Little Green Pharma Ltd (LGP) Earnings Call Transcript & Summary

Welcome, everyone, to today's webinar for Little Green Pharma, ASX code LGP. Shortly, I'll introduce Little Green Pharma's CEO, Paul Long, who will provide a presentation on the quarterly activities report for the period ended September 2024. It's fair to say it was a cracking quarter for Little Green Pharma. At the conclusion of the presentation, Paul will be on hand to answer any questions you may have, which you can submit using the Q&A button at the bottom of the screen. So, during the presentation, think of any questions you may have and submit them, and I'll put them to Paul at the end of the presentation. Right. Now we're going to get into it. I would like to now introduce Little Green Pharma's CEO, Paul Long, who, as I said, will talk to the quarterly presentation, the September quarter results, and give some insights into those results and what they mean for Little Green Pharma and shareholders of Little Green Pharma moving forward. Paul, if you can hear me, hopefully, you'll be able to turn on your camera.

Good morning, everyone. Thanks, David. Can you hear me?

Yes, got you loud and clear.

Excellent. Let me just share -- go back in and share the presentation. Excellent. Good morning, everyone, and afternoon for those joining on the East Coast, and thank you for your time today, everyone. As David mentioned, it was a fantastic quarter for us. I think it was a gradual build for us this year. We've been really working well over a number of years, really working towards a quarter like this and the capability inside the business to have repeat growth quarters like this has been a focus for a long time. So the pleasing thing about this quarter, and I'll share a little bit about that in today's presentation, is that we didn't have any really big lumpy movements in this quarter, which meant that it was a gradual build into this quarter. But certainly, I'd like to take a moment to really thank the team at Little Green Pharma. Our industry has been challenging for a number of years now, and there has been a big focus inside the company to be really pushing for cash flow positivity. And we've sounded like a bit of a broken record internally for a long time. So it's credit to what we've been able to achieve and primarily to our incredible team here at Little Green Pharma. So I'll jump in now and work through a bit of a highlight of the quarter. So to begin with, I'll just give a quick snapshot really of how we -- of really who we are for those who haven't had that previously that are on the call today. But you can see on this slide that Little Green Pharma, being really the headco of our business in LGP, but we have a number of brands now. And that really was a response to what we saw happening, particularly in the Australian market. So we're not seeing this yet in some of those emerging European markets. But in Australia, we felt that it was really critical that we started to think more like a fast-mover consuming goods style company, and we started to think about how we could target certain parts of the market. So you can see there with CherryCo and Indicare and a few other, we'll have a few other brands late this year that start to segment the market slightly. Important to note that we're still absolutely in the swim lane of medical cannabis focus. You'll also see there Reset Mind Sciences, which is our psychedelic, which is one of the leading companies now here in Australia, soon to provide services for a number of conditions out of our -- and a partnership with HIF out of our clinic here in Western Australia. But we've expanded our product range to 26 products now across 3 facilities, 1 in Perth, 1 in Busselton and a very large site in Denmark, just 2 hours from the German border. Our total production capacity sits at 30 tonnes. So we've got a huge opportunity for growth and economic growth, and I'll talk more about that in a slide. We're distributing across a number of territories. We continue to really double down and invest in R&D. And whilst that's not heading down a drug registration pathway, we really do believe setting up our brand and the future growth and more information required inside the medical market will benefit us in the years to come. The team has flexed and dropped off and expanded over the journey. But as we sit here today across our 3 locations, we have 94 staff across 5 countries. And our big focus, particularly on the R&D side, has been building out our genetic bank. So we have over 20 strains now that have specifically been handcrafted for specific parts of the market. So I'll just start by giving you a bit of a general market update. What we had seen in the last 2 to 3 years was a significant oversupply actually of product globally, primarily coming out of the Canadian market. So if we look at the stats, a big chunk of the Australian products coming into the market, particularly flower, which dominates the market here in Australia, has come from the Canadian market into the Australian market. So my estimation would be around about the 70% of total flower supply coming in from Canada. And we've seen a similar number into the German market, which is one of our other big markets. So we're starting to see that change slightly. So this oversupply, this investment that was around in 2017 and '18 and even 2016, there was a huge investment made into the cultivation side of business. And that resulted in a big oversupply in the market. Whilst I don't think we're fully out of the woods yet, we're starting to see just some change now in the power of those conversations. We sit on both sides of the fence. Obviously, our primary focus is the Little Green Pharma brand, but we also supply white label into a number of companies, primarily into the European market, and I'll expand on that. But it has