Q3 2023 Green Thumb Industries Inc Earnings Call

Ladies and gentlemen.

Speaker 1: Ladies and gentlemen, the green thumb call will begin shortly.

The Green thumb call will begin shortly thank you for your patience.

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Speaker 2: The.

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Yes.

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Speaker 2: I my o o.

Speaker 1: Good afternoon and welcome to Green Thumbs 3rd quarter 2023 earnings conference call. At this time, all participants are.

Good afternoon, and welcome to Green thumb third quarter 2023 earnings Conference call.

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

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

Speaker 1: A question and answer session will follow the conclusion of formal remarks.

Speaker 1: During the question and the answer session, we would ask for a limit of one question per person.

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

As a reminder, a live audio webcast of the call is available on the Investor Relations section of Green Thumbs website and will be archived for replay.

Speaker 1: As a reminder, a live audio webcast of the call is available on the investor relations section of Green Thumb's website and will be archived for replay.

Speaker 1: I'd like to remind everyone that today's call is being recorded.

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

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

Speaker 1: I will now turn the call over to Shannon Weaver, Vice President of Communication. Please go ahead.

Thank you Betsy and good afternoon, and welcome to Green Bank third quarter 2023 earnings call I'm here today, with founder and CEO of Banco popular President Anthony Georgiadis, Chief Financial Officer, Matt partner base.

Speaker 3: Thank you, Ben Cies. Good afternoon and welcome to Green's on the third quarter, 2023 earning cost. I'm here today with founder and CEO , Ben Kovler, president, Anthony George-Oddes, and chief financial officer, Matt Boppel.

Today's discussion and responses to questions may include forward looking statements, which are subject to various risks and uncertainties that could cause our actual results to differ materially from these statements. These risks and uncertainties are detailed in the earnings press release issued today, along with our reports filed with the United States Securities and Exchange Commission.

Speaker 3: Today's discussion and responses to questions may include forward-believe statements which are subject to various risks and uncertainties that could cause our actual results to differ materially from these statements. These risks and uncertainties are detailed in the verdicts press release issued today, along with the report's files with the United States Securities and Exchange Commission and Canadian Securities Regulators, including the 2022 annual report filed on form 10K.

And Canadian Securities regulators, including the 2022 annual report filed on Form 10-K.

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

Speaker 3: This report along with today's earnings release can be found under the Investor section of our website.

Speaker 3: Green thumb assumes no obligation to update or revise any forward looking statements to reflect events or circumstances that may arise after the date of this call. Throughout the discussion, green thumb will refer to non-gas financial measures, including EBITDA and adjusted EBITDA.

Green Bond assumes no obligation to update or revise any forward looking statements to reflect events or circumstances that may arise. After the date of this call throughout the discussion green thumb I'll refer to non-GAAP financial measures, including EBITDA and adjusted EBITDA.

Speaker 3: A reconciliation of non-gaft financial measures of the most directly comparable GAAP measures is included in our earnings press release and SEC and Cedar filings. Please note, all financial information is provided in US dollars unless otherwise indicated. Thanks, everyone, and now here's fun.

A reconciliation of non-GAAP financial measures the most directly comparable GAAP measures.

Earnings Press release SEC filings. Please note all financial information is provided in U S dollars unless otherwise indicated thanks, everyone and now here's Ben.

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Speaker 4: Thank you, Shannon. Good afternoon, everyone, and thank you for joining our third quarter 2023 conference call.

Thank you Shannon and good afternoon, everyone and thank you for joining our third quarter 2023 conference call.

Speaker 4: I'll lead off with some quick observations on the industry and an overview of our results.

At all with some quick observations on the industry and an overview of our results.

Speaker 4: Anthony will discuss our operations and Matt will dive into the financials.

Anthony will discuss our operations and Matt will dive into the financials.

After that we'll open the call to questions.

Speaker 4: I'm pleased to report that our team delivered a great third quarter. We both record revenue of $275 million, a 9% increase quarter over quarter, with a nice lift from adult youth sales in Maryland.

I'm pleased to report that our team delivered a great third quarter, we booked a record revenue of $275 million, a 9% increase quarter over quarter with a nice lift from adult use sales in Maryland.

Speaker 4: Our gap net income was 11 million or five cents per basic and diluted share. And adjusted Yibbidah was 83 million or 30% of revenue.

GAAP net income was $11 million or five cents per basic and diluted share and adjusted EBITDA was 83 million or 30% of revenue.

Nine months cash flow from operations was $154 million and we ended the quarter with a strong balance sheet, including $137 million in cash net of our share buyback and tax payments.

Speaker 4: Nine month cash flow from operations was 154 million, and we ended the quarter with a strong balance sheet, including 137 million in cash, net of our share buyback and tax.

Just today Gallup released a new poll, showing a record 70% of U S adult elite marijuana should be legal.

Speaker 4: Just today, Gallup relief and new polls showing a record 70% of US adults believe marijuana should be legal.

Speaker 4: And with Ohio legalizing yesterday, more than 50% of the US population lives in a state with adult use cannabis.

And with Ohio, legalizing yesterday more than 50% of the U S population lives in a state with adult use cannabis.

Yet it remains a schedule one narcotic in the eyes of uncle Sam.

Speaker 4: Yet, it remains a scheduled one narcotic in the eyes of Uncle Sam.

From a federal perspective, it is impossible to predict whether we will get regulatory change from safer banking rescheduling of candidates a potential garland memo or something else and if so what the timing might be.

Speaker 4: From a federal perspective, it is impossible to predict whether we will get regulatory change from safer banking, rescheduling of candidates, a potential garland memo, or something else. And if so, what the timing might...

