Diamond Estates Wines & Spirits Inc. (DWS) Earnings Call Transcript & Summary

If I can just -- I'll wait for a few more people come on. I'd just ask everybody to go on to mute while we do the kind of formal part. And then once the -- because as you know, from unfortunately, doing these virtual meetings, we do the voting by show of hands as opposed to raising your voice. So just to go on mute for now, and then we'll open it up during Andrew's session when he presents. We'll open it up at the end of that for questions. So we can get going now. All right. It's just get about 10:02, get going. This Annual General Special Meeting of the shareholders of Diamond Estates Wines & Spirits will now come to order. My name is David Beutel, and I'm Chairman of the Board of the corporation. In accordance with the bylaws of the corporation, I will myself preside as Chairman of the meeting, and Andrew Green will act as secretary of the meeting. I hereby appoint TSX Trust Company as scrutineer for the purposes of this meeting, represented by Wayne Yearwood. We also thank TSX Trust Company for their work with us over the years. Wayne, do you have any final housekeeping comments or steps before I begin, any voting items on the agenda.

No. I don't.

Okay. Thank you very much. That has been filed with me by the scrutineer of the meeting, proof of mailing of the notice of this meeting and its accompanying documents. I direct that the affidavit of the meeting and the mailing of the notice of this meeting and accompanying documents being annexed to the minutes of this meeting as Schedule A. With the consent of the meeting, we will dispense with the reading of the notice. Also, during the voting portion of the meeting, Andrew Green has offered to be the person to put forward the voting motions, and John Hick, one of our Directors, has agreed to be the seconder. Lastly, after the formal portion of this meeting is closed, Andrew Howard, President and CEO of the Corporation, who will take us through the President's report. And this has now been posted on diamondestates.ca under the Diamond Estates and then Investor Relations tab. We will give a short break between my portion of the meeting and Andrew is to allow you to open the President's report. The secretary advises me that the requisite forum of shareholders is present, and I declare that this meeting is properly constituted for the transacting of business. I've received the scrutineer's report on attendance, and direct that the annex to the minutes of this meeting as Schedule B. In order to expedite the voting on the matters to come before the meeting, the Business Corporations Act of Ontario and the bylaws of the corporation, permit voting on all matters to take place by a show of hands unless a shareholder or proxy holder demands that a ballot be conducted on any motion. Since we cannot have a show of hands visually on this call, TSX Trust Company will provide the count of any, who are opposed to a motion, after they identify themselves on the call for each vote taken. The first item is the receipt of the financial statements. I note that the financial statements of the corporation for the year ended March 31, 2022, and the auditor's report thereon together with management's discussion and analysis for that period were distributed electronically to shareholders of the corporation, along with the management information circular dated August 18, 2022, and that such materials are available on sedar.com under the corporation's profile. Receipt of those documents is, therefore, acknowledged. Next item of business is the appointment of auditors for the current year and authorizing the Directors to fix their remuneration. I would ask someone to move the resolution appointing the auditors for the current year.

Mr. Chairman, I so move, and be it resolved that PricewaterhouseCoopers LLP be, and they are hereby appointed auditors of the corporation to hold office until the close of the next Annual Meeting of Shareholders or until their successors are elected or appointed and that the Directors are authorized to fix their remuneration.

Thank you, Andrew. May I have a seconder for the resolution?

Mr. Chairman, I second the meeting -- second the motion, sorry.

Thank you, John. I now put the resolution to the meeting. All those in favor of the resolution, please so signify by raising your hands, which, of course, may not -- we could sort of see that. But therefore, we will assume you've raised your hands unless you now identify yourself and indicate your opposition, which TMX Trust Company will tabulate. Are there any withholding? Okay. We'll now proceed with the election of Directors for the ensuing year. Currently, the number of Directors is at 7, and the proposal is now to move to 8. Andrew Green will now read the names of the persons listed in the information circular, who have been proposed for election as the 8 Directors for the coming year, each of whom has agreed to serve as director if elected.

