Q1 2020 Earnings Call
[music].
Specialist by pressing the star Keith followed by zero.
After today's presentation, there will be an opportunity to ask a question.
Good question you May Press Star then one on your Touchtone phone to withdraw your question. Please press Star then to please note. This event is being recorded.
I would now like to turn the conference over to Daniel Foley, Vice President of Finance and Investor Relations. Please go ahead.
Thank you good afternoon, everyone and welcome to securely Holdings first quarter 2020 conference call.
Today I'm joined by Boris Jordan Executive Chairman, Joe, What's already Chief Executive Officer, Joby Air President Neill Davis, Chief operating Officer, and my Carlotti Chief Financial Officer.
Earlier today, we issued a press release announcing our results for the fiscal quarter ended March 31st 2020, <unk> press releases are available on our website under the Investor Relations section filed on SEDAR.
Before we begin I'd like to remind you the comments on today's call will include forward looking statements what in the meeting Canadian in United States Securities laws, which by their nature and all the estimates projections plans goals forecasts and assumptions, including the successful completion of announced acquisition and the impact of Cobot 19 and are subject to.
Risks and uncertainties that could cause actual results or outcomes to differ materially from those expressed in forward looking statements on certain material factors or assumptions that were applied in drawing any conclusions or making a forecast such statements.
Forward looking statements speak only as of the data This conference call it should not be relied upon predictions of future.
We undertake no obligation to update or revise any forward looking statements, but there was a result of new information future events or otherwise except as required by applicable.
Additional information about the material factors and assumptions for me to basis.
Forward looking statements in risk factors can be found in the company's filings and press releases on SEDAR, indicating security exchange.
During today's conference call carefully for refer to non I FRS measures did not have any standardized meaning prescribed by I FRS such as pro forma revenue adjusted EBITDA and managed revenue the definitions of which may be found in our earnings press release. Please note that all financial we're making is provided in U.S. dollar as unless otherwise indicated without I'd like to turn the call over to executive Chairman.
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Thanks, Dan before we begin I would like to officially welcome my Carlotti, our new Chief Financial Officer, Mike joined the company in February taking all the CFO role as Neal Davidson was appointed Chief operating Officer, Mike is a seasoned financial executive what was already added great depth the leadership team.
And we'll provide or for the natural overview and outlook going forward.
To begin by highlighting the extraordinary efforts the entire true or weeks team has expanded navigating the cobot 19 environment so far.
We have successfully kept our employees and customers save while continuing to serve the communities where we operate.
We have been relentlessly focused on taking all necessary steps to adopt our business. So that's evolving situation and our record results since electric trying time demonstrate our continued emphasis on excellence in execution.
I'm incredibly proud of the entire teams response and stepping up the challenge I'm extremely pleased with our overall performance thus far.
Our ability to deliver profitable growth. There's also a reflection of our diversified portfolio baskets early parts exposure to some of the best kind of its markets then the country and our portfolio will only strengthen what the inclusion of grassroots.
At this time the principles have resolved all outstanding matters that are currently working to complete the transaction. We have made substantial progress all regulatory approvals and a transaction is expected to close by the end of the second quarter.
Grassroots was a strong market leader throughout the Midwest within the Phillies portfolio of approximately 63 dispensary licenses, including 33 operational today.
23 cultivation of profit from Watson's.
Importantly, grassroots has a leading presence at large markets and what's truly does not operate strategically accelerating our continued expansion across the nation.
<unk>, Pennsylvania, which are among the largest and fastest growing canvas markets in the U.S. are the most significant immediate opportunities grassroots Brent.
The cure all the brand to Arkansas, North Dakota, Vermont as well.
The combination is also complimentary to our existing business and seven other states can make us more scale and operating leverage in major markets, such as Aurizona, Maryland, Michigan and Ohio.
I'm also encouraged by the integration of our recent acquisitions, most notably select we've been working diligently to expand and vertically integrate select as we look to structure the business for lasting and profitable growth.
The brand to seeing an acceleration in legacy markets, even as we entered new ones and select US now on the shelf in Oklahoma, Michigan, Maryland, and Colorado with plans for Connecticut, Florida, Massachusetts, New Jersey, and New York.
What products already available at approximately 800 independent the spend treats across six states and company owned stores and three additional states.
Why your and consumers will have access to select the 15 states, including an over 70 cure all the oldest batteries are we expect to continue this aggressive rollout in conjunction with the pending grassroots transaction.
So like this the perfect complement to our in house.
Wellness, Brad and will allow us to engage.
Wider spectrum of customers, particularly as limited license markets.
Well like this rapidly becoming the first true national adult you spread yes, we are only beginning to see the full potential here.
Whitespace that exists for brands in Canada is enormous and we intend to leverage our industry, leading scale to maximize this opportunity.
We have also successfully integrated our alternative care immediately making sure leap leading candidates retailer in Connecticut, and fulfilling our vertical integration objectives in that market.
On the regulatory front essentially designation, we received an all markets, where we operate that's been a welcome validation of our business. We're pleased that many state governments explicitly recognize the vital role cannabis plays in the health and wellbeing.
Our citizens.
As a significant economic driver to their states.
I'd like to take this opportunity to once again, thank the governors and their hardworking stops for their leadership commitment that's for their tireless efforts. During this tough time their support has been critical in helping ensure that our customers can access the campus products they have come to rely on without interruption.
That said covered my team became a headwind in Nevada in Massachusetts, late first quarter and until second quarter.
March 21st the Governor of the bottle limited dispenser itself to delivery.
In response, we quarterly added home delivery capabilities, allowing us to continue to serve our local customers.
My first Nevada pool, curbside sales, which we recently implemented successfully and finally on May eight customers were able to we entered this country's that's part of the state's phase one reopening director.
We continue to service customers through curbside delivery and pick up operations, and Nevada, and given our business has a strong local following our operations have held up relatively well, however, nevada's full potential will not be realized until Las Vegas tourism rebounds.
On March 24th the Governor of Massachusetts issued an order temporarily closing all adults eustace batteries due to the corona bars, while allowing the state's medical dispensary, including ours to remain open.
Since then we have seen strong growth in medical sales driven by 245% increase inpatient registrations, but the lack of adult you sell since March 24th has been significant setback.
Recently, Massachusetts announced that adult used kind of the stores will reopen and we believe there is tremendous pent up demand in this market with these restrictions behind us we look forward to very significant profitable growth.
The oldest Saudi has been instrumental and these developments and I want to recognize extraordinary leadership the Joe at our government Affairs team showed and working to ensure adult use kind of US was included the first phase of the state's reopening.
At the federal level, the safe banking I was included in the newest Corona bars relief Bill and we are encouraged by the bipartisan support for candidates for for the house of Representatives.