been interesting to see that change. I think the investment after 2018 certainly has dried up in the Canadian market, and that's resulted in most companies in our space really growing to order. So it's not an oversupply anymore, which is having a positive impact, I think, on the markets in which we're operating in. So I think if we just touch on, and I'll expand more on the European markets, but we're definitely seeing a resurgence in some of our key markets. The Australian market continues to see strong growth, and we're really, really happy and comfortable with where our position and our market share is continuing to trend. The German market, for those who are not aware, went through a regulatory down scheduling early this year, mid -- that was in July. And we've seen some pretty significant increase in demand out of that market, and I'll touch more a little bit later on, in particular, France, U.K. and Poland. And we're seeing, as a general rule, that stocks in our space seem to be priced well below sort of fundamentals. And in particular, I'll talk on a slide later about our fundamentals as a company, why we think we represent really good value in the current market, particularly with the growth opportunities that we have. And like I mentioned that first point, this shift towards kind of producers having a little bit more power in these conversations, we're starting to feel that. And as the market changes, we're seeing the evolution of our market through shakeout and more maturity, particularly in Australia. We think that the stalwarts of the industry like Little Green Pharma are very, very well positioned. So, touching on our markets. As hopefully, most of you know on the call, our focus has been building a foundation in Australia. We believe we've got a really good market share, and we're continuing to see some decent growth, particularly on the back of our thinking around market segmentation, has been a successful move for us over the last 12 months. But the European market -- in this slide, if you see the numbers on each slide, it actually represents the time in which we entered each market. So Australia was first, Germany was second, U.K. was third and so on and so forth. The German market, as I mentioned, the changes mid this year have resulted in a really large increase in demand. As we sit here today, the product -- almost all product entering that market is sold. So it's an interesting dynamic we're seeing in that market. Our site, if you can see # 5 in Denmark, we have a large 30-tonne site up in Denmark, which just a 2-hour drive from that border. So we expect to see continued significant growth into the German market, and we think we're very, very well positioned to capitalize on that opportunity. The U.K. market is the other interesting one I'll touch on briefly, but our partnerships into the U.K. market have been really strong, and we're seeing demand increase almost in a month-on-month capacity. So whilst there is still a limitation in that it must be a specialist doctor prescribing inside the U.K., that seems to be unlocked and some real growth coming out of there. So we've got some exciting things prepared for the U.K. market as well. I'll touch on the Polish market. So we're one of only a handful of products being sold in that market. So to enter that market, took us about probably start to finish over 2 years, but it is a heavily regulated market where you must submit a dossier, like a pharmaceutical dossier. And so therefore, there's limited companies in the world that are able and have the capacity to submit those dossiers. So that's given us a big advantage inside that market. I believe there's only between 7 and 10 products currently available inside that market, and we expect to see some pretty significant growth from product sales. We've been positioning slightly looking to reposition the flower in which we're delivering into that market from our Australian facility up to our Danish facility given the tyranny of distance between our Danish site and straight into the Polish market. So, certainly more to follow there. And then the French one is the other really interesting one. For those that recall in previous presentations, we've been a part of a clinical trial or a study really that's been run by the French government, the ANSM. And that study has run firstly over 2 years, it got expanded for a third year, and now we're into a transition period. Inside that transition period, we continue 1 of only 2 companies that continue to deliver product into that transition period to patients. That's a really nice market for us at the moment. We're delivering product at a decent margin, and we will expect to see that into 2025 at a similar rate. But then late 2025 or we predict early 2026, that market will open up to a medical market. Now the advantage we have in being a part of the trial as we see it is that our dossier will be submitted first, and it's highly likely that we'll be the only -- one of the only products, maybe there'll be 2, to begin with in 2026. So it gives us a first-mover advantage. There will be no flower to begin with, just other forms on that market as we understand it, and it will be through specialists. So it won't be the huge growth that we're seeing 6 years in, 7 years into the Australian market, but it will be limited number of players in that market. It will be dossier submissions, like I mentioned, into the Polish market. So -- and hopefully, decent margins. So -- but if you zoom out and look at the size of France, 65 million people, a significant opportunity. And if we look at all those green zones in there that we're operating, it represents 380 million people. And for us in Australia compared to 25 million people, it's obvious to us that whilst Australia will remain the key focus as our foundation, and it's one of the largest markets, medical