Q3 2022 urban-gro Inc Earnings Call
Hello, and welcome to the urban growth 2022 third quarter earnings Conference call. As a brief reminder, all participants are currently in a listen only mode. If anyone requires operator assistance during the conference. Please press star zero on your telephone keypad.
Following the presentation there'll be a question and answer session for those on the telephone conference line.
Please note that this conference call is being recorded and a replay will be available on the Companys web site. Following the end of the call at this time I'd like to turn the conference over to Dan's roller executive Vice President of corporate development and Investor Relations effort at urban grow Sir. Please go ahead.
Good afternoon, and thank you for joining us today's call will be led by Brad Mattress, Chairman and Chief Executive Officer, Doug <unk>, Chief Financial Officer.
I'd like to remind our listeners that remarks made during this call will include discussion of non-GAAP metrics, including adjusted EBITDA and backlog.
These items should not be utilized as a substitute for urban gross financial results prepared in accordance with GAAP.
Conciliations of a GAAP net loss to adjusted EBITDA are available in our press release and in our Form 10-Q filed with the Securities and Exchange Commission and can be accessed from the Investor Relations section of our website.
On this call we may state managements intentions beliefs expectations or future projections. These are forward looking statements and involve risks and uncertainties.
Forward looking statements on this call are made pursuant to the safe Harbor provisions of the federal Securities laws and are based on urban growth current expectations and actual results could differ materially as a result, you should not place undue reliance on any forward looking statements. Some of the factors that could cause actual results to differ materially from those contemplated by such forward looking.
<unk> are discussed in the periodic reports <unk> files with the Securities and Exchange Commission. These.
These documents are available in the investors section of the company's website and on the Securities and exchange Commission's website. We do encourage you to review these documents carefully.
Lastly, a copy of our earnings press release and the webcast replay for today's call may be found on the Investor Relations section of our web site that is at IR Dot urban dash grow dot com with that I will now turn the call over to Brad.
Thank you Dan good afternoon, everyone and welcome.
I'll begin today's call by providing an update on the state of our business, including a focus on our execution results market conditions and vision. This will be followed by Dirk reviewing our financial results in greater detail and then we'll open the call for your questions.
Well I'm pleased that we exceeded our revised guidance on both revenue and adjusted EBITDA that should not be misconstrued as being satisfied while our results were directly impacted by the headwinds associated with decreased capital expenditures within the cannabis sector. One of the positive aspects of our performance that our.
<unk> demonstrated our sector and capability diversification strategy is paying off.
This diversification strategy, coupled with the strength of our professional services delivery model that we've been building over the last 18 months has.
<unk> has built our project backlog to a company record $67 million as of the quarter and an increase of over $40 million on both a sequential and year over year basis.
This is a clear indication that the model that we've built is working as intended and I'm proud of what we've been able to accomplish amid this dynamic environment.
Briefly touching on our third quarter results, we achieved revenues of $12 $4 million, which is above our third quarter guidance of $10 million to $11 million.
From a positive standpoint year over year construction design build revenue increased by $5 $4 million and professional services revenue increased by $1 $4 million with both increases being driven by the synergies we are creating with our strategic acquisition.
Offsetting this growth was the $12 $6 million year over year decrease in cultivation equipment revenue due to pressure, resulting from macroeconomic conditions and further state regulatory delays tied to the cannabis sector.
As we continue to invest in both scaling our team to serve as 2023 demand into expanding our European operations adjusted EBITDA for the third quarter was negative $2 3 million just above the high end of our guidance range of negative two four to $2 six.
And as it pertains to our balance sheet entering Q4, with approximately $18 $6 million of cash and no debt at.
It remains strong agile and is providing us with the flexibility to continue investing in growth.
Moving on I'll now.
Now shift to our most recent acquisition current sector trends that we're seeing and the outlook for the balance of 2022.
The increasing market demand for our services in all sectors.
Isaly why we made the decision to acquire Dawson that Oregon, the DBO at 24 person World Class Engineering firm based in Texas with considerable experience and expertise into our CEO and commercial sectors.
Accretive and synergistic transaction, both increases our professional services revenues and margins.
And further provides immediate cross selling opportunities to leverage both urban grow and deal with existing clients and contracts to.
To be clear the demand for both our professional services, including engineering as well as our turnkey design build solution across all sectors.