You are only for the industry are going to fight hard to hold these games and the Senate, but there was much work to be done.
And just as an industry.
It's still only in its early days, yes. It employs over 250000 American workers and generated over 1.9 billion in state and local tax revenue in 2019.
New frontier estimates that if marijuana were legalized.
National level today, roughly 782000, new jobs would be created growing to 1.1 billion by 2025.
Federal Equalization is estimated it would generate 131.8 billion total tax revenue between 2017 2020 bought.
It is time for the Senate to recognize Canada, Cisco to state that the industry wants the modifications that will allow it to achieve its full potential.
Before reviewing the quarter one results I would also like to highlight how cold it 19 impacting the way we interact with customers.
Leap is responding to patient shifting preferences by further expanding the liberty online and mobile capabilities moving experiences beyond the traditional brick and mortar.
Enhanced online purchasing including recent introduction of debit based transactions and so I won't markets streamlined the in store transaction process and enhance basket size, even as we socially distance.
We are seeing robust growth that online commerce, and we'll continue to invest in approving our.
Right.
Turning to our financial results.
The one we delivered the highest quarterly pro forma matters.
Adjusted EBITDA in company history pro forma revenue of 147 billion reflects the power of our platform and leadership position in the sector.
That is revenue, which includes select as acquired on February 1st 2020 grew 29% sequentially.
To over 105 million.
The 20 million of adjusted EBITDA, We delivered the first quarter represents 77% total fiscal 2019, adjusted EBITDA, demonstrating operating leverage president and our business as we rapidly scale.
Mike will go into greater detail about our results in future expectations, but I'm very pleased with our business.
Importantly, these results were delivered despite losing substantially all of our revenue in Massachusetts, and Nevada for the last two weeks of March.
Not only are we're delivering strong profitable growth, but we have a solid balance sheet with over 176 million of cash on hand at the end of quarter, one to invest in our organic growth and strategic acquisitions.
Looking ahead, we will continue to implement a disciplined capital allocation strategy focusing on high return projects that will be most accretive to our diversified position.
We're already seeing exciting opportunities to fuel additional growth. That's the Canada space continues to consolidate states announced expanded initiatives.
In addition to our cash position. We also have substantial unlevered real estate and my partners <unk> committed funding up 200 million for any.
Particularly attractive opportunities that may arise on this cash constrained environment.
Many of you know that I've been involved in investing in developing businesses in emerging markets for over 30 years and I use these experiences.
As context, when I look at the involved in Canada sector.
The road has been bumpy, perhaps more than originally anticipated, but this sector presents a rare opportunity to create significant value and I'm optimistic of outdoor I'm sure leaf and the industry.
Sure I reiterate that I have no plans to sell it single share purely and remain fully committed to the growth and success of the company I will now turn the call over to Joe.
Thanks for it.
Well I go into the details of our business.
I'd like to thank you will be president Joe Baird, Our management team and all our employees for their leadership navigating adapting to the very difficult circumstances of the last few months.
I have never been prouder of our people and our purpose.
In addition, I want you once again, thank our customers across the country. The continued support it carefully.
We remain confident they will continue to manage our company effectively to the duration of cooking Nike the support of regulators. They leadership, our dedicated employee base and critically the supported by our customers.
As Boyd mentioned, we redeemed and essential service in almost every state in which we operate and the fundamentals of our business remains strong.
By and large we have maintained consistent velocity through artist centuries, except in Nevada, and Massachusetts, which temporarily prevented normal operations.
Oh, Yeah look in these states as well as nationwide is now more Trojan as we focus on gradually lifting the restrictions that were put in place in late March.
But clearly supply chain remain strong.
We continue to collaborate with vendors and are confident that we'll continue to have access to needed supply as the global economy begins to restart.
You have implemented in maintained guidelines such as social distances increase sanitation and how you measure that utilize technology solution to help minimize unnecessary customer and employee interaction and contact.
We continue to employee curbside pickup delivery mobile preordering expressed pick up and new technology out to protect the health and wellbeing of our employees and customers.
All of which have been.
Become embedded set of technologies not business was strong future application potential and have served as the leading example, but only for our industry or for other essential service retail environments.
We remain firmly focused on operational excellence to drive both top and bottom line results in 2020.
Overall, our operations continue to scale and key states continue to become more self supporting yielding increased amounts of operating cash flow.
This was demonstrated in the strong first quarter results, we posted today.
That are indicative of the underlying strength of our business.
But the continued dedication of our management team in employees, coupled with a gradual relaxation. The restrictions I have no doubt that clearly cool emerged from the situation as it should be there and the Kansas industry.
Organically, we expect you add an additional 17 carries dispensary across five states and expand our cultivation by approximately 200000 square feet it cannot be all by yearend.
The coupled with her strategic acquisitions, including the pending graphs, you would feel our reach would grow to more than 100, just countries across 22 states by yearend.
Ultimately, we expect to go operation with the nearly 142 centuries, and 2.3 million square feet a cultivation space.
So make sure leave the most well diversified vertically integrated kilobit company in the United States with access to nearly two thirds of the entire U.S. population.
Turning to a recap of first quarter operation and our significant progress the key states.
In Florida, we're intently focused on optimizing and expanding our cultivation capacity to drive market share gains in the key states.
With that and we are aggressively expanding capacity at our madora cultivation facility.
Construction on the first endorse that you know the facility has remained on schedule with anticipated completion by this July.
It's new 50000 square foot indoor building combined with further ongoing extensive within the existing footprint of our 270000 square foot Dutchcow screenos well more than double our camping.
This will allow our supply chain to catch up to the robust slow demand that exists in the market. It's important to dispense your opex.
In addition to our 28 stores, we offer statewide delivery and cashless debit transaction capabilities.
Have 12, new stores in various stages of development.
We expect you finished deal with a total of 40 stores the maturity for President and every major population center in Florida.
With over 330000 active registered patient the mistake.
And over 10000 patients they bought registering for the program.
Well were named one of the fastest growing medical cannabis markets in the country.
Even sell through data sealed the deal H. weekly data.
We anticipate hoping to be a 1 billion market this year.
With substantially increased competition capacity and a new wave of store openings early is well positioned to gain market share now and they capitalize on the immense long term opportunity in Florida.
In Massachusetts, we've implemented cashless debit transaction and have continued to serve patients at our two medical stores again over in Oxford.
We are eager to reestablish our leadership position in the adult use market, which is expected to open this month.
Well the operations were impacted by the Governor's order the temporary quote oligo uses batteries.
It's important to highlight the significant opportunity that exists in Charlie's home state.