Speaker 4: We believe that eventually change will happen and green thumb is well positioned for that change.

We believe that eventually change will happen and green thumb is well positioned for that change.

Speaker 4: Regardless of what happens, we'll continue to build our business by focusing on our long-term strategy.

Regardless of what happens, we'll continue to build our business by focusing on our long term strategy, creating.

Speaker 4: Creating brands and products that resonate with the consumer, remaining disciplined with our capital allocation and driving growth that generates cash flow.

Creating brands and products that resonate with the consumer remaining disciplined with our capital allocation and driving growth that generates cash flow.

Regarding the cannabis industry and the economy nothing has structurally changed since the last quarter.

Speaker 4: Regarding the cannabis industry and the economy, nothing has structurally changed since the last quarter.

Speaker 4: The industry said a new high water mark with sales of 7.4 billion in the quarter, which is a run rate of nearly $30 billion. And a 2.8% increase.

The industry set a new high watermark with sales of $7 4 billion in the quarter, which is a run rate of nearly $30 billion and a two 8% increase over last quarter we.

Speaker 4: We feel good about our 9% growth versus industry of 2.8%. And especially given our historical CAF X spend, we like the setup going forward.

We feel good about our 9% growth versus industry of two 8% and especially given our historical capex spend we like the setup going forward.

<unk> is in a solid financial position, mainly due to our intense focus on capital allocation and being fiscally responsible with the dollars anthem.

Speaker 4: Reedom is in a solid financial position, mainly due to our intense focus on capital allocation and being fiscally responsible with the dollar.

Speaker 4: Anthony will go into more detail on our CAPEX plans, but as I've said, we believe we are in the final stages of this CAPEX cycle. CAPEX cycle.

Anthony will go into more detail on our Capex plans, but as I've said, we believe we are in the final stages of this capex cycle.

I'll use our recent success in Maryland as an example.

Speaker 4: Positioning our company to benefit from adult use sales was two years in the making. We needed to invest in expanding our cultivation and manufacturing capacity to meet the anticipated demand.

Positioning our company to benefit from adult use sales was two years in the making we needed to invest in expanding our cultivation and manufacturing capacity to meet the anticipated demand.

We planned ahead to strategically locate our rise doors, where theres optimal access for medical patients and consumers.

Speaker 4: We planned ahead to strategically locate our rise doors where there's optimal access for medical patients and consumers.

Speaker 4: Hey, your town in the northwest corner of the state, Jocco near Baltimore and Silver Spring and Bethesda suburban communities in Washington, DC.

Hagerstown in the northwest corner of the state chocolate near Baltimore, and Silver spring in Bethesda suburban communities in Washington D C.

[laughter].

Speaker 4: We learned from the adult youth's Glippin' New Jersey last year as we prepared for a successful launch in Maryland. And we will build on our learnings from Maryland as we gear up for upcoming adult youth sales in Ohio.

We learned from the adult use flip in New Jersey last year as we prepared for a successful launch in Maryland, and we will build on our learnings from Maryland, as we gear up for upcoming adult use sales in Ohio.

Speaker 4: which voted to legalize yesterday and Minnesota coming soon, and potentially other states like Pennsylvania, Virginia, and Florida.

Voted to legalize yesterday, and Minnesota coming soon and potentially other states like Pennsylvania, Virginia and Florida.

All of this long term planning was focused on driving one outcome organic growth that generates cash flow.

Speaker 4: All of this long-term planning was focused on driving one outcome. Organic growth, the generis cash.

And because we have been successful in executing this model.

Speaker 4: And because we've been successful at executing this model, we have sufficient cash flow to continue investing in the business and pay our heavy tax burdens without taking on additional debt or diluting our shareholders with an equity rate.

We have sufficient cash flow to continue investing in the business and pay our heavy tax burden without taking on additional debt or diluting our shareholders with an equity raise.

Taking all this into consideration our board of directors authorized a share repurchase of up to $50 million.

Speaker 4: Taking all this into consideration, our Board of Directors authorized a share repurchase of up to $50 million, and we spent 25 million of-

And we spent $25 million of it in September.

Speaker 4: Going forward, we have the flexibility to use our cash reserves to repurchase more shares, or on debt...

Going forward, we have the flexibility to use our cash reserves to repurchase more shares.

On debt refinancing.

Speaker 4: Strategic M&A or investments in the business as opportunities present.

Strategic M&A or investments in the business as opportunities present themselves.

Turning to our CPG business, we are steadfast in our mission to build brands that will be part of the American experience for decades to come.

Speaker 4: For your CPG business, we are steadfast in our mission to build brands that will be part of the American experience for decades to come.

Speaker 4: And we're doing that by connecting people to cannabis in innovative ways. In early September , we held the first ever music and legal cannabis consumption concert in Illinois with the miracle in Mundalaj.

And we're doing that by connecting people to candidates in innovative ways. In early September we held the first ever music and legal cannabis consumption concert in Illinois with the Miracle in bundle line.

The event was truly a miracle the vibes, where hi, everyone was happy relaxed and connected with the music and each other.

Speaker 4: The event was truly a miracle. The vibes were high. Everyone was happy, relaxed, and connected with the music and each other.

Speaker 4: I want to thank everyone involved from our team members and our rise Munderline dispensary to the entire village of Munderline who will ensure the event was equal parts fun and safe.

I want to thank everyone involved from our team members at our ryzen underlying dispensary to the entire village a bundle lines helped ensure the event was equal parts funding unsafe.

It's no surprise that cannabis and music had been associated together for a long time.

