Q1 2023 Columbia Care Inc Earnings Call

Good day and welcome to the first quarter of the 2023 earnings conference call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. Instructions will be given at that time. As a reminder, this call may be recorded.

I would now like to turn the call over to Leanne Evans, Senior Vice President of Capital Markets. Please join me as the call may begin.

Thank you, operator. Good morning and thank you for joining Columbia Cares first quarter 2023 earnings conference call. With me today are Nicholas Bida, our chief executive officer, David Hart, our chief operating officer, Derek Watson, our chief financial officer, and Jesse Shannon, our chief growth officer.

Earlier this morning, we issued a press release reporting our first quarter of 2023 results, which we will also file with applicable Canadian Securities Regulatory Authorities on CDAR and the U.S. Securities and Exchange Commission on EDGAR.

A copy of this release is available on the investors section of our corporate website where you will also be able to access a replay of this call for up to 30 days.

future expectations, plans, and prospects for the company, including statements relating to the Cresco Labs transaction, constitute forward-looking statements within the meaning of applicable Canadian and U.S. securities laws. Actual results may differ materially from those indicated by such forward-looking statements as a result of various important factors, which we disclose in more detail in the next video. Thank you for listening. We hope you enjoyed this presentation. If you have any questions, please feel free to contact us at the Q&A section. We'll be happy to answer any questions you may have. Thank you. Thank you.

and the risk factors section of our annual Form 10-K for the year ended December 31, 2022, which has been filed as applicable by regulatory authorities and also subsequent securities filings.

We remind you that any forward-looking statements represent our views as of today and should not be relied upon as representing our views as of any subsequent date. While we may update any such forward-looking statements in the future, we specifically disclaim any obligation to do so, except as otherwise required by applicable law.

Also, please note that on today's call, we will refer to certain non-GAAP financial measures such as EVITA and adjusted EVITA. These measures do not have any standardized meaning prescribed by GAAP and may not be comparable to similar measures presented by other companies. LemmyCare considers certain non-GAAP measures to be meaningful indicators of the performance of its business in addition to, but not as a substitute for, our GAAP results.

Good morning and thank you all for joining our call today.

As we discussed on our fourth quarter 2022 earnings call just six weeks ago, as an organization, we remain intensely focused on optimizing our asset portfolio and operational structure. We are leaning into the areas of our business that are driving value and eliminating those that don't. We have prioritized rigorous cost management, and we are moving towards positive cash flow generation, which is a very important part of our business.

we anticipate later this year. In the first quarter, we achieved positive top-line growth of 1% year-over-year despite the closure of three dispensaries at the beginning of the quarter. The need to amortize a portion of our revenue attached to the rewards accrued by our Stashed Cash Loyalty Program members and ongoing pressures on consumers' wallets and pricing pressures in certain markets.

These factors, along with the expected seasonality in one cue we discussed during our last earnings call, impacted our top line on a sequential basis and resulted in a revenue decrease of approximately 1%.

Our adjusted EBITDA margin in 1Q reflected the flow through from the absorption accounting reallocation in gross margin that occurred due to the rationalization of cultivation assets at the beginning of the quarter at the end of 4Q.

This anticipated decline in gross margin was partially offset by the cost reduction measures that we executed upon during the second half of the first quarter.

As we mentioned in our last call, we expect the cost reduction measures announced in January to generate $35 million in net annual savings, significantly contributing to improved cash flow this year.

Due to the timing of implementation of these changes, especially for cultivation rationalization, reductions in our operating and overhead costs aren't expected to show a full quarter's benefit until the end of the second quarter.

Our focus on cash flow from operations does come with some trade-offs.

Utilize our canopy square footage more efficiently, reduce headcount, and right size operating costs, we saw an overallocation of certain fixed costs such as sale leaseback payments to cogs. This was anticipated and discussed during our last call. However, we made the decision to focus first on our SG&A and back-of-house utilization rates.

