Q4 2023 Green Thumb Industries Inc Earnings Call

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Operator: Good day, and welcome to Green Thumb Industry's fourth quarter and full year 2023 earnings conference call and webcast. All participants are in a listen-only mode.

Good day, and welcome to Green thumb industries fourth quarter and full year 2023 earnings conference call and webcast.

Operator: Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. On today's call, management will provide prepared remarks, and then we will open up the call for your questions. To ask a question, analysts may press star then 1 on their touchtone phone. If you are using a speakerphone, please pick up your handset before pressing the keys.

Operator: And to withdraw your question, please press star, then 2. Please note, this event is being recorded. I would now like to turn the conference over to Shannon Weaver, VP of Communications. Please go ahead, ma'am.

I would now like to turn the conference over to Shannon Weaver VP of Communications. Please go ahead ma'am.

Shannon Weaver: Thanks, besties. Good afternoon, and welcome to Green Thumb's fourth quarter and full year 2023 earnings call. I'm here today with founder and CEO Ben Kovler, President Anthony Georgiadis, and Chief Financial Officer Matt Faulkner. Today's discussion and responses to questions may include forward-looking statements that 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 the reports filed with the United States Securities and Exchange Commission and Canadian securities regulators, including our most recent annual report filed on Form 10-2. This report, along with today's earnings release, can be found under the Investors section of our website. 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-GAAP financial measures, including EBITDA and adjusted EBITDA. A reconciliation of non-GAAP financial measures to the most directly comparable GAAP measures is included in our earnings press release and SEC and CEDAR files. Please note that all financial information is provided in U.S. dollars unless otherwise indicated. Thanks, everyone. And now, here's Beth.

Shannon Weaver: Thank you Betsy and good.

Shannon Weaver: Good afternoon, and welcome to Green by the fourth quarter and all year in 2023 earnings.

Shannon Weaver: I'm here today, with founder and CEO of Banco work.

Anthony Georgiadis: Anthony George got it.

Anthony Georgiadis: Financial Officer, Matt.

Anthony Georgiadis: 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 days.

Anthony Georgiadis: 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 and Canadian Securities regulators, including.

Anthony Georgiadis: Our most recent annual report filed on Form 10-K.

Anthony Georgiadis: That's the report along with today's earnings release can be found under the investors section of our website.

Anthony Georgiadis: Greenbaum 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 greenbaum overburden and non-GAAP financial measures, including EBITDA and adjusted EBITDA.

Anthony Georgiadis: A reconciliation of non-GAAP financial measures and most directly comparable GAAP measure is included in our earnings press release and hockey in senior housing.

Anthony Georgiadis: No all financial information is provided in U S dollars.

Anthony Georgiadis: Otherwise indicated.

Anthony Georgiadis: Thanks, everyone and now here's Pat.

Benjamin Kovler: Thank you, Shannon. Good afternoon, everyone. Thank you for joining our fourth quarter in 2023 year-end conference call. I'll lead off with an overview of our results and some quick observations on the industry. Anthony will discuss the progress we made in 2023, designed to carry momentum into 2024 and beyond. Then Matt will dive into the financials, and after that, we'll open the call up to questions.

Pat: Thank you Shannon and good afternoon, everyone. Thank you for joining our fourth quarter 2023 yearend conference call.

Pat: I'll lead off with an overview of our results quick observations on the industry.

Pat: Anthony will discuss the progress we made in 2023 designed to carry momentum into 2024 and beyond.

Anthony Georgiadis: Then that will dive into the financials and after that we'll open the call up to questions.

Benjamin Kovler: I'm pleased to report that our team delivered a strong finish to 2023. Even with price compression in some markets and inflationary impacts on consumer spending, we saw our year-over-year revenues increase 7.3% in Q4. This performance contributed to a record fourth quarter for revenues, cash flow from operations, and adjusted EBITDA. On a gas net income basis, we reported $3 million, or one cent per basic and diluted share for the fourth quarter.

Speaker Change: I'm pleased to report that our team delivered a strong finish to 2023.

Pat: Even with price compression in some markets and inflationary impacts on consumer spending we saw our year over year revenues increased seven 3% in Q4.

Pat: This performance contributed to a record fourth quarter revenues cash flow from operations.

Pat: And adjusted EBITDA.

Pat: Oh, yeah, they didn't come basis, we reported $3 million, one per basic and diluted share for the fourth quarter.

Benjamin Kovler: Importantly... For 2023, cash flow from operations was $225 million, and at year end, we had $162 million in cash on our balance sheet, net of share buybacks, debt repurchases, and fully funded tax payments. Green Thumb is in strong financial shape, which largely reflects a capital allocation strategy focused on generating cash flows.

Pat: Importantly.

Pat: We're calling 23 cash flow from operations was $225 million.

Pat: And at year end, we had $162 million in cash on our balance sheet net share buybacks debt repurchases and fully funded tax payments.

Pat: Green thumb is in strong financial shape that largely reflects the capital allocation strategy focused on generating cash flows.

Benjamin Kovler: Over the past few years, we have deployed considerable capital within our key markets in anticipation of expansion. When New Jersey, Maryland, Connecticut, and New York launched adult-use sales, we had an expanded infrastructure in place to serve a greater market demand. Adult-use sales are on the horizon for Virginia, Ohio, and Minnesota, and potentially other states where we operate, like Florida and Pennsylvania.

Pat: Over the past few years, we have deployed considerable capital that our key markets in anticipation of expansion.

Pat: We have New Jersey, Maryland, Connecticut, and New York launched adult use sales, we had an expanded infrastructure in place survey greater market demand.

Pat: Adult use sales are on the horizon for Virginia, Ohio, and Minnesota.

Pat: And potentially other states, where we operate like Florida and Pennsylvania.

Benjamin Kovler: We are ahead of the curve when those markets open for adult-use retail sales. While our major CapEx cycle is behind us, we will continue to invest in accelerating growth within our operating market. As part of our capital allocation strategy, in September, our board authorized our first share repurchase program for up to $50 million.

Pat: We are ahead of the curve when those markets open for adult use retail sales.

Pat: While our major Capex cycle is behind US, we will continue to invest in scaling growth within our operating markets.

Anthony Georgiadis: As part of our capital allocation strategy in September our board authorized our first share repurchase program for up to $50 million.

Benjamin Kovler: We believe that this share repurchase program is an appropriate tool for creating shareholder value without compromising our growth initiatives. To date, we have purchased approximately $40 million, or 3.8 million shares. We paid a reasonable price, and now every shareholder owns a slightly bigger piece of the pie. In addition, the board approved an additional $50 million for the repurchase program, bringing the remaining authority to repurchase shares to approximately $60 million, for a total of $100 million for the program.

Anthony Georgiadis: We believe that this share repurchase program is an appropriate is an appropriate tool for creating shareholder value without compromising our growth initiatives.

Anthony Georgiadis: We have purchased approximately $40 million or three 8 million shares.

Anthony Georgiadis: We paid a reasonable price and now every shareholder owns a slightly bigger piece of the pie.

Anthony Georgiadis: In addition, the board approved an additional $50 million for the repurchase program, bringing the remaining authority to repurchase shares to approximately $60 million for a total of $100 million for the program.

Benjamin Kovler: Additionally, as it relates to the senior debt, we repurchased $25 million of that debt at a 5% discount during the fourth quarter, bringing our remaining principal balance to $225 million at the end of 2023. We continue to focus on building a business to succeed regardless of federal change, while remaining hopeful for the potential reclassification of cannabis to Schedule III, a move that would eliminate the punitive impact of 288. This would be helpful for Green Thumb, especially since we paid over $100 million in cash taxes in 2023.

Anthony Georgiadis: Additionally, as it relates to the senior debt, we repurchased 25 million of bad debt and a 5% discount during the fourth quarter, bringing.

Anthony Georgiadis: Bringing a remaining principal balance of $225 million at the end of 2023.

Anthony Georgiadis: We continue to focus on building a business to succeed regardless of federal change while remaining hopeful for the potential reclassification of Canada the schedule III.

Anthony Georgiadis: A move that would eliminate the punitive impact of 280.