<unk> and increasing rapidly.
As such this acquisition allowed us to immediately add depth to our suite of services as well as a deep bench of talent and engineering leadership structure to efficiently service our clients.
More specifically this transaction adds new and enhanced expertise in the areas of mechanical electrical plumbing and fire safety Engineering and includes the addition of an industrial architecture teams that had been recruited prior from a global leading engineering procurement and construction company.
Given that our respective teams have experienced working together on joint projects prior to the close I'm confident that we will see a quick and smooth integration process over the next several months and be able to take advantage of the opportunities that lie in front of us.
Furthermore, I'm excited about the opportunity to build a hub in Texas located in Houston, We plan to build out our office to accommodate a CPA and commercial opportunities that we've identified in the region.
Not only have we determined but theres, a solid and accessible labor pool to work with but forward looking we expect the state to provide an influential business opportunity as cannabis legalization is considered in the future.
Now shifting to our business development in the commercial sector.
Not only is our success here beginning to have a positive material impact on our financial performance.
Effectively beginning to bridge the cannabis sector weakness experienced.
It also truly promote the consistency and effectiveness of our well thought out and executed M&A strategy.
Following the acquisition of Emerald construction management and in turn the successful launch of our design build division in the second quarter.
We now possess the ability to add value through service levels provided within a single point of responsibility across all aspects of our clients' operations.
The launch has been successful and our pipeline of projects is strong qualified and growing.
Last month, we announced the signing of over $50 million of new design build contracts in the third quarter.
These contracts, which are from CBA health care, and industrial clients, including a leading global consumer package goods enterprise.
For the design build portion of the project already and are separate from any associated professional services or equipment contracts sorry.
This progress demonstrates that client interest and engagement in our turnkey design build capabilities has continued to gain momentum as expected.
And it gives me great confidence that the investments we are making the business.
Physicians urban growth are sustainable and consistent global growth over the long term.
Coupled with the continued integration of our recent acquisition, including two WR Emerald and now <unk>.
Our combined team and now exceeds 150 employees.
It enables us to address a larger market and capitalize on opportunities in adjacent markets. We've collectively built decade plus long relationship.
Our ability to penetrate these new markets with cross selling opportunities and service has set a high profile customers.
Speaks well to both the end to end set of capabilities, we have and the quality of our experienced team.
Now I'll provide our outlook.
For the fourth quarter, we anticipate revenues to be approximately $17 million and an adjusted EBITDA loss to be approximately negative $1 5 million.
It's very important to address that our adjusted EBITDA forecast is influenced by the expenses incurred to rapidly continued building out our team to meet anticipated 23 demand.
And our continued investment in the European operations.
We remain good stewards of our balance sheet and we'll continue to invest in the business in ways, we expect will reward our shareholders.
Looking ahead to 2023.
Supported by the expanding backlog.
Expect continued accelerating demand for our professional services and construction design build solution and all sectors that we operate.
Further.
As a result of the anticipated Canada sector recovery next year, we expect a material increase in our equipment sales as well.
Based upon constructive client sentiment as well as a rapidly strengthening pipeline and backlog, we are seeing opportunities emerge and importantly, we will be scaled and ready to handle the demand from this rebound.
Again to be clear on my intention.
We are investing in our business, we remain focused on returning to positive cash flow as soon as possible.
In closing the model we have built is working as intended and we expect the investments we have made and continue to make will result in strong future performance for urban growth.
We remain committed to advancing our diversification strategy to reduce exposure to a sector risk and we not only expect this to help continue insulating us from the short term, but over the long term, we believe it will position us for new and larger avenues of growth.
In the quarters ahead, we will continue to drive efficiencies in our model build our backlog and integrate and identify cross selling opportunities for our acquisition.
All of which is geared towards creating tangible value for our clients and shareholders.
Thank you and with that I will now turn the call over to Dirk.
Thanks, Brad revenue was $12 $4 million in the third quarter of 2022 compared to $18 $3 million in the prior year period.
This decrease was driven by a decrease in conservation equipment systems revenue of $12 $6 million, primarily reflecting significantly reduced equipment demand in the U S cannabis market because of ongoing state level regulatory delays in the licensed noteworthy cross sell as well as the lack of move.
A key industry financial support models, such as the Safe Banking Act.
