Q2 2022 4Front Ventures Corp Earnings Call
[music].
Good afternoon, and welcome to forefront ventures second 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 the prepared remarks, there will be a question and answer session.
If you would like to ask a question during that time simply press Star then the number one on your telephone keypad if.
If you would like to withdraw your question. Please press star followed by the number too.
I would now like to turn the conference over to your host forefront ventures, Chief Executive Officer Leo Carmaker. Please go ahead Sir.
Thank you.
As a reminder, during the course of this conference call management May make forward looking statements that are based on current expectations and are subject to a number of risks and uncertainties that may cause actual result, actual results to differ materially from expectations. These results are outlined in the risk factors section of the company's filings and disclosures materials.
Any forward looking statements should be considered in light of these factors.
Please note our safe Harbor any outlook presented is as of today and management does not undertake any obligation to revise any forward looking statements in the future.
I'm joined on today's call by our Chief Investment Officer, Andrew <unk> interim President and Carl just garneau.
So Keith Adams Executive Vice President Brandon Miller.
President of California operations, Ray land graph, and our EVP of finance Jacob.
I'll begin today's call with a quick review of our thesis and strategy before providing color on the top level operational trends and milestones we achieved during the quarter. I'll then hand, the call over to Andrew who will give a deeper look into our Q2 results and provide an update on our active start to the second half of the year before looking ahead, what we have in store.
In early 2023.
We will conclude with a question and answer session, where the entire management team will be available for any follow ups.
At forefront we are guided by our simple thesis after protecting our high quality high margin production capabilities in Washington State, we're replicating that operational excellence by implementing those slp's enlarge cornerstone adult use markets, like California, Illinois, Massachusetts and Michigan.
Our belief is that the sweet spot in the candidates supply chain and manufacturing low cost high quality production of cannabis consumer packaged goods at scale as.
As with any CPG company forefront stands to benefit as the cost of our ingredients in this case candidates.
I didn't margins become more accretive.
As we sit here today, we couldn't be more excited for how our company is positioned in this emerging industry.
Our retail operations are performing at or above expectations across the board with additional customer counts as we continue to raise the bar with product innovation and quality improvements.
We believe we're poised with meaningfully accelerate the trajectory of our growth.
Our investments in the state of the art automation and scaled manufacturing processing facilities in California, Illinois and Massachusetts.
This approach, we're poised to triple or quadruple the revenues of our company within our existing geographic footprint over the next three years.
Our thesis is playing out in real time, while we've made great strides in the second quarter, we've seen an acceleration in business trends in our growth markets reached the midway point of the third quarter, particularly in Massachusetts and California.
The cannabis industry has unique challenges have not deterred our confidence in this enormous opportunity.
In fact, the obstacles that many other companies are facing only serves to strengthen our conviction and our unique positioning in the U S cannabis landscape.
With automation at scale in our manufacturing facilities, we can drive efficiencies and savings that nobody else can match.
The existing 100 billion U S cannabis market shifts.
Shifting from the illicit and great markets the state licensed operators and despite inconsistent capital markets and an onerous state tax system.
Stay rollouts that trend should continue as customers demand safety and consistency in their branded products in states look to maximize tax revenues.
While we are increasingly optimistic we will see incremental candidates performed this year, we remain focused on what we can control in protecting what we do best manufacturing of cultivating high quality product with scale and honing our strategy.
We cut costs, while enhancing product quality.
This has resulted in one of the most nimble and diverse product lineups in the industry.
Further insulating us against pricing pressures and ultimately benefiting our customers with a variety of price points stages.
As a management team we've been incredibly busy during Q2.
Overseeing the growth of our existing operations and advancing significant discussions with a number of potential partners and strategically attractive businesses in.
In California confidence in our strategy continues to grow as we're seeing a ramp in sales and an expansion of the opportunity set we are seeing in the state.
As a reminder, we are pursuing a four part strategy in California.
Direct sales of our award winning and proven product suite.
Third party processing and manufacturing.
Select brand acquisitions.
And opening a retail locations.
Before I address each of those individually, let me share a few observations on the California market.
First both legacy brands in the state continue to suffer as pricing for both flower and ancillary products remains challenged few operations have the low cost production capabilities or the capital to compete overtime.
In the near term struggling operators are selling their products that severely discounted prices and in an effort to stay alive.
This is unsustainable and over time will allow us to opportunistically tuck in the brands, we desire with advantageous economics.
Retailers are actively trying to expand that percentage yourself space dedicated to their private label products and they they need quality third party processing and manufacturing to achieve that goal.
