Q4 2021 Trulieve Cannabis Corp Earnings Call
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Good morning, everyone and welcome to the truly inside of a corporation fourth quarter and full year 2021 financial results Conference call.
My name is Rocco and I will be your conference operator today.
As a reminder, this conference call is being recorded.
I would now like to introduce you to your host for today's conference Christine Hersey Director of Investor Relations for Shirley you may begin.
Thank you good morning, and thank you for joining us during today's call Kim Rivers, Chief Executive Officer, and Alex D'amico, Chief Financial Officer will deliver prepared remarks on our financial performance and outlook for two leave following their prepared remarks, we will open the call to questions Steve White President.
<unk> will also be available to answer questions.
As a reminder statements made during this call that are not historical fact constitute forward looking statements and these statements are subject to risks uncertainties and other factors that could cause our actual results to differ materially from our historical results or from our forecast, including the risks and uncertainties described in the company's filing.
<unk> with the Securities and Exchange Commission, including item one a risk factors of the company's annual report on Form 10-K for the year ended December 31st 2021.
Although the company may voluntarily do so from time to time it undertakes no commitment to update or revise these forward looking statements whether as a result of new information future events or otherwise except as required by law. During the call management will also discuss certain financial measures that are not calculated in accordance with the United.
States generally accepted accounting principles or GAAP, we generally refer to these as non-GAAP financial measures. These measures should not be considered in isolation or as a substitute for true leaves financial results prepared in accordance with GAAP. A reconciliation of these non-GAAP measures to the most directly cause.
Operable GAAP measures is available in our earnings press release that is an exhibit to our current report on form 8-K that we furnished to the SEC today and can be found in the Investor Relations section of our website.
Lastly at times during our prepared remarks or responses to your questions. We may offer metrics to provide greater insight into the dynamics of our business or our quarterly results. Please be advised that we may or may not continue to provide these additional details in the future.
This morning, we reported results for the fourth quarter and full year 2021 a copy of our earnings press release and an accompanying Powerpoint presentation may be found on the Investor Relations section of our website www dot truly dotcom, an archived version of today's conference call will be available on our website later today.
I will now turn the call over to our CEO Kim Rivers. Please go ahead, thanks, Christine and good morning, everyone and thank you for joining US today, we are thrilled to report record fourth quarter and full year results capping off what has been a truly remarkable year 2021 was full of monumental achievements, including the harvest acquisition, our ability to produce record.
Adult while continuing to execute during the most transformative year in our company's history is a true testament to the capabilities of our organization. We have made substantive progress while remaining disciplined and fully committed to our plan to leave us well positioned at this early stage of the U S cannabis industry and have never been more confident in our ability to capitalize on the opportunities ahead.
Contributions from organic growth acquired assets and strategic positioning of assets drove outperformance in 2021 full year record revenue was $938 million up 80% compared to $521 million. In 2020. This impressive growth was achieved with an industry, leading GAAP gross margin of 60% and adjusted EBITDA.
Margins at 41% or $385 million for the full year truly a achieved a fourth quarter record revenue of $305 million up 81% year over year and 36% sequentially.
Fourth quarter adjusted gross margin was 59% and adjusted EBITA margin was 33% or $101 million, representing our 16th consecutive profitable quarter truly part of a long track record of success.
Instantly demonstrating operational excellence and stand out financial performance, our history as the most profitable multistate operator is rooted in our purposeful approach and steadfast commitment to our strategy. We did not participate in the frenzied M&A land grab in 2019, instead, we recognize the significant potential in our home state of Florida choosing to invest heavily.
<unk> building, a solid foundation for sustainable growth. Consequently, truly was incredibly well positioned in 2020 during the accelerated growth period brought on by COVID-19, and government stimulus by tuning out the noise and focusing on the tremendous opportunity in our backyard, we were able to establish a powerhouse operation and commanding market share in the most attractive medical market.
In the U S. Our leadership and success with our strategy to go deep and high conviction market is undeniable and 2020, we communicated our plan to build further upon this success through our regional hub strategy, we identified five regional hubs to serve as a cornerstone for growth in the U S. We articulated our intention to diversify our business by geography and channel.
While building out a distribution platform for branded products by building depth and scale and attractive markets, we could expand access to customers, while generating fast and favorable returns that could be redeployed with a broader retail platform in wholesale network truly to introduce and develop new and innovative products was leaning valuable insights about customer preferences and trends.
This regional hub expansion strategy was designed and further is a truly a vision to become a leading purveyor of high quality cannabis products in the markets that we choose.
In 2021, we delivered on our strategy Big time, we made remarkable progress expanding through our regional hub strategy with organic growth and seven M&A deals valued at $1 5 billion, we added valuable talent and strategic assets and cultivation processing and retail while firmly establishing our position in the southwest the transformational Harbor.
Start with the 10 turned the page to a new chapter in our company's history.
While building a market leading position in two additional hubs at the beginning of 2020 one truly operated in four states with a significant concentration of the business in Florida exiting 2021, our operations covered 11 states across three regional hubs with revenue from retail and wholesale serving both medical patients and adult use customers in 2021.
We increased our retail footprint by 84 stores or 112% and exited the year with 159 locations in eight states inclusive of market, leading positions in Florida, Arizona, and Pennsylvania Importantly at year end, 30% of our retail locations were outside of the state of Florida.
As we continue to expand and diversify our business the value of our platform becomes increasingly apparent performance metrics demonstrate the strength of our growing retail network. Following phenomenal revenue growth of 106% in 2020 same store sales in our legacy truly portfolio in 2021 declined by just 1% representing a model.
Decline in a year with tough tough comparisons.
Excluding locations opened in 2018, our before same store sales and that same portfolio increased by 8% and.
In the fourth quarter, we began to relocate older locations in Florida to improve performance and these efforts will continue this year on a pro forma basis, driven primarily by the introduction of Arizona recreational sales same store sales of the combined company increased by 19% in 2021 or 159 dispensaries generated approximately <unk> <unk>.
$500 and sales per square foot based on days open for the full year company wide active customers visited our stores on average of two nine times per month with an average basket size of $87 and medical only markets average basket size was $101. Our retail metrics are significant considering the potential to unlock future value.
When recreational sales are permitted in more markets comparing the fourth quarter 2021 was the third quarter customer retention was 82% company wide.
Now turning to supply chain to support our growing distribution network. We added over one 6 million square feet of cultivation and processing capacity in 2021, increasing our upstream supply chain by 89% to over $3 5 million square feet, notably, we added significant scale and depth in our high conviction cornerstone markets in 2021.
We produced $25 1 million units of 77%.
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Hello, everyone. This is Kim and I'm going to just start back at where I think that maybe we left off and I apologize if it's a if it's redundant so youre going to get to hear about our retail network again, which I know is everyone is very excited about him as.
