Q1 2022 4Front Ventures Corp Earnings Call
Good afternoon, and welcome to forefront ventures first quarter financial results Conference call Today's conference is being recorded.
At this time all lines have been placed on mute to prevent any background noise. After.
After the prepared remarks, there will be a question and answer session. If you'd like to ask a question. During this time simply press Star then the number one on your telephone keypad.
If he would like to withdraw your question. Please press Star then the number two.
I'd now like to turn the call conference over to your host forefront ventures interim Chief Financial Officer, and Chief Investment Officer, Mr. Andrew too.
Thank you you may now begin.
Thank you operator, and welcome everyone to the forefront bankers earnings call for the first quarter of 2022.
I'm joined on the call today by our CEO Leo got maker, President Carl Test Gano, our CLO Joe fell from <unk>.
Ray land graph, who is our president of our California operations.
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 factors section of our filings in our disclosure materials.
Any forward looking statements should be considered in light of these factors. Please also noticed 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.
Alright.
So with that out of the way, let me give you a very quick overview of the call today as always I'm going to start with a review of our thesis and strategy.
Then I'll provide color on our first quarter results and an update on what's been a very exciting and busy start to the new year for our company.
I'll, then hand, the call over to Leo who will go into 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 for the rest of 'twenty two.
We will conclude with a Q&A session where.
Where we will all be available for any follow up.
So to begin at forefront, we're guided by a simple thesis after protecting our high quality high margin production capabilities in Washington State were replicated and large cornerstone.
Excuse me.
And large cornerstone markets.
Uh huh.
California, Illinois, Massachusetts, and Michigan.
We believe the sweet spot on the cannabis value chain is the low cost high quality production of cannabis consumer packaged goods at scale and that is starting to prove itself in spades.
We are lifting that sweet spot in Washington for seven years and are confident that the ability to produce low cost.
Scale will be the most advantageous skill sets to navigate this industry as it continues to mature.
As we sit here today, our retail locations across the board are performing well and believe we're taking market share because transactions and in many cases net sales are up.
Might expected pricing headwinds.
Our cultivation and production facilities are dialed in and producing high quality products at low cost.
Our construction project Madison, Illinois.
Formerly formerly referred to as Big Daddy is.
Head of schedule with the first phase planned to be delivered and as early as six months.
Our production facility in Commerce, California is operating in full swing with strong sales momentum and seemingly infinite blue sky opportunities.
Our business has inflected and.
And we expect strong sequential growth to build as we move through the year.
So let me spend a minute on two of the biggest growth drivers for our business in the intermediate term caliber.
California and Illinois.
First on capital.
Our 170000 square foot state of the art production facility in Commerce, California, It's just a very unique asset that came online late last year.
I spent two days in the facility last week tour and investors and analysts and the momentum is palpable as production continues to ramp.
The activity and interest we're seeing after just six months of operation has us more confident than ever that forefront is positioned to be truly disruptive and the California market that is ripe for consolidation and subsequent streamlining of cost efficiencies.
Our timing for entry into California is proving to be an packable.
Possibly a bit serendipitous.
Given our success in Washington, we have always thought that the.
Forefront was uniquely qualified to succeed in this market where others have stumbled.
But the opportunity.
But the opportunity set we are seeing the California, excuse me guys Mcdonald's or go into now.
But the opportunity set.
We are seeing in California, maybe larger than we anticipated.
The market has been absolutely clobbered by an oversupply of flour high taxes and lack of retail stores that it's been brutal for incumbent operators.
Forefront entered Kelly this winter with an asset which solves a major problem in the state.
Lack of scale low cost production.
We're able to enter the market with our proven and award winning portfolio of products with pricing as much as 50% lower than the leading incumbent.
We're doing this while maintaining very healthy margins.
Because we started the year with a revenue base of zero, we arent faced with pricing pressure headwinds to grow because of Commoditization has largely already happened.
Additional tailwind in what appears to be a slowly healing tally market or an expanding retail base.