Anthony Georgiadis: This would be helpful for green thumb, especially since we paid over $100 million in cash taxes for 2023.

Benjamin Kovler: Separately, we also look forward to the day when U.S. cannabis companies can list on the U.S. exchange, which would increase the company's access to capital and the marketability of our stocks. Turning to consumer demand, We see positive indicators that consumer sentiment will continue to drive the long-term growth prospects of Canada. Number one: Acceptance of cannabis for health and well-being is evident, with 70% of U.S. adults believing cannabis should be legal. Number two.

Anthony Georgiadis: Separately, we also look forward to the day that U S. Cannabis companies can list on the U S exchange.

Anthony Georgiadis: The increase the company's access to capital and the marketability of our stock.

Anthony Georgiadis: Turning to consumer demand.

Anthony Georgiadis: We see positive indicators that consumer sentiment will continue to drive the long term growth prospects co candidates.

Anthony Georgiadis: Number one.

Anthony Georgiadis: Acceptance of candidates for health and wellbeing as evidenced with 70% of U S. Adults, believing cannabis should be legal.

Anthony Georgiadis: Number two.

Benjamin Kovler: U.S. legal cannabis sales are estimated at approximately $30 billion for 2023, with more growth expected ahead. And number three, my favorite: over the next five years, there are expected to be 18 million new cannabis consumers in the U.S., while there will be 2 million fewer alcohol consumers. And that's the driver.

Anthony Georgiadis: U S legal cannabis sales are estimated at approximately $30 billion for 2023 with more growth expected ahead.

Anthony Georgiadis: And number three my favorite over the next five years, there are expected to be 18 million new candidates consumers in the U S well, there will be $2 million less alcohol consumers.

Anthony Georgiadis: And that's that drives us.

Benjamin Kovler: Now more than ever, we remain hyper-focused on our patients and customers. We are growing our family of award-winning cannabis brands, Rhythm, Dogwalkers, Incredibles, and Bebo. We provide our customers with an even wider array of choices that suit their preferences and price preferences.

Anthony Georgiadis: Now more than ever we remain hyper focused on our patients and customers.

Anthony Georgiadis: We are growing our family of award winning cannabis brands rhythm dog walkers Incredibles in vivo.

Anthony Georgiadis: To provide our customers with an even wider array of choices that suit their preferences and price points.

Benjamin Kovler: We're on a mission to continue building brands that will be part of the American experience for decades to come, and we will continue to explore innovative ways to connect people to cannabis, whether it's the first-of-its-kind Miracle in Mundelein Legal Cannabis Consumption Music Festival that I mentioned last quarter, the expansion of our Rhythm Artist Series, including the exciting momentum around Tinashe's Green Pea Strain or new collaborations like the one Our strong brand recognition is opening doors to engage and excite our customers in new ways. And as our brands grow, the stars are aligning to create even more opportunities to increase brand awareness and attract new customers. We believe this is just the beginning for Rhythm, Dogwalkers, the Incredibles, and B-Boys.

Anthony Georgiadis: We're on a mission to continue building brands it will be part of the American experience for decades to come and.

Anthony Georgiadis: And we will continue to explore innovative ways to connect people to candidates.

Anthony Georgiadis: Whether it's the first of its kind miracle I'm underlying people cannabis consumption music festivals as I mentioned last quarter.

Anthony Georgiadis: The expansion of our rhythm artist series, including the exciting momentum around <unk> Green tea strain.

Anthony Georgiadis: Or new collaborations like the one with Magnolia bakery and our incredible brand.

Anthony Georgiadis: Our strong brand recognition is opening doors to engage and excite our customers in new ways.

Anthony Georgiadis: And as our brands grow the stars are aligning to create even more opportunities to increase brand awareness and attract new customers.

Anthony Georgiadis: We believe this is just the beginning for rhythm dog walkers Incredibles and BMO.

Benjamin Kovler: My confidence in the future of cannabis has continued to grow since we founded Green Thumb ten years ago. That said, outsized opportunity is only as good as an organization's ability to maximize its potential. We are continuously studying what separates success from failure. It all comes down to long-term planning paired with strong execution that delivers organic growth and cash flow. For us, it's about focusing on investing capital for the greatest risk-adjusted return, our obsession with providing customers with the best, most authentic cannabis products and experience, and our intensity around strategically executing our growth. Every day is still day one, and we are always looking forward to ways to get better as we evolve and continue to win. The team accomplished a great deal in 2023, and that sets us up well for 2024 and beyond, as Anthony will discuss in a moment. However, no achievement, whether big or small, happens without an amazing and committed team across all aspects of the business. We can build cultivation facilities, open stores, and develop new products, but it's the people who care about promoting well-being through the power of cannabis and who are dedicated to treating people well that matter most.

Anthony Georgiadis: My confidence in the future of cannabis has continued to grow since we founded wrapped up 10 years ago.

Anthony Georgiadis: That said outsized opportunity is only as good as an organization's ability to optimize its potential we.

Anthony Georgiadis: We are continuously studying what separates success from failure and it all comes down to long term planning paired with strong execution that delivered organic growth and cash flow.

Anthony Georgiadis: For us, it's about focusing on investing capital for the greatest risk adjusted returns.

Anthony Georgiadis: Our obsession on providing customers with the best most authentic cannabis products and experiences.

Anthony Georgiadis: Our intensity around strategically executing our growth plan.

Anthony Georgiadis: Every day, it's still day, one and we are always looking forward to ways to get better as we evolve and continue to win.

Anthony Georgiadis: The team accomplished a great deal in 2023 and that sets us up well for 2024 and beyond as Anthony will discuss in a moment.

Anthony Georgiadis: However, no achievement, whether big or small happened without an amazing and committed team across all aspects of the business.

Anthony Georgiadis: We can build cultivation facilities open stores and develop new products, but it's the people who care about promoting well being through the power of cannabis and who are dedicated to treating people well that matters most.

Benjamin Kovler: And this dedication extends beyond the doors of Green Thumb and out into our community. On February 8th, we published our second annual social impact report that shares many stories of our Growing for Good program and the positive impact it's having in the communities we serve. The report highlights the causes we support to promote a more inclusive and equitable industry, the ways we advocate for social and restorative justice, and how we seek to be more environmentally aware. Above all, our social impact report celebrates our team's dedication and achievement, and I could not be prouder of our 4,600+ team members who make it happen every day in every way. Now, I'll turn the call over to Anthony to add his thoughts on 2023 and beyond. Anthony?

Anthony Georgiadis: And this dedication extends beyond the doors at green thumb out into our communities on February eight we published our second annual social impact report. It shows many stories of our growing for good program and positive impact it's having in the communities we serve.

Anthony Georgiadis: The report highlights the causes we support to promote a more inclusive equitable industry ways, we advocate for social restorative justice and how we seek to be more environmentally aware.

Anthony Georgiadis: Above all our social and back report celebrates our team's dedication on achievements and I could not be prouder of our 4600 plus team members, who make it happen every day in every way.

Anthony Georgiadis: Now I'll turn the call over to Anthony to add his thoughts on 2023 and beyond Anthony.

Anthony Georgiadis: Thanks Ben, as you just heard, despite substantial industry, inflationary, and consumer headwinds, the company posted robust fourth-quarter results, tapping off an incredibly successful year for our team. Let's look at some of the highlights.

Anthony Georgiadis: Thanks, Dan.

Anthony Georgiadis: Just heard despite substantial industry inflationary in consumer habits.

Anthony Georgiadis: The company posted robust fourth quarter results capping off an incredibly successful year for our team.

Anthony Georgiadis: Let's look at some of the highlights.

Anthony Georgiadis: First, throughout the year, we invested $220 million in CapEx and opened 15 new stores across six states, ending the year with 91 stores. We also made major wholesale investments in New York, Minnesota, Virginia, New Jersey, and Florida. Second, continue strong performance across our award-winning family of brands, Rhythm, Dog Walkers, Incredibles, and Bebos. We're incredibly proud of our BDS market share gains in Illinois, Maryland, and Pennsylvania, along with our 12 High Times Candidates Cup wins in Illinois and Massachusetts, including six gold cups. Third, an incredibly successful adult use launch in Maryland. Since July 1st, our team has established a leading market position in the state and has not looked back. And last, but not least, the successful launch of the first open Cannabis Consumption Music Experience, Miracle in Bundelheim, as well as the launch of our Rhythm Artist Series with Mitchell Tenpenny, Marcus King, State Champs, and Tinashe.

