Q4 2021 4Front Ventures Corp Earnings Call
Thank you for standing by you are currently on hold for this forefront ventures fourth quarter and fiscal year 2021 earnings conference call. At this time, we are assembling today's audience and plan to be underway. Shortly we appreciate your patience and please remain on the line.
[music].
Please standby.
Good afternoon, and welcome to the forefront ventures fourth quarter and fiscal year 2020 'twenty one.
Earnings Conference call. Today's conference is being recorded at this time all lines have been placed on mute to prevent any background noise. After the prepared remarks, there will be a question and answer session. If you would like to ask a question during that time simply press Star then the number one on your telephone keypad, if you would like to withdraw.
Your question. Please press star two I would now like to turn the conference over to your host forefront ventures interim Chief Financial Officer, and Chief Investment Officer, Mr. Andrew too. Thank you you may begin.
Thank you Cynthia and welcome everyone.
At the forefront ventures earnings call for the fourth quarter and year end 2021.
I'm joined on the call by our CEO Leo got maker, President Karl just Ghana.
Hello, Joe Feltl, and Jake Wootten, our EVP of finance.
Before I begin I'm obligated to remind everyone that during the course of this conference call management may be making some forward looking statements that are based on current expectations and are subject to a number of risks and uncertainties that may cause actual results to differ materially from expectations.
These results are outlined in the risk sections of our filings in our disclosure material.
Any forward looking statements should be considered in light of these factors.
Please also note a safe harbor any outlook, we present is as of today and management does not undertake any obligation to revise any forward looking statements in the future.
So with that out of the way, let me give you a really quick overview of our call today.
As always I'm going to start with a review of our thesis and strategy then I'll provide some color on our fourth quarter results and an update on the progress we've made in the business over the last few months.
I'll, then hand, the call over to Leo who will go into a more detailed review of our operational trends.
And will highlight the milestones we achieved during the quarter before looking ahead to what's on deck for 2022.
Well conclude with question and answer session, where the entire management team will be available for any follow ups.
So at forefront, we're guided by a simple thesis Africa after perfecting our high quality high margin production capabilities in Washington State, we're replicating them in large cornerstone recreational markets, like California, Illinois, Massachusetts, Michigan.
We believe the sweet spot on the cannabis value chain is in low cost high quality production and distribution of candidate consumer packaged goods at scale.
And Washington, one of the most competitive markets in the world.
Our facilities continued to outperform more than 600 license holders, while maintain an incredibly attractive margins and profitability.
As the ongoing developments in our other states take shape. We are now beginning to see similar results on a much larger scale currently serving an addressable market of over 70 76 million people.
As we deliver on this thesis, let's dive into the fourth quarter results and our important recent developments.
First and most important to our long term long term growth prospects. We are pleased to now have a fully capitalized infrastructure in place to drive a robust 22 and beyond.
Our 170000 square foot state of the art production facility in Commerce, California is up and running smoothly as designed and the activity and interest we seen after just a few months of operations habits more confident than ever that forefront is uniquely positioned to be a truly disruptive force in the California market.
Is ripe for consolidation and subsequent streamlining of cost efficiencies.
Our timing for entry into California has proven to be impactful and we believe 2022 will be a transformational year and what is the biggest cannabis market in the world.
As a management team we've been incredibly busy advancing significant discussions with a growing number of potential partners and strategically attractive businesses.
To that end, we're extremely pleased to have announced the acquisition. This afternoon of Iris can island cannabis company.
Island to the California, mainstay with high quality products, including pre rolls flower and vape that distributes into hundreds of retail locations on any given month.
Our commerce facility allows us to acquire brand and manufacture them significantly cheaper and more profitably, which is exactly what we're doing here.
Equally is crucial to our California strategy the management team at island bring deep operational expertise and experience in the local market.
Particular, the additions are founder and CEO Ray land graph and C. O O Brandon Mills to our operations will strengthen our bench and provide lasting impact as the island is folded into our larger platform.
Leo will delve deeper into our multi pronged, California strategy later on the call, but we are excited to have the island team on board as we build momentum in that state.
Switching to Illinois.
We continue to see strong results at our retail locations and increased demand in our wholesale business after.