During the quarter you open to adult you source Robin tell him in January anywhere in March.
Buying with our existing adult used to penetrate Oxford. It's me three of only 44 don't you stores in the entire state are purely scores.
Only one or the operator altered their therapy group has opened three adult you stores in Massachusetts.
The under a leading retail position or perhaps even more enthusiastic on the wholesale market.
By state mandated foreclosures, maybe ended the quarter.
You sales were over 150 million in Q1, almost 50% higher acuity, though you feel the Illinois.
Surely it's one of only 28 companies in Massachusetts, with an active cultivation license.
We continue to harvest on schedule from our existing 50000 square facility and began construction on an additional 50000 square feet indoor space, that's expected to come online in July.
If you'll get securely 100000 square feet of high quality and more capacity and the state that according to cannabis benchmarks.
Hi, fire price or power I mean, any state and the country.
Meanwhile, we continue to work with regulators to close that transaction with alternative therapies group, which turned out has been included managed revenue will ultimately be moved to wholesale revenue. Once you close on the acquisition of IGI is cultivation of processing assets.
We remain extremely optimistic about our overall prospects you, though these markets and 2020 and beyond.
New Jersey securely has historically held over 35% marketshare Arkema once again produced record quarterly results.
Our 12000 square foot Dispensary has continued to safely and effectively meet strong patient demand.
During the first quarter, we completed construction of an additional 7200 square feet, Oh supplemental cultivation capacity I could del Mar facility.
We expect our first harvest I have to supplement the facility you're ready images feeling further near term growth.
Well I bought a retail and wholesale fraud remained the largest provider in the state of 9 million residents that crucially seems poised to legalize adult use on the November 20 $20.
Last year, the legislature formally approved the ballot measure and a month University pole and maybe April if on the measure 61% voter support.
With strong growth in the medical program and adult use on the horizon. We are actively building on our market leading position.
We expect to open at least one additional the statue by year end for which we have security site and are working through regulatory approvals.
We have also security 100000 square foot warehouse, plus 68 acres Hillman, which will become a state of your production facility later this year, creating hundreds of new jobs realistic.
Finally, we are actively working through the process of converting operation to a for profit entity and expect to complete this process in June.
Moving on to New York.
First quarter, our retail operations achieved over 25% marketshare According to state tax status.
With Penn licensees in the state.
Represents more than double our fair share even before factoring in our significant wholesale volume.
In February we launched cure accuse into the market.
First chewable job product mistake.
<unk> April we saw extremely strong demand for our curbside pickup and delivery options, helping drive our 40% retail growth from January to April alone.
We've also implemented a cash the debit offering for our kitchen.
Well, the Kuroda virus solid momentum for adult use legalization and the legislature this year.
We remain well positioned the first the needs our medical patients and adult use customers should legislation being active.
Well I'll do my son's either reducing operations are healthy because of the New York purely on the other had has opened the maximum number of retail location and a fully built out 72000 square foot production facility every name poised to capture outsize market share as the program experience in the state of 19 million residents.
In Maryland purely for me is one of the only vertically integrated operators would statewide maximum 40 sensors.
We've continued to serve patient at our four stores have implemented cashless debit transactions and have seen significant progress improvements in our production facility since we acquired the assets last year.
First quarter yield more than doubled compared to the prior year.
Barrel and has a strong medical program. That's all state why Q1 sales of over 90 million and we're optimistic that our vertical platform.
Just retail fleet will allow cure leads to continue to drive market share gains.
Moving on to Connecticut in early April we closed the acquisition of Arrow alternative care.
With this acquisition purely overnight became the leading retailer, Connecticut three of the state 18 operations batteries and the largest metro areas and the state.
Hartford and in Northern Tristate Metro corridor, no forgets Stanford.
Combined with our existing 60000 square foot production facility in center, which is one of only for production facilities mistake.
I will help us achieve our goal of becoming vertically integrated in Connecticut, and that's been immediately accretive to our margin.
On the Legislative front, we're seeing growing bipartisan support for adult use legislation and are optimistic that they'll use cannabis will be a reality, Connecticut at the end of 2022.
And maybe we continue to provide management services.
Q2 of the eight medical license holders, while positioning purely to be a leader in the adult use market when it launches later this year.
We intend to open the maximum afford don't used retail locations early in the program with location secure and then development.
<unk> expanding production capacity at our current vertically integrated medical operations.
Additionally, we continue to work with regulators to convert over many medical entity before proffered operation after securing their first approval recently.
Being struck supportive cannabis and sizable tourist market bode well for growth and 2020.
In Ohio, we are scheduled for final inspection later this month for a job tell cultivation and processing facility.
Facilities fully developed with construction complete and includes the maximum allowable cultivation of 25000 square feet plus processing square footage that will allow us to delivered nearly 12000 pellets a flower per year, bringing a full breadth of products to the market.
<unk> medical cannabis industry, it's still fairly Mesa, and we are excited about Ohio.
The nation seventh most populous state with 11.7 million residents.
In Pennsylvania, we were awarded one of the first seven critical registered license.
A lot of you have to open a total of six new dispensary at 50000 square feet of cultivation capacity in the state.
This award coupled with our pending grassroots acquisition when they currently for leader and one of the fastest growing medical markets in the nation.
No I want to take some time to touch on the West coast strategies.
In California, we continue to harvest on schedule at our cultivate facility and Selena and meet our manufacturing targets.
The for like processing facility in Sacramento.
You mean, California is robust elicit market.
Favorable tax regime, that's struggling dispensary operators, we are addressing this market thoughtful manner that recognizes its unique challenges.
Operational excellence disciplined pricing and tight receivable management will be our priorities as we expand this like family of products to include Gummies life, President and pictures.
We also just sorry, herbal, California largest cannabis distributor and supply chain cash solution company. That's the exclusive distributor of select products in California.
[laughter] partnership will allow for an increase in deliveries expanded customer footprint. It more cost efficient delivery method and opportunity for continued growth, bringing select to more than 850 license dispensary and delivery partners across the state.
In Nevada, we're pleased that the state reopen retail dispense with the customers on me.
Oh, lobbing curbside delivery and pick up to continue in parallel.
Oh, the cultivation side, we continued to operate on plan three production facilities in the state.
Despite our focus on local residents the pace at which tourism rebounds overtime will be a key sales driver for care at least in Nevada.
We closed on the acquisition of Bakers cultivation of late 2019 and are working to increase the productivity those assets long enough to backward integrate selected or supply chain.
Hey, renewed emphasis on the wholesale market, but the upcoming launch of new select products, including Gummies why doesn't it pictures will allow us to achieved full potential of the brand.
In Arizona, what surely hold more licenses and all but one company our eight stores have seen extremely strong revenue growth of 2020.