As we continue to expand and diversify our business the value of our platform becomes increasingly apparent performance metrics demonstrate the strength of our growing retail network. Following phenomenal revenue growth of 106% in 2020 same store sales in the legacy truly portfolio in 2021 declined by just 1% representing a modest decline in a year with tough comparisons.
Excluding locations opened in 2018 or before same store sales and that same portfolio increased by 8%.
Fourth quarter, we began to relocate older locations in Florida to improve performance and these efforts will continue this year on a pro forma basis, driven primarily by the introduction of Arizona, a recreational sales same store sales of the combined company increased by 19% in 2021 or 159 dispensaries generated approximately 2500 dollar.
And sales per square foot based on days open for the full year companywide active customers visited our stores on average of two nine times per month with an average basket size of $87 and medical only markets average basket size was $101. Our retail metrics are significant considering the potential to unlike unlock future value.
When recreational sales are permitted in more markets comparing the fourth quarter 2021, with a third quarter customer retention was 82% companywide now turning to supply chain to support our growing distribution network. We added over one 6 million square feet of cultivation and processing capacity in 2021, increasing our upstream supply.
<unk> by 89% to over $3 5 million square feet.
Notably, we added significant scale and depth in our high conviction cornerstone markets. In 2021, we produced $25 1 million units of 77% from $14 2 million units in 2020 with our continued investment in supply chain capacity, we expect to further increase our scale and depth in 2020 to improving our financial performance.
And preparing for future catalysts by controlling more of the value chain internally, we are better equipped to manage through external macroeconomic pressure and absorb changes in the competitive landscape, including price compression, our expertise and capabilities and rapidly scaling and operating supply chain capacity are a distinct competitive advantage.
In addition to expanding our network and reach we introduced a new branded product portfolio and integrated acquired brands from harvest. Our combined portfolio includes a broad range of offerings across consumer segments and form factors by offering a variety of products at appropriate price points, we're able to meet customer needs. Our data consistently show those customer preferences exhibit a barb.
El distribution pattern with higher demand for premium and value products. We are continually evolving our product offering with a particular emphasis on premium and value tier products that speak to customers. During 2021 Trillium introduced over 475, skus exiting the year with over 1000, Skus and brought a number of new and innovative products to market, including the first half.
Carbon extracted concentrates in Florida differentiated products are an important part of our strategy to meet patient and customer demand, while building and reinforcing long term brand value.
Regional and local brand partnerships complement distribution of our own brands in 2021, we launched our branded products into new markets with brands such as alchemy cultivar collection modern flower Muse enrolled one increasingly available to customers as part of the Trulia product offerings. Although we are just beginning to promote branded products more broadly across our network we are highly.
Encouraged by the initial success of recent product launches throughout 2022, we will continue to bring our branded products into new markets and expand our distribution channels, our track record of profitability and disciplined capital allocation affords us access to growth capital at industry, leading terms in 2021 truly is completed <unk> oversubscribed capital raises with 220 <unk>.
$9 million in equity and $350 million in debt given the volatility in the equity markets and for U S. Cannabis in particular, we structured the harvest transaction of the relative ratio share exchange insulating both sides from sentiment driven moves in the sector as a sector underperformed in the months between the deal announcement and closing in October this deal structure allowed the transaction to move ahead.
In accordance with our plan, we were able to repay and reposition high cost in short term harvest that shortly after the deal closed in January we closed the second tranche of 8% senior secured notes totaling $75 million truly put sufficient capital to fund our growth plans and strategic initiatives. In 2022, we are investing in our asset teams and infrastructure to support future growth and position.
In our operations ahead of catalysts during the fourth quarter, we began the process of fully integrating teams and assets from harvest, we repaid harvests that integrated branded products organized teams and rebranded 14 retail locations in Florida, We continue to see outperformance in the converted Florida stores, we saw a 75% increase in the number of transactions in December .
<unk> compared to August and the 11 harvest stores that were opened during both periods. This year. We have continued our integration efforts with the rebranding of 15 acquired unaffiliated retail location in Maryland, and Pennsylvania throughout this year, we will continue to streamline operations as part of our ongoing optimization of assets, we acquired indoor cultivation capacity in Erith.
Ona and Pennsylvania, we have taken steps across our affiliates refining our product production schedules of product mix and allocation of products to our retail and wholesale channels. We are investing in systems and infrastructure to realize efficiencies and support our growing platform. In 2021, we did exactly what we said we would do we stayed true to form and laser focused on our <unk>.
Long term strategy, we did not stray from our plan our pivot in reaction to external noise, we have a clear and defined strategy and well established criteria for markets that fit our definition of attractive early on our organization made a conscious choice not to pursue profitless prosperity through deals that do not fit our strategic plan, we remain committed to prudent.
Capital allocation.
Towards the end of 2021 and into this year U S. Cannabis has seen macroeconomic headwinds and increased pricing pressure in select markets. The U S. Consumer has exited a period of lower expenses.
And government stimulus driven by Covid and entered a new period defined by rising inflation cannabis is an all cash business and is susceptible to macroeconomic pressure on disposable income regardless of short term headwinds or transient economic conditions U S. Cannabis presents a generational investment opportunity truly has already achieved unmatched scale and success in.
Florida, and we are now building scale to support our leading retail presence in other cornerstone markets. We are undeterred by short term market conditions and committed to manifesting. Our long term vision. We are building a leading company in an emerging industry not casually, making a short term trade in a passing fad. We have seen this movie before sentiment turns negative in response to short term <unk>.
<unk> and then returned with greater force when catalysts become more readily apparent we absorbed this phenomenon in November when the state's Reform Act was introduced and again over the past week as excitement build around the prospect for say thinking legislation and the more act. We don't know the exact timing of all of the upcoming catalysts on the horizon, but we certainly expect to realize upside in the future.
As new markets, like Georgia, and West, Virginia Open and as adult use sales launch in Connecticut, Florida, Maryland, and Pennsylvania in the meantime, we are staying true to form.
Turning out the noise and executing on our strategy, we have a plan to improve our operations and performance and 22, while positioning our assets ahead of future catalysts. So that we're ready when those opportunities arise we are reinforcing our leadership position and setting the stage for the future with four strategic initiatives first we are delivering exceptional customer and retail experience.
As with convenient transactions frictionless returns broad and innovative product assortment across multiple segments and enhance loyalty and rewards programs. We are focused on solidifying customer loyalty and long term brand value.
Second we are continuing to expand to a regional hub strategy with investments to deepen our presence in cornerstone market and develop emerging markets, we're expanding our reach and distribution network by adding upstream supply chain capacity in Arizona in Pennsylvania, and expanding our footprint in Florida, we can further leverage our existing scale and depth and cornerstone markets. We are.