markets in the world, the future for us is really up in Europe. So touching on our quarterly, as hopefully some of you would have seen, we did have a really strong and growth quarter. So we had a record revenue of $10.2 million, unaudited, of course, and that was up 40% on the prior quarter. So a fantastic result. We also had a really strong cash receipts position, and that's been a shift inside our -- internally here to make sure that we're slightly changing the dynamics on how we're bringing cash in, particularly in a scenario where we're really trying to drive our cash receipts and really trying to drive towards cash flow positivity. So you can see the trend line there over the last 4 or 5 quarters, certainly feeling like that's heading in the right direction. If we now break down on the next slide, our revenue by category. So if we look at our flower, oil and vaporizer products and others, you can see there that in the last quarter that we just reported, we had a pretty significant growth in both flower and in our oil-based products. So a 45% increase in our oil sales, and that was driven both in Australia, but also in Europe, specifically into France. We had delivery up into France during the quarter, and we expect to see that again in the next. And a 35% increase in flower sales. And that was largely driven both by Little Green Pharma brand, but also white label brands as well. And then if you trend line on the bottom graph there, you have a look at how we're tracking year-on-year. Just a note on this particular slide that the periods have been annualized to give a straight-line basis, as we switched to a March year-end a few years ago, we've annualized that year. And obviously, 2025, we've done the same. But again, you can see a really positive trend on where -- how we're tracking. Okay. If we just break down on this slide into Australia and Europe, we have been very focused in the European sales and really driving some growth there. And so it was really encouraging to actually see just in the last quarter, a fairly significant increase into the Europe. You see the light blue section on that top graph. So we do expect to see that continue to grow. It's not, as I mentioned before, France 2026, early 2026, the German market slowly opening up, the U.K. market opening, the Polish market opening. So we'll see -- we believe that we'll see -- continue to see a really strong trend towards that being bigger. And we expect within years to come that, that will be almost inverted when we look at that top graph. So there's a big focus on growth inside those markets. But over a 30% increase in flower sales in Australia, coupled with a 35% increase in oil sales. And we did have a 60% increase, as I mentioned, in the flower sales into Europe and over 100% increase in oil sales in the quarter. And again, if we look at the straight-line annualized basis, we're seeing some good growth. And again, what's encouraging is that growth that we're seeing in FY '25 into the European market, but a continued growth here and a continued growth in market share for the Australian market. I mentioned at the start that we had a breakdown in our products, and we had been -- for sort of a good 12 months before this quarter, we've been really starting to try to look through the lens of FMCG and market segmentation. So you can see here that, that planning has -- is really paying off for us. So in particular, you have a look at our CherryCo sales. So CherryCo began with a way to use the smalls that we're harvesting, particularly in our Danish site. So the market is really demanding a larger flower inside the market. So we began to grade our flower. So we had sort of 70% of our flower roughly going into A grade or superior-based product, which we label LGP. And then we were left with 20% to 30% of the -- each batch that we decided to bring in under CherryCo. But we've seen really increased demand, which has meant that we've had -- we've looked elsewhere for some additional flower, and we're actually looking to grow inside our own facility. And as we scale into volume inside that market, particularly at that site in Denmark, we see that we'll get an increase or a decrease cost per gram as we increase the volume from where we sit today. So if we have a look at this slide, this is a really interesting slide. I think we can see there that our cash at bank was -- for the first time without R&D, we had a positive cash flow -- cash at bank. So we sat at $4.8 million, up from $4.3 million. We can also see if we trend this over the last few years that we can really see we've tightened up our debt position. So we're sitting at $3.3 million of debt. And that gives us a really undervalued enterprise value, in my opinion. So we're trading based upon the date in which we released this slide, but at 0 -- or put this slide together, sorry, at 0.75, I think we're slightly higher on an enterprise value to annualized revenue as we sit here today after we had a decent run off the back of this quarterly and our enterprise value of only 0.4x of our net tangible assets. So our net tangible assets, you can see there in September 30, 2024, is above $70 million, and that's largely made up of the landholding. So we are really backed by landholding. We've been able to maintain that landholding. So up in Denmark, we not only own the building itself, but the land, the farm next door, 2 houses that are connected to the property as well. So we own that land. It's a tangible asset that we have, and we've been able to maintain that land and that holding and even tighten up our debt and in a market where we're pushing to cash flow positivity. So it just -- it gives us a different foundation. I think if you compare us to other players in the market we're underpinned by hard assets as well. But not only that, we've got to cash flow positivity, and