After further off through optimizing our cultivation processes over last summer we saw good sequential growth in Q4 with our wholesale business is contributing nicely to Illinois sales into the end of the year.
Construction of our Madison facility, when we used to call Big Daddy remains ahead of schedule and the.
The completion of phase one construction is expected to end in Q4 this year.
Coming online in early 2023.
We have Kris for years forefront aims to be the poster child for scaled efficient production.
And the opening of Madison will Mark yet another significant milestone as we continue to iterate and perfect that engine and Illinois.
With only two open dispensaries out of our allowable pen and Illinois, we see a lot of room for growth as we expand our retail footprint. In addition to expanding our wholesale presence of low priced quality products in the medium term.
So stay tuned there is we have a lot of unrra unrealized potential in this state.
In Massachusetts, we announced the close of New England, Canada in January .
This transaction significantly bolsters, our wholesale presence in the Massachusetts market.
It's one that is poised to expand significantly.
With the addition of meaningful new retail licenses this year.
The acquisition of any C C and if license fully operational 55000 square feet cultivation facility immediately scaled forefront presence as a dominant wholesale or a producer in Massachusetts.
The transaction more than doubled for Canada company's total flowering canopy en masse to over 30000 square feet and the facility also has the potential to expand an additional 10000 square feet of flower in Canada if need be.
Furthermore, the NAC facility, nearly nearly triples, forefront kitchen processing distribution space in Massachusetts, and we'll supplement the products currently sold would be a wholesale distribution and through forefront existing mission dispensaries.
<unk> full suite of popular brands has already achieved wide scale consumer support in the state's rapidly growing adult use cannabis market and has won several awards, including first place for Hibor has the best 30, non gummy edible in high Times 2021, Massachusetts People's Choice candidate Scott.
The acquisition firmly establish our presence as a leading operator in the region and allows us to expand the distribution of our products in the wholesale market supporting our goal of being the premier low cost finished goods wholesaler in math.
With that let me now review the year end numbers.
2021 system wide pro forma revenue was $132 7 million for the year, an increase of 50% over 2020.
2021, GAAP reported revenue was $104 6 million, an increase of 68% over 2020.
2021, adjusted EBITDA was $34 million up 479% year over year, representing an adjusted EBITDA margin of $32 6 million or 32, 6%.
Q4, 2021 system wide pro forma sales were $33 8 million, an increase of 35% over the same quarter last year and a slight sequential increase from the third quarter of 'twenty one.
While we expect pricing in limited license states to naturally become more competitive we think wholesale growth in mass and Illinois are poised to strengthen over the year as additional retail comes online and those under stored state.
As a reminder, pricing compression in the cannabis industry. The fact of life and one that we have been proactively positioning for for years.
Low cost high quality operations matter and move and we will see that continue to come home to roost.
Industry evolves.
With California, now online and any CRD closed, we're expecting strong growth to resume as we move through 2022.
Yeah.
Q4, 2021, adjusted EBITDA was $13 2 million, an increase of 75% sequentially from the third quarter of 2021.
Our balance sheet, leaving the year is in solid shape as of December 30, we had $22 6 million of cash and $48 3 million of related party long term debt, which doesn't come due until 2024.
Despite the Rocky performance of Canada stocks in the capital markets and headlines around the lack of progress on banking reformed over the past year. We continue to feel very good about our access to additional capital our market position and ability to execute on our strategy.
So our thesis continues to prove valid.
We are successfully introducing the brands products and best in class Sop from Washington into new new markets at scale.
We continue to add ft use on a monthly basis, developing and launching a dozen new line since Q4 alone.
We are executing on our strategy of continued expansion into our core markets of Massachusetts, Illinois, and now California.
We're shaping up for a very active 22.
Which brings me to my final point.
As I haven't seen for some time.
We are entering into one of the most active M&A environments, we've ever seen in our industry.
As I briefly mentioned during last quarter's call.
Details on safe banking in the tiny timing of meaningful change on the federal side remain hazy, but there.
Inevitability.
It is very apparent.
Our goal has consistently been to become a larger company.
We are open to the right opportunity to be part of a larger enterprise, but in the meantime, it's very important for us to continue to create shareholder value by perfecting our low cost production engine and proving out our investment thesis.