<unk> to invest in Connecticut, Maryland, and West Virginia at the same time, we recognize the value and growth potential in new medical markets like Georgia, We're very bullish on new market opportunities in the southeast and we fully expect to play a meaningful role in the development of these markets in the coming years third we are distributing branded products through branded retail and wholesale channels.
It is enabled by our investments in supply chain capacity. We are in the early stages of this endeavor and we have a significant opportunity ahead to bring our own internally produced branded products into more of our markets. We expect to realize improved margins in the second half of 'twenty, two and optimization initiatives and additional supply chain capacity take hold.
As we open new doors and convert acquired locations to the truly brand. We are increasing the number of true leavers moving branded products through branded retail is critical to reinforcing customer loyalty building long term brand equity and improving margin performance and finally, we are continuing our disciplined approach to capital allocation, our resolve to stay true to.
Forum has served truly very well our restraint in 2019 preserve the strength of our balance sheet ultimately leading to better opportunities for strategic diversification in 2020 in 2021, we will remain disciplined with our approach to M&A adhering to our stringent criteria. In summary, 2021 was an extraordinary year bridge relief highlighted by many <unk>.
Difficult achievements and underscored by the transformational acquisition of harvest looking ahead, we are energized and focused as we write the next chapter in our company's history truly this poised and ready to define the future of cannabis with that I'll turn the call over to Alex for more details on our results and current outlook. Thank you Jim and good morning, everyone 2021 was in excess.
<unk> all year in our company's history as evidenced by our rapid growth and record results in just one year, we have transformed the complexion of our organization expanding our operations nationally and setting the stage for future growth in the years to come and it's been incredible to witness a continued evolution of this organization within such a short period of time, we're proud of.
How far we've come and excited to reach new Heights in 2022, as our strategic initiatives to drive continued outperformance.
During today's discussion of our reported financials. Please bear in mind that our fourth quarter results represent an initial reset for our organization following the largest U S cannabis transaction to date.
As we have previously indicated we expect short term results to show non linear trends and impacts due to noncash accounting treatment associated with the deal initial inefficiencies in our operations immediately following closing and contributions from lower margin operations that we believe can be significantly improved in the year ahead, we anticipate our reported results will improve.
As we progress with our plan to streamline and optimize our recently acquired assets. Our company has already demonstrated the potential for operating leverage and profitability that can be realized by going deep into and scaling operations in attractive markets.
We delivered record full year revenue of $938 4 million, an increase of 80% compared to $521 $5 million in 2020 record fourth quarter revenue of $305 $3 million increased 81% year over year compared to $168 4 million during the fourth.
Quarter of 2024th quarter revenue increased 36% sequentially compared to $224 $1 million during the third quarter and included a full quarter contribution from the harvest acquisition.
Truly ended 2021 with 159 dispensary locations as of March 30th truly owns or operates 162 dispensary relocations supported by over 4 million square feet of cultivation and processing capacity.
Full year GAAP gross profit was $566 1 million and gross margin was 60% compared to $386 4 million and 74% in 2020, excluding the impact of transaction related charges full year. Adjusted gross profit would have been $621 4 million and adjusted gross.
Margin would have been 66% in the fourth quarter reported gross profit was $132 $4 million or gross margin of 43% compared to $119 9 million or <unk>, 71% during the fourth quarter of 2020.
Excluding the impact of transaction related charges fourth quarter. Adjusted gross profit was 180 $686 million or adjusted gross margin of 59% as we have signaled before adjusted gross margin was primarily impacted by revenue contribution from harvest assets.
In line with seasonal trends promotional activity during the fourth quarter increased as part of holiday events. Looking ahead, we expect first quarter GAAP gross margin will include some transaction related charges and we anticipate those impacts will decrease in the second and third quarters of 2022.
We expect gross margin will continue to fluctuate quarter to quarter, depending on product and market mix and inventory flow through.
Turning now to SG&A expenses for the full year 2021, SG&A expenses were $315 7 million or 34% of revenue compared to $155 $5 million for 30% of revenues during 2020 SG&A expenses in the fourth quarter were 117 million.
Or 38% of revenue compared to $52 million or 31% of revenue during the fourth quarter of 2020.
Fourth quarter expenses included approximately $26 million of transaction and integration related charges, primarily associated with the harvest acquisition.
Excluding these charges fourth quarter, SG&A was $96 4 million or 32% of revenue SG&A was impacted by expenses to enter new markets Sox readiness and new system implementations as we continue to invest for future growth, we expect quarterly fluctuations in SG&A expenses as investments are made ahead of <unk>.
<unk> and revenue.
Depreciation and amortization expense for the full year increased to $48 1 million from $12 6 million in 2020, depreciation and amortization expense in the fourth quarter increased to $28 $3 million compared to $4 million in the prior year approximately $24 million of the increase was due to the additional <unk>.
Depreciation of fixed assets and amortization of intangibles from the harvest transaction.
This increased depreciation and amortization expense will be recurring in nature over the useful life of the underlying assets.
Net income was $18 million for the full year 2021, compared to $63 million in 2020, excluding nonrecurring charges net income would have been $123 $4 million in 2021.
Full year 2021 earnings per share was <unk> 12, compared to <unk> 53 in 2020, excluding nonrecurring charges full year earnings per share would have been <unk> 84.
Net loss was $71 5 million for the fourth quarter compared to net income of $3 million for the fourth quarter of 2020, excluding nonrecurring charges fourth quarter net income would have been $1 8 million fourth quarter 2021 loss per share was <unk> 49 compared to earnings per share of <unk> <unk> in the fourth quarter of 2020, excluding <unk>.
Non recurring charges fourth quarter earnings per share would have been <unk>.
We expect transaction related charges will continue to impact reported EPS throughout 2022.
Turning now to adjusted EBITDA full year 2021, adjusted EBITDA was $385 million or <unk>, 41% compared to $260 million or 50%. During 2020 for the fourth quarter 2021, adjusted EBITDA was $100 9 million or 33% compared to $81 4 million or <unk>.
48% during the fourth quarter 2020.
Adjusted EBITDA was lower due to the expansion into lower margin markets and channels, we expect adjusted EBITDA to improve as we optimize assets and execute on our strategic plan.
Turning now to our balance sheet and cash flow during the fourth quarter, we completed $350 million private placement of five year senior secured notes at 8% and we retired $293 million of debt. We ended 2021 with $234 million in cash and $479 million in debt operating cash flow.
In 2021 was $13 million and would have been $118 million, excluding nonrecurring and transaction related charges, we expect to generate positive operating cash flow in 2022 with greater contribution in the back half of the year.
In January we closed our second tranche of 8% senior secured notes totaling $75 million, our strong cash generation and financial profile provide flexibility to invest in growth, while supporting our strategic initiatives.
