Q3 2022 Green Thumb Industries Inc Earnings Call

Good afternoon, and welcome to Green thumb third quarter 2022 earnings conference call.

At this time all participants are in a listen only mode.

A question and answer session will follow the conclusion of formal remark.

During the question and answer session, we would ask for a limit of one question per person.

As a reminder, a live audio webcast of the call is available on the Investor Relations section of Green thumb right I won't.

Be archived for replay.

I'd like to remind everyone that today's call is being recorded.

I will now turn the call over to Shannon Weaver Director of Communications. Please go ahead.

Thank you Betsy and good afternoon, and welcome to Green thumb third quarter 2022 earnings.

I'm here today, with founder and CEO , Ben <unk> and Chief financial.

Financial Officer, Anthony forgot.

Today's discussion and responses to questions may include forward.

Looking statements, which are subject to various risks and uncertainties.

Could cause our actual results to differ materially from here.

These risks and uncertainties are detailed in our earnings press release issued today, along with our reports filed with the United States Securities and Exchange Commission and Canadian Securities regulators.

The 2021 and annual reports filed on Form 10-K.

This report along with today's earnings release can be found under the investors section of Ireland.

Green thumb assumes no.

No obligation to update or revise any forward looking statements reflect our best or circumstances that may arise. After the date of this call.

Throughout the discussion Green Dot will refer to non-GAAP financial measures, including EBITDA and adjusted operating EBITA.

A reconciliation of non-GAAP financial measures to the most directly comparable GAAP measures is included in our earnings press release, and I think the in Theater Island.

Note that all financial information is provided in U S dollars unless otherwise indicated.

Everyone and now you're spot.

Thank you Shannon and good afternoon, everyone and thank you for joining our third quarter conference call.

Green thumb reported record revenue and adjusted operating EBITDA results, even in the face of rising inflation and greater economic uncertainty.

<unk> increased 12% year over year, and 3% quarter over quarter to $261 million.

GAAP net income for the ninth consecutive quarter.

Adjusted operating EBITDA grew 7% sequentially to $84 million or 32% of revenue for the quarter.

And $230 million year to date.

Finally, our cash flow from operations was $48 million for the quarter and $88 million year to date.

We feel good about these results and I think we are positioned to finish the year with solid performance.

That said no one has a crystal ball on what inflation will come under control and how much it will impact consumer spending, particularly in this new industry.

Despite these challenges consumer demand for legal cannabis remains healthy.

Well there is price compression in certain markets unit growth increased 22% year over year. According to PDSA.

We believe this is a clear indicator that candidate is that a central purchased for American consumers.

As I've said before cannabis as a branded consumer packaged goods business and its growth continues to over index. Other CPG categories like domestic beer, which declined 1% year over year.

Green thumb continues to build strong brand loyalty with products like rhythm flower and dog walkers payrolls.

Finally, we are operating in highly attractive states.

We are seeing strong momentum in new adult use markets like New Jersey, and look forward to similar results in Rhode Island, which is expected to launch adult use on December 1st and Connecticut, which should launch in the next six months.

In addition, three of them is well positioned at both Virginia, and New York, but when those states come online with adult use.

Zooming out U S cannabis industry generated sales of over $6 $6 billion in the third quarter, which equates to a run rate of over $26 billion.

That is 3% growth year over year, and 2% growth quarter over quarter for the industry.

In contrast, green thumb grew 13% year over year, and 3% quarter over quarter.

Obviously, we are proud of that achievement, but we are focused on the future.

We are laying the foundation for industry, leading growth as demonstrated by our disciplined capital spending creative partnerships and our commitment to go to all the hard work.

The recent buys an executive order in potential passage of the Safe Act as Senator Schumer alluded to earlier this week, our positive news for the industry.

We continue to operate with a healthy degree of skepticism that keeps us focused on protecting against the downside risk.

That means staying focused on cash flow and our balance sheet.

Even with all the noise in the marketplace Green thumbs cash actually grew in the third quarter we.

We paid all of our taxes and we extended our debt agreement to April 30th 2025.

We believe that worrying about the downside is equally important is planning for the upside.

You can actually create more value for stakeholders overtime.

Market demand for candidates will continue to give us a runway of opportunity and our recently announced innovative partnership with circle K Global convenience store retailer is a prime example of that.

