🎙️ Metrc CEO Michael Johnson
While Metrc's customer may be state regulators, CEO Michael Johnson is focused on improving the company's NPS/improving the end-user experience.
Background. Michael Johnson was appointed Metrc’s CEO in May 2022. He previously served as the company’s President and CFO from May 2021 to May 2022, where he was responsible for driving the company’s strategic and financial decisions. Prior to joining Metrc, Michael served as CFO at InformedDNA in St. Petersburg, Florida, and CM Group Global, in Nashville, Tennessee
Overview of Conversation.
Stepping into the CEO role. Michael outlines his past 18 months as Metric’s CEO 18 months ago. He details Metric's position as the leading regulatory compliance software provider for the cannabis industry, currently operating in 23 states and processing vast transaction volumes
First 180 days. In his first six months, Michael immersed himself in all roles to identify customer challenges. He overhauled leadership and prioritized quick issue resolution and improved training and support. While also making significant architecture changes aimed to elevate the customer experience
Business model. Metric's model funds development via licensing fees, following typical government contracting. In addition, the company provides RFID tags which helps regulators cost-effectively audit operators
Partnerships. Metric focuses on the best customer experience through collaboration with exceptional partners rather than trying to build certain solutoins themselves
Product launches. Recent product launches include an API platform, local data viewers, and analytics tools. Additional offerings in development aim to bridge compliance friction points and make the ecosystem more efficient through standardization
0:18 - Michael Johnson (Metrc)
I've been with Metrc here in my role for a little bit more than a year and a half now as CEO. Metrc is the leading provider in the United States of regulatory compliance software solutions for cannabis. We are currently operating in 23 different states and We process an incredible amount of volume. We support about 75% of the legal market in terms of size and scale and are really focused on trying to make sure we have the best experience for everybody that's going to encounter Metrc really in any scenario, whether you're somebody with a government regulator, a licensee, party integrator, a partner of a different kind of consumer and even non-consumers.
1:06 - Dai Truong (Arlington Capital Advisors)
Can you tell us a bit more about your background before becoming CEO?
6:09 - Michael Johnson (Metrc)
Metrc is based in Lakeland, Florida, which is a smaller town, kind of in between Tampa and Orlando. You know, it's actually a very quaint little place, but really more focused on agriculture distribution, a lot of supply chain emphasis here. And of course, a lot of great Florida man stories. It is about 45 minutes away from my house in Tampa. And so definitely part of kind of the Tampa Bay ecosystem. I came across Tampa when I was previously CFO of a software company. And there's just there hadn't been at the time, although we're experiencing quite a quite a boom of software companies in the Tampa Bay area. And so coming across one base in Lakeland in the. cannabis base that has a lot of supply chain experience with founders that have been doing it for a pretty long time was very unique and for me, that's that's how I I kind of was attracted to what was happening here Got to know Jeff Wells who was it was one of our primary founders and then the only CEO we had prior to myself spent time with with them spent time with Metrc got a good sense of what the mission was and and what the vision was for what Metrc would become started advising a bit to the board and then ultimately decided to join full-time and ultimately, that's how I got here and Help us understand when you became CEO in May of 22 You know why that transition from the previous CEO to to yourself who at the time was present in CFO Yeah, and so Metrc has been around for 13 years a big part of the Metrc story I think for most folks that are familiar with Metrc What about providing solutions to the government almost in a subcontractor Well, certainly in a subcontractor capacity, almost in a, almost like an employee capacity to the state government. And that was, that was by design, that was contracted, and it made a lot of sense at the time. And in many ways, we still do hold, hold that role. I think it has become clear over, you know, the decade or so since the industries really started to mature mostly in the west side of the country is the expansion of our definition of customer has become paramount if we are really going to achieve the vision that our founders have laid out. And the way the founders had started, it was achieving that vision exclusively through that emphasis on the relationships with government. And I think the way that we've realized and had, you know, a number of conversations about what Metrc will look like. like over the next five to 10 years is much more about bridging the gaps, making compliance more frictionless, and turning the opportunity for folks to embrace a compliant and safe, secure market as a competitive advantage for the cannabis space. A really great example is in the pandemic, which is when a lot of these conversations started, you didn't really see a lot of supply chain disruption for cannabis related products. In fact, you saw a number of state setting records in that period of time from a retail sales perspective. And the supply chain visibility and the transparency associated with that supply chain is very much afforded to the industry by having a standard. And we're very proud to have that standard. That example was a real life proof of concept into how Metrc can be really meaningful to the success of the overall industry. And I think that was a watershed moment. I know for Jeff Wells and for some of our other founders. And as we kind of started to lay out that vision, I articulated a lot of the learnings that I had gained from spending time with hundreds of licensees and different state regulators and folks in the industry. I think it became apparent to them that there is a shift in direction that would be hugely beneficial for the industry, hugely beneficial for Metrc. And they gave me an opportunity to help shepherd that through. So that's how I got into the chair.