But lumpy retail revenue, increasing nearly 35% from January to April.
Its march implemented cashless debit solutions at our stores as well as delivery.
In Q1, we also doubled our canopy and a 100000 square for facility and hold Mark.
Well, they focus on improving gross margin and free cash flow through vertical integration.
There's no they continue to be one of the largest cannabis markets in the U.S. with over 230000 registered patients or 3.3% of this they've population.
We remain confident residential vote to approve adult use the November about.
Select is already a leading baked bread in Arizona, and we plan to win additional market share or further integrating like in this market and introducing new products, including gummies like resident and pictures.
In Oregon, we're focused on backward integrating select and are established vertical operation with a 37000 square feet of cultivation.
So that remains the leading vapor and in the market and we are committed to growing the brand profitably and away that continues to earn customer and patient trust influx home state.
In Colorado, We recently announced the acquisition of lucrative.
They produce Canada's chocolate baked goods and gabi that utilize high quality ingredients.
Upon closing purely cool obtained at 8500 square foot cultivation and processing facility that will support the company's plant expansion of the flick ran into Colorado.
So like successfully launched there in January and we view this market as an attractive opportunity to build brand identity and gain market share or a bus market. Although it's the second largest state in terms of accounts get them as revenue.
And you talk we finalized the device and it started construction on our new 7500 square foot pharmaceutical grade processing facility and North Salt Lake City.
We have submitted plans for our children dispensary located in the city of Lehigh Yeah. The geographic center of the Salt Lake City Pro Bowl or.
Combined statistical area.
Which can take 82% above the 3.2 million residents.
We expect to be fully operational by the end of July.
Finally, I would like to just add some additional color to select business.
In closing the acquisition that February for.
We have been laser focused on integration pursuing acquisition synergies and expanding the brand across several of these states.
Much work, you've left to be done, including the realization of synergies through the sourcing of oil from several of our manufacturing facilities in existing state. That's all for roll out the other thing like Brad and certain teacher at least markets.
It's part of our initiative to expand selects presence we've introduced the Grand in Maryland, Oklahoma, Michigan in Colorado with seven new state launches planned by yearend.
New products, including Germany, France like NATO Gabi.
So like delete lives have launched or lunch meat, you too in several states, including Nevada, Arizona, Massachusetts in California.
Oh God, he's made with anyone motion technology, providing faster onset and matter offset the judicial edible and offer more predictable experience for the customer.
You did the precise in calibrating the facts and our products are perfect micro dosing solution and an optimal choice because he was looking to try candidate for the first time or for those seeking alternative consumption methods.
Well the nano technology is a game changer for the edibles market and we're very optimistic about capturing additional share of new categories consumers, who see the says hey, more accessible product.
So lets elite lives that broad spectrum oil products derived from fresh frozen flower capturing more evidence of the living plant and a higher chirping collagen, resulting in enhanced flavor.
Currently available in Arizona, California, Maryland in Oregon.
Like elite life will be available across the majority of purely network by Q3.
Furthermore, we continue to make progress on expanding its like Brad and the state Securities does not currently operate in such as Oklahoma in Colorado.
It's worth discussed we envision for like at the National lifestyle brand and we are well underway toward making mr. reality.
Continue to believe that overtime, we can materially improve but the topline and margin profile looks like as we integrate it into care leaf and expand the brand into new markets.
In summary, I am pleased with our progress, but he moved through 2020.
We are poised to deliver strong organic growth and our existing asset base and do targeted acquisitions, such as select our alternative care independent grassroots deal.
We are executing on all fronts prudently deploying capital to key markets expanding both our brick and mortar nominally president.
We remain focused on growing our cultivation of processing sales and marketing and innovative and proprietary R&D, we deliver brands that resonate with our patient and lifestyle customers.
We saw the fruits of this investment pay off in several key states as we exit 2019, and we firmly believe that are planned investment and 2020, many of which will be completed early in the second half of 2020 will yield strong growth both in the top and bottom line, we didn't securely becoming free cash flow positive after all planned capital expenditures.
In the coming quarters.
In summary, despite the challenging environment presented by Cobot 19, we administer weather situation extraordinarily well.
Just in general remains a bright spot in the consumer space and we're confident that clearly I mean, what are the best position candidates companies to emerge from the crisis stronger endeavor, but that's a behind us deliver strong growth in 2020.
Now I'll turn the call over to my Carlotti, our new CFO will review our financial.
Thank you Joe and good afternoon, everyone.
First I want to say, how pleased I am to have joined the cure leaf team at both.
A challenging an exciting time in the company's history.
Like force.
And the entire management team I'm very optimistic about carrier Leafs future growth prospects.
I've already spoken several people on this call and look forward to getting to know each of you better overtime.
Looking at the first quarter once again, we posted record results as we remain focused on generating strong top and bottom line growth that we believe will drive long term value creation for our shareholders.
In the first quarter, we not only posted record pro forma and managed revenue, but also posted our fourth six consecutive quarter of record positive adjusted EBITDA, our broad geographic base and product diversity, a key strength of care leaf allowed us to deliver these results.
First quarter results were driven by strength in Arizona, Florida, and New York as we continue to see strong growth in retail operations and these key states.
Vertical integration remains a key component to our strategy, we continue to increase cultivation capacity in each of our states of operation and those markets, where we continue to see expansion of medical programs and door ongoing discussions around legalizing adult use consumption such as Arizona.
Corridor, New Jersey, New York and Connecticut.
Our gross margins from Canada sales expanded more than 460 basis points to 43% as compared to the first quarter of the prior year.
The increase was primarily due to higher operating capacity of the company's cultivation and processing facilities.
As mentioned in previous calls, while we expect our gross margin from Canada sales to trend upward. It will continue to fluctuate quarter to quarter based on our investment cycle and processing and cultivation as we continue to expand and bring new facilities online.
Overtime, we expect this fluctuation to moderate, especially in the second half of 2020 as our investments continue to ramp and the capital intensity of our investments continue to moderate.
In the first quarter managed revenue more than doubled over last year to a record 105 million and was up 29% quarter over quarter.
Total revenue for the quarter was a record 96.5 million.
28% over last quarter, demonstrating the strong growth that exists in both our core and managed business operations.
In order to provide more clarity this quarter, we have provided a breakdown of retail wholesale and management fee income as it pertains to total revenue.
Select was acquired on February 1st and is contained in the wholesale revenue line.
We reported record adjusted EBITDA of 20 million in the first quarter up 45% sequentially and compared to a loss of 2.8 million for the first quarter of 2019.