This decrease was partially offset by the accretive acquisition of Emerald construction management in April of 2022.
A $5 $4 million increase in construction design build revenue as well as incremental services revenue of $1 $4 million associated with the acquisition of two WR in July of 2021.
Gross profit was $2 6 million or 21% of revenue in the third quarter of 2022.
Compared to $4 $3 million or 23% of revenue in the prior year period.
This represents a decrease of $1 7 million quarterly.
Correlating to the decrease in revenue the.
The decrease in gross profit margin was driven by the lower margin construction design build revenue from the Emerald acquisition.
Operating expenses were $9 $5 million in the third quarter of 2022 compared to $4 $2 million in the prior year period, representing an increase of $5 $3 million.
Included in the third quarter operating expenses are one time expenses, including a previously disclosed $3 3 million dollar business development expense attributable to assisting a key enterprise client with a negative situation within the international lighting manufacturer.
Zero point $7 million in severance expenses.
Zero point $2 million in nonrecurring legal and transaction costs.
The remaining increase in operating expenses was driven by increased head count to support both current and future demand for the company's solutions and continued investment in European growth.
Net loss was a negative $8 7 million or negative <unk> 81 per share in the third quarter of 2022.
Compared to net income of zero point $1 million or breakeven on a per diluted share basis in the prior year period.
This loss includes the $4 $2 million of onetime operating expenses outlined above.
Well as a $1 $7 million impairment for the entirety of R&D investment, which was made in prior years.
Adjusted EBITDA was a negative $2 $3 million in the third quarter of 2022, which compares to $1 million of adjusted EBITDA in the prior year period.
The decrease in adjusted EBITDA was driven by lower revenues and gross profit as well as strategic investments in operating expenses to drive growth.
For the first nine months of 2022, we reported total revenue of $49 7 million compared to $43 2 million in the first nine months of 2021, representing an increase of 15%.
Net loss was a negative $11 1 million compared to a net loss of negative zero point $3 million and adjusted EBITDA was a negative $2 $2 million.
<unk> to a positive $2 $1 million in the prior year comparable period.
Now turning to our balance sheet.
Our capital structure remains in excellent condition, we entered Q4 with $18 $6 million of cash on our balance sheet and no debt, which provides us the necessary.
Barry flexibility to manage through the macroeconomic market circumstances, while simultaneously fueling our growth strategy, including potential additional M&A targets.
Additionally, during the third quarter, we repurchased zero point $2 million of Bourbon gross dropped stock at an average price per share of $2 a night in south.
Moving to reported backlog our total backlog as of September 32022 was approximately $67 million and is up from the $22 million that we reported at the end of the second quarter of 2022.
This backlog is comprised of $56 million of construction design build.
$6 million of professional services.
And $5 million of equipment systems contracts.
While there are several variables that influence the change in backlog. The two primary factors are signed orders and revenue recognized for signed orders during a stipulated period.
Because our backlog relates to capital expenditure commitments made by our customers. The dollar amount of signed customer orders in individual periods can fluctuate materially.
Revenue recognition is dependent on delivery of these orders.
That concludes our prepared remarks, operator, please open the call for questions.
Thank you we will now be conducting a question and answer session. If you would like to ask a question. Please press star one on your telephone keypad, a confirmation tone will indicate your line is in the question queue. You May press star two if you'd like to move your question from the queue for participants using speaker equipment may be necessary to pick up your handset before pressing the star.
One moment please poll for your questions.
Yeah.
Our first question comes from the line of Eric <unk> with Craig Hallum Capital Group. Please proceed with your question.
Great. Thank you for taking my questions and congrats on the strong contract wins this quarter, it's great to see those synergies coming in.
Thanks, Sarah can you help us understand the mix between CA and non CE and those contract wins I know you mentioned some global CPG enterprises there.
And then kind of on a go forward basis, I know, there's a bit of a difficult question and probably hard to answer but.
Factoring in the recent acquisitions, you've made what would you say is your mix of <unk> and non <unk>.
Going forward I mean, I know, it's going to fluctuate, but just anyway, you can help us sort of understand.
The diversification strategy, you've made would be great. Thanks.
Perfect. Thanks.
As far as the backlogs concerned at $67 million that gives us a good idea looking forward about 75% of that backlog is in the CPA space and the majority of that is in Canada.