Everything we are doing right now is not only building our company, but is setting us up to be the ideal merger partner as we become the poster child for scale and efficiency.
As a management team always looking for ways to maximize value for our shareholders. We continue to explore new means to augment our growth via accretive acquisitions or as part of larger platforms.
With that I'll now turn the call over to Leo got maker, our CEO , who will dive a little deeper into our assets by state and provide us with additional color on our near and midterm plan.
Yep.
Okay.
Thanks, Andrew for the update on our business progress and on the strength that we see in our model it within the industry.
As just discussed in the fourth quarter and into the year. We reached several substantial operational milestones that pretend last thing momentum expected need to drive our growth well through 2022 and beyond while we experienced the ridiculous delays during the California approval process last year with the opening of our Congress facility, we're more conscious.
We didnt than ever that we now have the strategy facilities and teams in place to realize considerable growth in the coming year.
In the spirit of not burying the lead let's start with California.
Our Congress facility is only just starting to make waves in the industry and we believe that we now have the means to considerably disrupt the world's largest cannabis market.
As everyone knows by now, California has been absolutely devastated in the last year with operators struggling to move products and prices hit an all time lows.
No for inexperienced operators without the capability to scale.
We are only just starting to rebound as retailers begin to clear some inventory municipalities enact much needed tax holidays and pricing in general improves I mentioned November December Trust.
Do you view the pricing collapse in California, as a golden opportunity to began consolidating market share from unprofitable operators that are unable to keep up.
Our significant competitive advantages in cost derived from the automation and scaled manufacturing.
We put this is what we do.
We have now built the disruptive to us with over $500 million of processing capacity and low cost production only gets lower as that capacity gets built.
We have a four pronged strategy to see disease, let's start with the pricing.
After just about two months in the market you've made solid strides starting the direct sales noble hasnt penetrated over 150 retailers, so far and their response to our product has been fantastic.
We are now ready to flex the pricing muscle.
The scale of our facilities as horses.
Starting April one.
For 'twenty.
And pricing in California that is truly I taught me across all brands and Skus.
And then on average 50% lower than the competition.
Instance, pricing for Marvell as the number one selling W. In Washington will wholesale at $4 or a 100 milligram 10 pack box.
That's still drive gross margins in excess of over 50%.
For comparison wholesale pricing through the leading them using the California market on average is between eight and $9 for a comparable 100 milligram products.
We said we were going to come into this market with the goal has been the outsized price leader and we're doing it.
As the market starts to go again, we truly believe that this new pricing model has set the standard for candidates in California.
Moving onto brand acquisition incubation.
Current distress in the California market timed with our scale low cost production coming online in the state has created a perfect storm for us to begin to selectively and Accretively consolidate strong brands with good shelf space, who are struggling to turn a profit.
You have this unique asset they can manufacture acquired brands cheaper and more profitably than they could on their own as island and others are folded onto our platform margins expand as capacity is absorbed and fixed cost leverage.
Additionally, each acquisition comes with an installed base of retailers, which presents a chance to cross sell a diversified portfolio of high quality low cost product.
We believe the Congress facility lend itself to open ended profitable growth for the foreseeable future and as we continue to execute in California, we expect to announce similarly accretive strategic acquisitions over the coming months.
Lastly, California brands tend to travel well and we look forward to introducing those in our existing markets with Washington, Massachusetts, and Illinois, and one day across the country via Interstate Commerce.
Third party production as retailers look the single source private label products and brands look to improve profitability by going asset light, we've seen very strong interest from the market. They use our facility for third party processing.
We have a high throughput extraction lab kitchen line Batesville pre Roseville flower co packing tincture gel cap and mid capabilities. We're currently exploring multiple opportunities for symbiotic partnerships with brands and retailers alike that we expect to announce as we moved through the year.
Retail.
We expect to have a retail presence in California. This year as well, while we believe that the sweet spot for value creation in the cannabis industry as finished goods production and vertical integration is necessary at this point in the industry's growth curve.
Our retail presence not only drives higher margins that would allow us more direct control over the distribution of our products and brands in the marketplace.