Mr. Chairman, I nominate David Beutel, Guy Blanchette, John De Sousa, [indiscernible], Andrew Howard, Keith Harris, John Hick and [ Ron McEachern ] for election as directors of the corporation to hold office until the close of the next annual meeting of shareholders or until their successors are elected or appointed.

Thank you. Andrew, may I have the seconder?

I second the motion term.

Thank you, John. I now put the resolutions to the meeting. Although we are electing directors on an individual basis in the interest of time rather than list all the nominees, I would ask that anyone withholding their vote for any of the proposed nominees, please indicate so now. I will then ask each of you who are withholding for -- who you're withholding for and will have the secretary and TSX Trust Company note it. If a shareholder or proxy holder does not raise their hand, it will be assumed that they are voting for all of the proposed nominees. Are there any withholding? Okay. I also note that the vast majority of shares voted in favor pursuant to the scrutineer's report. I declare those nominated to have been elected as the 8 Directors of the corporation to hold office until the close of the next annual meeting of shareholders or until their successors are elected or appointed. I also want to take a moment to thank Jean Rocheleau for his time and his contributions as a director. With Jean's extensive financial experience, he has been a very valuable member and contributor to the Board. Thank you, Jean. We will now proceed with the next matter of business being the annual reapproval of the corporation's incentive stock option plan.

Mr. Chairman, I also move that we resolved out the corporation stock option plan as amended at the 2020 Annual General Meeting of Shareholders is hereby amended and reapproved.

I second the motion, Chairman.

Thank you, Andrew and John. I now put the resolution to the meeting. All those in favor of this resolution, please so signify by raising your hands, which, of course, we can't see everybody. Therefore, we will assume you've raised your hands unless you now identify yourself and indicate your opposition, which TMX Trust Company will tabulate. Are there any withholding? Okay. I also note that a vast majority of shares voted in favor pursuant to the scrutineer's report, and I declare the resolution carried. Is there any further business? Seeing that there's no further business, this concludes the business of the Annual General and Special Meeting of Shareholders of Diamond Estates Wines & Spirits, Inc. The secretary will move the final resolution.

Mr. Chairman, I move that the meeting be concluded.

I second the motion Chairman.

Thank you, gentlemen. I declare the motion carried and the meeting concluded. And before I turn it over to Andrew Howard, our President -- our new President and CEO, I'd like to say a few words about Murray Souter, Andrew's Predecessor from September 2013 until August 1 of this year. Murray led Diamond through several years of growth, both domestically and internationally as well as some difficult years of global trade tensions and more recently, of course, the COVID pandemic. And those impacted the company's progress significantly. On behalf of the other Directors, I'd like to thank Murray for his hard work and commitment in leading our company through all those 8 or 9 -- almost 9 years. Thank you, Murray. And Andrew will now take us through the President's report, which I remind you is on www.diamondstates.ca website. Thank you very much, and I'll turn it over to Andrew, and we'll give a few minutes for people to pull up the President's report if you haven't already. Maybe, we're going to put it up here, [ save you the work ].

You're on mute, Andrew.