Speaker 4: It's no surprise that cannabis and music have been associated together for a long time.

The elevate the positive connection between cannabis and music, we launched the rhythm artist series a line of celebrity musician strains that were developed with each artist and inspired by their lifestyle brand and preferences.

Speaker 4: To elevate the positive connection between cannabis and music, we launched the Rhythm Artists series, a line of celebrity musician strains that were developed with each artist and inspired by their lifestyle, brand, and preference.

This series is about honoring the authentic relationships with artists have wouldn't candidates, while bringing fans closer to their favorite artists by actually smoking the same strains as they do.

Speaker 4: This series is about honoring the authentic relationship that artists have with cannabis, while bringing fans closer to their favorite artists by actually smoking the same strains as they do.

Speaker 4: While we're excited about this innovative way to enhance the business experience, the artists are even more excited. Mitchell-Tempeany, State Camps, Marcus King and Tinashe are contributing their artistic senses and cannabis preferences to craft unique strains that will resonate with their fan base.

While we are excited about this innovative way to enhance the wisdom experience. The artists are even more excited Mitchell any state Champs Mark just king and <unk> are contributing their artistic senses and candidate preferences to craft unique strains that will resonate with their fan bases.

Yeah.

Speaker 4: I also want to welcome two new board members to the Board of Directors Richard Ryzen and Hannah Roth.

I also want to welcome two new board members to the board of Directors, Richard Ryzen and Hana Ross.

Richard has joined the audit Committee and Hana has joined both the audit and compensation committees of the board.

Speaker 4: Richard has joined the audit committee and Hannah has showing both the audit and compensation committees to the board.

Speaker 4: I look forward to the contributions both Richard and Hannah will bring to the table as we continue to strengthen our voice.

We look forward to the contributions both Richard and Hana will bring to the table as we continued to strengthen our board.

Finally.

Speaker 4: Finally, the world at war is creating a great deal of fear, uncertainty and anxiety. We are surrounded by heartbreaking coverage of the Israel-Hamas war, the continued conflict in Ukraine and other tragedies across the globe.

The World of war is creating a great deal of fear uncertainty and anxiety, we are surrounded by heartbreaking coverage of the Israel Hamas War.

<unk> conflict in Ukraine, and other tragedies across the globe.

Speaker 4: Our hearts are with the innocent people who are suffering as a result, and we hope and pray for peaceful resolution.

Our hearts are with the innocent people, who are suffering as a result, and we hope and pray for peaceful resolutions and.

Speaker 4: In these dark and overwhelming times, I've never been more confident in our mission

In the dark and overwhelming times I've never been more confident in our mission and the power of candidates to ease pain, calming xiety and promote positivity and wellbeing.

Speaker 5: Now I'll turn the call over to Anthony to add his thoughts on the court. Anthony, thanks Ben. Good afternoon everyone. Thanks for joining us.

Now I'll turn the call over to Anthony to add his thoughts on the quarter.

Anthony.

Thanks, Ken Good afternoon, everyone. Thanks for joining us.

As you just heard the company posted a robust third quarter to.

Speaker 5: to summarize, 275 million in revenue, 83 million in the just in the 58, 25 million in stock repurchase, and our favorite, 61 million in operating cash flow.

To summarize $275 million of revenue.

$83 million and adjusted EBITDA.

$25 million stock repurchase.

Our favorite $61 million in operating cash flow.

We couldnt be more proud of the team for their hard work and execution, especially in Maryland, where substantial preparation and planning allowed us to have a seamless transition into adult use.

Speaker 5: especially in Maryland, where substantial preparation and planning allowed us to have a seamless transition into a coating.

Throughout the quarter. We also saw a wholesale brand performance continued to strengthen in a number of greenfield markets.

Speaker 5: Throughout the quarter, we also saw a wholesale brand performance continue to strengthen in a number of green thumb markets.

Speaker 5: These share gains by rhythm, dog walkers and incredible as reported by BDS. Highlight our teams continue focused on improving flower quality and increasing stocking levels on our top performing goods.

These share gains by rhythm dog walkers and Incredibles as reported by Bds highlight our team's continued focus on improving flower quality and increasing stocking levels in our top performing goods.

Speaker 5: Just this week in Illinois, our team was recognized with 10 awards at the High Times Canada Cup, including four flower awards for rhythm jack-a-rare, rhythm slaps, rhythm black afghan, my personal favorite, a rhythm animal.

Just this week in Illinois, our team was recognized with 10 awards at the high times candidate <unk>.

Including four flower awards for our rhythm jhatka rare rhythm swaps rhythm Black Afghan my personal favorite a rhythm animal face.

On the Edibles front, our recent collaboration with Magnolia bakery highlights the broad reach of our incredible brand.

Speaker 5: On the edible front, a recent collaboration with Magnolia Bakery highlights the broad reach of our incredible brand, along with reinforcing its reputation as the credible edible.

Along with reinforcing its reputation as the credible edible.

Speaker 5: It's exciting for our team to receive these recommendations given our dedicated focus on the concerns.

It's exciting for our team to received these recognitions given our dedicated focus on the consumer.

In Q3, we invested 54 million across our CPG and retail fleet, bringing our year to date capital spend to $184 million.

Speaker 5: In Q3, we invested 54 million across our CPG and retail fleet, bringing our year-to-date capital spend to 194 million.

We anticipate spending approximately $50 million in the fourth quarter, bringing total 2023, capex spend to approximately $230 million.

Speaker 5: We anticipate spending approximately 50 million in the fourth quarter, bringing total 2023 cap expense to approximately 230 million.