6:35 - Dai Truong (Arlington Capital Advisors)
And I think you mentioned this to me in the past, your first six or so months of being CEO, you kind of went and did a bunch of jobs, to really figure out the ins and outs of Metrc and how it's being used. Give us an understanding of, you know, where you spent time, as an end user of Metrc, what do people like about it? What do people hate about it?
5:58 - Michael Johnson (Metrc)
Well we covered kind of the entire package, I'm a big believer in the discipline of Lean Six Sigma, I'm a Lean Six Sigma Black Belt. Getting to Gemba is what you talk about in the Lean Six Sigma world, and that's really getting to where things happen. So, Japanese word, kind of where the action is.
And getting to Gemba is hugely important. So, getting not only in your customer's shoes, but actually walking through their processes in real time. And I personally went through that with regulators, with investigators, with understanding the challenges that they experience in terms of just doing their job, unrelated to Metrc, understanding the challenges that Metrc puts on them in terms of doing their job.
Then, of course, spending a lot of time with all different kinds of licensees in all different states. Some states, you're vertically integrated. That's going to be a unique scenario. Other states, you're a really large outdoor grower like you see in a lot of California. Sometimes you're a really small outdoor grower, which you also see a lot of in California. That's fundamentally different from being an indoor grower, or a process or a transporter distributor.
So walking through and seeing, I think a fairly representative sample in most of our states of how folks are actually using and integrating and getting frustrated, frankly, by the system was important. As it relates to the internal roles and understanding the way we were structured, I personally spent time taking support calls. We built out a fundamentally different outreach group, which we call customer success management. I have a lot of experience, obviously, in Finance, but in breaking out what our Human Capital Strategy is and working to set up what was really the very first HR function that Metrc had so that we can attract and recruit people that are aligned to the Metrc strategy, the Metrc vision, and can carry out the best customer experience scenarios was critical for us.
I'm not coding, so I can't say I spent a lot of time trying to write any of the code. I certainly did not, but I did spend a ton of time with our technologists to understand where they're struggling, where their gaps are, where they feel like there's miscommunication, misdirection, and really went through the entire gamut of our internal processes.
And so as a result, we made a number of shifts. We brought in almost an entirely new executive leadership team, or we kind of transitioned some folks in their roles into different roles where they could be more effective. We implemented almost completely new systems, everything from salesforce to different telephone systems so that we had some experiences, which I personally encountered in calling support and answering support calls where calls were dropped. That's not acceptable, so we needed to upgrade what we were doing there and really pull all the threads together so that we can truly become a business. that's focused on the customer experience. And I think the three key categories that we really spent a lot of time on was shorting up some of the sins of the past, so to speak, in performance of Metrc and how it worked with integrators. A lot of people talk about the spinning wheel. That was a pretty big deal to eliminate. We also have had a lot of conversations about how we can be better partners and train better. And then lastly is how we can respond from a support perspective very quickly and make sure that we're resolving issues on the first contact when they call. And that's really, I mean, that was the first six months. lot of that stuff still continues, but making a lot of those fundamental kinds of architectural changes and foundational changes with the right people, processes and systems is really where we spend a ton of time.
9:52 - Dai Truong (Arlington Capital Advisors)
And let's go back to sort of how you generate money for the company. So you have these Government contracts, what do they typically pay or how are they typically paid to Metrc.
10:05 - Michael Johnson (Metrc)
Government contracts are very interesting because there's generally speaking a public RFP process where they're going to dictate exactly what they need and sometimes exactly what they will pay or at least how they will pay. So a lot of folks look at Metrc and they look at our model which for most states puts a lot of the cost of the system onto the licensees and that that feels foreign and candidly for me it felt foreign. Until you get in you understand how government software works and you kind of break apart why you pay these different government fees for a number of different different services or to be able to access different systems within the government.
So a really great example is anywhere that you park on the street. For the most part in America, if you park on the street you're paying to park and you're usually paying via ParkMobile. ParkMobile is generally not paid by any municipality. In many cases, park mobile actually pays a municipality, but they're able to get their fees covered as a percentage of folks that are parking on the street.
You have situations where you get a driver's license. It's kind of weird that you pay to get a driver's license or you pay to register a car even for a license plate. But these systems, these software systems, are generally not homegrown from the state. They're generally from other third parties and those third parties get paid by taking a piece of essentially what the state gets. You also see it in hunting license, fishing licenses. There's no shortage of government software suppliers.
