Fire & Flower Holdings Corp

TSX:FAF

Earnings Call Transcript

[Operator]

Hello, everyone, and welcome to the Fire & Flower Holdings Corp. Second Quarter Fiscal 2021 Financial and Operational Results Call. My name is Daisy, and I'll be coordinating today's call. [Operator Instructions] I'll now hand over to your host, Trevor Fencott, the CEO of Fire & Flower Holdings, to begin. So Trevor, please go ahead.

[Trevor Fencott, President, CEO & Director]

Thank you very much, and thank you for joining me today on our second quarter 2021 conference call. I'm Trevor Fencott, President and CEO of Fire & Flower. And joining me today is Judy Adam, our CFO; and Nadia Vattovaz, our COO.Earlier today, our company published its operational and financial results for the second quarter ended July 31, 2021, and the results are available on the company's website and on SEDAR.Prior to beginning our call, I'll direct listeners to the cautionary statement regarding forward-looking information published on the news release for the second quarter, as well as the company's filings on SEDAR. Similar to previous earnings conference calls, we'll be providing commentary on our fiscal second quarter 2021 financial results, along with an operational update on our tech-enabled retail business model and the steps we've taken to advance key industry partnerships and secure strategic acquisitions through our newly implemented expanded digital strategy.We focused this quarter on strategically leveraging our proprietary data-driven retail platform, Hifyre, to drive near and long-term financial growth for Fire & Flower, while helping to transform the cannabis retail experience for the industry at large. We'll then conclude with the moderated question-and-answer period from equity research analysts that cover Fire & Flower.So first, I'd like to provide an overview of our financial highlights for the second quarter of 2021 as these results demonstrate the strength and continued success of our data-driven retail operations.Our vertically integrated operations -- and I'll start with financial highlights -- composed of our retail, wholesale and digital business segments continue to drive our total revenue performance, resulting in second quarter revenues increasing 51% year-over-year to CAD 43.3 million. Once again, we've delivered another quarter of positive adjusted EBITDA, making this our fifth consecutive quarter, reaching CAD 3.1 million in the second quarter, an increase of 176% compared to Q2 2020.Key to our overall growth is the milestone performance of our digital business, driven by our Hifyre digital retail & analytics platform. In the second quarter, this business segment generated CAD 3.7 million, representing an increase of 293% from the previous year comparable period.Before diving deeper into the numbers, which Judy will do in a bit, I'd like to review our operational accomplishments in the second quarter and discuss how we're successfully scaling our unique tech-enabled cannabis retail platform to reach a new level of growth for Fire & Flower and build our leadership position in new markets we strategically enter.So again, here for our operational highlights. Today, we operate 93 stores with multiple banner brands, including Friendly Stranger, HotBox, Happy Dayz and Fire & Flower. All of these are powered by our Hifyre digital retail & analytics platform. While our retail sales have been impacted this quarter by pricing pressure due to an unprecedented number of licenses being issued in Ontario, where we focused much of our retail expansion in Canada. We view this as a temporary industry disruption.Despite our retail sales being slightly down this quarter-over-quarter, we're more energized than ever by the opportunities we've secured this quarter in expanding our digital footprint to acquire an even stronger data set of customer cannabis purchasing behaviors.As you are aware, we are a technology-first cannabis retailer, and our competitive edge lies in our ability to own and drive value from the customer relationships that we continue to build through our data and analytics technology that's employed in every store we own, and now every store we enter, either through acquisition or partnership.Our retail strategy, unlike any of our competitors. And as we continue to deploy our digital technology platform across the expanding cannabis retail industry, we're building greater opportunities to generate high-margin revenue growth, and we're more powerfully demonstrating our true competitive edge to drive our leadership position.Our growth this quarter is a direct result of more and more leading cannabis players recognizing the unmatched value of our proprietary data-driven technology and are looking to Fire & Flower as an essential partner for growing their operations. Our long-standing partners have always been key to our growth, our strategic partner, Alimentation Couche-Tard, owners of Circle K, continue to support our expansion initiatives and exercise their A-3 warrants in Q2, increasing their position to 22.4% as we jointly work to advance our colocation pilot program within their Circle K stores. This program, which enables us to open Fire & Flower stores co-located with Couche-Tard Circle K stores, using their existing real estate, presents an opportunity as we aim to expand across Canada.In this quarter, we've also worked with our partner, American Acres, to drive expansion opportunities across the U.S., targeting key markets like California, Arizona and Nevada. Through our licensing agreement, American Acres has licensed our Fire & Flower brand, store operating system and Hifyre technology platform. We recently announced our entry into the California market with the opening of our first Fire & Flower brand store in Palm Springs, California. In addition, American Acres has officially changed its name to Fire & Flower U.S. holdings, firmly establishing our U.S. entry strategy and laying the foundation for New Fire & Flower branded U.S. store openings.As part of our licensing agreement, Fire & Flower has an option to acquire American acres once regulations permit. We believe that we have a unique opportunity to expand in the U.S. by continuing to leverage our Hifyre technology as we incorporate our platform into each acquired store to strategically advance our overall data-driven retail offering.Finally, in the second quarter, we entered into a strategic supply agreement with Humble & Fume, to offer an