we see this huge growth opportunity. I think if we just touch then just on the peers, and I won't sort of delve too much into this slide, but hopefully there might be a few questions on this. But if we -- the summary here is that there has been a lot of change in our market. It has been a challenging 2 years inside the medicinal cannabis market here in Australia and, in fact, internationally. But if we look at the 20 cannabis companies in 2022 that were listed, there's 7 that are either delisted or suspended now, and we expect to see that to continue. I think if you look at some of the metrics of a few of those companies on the previous slide, we expect to see that relatively soon with a few more. But I think the key 3 points here is the first one is that we're 1 of only 2 companies with positive operating cash flow and the only one with growth -- year-on-year growth there. So, really well positioned from an operating cash flow perspective. We had the highest percentage of revenue growth for companies with similar revenue. So we've said more than $25 million. We had the highest revenue growth. So really strong performance from our team, largely driven through the Australian position. And the majority of companies have incurred operating cash outflows during the year, which are greater than their cash at hand. So again, we outperformed most companies that we've seen that are listed there. So a really strong position for this quarter, but also one that's been trending for a period of time. On the corporate overview, we'll touch -- I think the big change that some of you may have seen is that the Thorney Group took a large position in the company last week. And so, you'll see there that our largest shareholder, Tiga Trading, which is Thorney Investments. They were our largest shareholder last week, holding, I think, 11% or 12%, and they've now gone up to 19.8%, holding 60 million shares. We think this is a fantastic sign for our business, and they've been a supportive but driven shareholder to really drive a lot of the fundamentals. So we're really excited that Thorney have taken that stake. And it was an off-market transaction with Hancock Prospecting last week. So we're really excited around the faith shown in Thorney and the opportunity we've got to continue to see them to take a strong position. Obviously, they're right at the 19.8% position for -- which is the maximum position before takeover provisions would entail inside our trading here in Australia. And I guess in summary, what I'd just like to point out a few points, which I have been inside this presentation, but it really does feel like it has been a challenging few years, but it does start to feel like a few things are starting to align for us. So the size of the market has -- is here to stay. It's validated. I think these conversations, these presentations we were having back in 2018 and '19, we spoke about a potential size of the market in Australia that at the time felt significant. But as we sit here today, there's over 1 million patients, we believe, inside the Australian market, and we expect to see that to continue to grow. So the size of this market -- this is a product that is working for patients in this country. And we believe that the metrics of growth we'll see into those European markets and a lot of those markets are well behind where we are in Australia. We have the biggest facility in Europe. And like I mentioned, we have this low marginal cost now. So for every gram that we produce now gets cheaper and cheaper for us. We're currently -- our total tonnage out of the European site sits at sort of 4 to 5 tonnes per year at the moment, but we can do up to 30 tonnes. So as we continue to scale, our average price comes down. So that puts us in a very, very strong position. And for those that don't know that site, we purchased off Canopy. Canopy had spent $120 million building that site. We purchased it for $20 million, and we own it debt free. So no one's going to build another $120 million site in this market. And so we're incredibly well positioned to deliver low-cost, high-quality product into particularly the European market, but even beyond from that site. The position financially we've landed in on cash flow positive and record revenue in the last quarter, we expect to see that to continue to grow, and it has been one in which is quite unique in the market. We are backed by hard assets, like I mentioned before. And the other really important thing I'll say on this slide is the start -- not only those competitor exits that I mentioned before, but there's been significant media and regulator crackdowns. And I personally believe whilst there's some in the industry that feel that, that is bringing some negativity on the industry, and yes, that is the case, in my opinion, I feel that shining a light on the poor behavior from some -- just a few players out there in the market is a really good thing. And I think it will clean up the industry, and I think we'll get to a position where we mature and there'll be a fewer really good quality players in the market. And we obviously believe that we'll be one of those, particularly in the Australian market and into Europe. And I think more broadly, outside of Little Green Pharma and medicinal cannabis, we expect to see a different market in 2026. We're starting to see those different conversations happening in the market from institutional investors now starting to see that there might be a shift in slowing inflation and interest rates next year, which changes the dynamics and brings in some more retail investment into next year. So this year has been a really solid period for us, but we do expect that there will be some changes more broadly in the market next year. That's it for me. David, I might hand back to you to see if we've got any Q&A on the way through.