Anthony Georgiadis: First throughout the year, we invested $220 million in Capex and opened 15, new stores across six states ending the year with 91 stores.

Anthony Georgiadis: We also made major wholesale investments and New York, Minnesota, Virginia, New Jersey, and Florida markets, We anticipate will grow considerably in the years to come.

Anthony Georgiadis: Second continued strong performance across our award winning family of brands rhythm Dog-walker Incredibles in vivo.

Anthony Georgiadis: We're incredibly proud of our Bds market share gains, Illinois, Maryland, Pennsylvania, along with our 12 High times Cannabis Cup wins in Illinois, Massachusetts, including six Cold Cups.

Anthony Georgiadis: Third an incredibly successful adult use launching Maryland.

Anthony Georgiadis: Since July 1st our team has established a leading market position in the state and its not look back.

Anthony Georgiadis: Alas successful launch of the first open cannabis consumption music experience, a miracle and bundle up as well as the launch of our rhythm artist series with Mitchell Tenpenny, Marcus King State Champs internationally.

Anthony Georgiadis: These results represent the culmination of a tremendous amount of hard work, discipline, and passion with which our team approaches the work we do for patients and consumers every day. Two months into 2024, and some of last year's themes continue to ring true. For example, we remain skeptical about the timing of any fundamental federal reform, including rescheduling and capital market accessibility.

Anthony Georgiadis: These results represent the culmination of a tremendous amount of hard work discipline and passion with which our team approaches the work, we do for patients and consumers every day.

Anthony Georgiadis: Two months into 2020 for some of last year's themes continue to ring true.

Anthony Georgiadis: One we remain skeptical on the timing of any fundamental federal reform, including rescheduling and capital market accessibility.

Anthony Georgiadis: As a reminder, we were left at the altar of safe banking around this time last year. Two, we anticipate continued price erosion in many of our markets. The confluence of supply-demand imbalances, competition from unregulated and or Farm Bill compliant products, and the current state of the consumer leads us to believe that industry pricing and margins will continue to be under pressure throughout the year. If we prefer wind at our back versus in our face, this setup plays to our strength. Cash flow generation and balance sheet management have been core to our DNA since day one. [inaudible] Despite regulatory challenges and industry pricing, we are cautiously optimistic about the state adult use discussions happening in Ohio, Minnesota, Virginia, Florida, and Pennsylvania.

Anthony Georgiadis: As a reminder, we were left at the altar on safe banking around this time last year.

Anthony Georgiadis: Two we anticipate continued price erosion in many of our markets.

Anthony Georgiadis: Confluence of supply demand imbalances competition from unregulated indoor farm Bill compliant product and the current state of the consumer leads us to believe that industry pricing and margins will continue to be under pressure throughout the year.

Anthony Georgiadis: Well, we prefer winded our back versus in our face. This setup plays to our strengths as cash flow generation and balance sheet management have been core to our DNA since day one.

Anthony Georgiadis: Despite regulatory challenges and industry pricing.

Anthony Georgiadis: We're cautiously optimistic on the state of adult use discussions happening in Ohio, Minnesota, Virginia, Florida and Pennsylvania.

Anthony Georgiadis: In the last 24 months, we've deployed significant capital into these markets, and our well-timed investments should provide strong shareholder cash-on-cash returns. For the year, we anticipate CapEx spend to be approximately 50% less than in 2023. The bulk of the spend will be focused on 10-15 retail store build-outs and renovations in Florida, Nevada, Minnesota, Virginia, and Ohio, along with some wholesale investment in Connecticut and potentially others.

Anthony Georgiadis: And the last 24 months, we deployed significant capital into these markets and are well timed investments should provide strong shareholder cash on cash returns.

Anthony Georgiadis: For the year, we anticipate capex spend to be approximately 50% less in 2023.

Anthony Georgiadis: The bulk of the spend we focused on 10 to 15 retail store build out some renovations in Florida, Nevada, Minnesota, Virginia, and Ohio, along with some wholesale investment in Connecticut and potentially others.

Anthony Georgiadis: In terms of business strategy, within CPG, we plan to operationalize our recent facility expansions in New Jersey, Virginia, and Minnesota, continue to innovate and expand our brand and product portfolio, and last, improve our overall operational efficiency and product quality in retail. We plan to continue to build out our physical store presence. [inaudible] invest further in our omni-channel strategy and refine our curated product selection and consumer experience in each market with the stated goal of being best in class. Our success in implementing these various strategies will be defined by our ability to obsessively focus on the consumer, continue to optimize our competitive market positions, and deploy capital to projects that optimize shareholder returns.

Anthony Georgiadis: In terms of business strategy within CPG plain to operationalize, our recent facility expansions, and New Jersey, Virginia and Minnesota.

Anthony Georgiadis: Continue to innovate and expand our brand and product portfolios.

Anthony Georgiadis: And last improve our overall operational efficiency and product quality.

Anthony Georgiadis: In retail we plan to continue to build out our physical store presence, taking a hard look at those states that convert to adult use markets soon.

Anthony Georgiadis: Invest further into our Omnichannel strategy.

Anthony Georgiadis: And refine our curated product selection and consumer experience in each market with the stated goal of being best in class.

Anthony Georgiadis: Our success in implementing various strategies will be defined by our ability to access and we focus on the consumer continue to optimize our competitive market positions.

Anthony Georgiadis: Solar capital to projects that optimize shareholder returns.

Anthony Georgiadis: We continue investing in our team, who remain the heartbeat of our organization and core to everything that we do. With that, I'll turn the call over to Matt to review our financial report. Thanks, Anthony, and hello, everyone. Report fourth quarter revenue of $278.2 million, a 7% increase over the fourth quarter of last year, while sequential revenue saw an increase of $1.5%. The year-over-year increase was primarily driven by the legalization of adult use sales in Maryland and Connecticut, while the effect of price compression continues to pressure the top line. Overall, retail revenue increased 6% versus the fourth quarter of 2020. Fourth quarter comparable sales increased 1.3% over the prior year on a base of 76 stores, while growing 1% sequentially on a base of Consumer packaged goods net revenue increased 13% over the prior year quarter at 3%.

Anthony Georgiadis: We continue investing in our team who remain the heartbeat of our organization and core to everything that we do.

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

Matt: Thanks, Anthony and Hello, everyone.

Matt: We reported fourth quarter revenue of $278 2, Million% to 7% increase for the fourth quarter of last year, all sequential revenue saw an increase of 1%.

Matt: The year over year increase was primarily driven by the legalization of adult use sales in Maryland and Connecticut.

Matt: While the effective price compression continues to pressure the top line continued to unit growth as well as revenue generated from 15, new stores opened during the year also contributed to the increase.

Matt: Overall retail revenue increased 6% versus the fourth quarter of 2022 and 2% sequentially.

Matt: Fourth quarter comparable sales increased one 3% over the prior year base of 76 stores, all growing 1% sequentially on a base of 82 stores.

Matt: Consumer packaged good net revenue increased 13% over the prior year quarter and 3% for the full year.

Anthony Georgiadis: Looking forward, we expect to see first-quarter sequential revenue to be down a bit single-digit, much like we saw sequentially last year. Gross profit for the fourth quarter was $142.7 million, or 51%, compared to $124 million, or 48% of revenue for the fourth quarter last year. For the full year, gross profit was $526.5 million, or 50% of revenue, versus $504 million. The increase in gross profit was directly attributed to the

Matt: Looking forward, we expect to see first quarter sequential revenue to be down mid single digits much like we saw sequentially last year.

Matt: Gross profit for the fourth quarter was $142 7 million or 51% compared to $124 million or 48% of revenue for the fourth quarter last year.

Matt: For the full year gross profit was $526 5 million or 50% of revenue versus $504 million or 50% in 2022.

Matt: The increase in gross profit was directly attributed to the revenue growth.