expanded online catalog of Humble's newest products, including a wide assortment of the most popular cannabis accessories in the world. With the addition of over 5,000 new SKUS, we have further deepened our relationship with our customers by expanding the Sparks Perks program to the cannabis accessories consumer segment, driving even stronger digital engagement with a broader customer base. Another key facet of this partnership is that it requires little capital investment from our end, as we are able to extend our existing Hifyre digital retail platform to this high demand line of cannabis accessories and further enhance the e-commerce purchasing experience for our customers.So I'd like to talk a bit about our expanded digital strategy and Hifyre, Spark members. We spent significant time building the most comprehensive and insightful cannabis digital retail & analytics platform. And as you can see by our recent results, the strategy is really starting to blossom. Our early investments in the collective work of our leading engineers and data scientists at building our Hifyre platform is now driving a number of new growth opportunities that focus on commercializing our proprietary technology. With very little capital investment at this stage, we are rapidly building and monetizing the most valuable asset in the cannabis market, customer engagement.As our Hifyre platform has proven to provide the cannabis industry with the strongest understanding of consumer preferences and behavior, market dynamics advance the cannabis operations in its very competitive market. With that said, we've successfully accomplished the rollout of our expanded digital strategy.As part of our business strategy, Hifyre is creating white-labeled online dispensaries fulfilled by the Fire & Flower retail network that can be expanded to other cannabis dispensaries and delivery channels in both Canada and the U.S. Users of these websites are then enrolled into Fire & Flower s proprietary Spark Perks membership loyalty program, which now is over 310,000 subscribers.Through the continued execution of the digital strategy, we believe we will drive a much larger Sparks Perks member base that prevents exponential value to our business.As I continue to emphasize, the most valuable piece of our business and underlying impetus of each of our growth initiatives is a continued advancement and extension of our retail technology platform in the new cannabis markets to capture the most valuable piece of the cannabis value chain, owning the customer relationship.Fire & Flower has always placed technology-first in developing our multi banner cannabis retail network. Our Hifyre platform seamlessly connects our customers to achieve the greatest value for each of our stores and present the unique opportunity to easily integrate this powerful infrastructure into other cannabis operations. We secured 2 very important acquisitions in the past month that present another great opportunity to drive our Fire & Flower brand expansion in the U.S. and most importantly, demonstrate our success as a tech-enabled retailer.So recent acquisitions focused on our expanded digital strategy. I want to talk about that for a moment. As we entered the third quarter of 2021, we announced the acquisition of Wikileaf Technologies, an online cannabis platform that's proven to generate significant user traffic through engaging content and domain name strength. This acquisition officially launched our expanded digital strategy as we will be transforming the Wikileaf website into a virtual online dispensary for cannabis and accessory products, utilizing the same e-commerce proprietary technology platform that powers our Fire & Flower retail network.With this acquisition, we launched a larger dedicated plan to create new branded online dispensaries, white labeling cannabis websites and rolling users into Fire & Flowers proprietary Spark Perks membership program. Not only does this digital strategy offer high-margin revenue through our Hifyre platform, it is very asset-light and highly scalable as we expand across North America.Following this acquisition, we announced the acquisition of PotGuide, one of the world's largest cannabis websites and content platforms. Coming right on the cusp of our acquisition of Wikileaf, the significant opportunity demonstrates the strong growth opportunities that are being created by our newly complemented expanded digital strategy. Even further, this acquisition will provide Hifyre with a U.S. base for technology and operations in Denver, Colorado. Once again, the goal here is that we will be able to leverage a significant amount of user traffic by white labeling our dispensary e-commerce software to convert traffic into purchases.PotGuide and Wikileaf together bring an existing subscriber base of approximately 225,000 cannabis consumers into our Sparks Perks ecosystem, further strengthening our understanding of cannabis consumer preferences across North America to enhance our overall cannabis retail offering as we expand.Our wholesale division, because we are vertically integrated business, in this sense, also supports our continued growth in the face of industry-wide challenges. Our wholesale division operating in Saskatchewan Open Fields Distribution has maintained and remains a steady source of recurring revenue. We continue to source cannabis products directly from licensed producers in this province to distribute these products to our retail stores and other third-party retailers. This business division has proven successful and supports our overall continued revenue growth.And finally, on this, I'd like to provide a NASDAQ update. We continue to progress towards listing on NASDAQ Exchange and expect this could be done by the end of this year. While this has been a longer process than we would have liked, it's an exciting one as it presents a great opportunity for Fire & Flower to drive increased visibility of our rapidly expanding business.Now that our Hifyre tech platform is generating greater interest from the cannabis industry and investors are increasingly recognizing our position as a tech-enabled retailer, we believe our listing on the NASDAQ is well suited for our position as a publicly traded company.I'd now like to turn the call over to Judy to discuss our financials and provide a more detailed overview of the progress each of our key businesses has made in the first quarter as of the second quarter of 2021. Judy?