Thanks, Paul. Great presentation and clearly, very pleased with the results. So, well done there. I might just get you to stop sharing your screen might make that easier.

Yes, there we go.

There we go. Stack of questions. Clearly, a very well-educated shareholder base. So we do have a lot of questions. So let's just jump straight into them. LGP reported a record revenue of $10.2 million, a 40% increase from the previous quarter. What are the key factors driving this growth, particularly in the European market?

Yes. So I think in this -- well, as I mentioned before, there's been a quarter-on-quarter growth. But in the last quarter, we obviously saw some increased growth into both oil and flower sales. So we had a delivery -- and that's a relatively consistent delivery into the French market. So that was noticeable. And then flower markets into both the German and the U.K. market. So we're seeing some repeat orders and growth orders into a couple of customers that we're working into that market, but also I think in the Australian market, I think we had a significant increase in the CherryCo sales as well. So the nice thing about that quarter, there wasn't one thing that we could point to, to say that was a lumpy position. It was across Australian brands, Australian products, even our Little Green Pharma sales here in Australia. Even our traditional pharmaceutical oils that we sell in the market, we're seeing some trending growth. So that was really positive.

Now we're just getting a little bit of reverb, if you like, off your microphone. So I'm not sure you might need to just adjust that a little bit. But I will jump into the next question. You did talk about flower and oil sales increasing 35% and 45%, respectively. How do you see that demand evolving for these products across the various markets? And do you have any plans to introduce any new product lines?

Is that sounding a little bit okay now, David?

We're just getting a little metallic ring there, but we might just persevere.

Okay. No worries. I can take my headphones out, but I'm not sure how that will go. So we'll give it a go. Yes, we do absolutely see that the focus on new brands will be important. The CherryCo success has shown us that, that pathway is important. So we will -- there will be a number of new brands that we're working on. We're hoping to have -- in the next couple of quarters, you'll see a few new brands out there in the market, again, segmenting the market here in Australia. Inside the growth into the European market, right at the moment, I mean, we've been growing to demand. So once we know what our fixed demand is, that is how we cultivate. We're not growing additional product in our Danish facility. We haven't been doing that because we've been chasing cash flow breakeven. So it's not possible to just quickly turn on an extra 5 tonne out of that market. We have to -- by the time we decide to do that and make that investment, it takes 4 to 5 months before we actually bring that into the market. But we have been watching the trend in growth, particularly on the German market and then U.K. has been interesting. So you'll see that our capacity continues to grow into that market, and we should start to see that trickle through into the next quarter and certainly start of 2025.

Now we might just try seeing if there is a little metallic sound coming through if you are able to unplug the headphones, but -- hopefully.

Can you hear me now?

Yes, yes. Got you. No problems. Yes, that's perfect. Now looking at European market expansion...

Sorry, mate. I can't hear you. Okay. Just try now, David.

Yes. Can you hear me now? Sorry, we always know the joys of webinars, you occasionally do get technical issues. So we do apologize for that, and we will jump back into the Q&A in a second.

What about now?

Yes. Can you hear me? Can you hear me?

Sorry, mate, I can't hear you. I might have to put my headphones back on.

Yes, put them back on.

Again, David?

Yes. Can you hear us now?

I can, yes. I've got you now. Sorry.

Okay. No problems at all. Now just looking at the European market expansion, given the strong growth in Europe, particularly in Germany, France and the U.K., can you elaborate on your strategy for further penetration in these markets? And are there any regulatory hurdles anticipated that could impact growth?

Yes. So our strategy inside Little Green Pharma has been a focus on brand LGP. Whilst I mentioned in the presentation, we sit on the LGP side, but on our own brand and the subsequent brands we're working on, we're also actively working out there in the white label market. So we do deliver into a couple of customers in Germany, a couple of customers in the U.K. and under our own brand into the Polish market with a partner. So we're not actively out there looking for white label partners. But for every additional gram that we sell, it brings our average cost price down, which brings our margin -- increases our margin for our own brand. So it is -- we -- given the scale and the size of the market, given the demand we're seeing, in particular, inside the German market, there's increased inbound from some of the bigger groups to work with us. So we'll wait and see where all of those things land. But for us, we're really open to those conversations, and it gives us that economies of growth of scale for us inside our own brand. So it will be a combination of both 70% to 80% of our strategic thinking will be on brand LGP, and we will see our own brand begin to push a little bit harder into the German and the U.K. markets over the next 12 months. But whilst we transition into that and whilst we scale up, we'll certainly take on some more white label volume. That's where we're seeing quite a bit of that growth at the moment. So we're comfortable with that.