Recent research indicates that there are currently about 900 active licensed retail locations, which are expected to expand to about 1200 by the end of 'twenty, two and 1600 by the end of 'twenty three.
Furthermore, if the cultivation taxes lifting and Kelly our flower based products will get we will get about extra 10% additional margin points to play with.
As a management team we've been incredibly busy advancing significant discussions with a growing number of potential partners and strategically attractive businesses.
Does that it.
We're extremely pleased to have closed in April our first strategic deal in California, A island company.
Ireland is a california mainstay with incredibly high quality products, including pre rolls flowers and vape.
Our commerce facility allows us to acquire brands and manufacture them significantly cheaper and more profitably.
It is exactly what we're doing here.
We're able to integrate the island production in a matter of weeks.
Even more confidence in our ability to buttress our growth with simple accretive acquisition.
Equally is crucial to our California strategy the management team at island bring deep operational experience in the local market.
In particular.
The additions of founder and CEO Ray land graph in C. O O Brandon Mills and team has made an immediate impact to our operations and strengthen our bench both on the production and sales side.
We are excited to have the island team onboard as we build momentum in the state.
In Illinois.
Struction of our Madison facility remains ahead of schedule the.
The completion of phase one of construction is expected in Q4 of this year coming online in early 'twenty three.
As we have preached 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 in Illinois.
With only two dispensaries open out of our well are out of our allowable pen in Illinois, we have enormous room for growth as we expand our retail footprint. In addition to expanding our wholesale presence.
Let me take a minute to underscore the growth engine that Illinois can be to our story.
In Q1, we run rate at 42 million out of Illinois between two retail locations and a small 9000 square foot growth.
Quickly eyeball in some of the other msos in Illinois, with large cultivation capacity and a full complement of 10 retail locations I ask them. What they are doing in the neighborhood of 275 to 300 million of revenue.
With Madison coming online the first box for achieving this kind of scale is checked.
<unk> boxes, buttressing, our wholesale capabilities and capturing the upside by adding additional retail.
So stay tuned there because we have a lot of unrealized potential in this state.
With that said let me.
I'll review the numbers.
Q1, 2022 system wide pro forma sales was $32 4 million an increase of 7% over the same quarter last year and a slight sequential decrease from the fourth quarter of 'twenty one.
While we expect pricing in limited license states to naturally become more competitive we think wholesale growth in both math and Illinois has potential to strengthen as additional retail comes online and have underscored states.
As I stated last quarter pricing competition in the cannabis industry is a fact of life one that we've been proactively positioning for for years.
Low cost high quality operations matter.
We'll continue to and we will see that continue to come home to roost as the industry evolves.
Q1, 'twenty two adjusted EBITDA was $9 million.
Up 53% from Q1 in 'twenty Q1, 'twenty, one represents representing an adjusted EBITDA margin of 28%, which we expect to grow in lockstep with incremental revenue growth.
Our balance sheet, leaving the year is in solid shape or leaving the quarters in solid shape as of March 30th we had $8 6 million of cash and $48 7 million in related party long term debt, which doesn't come due until may 24 cash.
Cash balance was down sequentially with the closing of our any C C acquisition in mass.
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 our brands products and best in class of therapies from Washington into new markets at scale.
We continue to add additional skus on a monthly basis.
Eloping and launching a dozen new lines and since Q4 alone.
We are executing on our strategy of continued expansion into our core markets of Massachusetts, Illinois, and now California.
We are shaping up for a very active 2022.
Which brings me to my final point.
As I've been saying for some time, we're entering into the one of the most active M&A environments, we've ever seen in our industry.
As I briefly mentioned during last quarter's call, while details on safe banking and timing of meaningful change on the federal side remain AZ.
They're inevitabilities is apparent.
Our goal is consistently tend to become a larger company. We're 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're doing right now is not only building our company, but 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 stakeholders. We continue to explore new means to augment our growth via accretive acquisitions as part of a larger platform.
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.
Yeah.
