Q4 2022 Goodness Growth Holdings Inc Earnings Call
Ladies and gentlemen, thank you for standing by and welcome to the Goodness Group Holdings fourth quarter and full year 2022 results call I would now like to turn the call over to Sam Gibbons Investor Relations. Please go ahead.
Thank you Mani and thanks to everyone for joining us with me on today's call or our interim Chief Executive Officer, Josh Rosen, Our Chief Financial Officer, John Heller and our President <unk> Today's conference call is being webcast live from the Investor Relations section of our website dial in and webcast details for the call have also been.
Abided in this and Fridays earnings release, which is also available on our website before.
Before we get started we'd like to remind everyone that todays conference call may contain forward looking statements within the meaning of U S and Canadian Securities laws. These statements are based on management's current expectations and involve risks and uncertainties that could differ materially from actual events and those described in such forward looking statements.
For more information on forward looking statements. Please refer to cautionary note regarding forward looking statements in today's and Fridays earnings release, now I'll hand, the call over to Josh.
Yeah.
Alright, Thanks, Sam and thanks, everyone for joining us this morning.
I wanted to take a moment to thank the good growth team I've been drinking from a fire hose.
At the end of the day to day role late last year and the team has been nothing but supportive hardworking and open to my perspective, the leadership from the start.
And it has required the patients on their part because I'm not bashful about asking that question first principles.
Begin today with some brief updates on the progress we've made as an organization over the past few months and.
And Andrew will run through some state level updates before we pass the pass the call to John for a quick review of the financials and balance sheet.
We're going to do our best to focus this call on the most relevant details and I'd note that our 10-K, where their audited financial statements and the MD&A is available for a more thorough review.
So I would ask John to keep some important context as opposed to repeating within our press release and filings reviews our financials.
Please turn to slide three of today's presentation, which is available in the quarterly results and events and presentations section of our Investor Relations website SME congested.
Since Toronto wrongfully terminated the agreement to be acquired in October last year.
Our team is adapting to the new reality of remaining an independent operator for foreseeable future.
As was previously communicated the board and our leadership team reopened the review of strategic alternatives immediately.
It goes without saying that we found ourselves in with a much different industry and capital markets environment and with Brexit in late 2021.
Let's be candid one year ago, we did not expect to be here today, we expect them to be part of a much larger better capitalized operator.
Leaving out litigation aside we needed to make a choice about the direction of our company and with the album landscape, we concluded that regardless of whether a value enhancing strategic alternatives materializes.
We needed a laser focus on being a strong independent operator.
We believe that we have an attractive standalone platform for growth.
The foundation to be successful on our own.
And we are relentlessly focused on our standalone success.
In my new role as interim CEO I have them.
Mandate from our board.
I've met our operational capabilities.
Our balance sheet to support our long term success.
Over the last few months, we have restructured the organization to improve operating performance.
Are there any state markets to Exelon.
Italy is decentralized approach to the leadership of our various state markets designed to improve the speed and quality of decision, making on the ground at our facilities, which should help us drive stronger operating and financial performance in the future.
And we haven't done this in a vacuum we also augmented the local teams with some resources from my network that are battle tested and competitive and transitioning markets.
Having seen amyris, but people first common sense approach to leadership and key decisions as a member of the board I was excited to partner with her to help drive change.
We recently promoted her to the role of President and also the CEO of <unk> health of Minnesota, Our most significant state operation.
Andrew will speak more about our approach to management operations in more detail momentarily.
Yeah.
<unk> remains a key thought partner to me and vital to our success and is now in the role of executive Chairman of our board of directors.
Particular power remains heavily involved in matters related to product safety effectiveness and access as it relates to both our operations as well as how it intersects with policy and emerging regulations.
I wouldn't have stepped into this role without the full support of style.
In addition to our focus on optimizing operations and preparing for the launch of adult use sales in several markets.
I've been working with John Hello, and his team to drive several important initiatives to improve the strength of our balance sheet and cash flow.