During the quarter. In addition to various CPG facility investments, we opened two new stores, one off Craig wrote in Nevada, and the other in fruit when Park, Florida.

Speaker 5: During the quarter, in addition to various CPG facility investments, we open two new stores.

Speaker 5: One off Craig Road in Nevada and the other in Fruitland Park, Florida.

Speaker 5: Subsequent to quarter end, we've opened two additional stores in Florida and anticipate that we'll open approximately four more prior to year end as our Florida expansion continues.

Subsequent to quarter end, we've opened two additional stores in Florida and anticipate that will open approximately four more prior to year end as our Florida expansion continues.

Speaker 5: In a bit of recent news, we wanted to give a shout out to the bug eye state, which handily passed and don't use still yesterday. Big thanks to everyone.

And a bit of recent news, we wanted to give him a shout out to the Buckeye state, which handily passed an adult use bill yesterday.

Big banks to everyone involved to help support the effort.

We're hopeful the legislators now follow the will of the people and allow the personal freedoms people voted for.

Speaker 5: We're hopeful the legislators now follow the will of the people and allow the personal freedoms people voted for.

Yesterday.

As a reminder, we are well positioned to stay with our retail footprint and our state of the art Toledo based cultivation and processing facility.

Speaker 5: As a reminder, we are well positioned in the state with our retail footprint and our state-of-the-art Toledo-based cultivation and processing.

Speaker 5: As we get closer to 2024, while we are allocating meaningful resources toward cannabis legislative change, we intend to continue to operate our business assuming no tax relief, nor incremental capital market accessibility.

As we get closer to 2024, while we were allocating meaningful resources toward candidates legislative change, we intend to continue to operate our business, assuming no tax relief, nor incremental capital market accessibility.

As such we anticipate this year seems a cash flow generation and balance sheet stability to continue into the new year.

Speaker 5: As such, we anticipate this year's themes of cash flow generation and balance sheets' stability to continue into the mid-year.

Glass in advance of this weekend, we wanted to acknowledge the veteran community.

Speaker 5: Last, in advance of this weekend, we wanted to acknowledge the veteran community.

And thank them for all their sacrifice.

We look forward to the day that we can legally share a dog Walker as easy if they cannot Budweiser.

Speaker 5: We would forward to the day that we can legally share a dog walker as easy as a canabood watch.

Speaker 5: We hope everyone is a safe holiday season with their loved ones and we're forward to speaking with you in late February . With that, I'll turn the call over to that to review our financial results. Thank you.

We hope everyone has a safe holiday season with their loved ones and look forward to speaking with you in late February.

With that I'll turn the call over to Matt to review our financial results.

Thanks, Anthony and good afternoon, everyone.

Speaker 6: Generated over 275 million revenue in the third quarter of 2020.

We generated over $275 million in revenue in the third quarter of 2023.

Speaker 6: 5% increase compared to the prior year and a 9% sequentially.

5% increase compared to the prior year and a 9% sequential increase.

Speaker 6: While the effective price compression continues to pressure the top line, revenue during the quarter benefited from the legalization of adult use sales and marital.

While the effect of price compression continues to pressure the top line revenue during the quarter benefited from the legalization of adult use sales in Maryland.

Speaker 6: continued unit growth as well as revenue generator from eight new stores open during the year also contributed to the increase in rep.

Continued unit growth as well as revenue generated from eight new stores opened during the year also contributed to the increase in revenue.

Speaker 6: Overall, retail revenue increased 3% versus the third quarter of 2020.

Overall retail revenue increased 3% versus the third quarter of 2022.

Speaker 6: Third quarter comparable sales were up slightly compared to a third quarter last year on a base of 77.

Third quarter comparable sales were up slightly compared to the third quarter last year on a base of 77 stores.

Speaker 6: Consumer package goods growth revenue increased 18% versus the prior year.

Consumer packaged goods gross revenue increased 18% versus the prior year quarter.

Looking forward, we expect to see fourth quarter sequential revenue to be down low single digits much like we saw in the fourth quarter last year.

Speaker 6: Looking forward, we expect to see four-quarters sequential revenue to be down most single digits. Much like we saw...

Gross profit for the third quarter was $133 8 million or 48, 6% of revenue compared to $131 2 million or 52% of revenue for the third quarter last year.

Speaker 6: Gross profit for the third quarter was 133.8 million for 48.6% of revenue compared to 131.2 million for 50.2% of revenue for the third quarter last year. So the client and gross money.

The decline in gross margin was primarily driven by price compression.

Turning to Opex, selling general and administrative expense for the third quarter was $84 8 million or 38% of revenue compared to $82 5 million or 31, 6% of revenue last year.

SG&A, excluding depreciation amortization and onetime transaction costs and stock based comp, which we referred to as normalized operating costs approximated $59 million compared to $57 million in Q2 and $53 million in the third quarter of 2022.

Speaker 6: S-GNA, excluding depreciation, amortization, one-time transaction costs, and stock base comp, which we refer to as normalized operating costs, approximated $59 million compared to $57 million in Q2, and $53 million in the third quarter of 20.

The sequential increase in total expenses, primarily reflected costs associated with opening new stores and supporting adult use launch.

Speaker 6: The sequential increase in total expenses primarily reflected costs associated with opening new stores and supporting adult use.

Speaker 6: We continue to carefully manage our costs in this inflationary environment.

We continue to carefully manage our costs in this inflationary environment.

The company generated net income of $10 5 million or <unk> <unk> per basic and diluted share during the quarter.

Speaker 6: The company generated net income of 10.5 million for five cents per basic and the losing share during the course.

Speaker 6: This compares the net income of 9.8 million or 4 cents per basic individuality share reported last.