With that behind us, we expect to begin implementing our plan to improve absorption and costing strategies across the country to utilize cultivation square footage and manufacturing space as effectively as possible. Concurrent with that initiative taking hold, we expect to continue to invest in areas and locations that are driving profitable growth and we continue to bring new form factors of fresh genetics and differentiated brands to our customers and patients.

Finally, we have very specific development programs to optimize our dispensary portfolio in Virginia, New Jersey and Maryland, all of which has significant market growth potential and very attractive sub markets such as Prince George's County, Maryland. Lastly, we are very excited about the launch of adult use in Maryland in July and Delaware in the second half of 2023. And finally.

million of senior secured notes to May 2024, investing non-core and unprofitable assets and continuously evaluating appropriate measures to further deliver the business in the current environment.

With a commitment to improving the fundamentals of our business, we are continuing the momentum of our ongoing operational and financial reprioritization of resources, which includes targeted cost reduction measures, non-core asset divestitures, improvements in cultivation and manufacturing, and optimizing our liquidity position.

stepping back and assessing where we stand today, I firmly believe two things. First, we are exceptionally well positioned with continued growth momentum in the best markets in the US, and second, we are very much in the right place to our strategic footprint and asset base.

Second, we have strong and sustainable differentiated advantages with best in class potential, limited capital needs and the right positioning for current market conditions. We are poised for expanding margins to generate free cash flow as the year unfolds.

We are pleased with the progress that we have achieved in the first quarter. We look forward to additional meaningful progress over the coming quarters. We continue to see embedded potential in our organization and our markets with known catalysts on the horizon. Our retail and cultivation portfolios are well positioned, ready to take advantage of the growth opportunities ahead, now with reduced burden from underperforming areas and operations, as well as an improved liquidity profile.

limited updates to provide today on the timing for execution of the agreements relating to outstanding the vesturess transactions and look forward to answering your questions during Q&A. With that, we'll now turn the call over to Derek to review our financial results and now looking more detail. Derek?

Thank you, Nick, and good morning, everyone. I'll provide a summary of the key financial results for the first quarter, discuss the key trends we're seeing in our markets and comment on the pending Cresco transaction.

For the first quarter, we achieved $124.5 million in revenue, representing growth of 1% over Q1 of 2022, and a 1% decline sequentially, as we'd anticipated, primarily due to normal seasonality.

In the first quarter, we opened three new retail locations, two in Virginia, one in West Virginia, and as part of our previously announced restructuring efforts, closed two further unprofitable dispensaries in Colorado.

Together with the sale of our Missouri operations, which included one dispensary, we therefore ended Q1 with 84 active retail locations. We've since opened an additional cannabis store in Norfolk, Virginia, bringing the current store count to now 85.

In Q1, a wholesale revenue was flat compared to Q4 of 2022, at 15.4 million, and represented 12% of total revenue in the quarter. Average basket size, which is a combined measure of pricing, discounts, and share of wallet from guests at our retail stores, decreased quarter over quarter by less than 1%.

which is a significant improvement from the larger declines experienced in prior quarters. As Nick mentioned, in Q1 we saw continued growth in our emerging markets, particularly New Jersey, Virginia, and West Virginia, and also saw approximately 7% growth in revenue in both Ohio and Pennsylvania quarter over quarter, and 8% growth in Maryland.

as that market prepares for adult use on July 1. Revenue declined in Colorado and California, partly impacted by the closure of retail locations in both markets.

Adjusted gross profit for the first quarter increased sequentially to $47.7 million.

from $47.2 million in Q4, resulting in an adjusted gross margin of 38.3%, up almost 1 percentage point from Q4,22.

As we've highlighted previously, due to rationalization of certain cultivation assets, our Q1 gross margin was impacted by unfavorable absorption at underutilized sites that require us to extend overhead costs rather than capitalizing them into inventory.