Not only is our facility a one stop shop, allowing customers to achieve other savings such as fuel costs, but nobody can beat us on price.
No capital is coming into California, right out which not only.
Insurers that no one will replicate what we have built but also add the sense of urgency for operators to use our services as they look to cut costs and maximize profitability.
The momentum of our Congress facility continues to build.
We see steady month over month growth in our direct sales efforts as the quality and pricing of our products is driving deeper penetration into existing accounts and we continue to add new accounts on a weekly basis on.
On the brand front, we closed our first acquisition in April of Island.
The California mainstay incredibly high quality products, including flower and both classic and easy to use pre rolls.
We were able to seamlessly integrate their production into our model and as a matter of weeks, giving us even more confidence in our ability to buttress our growth our growth with simple accretive acquisitions.
Since introducing unfolding island in our California projects.
Brand has been well received and our sales force is loved having established branded flower and their sales tax.
Ireland is back in growth mode, and selling through flower about as fast as it hits the menu.
We're very excited to bring the successful island brand through our Massachusetts consumers. This quarter. The first of many brand expansions to come.
Along with island are popular award winning brands are more than holding their own in California.
Crystal clear based products have become the fastest growing brand in our California portfolio and nearly crossed 300000 in revenue.
<unk> sales for the first time during the quarter.
<unk> choose environment Gummy continue to gain traction and we continue to innovate with the recently added CB and SKU that became a top performer in its first month.
We will continue to explore new ways to further diversify our product offerings.
As a function of where we sit in the supply chain and the automation and scale in which we operate we have a multitude of levers dials and knobs, we can adjust as market conditions and preferences dictate.
And we're always actively reviewing a tweak in our portfolio to optimize results and drive future growth.
We're also pleased to announce this afternoon, we excited agreement to acquire a balloon farms Ah, California cannabis company known for bringing safe and enjoyable products to consumers in the form of tapes and tinctures, we believe that by integrating <unk> suite of products under the <unk> platform.
A reduction in manufacturing costs, while simultaneously increasing sales and a successful balloon farm brands, which include popular variety of the concentrates glower hemp CBD based products.
We look forward to completing the transaction with balloon soon and expect to announce similar acquisitions in the coming months.
On the private label side, we now have active partnerships with five of the leading retailers in the state, including several large region, leading operators numerous dispensary relocations.
Leading statewide delivery service and even a national publicly traded operator.
We're now producing packaging dummies beeps infuse pre roads distillate diamonds, you name it and we're making it for these major operators significantly cheaper and more profitable like what you can do.
To provide competitive margins with little to no comparably scaled competitive operations in the state.
We have a robust private label pipeline in California, with the strategic focus on.
Top retail partners, where we could secure shelf space within their retail footprint.
Large strategic partners, where there is a material revenue and growth opportunity combined with other strategic alignment.
Toll processing.
We've not yet been beaten on price for these deals and were looking at at least 40% gross margin lines of business in today's market.
Private private label partnerships in California, typically start with small batch orders in test runs to establish future Reorders overtime. We believe we can move some of these partnerships to more former private label contracts, but this is not yet standard practice in California outside of toll processing and supply contract deals.
This is a solid business that the switching costs are high once partners are on the forefront platform. So we believe we can land and expand with many of these partners to grow revenue over time.
Rising churn and maximizing the value of our assets.
We've said before that we view, California is a flywheel for our business and as we progress through the end of the year and into 'twenty three we expect to see a steady expansion of our private label pipeline.
We're also in the final stages of securing growth opportunities through new accretive cash flow positive brand and our retail expansions, which we hope to announce over the coming months.
Moving on to Massachusetts.
We continue to capture market share in the state by implementing improvements to our product quality and bulk prices.
The quality of our flower in Massachusetts has improved dramatically driven in no small part to our acquisition of <unk> and its holliston facility in Q1 of this year and our company's focus on always finding ways to offer even better products at a market leading price point.
Tweet store growing techniques and post production procedures have supplemented our already leading industry leading yields.
Fact, we've already incorporated these meaningful methodologies from holliston across Massachusetts, and Illinois and are currently in the process of adding them to our Washington facilities as well.
When prices soften this spring we were able to meet the challenge head on and we're now seeing great sell through rates at our retail locations due to new wholesale pricing and product innovations. For example, we've been able to successfully drive a lot more sales of our popular <unk> Bud light.
Loudness can make room for the excellent new products coming onto the shelf from our holliston facility.