And.
About 25% is other.
For construction design build that's about 80% of the backlog number 67, so when you look at our third quarter.
The majority again still with CPA, but it was really close to 50 50 and in the CE space cannabis continues to be the majority for us as well.
Looking at some of the CPG companies for example that we discussed that is from a long term decade plus relationship.
With the Emerald construction management and the nice part about urban grow acquiring them with the strength of our balance sheet.
We're able to out to provide this client with a greater number of projects and also increase value of the projects.
So it was definitely a great synergy.
Yes, it's really great to hear.
On the M&A fronts.
Obviously you guys.
We disclosed DBO.
Can you help us understand.
Just what sort of other services may be bench depth geographic diversification might still be on your wish list like is there anything else out there that you are still looking for or do you feel that you sort of have.
The services, the bench and the sort of geographic reach that you're looking for thank you.
Still really good Eric with the reach that we have right now there is only one part of a CPA, but herbal grows not involved with today and that is green houses and Moreover, food focused CEO .
Bill Tod and greenhouses. So that's one area that we'd look at in the future too.
To enter new geographies for sure.
Been investing aggressively in our European operations by adding some employees, we relocated some employees as well over to Europe in the third quarter. So we are strategically working with some architect firms engineering firms in different European countries, right now, but that would probably be.
Smart piece to look at in the future.
Also in the in.
In the U S market right now.
I've made it really clear we have a lot of momentum as evidenced with the backlog right now and we have.
More than 20 open positions that were hiring were in full growth mode right now our EBITDA is.
As <expletive> alluded to is definitely being influenced by these costs associated with hiring whether it be the job placement cost or are bringing people in to get them trained so theyre ready to efficiently service our clients in Q1 and beyond.
So aqua hiring is also something that we're looking at the ability to with the right model that we've done a great job, creating in terms of acquiring these services companies for cash stock and earn out.
If we have the right model and we have the right talent.
Aqua hire another great great move for US also adds maybe some contracts that we that we're looking for that we don't have right now.
Okay.
Thank you. Our next question comes from the line of Brian Wright with Roth Capital. Please proceed with your question.
Thanks.
Congratulations on.
Such a quick rebound.
I haven't I'm kind of bigger picture kind of like taking a step back with a lot of things going on but if you think about future M&A and then the comments with regarding to getting to cash flow positive is stacked back to cash flow positive as soon as possible I guess would rethink about that M&A in light of.
Accelerating that that that conversion like you have the path right now to get back to cash flow breakeven.
Cash flow positive, but if you do additional M&A that would kind of accelerated is that the way to kind of thinks about it but you just kind of big picture, how youre thinking about that dynamic.
So Brian you're absolutely right it would but its not how we've been thinking about it.
Consistent with our acquisitions, all service companies and all of them.
Cash flow positive.
At time of acquisition.
And therefore, it would be definitely additive in help but that's not how we're looking at it.
Okay. That's just an added benefit for us and that's great that's correct.
I'll get back in queue. Thank you.
Thanks, Brian I appreciate it.
Thank you. Our next question comes from the line of Eric better with SCC Research. Please proceed with your question.
Good evening.
Hi, Eric.
Alright.
Is your backlog is significantly.
Construction now.
How should we be thinking about how long those price extinct realized in terms of revenue.
This is the other.
This is a this segment how should we be thinking about the margins for those pieces going forward.
Thanks, Eric as four timeline.
It does vary.
On the commercial projects.
Six to nine months, depending on the size of the project on the CPA side design build of of facilities and so we say 18 to 24 months there.
<unk>.
I'd like to also make clear.
Those that backlog for designs, though it doesn't include any future equipment contracts and it doesn't include any of our professional services contracts either.
Those are I don't want to call them gravy, but those are additive and so the backlog now is a good indication of what to expect in the future.
As for margins.
When we look at.
The design build side, yes orbital rose during the full design build that means we're outsourcing and running the GC GC through urban growth. We don't have we're not a G. C. We don't have we don't swinging hammers, but that would run through urban growth. So we maintain that single point of control. So we can.
Liver the facility and the lowest timeframe possible.
To the client.
In that case, the construction side is only going to be about six two.
10% margin depending on the size of the project, but that is then brought up with the sales of equipment and also the high margin, 60% plus professional services side as well so blended our target on a large design build.