This compares to net income of $9 8 million or <unk> <unk> per basic and diluted share reported last year.

Adjusted EBITDA, which excludes noncash stock based compensation and other non operating costs was $83 million or 30% of revenue for the quarter as compared to $84 5 million or 32% of revenue for the third quarter last year.

Speaker 6: Adjust an eva-dub which excludes non-cast, stock-based compensation and other non-operating costs with 83 million or 30% of revenue for the quarter that's compared to 84.5 million or 32% of revenue for the third quarter to last.

We ended the third quarter with a strong balance sheet, including cash of $137 million and working capital of $170 million, while staying current with more than $28 million tax payments during the quarter and $80 million year to date, along with the repurchase of $25 million in shares during the quarter.

Speaker 6: We enter the third quarter, the strong balance sheet included cash, $137 million, and working capital of $107 million, while staying current with more than 28 million tax payments during the quarter in 80 million years today, along with the repurchase of $25 million in shares.

Cash flow from operations came in at $154 million for the nine months this year compared to $88 million last year. It was $61 million generated during the current quarter.

Speaker 6: Cash flow from operations came at 154 million for the nine months this year, compared to 88 million last year, was 61 million generating during the

Speaker 6: In summary, we're pleased with our third quarter performance and execution within this current market environment. We will continue to focus on execution.

In summary, we're pleased with our third quarter performance and execution with this within this current market environment.

We will continue to focus on execution and our stated goals.

Speaker 6: Thank you for your support and confidence. And we look forward to updating the next quarter. With that, I will open the call to your questions. Operator.

Thank you for your support and confidence and we look forward to updating you next quarter.

With that I will open the call to your questions operator.

We will now begin the question and answer session.

Speaker 1: Do ask a question. You may press stars and one on your touchtone phone.

To ask a question you May Press Star then one on your Touchtone phone.

If you are using a speakerphone please pick up your handset before pressing the keys.

Speaker 1: If you are using a speaker phone, please pick up your handset before pressing the keys.

Is it any time your question has been addressed and you would like to withdraw your question. Please press Star then two.

Speaker 1: Is it any time your question has been addressed and you would like to withdraw your question? We pressed star then to. You would ask for a limit of.

We would ask for a limit of one question per person.

At this time, we will pause momentarily to assemble our roster.

Speaker 1: As the family reposts momentarily to assemble our roster.

Yeah.

The first question today comes from Matt Mcginley with Needham. Please go ahead.

Speaker 1: The first question today comes from Matt McInley with Meadham. Please go ahead.

Speaker 7: Thank you. So on the gross margin, times you noted that price compression with the primary driver of that Deconn and rate, is like a few cap expand over the last few years. It's been mostly into production facilities.

Thank you.

On the gross margin side, you noted that price compression was the primary driver of that decline in rate.

Your capex spend over the last few years, it's been mostly in the production facilities and I think it's probably some of your some of your older facilities, you, probably arent fully utilizing that capacity as wholesale opportunity shrank and then some of the newer facilities you probably arent fully utilizing them because the markets have been opened up yet another DNA in your Cogs, probably increased a little over time, but I guess my question is like as you are.

Speaker 7: And I think in probably some of your older facilities, you probably aren't fully utilizing that capacity as whole soil opportunity shrank. And in some of the newer facilities, you probably aren't fully utilizing them because the markets haven't opened up yet.

Speaker 7: I know that DNA and your COGS probably increase a little over time, but I guess my question is, has your COGS per unit gotten worse over time from that capacity that's under utilized? And why would that not?

Cost per unit gotten worse over time from that capacity, that's underutilized and if not why would that not be the case.

Speaker 5: Yeah Matt, this is Anthony, that's a really good question.

Yes, Matt.

This is Anthony that's a really good question.

Speaker 5: What the reality is, we have a bit of what you just described happening within the portfolio.

Look the reality is.

We have a bit of what you just described happening within the portfolio.

Speaker 5: Right, so when you think about some of the states where we have greater capacity than needed, now I'll take Ohio for one, you know, that's a place where we have effectively plan to be less right now than we plan to call it a year ago. Obviously that will change what the dough needs, but certainly that facility is not operating at optimum efficiency.

So when you think about some of the states, where we have greater capacity than needed.

I'll I'll take Ohio for one.

That's a place where we are.

We effectively planting less right now than we that we plan to call. It a year ago, obviously that will change with adult use but certainly that facility is not operating at optimum.

Efficiency and.

Speaker 5: And then in addition to that, we have a number of facilities that we just turned on, call it Minnesota, Virginia, the new half its town facility in New Jersey, the New Facility in New York. Well, those are just going to be ramped up. So generally speaking, yes, we're running a little bit more cost to the P&L from a facility standpoint, due to having some new facilities that we brought online, as well as having some older legacy ones that are not operating up die at full cost.

And then in addition to that we have a number of facilities that we just turned on call. It in Minnesota, Virginia, The new Hackettstown facility in New Jersey.

Facility in New York, where those are just getting ramped up.

So generally speaking, yes, we're running a little bit more cost in the P&L from a facility standpoint.

Due to having some new facilities that we brought online as well as having some older legacy ones that are not operating at full capacity.

The next question comes from Eric Dey lawyer, right Craig Hallum Capital Group. Please go ahead.

Speaker 1: The next question comes from Eric DeLorius with Craig Hallum Capital Group. Please go ahead.

Great. Thanks for taking my questions and congrats again on another strong quarter here.

