Q3 2020 Trulieve Cannabis Corp Earnings Call

This time all participants are in a listen only mode. After the speakers presentation. There will be a question and answer session to ask the question. During the session. You will meet the press star one on your telephone. Please be advised of today's conference is being recorded. Thank you I would now like to hand, the conference over to your host for today the split.

Henrici director of Investor Relations for truly please go ahead.

Thanks, Jack Good morning, ladies and gentlemen, and thank you for joining us today on the call with me today or the Kim EBIT, Chief Executive Officer, and Alex Demicco, Chief Financial Officer. Following our prepared remarks, we will open the call for questions before.

Before we get started I would like to note that today's call is being recorded for the benefit of investors individual shareholders. The median other interested parties. Please remember that our discussions today may include forward looking statements that involve a number of risks uncertainties and other factors that could cause actual results to differ materially from those forward looking statements.

Statements made on this call speak only as of today and we assume no obligation to update any of the forward looking information.

Our financial results are provided in IR for US also our prepared remarks. This morning reference non I of our us financial measures in order to provide greater transparency regarding truly where applicable. We may also provide a comparison to GAAP and non-GAAP financial measures to assist investors any non <unk>.

For us the financial measure of presented should not be considered an alternative to financial measures required by <unk> for us.

Unlikely to be comparable to non <unk> for a financial measures provided by other companies a non I have for us financial measures referenced on this call are reconciled to the most directly comparable I of Horace measures in the Companys Mdna for the quarter ended September Thirtyth, the 2020 as well as in the table at the end of the earnings press.

Really.

We believe our profitability in performance or for other demonstrated using these non eye of for us metrics. Please.

Please note that all dollar references are to U.S. dollars.

This morning, we reported results for the third quarter of 2020, a copy of our news release financial statements Mdna may be found on the Investor Relations section of our website to leave Dotcom and were also filed on SEDAR. In addition, a webcast of today's conference call will be available on our website. Later today now I will turn the call over to art.

CEO Tim revenue.

Thanks, Len good morning, everyone and welcome to today's call truly of exceeded consensus for revenues and EBITDA again, this quarter, achieving approximately 136 million in revenue representing a sequential quarter over quarter increase of 13% true leaves third quarter quarter pro forma revenue, including the Pennsylvania acquisitions that closed last week.

Week with $154.9 million, our adjusted EBITDA was 67.5 million or 50% in the third quarter. This is it 93% increase in revenues and an 83% increase in EBITDA on a year over year basis, we're proud of the industry, leading profitability performance as discussed last quarter, we are transition.

Moving to GAAP by year end, an area that has a significant difference between IR for us and GAAP net income our net income on a GAAP basis would of been 17.4 million, resulting in an impressive earnings per share of 15 cents.

Alex will provide additional details around our TC result, and the transition from my of for Us to GAAP before we get to that I would like to highlight our hub model expansion strategy as well as the update metrics. We traditionally report on but first I would like to touch on the election, which is of course still top of mind for everyone.

Canada was the decisive winner on election night, all of medical and adult east valid Pos in the clean sweep from the New Jersey Adult day solid and the North east to Mississippi, the medical valid and the sell the overwhelming support of these measures of sends a signal to our political leaders in Washington, The cannabis is not the partisan issue, but of human one we are incurred.

EPS for brighter days ahead, and the U.S. regarding the cannabis industry. We are actively preparing for what that might mean in the years to come.

One of the ways, we are preparing as our hot expansion strategy, which the bites of the country into five hubs or regions northeast Southeast Midwest Northwest and southwest we will leverage the experience of the of gain across the supply chain and these had a process. We have started in the northeast we've established our north of these Todd the acquisitions in Connecticut, Massachusetts.

Good and most recently, Pennsylvania as the as stated before we evaluate an acquisition opportunity we focus on the culture of the potential target and whether or not it's true leaves values. The second focus is whether the acquisition will be accretive, Pennsylvania and bodies, both with the closing of the legal and Pierpont acquisitions last week, we are expanding our northeast hub.

Pure kind of the premier cultivation of production company and to leave of brings US three successful medical marijuana dispensaries in the Pittsburgh area. These acquisitions are a game changer for our pension plans as they create an immediate and significant presence in Pennsylvania, a large and growing market tend.

Pennsylvania is the fifth most populated state in the U.S. with approximately 13 million people and an expanding medical marijuana patient base of approximately 380000 patients as of September Thirtyth pure pendants, levo, our proven and profitable operator with strong management teams. Each company also on the deep ties at the port within their communities the transaction.

The offer state of the art facilities, a premium product portfolio, a strong and growing patient base in the state wide wholesale customer base of 100 per side of the 90 free to countries in Pennsylvania, We're expanding our 35000 square feet of cultivation to 90000 square feet and the additional facilities are expected to come online by the end of Q1 2021 day.

For the engine will allow for relief to meet demand in Pennsylvania, particularly with the potential for operational use more likely now that new Jersey has the cost of recreational initiative on the the century side. The leave us customer centric philosophy has been wonderful to see throughout the acquisition process. The LIBOR experienced healthy patient growth this quarter and how to customer retention rate of 83.

Percent, reflecting strong customer loyalty, Pennsylvania is a major milestone for true leave and we will continue to explore additional strategic growth opportunities and look forward to sharing more in Pennsylvania in future quarters.

I'll now turn the Connecticut, where we began our northeast of operations, Connecticut was another successful transaction for us as the met the criteria I just described for customer centric values and profitability, our Connecticut. The spend three continues to hold market share and an expanding market. Our Bristol store is now one of 18 opened dispensary state yet maintains an outsize 10.

Current market share we are incredibly proud of our Connecticut team for their outperformance another exciting state for us in the northeast region of Massachusetts wholesale flower pricing remains strong the Massachusetts and given there is currently a significant power shortage in the state. We believe the this continues to be a great opportunity for true lead to bring high quality products for the market.

Navigation of the regulatory environment has been a slow road, but we are currently in the inspection and approval phase of our first dispensary as well as our 140000 square foot cultivation of production facility.

Absent additional delays attributable to co. The shutdowns we are confident that we can get both the proved and commence operations in the first half of 2021, we look forward to giving a more specific timing updates on our Q for call.

And other recent addition to our northeast hub in West Virginia, just last week, we announced that we had been awarded a processor permit approval of the medical cannabis licensee provides truly with an opportunity to bring the truly brand of for new patients through wholesale opportunities let's.