A commercial CBA facility it would be 18 to 24 months and the blended margin would be somewhere right around 10%.
So youre going to see Erika as a result in future quarters, because youre going to see.
A strong increase on the revenue side, but.
But you are going to see we're going to look at it as margin dollars. Because you will see begin to see a decrease in the overall gross profit as as those revenues drive up substantially.
Perfect. When you look at Europe , I know you just started ramping up there.
Are you more or less excited when you started out putting into it and where do you think it goes given that now we're hearing that potentially Germany my.
To recreational cannabis in other countries there.
Europe .
It's an interesting market.
The middle East right now.
Food is extremely strong traditional horticulture in the European market because of the price of energy.
Raising significantly multiples.
That market in terms of food, it's going into its going into a little bit of a downturn for sure.
For urban growth, the Canada side in Europe right now.
Definitely our strength.
We have with Germany opening up and the fact that not only are they open up they're going to be building facilities in country and not importing in the past Germany's looked up to Canada and other countries to import their Canada. So absolutely increase in demand there urban grow right now is also.
Working in Portugal, Greece.
The Netherlands, the United Kingdom.
Also Israel I'm missing a couple there.
Macedonia as well so the strong demand and we've seen that we've seen that demand increase over the last couple of months.
And finally here in the U S. When you look at the industry. Obviously Q3 was a tough quarter, who is driving or what is driving the.
The demand to come back to somewhat normalized levels are you in terms of are we seeing are you seeing are people more optimistic that some of these states are going to come back online or get their act together and how have you seen looking at going forward.
The majority of our urban growth candidates business is east of the Mississippi and.
The results of the election, a couple of nights ago, Missouri and.
In Maryland, two states adult use legalizing that means licenses will be awarded and therefore facilities will be built we're working on.
Less than 10 projects right now between those two states and we expect that to increase.
As the delays in certain states begins to relax, which we anticipate will happen in Q1 and Q2 of next year.
It's like New York.
Some of the.
Delays in.
Being experienced in Florida for a variety of reasons.
We will see that open up and therefore to the exact same each state is like its own country and when the state awards licenses those facilities those dispensers, they will be built and urban grow because of the strength right now of our of our non Ta division. The commercial division we are aggressively staffing up so we will have that.
Team ready 150 employees today, and growing will have the team ready to supply them, but another one there all of that in the New Jersey, New Jersey and Thats.
Growth mode right now.
Okay.
And good luck for the holidays.
Thank you and to us.
Thank you. Our next question comes from the line of Thomas Mcgovern with Maxim Group. Please proceed with your question.
Hey, guys. Thanks for taking my question.
I just have a couple.
Questions to follow up on some of the stuff you touched on so firstly on the development of your teams and kind of looking at how do you guys have been successful with diversification I just wanted to get a understanding of as you're building up your teams. How are you kind of looking at it like breaking down.
Individual members pursuing cannabis related and CA versus non candidate some of those diversified channels and also on top of that how are you looking at approaching searching for contracts domestically versus internationally.
As for the team we don't look for CBA specific expertise at this point, we've worked bottom up and would shed division. We look at that backlog for example, and then we look at our strong pipeline and time out when we expect that pipeline to.
Two additional backlog.
We have it down to a formula X amount in backlog and a discounted X amount and pipeline equals we need to hire this many individuals.
So we've.
Working remote has absolutely helped Thomas because we're able to hire people in different locales across the country. At this point they don't have to be in a specific office.
It really helped us and also as we bring new individuals' on with the use of our placement firm.
We're able to.
Look for some very strong individuals and when they join us they are.
We have incentives for others to join as well.
Connections that that they have.
We cross train them.
And that's very important for engineers and for architects. It gives them also a little bit more excitement instead of doing the working on the same type of projects. All the time to work on work on a hotel or a hospital or a smaller medical facility occurred architected, it's pretty exciting.
A larger bar.
Fox, which contains our cultivation facility.
Cross training is really really important.
And in terms of searching for contracts domestically and in Europe domestically at this point, we'll either offer full design build or we will offer our services to Ala Carte and maybe it's just architecture, maybe it's just.
Engineering or the cultivation design side, but we get to know the client we'd get to deliver.
A high service level to that client so they want to come back and typically we do a great job.