Thanks, Andrew for the update on our business progress and on the strength, we see in our model and within the industry as just discussed in the first quarter. We reached several substantial operational milestones that pretends last name momentum expected to drive our gross wells through 2022 and beyond with the California facility now humming.
We are more confident than ever that we now have the strategy facilities and teams in place to realize considerable growth in the coming year.
So let's start with California.
Carlos facility is only just starting to make waves in the industry and we believe that we now have the means to considered we disrupt the world's largest cannabis market it is happening.
We had no winter in California, where operators struggled to move product and pricing hitting all time lows of death knell for inexperienced operators without the capability to scale, we're starting to see a rebound as retailers begin to clear inventory municipalities that act much needed tax holidays and pricing in general improvements there.
It's November December draws.
We view this memorial in California is a golden opportunity to begin consolidating market share from unprofitable operators to accelerate our growth.
Due to our significant competitive advantages in cost derived from automation and scaled manufacturing, we can drive meaningful accretion that others cannot simply put this is what we do.
We have now built the disruptive asset with over $500 million of processing capacity with low cost reduction only gets lower as that capacity gets built.
Hello, Prong strategy to see east.
Pricing.
After just about six months in the market, we've made solid strides in starting the direct sales snowball.
The response to our products has been fantastic and the Salesforce continues to focus on new accounts and deeper penetration into existing accounts starting April one we select the pricing muscles that are low cost reduction affords us introducing pricing in California that was truly ice hockey across all our brands and Skus coming in.
On average, 50% lower than the competition for instance, pricing <unk> was the number one snowy Washington Wholesales at $4 400, milligram 10, Black box price that still drives gross margins in excess of over 60%.
For comparison wholesale pricing with the leading gummies in the California market is between eight and $9 for a comparable 100 milligram products.
We said we were going to come into this market with the goal of being the outsized price leader and we're doing it.
As the market starts to go again, we truly believe this new pricing model will set the standard for cannabis in California.
Moving on to brand acquisitions and incubation.
The current distress in the California market tie with our scale low cost production coming online in the state is created the perfect storm for us to begin to selectively and Accretively consolidate strong brands with good shelf space, who are struggling to turn a profit.
We have this unique asset that can manufacture required brands cheaper and more profitably than they could on their own.
As I alluded others are folded onto our platform margins expand as capacity to use absorbed and fixed cost deleverage. 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 products. It's early days in the integration with island, we were very.
Pleased that cross sales are already showing significant overlap on the 90 day Rolling average our customer count is up to 240 in May up from 224 in April and 188 in March.
We believe the Congress facility lends 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.
Lastly, California brands tend to travel well and we look forward to introducing those in our existing markets of Washington, Massachusetts, and Illinois, and one day across the country Interstate Commerce.
Third party production as retailers look to single source private label products and brands look to improve profitability by going asset light, we've seen very strong interest from the market to use our facilities to third party processing and manufacturing.
We have a high throughput extraction lab kitchen line Zanesville free Roseville flower co packing T shirt gel cap and mid capabilities.
We're currently exploring multiple opportunities for symbiotic partnerships with brands and retailers alike.
We expect to onboard the first of our private label clients before the end of the quarter.
Lastly, retail distribution.
Nice to have a retail presence in California. This year, while we believe that the sweet spot for value creation in the cannabis industry as finished goods production vertical integration is necessary at this point in the industry's maturation curves our retail presence not only drives higher margins would allow us more direct control over the distribution of our products.
Brands in the marketplace.
Moving on to Washington, which remains stable with wholesale prices haven't rebounded from their lows in 2018.
Our facilities have seen a very consistent performance, despite having more outdoor product in the market, causing us to pause on taking price, while we don't anticipate outsized growth in the state of Washington, We continue to hold surge, which is a testament to the market reception for our products and the focus of the team.
On the Massachusetts.
Our operations and opportunities in Massachusetts had been significantly bolstered by the acquisition of <unk> in January .