[Judy Chieh Adam, Chief Financial Officer]

Thank you, Trevor, and good morning, everyone. I'm happy to provide a financial overview of Fire & Flower and our operations as released to the markets earlier this morning. To begin, I'll remind everyone that Fire and Flower follows a retail calendar with every quarter consisting of 13 weeks. Today, I will be speaking to the second quarter ending July 31, 2021.We continue to report quarterly positive adjusted EBITDA with CAD 3.1 million for the second quarter of 2021, representing an increase of 176% compared to positive adjusted EBITDA of CAD 1.1 million in the second quarter of 2020. Our adjusted EBITDA performance continues to be driven by steady revenue growth from all 3 business segments, continued monetization of our Hifyre digital retail & analytics platforms and our ability to introduce new cannabis products that specifically meet our target demographics in each of our markets.Total revenue for the second quarter of 2021 increased 51.4% to CAD 43.3 million compared to CAD 28.6 million in the second quarter of 2020. Fire & Flowers total revenue is derived from 3 primary business segments: the retail segment, which we had 91 stores as of July 31, 2021, across Alberta, Saskatchewan, Manitoba, Ontario, British Columbia and the Yukon Territory; our wholesale distribution segment, Open Fields Distribution, that sells cannabis and cannabis-related accessories to both Fire & Flower store as well as the external accounts in Saskatchewan; and finally, our digital platform segment offering through the Hifyre digital retail & analytics platform, proprietary to Fire & Flower. It produces revenue from external clients of the Hifyre IT data & analytics platform as well as industry-leading targeted digital advertising.Of the total revenue of CAD 43.3 million for the second quarter 2021, RETAIL operations generated CAD 31.8 million, Open Fields Distribution generated CAD 7.8 million, and CAD 3.7 million came from our Hifyre digital platform. Retail revenues of CAD 31.8 million for the 13 weeks ended July 31, 2021, increased by 36.3% from CAD 23.4 million in the comparable period of 2020. The increase in retail revenue is a result of Fire & Flowers expanded retail network of 91 stores at the end of Q2 2021 compared to 49 stores at the end of Q2 2020. 7 new locations opened in the current quarter, which included 2 in Ontario, 2 in British Columbia, 2 in Manitoba; and 1 in Saskatchewan.Traditional formats, such as Flower, particularly in pre-roll and large-format value options in cannabis 2.0 products continued to see top line growth. On a same-store sales basis, comparing the 48 stores with operations throughout the 13 weeks of Q2 2021 and Q2 2020, sales decreased by 14% year-over-year. This decrease in same-store sales is attributable to the surge in newly licensed retail cannabis stores in Ontario, increasing 48% from 665 at May 1, 2021 to 981 at July 31, 2021, as well as increased competition and aggressive price strategy -- pricing strategy by deep discount retailers.Wholesale distribution revenue of CAD 7.8 million for the second quarter 2021 increased 81.3% from revenue of CAD 4.3 million in the second quarter of 2020. Our wholesale distribution segment operates through our Open Fields Business, which purchases cannabis products directly from license producer and distributes them directly to our retail stores and other third-party independent licensed retailers in Saskatchewan.Open Fields also purchases cannabis accessories and related ancillary products from Canadian-based and global suppliers and distributes them to Fire & Flower retail stores and third-party independent retailers in Canada. Revenue in this segment increased as the Saskatchewan market continues to open up and more retailers sourcing inventory from Open Fields and growth of cannabis 2.0 products.Digital platform revenue increased 293% to CAD 3.7 million in the second quarter of 2021 from CAD 0.9 million in the second quarter 2020, as the company continues to monetize the Hifyre digital retail & analytics platform. The year-over-year increase reflects growing monthly recurring revenues in data sales, both in Canada and the U.S., plus continued maturation of our Hifyre reach ad network and the initial kick off of branded digital dispensary partnerships.Total gross profit for the company for the second quarter 2021 was CAD 16.2 million or 37.3% of revenue compared to total gross profit of CAD 10 million or 34.8% of revenue for the same period of the previous year ended August 1, 2020. All business segments individually contributed to the increase in gross profit dollars.The expansion in gross profit percentage reflects a shift in mix for a larger portion of gross profit coming from the high-margin Hifyre business in the current period compared to the prior year. Total adjusted EBITDA for the company for the second quarter 2021 was CAD 3.1 million compared to a loss of CAD 1.1 million in the same period of the previous year-ended August 1, 2020. All business segments individually delivered positive adjusted EBITDA in the current quarter with Hifyre leading the way with CAD 2.2 million in adjusted EBITDA.The expansion in gross profit percentage and continued growth in adjusted EBITDA reflects the benefits of being a tech-enabled retailer with a diversified segment portfolio and is a clear testament to our ability to outperform in a highly competitive market.The company reported net income of CAD 19.5 million or earnings per share of CAD 0.06 for the second quarter 2021 compared to a net loss of CAD 42.1 million or net loss per share of CAD 0.13 in the comparable period of 2020. We have a strong balance sheet. And as of July 31, 2021, the company had cash and cash equivalents of CAD 29.3 million and total debt of CAD 3.8 million.Thank you. And I'll turn it back to Trevor, and look forward to questions from the participants on the call.