Please turn to slide four.
We summarize key components of our organizational priorities for the year ahead.
2023 is a transformational year for the company and internally, we've been referring to as the year clean and cycling.
Our priority is boiled down to first making decisions to drive cash flow generation and profit growth for those not.
Im familiar with the clean up of them.
Rules everything around me guiding ethos for how we spend and make money.
And then second <unk>.
And selling <unk> cannabis products, because we firmly believe that we need that passengers with the quality and value that we're providing customers in order to drive longer term.
This needs to be corridor operations team.
Maybe it's a good corny, but Andrew and I are focused on keeping our core messaging simple to support better performance.
Over the past few months, we've made considerable progress with our decentralized structure to improve our decision, making and manufacturing operations at the state level.
We've streamlined our operating our operating teams and brought in some additional external resources that are helping us position, our product and brand portfolio for adult use markets do you expect the outcome of these efforts are both improve profitability as well as better working capital efficiency moving forward.
From a balance sheet perspective, we were pleased to announce on Friday.
Our credit facility with our senior secured lender.
Which was the first step again, the flexibility we need to execute the agreement fire initiatives this year.
We're also in advanced discussions to secure an incremental $10 million in capital through the issuance of convertible notes, which is the second step.
John will have more details on our balance sheet, but this was the single most important item I started in my role.
Although the current capital markets environment as stretch resting expensive for incremental needs Chicago Atlanta had been highly collaborative in their appropriate yes.
The other lenders in the space.
All of them, which I have firsthand experience.
We will continue to manage the balance sheet with our capital partners to support our transformation into a stronger operator and credit partner, we've implemented strong cost controls in the current environment and what.
We're prudently deploying capital expenditures against high returning projects in all candor at this point. These small investments have been no brainers, thus far I'd like to say that our current situation requires us to play you said first but I'm optimistic that as we gain momentum we can selectively begin to be more offense oriented.
As part of being defense oriented we remain open to divestitures of noncore assets, which Tom discussed on last quarter's results conference call I happened to be the largest I often view the emerging industry like a portfolio manager in terms of each individual state market, representing its own set of risks and opportunities translate into the current and anticipated future value.
So they are also open to the investment and strategic partnership on our core assets and as is no surprise to anyone that knows us and our client situation. We are aggressively pursuing litigation against Ronald and taking significant damages to the court system in British Columbia.
<unk> termination of our arrangement agreement last fall.
On a personal level as I stepped into this role it's worth noting that although litigation comes with timing and magnitude of uncertainty and need of Ronald litigation as a key asset of our company.
Please turn to slide five.
Where we've provided a summary of our asset portfolio.
Which remains very well positioned for growth with pending regulatory catalysts in several of our markets.
Lots of adult use sales in Maryland stated this summer should be a strong growth driver for us in 2023.
And while the exact timing of our participation in new York's adult use market remains uncertain.
That will be able to start selling into new York's adult use markets through the wholesale channel later this year.
There is currently an adult use still working through the state legislature in Minnesota, and we believe it's likely that some form of adult use legislation is likely to pass before the current legislative session ends on May <unk>.
Collectively our meaningful catalyst for our business and we anticipate they could pave the way for accelerated improvement in our ability to generate substantial cash flow.
In new Mexico, we have shifted our focus away from opening additional dispensaries in the state has rapidly become saturated with adult use stores. We are no longer considering the next until the core market much higher priorities for our limited growth capital. We are now focused on cash flow generation.
On slide six we provided a deeper look into several key performance indicators that our recently formed we hustle office believes are critical to the success of our premium tire initiatives.
Our new we Hustle office is supporting our new approach to that centralized state markets, which is comprised of our state leaders as well as some third party partners to collectively satisfying responsibilities of Chief operating officer, Andrew will speak more to our wheelhouse of office.
The API is shown on this page represent a few of the most relevant metrics for our business and we believe they can help measure and we believe they can help us and you measure of our progress as we move forward.