Company wide capital expenditures in 2021 totaled $276 million.
In 2022 capital expenditures are forecasted to continue at a similar rate corresponding with our strategic plans.
Distant with past performance, we will continue to evaluate the return on capital for each project and market as we build scale and depth and position our operations ahead of future catalysts.
Turning now to our outlook and guidance for 2022 based on our current expectations and performance year to date, we are issuing 2022 guidance of one three to $1 $4 billion in revenue and $450 million to $500 million and adjusted EBITDA for the full year 2022, we expect to open between 25 and.
30, new dispensaries, companywide and relocate up to six existing stores in Florida, we do not expect to realize linear quarterly revenue growth in 2022, we anticipate first quarter 2022 revenue will be flat with flat adjusted gross margin compared to the fourth quarter 2021, given the timing of investments and ramping up supply chain capacity.
We expect to report stronger performance in the back half of 2022 and exiting the year as such we expect adjusted EBITDA to be comparable in the first quarter compared to the fourth quarter 2021 longer term over a two to three year horizon. We believe adjusted gross margins of at least 60% and adjusted EBITA margins.
At least 40% represent a reasonable target model, we expect fluctuations in our quarterly results may exceed this range during periods, where we have catalysts and favorable operating conditions and may underperform. This range during periods. When we are investing for future growth.
In closing I'd like to express my Thanks, and offer congratulations to the team here actually relief for their significant contributions and impressive achievements over the past year I look forward to building further upon this solid foundation and working to fully realize our true potential we have already made incredible progress year to date and the best is yet to come we are highly <unk>.
And our ability to execute on our plan and reach our stated goals and with that I'll turn the call back over to Kim <unk>.
Thanks, Alex 2021 was another incredible year for our company and yet as Alex said, we've only just begun we are still in early innings for U S. Cannabis everyday cannabis becomes more widely recognized in the U S signaling a new paradigm of mainstream acceptance, we remain steadfast in our conviction that change will eventually come we are encouraged by the ever.
The increasing level of discourse and activity focused on meaningful federal reform as we expect to be evidenced by the vote in the house on the more acts. This week, we are proud to be at the forefront of this ever changing and rapidly evolving industry contributing to the development and expansion of access to cannabis. We continue to advocate for change at all levels recognizing.
That every advancement is indeed, an important and necessary step along the way to victory to close late Rus later Ginsberg real change and during change happened one step at a time, we understand the importance of truly its position as a pioneer in the industry and our responsibility to serve all stakeholders over the past year truly a added bench strength and industry.
Pretty through hires and acquired talent across multiple disciplines. We also welcomed two new members to our board, which now includes 50% representation by women. Once again, we were at the front of the pack with the release of our inaugural ESG report in the fourth quarter building upon the work done in our sustainability report in 2020, while we are proud of these initial steps.
We recognize much work remains ahead, we look forward to setting new standards for our industry in this arena in the upcoming years.
It has often been said, but it's worth noting again that we are on the precipice of an incredibly exciting moment in U S. Cannabis the legal U S. Cannabis industry is forecast to almost double again in the next five years, reaching over 46 billion in annual sales by 2026.
We lead with strategy, although with execution maintain discipline and go deep in markets like our profitability depends on it truly uniquely positioned and ready to meet the promise of this opportunity. We will continue to do what we say we're going to do.
Thank you for joining us today, and as I always say onward.
At this time, Kim rivers, Alex Amigo, and Steve White will be available to answer any questions. Operator, Please open up the call for questions.
Thank you we will now begin the question and answer session to ask your question in reverse Starwood one of you touched on phone.
As you know, we usually have a speaker phone. Please forgive me.
Appropriately choose to withdraw your question. Please press Star then two.
I was more mature with little trouble roster.
Okay.
Your first question comes from birth to learn with Canaccord Genuity. Please go.
The hub.
Hi, Good morning, everyone. Just I wanted to follow up just on the on the now that we're six months into the integration of harvest and truly.
Can you just comment on how some of the harvest stores that have been rebranded to truly have are performing.
Appreciate your statistics on a 75% increase in transactions, but in terms of revenue everything you know incremental revenue I think 35% was a number mentioned on the last call.
And if you can just sort of provide some of the initiatives that you're implementing whether it's increased SKU count increased product offering within those stores that that's helping drive the outperformance.
Yeah sure I think that thanks, Derrick and so as we noted on the call. We have complete you know we have the most data as it relates to the rebranded stores in Florida, because those worthy initial required stores by regulators to be transitioned into the Trulia brand.
Those stores as we noted on our call we have seen significant increases from baseline harvest numbers at the time of acquisition.
Absolutely our continued and are committed to bringing those stores into the fold and into our call. It truly legacy standards as it relates to performance.
And strides have been made as a first step of course is to have the right product mix in those stores and to adequately bring them into our.
Marketing cadence and Outreached cadence, which we believe that we're successfully doing.
And those continue to trend in the right direction and as we noted on the call. We have just since the beginning of the year successfully rebranded the stores in Maryland, and Pennsylvania and are undergoing similar efforts in both of those markets now and so we should have better color for you as we get some time Ah <unk>.
Formats in those markets and we will be and I think this is an important important note that we didn't mention in our prepared remarks, we will be rebranding some truly of stores.
<unk>.
Brand in Arizona. This year. So we're excited about that that is going to go in a more I'll call. It disciplined pace as of course, we recognize the brand equity of the harvest the harvest name in that market until we do want to be thoughtful in terms of how we transition those over but there are some stores that are not currently.
And at harvest that and that makes sense for us to go ahead and rebrand truly so very interested on those on those performance and we'll have more to talk about on that as the year progresses.
Okay, Great and then just one more in terms of.
You mentioned, 30% of your dispensary, they're now outside of Florida, which is helpful. But can you comment on perhaps the the retail and wholesale split that we should expect going forward and just some of the some of the learnings.
Youre, gaining as you increase your wholesale exposure with this transaction and just entry into new states.
Sure. So you know we're not reporting on a segmented basis as I'm sure you noticed.
However to your point, we will be and will continue to ramp wholesale.
In markets across across the country.
In Pennsylvania, where we have a strong wholesale platform that did take I think consistent with.
Likely comments that you all have heard from other from other folks that did take a bit of a hit.
In Q4, we are increasing our wholesale operations as well in Maryland currently with expanded capacity coming online in Maryland ahead of what we view as a likely path to adult use and so we like that strategy in Maryland by having again branded Brendan.
Product and branded retail, but also having that secondary channel built out with appropriate supply and and of course, Massachusetts, and we are increasing kind.
The month over month or wholesale.
Our wholesale metric and Massachusetts as well interesting.