In addition to doubling our canopy and tripling our processing and production space in Massachusetts. The acid is simply one of the best designed cultivation facilities, we've ever come across and has contributed to improvements not only in Massachusetts, but across our platform.
This brand new facility is already producing premium flower efficiently, which bodes well for what has been a more competitive market in the state.
While we see the market headwinds in Massachusetts might be transitory as a number of retail locations are expected to increase the long term trend will be towards reduced pricing, which is precisely what we had slipped render position forward.
Our broad portfolio can lead to brands allows us to mix and match products menus very efficiently and we've increased house brands.
We increased house brands sell through during Q1, and Q2 in both Massachusetts and Illinois.
In Massachusetts or in house brands and represented around 66% of revenue in 'twenty. One we think that number could be as high as 80% from 2020, due and potentially push the limit as high as 85%, which we believe to be one of the highest percentages of in house brands sell throughs in the state.
In Illinois, we continue to see solid performance 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're able to sell out of everything we grow.
With the construction of our Madison facility ramping up and ahead of schedule and we look forward to this capacity not only be able to meet our growing retail needs in the 'twenty three and beyond but also generating meaningful wholesale revenue as our suite of products hit the market that year.
As for guidance, we've always said the revenue and EBIT opportunity from our current assets and $650 million in revenue and $250 million and adjusted EBITDA.
To reiterate our thesis we believe that the sweet spot for outsize value creation. In this industry is around the low cost high quality production and distribution of cannabis consumer packaged goods with our close loop raising capabilities now in place. We are really building out this company to not only address current opportunities at hand, but also.
So the market demands in the future.
Now as confident as ever in 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 share our continued progress with you.
We're always thinking three steps ahead, and I'm convinced that our model will continue to build value from forefront stakeholders well into 2022 and beyond with that I'll now turn the call over to the operator to open the lines for Q&A.
Yeah.
Thank you.
Yeah.
Ladies and gentlemen, we will now begin the question and answer session should you ask a question. Please press star followed by the number one on your Touchtone phone.
Well here are three telecom technology and great questions and your questions will be pulled in the order they are received.
Should you wish to decline from the polling process. Please press star followed by the number Q1 moment here for your first question.
Your first question will come from Neal Gilmer with Haywood. Please go ahead.
Yeah.
Hey, Danielle.
Thanks for joining us on your Victoria day here I apologize nowhere is you know where you're not the first company. That's scheduled debt because you guys. The holidays next Monday right. So.
Tell you what I'll give you a memorial day off.
Perfect. Thanks, I'll pass it along.
Yes, thanks for the questions, maybe just sort of start with your comment about the strong sequential growth you've touched on a little bit in your prepared remarks, but just wondering if I can get a little bit more of your perspective, I'm going to assume that most of that growth at least in the near term is coming from California, and your comments with respect to Massachusetts.
Illinois with new stores coming online whats your perspective on the timeframe of that I think theres a few different views out there.
Because that might challenge the growth in some of those markets. So you're still sort of see California. So the main driver of near term revenue growth supported by sort of maybe late into this year into next year from from some of those other markets.
Yeah, well, let's take let's take the first one first one first on on incremental growth and why we see improvements there. So maybe Jay why don't you start and Joe can fill in.
Yeah.
Yeah happy to I'll lean heavily on gel as well as Ray and Leo to support the California story, but I think Neil Youre kind of spot on in terms of over the next quarter or two we see that incremental revenue growth really coming from the California market.
As well as our burgeoning, Massachusetts wholesale entrants supported by the incremental square footage, we added with the <unk> facility.
Joe or Leo or Ray if you want to support kind of either at the California or discuss the Massachusetts, Illinois landscape.
I think in further detail that'd be great.
Sure I can start and touch on it and pass it off to Leo. So this is Joe and just touching on <unk>.
Massachusetts, and Illinois, J code on it Dan ACC acquisition from end of January January we have some really high quality product that works excited about.