Last week, the California, I'd be remiss without highlighting two crucial aspects of the island acquisition that don't necessarily jump out at you.
First we're ecstatic to have re branding in the island management team joined the forefront family NUCYNTA.
This industry lacks breadth and depth of operating talent and we believe our company's success in acquiring and retaining talent to our management team is imperative to value creation.
The island acquisition as premium flower to our product suite, while we have no aspiration to become an at scale Cultivator, We believe flowers and important addition to our sales teams product.
Moving to Washington to bricks remains stable with wholesale prices haven't rebounded from their lows in 2018.
Facilities are very consistent performance, despite having some more outdoor product in the market again, causing us to take on price, while we don't anticipate outside of the growth in the Washington market. We continue to hold serve which is a testament to the market reception for our products and the focus of the team.
On to Massachusetts.
Our operations and opportunities in mass.
Currently bolstered by the acquisition of <unk> in January .
In addition to doubling our canopy in crippling or processing and production space in Massachusetts. The asset is simply one of the best design cultivation facilities, we've ever come across.
A brand new facility, we are already producing premium flower efficiently, which bodes well for what's been a more competitive market in the state.
While we think the market headwinds in mass might be a transitory might be transitory as the number of retail locations are expected to increase the long term trend will be towards reducing pricing, which is precisely what we have to work front our position before.
In Illinois, we continue to see good momentum in our two retail locations and plan to add to our Illinois retail footprint as we move through 2022.
After further optimizing our cultivation processes over the summer we saw a wholesale business were up nicely in Q4 and are seeing that momentum continue into the current quarter plus with the construction of our Madison facility ramping up and ahead of schedule and we look forward to its capacity not only being able to meet our growing retail needs.
Into 'twenty, three and beyond but also generating meaningful wholesale revenue as a suite of products hit that market next year.
As for guidance, we've always said the revenue and EBITDA opportunity from our current assets of $650 million in revenue and 250 million in adjusted EBITDA.
To reiterate we believe that the sweet spot for outside value creation with industry is around the low cost high quality production and distribution of cannabis consumer packaged goods.
With our core footprint and capabilities in one place you really broke out. This company you can not only address earn opportunities at hand, but also the market demands of the future.
You announced publicly been together and our ability to drive sustained growth and capture significant share of every market we enter.
We are very well positioned to be a major piece of the cannabis landscape for years to come and we can't wait to show continued progress.
We're always making the steps ahead and I'm convinced that our model will continue to build value with forefront stakeholders well into 2022 and beyond.
I will now turn the call over to the operator to open the lines for Q&A.
Thank you.
I would like to ask a question. Please signal by pressing star one on your telephone keypad. If you are using a speaker phone. Please make sure. Your mute function is turned off to allow your signal to reach our equipment again press star one to ask a question, we'll pause for just a moment to allow everyone an opportunity to signal for questions.
We will take our first question from Neal Gilmer with Haywood Securities. Please go ahead.
Hey, Neal.
Good afternoon. Good how are you guys doing.
Doing well.
Yeah for sure for sure.
To start obviously I think on an island.
And can.
Can you give us any sort of sense of the terms at all stock or is there a mix of cash and stock any sort of metrics on you know what our island has been doing in the past and then maybe lastly, just trying to clarify you. Obviously just learned about this shortly before the call.
They have their own production facility or were they using someone else and they are basically just bring this all into your commerce facility and folding the brands into the forefront.
<unk>.
Multi part question there.
Yeah, Let me let me let me put this over to Karl and then Leo Karl on sort of the terms and then those guys can sort of tag team with the additional color on island.
Sure Hi, Neal it's Carl.
Yeah, we are not that we're guiding but we're more of a modeling or the current modeling for Ireland, Standalone, let's say low teens and pop.
Offline.
The terms in essence were you know roughly 1.2 ish.
Top line in total consideration the consideration is really primarily.
Split between our vendor take back note, which is.
Low mid fully pik interest with a balloon payment at 54 months, that's probably let's say, 60% and then the or 40% of consideration is.
Is share consideration common shares of our company, which makes up roughly 1% of our total outstanding shares.
There is some conditional.
Warrants attached 4 million warrants attached but they are triggered upon very successful.