Let's now switch to the southeast our home based in Florida is the cornerstone of our southeast hub as more southern states legalize and launch cannabis programs. We will look to expand truly of is the undisputed leader in Florida. A foundation of the success is our ability to quickly execute as demonstrated by having the first sales medical marijuana. The first sales flower and the flow.

Sales at levels in the state.

Nearly sold the first edible per product in the state on September 2nd.

We've been planning for edible spray long long time and the main directive for team was to have a go plan in place Edibles regulations were released at the end of August and within a week truly made its first sale of true gels and our Tallahassee store to a longtime patient and member of our true that program. We only have one full month of data so its not enough the show a trend however.

I was impressed with the sell through rate I think we have of product that the market has clearly been waiting for we currently offer of five flavors of true Giles two varieties of two true true chocolate brownies and cookies from loves the of in the varieties of Peruvian chocolate bars from Ben and recently added true nano gels and three flavors are 10000 square foot kitchen is cranking.

Working three shifts and we're already adding new equipment in lines to meet patient demand. In addition to the launch of out of old. We've added other exciting products such as true keep a high teach the product and CBN launch with Bert Blue River, which of the naturally occurring cannabinoid the can aid sleep without the psychoactive effects of of teach the we also launched our cash.

As of our collection the line of premium quality strains with the unique flavors and terpene profiles. The cross collection will be rotational and available at select stores throughout Florida, We've had wonderful feedback from our truly per community on these new additions.

Our strength of execution has allowed us to achieve and maintain our consistent share of over 50% of the Florida market truly of has built a powerful even the state and we have become the standard for patients for loyalty Trust selection of quality. This is reflected in our ability to improve on already impressive market share in October we maintained a 51% share of the.

The sensations of oil and increased to 54% for flour and recently had a record breaking weeks in both categories.

Our performance continues to remain strong in the fourth quarter operating 22% of the dispensary, yet outperforming with approximately 52% of the market share third quarter patient growth growth in the state had approximately 62400, new patients just 300 patient shy of the entire patient count for the first half of the year. This is incredible growth.

We are seeing the patient growth come through in our store count and performance our expectations of seven to 8 million per dispensary on an annualized basis are now nearing $10 million per dispensary during the quarter. We continued our unmatched page of launching new stores opening nine new dispensers in Florida. This month, we achieved our previously for.

Weighted goal of 60 stores nationwide by year end and yes, there will be more to come as a matter of fact, we are looking forward the opening the lake city location in Florida Tomorrow.

Let me take a moment now to update you on the key retail performance indicators, we provide each quarter truly of customer retention rate was approximately 79% in the third quarter, a sequential increase compared to 76% in the second quarter and 74% in the first quarter for me. This is quite meaningful as our focus on patient satisfaction translates to growing loyalty of.

The March relievers.

We also track average basket size and number of EBIT for the third quarter patients visited an average of 2.9 times per month trending up from 2.7 times per month in Q2 average basket size was $108 for the quarter, we expect the basket sizes to normalize somewhat in the third quarter as there were a macroeconomic drivers that play in Q2.

Such as credit related buying stimulus checks and tax refunds. In addition, we experienced of third party testing bottleneck in Florida during the third quarter product availability cause some patients to have return visits skewing the visits higher and contributing to the lower baskets and other metric. We track of same store sales for the 29 stores open for the entire.

As of the third quarter of 2020 that were also opened for the full quarter. In Q3 2019, we of same store sales increase of 19% 15 of the stores were also opened in Q3 2018 from our analytics and based on the velocity of store openings and how rapidly the output brands. We see this is indicative of healthy overall growth continue.

Consistently achieving a press. The result is a product of our ability to expand and optimize our production facility.

The support the continued patient growth I, just outlined and importantly key products on shelves you need not only a large cultivation footprint, but also deep expertise in supply chain management logistics and product development with a clear focus on efficiencies and optimization. These skills and scale will serve us well as regulatory barrier shifts and we execute our hub model.

As truly of continued to expand its cultivation footprint, we're not just adding more plants, we are making investments in our people processes of production to meet ever growing the mic demand. During Q3, we added 96000 square feet of cultivation and another 24000 square feet in October which brings us to almost 1.9 million square feet with annual income.

Half of the of over 86000 kilograms, and we're still building we expect another 70000 square feet to be added by year end.

We are doing this for remaining agile enough to pivot responding to the catalyst in the market such as the approval of new products or dealing with losses in third party testing third party testing slowdowns were unique to Florida. So let me take just a moment to add some context here.

As mentioned earlier at the start of Q3, new testing regulations for implemented that require all for licensees to test products that certified laboratories, as well of adding additional testing requirements truly the protocol since inception have included internal testing in our GMP certified lab, coupled with third party testing. The this is nothing new for us that was not.

True however for some of our competitors when third party testing was mandated labs were immediately backlog with product to test and the bottleneck accreted impact impacted truly product distribution. Let me just say the profit was painful and had an impact on third quarter revenue at one point to put it in perspective, we had close to 600000 units hung up in test.

Thing, we worked with our land and change some internal processes and as we enter the fourth quarter, we see improvement in the testing turnaround times as evidenced by our record setting weeks discussed earlier I am very proud of our performance this quarter not only in light of cobot, but despite that the double digit revenue growth performance is even more remarkable remarkable considering.

And is building on the 26% increase to our revenue base generated in Q2 the.

The leadership to the can we and Florida and the distance between Us and our next nearest competitor is unlike any other market in the country and the transformational path. We are on for strategic expansion as the execute on our northeast and southeast hub is exciting I'll now pass the call on to our CFO, Alex Demicco to share our Q3 financial highlights and if it happens to cash.

And for the record he does not have TCO bid, but the does have asthma, Alex. Thank you Kim and good morning, everyone. As can cover the top of the call. We had a very strong quarter for revenue and profitability truly of had a record quarterly revenue of $136.3 million, representing a sequential quarter over quarter increase of 13%.

And the 93% increase over the same quarter last year unaudited pro forma revenue, which includes pure price and silly, though and assumes the acquisitions had occurred on January Onest 2021, other thing $154.9 million for the current quarter and $392 million for the nine months ended September Thirtyth as.

The reminder, this will be our last quarter reporting on an item for us pieces, the moving to get there will be a subtle shift the how we report certain items, we will be discussing the GAAP equivalent the key financial items for the current quarter as I walk through our financial results.