Mathew Faulkner: Turning to Op-Ex. Selling general administrative expenses for the fourth quarter were $92.3 million, or 33% of revenue, compared to $80 million, or 31% of revenue, for the fourth quarter of 2020. SG&A, excluding depreciation, amortization, and one-time transaction costs, and stock-based comp, which we refer to as normalized operating costs, approximated $61 million this quarter, compared to $59 million in Q3. 3 million lives. Normalized operating costs for the full year increased 4%, to $233 million from $224 million last year.

Matt: Turning to Opex, selling general and administrative expenses for the fourth quarter were $92 3 million or 33% of revenue compared to $80 million or 31% of revenue for the fourth quarter of 2022.

Matt: SG&A, excluding depreciation amortization and one time transaction costs.

Matt: Stock based comp, which we referred to as normalized operating costs approximated $61 million this quarter compared to $59 million in Q3 and $53 million last year.

Matt: Normalized operating costs for the full year increased 4% $233 million from 224 million last year.

Mathew Faulkner: The increased total expenses primarily reflected costs associated with opening new stores and supporting the adult use law. Continuing Cost Management and Discipline enabled us to carefully manage our costs. Fourth quarter net income was $3.2 million, or $0.01 per basic and diluted share, compared to a net loss of $51 million.

Matt: Increased total expenses, primarily reflected costs associated with opening new stores and supporting adult use watches.

Matt: Continued cost management discipline enabled us to carefully manage our cost base.

Matt: Fourth quarter net income was $3 $2 million, one per basic and diluted share compared to a net loss of 51 million or 22 cents per basic and diluted share in the prior year period, which included a noncash impairment charge.

Mathew Faulkner: 22 cents per basic and diluted share in the prior year period, which included a non-cash impairment, and Justin Iveda, which excludes non-cash stock-based compensation and other non-operating costs, was $90.8 million, or 32.6% of revenue, as compared to $81.9 million, for 31.3% of revenue for the forward quarter of 2021. Adjusted EBITDA for the full year was $325.8 On the liquidity front, we ended the year with a strong balance sheet, including cash of $160,000. Operating cash flows increased $66 million to $225 million from $159 million last year.

Matt: Adjusted EBITDA, which excludes noncash stock based compensation and other non operating cost was $90 8 million or 32, 6% of revenue as compared to $81 2 million or 31, 3% of revenue for the fourth quarter of 2022.

Matt: Adjusted EBITDA for the full year.

Matt: $325 8 million or 39% of revenue compared to $311 5 million or 36% revenue last year.

Matt: On the liquidity front, we ended the year with a strong balance sheet, including cash of $162 million.

Matt: Operating cash flows increased 66 million to 225 million from 179 million last year with 71 million generated during Q4 alone.

Mathew Faulkner: 71 million generated during Q4. In closing, we're pleased with our fourth quarter results, and we are in a strong financial position as we enter 2021. We look forward to speaking with you soon when we report our first quarter 2024 results. With that, we'll open the call to your questions, Operator. We will now begin the question and answer session. To ask a question, you may press star then 1 on your touchtone phone. If you are using a speakerphone, please pick up your handset before pressing the keys.

Speaker Change: In closing I'm pleased with our fourth quarter results and we are in a strong financial position as we enter 2024.

Speaker Change: Look forward to speaking with you soon when we report first quarter 2024 results.

Speaker Change: With that we'll open the call to your questions operator.

Speaker Change: We will now begin the question answer session.

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

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

Matt Bottomley: If at any time your question has been addressed and you would like to withdraw your question, please press star then 2. In the interest of time, please limit yourself to one question. At this time, we will pause momentarily to assemble our roster. The first question today comes from Matt Bottomley with Canaccord Genuity. Please go ahead. Good morning, everyone.

Matt: If at any time. Your question has been addressed and you would like to withdraw your question. Please press Star then two.

Matt: In the interest of time, please limit yourself to one question.

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

Matt: The first question today comes from Matt Bottomley with Canaccord Genuity. Please go ahead.

Mathew Faulkner: Thanks for the question. I'm just wondering if we can get a little more granular on the outsized performance in your adjusted EBITDA margins and operating margins, considering that SG&A was up a little bit, and we did see, you know, maybe a 1% increase in revenue. It looks like on a year-over-year basis, some of this might have to do with non-cast charges in SG&A on the back of M&A, but I'm just wondering to kind of triangulate the sort of outperformance we saw in adjusted EBITDA given a higher cost base in SG&A. Well, we did.

Matt Bottomley: Hi, good morning, everyone and thanks for the question I'm just wondering if we can get a little more granularity on the outsize performance in your adjusted EBITDA margins and operating margins.

Matt Bottomley: That SG&A was up a little bit and we did see you know maybe a 1% increase in revenue it looks like on a year over year basis. Some of this might have to do with noncash charges and SG&A on the back of M&A, but I'm. Just wondering if you kind of triangulate the sort of outperformance we saw in an adjusted EBITDA given our higher cost base on the SG&A.

Matthew Robert McGinley: Thanks for the question, Matt. So we did see some improvement in March and in the quarter, thanks in part to improved scale and efficiency in CPG. But, you know, at the end of the day, we continue to manage costs and focus on our goal of just 30%, and we're less concerned about the components. Great. Thanks, guys. The next question comes from Matt McGinley with Medium. Please go ahead.

Speaker Change: Well, we did thanks for the question, Matt. So we did see some improvement in margin in the quarter.

Speaker Change: Thanks in part to improve scale and efficiency.

Speaker Change: B G.

Speaker Change: But you know as you know today, we continue to manage costs and.

Speaker Change: Focus on our goal of adjusted EBITDA.

Speaker Change: 30%.

Speaker Change: Less concerned about about the components there.

Great: Great. Thanks, guys.

Speaker Change: Thanks, Matt.

Speaker Change: The next question comes from Matt Mcginley with Needham. Please go ahead.

Anthony Georgiadis: Maybe I'll have a follow-up on that one. I mean, there was something unique about the fourth quarter, where you were able to generate the highest gross margin in two years. I mean, was there something with regard to production efficiency or less pricing pressure or some sort of shift in geographic mix that enabled you to get that margin rate up so much? You did have an increase in revenue, and it did increase sequentially year-over-year, but the dollar amount there is incongruent with the amount of margin increase you got there.

Matthew Robert McGinley: Yeah. Thanks, So maybe I'll follow up on that one I mean, there was something unique about the fourth quarter, where you were able to generate the highest gross margin in two years. I mean, there was there something with regard to production efficiency or less pricing pressure or some sort of shifting and geographic mix. It enabled you to get that margin rate up so much.

Speaker Change: And you did have an increase in revenue and it did increase sequentially and year over year, but the dollar amount there just it it's it's not it's in congruent with the amount of a margin increase you got there and you did note that you could see some pressure going forward, but you know I guess.

Anthony Georgiadis: And you did note that you could see some pressure going forward, but I guess what I'm trying to get at there is, was there something different this quarter in terms of gross margin? I'm not sure if that's unique or if that's just good management of the business that you can sustain that level on a go-forward basis. Yeah, Matt, Anthony here. I'll take that.

Speaker Change: Trying to get at there is like was there something different this quarter in terms of gross margin.

Speaker Change: I'm not sure if that's unique or if that's just good good good good management of the business that you can you can sustain that level on a go forward basis.

Anthony Georgiadis: Yeah, Matt Anthony here I'll take that so well, we definitely had strong performance on the CPG side of the business better operational utilization.

Anthony Georgiadis: So, look, we definitely had strong performance on the CPG side of the business, and better operational utilization. We also, you know, took a hard look at discounting at the retail store level and maybe made some adjustments there that kind of flowed to the bottom line. But, you know, I mean, look, at the end of the day. The other contributing factor was that some of the states that are big contributors to the overall business had a strong quarter. So that was also a contributing factor.

Matt Bottomley: You know we also took a hard look at discounting at the retail store level and maybe made some adjustments there they kind of flow through the bottom line.

Matt Bottomley: But you know I mean, you look at the end of the day as you know the other the other contributing factor was the some of the states that are big contributors of the overall business. You know had a strong quarter. So that you know that that was also a contributing factor you know, but again kind of looking back as we look ahead, you know our north star is really kind of 30% it was a strong quarter.