That's helpful. Thank you. And I just wanted to make it full screen, so I could -- so you'd see it better, so there we go share. I think you can see that now? I too wanted to thank Murray. Murray has been -- when I reported to Murray, I'm first arriving in October. He's been super helpful getting me on board. And then with a long-planned and long-earned retirement, and Murray has also continued to help me and be a mentor to me. So I'm super appreciative Murray. I know you're on the call. So thank you very much. Early observations for me, I just see there's a lot of really great things. We have terrific facilities. We've got a fabulous import portfolio. And well, it's a little happy to say, we've got great people, almost to the 100% level. Of course, there's things that I really focused on, and want to improve as well. And so Murray had started on, and some are new items. But I think we have an opportunity to charge more for the things that we sell and the services we provide. I think we have a real opportunity to premiumize. We need to fill our capacity, and Murray was always really focused on that. We've got a really good production winery that's running at about [ past level ] so there's real opportunity there. And we need to contain expenses. So those are the things you'll hear me talk about a fair bit today, and I'm excited to get better results and a share price that we're more proud of. I'm going to jump right into it and hope [indiscernible]. Of course, there's the standard disclaimers that I'll let you guys read through at your regulation timing. I spoke a little bit about some of these items, but in terms of highlights from fiscal '22. We had pretty good revenue growth, plus 17%. About half of that is from acquisitions for the 6 months that we had the Equity Wine Group and Shiny in the tent. That said, it was offset by increased COGS and expenses as both government -- support programs ended. And with COVID waning, we had to become competitive again out in the marketplace, in additional channels and costs have increased faster than revenue. I talked a little bit about acquisitions, but they're contributing to sales and gross margins. Some of the acquisitions have a more -- slightly more premium portfolio, which will help ongoing there. And I was very excited. We bought the Shiny Apple Cider brand, but then through a series of good fortune, we also secured the facility. I'm a big believer in homes for brands to give them authenticity. And we've got access to the Shiny Apple home in June and opened it -- reopened it in July, with a lot of hard work from a lot of good people. So we now have a place to conduct on-site retail and hospitality. And I'll tell you more about that shortly, but we also have an opportunity to consolidate all of our warehousing into that facility. We saw an explosion of people wanting to get back into restaurants, and we've seen good growth in export. I'll talk more about both of those, and a real pillar of strength for us, we will continue as we see more privatization at grocery. We are a real force in batting or punching well above our weight in that channel. And we did see supply chain issues still, but they were less severe. We're still having challenges sometimes getting the right bottle and the right delivery at the right time at the right place. But we're -- it's not as bad as it was previously. A very positive outcome. You may know that we had an excise tax removed in a trade dispute, with largely Australia, where domestic product is now charged excise after 20-some-odd years not big charge excise. The government did help us separately and differently and not attached to that with a winery support program that will actually result in about $1.3 million, maybe a little bit more of a lift in fiscal '23. And it's largely because we've got a lot of product packaged and that will hold us -- we won't have to pay the excise tax until it actually is sold. So anything package is exempt. So we'll -- I said that slight [ dip wrong ]. Anything that's packaged is excise exempt, anything that goes into package as of July 1 is not. We have enough to last us probably to the end of the fiscal, but this support program delivers in October or November, and we're estimating about $1.3 million. So it truly will be a pure lift as long as the program continues onwards than we expected to. And then lastly, on the highlights, we had -- you've been aware that one of the acquisitions was getting through some licensing and some challenges, and all hurdles have been left over, and we're now fully in operation and able to execute against our full strategy, which includes events as well. So those are the highlights you'll hear more about them as we go. So when I turn to -- 3 slides on the financials and summary, and I'll try to get dimension, and if I get caught on anything, Ryan is going to pile in and help me. We saw good growth in 2022, 17%. And I said half from acquisitions over those first 6 months. What we did see though is that gross margin grew -- was eroded, and we lost 4.4 points in gross margin. Nearly half of that are -- yes, nearly half of that was actually a -- we adjusted our inventory for fair value. It was over $4 million of inventory adjustment in the Equity Wine Group acquisition. So if you adjust for that and take it out, it actually is about 2.5 points erosion in margin. And it's a place that we're going to really watch for. We've