Our industry tends to only highlight in big ticket summary numbers and oftentimes glosses over poor performance in some places we intend to provide an extra level of transparency and disclosure about our business with these metrics and we plan to be honest one performance doesn't meet expectations and explain what we plan to do about it.
And we plan to continue to show at the state level detail as we have as can be found on our press release and 10-K.
Looking at the buckets, we are first and foremost focused on improving our production quantity and quality of flower within each of our markets.
Total harvest.
Pounds and biomass produced a certainly a focal point, but the more important metric for our teams today as a percentage of biomass produce which meets our internal standards of optimal flower quality size on the parents to be considered a flower.
Our current numbers aren't acceptable.
I believe also demonstrates a great opportunity for improvement as we move through 2023 and beyond.
From a hurricane standpoint, it's worth noting that two of our core markets didn't include the sale of flower in their initial regulations that the Minnesota and New York, So the legacy infrastructure with an optimized flower production.
Okay.
Also want to highlight same store sales as an important indicator. While these are often a function of regulatory and competitive shifts in the early years.
All of our emerging markets, we believe like with other retail businesses. This method.
An appropriate indicator of business health and momentum we may choose to share this on a market basis in the future.
Lastly, we've identified inventory term doesn't improvement area for our teams as improving this component of our working capital performance will help us improve our cash flow performance in the future outcome.
Outside of a rare market transition plan.
Such as Merrill Lynch coming this year.
The concept that holding and building inventory is toxic to cash flow.
I would now like to pass the call over to Amber.
More discussion on our sort of our core markets, our core market results and the progress ingredients by our strategy and then some additional core market updates.
Thanks, Josh and thanks, everyone for joining the call. This morning.
By providing more transparency into our new way of operating.
In a few minutes on important updates in our core market.
Change management, it's hard to do and to get right.
Outside of Iran, wrongful termination of our transaction with aimed to prioritize compassion for our people as we manage through this challenging transition.
Synergistic leadership style and fresh approach to how we operate has really energized our team.
Price repeat acknowledge the Canada space has been very impactful to payers.
We then supported by key teammates throughout this transition we have answered the call and our leading action. These teammate makeup.
We have to lap it and we're already seeing early indications that our decentralized approach operation leading to greater success.
Josh and I've been particularly impressed with how Patrick Peters, our executive Vice President and state lead for both New York and Maryland.
Brendan Delaney, our vice President of operations at both nationally risen within our team is clearly there's a people and process.
As you know our business and the business of candidates.
And that's been eager to wear Kumar have quickly ask of our operational pivot and execute on our year of cream and fire.
Moving on to the market.
Next on slide eight.
Our home market of Minnesota remains our most important market and continues to grow following the commencement of flowers and edible sale in 2022.
As Josh mentioned, there is an adult use.
Bill working its way through the state legislature and proactive conversations regarding this legislation are ongoing.
In New York retail sales have been negatively impacted by proliferating illicit market and the overall uncertainty about landmark's direct will be open.
But wholesale volumes have increased substantially to other uses.
Registry registered operator.
We are we are balancing our need to control cash burn in New York with the need to prepare for adult use implementation make no mistake. This has been a challenging market environment for us.
We are getting closer to the completion of our 170000 square foot indoor cultivation facility in Johnstown, which we expect to be ready for occupancy late this summer.
We believe it will be it will represent one of only a few large capacity indoor cultivation facilities in the state.
New building, it's predominantly comparable patient base.
As well as the new bright cloning and bedding space.
<unk> training and flower packaging operation.
We believe that efficiently.
High quality indoor flower and be the primary competitive advantage for us in New York, and we're putting less energy and manufacturing.
Expecting the markets have ample biomass and oil derived products relatively quickly.
The exact timing of our participation in the adult use market remains uncertain, but we are hopeful that we'll be able to begin selling products into the wholesale channel later this year once our new facility is operational.
In Maryland, our second dispensary in Baltimore drove increased retail sales performance in 2022. However, we are not satisfied with our cultivation performance due to the environmental and infrastructure challenges and that is the <unk>.