As Bourse mentioned the increase year over year, primarily due to the continued scaling of operations and higher gross margins across several states, notably in Arizona, Florida, New York, and New Jersey, offset somewhat by the keep continued investment in key markets, where we are expanding.
To meet demand.
Our retail and wholesale revenue more than doubled to 77.1 million during the quarter compared to 27.8 million in the first quarter of the previous here.
Management fee income was up 160% to 19.4 million in the quarter versus the comparable prior year period. The increase in retail revenue was primarily result of organic growth and new store openings in Florida, Massachusetts, and New York.
We grew our retail footprint to 54 dispensary as of March 31st 2020 up from 43 on March 31st 2019.
As of today, we operate 57 dispensary split the inclusion of the three dispensary is we acquired in Connecticut on April six.
As June eight for the quarter was 45.9 million compared to 23.3 million in the prior year period, and 36.2 million in the prior quarter.
Adjusted for one time charges asked you now in the quarter was 34.7 compared to 27.9 million in the prior quarter or 33% of managed revenues.
A decrease of 100 basis points compared to the prior quarter.
As we continue to integrate select identify additional cost savings and scale overall operations. We expect our S. You need to decline as a percentage of managed revenue, resulting in significant operating leverage.
During the quarter income tax expense was driven by increased deferred taxes associated with the increase in biological assets.
Net loss attributable to securely holdings for the first quarter of 2020 was 15.1 million compared to a net loss of 10.2 million in the first quarter of 2019.
Due to our acquisitive nature, we believe adjusted EBITDA is the best measure of our performance as it excludes the impact of 32.7 million of noncash charges related to biological assets, depreciation and amortization and stock based comp as well as 11.2 million of onetime items.
Primarily relating <unk>.
<unk> increased business development acquisition and financing related activities.
We have provided a reconciliation of net loss to adjusted EBITDA in our press released this afternoon.
Adjusted EBITDA for the first quarter of 2020 was 20 million an increase of 45% over the fourth quarter and illustrates the operating leverage we continue to experience as we scale.
Moving onto the balance sheet.
As of March 31st 2020, we had 176.4 million of cash on hand.
With the results announced today, our fourth consecutive quarter of positive adjusted EBITDA, We remain confident in our financial position and believe we have ample cash on hand to fund all of our current business business initiatives to support future growth. Furthermore, several of our states continue to generate increase.
Using operating cash flow, which paves the way towards generating significant organic cash flow.
Finally, as Joe mentioned, we believe the capital investments that we made in 2019 and continue to make in 2020 will lead.
Securely, becoming free cash flow positive after all planned capital expenditures in the coming quarters.
Weighted average fully diluted shares outstanding were 507.7 million.
Please note that we issued approximately 47 and a half billion shares to select shareholders. Upon the closing of that transaction on February 1st.
With respect to guidance.
We respect we expect to report another record quarter of managed revenue for the second quarter of 2020, albeit at a slower sequential growth rate due to the temporary covert 19 related restrictions placed on operators in Nevada through may eightth and the temporary closure of adult dispenser.
Series in Massachusetts. These factors are expected to be offset somewhat by increased strength and key states, such as Arizona and New Jersey.
As such we currently expect that manage revenues for the second quarter of 2020 will be approximately 120 million, reflecting sequential growth of approximately 14% and.
And growth of approximately 118% versus the second quarter of 2019.
It's worth noting that the impact of temporary closures in Nevada in Massachusetts have reduced our expectations for the quarter bye-bye approximately 29 billion.
Mismanaged revenue guidance excludes any contribution from the proposed grassroots transaction, which is expected to close at the end of June.
Pro forma basis, which would include grassroots we would estimate that our second quarter manage revenues will be approximately 165 million.
This guidance assumes that we are working on our Maryland structure, given the restrictions around the number of licenses that can be held within that state and takes into account the aforementioned impact of temporary closures.
It is important to note that embedded in this overall guidance is the assumption that adult use sales resuming, Massachusetts on may 25th.
Lastly, these expectations assume no further changes in the operating environment due to covert 19 for the remainder of the quarter.
With that I'll turn the call back over the operator to open the line for questions.
We'll now begin question answer session.
The question.
Star then one on your question.
If you're using its speakerphone, please pick up your hands that there's going to Preston.
To answer your question. Please press Star then too.
Our first question comes from Grand Kids with <unk> capital.
Yeah, Hi, good afternoon. Thank you for taking my questions here.
The first question I wanted to follow up on the Q2 20 outlook here. So you mentioned you know some of the states, where you're seeing growth some of the other states, where it makes them a bit a weaker.
I was wondering in terms of be dynamics, where a customer behavior I think the discussion in the past its been about your lower volumes and higher average basket sizes, given all the work you've done to implement I'm various alternative methods for customers to transact I'm wondering if that dynamic has changed at all looking into Q2.
And aside from the individual markets and mistakes whether that actually is driving some of the growth as well. Thank you.
[laughter] Yeah Grand This is Joe <unk> Ah. Thanks for your question I would generally say that.
You know, we're seeing growth across the country I mean, the only limiting factor frankly in Q2 is the fact that Massachusetts effectively shut us down for 10 weeks and we lost a lot of momentum in Nevada, but in terms of momentum you know it's building across the country and yes, we are definitely seeing a changing consumer behavior, we're implementing.
New strategies, including curbside pickup in elect a electronic payments and we're seeing the the basket size continue to increase when people use electronic payments. So that's an encouraging trend.
So I think generally we feel very good about where the businesses and the trends across the country be growing demand even in the stealing Massachusetts. You saw you know, 250% increase and medical registration. So the consumers want this product right. I mean, this isn't complicated and the demand is going to continue to build we need to build capacity to meet that demand if we do.
We're gonna be very successful.
Okay. Thanks for that and then just too just to follow up is there is there anything or any sort of numbers you have to quantify whether these various initiatives event blanket like curbside on express pick out things like that whether that's actually increased average throughput.
Hey, it's certainly has reduced transaction time, I mean, it's hard to get metrics, just given how diversified our portfolio is and how different we operate in every state, but I think where we've implemented curbside. It's certainly reduce the transaction time and Weve definitely seen the basket size increased almost consistently across the country.
Average basket sizes up 7% since the last quarter.
With visitation disowning slightly on average.
Okay, Great. Thank you and then my last question here and then I'll jump back in the queue looking at the pro forma revenue sequentially quarter over quarter on if my math correct that the pro forma revenue was up about a 12% which is a significant increase from the previous period, where we saw about 2% growth, but that bridge I think.
It has gone from a cute about 47 million. It was previously 50 million on the bridge from the manage revenues. So I was wondering if you could give a bit of color in terms of you know some of the parts on that a pro forma revenue, especially on the bridge and you know from the various entities included in that you know, which have which have seen.