July saw an 80% jump in flower sold in Massachusetts, and that momentum has carried into August .
In Illinois, we continue to see improved product quality and sales volume.
Due to the methodologies obtained from <unk> and other refinements to our production process. We have made notable improvements to the quality of our cloud work during Q1 and Q2 this year.
After recently, introducing our premium used pre roll TERP sticks, two packs to Illinois.
Quickly become the fastest growing product line in our history and they are flying off the shelves. We continue to see strong performance from our two retail locations and we haven't even rolled out our ancillary product yet.
So we're seeing tremendous unrealized upside already.
Our near term plan. It includes an increased focus on expanding our retail footprint in the coming months as our cultivation and production facility in Madison or Big Daddy wraps up bayswater construction and prepares to commence operations in 23.
Lastly, I'd be remiss, if I Didnt mentioned, the Fabulous additions, we've made to our senior management team in the first half of the year.
Q2, forefront added Keith Adams, as Chief Financial Officer, Chris swimmer as General Counsel Islands boundaries array Atlanta graph and branded Mills is present in the California operations and executive Vice President, respectively, as well as new appointments to our board Rob heart in a minute.
<unk> Senior management and board appointments strengthen our leadership team and are in line with our action centered approach to ensure the best positioning it for a long time growth.
Once again welcome our new team members and I look forward to working closely alongside with that I'll now hand, the call over to our CIO Andrew.
Deeper look into our Q2 performance Andrew.
Thanks Leo.
As discussed our belief is at the sweet spot the canvas value chain lives in a low cost high quality production of cannabis consumer packaged goods at scale.
That's precisely what we've positioned forefront before as a company and as a result, we are now witnessing the start of a significant leg of growth that will play out over the next 12 months augmented by strategic and accretive M&A.
Our retail locations platform why continue to outperform maintaining or gaining share with increased transactions and in many cases net sales despite anticipated pricing headwinds.
In California, we are demonstrating our ability to enter the market with a proven and award winning portfolio of products price as much as 50% lower than the leading incumbents.
We're doing this while maintaining very healthy margins, which we expect to improve as fixed costs are leveraged and our competitors' product dumping comes to inevitable at.
Because we started the year with a revenue base of zero in California, the pricing pressures, having created a grow over problem for us and in fact, we're bringing our scale low cost production to bear in a market, where commoditization has largely already happened.
California is the largest cannabis market in the world and Atlanta brand.
Other operators have shifted operations away from the state we are leaning in building brand and taking share.
As our statewide routes continue to grow there are emerging and encouraging signs that the California legal cannabis industry itself will soon find some relief.
Combination of factors, including the repeal of the cultivation tax a crackdown on illicit grows in water usage and a significant expansion of retail licenses all proved to be tailwind and this is all before Interstate commerce allows our regional hubs to servicing service neighboring states at some point in the future.
Recent research indicates that there are currently about one.
45 active licensed retail locations as at the end of June .
Up from 750 in June of 2021 and catalyst.
The pace of new licensing issue and then the state finished the quarter at a blistering pace with 111, new retail licenses issued in June alone.
Prior to June the previous record for months in California has been a mere 31.
If that pace continues or even comes close it would make a previous estimate of 200 locations by the end of 'twenty, two and 600 locations by the end of 'twenty three looked quite conservative.
We're already seeing more and more repeat buying from our retail customers improving our monthly and 90 day average branded repeat customers each month since March all.
All the while our 90 day average wholesale customer count has grown 50% since the end of Q1, just 277 locations.
This month, we're already seeing net sales growth of 50% over July at 39% over the prior three month average.
And it's already our highest month of private label and bolt biomass sales.
In Massachusetts, as Leo said, we're feeling great about our business is performing despite price softness in that market as.
As a management team, we acted swiftly to improve quality fresh.
Fresh and the product assortment and be creative with promotions.
The result has been a business that rebounded nicely into the end of the second quarter and should show nice momentum into Q3.
Let me throw a few noteworthy stats from last month's to help illustrate our accelerated progress in.
In July we saw the highest transactions per day of 2022, so far.
July also saw the highest average ticket for all of 'twenty, two so far and that has continued into August and by weight or flowers sold our flower sales increased 80% in July .
Over June and those strong sales trend has continued into August .
With the ever improving quality of our flower, but it is still working itself onto the menus. We're very optimistic about our continued progress as we enter the second half of the year.
I'll reiterate that our model is a stepwise process adopted from our success in Washington.