And you touched on in your presentation, the introduction of some new cost-saving initiatives, which are sort of fixed cost-saving initiatives, so not one-offs, but something that will drive cost savings year-on-year. Are there a number of other initiatives that you're looking at? And how do you think they may impact margins moving forward?

Yes. Look, I think we have been focusing on cash flow breakeven, as I mentioned, for a long time. So cost savings clearly have been a big part of that. I think we -- if we compare ourselves to the markets we're operating in to the parts of the supply chain that we operate in, I think we're pretty unique out there in the market. I think what we've been able to deliver is quite exceptional if we look at all of those factors. Having said that, there's always some smarter ways to do elements of the market. So one of the things we did actually mention in this quarterly is that we've had a slight shift in what we're -- how we're operating our Busselton facility. So we're working with a third party, our former head grower down there to essentially manage the team. And that enables us to get a high rental yield, but also to have an offtake agreement. And combined, that brings us about $0.5 million annualized cost savings. And that we wouldn't have seen that yet in the last quarter. So we'll see that start to trend through now. So that's relatively significant cost savings in the scheme of what we've been trying to push for the last 2 years and a few other minor things. So here in WA, we combined our Reset Mind Sciences with our Little Green Pharma offices just recently. So we'll see some flow-through cost savings there. And -- but really, if we look at our Danish asset, the fixed cost base we have there, we've got site managers, we've got QA managers, we've got obviously the hard asset itself, really, the incremental increase is relatively insignificant as we scale up our volume now.

And in terms of sort of the balance sheet, very robust balance sheet with almost $5 million cash and minimal debt, and as you say, net operating cash inflows. Do you anticipate maintaining that positive cash flow? And do you think you've sort of -- you've crossed that precipice, if you like, into being a cash flow positive business?

Yes. Look, I think we've always been and we'll continue to be cautious of making clear forecasts in this market and this space. And it's not -- what is clear, it won't be a straight line. It never has been for the last 7 years in our industry. So there will be some lumpiness to what we see. We've been working towards this quarter and these results for a number of years. I can't stress that enough. And we did see a nice gradual growth into this quarter. The March and the June quarters, we thought were really strong. It was great to actually tick over that into cash flow positivity in this particular quarter. We believe we'll continue to see that type of growth, but we don't think it will be a straight line. There will be some lumpiness. And for us, we sit back and go, what are the fundamentals of where we're heading in the markets we're operating in, can we deliver high quality at a reasonable cost into that market and continue to grow? And for us, the answer is yes, and our strategy is working and clear. So yes, I think inevitably, that's the pathway we're heading. But yes, we expect to see a little bit of lumpiness in this market as we have seen for 7 years.

Now this may be a question you don't want to answer given the fact we're not in the business of making projections or forecast. But do you have a view on what revenue targets look like over the coming 6 to 12 months?

I think all we can really say to that one, David, is if you look back historically at what our top line revenue growth line has been, it's roughly a 35% CAGR for the last 4 years. So I think if you're looking at our annualized revenue and you add a 35% on to that, I think that would be probably a fair expectation based upon history. But again, we're not in a position of forecasting looking forward. But just looking at that, we'd expect to see growth would [ beat ] the performance. And I think if you took a straight line, so Canaccord issued some research on us last week. I'm not sure for those that haven't seen that, please feel free to reach out, and I can share that through. But Campbell, the researcher, basically said if Little Green Pharma straight-lined revenue over the next 2 quarters for this particular financial year, then we'd actually hit about a 48% or 50% growth rate for this year. So this year could be slightly better than average, but we expect that, that sort of 30% to 35% as sort of a minimum moving forward.

There's a question here in relation to M&A. You clearly keep a close eye on your peers and you understand the various challenges and opportunities presented by each. Do you keep an eye on M&A? And if you do, what is the perfect M&A opportunity look like?

Yes. Yes. The answer is we do. We have a really clear 4-point strategic strategy for growth inside Little Green Pharma. And point 3 is to look at M&A opportunities. So we are pretty actively out there having a look, and it has to make sense for us, both in a product alignment, geography, a whole number of areas, and even culturally is really important for us. We've worked really hard to get to the position we have and to see on behalf of shareholders and to see continued growth. And so whilst we don't think it's absolutely mission-critical, but we do see opportunity out there. We look at some of the other players in the market and see that all of us in the market are undervalued. So I think it's inevitable for us to be looking, but we will be very, very conservative on how we look at opportunity to ensure that we maximize shareholder return on any opportunity.