Eric Des Lauriers: But again, kind of looking back as we look ahead, our North Star is really kind of 30%, a strong quarter. We took some learnings from it. We're already on to Q1, and we're looking ahead. Okay, thank you.

Matt Bottomley: We took some learnings from it already on the Q1 and we're looking ahead at this point.

Speaker Change: Okay. Thank you.

Unnamed Speaker: The next question comes from Eric DeLaurier with Craig Hallam. Please go ahead. Thanks for taking my questions, and congrats again on yet another strong quarter here. A bit of a qualitative question for me.

Speaker Change: The next question comes from Eric <unk> with Craig Hallum. Please go ahead.

Eric: Hi, Thanks for taking my questions and congrats again on yet another strong quarter here a bit of a qualitative question for me. So given this outlook for you know continued elevated competition. Obviously your operational efficiency kind of gives you more room to absorb price compression, but wondering if you can comment on.

Unnamed Speaker: So given this outlook for, you know, continued elevated competition, obviously your operational efficiency kind of gives you more room to absorb price compression, but I'm wondering if you can comment on your assessment of your product quality, just how that's trended, you know, whether that's sort of over the past year or in individual situations, and then maybe just sort of comment on, you know, how you're seeing maybe market average quality sort of trending over the I'm just wondering if you can kind of comment on your overall quality and how it's performing in the market. Thanks. Yeah, Eric. This is Sam here.

Eric: On your assessment of your product quality I'm, just how that's trended.

Eric: That's sort of over the past year or in an individual's situations and then maybe just sort of comment on how you're seeing maybe market average quality sort of trending over the past year, you know, obviously quality, having a big.

Eric: The impact on pricing here I'm, just wondering if you can kind of comment on your overall quality and how that's performing in the market.

Matt Bottomley: Yeah. Eric This is Anthony here Great question. So yeah look this is something we take a lot of pride in.

Unnamed Speaker: Great question. So, you know, look, this is something we take a lot of pride in. We're very focused on product quality. And, you know, starting at the beginning of the year, we really leaned into this effort, and we saw a lot of nice progression over the course of the year.

Anthony Georgiadis: Focused on product quality and starting at the beginning of the year really waned in this effort and we saw a lot of nice.

Anthony Georgiadis: Progression over the course of the year you were in my prepared remarks prepared remarks, I talked about the market share gains that we saw in Illinois, Pennsylvania, Maryland, and we think you know.

Unnamed Speaker: You know, in my prepared remarks, I talked about the market share gains that we saw in Illinois, Pennsylvania, and Maryland, and we think, you know, product quality was a big contributor to that. In addition, we talked about the Cannabis Cup wins, where we were up against every other operator out there, and a very strong performance. So, you know, really kudos to the team for just continuing to do really strong work out there. The flower quality is incredibly strong.

Matt Bottomley: The quality was a big contributor of that in addition, you know we talk about the cannabis Cup wins you know.

Matt Bottomley: We're up against every other operator out there and you know very strong performance, so really kudos to the team for just continuing to really strong work out there that's lower quality is incredibly strong we're leading with the brands you know.

Unnamed Speaker: We're leading with the brands, you know, obviously with Driven being kind of the lead horse there, but, you know, product quality is front and center for us. Thank you. The next question comes from Pablo Zuanic with Zuanic & Associates. Please go ahead. Good afternoon, everyone.

Matt Bottomley: Obviously with rather being kind of the lead horse there but.

Matt Bottomley: Product quality is front and center of course, we will continue to be.

Speaker Change: Okay. Thank you.

Speaker Change: The next question comes from Pablo to Atlantic with two Attic and associates. Please go ahead.

Pablo: Good afternoon, everyone been I guess, the one question regarding the rescheduling.

Pablo Zuanic: Ben, I guess one question regarding rescheduling. Do you have an estimate of the cash savings for Green Thumb if you were to have rescheduled, and what would you do with that cash? And related to that, we've seen other companies take a more, I guess, proactive stance against 280E, and they have either stopped paying their taxes or even started providing for a normal corporate tax rate, as opposed to being a cannabis company. So is that something you're also looking at in terms of how you deal with 280E?

Pablo: Do you have an estimate of the cash savings for Green thumb. If you were to have rescheduling on what would you do we does cash.

Speaker Change: And related to that we've seen other companies take them or I guess proactive stance against way D E and they have either stop paying their taxes or.

Speaker Change: Or even started providing for the normal corporate tax rate are supposed to be an economies company. So is that something you are also looking at in terms of how you deal with a 20 person. Thank you.

Mathew Faulkner: Hey Pablo, this is Matt. I can take that question. So with rescheduling, we, the savings there from a tax perspective, it should cut our tax burn by about half or so. And we look at what we would do with that cash. You know, we have options on what we could do with it. And when we get to that point, we'll evaluate all those, but you're looking at things such as stock buyback, debt paydown, M&A, and cap back. So no definitive plans. We're waiting to see what happens there before we can count on any real tax savings. As far as others in the industry are concerned, we are definitely aware and familiar with their position, but at this time, we continue to follow and apply the tax code as we have in the past. Thank you. And can I ask a follow-up question just quickly regarding New York?

Speaker Change: Yeah, Hey, Pablo this is Matt I can I can take that question.

Matt: So with with rescheduling we.

Matt: We think the savings there from a tax perspective, it shouldn't cut our tax.

Matt: Burned in and about half or so.

Pablo:

Pablo: We look at what we would do with that cash.

Pablo: We have we have options.

Pablo: What we could we could do it there so.

Pablo: And when we get to that point, we would evaluate all of those but youre looking at things such as the stock buyback debt pay down M&A and Capex. So no definitive plans, we're waiting to see what what happens there before we can count on any any real tax savings as far as others in the industry. We are.

Pablo: Definitely aware and familiar with their position, but at this time, we continue to follow and applies the tax code as we have in the past.

Speaker Change: Thank you and can I ask a follow up just quickly regarding New York I know you opened your voyages Rochester store. If you can comment on how that's going and also when do you do you start planning to supply the wholesale market in New York State.

Pablo Zuanic: I know you opened your Rochester store. If you can comment on how that's going, and also, when do you start planning to supply the wholesale market in New York? Hey Pablo, Anthony here.

Pablo: Hey, Pablo Anthony here, Yeah look we opened Rochester, just recently and things are going well.

Anthony Georgiadis: Yeah, look, we opened Rochester just recently. Things are going well. We also entered the wholesale market in January, and that's really where we're leading at this point. We have indoor capacity that we built out, and we're really leading that through rhythm. So far, we've got a warm reception from the market. We're adding doors by the week, and so far, so good.

Speaker Change: We also entered the wholesale market.

Speaker Change: And in January and that you know, that's really where we're leaving it at this point yeah, we have indoor capacity that.

Anthony Georgiadis: We built out and we've really leading that through our through rhythm and we got so far it's got warm reception from the market.

Anthony Georgiadis: We're adding we're adding doors kind of by the week and so far so good. So I think we have a lot more visibility probably on our next call, but we're cautiously optimistic we've got a pretty good starting to work and I hope we can build from here.

Gerald Pascarelli: I think we'll probably have a lot more visibility on our next call, but we're cautiously optimistic. We've got a pretty good start in New York, and I hope we can build from here. The next question comes from Gerald Pascarelli with Wedbush Securities. Please go ahead. Hi, this is Antoine. I'm on behalf of Gerald.

Speaker Change: Thank you.

Speaker Change: The next question comes from Gerald Pascarelli with Wedbush Securities. Please go ahead.

Speaker Change: Hi, This is antoine on for Gerald Thanks for taking the question.

Benjamin Kovler: Thanks for taking the question. Can you provide an outlook on your expectations for the cannabis category dynamics in general headed into 2024? Do you expect performance to improve relative to 2023 considering most major operators meaningfully cut back on CapEx, which in theory should improve the supply-demand imbalance? And lastly, there looks to be some top-down tailwinds on the horizon just related to the lower-income consumer, including the revolving door of removal of SNAP benefits and the potential for lower interest rates to result in higher disposable income, so any color on category health and your broad outlook will Sure, I can take that. Hey, it's Ben.