As many of you know, Florida is an interesting and unique market for starters and is the third largest cannabis market in the U S with annualized sales of over $2 billion in what is still a medical only market.

The other unique attribute about Florida is that there's no cap on the number of dispensaries that license holders may open.

As we announced on October 19th we plan to expand our medical retail footprint in Florida leasing arrangements with circle K as.

That's the first phase of our test and learn rollout subject to regulatory approvals. We plan to open approximately 10 rise express branded medical dispensaries.

Through this exclusive agreement Green thumb kept lease space adjacent to circle K stores in Florida, where the retailer currently operates approximately 600 locations.

The rise express stores will offer patients with a valid medical marijuana identification card expanded access to a selection of branded medical cannabis products, including rhythm flower dog walkers pre rolls Incredibles, Gummies and Ann Shine base.

And while we've had a presence in Florida since 2018, and currently operate seven medical dispensaries, We believe opening rise express can change the game.

Convenience is a strong channel and retail and people, including medical cannabis patients want more convenient access to canvas.

Rise Express model is a huge step forward and normalize the canvas routine access now patients will be able to pick up a pack of dog walkers or incredibles in the same trip if they fill up their tank of gas.

A lot of forethought and preparation went into making the Supreme are possible. For example, we are near completion of our new cultivation facility in Ocala, Florida, which will supply products for the rise express stores.

So to comply with Florida's integrated supply and production regulations. It was critical to make this investment well in advance of expanding our retail footprint. So we have the product ready.

Capital allocation decisions like this require a long range planning to position our company for future returns and value creation.

Before I turn the call over to Anthony to review the financials I want to address the recent departure of three Greens on board members.

Unfortunately, it was a situation where opinions diverged and while we work behind the scenes for quite a while to find a resolution it became clear we could not find the common ground and those individuals' elected to leave the company.

I am grateful for all the guidance and insight we received from our former directors.

Fortunately, we have two new Great Board members, Richard Drechsler, a seasoned financial executive with strong board and audit experience.

And Jeff Goldman was operated in scale multiple branded CPG businesses.

We look forward to benefiting from their considerable experience and fresh perspectives.

We are excited to move forward with the team and board understand the inherent challenges operating it federally illegal business and are committed to our goal of maximizing shareholder value.

Finally, I want to emphasize that strong corporate governance remains a top priority for green dot.

We believe it is especially relevant to the important work we are doing day in and day out to assure our stakeholders that their company is in good hands and has a leadership team aligned with their interests.

We continue to actively recruit new board members in preparation for a potential U S listing.

Now I'll turn the call over to Anthony to review the financials Anthony.

Thanks, Dan and good afternoon, everyone.

As you just heard the company posted solid financial results for the third quarter generating 261 billion of top line net revenue and $84 million and adjusted operating EBITDA.

Total net revenue increased 7 million over the previous quarter.

Our gross CPG and retail revenue both grew by $7 million.

Which was offset by a corresponding $7 million increase in intercompany rod.

Closely monitoring corporate spent.

Given the current macroeconomic uncertainty the company intends to keep a close eye on its SG&A to balance short term business profitability targets with its long term strategic objectives.

And to confirm are 30% EBIT margin target remains.

None of SG&A, along with 5.6 million another expense the company generated 10 million and net income or four cents per diluted share our ninth consecutive quarter of positive earnings per share for the business.

Turning to our balance sheet. The company ended the quarter with 147 million of cash a slight increase over to you too.

Are healthy cash balance as a result of a tremendous amount of hard work by our team.

Strong operating performance combined with the daily focus on managing our inventory levels has created the one plus one equals three type of math our shareholders well.

The company generated 48 billion in operating cash flow to the third quarter and $88 million a year to date.

All the while paying uncle, Sam 31 billion in cash taxes in Q3 and nine.

95 million here today.

During Q3, the company and best it's $49 million gross Capex as we continue to make substantial capital investments in New York, Florida, New Jersey, Virginia in Minnesota.

You're to date, we have invested 178 million in gross Capex and remain bullish that our investments will drive meaningful cash on cash returns for our shareholders.

As we look ahead to 2023, we anticipate continuing to allocate capital certain markets, while conservatively managing our balance sheet.