[Trevor Fencott, President, CEO & Director]

Thank you so much, Judy. As we move forward to the second half of the year, we continue to build out our asset-light model to generate even stronger financial results in the quarters ahead. We will continue to monetize our Hifyre technology platform and build this technology into our expanding retail network to operate a cannabis retail platform unlike any of our competitors. We look forward to advancing this business strategy that's proven itself, advance and lead the cannabis industry.I'd now like to turn the call over to the operator for questions. So over to you, Daisy.

[Operator]

[Operator Instructions] Our first question comes from Justin Keywood from Stifel.

[Justin Keywood, Director of Equity Research]

Just on the gross margins in the quarter, it showed a nice expansion. I think you calculated around 250 bps despite the increased competition in the market. I'm just wondering how sustainable these gross margins are?

[Trevor Fencott, President, CEO & Director]

I think actually, Justin, I'm going to kick that over to -- we have Nadia on the call. Nadia would probably be the best one to speak to that.

[Nadia Vattovaz, Chief Operating Officer]

Justin, so if you're talking about margin on a consolidated basis, certainly, the margin mix with the really strong performance of the digital platform, this quarter has really contributed to an increase in that gross margin, and we expect that to continue. On the retail side, we did see sort of a tale of different provinces. So Ontario, as it grows, continues to look really strong. Certainly, in Alberta, we're seeing a price compression from the deep discount competition. And I think that this is we're evolving like we did a couple of years ago when the Alberta competition really was increasing. And we'll see probably some shakeout in terms of margin, but there's also opportunities like private label to increase margin. So I anticipate that there will be pressures on gross margin and that there'll be opportunities just on gross margin. But what I'm really excited about is the digital platform because we know that, that -- the margin on that business is really strong. And as we continue to grow those sales, particularly in the sales mix, that will continue to keep our margins up.

[Trevor Fencott, President, CEO & Director]

Justin, that's always been our strategy. We started with the end in mind. We knew it was going to be hypercompetitive, which is why we invested in this in 2018 before it was competitive. So now we're starting to see the dividends paid by our digital tech.

[Justin Keywood, Director of Equity Research]

Absolutely. And on that digital tech, I think I calculate a run rate of about CAD 15 million in annual sales and showed some nice expansion in the quarter. And that was prior to the PotGuide and Wikileaf. I'm just wondering if there's any broad goals for where this revenue can trend to? And also just on the PotGuide and Wikileaf, it sounds like there may be some investments required to upgrade that -- those platforms to the Hifyre standard? And if there's an amount attributed for that expected investment?

[Trevor Fencott, President, CEO & Director]

Judy, do you want to handle that one?