And I suppose the follow-on from that, a point has just been made that when you acquired the Danish facility, everyone thought it was too big to -- although very fairly priced for a company of your size, almost too expensive and too risky. Do you now look back and think that was the right call to make and what it's now enabled the company to do?

Yes, I think so. Yes, we did have plenty of doubters in that market. Remember, we took that acquisition at a time where there was an oversupply in the market and therefore, some really cheap product flowing through from -- particular from Canada. But as we sit here today, we think that, that has been a really good decision. I think for us, the fundamentals of the tangible asset made a lot of sense and the ability to control our own supply chain even through COVID years has been really instrumental in sort of maintaining our growth. And like I mentioned before, we're starting to see this shift from suppliers at a cultivation level, the conversation is changing slightly. We see a bit of power coming back to the growers for the first time in years. So we do think we're in a good position. And like I mentioned before, no one's going to build a $120 million site in Europe anymore. That's definitely not going to happen. And for us, we're at 4 or 5 tonnes, but we expect that to, within a few quarters, be up to 6, 7, potentially 8 tonnes and continue to grow as that market expands into the European market, sure.

And just a question here, more probably product related. Can you offer any commentary on dosage forms? We've seen the evolution of flower and now into oil and have clearly performed well for Little Green Pharma. But we're now pastilles [indiscernible] to grow. Where do you see the market heading? And how do you align the business to those market changes?

Yes. We do think that there'll be -- that the gummy range will be quite significant inside this market. So we're working -- we're pretty close to having a product inside that category. What we try not to do is to reinvent the wheel per se. I think for us, you can look at more evolved markets, in particular, the Canadian and even some of the U.S. adult-use markets to look at where these things land and what the average percentage of flower versus edible versus capsule versus oil-based products versus vape-based products. So we really closely watch those markets. And when we're looking at our new market segmentation, we're clearly thinking about what -- where we think that market might land. And so far, I think we've made some pretty good calls there. There are some interesting tweaks to that, that I think are a little bit different for our market and particularly the drug registration market. So the Canadians and the big multistate operators in the U.S., they are very adult-use market thinking, whereas for us, we don't really directly compete with those groups in many ways because of -- I mentioned these dossiers that we submit into the European markets. You have to have a pharmaceutical-grade pathway to deliver those dossiers into the market. And it does mean you've got limited players. So it won't be a like-for-like in a lot of markets, but certainly, the trend that we've seen and we think we'll continue to see in the Australian market is an overlay of the use in those markets. So yes, I agree with that comment, and we are -- we have been -- you can see that the vaporizer products has been an interesting opportunity and growth for us. We've got a new range of -- inside that category coming out soon. And certainly, the more of the edible style products, we think will emerge more into late this year, early next year.

Just a couple of questions on Reset. You talked in the presentation around -- and it was well documented in the quarterly around that you've completed recruitment and finished dosing by the end of 2024. Can you provide any updates? And are you seeing any preliminary observations from this activity?

Anecdotally, we're getting some really, really positive feedback from the researchers that are conducting that study. We've tweaked slightly the metrics of that study just to sort of manage the cost. But certainly, that's positioned us incredibly well inside Reset. It's enabled us to build a protocol that we can roll into the clinic here in Shenton Park. And just to remind everyone that the cost to actually -- so Australia downscheduled the use of psychedelics this year. And so as of July this year, we became one of the only countries in the world to actually deliver these services. And we've been the only company to actually partner up with a health insurer in HIF. So HIF have actually publicly come out and to say that if you're a HIF member, they'll be looking to fund, I think it was up to about 80% of the treatment, which is really, really significant. So Little Green Pharma, the trials enabled us to build a best-in-class protocol. And in partnership with HIF, we've got a really interesting delivery. So for us, we think that we'll see some really, really good growth. It's not off a pretty low cost base in how we're operating that at the moment given the environment. And we think that 2025, we'll see some really interesting growth inside that market in what is very, very unique.

And in terms of Reset and the trial underway, how does that fit into LGP's current and future product offerings? Do you see them aligning?