Antoine: Can you maybe provide an outlook on your expectations for the cannabis category dynamics in general heading into 2024 do you expect performance to improve relative to 2023, considering most major opera, whose meaningfully cut back on Capex, which in theory should improve the supply demand imbalance and lastly, just it looks to be some talk down until wins on the horizon just related.

Speaker Change: The lower income consumer including them.

Speaker Change: Removal of snap benefits in March and the potential for lower interest rates. The result in higher disposable income so any color on category health and your broad outlook would be great. Thank you.

Speaker Change: Sure I can take that hey, it's Ben.

Benjamin Kovler: The question was consumer health. I think that's a good first question on what's going to happen in the industry and overall supply-demand. We've certainly watched the CapEx numbers come cratering down to freakishly low numbers. We've continued to spend. 2023 was a big year for us, and we have a real number going into 2024. However, EBITDA is very strong. So we can continue to play offense.

Speaker Change:

Ben: Let's see the the question was the consumer health.

Ben: Okay.

Ben: Capex in supply demand Oh, Yeah, I think that's a good first question on what's going to happen in the industry overall supply demand, we certainly watch the capex numbers come cratering down to previously low numbers.

Ben: We've continued to spend twice twice, where he was a big year for us and we have a real number going into 2024. However, the EBITDA is very strong. So we can continue to play offense, we're continuing to spend its hard for me to comment on others, but I'd be curious, what's going on and how that growth gets there how that balance sheet rectifies and other kinds of core questions in terms of the state of the consumer.

Benjamin Kovler: We're continuing to spend. It's hard for me to comment on others, but I'd be curious what's going on, how that growth gets there, how that balance sheet gets redressed, and other kinds of core questions. In terms of the state of the consumer... Again, a good question. What we see in terms of some of those pressures you mentioned, which are real, which are macro, which may hit the more, you know, staples, I guess, would be the term. We're seeing a lot of growth, new markets opening, and some of the, like, the step function up towards warmth, those sorts of things. But those are very real.

Speaker Change: Again. Good question you know what we see in terms of some of those pressures you mentioned, which are real which are macro which make it. The more you know staples I guess would be the term well see.

Speaker Change: A lot of growth new markets open and some of them like the step function upward towards those sorts of things, but those are very real.

Benjamin Kovler: But I would say, broadly, the cannabis consumer remains resilient. People still like the products. We see them behave like other products in this space, you know, and they're not giving them up. Particularly for us, it's an investment in the brands. I think you're seeing that with Rhythm.

Speaker Change: I'd say broadly the canvas consumer remains resilient.

Speaker Change: People still like the product we see it behaved like other products in this space, you know and they're not they're not giving it up particularly for us as an investment in the brands I think you're saying it was really them here at the very early stage. We've talked about this on these calls over the years, but you know watch out for what happens with rhythm and Incredibles dog walkers of people over the next decade.

Benjamin Kovler: You're at the very early stage. We've talked about this on these calls over the years, but, you know, watch out for what happens with Rhythm and Incredibles, Dog Walkers, and Bebo over the next decade. And, you know, we're pretty optimistic about that. Thank you. The next question comes from Aaron Grey with Alliance Global Partners. Please go ahead.

Speaker Change: I'm pretty optimistic about that.

Speaker Change: Thank you.

Speaker Change: Thank you.

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

Aaron Grey: Hi, good evening, and thank you for the question. Just wanted to talk a little bit about, you know, CPG and wholesale opportunities in third-party stores, particularly maybe in states such as, you know, Illinois, New Jersey, and New York, where you have new stores opening. Just any color you could provide on strategy in terms of getting on the shelf, how that might differ in new stores ahead of them opening versus, you know, trying to get on the shelf in already open stores. You might not be there.

Aaron Grey: Hi, Good evening and thank you for the question I just wanted to talk a little bit about you know CPG and wholesale opportunities and third party stores, you know, particularly maybe in states such as you know, Illinois, New Jersey, and New York, We have new stores opening just any color you can provide on strategy in terms of getting on shelf, how that might differ in new stores the head.

Aaron Grey: Them opening versus you know trying to get on shelf of already opened storms you might not be there and then any color you might be able to provide in terms of you know hired looking to approach that in these markets would be appreciated. Thank you.

Anthony Georgiadis: And then any color you might be able to provide in terms of, you know, how you're looking to approach that in these markets would be appreciated. Sure, and I'll take that one. You know, look, we're very focused on building out our CPG presence within third-party doors, right? We're leaning into our brands, you know, in terms of market-to-market kind of strategies, the reality is all these are different games given the different components of regulation, product sets available, supply, demand, and whatnot. So, it's not a kind of – it's not a one-size-fits-all approach.

Speaker Change: Sure and I'll take that one.

Speaker Change: Yeah.

Speaker Change: You know, but we're very focused on building out our <unk>.

Speaker Change: Our CPG presence.

Speaker Change: Within third party doors right relating into our brands.

Speaker Change: You know in terms of market to market kind of strategies. The reality is all these are different games given the different components of regulation product sets available supply and demand and whatnot. So it's it's not a kind of it's not one size fits all approach.

Anthony Georgiadis: But, you know, look, we just talked about product quality. That's one area that we're really leaning into, because at the end of the day, we think we can win there. And so, you know, it's really just establishing the ground game, building the sales team, and having products that are demanded by consumers. And if you can do that, and you can maintain product quality, the rest largely takes care of itself. So, that's what we're focused on. Product quality is kind of the tip of the spear there. And then all the other kind of operational, kind of, you know, execution-type things associated with servicing third-party accounts, in terms of delivery, fulfillment, and everything else.

Speaker Change: But you know look we're just talking about product quality. That's one area that we're really leaning in because at the end of the day. We think we can win there and so you know it's really just establishing the ground game building the sales team and you know having products that are demanded by consumers and if you can do that you can maintain product quality. The rest largely takes care of itself.

Speaker Change: So that's what we're focused on product quality is kind of a tip of the spear there and then all the other kind of operational kind of you know execution type things associated with servicing third party accounts in terms of delivery fulfillment and everything else.

Anthony Georgiadis: We're just incredibly focused on building that part of the business and doing it the right way. Okay, great. Thanks for the call. The next question comes from Sonny Randhawa with Seaport. Please go ahead.

Speaker Change: We're just incredibly focused on building that part of the business and doing it the right way.

Speaker Change: Yeah.

Speaker Change: Okay, great. Thanks for the color.

Speaker Change: The next question comes from Honey Roswell with Seaport. Please go ahead.

Sonny Randhawa: Great, thanks for the question. I just wanted to talk about the Florida investments you guys have made. How many locations, I guess, on the retail side, do you think that that investment could support once it's fully ramped up? Just trying to think about 2024 and modeling out, you know, additional locations in Florida. So kind of wanted to see what the constraints there were. Yeah, sure, Sonny. This is Anthony again.

Honey Roswell: Great. Thanks for the question I just wanted to talk.

Honey Roswell: Talk about the Florida investments you guys have made.

Honey Roswell: How many locations I guess on the retail side do you think that that investment could support once it's fully ramped just trying to think about 2020 for modeling out.

Honey Roswell: <unk>.

Speaker Change: Additional locations in Florida, So kind of wanted to see what what the constraints there were.

Speaker Change: Yeah Sure study I'll provide this is Anthony I'll provide some context on that so.

Anthony Georgiadis: I'll provide some context on that. So, you know, as everyone is probably aware, given the verticality in Florida, you really have to build out wholesale first before retail. So we did that with our first real phase in Ocala. You know, we have 14 stores open today. We've got another one opening in the next few days.

Anthony Georgiadis: As everyone is probably aware of you know given the Berta County in Florida, you really have to build out wholesale first before retails.

Anthony Georgiadis: So we did that with our first real phase in Ocala.

Anthony Georgiadis: We have 14 stores open.

Anthony Georgiadis: You know today, we've got another one opening in the next in the next few days and then we've got several more that we anticipate opening throughout the rest of the 24, what we are doing is obviously watching the ballot initiative in.