[Judy Chieh Adam, Chief Financial Officer]

Sure. Yes, we're really excited about the Wikileaf and PotGuide acquisition, as we already have a significant base of monthly and annual recurring revenue subscriptions coming out of existing Hifyre products. You'll see that we've been more than doubling year-over-year quarterly revenues. And as we add new revenue channels and products to the digital platform, this will give us an opportunity to produce more high-margin revenue stream. So, so far this year, Hifyre has delivered significant year-over-year growth. And yes, we expect us to see the same trends play out for the remainder of the year.

[Trevor Fencott, President, CEO & Director]

Justin, maybe what I'd add to that in terms of color as well. I always like to talk about Hifyre is not our IT department. People often sort of confuse it with -- you've got a lot of SG&A, what is this -- it's an R&D arm of the company. It develops and commercializes technology. So it's not even just that one -- there's one revenue stream associated with the digital product. But we keep creating new digital products and services and revenue streams as the market matures. It's a dynamic kind of living thing that's creating new revenue streams. So it's not even -- Wikileaf and PotGuide's are just the latest instantiation of our tech R&D. So I think that's important to kind of factor in when you look at how it could grow. Because remember, last year this time, people were asking questions on, well, how many data & analytics platform subscriptions can you sell? Well, we've proven that actually, we developed an ad network. And now we've developed a customer acquisition channel. So that's how I would look at it.

[Justin Keywood, Director of Equity Research]

Yes, and then certainly diversify.

[Judy Chieh Adam, Chief Financial Officer]

Yes. And I would just add, again, these are all high-margin revenue streams and highly scalable, especially as we expand across North America.

[Justin Keywood, Director of Equity Research]

Great. And if I could just fit in one more question. In Ontario, the store cap lifting this month from 30 to 75 per operator, what would be the strategy for Fire & Flower in either buying or building or co locating, assuming the strategy is still to maximize that store cap?

[Trevor Fencott, President, CEO & Director]

So maybe I'll start with this one and Nadia and Judy can jump in and add some color. But I mean, obviously, Ontario going to be important. We always knew it's going to be an important market in Canada, it's a 14 million person province. So it's important. Having said that, we've taken a real, sort of, a careful look at our real estate portfolio. We have a shared services agreement with Circle K Couche-Tard. So we planned our real estate portfolio well in advance. So as we're kind of looking to maximize the cap, I think it's more important that we go into the right locations rather than we sort of run a sprint to just open stores. That's a very early-stage game play, and I think it leads to potentially capital misallocation. So for us, we want to make sure that we obviously want to max out our cap, but we want to do it in a very planful way. The right location is always going to be the right location. I don't know if there's any other color Judy or Nadia, you want to add to that.

[Nadia Vattovaz, Chief Operating Officer]

Well said, Trevor.

[Trevor Fencott, President, CEO & Director]

I've learned the word planful from Nadia.

[Operator]

Our next question comes from Frederico Gomes from ATB Capital Markets.

[Frederico Yokota Choucair Gomes, VP & Analyst]

Just to stay on the Hifyre topic, very strong digital sales growth this quarter. I just wonder if you could maybe just provide more color on what's driving that growth? Are you getting more customers or it about upselling existing customers? And is that coming mostly from Canada or from the U.S.?

[Trevor Fencott, President, CEO & Director]

Yes. So return to kind of the idea of layered revenue stream. So if you look at kind of our last year's results, I believe it was sort of CAD 6.2 million, CAD 6.3 million in overall digital revenue. The bulk of that was recurring data & analytics subscription revenue, but just the touch of it was the beginning of our ad network revenue coming in. And so we continue to kind of layer that on, and that continues to grow. And now we're bringing on sort of different customer acquisition and monetization channel. So I would expect it to be almost like a layer cake. You're adding different sort of revenue streams on top of different revenue streams. So the mix isn't going to be completely homogenous anymore as we diversify the product. So with Wikileaf and PotGuide's, you have this tremendous opportunity to bring in all these customers in the customer acquisition funnel or channel, and then we can push them out to different branded e-commerce websites or into stores, and we'll monetize it all through our sort of tech chain.So I mean, short answer is that there won't be any one dominant sort of revenue stream as time progresses, which is a good thing for us. It means we've got a diversified revenue stream. We are definitely adding customers, and you've seen the growth in our Sparks Perks membership. And as I said, with 225,000 combined users or members of Wikileaf and PotGuide's, you can see pretty clearly that you start to aggregate that, you can start to monetize that. And that hasn't even started yet.I mean hopefully, that provides some color on kind of where the revenue is coming, and the growth will be coming from. The other thing is the opportunities that we're starting to push down the pipe on that one, including the branded website, that again is just starting. This is something that is sort of like measured in weeks, not quarters. So we're excited that we're just at the beginning of that process.