In closing as we head into the season of banks, we can't say enough about our entire green thumb family and the magic They make happen every day.

As a team we continue to navigate a highly complex industry with ever changing rules aggressive competition and an unpredictable economic environment.

However, through hard work and dedication we remain focused on our true norstar the consumer.

We continue to think that above all of our success will be defined by our ability to embrace art craft and create products brands and retail experiences that resonate with the consumer.

We hope everyone has a wonderful holiday season with their loved ones.

Forward to speaking with you all in the new year.

Back to you then.

Thank you Anthony.

In closing I'm very optimistic about the future of the U S cannabis market.

And I'm proud of Green thumbs leadership position in the industry.

Sure there'll always be some bumps in the road, but will be smarter and more resilient as a result.

R. N game has always been to play with strength and trust that means being true to our strategy and executing it to the best of our ability.

It's very important to us that our investors and stakeholders know, who we are and what we stand for.

First we have always resisted exuberance of growth for gross sick with the looming recession balance sheets are coming back into focus and we are proud of our prudent approach to maintaining a strong one which can fortify us in a downturn as well as give us the optionality to act on opportunity.

Second we believe in putting capital into markets that will generate strong returns over time.

As I mentioned earlier circle K partnership could not have happened without forward looking capital investment and that's what we will continue to do.

Third diversification helps that's why we have built it diversified portfolio states to provide some insulation from near term volatility that's happening in certain markets.

Or embrace your mission, we believe in expanding access to cannabis as a means to improve wellbeing.

This quarter Fries dispensaries serve as a premiere sponsor of head counts cannabis voter project to encourage voters to go up to the polls by registering informing voters would support cannabis policy reform.

And while President <unk> recent executive orders a step in the right direction, they're still a big capital Hill to climb.

We're proud to be part of this effort and we will continue to do important work to support cannabis policy reform and restorative Justice.

And finally, we believe in our brands. We appreciate the flower and we embrace our craft at every opportunity.

With that will open up the call for questions operator.

We will now begin the question and answer session.

To ask a question you may <unk> and one on a touchtone phone.

If you're using a speaker phone please pick up your handset before pressing the keys.

Is it any time your question has been addressed and you would like to withdraw your question. Please <unk> then too.

We ask that you please limit yourself to one question.

At this time, we apologize apparently to assemble our roster.

The first question today comes from <unk> with talent. Please go ahead.

Hi, Thank you so much and good evening.

Hi, My name is <unk>.

Hi, we got a lot of imbalance on the on your circle K announcement, not surprisingly so many Canada C. As in particular in Canada.

The possibility of selling <unk> and you guys are actualizing it to <unk>.

Interesting partnership with circle, K I recognize that a lot of different probably competitively sensitive but can you expand at all on like Capex and you know what what are you guys responsible for a circle K responsible for anything are you paying them rent is there a revenue sharing involved if any.

Incremental detail on kind of the the financial relationship would be helpful. Thank you.

Sure Thanksgiving and it's been thank you for the question.

No not much more we can say that what we've already said I think it's a standard landlord tenant relationship and we're paying rent and as with all rise expense relocations in Florida.

This is a separate entrance it's adjacent to the convenience store the patient's needs to have valid I D with the state in our subject to just sort of normal regulations in the state of Florida.

And that's about all we can say we're pleased with the <unk> you know the progressive thinking of the counterparty here and you know.

I think this is where the momentum and the world is going but it's a crawl walk wrong approach and we're excited about what's ahead and look forward to 2023.

Okay. Thank you.

Sure.

The next question comes from <unk>.

Research. Please go ahead.

Good afternoon. Thanks for the question. So I just wanted to focus on pricing for a minute. How are you thinking about industry pricing as we headed to four Q and then into next year and then with the increasing constraints on capital that we're seeing across the industry. Do you think we'll start to see more rational capacity expansion or do we still have to wait on that.

Hey, Spencer Anthony here I'll take that question, that's a great question.

You know like I said in the prepared remarks, but we we started to see a slowdown in the in the price compression that we you know really starting to experience earlier in the year.

Where it goes from here <unk>, we don't have a crystal ball, it's anyone's guess.

One of the things, we like about our business as the diversified kind of approach to it.