I measure you need for EPS is production expenses and cost of goods from third party suppliers I would like to remind all of you that something that was communicated on our prior calls. This line is now cost of goods sold as you refine of their debt is the cost of goods plus other production costs and accounting election, and their eye of for us allows for.

For production costs for pre harvest costs to be Expensed as incurred there for the additional costs added here and would differs from the cost of goods sold line under GAAP for those of you attacking the reconcile our those production costs related to the unsold inventory or said another way, what we call grow cost for unsold inventory.

I am very happy to say the this is the very the final quarter, we will have this dynamic.

On a consolidated basis production expenses in Florida and cost of goods from third party suppliers in Connecticut, and California totaled $34.1 million for the third quarter.

Revenue less these production expenses and costs was $102.2 million for the quarter for 75% of revenue for.

This compares to $91.1 million for 75% in the second quarter as we see the last quarter. We are continuing to realize the benefits of our efficient production and cultivation processes in conjunction with the fact that we did not do a spring greenhouse planting.

It is possible for our gross margin to fluctuate of few basis points in either direction from quarter to quarter, depending on inventory flow through and product mix under GAAP. We also had gross margin of 75%.

Now I would like to update you on inventories at the end of Q3, we had a total of $205.3 million of inventory, which includes the significant amount of fair value. We also had $34.8 million of biological assets. This compares to $219 million of inventory and $33.3 million of biological.

Assets at the end of Q2.

The quantity basis, we ended the quarter with approximately six months of inventory on hand down from approximately seven months of the end of Q2, resulting in a $13.7 million reduction in inventory in the quarter.

Inventory of biological assets are two of the areas that showed the greatest difference between I of for EPS and GAAP for our business under GAAP. We don't have the concept of biological assets and all fair value is removed from inventory.

Such the $240 million of inventory and biological asset that we reflect under IRS would equate to $77.7 million of inventories under GAAP.

Our oil inventory levels remain a differentiator, enabling us to quickly respond to challenges such as colon and catalysts such as edibles I'll now turn to expenses third quarter SGN, a expenses, excluding depreciation and amortization were $37.9 million for 28% of revenue compared to.

$33.1 million or 27% of revenue in the second quarter of 2020, the slight increase this quarter is primarily due to the opening of non stores in the quarter versus five stores in the prior quarter.

We expect increases in operating expenses through 2021, as we continue to add dispensary enter new markets and ramp our infrastructure to support our growth initiatives and go forward compliance, but we do not anticipate a material change as percentage of revenue overall.

Overall, keeping a high degree of financial discipline around expenses is one of our key the profitability.

Operating income for the company was $43.4 million this quarter compared to $37.5 million last quarter net income was $4.7 million for the third quarter compared to $6.6 million in Q2, resulting in EPS of four cents under.

Under our debt for us for net income and EPS. It's important to note that if the fair value impact of biological assets and the revaluation of our debt warrants were excluded net income would increase of $33.3 million for the third quarter compared to $28.4 million in Q2, resulting in EPS of 30 day.

Yes.

Under GAAP, the fair value impact of biological assets account for the goes away, but the revaluation of our debt warrants will really as Kim mentioned net income under GAAP would be $17.4 million, resulting in EPS of 15 cents on a fully diluted basis.

Focusing now on EBITDA, we believe adjusted EBITDA, a non IRS measure provides valuable insight into our profitability performance adjusted EBITDA excludes from net income as reported interest tax depreciation non cash expenses RTL expenses share based compensation other income growing cost free.

Weighted to biological assets and unsold inventory and the non cash effects of accounting for biological assets, we reported adjusted EBITDA to help investors assess the operating performance of our business.

Adjusted EBITDA for the third quarter of 2020 was $67.5 million for 50% of revenue compared to $60.5 million for 50% of revenue in Q2, 2000 $20 million to $7 million improvement and adjusted EBITDA of this quarter is primarily due to the increase in revenue partially offset by increases in operating.

Fences and production expenses and cost of goods from third party suppliers. This is even more impressive when you consider the cosy. The response costs incurred in the quarter to keep our employees of patient safe and the investments we've made throughout our facilities and dispensers in this quarter. The GAAP equivalent adjusted EBITDA was a proxy.

At least $65.8 million for 40% of revenue. The primary reason for this difference relates to the accounting treatment of leases under GAAP, which was factored in when we provided our increased guidance last quarter turning.

Turning to taxes as a percentage of gross profit, including the net change in fair value of biological assets, our tax rate was 25% for this quarter.

We continue to maintain a strong balance sheet and cash position through.

Through the end of the third quarter, we have delivered $73.7 million in cash flows from operations for the year. This is the result of our continued quarter over quarter profitability.

In the quarter itself, we have the unique onetime impact of the Cobi tax extension, whereby we paid $45.4 million in tax payments in July that were delayed from the prior quarter. This was coupled with our standard quarterly tax payment in Q3, two weeks of $70.9 million of tax payments in the quarter the double tax pain.

Resulted in negative $4.2 million of cash flows from operations in the quarter.

Where we would have been positive in both Q2 and Q3 had the timing of tax payments remains standard as such it is more appropriate in this case to look at the last two quarters combined where we have delivered $49.1 million in cash flows from operations.

We fully anticipate positive cash flow from operations on a quarterly basis for the foreseeable future.

We ended the quarter with the cash balance of $193.4 million, our strong cash the cash position allows us to quickly leverage the foundation, we have built to capitalize on expansion opportunities for organic growth and go deeper in the states, where we operate in that regard we plan to continue ramping our indoor buildings as we.

The monitor the market and response of the demand for flour, we will invest back into the business with the capex expenditures through the remainder of the year and throughout 2021 to support our raised revenue guidance for this year and our plan for 2021 revenue targets, which we will detail for you next quarter.

Total capex spend for the quarter average just over $11 million per month. This includes the buildout of our Florida production and cultivation facilities as we continue to ramp our infrastructure to respond to the market demand for flour and the construction of our new dispensers. This from amount also includes what we refer to as operational Capex.

Sales of dispensary equipment utilized for automation of processing efficiencies security and systems inclusive of upgrades for.

Finally, we have our buildouts in markets outside of Florida.

We expect the similar run rate through the remainder of the year. We also anticipate continuing to ramp our production and the Spencer you facilities in 2021, as we support our growth initiatives as we look forward to 2021 of beyond we will evaluate market demand and growth in our current markets to determine our expected capex.