A reduced canopy in certain markets will continue to generate cash savings, but will also continue to create an unfavorable impact on gross margin until utilization rates improve.

Adjusted EBITDA for Q1 was $16.4 million, representing a 13% margin, and was supported by cost savings initiatives completed during the first quarter.

These initiatives announced in early January reduced or exited cultivation operations in six markets, closed four unprofitable retail stores in Colorado and California, and eliminated approximately 25% of our corporate positions.

These are on track to generate a net $35 million in annualized savings with incremental cost saving measures in the pipeline.

Once we are liquidity, we ended the quarter with 40.2 million in cash.

This represented an $8 million cash outflow in the quarter and included capital expenditures of $5.7 million, one-time severance payments of $1.2 million, $3 million initial net proceeds on our sale of the Missouri operations, and over $13 million in a combination of income tax and interest payments.

As you can see, without these items, our operations continue to create positive cash flow in the quarter.

As we announced in late March, we extended the maturity on our 13% senior secured notes, which are now due in May of 2024. This extension was done under the existing indenture and did not require consent nor fees.

There are no additional maturities on the horizon until December 2023 and 5.6 million of convertible notes come to you, and we'd expect the settle these out of our operating cashflow. We've taken necessary steps to strengthen our balance sheet, ever made operating adjustments to create a clear path to positive free cashflow.

As 2023 progresses, we'll continue our focus on cost discipline, optimizing our asset base, preserving cash, and deploying capital efficiently.

Now, turning to the pending transaction with Cresco Labs. As we've mentioned, we continue to support Cresco and their efforts to bring the transaction to a close.

Transaction aside, we continue to execute on initiatives, strengthen our own business, and look forward to the growth that the Columbia Care Operations can bring in the future.

With that, let me turn the call over to David of operational highlights. David. Thank you, Derek. I will now highlight important operational developments during the first quarter, particularly in our top markets. On a revenue basis, our top five markets alphabetically with Colorado, New Jersey, Ohio, Pennsylvania and Virginia. Good day.

Pennsylvania Replace, California, and Q1. On an adjusted EBITAB basis, our top five markets were Maryland, New Jersey, Ohio, Pennsylvania, and Virginia.

Maryland replaced Massachusetts and Q1. New Jersey and Virginia remain top markets in both revenue and adjusted if dot, demonstrating continued strength. Maryland's inclusion in the top five is an encouraging sign of what's to come as that market prepares for a don't use on July one of this year.

During the first quarter, the prevailing trends from an operational perspective were growth in emerging markets, price stability relative to the previous 18 months, and real-life cost saving measures taken last year.

I will now go into more detail on our top markets. In Colorado, we remain focused on our restructuring efforts. We closed two additional underperforming retail locations during the quarter, bringing us to a total of 23 active dispensaries in the state.

These store closures, along with other initiatives we've implemented, resulted in slightly improved gross margin, quarter over quarter in Colorado. We continue to see improvements in flower quality and potency as a result of the long-term efforts to enhance productivity and SOP adherence in our Colorado cultivation operations.

In Q1, Maryland replaced Massachusetts as a top market by adjusting EBITDA. During the quarter, we experienced improvements in our overall manufacturing throughput, allowing us to bring higher quality products like Libraz into meat growing consumer demand.

Introduction of these products led to improvements in wholesale, which is a positive trend given the imminent wholesale opportunities in Maryland as the market transitions to adult use in July .

Given our efficient operations in the state and the steps we've taken to improve our post-harvest abilities and wholesale strategy, we feel confident that we'll be ready to meet the anticipated surge in demand. As a reminder, we have three active retail locations in the state in Chevy Chase, Frederick, and Rockville.

Moving on to New Jersey, which continues to be a growth driver, we saw 7% growth in revenue quarter over quarter. There are 2 active retail locations in the state remain among our top performing dispensaries. The entire portfolio continue to see promising growth in the wholesale market with additional stores coming online.