As an acceleration or above expectation acceleration with the conditions because of co bid and which might have lagged a bit there. Thank you.
Yeah sure. This is Mike so I'm on the first part you're correct that the bridge from 119 of managed revenues expectations to pro forma.
It's organic growth of about 15% and then the rest of the the Delta between management pro forma.
As a result of grassroots there's a you know a couple of decades of Arrow and air, but it's it's kind of a rounding error.
Okay. Thanks, I'll get back in the gift.
Our next question comes from Vivien Azer with Cowen and company.
Hi, all this is Harrison leave us on for Vivian. Thanks, So much for taking the question congrats on a strong quarter.
As the number three player in Florida, we were interested to know to recent New York Times analysis that show the exit is from Manhattan, particularly over indexed Florida.
Can you comment on the impact that this consumer migration had sequential trends Nike market. Thanks.
Well you know what I'll say generally is that we think Florida is going to continue to be one of the fastest growing cannabis markets and the country. It's hard to quantify I'm you know that migration from New York and how many new patient registrations were result of that but I think if you look at the state data <unk> the new registrations.
Continue to go up so we're very encouraged by that market you know clearly for cure leaf you know when when we bring on our new 50000 square foot cultivation facility will be able to bring a lot more supply into the into our stores, we're going to open up another dozen stores. This year. So I'm you know, we're very we're working very hard down there to grab market share and we think that the <unk> that the market but.
Central is quite strong for the foreseeable future not to speak of you know with don't use which which could be on horizon and a couple of years as well.
I would just I would just that but you know on New York.
We're only seeing strength oh quarter to quarter, New York, New York is really picking up to be one of our better states.
And that's not necessarily be case, all the other operators, we've seen a lot of operators actually either shut down stores or or bring down the hours that their stores were operating in archrocks actually would seem to reverse we're seeing a quarter on quarter substantial growth in New York and York, It's one of the largest stuff in the second largest.
A black market for cannabis and United States up to California, and as we continue to see those patients or those customers moving over to either the medical market or what we expect fully after new Jersey approves in their ballot in November adult use we suspect New York will go.
Very very quickly after that then we'll see a fairly large potential for growth from New York market.
That's very helpful. Thanks, I'll jump back into queue.
Our next question comes from our bottom line.
Right.
Good evening, everyone. Thanks for taking the questions and congrats on a very strong quarter I'm just two questions for me one relates to select the other one but grass roots.
Some very fulsome commentary and in the operation State by state apologies. If this might have been mixed in that alright, I missed that in the mix, but I'm just wondering on select you know given what you've seen a you know last quarter with some rebounding compared to the headwinds we saw throughout 2019 with vaping, where did that segment of the business.
All when it comes to maybe that 12% growth that we saw on a pro forma did outperform or underperform wasn't in line and sort of any other anecdotes with respect to you know where you see that going in addition to your your prepared remarks on that state by state basis.
Yeah, we're very encouraged with my house likes is performing you know, we definitely think that even in core even in challenging markets like California, we managed to get back to growth mode. As we launch new products like life resin and gummies and so on the business. The is definitely on the on the growth trajectory. You've also brought it into a couple of new market.
So we're very encouraged over all about consumers going back into the big category and also be willing to try the brand don't different form factors I'm you know in terms of where select can go I think it's important to say that in its core markets, where clearly fibrates, we're going to vertically integrate it which we've already we've talked about to improve the margins, but more importantly.
We are aggressively move into brand across the country and so I think it's kinda early to really talk about so like I was going to say that we have big plans for its going to be a national brand. It's gonna be in New York, Florida, You know Boston all the major markets. This year and we see it really a unique opportunity to build the first national cannabis.
So we're very happy with how its going and we're excited about where we can take the breadth.
I would just after that that if you include January which we didn't own the company, which included in the quarter that select business did see sequential growth over the fourth quarter 2019.
Perfect. Thanks, that's helpful and the follow up is just on grass roots. So a couple of parts of this question, but but feel free to answer where you can one is just on the on the risk of closing so we've seen in the past with with within the sector. You know one taking kind of gone up the works I think Oregon has been a bit of an issue in the past there just wondering if there's any.
States within grassroots and understood that that both both parties, but then the deal I've done everything they need to do but just with respect to them the ought be a the regulator signing off if you think there's any sort of trouble state to not that that's an outsize risk and then the second part of that questions that you could just comment on would it be consolidated in the operations Tomorrow.
Wearing their EBITDA profile or they are positive much like yourself and then also access to capital I understood. There there was some real estate within grass roots that potentially could be spun off or seven lease back. So anything you can answer and those sort of types and passion to be helpful.
Sorry, I I'd like to start out by saying that.
On the also lets start with the last question.
We don't have any capital problem for grassroots Chili's has enough capital and grassroots effort to build out the rest of their facilities and so we don't see a real need UBS for grassroots today for capital as far as closing I just want to make one point surely puts close every deal we've ever know so.
I don't think we'd get a lot of credit for that.
We announced the deal we're going to close Oh, there's always circumstances like to stop it you know <unk> extraordinary circumstances and the deal, but we typically.
You know treat transaction for us are saying, we don't go out announcing deals must have full attention. So we fully expect to close grassroots to be honest I think we see Oh why did you happen to tell in terms of closing a deal that second quarter I think it's actually a little better than we originally anticipated when we were thinking Oh during the first.
First quarter, we thought that it might drag out into the third quarter due to the cold that situation. We made a lot of progress on the transaction since our last call in March and we do expect the transactions close at the end of the first quarter.
Ended the second quarter, sorry, and then second quarter and the second quarter perfect and any other commentary on the potential existing either profile, which I think you touched down there. So so they are so they are EBITDA positive, but we will not give any more color until we consolidate them without <unk> I'm correct for us to do but but a grassroots.
<unk>.
Great. Thanks, so much.
Our next question comes from Robert Segun diesel C and D.
Hey, guys. Thanks to the question and congrats on a on a great quarter there.
Well I just want to focus a bit on the gross margin performance. So you know very solid it the way we looked at it the X. I FRS adjustment X depreciation.
You know, we calculate it somewhere in the 56% area and up from Q4, it and I was wondering if you could talk to that and in light of the contribution from select.
Which I believe was the sport lower gross margin of the Standalone generally so what's going on and like you on a gross margin a improvement if you could give some color would be great.
Yeah sure I'll start this is Mike you know as we've mentioned you know the select margin profile is not the same as cure leaves just given its.
Wholesale business and not a retail business and so.
You know that would have an impact on our gross margin. However, as we continue to scale up in several of our key markets. We're seeing gross margin improvements out of our key states.