Anthony Georgiadis: And then we've got, you know, several more that we anticipate opening throughout the rest of 24. What we are doing is obviously watching the ballot initiative in Florida pretty closely because, you know, if things head in a positive direction, we're probably going to have to reinvest in the wholesale capacity and then revisit kind of our retail plan. So that's really where we are at the moment. You know, we'll have a lot more kind of visibility on our next call, my guess. But, you know, in Florida, it's build a wholesale business first and then the retail second.

Anthony Georgiadis: In Florida pretty closely because you know if things things head in a positive direction, we're probably going to have to reinvest into the wholesale capacity and then revisit kind of our retail plants. So that's really where we are at the moment you know we'll have a lot more kind of visibility on our next call is my guess, but you know in Florida is still there.

Anthony Georgiadis: Wholesale person in the retail sector, that's really that's really how we did it.

Scott Fortune: That's really how we did it. The next question comes from Scott Fortune with Roth Capital. Please go ahead. Yeah, good afternoon.

Anthony Georgiadis: The next question comes from Scott Fortune with Roth Capital. Please go ahead.

Scott Fortune: Yes, good afternoon, and thanks for the question just wanted to dig in a little unpack the fourth quarter, a little bit you guys anticipate a low single digit decline and you called out stays kind of contributing a little more strength there, but just kind of understand was it was a less discounting price compression there.

Anthony Georgiadis: Thanks for the question. I just want to dig in a little, unpack the fourth quarter a little bit. You guys anticipated a low single-digit decline, and you called out better states kind of contributing a little more strength there, but just kind of understand, was there less discounting, price compression there? And kind of calling out for the same thing in the first quarter, but are you starting to see in some states some pricing stabilization here in your kind of key states? Just kind of call out some of the better pricing opportunities that you see in some of your key states kind of going forward. Hey, Scott, Anthony here.

Anthony Georgiadis: And kind of calling out for the same thing in the first quarter, but are you starting to see and in some states. Some pricing stabilization here in your kind of key states is kind of call out some of the bed.

Anthony Georgiadis: Pricing opportunities that you see in some of your key states kind of going forward.

Speaker Change: Hey, Scott I didn't get your I'll, just I'll take that as well.

Anthony Georgiadis: I'll take that as well. So, let's zoom out. Obviously, a very strong quarter from a profitability standpoint. We talked about operating leverage at wholesale. We talked about kind of, you know, really looking at the retail gross margin line. You know, those were the two biggest drivers.

Scott Fortune: So what's your amount, obviously very strong quarter from a profitability standpoint for the business.

Speaker Change: We talked about the operating leverage at wholesale we talked about kind of you know really really looking at the retail gross margin line.

Speaker Change: You know those were the two biggest drivers now look we had a we had a very strong December particularly late December and you know given the overall operating leverage of the business.

Anthony Georgiadis: Now, look, we had a very strong December, particularly late December. And, you know, given the overall operating leverage of the business, you know, with us, the way we manage the SG&A line, every incremental dollar of gross profit really just drops to the bottom line. So, in terms of pricing, we started to see a slowdown in a few markets, but it's too early to say that we're out of the woods yet. The reality is, however, we continue to see price erosion in most of the markets that we operate in. We saw a slight slowdown in the fourth quarter, but it's too early to say if that slowdown is systemic and not going to continue. But it really, again, just comes back to running the business and trying to optimize wholesale retail by state and just running a good, clean business while keeping fixed costs low. I appreciate the color, thanks.

Speaker Change: With us the way, we manage kind of the SG&A line every incremental dollar of gross profit really just drops the bottom line. So.

Speaker Change: You know in terms of pricing.

Speaker Change: We started to see a slowdown in a few markets, but it's just too early it's too early to say that you know we're proud of what you had the reality is we continue to see price erosion in most of the markets that we operate in so.

Speaker Change: You know we saw a slight slowdown in the fourth quarter, but you know.

Speaker Change: Too early to say if that slowdown is.

Speaker Change: Systemic and and you know I'm not going to continue but it's really again it just comes back to running the business.

Speaker Change: And trying to optimize wholesale retail by state and and just running a good clean business with you know keeping fixed costs low.

Speaker Change: I appreciate the color. Thanks.

Ty Collin: The next question comes from Ty Collin with Eight Capital. Please go ahead. Hey guys, thanks for the question. As you're thinking about your capital allocation options for the year ahead, especially with the pretty significant step down in CapEx, how are you guys weighing share buybacks against debt repurchases at this moment? And do you think that share repurchases are still a good use of capital, considering the repricing we've seen in your stock over the last few months and compared to where you guys were buying in the second half of last year? Sure, I can take that. Great question!

Speaker Change: The next question comes from Todd Cohen with eight capital. Please go ahead.

Todd Cohen: Hey, guys. Thanks for the question as you're thinking about your capital allocation options for the year ahead, especially with the pretty significant step down in Capex. How are you guys weighing share buybacks against debt repurchases at this moment.

Todd Cohen: And do you think that share repurchases are still a good use of capital considering the repricing that we've seen in your stock over the last few months and compare to where you guys were buying in the second half of last year.

Speaker Change: Sure I can take that it's been a great question. So what I would say, it's a core is.

Benjamin Kovler: You know, what I would say at the core is... We remain opportunistic. Things are set up pretty well, given where the balance sheet is. However, debt is due in April of 2025, so we want to be sure we cover that.

Todd Cohen: We remain opportunistic things are set up pretty well given where the balance sheet is however that is due in April 2025. So we want to be sure. We cover that I think in the last call and maybe two or three calls you talked about the progression of Capex, one handle the debt two and thinking about the share repurchases and how to return cap.

Benjamin Kovler: I think in the last call, and maybe two or three calls, we've talked about... Regression of CapEx I, Hand of the Debt II, and think about the share repurchases and how to return capital or what else we could do. Obviously, there's always an overlay of M&A, and we've given thoughts on that before. So that really remains what it is.

Todd Cohen: Or what else we could do.

Todd Cohen: Obviously, there's always an overlay of M&A.

Todd Cohen: We've given thoughts on that before.

Todd Cohen: So so that really remains what it is we want to make sure we handle all of those things all those things we feel good about the Capex, obviously, some regulatory changes could call them that make 'twenty five 'twenty six 'twenty seven and beyond look a little different and we obviously plan pretty far in advance and shown a tendency to do that.

Benjamin Kovler: We want to be sure we handle all those things. We feel good about the CapEx. Obviously, some regulatory changes could come that make 25, 26, 27, and beyond look a little different. We obviously plan pretty far in advance. We've shown a tendency to do that. We're optimistic about the stock. I don't think that's a secret.

Todd Cohen: We're optimistic about the stock you know I don't think that's a secret is the first time in a while we've been able to talk about that over the last few quarters not the board has authorized buyback.

Benjamin Kovler: It's the first time in a while we've been able to talk about that in the last few quarters now that the board has authorized the buyback. We want to be opportunistic on the price. It's very volatile. So we'll see what happens, but we want to be able to be in there and see what happens. You know, you never know, but obviously, the price you pay matters.

Todd Cohen: We want to be opportunistic on the price, it's very volatile so.

Todd Cohen: So we'll see what happens, but we want to be able to be in there and let's see what happens.

Todd Cohen: You never know, but obviously the price we pay matters.

Michael Regan: The next question comes from Mike Regan with Excelsior Equities. Please go ahead. Hey guys, great quarter and thanks for taking the question. In terms of sort of, more recently, the first time you've been mentioning M&A as a potential use of capital. Can you please give us a little more color on sort of what types of things? You'd be looking to acquire new markets, fill-in markets, things like that. Sure, hey, it's Ben. Didn't mean to imply it's any different than the answer last time.

Todd Cohen: The next question comes from Mike Reagan with Excelsior Equities. Please go ahead.

Michael Scott Lavery: Hey, guys, a great quarter and thanks for taking the question in terms of sort of what.

Michael Scott Lavery: Originally the first time, you've been mentioning our M&A as a potential use of capital could you. Please give us a little more color on sort of what types of things.

Michael Scott Lavery: You'd be looking to acquire or is that sort of new market still in markets things like that thanks.

Speaker Change: Sure Hey, it's been didn't mean to imply that's any different than the the answer last time.

