial position as I said we're growing this business and almost 300 percent in the top light every year we expect to generate a hundred million dollars in cash flow in 2019 based on our current operations today our market cap sits at 2.9 billion dollars which is a dramatic discount to our Canadian peers which we don't think is justified as I said we raised 400 million dollars in our equity race the largest single equity reason us cannabis history we will put 150 million dollars of that into our existing business this year and that leaves 250 million dollars of dry powder plus our stock to go out and do M&A and I believe that we are one of the best companies in the space and the M&A arena but more importantly doing M&A that's a creative do our shareholders everybody that's been a shareholder of key relief along the way has made money and that's what we believe in is deploying capital to get the greatest possible return for our shareholders so we'll be very disciplined and how we deploy capital but we'll put that money to work to create value for our shareholders in 2019 and beyond I believe we have one of the finest management teams in the industry our executive chairman is Boris Jordan Boris Jordan was the primary financier of our business prior to the public offering in October Boris has an incredible track record of success in emerging markets he is the founder of Renaissance Capital one of the leading emerging market investment banks in the world Boris sits on the Council of Foreign Relations he has an incredible capital markets experience and he provides a tremendous amount of leadership to our company as
our chairman our chief operating officer is Stuart Wilcox Stuart is a distinguished operational executive and before Stuart touring key relief he was responsible for turning around hostess a well-known iconic US brand and a well-known turnaround story Stuart is the guy that makes the trains run on time we have 650,000 square feet - day of operational space and you need someone like Stuart to make all that happen as you can imagine government relations is a huge piece of our business given the state of play of cannabis and u.s. our head of government relations is Eadie Conklin Eddie Conklin joined curly from the McDonald's Corporation where he ran government relations for the entire McDonald's Corporation for many years it is not only providing leadership to our company in DC and state capitals but also to the industry in 2018 the industry formed the cannabis trade federation it's the business Lobby that is in DC to lobby the states act and legislation that will help us operators and Ed is the chairman of that Federation and providing a tremendous amount of leadership to the industry katrina yan is a head of marketing Katrina has come up through some traditional CPG companies including Kraft Foods and that handsome gentleman in the back there is Chris Mahalo Chris Mahalo is a head of retail Chris came up through the home depot and at one point it ran all of Nikes North American stores he's a seasoned retail experience and really our chief experience officer and making sure that all of our stores provide a high quality highly consultative approach to cannabis where people can come in and learn about cannabis and a non intimidating setting and get the products they need I think it's important to say that key release care leaf is a wellness business we are about creating cannabis accessibility promote about creating education and giving people a format where they can learn about cannabis and not be intimidated and that's where we think the markets going and then we're happy about Chris on board to help us in that initiative finally this is a little bit of just macro thesis in our view of the of the you know the cannabis investing landscape I think this chart is actually interesting so if you look at the estimated market size of the Canadian market right now and then you look at the aggregate market cap of the leaders in Canada then you look at the average the estimated market size of the US opportunity and their aggregate market cap of the US operators I think you could pause it that maybe that charts backwards we believe that there will be a sector rotation in 2019 as US companies post significant financial returns and distinguish themselves from their Canadian peers I believe you will see a sector rotation I believe that all US cannabis companies almost are over undervalued and prove significant investment opportunities for our investors why do I believe that one because the u.s. is the largest cannabis market in the world full-stop cannabis is the fastest growing consumer segments in the US and has continued to be mainstream every single quarter there are strong barriers to entry the state by state regulations allow us to build moats honor on our licenses and our business there will be rapid consolidation led by us operators us operators are the best position that roll up this fragmented market giving their presence in the existing space and the states Act will provide a significant value creation for our investors when that passes if and when that passes and finally I think it's important to understand that in the United States we are vertical so we don't not only do we control what we grow on what we make but we control our distribution points and therefore we control how much we charge for our products unlike Canada that has to sell their products to a government so we believe that investors with a long term thesis should get in the US cannabis because it represents a significant opportunity for value creation so I'm in summary just a couple of key takeaways we are the first multi-state operator to create a true national brand we have the largest footprint of branded retail stores in the country we are vertically integrated with industry-leading production facilities we are well capitalized and we have an experienced management team to make this all happen thank you all for your attention I have a few minutes for questions listen hey Matt so the question is does the cure leaf brand affect our ability to wholesale so in fact in some markets I mean we're primarily a retail business we are very focused on being vertical and making sure that our products go through our stores because that's where you enjoy the highest margin but in fact in some markets we do wholesale so for example cure leaf is available for wholesale in the state of Maryland and you can buy it and more than half the dispensaries in the state so we do wholesale it on a limited basis but we're really focused on creating the biggest retail footprint and writing the products into our stores thank you for that question I'm glad you asked that sokurah leaf owns 98 percent of its assets today we have almost no minority partners at this point that is all behind us that everything you see here is what we own so I'm glad you asked that this is not a portfolio this isn't a collection of assets with minority partners this is one integrated company that's owned 98% bikie relief yeah I'm happy to do that so we announced in the fall that we have the ability to do a 50 million dollar share buyback it's no secret that the market said we're incredibly volatile in q4 I think it was the you know by some accounts the worst equity markets in a decade so basically we made that announcement to show shareholders that we stand we're standing in and we believe in the value of our business we're gonna deploy capital where we get the best possible return and that means if the market falls off and our share price is low enough we'll buy back our own shares because we're well capitalized we can generate a one hundred million dollars of free cash flow this year on our own business and so we can deploy that capital to wherever we get the best return for our dollar including buying back shares if we have to well that's an interesting question so you're not really allowed to be organic given the federal standards you can't say you're certified organic but yes in many instances do we grow cannabis does the some of the strictest standards in the country including Massachusetts in Nevada and soon-to-be California so we grow everything without pesticides if we use pesticides we use 25 B pesticides which are organic and all of our products are exit tested meaning that they have to meet the standards of that state including their mold free microbial free no heavy metals and so we believe we're providing some of the safest products in the industry and frankly that's why we're so optimistic about the mainstreaming of Canada because I think consumers are more and more recognizing that there are particularly in the black market there are unscrupulous growers and you don't know what you're getting in that product and so we're proud to say that our products are exit tested highly reliable and safe for our consumers it's time for one more question all right thank you all for your time [Applause] [Music]