Yes. So there's definitely some crossover. So when a patient comes in for treatment for nonresponsive clinical depression or PTSD under that pathway, under the protocol, they actually need to come off their medication. So we see that there's an interesting crossover for cannabinoid-based medication leading up to the psychedelic treatment. It's an interesting opportunity. But for us, we actually do see them as different focuses, which is why Fleta is now running Reset and really heavily focused on the growth of that business. And we see some parallel opportunity. We're leveraging the assets and some of the cost bases we have inside the businesses, but we think Reset has a really unique position to drive its own pathway. And Little Green Pharma are obviously very, very focused on market share here in Australia and growth into those emerging European markets.

And if successful, what are the company's plans for commercializing the products or protocols validated through the Reset trial? How do you envisage positioning these in the market?

Yes. For us to begin with, it will be really focused on getting the model right here in Western Australia. So the number of authorized prescribers is limited. The number of first patients coming through that pathway will be limited. So it's proving that concept and sort of managing the cost going into that. And we've done that. We've intentionally set it up that way, but proving that concept. But certainly, the opportunity once we've proven that inside a private clinic setting is significant for scale. So the protocol we've built will be robust and really world-class. And the partnership with HIF will hopefully enable us to scale up into multiple locations. So the Australian market is significant in terms of the potential number of patients out there. But then you think globally, where if you're a patient inside another country and you're looking for evidence-based best practice solutions in this space if you've got one of those conditions I mentioned before, then you're probably going to look at the Australian market as that pathway. So there's international opportunity as well.

Last question. We have exhausted all the questions. So I appreciate you taking them all on. In terms of looking forward, what's the focus? Is it maintaining that cash flow positivity as well as revenue growth? And are you confident of that continuing?

Yes. Look, our strategy hasn't -- actually hasn't changed for a long time, David. So our focus is to continue to maintain and grow market share inside the Australian market and to really focus on those new emerging markets inside Europe. Particularly, we really like those markets that are sort of more towards the pharmaceutical end where there's fewer players, limited opportunity to submit those dossiers, but then the growth for us inside those faster-moving markets like the German and the U.K. market and the Polish market. So strategy for us hasn't changed. We will still continue -- whilst our balance sheet is looking much stronger, and we've been working hard towards what we saw in this quarter, the focus won't change on ensuring we're maintaining really good cost-conscious balance sheet with managing costs and really driving our top line growth and margins on the way through as we get that scale. So yes, that strategy remains unchanged.

I did say it was the last question, but one has just come through that I feel like I should ask. How hard has it been for you and the team to maintain discipline and maintain focus when there's been a lot of noise in the medicinal cannabis space? There's been a number of companies, as you've outlined previously, sort of getting themselves into difficulty. How hard was it to just maintain that forward focus knowing where you wanted to get to?

Yes. I think even we've seen -- it sounds like there's some people on the call today that know the industry, which is great. But even we've seen over the last few months, a lot of negative press. I think the APC and then the age of negative press on some really poor activity out there or players inside the market. So the light is being shone on some of that activity. The regulator is beginning to crack down. I think there's a few big court cases that some people might be familiar with. So your question is how hard has it been for us to stay focused. I don't think at all. In fact, I think it's -- seeing this happen, we've almost applauded it from the sidelines because for us, I think that it's what is needed. We need to shake up in this market. This is -- we can't forget this is a medicine that is really helping patients that have had no other option. And we constantly have to come back and think about what -- when we make decisions, what's driving those decisions and [ it eases ] the patient. So what we don't want to see is this industry implode on some poor behavior. So that media, that regulator crackdown, I think we're applauding that. We're happy with that. We sort of called for this to happen a number of years ago. So we're, in some ways, happy to see that, and we think that it's just part of the evolution of our industry, and we think that those stalwarts like us and a few others will continue to be a big part of the market moving forward.

Well, that was the final question. So Paul, thank you, as I said, for taking all of those questions on. There was a stack to get through, but I appreciate you taking the time to give them all a go and appreciate everyone who submitted questions. Certainly, a lot came through. As I said at the beginning, I think you must be pleased, you and the team, for the quarterly results you've delivered. The markets reacted positively. They've seen the results for what they are and how positive they are, but also setting the foundation for the continued growth of Little Green Pharma, not just here in Australia, but abroad, both operationally and financially. And I think aligning those 2 things has been a key aspect of the success of the company. So Paul, thank you to you and the team.

Thanks, David, and thanks to everyone for joining today. Appreciate it.

Thanks, everyone, for joining. A copy will be available and will be sent out to you over the coming 24 hours. Enjoy your day, continue to watch Little Green Pharma and the strides that it continues to make as it looks to continue to grow its business. Thanks, everyone, for participating, and have a great day.