So for me, it was a bit foreign. And I think for a number of folks that play in the cannabis space, it's a bit foreign as well. But it's not actually. It's the preferred model of a typical government. And this is kind of how it works. And so a lot of our costs are pushed to the industry. I will tell you that, in the way, we charge on a per unit basis for a package or a plant that comes with a tag, and we have done a number of different analyses and studies. You can't, up until a certain point, you can't print your own tag for less than what we charge you to track a package or a plant. Of course, once you get over 10,000 to 20,000, then it starts to change, but the vast majority of operators are much lower. So even though I'm well aware that it could feel as though these costs are being pushed in a way that might not be desirable for certain licensees, it actually ends up being tremendously valuable and they're actually saving money on the overall process.
12:45 - Dai Truong (Arlington Capital Advisors)
Yeah, so I want to get to that. I'm glad you brought it up, but recently we saw Colorado, some operators pushed back on RFID chips that are needed. with Metrc and the state of Colorado has a contract with you for the next several years. I think they suggested they could do the tagging without RFID, which then would save a good amount of money as an operator. So you're saying that it's not necessarily the case that having those RFID tags make tracking traces that much more expensive and you would argue that it's cheaper.
18:24 - Michael Johnson (Metrc)
Yeah, tracking, I mean, the cost of our costs are a per unit model, right, which is very consistent with any number of other software companies. I think there's been a conflation between the per unit model and the cost of these RFID chips as, you know, as being kind of one in the same and they're not. We do provide tags that have RFID in 30% of plants that are harvested in Colorado are harvested by licensees that engage with our third-party integrators to automate that process. that's using the benefits of RFID. And they're some of the most profitable cultivators in the entire industry. So it's a big benefit. But I think somewhere along the way, folks came to the conclusion that RFID for whatever reason is behind the cost. While RFID is certainly different than picking up a paper or plastic tag and pricing that, it's not like it's the vast majority of the costs that we incur in terms of servicing our customers. And there's a big reason that the vast majority of the entire logistical transport and supply chain infrastructure utilizes RFID. As an example of Walmart, it's the largest retailer in the country. They implemented a requirement for RFID two years ago. they're saving multiple billions of dollars per year in efficiencies by taking advantage of the benefits of RFID. I would say the The biggest tragedy in the example that you identified in Colorado is that folks really aren't taking advantage of the magic of RFID. This isn't a cannabis related thing. This is a supply chain related thing. There's RFID. I mean, places that you would buy a shirt from in the mall have an RFID in them. This is ubiquitous in every element of the supply chain. Unfortunately, there're some folks in the cannabis space that just really aren't taking advantage of that. But I would absolutely counter that with an applause for a number of new third party integrators and also previously existing third party integrators that are continuing to grow pretty rapidly with exceptional platforms that help to facilitate and automate any number of processes within a cultivation processor within a dispensary even with the automation that is afforded via RFID.
15:56 - Dai Truong (Arlington Capital Advisors)
And what are some of those benefits for having the RFID protracted?
16:00 - Michael Johnson (Metrc)
And number one thing for folks, well, I mean, it's kind of twofold. If you look at the benefits to the state, the states have the ability to spend less money on their inspections because they can inspect a lot faster. And then ostensibly, if they're spending less money operating their departments, and that means that there's more money that can be distributed for, you know, it depends on the state, of course, but for social equity or they can evaluate taxing, things like that. They can be wildly efficient in terms of performing inspections with RFID. And you can count 25,000 plants in a matter of minutes, which is amazing. But on the industry side, on the operator side, it doesn't matter how big your farm is, it doesn't matter how big your processing facility is. Everybody has to count inventory. Things get lost, things get misplaced. It doesn't matter if you're in cannabis or if you sell, you know, pillows. people, everybody needs to count. other it's a requirement. And anybody that owns a business or operates a business certainly going to want to make sure that the inventory is accurate. The easiest and the fastest way to count inventory is with RFID. And so, I mean, I can't stress this enough. In a matter of minutes, you can count tens of thousands of plants just by walking past them. There's some folks that even get more sophisticated and they will permanently install RFID readers inside a room or a space so that they know what's going on at any point in time. And when I say permanently install, it's not like these are thousands upon thousands of dollars to do. Typical RFID readers, maybe a permanently installed one isn't more than a few thousand dollars. And it's literally reading in real time. There's additional magic in RFID that a lot of folks in the agricultural space take advantage of, in particular, for location tracking. So in beef cattle in the United States, every single cow, every single cow. the United States, FDA requirement has an RFID tag on its ear. Every single one of them. And they're a lot more than we charge. And that allows for folks to be able to identify and also track kind of what folks, what these, what these cows are actually doing. It also allows them to keep track of any tests, anything they need to do, any, any, any types of vaccines and things like that for these cows in a scenario where somebody will want to use other functionality from a chip in RFID, for example, humidity or temperature. These are sensors that can exist inside of an RFID inlay that cost very little. That will allow folks to be able to have real time data for temperature of a plant, humidity associated with that plant. And it's even more impactful than sensors that we place at different parts in a room. Because just like in your house, I'm sure you experienced scenarios where a corner might be cold or hot. The same things are happening in these grow rooms. And a lot of folks will say, well, you know, that's kind of how it is. We're not going to keep track of how that happens on a plant-by-plant basis. I would challenge them to really think about that because their competitors are starting to, if they haven't already. And if you can increase another 20 grams per each plant that's inside of a specific room, because you've been able to identify that plants are growing a lot bigger in one corner, where humidity is a little different, or temperature is a little different. mean, imagine how much more successful your yield would be. And it's a huge opportunity that folks just, frankly, I don't think are taking advantage of and really could do quite a bit more with.