<unk> focus where are premiums by our initiatives. This year as we expect Maryland adult use market to lifestyle times in the second half of this year.
As Josh mentioned earlier, we are now considering new Mexico, a noncore market as we have pivoted to focusing on cash flow generation rather than growth.
Adult use sales started in new Mexico.
Congrats significant revenue growth, but ultimately our operations there a monopoly minimally profitable and not generating meaningful cash.
On slide nine we've highlighted a few upcoming program in Minnesota, which reflect the hard work and dedication of our teams commitment to being a strong community partner and advocate for candidates perform in Minnesota, We're very proud of our Minnesota.
And our status as a Minnesota founded and run company in the U S cannabis industry and we are laser focused on licensed longevity in our home market.
And then spending time with key stakeholders in the state. This legislative session sharing lessons learned from other markets that have transitioned to adult use and advocating for a fair and equitable and practical licensing and regulatory framework.
This data for a successful adult use program implementation.
Our support of social equity applicants includes sponsoring pillar.
Our Canada business accelerator like our recent applicant who works in a minute I'll just start out we want to explore licensure.
Social equity license in the state.
Our 1937 impact also prefer a key equity focused.
Our April beneficiary, the great right, which.
Which is advocating for Jeff this impairment to participate in this expanding market.
We also continued to best time and resources into our various expansion at clinic program, which we hope to cross various operating market.
Our next clinic is slated to take place in Moorhead, Minnesota Green.
Our community and equity programming initiatives led by our GI cancer early leader electrical MLA. Sal. This work is so important to us and is foundational to who we are and how we support the communities in which we operate.
Please turn to slide 10 for some more additional discussion of how we are operating today as we work to execute against the agreement by your strategy.
Some of these assets already this morning, but I want to provide some additional clarity around the progress we're making.
At the time, Brian wrongfully terminated our arrangement agreement in October our teams were mostly focused on preparing for the pending integration with Toronto and we actually caused several projects and initiatives in order to provide grano with maximum flexibility with the management of our assets.
That could change of control.
The result of the wrongful termination of the transaction with months of critical time law amidst a very challenging environment for the cannabis industry as well as the broader capital markets.
Our team had to react very quickly to this changing circumstances and we believe we've done so effectively.
And expect to begin seeing benefits of our recent initiatives to improve our operating performance during the second half of this year on severance expenses related to workforce reductions lap.
To make some difficult decisions to streamline our operating team.
But we believe we now have the right people in the right places and our decentralized approach to the management of our state market has empowered our on the ground leader to act quickly.
Multi disciplinary expert and a real hassle asset.
We're already seeing early indications of improving performance with anecdotal evidence across our markets during the first quarter of this year.
Our fire focus on driving stronger quality product helps Patrick Patrick Peter team set a new record for sales of our high color at both brands in Maryland in the month of March.
<unk> products are also being sold in our Minnesota market under the <unk> brand name and have been contributing kind of the sales growth performance in Minnesota.
We're also continuing to reach new highs and retail sales performance.
Got it.
And finally recent effort of our rehab assets have been making to improve our inventory management had begun translating to increased sales velocity and manner.
Inventory turns are one of the Kpis, we tracking more closely over the next few quarters. So we're pleased to see early indications that our efforts to better align inventory to demand are working.
As Josh mentioned earlier discussion of Kpis, we are operating with a much stronger sense of urgency and have a keen focus on measuring our progress transparently, both internally to support our decision, making and externally with the investment community and our other partners invested in our success.
I'll now hand, the call over to John for a more detailed review of the financials.
Thank you Amber and thanks to everyone for joining us this morning.
I'll provide a high level summary of key financial metrics from the fourth quarter, and then review our balance sheet and liquidity position in more detail. Please turn to slide 11.
Our fourth quarter results reflected revenue growth in each of our core markets sorry in each of our markets as well as continued improvements in margin performance, which was amplified by the negative performance drag we experienced last year and our former Arizona cultivation facility.