Last quarter, we raised guidance for revenues in the range of $465 million to $485 million and adjusted EBITDA of approximately $205 million to $225 million. While we are not adjusted guidance at this time, we do not expect declines in Q4. Please.

Please note that our guidance does not contemplate our recent acquisitions of Pennsylvania, where we will have the benefit of approximately a month and a half of revenue in our consolidated year on the results.

I will end by saying that I'm proud of what we've accomplished to date, we of optimize our accounting and finance departments enabled us to fully capitalize on all opportunities as we continually assess our M&A and applications pipeline, we have upgraded our SSP platform, which will lead to increased compliance and analytics capabilities for years to come and we are willing.

On our way in our transition to a us reporting company as is evidenced by the GAAP metrics provided today.

Finally, we have begun the formal buildout of our Sarbanes Oxley program, which will continue throughout 2021. This will enable us to quickly take advantage of uplift opportunities when they arise. We are looking forward to an exciting end of the year and an even better 2021, I'll now hand, this call back over to Kim for closing remarks Kim.

Thanks, Alex 2020 has been a market share for change not only with coated but in a more encouraging manner around the social justice conversations we are having as a country, giving back the communities we operate in and supporting diversity equity inclusion efforts are part of our core values of.

In addition to social issues. Our team is actively supporting many great causes that are important for our patients and their communities, making a positive impact doesn't stop there we understand environmental issues are important which is why we just issued the sustainability review of where we are and where we will be focused in the year to come there's more to growing the business than just the day to day operations.

Bottom line, we are growing of socially and environmentally responsible company that is ready for the future.

And that future is exciting as I shared last quarter and throughout our remarks today truly was on a strong trajectory and we are operating with a clear set of priorities to maintain our leadership in Florida and expand our brand nationally our team of highly focused on executing strategic strategic initiatives to support our hub model and we are excited about not only ending of.

The year, but also the road ahead as we enter 2021, bringing the Trulia brand into new markets. Thank you for joining us today and as I always say onward.

Operator, we can now open it up for questions.

Certainly at this time, if you'd like to ask the question. Please press star one Derek delay with Canaccord Genuity. Your line is open.

Hi, Thanks, and congrats on another really really strong quarter.

I just wanted to talk a little bit about sort of capital allocation priorities and plans you guys are obviously in a very fortuitous.

Balance sheet position and we did see an increase in Capex. This quarter should we expect something similar again over the next sort of few quarters as you guys execute on what seems to be quite a big number of growth opportunities.

I think Derek you know our Capex is really something that we focus on and we and we strategically evaluate on a continuous basis and that will continue it is important for us to make sure that in our for markets for continuing to invest appropriately for that we can generate that return on every dollar spent and that is something that.

We hold ourselves to a very high standard clearly, Florida has been a market where that investment has a significant return for us and generates cash that were then able to continue to add to invest not only in Florida, but in all our other growth markets as the what I would say is that and we're not prepared on this call.

Paul to provide specific guidance on a forward basis related the capex, but we do of course have ambitious growth plans I not only for the remainder of this year was reflected in our increased guidance, but also as we look into 2021 and as we're putting that plan together, which we're going to share with you all on the next call and it will require of.

Of course investments in Capex and as we as we build out that platform. So more to come on that but certainly as you heard from Alex you know you can expect for the current run rate in Q4, and really about Q4 as we all as we all know this Q for capital investments are really 2021 capital investments at this point because.

Particularly when we're talking about cultivation of production investment those the required investment upfront, but it takes a minimum of of quarter for us to begin to realize revenue and output from those investments.

Okay. Thank you Thats helpful and just in terms of when we think about some of the the additional states that that you brought on or certainly the can play a bigger part in 2021, mainly I'm thinking, Pennsylvania, and Massachusetts, which do have wholesale markets. Obviously different from Florida can you just talk about it I'd be curious to hear your approach to wholesale and how your.

Thinking about attacking that portion of the market.

Yes. We are we are extremely excited to get to get into activate our wholesale line of business and we have been on the ground in Massachusetts now for for quite some time really feel like we have a fantastic understanding and graph on that market and clearly in Massachusetts with the.

The restriction on number of retail we do believe that wholesale will be an important line of business for us to be successful on and and again, it's the tool in the toolbox, but we'll need to deploy depending on the regulatory regime of of the market and we do understand and I think everyone understands that having a vertical platform is certainly the most profitable and something.

That we have Axell dawn. So we will continue to add to continue to have vertical channel wherever we're that's allowable. However, we also understand that in some markets. There is the limitation to what that channel can provide intend diversifying into wholesale channel, where you then have access to an ever increasing.

And the slice of the pie if you will with respect to other discoveries that are that are coming on onboard is is very very important too so, massachusetts and that plan has been developed and we're looking forward to launching in Pennsylvania, and specifically, we're very excited that we have a 100.

Per cent penetration currently.

In three through the wholesale channel and we'll be looking to maintain that while also of course producing enough that we have good depth of product across all product types.

In stores that are also under the company umbrella.

Great. Thank you very much.

Thanks Derek.

The Stanley with Beacon Securities. Your line is open.

Good morning, and congratulations as well.

Just wondering pardon me.

The respect to Florida.

For the dispensary build out there of congrats on on reaching your target well in advance of can you I guess the levered to sell many openings, we might see before year end and then if you have any preliminary thoughts on the pace of expansion in 2021.

Thanks for us, we're not going to give a specific number of for year end I'd like I mentioned, we are we do have a grand opening tomorrow and Lake City, which is the fantastic I'll location. It is actually off of two two primary interest Interstate I 75, and IP and is it and I think the great area.

For for both medical and then one day potentially recreational market here in Florida. We continue to monitor of course, all of our metrics that lead to lead us to make the decision of for store expansion, including of course customer demand current sell through rates and the and wait times on existing the Sensorys and then of.

Of course with an eye for what.

What's to come on the not potential of recreational.

Coming to fruition in Florida, which.

Again with the recent activity with the elections across the country and sort of the the tone.

Typically we think certainly has a shot here in Florida in 2022.

Great that's for sure.

That's helpful and maybe if I could just around the the impact of the testing delays. The if you still be.

The consensus and generally our estimates, but can it can you quantify the the revenue impact of those testing the waters.

Yeah.

Ross, we actually we don't have a specific revenue impact.

Obviously that the multi dimensional question.