19:43 - Dai Truong (Arlington Capital Advisors)
Are you guys somehow helping them to do more with Metrc?
19:49 - Michael Johnson (Metrc)
I would say we're starting to. I mean, historically, that hasn't been our focus. The focus has really been trying to kind of stay in our lane a bit. But I would definitely. I'd be remiss if I didn't mention that we're spending a lot more time with some of these folks that provide RFID solutions. Really good example is Outlaw [Technology], StashStock GeoShepard is another one trim just released something recently and a number of other folks are starting to pay a lot more attention to the automation and the efficiencies and cost savings that are afforded via this so for our purposes We're trying to be the best partners we can to folks that are bringing these things to market We don't really transact with licensees typically and so that's not it's not really the area that we're working towards But I do recognize 100% that there's tremendous opportunities to continue to expand on our functionality to partner with these folks that have really special functionality and to make sure that we're doing the best We can so that folks have the best experience with Metrc.
21:00 - Dai Truong (Arlington Capital Advisors)
So you sort of leave it to the partners to provide that additional capabilities or is that something the company would ever consider Getting into where you built some cost my software for the licensees so that they can actually take advantage of all the data and the tracking that's happening within Metrc.
21:06 - Michael Johnson (Metrc)
I would say it's an area that we can, it's like the classic build/buy/partner debate, right? And so these folks that have built this technology, it's really good. It's exceptional. I was in Michigan about a month ago looking at StashStock and went to a facility that used StashStock. It's great. I'm not, mean, we can certainly build something similar, but it's already working. It's exceptional. So I think trying to build stronger relationships at this point is going to get the quickest, the quickest impact and the biggest impact in the space. You know, I mentioned Outlaw [Technology], I mentioned GeoShepard. I'm sure I'm missing many others. So hopefully I don't offend anyone, but you know, trim invested quite a bit into building out their functionality. Folks are doing this or doing it well. It's not. necessarily the hottest fire for me to dig in and kind of do it as well because we got great partners out there and folks are already really successful at what they're doing.
22:15 - Dai Truong (Arlington Capital Advisors)
Yeah, you guys are. I guess since you brought up earlier, like, hey, you're the platform, you're Salesforce, other folks can kind of customize and build on top of it because as we know, lot of you have customized to certain verticals for Salesforce and have been very successful. So you sort of take a similar approach, it sounds like.
22:33 - Michael Johnson (Metrc)
Yeah, that's right. We need to, if we are going to be successful and the industry is going to be successful, I think we need to embrace our role of being the backbone of the way commerce runs through the cannabis ecosystem. And I think we need to be in a position where we are giving a lot of the benefits of that standardization and that transparency. as a platform to be able to bring others into the fold that are going to frankly create some incredibly innovative solutions and really be meaningful partners to the industry in a way that I think not one single company can do.
22:15 - Dai Truong (Arlington Capital Advisors)
Are you familiar with this startup called Greenlists?
22:18 - Michael Johnson (Metrc)
I think they're building on top of Metrc data. Yeah,I don't know about building on top of data but yes I'm familiar with Greenlists. We met some folks there. You know I just like mentioning innovative partners and folks that are building incredible solutions. I think that there's a number of them. I mean Greenlists is definitely a little early from my perspective to have like a ton of knowledge but you know I met with some folks on their team. I think they're impressive people and I'm super hopeful that we can be as supportive with them as we are with all of our partners in helping them achieve their dreams.
22:58 - Dai Truong (Arlington Capital Advisors)
Yeah because it just reminds me when you mentioned Partners, because they mentioned kind of the time saving component is they'll automatically generate Metrc manifests for approval, which I just assumed was already kind of being done by you guys or available. So for me to hear that as like, hey, is like one of the pros of using Greenlists. I was a little surprised to hear that.
24:17 - Michael Johnson (Metrc)
Yeah, I mean, I don't know exactly how that part of their functionality works. But there's no shortage of different ways that both Metrc can continue to improve the user experience, to automate processes and to limit friction. But we're also just as happy to partner with third parties that have kind of gotten ahead of something and built something novel.