We're always analyzing what is selling and what isn't and adjusting accordingly.
For instance, we recently retired the under four underperforming pebbles hard Candy brand in Massachusetts.
Performing skus like many bud shapes are providing to be <unk>.
Moving to be a sizable component of our growth in.
In the quarter and in the most recent months.
We are adapting in real time to the ever shifting consumer demand and in each iteration, we further improve our efficiency and our bottom line.
And Illinois construction of our Madison cultivation and production facility remains on schedule as we approach the final stages of construction of phase one we're experiencing some nominal challenges regarding the timing of electrical supply to the facility.
But our teams there have identified contingency options for temporary power and scope phasing in the event that we need at.
These challenges are not expected to influence the on time completion of phase one construction still expected in Q4 of this year.
Meanwhile, we have great market penetration as it is and are already selling into 90% of the retailers in Illinois.
With the recent 185 to 185, new retail licenses coming on board. We are excited to expand those wholesale relationships even further.
We project about 80, or so of those 185 license licenses to come online within the next year.
Great growth for the market and holds promise that the growth can be sustained over the coming years.
On Illinois, Let me, let me reiterate a point I made on last quarter's call with only two open dispensaries out of an allowable 10, 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, Illinois can beat of our story.
In Q2, we run right at about $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 and production capacity and a full complement of 10 retail locations I estimate that they were doing about $275 million to $300 million in revenue.
With Madison coming online the first box for achieving this kind of scale will be checked.
The second box.
But youre seeing our wholesale capabilities and capturing the upside by adding additional retail.
So stay tuned there is we have a lot of unrealized potential and the state and we're just getting started.
Now, let me review the numbers for Q2.
System wide pro forma revenue for Q2, 'twenty, two was $34 5 million up 6% from the prior quarter and flat year over year.
GAAP revenue for Q2 was $28 4 million up 5% over last year and 9% sequentially.
The increase is due to the increased revenue of the California's wholesale revenue as it ramps.
And portions of wholesale growth in Massachusetts as well.
Q2, 'twenty two adjusted EBITDA was $9 2 million up 23% from last year, representing an adjusted margin of 27%.
Continued growth of adjusted EBITDA and margins is expected to persist through 'twenty three as the company's operations drive increased production and higher sales volumes without material increases to overhead.
Our balance sheet, leaving the quarter is in solid shape as of June 32002, we had $6 million of cash on hand, and $49 $5 million of related party long term debt, which doesn't come due until may of 'twenty four.
Our cash balance was.
Cash balance was.
<unk> was down about two and a half sequentially due to the anticipated closing and integration costs associated with island.
And in investment inventory as we look to as we set the stage for our next phase of growth here. We continue to feel very good about our access to additional capital given our longstanding partners unique market position and ability to produce results.
As we execute on our strategy. Our thesis continues to flex, we're continuously improving and actively introducing our brands products and best in class <unk> into markets and growing scale successfully.
We're adding new skus on a monthly basis, having developed and launched more than a dozen new products and product varieties in Q2 alone.
Which brings me to my final point.
Our goal has always been to become a larger company.
By design and that's how our model operates best.
While we are of course open to the right opportunity to be part of a larger enterprise, we will not compromise to do so we will remain heavily invested in the continued creation of shareholder value by protecting our low cost production and manufacturing and and proving our thesis time and again.
Everything we are doing today builds our company and grows our value in the marketplace. While also positioning us to be the ideal merger partner is the standard bearers of automation and efficiency of scale.
With now with that I'll turn it back to Leo for some final commentary before we turn it over to Q&A.
Thanks, Andrew to sum things up we believe we found the sweet spot for outsize value creation via the low cost high quality production of cannabis consumer packaged goods, we reiterate our belief that our current assets represent an opportunity.
<unk> for $650 million in revenue and $250 million and adjusted EBITDA and we are confident we can drive sustained growth and capture a significant share of every market we enter.
We're proving ourselves to be a major piece of the cannabis landscape and some of the most exciting cannabis markets in the country and we can't wait to share and our continued success as we move forward.
We're excited about our brands and as always I'm incredibly proud of our team and their dedication to providing consumers with a terrific user experience at a great price I'm convinced that the next 12 months will demonstrate the power of our model at scale paving the way for a robust sustained growth in the long term and value for our shareholders with that I'll now turn the <unk>.
All over to the operator to open the lines for Q&A.
Thank you Sir.
Ladies and gentlemen, we will now begin the question and answer session.