Yeah, because we're not experiencing kind of the same level of compression across the entire market base.

What 20 twenty-three looks like you know casually just anyone's guess.

In terms of the impact you know the capital markets on you know essentially capacity and and that you know that corresponding impact on pricing again, it's really difficult to say this really comes down to a market to market kind of discussion, but obviously you know with a capital market typing that we've seen.

That's last dollars available for for Capex, which really should show up over the next several call at 12 to 36 months. So T. B D kind of what the true impact is again it really just comes back to market to market, but you know, we certainly think that the the capital market challenges that they were experiencing today will show up.

Within the business some point in time.

Got it thank you.

The next question comes from <unk> Mckinley with medium. Please go ahead.

Thank you so with wholesale price compression and operators, becoming more vertically integrated and many of your your key wholesale markets I think having net wholesale revenue goes flat is is definitely a solid resolved.

Is that primarily new Jersey that was offsetting weakness in other markets or did did something else help you in that wholesale second in this quarter and on that kind of thing. It on the pricing is that something that actually help the third quarter or is that more of a prospective comment that pricing is now looking to get a second derivative positive and it's yeah.

They get into a stabilizer I guess is that something actually pull up your piano and helped you in in this in this corner.

Hey, Matt Anthony here. Another good question. So in terms of kind of what we experienced in the wholesale side of the business.

Josie help but overall this was this was quite right I think the team is an excellent job. It really taking advantage of all the opportunities presented themselves within the market, but this was not just a new Jersey story you know, we we kind of mentioned during the prepared remarks, who has a 7 million dollar kind of increase in gross.

At a flat kind of that but you know it wasn't all driven by one specific market.

Your second question do you mind repeating it just to make sure I've got it straight.

Yeah, just I want to make sure I understand what you're commenting about at around the pricing being a little bit better is that is that the second derivative positive and that that will you know look better stabilized I guess for US are you, saying the pricing actually had a had a positive impact on on your on your either margin or top line in in the third quarter.

You know it's.

I mean look pricing certainly didn't help kind of wholesale revenue in the quarter the impact relative to Q2, I think that you know we experienced slightly less compression in Q3 over Q2, but this was really kind of a unique game I mean, we were able to drive the growth by producing and selling more units, we didn't experience it a bit.

Benefit from even the slowdown in pricing that you just alluded to.

Okay. Thank you very much.

The next question comes from Eric came over here with Craig Helen <unk>. Please go ahead.

Great. Thanks for taking my question and congrats on the solid results. Here. Then you mentioned that worrying about the downside is just as important as preparing for the upside I think that's incredibly prescient and will become increasingly apparent here could you just expand on that comment a bit maybe give us. Some examples of how you there.

Implemented that in the past and then perhaps how that philosophy is informing some of your capex decisions today. Thanks.

Sure it's nicer to appreciate the question.

On.

Or were paranoid birds and so instead of just constantly taking the glass is half full although or an optimistic people and we liked to be upside we're prepared for the worst and so it's come up all over the place it's come up in our M&A strategy has come up and where we've expanded to come up and keeping a healthy amount of cash not getting too much debt.

You can't bank on what we don't know and especially what we don't control. So to start with any particular market is always late and it takes too long cost more than you think and so we just it's hard to bet everything on the come biggest thing we have confidence in as the demand on the product.

Sleep incredibly well on that we just kind of focus on that and worry about everything else that could go wrong, because it's not that we tend to do okay. We make products that everybody likes to make brands that up simple stories that create an honest relationship we're gonna win.

And then we gotta be ahead of the distribution, we gotta be ahead of several other things but.

I think we're always worried about what can go wrong I think we say expect the unexpected I think we think about you know invert the problem or you know what would you not do those are those are kind of inverse in various questions. We often ask you that I think generates edge and how we analyze problems. Because this is a unique game is unique market with 30 different states.

Accomplished federal environment in which it's hard to handicap, what's happening out of D. C. So.

Hope for the best prepare for the worst and hope really isn't the strategy. So hope.

Hopefully that helps a little bit yeah.

I appreciate the insight thank you.

Thank you Sir.

The next question comes from Aaron Grey with a line global appointment. Please go ahead.