24:42 - Dai Truong (Arlington Capital Advisors)
And I want to go back to what you mentioned earlier about helping regulators sort of be able to save time and sort of look at any suspicious activities. So you always see a story about, I think, the most recent one I saw was there was something about a cultivator that was using Metrc. But then it looked like there was some weird things happening with their Metrc data. You know, and it was The Hempire Co. LLC. So their permits were actually suspended after suspicious Metrc activity. So could you help us better understand, you know, when a regulator looks at some of the data, what sort of flags can kind of come up for them to know if someone's doing something weird with their cultivation or other things are being tagged and tracked by Metrc?
25:31 - Michael Johnson (Metrc)
So I can't speak to that particular situation. And frankly, I can't really get too deep into what regulator strategies may exist out there. Simply because I don't know them. But what I can tell you is the data that we provide and the analytical tools that we provide really tell a pretty clear story because there's just so many points and there's so many different packages. And there's a lot of volume. mean, you know, we're. We're talking tens of billions of dollars of activity, but not just on the retail side, which is the numbers that usually are quoted, but kind of through the entire supply chain. There's, you know, cannabis will change hands three, four, five times sometimes before it gets to the end consumer, which means there's an economic exchange every step along the way. us and what we see and what is pretty clear are more basic elements that I think are the kind of the most telling. And that doesn't mean that there's not really intricate and complicated data relationships because there certainly are, but I don't see scenarios where a lot of folks are, you know, to get, they have to get to the point where you have to get so deep into the data to find this needle and a stack of needles. Usually things that are kind of anomalous that pop out are pretty clear. And that's just the experience that I think we've had when we take a look at the data, you have a pretty good sense of what indoor plants should yield on a per plant basis. You have a pretty good sense of what outdoor plants should yield on a per plant basis. There's certainly exceptions like plants in Humboldt County that are growing more than 100 pounds per plant is definitely the exception. You have a pretty good idea of what the yield from packaged and harvested flour will produce and concentrate. You have a pretty good idea of what the levels of concentrate are that will produce gummies or what have you. And so the relationship that you see given the power of large numbers allows for certain anomalies to just pop out very, very clearly. different states are going to have their own strategies. They're going to look at the data and we will provide the data. We don't highlight anything or like calls. There's no scenario where we're calling a state and saying like Hey, we think these guys are doing something. We're non-investigators. We're being able, what we do is we make the data available to other state agencies and certainly the data available to licensees. State agencies are then able to see certain things in the data and they're able to configure the way that data is reflected for them in a way that enables them to see certain anomalies and scenarios. this is native functionality inside the Metrc. And it works, I think, pretty well. But I would probably not be the best person to talk to about exactly what the strategies are from a state-by-state basis or how they may build and carry out their investigations. don't have visibility into that.
26:49 - Dai Truong (Arlington Capital Advisors)
That makes sense. How about one other one that's been a big discussion point for the industry the last two-three years, which is these California burner licenses. Like who are some of the California regulators using that Metrc data to be able to find these things? is it just like it's too late once they find out who's maybe using Metrc and recording and accurate data?
29:14 - Michael Johnson (Metrc)
I mean, I think a lot of people have different definitions of what a burner license is. I will give you what I think the most broad definition is, at least the way I think of it. And it's a distribution that you may transfer something in Metrc legally to because it's licensed, it's actually a licensed distributor. And sometimes that distributor will never accept it. So a Metrc, there's a very unique chain of custody sort of type control. And that chain of custody is that if I'm a licensee, I'm going to sell you as a distributor 10 pounds of raw flour. I'm going to transfer that and create that manifest inside of Metrc, but you have to go into Metrc yourself and accept that transfer. And so what could happen for some folks is that you would make a transfer to Metrc and it's never accepted. And that certainly stands out if a transfer admin accepts for a long period of time and I'm sure the regulators can pay attention to that and do things with that and those are identifiable. But in other scenarios, you could have a distributor that's going to accept a transfer and then sits on it and never does anything with it. And I think that happens if that has happened at least based on the articles I've read. And so for either of those scenarios and I'm sure there's much more many more complicated scenarios, but in either of those scenarios, the data is certainly there. And to my knowledge that the DCC has acted upon that and I think they have a number of investigations and I don't know what that number is and I don't know how many there are all but the, you know, they have the data. To be able to make the best decisions that they think. to make and how they enforce the regulations and how they are able to oversee the industry. so I can't opine on the details behind burner distros because I simply just don't know. But I can certainly tell you the kind of high level scenarios that I'm familiar with and certainly the way Metrc works and allows for data visibility.
31:28 - Dai Truong (Arlington Capital Advisors)
Yeah, and I think it comes down to more of a market thing where there's so many licenses and it's easy to get a license or a license can be bought and exchanged very cheaply, right? Versus you guys have the data you have the tracking but again to your point earlier, it is more about providing that capability, not necessarily being the enforcer of that data.
31:50 - Michael Johnson (Metrc)
That's right. We're non-investigators.