But what we can say is that we have certainly seen the pull through into Q4 of which I know that you. All are all seeing as well as you look at the numbers on a weekly basis and for and with respect to our performance of really the market as a whole here in Florida. So I know, we saw the that sort of rate.

Flow down a bit of last quarter, and we really do things of that was due primarily to just again product availability, we certainly weren't meeting our targets with respect to debt.

In certain product categories that we know are drivers of.

For patients and yet what was it the has been very encouraging is that we've seen that demand.

Almost immediately back once we were able to get those products clear from the bottleneck and back on shelves. So we.

We are and we are seeing kind of the the I guess the the pull through again in Q4 and I don't have an exact number for you, but and we certainly do believe that we could have been higher in Q in Q3 had that not occurred.

Understood Thats, great color, Thanks, again and congrats.

Thanks.

Matt Mcginley with Needham Your line is open.

Thank you on the acquired assets in Pennsylvania, It looks like you had.

The strong sequential growth at least from the.

First half weighted into the third quarter, but how much of that growth in the third quarter was driven by increases in retail productivity versus cultivation of I'm not sure. If I should assume a similar sequential increase into the fourth quarter is the or if that third quarter is kind of look of baseline to build the to the model off of.

Matt Yeah, we're not we're not prepared to give any additional depth of color and as you know thats and as Weve certainly state ended the unaudited numbers at this point and we'll have additional color for you all and as we again, we've been to the move into Q4 and year end and get through our cash through our audit and for that we can speak with a bit more.

Competence and specificity around those numbers, but at the I, we're not at this point and prepare to give give any sort of breakdown on the.

Okay and the does the pace of unit growth of Florida, I mean does that you've been growing it looks like the units per quarter does that feel sustainable in the 2021 or do you feel like either internally or externally you're sort of strength.

Staying out of that sort of growth rate.

I, certainly don't think that add to it the strain from a from a the ability to execute standpoint.

Clearly, we look at those numbers in a very analytical way and in terms of pace.

Pacing to meet demand and making sure that were within our kind of operating metrics. If you will I don't think that it's certainly not a stretch from a from an execution or a team or of what our pipeline looks like from a retail location standpoint interest would be a question.

In terms of whether or not it makes sense given sort of the overall.

Yeah, the overall, Max and mix and how it fits into our metrics.

Okay. Thank you very much.

Pablo is one of them with Cantor Fitzgerald Your line is open.

Thank you good morning from just start from the update in terms of those.

The court cases from the state one regarding wholesale whether the shooting for the we have the job debt and the second one of the things related to potential Barlow.

Followed for Reg, but just any more color and context around the okay from timing.

Thanks.

Sure I wish that I had.

I wish that I had a substantive update for you I don't we're waiting on the Supreme Court in both instances and so.

Nothing new yet as the result of the oral argument the second round of oral arguments on the on the we'll call it the wholesale case.

That that the Supreme Court had oral arguments again on in October and then also nothing on the ballot initiative, yet and so I really I don't have anything anything that the you all don't know on the on either of those but we'll certainly I'm sure be talking once once the high.

Your once we hear from news from the court.

Okay, and just a quick follow up.

The other competitors sort of talking about the philosophy in Saudi the Jude.

From one for them.

But do you how the sales or what's really going on when I look of the one more day I find that interesting. The you know the number two or three force quality of operations tend to shift week to week or month to month.

Other companies are necessarily you know the don't have the simple solution in say oil the flowers. So that's the contributor Roger I don't know the makes sense, but any color you can share there.

Yeah, I mean, obviously I can't I can't speak to and you know competitors and what they may or may not be doing strategically although I can say that if you don't have enough capacity than you do have to make decisions related to.

Flower versus non higher allocating higher allocating that supply and you certainly and we've refined our EIM our product mix as well as our I'm as our growth techniques and the way that we're the way the we're allocating different material for different product lines and it's it's it's for.

The simple concept to say it gets much more complex than practice and as you know we've diversified our grow with again the greenhouse of the greenhouse inventory, which gives us a of a robust supply chain of.

The less expensive and put material for biomass for oil products and then of course, we have our high quality indoor grow which is delaying delineating between flower and then also higher and concentrates and so I do think that our scale provide certainly a competitive advantage in our ability to continue to keep our product lines for ash and interesting and diverse.

While others may be fine.

Finding themselves into more of decision maker of having to make more specific decisions around pemex due to supply constraints.

If the Guy one last one of the maybe more for the Alex but.

Interest for the guidance, you've given for Pennsylvania, so that the value of we the other ones was 141 million growth. When you said the so below five times EBITDA.

So I mean as you know for a good run rate of maybe talk about 50 million.

Yes.

I assume the 25% margins on the is 120 million sales next year and your Thanksgiving the operations.

For the start of course, the the of on nights in medium grade of 76 on the alive.

What seemed of number you know, it's quite doable under the <unk>.

Actually be of Doug number based on the growth momentum.

Any comments you make of their order what Alex.

Yeah, I mean, you know as you know Pablo we're not we're not providing guidance for them I think specifically found that this year's guidance does not include the Pennsylvania acquisition and certainly as we get into.

Another round of guidance as we said non potentially coming and you know as early as as the next call and I think and again as we get through the Pennsylvania audit and really make sure that we've got and you know clear clear handle on on exactly what that May look like and then I think we will be in a better position to add to the.

Comment on that specifically, but with respect to what we released about the deal and of course. The stood just remind everyone. We do have the specific presentation on the acquisition available online I truly dot com and for our investors tab that the book there are more the welcome to referred to.

Thanks.

Andrew price I mean with Stifel. Your line is open.

Hi, Thanks for taking my question.

Well one of two maybe discuss on promotional environment currently and.

In Q3, and Q for did you give a little bit of color on on the how you see the.

The evolving and.

As well the the part of it makes that you had in Q3 and.

And how that may or may not have affected average price.

Sure.

So we have very specific criteria that we hold ourselves to with respect to with respect to promotions and our acceptable range. If you will on a on a on a monthly basis with respect to promotional activity we've been within that range.

Every month and well within that range and so we feel very comfortable and haven't seen any significant shifts the that weve the at least affecting affecting truly with respect to the market at all as a whole certainly and I think of the as the last as Pablo the last speakers.

Correctly identified we certainly see swings among other competitors in in terms of there.

Changes in position.

We believe based on our analytics that.