[Frederico Yokota Choucair Gomes, VP & Analyst]

I appreciate that. That's very helpful. And maybe if you could comment on your pipeline for further M&A on the digital side. Are you looking at different companies to build their effect back further? Or just how is the pipeline looking there?

[Trevor Fencott, President, CEO & Director]

Yes. I mean, that's a great question because we -- with the PotGuide and Wikileaf acquisition, we are the only company that we're aware of, actually, that has a fully vertical -- fully integrated, complete vertical stack from customer acquisition to customer management to digital modalities like e-commerce, things like delivery. So all the way from the beginning to the end, we have this complete vertical staff. So it's sort of completed our tech stack, so to speak, and we're the only one that has these capabilities at the moment. Although it's relatively slim, it's complete.So I would expect us to be looking at ways to increase things like customer acquisition channels, customer count, because that's ultimately what's going to drive value. We will always be looking for valuable acquisitions in the space. There's a lot of, sort of, smaller tech offerings that are out there that we will continue to evaluate. And we're always sort of interested in growth, but it's got to be appropriate growth. We're not interested in overpriced acquisitions. We're not interested in things that are duplative. It has to really pass a pretty rigorous internal test before we would proceed with things. But we are looking for growth.

[Operator]

Our next question comes from Andrew Semple from Echelon Wealth Partners.

[Andrew Semple, Special Situations Associate]

First question from me is just on the revenues, the retail part of the business. Obviously, retail revenues may face some pressures with COVID-19 walk downs during this quarter. Could you maybe provide some insight as to whether and to what magnitude we should expecting those retail sales per store to recover into Q3 as we move past some of the walkdowns we experienced in the prior quarter?

[Trevor Fencott, President, CEO & Director]

Sure. So maybe I'll start that one off. I'm sure that you're going to get color from all 3 of us on this one because it's something that is very topical for us. But at a high level, the metaphors is we're kind of in this trifecta or perfect storm of 3 different sort of competing factors. You've got COVID, which continues to sort of weigh on the industry and the regulatory uncertainty, things like build-outs are still solved out in some cases. You still have reduced foot traffic, it hasn't return to pre-COVID levels. We're in a fourth wave. It's all that sort of stuff. You've also got -- you've also got licensing expansion, which, again, as a nearly 50% expansion in one quarter in the major -- a major market is nothing to sneeze at, so that's going to happen. But again, these are nothing -- these are things that we faced in Alberta before. And then I think you've got the third pressure pillar of creditor price, the price wars happening for the deep discount retailers.So you've got these 3 things. All of these 3 things have an end to them. Do I think it's Q3? Well, I think that that's unlikely. These things are going to resolve themselves over time because, of course, you can't -- on the deep discount front, there has to be a sustainable business model underneath it. You can disrupt for a little while, but eventually, economic sense has to prevail. You have to operate a business that makes money.On the COVID side, of course, COVID, knock on wood, COVID has to end at some sort of juncture, but we've been hearing predictions on when that's going to happen for over a year now. And then, of course, on the licensing frontier, you quite naturally, like this is just a normal part of the business cycle, we saw us in Alberta, where there was a mass licensing. I think the record at the time was 20 licenses a week and it expanded. It's got a lot of kind of mono pops in the queue that, unfortunately, even though there isn't really a lot of room for single players anymore in the market, they have to kind of launch to the market because they've signed a lease. And so they're coming come no matter what they're going to launch. And then you got the overcrowding and then a paring back as businesses, unfortunately, can compete. So all these things resolve themselves. I doubt they resolve themselves in a quarter, but they eventually do.So I'd pass it off to my colleagues to see if there's another perspective, they want to -- or some color they want to add.

[Judy Chieh Adam, Chief Financial Officer]

Trevor, I think you're on a roll today. You don't leave me anything else to say. Yes, I'll be more careful next time. Let's start with that, yes.

[Andrew Semple, Special Situations Associate]

Yes. That was very helpful, Trevor. Just on the -- one of the points you brought up, I did want to explore your team's value segment of the markets, which, as you guys know and I'm sure you've seen your Hifyre data is coming on quite strong. Could you maybe speak to whether Fire & Flower has a strategy or a plan to unveil a strategy on how the company plans to address the value segment of the market and potentially looking at more aggressive pricing strategies within your retail portfolio?