And then ask Hey would you like to bid on this part of it.
We bring in it it's not about selling any more it's more about holding the clients and taking them down the path and helping them make decisions, whether it's on equipment or whether it's other services that we offer in.
In terms of internationally.
So I'll focus on the Canada side in Europe right now.
So theres not a lot of facilities that have been built so theres no large list that you can go look at to find these quiet.
It's guerrilla marketing its grass roots, it's getting out to conferences we attended.
About eight to 10 this year in different countries.
So we're focused on having a consultant I joined our team full time and that consultants in Europe had been focusing for two years on helping clients acquire licenses.
Sure.
Awarded licensed during that process, so it's something different than what we've done in the U S market, but it's a lot earlier in the U S like where the U S was five or six years ago, and so that is helping us bring success as well.
Our social our social program, we invested this year quite heavily on the social side.
Our marketing campaign and it's driving.
It's driving.
New inquiries and opportunities through our website so word of mouth.
Much more established market in the U S.
I'm going to go a little more guerrilla grass roots over in Europe .
Great that was a very thorough and helpful answer I appreciate that and then my last follow up question before I'll hop out of the queue.
You elaborate a little bit on that.
Some of the margin benefits youre seeing or expect to see from the DBO acquisition.
Sure.
Contracts.
I'll start with commercial so there is some contracts that they have where they were doing handling the construction management side or are they were handling the full.
Design build.
And they are now, giving urban grow the opportunity to bring in our architects or bring in.
Engineers for example, with now with <unk>.
And it's just getting a shot that that's all we look forward to just get to the dance and then let our.
<unk> the quality of our team and their leadership.
Let them.
Be able to convince our show the client why we're a good solution. So there is a multiple opportunities on that side.
In the cannabis space. It it's the same thing a little bit for a reverse strong relationships on the design side and architecture and engineering and for us to be able to say hey, we want that single point of responsibility. So.
One one individual or one one company that focus on to deliver a high.
Express decline if something goes wrong, we're there to fix it immediately.
And so we're bringing in Emerald in that case to meet with those clients.
Yeah.
Great. Thank you again for taking my questions and congrats on the strong performance this quarter.
Thanks, Thomas I appreciate it.
Thank you. Our next question comes from the line of Aaron Grey with Alliance Global Partners. Please proceed with your question.
Hi, good evening and thank you for the questions.
So first one for me just want to go back to some of those open positions you mentioned and you gave some pretty good color I. Just final question before but just wanted to ensure just because I don't want human capital as you know really important for you guys. So is there any risk to that kind of creating a bottleneck I know youre looking to do some cross training and also higher 20 more so you feel confident in your ability to find those qualified personnel.
Personnel to fill those slots.
Before creating some type of a bottleneck in terms of you guys being able to deliver or have to delay.
Some of the products you guys have going thank you.
Thanks, Brian I appreciate it so first foremost we did start using job placement firms as opposed to hiring internally multiple firms in that area and firms that are specialized.
Does help we remove that requirement to work in one of the offices. So that has helped us.
Access individuals' in different markets, where there could be a slowdown and so individuals.
Our open.
To work.
Houston market.
DBO 24 person firm had the ability to office close to 60 and their offices right. Now. So we've found there is a great strong labor pool in Houston that surrounding area.
So it doesn't have to be just engineers will be engineers architects construction individuals in that office. There. So looking at different locales has really helped as well we have with eight offices in the US now so we're putting together our efforts around each of those offices and using outside firms I'm not.
Worried about the bottleneck.
The.
The high design build portion of our backlog.
It's not like services, where it starts immediately it's over 18 to 24 months on the CA side as I mentioned six two.
Six months to eight months, so roughly on the on the commercial side. So we have time there. So it's architects and engineers that would have to make sure already and then on the construction side at site Superintendents and project managers and.
Those are those are hot rolls right now in the U S economy, but we're doing everything we can to secure high quality talent quickly.
Thanks for that that's really helpful. Second question for me.
Now with the election passed us outside of a few of tossup state still going.
Yeah.
Banking is obviously a lot of People's minds that thing of the past by end of year I just wanted to get your commentary in terms of potential impact that could be for you guys to urban grow obviously, hopefully, bringing some more capital into the industry, even though up listing is still uncertain for plant touching I know you said on the canvas roundtable. So any thoughts you might have now that we're kind of in that come with that lame duck session.