taken some price since then. It was driven a little bit by bulk wine sales, channel mix. There's a few things that are driving it. You'll see in another chart that we've actually seen that improve a fair bit. So we're watching it carefully because every point is worth about $300,000 in EBITDA. So it's a key lever. Expenses, as I referred to earlier, grew faster than sales. So expenses grew at 30% to nearly double the growth of sales. We saw government support removed back to competing in all channels. And we had some onetime costs associated with new brand design and just getting back out there and competing. So it is an area we really need to control. And as a result of those combination of events, we saw an adjusted EBITDA of minus $1.1 million or $1.2 million [ less than ] a year ago. Okay. So you'll hear my themes over and over again, but the big one is balanced growth and really a focus on cost containment or cost removal. Okay. So in terms of the balance sheet, the big change was the purchase of Equity Wine Group and the Shiny Apple Cider brand. We used the convertible debenture and equity raise to do so. And we saw a significant increase in assets to the tune of $18 million more assets with land building equipment and inventory driving that. Of that $15 million was Equity Wine Group. The purchase is actually $11 million, but the $4 million fair value adjustment for inventory took it up to $15 million, and then $1.1 million on Shiny. And on the liability side, we saw an increase in debt of $6 million -- $6.3 million, leading to a $12 million increase in shareholder equity, with significantly more shares outstanding as well. I'm going to keep going unless I get stopped to ask questions because I typically will toss more otherwise. In terms of Q1, so we're seeing some improvement on some fronts. But what we didn't see was on revenue. So despite acquisitions, we had a soft first quarter in revenue. There is a whole bunch of promising elements, including Lakeview Winery was up 47%, and the big driver of our domestic business. If you removed export, the business -- the domestic business actually grew 25% and the total combined business grew 14% versus a year ago, but export almost posted a 0 in the first quarter, and I'll tell you why. It was sort of a phenomena of terrible events. First off, Shanghai closed down for the quarter, and COVID locked down China sales. We lost what we thought was going to be $600,000 of sales in the first quarter. Korea delayed their order, again, with similar issues going on, but more about supply chain into the third quarter. And we refused an order, hard to do, but we had to and wanted to refuse an order to Russia of a $100,000. So $850,000 of predicted sales was mostly moved, some lost. We're still predicting growth in the export market, but that really was the hard challenge to the first quarter's results. Again, if you look at gross margin, it's down 1.6 points. But if you strip out the fair value adjustment for inventory is actually up 1 point versus a year ago, that's promising. A whole bunch of things drive that. We did take pricing for -- one of the first times in a long time, hard to take price in this business. We took at least $1 across the board in every retail SKU. We're seeing some channel mix changes. We're seeing a little more premium miss out of our acquisition portfolio and a VQA rebate came into the -- just admitting another person -- VQA rebate came into the business a little bit earlier than normal. So pleased to see gross margin. We're monitoring it carefully, as I said before. But we still had expenses well outpacing our growth, 35% increase in expenses, kind of balanced between people, sales and marketing and SG&A, all growing at about that rate. So adjusted EBITDA again $700,000 negative or $1 million, [ of course ], than year ago. Okay. I hope to present better results in the future. So to describe a little bit more on the [ investors ] questions, I should stop and pause for a second in case there's any questions. Okay. You'll ask me afterwards. In terms of acquisitions, so I talked a little bit about the valuations. Look, one of the positive -- well, it's a story, and I'll try to tell it quickly. When we bought Shiny about a week before or 2 weeks before, we closed the deal, they had a large product recall. It was driven by a refermenting can. And kindly, it happened before we close versus afterwards, Ryan and Murray renegotiated the deal and put half the acquisition into escrow on performance to see if the brand would do okay coming out of it. We lost a lot of listings through the winter. They don't need to bring a listing back on in the wintertime. And so the end result is that full escrow is going to come back to Diamond in the next few weeks. And we are seeing the brand showing good signals of improving, but it's taken a lot. You have to get those grocery listings back, and that can take a full year sometimes. So blessing in disguise, but we're back on track. What these acquisitions do is really fill portfolio gaps. We're really satisfy more consumer needs. And we brought sort of a increased hospitality focus with more facilities and a real focus to grow our direct-to-consumer, our e-comm capabilities. We're seeing interest in other provinces, and export as well with some of these new products. I talked about the Shiny Apple facility being opened in July, warehouse consolidation within fiscal '23. And