Speaker 8: Great, thank you for your questions. We'll go back to again on another strong quarter here. So it looks like Florida retail expansion, seemingly picking up here. I guess just a few questions there. Are these circle K stores? If you can comment on sort of the status of that partnership as it relates to regulators. And then just any comments on production expansion or CAPEX for Florida going forward. Thanks.

So it looks like Florida retail expansion significantly picking up here I guess just a few questions. There are these circle K stores.

If you could comment on sort of the status of.

That partnership as it relates to regulators and then just any comments on.

Production expansion or Capex for Florida going forward. Thank you.

Sure Eric Anthony here, I'll answer that again as well.

Speaker 5: Sure, I have any girl links for that again as well. So the source that we've opened this year have been standalone ride stores. Those are the things stores that we've been operating since we became operational to state a few years back.

So the stores that we've opened this year have been Standalone Rye stores. Those are the same stores that we've been operating since we became operational in a state a few years back.

Speaker 5: You know, we're still working with the Department of Health on operationalizing the stores that are adjacent to Circle K's. I hope you have an update there soon, but nothing tangible just yet. And look on the authority side, so the CAPEX spend was really fun and loaded.

We're still working with the <unk>.

With department of health on Operationalized in the stores that are adjacent to circle K's I hope to have an update there soon but nothing tangible just yet.

And look on the on the facility side or the Capex spend was really front end loaded.

Speaker 5: So for those that have operated in Florida for a while, they know that really the best way to approach is go to wholesale capacity and advance to the retail. So you can actually see the stores and scale them up over time. So at the thank you what we've been doing, we finished the spend call late last year and the this year. We've been ramping up the facility and now we're over to our retail site expansion and have a lot of good things to store for 24.

So for those that have operated in Florida for a while.

Really the best way to approach is filled the wholesale capacity in advance of the retail. So you can actually feed the stores and scale them up over time. So that's effectively what we've what we've been doing we finished the spend call. It late last year into this year, we've been ramping up the facility now.

To our retail site expansion and have a lot of good things in store for 'twenty four.

Thank you.

Speaker 1: The next question comes from Erin Gray with Alliance Global Partner. Please go ahead.

The next question comes from Aaron Grey with Alliance Global Partners. Please go ahead.

Yeah.

Thanks for the question and congrats on the quarter.

So can you speak to some of the learnings that <unk> had in terms of setting up our conversion in the adult use market that you mentioned with strong conversion that you guys had in Maryland.

Speaker 9: So can you speak to some of the learnings that you've had in terms of setting up for conversion and they don't use markets that you mentioned with strong conversion that you guys have had in Maryland?

Speaker 9: You guys were a market leader in the legacy Maryland market. You're also one of the market leaders in Minnesota In Ohio, which should be converting as well as a potential converting market of Pennsylvania So if you feel like this is a distinct advantage Needs in kind of capitalizing on the conversion or other factors that you believe contributed to it You know any color you could provide without giving away Maybe some ticker sauce would be appreciated in terms of that so commercial with Maryland. Thanks Yeah

We're a market leader in the legacy, Maryland market, you also wanted to market leaders, and Minnesota, and Ohio, which would be converting as well as the potential converting market in Pennsylvania. So do you feel like this is a distinct advantage in using kind of capitalizing on the conversion or are there. Other factors that you believe contributed to it.

Color you can provide without giving away some secret sauce that we appreciate in terms of that sequential comparison with Maryland.

Sure, Yeah, and Anthony here.

Yeah look the reality is our number one you've got to learn from your mistakes I would say that we've learned a lot in new Jersey.

Speaker 5: Look, the reality is, number one, you've got to learn from your mistakes. I would say that we learned a lot in New Jersey, learned a number of things of what not to do. And the reality is there's not a silver bullet, there's no real secret sauce. It's really just making sure you've got a great team because it's a lot of heavy lift. That's number one, two, product quality of key. You know, one of the things that we did early on when we knew Maryland was going to do it, you know.

On a number of things of what not to do.

In reality, there's not a it's not a silver bullet there is no real secret sauce.

It's really just making sure you've got a great team because it's a lot of heavy lift.

That's number one to product quality is key.

One of the things we did early on with women in Maryland was going adult use.

We focused on improving the rhythm flower quality, so that once we hit the adult use market, we can really hit the ground running.

Speaker 5: We focused on improving the rhythm of our quality, so that once we hit the adult use market, which really hit the ground running, generally flower is the tip of the sphere. So, you know, but it's really just making sure that we're fully staffed up, our sites are ready to handle the additional volume, and really just continuing to learn from our mistakes and evolve as a business. Thank you.

Generally flower as the tip of the spear so.

But it's really just making sure that we're fully staffed up our sites are ready to handle the additional volume and really just continuing to learn from our mistakes and evolve as a business.

Great. Thanks for the color.

Thanks Darren.

The next question comes from Scott Fortune with Roth.

Speaker 1: The next question comes from Scott Portion with Roth MKM. Please go ahead.

Please go ahead.

Yes, good afternoon, and thanks for the question.

Speaker 10: Yeah, good afternoon. And thanks for the question. Do you want to focus a little bit on the wholesale side? And as you see, some new tours, these social media stores coming on board in Illinois, New Jersey. How are you, how's that growth coming from that on the wholesale side? And are you seeing kind of that starting to canabalize a little bit on the retail sales as we see more of this, these stores come on board in these stages. Kind of your strategy at wholesale versus retail on these these states that are picking up on the retail side. Yeah, Scott, everything else.

Focus will be on the wholesale side as you see from new stores, the social activities towards coming onboard in Illinois, and New Jersey.

How are you how is that growth coming from that on the wholesale side.