Okay, great. So.
Good good benefit of your platform diversity that.
And I was just wondering if you guys could comment a little bit on err on the one time charges that werent <unk> or do you want it EBITDA.
And he had any additional each other it would be helpful.
Yeah. Most of the Q1, a onetime charges were mainly due to the closing on select which include <unk> you know legal and advisory fees are there was also some certain onetime litigation fees that were incurred in the quarter as well that that went into that number.
Great. Thanks, again, Mike one last quick one if I could get it did is a is there's certainly no updated timing for closing of VTG you know realizing.
The Massachusetts had slowed up do you Oh, good but.
<unk> or is there not bid pipeline for that for that acquisition and the you know seeing how it's performing or probably quite well access the closure that'd be great. That's the kind of get that integrated.
Yeah. Robert This is Joe I mean, the you know the deal has been filed with the regulators for many months now the transaction is being reviewed we fully expect it to be approved but I'm. Obviously, the covert 19 puts it a little bit of uncertainty into the exact timing we will consolidate those assets. They are performing quite well I'm you know enjoy.
General and Massachusetts is you know prior to being shut down was was I, probably our strongest market and the country really excellent gross margins EBITDA margin. So you know in general we're very bullish about that dealing it's in it you know eventually look we'll get over the finish line just well time is a little bit out of our control, but we're working hard with the regulators to getting over the finish line.
I think the good news Robert <unk>.
Covenants stepped up this morning, I'm trying to read the news or not yet.
Asked to open El Paso, the 20 cents made and so.
That's really really good builds for everybody in Massachusetts.
Okay, great. Thanks again.
Our next question comes from Matt Mcginley with me.
Thank you my questions on the wholesale revenue growth specifically the revenue in that segment went from 9 million to 20 million from the what quarter to the first quarter and that included two months of select which I think would imply a run rate of that business is probably 65 or $70 million I remember the earn out a base about was around 130. So just.
Karen Directionally, that's the way that doesn't that today and is there anything different sequentially that other than I think you said it was up sequentially, though that is there anything differently that business and in terms of how it looked in the fourth quarter versus the first quarter that would make that.
<unk> much lower than what I think the least earn outs were from from last year.
Sure. This is Mike So remember obviously, we only had two months of select.
In the quarter and also you know as as the adult businesses, and Massachusetts, where shut down for a period of time during the quarter that had a negative impact on our adult I'm sorry, our wholesale revenues in the state of Massachusetts. So you can't simply look at the Delta between.
Wholesale revenues in Q4 versus Q1, and presuming that at Delta is all selects because there are other movements in our wholesale business, namely.
Overall, good, but obviously, Massachusetts was was it a slowdown in and wholesale revenues sequentially because of the shutdown.
That's very important to understand that's very important understand that a lot of the wholesale across the country take place at the end of quarter Oh. So the last two weeks are typically the busiest a two weeks of any quarter of wholesale smart quarters, and so we had you know both in the fourth quarter of Oh I'm sorry.
Last year, where we've had a big crisis in the shutdown the big self, Massachusetts, and then of course with Cobranded beyond the fourth quarter, where are our wholesale sales were halted, Massachusetts agenda, but the first quarter also had an impact on that so I think you know weren't we're expecting very very large scale pent up demand in Massachusetts in June.
As we reopened here on May 20, something we fully expect onto so anything we could possibly produce in Massachusetts and as.
Joe said, we have a oh, an expansion of our existing cultivation.
Coming onto coming onto the market here at the under the corner as well. So we anticipate that we'll have plenty of product in order to be able supply the wholesale and retail stores.
Just just add to that that the news if you also on Massachusetts, when the adult dispensary open back up they will allow for out of state residents to visit those dispense reserve curbside pickup.
Thank you Alan DNA dollar.
Excluding the onetime items like the dollar jokey kept pretty tight and that certainly helped the rate how's that looking at the second quarter with yes, you noted with Nevada in Massachusetts, and it's probably a cohesive.
Would you expect to have de leverage on that and into the next quarter or is it a pretty flexible what those costs in those states, where you're going to have the revenue drag.
[music].
Yeah, we certainly expect that there'll be a drag on margins in Q2 do you didn't Nevada in Massachusetts, you know, Nevada is a relatively small state for US you know probably about 10% of managed revenues in the north and the normal operating environment, but Nevada, we'll see a negative impact to its gross margin given the restrictions that were put on there and that.
State, Massachusetts gross margin will probably remain relatively similar but gross margin dollars given the size of Massachusetts relative to other markets will bring gross margin dollars down.
Margin compression from those two states, however will be somewhat offset by increasing margins in Florida, Arizona, Connecticut, and New Jersey.
Very good thank you very much.
Our next question comes from meal Gellner will pay less exciting.
Yeah. Good evening, none of the question is been answered, but maybe just to clarify on on the Florida market. You commented about 12 stores opening between now and we ended the year is that mostly a second half the year story with respect to are you going to be waiting for your your cultivation facilities to increase before we see many more store openings in the Florida.
<unk> market.
Yes, we've got to 50000 square <unk> expansion, that's gonna be completed here in June and voted up at July So that'll harvest a you know at the end of September and I think the time will wind up pretty well with that that new capacity coming online. I mean, you know sort is a great market and it's a high class problem, but where supply constrained at every time, we put products on the.
Sells the boots, so I think the more product, we make them more will sell.
It's valtra those store openings later this year.
Great. Thanks very much.
Our next question comes from Dell occur with MKM partners.
Hi, Thanks for taking the questions I have to that our select related when you're putting the select brands on.
On your shelves what products are coming off so what did what do you, replacing when you put that brand out and your retail stores.
You know, we think that selected it is a net new brand and it it speaks to a different consumer particularly in adult use market. So we think there's room for both if you. If you think about our brand architecture, where really building share lease as they have a wellness premise liked as an adult.
[music] spreads and in a market like for example in Massachusetts, We think that works really well markets that have both medical adult used to think their brands meet different occasions, and so I think that you know they don't necessarily knock out anything else stuff to keep in mind that clearly if it's primarily vertical and so you know the vast majority of.
This stuff that we sell into our stores as our own products and so it's really just a function of making space in our shows for a different brand and you're trying to get a different consumer with that product. So for example launch selected aggressively and Florida I'm you know here and this summer I think that will create a lot of excitement we're going to bring selecting the New York I think that Chris.
A lot of excitement potentially bring new cat you know consumers into the category. So we don't think that you know, it's one or the other we think both brands can be really successful.
Yeah, and they target different audience, you know a different customer sorry, I mean selected the average age with select a customer.
Mid Thirtys the average age of a purely customers around 50.