Good evening I think for the question here. So I wanted to hear a little bit more on the Verticalization you spoke of living on on the progress there in terms of song into your own store.

I just want to know how much of an impact you say there might've been you know on third party wholesale business look pretty strong you spoke to some of the unit growth that you saw so do you feel more comfortable where your own brand stand today within your store or do you feel like there might be some more room to go into the terms of Verticalization and then how do you feel like it is for some of the broader participants in the market outside yourself.

Thank you.

[noise], Hey, Anthony here I'll take that one another good question.

So you know I mean look we you know say a lot of things around here one of one of which is the brain seem to be able to stand on their own two feet.

Concept of being able to move your own good three on retail you can do that for a period of time, but over time, the consumer will either stop showing up or gravitate towards the other products.

If there is not real real value differentiation. So you know unfortunately, what we've seen in you know across our store base that you know our brands are able to kinda perform a pound for pound against the other the other products out there and so that's one of the things, we're just incessantly kind of focused on.

You know whether or not we continue to kind of leaning on the verdict coward or you mean, a part of it is you know we just have to take what opportunities are given to us. So every market is different.

The supply demand dynamics within those markets are materially different and so as opposed to watch thing can kind of top down how do we optimize it's really bottoms up on a market to market basis. So.

So I hope that kind of answered the question, but again it really just comes down to a market to market kind of game and we just optimize our position within within within each respect to market.

And a couple of details thank for that.

Right.

The next question comes from and to Van with Caffeine. Please go ahead.

Evening, all Andrew bought in the line for Owen Burnett. Thanks for taking our questions. So may be stepping back from quarterly delivery for a moment I wanted to get your thoughts on uplifting. So specifically your thoughts on the recent actions taken by canopy to consolidate their U S plan touching operations through a ring fence structure in this appearing to be permissible by the Toronto stock exchange based on <unk>.

Comments from T. S X officials [noise] so.

So if this is the case and this is permissible with cream thumb explore a similar structure to be able to uplift to the T. S X.

Very interested to hear what your thoughts might be puts and takes around these recent developments and what this might mean for uplifting potential for M. S. Okay. Thank you.

Yeah. Thanks, Andrew spend here. Good question on the topic of that thing it's been on everybody's mind and I'll I'll stick to it I think a direct listening has been on our mind for several years I think we zoom out back up for the first one of the early companies Register with the S. E. C file an S. One two GAAP financials and steak apply it there.

You know we're focused on building the best business in the current landscape and assume that eventually we'll be able to list directly on a U S exchange.

We continue to study the structural changes that are out there understand what's happening in in sort of different kinds of ways, but I would say listing in the U S remains the objective of ours, we have a to do list prioritization in order to make that happen and we're focused on checking those boxes.

Don't think it's likely for us to explore very creative illegal structures in order to sort of get somewhere but we're always open to new ideas. We are looking and studying but Ah Northstar remain sort of what I said and and I believe a direct you us lifting us in the future. So that's what we're planning a court.

Very helpful. Caliban, Thank you I'll pass it on.

Sure.

The next question comes from problems doing that with Cantor Fitzgerald. Please go ahead.

Thank you Anthony can you talk about the drivers for the fourth quarter, you know, but you go into some new capacity then we'd be coming through in October November December two states I'm going to talk to all the topics and the same thing. So you can keep calling or anything else about any new stores in the fourth quarter and then I know, it's only just one question, but thank you for that.

Call regarding the resignation was to be board members I mean, the press release, you know talk to all of this agreement companies' policies and practices related to personal misconduct I have to say that's not very calm on regular seen that one thing that everyone agrees on it's what was true.

<unk>, that's what I was gonna do some cornered him that'd been but Anthony if you can answer my question first thank you.

[noise] sure. So popular just you know a good question.

We don't have we don't have much juice in the fourth quarter in terms of new stores in new facilities coming online you know the only thing that could potentially pop up is you know, Rhode Island Ah going live with don't use. We think you know December one is kind of a target date, there, but other than that you know most of the capacity expansion that.

<unk>.

That we've completed you know it was really going to start to show up in in the early part of next year then throughout the the balance of 2023, so not a lotta tailwind that we got within the business you know at the moment.

Although there's been an interesting question. So thanks for asking I'm glad you did so what I can say is the former directors gave their reasons publicly in the resignation letter and it's tough for me to really expand on that.