31:54 - Dai Truong (Arlington Capital Advisors)
So help me understand from a funding standpoint. So in October 2018, there was an announcement. You guys have raised $50 million from Casa Verde, Tiger Global. Tiger also famously has put a lot of money into the ecosystem via Dutchie. They've had some pullback from just really activity in general beyond Cannabis investments. Where do you guys stand on sort of funding needs today? You haven't, it seems like unless it's not even made public, raised any funding in the last five years.
32:30 - Michael Johnson (Metrc)
Yeah, and we haven't. And so I wasn't here as part of that investment from Tiger and Casa Verde. I can say the vast majority of that went to pay off debt that the founders accumulated in certainly some taxes. Metrc has been fortunate to be mostly cash profitable, mostly cash-positive for the last few years. But that doesn't mean that I certainly wouldn't misconstrue that as Metrc doesn’t need any money. We are in a fortunate position. to be kind of where we're at in an industry that I think is facing some challenges. so we're trying to be very, very smart with how we deploy our cash and the expenses that we bring on. You know, we think that this is a really special market. We think Metrc has the ability to continue to grow and help that market flourish. And so at some point, I'm sure it will make sense for us to have deeper conversations with folks about investment opportunities and Metrc and being the part of that ride as we continue down the path.
33:38 - Dai Truong (Arlington Capital Advisors)
And would that be again, depending on what the needs are? But you know, certainly, I think one of your biggest competitors, BioTrack, which we saw earlier this year in February, Alleaves, which is also headquartered in Florida was purchased, or I guess they bought it from the parent company. So they bought BioTrack. might that deal sort of get you guys to raise money for M&A purposes.
34:08 - Michael Johnson (Metrc)
I mean, I would love to. It'd be great to see a scenario where we can bolster the platform where we can expand it to where that regulatory compliance solution becomes even more impactful and meaningful for folks. It really is going to probably depend on the right scenario at the right time and what that would look like. I think the opportunities in the space for folks to be able to really have a very successful investment, not just in Metrc, but really in cannabis writ large is there. I definitely encourage folks to pay close attention to it because it was hot there for a while and then I think some folks kind of looked at it and maybe softened me. The opportunities and the fundamentals are there, the unit economics for the industry. The opportunities that I think exist in the software space are exceptional. As I mentioned, folks can increase their yields by 10, 20, 30 percent just by paying closer attention to the data. That's a huge opportunity for anybody that wants to participate in this space. definitely encourage investors to get deep into it. We're happy to pay attention and have conversations with investors. If the opportunity seems to make sense, but for us, I think the primary focus is trying to execute on what's ahead of us and try to continue the mission.
35:41 - Dai Truong (Arlington Capital Advisors)
So it seems more like just keep making Metrc better and users happier more than, hey, we have a gap in our software operating. Here's the one, two or three areas we may look to acquire or potentially raise capital to build ourselves.
35:57 - Michael Johnson (Metrc)
Yeah. I mean, I'm of the philosophy or the mindset that if we do things right, if we take care of our customers, if we stay just maniacally focused on commitment to creating the best platform we can and the best experience we can for our customers, that the opportunities will present themselves and present themselves in a big way. And so we're going to focus on this. We're going to focus on the short, medium and long term and to the extent, know, those funding opportunities present themselves, we'll take a look at them for sure and to the extent, an acquisition target or targets present themselves, we'll certainly take a look at that as well. We're not shy about wanting to really make sure we're doing the best we can on that mission. And so I'll do whatever it takes, whether it's staying the course, getting more funding or getting some additional partners.
437:01 - Dai Truong (Arlington Capital Advisors)
Help us understand the scale today of the company. You know, it's been around for over a decade, as you mentioned, how big is the company today?
37:10 - Michael Johnson (Metrc)
The company's about 200. A third of that is focused on customer support. And so we've ratcheted that up a bit to try and make sure that we're responding to customer issues as quickly as possible. We've also invested heavily in our product and technology teams so that we can catch up to, I think, some of the challenges that I alluded to earlier with performance and usability and get on the other side of that, which I'm very proud that this past month was by far the fastest that Metrc has ever run.
In a five-month period, we look at California, which is the largest market. The average transaction in California increased by 300% in terms of how quickly it was processed. And so what the folks have done to really bring forth a lot of improvements and innovation to the architecture and the platform is exceptional. And I can't say enough about that. But we also have been working on four separate products this year. And so 13 years of Metrc didn't produce any additional products. And then all of a sudden we've got four that are in testing or [have] already been announced. So for us it's about making the investments that we can to really get to what I mentioned about prominence in the customer experience space, but also setting us up for really strong foundational growth in the future.
38:42 - Dai Truong (Arlington Capital Advisors)
Is one of those four products you mentioned the global product catalog that you partnered with Treez on?