GAAP revenue of $19 million in the fourth quarter increased approximately 39, 4% compared to the fourth quarter of last year.
If you exclude last years contributions from our former operations in Arizona total revenue grew approximately 55, 8% year over year.
Gross margin performance improved significantly year over year from 15, 8% of sales in the fourth quarter of last year with 44, 7% of sales.
As mentioned previously gross margin benefited from our recent wind down of operations in Arizona as well as from increased retail sales in Minnesota and Maryland.
SG&A expenses as a percent of sales also improved year over year in the fourth quarter declining to 38, 9% of sales from 67, 2% of sales.
This number remains too high and between revenue growth and cost containment, we expect to bring this down meaningfully in 2023 and again in 2024.
Finally, we've provided a look at EBITDA and adjusted EBITDA performance on the slide for consistency with prior disclosures, but we do not intend to provide a break out of adjusted EBITDA performance moving forward in future quarters, we intend to focus our disclosures around the key performance indicators, which Josh Amber discussed earlier today.
Please turn to slide 12 for a review of our balance sheet and liquidity position.
We ended the year with total assets total current assets of $46 $7 million, including cash on hand of $15 1 million total current liabilities at the end of the fourth quarter were $29 7 million and we had $46 2 million in long term debt outstanding.
We disclosed in a separate news release on Friday afternoon, we have amended our green IV credit facility, which extended the maturity on our credit facility loans to April 32024, and removed. The previously required amortization schedule. We also have the opportunity to hit some performance based milestones that would extend the maturity to January of 2020.
Six.
We believe we are on a path to becoming a better credit partner through the initiatives, we've taken to improve our operating and financial performance. This year.
Please turn to slide 13.
Where we've provided a summary of debt outstanding as of March 31, 2023 reflective of the amended credit facility terms, we announced on Friday.
We have a total of $64 million in debt outstanding related to our Green IV credit facility $4 $3 million of this balance is related to our acquisition of our dispensary in Baltimore has some different maturity date of November 19 2024.
Our other debt primarily relates to former M&A activity with maturity dates at the end of this year.
As previously mentioned, we have the potential to extend the maturity date on our Green IV credit facility. Even further to January 31, 2026 by meeting some performance related milestones.
Although the milestones are not easy performance hurdles given our history. We believe they are attainable for the operational and profit profitability improvements. We are implementing proved to be successful and assuming we continue to have reasonably can.
Can do some state regulatory environments. The milestones themselves are based on fixed charge ratios. So they are effectively tied to our ability to generate profits and cash flow consistent with being a better credit.
As we disclosed on Friday afternoon. We're also in advanced discussions with a separate affiliate of Chicago Atlantic on the Finalization of terms of a $10 million convertible loan facility, which we expect to start funding during the second quarter of this year. This facility is expected to have a monthly draw schedule that will provide us additional support as we execute our cream and fire strategy for this year.
We plan to provide more clarity around the details of this facility later this month with disclosure in the news release once the transaction closes.
On slide 14.
We provided a summary of share capitalization as of Friday at market close inclusive of shares issued to our lenders related to the credit facility Amendment and extension fee we announced.
Good afternoon.
Following the issuance of subordinate voting shares to our lender in connection with the amendment to our credit facility and the conversion of Supervoting shares to subordinate voting shares, which we announced on Friday afternoon.
We will have $128 million 126330 equity shares issued and outstanding on an as converted basis $178 million 921494 shares outstanding on an as converted basis on.
On an as converted fully diluted basis.
And 131 million 348007 shares outstanding on a treasury method basis, I will now hand, the call back to Josh for some additional closing comments.
Okay.
Thank you John .
With that if there are any questions we'd be happy to take them at this juncture or I can get some concluding remarks.
The floor is now open for your questions to ask a question at this time. Please press star one on your telephone keypad at any point you would like to withdraw from the queue. Please press star one again, we will take now take a moment to render our roster.
Yeah.