Some of that does have to do with what promotions, they're running or what they're focused on with respect to particular product classes or segments on the certainly may see a higher level of promotional activity in it. It may not be of were all higher level of activity just maybe a higher level of focus on a particular product segment and again that may have to do with their product mix.

The et cetera, so on but overall I would say globally as the as it relates to truly of we're certainly well within our range and have been consistently within that range for on a on the from a promotional perspective of quarter to quarter and in month to month.

Great Thats very helpful. Thank you.

And.

Just on another topic of M&A.

Good day.

You, obviously have the ability to deepen.

Deep in your footprint within Pennsylvania.

The more store licenses there.

Would you say that that could be a focus for you or.

How does that.

Focus.

The slate.

Relative to entering even more new markets.

[noise], Yeah as I've said historically, we certainly are focused on and unit profitability and increasing profitability wherever possible in markets that we that we operate in obviously that's dependent on opportunities that are that are you know that exists.

And we are opportunistic with respect to with respect to M&A and on the call. We tried to clearly identify our priorities with respect for the build out of our southeast and northeast hub.

Which will continue to focus on and as we enter as we as we close out 20 2020 and enter 2021.

Okay. Thank you and congrats on the good quarter.

Thanks, Joe.

Jason Sandberg with P.I. financial your line is open.

[noise] well thanks for taking my question.

Just wanted to maybe.

Shifting gears onto the West Virginia, just first of all congrats for.

The recently being awarded the license from the stage.

It was the same side just to sort of to get your thoughts on pursuing further licenses in the speech.

How how important do you see west Virginia in your roadmap moving forward just any color you could kind of would be fantastic. Thanks.

Sure you know as an adjoining state at the Pennsylvania, and certainly again as we're thinking about operational efficiencies and that northeast hub of West Virginia with an average fall application target for us.

The state of course this is not a through a warning a wedding licenses there and so we'll have the again in a more complete evaluation of what that market may or may not look like once we're completely through a the licensing award process and and again and clearly are going to be.

Evaluating other.

The impacts and we'll have additional color and as we as we look to add to the contribution from the state of 2021.

[noise] Kenric Tyghe are you with the TB capital markets. Your line is open.

Thank you good morning, and congrats from the quarter.

Interest with respect to edibles Edibles from Florida could you speak to how you see animals. The full in fact, the evolving as a percentage of mix or all of the watch you see edibles, representing let's call. The you know a.

Yeah, we'll true down the line and then the follow on for that would be what is the read through in terms of your gross margin profile of edible ex way and how should we think about the potential impact of edibles ex quite on the old margin profile between GAAP.

[laughter] you know out of also has been a fantastic addition to our product mix of so far and clearly we're in the ramp up phase and certainly a in Q3 and as we were bringing out of both online and then coupled with our testing of bought on the.

The next you know you have to remember that labs. The we're also testing out of both for the first time, which is the whole different that's the whole different animal with respect to how those tests or per for Ben I'm in it and quite frankly, the number of tests that have to be performed on edible has required by the state of Florida. So that's why we were hesitant.

In large part to get you know any specificity around those numbers for Q3, because quite frankly, we had a lot of a lot of products hung up in testing that then you know got got kind of shaking loose if you will towards the end of the quarter. Now we are seeing you know im very impressive you know animals is at the top of our sell through rate.

From a velocity perspective, so we are seeing very impressive sell through rates on our edibles and what that's telling us is that you.

I need to make more of them faster. So that's the surrounds our call you know the comments on the call around ramping production of making sure that we're fully staffed all three shifts on looking at expanding of equipment, adding lines, so forth and so on because we know that the demand for that product category is here you know to the we see it as a.

Strong contributor and moving into Q.

She for as long as into early 2021.

We have it again given specific the specific guidelines on margin contribution or profile and I think we all know that the out of balls in general are and do you tend to have a stronger margin profile again that was tempered somewhat because labs and fit for us we're trying to get their feet underneath them and actually required of the.

Additional guidance. It was just issued by the department of health around and adding some more practical quite frankly, and we are appreciative of it guidelines in terms of in terms of how many tests and that will greatly affect both the cost and the timing flow through of getting out of aftermarket in Florida. So that's been in flux right now.

But but they are certainly on the above average with respect to a margin performance.

[laughter] that's from congrats on given some of the on the velocity of discussion you mentioned, the three shifts a day or you.

Very impressive kitchen, the that you have the 10000 square feet, but it all day regulatory all of the constraints for look for exclude expanding that I mean I. Appreciate the as you know there's only so many large you can layer into the 10000 square foot kitchen, how do we think about that and is that a regulatory constraint for you.

Expansion of your kitchen.

[noise], Yeah in Florida, there's there's not and there aren't any regulatory constraints across the supply chain, which is one of the reasons quite frankly, it's such an of an.

An important market for us and why we've been able to reach the scale that we've been able true to reach which we think of course will be important because as the again the regulatory landscape share across the country. You know the ability for that to how the operate in and really understand what it takes to operate at true we truly scale. We think is critical.

In terms of our ability to actually produce volume you know, it's one thing when you have the of two.

2000 square foot kitchen, and you're running one shift the day right, it's quite different when you're doing literally right of a commercial manufacturing level on the of course, I'll GMP certified and so forth. So there's not a regulatory constraint and you know we would think about adding an additional square footage for for a kitchen and certainly.

Net earned discussions around that as we think about Capex and we think about expansion going into 2021 and of course, there's the there's the timing right on non and that of course is a separate conversation, but no regulatory constraint and certainly we see it as a strong contributor again as we move into 2021.

Yeah actually given just the very quick follow up on the slip one of them, Pennsylvania. Please the old capacity expansions of 90000 square feet is the largely or entirely the service the wholesale opportunity or is there an opportunity within the sleeve of stole his whole increased penetration of all the or less of buying in the off price.

The cost we think about that as a director of the wholesale exclusively for Brazil. So some additional opportunity within the three stores do you have.

So right now a pure pan is selling into the LIFO at the at a fairly low rate. So we definitely believe that there is increased availability to sell through into the sleeve, though locations and then of course in addition to expand the wholesale penetration as one other penetrate.

Moving covered 100% of the stores, but to increase the the mix and to increase the variety and and the quantity of product that they are also selling to and to to whole fit to the odds of the wholesale market as well. So we think theres upside on both the on both of those avenues.

Thanks for your not read on how many of the kind of.

Thanks.

Eric the lorry with Craig Hallum Capital Your line is open.