Operations in California.
Without the pull of the consideration in terms of the production.
Yes, they do have a standalone production facility in Oakland, which we'll be closing and they'll be moving all of the production of all of their products into our facility in commerce and they do have.
Yes.
To grow facilities right now I'll, let Lee I will give the details plus I guess another small farm that will be attached that will be producing the flower which of course will be packaged in our callers facility. Maybe Leo you can give some detail on the cultivation assets.
Probably.
Okay, Yes.
We're excited to bring on their cultivation.
Sun grown hoop house, which is fits well with our low cost.
Type of production model and our sales team is definitely excited to have.
Flower product on the menu to add to our offering.
And with no plans for I'm, sorry go ahead.
You can say well you know what sort of <unk>.
Scale cultivation is obviously they've got their own flower product now would you.
Be able to scale that up and use some of that for other flower products under some of your other brands.
Okay.
Yes, so they're currently selling everything they produce we have plenty of input as far as making everything that we have.
Derivative products island hasn't infused pre roll currently under their brand that we'll continue making it a more efficient way with our machinery, but aside from that we're going to be using the flower to continue to grow the island brand.
Okay. Okay. That's helpful. Thanks, guys.
Maybe on the on the Q4 results.
EBITDA growth certainly outpaced revenue growth can you just give a little bit more color, obviously haven't ripped through all your financial statements, yet, but a little bit more color. How you were able to sort of achieve that margin expansion on relatively flat revenue quarter over quarter.
Yes, I'll turn that over to Jake.
Hey, Neal.
No. It's a great question and call out to be honest, where we're trying to focus folks on the yearend EBITDA number.
Q4 had some year end adjustments that manifest themselves in that single quarter.
That did not were.
Were not present in quarters, one through three particularly and I won't get too much into the weeds here, but a a noncash balance sheet inventory revaluation.
Upon us updating our costing model for manufactured products.
So basically we took that adjustment all in Q4 and didn't didn't go back and restate didn't feel like it was warranted to restate prior quarters.
But it does lead to if you're solely looking at Q over Q.
A little bit of an eye opener.
Then that's why we're trying to kind of refocus on an apples to apples basis had we spread that inventory adjustment back two quarters, one two and three respectively.
Looking at pretty similar position in terms of the EBITDA quarter over quarter.
Okay, Alright thats helpful. Thanks, we'll take a look at that then.
Maybe my last one for me is just any.
Any comments you guys have on what you've seen through Q1, obviously, you've probably heard some of your peers comments with their results and conference calls through the month of March here.
Looking for relatively.
Modest to no growth in Q1, whether you have you guys seen similar trends I'm, assuming across many of your markets or any anything standout from your <unk> perspective, you would call out.
Yes, I'll turn that call I'll turn that question over to Joe fell from our CLO.
Okay.
Yeah, Hey, Hey, Neil.
Yes.
Okay.
Do you mind I buy my phone cut out for the last little bit of it do you mind, just repeating the last little bit of your question Neal I want to make sure I am.
Yes, we're still here.
Yeah for sure. So it was just basically sort of what what sort of trends you guys are seeing in Q1 I was talking about how some of your peers are sort of saying it's been pretty flat whether you guys are seeing similar trends in your markets or whether theres any something sort of standout in one of your markets that you think is warranted.
To call out.
Yes, absolutely.
For us its customer acquisition. So we're seeing some of that same software softness and like I say average ticket or net.
Net sales at our dispensaries. So average tickets are definitely down quarter over quarter, let's call. It when some markets as much as 10% that's deliberate on our part because we've been lowing lowering pricing to try to capture more market share.
So while our average tickets are down we have kind of flat revenue, which means we're increasing our customer accounts.
That's where we're.
We are definitely seeing more competition in Massachusetts, and Illinois, we.
We are welcoming Ed we have been lowering prices end of last year. We will continue to do so into this year and as long as we see customer counts going up.
That means we're gaining market share. So that's what we're really focused on right. Now we are seeing that in Q1 of this year, we feel like were.
Seeing that trend line continue in Q2 of this year, so as long as we continue to see that.
We feel like we're kind of countering the softness so to speak.