what we're seeing is, obviously, the synergies at our sales force. So we have our own instead of using an agent. We're seeing the back office functions really combining and getting some efficiencies there. I've seen it live in upfront with harvest logistics, winemaking and some inventory management. So we're seeing those synergies come into place from these acquisitions, and there's much more to be done. In terms of pandemic, I'd like to forget about it, but what we're seeing is massive growth in the licensee business. We're actually at or slightly above pre-COVID levels driven -- the volume is actually still about 5% below in terms of tickets, but the -- as we all maybe know, the price of dining out went up. So we're seeing about a 15% increase in total revenue. And we're seeing good, strong results from our portfolio that's really well suited to this channel. I see license growing from $2.73 million in Ontario, specifically for the domestic business to -- we should be targeting $5 million. We have real potential to grow there. We saw our winery retail stores get back to near COVID levels. What's happening is it's fabulous on the weekends and quiet on the weekdays, and that's driven by international tourists not yet being there. So we're seeing good results and getting close to pre-COVID level, but they talk about tourism taking 2, 3 years to get back to real normal. We've seen -- I joke with people that I say my crystal ball has been [ amassed ] during COVID. It's been so hard to judge channels because the consumer is buying completely differently. So what we've seen now is direct-to-consumer, e-comm to your home has moderated a lot well above what it was pre-COVID because consumers have realized that they can get interesting wines conveniently delivered to their home. So it's a great channel with tons of potential. It's all about database and how you mine it. But it's definitely moderated from where it was during COVID as on-premise increased. I talked about Shanghai, talked about global supply chain issues -- and we're seeing a lot of pressure, you read it every day. So we're seeing pressure on bottle labels closures. We're seeing HR pressures on inflation-driven and lack of raises over the last few years. We have executed prices on almost everything, and we have more plans going forward, and we're supporting that with stronger brand propositions and designs. So I really believe that we've got the ability to actually drive our margins and at least cover our increased COGS. We talked -- I talked earlier about how well we do at grocery, and we're getting better at it with more dedicated resources. These are a few photos that you've never seen a year ago or 2 years ago even. And this is in-store displays, beautiful grocery displays that you see in normal retail but not in material. You see them out west a little bit. We're the #2 supplier with 14 share of market. It's incredible. 20 Bees has 4 of the top 12 SKUs. Would like to get a couple of other brands into that list. We're the #4 supplier for import, with Josh is the #1 brand in wine now in Ontario and getting their out in Canada. And I talked about Shiny building distribution and you can see a display photo there. So grocery is a huge piece. And as we see more privatization, we're expecting -- some say imminently, some say within the next year or 2, a significant increase in grocery licenses. We actually have the key buyer for Loblaw's at one of our wineries yesterday, he was talking nationally about their expectations of more opening of retail. And we actually had the Mondavi folks with them and talking about getting one of our import wines, C.K Mondavi listed throughout their Loblaw's banners. It's a fabulous meeting. I mean I have probably 2 really core beliefs. One is that brands need authenticity, and home is a really good way to help do that. So you'll see us making sure our brands have homes, places that they are rooted in, places and people that help to bring them to life. And then -- as much as I'd like to think we're all really good at tasting wine, most people aren't. And so you have to make the wine look as good or even better than it tastes. And I always say a $15 wine will taste like a $20 wine, if it looks good. So it's critical to get your brand design right, and you'll see some of the photos of the things we've done here. I'll talk about 2 things. One is I'll talk about some redesigns. I'll talk about a new product we just launched. So our predecessors, Tim. Tim is our Director of Marketing now on the trajectory side. He had a hand in this, as did a couple of people on the domestic side, and certainly Murray. We launched this new product called Mindful. I'm amazed we could get the trademark. It is the only VQA low sugar, low alcohol, 8% wine, 1 gram of sugar per serving. It tastes shockingly good for the compromises that come with those 2 pieces. It's arguably the best taste when I've tried of that caliber, definitely leveraging a trend. LCBO desperately wanted this, and we were the first to provide it. And we've got more coming. They just accepted the Sparkling Mindful product for next spring, and we're working them on the Merlot. We -- I think we sold 35 of 4,000 cases already in just a short couple of months. This thing is going to be a great addition to our portfolio. Really proud of the team for creating that. And since I've arrived, we've been working really hard on making our