I'd like to ask a question. Please press star followed by the number one on your telephone keypad.
I would like to withdraw your question. Please press star followed by the number too.
Please standby for your first question.
Your first question will come from Sean Mirror of Canaccord. Please go ahead.
Hey, Sean how are you doing.
Good how are you guys doing.
I'm doing well dog days of summer.
Yeah.
Congratulations on the quarter end.
Thank you for taking my question.
I'll be quick here, but the first one I was just hoping you could unpack the gross margin movement this quarter a bit.
It looks as though it was down sequentially bye bye.
A notable amount so.
I would assume does that at least in part due to the onboarding of the California facility, which isn't at that scale yet.
So theres likely some growing pains there. So if there's just anything that you can provide on what impacted the margin this quarter and how we should be thinking about it going from here is.
Is this kind of a new baseline or do you anticipate sequential increases.
Perfect Yes.
Turn this over to our new CFO , Keith Adams, and Jake Luton, our EVP of finance can tag team. This one.
Keith are you on.
Hi, Sean Keith Adams as you stated part of the margin pressure was bringing on the acquisition of Ireland, but also pricing pressure across the states, but we see margin improving back to where it was before with increased spending on automation.
Higher yields that we talked about and as we start to get operations at higher scale to absorb more of the fixed cost overhead and so again, we expect that margins to reach.
Seemed to what you've seen previously or better.
Okay. Thank you and then just my next question, it's from the Illinois operations. So.
Illinois.
The 185, new dispensary like the few weeks back.
Just wondering what you what you think or anticipate for the cadence of the new store opening.
And how that timing will compared to you're bringing on.
The masses and facility.
And then if you could just add if you.
<unk> already started reaching out to some of those licensees to establish relationships or any sort of efforts that are underway to kind of get your brands in front of those new store operators.
Just anything that you can provide on how you are preparing for this new way, but store openings in Illinois.
Leo and Karl do you want to take that one leader someone start.
Sure absolutely I'll take a first kick at the can here, it's been a slow process getting these retail locations opened in Illinois.
Doing the best we can to keep our ear to the ground on a local and on a national level to try to gauge when some of these stores will be opening our sales team wholesale on the ground there is constantly in contact with them.
With new potential locations as they come up and contact information comes available and we feel very confident that we're going to grow.
Significant wholesale won't speak that he comes online as far as how many stores are going to open. This year and next is just really hard to tell with the regulatory but I can definitely say with confidence that we're all over at the stores that are open and as things come around we have full new packages to provide to the retailers the buyers and the Bud tenders.
Make sure that we get the full product suite on the shelf as quick as possible.
Carl I missed anything there yet.
Not really Lee I'll, just add to it.
We are.
Actively pursuing not only arrangements, where we can have.
A fair amount of shelf space for the new to open facilities, but we are also actively looking to acquire our own retail outlets plus the way in which madsen has been.
We have built in the infrastructure. So that we have great flexibility in order to turn on or turn off canopy.
Pending upon what the what the wholesale market looks like but at this point in time.
As we look towards the end of the year and we're very confident we're going to be able to have relationships or and or acquisitions and certain other more retail.
Okay.
With the bats.
Yes.
Okay.
Thank you I appreciate the color there and again congrats on the quarter.
Has it on that.
Thank you. Thank you.
Ladies and gentlemen, as a reminder, if you would like to ask a question. Please press star one at this time.
Your next question will come from Collin George of Haywood Securities. Please go ahead.
Hey, Colin how are you doing.
Good how are you guys.
I'm doing well, we're doing well.
Yes, the busy week.
Hey, Eric.
Im asking questions on behalf of Neil.
Busy post market here.
Yes.
I wanted to dive back into the gross profit and gross margin for a second here.
If I'm looking at it on a dollar basis it looks like the gross profit came down by roughly about a million bucks during the quarter EBITDA was relatively flat and SG&A was relatively flat and then some onetime items that might have been in that the cost of sales that would have been backed out of EBITDA that could be a bit of a drag on it during the quarter or is it.
Coming out of.
Opex, just trying to get a better idea what the normalized levels were in this quarter.
Yes.
We we all jump it.
Yes, as you said, we had one time transaction and integration costs with the island acquisition and just some of the other financing and M&A activity that were doing so would you back those out of me.
All of the.
The spending.
Normalized back out to again, where we think where we were before in gross margin and hopefully it stepped up increase the EBITDA. The adjusted EBITDA also.
So some of those onetime costs would have been in the cost of goods.
Gross margin in the quarter.