Going to be evaluating Arizona to date, Arizona has not had any meaningful wholesale through through the previous harvest and harvest platform, so with additional capacity and with right sizing and adding some capabilities in terms of production and ability to get different branded.
<unk>.
<unk> in end market in Arizona, we are going to be exploring potential wholesale opportunities in Arizona as well so certainly are growing.
Part of our business and one that we do have certainly initiatives around for this year. However, I will say that we're certainly leading with the strategy of branded product through branded retail channels and we think that that's important and that certainly is at.
At the top of the list for initiatives for this year.
Understood. Thank you very much.
Sure.
Whereas our BTR.
Please go ahead.
Thanks, Good morning, everyone.
I wanted to focus a little bit more on gross margin and.
And Alex you gave some good detail on how to think about the long term opportunity, but maybe if you could just parse out in the quarter.
What happened or maybe the puts and takes as better said on the gross margin line with respect to some of the more cyclical changes with respect to pricing what does that have what impact did that have on the quarter versus some of the more structural changes given the state makes now evolving.
By our math, we're getting to.
The Florida market, having compressed by about.
To the to the mid sixties yourself from a gross margin perspective.
And wondering if that again, that's just a function of.
Again, more pricing dynamics or some of the integration efforts that are unfolding. During this period with with harvest. So any sort of color to isolate what is actually ongoing versus what is more temporary in nature would be really helpful.
Sure Yeah. So obviously margin as we noted was significantly impacted by the harvest acquisition radio. So we had various GAAP accounting impacts such as you know we reported on Paris acquisition fair value step up of inventory was approximately $38 million in other transaction integration and nonrecurring costs.
That got us to an adjusted when you add those all back you get to an adjusted gross margin of 59%.
So youre looking at a true delta of about 10% quarter over quarter when you remove those.
Nonrecurring integration costs and the majority of that is the acquisition the integration of the harvest assets, which traditionally operated.
Margin and EBITDA profile.
Not built out and we're optimized without the full benefit of cultivation to support the retail part of our strategic plan as Kim noted in 2022.
Alliance on third party retail revenue and wholesale presence that was the primary driver of the true margin Delta in the quarter you noted.
As we spoke about in the past we had.
It's our it's our promo quarter rate with the holidays. So there was an impact there kind of an old legacy truly markets.
As we also noted prior many times like inventory flow through product mix will swing, a few basis points quarter to quarter and they generally offset each other in the quarter from a legacy perspective, and then you can and will see a.
A couple of basis points swings quarter to quarter going forward.
Got it so is it right to think that the biggest opportunity from a gross margin perspective.
And then you talked about more branded products through your own retail stores and the caliber of that next that's pretty clear.
If we're looking at it from a state perspective is it really coming up.
Integrating harvest operations in Florida up too.
Truly legacy type of operating structure in margins is that is that the biggest opportunity going forward.
I think the biggest opportunities kind of across the platform on our core markets building, our our cultivation to support our leading retail alright, and then as we do that in the first half of the year you should see incremental pickup in margin during the back half of the year.
Perfect.
And then.
Kim you made some pretty.
Impressive and interesting announcements during the quarter from a partnership perspective.
It could be one of them.
Can you talk about the impetus behind those partnership agreements that you signed and where are you trying to take the market.
Clearly, Florida is at a competitive pressures as we all know and very much are aware of.
So what are you trying to do with these with these partnerships in terms of.
Product quality brand awareness and ultimately what is the result, you're trying to strive for here.
Sure so we.
We are thrilled with our current our current partnership.
The folks that we've announced and with existing partners and so we introduced this idea of having partners in in Florida, a number of years ago. We were the leader in doing that in Florida and felt that it was really the rationale then holds true today, it's really about bringing best in class.
Products to ourselves so that we can offer and depth and selection to.
To our customers regardless of the market that we're in and we particularly in Florida with our partnerships that we recently announced our focused on premium.
<unk> and having and high quality brands on our on our shelves.
And these are of course with connected specifically, it's a relationship that harvest is hard for a very long time, we're very familiar with the team we're very impressed with the quality.
Genetic portfolio that they that they bring as well as again their ability to really to speak and market to that particular segment, which we believe is very beneficial not only in selling their products, but also in the additional.
Additional impacts that they will have on basket size and additional items added to basket and are in our retail locations in Florida. So.
I think that when when we look at our shelf space and this is a broader conversation.
I will try to boil down into a couple of minutes here, but when we look at shelf space and positioning across the trulia platform and across our retail locations across the U S.
Product availability does differ from market to market and so we have to be very focused and we are very focused around the market segmentation around choice for our customer but also.
The balance between.
Purposeful choice as opposed to.
Confused confusion and category.
There is tremendous opportunity, we think there as it relates to again, our acquired acquired stores across the U S and really again this partnership relationships fit into our strategy as we think about our tiered.
Our tiered product offerings in our in our stores.
That's great.
If I could ask one other question just on <unk>.
Segmentation and product innovation and just the general kind of barbell Ing that you continue to see.
Is there a distinct margin differential between your high end.
<unk> product and your lower priced product.
The I understand the differences.
Basket.
Ticket.
But I'm curious about is there are you getting to a point of efficiencies on the cultivation side, where the margin.
Differential is not existent.
Yeah, Great question and it really is going to be I'm going to give you my recovering lawyer answer that it really does depend.
It gets down to a subset conversation.
So I can't give you across the board if I were to look at it on a blended rate certainly there is we believe additional.
Pricing durability and margin protection, if you will and in the premium segment, which we really like and obviously for value. We're also looking at product velocity, which is.
And in an input into into that segment and a more significant way if you will.
But yes to your point and we have great margin on both sides of the spectrum.
And we certainly have and released and we will continue to develop products and spend time on innovation in both segments.
We believe very very strongly that it is important to have.
Product.
And significant product offerings in both value and premium and most recently and for folks who have been following us we've announced a number of our products in the premium category with <unk>.
And by the way not only in concentrates, but also in flower and in the debate category. So again, we think it's important to have a tough clear segmentation and to your point, though our efficiencies on cultivation lead to better margins across the board.
So which is a good thing.
But we and we enjoy good margins in both on both ends but certainly like the premium category.
Hey, guys. Thanks for the color all the best.
I don't remember your interests are aligned well for.
For all those questions. We do ask you please limit yourself to one question.
So there is no question from Russell firmly for journeys. Please go ahead.
Good morning, and thank you for taking my question just wanted to follow up on.
On the on the barbell pattern you've seen in your comments around.
The premium segment in your growth there and in the face of the macro headwinds. So just wondering have you seen any softness in premium or are you envisioning or preparing for any softness in that category given the macro headwinds.
That everyone is seeing.
And I guess.
You do see that I guess, how are you how are you preparing for that and which markets do you think or perhaps a little more vulnerable to others there.