Alright, great. Thanks for taking my questions and or for you my congrats on the strong quarter as well for me is a bit of follow up on Cameron's question.

So I believe right now pure pen or Remoxy production for the 100% concentrates I guess the correct me if I'm wrong there.

You also stated that you'll be expanding cultivation from 30.

35000 square feet to 90000 square feet and of course further room for expansion.

Should we expect to see some for our production coming from that expansion.

And you know if you can opt for any color, where the whether it'll be moxi or or truly branded and then.

The color on the margin profile difference between concentrates in flower, if you're willing to offer it would of course be helpful.

Yeah. So you know just a quick reminder, on on Pennsylvania, as we move into the 2021 and I know you onto the but we are an earn out. So there is we are in and we look at we look at that very and you know as a per as a true partner.

The into we are in a bit more of a consultative relationship through 2021 that being said you know certainly there is an expansion we are in deep conversations with our partners around the product mix and and you know finding different models and considering on the different strategic alternatives.

With for the expansion of the of that that 35 to 90 to 90000 square feet I'm certainly of pure paid in the past has provided flower I say they are equipped to and know how to grow very high quality premium flower that had the you know incredible sell through as we know depends.

For the market of course does have of current flower short range like a lot of markets across the country I see that as part of the discussion on so I am not in a position to comment today on that Oliver and again kind of conversations are ongoing we have the and you know a great outlook on for for Pennsylvania and for that relationship moving forward.

Third and and look forward to being able to bring a variety of products for the market.

Okay. That's helpful and the Washington, the regarding the testing backlog in Florida first can you comment on how you were able to get edibles out so quickly of mid that backlog.

And then any commentary on whether you expect the testing backlog to improve I know from my personal experience. The testing backlog is difficult to work through and especially a with edibles with the various major Susan ball. There. So any comments on whether you're seeing more labs opening the or.

No current lab, the increasing capacity just any any kind of comment on.

Your thoughts on that testing backlog and how we should think about it going forward.

Sure as you know with respect to our ability to get out of those out the door and as we've mentioned now I think you all of literally heard me talk about out of old now for the last three calls or style. So I think we can all appreciate the that it's been top of mind and it was no surprise that we were sitting on go related to edibles and you know what that meant is that.

Hi to oil in reserve allocated are ready to be batch, we had all of our formulation or kitchen was approved I'm in advance of our amendment for drafted we kept it very very simple and what we thought could be approved easily by the department given the statutory rate.

For amounts that were clearly outlined and three years ago, and the and the edible section of the of Florida statutes. So I preparedness and then our teams laser focused on being on execution I mean, the the rules came out I believe mid afternoon. Our team worked literally around the clock until until we made.

Not for sale. So it wasn't something where we were looking at it like there were there were 12 12 hours of of the of time to work in a day I mean, it literally was an all hands on deck 24, seven of plush. So and you know in terms of in terms of the labs also you know when you're talking about smaller batches from a launch perspective.

That becomes much easier to handle then again as we ramp up to production level batches and varieties of products and we're talking about not only you know the true Giles or gummies, but we're also talking brownies and cookies and chocolate and that becomes of course and more complex depending on the form factor and with respect to how we see that clearing initial.

There was not to get too granular here, but initially there was some confusion and it could have been interpreted that literally over 40 tests were required per batch of out of all that now husband clarify the and by the department of health.

And some of that I would like to think of not only ourselves, but many of the other companies in the state asking for that clarification, along with the lab. So we now have a clarification, it's actually much fewer the not so that helps that in of itself and in addition, we worked with our lives and have just have we have a high level of transparency of there's literally report the goes off of them every single day with.

When they promised it where they are and what our expectations are and so I think it's just that and working and making sure. We've got good processes in place and also clear expectations that lots of also increased the their equipment and additional lots to your point are getting certified in the state. So it's a multitude of factors in terms of what's going on.

And with that dynamic, but I think as far as truly the is concerned we have successfully cleared that backlog and are now back on track within our I'll call. It pre testing backlog of parameters in terms of sell through in flow through on our on our tests.

All right that's great to hear I appreciate the color.

Good day, and Gray with the Alliance Global Partners. Your line is open.

Hi, my congrats on the quarter and thanks for the question.

First of all of them, yes, one of the you know kind of come back out of Bulls. You appreciate still very much early days, but just on regarding the sell through rates that you talked about just wondering if you could give any kind of initial kind of consumer takes for you have how you feel the increase basket for those types of people who have been taking on edibles have they been adding on to maybe the other form factors they've been.

Been buying and then also because you guys had been ahead of the curve in terms of getting out of both you know on the shelf have you seen in the uptick in terms of new patients that might be coming to truly band of been going to a competitive price and competitor. Prior could you do have some out of both double even though it might be the contract for you guys. Thanks.

Yeah, and certainly you know we have and approximately 90% of of product of patients that are on Florida, Florida patients had and have visited a truly of location and so they're in our database and you know, they're there and they're part of our our group that we.

Continually message and and get a.

And get you know get product to you and so I would say that certainly we continue to see a strong on a strong capture rate of patients in Florida, I can't speak again, specifically because the impact on the quarter quite frankly, I was not significant enough due to what the comment.

That I made earlier around and you know went out of both were approved and then what we saw when we when we were ramping in terms of production level batches and trying to get those on shelves. So I don't have that data specifically for the quarter and but certainly again I believe that we'll be able to add some additional some additional data points for.

Are you all next quarter as we as we see that come through on it in a more meaningful way in Q4.

Okay. Thanks appreciate that and then just simple one for me just in terms of you know the store expansion as you guys look to 20 of wouldn't want specifically for Florida. Just talk about you know how you think about you know the locations the store set ups, particularly with the potential for adult use maybe coming online and 2022 and how you might think about store location.

In the set of differently than the the maybe you had historically when it was predominantly of medical market a few years back of thanks.

Absolutely and the team is very excited about continuing to look at Florida, not only is the medical but also potentially of the recreational market and and certainly are how of that as the consideration per stores at route through our build outs and 2021 and I think what you'll.

Well, you'll begin to see from US is then from different store footprints and so you know we kind of how the standard the store and then we will begin to look at and it's been the flagship or and in a different location as we think through and again try not to be too premature on that making sure that it is time to appropriately.

With the Marquette and but for example, you know you see our Daytona Beach store is the larger format store and we use the we utilize part about store currently as more of a.