In terms of what might be included potentially being passed by end of year and potential impact for urban growth. Thank you.
For sure in terms of the impact, it's it's being ready to design build or provide the architecture engineering cultivation design services.
The clients.
So when when they are ready and they're funded we will be there to support the clients in terms of the NCR and we our board meeting.
But our official board meeting there was a call today with the NCI.
The state of flux right now even with the elections, almost 48 hours now complete but still confidence level of greater than 80% of space plus safe in one form or another will pass.
In this session before the end of the year I believe it will.
Allow for banking for the four single state amongst state operators.
Had hoped it would provide the ability for the msos to uplift to larger exchanges or to attract institutional investment.
Thank now that that's going to happen in the next.
By the end of the year or in the next quarter or two.
But the key is just from a banking standpoint, allowing them to access more funds.
At at stronger rates for them.
Okay, Great really helpful color, there and I'll go and jump back in the queue.
Thanks, Eric I appreciate it.
Thank you. Our final question comes from the line of Brian <unk> with Roth Capital. Please proceed with your question.
Thanks.
I wanted to talk a little bit about the progress.
<unk>.
Getting the into any kind of contracts.
Just kind of you know.
I know thats a processing.
We recently closed umbrella but.
And it may be too soon to be.
And about that but I mean is there anything in the backlog that's kind of along that that's a step in that direction or anything to think about there.
Yeah, Brian from the Canada side of CA. There is a large pull design build of our cultivation facility in Florida dispensaries in that backlog.
Have.
How about 10 other design build contracts in the cannabis space.
Potential sorry contracts in the cannabis space that we're working on.
Many of which were depending on the.
The.
Legalization of their specific states passing.
Or securing their financing and so that's all positive developments for those.
That potential for will grow with what happened in the election, a couple of nights ago.
In the food side Brian .
We continue to sign multiple contracts per month.
With the large crude focused vertical farms in.
Indoor CDA greenhouses.
But it's not designed build at this point and it'll be it'll be very interesting to see when we have the opportunity from design build and food vertical farming and the U S.
We love working with them, we're building our credibility we're solving problems typically its environmental and some were helping with mechanical systems.
We're helping with.
Just providing guidance in solving issues that they are encountering in the day to day basis, but we will be ready when the opportunity presents itself. The key to vertical farming of course is an efficient use of energy and the efficient use of water and there is a lot of study in depth study going on globally right now and <unk>.
Those are areas.
The second is the automation, how you move the crop around the facility and that too.
Very early and there is probably a handful.
610 companies.
In Europe , and the U S that are working on that so it's all about efficiencies.
Food is early on vertical farming and we feel we're at the forefront we have the right partnerships and.
We have the right.
Employees that we're hiring that have the knowledge to help our clients I think.
Finish off with.
We have the right board member and Saudi are low as CEO of <unk> AG, most recently and before that crop one has a tremendous vision of growing in urban areas and controlled environment AG environment.
And that's helping our urban grow buildup.
A really good brain trust that that'll help take our clients for the next level. So we're becoming a trusted partner from a service level to our clients exactly what we set out to do.
Great. Thank you.
Thank you welcome. Thank you.
Thank you that is all the questions. We have for today. Please reach out to investors that urban grow dot com with any additional questions I'll now turn the call back over to Mr. <unk> for closing comments.
Thank you Michele I appreciate it.
In closing everyone. Thanks, Thanks for for <unk>.
Signing in today, but in clothing, our sector diversification strategy, it's working.
The acquisitions that we've made continue to prove to be immediately synergistic and accretive to the company.
In our professional services and design build build model that we've been building since we listed on the NASDAQ and completed our raise over 18 months ago. It's executing is as anticipated and of course all of this is supported by that record backlog of $67 million at the end of the quarter and growing.
We've got strong momentum in Q4, and we're very confident as a company that's going to carry into 2023 and therefore, we are in growth mode. We're focused on scaling the company to service. This demand as Aaron said, eliminating any chance of bottlenecks as we go and there will be ready for 2023.
Very much for your interest your ongoing support and have a wonderful evening.
Thank you. This concludes today's teleconference. You may disconnect. Your lines at this time. Thank you for your participation and have a wonderful day.
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