38:48 - Michael Johnson (Metrc)
No, the global product catalog that's something specific to what Treez is working on. So the Metrc data belongs to the state, belongs to the state and the licensee by extension. And so we're not on it. We're not in position to where we're going to be kind of piecing that together. But the global product catalog is enabled. And I think it can certainly be productized by Treez, [which] is really at the forefront of that. But I think others will do well with it in combination or in concert because what we're doing in terms of standardizing the data structure is we're enabling that standard SKU or that UPC of cannabis to exist. And in folks that are data folks and certainly folks that are making really strong software like Treez, I think are going to be able to work even faster and to create even more value for licensees by using standardized data structure as it relates to the individual products at the SKU level.
39:55 - Dai Truong (Arlington Capital Advisors)
Got it. Can you help us understand some of these others, and you may not be able to speak to them or may not want to be something or launch, but what some of these other products are that you're working on. I agree that's great. That thing had been innovated on or released in the first 13 years and you guys are releasing new products, in your words, the conversation on Metrc.
40:18 - Michael Johnson (Metrc)
The goal is that Metrc is desired, not just required. For that to happen, we have to find ways to surprise and delight. We have to find ways to bridge that gap between certain parts of regulatory compliance that might not be particularly efficient in your operations, but are critically important for compliance, critically important to secure the market and protect public health. We need to bridge some of those elements with strong efficiencies so that we can make frictionless compliance a real thing. The first thing that we released was in April and that was Metrc connect, which is a re-affirm architected new API platform. API had never really been a product, been kind of an afterthought requirement, and it wasn't great. And I think that's been a challenge in our commitment to being the best partners to other software providers. We are now over 200 of our nearly 400, so a little bit more than 50% of our integrator partners are on the new platform. It definitely takes a little bit of time for folks because there's some engineering work that happens on their side to be able to get fully on to the new Metrc connect platform. But it's been great. And I think folks that have gotten onto it have seen market improvement in speed in the availability of endpoints in the way they're able to interact with the API on improvements and usability documentation and support. And so that's super critical. Really happy to have done that. CanX was our first partner. But as I said, more than half of our integrators are already on it. It's free for almost the vast majority of the don't pay anything and that allows for them to be able to get inside of the Metrc ecosystem and then hopefully build out their businesses.
The next offering that we made available for California only at this time is a local viewer product that enables states and is a requirement for California and really in a way we just sort of rebuilt something that we had previously provided. This just allows for folks that are local regulators, so different county or city governments that are trying to regulate cannabis in their own right to have better access to data, better access to kind of what's happening in Metrc and really be able to be, I think, more effective at what they're trying to solve for. So that's a new thing that had been a fair amount of time coming. We also have piloted which we got some interesting notoriety, valuable notoriety from Rhode Island and piloting a new and more robust analytics platform that allows the state regulators to be able to use a tableau-based tool to get a better view of their data, to be able to do more with their data, and to be able to, I think, help make better decisions as it comes to how they regulate, how they decide what rules to implement statutes, things of that nature. And so that's in pilot right now.
And then at MJBiz, just a few weeks back, we were able to kind of announce the coming of a solution that we built in some direction from certain states that are interested in seeing other opportunities to support the market. And that's called retail ID. And so it is enabled inside the Metrc ecosystem for each unique retail.
Not a festival, at it's kind of a, you know, you, you, we don't want to get into an Elon Musk, uh, of 2020. Here's the cyber truck coming and then, you know, four years later, it comes out. want to make sure that we're as much as, you know, all, all due respect to Elon. course. But the, we want to make sure that we are, uh, we're further far enough down the path to where, um, where we're kind of building credibility with, with our customers and with the industry in terms of, um, of making sure that if we say we're going to produce something, we're producing it on time and in a way that, that is meaningful for them.
40:35 - Dai Truong (Arlington Capital Advisors)
No, it makes sense. It's way better to just press release when it's live for everybody, when it's still in testing, just keep it low key and the few that need to know will know.
40:46 - Michael Johnson (Metrc)
That's exactly right. We want to make sure we're ready to go.
40:49 - Dai Truong (Arlington Capital Advisors)
And, and I think, you know, we kind of know the answer to this, but we'd love to hear it from you. So this kind of shift for Metrc where, you know, what you said earlier and I really like. It's desired, not required, you're innovating on products, and you're building things to be better. Did that come with that new management team? Is that what drove this different mindset for Metrc and how you interact with the end users who might not necessarily be your customer? But you still want to make sure they love the product.
41:22 - Michael Johnson (Metrc)
Yeah, in a way, I mean, I would argue saying that it's a totally fundamental shift. It takes away from lot of the greatness that Jeff Welder, our founder, has brought to the organization. I mean, he really is a wonderful man, the most exceptional person, and his vision really is aligned to where Metrc is running now. It's really just about how we're going down that path.
And so we had kind of stayed in one very siloed lane, and we're expanding and I think kind of shifting the philosophy on how we will get there. Jeff’s vision has been steadfast since long before he founded Metrc, which was to create as much efficiency in the supply chain as possible through safe and secure transparent supply chains. And we're we're doing we're still doing that. I think the difference is the approach that we're taking to do that it needs to be much more inclusive of the industry at large and that's why our definition of customer shifted.