We continue to improve our genetics and introduce new products like HETI, our line of effects-based gummies, to keep up with consumer demand as the market evolves. We also have a third retail location in development.

Ohio also remained a top market by revenue and adjusted EBITDA during the quarter. Pricing in the state is beginning to stabilize and our dispensaries maintained their throughput during the quarter.

We continue to see high quality genetics out of our Mount War facility and experience significant growth in our wholesale business, including a record month during the quarter. We're looking forward to expansion of the wholesale market as incremental dispensaries come online. Pennsylvania Replace California is the top market by revenue, supported by price stability in the wholesale market. We're looking forward to expansion of the wholesale market.

an increase in foot traffic at the dispensary level in favorable trends in retail sales. We've significantly reduced our operational canopy in our sacks and cultivation facility as part of the company-wide rationalization effort. While this pressure is gross margin in the near term due to underutilized capacity, we expect to put more plants underlides as we see demand continue to build.

The Q1 for Jenny continued to be a standout market. Changes made to the patient registration process in the state have made it easier for individuals to access the medical market. We continue to do all that we can to keep up with demand for new products and form factors in the market. We open two new dispensaries and hand in the colonial hides during the quarter and another cannabis dispensary in North-Northoac, the ninth of the 12 planned dispensaries in the state.

We remain confident about the future growth prospects the market has to offer. As we are halfway into the second quarter, we are focused on improving genetic selection and productivity in all of our cultivation facilities. Cultivation improvements and continued adherence to standardization represent a significant opportunity for us to improve gross margins going forward.

I want to thank the team for their continued commitment. Thank you again to the team for their execution. I will now turn the call back to Nick to take your questions. Nick.

Thank you, David. Operator, can you please open up the line for questions? If you'd like to ask a question, please press star 1-1. If your question has been answered and you'd like to remove yourself from the queue, please press star 1-1 again. Our first question comes from Erin Gray with Alliance Global Partners. Your line is open. Thank you, Echoes.

Hi, good morning and thank you for the questions. So first one for me is just talking about the margin. You spoke again to some of the unfavorable absorption from underutilization. Can you talk about how much of an impact that had during a quarter? And I know you looked at that to persist, so are you looking for that to ease a bit or just giving some much?

of an impact they expect kind of going forward and then if you can give more color in terms of you know how much of an impact from those restructuring measures starting to flow through I think sitting in the second quarter so how much of an impact should we start to see just to try and put some pieces again in terms of what even a margin expectations to expect thanks.

Yep, so appreciate the question that is correct on the gross margin specifically. So the underutilization of canopy that we implemented as a result of the restructuring at the end of Q4 and Q1, that's about a 5%-page point impact on gross margin. So we've got a reported gross margin of 38% in Q1, that's...

after the reduction of this canopy and that 5% overhang. We are continuing to see some improvements in canopy and so that utilization will increase as David mentioned over time. But again, the accounting requires us to take that as a cost and a hit to our gross margin if we don't have those assets utilized.

Okay, all right, great. Thanks for that color. Same question for me. So I know obviously a lot of the questions around the Cresco deal. I know you guys said there's a little bit more to add at this time than the last call that we had. But is there any more color you could provide in terms of divestitures? You talked about previously saying there was demand out there. Maybe sometimes you'll think about outside.

that's potentially impacting the closure of the deal. Thanks.

So I think there are a couple of questions in that train of thought. In terms of the divestitures, we continue to move forward on the divestiture front. Obviously, we've got a great partner in Coombs, and they're working through their process. There was a lot of information that came out in New York last week as an example that I'm sure we'll have.

We'll have everyone sort of trying to figure out exactly what direction the state of New York decides to move in. You know, we're having conversations for all the other markets and it's I think at this point the what I can say is they're great assets. There has been demand from a variety of different pockets. We continue to move forward, but these processes are always very unpredictable.