We do have a question from the line of Eric <unk> from Craig Hallum Capital Group. Please proceed.
Alright, Thank you for taking my questions.
<unk>.
The increased transparency.
I'll offer my congrats to amber on her promotion swap.
Our first question from me.
Just on the topic of Minnesota adult use.
The.
Regulations, there seem to be influx a bit I'm, just wondering sort of what your expectations are.
At this moment for.
<unk>.
The opportunity for the existing medical players to be able to compete in the adult use market and just overall, how the Minnesota team is preparing.
Preparing for that potential transition just some additional color there would be great. Thanks.
Yeah, certainly Eric.
It over to Amber for some specifics in terms of the actual blocking and tackling on the ground color.
But the core of the messages, we're really optimistic about our ability to participate.
There's been a lot of work on the initial draft.
Alright.
We've seen time and time again.
Particularly with the.
The legislative processes, it's difficult to be precise with exactly what is the final product at the end of the day.
As noted we've got a lot of optimism and there is from our vantage point a lot of what I would call early prep work not late prep work, because implementations and take quite a bit of time.
When it comes due to this so we should have time to adapt to two said rules.
As opposed to trying to pre plan to aggressively.
So Andrew if you could offer a little bit more color on.
The day to day on the ground in Minnesota and that would be fantastic.
Absolutely.
Thank you and good to hear from you Eric.
Minnesota here.
It's not new to our team we have been active now for about eight years operating in the state of Minnesota and the team is really excited about what's to come.
Expanding Minnesota market and so we have.
Minor facility improvements that are underway to focus on.
Producing quality fire flower.
And our team stands ready to support.
Josh and I and highlight supported by an incredible Minnesota based team.
And they're ready to go.
Looking forward to what comes out of the Legislative session. We've really been spending some time like I mentioned earlier with key stakeholders in the state sharing our learnings.
Encouraging felt to lean into from the experience that we've seen what's working what happened.
Alright, I appreciate that color.
And then on the.
Overall effort to increase the quality of a flower again I appreciate the.
The transparency you guys are providing here.
Could you just help me understand maybe.
Where.
Some of the key focus is.
In terms of states.
Assuming that.
These core markets.
Maryland, Minnesota, New York are obviously, the focus here, but I don't know if youre able to.
Sort of rank those or just if youre.
If youre thinking about those.
<unk> at all in terms of.
What what needs to be done or sort of what the priority is and then just overall could you just help us understand.
What you see from our improvement standpoint from Cigna.
Significant capex perspective versus just kind of getting better at the blocking and tackling so to speak just kind of help us understand a bit more of the color that sort of goes behind what you see needs.
It needs to happen to sort of increase that quality of or that percentage of base lower thank you.
Yes, certainly.
Let me attack this in parts.
First is the cultural side of this so some part of the push around this fire principle is really understanding what quality flower looks looks like what it is and having a passion for producing it.
And having a greater understanding through our people what that is and what I would say is coming in.
And working with some folks going back quite some time on this topic.
The opportunity set to improve.
Our quality.
Even within let's call it mature markets really exist from beginning to end.
Its problem identification and early stage cultivation Midstage automation, just how you handle the product post harvest it's.
From beginning to end and it's not just the Sop is it really does come back to the cultural side.
From my Vantage point in terms of really seeing what works well and so.
Adding that back.
Backdrop, what I would say is there are things to do kind of regardless of the facility infrastructure.
Can improve now certain certain infrastructure is going to be more constraining than others relative to others.
What's that portion can go to how much quality et cetera, what the yields might be there are infrastructure constraints that come into play.
And that's where the Capex question becomes more relevant and so if we just do a quick rundown of the states that we operate in on the core side.
You looked at it from a pure opportunity standpoint for US there are two things that jump out meaningfully one is.
The state of Minnesota.
And our position in the state of Minnesota, and our ability to be a long term winner in the state and provide great value and access to customers in the state of Minnesota.
And so getting this right over the intermediate longer term in Minnesota is vital near term.