I think like we stayed at you know the reasons had nothing to do and it's important to emphasize nothing to do with the company's business performance our operations financial performance nothing about the financial statements or even the financial controls.

When I can say you know that's it and as you know cannabis as a tough and very unique industry, you said dot com and nothing in Canada, particularly common in every day, we manage risks related to operating in a federally illegal space.

Not for everyone.

From my perspective, former directors of management would fundamentally not aligned really on some of the core aspects of our industry.

As you know, having a line management and board remains fundamental.

So I I do want to say I appreciate the experience and insight they brought to their tenure, but the business and we're focused on moving forward and finally I was really I said my prepared remarks and as the the prior question strong corporate governance remains a top priority.

We continue to actively recruit new board members and preparations for a potential U S listing.

The next question comes from Andrew personnel with people.

[noise] ahead.

[noise] hi, congrats on the corner and and congrats as well on the element Pansil and Cousteau agreement.

Maybe you're just continuing on on the.

The ladder if you could.

I'm wondering if you could talk about you know how how this deal really came to be how long have you been working on it why did khrushchev choose choose G. T I in Florida in particular versus any other operator jurisdiction and if there's any other kind of collaboration that we could see between.

Both companies, saying is convenience is is a common aspect and in both businesses. Thanks.

Sure. It makes Andrew it's been I'll I'll take that I'll share what I can sort of I can't speak for <unk>. So I can speak for us and me and our strategy and how we've thought about it we've been planning and strategizing, how candidates is going to be more easily accessible for everyday American consumers across the country and their everyday life, we've been bang on the drums.

This is a means to wellbeing and thinking like the American consumer always said that I think every conference call. It it leads us down a path like this leads us to a counterparty that's.

Progressive and how they've thought about it this is not their first foray into candidates they've done an arrangement fire flower and we've seen that but it takes a while to do any kind of arrangement partnership landlord tenant anything in cannabis as you've seen across the spectrum across the supply chain.

And so we're very excited about what we have here were very align with the test to learn phase of 10 or a dozen stores coming in 2023 or head down and executing that and making sure we get that right. So that when those already in windows is inspected or approved and we open that we get going.

That's the arrangement there nope no more coming up on what we would do with them or anything like that I, just think what you'll see from Green thumb is continued thinking like the consumer to continue to drive a better experience and for us than those answers emerge as more common sense similar to how we think this'll look over time.

Thank you.

The next question comes from Michael Lavery with Piper Sandler. Please go ahead.

[laughter].

Thank you have a good evening.

Just wanted to see if you could unpack, but the 22 per cent volume lift and maybe just.

And some of the same I'm sure it's hard to measure but is is it driven primarily by sheer gains from illicit trade.

Is the price compression at least helped.

Helping in terms of penetrating but with those consumers are you seeing increases per consumer you know is it is it ticket or traffic just how much can you kind of understand the the drivers of what's really behind all that.

Good question like this has been I'll I'll start there maybe I have to go jump in the 22 per cent, you're gonna grocery referring to I think is what I said in my prepared remarks, as the beady essay industry data not a green thumb stat right jump in about if I, though.

<unk>, Yeah, I might have misunderstood that sorry about that.

And so what we what we take from that really like I said. This is the American consumers use cannabis as essential to their wellbeing and it has a real viable share of market.

Talked about being recession resistant I think that holds true so into your question on what insights do we see in consumer trends along those lines.

It doesn't seem that wild for us it makes a lotta sense I think it's been talked about a lot that instead of buying a lot of premium age you might buy a lower price value half to get or AIDS for a little bit less dollars, but continued to get the positive experience from the product because it's not going to leave your daily life and so as we begin to understand and 80 20 the consumer.

[noise] base understand those form factors.

A lot of confidence and what's happening and low and behold 22 per cent unit. So thank you also ask people that back a little where you're seeing it as a combination of a lot of things I don't think individual consumption 22 per cent standalone, new states coming on the massive growth in certain markets, New Jersey, and others that are growing but as you unpack those state of the states and look at what's happening in there.

Yeah, I believe that consumption is not going down share games from illegal to new markets coming on and better experiences for the consumer leading to repurchases ingrained position in their lives and as we bring convenience and I'm proud that make this easier for American consumers, we think grosses in store.