And so it's hard to handicap kind of what a timeline would look like and what an outcome looks like in the absence of definitive agreements. As far as sort of other asset sales and other sort of initiatives, I would just kind of break the decision making process into two different buckets. The Columbia GARE balance sheet is fine. We feel very comfortable with where we are from a liquidity perspective.

We, you know, we're making decisions to improve profitability and we expect that profitability to allow us to begin to build cash just, you know, from a fundamental perspective as the year progresses and certainly into next year. And that leads up to our first majority, which is, you know, over a year away, actually about a year away today. And so we're very comfortable with where that stands.

Separately and apart from that, there's the reorganization that we're going through right now and the way we think about asset sales. We've made the decision to focus on the markets that are really driving the most value. I think that our strategy up until the restructuring was announced was to have our fingers in a lot of pots and that has served us well.

But, you know, at this point, especially in the context of the Cresco merger, you know, we're not in a position to go out and continue to scale into a lot of these markets. So we really need to focus on the market where we already have scale. Thankfully, we have enormous scale in, you know, in the number of very, very meaningful markets that are providing us with a very attractive runway going forward.

So when you look at a market like Missouri, the vision and the exit was as much about driving profitability and margins as it was to sort of do a relative value assessment, right? Where are we gonna be able to either redeploy that capital or enhance liquidity to improve our overall performance? So we don't have a lot of assets like that. Whatever assets in the portfolio that remain could certainly fall into that bucket if we pushed in that direction. Hopefully that's helpful.

That's great. Thanks for that detail. I'll go ahead and jump back in the queue.

and I'll go ahead and jump back in the queue. Thank you.

Thank you. Our next question comes from Scott Fortune with Ross MKM. Your line is open. Yeah, good morning and thanks for the questions. Real quick, can you provide a little more color on the expected $35 million in net annual savings? And that day, I know you timing, you mentioned that will probably be cut will hit primarily towards the end of this.

Sure, and appreciate the question. So the restructuring, I'd say the latest round of restructuring to be clear, that we announced in Q1 was a result of actions that we started in Q4. By the end of Q1, we've completed that restructuring, the reductions in head.

heads, particularly corporate overhead, that we took place. All those positions have been eliminated by the end of the first quarter. So we are starting to see the benefit of those cash savings now fully in the second quarter. It's obviously building part of that restructuring with the canopy reduction at six markets around the country.

And we're starting to see a slight improvement in utilization at those sites as well. So the 35 million of annualized cash savings, we're starting to see the benefit of that in Q1, sorry, in Q2. And as Nick mentioned, we'll see the benefit of that and driving towards free cash flow anticipation in the balance of 2023.

Just to kind of follow up on that, I mean with the focus on positive cash flow generation here, can you just kind of provide an update on the inventory level, where you said how much of that is part of the free cash flow generation here?

with working capital deferred tax is all part of that. I know you guys have built out and your CAPEX are kind of limited, but any additional color on the CAPEX for the rest of the year to kind of meet this positive cash flow generation that you guys are targeting here.

So I think what you'll see is in the first quarter you know there wasn't a sort of a meaningful improvement in working capital but we do expect that to become a source of cash as the year goes on. You know that's that's going to be one obvious area that we focus on. CapEx you know we always expect at the first quarter to be the high end of the range in terms of the sort of annual.

we anticipate, let's call it the contributors below the income statement for cash flow including working capital to be either as you know for us this is a year of singles. We're not, we don't need any home runs to make things work we just need to make sure we execute on sort of a lot of the smaller details and so what you'll hear us talk about a lot is

sort of meaningful but small moves that actually have a profound effect over a longer period of time. So, you know, sort of, you know, are you, we will have maintenance cap-backs. We will have some cap-backs as David mentioned. We're going to be building out some dispensaries later on this year, but those are not big ticket items. We don't need to add any more cultivation. You know, we will have improvements in working capital as the year goes on.

correlation between the just deep and operating income over the next 12 months and that for us is meaningful because that's you know that's obviously a very high quality source of earnings going forward. Derek I don't know if you have anything to add to that.