Yes, Thanks Ross.
It's really fairly interesting and that we in the majority of our markets, we've actually seen and we're talking about kind of in units and in that dollar as we've seen increases in.
In premium and which is I know kind of false flies in the face a little bit of what we might have thought as it relates to the inflationary pressure that we're seeing of course.
So not all markets are the same as what I can tell you and it does appear that certain markets are being affected differently.
So we think that again it comes down to value proposition of our product so and what is the perceived quality right for the price and whether or not.
That product can stand up to our customers' perception of of value right, depending on the other choices and availability in the marketplace. So.
And again going back to my earlier comments.
Cannabis is a little bit different than other than other businesses and that there's not the same type of choice right. There's not the same product on shelves from market to market, So and which also can account for some of the differences.
Between between markets that be.
<unk> said as I've as I've sat in and we certainly believe it is critical that we have a portfolio that also meet customers, where they are which means that we have to have a robust product offering also at the value at the value segment and also in mid tier.
And so in fourth quarter, which is this is typical for us we tend to see velocity and mid tier as folks take promotional activity.
Kind of to the bank and those value customers may.
Jump up in a category.
With the same dollar rate, they're able to get a perceived higher value products, while we while we see potential more spending by that premium customer and again kind of in a holiday environment and so on.
We are certainly continuing to focus we will continue to focus on development of premium products again at the right value proposition, but also important for us which we will also continue to do is to develop and now just to develop but also make sure we have consistency and availability.
Reliability of products that are good quality products at a good price for that value segment consumer.
That's great color I'll get back into queue. Thank you.
All of our questions Murray Hill.
Immuno model. Please go ahead.
Nope.
Thank you Tony.
How many of the 25% to 30 dispensaries, what you expect to open this year, how many of those do you think it will be in Florida versus other states and how do you think about the need for unit growth in Florida going forward are you, adding those units to support the patient population in Florida or are you, adding those units are relocating is against this year more with an eye towards that market converting to adult use.
And at some point in future, probably 2025 and beyond.
Yes, Thanks, Matt.
We would anticipate that you know about I would say approximately and obviously, it's going depend on if we land on 25% or 30, but we will say approximately half of those well.
We will end up.
And the state of and the state of Florida.
And then can you give me your second part of your question one more time.
How do you think about adding those units are you, adding those with it with the mindset of the patient population is growing in Florida, and so youre, adding units to support that or are you. Adding these are relocating them with a more of a mindset or eye towards that adult use market that'll probably be there in 2025 in Florida.
Yes, no and so a couple of points there one I just want to make sure that folks hurt us that we are relocating six locations and those locations, our florida locations that and that.
Not included in our 25% to 30, so I think thats.
Maybe an important distinction.
And those stores or stores that and.
Our stores that were legacy stores that we had to open under the previous regime. When the program in Florida first got started and so they had different restrictions in terms of location and zoning and whatnot and oftentimes, they're smaller stores and so we need to relocate those stores and two to better serve our customers.
With our kind of improved if you will retail experience.
As it relates to how we think about store placement, we do a ton of analysis in terms of <unk>.
Ms of locations and I think there was a great report that came out earlier this week around.
Our store locations in the area of populations that those stores are able to serve and we do believe that we outperform our competitors with respect to our stores our source selections in our locations.
And to your point the market in Florida is continuing to grow we're coming off a period, where Q4. It was growing at a rate of approximately 2500 patients per week now it's growing at a rate of approximately 3500 patients per week. So we are not seeing.
Underlying fundamental metric of patient growth slowing down in the state of Florida.
While we may see some some.
Some slower growth as it relates to spend or as it relates to consumption. We are still seeing that underlying patient growth continue to continue to grow and we do feel it but we need to be positioned in order to serve.
And in order to serve the growing market that being said, we always have an eye on locations that can serve and will be phenomenal locations. Once recreational happened in the state of Florida. So that's that's always a consideration when we think about when we think about positioning.
Thank you.
Okay.
For social personnel.
Please go ahead.
Hi, good morning, Thanks for taking my questions.
Thinking about your cash balance and future M&A, obviously, the harvesting acquisition.
Considerable amount of integration Thats, that's necessary and was transformational.
But you do have pro forma $300 million of cash.
Right now by our estimation.
Wondering if you could give.
Your updated thoughts on New Jersey, and New York markets.
Or any other state that could be attractive.
Mainly in New York, you know, including the they included hemp operators and direct supply chain, which is.
Something that's relatively new wondering.
Wondering if you have any updated thoughts around that.
Yes, Andrew this is Steve.
For a variety of reasons, we won't get too deep into specific markets, but we do have a well established criteria to make decisions about entering into new markets.
Generally the stuff that we're looking at.
Assets the price of those assets the team.
Timing and whether that is consistent whether the potential acquisition is consistent with our overall strategy.
I think it's fair to say that sometimes our view of assets in geographic markets is different than how others assess those those markets for those assets.
In many instances the timing or the price may not be right for us.
We're not interested we don't look at potential M&A like a trade.
Building, a sustainable and profitable business and so it's through that lens that we view opportunities.
We did we did closed seven transactions last year.
So it is fair to conclude that there have been and there will continue to be opportunities that fit our criteria.
And we have previously given guidance about potential additional hubs for the truly a organization.
All right thanks for that I'll get back in the queue.
One of our questions.
<unk> shrugs portion.
Roth Capital Partners. Please go ahead.
Good morning, just kind of looking at your long term target model, you mentioned two or three years.
Gross margins of 60% adjusted EBITDA, 40% does that.
Include Florida, and Pennsylvania, turning the rack and as.
As we look at margins normalizing Laurie here with competition.
How do you kind of look at maintaining your industry, leading margins going forward.
We look at that from a longer term perspective, as youre seeing pricing and margin compression going bode well for the industry here.
Yeah. So.
A couple a couple I think questions there.
And our.
<unk> never include.
Things that are here.
So it does not include recreational and in Pennsylvania, or Florida. So there would be of course, additional and very probably substantive.
Upside if and when those things were to occur and as it relates to how we think that we can achieve those margins.
Very specifically laid out.
Strategic initiatives on the call and it's going to be our ability to execute on.
Against those strategic initiatives.
And the flow through into our financial performance as a result of execution I think we have a strong track record of again doing what we say that we're going to do we have a very specific and identifiable plan on a market by market basis in terms of how we are going to increase.
<unk> financial performance in each of those markets.
Again building out supply chain is one is one element that we believe is critical getting deeper in those markets, which again is our philosophy and our strategy that we have held true to since the formation of <unk> is one that we expect to again start to see results pull through.
As soon as the second half of this year. So we're very confident in our ability to get there and believe again the really it's.
It's nothing more complicated than execution, which.