The SG&A level right now is flat quarter over quarter is pretty much the normalized level.
Yes, gross margin getting to scale.
In the operations, specifically in California, and getting the higher yields will help us significantly too so.
Yes, it makes sense just trying to reconcile back down to that EBITDA number thats helpful. Thank you sure.
And then maybe just one more for me and dive a bit more into the balloon acquisition.
Like another nice good brand add to your portfolio are there is it essentially just the brand and the IP that you guys are acquiring and do they have some facilities in outdoor cultivation or anything like that in the state already.
I'll turn it over to Ray land graph and Leo to answer that question.
Where do you want to start.
Sure Hi, Collyn, great to meet you.
That's good.
The Bloom acquisition is an asset.
And in addition to the assets of Bloom, we're picking on some equipment.
Some some staff some team.
Look forward to folding that into the portfolio here in the next coming months.
Okay.
Okay. Thanks.
The facility attached to that.
And then I guess, maybe just one last for me before I pass the line, there's no facilities or our fixed overhead attached to it.
There are no facilities attachment.
No facilities or fixed overhead no. Okay. Thank you sorry, it broke up.
Okay.
Okay.
And then the last one for me just it's been a pretty topical in the sector over the last little bit.
Was there any cash taxes paid during the quarter, there that might have impacted cash flow.
Getting deferred out into further periods right now.
This is Keith we made a payment against one of them.
We made a payment against the Q1 tax liability and the rest is being deferred at this point.
Okay, and just to quantify that.
<unk>.
Gasoline and federal tax liability and a little over $1, one in Massachusetts taxes, as well, so a little over $2 million in cash taxes paid out in the quarter.
Okay. Thanks.
Thats all the questions from me.
<unk> turned the corner and thanks again for taking my questions here I'll pass the line.
Thanks, a lot I appreciate it.
Your next question comes from Howard Penney of <unk>. Please go ahead.
As far as your question and I was wondering hey, Andrew how are you.
Dan how are you.
I'm doing well I was hoping maybe you could speak to I know you said you have access to capital I was wondering if you could speak to what your needs are in Illinois is that complete.
Manufacturing facility and then what you think it might take for you to get how much capital do you think it might take for you to get to the full suite.
Dispensaries.
Yes.
So Carl well so Carl.
Well.
Imagine dispensary on the mats and build out we are that is.
Sure.
Fully financed by IAP.
And we will have some equipment financing.
Here as we as we move into the end of the year.
So that is that is all accounted for.
In terms of new retail locations that we're looking at a lot of those.
We are likely to be stock deals.
For small license or.
Or license acquisitions, where we use a small amount of cash and.
Maybe a little bit of stock.
So.
Our stock is something that people are acquisition partners are very interested in given our level of operational capabilities.
What they view as the upside in the industry and our company given our growth opportunities.
So when we think of the occur the main currency for all M&A is going to be is going to be stock and we are highly confident that we can we can do accretive acquisitions here as we move into the end of the year.
If I can ask did I answer your question.
Yes, you did thank you, Okay, and then if I could actually ask that.
Kind of the same question again.
Differently you I think you said you can triple or quadruple your revenues under the existing asset base.
Got those words correctly I didn't write it down.
That doesn't require any capital to get there so you could triple or quadruple your revenues.
Okay.
Okay.
If you could clarify that.
Yes.
Did someone jump in there.
No.
We have we're looking at.
Howard our feet our feet are always moving we've been very vocal about.
Our desire to be acquiring.
Getting involved in retail in Illinois.
And we're very desirous to be in California, as a retailer.
And so to the extent that we do need any additional capital we are feeling very good about.
The ability of our capital partners too.
Expand our cash available through some debt instruments, but we don't think we need very much.
And we also.
We are at a point in our business, where California is ready to flip cash flow positive. This fall and we think that we're going to be free cash flow generative as we leave Q4.
So.
We.
We have a lot of stuff that we want to do in this business I think that our capital partners are very onboard with what we're trying to achieve and love what we're trying to achieve and they are there to be supportive and opportunistic as needed.
Perfect. Thank you so much.
Sure.
There are no further questions at this time I will turn the conference back to Leo Gourmet car for closing remarks.
Thanks to everyone for joining and we look forward to keeping you up to date on the progress of our growing business.
Take care.
Alright, thanks, everyone.
Ladies and gentlemen.
Ladies and gentlemen. This concludes your conference call for this afternoon, we would like to thank everyone for participating and ask you to please disconnect your lines.
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