We think it's really competitive with some of the best in the Massachusetts market. So that's been growing every month and Massachusetts. We also have a full suite of product launches for the summer.
Similar story in Illinois quality is improving and we're taking some of those best practices from an ACC and applying all of that all of our facilities. So the improved flower quality is absolutely a help and wholesale and retail and both of those markets and we've really been folk.
<unk> on live resin products and getting now live resin edibles and some new skus for us.
That'll be a nose those markets as well so Cali gets all of those exciting new products too.
And then Leo can speak to some of the other things.
You've seen it.
Our sales ramp buildup in Cali.
Yeah. Thanks, Joe.
Next will be going into Q2, and Q3, which are the better quarters.
In the industry historically.
And bind with.
The organic growth we've been seeing since inception of our sales in January makes us feel really good about where we're headed in California.
Products feedback has been phenomenal, we're seeing reorders from the larger chains and those orders are growing more of our brands are starting to penetrate shelf space, where we initially saw some of our partners picking up one or two brands a lot of them have now expanded that as you said to include all of our brands are closer to five six.
I'm extremely excited about the opportunities we have at hand for private label that we've been working on for the last few months.
Just combined with the natural sales growth in sell through.
We feel really really good about what's going on in California, and I think the last part of that would be we're finally seeing some retailers.
Come out of what's been a very very difficult time over the last eight to 12 months and finally, starting to get caught up with with their vendors and figuring out.
Whose product sales and who's doesn't see a lot of retailers cut down the amount of vendors they carry.
Making space for products like ours, and overall, just feeling really good about the organic growth.
Okay, great. Thanks, everyone for that so I guess for my second question.
I guess, Andrew you commented about you expecting EBITDA margins to continue to expand as revenues grow.
Is that going to be through the gross margin line or some some opex synergies, there's looks like a little bit of a dip in gross margins in Q1, obviously slightly lower cannabis sales and pricing pressure in that quarter.
So is there a little bit of a mix of growing gross margins, but is there also some some operating leverage that's going to be driving some of that EBITDA margin expansion.
I'll, let Jay take that one.
Yeah absolutely.
There is some operating leverage that will drive margin improvement on the EBITDA side.
The other thing to point out is as we mentioned <unk> coming online.
It's as much of a top line play from a wholesale introduction.
As it is an improvement to our bottom line in Massachusetts, We went from approximately 85% sell through of forefront developed products up into the Ninety's labs. We've introduced some products that we previously did not carry so you've got a margin uptick in that respect and I think as we're selling more and more of our own products.
We are pushing some indirect cost depreciation and amortization.
Through the cost of goods sold line ordinarily company.
Company wouldn't have to but with was $2 80 E. Any indirect costs that we can attribute to cost of goods obviously its in our benefits to do so so theres a little bit of noise in that line item, Neil I'm happy to kind of dig in deeper offline.
But I think the the statement that Andrew spoke rings true as we expect EBITDA margin in particular to continue to increase as our topline sales come through.
Okay great.
Thanks for that I'll pass the line.
Yeah.
Thanks, Neil as a reminder, should you have a question. Please press star then the number one.
Your next question will be coming from Thai calling with eight capital. Please go ahead.
Hey, guys, thanks, and apologies to tie.
Yeah, No problem, Andrew no crop is almost over anyways.
Look Andrew I wanted to follow up on your comment that you were seeing growth at retail I guess, despite the price compression environment. We're in just.
Just given the sequential sales decline in the quarter should we read that as most of the sequential weakness kind of coming from wholesale just maybe what were some of the puts and takes in the quarter between retail and wholesale.
Joe do you want to take that one.
Sure Yeah, absolutely so.
Kind.
Quarter to Corey.
Comparison tied to year end, we will.
Going into last year, we actually blew out some excess inventory or inventory in both markets. So if you kind of isolate that and eliminate that which happens at time to time in our business normally kind of more at the end of that year.
But both retail and wholesale, Massachusetts, and Illinois have both been growing Q1 over Q2 earnings.