Seeing kind of that starting to cannibalize a little bit on the retail sales as we see more of these stores come on board in the states is kind of your strategy.

Wholesale versus retail on these days.

These states are picking up on the retail side.

Yes, Scott I'll take that question as well.

Speaker 5: If your question is specific to New Jersey, yes, you know, what we've seen is as additional stores have opened up in the state, there's been a rogion on our retail business and increased demand on the wholesale side.

If your question is specific to new Jersey.

Yes, what we've seen is there's additional stores have opened up in the state has been erosion on our retail business and increased demand on the wholesale side.

Speaker 5: you know that's the that's currently what's happening in in New Jersey right now the reality is that you know you can't paint all these markets with the same brush

That's the that's currently what's happening in New Jersey right now the reality is that.

You can't paint all of these markets with the same brush so.

Speaker 5: So, well, that may be going on in New Jersey to be a different kind of supply demand situation in other markets.

While that may be going on in new Jersey, it could be a different kind of supply demand situation in other markets, but we've seen in new Jersey stores have opened up.

Speaker 5: But we've seen in Jersey if it, you know, stores have opened up, you know, at a nice pace over the last call, you know, two quarters. And, you know, we feel pretty good about the fact that we've got additional wholesale capacity coming with Aguistown. I mean, you know, can't really, we wish we had the capacity sooner, but setting up to work out pretty well now is all these stores really opening up.

At a nice pace over the last call it.

Two quarters and.

We feel pretty good about the fact that we've got additional wholesale capacity coming with Abbotstown.

Candidly, we wish we had the capacity sooner, but it's setting up to work out pretty well now is all these stores really opening up.

Speaker 5: So as we kind of look ahead, we think there's probably greater growth in the whole sales side than the retail side for at least for green time.

And so as we kind of look ahead, we think theres, probably greater growth in the wholesale side and the retail side for at least for grant them.

Thank you.

The next question comes from Gerald Pascarelli with Wedbush. Please go ahead.

Speaker 1: The next question comes from Darrell Pascarelli with Lead Bush. Please go ahead.

Speaker 8: Great. Thank you very much for taking a question. Mac were a related question on the resumption of student loan repayments. They were doomed last month. Just curious on how you're thinking about a potential impact from that. Speaking of the industry just in terms of unit sales or potential down trading. Any color you could provide.

Great. Thank you very much for taking the question.

Macro related question on the resumption of student loan repayments. They resumed last month, just curious on how youre thinking about a potential impact from that.

Speaking of the industry just in terms of.

Unit sales or potential down trading any color you can provide.

Speaker 8: you know, on that, on your thoughts on the student won't repay them, it will be great. Thank you very much.

On that on your thoughts on the student loan repayments will be great. Thank you very much sir.

Speaker 11: Here, hey, Jared, I'll spend the weekend and we haven't spent a lot of calories at time on that. We're focused pretty bottom up on what's happening in the box and appealing to consumers. There's more money coming in to consumers pockets through the leap of fire dead or whether it was tax repayments. We saw that hit pretty fast. And that was a big thing coming out of COVID or other sorts of bonuses.

Sure Hey, Jeremy it's Ben.

Candidly I Havent spent a lot of calories of time on that we're focused pretty bottom up on what's happening in the box and appealing to consumers, there's more money coming into the consumer's pockets through relief of prior debt or whether it was tax repayments, we saw that hit pretty fast and that was a big thing coming out of COVID-19 or other sorts of bonuses.

Bonuses to the consumer.

We're watching what's happening on the ground every day bottom up to make decisions on pricing and sort of value orientation and a different sorts of deals to drive the best unit economics, we can.

Speaker 11: We're watching what's happening on the ground every day, bottom-ups make decisions on pricing and sort of value orientation and different sorts of deals to drive the best unit economics we can. But having to, you know, aren't super focused on the student loan. We're seeing a lot more unit growth, obviously, than giving the pricing. But it's a five-state.

But haven't.

Our Super focused on the student loan we're seeing a lot more unit growth, obviously, and then given the pricing, but it's a by state.

By sort of product discussion for us versus a macro one market business for now.

Speaker 11: by sort of product discussion for us versus a macro one market business for now.

Got it thanks, Thanks Pam.

Okay.

Our next question comes from Matt Bottomley with Canaccord Genuity. Please go ahead.

Speaker 1: The next question comes from Matt Bottomel with Canico Genuity. Please go ahead.

Good evening, congrats on the Great Frontier and a question for me just on the onset here just on Maryland, specifically you called it out in your prepared remarks and in the press release.

Speaker 12: Good evening, congrats on the great print here. And a question for me just on the onset here is just on Maryland specifically, you called it out in your prepare remarks and in the press release. You had to appear this morning, report earnings and gave some granularity on sort of state by state metrics. I'm just wondering, I think they quoted having about a 7% market share in Maryland and it looks like from what I've seen in the branded sales data, which I know is on a sample base. You guys are probably 2X that. Are you comfortable on providing any sort of commentary on where your standing is in Maryland? I know it's about a billion dollar market. Right out of the gate on the July 1 implementation, I'm just wondering, could you have a 15%-ish market share there or if you're not willing to get into the numbers, just any sort of directional commentary on how that market's been going so far?

You had a peer this morning report earnings and gave some granularity on sort of state by state metrics I'm. Just wondering I think they quoted having about a 7% market share in Maryland, and it looks like from what I've seen.

In the branded sales data, which I know is on a sample base you guys are probably two X that so are you comfortable on providing any sort of commentary on where you are standing us in Maryland, I know, it's about $1 billion market right out of the gate on the July one implementation I'm. Just wondering could you have a 15% ish market share there or if you're not willing to get into the numbers just.