[Trevor Fencott, President, CEO & Director]

So this one, I am going to hand to Nadia, because she's obviously very close to this, but I would just point out one thing before, which is there's a difference. It's important to understand the difference between a value strategy, which is giving the consumer what they want at the price they want, and it's a certain type of consumer, which we're very plugged into because, of course, we're a data-driven retailer. Our value strategy is different than category discounting, which is sort of just a blanket discount strategy. That's market disruption, and it is a competitive strategy for a while. But again, just blanket discounting to disrupt the market is not a value strategy. So it's an important kind of distinction that I think people need to keep in mind. And then with that, I'll leave to Nadia, who will explain how we look at it.

[Nadia Vattovaz, Chief Operating Officer]

So this is exciting in retail, because we are now seeing the emergence of the various types of consumers and how they like to shop and in what brands. So we, in fact, in the middle of the quarter, Andrew, launched a value proposition to our customers. And we know that there is a value segment of our customer base that shops in our store, and they need to have compelling product and the appropriate assortment priced in the way that is compelling to them. And it was highly effective. And so we will continue to expand that within our current stores so that those customers are always compelled to come to us. And then we can also offer them other choices while they're in shop with our [ keen staff ].There is a -- within our portfolio, a few of our stores, particularly in the Happy Dayz locations that are more of a value-based offering. And those are also highly successful stores. I think it's fair to say that we will explore that in a meaningful way in the quarters to come, for sure.

[Andrew Semple, Special Situations Associate]

Great. That's helpful. And one last question, if I may. I did want to ask on Hifyre. There's another great step-up this quarter in terms of commercializing the hard work that goes into that ecosystem. How should we be thinking about digital revenues in the back half of the year? If we look back to Q4 of last year, we did see a bump around the holiday period. Would you expect that to reoccur in this upcoming holiday period? And then more generally, how do you think the pace of that business is building towards the second half?

[Trevor Fencott, President, CEO & Director]

So maybe I'll start that one as well and pass it to Judy. But I think that it still goes back to that kind of layered product assortment from layered revenue stream assortment this year versus last year. So last year, as I said, most of that CAD 6.3 million or CAD 6.2 million was comprised of digital analytics, a data package sort of subscription, recurring subscription revenue and that some of that has to do with subscription timing, right, sort of renewals and that kind of thing. So that's part of that business. I would say the difference this year is we have our digital advertising network. We've got these other sort of revenue streams and layering on top of that. So it's going to be, as I said, a lot less homogenous, a lot more layered and kind of nuance. But that's just to keep having these sort of growth drivers layered on top to continue having a growth. So in terms of lumpy, we have other different streams that are layered on top of it. But Judy, do you have any other color you want to add to that kind of general framework?

[Judy Chieh Adam, Chief Financial Officer]

Yes. No. Yes, the only thing I'd add is, as Trevor said, in Q4 last year, we really just started to launch that -- the Hifyre reach ad network. So we're seeing maturation in that now. And we continue to see a growing monthly recurring revenue stream and data cells, both from Canada and U.S. So things have started to really kind of steady out. And we're also seeing an initial kick off of revenues coming from the branded digital dispensary partnerships. So when you look at the front half performance with a doubling of revenues year-over-year, I mean, we really expect that trend to kind of continue into the back half.

[Andrew Semple, Special Situations Associate]

That's very helpful. Congrats again on the quarter.

[Operator]

Our next question comes from Aaron Grey from Alliance Global partners.

[Aaron Thomas Grey, MD & Head of Consumer Research]

First one for me. Trevor, you kind of spoke to potential other acquisitions down the line on the technology side, always from acquisitions in the space. So would love to get your thoughts in terms of where you feel you guys are right now, the recent Wikileaf and PotGuide acquisition and just how you're seeing the overall landscape? You talked a little bit about valuations, so still a little bit frothy. We've seen some other competitors on that side of technology continue to announce other acquisitions. So could you maybe just give some color in terms of what you're seeing out there in terms of the prices and maybe the pipeline, if you think that's more of a near-term dynamic in terms of more acquisitions? Or you're kind of focused on integrating some of the recent acquisitions you've had today and maybe incremental acquisitions down the line?