Really we're expecting Massachusetts to have that stronger growth kind of in the summer for US yes pricing is.
Only coming down in that market, we're seeing the average tickets come down at our store and some of the bulk pricing that we're selling is definitely coming down it's just being offset by higher quality flower.
And then also live racing product, so, it's like you're bringing pricing down on distillate distillate based products, but if you offset it with live resin based products and focus on the sell through there.
That's where it's.
It's leading to some incremental top line growth, but then also really helping.
The bottom line like Jake was speaking to.
Okay. That's great color and then just for my follow up obviously, there is a lot of pressure on the consumer right now and we're seeing the impacts across the consumer products universe right now.
Do you think your product portfolio is positioned for a period of belt tightening among consumers and are there any ways you could tweak the SKU assortment throughout this year, maybe or maybe the marketing approach to address a more value conscious consumer.
Well I'm going to turn that over to Joe.
But the one of the things that I sort of hit on in my script.
Which I think is you know what.
Really compelling piece of our story is that we're entering California.
Is it a really turbulent time for the market. So we didn't have a sales pace in California that we were seeing melt a little bit you know we're coming in at what we feel like is a pretty trough anytime in the market and so all of our growth is incremental.
So with and with good momentum in California, we're feeling we're feeling awesome about that.
In terms of.
Making tweaks to products you know Joe Ray.
I'll turn it over to you that.
Sure.
I'll kick it off and then pass it over to.
Leo win rate because this was kind of the genius behind the Washington model.
And what we've been waiting for in these other markets. So.
I'll start we have 22 brands and we try to launch in each market.
One new brand of quarter and retire two brands at year end.
And bring on new Skus and so the strategy is new brands and new Skus allow us to bring the price point up on premium products and that helps offset what we do on what we like to call our economy products.
Which is.
Got it.
Copper price point until we get to a point, where we don't think it makes sense from a margin standpoint, and then just retire that product out of the mix. So.
And I call it the Washington way, the Lille model right, it's introduce new products at a premium.
And keep cutting the economy and when you need to retire our economy and eventually products that are viewed as premium essentially kind of end up coming up in the economy band.
And you better be on top of your game and keep launching new products, which I'm really proud of our team doing.
But that's.
That said, what we're built for and that's what kind of housing so excited about these markets.
And the trend that way, even though it is tough sledding. If you look at where average tickets are going but Leo.
It's kind of Crazy Sparks speaking about the Washington way without you chiming in.
Yeah, absolutely I Echo what Joe says.
We've had a lot of success historically coming out of Washington, being able to place of what the market needs at any given time and being able to always find the sweet spot between price and volume for any given product that we produce.
Closely looking at the data and listening to what the market tells US is how we make those decisions on what kind of brands. We added what kind of brands, we retire and having 22 brands. It gives us the flexibility to hit a bunch of different price points with that low cost production, which is believed to thesis for our whole company.
Way, we built this out in a way that allows us to survive and thrive in markets where pricing is crashing.
Okay.
Great. Thanks for the color guys. That's it for me.
Your next question is coming from Tom Carroll with Stan Bury Research. Please go ahead.
Hey, Tom how are you.
Hey, yeah. Thanks, Thanks for the question I really appreciate it.
Relatively new to the story here, but.
So we'll keep my questions up for another time by more detailed launch, but there is a theme you guys are bringing up that a number of others are bringing up as well right Thats just unique M&A opportunity out there right now thats been driven by just the tough environment of the last six to 12 months. So.
Could you maybe talk a little bit more about how your company is approaching this opportunity. So for example are you focused just in your current footprint of states or are maybe looking elsewhere looking into new markets and using.
This particular.
Robust M&A pipeline.
Expanded into other markets and then and then secondly.
How are you planning to finance this you've got $9 million in cash $49 million in debt and it looks like your share count has gone up a good bit over the last year. So maybe unpack that for me a bit more thank you.
Sure.
No.
I think the question on sort of the targets the very near term targets on M&A are really first.