<unk>.

Okay, great. Thanks, so much.

Sure it's nice but.

The next question comes from Scott fortunate with Roth Capital. Please go ahead.

Yeah. Good afternoon. Thanks for the questions real quick I'm Gonna talk about New York market, but I just wanted to follow up on the U S. Six changes and and potential uplifting. There are you see what what kinds of <unk> are you see more discussions and you haven't passed and what's the concern of the exchanges to overcome.

Come right with potentially C plus cole memo or the you know Simpson or email guidelines changes there and then just wanted to talk about New York market timing <unk> expectations of that with with the new regulations coming out kind of off the 19, a new York market for T. G I in the future and he's just becoming.

More like a California market <unk>, there's gonna be a thriving illicit market is established and slow retail rule out there. It's just kind of sits on that that'd be helpful.

Sure. Thanks, Scott a couple of good questions on listing.

I think every day you get a little closer I think saw.

Senator Schumer's comments. This week, we saw biding a month ago. This is a growth industry in the United States. This is an economic stimulus package that it's communities that need jobs. The tax revenue and it's also bring a lot of wellbeing, we talked about the opioids, we talked about sleep and other sorts of things. So so let's it makes a lotta sense.

How does it actually happens what's in the details you know a little bit unclear, but the other strong force. That's happening here is the need for capital access, especially for new entrants to the industry at non paralyzing rates, especially in a rising rate environment, there must be access to capital or there is no industry and they're particularly is no newcomers.

So some of US can produce capital R capital that we've created a machine here, but in order to stimulate new interests, which is something that we're very positive on the cost of entry has to go down access to capitalize to happen and listening as a part of that as we engaged in the U S banking system small business world favorable sort of structure is to stimulate investment. So all that is part of the same <unk>.

<unk> and you know the phrase Roberta Saint plus something like that there's action you know obviously next week's elections important and we'll see what the table looks like towards the end of the year.

New York you know.

[noise] head down execute there was a lot of noise, but there's 20 million people mistake, we're gonna Wanna consume a lot of premium indoor rhythm flower are very focused on what we're doing in controlling what we can control. So we're building a world class facility in Warwick Lovely community. We love employees were excited we're looking forward to sort of doing that.

Waiting for clarity from the regulators, it's confusing situation out there we're trying to be an asset and have constructive conversation about how the rules, how the timing and how the structure would work.

I think it's a little as I say, New York will be Californian, you know there'll be or keep in mind, California pass medical in 1990 625 years later, there's a lot of issues okay.

In New York, It's just license all they have grown as we have a lot going on we saw some interesting news yesterday on tests requirements or lack thereof is gonna be a lot of learning as we go Fortunately for us and our shareholders. You know a lot of experience, making Canada facilities building high quality product and getting this going so that's our playbook. We think it starts in 2023, if I had to bet I would say the second.

Half of 2023, a real size, though states at a store to open sooner than I think it will be a unique path not a a day one like everywhere else, but for green thumb head down executed we produce high quality flower grow a lot of dog walkers, we think consumption the state's gonna be strong and we're going to get the return on invested capital that we plant.

So we're pumped about 23 in New York.

Thanks, I appreciate the color.

I'm sure it's gotten.

The next question comes from Sunny random <unk> with the court research pregnant.

Go ahead.

Hey, great. Thanks for taking my question and congrats on a good quarter.

I was hoping you guys could give me some color on Virginia, and Minnesota, How's, Virginia tracking in terms of new patient growth with with the new requirements that I think you have a full quarter of as of Q3 and in Minnesota I think we also saw a pretty decent ramp in in in new.

[noise] patient growth.

For for Q3 is that directly related to the edibles or just I I guess, some additional collar on both those markets and how they're ramping ramping relative to some other medical market since they were ramping.

Yeah, Sonny Anthony here some good questions look [noise], obviously very bullish on both markets.

You know, Virginia, specifically, you know sure when when the adjustments rolled through in just in terms of how patients can can get access we definitely saw bump and you know at this point, we're seeing a nice steady climb on a monthly basis.

Obviously, starting at a much smaller base. So it's gonna take some time to build you know.