Any sort of directional commentary on how that market has been going so far.

Yes, Thanks, Matt Hey, it's Ben.

Speaker 13: Yeah, thanks my head Ben.

Speaker 14: I can take this from giving me some relief to businesses. I know the number's a little not as well as antigen. So we're very bullish on Maryland. Great start, a lot of transparency from the state.

I can take this one giving us some relief continues as I don't know if theres, a little not as well as Anthony so.

We're very bullish on Maryland, great start lot of transparency from the state and.

Speaker 14: And we see a lot of growth ahead. We're really focused on the quality of our products. Like Anthony mentioned, rhythm flower, dog walkers, incredible things are doing very well there.

And we see a lot of growth ahead, we're really focused on the quality of our products like Andy mentioned rhythm flower al walkers Incredibles things are doing very well there.

Speaker 14: and we continue to be able to increase output and drive some efficiencies there.

And we continue to be able to increase output and drive some efficiencies X, we're not going to comment on state by state individual data, but we remain optimistic on what's going on in Maryland. The team. There continues to really kill it they are grinding it out and it's showing up in.

Speaker 14: We're not going to comment on state-by-state individual data, but we remain optimistic on what's going on in Maryland. The team there continues to really kill it. They're grinding it out. And it's showing up.

Speaker 14: And we can take that playbook and we know what consumers want and we can continue to deliver on that across the country Because that's what we've been focused. It's really the same script over and over for us in order to drive those games

And we can take that playbook, and we know what consumers want and we can continue to deliver on that across the country. Because that's what we've been focused it's really the same script over and over for us in order to drive those gains so.

Speaker 14: Just yesterday Ohio turns on, we see that September 7th, 2024. It's marked on my calendar and we're ready for it. And we're going to go out of it again. So thanks.

Just yesterday, Ohio turns on and we see that September seven 2024, it's Martin on my calendar and we're ready for it and we're going to go at it again.

So thanks I appreciate the question Matt.

Okay, and then just on Ohio, specifically had some calls today sort of going around and obviously.

Speaker 12: okay and then just on ohio specifically had some calls today sort of going around and and obviously you know a lot of bullish sentiment on on the positive vote from from last night but it seems like there's some cautious optimism uh... with respect to maybe what the governor might say or just sort of the state politicians with respect to potentially challenging it so it is you know ohio a bit of a a bit of a

A lot of bullish sentiment on the positive vote from from last night, but it seems like there is some cautious optimism.

With respect to maybe what the governor might say or just sort of the state politicians with respect to potentially challenging it so isn't ohio, a bit of a bit of a.

Speaker 12: is there some new ones to exactly what we're waiting to see before we actually expect you know maybe nine months out and implementation are we waiting to get official commentary from the governor or from uh... the legislators on that uh... just given the fact that it's something that you know although polling was very positive uh... in advance of of it actually going through yesterday it seems like uh... you know the local politicians there have not been shy about speaking against it

Is there some nuance to exactly what we're waiting to see before we actually expect maybe nine months out and implementation are waiting to get official commentary from the governor from.

The legislators on that just given the fact that it's something that.

Although polling was very positive in advance of actually going through yesterday. It seems like the local politicians there have not been shy about speaking against it.

Speaker 14: Yeah, I mean, it's hard to comment. There's been again, thanks. It's hard to comment politicians and say whatever they want. The will of the people is pretty clear. 57% in Ohio is about 70% across the country and all the polling in Ohio makes it very clear this is what the people want. And there's a lot of political posturing. We're focused on hiring people, creating a great economy in there, taking away unsafe products that's on the street, or frankly a lot of people driving over to Michigan to bring their products back to Ohio, there should be Ohio jobs and Ohio tax dollars.

Yes, it's hard to comment there's been again, thanks, it's hard to kind of politicians can say whatever they want the will of the people is pretty clear at 57% in Ohio is about 70% across the country and all the polling in Ohio. It makes it very clear. This is what the people want and Theres a lot of political posturing, we're focused on hiring people, creating a great economy and they're taking it.

Unsafe product that's on the street or frankly, a lot of people driving over to Michigan to bring that product back to Ohio, there should be Ohio jobs in Ohio tax dollars.

Speaker 14: So we're ready to play our part in this and we're focused on the win But there's a lot of detail to be worked out. It's not a constitutional amendment We put a lot of facts out there both on our social media and otherwise to give the way of the land of what's happening And we're comfortable with what's going on We're excited about Toledo and we're excited about the job creation in Ohio as a result of this program Great question

So we're ready to play our part in this and we're focused on the win but there's a lot of details to be worked out is not a constitutional amendment, we put a lot of facts out there both on our social media and otherwise to give you the lay of the land of what's happening.

We're comfortable with what's going on and we're excited about Toledo and we're excited about the job creation in Ohio as a result of this program.

Question.

Okay got it thanks Ben.

Thanks, Matt.

This concludes our question and answer session I would like to turn the conference back over to Ben Copay, Chairman and CEO for any closing remarks.

Speaker 1: This concludes our question and answer session. I would like to turn the conference back over to then Cobler, Chairman and CEO for any closing remarks.

Speaker 14: Thanks Betsy, thank everybody for joining us. Have a happy and safe holiday season. Talk to you soon.

Thanks, Betsy thanks, everybody for joining us have a happy and safe holiday season talk to you soon.

Speaker 1: The conference is now included. Thank you for attending today's presentation. You may now disconnect.

The conference has now concluded. Thank you for attending today's presentation you may now disconnect.

Yeah.

Speaker 2: We.

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