No, that's absolutely right. So the capex in Q1, again just a reminder of the numbers, a 5.7 million dollar number, we had three stores opened in Q1 and one open subsequent to the end of the quarter. So a lot of that capex was supporting the dispensary openings.

And as Nick said, we expect that to be the cat of CatX.

by quarter for the balance of the year. And in terms of inventory, as you'll see on our balance sheet, inventory increased slightly from Q4 of 22, partly because the canopy reductions take a little bit of time to execute on.

But going forward, you should expect to see the benefit of those canopy reductions in inventory coming down, which will be a driver and source of working capital benefits.

I appreciate it. Thanks for the color.

Our next question comes from Glenn Mattson with Leidenberg-Dahlman. Your line is open.

Thank you. Our next question comes from Glenn Mattson with Leidenberg-Dahlman. Your line is open. Hello, can you hear me?

We can. Great. So, yeah, just I guess start off with I'm kind of curious as the Cresco deal kind of continues to drag on. I know you guys talked about, you know, possible further delivering or whatever. You know, you could be making decisions now about some asset.

sales or whatever if the transaction you know were to not you know

be completed, you know, and the timing could be very important. So like I guess just can you talk about like your level of patience with how long this is taking versus what would be in the best interest of Columbia Care long term if it was to remain an independent company and just kind of think about or talk about how you're thinking about that a little bit.

So let me just start by saying, you know, our shareholders have voted. We have a process in place. We're working very closely with Cresco to move the transaction forward along with the asset sales and divestitures that are required to get regulatory approval. There's nothing that changes that. So we have that as a path that we are on.

And there's an outside date, which is the end of June , at which point the transaction as we're currently describing it either gets extended by mutual consent, which requires both parties, or it doesn't. And so, right now we have all of our efforts that need to be focused on.

sort of stakeholders, but also for Cresco at the point in time when the transaction consummates. So, everything we're doing right now, whether the asset sales improvements to our cost structure, um, reorganization of the, uh, of the way we actually function, um, is, is, is, is.

what I would describe a

a very sort of

a very important outcrop of a very deliberate process that has taken place over the past 12 months. When we needed, the minute we announced the transaction with Cresco, we had obviously a process in place to move that transaction forward, but we never stopped focusing on our own business. And I think what we use this unusual period of time to really think about is how do we position.

the assets of Columbia Care for the greatest success possible, for the greatest profitability possible. And that's what you're seeing. So, you know, any assets that are sold, we're obviously doing that in collaboration with CRESCO, right? We can't do these things unilaterally based on the terms of the agreement. But I can tell you that we wouldn't.

consider them and we wouldn't have followed through with them unless we thought they were in the best interest of not only our stakeholders but also Cresco's on a combined basis. As far as liquidity is concerned, as far as the balance sheet is concerned.

You know, I think fortunately we have what I would argue is an exceptionally sophisticated management team that is very familiar with the capital markets and with balance sheet considerations. And we're critically aware of you know of what the rumor mill sounds like, right? We're critically aware of the misinformation that's out there and we're critically aware of the impact that sort of you know

people's concerns regarding liquidity could have and have had on our stock price and on the spread. And the fact is that we don't have a liquidity issue that I can see, and I've got the best information of anybody on this phone call aside from Derek. And when we think about the next 12 months, we think about the next 18 months, the next 36 months, I think leverage is something that we want to address.

And it's a very natural progression for us to reallocate any cash flows that's generated into the balance sheet to reduce that leverage because at our market cap every dollar that we take off of the balance sheet has an accelerator on the value of our equity. So it's a very simple sort of transactional relationship between the two sides of our balance sheet. I don't feel any pressure to do anything dramatic today, but I can tell you the things that we're doing have been a byproduct of a very long and thoughtful process that will continue.