Okay, Great. That's helpful. Thanks for all your answers I'll pass the line.
Thanks Neil.
We will take our next question from Ty Cohen with <unk> capital. Please go ahead.
Hey, Todd.
Very well how are you guys doing.
Excellent.
Great well, thanks for taking my questions here.
Just wondering if you could maybe speak to the.
On California, if you could speak to the economics.
White label production versus sort of your own brands and maybe if you could kind of speak to the pipeline.
Have those conversations youre having.
White label opportunities.
Sure ill turn that over to maybe Lee I'll take first crack with an assist from Carl.
Yeah.
Sure absolutely fantastic question.
With our suite of products. There is a lot of variety in what we can offer in terms of white label or private label. So taking the simpler variety of someone wanting to take our product and our form factor with their design on packaging that we offer them for the most part of the profit margins are white label will look better than the profit.
Margins on our product because we get to cut out the distribution fee.
If people start.
Have many requirements about different touch points they want in different packaging.
Pricing goes up and then it's a different story, but.
For the most for the most part we're looking at similar margins pretty close between selling our own versus doing the white label private label with the new pricing that we will be seeing on April 1st year.
And as far as people were talking to.
Been approached by I would say 75% of the people.
Sits at about 50 to 70 people if it's pointed towards this facility about some sort of white label private label opportunity.
That's part of our business and we're hoping you know a big part we're definitely have been selective about trying to find the correct relationships that allow us to leverage our machinery to its full capacity into its best efficiency and some of those bigger conversations have been with groups like grass door delivery groups like Mad men.
Initial conversations with ease and then a lot of smaller retail chains that have anywhere between four to six stores Grupo Fleury as a group of stores here that has a five chain that was our first little deal person based in pre rolls that kind of test out how it goes with their store private label something new for them and then 'twenty.
There are smaller ones that are very early stage across the board for different products.
Okay I appreciate that and just as a follow up for me.
Appreciate the comments on sort of the M&A pipeline in California, and and what you plan to do in the coming months, there, but I'm just wondering if you could maybe speak into a little more detail.
Just how many potential assets are out there how big is that universe and maybe if you could also comment on how leverage the California growth story is defining those acquisitions, whether there's a risk that the commerce facility can't scale click on that that you can't get those deals done quickly. Thanks.
Carl Leah.
Well.
I think Leo.
You'd be better.
To provide a number of the potential M&A targets, but I will tell you we're having.
Let's call it five discussions a day between M&A and White label at least Leo will probably bump that up over the last couple of weeks for him.
There is a multitude of targets the real question is.
What's the most efficient use of our facility in what.
The strongest growth path for us to take.
For sure the pricing.
The pricing gesture that Leo introduced.
Various names for it but let's just say, we're coming out with what we consider very strong a strong show of our abilities in our pricing.
Sure.
<unk> serves two purposes right it.
We will definitely.
Increase the probability of quicker absorption of our product onto shelves, but secondly to a certain extent it shows that flexes, a little bit of muscle right tie and it will get the message out as to how efficient we can be and that may.
That may alter the nature of all the white label discussions that we're having it is truly a tetris game right now so to be able to.
Provide you absolute clarity to the path that we will be taking is difficult. We do know this we know that we are interested in.
Quiring some strategic retail to help bolster the organic growth of our products on shelves. We are interested in significant white label deals.
Do not require.
A significant alteration of the Congress facility and that can properly fit into the production schedule that we have.
And mostly most importantly, I think we are very well served to be able to bring on brands and manufacturer peoples products more efficiently.
There's just such a pipeline of this sort of stuff's coming it's very difficult to give you an absolute number we do have a spreadsheet that has.
Over 50 targets on it but I don't know exactly how to focus that answer better for you.
Yeah, sorry.
So maybe if you would like to re raise the question of if that answers it or Leo maybe you can add to.
I can add a little bit more color.
The new pricing that's been given to the market and what we believe is.
Industry, leading across the board by by a large margin, we think that model probably suits white label better for retail than it does for other brands it suits us being able to acquire and bring in other brands that are having trouble, but we're now undercutting the market in general across the board in every category.