Is that is again the element that we that we believe we again have a very strong track record in achieving and also I should just point out that again that guidance is.
Our minimum guidance right. So we believe that we can achieve at least 60 40 in both in both margin and EBITDA.
I appreciate it thanks, Ken for the opinion I'll jump back in the queue.
Our next question comes from Andrew.
Along with global partners. Please go ahead.
Hi, good morning, and thank you for the question.
So on.
The question thing that's early in terms of growth for Florida, and talk a little bit more about average sales per store same store sales. So legacy, Florida stores are down 1% up 8% excluding.
Those opened prior to 2018, so kind of going forward embedded in the guidance just want to get some color in terms of what you guys are thinking about in terms of average sales per store or same store sales within the guide.
On hand, you have the continued patient growth, but then you also have additional.
Additional stores coming on line from competitors also some relocations of your own stores that could have an impact during the year. So any embedded expectations in terms of average sales per store, specifically for Florida, how we should think about that going forward in 2022 it would be helpful. Thank you.
Sure Erin so we're not giving any specific same store sales guide and embedded in guidance.
However.
As I think indicated we anticipate improvement across the combined network.
In 'twenty two.
Again, as we continue to increase and the.
Availability and to right size, our product portfolio offerings.
Our and our and our branded retail locations across the country.
So.
Performance is trending in the right direction and are looking to continue to add continue to improve again throughout the year.
Okay, great. Thanks.
All of our questions.
Hum.
<unk>. Please go ahead.
Thank you and good morning.
Can you reported and spoke to some impressive average average baskets in both.
Medical and recreational markets just wondering in the context of the current macro and promotional backdrop. How are you thinking about the evolution of those basket.
Perhaps any any levers you can that you can pull to mitigate some of those macro and promotional type pressures and frankly, how disciplined do you expect the market to be Matt.
In the first half of 2022 given that backdrop.
Yeah. Thanks.
Thanks for the question.
It is interesting and like I mentioned, a few times.
I wish that this was as simple as giving you just an overall kind of.
All markets are not the same and so we are seeing different impacts in different in different regions across the U S.
Interestingly, we have not seen as much pressure on necessarily the basket as one might anticipate where we are what we are seeing as I mentioned is kind.
Kind of consumption overall, and depressed and relatively flat again from quarter to quarter.
I guess the positive is that we're not necessarily seeing precipitous declines in our basket.
And our average ticket.
Across markets.
We do believe that it is important in order to hold or.
Defend and that basket.
Note offering selection innovation again high end and lower end, we've introduced a variety of products and in Q1 that will start to pull through in Q2 in Florida in particular.
And we call. It basket edition type products. They are products that are priced underneath.
There are 510 or $15 that are quick and.
<unk> registered type type products, which we think and we have seen from early from early data has certainly helped in terms of defending right against against any potential erosion in basket, but again moving into Q1, we're not we're not seeing any significant decline there.
And again I think that this is just a period of time, where it's kind of overall more of a macro consumption.
The challenge then it is a specific kind of at the registers impact.
Great. Thanks, Ken I'll get back in queue.
Our question comes from Spenser <unk> with Wolfe Research. Please go ahead.
Good morning, Thanks for taking the question when you adjust for the seasonality of the industry or are you seeing any change in promotional activity from <unk> in Florida.
And then when do you think we'll start to see an improvement in Pennsylvania pricing, which has been under pressure recently.
Yeah.
Thanks, Thanks, Spencer So Q4 to Q1 as we mentioned Q4 is the highest it's keep our in Q2 and our business.
Across the industry or the higher promotional.
Orders have gotten in Q4, obviously with the holidays both.
Black Friday or in Green Wednesday, and then of course over over the end of the year holiday period and in Q2, you've got for 'twenty.
And then.
<unk> so Q1.
Is in line with previous.
Previous seasonality and then the discounts.
Theres discount relief or promotional relief in Q1 in Pennsylvania, specifically.
We've talked about this I think throughout the last year and that there was a normalization of pricing that needed to occur in Pennsylvania.
We believe that that's happened and we do believe that baseline pricing in Pennsylvania, We think has stabilized and the impacts that we're seeing in Pennsylvania now we believed to be more transient in nature and really a fallout of the vape issue that began to happen in Q4 and more directly impacted.
Wholesale channels in Q4.
It was widely telegraphed and folks were.
Ramping down both production and ordering of the throughout the vape category, while they waited to see what exactly what happened in Q1 Q1.
<unk> actually did occur and so all of the businesses across Pennsylvania did of course have that impact both again at wholesale and also at retail.
And that's creating I think some fallout across across the end to noise across across that that market.
And so.
It's a little hard to decipher because that noise is built in but.
But what we believe anyway is that pricing in general has has stabilized there are some promotional.
Certainly heightened promotional activity in NPA, but difficult to discern whether that's fundamentally driven or if it's driven in response or reaction to.
To this regulatory issue that we believe will flush out.
As the year continues and important to note, which I haven't yet in Pennsylvania for US specifically, we have gotten additional products approved.
By regulators in Pennsylvania, both in value flower segment as well as in.
Cannabis derived chirping base. So we're looking to roll those out and again, we should have.
Some stabilization in that market as it relates to the <unk> coming into Q2, and certainly through the rest of the year.
Got it that's helpful and then regulators, allowing wholesale sales in Florida would be significant opportunities for your business. How how open are regulators to making that change where they need to see to.
Do that and then any updated thoughts on when you think Pennsylvania could go back or we could see some change there on the regulatory side.
Sure So Florida just ended session.
There was not movement there.
Repititis for movement.
This legislative session will.
We will need to watch next session.
No.
Likely between now and next session there will be some activity as it relates to valid initiative. So next session would be the session that if the legislature wanted to posture or position ahead of that initiative going to the voters thats. The session that we would see that activity occur.
As a reminder, that is what happened with the medical valid or with the initial ballot initiative that expanded.
The medical program.
So it's certainly a pattern that could be followed.
Couldn't really tell you in terms of likelihood I think it is going to depend on response and reaction.
Once again valid initiative gets kicked off in responses to that.
As it relates to Pennsylvania, and clearly, we all I think wed love to see some.
Activity by by by the folks in Pennsylvania to move forward and certainly then the increased kind of getting closer to adult use sales in neighboring markets and adds pressure, we believe to that conversation.
Again.
Crystal ball type question, but.
We are encouraged by increased.
Increased conversation that is substantive by folks in both parties in Pennsylvania, So and we're working hard in that in that market too to advocate for for adult use.
Fair enough thanks for the color.
Mhm.
Ladies and gentlemen, our next question promotional from Andrew Wong of Jefferies. Please go ahead.
Okay.
Okay.
Okay.
Hello, everyone.