The sell through of higher quality flower is pretty immediate for us the cash corporate.
Cash flow cycle about what that what happened in just making those improvements through the state infrastructure is really quick and efficient and so near term revolving needs route.
Modestly picking that number higher longer term is how you win producing producing quality and value.
So that's kind of the.
So it is.
Where we see the most intermediate longer term value and we will continue to have the focus around that.
Eric.
And Amber identified we see a great opportunity for indoor flower producers with how that regulatory structure works and so we are yes.
Fairly far along in completing the large what we just heard a bluebird facility in Johnstown.
It is a large indoor cultivation in the rest of our the rest of our infrastructure on the completion side as greenhouse.
And so in New York, we are.
Hitting that market as we move forward with with indoor product and we've got the infrastructure fully map there.
Obviously, it's a fairly large capex project to begin with.
But not incremental need not meaningful incremental capex for us at this juncture.
Maryland is the one where we've got some low hanging fruit as well as adult use catalysts coming.
What we think very quickly.
<unk>.
It is also the place that were probably the most constrained from an infrastructure standpoint, the greenhouse in environmental controls in Maryland leave a little bit to be decided relative to producing quality flower and we're working through that but what's nice is similar to what I described in Minnesota, what we produce we move really efficiently.
And there is there is low hanging fruit to be had with some pretty modest capex improvements. So when I when I mentioned no greater investment decisions, we're talking sub six figure type investment decisions, we're not talking about large capex decisions.
Covered a lot of ground and naturally I had a 100% of what's you're asking.
Yes.
But the core yes.
Yeah that was the that was exactly that.
Very helpful. Thank you.
And then just last question from me here, John I think Hugh you did touch on it but I was just looking.
For some more color on some of those performance based milestones that could help extend.
Your loan maturities to 2026, I think you may have mentioned.
Some fixed charge ratios and just overall focus on cash flow. So just seeing if I heard that right and then if theres any additional color that you have to offer on those milestones.
Yes, sure John can I jump in quick Tom Yes. Please go I wanted to note I wanted to know what one thing from the conversation because because a lot of us do.
These things all tied together I mean cash flow performance comes from operating performance and one of the things that was really key and our conversations with Chicago Atlanta when it when it came to extending was with meeting to improve our performance and so the way that I.
And then the way we've discussed these things internally as I would qualify.
Yes, the extension milestones as attainable, but theyre not no brainers, we have to perform.
We shouldnt.
And so that's the context that will give us.
If we execute like we think we should.
We can attain those.
And as John mentioned on that bid.
The prepared remarks.
Fixed charge ratio oriented.
John feel free to jump in with more specifics.
Yes, Eric.
Later this year, we'll will be.
There'll be a fixed charge coverage.
Covenant in place and the new and the amended credit facility and then starting.
In.
The first quarter of next year 2024.
We'll have the optional extension of the <unk>.
Silly if we.
If we can slightly outperform the base covenant.
<unk>.
Fixed charge coverage, so that will ratchet up for me.
On a quarter to a half a turn of fixed charged throughout.
2024 into 2025.
Simple.
<unk>.
But.
That's what that's how that'll work.
Alright. Thank you very much appreciate you taking my questions.
The floor is now open for your questions to ask a question at this time. Please press star one on your telephone keypad.
I would now like to turn the call over to Josh Rosen for closing remarks.
Alright, well, thank you for participating in todays call I'd like to conclude by noting that I'm really excited about the opportunities in front of US we have an enviable geographic footprint and I can feel the initial momentum of our Cleveland prior initiatives.
We're going to continue to focus on executing what's within our control amidst the current landscape the core of our business isn't all that complicated we grow manufacture and sell cannabis.
Really highly nuanced because of the patchwork regulatory environment and various levels of state level competition.
What we clearly control is being focused on getting better at the basics to delight our customers.
And with that I will hand, it back over to the operator.
Thank you ladies and gentlemen, this does conclude today's call. Thank you for your participation you may now disconnect.