First and foremost it's in California, and then secondly, it's in Illinois, So first on California.
We have built.
And then some.
Times I feel like it's hyperbole to sort of talk about it but we have built this low cost production.
It's a it's a behemoth that.
I don't think anyone can beat us on price.
And so as we go into the California market, where there are brands that are.
Our terrific brands terrific products, they've got good penetrated.
Store bases.
But they just <unk>.
People buy enlarge haven't figured out that last piece of.
Gosh I've got good revenues, but I can't make any money here, because we haven't figured out low cost production.
We have the advantage coming into California at being able to say look with our currency, we can buy stuff accretively right off the bat.
Then we can shut down their production throw it onto our platform.
And you can make them even more accretive.
And then.
You'll have all these cross sell opportunities. So as we look at M&A in California, It's kind of brand acquisitions, and we're not gonna be Willy nilly about it and sort of go and buy every brand under the sudden we're going to be really thoughtful about it and we've had to be because we're seeing so much opportunity in cali.
But we also want to we want to we want to own some retail and Kelly.
And so that's that's that's a place where we can.
Really add some additional just.
Daddy product sell through for our products.
And our retail base and capture that extra margin and get the brand awareness out there.
So that's Kelly and then on Illinois as I said.
We look at some of the bigger msos in the space that are doing $300 million in Illinois, and we've got and they've got the full slate of 10 dispensaries.
And scaled production in cultivation.
And we as I said in my in my prepared remarks and between the dog Barks was that we have we're run rating about 40 million in Illinois, with two dispensaries, and a small and a small growth.
So the first piece to getting the kind of scale that some of the other bigger a bigger msos have in Illinois is having that cultivation production engine on board. So that comes online in the next six months.
And then the second piece is making sure that we've got the retail.
And so we will probably be <unk>.
Adding retail.
Both organically and through M&A in Illinois.
Which leads to the last part of your question.
Is capital availability for people in this industry that are good operators is out there. So we are you know we are currently looking at any number of opportunities and being able to come to the table with.
A letter from.
Our financing partner to help us finance it.
And so there's there's plenty of the equity markets are closed and obviously had been for a long time.
But we are seeing.
A lot of capital sources that are that are pretty eager to work with us.
Because of the growth trajectory, we only had $133 million in revenue last year and people see a ton of growth in front of us.
And we're proven operators.
Our access to capital.
<unk> is not something that you know, especially when that capital is being targeted at super accretive projects.
It's something that we're really really comfortable and confident that.
That's great. Thank you for that.
Follow up that I'm thinking about as I listened to your chat and you keep talking about you guys. Just the low cost provider do you guys share any metrics on kind of like your all in cultivation costs per pound or for whatever you use.
Yeah, Leo do you want to take a crack at that.
Sure I can speak to Washington, and then I'll, let Joe fill in for Massachusetts, and Illinois.
Historically in Washington, we've been at about $300 a pound for indoor production pre.
Pre testing this is just raw dry cured.
Hum believe it was one of the better numbers that's out there for indoor production.
Joe do you want to fill in the blanks for Massachusetts and Illinois.
Yes.
Can definitely higher than Washington, I mean, both states just have a much higher cost structure.
What were.
So $2, we think in Illinois, and Massachusetts, which comparatively speaking, we think that somewhere probably in the.
Tom.
Top quartile for sure it could be as high as the top 10% in those states.
Okay.
Alright, great.
Okay. Thanks, very much I appreciate your time.
John .
I appreciate it.
I'll talk to you tomorrow.
There are no further questions at this time you may now proceed.
Alright, well. Thank you everyone for joining us it's it wasn't very long since our last conference call, but we have an awful lot going on at forefront and.
Are excited to keep.
Keep you updated as we move through the year because we have.
There's a lot of activity in our country and our company and a lot of momentum and look forward to updating you in August I haven't Goodnight.
Thank you ladies and gentlemen. This concludes your conference call for Tonight, we thank you for participating and ask that you. Please disconnect your lines.