And I mean you're there's a lot of ways that you can kind of reach the mountaintop. I think the best way and the most effective way for everybody that's in the industry is to find a way to make it work best for everybody that's in the industry. And so the carrot and the stick certainly exists in every industry. We would like to we'd like to find a way to balance some of the challenges that are really on both sides. And so it's different. philosophical approach to getting to where we need to get to, it's certainly a different mindset on how we will carry that out. But I don't think the mission has fundamentally changed between where we are right now versus the one that our Founder brought forth in founding this company.
48:16 - Dai Truong (Arlington Capital Advisors)
Yeah, I mean, Jeff Wells’s been, you can say 30 years building this, right? it really started as Franwell in 1993, and then I think at some point, building apps became Metrc. So, you know, he's had a long track record of developing software for sort of the supply chain.
48:35 - Michael Johnson (Metrc)
Absolutely. I mean, number of patents in the use of RFID and different techniques and managing supply chains. mean, Metrc was definitely a product that was born out of Franwell and a number of those other products have turned into companies that were spun out and whatnot. It's all part of, I think, his overall vision and he's been able to find certain doors that opened and. and kind of double down on those opportunities when they existed. Some have worked out really well. others, I'm sure you'd like to have back, just like any entrepreneur, but it's been an interesting ride here for Metrc to say the least.
49:14 - Dai Truong (Arlington Capital Advisors)
And who do you guys consider competitors and sort of what do they do better? I guess, you know, easiest for competitors is when you go head to head for some of these government contracts. Should you not win one of those government contracts, usually what's the difference?
54:30 - Michael Johnson (Metrc)
It's hard to play in this space. You have kind of factors working against you. I think a lot of folks don't necessarily understand the cannabis supply chain, which makes it a bit challenging for folks to compete. And then the secondary part is government contracts and government contracting is very different than private contracting. The company contracting is going to transact in a very different way, whereas public or government contracting, really goes through written RPs. You're actually oftentimes in blackout periods where you can't even actually have conversations with the state who ultimately will be your customer. You can get clarifications, but usually they're written. So it's tricky. And so the next largest provider of track and trace solutions is called BioTrack, which you mentioned earlier. And I think their model's a bit different than ours. I think that they are able to provide solutions that are both for the government, but then also are for the industry in an ERP and appointed sale. And so Metrc is just different. I mean, I'm not gonna say a lot about, certainly not gonna say anything about any perceived faults or anything that might happen from a competitor. I speak mostly about what we do, and I'm proud of what we do. And I think it's different from what anybody else does. And that's really focused. exclusively 100% on the regulatory compliance solution on track and trace and I'm trying to create this meaningful foundation and standard for the way transactions can flow. And in such a way that we're building. An opportunity for the ecosystem of other software companies. Of licensees of consumers so that they can have a really strong. Really strong and resilient supply chain and she's different. And frankly I think that's a big reason why I've been able to be successful.
51:33 - Dai Truong (Arlington Capital Advisors)
Yeah it's hard to compare because state by state it's very different and also your offerings and where the company you know like I referenced earlier their ownership under for Ian and now being under always which is I think more driven by POS and being part of that ecosystem completely makes sense that the companies are very divergent and where they've chosen to focus recently.
51:55 - Michael Johnson (Metrc)
And we work with them. I mean so we integrate with us just like. Like many other, many other point of sale vendors or ERP vendors. You know, we certainly hope for them to succeed. Just like we hope for success for all of our partners.
52:13 - Dai Truong (Arlington Capital Advisors)
So with that, I'll ask you one last question. I know it's that time of year where folks love to give their predictions or things they are kind of watching out for in 2024. Um, do you have any that you'd like to share?
52:27 - Michael Johnson (Metrc)
So we've been, we've been in a bit of a, from a, like an industry perspective, I think there's been a bit of a lull in, in more of your, um, I guess older states or more, um, states that have been around for a bit longer. Uh, and I see that we see in the numbers, we see that's already a turnaround. Um, we see, I think a lot of opportunities for, you know, the industry to have gotten a little bit smarter about how they do business, a little bit smarter about, um, finding efficiencies in the supply chain and really growing up. And so I think that we're going to see some turnaround in kind of the negative trends that have persisted over the past couple of years in those more legacy states. I think that you're going to see a lot of the states that have really focused on trying to curtail the illicit market and really focus on trying to protect their markets. I think they're going to do better. I think you're going to see the average price per gram jump. And I think that's a huge thing for them. I'm really hopeful that we'll continue to see opportunities to find efficiencies and to gain a little bit to margin in the supply chain for folks, but also that we'll be able to, I think, get further ahead of some of the challenges that states and the industry has in terms of protecting the supply chain and protecting public health.