They're really looking for different experience. One is looking for you know a a product that can help them sleep in the form wellness product or help them pain manage or help them a you know.
Various elements that they have and on the on the select side, it's really a a you know a recreational use or someone that's used in cannabis on a regular basis for recreational purposes. So they are targeting different or this isn't what that's going to do as it's going to allow us to really have the full spectrum of customers you know from the younger.
Customer and there are 30 late Twentys and 32 the older customers. The there that are more used to the sort of purely product, which which more as more sort of skews with lower T C or very very high for you see depending on the conditions, but really its gear that youre dealing with wellness rather than you know recreational use.
Okay. That's it for me thank you.
Our next question comes from Russell Stanley taken security.
Good afternoon, Thanks for taking my question.
Just first on a on Nevada, when you walk into business, now and and and the pre code that shutdown business, you know understanding or must around focusing on a local a will resonate <unk> how much gain how much ground have you taken back in that market with the additional.
Term side, a little allowed dock.
<unk>.
Yeah, I think in Nevada, I think one of our advantage is that we as you pointed out we did have a long drawn on local presence I think the businesses come almost all the way back from where it was but I think that you know we're definitely you know don't anticipate a tremendous amount of growth until the strip get back in the into action right.
I mean, both of our doors are in very close proximity to the strip and you know without casinos in restaurants in clubs all the all the work or is that that support that industry aren't really coming into the the strip area and so we're feeling good that the business is on solid footing, but you know to get it back in a really strong growth mode is going to require.
Stripped you're really lightened up again.
Understood if I could sneak one more in there just on Pennsylvania, and the clinical registered program. Its the game playing here have you had the matter to build out plan there or are you waiting on a closing grassroots and I understand your position in Pennsylvania, and trying to weren't that in tandem with with the combined company what you know.
Any color on that on that strategy would be helpful.
No we're going full steam ahead on Pennsylvania, we secured a building and.
King of Prussia that we've we've frankly have secured for a couple of years now I'm. The corn shallow is already adult and now we're just doing the internal fed out we've already secured and are working on three of our six dispensary further clinical registering program that we think that actually and plugs in quite nicely that grassroots is doing and so we really.
We anticipate using all of that those stores and that license to capture the market as you're aware, Pennsylvania as you know among the fastest growing markets in the country grassroots has a really nice business. There you know and they're building more capacity. So I think really have a really strong leading presence in pennsylvania going forward.
Excellent thanks for the color.
Our next question comes from Pablo do I think with Cantor Fitzgerald.
Thanks, and good afternoon, everyone I'm just two questions on grassroots I understand that he's asking closer you can give you little deals.
But oh, the pro forma number that difference it into 165 on 124 of the second quarter. These grassroots right. So it's about 45 million revenue, we don't know exactly what he was in the for sports that only if you can share that but I'm thinking about Oh, my motto, 40% growth sequentially for the grass roots in the second quarter, then that's great, but I'm surprised me some comments from other companies.
And the fact that illinois' up on nearly 40% in April this is March.
She can give some color around what's gonna be capacity increase would what what's going on.
Let me first thanks, Yeah, Let me, let me address that so the first thing isn't <unk> and the kids grassroots they have been aggressively building out the Illinois, and there are Maryland, and Pennsylvania cultivation facilities are they have now finished their maryland cultivation facilities and I believe it's hard to spend as we speak.
They are finishing up their new Illinois, a new Pennsylvania cultivate facilities here in may and so on most of the capacity and bolt, Illinois, and and Pennsylvania for grassroots will hit the market and early and mid third quarter, So you're going to see step up growth.
Substantial stuff on girls from from grassroots and the third quarter.
Yeah related do you heard since roughly what share to go into how about sort of quarter of Kubasik in Pennsylvania and of stores just roughly from the two combined operations and just rough.
I'm not sure I can send up or Joe if you I don't know a wheel out to bid on or not I'm not sure.
Oh, well grassroots has nine stores operational and Pennsylvania today, I'm, you know with with our clinical registering licensed that'll take up the 15th or that will be you know the leading footprint of retail stores in Pennsylvania, and I believe you know grassroots as a leading wholesale brand as well. So I'm you know I think that I would say the dead the number one player.
Or you know among the one or two players in Pennsylvania. Thank you I know its little to go but I want to squeeze toward just someone accounting went to view when when those assays on a consolidated you get like a doubling of revenue right because you're generating the fee on the when would you go the monies revenue and then when do we.
Certainly they did you want if they can afford gross revenue. So correct me if I'm wrong and if you can also clarify what's the pro forma she had accountnow. If we if we factor <unk>. Thank you.
Yeah, I, probably on the yeah, you counting stuff, maybe we can cover that in our call later today, because it's that can get timely, but a in terms of the share count we.
We had 567 million shares outstanding weighted average at the ended the quarter, obviously there'll be more shares issued a grassroots, but we really haven't gotten through.
Haven't talked about how that's going to work yeah.
Okay. Thank you.
Our final question today comes from Aaron Gray with a like global partner.
Hi, guys. Thanks to the question congrats on the corner or just one from me I'm just in terms of where you guys stands right now pretty comfortable from a capital position <unk>, Let me think I see on the M&A front are there any you know markets, we feel like might need to or want to deepen your penetration do some potential smaller tuck in acquisition.
And I'm, just thinking on that but I know you're pretty diverse geographically right mob absent one north minimum our small ones eating your conference. Thank you.
So we are very active on the M&A front as you saw we were we announce them close or the arrow transactional in Connecticut. The at the other of the first quarter beginning in second quarter.
We have submitted bids out outstanding for different.
Tuck in acquisitions across the country. Our strategy is very much should continue to grow our market share and the most important states and our franchise I will tell you, but you know our position as we want to be number one and every single market that we operate in on them on a more market share basis. So that could tell you, where we're focused strike and most.
From our states, we have that position, but there's two or three states, where we're not that they're at this point in time and we're very focused on those states in order to be able to brown market share position to the number one position on so we are very very active and we are looking at multiple tuck in acquisitions.
In states, where we want to grow our positioning and our market share.
Okay, great. Thanks very much.
That concludes our question and answer session I would like to hand, the call back over the Daniel Foley for any closing remarks [laughter].
Thank you operator, thank you for joining today, we would like to invite those of you listening to join us at upcoming conferences and events, which are posted on our website any investor relations section under events, but also like to let you know that we have sent out our first Kimberly environment.
Quarterly update you can see by signing up for email alerts on the website. We certainly welcome your feedback on that we look forward to speaking with you at these events or a second quarter 2020, <unk> results conference call stay well, let's say, thank you for joining us everyone.
The company well concluded. Thank you I can in todays presentation you may now disconnect.