Our intention is to make sure that if there are opportunities to delever or take advantage of the asset sale processes or other indications of interest, we certainly will look at it. Because I think deleveraging is a very easy way to create equity value over the next 12 to 24 months if we remain an independent entity.

So it's a fair question that has a lot of complexities because of the transaction with Cresco. But I can tell you right now, it's not something that we're sitting there waiting for somebody else to kind of solve our problems. We're taking a very proactive approach to it and we feel very comfortable where we are.

You're kind of know if you're being bad to that. That's great. I think do it. Yeah, thanks for the color, Nick. David, maybe can you just touch on as you went through your state overview kind of sound like Pennsylvania stood out as a little bit of perhaps you guys are outperforming versus what others have said this quarter a little bit? Maybe can you just give us a sense of what you're seeing in Pennsylvania and how that...

You know how that performance is going? Sure, I think in Pennsylvania, you know, our footprint, we obviously have a cultivation facility through the GLEE acquisition and three dispensaries. I think it sounds like a relatively simplistic answer, but it was just relative out performance for us.

at the hyperlocal level for our dispensaries and some modest improvement in the cultivation wholesale opportunity in Q1. So I don't think it was anything Herculean other than just sort of better execution at the hyperlocal level by the team.

Okay, thanks guys.

Sure, thank you. Thank you, As Remander. If you'd like to ask a question, please press star 11.

And our next question comes from Andrew Simple with Eklaan Capital Park Markets. Your line is open.

Hi there, good morning and thanks for taking my question. First one, I'll ask one quick one on the Cresco transaction here. You know, there's been some time that's obviously passed since the last updates.

Just want to get your sense on the timing and

more specifically, I guess on the timing of things to be announced, you know, it feels like June is approaching quickly here. If we were to see divestiture announcements announced in the near term, do you think there'd be sufficient time to get regulatory approval for those announcements or

Would you have the ability with some wiggle room beyond the June 30th date? So, it's a great question. And, you know, those are really board level decisions, you know, in terms of extending the, the things that are in our control are that, you know, are making sure the business is run properly and driving value and having a very optimistic and positive outlook.

All of that is partially in our control and partially not because you know Cresco and Columbia Care obviously aligned on one side of the equation but then you have the other parties on the other side and every group that's coming to talk to us you know it wouldn't not be surprising to think that they might have both an operating and a financing component to that conversation. So it's a it's a sort of a little bit of a three-dimensional game of chess.

But what I can tell you is that if the two boards need to have those conversations about an extension of time, I'm sure they will. And I don't think it's a stretch to say it's getting tight. And I think that's a fair characterization. You know, that's a fair question for you to ask.

Those are really more level conversations that I can't comment on. Understood and appreciate you providing some additional color there. Moving on to Virginia, to state that the company has been highlighting as one of the strongest markets over the past three quarters and you continued to open new spenders there. Just want to get an update maybe on the timing of you opening the remainder of the stores that you have licensed in that state and could you maybe speak to the wholesale dynamics.

within that market and how that's been developing as other parties open more stores. Sure. This is David. I'll take that one. You are correct. We continue to be enthusiastic about the state of Virginia. We have at least one more plan to open.

This year, we continue to look for, like I said this on the previous two calls, we're being very thoughtful about site selection for the remaining dispensaries to make sure that they're well positioned for the eventual adult use. So, we have, we are swinging hammers and expect to open at least one more through the balance of the year. We did, as Derek mentioned, we opened one in Q2, so we've got at least one more planned for the balance of the year and we do anticipate opening all of the dispensaries in the next.

Call it calendar, you know, 12 months, but we're trying to pull as many into this year as we can. Great, thank you.

Thank you. There are no further questions at this time. I'd like to turn the call back over to Nicholas Vita for any closing remarks. Thank you, everybody, for joining us today. Please reach out to us if you have any other questions. We're always around, and as many of you know, we've been engaging with the community.