We kind of tell the team you know this looks like Illinois, Pennsylvania somebody earlier kind of medical markets. When they first kind of got their initial lift but I'll tell you that you know we're pretty excited about what's going on there. We got you know our another facility under construction it should operationalize in the second half of next year and so in in addition to that we still.

I have two more stories that we're working hard to open up what should happen in the first half of next year.

Minnesota.

Miller story.

You know the the animal legislation regulations that certainly did allow for you know an immediate kind of pick up from the consumer you know again, that's another market, where we're seeing nice to any kind of bumped over a month gross the reality is there is that you know we're working hard to also opened up we've got two additional stories were trying to open up.

We have a large expansion that's currently kind of taken place it should operationalized in the second half of the year and again, it's one of those medical markets, where we've we've essentially seem to move before where he can point to other markets and look at the growth trajectory and just where they are from you know based off of when they you know when the programs effectively.

Starting in terms of timing. So you know big plans for twenty-three in both states and we really think you know the best is yet to come you know in both Virginia, Minnesota.

R. R. R. I'm sorry, just to follow up on Minnesota are those two new store is gonna be in the I guess.

The the twin cities area I think 54 per cent of the new patients are total patients are in that market and you only have two stores.

Yeah. So you know, Minnesota has a unique way of kind of breaking down the jurisdictions, but that's absolutely right. The two stores that we still have to open our and highly densely populated areas and so that's why we're working you know teams working pretty hard to to get those open.

Alright, thank you.

The next question comes from <unk> with Ken According to nudity. Please go ahead.

Evening, Oh, congrats on on the the strong quarter just on the slight expansion in the adjusted EBITDA margin this might be housekeeping, but I'm. Just wondering you know more on a sequential basis. So you know you had talked on and adjusted basis that is that it.

SG&A had declined but it looks like on the face of the consolidated number there was a pretty sizable bump in SG&A. So I'm just curious if there's a non-cash element to that to consider or if it's just the transaction or things that are non-recurring and then just a quick follow up to what Pablo Pablo It asked about just on the on the board resignations, they're not to press the issue, but I know.

You guys were very thoughtful and how you you mentioned, it's a difference of opinion, it's non operational and then and then I think you had alluded to some some differences between how you know there there's the the federal you know schedule one element to this industry, which impacts all operators that does sound more operational to me, although albeit it impacts every M. S. O. In every legal stayed operator versus you know.

No misconduct, so I, just sort of putting it back to you guys or if there's any other commentary and I'm I'm only really asking cause. It's clearly you know a topic that that were I'm sure. All analysts are getting a lot of inbounds on dope. Thanks for any comments.

Hey, Matt Anthony here. So you know a good question what is the amount for a minute. So you know.

It started with kind of the you know the gap SG&A figures.

And the second quarter, Yeah, we had there were some.

Is that going to be some non-cash fair value remeasurements about $50 million that was one time that in fact, we brought that SG&A number down right. So that's why you know if you look at it just look even the press release, you're looking at 63 five grown to 82 five.

Reality is that you know the 63 five was you know if you normalize that and add back for 15 million non-cash that relate to some fair value remeasurement cause that number is much closer to the counter the gap number that we saw in the third quarter.

Internally, we look at normalized cash based SG&A.

That's trips out depreciation and amortization that's trips out Stock-based cop and then you've got you know some of the add backs as well and so you know that was the number of candles.

That we were most one of the most excited about for the corner you know.

We had kind of a normalize SG&A of $57 million in the second quarter and 53 million in the third quarter.

You know and again that was really driven by you know effectively some of the.

You know some of the timing that we did earlier this year that really is now starting to show up within the pick it out.

As it relates to your second question I'll, just tell you that at this point, we don't we have no further commentary than what we said we can't speak for the former directors. We understand that you. All are continue to get some inbound calls, but you know we've been pretty direct as far as what we can and can't say here and will stand by that.

Okay, well appreciate the comments thanks, though.

This can include that question and answer session I would like to turn the coffin backup <unk> any closing remarks.

Sure. Thanks Bye thanks for joining us everybody I'll be back to you in late February early March with the with the annual numbers and wish everybody, a safe and healthy holiday season and talk to you soon.

It sounds like that's not concluded. Thank you for attending today's presentation you may now disconnect.

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