As more of the delivery a delivery platform kind of back of house, but have plans that again that location will be we believe was very very strong location from recreational perspective, so could could flip that store into a more we'll call. It experiential a location if and when.

The recreational looks to be more certain and so certainly we've got some other and locations that we have our eye on that would be that would be similarly positioned.

Okay, great. Thanks.

Andrew simple with special.

Hi, Sean <unk> capital markets. Your line is open.

Hi, good morning, everyone and congrats on the on the results.

Thanks, Kim I, just I just wanted to touch on.

Colombian moving in the third remarks.

So your average reaching 10 billion of sales per location just want to clarify is that something that youve already achieved today.

And I also want to get your thinking forward as you continue to open new stores.

I do think there is still.

A number of underserved markets, where you can continue over the opening stores.

The stores that would be the cheese this level of the productivity is the.

Got any thoughts on the.

Sure. So the answer is yes, we have achieved that and in terms of additional store growth and certainly you know look we're not a company that is going to open stores. We've never been the company that the does things just for the just for the press release rate and so we we didn't weren't.

I'm going to open stores, if we don't think that the stores would be able to to be strong contributors to out of profitability and or are needed to make sure that we're keeping our eye on our customer service you know expectations in line or in line for our for our true leavers for patients. So that you know certainly as the is a strong.

Consideration and but again, we're not going to we're not going to do something just for the sake of just for the sake of the press release.

Understood. Thank you for the just touching on the legal impure and when I look at your pro forma results for the three of nine months. It appears Q3 was it was quite a strong quarter goes out. So just wondering if you would the deal.

The able to provide any additional debt.

Well it may be and what the growth drivers there were.

Yeah, and I'd say as I mentioned before and you know we were not able to provide any additional comments at this time and certainly you know and this run out of the pro forma for pro forma numbers of of course, we also are happy with.

With those numbers and it was one of the you know their performance is one of the reasons why and we found those assets to be and its partners to be so attractive for us to breast you and pursue the as the transaction. So we're excited about the performance and we're excited about the growth trajectory ahead.

We of course know that pure opinion has additional square footage coming online in Q1 and that that's just the into additional increased profitability and certainly we believe that on the Leabo highs and has you know run rate ahead of it as well so and you know again can't give you any real specifics there.

But are very you know could not be happier to have to have the two companies and then really important note is their teams.

And the alignment between our companies as it has just been incredible and you're actually there's a group of folks that are going to be here for a big meeting and later on this week and you know the integration continues to go really well and we're very excited I think the entire team is excited about what Pennsylvania has.

The offer in terms of growth.

Hi, my questions on the congrats again.

Thanks.

[noise], Paul Piotrowski with M Partners. Your line is open.

Hey, good morning, Tim Congressionally, great quarter of.

Just one follow up on on the West Virginia. So are you guys looking at all to acquire in the of contribution was from sphere and is being a vertically integrated important you guys and that's true.

Yeah again.

We're excited about West, Virginia, and think that of the from a strategic location perspective, with the proximity and certainly the attachment to the northeast and not hubs debt where that were.

Working too and to grow their is certainly it certainly a a good and a solid state. It's all income contributor.

You know as I mentioned in the at West Virginia is not finished in terms of the entire process on licenses and so we will have additional comments from a strategy perspective, you know once obviously, that's all finalized however, and you know certainly having of production license of the key is the key license for us because it gives us the flux.

The ability and to have a you know.

Wholesale relationship was all dispensary through the state and we certainly you know we believed that we would have the ability of kind of with or without of grow to tend to be the contract for supply and if if we need to and have the ability to have again control over of kind of final product for him.

Doctors and product mix and which again is is we think the key strategic a requirement for us in that market and then again I think it remains to be seen in terms of.

What the what the rest of the supply chain may look like.

Okay, great. Thank you.

No we are moving on to our final question follow up question with Andrew presenting you with Stifel. Your line is open.

Hi, Thanks for taking some additional questions.

Just wanted to follow up on on the M&A.

With the election, having you know obviously contributed to significant it was you guys and could you give a little bit of color of what you're seeing in terms of.

All the way Susan.

And what not and and the credit markets.

Yeah, I think I mean, I I think it continues to be I, you know I can't say that I've seen significant significant changes with respect to with respect the valuations I mean at the end of the day I'm certainly their excitement, but you know the way that we look at at least.

From our perspective, the way that we look at businesses and the way that we we and we have those conversations both internally and with potential partners really center again around the upper pretty pretty basic fundamentals and you know the realities of the fundamentals of necessarily changed right. I mean, if you have square feet of of production that.

That's what that that's what you know.

Theres only ex amount of theirs ex amount of product that can be pretty there and you know and and similarly in terms of the at the fundamentals of of the business and so I think I think for us and it's.

You know, it's just the disease you all had down staying true to our valuation metrics, making sure that we're disciplined in terms of how we're looking at and how were looking at partners I think in increasing enthusiasm and maybe a bit more of an understanding that day.

Ill will be imported and so perhaps you know some some of the operators to have considered or maybe have not considered partnering up into the way maybe getting their head up and saying, okay, either we're going to need to get from additional capital and expand right or we need to the thing you need to think in.

In a very real way about potentially partnering and for the we can be positioned for change if it does and when it does occur and their particular markets, but in terms of you know how we're viewing M&A I would say that we're continuing on the path that weve. The we set out for ourselves.

Thanks for that then.

Just a follow up you know you talked a little bit about how the.

Players are understanding the scale is important.

Would you say that that was an important consideration and the acquisition of of your P.A. assets, considering the attractive multiples, but the you guys excuse the dawn.

You know again, I I'm not going to speak for for our partners there, but I will say that that relationship with developed over the course of the year I said that was not something that you know that's not a transaction that we that we began conversations on in the last you know.

60, 90 days and you know we thought that it was very very important on both sides for us to appreciate and understand what each party, who is bringing to the table and certainly I think that you know there is the there is the desire and a competitive spirit and I in both of those in both of those management teams in the employee.

I used to it you want to to want to continue to grow and and when I'm in their home state of Pennsylvania, and we're very excited to be partners with them into into the right there with them as we achieve that.

Thanks, very much for the questions and congrats again.

Thanks, so much.

I will now turn the call back over to the CEO, Tim Robbins for closing remarks.

Thank you for joining us today, and we'll see you all next quarter.

This concludes today's call. We thank you for your participation you may now disconnect.

[noise].