[Trevor Fencott, President, CEO & Director]

Yes. That's a great question. Because, again, it comes down to the idea that we -- our first acquisition was Hifyre back in 2018. And so think of it as a team of like 25, 26 data science engineers that are building things for us. And so it will -- as you know, in business, it's always sort of -- it's often cheaper to build things yourself. If you started the right way and you build it to be scalable and extensible. If you're buying something unless it's distressed or massively undervalued, just sort of you taking on some of their development costs in that purchase price. So we really take a keen focus on what do we need to build, what can we expand? And what can we do ourselves because that is very cost effective. And what do we need to go out to augment and what gets us farther faster on that front. So we started off with a very robust, call it, like a technical spine or the building blocks being very, very solid. So when we add things like Wikileaf, is an easy add for us, because we have that bench strength to integrate it. So we're going to focus, obviously, on PotGuide integration and Wikileaf integration and commercialization and the kind of -- obviously, immediate term. I would say that in the technical landscape, and yes, we agree that valuations are extremely frothy out there on the tech side. We are hopeful that people, investors will start to recognize that we actually have -- are the only ones with a complete vertical tech stack in the cannabis industry. I think a lot of the acquisitions in the outside tech industry are going to be focused on actually creating a vertical stack for themselves, right? If there's missing pieces. So analogs to all the pieces of our technical stack, whether it's customer acquisition or customer management, loyalty or e-commerce or all the things that we already have in our stack, I think that that's probably where the M&A outside will look at as they try to fill in missing pieces of their technology.With us, we have a complete technology. The technology is complete. It's the only complete vertical certainly that we're aware of the cannabis things. So for us, it's a little different when we look at acquisitions. It is what's going to get us further faster and what's going to leverage our existing engineering and technology base. This is all stuff that we've largely built, right? So -- and hopefully, that explains a little bit of how we look at acquisitions. It's not simply sort of going out in an M&A frenzy, I know, that's sort of for anyone, but measured, planful kind of what gets us further faster are things that we would look at.

[Aaron Thomas Grey, MD & Head of Consumer Research]

That's really helpful color. And my second question will kind of be a follow-on to that. Number one, just could you provide some more color in terms of how -- you guys are currently, have the vertical tech platform. And you mentioned kind of some of your competitors may be looking to go out and become similar. What do you see as maybe the difficulty and you're already having it on a legacy basis and already having that expertise versus them trying to go and acquire maybe the difficulties in terms of being able to integrate that? And then secondly, just in terms of what area the technological supply chain you believe would be most valuable maybe today, that gets you further fast, as you mentioned before, just to maybe think about, more clearly you might within that pipeline in terms of the different verticals of the supply chain for technology might be looking.

[Trevor Fencott, President, CEO & Director]

Sure. Yes, there's a lot in there, but I can unpack it. I think that the -- for us, the most valuable part of the chain is owning the customer relationship, because it's the job of retailers, like that's their job. If you can't own the customer relationship, then in some way, you've lost it. And each time you have a piece of technology, from the outside of third-party technology that you are integrating into your operations, you've lost control in varying degrees to that relationship. So if you're using third-party e-commerce as a retailer, you've lost control over that customer relationship. They're using third-party loyalty, customer loyalty services, then you definitely lost the relationship with that customer. If you're using third-party delivery, all these sort of things matter. And so for us, it's driven on the fundamental premise of own the customer relationship, that's what you have to do.And I would sort of say the difference between what we're doing and what I think the general technology environment at cannabis outside is doing is we are based in a retail environment. And that was by design. So what we do and the way that we develop our technology is we are a retailer. So the use cases, the technology development protocols, what we need to develop comes from ourselves. We are beta testing on ourselves. So we are able to have a feedback loop between what is advantageous at retail to what we should develop and deploy almost instantaneously. It's a very, very small feedback loops as opposed to a third-party software provider, which is, well, we'll get to it when it suits our development process or our staffing resources. A great example was when COVID hit, to be quite honest, we didn't have in our development pipeline, Fast -- Sparks Perks Fastlane, like the kind of click and collect functionality. And so we very, very quickly, of course, adapted that. We built it, and it was done deployed, things like early on with Sparks Perks being able to message, if you recall, in Canada, there was a lot of product disruption in the beginning. So there was -- product availability was a big issue. So we, of course, accelerated, inspired Perks the ability to notify our Sparks Perks members that, Hey, your product is in. You're not going to come to a store and be met with that product. We'll notify you. You can come pick it up. In fact, we'll reserve it for you, hold it for you. So that, I think, is a kind of key difference between what we're doing using the retail platform is a necessary part of that development feedback loop versus what's happening on the outside. Does that make sense?

[Aaron Thomas Grey, MD & Head of Consumer Research]

No, it does. And that was really helpful to provide that detail. So appreciate that. Helpful color.

[Operator]

[Operator Instructions] We have no further questions at this point. I'll hand back over to the team.

[Trevor Fencott, President, CEO & Director]

Well, thank you very much for joining us today. We look forward to speaking with you again next quarter, and please watch the press releases. Lot of stuff going on. Thank you very much.

[Operator]

Ladies and gentlemen, thank you all for joining today's call. You may now disconnect your lines.