I was wondering if as long as Martin will go to the nurse Horseshoe, which is from <unk> <unk> with Craig Hallum Capital. Please go ahead.
Great. Thank you for taking my questions.
Can you talk about.
The ability of the Florida market to absorb more supply and how that.
Then relates to.
Expectations for you guys, bringing additional supply online I guess, just the overall pace of that additional.
Expansion in Florida. Thank you.
Yeah, absolutely so Eric we.
We have built the company and we've.
We built the supply chain, specifically in Florida to be very modular in nature in terms of how we bring capacity on as it relates to projected growth in the market and projected needs within our company of inventory flow through so.
Sure.
That discipline.
Discipline will continue throughout this year and beyond and so it is very specifically tied to how.
How were projecting.
And really the underlying metric there is patient growth.
And the market along with them, we go down to <unk>.
Number of physicians.
Number of registers average timing of transaction et cetera, So we feel very comfortable and confident about how we match.
You will capacity with <unk>.
With needed.
Or required growth are to meet our patient experience expectations in the market and we certainly are not here to overbuild or over saturate, but at the same time. We also want to make sure that we have plenty of supply to be.
Be able to service our customers and have depth.
In category like for all the reasons that we've talked about on this call.
Okay, Great. That's very helpful and so I guess, just so we should sort of continue to think of a methodical steady expansion of your Florida.
Capacity versus kind of a step function growth in the second half for example.
Yes, I mean in Florida, again, and now let me be clear its cultivation. So.
We're not we're not going to bring just inefficient I mean, there are certain efficiencies that are built into that comment so and we do bring in phases at a particular time, so depending on Eni definition of what step function looks like I, just don't want to Miss you don't want to make sure that we're aligned there, but yes to your point it will match, what we believe we need from a capacity.
The city perspective to meet.
Demand and the demand that we're projecting through our retail channel and in the state of Florida.
Got it thank you.
Yeah.
Yes.
Next question please.
Uh-huh with Cowen. Please go ahead.
Hi, good morning, Thank you.
So I appreciate the portfolio optimization work that you referenced Tam in terms of putting lower priced product at the front Register that certainly I think helpful. In terms of driving basket, but the reality is there is a lot of competitive discounting and promotion in the category. So I'd love to get your perspective.
And in your philosophy really around promotional spending because what we've seen in alcohol as two very different approaches right and you can just reduce the price.
But that signaled something very specific to the consumer or you can do more value added kind of promotion. So I'd love to understand how you think about the balance of those two and where you guys are leaning from an execution standpoint today. Thank you.
Yes, Vivien. Thanks, So we are absolutely very strategy, driven and promotions and we have specific drivers that we're looking to accomplish with every promotion that we run so whether that's two increase in average ticket whether that two and move product in a particular category where we are.
Have greater margin.
<unk>.
Availability to begin with whether that's to encourage a customer to come back for another visit and whether or not that is to encourage a customer to try a product segment that we know.
Normally comprised the basket, but and that perhaps isn't but we have strong indicators that if a customer were to try that products that they may very well make that part of their repeat by moving forward. So it is it is very data driven and it is very strategic.
And we are looking and we do measure outcome.
As a result of any promotion that we may run.
Yes.
Yeah.
Oh.
And remember all those questions.
Relative Jefferies. Please go ahead.
Hey, good morning, Andrew Bond and the line for Owen Bennett can you all hear me okay.
We can.
Awesome.
Quickly going back to the commentary around partner brands.
Could you just give some more detail around specific qualities you evaluate when considering bringing on additional partnerships and then.
Related to that just how you plan to balance that between and expanding branded wholesale operations outside of Florida. Thank you.
Sure. So when we're looking to evaluate and our brand partnership it needs to fit into a couple of different one.
One of a couple of different.
Criteria.
One is and certainly if we're thinking about something that's more national in nature.
A particular customer segment and our skill set that that particular brand can bring into our portfolio that does it makes sense quite frankly for us to develop or that theyre significantly developed because of their time in market.
Where the equity value that we believe is built on that brand and makes sense to have a partnership relationship as opposed to for us to start start to build it from scratch internally. So an example, there would be our partnership with Blue River Blue River is the solvent less company they've been in market for a decade plus.
The extensive experience in the California market very competitive market as we all know and it's a beloved brand known for high quality high efficiency, It's hyped Hi, hi.
Hi, flavor taste et cetera has a cult following within that Paavola space and we've brought Blue River into Florida. We've also launched with them in Massachusetts and are looking to bring them into the product portfolio in other markets.
Second would be a regional brand and a regional brand is a brand that has very strong ties to our local market.
And that has typically and oftentimes could have an advocacy element to them.
An example, there would be for example, our blocks tuna stream with Bobby Tuna, and we're going to have another regional partnerships that we're going to announce here very soon and Bobby spent 30 plus years in prison for cannabis per in the seventies. He has been an advocate for legalization.
He also originated the senior tour in Florida, which actually advocated for the passage of the amendment to where he went around the state and had conversations with seniors and assisted living facilities around cannabis and why it was important for them to vote, yes on that amendment and so we partner with Bobby and he has been a wonderful partner in the <unk>.
A florida.
It is actually it sells out every time we have it.
And he'll be a great partner for us as well as we look to launch in other markets for example, Georgia and neighboring in neighboring markets in the southeast so.
And those are those are the two kind of buckets. If you will that our brand partnerships typically fall into as.
As we think about again brand partnerships versus how we think about our own product portfolio on a go forward basis and specifically in wholesale channels again, it gives us the flexibility in certain market. So let's take Massachusetts as an example, blue River the founders of Blue River actually live in Massachusetts now.
So absolutely we've added Blue river to our portfolio in Massachusetts, there and an advocate not only for their own products, but also will allow us to sell through additional truly branded products through the wholesale channel through doors that they have relationships with or that they have opened so it's certainly a mutually beneficial relationship.
Market like Massachusetts.
Bang is another brand partner that we have that has been in market for I think 12 years very very strong in the chocolate space have a very strong presence and relationships with retail.
Retail doors across several markets and so another another great I'll call. It a door opener for additional truly products and truly branded products in the wholesale channel.
Perfect very very helpful. Ken Thank you.
Yep.
Ladies and gentlemen, this concludes our question and answer session.
The call back over to Christine Hersh for any closing remarks.
Thank you all for your time today, we will be hosting an analyst event in Tallahassee, Florida on June 7th analysts who are interested in attending should contact me directly for additional details.
Space will be limited, but we will webcast a management presentation in conjunction with the event in the meantime, we look forward to providing additional updates during our next earnings call in May. Thank you again and have a great day.
Ladies and gentlemen, this concludes our conference call today. Thank you all for attending today's presentation you may now.
Orchard Orange remember wonderful day.
Okay.