Going to a retailer and looking at white label there they're for the most part have been okay with paying the same price or slightly higher for white label for their product knowing that theyre getting our product for so cheap and then we work together and they take a little margin extra and one of the product and they do a smaller market than the other.
That's part of what we offer is having that flexibility in being able to work with our retailers on on the margins that you need to hit while also making it make sense for us.
As far as the deal flow you know I would say that at <unk>.
Five or six a day minimum there is a lot of interest you know more than ever in the industry today to actually be a part of something bigger and to be more realistic about what the value of one's company is and what the future looks like in the industry for people that don't take the consolidation lens.
And I think for US is just making sure that we take the best deal that we've got them and leverage our assets to the best of our ability and I feel good about our ability to do that with the amount of deal flow we have on the table.
Okay. That's been really great color I appreciate the discussion that's it for me. Thanks.
Awesome, Thanks, Hi.
As a reminder, if you would like to ask a question. Please press star one.
We will take our next question from Eric <unk> with Craig Hallum. Please go ahead.
Great. Thanks for taking my questions.
Good how are you.
We're doing great good.
Good to hear from me that's good.
I Wonder if you guys could provide a bit more color on the pricing dynamics youre seeing in Massachusetts, and then as we think about this recent acquisition kind of bolstering your cultivation.
Capacity here should we think of this more as a wholesale growth opportunity for you guys or is this more about.
Kind of margin protection.
This pricing pressure thank you.
Carl and Joe do you want to take a crack at that.
I think Joe I should take the first kick, but it's an excellent question.
Okay.
Yes, I salute lease so when in regards to pricing.
Just some flower pricing for example.
Sure.
I have seen that.
At the start of 'twenty, one for us at least.
We sell a few different brands of flower, but the average across those brands was as high as $11 75 that is now down to about $10 25.
And we think it could go as low as $9 kind of an average gram across.
Different quality.
Massachusetts So.
That's something like real numbers, we're seeing we're seeing percentage wise similar declines in other major categories like Vapes and edibles as well.
So for the <unk> acquisition.
Two fold.
Expansion of our product portfolio.
This facility is hydrocarbon extraction, which are their two facilities don't and it's pretty rare in Massachusetts. So for us that's bringing in all of our live resin brands and products higher end concentrates stuff that we sell.
<unk> volume is now out of our stores call it almost.
15% of our store volume that's all third party product now so we will get the margin capture from that but it also gives us the ability to have all of that on our wholesale menu, which we think is important for offering retailers a one stop shop and look our belief is that <unk>.
High quality flower wall way itself. So this is just we love the flower that's coming out of this facility Leo and I think it's one of the best that we've been in across the country. So even as pricing declines having a high end brand or high end product for us in mass is import.
For our overall wholesale strategy.
We think any C C.
We will really deliver that.
That's very helpful. Thank you.
Yeah.
Anything else there.
Yep.
Go ahead sorry.
And so if you do have further questions you can press star one again and we will go next to Howard Penney with <unk>. Please go ahead hi.
Thanks for the clarity of the target.
Has it gone Andrew.
Good.
Do you have a target for the number of wholesale doors, you'll be in Massachusetts, and California by year end.
Yeah.
Okay.
I doubt that we're going to want to disclose I'll turn it over to Joe.
Oh, yes, I mean, we can give you a more color off offline, but.
North of 500 hour between the two the two markets.
More of that California, and Massachusetts, but between the two.
My goals North of 500.
Great. Thank you and I'll ask offline how about a comparable I think you said was it <unk> wholesale price in Massachusetts that you think you can get to or what you're at now.
Maybe.
Along those lines sort of where you are.
Sure so <unk> comparable wholesale in Massachusetts.
Today is around $8.
And so probably will or will not.
Not be nearly as lowest California, but we'll probably be approaching six by the end of the year.
That's great. Thanks, so much.
Thanks Howard.
And at this time there are no further questions. Mr. Bombmaker at this time I will turn the conference back to you for any additional or closing remarks.
Okay.
Thanks, everyone for joining and I'm looking forward to updating you all again in May.
Sure.
This concludes today's call. Thank you for your participation you may now disconnect.
[music].
Yeah.
Yeah.
Okay.
Yes.
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Thanks.
Yeah.
Okay.