Benjamin Kovler: Uh, you know, we answer the phone, we talk to a lot of people. Things are always on the table. We're down to be creative and think through stuff, but... You know, given where multiples are, given the cost of capital, given where balance sheets are, given the, you know, non-believability of most people's quoted EBITDA, we tend to sit where we are and sort of take the calls. We're always interested in looking and seeing what's out there and trying to be a creator for shareholders. You never know what's going to happen in the future, so we want to be up to speed. But right now, we're pretty focused in. All right, great. And just a quick follow-up. Is there any update on how the regulators are looking at the co-located Rise Express stores with the Circle K agreement, which could allow you to really expand in Florida pretty rapidly if they approve that? Sure, Mike, Anthony here.

Speaker Change: Now we answer the phone we talked to a lot of people things are always on the table, we're down to be creative and thing throughs stuff, but.

Speaker Change: You know given where multiples are given the cost of capital will get more balance sheets are given the you know nonbeliever ability of most peoples quotas EBITDA.

Speaker Change: We tend to sit where we are and sort of take the calls we're always interested in looking at seeing what's out there and trying to be accretive for shareholders. You never know what's going to happen in the future. So we want to we ought to be up to speed, but right now we're pretty focused inward.

Speaker Change: Great. That's a good follow up is there sort of any update on how the regulators are looking at the co located rise express stores with the circle K agreement.

Speaker Change: Which could allow you to really expand Florida pretty rapidly if they approve that.

Speaker Change: Sure Mike Anthony here. Unfortunately, no no real tangible update there you know we continue to work with state regulators to.

Anthony Georgiadis: Unfortunately, no real tangible update there. You know, we continue to work with state regulators to get the requisite permits. And look, we continue to believe that, at some point in time, we're going to open up a rod dispensary adjacent to a Circle K. Great, thanks. The next question comes from Andrew Semple with Echelon Capital Markets. Please go ahead.

Mike Anthony: If you get the requisite permits.

Mike Anthony: We continue to believe that you know at some point in time, we're going to open up a raj dispensary adjacent to a circle K.

Speaker Change: Great. Thanks.

Speaker Change: Thanks, Mike.

Mike Anthony: The next question comes from Andrew Semple with excellent capital markets. Please go ahead.

Andrew Semple: Hi there, congrats on the results. I just want to return to the question of capital allocation. I think it'd be helpful maybe if you could provide some sort of a sense of what you think an appropriate minimum cash balance would be for Green Sum or maybe even a minimum or maximum leverage ratio that you'd be comfortable bringing the business to, just to give us a longer-term sense of what sort of spare capital you would think is available for capital investment, share buybacks, or M&A. Any thoughts on that? Sure, I can take it. You know, it's just more of an art than a science.

Andrew Semple: Hi, there congrats on the results.

Andrew Semple: Just wondering in terms of the question of capital allocation I think it'd be helpful. Maybe if you could provide some sort of a sense of what you think an appropriate minimum cash balance would be for green thumb or maybe even like a minimum or maximum leverage ratio that you'd be comfortable bringing the business to just to give us a longer term sense of what sort of spirit.

Andrew Semple: If at all.

Speaker Change: You would think is available for capital investment and share buybacks or M&A any thoughts on that.

Speaker Change: Sure I can take it out.

Speaker Change: More of an art than a science, we read buffett's letter over the weekend and we like their cash balance we certainly not that many decimal places yet, but we like to sleep well, we like to have a lot of cash and the debt comes due we wanted to be sure. We're in a position to figure it out and.

Benjamin Kovler: And protect the balance sheet. We don't know what happens for the long term for shareholders, but we feel really good about where we are. So I can't really give you an exact number, but we like where things are, we have some room to play offense, and we continue to produce cash as a business, despite 288. And despite paying taxes, which I never thought would have to be something we'd actually have to call out.

Speaker Change: And protect the balance sheet over we don't know what happens for the long term for shareholders, but we're we feel really good about where we are so I can't really give you the exact number but we like where things are we have some room to play offense and we continue to produce cash as a business. Despite 280.

Speaker Change: And despite paying taxes, which I never thought it would have to be something we would actually have to call out, but paying taxes paying to the paying the interest produces.

Benjamin Kovler: But paying taxes, paying the levy, paying the interest produces additional cash for us to figure out what to do. And we're measuring those returns inside the business, M&A, debt, equity, and what we can do to best position the business for medium and long-term growth, not next quarter or next year even, but trying to really think outside the box and think long-term. So that puts us in a pretty good position. Thank you. The next question comes from Frederick Obains with APB Capital. Please go ahead.

Speaker Change: Additional cash for us to figure out what to do and we're measuring those returns inside the business M&A debt equity and what we can do to best position the business for medium and long term growth, but not you know next quarter next year, even but trying to really think outside the box I think long term.

Speaker Change: That puts us in a pretty good position.

Speaker Change: Thank you.

Speaker Change: The next question comes from Patrick O'brien with E. P. B capital. Please go ahead.

Frederick Obains: Hi, thanks for taking my question. Just coming back to the margin side, I'm just curious, now as you come off the large cutback cycle this year, how far along are you in utilizing your capacity and achieving efficiencies in some of the facilities you have invested in this year? And do you see any sort of low-hanging fruit there to continue to optimize and improve your margins? Frederick, Anthony here.

Patrick O'brien: Hi, Thanks for taking my question I'm, just coming back to the margin side I'm just curious to know as you come off the large capex cycle. This year, how far along are you in your life and their capacity and achieving efficiencies in some of the facility that you haven't factored into year end and do you see any sort of a.

Patrick O'brien: Low hanging fruit there to continue to optimize and improve your margins. Thank you.

Speaker Change: [noise] Fredrik Anthony here I can provide some context on that so you know.

Anthony Georgiadis: I can provide some context on that. So, um, you know, that question really, to answer that correctly, you have to look at it on a state-by-state basis. So, there are some states where we have excess capacity. I'll tell you that, you know, those are states where we're also having adult use discussions today. And so, you know, when we look ahead, as I mentioned, a lot of the CapEx building that we did over the last two years is really in advance of what we think is to come. So, in some ways, we're operating those facilities at a less than ideal kind of perfect scale, but we've got a lot of optionality that we can kind of grow into.

Anthony Georgiadis: That's my question really to answer that correctly, you have to look at it on a state by state basis. So.

Anthony Georgiadis: There are some states, where we have excess capacity I will tell you that you know those are states, where we're also having adult use discussions today and so you know when we look ahead you know as I mentioned, we you know a lot of the Capex building that we did.

Anthony Georgiadis: Over the last two years really in advance of what we think is to come so.

Anthony Georgiadis: Some ways, we're operating those those facilities at a less than ideal kind of perfect scale, but we've got a lot of optionality that we can kind of grow into so.

Anthony Georgiadis: So, you know, we don't talk specifics on kind of capacity utilization and things like that, but we are well-positioned to take advantage of some of the adult use discussions that are taking place today, such that in a number of the markets, we already have the capacity built. So, feel very comfortable with where we sit there and our ability to continue to grow into the facilities that we've built out. Thank you. This concludes our question and answer session. I would like to turn the conference back over to Ben Kovler for any closing remarks. All right, thanks everybody for joining us. Look forward to our next update in the spring. Thanks, everybody. The conference has now concluded. Thank you for attending today's presentation. You may now disconnect. BF-WATCH TV 2021

Anthony Georgiadis: You know, we don't talk specifics on kind of capacity utilization and things like that but.

Anthony Georgiadis: We are well positioned to take advantage of some of the adult use discussions that are taking place today, such that you know, we effectively and in a in a number of the markets. We already have the capacity built so feel very comfortable.

Anthony Georgiadis: Comfortable with where we sit there and our ability to continue to kind of grow into the.

Anthony Georgiadis: The facilities that we built out.

Speaker Change: Thank you.

Anthony Georgiadis: This concludes our question and answer session I would like to turn the conference back over to Ben Kofler for any closing remarks.

Benjamin Kovler: All right. Thanks, everybody for joining us look forward to our next update in the spring.

Anthony Georgiadis: Everybody.

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

Anthony Georgiadis: Yeah.

Anthony Georgiadis: [music].