brands look more premium, just what I was talking about a moment ago. On the far left, this is coming shortly. This is a smaller change, but the goal was to make it more premium, make it more contemporary, make it more professional. And just you got to change brands, you got to dial them up every 3, 4, 5 years. So this is 20Bees. We showed this to our retailers. They're really excited about the relatively modest changes we've made on the core lineup. We're going to see this first come in this month in the pouch, and the rest will roll out in the next 3 to 4 months. I believe that brands should have multiple offerings. And if you have a retail brand only, is missing some dimension. So we've launched a premium tier of 20Bees. And you can see this design just takes it up a notch. We go now from $10 to $14 in the regular retail tier to $20 to $35. The top end is the Queen Bee there, which is a Meritage blend at the high end. And it's in our retail stores and e-comm, and it's been presented to vintages and everyone seems to be responding fabulously to it. And then we took a relook at FRESH. So FRESH wines has been in our portfolio, while Andrew Green would know, it's been a long time. It came out of Birchwood, fabulous brand. We had 5 SKUs at the LCBO. It slowly started to erode -- we think it was really important to call it FRESH wines, not just FRESH and because they are -- that's what they're about their FRESH [indiscernible] wines. We gave it a home, that's Shiny, so you can go there and you'll find this wine on site. And we just went after a trend of younger, little more feminine, real fun lifestyle wines. And then lately, we've done a modest redesign on it to just our top end most premium wine at Lakeview Cellars fabulous. And you'll see very shortly, we're adjusting the Diamond logo a little bit. The one that you see up top here is not quite the final version. It's modest change, just making sure we're staying look professional, look premium. It was ready for a change, and you'll shortly see a change to Creekside as well. So our team has been very busy, driving our winemakers crazy, changing a lot of points. So it's a lot of logistics, and some onetime cost to get this done. But I felt it was very important. We saw some fabulous results at the winery despite lower international tourism, but 50% growth year-to-date. Now this is up to year-to-date 2023. We've premiumized our experience at Lakeview, and really dialed up the class where the experience of just how it feels when you're served wine there. We also did what I call the [ 5 10 5 ], which is we average increased our price of per bottle by $5, and it didn't skip a beat, not a beat at all. we added $10 to our group tours. And if there were more group tours because of international tourism, that was about $350,000 annually to the bottom line once we get back to that kind of tourism. Again, didn't skip a beat because everyone charges them, and we're seeing actually more group tours sign up to join us. And then we added $5 to our tasting fees without a refund. So when you come, you pay a tasting fee because you get real value. And recently, we doubled the wine club in price because it was unprofitable. It's now our most profitable, and we lost about 15% of our of our people, and we're now growing from there but at a profitable rate. [indiscernible] talked about earlier. We're seeing it positively contributing to EBITDA the last couple of months now that we've got events going there. Creekside is doing quite well, good active, dedicated in Wine Club members, events and traffic seems pretty good there. [ LCO's ] doing fine, and I talked a lot about Shiny. But this new brand home should drive somewhere between $450 million and $550 million this -- in a rolling 12 period of incremental revenue, just having that home and the ability to direct to consumer. There's some positive things happening at the wineries. You see a real -- when you look at this list, these are all the active accounts on-premise in terms of sort of multi-unit outlets, so fabulous group of opportunities here. We've got some great meetings coming up with Boston Pizza and Earls out west and next little while. So some good things happening on-premise. And then export it was the bane of our existence in Q1, but in 2022 fiscal, we doubled, so $2.4 million versus $1.1 million. We've been as high as $7 million in the past -- $7.5 million. And we're seeing growth. We still expect growth in fiscal '22, but it will be more modest than we had hoped for, but we expect growth. And we're in so many more countries, as you can see, even just the new markets secured this year down towards the bottom there, significant. And while we've lost volume in China, we saw $0.5 million of wine shipping out this week and next to China. So it's still our biggest country that we sell to, and we hope to get more. And I feel very optimistic about export because we're now no longer reliant just on 1 country. We've got -- Murray would correct me, I think we've got 17 countries now in our -- that we export to. So it's a terrific opportunity for us. and quite profitable. I won't run through each of the award. We won 84 new awards this year. So we've got a great one, and we need to make sure everyone knows that, and is not at 1 winery, it's at all the wines. So we're making fabulous plants. And I talked about meeting with the Mondavi folks yesterday, I think compared -- when you think about Woodbridge and the Robert Mondavi family, there's actually -- I believe there's no active Mondavi member in that winer anymore C. K. Mondavi had something like 6 or 8 family members active in the business, 5 generations deep, and they are fabulous. So they were here -- they've got some of their first listings in Canada over the last couple of years, and we see this as one of our biggest growth opportunities. I saw a couple of other new products that we've just won, including the Williams from Australia that just launched this. We just took over this month. And you see an [indiscernible], Deutsch and a really great opportunity with the general list of this Felix Solis brand. So there's lots to grow here, and we've got some terrific wines in this portfolio. If you go to anyone's house, you'll probably see Josh in their wine rack, and that's one of ours, obviously. So to try to put it to a page of what we're concentrating on a lot of what you've heard me talk about in the last few minutes. I won't labor this too much, but you think about premiumization. You heard me talk a lot about that for the last 2 minutes. You got to take price, and I'm looking for it everywhere we can get it in an inflationary market. Direct-to-consumer, I like the fact that you can control this channel. It allows you to manage your inventory, could you turn on the gas on something that you got more than you need. You can -- it's a fabulous channel, it's probably did about $2 million for us this year. You grow your database and you talk to them well, and that's how you grow that channel. You mind that data was good CRM. Export, I just spoke about a moment ago, we see great opportunity there. We see great opportunities there. In terms of the agency, it's really about getting the right portfolio, selectively adding more going deeper with your current ones. We have fabulous suppliers who have many more products that we don't yet have in market. So you focus on those, you have deeper, more meaningful relationships. I talked about grocery, we're ready when it privatizes to go deeper and take our competitive advantage to them. And I think there's so much more in license fee. It's something we've been concentrating on for the last couple of years as we were going into COVID, and then coming out. We're seeing the growth in our portfolios really well suited and probably better than most. I said we've got great people. We do. Let's keep training them, let's make sure we hire well. And then it's this real balance between growth and cost containment. And it's a little out of balance right now because our costs are growing faster than our revenue, somewhat driven by having to compete again and by inflationary pieces happening, but we have to corral that, and it's a big chunk of my team's focus right now. And then look for more growth opportunities, whether it be in partnerships or acquisitions, we're constantly watching for what's out there. In terms of funding for the future, post the difficult 18 months, our -- the funding is to support our improved results and we have a couple of things that are coming at us. We have the Shiny escrow that I talked about $1.1 million. We project it might be a little bit more, $1.3 million in the winery support program, which truly is a 1-year lift. It will be offset by excise tax that we have to pay in the future, not completely offset, but mostly offset. And we're working on a $3 million to $3.5 million convertible debenture pending final decisions and authorizations. And Ryan and team from the Board is working on a revised banking agreement right now. It's in final negotiation. I think it's very close from what Ryan updated me on yesterday. And others on the call might give more dimension to these as well. But it's important that we bridge from these results we've been having to the point where we have improved results at [indiscernible]. So to summarize for me, we've got good revenue growth. We've got gross margin growing in total, and I think we've got our gross margin -- percentage of gross margin under control, hopefully growing in the future. Our acquisitions have sold a number of portfolio gaps and added to our capabilities. We're premiumizing everything that we can without losing volume because we want to fill that winery. Grocery and direct-to-consumer e-commerce are real competitive advantages for us versus the industry on average. Export is improving despite a really rough Q1. We're focused on driving innovation, the news, new ideas and adding trajectory suppliers to our agency. And we're -- I probably said that 5 times now, balancing growth and cost containment. And one thing coming out of this meeting, and a number of you have actually referenced it to me is just how are we going to talk about our business, how are we going to communicate our business to the investment -- to the public market? And the belief is we have a story to tell. It needs to be backed with improved results and a good story, and that's something we're working on over the next couple of months. David, that is it for me. And I'm open for questions.

Yes, yes, exactly. I would suggest if anybody has questions, you can kind of take yourself off mute, and we can see if we can do this without raising our hands. If it is not, maybe we'll have to monitor it. But if somebody has any questions, just go ahead. Thant looks like Stephen Takacsy has a question. I see him in there.